Consolidated Edison, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. This combined filing covers Con Edison and its wholly owned subsidiary CECONY; Con Edison’s results also include O&R, the Clean Energy Businesses and Con Edison Transmission. Dollar amounts below are in millions unless stated otherwise.
Key financial metrics
| Con Edison consolidated | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Operating revenues | $3,415 | $2,971 | $7,475 | $6,648 |
| Operating income | $387 | $418 | $1,185 | $1,279 |
| Net income for common stock | $255 | $165 | $857 | $584 |
| Diluted EPS | $0.72 | $0.48 | $2.41 | $1.70 |
| Operating margin (calculated) | 11.3% | 14.1% | 15.9% | 19.2% |
| Common net income margin (calculated) | 7.5% | 5.6% | 11.5% | 8.8% |
For the six months, cash from operations was $1,957, investing cash outflow was $2,118, and financing cash inflow was $255; cash, temporary investments and restricted cash ended at $1,240. Utility construction expenditures were $1,828. Con Edison paid $544 in common dividends during the half-year.
At June 30, Con Edison reported $22,361 of long-term debt, $322 due within one year, $2,244 of commercial paper and a $400 term loan. Cash and temporary cash investments were $1,127, plus $113 of restricted cash. Commercial paper carried a 2.0% weighted-average rate, versus 0.3% at December 2021. The common equity ratio was 48.0%, up from 47.4% at year-end. CECONY separately reported $18,386 of long-term debt and $2,060 of commercial paper.
Material changes versus prior periods
- First-half revenue rose 12.4%, while operating income fell 7.3%; operating expenses increased faster than revenues, notably purchased power, fuel, gas purchases, operating and maintenance, depreciation and taxes.
- Common net income increased $273 and diluted EPS rose $0.72 for the half-year. The comparison benefited substantially from a $211 pre-tax Stagecoach investment impairment recorded in 2021, which Con Edison Transmission did not repeat in 2022. Clean Energy Businesses earnings also benefited from mark-to-market movements and lower project construction costs; these gains are not necessarily recurring.
- CECONY’s first-half net income increased to $645 from $593, even as operating income declined to $991 from $1,108. Higher non-operating income, principally lower pension and postretirement benefit costs outside operating income, more than offset weaker operating income.
- First-half operating cash flow increased $564 year over year, partly reflecting higher regulatory liabilities and accounts payable, deferred taxes and depreciation. Customer receivables and collection timing remained a headwind.
Outlook, management commentary and risks
- Rates: CECONY’s updated requests for January 2023 electric and gas rate increases were $1,038 and $402, respectively; NYSDPS testimony supported increases of $278 and $164. Approval remained pending, and management identified the rate-case outcome as important to future results and liquidity.
- Strategy: Con Edison is considering strategic alternatives for the Clean Energy Businesses. It describes earnings growth as supported by regulated utilities and contracted assets, while pursuing clean-energy and transmission investment.
- Customer arrears and liquidity: Commodity price increases, pandemic-related collection disruption and customer arrears may slow cash recovery and increase write-offs. CECONY had $1,345 of customer receivables more than 60 days past due at June 30. A New York assistance program provides state funding and regulator-authorized recovery mechanisms for eligible low-income arrears; final recoveries and credits depend on program implementation.
- Capital and financing: Utilities’ substantial construction needs require access to capital markets. Con Edison borrowed $400 under a 364-day term loan in June, with a further $200 commitment available subject to conditions. Short-term borrowing costs had risen from year-end levels.
- Project and regulatory exposures: Con Edison’s MVP investment had a $111 carrying value; ongoing permitting and litigation create risk of further or full impairment. CECONY’s proposed $1,000 Con Edison Hub for offshore wind remained subject to approval. The filing also discusses environmental remediation, asbestos claims, gas-safety inspections and potential customer compensation for prolonged outages. Management could not estimate certain possible losses.
- Other items: A $5 increase in the Clean Energy Businesses’ reserve for uncertain tax positions followed an unfavorable IRS appeals settlement. Con Edison’s maximum guarantees totaled $2,076. The filing reported effective disclosure controls and no material change in internal control over financial reporting; it reported no material changes to risk factors from the 2021 Form 10-K.
Most important facts for investors to verify
- Whether NYSPSC-approved CECONY electric and gas rates materially differ from management’s requests, and when the new rates take effect.
- How much of the increase in earnings reflects recurring utility performance versus 2021 impairment comparisons, 2022 derivative mark-to-market gains and tax-equity accounting.
- Whether customer arrears and collection trends improve, and how much of eligible balances is ultimately covered by assistance funding or recoverable surcharges.
- Con Edison’s short-term borrowing, interest costs and capital-market access as utility investment and construction requirements continue.
- Developments in MVP permits, litigation and cost estimates, and the resulting potential for additional investment impairment.
- Progress on strategic alternatives for the Clean Energy Businesses and approval, cost recovery and execution of major clean-energy investments.