Eversource Energy — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. Eversource is a regulated New England energy and water delivery holding company, with electric distribution and transmission, natural gas distribution, water distribution, and offshore wind investments.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Operating revenue | $9.86 billion | $8.90 billion | +$958.7 million, or 10.8% |
| Operating income | $1.99 billion | $1.99 billion | +$4.6 million |
| Net income attributable to common shareholders | $1.22 billion | $1.21 billion | +$15.3 million, or 1.3% |
| Diluted GAAP EPS | $3.54 | $3.55 | Down $0.01 |
| Non-GAAP adjusted EPS | $3.86 | $3.64 | Up 6.0% |
| Cash from operations | $1.96 billion | $1.68 billion | +$280.0 million |
| Property, plant and equipment investments, cash-flow statement | $3.18 billion | $2.94 billion | +$232.1 million |
Operating margin was approximately 20.2% in 2021, compared with 22.3% in 2020; the increase in revenue was largely offset by higher operating expenses. Net margin attributable to common shareholders was approximately 12.4% versus 13.5%. The filing attributes much of the revenue increase to the natural gas business, including a full-year contribution from EGMA, acquired in October 2020, as well as higher transmission revenues and wholesale market sales. The report does not provide a standalone Q4 income statement in the supplied text.
Balance sheet and funding: At year-end, cash was $66.8 million, total assets were $48.49 billion, and common shareholders’ equity was $14.60 billion. Balance-sheet debt-related amounts included $17.02 billion of long-term debt, $1.19 billion of current maturities, $1.51 billion of notes payable, and $497 million of rate reduction bonds (including current and long-term portions). Approximately 98% of long-term debt was fixed-rate. Eversource reported $1.14 billion of available commercial-paper capacity; revolving credit facilities were undrawn. Current liabilities exceeded current assets by $2.58 billion, which management attributes to the capital-intensive, long-duration nature of utility investment and funding.
Cash dividends were $2.41 per common share for 2021, up from $2.27 in 2020. The board approved a $0.6375 quarterly dividend in February 2022. The company issued $3.23 billion of long-term debt and repaid $1.14 billion during 2021. Auditors issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Material changes and unusual items
- Reported 2021 earnings included $109.7 million, or $0.32 per share, of after-tax costs: $86.1 million, or $0.25 per share, from the CL&P settlement and Tropical Storm Isaias performance penalty, and $23.6 million, or $0.07 per share, of acquisition and transition costs. Adjusted earnings exclude these items; GAAP results remain the reported measure.
- CL&P’s settlement and storm penalty contributed to lower electric distribution earnings. The settlement provided $65 million in customer credits and $10 million for customer assistance, avoided proposed ROE reductions, and froze base distribution rates until no earlier than January 1, 2024, subject to exceptions described in the filing.
- Electric transmission earnings rose $42.1 million, primarily with growth in transmission rate base. Natural gas distribution earnings rose $70.7 million, including a $43.0 million contribution from EGMA. Water distribution earnings fell $4.4 million, including the absence of a prior-year gain on the sale of a water system.
- On December 1, 2021, Aquarion acquired New England Service Company for $38.1 million in Eversource shares. The Massachusetts gas acquisition, completed in 2020, continued to incur integration costs.
Outlook, risks and contingencies
- Guidance: Management projected 2022 non-GAAP EPS of $4.00–$4.17, excluding remaining EGMA integration costs. It projected regulated-utility long-term EPS growth through 2026 in the upper half of a 5%–7% range. These are forward-looking estimates, not guarantees.
- Capital program: Planned 2022–2026 regulated and corporate capital expenditures total approximately $18.14 billion, excluding offshore wind. Management also projected offshore wind investment of $0.9–$1.0 billion in 2022 and $3.0–$3.6 billion in 2023–2026, assuming the three projects meet expected schedules.
- Offshore wind: South Fork Wind received BOEM’s final construction-plan approval on January 18, 2022 and entered construction. Revolution Wind and Sunrise Wind remained in federal and state permitting. Delays, cost overruns, project cancellation, permitting, supply-chain issues, and partner or contractor performance could affect returns. Eversource disclosed material project-related guarantees, including maximum exposure of $1.08 billion for North East Offshore construction agreements.
- Regulatory recovery: Approximately $1.01 billion of deferred storm costs had not yet been filed for recovery or remained pending regulatory approval at year-end. CL&P’s Isaias restoration costs include approximately $234 million deferred at CL&P; prudency review may result in disallowances, which the company could not estimate. The filing also identifies roughly $1 billion of storm restoration and pre-staging costs subject to regulatory prudency review.
- Transmission ROE proceedings: Four FERC complaints remained unresolved. Eversource had a $39.1 million reserve for the second complaint period and said it could not reasonably estimate the ultimate gain or loss. A separate proposed elimination of the RTO ROE incentive could reduce annual after-tax earnings by an estimated $17 million if adopted.
- Other exposures: Environmental remediation liabilities were $115.4 million for 61 sites, including $105.6 million related to former manufactured-gas-plant sites; costs could rise as investigations progress. The company also identified climate and severe-weather damage, cybersecurity, supply-chain constraints, customer arrearages, capital-market access, pension assumptions, and changing energy policy as risks. Goodwill was $4.48 billion; the 2021 impairment test found no impairment.
- COVID-19: Management reported no material effect on 2021 operations or results, but noted higher aged receivables and collection risk. The allowance for uncollectible accounts was $417.4 million at year-end. Recovery of incremental costs depends in part on regulatory outcomes.
Important facts for investors to verify
- Reconcile reported GAAP EPS of $3.54 with adjusted EPS of $3.86, and assess whether the excluded settlement and integration costs should be treated as nonrecurring.
- Track the recovery and prudency decisions for deferred storm costs, particularly CL&P’s Isaias-related costs and the broader storm-cost balance.
- Review rate-case and policy developments, including CL&P’s rate freeze, NSTAR Electric’s requested rate increase, and the pending FERC transmission ROE matters.
- Monitor offshore wind permitting, construction schedules, spending, contractual commitments, and guarantees against the assumptions underlying management’s forecast.
- Assess liquidity and refinancing needs alongside the sizable capital plan, current-liability position, commercial-paper usage, and upcoming debt maturities.
- Evaluate customer receivable collections, environmental remediation estimates, climate and cybersecurity exposures, and the assumptions supporting regulatory assets and goodwill.