Ice storm pelts Unitil’s 09 earnings

Monday, January 10, 2011

Unitil Inc. would have had a great quarter and year had it not had to pay millions of dollars as a result of regulators’ criticism of the company’s response to last year’s ice storm as well as its speculative gas purchasing program.

The Hampton-based utility posted net earnings of $1.2 million, or 11 cents a share, in the fourth quarter, compared to $3.2 million a year earlier, bringing net annual earnings to $9.9 million, compared to $9.8 million in 2008.

The 2009 earnings should have been much greater, since the company increased its assets by half with the purchase last year of Northern Utilities and Granite State Gas Transmission from NiSource. Natural gas sales margins, for instance, increased at an annual $35.1 million.

But “we had a challenging year in 2009 due to the economy and some extraordinary regulatory issues,” said Robert Schoenberger, Unitil’s chairman and chief executive.

First, there was the ice storm. While the company expects to recover the $14.6 million in costs through future rate increases, the company spent another $3 million repairing the regulatory and legal damage sparked by the outrage among customers in New Hampshire and Massachusetts who had their power off for weeks.

In addition, the Massachusetts Department of Public Utilities fined Unitil subsidiary Fitchburg Gas and Electric Light some $4.6 million plus carrying charges, for engaging in “an unauthorized natural gas price hedging program” that kept its customers from taking advantage of the drop in natural gas prices. As a result, the company took a fourth-quarter charge of $4.9 million.

Without those regulatory costs, the company would have earned $5.1 million in the last quarter, and $15.1 million for the all of 2009.

The company also spent $5.3 million more in interest in 2009, thanks to its issuance of some $90 million in long-term notes to partially finance the merger. The rest was mainly financed through the offering of nearly 5 million shares of common stock at $20 a share, raising some $93 million.

Unitil’s newly acquired assets were all in natural gas, which nearly quadrupled its previous sales.
Electricity sales were down for the quarter and the year, because of conservation, the economy and a cool summer, the company said. Commercial sales declined 6.1 percent for the year. Revenues were down $8.7 million for the quarter and $17.6 million for the year.

The company declared a dividend of 34.5 cents a share, increasing the annual common stock dividend to $1.38 for 2009. – BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW

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