Consolidated Edison, Inc. (Con Edison) — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. The combined filing covers Con Edison and its wholly owned utility subsidiary, Consolidated Edison Company of New York, Inc. (CECONY). Unless noted, amounts are in millions of dollars.
Business context and financial performance
Con Edison is a regulated utility holding company, principally comprising CECONY and Orange and Rockland (O&R), alongside renewable-energy businesses and transmission investments. Utility revenue is substantially shaped by regulated rate plans and includes pass-through energy costs.
| Con Edison consolidated | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Operating revenue | $3,613 | $3,333 | $10,261 | $9,286 |
| Operating income | $850 | $860 | $2,129 | $2,147 |
| Net income | $469 | $502 | $1,007 | $1,095 |
| Net income for common stock | $538 | $493 | $1,122 | $1,058 |
| Diluted EPS | $1.52 | $1.47 | $3.23 | $3.16 |
| Operating margin | 23.5% | 25.8% | 20.7% | 23.1% |
Revenue increased 8% for the quarter and 10% for the nine months, while operating income was slightly lower in both comparisons. The nine-month increase in common-stock earnings reflected stronger Clean Energy Businesses results, partly offset by a $211 million pre-tax ($147 million after-tax) impairment on the Stagecoach investment recorded in Con Edison Transmission. Net income attributable to noncontrolling interests also changed materially, including HLBV tax-equity accounting effects in the renewable portfolio.
CECONY reported nine-month revenue of $8,784 million, up from $8,072 million, and net income of $1,011 million, up from $963 million. Its operating income declined to $1,836 million from $1,854 million, as higher utility revenues were offset by higher purchased-power, fuel, operating, depreciation and tax expenses.
Cash flow, debt and liquidity
- Con Edison generated $1,712 million of operating cash in the first nine months, versus $1,368 million a year earlier. Investing used $2,437 million, including utility construction spending of $2,697 million; financing used $496 million.
- Ending cash, temporary cash investments and restricted cash were $215 million, compared with $314 million a year earlier. The $215 million includes $149 million of restricted project cash.
- At September 30, Con Edison had $21,841 million of long-term debt, $439 million due within one year, and $1,036 million of commercial paper outstanding. Its common-equity ratio was 48.3%. CECONY had $17,637 million of long-term debt and $942 million of commercial paper outstanding, with a 47.9% common-equity ratio.
- Con Edison’s current assets were $5,096 million and current liabilities $5,255 million. Management reported access to capital markets and a $2,250 million revolving credit agreement, with no borrowings outstanding under that facility.
- Capital requirements were estimated at $6,065 million for 2021. The company planned to fund 2021–2023 requirements with internally generated funds, long-term debt and equity, including up to $800 million of common equity in 2021 and approximately $700 million in aggregate during 2022–2023.
Material changes, outlook and risks
- Stagecoach sale and impairment: The first closing of the sale of Con Edison’s 50% interest produced $614 million, including working capital. A second closing for an expected $15 million share, subject to adjustments and NYSPSC approval, remained pending. The impairment substantially reduced the investment carrying value and weighed on nine-month earnings.
- Growth and investment: Higher Clean Energy Businesses revenue reflected renewable generation and energy-services activity, but related engineering, procurement and construction costs also rose. Con Edison increased its 2021 capital estimate by $50 million, citing additional Clean Energy investment. CECONY’s approved Reliable Clean City transmission projects are estimated to cost about $780 million over four years.
- Customer collections and COVID-19: Customer receivables and uncollectible-account reserves rose amid pandemic-related payment difficulties and restrictions on service disconnections. Con Edison’s customer allowance for uncollectible accounts reached $313 million from $148 million at year-end 2020. Management cautioned that slower collections and higher commodity prices could pressure utility liquidity. Supply-chain disruptions increased some prices and lead times but had not materially affected utility earnings, cash flows or financial condition.
- Rates: An O&R New York electric and gas rate-plan Joint Proposal for 2022–2024 was reached in October 2021 but remained subject to NYSPSC approval. RECO updated its New Jersey rate request to $19.5 million, effective February 2022, also pending regulatory action. The filing provides capital plans but no explicit consolidated EPS guidance.
- Contingencies: A July 2021 regulatory settlement resolved specified claims related to the 2018 steam incident, 2019 outages and Tropical Storm Isaias, with agreed settlement amounts of $75.1 million for CECONY and $7.0 million for O&R, plus future commitments. Environmental remediation liabilities were $841 million consolidated; additional costs may arise and could be material. The utilities could not estimate any possible loss from a NYSPSC audit of income-tax ratemaking calculations and had accrued no liability for that matter. CECONY also reported a 2021 dielectric-fluid spill; costs were not expected to materially adversely affect its financial position, results or liquidity.
- Other project risk: Mountain Valley Pipeline faced authorization and challenge risks; its operator targeted summer 2022 service at an estimated project cost of $6.2 billion, excluding AFUDC. Con Edison had recorded a $320 million pre-tax impairment on its investment in 2020.
- The filing reported no material change in risk factors from the 2020 Form 10-K. Forward-looking results remain exposed to regulation and rate outcomes, reliability and cyber risks, environmental and climate obligations, capital-market access, inflation, supply-chain constraints and customer credit conditions.
Investor facts to verify
- Whether the remaining Stagecoach sale closing received approval, and how final proceeds compare with the carrying value after the impairment.
- Whether the O&R Joint Proposal and RECO rate request were approved, and the resulting allowed returns, recovery mechanisms and performance adjustments.
- Whether customer arrears, write-offs and uncollectible reserves stabilize as COVID-related protections and recovery programs change.
- How the planned capital program is funded, including actual debt and equity issuance, cash generation and progress on CECONY’s reliability projects.
- Developments in the tax-ratemaking audit, environmental remediation exposure, outage-settlement commitments and Mountain Valley Pipeline approvals, timing and costs.