Northeast Utilities and NSTAR to Merge

On Monday, October 18, 2010, Northeast Utilities (“NU”) and NSTAR announced their companies’ Boards of Trustees unanimously approved a merger agreement for a large utility valued at $17.5 billion. This newly-formed utility will be known as Northeast Utilities.

According to the press release announcing the merger, the newly combined company will have six regulated electric and gas utilities spanning three states with almost 3.5 million electric and gas customers. The newly-formed Northeast Utilities will have almost 4,500 miles of electric transmission lines, 72,000 miles of electric distribution lines, and 6,000 miles of gas distribution lines. The companies’ also assured customers that this transaction will allow the companies to combine their resources to improve service quality in the service territory. The two companies currently plan to invest $9 billion in New England’s energy infrastructure throughout the next five years. The companies also assured customers that they will not experience “any merger-related rate changes.” Charles W. Shivery, Chairman, President and CEO of NU stated “NSTAR’s strong cash flows are very complementary to NU’s attractive regulated investment opportunities, mitigating the need for future equity issuances which is a significant benefit for our shareholders.” The press release anticipated that NU shareholders would own approximately 56 percent of the combined company, and NSTAR shareholders would own approximately 44 percent.

In terms of organization and leadership, the newly-formed Northeast Utilities will have dual headquarters in Hartford, Connecticut and Boston, Massachusetts. Charles W. Shivery will become the Non-Executive Chairman of the newly-formed Northeast Utilities. Thomas J. May, current Chairman, President and CEO of NSTAR, will become President and CEO of NU. The Board of Trustees of the newly-formed Northeast Utilities will be made up of Trustees from the two original companies, with seven members nominated by the Board of NU and seven members nominated by the Board of NSTAR. The Lead Trustee will be nominated by the Board of NU.

NU and NSTAR hope to garner shareholder approval by early 2011, and stated in their press release that they predict the regulatory approvals can be obtained in 9-12 months. Approval of the merger is conditioned upon the following:

• approval by two-thirds of the outstanding shares of each company

• termination of any applicable waiting period

• review by the Massachusetts Department of Public Utilities

• review by the Federal Energy Regulatory Commission

• review by the Nuclear Regulatory Commission

• review by the Securities and Exchange Commission

• review by the Federal Communications Commission

A copy of the press release announcing the merger is available here.