Eversource Energy — Q2 2021 Form 10-Q Summary
Business context and reporting period
This unaudited combined Form 10-Q covers the quarter and six months ended June 30, 2021, for Eversource Energy and three regulated utility subsidiaries: The Connecticut Light and Power Company (CL&P), NSTAR Electric Company, and Public Service Company of New Hampshire (PSNH). Eversource provides regulated electric, natural gas, and water services to approximately 4.3 million customers in Connecticut, Massachusetts, and New Hampshire. Comparisons are with the corresponding 2020 periods unless otherwise noted. Eversource’s 2021 results include Columbia Gas of Massachusetts assets acquired in October 2020.
Key financial metrics
Amounts are in millions of dollars except per-share data and percentages. Consolidated margins are calculated from reported revenue and operating income.
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Operating revenue | $2,122.5 | $1,953.1 | $4,948.4 | $4,326.9 |
| Operating income | $451.6 | $433.7 | $1,037.2 | $972.8 |
| Operating margin | 21.3% | 22.2% | 21.0% | 22.5% |
| Net income attributable to common shareholders | $264.5 | $252.2 | $630.7 | $587.0 |
| GAAP diluted EPS | $0.77 | $0.75 | $1.83 | $1.75 |
| Operating cash flow | Not separately presented | Not separately presented | $807.4 | $1,005.4 |
| Capital investment in property, plant and equipment | Not separately presented | Not separately presented | $1,423.2 | $1,400.2 |
At June 30, 2021, cash was $217.4 million, total assets were $47.2 billion, and common shareholders’ equity was $14.3 billion. Consolidated notes payable were $2.0 billion, current long-term debt was $799.9 million, long-term debt was $15.9 billion, and rate-reduction bonds totaled $518.5 million. Commercial paper capacity available was $647.5 million; revolving credit facilities had no borrowings outstanding. Management said operating cash flow, borrowing availability, and access to capital markets were expected to meet working-capital, operating, and forecast capital-investment needs.
Material changes versus the prior period
- Q2 GAAP EPS rose to $0.77 from $0.75; first-half EPS rose to $1.83 from $1.75. First-half common-shareholder income increased $43.7 million.
- Revenue increased $169.4 million in Q2 and $621.5 million in the first half. The CMA acquisition contributed $96.8 million and $349.4 million, respectively, to natural-gas distribution revenue. Higher transmission revenue also reflected increased investment and rate base.
- First-half operating cash flow fell $197.9 million. Management cited income-tax payments versus prior-year refunds, payment timing, higher pension contributions, storm-restoration payments, and receivable collection timing, partly offset by regulatory-tracker collections and CMA-related cash flows.
- First-half consolidated capital investment was $1.42 billion, slightly above $1.40 billion in 2020. Eversource issued $1.53 billion and repaid $1.02 billion of long-term debt during the period.
- Results include after-tax transition and acquisition costs of $6.8 million, or $0.02 per share, in Q2 and $13.0 million, or $0.04 per share, in the first half. Excluding these costs, non-GAAP EPS was $0.79 for Q2 and $1.87 for the first half.
Outlook, management commentary, risks, and unusual items
- Eversource reaffirmed long-term EPS growth through 2025 from regulated utilities in the upper half of a 5%–7% range. It expected 2021 non-GAAP EPS toward the lower end of its $3.81–$3.93 guidance range; this excludes CMA transition and acquisition costs but includes the CL&P storm-related charge.
- CL&P recorded a $28.6 million PURA assessment related to its response to Tropical Storm Isaias, with a $0.07-per-share after-tax impact for the first half. CL&P appealed the related PURA decision. PURA also ordered a prospective 90-basis-point reduction in CL&P’s allowed ROE; management estimated a potential annual reduction of about $31 million in revenue and $21 million in earnings if implemented. The timing, duration, and ultimate effect remained uncertain.
- CL&P had approximately $225 million of deferred Isaias restoration costs at June 30. PURA’s prudence review could result in some costs being disallowed; the amount could not be estimated.
- COVID-19 had not materially affected current operations or results, according to management, but customer arrears and collection risks had risen. The consolidated allowance for uncollectible accounts was $425.8 million. Management believed Connecticut and Massachusetts would allow recovery of incremental COVID-related costs, while a July 2021 New Hampshire order disallowed establishing regulatory assets for specified pandemic-related bad debts and late fees.
- Other uncertainties include pending FERC transmission-ROE complaints and a proposal that could eliminate an RTO return-on-equity incentive; management estimated that elimination could reduce annual after-tax earnings by about $15 million. Regulatory outcomes, cost recovery, interest rates, capital-market access, weather, cyber risks, and offshore-wind permitting are among the disclosed risks.
- Massachusetts Clean Energy 83D renewable-energy commitments at NSTAR Electric are estimated at approximately $6.7 billion over a 20-year contract, with costs expected to begin in 2023. Offshore-wind investments were expected to be $300 million–$500 million in 2021, subject to project design and permitting progress.
- COVID-19 and acquisition-related estimates, storm-cost recovery, regulatory decisions, and the CMA acquisition affect comparisons and may change future results. Eversource noted that interim results are not necessarily indicative of full-year results.
Important facts for investors to verify
- Track PURA proceedings and CL&P’s appeal, including implementation of the $28.6 million assessment, the 90-basis-point ROE reduction, and possible interim rate changes.
- Assess recovery prospects for the approximately $225 million of CL&P Isaias restoration costs and the $45.8 million of deferred net incremental COVID-19 costs.
- Monitor cash generation relative to capital spending, dividends, debt maturities, and commercial-paper usage; available commercial-paper capacity was $647.5 million at quarter-end.
- Check progress against 2021 EPS guidance and long-term growth targets, and distinguish reported GAAP results from the company’s non-GAAP measures.
- Review approvals, construction schedules, and financing needs for renewable-energy commitments, offshore-wind projects, and the proposed NESC water acquisition.