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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
------------ -------------



Commission file number 1-15995

UIL HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

CONNECTICUT 06-1541045
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

157 CHURCH STREET, NEW HAVEN, CONNECTICUT 06506
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 203-499-2000


NONE
(Former name, former address and former fiscal year,
if changed since last report.)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No
--- ---

The number of shares outstanding of the issuer's only class of common stock, as
of July 31, 2002, was 14,460,680.




- 1 -





INDEX

PART I. FINANCIAL INFORMATION

PAGE
NUMBER
------

Item 1. Financial Statements. 3

Consolidated Statement of Income for the three and six months
ended June 30, 2002 and 2001. 3
Consolidated Statement of Comprehensive Income for the three
and six months ended June 30, 2002 and 2001. 3
Consolidated Balance Sheet as of June 30, 2002 and
December 31, 2001. 4
Consolidated Statement of Cash Flows for the three and six
months ended June 30, 2002 and 2001. 6

Notes to Consolidated Financial Statements. 7
- Statement of Accounting Policies 7
- Capitalization 8
- Rate-Related Regulatory Proceedings 9
- Short-term Credit Arrangements 11
- Income Taxes 13
- Supplementary Information 14
- Commitments and Contingencies 15
- Capital Expenditure Program 15
- Nuclear Insurance Contingencies 15
- Other Commitments and Contingencies 15
- Connecticut Yankee 15
- Hydro-Quebec 16
- Cross-Sound Cable Project 16
- Environmental Concerns 16
- Site Decontamination, Demolition and Remediation Costs 16
- Termination of Standard Offer Supply Agreement 17
- Nuclear Fuel Disposal and Nuclear Plant Decommissioning 18
- Segment Information 19

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 20

- Major Influences on Financial Condition 20
- Capital Expenditure Program 22
- Liquidity and Capital Resources 23
- Subsidiary Operations 25
- Results of Operations 26
- Looking Forward 40

Item 3. Quantitative and Qualitative Disclosure About Market Risk. 44


PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders. 45

Item 6. Exhibits and Reports on Form 8-K. 46

SIGNATURES 47



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PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UIL HOLDINGS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----


OPERATING REVENUES (NOTE G)
Utility $ 168,471 $ 173,714 $ 340,496 $ 338,928
Non-utility businesses 115,817 88,795 202,128 165,779
------------- ------------- -------------- --------------
Total Operating Revenues 284,288 262,509 542,624 504,707
------------- ------------- -------------- --------------
OPERATING EXPENSES
Operation
Fuel and energy 62,020 65,910 125,975 134,292
Operation and maintenance 159,165 127,579 294,116 241,885
Depreciation and amortization (Note G) 20,137 21,274 39,646 40,776
Taxes - other than income taxes (Note G) 11,478 10,791 23,426 21,953
------------- ------------- -------------- --------------
Total Operating Expenses 252,800 225,554 483,163 438,906
------------- ------------- -------------- --------------
OPERATING INCOME 31,488 36,955 59,461 65,801
------------- ------------- -------------- --------------

OTHER INCOME (EXPENSE), NET (NOTE G) (3,746) 1,781 (3,955) 3,005
------------- ------------- -------------- --------------

INCOME BEFORE INTEREST CHARGES AND INCOME TAXES 27,742 38,736 55,506 68,806
------------- ------------- -------------- --------------

INTEREST CHARGES, NET
Interest on long-term debt 10,814 10,869 21,643 21,051
Interest on Seabrook obligation bonds owned by UI (1,541) (1,580) (3,083) (3,160)
Other interest, net (Note G) 553 812 982 2,812
------------- ------------- -------------- --------------
9,826 10,101 19,542 20,703
Amortization of debt expense and redemption premiums 532 544 1,063 1,094
------------- ------------- -------------- --------------
Interest Charges, net 10,358 10,645 20,605 21,797
------------- ------------- -------------- --------------

INCOME BEFORE INCOME TAXES 17,384 28,091 34,901 47,009
------------- ------------- -------------- --------------

INCOME TAXES (NOTE F) 8,244 12,871 16,192 22,313
------------- ------------- -------------- --------------

NET INCOME AND INCOME APPLICABLE TO COMMON STOCK $ 9,140 $ 15,220 $ 18,709 $ 24,696
============= ============= ============== ==============

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC 14,253 14,093 14,209 14,089
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED 14,324 14,153 14,290 14,145

EARNINGS PER SHARE OF COMMON STOCK - BASIC $ 0.64 $ 1.08 $ 1.32 $ 1.75
EARNINGS PER SHARE OF COMMON STOCK - DILUTED $ 0.64 $ 1.08 $ 1.31 $ 1.75

CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.72 $ 0.72 $ 1.44 $ 1.44



- ------------------------------------------------------------------------------------------------------------------------------


UIL HOLDINGS CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(THOUSANDS OF DOLLARS)
(UNAUDITED)

Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----


NET INCOME $ 9,140 $ 15,220 $ 18,709 $ 24,696
OTHER COMPREHENSIVE INCOME, NET OF TAX:
UNREALIZED LOSS ON INVESTMENT (388) - (519) -
------------- ------------- -------------- --------------

COMPREHENSIVE INCOME (NOTE A) $ 8,752 $ 15,220 $ 18,190 $ 24,696
============= ============= ============== ==============



The accompanying Notes to Consolidated Financial Statements
are an integral part of the financial statements.




- 3 -


UIL HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEET

ASSETS
(THOUSANDS OF DOLLARS)


June 30, December 31,
2002 2001*
---- -----
(Unaudited)


Current Assets
Unrestricted cash and temporary cash investments $ 6,847 $ 29,500
Restricted cash 29,855 56,596
Utility accounts receivable less allowance of $1,500 and $1,500 60,782 58,607
Other accounts receivable less allowance of $1,573 and $1,522 112,765 115,040
Settlement assets 58,792 37,655
Unbilled revenues 37,630 35,737
Materials and supplies, at average cost 14,104 14,528
Prepayments 2,785 3,299
Other 1,630 1,005
----------------- -----------------
Total Current Assets 325,190 351,967
----------------- -----------------

Other Property and Investments
Investment in United Bridgeport Energy facility 95,251 92,059
Nuclear decommissioning trust fund assets 26,932 26,269
Marketable securities - 3,954
Other 1,088 6,575
----------------- -----------------
Total Other Property and Investments 123,271 128,857
----------------- -----------------

Property, Plant and Equipment at original cost
In service 937,056 914,085
Less, accumulated depreciation 436,088 420,743
----------------- -----------------
500,968 493,342
Construction work in progress 36,774 32,103
Nuclear fuel 19,619 20,973
----------------- -----------------
Net Property, Plant and Equipment 557,361 546,418
----------------- -----------------

Regulatory Assets (AMOUNTS DUE FROM CUSTOMERS IN THE FUTURE
THROUGH THE RATEMAKING PROCESS)
Nuclear plant investments-above market 467,173 477,396
Income taxes due principally to book-tax differences 85,563 86,114
Long-term purchase power contracts-above market 108,744 112,250
Connecticut Yankee 18,686 21,291
Unamortized redemption costs 20,615 21,172
Other 53,269 44,752
----------------- -----------------
Total Regulatory Assets 754,050 762,975
----------------- -----------------

Deferred Charges
Goodwill 76,851 63,456
Unamortized debt issuance expenses 4,655 5,208
Other 7,371 5,050
----------------- -----------------
Total Deferred Charges 88,877 73,714
----------------- -----------------

Total Assets $ 1,848,749 $ 1,863,931
================= =================


*Derived from audited financial statements

The accompanying Notes to Consolidated Financial Statements
are an integral part of the financial statements.



- 4 -


UIL HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEET

LIABILITIES AND CAPITALIZATION
(THOUSANDS OF DOLLARS)

June 30, December 31,
2002 2001*
---- -----
(Unaudited)

Current Liabilities
Notes payable $ 23,355 $ 33,215
Current portion of long-term debt 100,000 100,000
Accounts payable 33,558 40,716
Settlement obligations 84,682 92,348
Dividends payable 10,265 10,163
Accrued liabilities 99,418 103,374
Taxes accrued 10,070 6,373
Interest accrued 18,321 11,119
Obligations under capital leases 455 438
-------------- --------------
Total Current Liabilities 380,124 397,746
-------------- --------------

Noncurrent Liabilities
Purchase power contract obligation 108,744 112,250
Nuclear decommissioning obligation 26,932 26,269
Connecticut Yankee contract obligation 12,577 14,969
Long-term notes payable 17,897 12,788
Obligations under capital leases 15,056 15,288
Other 13,927 13,689
-------------- --------------
Total Noncurrent Liabilities 195,133 195,253
-------------- --------------

Deferred Income Taxes (FUTURE TAX LIABILITIES OWED
TO TAXING AUTHORITIES) 221,095 221,727
-------------- --------------

Regulatory Liabilities (AMOUNTS OWED TO CUSTOMERS IN THE
FUTURE THROUGH THE RATEMAKING PROCESS)
Accumulated deferred investment tax credits 13,550 13,764
Deferred gains on sale of property 29,989 29,827
Customer refund 100 3,657
Other 4,380 3,405
-------------- --------------
Total Regulatory Liabilities 48,019 50,653
-------------- --------------

Commitments and Contingencies (Note L)

Capitalization (Note B)
Long-term debt
Long-term debt 579,301 579,264
Investment in Seabrook obligation bonds (78,754) (80,707)
-------------- --------------
Net long-term debt 500,547 498,557
-------------- --------------

Common Stock Equity
Common Stock 296,501 291,788
Paid-in capital 3,700 2,760
Unrealized gain on investment - 519
Capital stock expense (2,170) (2,170)
Unearned employee stock ownership plan equity (6,886) (7,361)
Retained earnings 212,686 214,459
-------------- --------------
Net Common Stock Equity 503,831 499,995
-------------- --------------

Total Capitalization 1,004,378 998,552
-------------- --------------

Total Liabilities and Capitalization $ 1,848,749 $ 1,863,931
============== ==============


*Derived from audited financial statements

The accompanying Notes to Consolidated Financial Statements
are an integral part of the financial statements.



- 5 -


UIL HOLDINGS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS

(THOUSANDS OF DOLLARS)


Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
----- ----- ----- ----

CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 9,140 $ 15,220 $ 18,709 $24,696
------------ ------------ ----------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,592 20,074 32,762 40,008
Deferred income taxes 718 (3,856) (1,064) (16,319)
Deferred investment tax credits - net (107) (156) (214) (311)
Amortization of nuclear fuel 1,031 1,557 2,585 2,442
Allowance for funds used during construction (391) (371) (1,068) (910)
CTA and SBC regulatory deferral (2,472) (2,655) (5,261) (5,879)
Changes in:
Accounts receivable - net (5,828) 15,101 8,128 (26,770)
Materials and supplies 826 (429) 605 955
Prepayments 1,849 2,204 306 (540)
Settlements assets (4,984) 6,071 (21,137) 5,166
Accounts payable 895 960 (9,425) (15,363)
Interest accrued 5,258 5,187 7,201 9,692
Taxes accrued (5,493) (10,583) 3,567 11,333
Settlements obligations 2,431 (11,354) (7,666) (8,626)
Other assets and liabilities (5,020) 9,261 (16,427) 26,317
------------ ------------ ----------- ----------
Total Adjustments 5,305 31,011 (7,108) 21,195
------------ ------------ ----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,445 46,231 11,601 45,891
------------ ------------ ----------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of:
Common stock 2,282 377 5,608 700
Long-term debt - - - 75,000
Notes payable 1,390 (16,496) (10,780) (73,986)
Expenses of issuances - - - (825)
Lease obligations (179) (100) (285) (198)
Common stock dividends (10,219) (10,140) (20,381) (20,275)
------------ ------------ ----------- ----------
NET CASH USED IN FINANCING ACTIVITIES (6,726) (26,359) (25,838) (19,584)
------------ ------------ ----------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES
Plant expenditures, including nuclear fuel (10,923) (11,165) (24,101) (19,501)
Acquisiton of businesses, net of cash acquired (13,849) (12,360) (13,849) (13,360)
Investment in non-utility business (2,250) - (2,250) -
Investment in debt securities, net - - 5,043 1,928
------------ ------------ ----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (27,022) (23,525) (35,157) (30,933)
------------ ------------ ----------- ----------

CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD (19,303) (3,653) (49,394) (4,626)
BALANCE AT BEGINNING OF PERIOD 56,005 46,466 86,096 47,439
------------ ------------ ----------- ----------
BALANCE AT END OF PERIOD 36,702 42,813 36,702 42,813
LESS: RESTRICTED CASH 29,855 31,073 29,855 31,073
------------ ------------ ----------- ----------
BALANCE: UNRESTRICTED CASH AND TEMPORARY CASH INVESTMENTS $ 6,847 $ 11,740 $ 6,847 $11,740
============ ============ =========== ==========

CASH PAID DURING THE PERIOD FOR:
Interest (net of amount capitalized) $ 5,990 $ 6,388 $ 11,966 $10,737
============ ============ =========== ==========
Income taxes $ 11,200 $ 25,600 $ 12,800 $27,500
============ ============ =========== ==========



The accompanying Notes to Consolidated Financial Statements
are an integral part of the financial statements.



- 6 -






UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

BASIS OF PRESENTATION

The consolidated financial statements of UIL Holdings Corporation (UIL Holdings)
and its wholly-owned direct subsidiaries, The United Illuminating Company (UI)
and United Resources, Inc. (URI), have been prepared pursuant to the applicable
rules and regulations of the Securities and Exchange Commission (SEC). UIL
Holdings' Consolidated Financial Statements include the accounts of UIL Holdings
and its wholly-owned subsidiaries, UI and URI. Intercompany accounts and
transactions have been eliminated in consolidation. The statements reflect all
adjustments that are, in the opinion of management, necessary to a fair
statement of the results of operations, financial position and cash flows for
the periods presented. All such adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the SEC.
UIL Holdings believes that the disclosures are adequate to make the information
presented not misleading. Certain prior year amounts have been reclassified to
conform to the current year's presentation. UIL Holdings' Consolidated Financial
Statements should be read in conjunction with the consolidated financial
statements and the notes to consolidated financial statements included in UIL
Holdings' Annual Report on Form 10-K for the year ended December 31, 2001. Such
notes are supplemented as follows:

(A) STATEMENT OF ACCOUNTING POLICIES

NUCLEAR DECOMMISSIONING TRUSTS

External trust funds are maintained to fund the estimated future decommissioning
costs of the nuclear generating units in which UI has an ownership interest.
These costs are accrued as a charge to depreciation expense over the estimated
service lives of the units and are recovered in rates on a current basis. UI
paid $0.6 million and $1.3 million into the decommissioning trust fund for
Seabrook Unit 1 in the three and six months ended June 30, 2002, respectively.
The payments made into the decommissioning trust funds for Seabrook Unit 1 and
Millstone Unit 3 were $0.9 million and $2.0 million for the three and six months
ended June 30, 2001, respectively. The sale of UI's interest in Millstone Unit 3
was consummated on March 31, 2001.

At June 30, 2002, UI's share of the trust fund balance for Seabrook Unit 1,
which included accumulated earnings on the funds, was $26.9 million. This fund
balance is included in "Other Property and Investments" and the accrued
decommissioning obligation is included in "Noncurrent Liabilities" on the
Consolidated Balance Sheet.

IMPAIRMENT OF LONG-LIVED ASSETS

Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which is effective for fiscal
years beginning after December 31, 2001, requires the recognition of impairment
losses on long-lived assets when the book value of an asset exceeds the sum of
the expected future undiscounted cash flows that result from the use of the
asset and its eventual disposition. This standard also requires that
rate-regulated companies recognize an impairment loss when a regulator excludes
all or part of a cost from rates, even if the regulator allows the company to
earn a return on the remaining allowable costs. Under this standard, the
probability of recovery and the recognition of regulatory assets under the
criteria of SFAS No. 71 must be assessed on an ongoing basis. At June 30, 2002
and December 31, 2001, neither UI nor URI had any assets that were impaired
under this standard.

COMPREHENSIVE INCOME

Comprehensive income included unrealized pre-tax losses of $645,342 and $862,500
for the three and six months ended June 30, 2002, respectively, $388,012 and
$518,578, respectively, after-tax, on a convertible note held by


- 7 -




UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

American Payment Systems, Inc. (APS). The unrealized pre-tax loss of $862,500
for the six months ended June 30, 2002 reversed an unrealized pre-tax gain of
$862,500 on the convertible note that occurred in the fourth quarter of 2001.
The convertible note was repaid in May 2002. Comprehensive income for the three
and six months ended June 30, 2001 was equal to net income as reported.

NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board has issued SFAS No. 141, "Business
Combinations." SFAS No. 141, which applies to all business combinations
initiated after June 30, 2001, would result in UIL Holdings accounting for any
business combinations initiated after that date under the purchase method of
accounting. The adoption of SFAS No. 141 will not change the method of
accounting used in previous business combinations.

The Financial Accounting Standards Board has issued SFAS No. 142, "Goodwill and
Other Intangible Assets." Under SFAS No. 142, which was adopted by UIL Holdings
on January 1, 2002, UIL Holdings will no longer be amortizing its existing
goodwill. At June 30, 2002, goodwill associated with its non-utility businesses
was approximately $76.9 million. The elimination of goodwill amortization in
2002 will increase earnings per share by approximately $0.15 compared to 2001.
In addition, UIL Holdings has been required to measure goodwill for impairment
effective January 1, 2002 as part of the transition provisions. SFAS No. 142
requires goodwill to be allocated to reporting units and measured for impairment
under a two-step test. UIL Holdings has completed the necessary test to
determine if any impairment existed under a prescribed standard. No goodwill
impairment was found under the prescribed standard. For the three and six months
ended June 30, 2001, UIL Holdings' net income, adjusted to exclude the effect of
amortization of goodwill during those periods, was $15.8 million and $25.9
million, respectively. Basic and diluted earnings per share for UIL Holdings,
adjusted to exclude the effect of amortization of goodwill during the three
months ended June 30, 2001, were $1.12 per share. Basic and diluted earnings per
share for UIL Holdings, adjusted to exclude the effect of amortization of
goodwill during the six months ended June 30, 2001, were $1.83 per share.

The Financial Accounting Standards Board has issued SFAS No. 143, "Accounting
for Asset Retirement Obligations." This statement, which is effective for fiscal
years beginning after June 15, 2002, requires that an asset retirement
obligation be recognized at the time when an entity faces a legal obligation to
retire an asset. The asset retirement cost would be capitalized as part of the
related long-lived asset and initially measured at fair value and adjusted in
subsequent periods when necessary. Upon adoption of the statement, a cumulative
effect approach will be used to recognize transition amounts for any existing
asset retirement obligations. SFAS No. 143 will be effective for UIL Holdings
beginning January 1, 2003. UIL Holdings is assessing the impact this standard
will have on its financial position and results of operations.

(B) CAPITALIZATION

COMMON STOCK

UIL Holdings had 14,460,680 shares of its common stock, without par value,
outstanding at June 30, 2002, of which 202,570 shares were unallocated shares
held by UI's 401(k)/Employee Stock Ownership Plan (KSOP) and not recognized as
outstanding for accounting purposes.

In 1998, UI entered into an arrangement under which it loaned $11.5 million to
the KSOP. The trustee for the KSOP used the funds to purchase 328,300 shares of
UI common stock in open market transactions. On July 20, 2000, effective with
the formation of a holding company structure, unallocated shares held by the
KSOP were converted into shares of UIL Holdings' common stock. The shares will
be allocated to employees' KSOP accounts, as the loan is repaid, to cover a
portion of the required KSOP contributions. The loan will be repaid by the KSOP
over a twelve-year period, using employer contributions and UIL Holdings'
dividends paid on the unallocated shares of the stock held by the KSOP. As of
June 30, 2002, 202,570 shares, with a fair market value of $11.0 million, had
been purchased by the KSOP and had not been committed to be released or
allocated to KSOP participants.



- 8 -


UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

In 1990, UI's Board of Directors and the shareowners approved a stock option
plan for officers and key employees of UI. Effective with the formation of the
holding company structure on July 20, 2000, all options were converted into
options to purchase shares of UIL Holdings' common stock.

On June 28, 1999, UI's shareowners approved a stock option plan for directors,
officers and key employees of UI, providing for the awarding of options to
purchase up to 650,000 shares of common stock over periods of from one to ten
years following the dates when the options are granted. The exercise price of
each option cannot be less than the market value of the stock on the date of the
grant. Effective with the formation of the holding company structure on July 20,
2000, all options were converted into options to purchase shares of UIL
Holdings' common stock. On March 25, 2002, the Board of Directors recommended to
the shareowners that the plan be amended to increase the maximum number of
shares of UIL Holdings' common stock for which stock options may be granted from
650,000 to 1,350,000, and to increase the limit on the number of shares that may
be covered by options granted in any one year to any employee from 50,000 to
150,000. The shareowners approved this amendment at the UIL Holdings Annual
Meeting on May 15, 2002. The Board of Directors had granted options to purchase
220,700 shares of stock at an exercise price of $56.605 per share and 20,000
shares of stock at an exercise price of $57.60 per share, contingent on
shareowner approval of this amendment.

RETAINED EARNINGS RESTRICTION

The indenture under which UI has issued $200 million principal amount of Notes
places limitations on UI relative to the payment of cash dividends on its common
stock, which is wholly-owned by UIL Holdings, and the purchase or redemption of
said common stock. Retained earnings in the amount of $81.3 million were free
from such limitations at June 30, 2002.

LONG-TERM DEBT

On February 1, 2002, the interest rate on $27.5 million principal amount of
Pollution Control Refunding Revenue Bonds, 1997 Series, due July 1, 2027, issued
by the Business Finance Authority (BFA) of the State of New Hampshire was reset
from 4.35% to 3.75%. The new interest rate will remain in effect for a two-year
period through January 31, 2004. UI is obligated, under its borrowing agreement
with the BFA, to pay the interest on the Bonds. Interest is payable
semi-annually on August 1st and February 1st.

(C) RATE-RELATED REGULATORY PROCEEDINGS

A final decision in a pending UI retail rate proceeding (Rate Case), discussed
below, is expected by the end of the third quarter of 2002. The decision is
expected to establish UI's rates, revenue requirements and authorized return on
equity on a prospective basis, as well as determining whether to approve UI's
proposed multi-year rate plan.

On December 31, 1996, the Connecticut Department of Public Utility Control
(DPUC) completed a financial and operational review of UI and ordered a
five-year incentive retail rates regulation plan for the years 1997 through 2001
(the Rate Plan). The Rate Plan accelerated the amortization and recovery of
regulatory assets if UI's common stock equity return on regulated utility
investment exceeded 10.5% after recording the amortization. UI's authorized
return on regulated utility common stock equity during the period was 11.5%.
Earnings above 11.5%, on an annual basis, were utilized one-third for customer
bill reductions, one-third to accelerate amortization of assets, and one-third
retained as earnings.

The Rate Plan included a provision that it could be reopened and modified upon
the enactment of electric utility restructuring legislation in Connecticut. On
October 1, 1999, the DPUC issued a decision establishing UI's standard offer
customer rates, commencing January 1, 2000, at a level 10% below 1996 rates, as
directed by the Restructuring Act described in detail below. These standard
offer customer rates superseded the rates that were included in the Rate Plan.
The decision also reduced the required amount of accelerated amortization of
assets in 2000 and 2001. Under this 1999 decision, all other components of the
1996 Rate Plan remained in effect through 2001.



- 9 -


UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

On February 13, 2001, the Connecticut Attorney General and the Office of
Consumer Counsel petitioned the DPUC to initiate a proceeding and hold a hearing
concerning the need to decrease UI's rates by reason of UI having earned a
return on regulated common equity more than 1% above the authorized level of
11.5% for at least six consecutive months. The DPUC docketed such a proceeding
and, by a letter dated July 3, 2001, stated its intention to combine a full
review of UI's retail rates in the same docket as the overearnings proceeding.
Following hearings on August 8, 2001 and August 27, 2001, the DPUC issued a
final decision on October 31, 2001 holding that as a result of the earnings
sharing mechanism embedded in UI's Rate Plan, UI's customers have directly
benefited when UI has earned over its 11.5% authorized return on regulated
common equity during the Rate Plan period. Because the earnings sharing
mechanism was scheduled to end, with the Rate Plan, on December 31, 2001, the
DPUC ordered that the earnings sharing mechanism be extended effective January
1, 2002 until the conclusion of the Rate Case proceeding. The DPUC's decision
also found that UI's earnings are not expected to exceed 11.5% in 2002, but that
just and reasonable rates for UI at this point in time can only be determined in
the full Rate Case proceeding.

UI filed Rate Case schedules in November 2001, together with supporting
pre-filed sworn written testimony. UI proposed no change in base rates for the
rate year 2002, and no change in its 11.5% authorized return on equity. In
addition, UI proposed a new rate plan for the period from the DPUC's Rate Case
decision through 2007 (Proposed Rate Plan), including a change in the earnings
sharing mechanism to utilize 50% of earnings over the authorized return, if any,
to reduce stranded costs and 50% retained as earnings. UI anticipates a final
decision in the Rate Case proceeding by the end of the third quarter of 2002.

In April 1998, Connecticut enacted Public Act 98-28 (the Restructuring Act), a
massive and complex statute designed to restructure the State's regulated
electric utility industry. As a result of the Restructuring Act, the business of
generating and selling electricity directly to consumers has been opened to
competition since January 2000. These business activities are separated from the
business of delivering electricity to consumers, also known as the transmission
and distribution business. The business of delivering electricity remains with
the incumbent franchised utility companies (including UI) which continue to be
regulated by the DPUC as Distribution Companies.

A major component of the Restructuring Act is the collection, by Distribution
Companies, of a "competitive transition assessment," a "systems benefits
charge," an "energy conservation and load management program charge" and a
"renewable energy investment charge." The competitive transition assessment
represents costs that have been reasonably incurred by, or will be incurred by,
Distribution Companies to meet their public service obligations as electric
companies, and that will likely not otherwise be recoverable in a competitive
generation and supply market. These costs include above-market long-term
purchased power contract obligations, regulatory asset recovery and above-market
investments in power plants (so-called stranded costs). The systems benefits
charge represents public policy costs, such as generation decommissioning and
displaced worker protection costs. Beginning in 2000, a Distribution Company has
been required to collect the competitive transition assessment, the systems
benefits charge, the energy conservation and load management program charge and
the renewable energy investment charge from its customers. The DPUC has an
annual proceeding to review UI's collection of the competitive transition
assessment and systems benefits charge for the prior year, and to establish the
applicable competitive transition assessment charge and systems benefits charge
for the next year. UI has proposed no changes to these charges since they were
established in 1999 for collection beginning January 1, 2000.

Under the Restructuring Act, all Connecticut electricity customers are able to
choose their power supply providers. Through December 31, 2003, UI is required
to offer retail service to its customers under a regulated "standard offer" rate
to each customer who does not choose an alternate power supply provider, even
though UI is no longer in the business of retail power generation. UI is also
required under the Restructuring Act to provide back-up power supply service to
customers whose alternate power supply provider fails to provide power supply
services for reasons other than the customers' failure to pay for such services.
On December 28, 2001, UI entered into an agreement with Virginia Electric and
Power Company for the supply of all of UI's standard offer generation service
needs from January 1, 2002 through December 31, 2003, and for the supply of all
of UI's other generation service requirements through 2008. See discussion in
Note (L) with respect to UI's prior standard offer supplier.



- 10 -


UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Restructuring Act requires that, in order for UI to recover any stranded
costs, it must attempt to divest its ownership interests in its nuclear-fueled
power plants prior to 2004. On October 1, 1998, in its "unbundling plan" filing
with the DPUC under the Restructuring Act, and in other regulatory dockets, UI
stated that it planned to divest its nuclear generation ownership and leasehold
interests (17.5% of Seabrook Station in New Hampshire and 3.685% of Millstone
Unit 3 in Connecticut) by the end of 2003, in accordance with the Restructuring
Act. The sale of UI's ownership in Millstone Unit 3 was consummated on March 31,
2001. On October 10, 2001, the DPUC issued its final decision approving, with
certain modifications, the jointly filed plan by The Connecticut Light and Power
Company and UI to divest their respective interests in Seabrook Station by an
auction process. The New Hampshire Public Utilities Commission (NHPUC), in
coordination with the DPUC, retained JPMorgan as the exclusive financial advisor
to conduct the auction. On April 15, 2002, the NHPUC, in coordination with the
DPUC, and JPMorgan announced that an agreement had been reached with an
affiliate of FPL Group (FPL) to purchase 88.2% of Seabrook Station, including
UI's ownership and leasehold interests in Units 1 and 2. Proceeds from the sale
will be used to terminate UI's obligation under its Seabrook Unit 1
sale/leaseback agreement ($208.9 million), net of UI's investment in Seabrook
Lease Obligation Bonds ($78.8 million). Consummation of the sale is subject to
requisite regulatory approvals and completion of FPL's due diligence
investigation prior to the closing date. UI currently expects that such
regulatory approvals will be received, and the sale will be consummated around
the end of 2002. In compliance with the Restructuring Act, the net-of-tax gain
from the sale, after termination of the sale/leaseback agreement, that is in
excess of the book value of the plant, as set by the DPUC, based on its estimate
of the market value of the plant, must be used to reduce UI's stranded costs.
Accordingly, at the time of sale, there should be no direct impact on financial
results as a result of the sale. UI will, however, receive no future operating
earnings from Seabrook Station after the sale is consummated.

The DPUC is required by Connecticut law to initiate a proceeding whenever a work
stoppage occurs at a public service company for a period of more than seven
days. Because the unionized employees at UI were on strike from May 16, 2002 to
June 9, 2002, the DPUC will conduct a proceeding to determine whether, as a
result of the work stoppage, UI earned unreasonable profits and whether the
quality of service to UI's customers was impaired. UI is preparing a post-strike
analysis of the financial impact of the strike, together with a review of
service quality metrics, for submission to the DPUC.

Under Connecticut law, the DPUC is required to conduct a management audit of
each electric public service company having more than seventy-five thousand
customers, no less frequently than every six years. By a Request for Proposal
dated July 3, 2002, the DPUC's Utilities Operations and Management Analysis Unit
invited proposals from consulting firms to assist the DPUC in its performance of
a management audit of UI.

(E) SHORT-TERM CREDIT ARRANGEMENTS

UIL Holdings has a money market loan arrangement with JPMorgan Chase Bank. This
is an uncommitted short-term borrowing arrangement under which JPMorgan Chase
Bank may make loans to UIL Holdings for fixed maturities from one day up to six
months. JPMorgan Securities, Inc. acts as an agent and sells the loans to
investors. The fixed interest rates on the loans are determined based on
conditions in the financial markets at the time of each loan. As of June 30,
2002, UIL Holdings had $12.1 million in loans outstanding under this
arrangement.

On August 1, 2002, UIL Holdings entered into a revolving credit agreement with a
group of banks, which extends to July 31, 2003. The borrowing limit of this
facility is $100 million. The facility permits UIL Holdings to borrow funds at a
fluctuating interest rate determined by the prime lending market in New York,
and also permits UIL Holdings to borrow money for fixed periods of time
specified by UIL Holdings at fixed interest rates determined by the Eurodollar
interbank market in London (LIBOR). If a material adverse change in the
business, operations, affairs, assets or condition, financial or otherwise, or
prospects of UIL Holdings and its subsidiaries, on a consolidated basis, should
occur, the banks may decline to lend additional money to UIL Holdings under this
revolving credit agreement, although borrowings outstanding at the time of such
an occurrence would not then


- 11 -


UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

become due and payable. As of June 30, 2002, UIL Holdings had no short-term
borrowings outstanding under the revolving credit facility that expired on
August 1, 2002.

Xcelecom, Inc. (Xcelecom) has a revolving working capital credit agreement with
a bank that has been extended to September 25, 2002. This agreement provides for
a $25 million revolving working capital facility, available to meet working
capital needs and to support standby letters of credit issued by Xcelecom in the
normal course of its business. This agreement also provides for the payment of
interest at a rate, at the option of Xcelecom, based on the bank's prime
interest rate or LIBOR. As of June 30, 2002, the outstanding balance on this
facility was $8.0 million. In addition, Xcelecom had outstanding standby letters
of credit of $5.1 million at June 30, 2002. Xcelecom is currently negotiating a
new facility with the bank.

American Payment Systems, Inc. (APS) has a $10 million revolving credit
agreement with a bank that has been extended to September 20, 2002. This
agreement is available for working capital needs, acquisition of fixed assets
and investments in acquired companies. The terms of this agreement allow APS to
select the interest rate on its short-term borrowings based on either the bank's
prime interest rate or LIBOR. As of June 30, 2002, APS had $2.3 million in
short-term borrowings outstanding under this agreement. APS is currently
negotiating a new facility with the bank.




- 12 -


UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


(F) INCOME TAXES


Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
(In Thousands) (In Thousands)

Income tax expense consists of:
Income tax provisions (benefit):
Current
Federal $6,170 $13,660 $14,155 $31,517
State 1,463 3,223 3,315 7,426
----------- ------------ ------------ ------------
Total current 7,633 16,883 17,470 38,943
----------- ------------ ------------ ------------
Deferred
Federal 872 (2,987) (286) (13,069)
State (154) (869) (778) (3,250)
----------- ------------ ------------ ------------
Total deferred 718 (3,856) (1,064) (16,319)
----------- ------------ ------------ ------------

Investment tax credits (107) (156) (214) (311)
----------- ------------ ------------ ------------

Total income tax expense $8,244 $12,871 $16,192 $22,313
=========== ============ ============ ============

Income tax components charged as follows:
Operating tax expense $8,890 $12,995 $17,178 $22,449
Nonoperating tax benefit (646) (124) (986) (136)
----------- ------------ ------------ ------------

Total income tax expense $8,244 $12,871 $16,192 $22,313
=========== ============ ============ ============




- 13 -


UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(G) SUPPLEMENTARY INFORMATION (UNAUDITED)


Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
(In Thousands) (In Thousands)
OPERATING REVENUES
- ------------------

Utility
Retail $ 148,700 $ 150,653 $ 295,987 $ 300,000
Wholesale 13,334 16,799 31,118 27,415
Other 6,437 6,262 13,391 11,513
Non-utility businesses
American Payment Systems 23,728 14,403 45,478 24,238
Xcelecom 92,152 74,423 156,768 141,603
Other/Eliminations (63) (31) (118) (62)
------------ ------------- ------------ -------------
Total Operating Revenues $ 284,288 $ 262,509 $ 542,624 $ 504,707
============ ============= ============ =============

SALES BY CLASS(MEGAWATT-HOURS)
- ------------------------------
Retail
Residential 472,575 472,973 1,019,924 1,026,125
Commercial 592,700 614,875 1,172,202 1,198,399
Industrial 256,484 275,142 493,345 533,023
Other 9,695 9,706 22,580 22,686
------------ ------------- ------------ -------------
Total Retail Sales 1,331,454 1,372,696 2,708,051 2,780,233
Wholesale 416,481 560,261 970,856 927,557
------------ ------------- ------------ -------------
Total Sales by Class 1,747,935 1,932,957 3,678,907 3,707,790
============ ============= ============ =============

DEPRECIATION AND AMORTIZATION
- -----------------------------
Utility property, plant, and equipment $ 6,910 $ 6,384 $ 13,837 $ 12,845
Non-utility business property, plant and equipment 1,549 926 2,710 1,782
Nuclear Decommissioning 673 834 1,345 1,771
------------ ------------- ------------ -------------
Total Depreciation 9,132 8,144 17,892 16,398
------------ ------------- ------------ -------------
Amortization of intangibles 510 1,122 946 2,095
Amortization of nuclear plant regulatory assets 3,168 3,768 6,194 5,874
Amortization of purchase power contracts 5,987 6,511 11,909 12,950
Amortization of other regulatory assets 1,047 1,436 2,119 2,873
Amortization of cancelled plant 293 293 586 586
------------ ------------- ------------ -------------
Total Amortization 11,005 13,130 21,754 24,378
------------ ------------- ------------ -------------
Total Depreciation and Amortization $ 20,137 $ 21,274 $ 39,646 $ 40,776
============ ============= ============ =============

TAXES - OTHER THAN INCOME TAXES
- -------------------------------
Operating:
Connecticut gross earnings $ 6,531 $ 6,337 $ 12,954 $ 12,340
Local real estate and personal property 3,174 3,121 6,587 6,419
Payroll taxes 1,773 1,333 3,885 3,194
------------ ------------- ------------ -------------
Total Taxes - Other than Income Taxes $ 11,478 $ 10,791 $ 23,426 $ 21,953
============ ============= ============ =============

OTHER INCOME (EXPENSE), NET
- ---------------------------
Interest income $ 259 $ 164 $ 418 $ 311
Allowance for funds used during construction 391 372 1,068 910
Equity earnings from Connecticut Yankee 101 128 185 91
Non-utility business passive income (expense) (4,149) 888 (5,622) 1,843
Miscellaneous other income and (expense) - net (348) 229 (4) (150)
------------ ------------- ------------ -------------
Total Other Income (Expense), net $ (3,746) $ 1,781 $ (3,955) $ 3,005
============ ============= ============ =============

OTHER INTEREST, NET
- -------------------
Notes Payable $ 106 $ 415 $ 209 $ 1,997
Other 447 397 773 815
------------ ------------- ------------ -------------
Total Other Interest, net $ 553 $ 812 $ 982 $ 2,812
============ ============= ============ =============





- 14 -



UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(L) COMMITMENTS AND CONTINGENCIES

CAPITAL EXPENDITURE PROGRAM

UIL Holdings' continuing capital expenditure program is estimated at $308.2
million, excluding UI's allowance for funds used during construction, for 2002
through 2006. UI is planning to participate in a proposed 345KV project in
southwestern Connecticut. The project will require numerous regulatory approvals
and construction is not expected to commence until 2005 at the earliest. Due to
uncertainty regarding the time schedule and UI's share of the cost of the
project, this project has not been included in the total estimated cost of UIL
Holdings' capital expenditure program for 2002 through 2006.

NUCLEAR INSURANCE CONTINGENCIES

The Price-Anderson Act, the renewal of which is pending in a Congressional
conference committee, limits public liability resulting from a single incident
at a nuclear power plant. The first $200 million of liability coverage is
provided by purchasing the maximum amount of commercially available insurance.
Additional liability coverage will be provided by an assessment of up to $83.9
million per incident, levied on each of the nuclear units licensed to operate in
the United States, subject to a maximum assessment of $10 million per incident
per nuclear unit in any year. In addition, if the sum of all public liability
claims and legal costs resulting from any nuclear incident exceeds the maximum
amount of financial protection, each reactor operator can be assessed an
additional 5% of $83.9 million, or $4.2 million. The maximum assessment is
adjusted at least every five years to reflect the impact of inflation. With
respect to the one operating nuclear generating unit in which UI has an
interest, UI will be obligated to pay its ownership and leasehold share of any
statutory assessment resulting from a nuclear incident at any nuclear generating
unit. Based on its interest in this nuclear generating unit, UI estimates its
maximum liability would be $14.7 million per incident. However, any assessment
would be limited to $1.8 million per incident per year.

The Nuclear Regulatory Commission requires each operating nuclear generating
unit to obtain property insurance coverage in a minimum amount of $1.06 billion
and to establish a system of prioritized use of the insurance proceeds in the
event of a nuclear incident. The system requires that the first $1.06 billion of
insurance proceeds be used to stabilize the nuclear reactor to prevent any
significant risk to public health and safety and then for decontamination and
cleanup operations. Only following completion of these tasks would the balance,
if any, of the segregated insurance proceeds become available to the unit's
owners. For the one operating nuclear generating unit in which UI has an
interest, UI is required to pay its ownership and leasehold share of the cost of
purchasing such insurance. Although this unit has purchased $2.75 billion of
property insurance coverage, representing the limits of coverage currently
available from conventional nuclear insurance pools, the cost of a nuclear
incident could exceed available insurance proceeds. Under those circumstances,
the nuclear insurance pools that provide this coverage may levy assessments
against the insured owner companies if pool losses exceed the accumulated funds
available to the pool. The maximum potential assessments against UI with respect
to losses occurring during current policy years are approximately $3.7 million.

OTHER COMMITMENTS AND CONTINGENCIES

CONNECTICUT YANKEE

On December 4, 1996, the Board of Directors of the Connecticut Yankee Atomic
Power Company (Connecticut Yankee) voted unanimously to retire the Connecticut
Yankee nuclear plant (the Connecticut Yankee Unit) from commercial operation. UI
has a 9.5% stock ownership share in Connecticut Yankee. The power purchase
contract under which UI had purchased its 9.5% entitlement to the Connecticut
Yankee Unit's power output permits Connecticut Yankee to recover 9.5% of all of
its costs from UI. A decision by the FERC that became effective on August 1,
2000 allows Connecticut Yankee to collect through the power contracts with the
unit's owners, the FERC-approved decommissioning costs, other costs associated
with the permanent shutdown of the Connecticut Yankee Unit, the unrecovered
investment in the Connecticut Yankee Unit, and a return on equity of 6%.



- 15 -


UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

UI's estimate of its remaining share of Connecticut Yankee costs, including
decommissioning, less the return of UI's investment in Connecticut Yankee
(approximately $6.1 million) and the projected future return on this investment
(approximately $1.2 million) at June 30, 2002, is approximately $12.6 million.
This estimate, which is subject to ongoing review and revision, has been
recorded as an obligation with an offsetting regulatory asset of $18.7 million,
which includes the $6.1 million return of investment. UI estimates that the
decommissioning will be completed in 2004.

HYDRO-QUEBEC

UI is a participant in the Hydro-Quebec transmission intertie facility linking
New England and Quebec, Canada. Phase I of this facility, which became
operational in 1986 and in which UI has a 5.45% participating share, has a 690
megawatt equivalent generation capacity value; and Phase II, in which UI has a
5.45% participating share, increased the equivalent generation capacity value of
the intertie from 690 megawatts to a maximum of 2000 megawatts in 1991. UI is
obligated to furnish a guarantee for its participating share of the debt
financing for the Phase II facility. As of June 30, 2002, UI's guarantee
liability for this debt was approximately $4.7 million.

CROSS-SOUND CABLE PROJECT

United Capital Investments (UCI), an indirect wholly-owned subsidiary of UIL
Holdings, has a 25% interest in Cross-Sound Cable Company, LLC (Cross-Sound),
which owns and proposes to operate a 330-megawatt merchant transmission line
connecting Connecticut and Long Island under Long Island Sound. UCI has
furnished a credit support agreement for its participating share of the debt
financing during construction of this project, up to a maximum of $33.8 million.
Under a separate agreement, UIL Holdings is a guarantor of the credit-support
obligation of UCI. Cross-Sound has informed UCI that, as of June 30, 2002, UCI's
credit-support obligation was approximately $9.4 million, assuming that the
primary third-party project guarantors meet their obligations. This project has
been opposed by a number of public officials and private groups who have
participated actively in governmental permitting proceedings relative to the
project and have attempted to enact a state statute delaying the project. On
March 17, 2002, the Connecticut Department of Environmental Protection issued a
permit for the project and, on March 19, 2002, the United States Army Corps of
Engineers approved a permit application for siting the cable in the New Haven
Harbor navigation channel. In January 2002, the Connecticut Siting Council (CSC)
approved a permit application for siting the cable; however, the Connecticut
Attorney General and the City of New Haven have appealed the CSC's decision to
the Connecticut Superior Court. The Superior Court has denied requests filed by
both the Attorney General and the City for a stay of the effectiveness of the
CSC permit pending a decision on this appeal; and UCI management believes that
the CSC decision will be upheld on appeal, although there can be no assurance
that it will be upheld. Construction of the transmission line in accordance with
the governmental permits has not been completed; and it is not known at this
time when commercial operation will commence.

ENVIRONMENTAL CONCERNS

In complying with existing environmental statutes and regulations and further
developments in areas of environmental concern, including legislation and
studies in the fields of water quality, hazardous waste handling and disposal,
toxic substances, and electric and magnetic fields, UIL Holdings and its
wholly-owned direct and indirect subsidiaries may incur substantial capital
expenditures for equipment modifications and additions, monitoring equipment and
recording devices, and it may incur additional operating expenses. The total
amount of these expenditures is not now determinable. Environmental damage
claims may also arise from the operations of UIL Holdings' subsidiaries.
Significant environmental issues known to UIL Holdings at this time are
described below.

SITE DECONTAMINATION, DEMOLITION AND REMEDIATION COSTS

As a result of a 1992 DPUC retail rate decision, since January 1, 1993, UI has
been recovering through retail rates $1.075 million per year of environmental
remediation costs for decontaminating its demolished Steel Point Station



- 16 -


UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

property in Bridgeport. The amortization of approximately $3.0 million of these
costs, as proposed by UI in its pending Rate Case for the period 2002 through
2004, reflects the remaining cost of cleaning up the property, assuming a zero
sales value. Final costs will be offset by any sale price realized, and will be
subject to regulatory true-up upon disposition of the property.

Subsequent to the demolition of Steel Point Station, the adjacent East Main
Street Substation was removed at the request of the City of Bridgeport. UI will
undertake an environmental subsurface investigation of the former substation
site, but potential environmental remediation costs cannot be estimated at this
time.

Concurrent with the removal of the East Main Street Substation, the Congress
Street Station was expanded to replace it. The Congress Street Station expansion
cost $11.1 million, of which $10.6 million is reimbursable from the City of
Bridgeport. UI expects that the receivable will be collectible from the City of
Bridgeport through anticipated redevelopment grants or similar funding by the
State of Connecticut.

UI is in the process of replacing the bulkhead surrounding a site, bordering the
Mill River in New Haven, that contains transmission facilities and deactivated
generation facilities, at an estimated cost of $13.5 million. Of this amount,
$4.2 million represents the portion of the costs to protect UI's transmission
facilities and will be capitalized as plant in service; and the remaining
estimated cost of $9.3 million has been expensed. UI expects the project to be
completed in 2003. UI has conveyed to an unaffiliated entity, Quinnipiac Energy
LLC (QE), this entire site, reserving to UI permanent easements for the
operation of its transmission facilities on the site. QE will complete the
bulkhead replacement project at UI's expense, with UI acting as the project
manager. UI has also funded 61% (approximately $1.2 million) of the estimated
environmental remediation costs that will be incurred by QE to bring the site
into compliance with applicable minimum Connecticut environmental standards. QE
intends to reactivate the generation facilities on the site as a merchant
electric generating plant.

UI closed on the sale of its Bridgeport Harbor Station and New Haven Harbor
Station generating plants in compliance with Connecticut's electric utility
industry restructuring legislation on April 16, 1999. Environmental assessments
performed in connection with the marketing of these plants indicate that
substantial remediation expenditures will be required in order to bring the
plant sites into compliance with applicable minimum Connecticut environmental
standards. The purchaser of the plants has agreed to undertake and pay for the
remediation of the purchased properties. With respect to the portion of the New
Haven Harbor Station site that UI has retained, UI has performed an additional
environmental investigation. That investigation has refined what UI knows about
the site conditions. At this time, UI is in the process of estimating the scope
and cost of the remediation that will be required.

The owner of a parcel of property in Derby, Connecticut, has notified UI that
the owner is remediating soil contamination of the property by fuel oil, which
contamination the owner has asserted resulted from activities conducted on the
property when it was owned by UI during the period 1961 to 1976. Based on its
own investigation to date, UI has advised the owner that UI has no
responsibility for the alleged soil contamination. The Connecticut Department of
Environmental Protection is remediating a migration of fuel oil contamination
from a neighboring parcel of property into the adjacent Housatonic River. If UI
or regulatory agencies determine that UI is responsible for the costs of these
remediation activities, UI may experience substantial costs, although no
estimate of potential costs is currently available.

TERMINATION OF STANDARD OFFER SUPPLY AGREEMENT

On December 28, 1999, UI entered into agreements with Enron Power Marketing,
Inc. (EPMI), a subsidiary of Enron Corp. (Enron), for the supply of all of the
power needed by UI to meet its standard offer generation service needs and its
other generation service requirements at fixed prices. The four-year standard
offer period ends December 31, 2003; and UI's other generation service
requirements continue, in decreasing annual quantities, until 2008. Effective
January 1, 2002, UI terminated all of its agreements with EPMI by reason of
EPMI's default under its agreements with UI, including EPMI's commencement of
bankruptcy proceedings on December 2, 2001. UI has been contacted by


- 17 -


UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

representatives of EPMI seeking information relating to the calculation of the
damages payable to UI as a result of EPMI's default.

(M) NUCLEAR FUEL DISPOSAL AND NUCLEAR PLANT DECOMMISSIONING

New Hampshire has enacted a law requiring that the funds required to finance the
decommissioning of nuclear generating units in that state be managed by the
State Treasurer. The New Hampshire Nuclear Decommissioning Financing Committee
(NDFC) has established $584.7 million (in 2002 dollars) as the decommissioning
cost estimate for Seabrook Station, of which UI's share would be approximately
$102.3 million. This estimate assumes the property on which Seabrook Station is
located will be restored on a commercial-industrial site restoration basis at
the end of its estimated 36-year energy producing life. Monthly decommissioning
payments are being made to the state-managed decommissioning trust fund. UI's
share of the decommissioning payments made during the first six months of 2002
was $1.3 million. UI's share of the fund at June 30, 2002 was approximately
$26.9 million.

On April 15, 2002, the NHPUC, in coordination with the DPUC, and JPMorgan
announced that an agreement had been reached with an affiliate of FPL Group to
purchase 88.2% of Seabrook Station, including the decommissioning trust funds of
the selling owners. The decommissioning funds will be transferred to the buyer
at the closing of the sale, along with the decommissioning obligation. UI
expects that it will be required to make an additional payment at closing, as a
final adjustment to its decommissioning funds.

Connecticut has enacted a law requiring the operators of nuclear generating
units to file periodically with the DPUC their plans for financing the
decommissioning of the units in that state. The projected remaining
decommissioning cost for the Connecticut Yankee Unit, assuming the prompt
removal and dismantling of the unit, under the August 1, 2000 FERC decision with
respect to Connecticut Yankee described above, escalated to June 30, 2002, is
approximately $228.4 million, of which UI's 9.5% equity ownership share is
approximately $21.7 million. Decommissioning costs of $0.8 million were funded
by UI during the first six months of 2002, and UI's share of the fund at June
30, 2002 was $24.2 million, based on the market value of the fund at that time.
The $24.2 million trust fund balance consists of $8.9 million reserved for
remaining decommissioning costs, $14.3 million for spent fuel disposal
obligations, and the remainder for completed decommissioning work not yet paid.




- 18 -




UIL HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(P) SEGMENT INFORMATION

UIL Holdings has two reportable operating segments, UI, its regulated electric
utility business engaged in the purchase, transmission, distribution and sale of
electricity, and Xcelecom, its non-utility, indirect, wholly-owned subsidiary,
which provides specialized contracting services in the electrical,
communications and data network infrastructure industries. Revenues from
inter-segment transactions are minimal. All of UIL Holdings' revenues are
derived in the United States.

The following table reconciles certain segment information with that provided in
UIL Holdings' Consolidated Financial Statements. In the table, Other includes
the information for the remainder of UIL Holdings' non-utility businesses and
inter-segment eliminations.

JUNE 30, 2002 DECEMBER 31, 2001
------------- -----------------
Total Assets (In Thousands)
------------
Utility $1,514,210 $1,536,802
Xcelecom - Non-utility business 201,310 180,794
Other 133,229 146,335
-----------------------------------
Total - UIL Holdings $1,848,749 $1,863,931
===================================





THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2002 JUNE 30, 2001
------------- ------------- ------------- -------------
Revenues from External Customers (In Thousands) (In Thousands)
- --------------------------------

Utility $168,471 $173,714 $340,496 $338,928
Xcelecom - Non-utility business 92,152 74,423 156,768 141,603
Other 23,665 14,372 45,360 24,176
------------------------------------------------------------
Total - UIL Holdings $284,288 $262,509 $542,624 $504,707
============================================================






Income (Loss) before Income Taxes

Utility $22,474 $27,051 $47,701 $47,948
Xcelecom - Non-utility business 2,621 2,994 (983) 3,404
Other (7,711) (1,954) (11,817) (4,343)
------------------------------------------------------------
Total - UIL Holdings $17,384 $28,091 $34,901 $47,009
============================================================



- 19 -


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

MAJOR INFLUENCES ON FINANCIAL CONDITION

The financial condition of UIL Holdings Corporation (UIL Holdings) will continue
to be dependent on the retail rate levels and the level of the electric utility
retail sales of its direct subsidiary, The United Illuminating Company (UI) and
on UI's ability to control its expenses, as well as on the performance of the
businesses of UIL Holdings' non-utility subsidiaries. A final decision in UI's
pending retail rate proceeding (Rate Case), discussed below, is expected by the
end of the third quarter of 2002. The decision is expected to establish UI's
rates, revenue requirements and authorized return on equity on a prospective
basis, as well as determining whether to approve UI's proposed multi-year rate
plan. The two primary factors that affect electric utility sales volume are
economic conditions and weather. The principal factors affecting the financial
condition of UIL Holdings' operating non-utility subsidiaries, American Payment
Systems, Inc. and Xcelecom, Inc., are the pace of technological changes,
competition, risks related to management of internal growth, acquisition
financing and integration, exposure to downturns in the economy, risks
associated with contracts, recoverability and possible impairment of goodwill,
and collectibility of receivables.

UIL Holdings' financial status and financing capability will continue to be
sensitive to many other factors, including conditions in the securities markets,
economic conditions, interest rates, the level of income and cash flow of UIL
Holdings' subsidiaries, and legislative and regulatory developments, including
the cost of compliance with increasingly stringent environmental legislation and
regulations.

On December 31, 1996, the Connecticut Department of Public Utility Control
(DPUC) completed a financial and operational review of UI and ordered a
five-year incentive retail rates regulation plan for the years 1997 through 2001
(the Rate Plan). The Rate Plan accelerated the amortization and recovery of
regulatory assets if UI's common stock equity return on regulated utility
investment exceeded 10.5% after recording the amortization. UI's authorized
return on regulated utility common stock equity during the period was 11.5%.
Earnings above 11.5%, on an annual basis, were utilized one-third for customer
bill reductions, one-third to accelerate amortization of regulatory assets, and
one-third retained as earnings.

The Rate Plan included a provision that it could be reopened and modified upon
the enactment of electric utility restructuring legislation in Connecticut. On
October 1, 1999, the DPUC issued a decision establishing UI's standard offer
customer rates, commencing January 1, 2000, at a level 10% below 1996 rates, as
directed by the Restructuring Act described in detail below. These standard
offer customer rates superseded the rates that were included in the Rate Plan.
The decision also reduced the required amount of accelerated amortization of
assets in 2000 and 2001. Under this 1999 decision, all other components of the
1996 Rate Plan remained in effect through 2001.

On February 13, 2001, the Connecticut Attorney General and the Office of
Consumer Counsel petitioned the DPUC to initiate a proceeding and hold a hearing
concerning the need to decrease UI's rates by reason of UI having earned a
return on regulated common equity more than 1% above the authorized level of
11.5% for at least six consecutive months. The DPUC docketed such a proceeding
and, by a letter dated July 3, 2001, stated its intention to combine a full
review of UI's retail rates (a Rate Case) in the same docket as the overearnings
proceeding. Following hearings on August 8, 2001 and August 27, 2001, the DPUC
issued a final decision on October 31, 2001 holding that as a result of the
earnings sharing mechanism embedded in UI's Rate Plan, UI's customers have
directly benefited when UI has earned over its 11.5% authorized return on
regulated common equity during the Rate Plan period. Because the earnings
sharing mechanism was scheduled to end, with the Rate Plan, on December 31,
2001, the DPUC ordered that the earnings sharing mechanism be extended effective
January 1, 2002 until the conclusion of the Rate Case proceeding. The DPUC's
decision also found that UI's earnings are not expected to exceed 11.5% in 2002,
but that just and reasonable rates for UI at this point in time can only be
determined in the full Rate Case proceeding.

UI filed Rate Case schedules in November 2001, together with supporting
pre-filed sworn written testimony. UI proposed no change in base rates for the
rate year 2002, and no change in its 11.5% authorized return on equity. In
addition, UI proposed a new rate plan for the period from the DPUC's Rate Case
decision through 2007 (Proposed Rate Plan), including a change in the earnings
sharing mechanism to utilize 50% of earnings over the authorized


- 20 -


return, if any, to reduce stranded costs and 50% retained as earnings. UI
anticipates a final decision in the Rate Case proceeding by the end of the
third quarter of 2002.

In April 1998, Connecticut enacted Public Act 98-28 (the Restructuring Act), a
massive and complex statute designed to restructure the State's regulated
electric utility industry. As a result of the Restructuring Act, the business of
generating and selling electricity directly to consumers has been opened to
competition since January 2000. These business activities are separated from the
business of delivering electricity to consumers, also known as the transmission
and distribution business. The business of delivering electricity remains with
the incumbent franchised utility companies (including UI) which continue to be
regulated by the DPUC as Distribution Companies.

Under the Restructuring Act, all Connecticut electricity customers are able to
choose their power supply providers. Through December 31, 2003, UI is required
to offer retail service to its customers under a regulated "standard offer" rate
to each customer who does not choose an alternate power supply provider, even
though UI is no longer in the business of retail power generation. UI is also
required under the Restructuring Act to provide back-up power supply service to
customers whose alternate power supply provider fails to provide power supply
services for reasons other than the customers' failure to pay for such services.

The Restructuring Act requires that, in order for UI to recover any stranded
costs, it must attempt to divest its ownership interests in its nuclear-fueled
power plants prior to 2004. On October 1, 1998, in its "unbundling plan" filing
with the DPUC under the Restructuring Act, and in other regulatory dockets, UI
stated that it planned to divest its nuclear generation ownership and leasehold
interests (17.5% of Seabrook Station in New Hampshire and 3.685% of Millstone
Unit 3 in Connecticut) by the end of 2003, in accordance with the Restructuring
Act. The sale of UI's ownership in Millstone Unit 3 was consummated on March 31,
2001. On October 10, 2001, the DPUC issued its final decision approving, with
certain modifications, the jointly filed plan by The Connecticut Light and Power
Company and UI to divest their respective interests in Seabrook Station by an
auction process. The New Hampshire Public Utilities Commission (NHPUC), in
coordination with the DPUC, retained JPMorgan as the exclusive financial advisor
to conduct the auction. On April 15, 2002, the NHPUC, in coordination with the
DPUC, and JPMorgan announced that an agreement had been reached with an
affiliate of FPL Group (FPL) to purchase 88.2% of Seabrook Station, including
UI's ownership and leasehold interests in Units 1 and 2. Proceeds from the sale
will be used to terminate UI's obligation under its Seabrook Unit 1
sale/leaseback agreement ($208.9 million), net of UI's investment in Seabrook
Lease Obligation Bonds ($78.8 million). Consummation of the sale is subject to
requisite regulatory approvals and completion of FPL's due diligence
investigation prior to the closing date. UI currently expects that such
regulatory approvals will be received, and the sale will be consummated around
the end of 2002. In compliance with the Restructuring Act, the net-of-tax gain
from the sale, after termination of the sale/leaseback agreement, that is in
excess of the book value of the plant, as set by the DPUC, based on its estimate
of the market value of the plant, must be used to reduce UI's stranded costs.
Accordingly, at the time of sale, there should be no direct impact on financial
results as a result of the sale. UI will, however, receive no future operating
earnings from Seabrook Station after the sale is consummated.



- 21 -


CAPITAL EXPENDITURE PROGRAM

UIL Holdings' 2002-2006 estimated capital expenditure program, excluding UI's
allowance for funds used during construction, is presently budgeted as follows:



2002 2003 2004 2005 2006 TOTAL
---- ---- ---- ---- ---- -----
(In Millions)

UI Distribution and Transmission (1) $68.2 $54.1 $35.8 $26.4 $22.4 $206.9
-------------------------------------------------------------------------------

United Resources, Inc. (URI) (2)
American Payment Systems 13.8 4.4 9.2 9.0 9.1 45.5
Xcelecom 15.6 8.6 10.7 7.9 8.2 51.0
United Capital Investments 1.2 1.1 0.2 - - 2.5
United Bridgeport Energy 2.3 - - - - 2.3
-------------------------------------------------------------------------------
Total URI 32.9 14.1 20.1 16.9 17.3 101.3
-------------------------------------------------------------------------------

Total UIL Holdings $101.1 $68.2 $55.9 $43.3 $39.7 $308.2
===============================================================================


(1) Any capital expenditures in connection with UI's interest in Seabrook
Station, including those for nuclear fuel, made during 2002 will be
recovered, subject to DPUC approval, through the sale of UI's interest in
Seabrook Station, expected to be completed around the end of 2002. These
expenditures are not included above. Capital expenditures for UI reflect
information filed with the DPUC, as part of the Rate Case proceeding. UI
may review its capital expenditure program after it has received the final
DPUC decision in this proceeding.
(2) Estimated expenditures in 2002 for URI include costs for an acquisition
that has been completed and estimates for investments similar to those
previously completed. There is no guarantee that such estimated investments
will take place, and none are forecast beyond 2002.




- 22 -




LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2002, UIL Holdings had $36.7 million of cash and temporary cash
investments, of which $29.9 million is restricted cash. This represents a
decrease of $49.4 million from the corresponding balance at December 31, 2001.
The components of this decrease, which are detailed in the Consolidated
Statement of Cash Flows, are summarized as follows:

(In Millions)
-----------

Balance, December 31, 2001 $86.1
----

Net cash provided by operating activities:
- - Net cash provided by operating activities before net settlements 40.4
- - Net settlements (Note A) (28.8)
-----
11.6

Net cash (used in) financing activities:
- - Financing activities, excluding dividend payments (5.4)
- - Dividend payments (20.4)
-----
(25.8)

Net cash provided by (used in) investing activities:
- - Investment in debt securities 5.0
- - Cash invested in plant, including nuclear fuel (24.1)
- - Acquisition of businesses, net of cash acquired (13.8)
- - Investment in non-utility business (2.3)
-----
(35.2)

Net Change in Cash (49.4)
-----

Balance, June 30, 2002 $36.7
=====

Note A: The net settlements reflected above as a component of cash provided
by operating activities represent the change in net accounts receivable
due from APS's agents, as well as net payables due to APS's clients.



- 23 -


UIL Holdings' capital requirements are projected as follows:



2002 2003 2004 2005 2006
---- ---- ---- ---- ----
(In millions)

Unrestricted Cash on Hand - Beginning of Year (1) $29.5 $ - $ - $ - $ -
Funds from Operations less Dividends (2) 69.5 71.1 87.6 91.7 90.8
--------------------------------------------------------
Subtotal 99.0 71.1 87.6 91.7 90.8

Less:
Capital Expenditures (2)
UI 68.2 54.1 35.8 26.4 22.4
URI 32.9 14.1 20.1 16.9 17.3
--------------------------------------------------------
Total Capital Expenditures 101.1 68.2 55.9 43.3 39.7

Plus:
Net Cash (after-tax) from Sale of Seabrook (3) 151.9 - - - -
Proceeds from Redemption of Seabrook Lease Obligation
Bonds Owned by UI 78.8 - - - -
--------------------------------------------------------

Cash Available to pay Debt Maturities and Redemptions 228.6 2.9 31.7 48.4 51.1

Less:
Maturities and Mandatory Redemptions 100.0 100.0 - 104.3 79.3
Termination of Obligation under Seabrook Unit 1
Sale/leaseback Agreement 208.9 - - - -
--------------------------------------------------------

External Financing Requirements (Surplus) (2) 80.3 97.1 (31.7) 55.9 28.2
--------------------------------------------------------

Plus:
Issuance and Sale of Long-term Debt 100.0 75.0 - 50.0 -
--------------------------------------------------------

Increase (Decrease) in Short-Term Borrowings (19.7) 22.1 (31.7) 5.9 28.2
--------------------------------------------------------

Short-Term Borrowings/(Temporary Cash Investments) -
End of Year $11.9 $34.0 $2.3 $8.2 $36.4
========================================================


(1) Excludes restricted cash in American Payment Systems, Inc. of $53.0
million, UI of $3.2 million and Xcelecom, Inc. of $0.4 million.
(2) "Funds from Operations less Dividends," "Capital Expenditures" and
"External Financing Requirements (Surplus)" are estimates based on current
earnings and cash flow projections Estimated capital expenditures in 2002
for URI include costs for an acquisition that has been completed and
estimates for investments similar to those previously completed. There is
no guarantee that such estimated investments will take place, and none are
forecast beyond 2002. All of these estimates are subject to change due to
future events and conditions that may be substantially different from those
used in developing the projections.
(3) The estimate for "Net Cash (after-tax) from Sale of Seabrook" is broken
down as follows:
Net proceeds from sale ($143.3 million), less Lessor's share of proceeds
($53.1 million), plus net income tax benefit from the sale of Seabrook and
termination of sale/leaseback agreement ($61.7 million). The sale is
expected to be completed around the end of 2002.

All capital requirements that exceed available cash will have to be provided by
external financing. Although there is no commitment to provide such financing
from any source of funds, other than a $100 million revolving credit agreement
that UIL Holdings has with a group of banks, a $25 million revolving credit
agreement that Xcelecom has with a bank, and a $10 million revolving credit
agreement that APS has with a bank, future external financing needs are expected
to be satisfied by the issuance of additional short-term and long-term debt. The
continued availability


- 24 -


of these methods of financing will be dependent on many factors, including
conditions in the securities markets, economic conditions, and future income and
cash flow.

SUBSIDIARY OPERATIONS

UI is a regulated operating electric public utility established in 1899. It is
engaged principally in the purchase, transmission, distribution and sale of
electricity for residential, commercial and industrial purposes in a service
area of about 335 square miles in the southwestern part of the State of
Connecticut. The population of this area is approximately 730,000, which
represents approximately 21% of the population of the State. The service area,
largely urban and suburban in character, includes the principal cities of
Bridgeport (population approximately 140,000) and New Haven (population
approximately 124,000) and their surrounding areas. Situated in the service area
are retail trade and service centers, as well as large and small industries
producing a wide variety of products, including helicopters and other
transportation equipment, electrical equipment, chemicals and pharmaceuticals.
Of UI's 2001 retail electric revenues, approximately 42% were derived from
residential sales, 41% from commercial sales, 15% from industrial sales and 2%
from other sales.

URI serves as the parent corporation for several non-utility businesses, each of
which is incorporated separately to participate in business ventures that are
intended to provide long-term rewards to UIL Holdings' shareowners. As of June
30, 2002, UIL Holdings has invested approximately $260.4 million in URI. URI,
which is not itself an operating company, has four wholly-owned subsidiaries:

AMERICAN PAYMENT SYSTEMS, INC. (APS) provides an electronic bill payment service
to companies throughout the United States with which APS has contractual
relationships, including major electric utility and telecommunications
companies, and for retailers with which APS does not have contractual
relationships. APS recruits and manages retailers to provide this service to the
companies' customers who prefer to pay their bills in person. APS acts as an
agent for each contracted client to engage in the collection activity, while the
non-contracted bill payment service permits each retailer to offer its customers
a wider range of electronic bill payment options. APS is the largest processor
of contracted utility customer in-person bill payments in the United States,
operating in 45 states. APS's subsidiaries include APS Card Services, Inc.
(CSI), which is 100% owned, and CellCards of Illinois, LLC (CCI), which is 51%
owned. CSI has been organized by APS to market a prepaid stored value card. CCI,
in which APS acquired its ownership interest in April 2001, sells prepaid long
distance telephone service, prepaid telephone calling cards and prepaid wireless
telephone service in check-cashing locations nationwide and APS's network of
retailers.

XCELECOM, INC. (Xcelecom) and its subsidiaries, provide general and specialty
electrical and voice-data-video design, construction, systems integration and
related services in regional markets of the Eastern United States. The Xcelecom
subsidiaries, all of which have been obtained through acquisitions, include
Allan Electric Co., Inc., Brite-Way Electrical Contractors, Inc., JBL Electric,
Inc. and The Datastore, Incorporated, all in New Jersey, Orlando Diefenderfer
Electrical Contractors, Inc., in Pennsylvania, 4Front Systems, Inc., in North
Carolina, J. E. Richards, Inc. and Richards Electric, Inc. in Maryland, Terry's
Electric, Inc. in Florida, and Johnson Electric Co., Inc., M. J. Daly & Sons,
Inc., McPhee Electric Ltd., LLC and McPhee Utility Power and Signal, Ltd., all
in Connecticut. Xcelecom also owns and operates two heating and cooling energy
centers, through its Thermal Energies, Inc. subsidiary, that provide heating
and cooling service to two of New Haven, Connecticut's largest office and
government complexes.

UNITED CAPITAL INVESTMENTS, INC. (UCI) invests in passive business investments.
Some of its investments include:

o CROSS-SOUND CABLE COMPANY, LLC (CROSS-SOUND) - UCI has a 25% interest in
a merchant electric transmission line project that owns and proposes to
operate a 330-megawatt high voltage direct current transmission line
connecting Connecticut and Long Island under Long Island Sound. UCI has
furnished a credit support agreement for its participating share of the
debt financing during construction of this project, up to a maximum of
$33.8 million. Under a separate agreement, UIL Holdings is a guarantor of
the credit-support obligation of UCI. Cross-Sound has informed UCI that,
as of June 30, 2002, UCI's credit-support obligation was approximately
$9.4 million, assuming that the primary third-party guarantors meet their
obligations. This project has been opposed by a number of public officials
and private groups who have participated actively in governmental
permitting proceedings relative to the project and have attempted to enact
a state statute delaying


- 25 -


the project. On March 17, 2002, the Connecticut Department of
Environmental Protection issued a permit for the project and, on March 19,
2002, the United States Army Corps of Engineers approved a permit
application for siting the cable in the New Haven Harbor navigation
channel. In January 2002, the Connecticut Siting Council (CSC) approved a
permit application for siting the cable; however, the Connecticut Attorney
General and the City of New Haven have appealed the CSC's decision to the
Connecticut Superior Court. The Superior Court has denied requests filed
by both the Attorney General and the City for a stay of the effectiveness
of the CSC permit pending a decision on this appeal; and UCI management
believes that the CSC decision will be upheld on appeal, although there can
be no assurance that it will be upheld. Construction of the transmission
line in accordance with the governmental permits has not been completed;
and it is not known at this time when commercial operation will commence.

o ZERO STAGE CAPITAL - Regional high technology venture capital funds in
which UCI has invested, both as a financial investment and as a means of
promoting local economic development.

o IRONBRIDGE MEZZANINE FUND - A regional Small Business Investment Company
committed to investing a portion of its capital in women and minority owned
businesses and businesses located in low and moderate income areas.

UNITED BRIDGEPORT ENERGY, INC. (UBE) owns, as a passive investor, 331/3% of a
merchant wholesale electric generating facility co-owned and operated by a unit
of Duke Energy and located in Bridgeport, Connecticut. As of June 30, 2002, UBE
has invested $95.3 million in the facility.

RESULTS OF OPERATIONS

UIL HOLDINGS CORPORATION RESULTS OF OPERATIONS: SECOND QUARTER 2002 ACTUAL
- ---------------------------------------------------------------------------
EARNINGS VS. PREVIOUS ESTIMATE
- ------------------------------

Net Income for UIL Holdings Corporation (UIL Holdings) was $9.1 million in the
second quarter of 2002, or $0.64 per share. The second quarter result was at the
top end of the range estimated in UIL Holdings' first quarter earnings release
dated April 22, 2002, despite losses in the non-utility businesses. Second
quarter earnings for The United Illuminating Company (UI), excluding the Nuclear
Division, increased significantly over the prior projections, but much of that
improvement was due to the timing of expenditures rather than permanent savings.
Earnings also improved from the previous estimate at the Nuclear Division
because of improved performance, a slightly shorter than anticipated refueling
outage, and lower expenses. These improvements were offset by unexpected losses
in passive investments at United Capital Investments, Inc. (UCI), deteriorating
economic conditions affecting Xcelecom's businesses, and the poor market for
power sales at United Bridgeport Energy, Inc. (UBE) during this period. The weak
economy has affected Xcelecom and similar companies in the specialty
construction contracting and systems integrations industry.

SECOND QUARTER 2002 VS. SECOND QUARTER 2001
- -------------------------------------------

UIL HOLDINGS CORPORATION RESULTS OF OPERATIONS: SECOND QUARTER 2002 VS. SECOND
- ----------------------------------------------- ------------------------------
QUARTER 2001
- ------------

UIL Holdings' second quarter 2002 earnings decreased by $6.1 million, or $0.44
per share, compared to second quarter 2001 earnings of $15.2 million, or $1.08
per share. The change in earnings was made up of the following components.
Nuclear Division earnings decreased by $0.23 per share because of a scheduled
refueling outage in the second quarter of 2002. Earnings for United Resources,
Inc. (URI) decreased by $0.25 per share, due primarily to losses in passive
investments at UCI and a scheduled overhaul at UBE. Earnings were also affected
by the slowdown in construction activity and technology spending impacting URI's
Xcelecom subsidiary. Earnings at UI, excluding the Nuclear Division, increased
by $0.04 per share.




- 26 -


The table below represents a comparison of UIL Holdings' Net Income and Earnings
Per Share (EPS) for the second quarter of 2002 and the second quarter of 2001.



- ------------------------------------------------------------------------------------------------
2002 more (less) than 2001
--------------------------
Quarter Ended Quarter Ended
June 30, 2002 June 30, 2001 Amount Percent
- ------------------------------------------------------------------------------------------------

NET INCOME (IN MILLIONS EXCEPT PERCENTS)
UI from Operations $12.1 $11.4 $0.7 6%
Nuclear Division 0.1 3.3 (3.2) (97)%
United Resources (Non-Utility) (3.1) 0.5 (3.6) - -
---- ---- ----
TOTAL NET INCOME FROM OPERATIONS $ 9.1 $15.2 $(6.1) (40)%

EPS FROM OPERATIONS
UI $0.85 $0.81 $0.04 5%
Nuclear Division 0.01 0.24 (0.23) (96)%
United Resources (Non-Utility) (0.22) 0.03 (0.25) - -
----- ---- ----
TOTAL EPS - BASIC $0.64 $1.08 $(0.44) (41)%
TOTAL EPS - DILUTED (NOTE A) $0.64 $1.08 $(0.44) (41)%
==== ==== ====
- ------------------------------------------------------------------------------------------------


Note A: Reflecting the effect of unexercised dilutive stock options.




- 27 -




The following table is a line-by-line breakdown of UIL Holdings' Consolidated
Statement of Income by subsidiary, including comparisons between the second
quarter of 2002 and the second quarter of 2001. Significant variances are
explained in the individual subsidiary sections that follow.


2002 MORE
(LESS) THAN
QUARTER ENDED QUARTER ENDED 2001
(IN MILLIONS) JUNE 30, 2002 JUNE 30, 2001 AMOUNT
- ------------- ------------- ------------- ------

OPERATING REVENUE
UI from operations, before sharing $159.0 $160.2 ($1.2)
UI sharing from operations 0.0 0.0 0.0
UI one-time items 0.0 0.0 0.0
Nuclear 9.4 13.5 (4.1)
URI 115.8 88.8 27.0
------ ------ -----
Total $284.2 $262.5 $21.7
====== ====== =====

FUEL AND ENERGY EXPENSE
UI $60.7 $63.9 ($3.2)
Nuclear 1.3 2.0 (0.7)
------ ------ -----
Total $62.0 $65.9 ($3.9)
====== ====== =====
OPERATION AND MAINTENANCE EXPENSE
UI $40.1 $39.3 $0.8
Nuclear 6.7 4.8 1.9
URI 112.4 83.5 28.9
------ ------ -----
Total $159.2 $127.6 $31.6
====== ====== =====
DEPRECIATION AND AMORTIZATION
UI $7.2 $6.9 $0.3
Nuclear 0.4 0.4 0.0
URI 1.5 1.1 0.4
------ ------ -----
Subtotal depreciation 9.1 8.4 0.7
Amortization of regulatory assets (UI) 10.5 12.0 (1.5)
Amortization URI 0.5 0.9 (0.4)
------ ------ -----
Total depreciation and amortization $20.1 $21.3 ($1.2)
====== ====== =====
TAXES - OTHER THAN INCOME TAXES
UI - State gross earnings tax $6.5 $6.3 $0.2
UI - other 4.0 3.8 0.2
Nuclear - other 0.4 0.3 0.1
URI - other 0.6 0.4 0.2
------ ------ -----
Total $11.5 $10.8 $0.7
====== ====== =====
OTHER INCOME AND DEDUCTIONS
UI $0.2 $1.6 ($1.4)
Nuclear 0.0 0.0 0.0
URI (4.0) 0.2 (4.2)
------ ------ -----
Total ($3.8) $1.8 ($5.6)
====== ====== =====
INTEREST CHARGES
UI $9.0 $9.2 ($0.2)
UI - Interest on Seabrook obligation bonds owned by UI (1.5) (1.6) 0.1
UI - Amortization: debt expense, redemption premiums 0.5 0.5 0.0
Nuclear 0.4 0.5 (0.1)
URI 1.9 2.1 (0.2)
------ ------ -----
Total $10.3 $10.7 ($0.4)
====== ====== =====
INCOME TAXES
UI $10.1 $10.1 $0.0
Nuclear 0.1 2.2 (2.1)
URI (2.0) 0.5 (2.5)
------ ------ -----
Total $8.2 $12.8 ($4.6)
====== ====== =====
NET INCOME
UI $12.1 $11.4 $0.7
Nuclear 0.1 3.3 (3.2)
URI (3.1) 0.5 (3.6)
------ ------ -----
Total $9.1 $15.2 ($6.1)
====== ====== =====




- 28 -


THE UNITED ILLUMINATING COMPANY RESULTS OF OPERATIONS: SECOND QUARTER 2002 VS.
- -------------------------------------------------------------------------------
SECOND QUARTER 2001
- -------------------



- -------------------------------------------------------------------------------------------------------------
2002 MORE (LESS) THAN 2001
---------------------------
QUARTER ENDED QUARTER ENDED
JUNE 30, 2002 JUNE 30, 2001 AMOUNT PERCENT
- -------------------------------------------------------------------------------------------------------------

EPS FROM OPERATIONS (BASIC)
UI excluding Nuclear Division and Sharing $0.85 $0.81 $0.04 5%
Nuclear Division 0.01 0.24 (0.23) (96)%
---- ---- -----
Total UI EPS from operations $0.86 $1.05 $(0.19) (18)%
==== ==== =====
RETAIL SALES (MILLIONS OF KWH) 1,331 1,372 (41) (3)%
- -------------------------------------------------------------------------------------------------------------


UI EXCLUDING THE NUCLEAR DIVISION

Excluding the Nuclear Division, UI's net income was $12.1 million, or $0.85 per
share, in the second quarter of 2002 compared to $11.3 million, or $0.81 per
share, in the second quarter of 2001. The $0.04 per share increase was due
primarily to a decrease in accelerated amortization expense in the Distribution
Division, mostly offset by increases in operation and maintenance (O&M) expenses
and reductions in other income. In 2002, UI is recording accelerated
amortization expense in accordance with its Rate Case filing that is currently
before the Connecticut Department of Public Utility Control (DPUC). That
amortization expense was reduced in 2002 to reflect anticipated changes in
revenues and increases in O&M expenses that will continue throughout the year.
The level of accelerated amortization could be adjusted by the DPUC in the
pending Rate Case proceeding. See the "Looking Forward" section for more
information about the Rate Case proceeding.

The details below explain the variances for all of UI, excluding the Nuclear
Division. It should be noted that changes to income and expense items in the
Distribution Division have an immediate net income impact, while changes to
those items in "other unbundled utility divisions" do not. Those divisions
include the Competitive Transition Assessment (CTA) and the Systems Benefits
Charge (SBC), both of which currently earn an 11.5% return on the equity portion
of their respective rate bases. That return is achieved by either accruing
additional amortization expenses, or by deferring such expenses, as required.
Amortization expenses in those divisions impact earnings indirectly through
changes to rate base. The "other unbundled utility divisions" also include the
Generation Services Charge (GSC), the Conservation and Load Management (C&LM)
charge, and the Renewable Investment charge. Those are pass-through charges.
Except for a small management fee earned in the C&LM division, expenses are
either accrued or deferred such that there is no net income associated with
those pass-through charge divisions.



- 29 -




Overall, UI's total revenue decreased by $1.2 million, from $160.2 million in
the second quarter of 2001 to $159.0 million in the second quarter of 2002.
Details of this change in revenue are as follows:

- --------------------------------------------------------------------------------
From
In Millions Operations
- --------------------------------------------------------------------------------
Revenue Increase/(Decrease)
- --------------------------------------------------------------------------------
RETAIL REVENUE FROM DISTRIBUTION DIVISION:
Estimate of operating Distribution Division component of
"weather corrected" retail sales growth, 1.0% $0.6
Estimate of operating Distribution Division component of
weather effect on retail sales, (1.2)% (0.7)
Impact of mix of sales on average price and other 0.0
---
TOTAL RETAIL REVENUE FROM DISTRIBUTION DIVISION (0.1)
RETAIL REVENUE FROM OTHER UTILITY DIVISIONS (NOTE A) (1.9)
---
TOTAL UI RETAIL REVENUE (2.0)

Other Operating Revenue Increase (Decrease)
NEPOOL transmission revenues 0.7
Other (0.5)
---
TOTAL UI OTHER OPERATING REVENUES 0.2
UI WHOLESALE PASS-THROUGH REVENUE 0.6
---
TOTAL UI REVENUES $(1.2)
===
- --------------------------------------------------------------------------------
Note A: Includes a 2.8% reduction in electricity sales and a corresponding $2.4
million revenue reduction resulting from the resolution of a station
service dispute with a generating plant owner.

Retail fuel and energy expense decreased by $3.2 million in the second quarter
of 2002 compared to the second quarter of 2001. UI has received, and expects to
receive through 2003, electricity to satisfy its standard offer retail customer
service requirements through fixed-price purchased power agreements. These costs
are recovered through the GSC portion of UI's unbundled retail customer rates.
It should be noted that a small number of customers have selected alternate
suppliers to provide generation services, but this has no effect on UI's
financial results. UI's wholesale energy expense increased by $0.5 million, but
these costs are recovered from customers through the CTA.

UI's operation and maintenance (O&M) expenses increased by $0.8 million, from
$39.3 million in the second quarter of 2001 to $40.1 million in the second
quarter of 2002. The principal components of these expense changes included:

- --------------------------------------------------------------------------------
Increase/
In Millions (Decrease)
- --------------------------------------------------------------------------------
Operating Distribution Division:
- --------------------------------------------------------------------------------
Net pension expense (Note A) $2.1
Severance costs (1.6)
NEPOOL transmission expense 0.6
Other (0.5)
---
TOTAL OPERATING DISTRIBUTION DIVISION $0.6
O&M AND CAPACITY FROM OTHER UNBUNDLED UTILITY DIVISIONS 0.2
---
TOTAL O&M EXPENSE $0.8
===
- --------------------------------------------------------------------------------
Note A: The increase in pension expense reflects the lower returns being
generated over the last twenty-seven months by the equity investments
held by the UI pension plan, a portion of which must be recognized
immediately with the remainder deferred and amortized over time. These
returns, when


- 30 -

combined with the lower market value of the assets in the pension fund
and the increase in projected liabilities caused by lower discount
rates, may require increased cash contributions in the foreseeable
future.

Amortization of regulatory assets, as booked, decreased by $1.5 million in the
second quarter of 2002 compared to the second quarter of 2001. The principal
components of these changes were:

- --------------------------------------------------------------------------------
Increase (Decrease) In Millions As Booked After-tax
- --------------------------------------------------------------------------------
AMORTIZATION OF REGULATORY ASSETS:
- --------------------------------------------------------------------------------
Accelerated amortization in Distribution Division $(3.6) $(3.1)
Amortization in CTA and SBC 2.1 1.2
--- ---
TOTAL AMORTIZATION OF REGULATORY ASSETS $(1.5) $(1.9)
- --------------------------------------------------------------------------------

Other Income and Deductions decreased by $1.4 million in the second quarter of
2002 compared to the second quarter of 2001, due primarily to reductions in
interest income and earnings on supplemental retirement plan investments.

NUCLEAR DIVISION

The Nuclear Division contributed net income of $0.1 million, or $0.01 per share,
in the second quarter of 2002 compared to $3.3 million, or $0.24 per share, in
the second quarter of 2001. The decrease of $3.2 million, or $0.23 per share,
was due to the Seabrook nuclear generating unit scheduled refueling outage that
occurred in the second quarter of 2002. The unit operated at 100% availability
in the second quarter of 2001. The components of the decrease in net income
were: a decrease in wholesale sales margin (revenues less energy expense) of
$3.4 million (wholesale revenues decreased by $4.1 million and energy expense
decreased by $0.7 million), an increase in operation and maintenance expense of
$1.9 million and other expenses of $0.2 million, and a decrease in income taxes
of $2.1 million.

UNITED RESOURCES, INC. RESULTS OF OPERATIONS: SECOND QUARTER 2002 VS. SECOND
- ----------------------------------------------------------------------------
QUARTER 2001
- ------------



- ---------------------------------------------------------------------------------------------------------
2002 MORE (LESS) THAN 2001
--------------------------
QUARTER ENDED QUARTER ENDED
JUNE 30, 2002 JUNE 30, 2001 AMOUNT PERCENT
- ---------------------------------------------------------------------------------------------------------

EPS FROM OPERATIONS (BASIC)
Operating Businesses
American Payment Systems, Inc. (APS) $(0.02) $0.00 $(0.02) - -
Xcelecom, Inc. (Xcelecom) 0.11 0.12 (0.01) (8)%
---- ---- ----
SUBTOTAL OPERATING BUSINESSES 0.09 0.12 (0.03) (25)%
Passive Investments
United Bridgeport Energy, Inc. (UBE) (0.03) 0.04 (0.07) (175)%
United Capital Investments, Inc. (UCI) (0.19) (0.07) (0.12) - -
---- ---- ------
SUBTOTAL PASSIVE INVESTMENTS (0.22) (0.03) (0.19) (633)%

URI HEADQUARTERS (NOTE A) (0.09) (0.06) (0.03) (50)%
---- ---- ----

TOTAL NON-UTILITY EPS FROM OPERATIONS $(0.22) $0.03 $(0.25) - -
==== ==== ====
- ---------------------------------------------------------------------------------------------------------


Note A: Includes interest charges on intercompany debt and strategic and
administrative costs of the non-utility holding company.

Overall, the consolidated non-utility businesses operating under the parent,
URI, lost approximately $3.1 million, or $0.22 per share, in the second quarter
of 2002 compared to income of about $0.5 million, or $0.03 per share, in the
second quarter of 2001. Operating revenue for the URI businesses increased by
$27.0 million, or 30%, mainly due


- 31 -


to business acquisitions, from $88.8 million in the second quarter of 2001 to
$115.8 million in the second quarter of 2002. Expenses for the URI businesses,
including gains or losses on passive investments but excluding income taxes,
increased by $33.1 million, and income taxes decreased by $2.5 million.

The results of each of the subsidiaries of URI for the second quarters of 2002
and 2001, as presented below, reflect the allocation of debt costs from the
parent based on a capital structure, including an equity component, and an
interest rate deemed appropriate for that type of business. The targeted capital
structures for each of URI's subsidiaries are: 100% equity for American Payment
Systems, Inc. (APS), UCI and Xcelecom, and 30% equity and 70% debt for UBE. The
Xcelecom capital structure is a change from the previous target of 65% equity
and 35% debt. See the Xcelecom section for an explanation. URI absorbs interest
charges on the equity portion of its investments in its subsidiaries to the
extent those investments are financed with debt. URI may incur other expenses
necessary to manage its investments from time to time.

The following is a detailed explanation of the 2002-2001 variances by URI
subsidiary.

URI OPERATING BUSINESSES

AMERICAN PAYMENT SYSTEMS, INC.

APS lost $0.02 per share in the second quarter of 2002, compared to breakeven in
the second quarter of 2001. Earnings from operations from the core contracted
payment business improved by about $0.03 per share. The number of authorized
transactions processed by APS's core business increased by 8.3%, and gross
margin on those transactions increased by 18%. Start-up and infrastructure
expenses in APS's other strategic initiatives, which are expected to produce
future growth, reduced earnings by $0.05 per share compared to 2001.

XCELECOM, INC.

Xcelecom earned $0.11 per share in the second quarter of 2002, compared to
earnings of $0.12 per share in the second quarter of 2001. As with other
companies in the construction and systems integration industries, there is now a
very evident decline in economic activity in Xcelecom's markets. Xcelecom is
experiencing customer postponements and cancellations of projects, a reduction
in new project orders, a continuing slowdown in spending for technology by its
customers, and increased competition for fewer jobs, resulting in both lower
demand and lower margins. Xcelecom is continuing to be selective in bidding for
jobs. Additionally, the completion of several large, non-recurring contracts in
2001 that have not been replaced has contributed to the earnings decline. The
negative earnings impact of these items, about $0.07 per share, was partly
offset by an increase of about $0.01 per share from acquisitions made since the
second quarter of 2001, and an increase of $0.03 per share due to the change in
accounting for goodwill mandated by Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets." They were also partly offset by
the conversion, in the second quarter of 2002, to a 100% equity capital
structure from the 65% equity and 35% debt structure used previously. This
conversion contributed $0.02 per share in the second quarter of 2002. That
earnings improvement was offset by an earnings decrease in URI Headquarters,
which received less interest income from Xcelecom. For a further explanation of
the debt conversion, see the "Looking Forward" section.

URI PASSIVE INVESTMENTS

UNITED BRIDGEPORT ENERGY, INC.

UBE owns a 33 1/3% interest in Bridgeport Energy, LLC (BE). UBE lost $0.03 per
share in the second quarter of 2002, compared to earnings of $0.04 per share in
the second quarter of 2001. Of the $0.07 per share decrease, $0.04 per share was
due to costs associated with a 2002 overhaul. The overhaul began in March and
ended April 17, 2002. The rest of the variance was due primarily to lower margin
from weak energy sales prices, partly offset by an increase in Installed
Capability (ICAP) revenues. In 2001, UBE had an agreement with Duke Energy
Trading and Marketing that effectively eliminated UBE's operating and margin
risks. There has been no such agreement in 2002, and UBE has recorded its share
of BE's income in the second quarter of 2002. See the "Looking Forward" section
for information on UBE's ICAP revenues.



- 32 -


UNITED CAPITAL INVESTMENTS, INC.

UCI lost $0.19 per share in the second quarter of 2002, compared to a loss of
$0.07 per share in the second quarter of 2001. An impairment loss of UCI's
investment in Gemini Networks, Inc. (Gemini), a broadband fiber-optic business,
caused a $0.16 per share loss. That write-off reflects the generally depressed
economic conditions in the telecommunications industry that worsened in the
second quarter of 2002 and an associated inability of Gemini to access capital
markets to continue the network build-out. The remaining variance was due to
reduced losses on other passive investments.

URI HEADQUARTERS

URI Headquarters incurred an after-tax loss of $1.3 million, or $0.09 per share,
in the second quarter of 2002 compared to a loss of $0.9 million, or $0.06 per
share, in the second quarter of 2001. Some unallocated interest charges and
strategic and administrative costs for the subsidiaries of URI are retained by
the parent URI. The increase in losses at URI Headquarters reflects additional
administrative expenses incurred for managing investments and lower interest
income from the reclassification of Xcelecom intercompany debt to equity.

UIL HOLDINGS CORPORATION RESULTS OF OPERATIONS: FIRST SIX MONTHS 2002 ACTUAL
- ----------------------------------------------- ----------------------------
EARNINGS VS. PREVIOUS ESTIMATE
- ------------------------------

Net Income for UIL Holdings was $18.7 million in the first six months of 2002,
or $1.32 per share. Both of the first two quarters were within the estimated
ranges for those quarters as reported in UIL Holdings' first quarter earnings
release dated April 22, 2002, despite losses in the non-utility businesses. The
second quarter result was at the top end of its range estimate. Earnings for UI,
excluding the Nuclear Division, increased over the prior projections, but much
of that improvement was due to the timing of expenditures rather than permanent
savings. Earnings also improved from the previous estimate because of improved
performance at the Nuclear Division, a slightly shorter than anticipated
refueling outage, and lower expenses. These improvements were offset by
unexpected losses in passive investments at UCI, unanticipated loss reserve
charges at Xcelecom, the deteriorating economic conditions in Xcelecom's
markets, and the poor market conditions for power sales at UBE during this
period. The economic conditions impacting Xcelecom have been evident in the most
recent earnings releases and reduced outlooks for similar companies.

FIRST SIX MONTHS 2002 VS. FIRST SIX MONTHS 2001
- -----------------------------------------------

UIL HOLDINGS CORPORATION RESULTS OF OPERATIONS: FIRST SIX MONTHS 2002 VS. FIRST
- --------------------------------------------------------------------------------
SIX MONTHS 2001
- ---------------

UIL Holdings earned $18.7 million, or $1.32 per share, in the first six months
of 2002, a decrease of $6.0 million, or $0.43 per share, compared to the first
six months of 2001 earnings of $24.7 million, or $1.75 per share. The decrease
in earnings was due to a $0.47 per share decrease in non-utility businesses
under URI, offset slightly by an increase in utility earnings. Earnings for UI,
excluding the Nuclear Division, increased by $0.03 per share, and earnings for
the Nuclear Division increased by $0.01 per share.




- 33 -




The table below represents a comparison of UIL Holdings' Net Income and Earnings
Per Share (EPS) for the first six months of 2002 and the first six months of
2001.



- --------------------------------------------------------------------------------------------------------
2002 MORE (LESS) THAN 2001
--------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 2002 JUNE 30, 2001 AMOUNT PERCENT
- --------------------------------------------------------------------------------------------------------

NET INCOME (IN MILLIONS EXCEPT PERCENTS)
UI from Operations $22.8 $22.1 $0.7 3%
Nuclear Division 3.6 3.4 0.2 6%
United Resources (Non-Utility) (7.7) (0.8) (6.9) - -
---- ---- ----
TOTAL NET INCOME FROM OPERATIONS $18.7 $24.7 $(6.0) (24)%

EPS from operations
UI $1.61 $1.58 $0.03 2%
Nuclear Division 0.25 0.24 0.01 4%
United Resources (Non-Utility) (0.54) (0.07) (0.47) - -
---- ---- ----
TOTAL EPS - BASIC $1.32 $1.75 $(0.43) (25)%
TOTAL EPS - DILUTED (NOTE A) $1.31 $1.75 $(0.44) (25)%
==== ==== ====
- --------------------------------------------------------------------------------------------------------


Note A: Reflecting the effect of unexercised dilutive stock options.



- 34 -


The following table is a line-by-line breakdown of UIL Holdings' Consolidated
Statement of Income by subsidiary, including comparisons between the first six
months of 2002 and the first six months of 2001. Significant variances are
explained in the individual subsidiary sections that follow.



2002 MORE
(LESS)THAN
SIX MONTHS ENDED SIX MONTHS ENDED 2001
(IN MILLIONS) JUNE 30, 2002 JUNE 30, 2001 AMOUNT
- ------------- ------------- ------------- ------

OPERATING REVENUE
UI from operations, before sharing $317.0 $317.6 ($0.6)
UI sharing from operations 0.0 0.0 0.0
UI one-time items 0.0 0.0 0.0
Nuclear 23.5 21.3 2.2
URI 202.1 165.8 36.3
------ ------ -----
Total $542.6 $504.7 $37.9
====== ====== =====
FUEL AND ENERGY EXPENSE
UI $122.7 $131.2 ($8.5)
Nuclear 3.3 3.1 0.2
------ ------ -----
Total $126.0 $134.3 ($8.3)
====== ====== =====
OPERATION AND MAINTENANCE EXPENSE
UI $81.3 $74.1 $7.2
Nuclear 12.0 10.3 1.7
URI 200.8 157.5 43.3
------ ------ -----
Total $294.1 $241.9 $52.2
====== ====== =====
DEPRECIATION AND AMORTIZATION
UI $14.5 $13.9 $0.6
Nuclear 0.7 0.8 (0.1)
URI 2.7 2.2 0.5
------ ------ -----
Subtotal depreciation 17.9 16.9 1.0
Amortization of regulatory assets (UI) 20.8 22.3 (1.5)
Amortization URI 0.9 1.6 (0.7)
------ ------ -----
Total depreciation and amortization $39.6 $40.8 ($1.2)
====== ====== =====
TAXES - OTHER THAN INCOME TAXES
UI - State gross earnings tax $13.0 $12.2 $0.8
UI - other 8.6 8.3 0.3
Nuclear - other 0.6 0.7 (0.1)
URI - other 1.2 0.7 0.5
------ ------ -----
Total $23.4 $21.9 $1.5
====== ====== =====
OTHER INCOME AND DEDUCTIONS
UI $1.6 $3.1 ($1.5)
Nuclear 0.0 0.2 (0.2)
URI (5.7) (0.3) (5.4)
------ ------ -----
Total ($4.1) $3.0 ($7.1)
====== ====== =====
INTEREST CHARGES
UI $18.1 $18.5 ($0.4)
UI - Interest on Seabrook obligation bonds owned by UI (3.1) (3.2) 0.1
UI - Amortization: debt expense, redemption premiums 1.1 1.1 (0.0)
Nuclear 0.9 1.0 (0.1)
URI 3.6 4.4 (0.8)
------ ------ -----
Total $20.6 $21.8 ($1.2)
====== ====== =====
INCOME TAXES
UI $18.8 $20.2 ($1.4)
Nuclear 2.4 2.2 0.2
URI (5.1) (0.1) (5.0)
------ ------ -----
Total $16.1 $22.3 ($6.2)
====== ====== =====
NET INCOME
UI $22.8 $22.1 $0.7
Nuclear 3.6 3.4 0.2
URI (7.7) (0.8) (6.9)
------ ------ -----
Total $18.7 $24.7 ($6.0)
====== ====== =====




- 35 -




THE UNITED ILLUMINATING COMPANY RESULTS OF OPERATIONS: FIRST SIX MONTHS 2002
- -----------------------------------------------------------------------------
VS. FIRST SIX MONTHS 2001
- -------------------------



- --------------------------------------------------------------------------------------------------------
2002 MORE (LESS) THAN 2001
--------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 2002 JUNE 30, 2001 AMOUNT PERCENT
- --------------------------------------------------------------------------------------------------------

EPS FROM OPERATIONS (BASIC)
UI excluding Nuclear Division and Sharing $1.61 $1.58 $0.03 2%
Nuclear Division 0.25 0.24 0.01 4%
---- ---- ----
Total UI EPS from operations $1.86 $1.82 $0.04 2%
==== ==== ====
RETAIL SALES (MILLIONS OF KWH) 2,708 2,780 (72) (3)%
- --------------------------------------------------------------------------------------------------------


UI EXCLUDING THE NUCLEAR DIVISION

Excluding the Nuclear Division, UI's net income was $22.8 million, or $1.61 per
share, in the first six months of 2002 compared to $22.1 million, or $1.58 per
share, in the first six months of 2001. The $0.03 per share increase was due
primarily to a decrease in accelerated amortization expense in the Distribution
Division, mostly offset by increases in O&M expenses and reductions in other
income. In 2002, UI is recording accelerated amortization expense in accordance
with its Rate Case filing that is currently before the DPUC. That amortization
expense was reduced in 2002 to reflect anticipated changes in revenues and
increases in O&M expense that will continue throughout the year. The level of
accelerated amortization could be adjusted by the DPUC in the pending Rate Case
proceeding. See the "Looking Forward" section for more information about the
Rate Case proceeding.

The details below explain the variances for all of UI, excluding the Nuclear
Division. It should be noted that changes to income and expense items in the
Distribution Division have an immediate net income impact, while changes to
those items in "other unbundled utility divisions" do not. Those divisions
include the CTA and the SBC, both of which currently earn an 11.5% return on the
equity portion of their respective rate bases. That return is achieved by either
accruing additional amortization expenses, or by deferring such expenses, as
required. Amortization expenses in those divisions impact earnings indirectly
through changes to rate base. The "other unbundled utility divisions" also
include the GSC, the C&LM charge, and the Renewable Investment charge. Those are
pass-through charges. Except for a small management fee earned in the C&LM
division, expenses are either accrued or deferred such that there is no net
income associated with those pass-through charge divisions.




- 36 -




Overall, UI's total revenue decreased by $0.6 million, from $317.6 million in
the first six months of 2001 to $317.0 million in the first six months of 2002.
Details of this change in revenue are as follows:

- --------------------------------------------------------------------------------
From
In Millions Operations
- --------------------------------------------------------------------------------
Revenue Increase/(Decrease)
- --------------------------------------------------------------------------------
REVENUE FROM DISTRIBUTION DIVISION:
Estimate of operating Distribution Division component of
"weather corrected" retail sales growth, 0.6% $0.6
Estimate of operating Distribution Division component of
weather effect on retail sales, (1.8)% (2.0)
Impact of mix of sales on average price and other 1.2
---
TOTAL RETAIL REVENUE FROM DISTRIBUTION DIVISION (0.2)
RETAIL REVENUE FROM OTHER UTILITY DIVISIONS (NOTE A) (3.8)
---
TOTAL UI RETAIL REVENUE (4.0)
Other Operating Revenue Increase (Decrease)
NEPOOL transmission revenues 2.5
Other (0.6)
---
TOTAL UI OTHER OPERATING REVENUES 1.9
UI WHOLESALE PASS-THROUGH REVENUE 1.5
---
TOTAL UI REVENUES $(0.6)
===
- --------------------------------------------------------------------------------
Note A: Includes a 2.8% reduction in electricity sales and a corresponding $2.4
million revenue reduction resulting from the resolution of a station
service dispute with a generating plant owner.

Retail fuel and energy expense decreased by $8.5 million in the first six months
of 2002 compared to the first six months of 2001. UI has received, and expects
to receive through 2003, electricity to satisfy its standard offer retail
customer service requirements through fixed-price purchased power agreements.
These costs are recovered through the GSC portion of UI's unbundled retail
customer rates. It should be noted that a small number of customers have
selected alternate suppliers to provide generation services, but this has no
effect on UI's financial results. UI's wholesale energy expense increased by
$1.0 million, but these costs are recovered from customers through the CTA.

UI's O&M expenses increased by $7.2 million, from $74.1 million in the first six
months of 2001 to $81.3 million in the first six months of 2002. The principal
components of these expense changes included:

- --------------------------------------------------------------------------------
Increase/
In Millions (Decrease)
- --------------------------------------------------------------------------------
Operating Distribution Division:
- --------------------------------------------------------------------------------
Net pension expense (Note A) $4.0
Severance costs (1.9)
NEPOOL transmission expense 1.7
Other 2.6
---
TOTAL OPERATING DISTRIBUTION DIVISION $6.4
O&M AND CAPACITY FROM OTHER UNBUNDLED UTILITY DIVISIONS 0.8
---
TOTAL O&M EXPENSE $7.2
===
- --------------------------------------------------------------------------------

Note A: The increase in pension expense reflects the lower returns being
generated over the last twenty-seven months by the equity investments
held by the UI pension plan, a portion of which must be recognized
immediately with the remainder deferred and amortized over time.
These returns, when combined with the lower market value of the assets
in the pension fund



- 37 -


and the increase in projected liabilities caused by lower discount
rates, may require increased cash contributions in the foreseeable
future.

Amortization of regulatory assets, as booked, decreased by $1.5 million in the
first six months of 2002 compared to the first six months of 2001. The principal
components of these changes were:

- --------------------------------------------------------------------------------
Increase (Decrease) In Millions As Booked After-tax
- --------------------------------------------------------------------------------
AMORTIZATION OF REGULATORY ASSETS:
- --------------------------------------------------------------------------------
Accelerated amortization in Distribution Division $(7.2) $(6.3)
Amortization in CTA and SBC 5.7 3.3
--- ---
TOTAL AMORTIZATION OF REGULATORY ASSETS (1.5) (3.0)
- --------------------------------------------------------------------------------

NUCLEAR DIVISION

The Nuclear Division contributed net income of $3.6 million, or $0.25 per share,
in the first six months of 2002 compared to $3.4 million, or $0.24 per share, in
the first six months of 2001. Outages of about equal duration at the Seabrook
nuclear generating unit, a refueling outage in the second quarter of 2002 and an
outage extension in the first quarter of 2001, largely offset one another. The
unit had slightly better availability in the first six months of 2002, resulting
in a margin improvement of about $2.1 million. O&M expenses increased by about
$1.7 million as a result primarily of the refueling outage, and income tax
expense increased by $0.2 million.

UNITED RESOURCES, INC. RESULTS OF OPERATIONS: FIRST SIX MONTHS 2002 VS. FIRST
- -----------------------------------------------------------------------------
SIX MONTHS 2001
- ---------------



- ---------------------------------------------------------------------------------------------------------
2002 MORE (LESS) THAN 2001
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 2002 JUNE 30, 2001 AMOUNT PERCENT
- ---------------------------------------------------------------------------------------------------------

EPS FROM OPERATIONS (BASIC)
Operating Businesses
American Payment Systems, Inc. (APS) $(0.02) $0.00 $(0.02) - -
Xcelecom, Inc. (Xcelecom) (0.04) 0.13 (0.17) (131)%
---- ---- ----
SUBTOTAL OPERATING BUSINESSES (0.06) 0.13 (0.19) (146)%
Passive Investments
United Bridgeport Energy, Inc. (UBE) (0.10) 0.04 (0.14) (350)
United Capital Investments, Inc. (UCI) (0.21) (0.12) (0.09) - -
---- ---- ----
SUBTOTAL PASSIVE INVESTMENTS (0.31) (0.08) (0.23) - -

URI HEADQUARTERS (NOTE A) (0.17) (0.12) (0.05) - -
---- ---- ----

TOTAL NON-UTILITY EPS FROM OPERATIONS $(0.54) $(0.07) $(0.47) - -
==== ==== ====
- ---------------------------------------------------------------------------------------------------------


Note A: Includes interest charges on intercompany debt and strategic and
administrative costs of the non-utility holding company.

Overall, the consolidated non-utility businesses operating under the parent,
URI, lost approximately $7.7 million, or $0.54 per share, in the first six
months of 2002 compared to losses of about $0.8 million, or $0.07 per share, in
the first six months of 2001. Operating revenue for the URI businesses increased
by $36.3 million, or 22%, mainly due to business acquisitions, from $165.8
million in the first six months of 2001 to $202.1 million in the first six
months of 2002. Expenses for the URI businesses, including losses on passive
investments but excluding income taxes, increased by $47.9 million, and income
taxes decreased by $4.9 million.

The results of each of the subsidiaries of URI for the first six months of 2002
and 2001, as presented below, reflect the allocation of debt costs from the
parent based on a capital structure, including an equity component, and an


- 38 -


interest rate deemed appropriate for that type of business. The targeted capital
structures for each of URI's subsidiaries are: 100% equity for APS and UCI, 65%
equity and 35% debt for Xcelecom for all periods prior to the second quarter of
2002 and 100% equity beginning in the second quarter of 2002, and 30% equity and
70% debt for UBE. See the Xcelecom section for an explanation on the change to
Xcelecom's capital structure. URI absorbs interest charges on the equity portion
of its investments in its subsidiaries to the extent those investments are
financed with debt. URI may incur other expenses necessary to manage its
investments from time to time.

The following is a detailed explanation of the 2002-2001 variances by URI
subsidiary.

URI OPERATING BUSINESSES

AMERICAN PAYMENT SYSTEMS, INC.

APS lost $0.02 per share in the first six months of 2002, compared to breakeven
in the first six months of 2001. Earnings from operations from the core
contracted payment business improved by about $0.05 per share. The number of
authorized transactions processed by APS's core business increased by 6.7%, and
gross margin on those transactions increased by 13%. Start-up and infrastructure
expenses in APS's other strategic initiatives, which are expected to produce
future growth, reduced earnings by $0.07 per share compared to 2001.

XCELECOM, INC.

Xcelecom lost $0.04 per share in the first six months of 2002, compared to
earnings of $0.13 per share in the first six months of 2001. Higher loss reserve
charges relating to projects at several Xcelecom subsidiaries reduced earnings
by about $0.05 per share. Also, as with other companies in the construction and
systems integration industries, there is now a very evident decline in economic
activity in Xcelecom's markets. Xcelecom is experiencing customer postponements
and cancellations of projects, a reduction in new project orders, a continuing
slowdown in spending for technology by its customers, and increased competition
for fewer jobs, resulting in both lower demand and lower margins. Additionally,
the completion of several large, non-recurring contracts in 2001 that have not
been replaced has contributed to the earnings decline. The negative earnings
impact of these items, about $0.13 per share, was partly offset by an increase
of about $0.01 per share from acquisitions made since the second quarter of
2001, and an increase of $0.06 per share due to the change in accounting for
goodwill mandated by Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets." They were also partly offset by the
conversion, in the second quarter of 2002, to a 100% equity capital structure
from the 65% equity and 35% debt structure used previously. This conversion
contributed $0.02 per share in the first six months of 2002. That earnings
improvement was offset by an earnings decrease in URI Headquarters, which
received less interest income from Xcelecom. For a further explanation of the
debt conversion, see the "Looking Forward" section.

URI PASSIVE INVESTMENTS

UNITED BRIDGEPORT ENERGY, INC.

UBE owns a 33 1/3% interest in Bridgeport Energy, LLC (BE). UBE lost $0.10 per
share in the first six months of 2002 compared to earnings of $0.04 per share in
the first six months of 2001. Of the $0.14 per share decrease, $0.10 per share
was due to costs associated with a 2002 overhaul. The overhaul began in March
and ended April 17, 2002. The rest of the variance was due primarily to lower
margin from weak energy sales prices, partly offset by an increase in ICAP
revenues. In 2001, UBE had an agreement with Duke Energy Trading and Marketing
that effectively eliminated UBE's operating and margin risks. There has been no
such agreement in 2002, and UBE has recorded its share of BE's income in the
second quarter of 2002 and the six months ended June 30, 2002. See the "Looking
Forward" section for information on UBE's ICAP revenues.

UNITED CAPITAL INVESTMENTS, INC.

UCI lost $0.21 per share in the first six months of 2002, compared to a loss of
$0.12 per share in the first six months of 2001. An impairment of UCI's
investment in Gemini, a broadband fiber-optic business, caused a $0.16 per share
loss. That write-off reflects the generally depressed economic conditions in the
telecommunications industry that


- 39 -


worsened in the second quarter of 2002 and an associated inability of
Gemini to access capital markets to continue its network build-out. The
remaining variance was due to lower losses on other passive investments.

URI HEADQUARTERS

URI Headquarters incurred an after-tax loss of $2.4 million, or $0.17 per share,
in the first six months of 2002 compared to a loss of $1.7 million, or $0.12 per
share, in the first six months of 2001. The results of each of the subsidiaries
of URI, as presented above, reflect interest expense on allocated debt from URI,
based on a capital structure, including an equity component, and an interest
rate deemed appropriate for that type of business. Some unallocated interest
charges and strategic and administrative costs for the subsidiaries of URI are
retained by the parent URI. The increase in losses at URI Headquarters reflects
additional administrative expenses incurred for managing investments. Lower
interest income from the reclassification of Xcelecom's intercompany debt to
equity, beginning in the second quarter of 2002, was more than offset in the
six-month period by lower interest charges.

LOOKING FORWARD

CERTAIN STATEMENTS CONTAINED HEREIN, REGARDING MATTERS THAT ARE NOT HISTORICAL
FACTS, ARE FORWARD-LOOKING STATEMENTS (AS DEFINED IN THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995). SUCH FORWARD-LOOKING STATEMENTS INCLUDE RISKS
AND UNCERTAINTIES; CONSEQUENTLY, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
EXPRESSED OR IMPLIED THEREBY, DUE TO IMPORTANT FACTORS INCLUDING, BUT NOT
LIMITED TO, GENERAL ECONOMIC CONDITIONS, LEGISLATIVE AND REGULATORY CHANGES,
DEMAND FOR ELECTRICITY AND OTHER PRODUCTS AND SERVICES, CHANGES IN ACCOUNTING
PRINCIPLES, POLICIES OR GUIDELINES, AND OTHER ECONOMIC, COMPETITIVE,
GOVERNMENTAL, AND TECHNOLOGICAL FACTORS AFFECTING THE OPERATIONS, MARKETS,
PRODUCTS, SERVICES AND PRICES OF THE SUBSIDIARIES OF UIL HOLDINGS CORPORATION
(UIL HOLDINGS). FORWARD-LOOKING STATEMENTS INCLUDED HEREIN SPEAK ONLY AS OF THE
DATE HEREOF, AND UIL HOLDINGS UNDERTAKES NO OBLIGATION TO REVISE OR UPDATE SUCH
STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO
REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS OR CIRCUMSTANCES.

CURRENT STRATEGY FOR THE USE OF CASH

UIL Holdings' cash flow available for dividends and investment is expected to
remain strong in 2002. UIL Holdings is committed to maintaining its dividend at
its current level of $2.88 per share.

UIL Holdings has employed a balanced approach of maintaining its strong dividend
while strategically investing internally generated cash in businesses with
strong growth potential.

Weak economic conditions in the specialty construction contracting and systems
integrations industry have adversely affected UIL Holdings' Xcelecom subsidiary.
New business growth has declined and attractive acquisitions are more difficult
to find. Many potential acquisition candidates continue to have expectations of
high acquisition proceeds, in spite of the decline in industry conditions and
profitability. Xcelecom does not expect to make more acquisitions under these
valuations and economic conditions, but will continue to monitor the situation
and look for viable acquisition candidates. None are currently anticipated for
the remainder of 2002. Additionally, Xcelecom is continuing to be selective in
trying to secure new projects in its core business, in order to protect profit
margins.

UNITED ILLUMINATING'S RATE-RELATED REGULATORY PROCEEDINGS

In an October 31, 2001 decision, the Connecticut Department of Public Utility
Control (DPUC) found that The United Illuminating Company's (UI) return on
regulated utility common stock equity was not expected to exceed 11.5% in 2002,
but that just and reasonable retail electric rates for UI could only be
determined in the context of a full Rate Case proceeding, which is currently in
progress. UI filed Rate Case schedules in November 2001, together with
supporting pre-filed sworn written testimony. UI proposed no change in base
rates for the rate year 2002, and no change in its 11.5% authorized return on
equity. In addition, UI proposed a new rate plan for the period from the DPUC's
Rate Case decision through 2007 (Proposed Rate Plan), including a change in the
earnings sharing mechanism that would utilize 50% of earnings over the
authorized return, if any, to reduce stranded costs, with 50% being retained as
earnings.



- 40 -


A final decision by the DPUC in the Rate Case is currently anticipated by the
end of the third quarter of 2002. UI cannot predict the outcome of the Rate Case
proceeding, and no change to UI's earnings estimates for the remainder of 2002
has been made at this time. It should be noted that the final decision will not
affect results from operations recorded prior to the effective date of the final
decision. If changes to the 2002 earnings estimates are warranted when a final
decision is issued, UIL Holdings will announce those changes as soon as they
have been determined. It is likely that UIL Holdings will also issue earnings
guidance for 2003 at that time.

UIL HOLDINGS' CONSOLIDATED EARNINGS ESTIMATES FOR 2002

UIL Holdings met its first half 2002 earnings estimate. However, because of
negative returns on passive investments in the first six months of the year and
the strong evidence of poor economic conditions in the second quarter,
particularly affecting Xcelecom's operations, UIL Holdings announced on July 22,
2002 that it was reducing its earnings estimate for 2002 to a range of
$3.20-$3.45 per share from the previous estimate of $4.10-$4.25 per share. The
estimate for UI, including the Nuclear Division, remains unchanged from the
previous estimate at this time. See below for further details.

THE UNITED ILLUMINATING COMPANY (UI)

UI EARNINGS ESTIMATES FOR 2002

Overall, UI, including the Nuclear Division, is expected to contribute
$3.90-$4.05 to UIL Holdings' earnings per share in 2002. Changes in 2002 pension
expense have been addressed in our rate filing and the 2002 earnings
projections.

If UI were to earn an 11.5% return on regulated utility common stock equity,
excluding the Nuclear Division, that level of earnings would generate
$3.30-$3.40 per share for UIL Holdings.

In the case of generation service, UI has contracted with Virginia Electric and
Power Company for the supply of all of UI's retail customer standard offer
service requirements through December 31, 2003, on a fixed-price basis. This
arrangement is intended to protect UI's retail customers and UIL Holdings'
shareowners from market and pricing volatility. The only retail electricity
sales volume fluctuations that directly impact UI's net income are those that
apply to the operating Distribution Division component of rates. Thus, a 1%
sales volume increase would produce additional sales margin of about $2.4
million, $2.1 million after gross earnings tax, in 2002.

NUCLEAR DIVISION EARNINGS ESTIMATES FOR 2002

The Nuclear Division contributed $0.64 per share to UIL Holdings' results for
2001. A refueling outage was performed in the second quarter of 2002 at the
Seabrook nuclear generating unit. The duration of that outage was roughly
equivalent to the duration of the outage that occurred in the first quarter of
2001. Assuming the unit operates as expected for the remainder of the year, the
contribution to earnings in 2002 of the unit should be $0.60-$0.65 per share.

On April 15, 2002, the New Hampshire Public Utilities Commission, in
coordination with the DPUC, and JPMorgan announced that an agreement had been
reached with an affiliate of FPL Group (FPL) to purchase 88.2% of Seabrook
Station, including all of UI's ownership and leasehold interests in Units 1 and
2. Proceeds from the sale will be used to terminate UI's obligation under its
Seabrook Unit 1 sale/leaseback agreement ($208.9 million), net of UI's
investment in Seabrook Lease Obligation Bonds ($78.8 million). Consummation of
the sale is subject to requisite regulatory approvals and completion of FPL's
due diligence investigation prior to the closing date. UI currently expects that
such regulatory approvals will be received, and the sale will be consummated,
around the end of 2002. UI's earnings estimate for the Nuclear Division for 2002
reflects the assumption that the sale may be consummated up to one month earlier
than the end of the year. In compliance with Connecticut's regulated electric
utility industry restructuring legislation, the net-of-tax gain from the sale,
after termination of the sale/leaseback agreement, that is in excess of the book
value of the plant, as set by the DPUC, based on its estimate of the market
value of the plant, must be used to reduce UI's stranded costs. Accordingly, at
the time of sale, there should be no direct impact on financial results as a


- 41 -


result of the sale. UI will, however, receive no future operating earnings from
Seabrook Station after the sale is consummated. For a normal operating month,
the Nuclear Division produces earnings in the range of $0.06-$0.09 per share.

UNITED RESOURCES, INC. (URI) EARNINGS ESTIMATES FOR 2002

UIL Holdings' non-utility businesses, under the parent URI, are expected to lose
$0.60-$0.70 per share for UIL Holdings in 2002, reflecting the poor performance
of passive investments, higher loss reserve charges relating to projects at
certain Xcelecom subsidiaries and recorded in the first quarter of 2002, the
economic downturn's impact on Xcelecom's businesses, and some additional
strategic expenses to enhance American Payment Systems, Inc.'s future growth
potential.

URI OPERATING BUSINESSES

AMERICAN PAYMENTS SYSTEMS, INC. (APS)

APS is expected to lose from $0.05-$0.10 per share for UIL Holdings in 2002. The
loss is expected to be higher than previously anticipated because of start-up
costs associated with the expected acquisition of a major new client in the
contracted part of the APS business. This new client is expected to increase
APS's contracted transactions by 25% and is expected to be profitable beginning
in 2003. The expected results also reflect other anticipated strategic expenses
designed to produce future earnings enhancements in the non-contracted payment
and financial services segments of APS's business. APS has already made
acquisitions and investments in 2001 and the first six months of 2002, giving it
the ability to grow its agent base and to diversify further its products and
services.

XCELECOM, INC.

Earnings for Xcelecom are expected to be approximately $0.05-$0.15 per share for
UIL Holdings in 2002, a significant reduction from the $0.44 per share earned in
2001 and from the previous 2002 estimate of $0.60-$0.65 per share. As with the
previous estimate, this new estimate reflects a $0.15 per share increase
compared to 2001 due to a reduction in the amortization of goodwill from the
implementation of Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets," but also takes into consideration the negative
impact of the slowing economy on the construction and systems integration
industries, and the completion of several large, non-recurring contracts in
2001. As with other companies in the construction and systems integration
industries, Xcelecom is experiencing customer postponements and cancellations of
projects, a reduction in new project orders, a continuing slowdown in spending
for technology by its customers, and increased competition for fewer jobs,
resulting in both lower demand and lower margins. Xcelecom is taking action to
offset the negative impact of these items by working to reduce operating and
overhead related costs. Generally, the economic activity of the construction
markets in which Xcelecom participates lags the general economy by six to
eighteen months, both in economic downturns and recoveries. A return to growth
in Xcelecom's primary markets is therefore likely to lag any general upturn in
the economy, and the timing of any recovery remains uncertain.

In addition, the new earnings estimate for 2002 reflects the elimination of
further acquisitions in 2002, as the opportunity for attractive acquisitions at
reasonable prices has disappeared for the foreseeable future. Xcelecom does not
expect to make additional acquisitions unless and until opportunities with
significant potential to earn a premium return on investment are found.

Through the first quarter of 2002, Xcelecom was financed, as a subsidiary of
URI, at a target capital structure of 65% equity and 35% debt. In the second
quarter of 2002, all of Xcelecom's intercompany debt was converted to equity.
This conversion is expected to make Xcelecom financially stronger on a
stand-alone basis and improve the terms of any potential acquisition. The
conversion of Xcelecom's inter-company debt to equity beginning in the second
quarter of 2002 will have a $0.07 per share benefit to Xcelecom for the year
that will be absorbed at URI Headquarters, for no net change to UIL Holdings
results. These changes are incorporated in the new 2002 earnings estimates for
both Xcelecom and URI Headquarters.



- 42 -


In the course of its operations, Xcelecom is subject to certain risk factors,
including but not limited to: exposure to downturns in the economy, risks
related to its acquisition strategy, risks related to management of internal
growth, availability of qualified employees, competition, seasonality, risks
associated with contracts, significant fluctuations in quarterly results,
recoverability and possible impairment of goodwill, collectibility of
receivables, dependence on key personnel, and risks associated with the
availability of capital and with debt service.

URI PASSIVE INVESTMENTS

Losses from URI's passive investments, including United Bridgeport Energy, Inc.
(UBE), United Capital Investments, Inc. (UCI) , and URI headquarters' costs, are
expected to be $0.65-$0.75 per share for UIL Holdings in 2002.

UNITED BRIDGEPORT ENERGY, INC.

URI's passive investment in United Bridgeport Energy, Inc. (UBE) is expected to
lose up to $0.10 per share in 2002, due to weak energy prices, costs associated
with the 2002 planned overhaul and increases in operating and maintenance
expenses. Additional analyses are being conducted to more fully evaluate the
uncertainties associated with BE's operations and energy markets, and to assess
potential impacts on UBE's future operations and earnings prospects. UBE's
expected results assume the realization of UBE's 33 1/3% portion of the revenues
of Bridgeport Energy, LLC (BE) related to the market value of the Installed
Capability (ICAP) of BE's merchant wholesale electric generating facility in
Bridgeport, Connecticut. BE's ICAP customer is currently disputing its contract
with BE. The Federal Energy Regulatory Commission (FERC), in an order issued
August 28, 2001, re-affirmed the value of the ICAP market in New England as a
necessary reliability function. The FERC order also set a deficiency charge
price for ICAP at a level that supports BE's contract price. The ICAP revenues
from June 2000 through December 2001 that are in dispute are equivalent to
approximately $0.49 per share for UIL Holdings. This income was recorded
although a portion of the ICAP revenues, representing approximately $0.18 of the
$0.49 per share income, was not paid by the ICAP customer in that period. This
issue is currently in litigation. The court has scheduled preliminary hearings
during the second quarter of 2003, and a trial will begin in the fourth quarter
of 2003, if necessary. Management believes that BE will prevail on this issue,
although there can be no assurance that it will. BE is continuing to record ICAP
revenues pursuant to the existing terms of the ICAP contract, and recorded an
additional amount of ICAP revenue in the first six months of 2002, providing UIL
Holdings with $0.14 per share in that period. The loss of the disputed ICAP
revenues for all of 2002 would reduce UIL Holdings' earnings in 2002 by
approximately $0.29 per share.

UNITED CAPITAL INVESTMENTS, INC.

The estimated losses in 2002 from URI's passive investments reflect the results
of the first six months of 2002 and contemplate no net investment income for the
last six months of the year at UCI.

QUARTERLY EARNINGS PATTERN FOR 2002
- -----------------------------------

The 2002 quarterly earnings pattern for UIL Holdings is expected to be somewhat
different from the 2001 pattern. The timing of nuclear generating unit outages,
which occurred in the second quarter of 2002 and in the first quarter of 2001,
and an outage at BE's electric generating facility in the first half of 2002,
changed the earnings pattern, particularly in the second quarter of 2002 from
the second quarter of 2001. UI has experienced some cost savings in the first
six months of 2002, due to delaying implementation of programs until later in
the year, pending a Connecticut Department of Public Utility Control (DPUC)
decision in the pending Rate Case. This will reduce earnings levels in the
second half of 2002, while the current projection that there will be no UI
earnings "sharing" in the third and fourth quarters of 2002 is expected to
enhance earnings relative to the comparable quarters of 2001, subject to the
final Rate Case decision by the DPUC.

Actual 2002 results may vary from estimates depending on factors that could
affect some or all of UIL Holdings' businesses to varying degrees. The factors
include the outcome of the UI Rate Case proceeding, changes due to weather,
economic conditions, sales mix, the ability to control expenses, the ability to
manage growth, the availability of and the ability to execute acquisitions and
the results of those acquisitions, recoverability and possible


- 43 -


impairment of goodwill, contract risks and collectibility of receivables, and
unanticipated risks and events. These factors can change from quarter to
quarter.

UIL Holdings' current overall estimate of earnings per share from operations for
2002 is between $3.20-$3.45. The estimates of quarterly results are as follows:

Earnings per share from operations:

Estimated Actual Actual
Quarter 2002 Range* 2002 2001
------- ---------- ---- ----
1 $0.65-$0.70 $0.68 $0.67
2 $0.55-$0.65 $0.64 $1.08
3 $1.45-$1.60 $1.77
4 $0.45-$0.60 $0.69
----
$4.21

* Quarterly high and low range estimates are not additive, that is, the sums of
the low and high range values should not be construed as representing any
estimate other than UIL Holdings' annual estimate of $3.20-$3.45 per share.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

UIL Holdings believes that it has no material quantitative or qualitative
exposure to market risk associated with activities in derivative financial
instruments, other financial instruments or derivative commodity instruments.



- 44 -




PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Annual Meeting of the Shareowners of UIL Holdings was held on May 15, 2002,
for the purpose of electing a Board of Directors for the ensuing year, voting on
approval of the employment of PricewaterhouseCoopers LLP as the firm of
independent public accountants to audit the books and affairs of UIL Holdings
for the fiscal year 2002, and voting on approval of the proposal to increase the
maximum numbers of shares of common stock for which stock options may be granted
under the 1999 Stock Option Plan.

All of the nominees for election as Directors listed in UIL Holdings' proxy
statement for the meeting were elected by the following votes:

NUMBER OF SHARES
----------------------------------
VOTED NOT
NOMINEE "FOR" VOTED
------- ----- -----
Thelma R. Albright 12,077,995 142,216
Marc C. Breslawsky 12,076,346 143,865
David E. A. Carson 12,074,541 145,670
Arnold L. Chase 12,076,588 143,624
John F. Croweak 12,076,491 143,721
Robert L. Fiscus 12,077,653 142,559
Betsy Henley-Cohn 12,074,683 145,529
John L. Lahey 12,078,905 141,308
F. Patrick McFadden, Jr. 12,077,127 143,085
Daniel J. Miglio 12,071,418 148,795
William F. Murdy 12,075,044 145,167
James A. Thomas 12,077,394 142,818
Nathaniel D. Woodson 12,075,794 144,418

The employment of PricewaterhouseCoopers LLP as the firm of independent public
accountants to audit the books and affairs of UIL Holdings for the fiscal year
2002 was approved by the following vote:

NUMBER OF SHARES
----------------------------
VOTED VOTED NOT
"FOR" "AGAINST" VOTED
----- --------- -----
11,982,725 175,860 61,626

The proposal to increase the maximum numbers of shares of common stock for which
stock options may be granted under the 1999 Stock Option Plan was approved by
the following vote:

NUMBER OF SHARES
----------------------------
VOTED VOTED NOT
"FOR" "AGAINST" VOTED
----- --------- -----
11,088,876 909,589 221,731



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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits.



Exhibit
Table Item Exhibit
Number Number Description
---------- ------- -----------

(3) 3.2a Copy of Bylaws of UIL Holdings Corporation, as amended through
July 22, 2002, superseding Exhibit 3.2*.

(10) 10.5d Purchase and Sale Agreement for the Seabrook Nuclear Power
Station by and among North Atlantic Energy Corporation, The
United Illuminating Company, Great Bay Power Corporation, New
England Power Company, The Connecticut Light and Power Company,
Canal Electric Company, Little Bay Power Corporation, and New
Hampshire Electric Cooperative, Inc., as Sellers, and FPL Energy
Seabrook, LLC, as Buyer, dated April 13, 2002.

(10) 10.21+ Copy of Employment Agreement, dated as of January 28, 2002,
between UIL Holdings Corporation and Richard J. Nicholas.

(10) 10.22+ Copy of Employment Agreement, dated as of April 22, 2002,
between UIL Holdings Corporation and Louis J. Paglia.

(10) 10.23+ Copy of engagement letter agreement, dated May 16, 2002, between
UIL Holdings Corporation and Robert L. Fiscus.

(21) 21a List of subsidiaries of UIL Holdings Corporation, superseding
Exhibit 21**.


- ----------------

+ Management contract or compensatory plan or arrangement.

* Filed with Quarterly Report (Form 10-Q) of UIL Holdings Corporation for fiscal
quarter ended September 30, 2001.

**Filed with Annual Report (Form 10-K) of UIL Holdings Corporation for the
fiscal year ended December 31, 2001.


(b) Reports on Form 8-K.

None



- 46 -




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

UIL HOLDINGS CORPORATION




Date 8/13/2002 Signature /s/ Louis J. Paglia
---------------------- ---------------------------------
Louis J. Paglia
Executive Vice President
and Chief Financial Officer




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