Consolidated Edison, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The filing also reports separately for wholly owned utility subsidiary CECONY. Unless otherwise noted, amounts are in millions of dollars.
Business context and key financial results
Con Edison is a holding company whose principal businesses are regulated electric, gas and steam utilities, alongside transmission investments. It sold substantially all of its Clean Energy Businesses on March 1, 2023.
| Con Edison consolidated | Q1 2023 | Q1 2022 |
|---|---|---|
| Operating revenues | $4,403 | $4,060 |
| Operating income | $1,739 | $799 |
| Net income for common stock | $1,433 | $602 |
| Diluted EPS | $4.05 | $1.70 |
| Cash from operating activities | $92 | $473 |
Reported results include an $855 pre-tax gain, or $791 after tax, from the Clean Energy Businesses sale. The gain was the principal reason earnings rose year over year; it contributed $2.24 per share after tax. Excluding that reported after-tax gain as a simple subtraction, net income for common stock would be $642; this is not a company-reported adjusted earnings measure. Sale-related transaction costs and other accruals also affected results.
Revenue increased about 8%, while the sale gain lifted reported operating income and margin substantially. CECONY revenue was $3,953 versus $3,517, and operating income was $809 versus $711. Its operating margin was approximately 20.5% versus 20.2%. CECONY net income was $604 versus $475. Utility rate-plan revenue increases supported results; higher energy costs largely flowed through to customers, while warmer winter weather reduced steam operating income to $56 from $90.
Cash flow, balance sheet and liquidity
- Operating cash flow fell to $92 from $473, reflecting working-capital and regulatory-balance movements. Utility construction spending was $1,050, compared with $837.
- Investing cash flow was positive $2,618, principally due to $3,927 of net proceeds from the Clean Energy Businesses sale. Financing cash outflow was $3,466, including $2,629 of net short-term debt retirement and a $1,000 share repurchase.
- Cash, excluding cash held for sale, was $771 at March 31, down from $1,282 at year-end. Con Edison reported $20,645 of long-term debt and $650 due within one year; debt including the current portion totaled $21,295, versus $20,796 at year-end.
- Con Edison’s common equity ratio was 50.2%, compared with 50.9% at year-end. CECONY’s ratio was 49.1%, up from 46.9%.
- A new $2.5 billion revolving credit agreement runs to March 2028; CECONY also has a $500 million 364-day facility through March 2024. No loans were outstanding under these facilities at quarter-end. Commercial paper outstanding was $411, including $405 for CECONY, at a 5.4% weighted-average rate.
Material changes, outlook and risks
- The Clean Energy Businesses sale reduced continuing exposure to that business and produced the large one-time gain and sale proceeds. The final sale price remains subject to customary adjustments. Con Edison retained certain tax-equity interests and the Broken Bow II project pending transfer, and remains responsible for certain battery-project obligations; potential exposure under the related agreement could reach approximately $172.
- CECONY, the NY State Department of Public Service and other parties reached a proposed electric and gas rate-plan agreement for 2023–2025. It reflects a 9.25% return on equity and a 48% common-equity ratio, but requires NYSPSC approval. The filing reflects the proposal from January 1 based on management’s assessment that approval is probable. CECONY’s separate steam rate request is $141 annually effective November 2023; NYSDPS testimony supports $94 and does not support the requested new revenue-decoupling mechanism.
- Management provided no company-wide earnings guidance in the supplied filing text. CECONY and O&R applied for federal infrastructure grants; CECONY sought up to $116 for a proposed hydrogen project. In April 2023, the NYSPSC approved cost recovery for the estimated $810 Brooklyn Clean Energy Hub.
- Key exposures include extensive utility regulation and rate-case outcomes, climate policy and changing energy demand, severe weather and system reliability, inflation and higher interest rates, customer arrears, commodity-market liquidity and access to capital. A 10% increase in rates applicable to variable-rate debt was estimated to raise annual interest expense by $4.
- Environmental and legal matters include Superfund liabilities of $994 for Con Edison, with further remediation costs potentially material; the companies cannot estimate possible asbestos exposure above accrued amounts. The filing also describes unresolved gas-inspection and tax-ratemaking matters. Con Edison’s MVP investment was carried at $111; pending legal and permitting issues create a risk of further impairment.
Investor facts to verify
- Final Clean Energy Businesses sale-price adjustments, retained assets, guarantees and battery-project obligations.
- NYSPSC decisions on CECONY’s electric and gas joint proposal and steam rate request, including timing and approved returns.
- Underlying earnings and cash generation apart from the one-time sale gain, alongside continued utility capital spending.
- Customer arrears, collection trends, regulatory recovery and effects on utility cash flows.
- Developments in MVP permitting, environmental remediation and other material contingencies.