Eversource Energy — Q1 2020 Form 10-Q
Business context and reporting period
Combined unaudited quarterly filing for Eversource Energy and certain regulated subsidiaries, covering the three months ended March 31, 2020. Eversource is a regulated energy and water delivery holding company serving approximately four million customers in Connecticut, Massachusetts, and New Hampshire.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 / comparator |
|---|---|---|
| Operating revenue | $2.374 billion | $2.416 billion |
| Operating income | $539.1 million | $494.7 million |
| Net income attributable to common shareholders | $334.8 million | $308.7 million |
| Diluted EPS | $1.01 | $0.97 |
| Operating cash flow | $420.3 million | $381.4 million |
| Property, plant and equipment investment, cash basis | $725.5 million | $628.1 million |
| Cash at quarter-end | $47.4 million | $15.4 million at Dec. 31, 2019 |
| Total assets | $41.65 billion | $41.12 billion at Dec. 31, 2019 |
| Long-term debt, including current portion | $14.43 billion | $14.10 billion at Dec. 31, 2019 |
Quarter-end notes payable were $661.4 million and rate reduction bonds totaled $561.7 million, including current portions. Available capacity under commercial paper programs was approximately $1.27 billion; neither revolving credit facility had borrowings outstanding. The company issued $750 million of long-term debt and raised $419.8 million net from common-share issuances during the quarter.
Changes versus the prior comparable period
- Revenue decreased $42.1 million, while operating income rose $44.4 million and common-shareholder net income increased $26.1 million. Earnings growth reflected regulated rate increases, transmission investment, and lower purchased energy costs; reported results also included market-related investment losses and acquisition costs.
- Reported EPS increased from $0.97 to $1.01. Excluding $3.5 million after-tax of Columbia Gas of Massachusetts acquisition costs, management reported non-GAAP EPS of $1.02, versus $0.97 a year earlier.
- Cash from operations increased $38.9 million, primarily due to the timing of receivable collections, partly offset by accounts-payable timing and lower income-tax refunds. Capital investment increased $97.4 million.
- Retail electric sales volumes fell 5.9% overall and firm natural-gas volumes fell 13.9%. Management said revenue-decoupling mechanisms limit earnings exposure to volume changes for most businesses; PSNH is an exception for electric sales.
- Common shares outstanding rose following issuance of 5.96 million shares in March. The quarterly common dividend was $0.5675 per share, paid March 31.
Outlook, commentary, risks, and unusual items
- Management reaffirmed 2020 earnings guidance of $3.60–$3.70 per share.
- COVID-19 had not caused a significant direct operational or financial impact by the filing date, but management could not predict future effects. Risks include weaker collections, reduced commercial and industrial demand, market volatility, access to and cost of capital, supplier disruption, workforce impacts, and pension investment performance. Customer disconnection moratoriums and waived late charges were in effect in the three states; management expected to pursue regulatory recovery of related costs.
- The company agreed to acquire specified Columbia Gas of Massachusetts assets for $1.1 billion, subject to regulatory approvals and a rate-plan approval. Closing was expected by the end of Q3 2020. Eversource will not assume debt or liabilities related to the 2018 Greater Lawrence gas incident.
- COVID-19 restrictions and permitting uncertainty were expected to delay South Fork Wind beyond its projected end-2022 in-service date. Management could not predict the effect on projected dates for Revolution Wind and Sunrise Wind.
- Four FERC transmission return-on-equity complaints remain unresolved. Eversource recorded a $39.1 million pre-tax reserve for the second complaint period; it could not estimate the overall outcome or range of gain or loss. A 10-basis-point change in the base ROE used for reserves would affect after-tax earnings by about $3 million per complaint period.
- Environmental remediation reserves were $79.1 million at Eversource. Management reported the pension plan funded status at approximately 100% as of March 31, down from 111% at year-end 2019.
- The filing reports $2.1 million of pre-tax COVID-related charges and $3.5 million of after-tax acquisition costs. Management reported no impairment-trigger indicators at quarter-end.
Most important facts for investors to verify
- Whether the $3.60–$3.70 EPS guidance remains achievable as pandemic-related collection, demand, and market effects develop.
- Regulatory approvals, final rate plan, financing, and closing timing for the $1.1 billion Columbia Gas asset acquisition.
- Subsequent customer-payment trends, regulatory treatment of COVID-19 costs, and the adequacy of the $262.1 million receivables allowance.
- FERC decisions on transmission ROE complaints and potential changes to the $39.1 million reserve.
- Offshore wind permitting schedules and project economics, especially South Fork Wind’s indicated delay.
- Capital spending, debt and equity funding needs, commercial-paper availability, and pension funded status.