Nathaniel Woodson and Richard Nicholas
offer concise answers to questions you may have about 2004 and UIL’s plans for the
year to come.

Nathaniel D. Woodson (left)
Chairman, President and
Chief Executive Officer
UIL Holdings Corporation

Richard J. Nicholas (right)
Executive Vice President and
Chief Financial Officer

What is UIL’s strategy to maximize shareowner value?

UIL’s strategy for maximizing shareowner value is to efficiently and effectively invest in and manage the utility to achieve our allowed returns, while managing our non-utility businesses for profitability and longer-term value. This strategy will provide strong earnings that will support our share price. In addition, we remain committed to our dividend that we know is so important to our shareowners, and our strong cash flow supports this commitment.

How does UIL support and maintain its current dividend?

We often get questioned as to how we can pay a dividend that is greater than our earnings. In 2004, our consolidated earnings per share from operations was $2.57 per share and our dividend per share was $2.88. This results in a payout ratio of 112 percent. We are able to maintain our dividend because, although the earnings may be below the dividend level, the cash flow is not. We have strong cash flow to support the dividend. Some of our investments have resulted in losses to the Corporation, but are not a cash drain on the Corporation. For instance, in 2004, UBE had a loss of $.24 per share, but was not a cash drain on UIL.

Will investing in significant capital infrastructure projects affect the ability to pay the dividend?

No. Right now we have the opportunity to triple our investment in the transmission business at a favorable rate of return. Our investment in the local transmission infrastructure not only will benefit customers in our service territory, but will benefit customers in the entire New England power grid as well. This investment, as well as any prudent investment that we make to maintain our distribution operations, will be included in the rate base and UI will be allowed to earn a regulated return on it. Prudent investments are recoverable through rates.

As UIL focuses on the utility portions of the business, what impact should investors expect from Xcelecom in contributing to earnings?

Xcelecom is a leading provider of specialty contracting and systems integration solutions in the Eastern United States, from Massachusetts to Florida. This portion of the country accounts for twenty-five percent of the U.S. economy. While the Florida markets were heavily impacted by four hurricanes in 2004, markets along the Eastern seaboard are growing. We are looking to capitalize on this expanding market by focusing managerial and operational measures on our businesses with an aim to take advantage of a strengthening economy and allow us to become an industry performance leader. The number one goal of the management team at Xcelecom is to achieve operational excellence and move from a median performance level to a first-quartile performance level. Along with growing markets, this strategy will lead us to an increasingly profitable business.