Consolidated Edison, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Filed August 5, 2021. This is a combined filing for Con Edison, Inc. and its wholly owned utility subsidiary, Consolidated Edison Company of New York, Inc. (CECONY); Con Edison’s results also include O&R, Clean Energy Businesses and Con Edison Transmission.
Business context and financial results
Con Edison is a holding company with regulated electric, gas and steam utilities and clean-energy and transmission businesses. Unless otherwise stated, figures below are for consolidated Con Edison and are in millions of dollars except per-share amounts.
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Operating revenue | $2,971 | $2,719 | $6,648 | $5,953 |
| Operating income | $418 | $479 | $1,279 | $1,287 |
| Net income for common stock | $165 | $190 | $584 | $565 |
| Diluted EPS | $0.48 | $0.57 | $1.70 | $1.69 |
| Net cash from operating activities | — | $1,393 | $1,180 |
Six-month revenue rose 11.7%, while operating income was slightly lower and common-stock earnings increased 3.4%. Q2 operating income and EPS declined year over year. For the six months, utility construction expenditures were $1,781 million; total investing cash outflow was $2,000 million. Cash, temporary cash investments and restricted cash ended the period at $1,178 million, down from $1,436 million at year-end 2020.
At June 30, Con Edison reported $21,666 million of long-term debt, $444 million due within one year, a $903 million term loan and $1,052 million of notes payable. Current liabilities were $5,557 million and total equity was $20,053 million. The common equity ratio was 48.1%, compared with 48.3% at year-end 2020. CECONY reported six-month revenue of $5,692 million and net income of $593 million, versus $5,200 million and $558 million, respectively, in 2020.
Material changes and unusual items
- Stagecoach impairment and sale: Con Edison recorded $211 million of pre-tax impairment losses ($147 million after tax) on its investment during the first half, contributing to a $142 million six-month net loss for Con Edison Transmission. The investment’s carrying value was $630 million at June 30. The first closing of the sale occurred in July, attributing $614 million, including working capital, to CET Gas; a second closing remains subject to regulatory approval.
- Clean Energy Businesses: Six-month revenue increased to $515 million from $344 million, while operating income rose to $117 million from $96 million. Higher renewable and energy-services revenue was partly offset by increased project-construction and other operating costs. Segment results also reflect mark-to-market and tax-equity accounting effects.
- Equity and debt financing: Con Edison issued common shares for net proceeds of approximately $775 million. CECONY issued $1.5 billion of debentures, including $750 million of 3.60% green debentures due 2061, and redeemed $640 million of floating-rate debt at maturity.
- Credit-loss reserves: Con Edison’s customer receivable allowance rose to $275 million from $148 million at year-end 2020; CECONY’s rose to $262 million from $138 million. The filing attributes the increases primarily to expected COVID-related collection and write-off risks.
Outlook, management commentary and risks
- Capital program: Estimated capital requirements were increased to $6,015 million for 2021, $4,644 million for 2022 and $5,385 million for 2023, including approved Reliable Clean City transmission projects. Management expects to fund requirements with internally generated cash, debt and equity. Plans included up to $800 million of common equity in 2021, in addition to employee and dividend-reinvestment issuances.
- COVID-19 and collections: Management said lower billed sales and slower collection of customer receivables could continue through 2021 and pressure utility liquidity. New York residential and small-business disconnection protections for qualifying customers were to continue through December 21, 2021. CECONY sought approval to recover specified 2020 deferred late-payment charges through a surcharge; recovery is subject to regulatory action.
- Rate cases: RECO’s updated New Jersey filing requested a $16.1 million electric rate increase effective February 2022. O&R also had pending New York electric and gas rate requests. These requests are not guaranteed approvals.
- Reliability settlement: In July 2021, after quarter-end, CECONY and O&R reached a settlement resolving specified steam-main, outage and Tropical Storm Isaias matters. The agreed settlement amounts were $75.1 million for CECONY and $7.0 million for O&R, alongside customer-recovery concessions and ongoing operating commitments.
- Environmental and other contingencies: Con Edison reported $847 million of accrued Superfund and environmental costs, substantially offset by $852 million of related regulatory assets. The filing cites a 2020 estimate that potential manufactured-gas-plant remediation liability could range up to $2.7 billion for Con Edison, based on assumptions, and says actual costs may differ materially. The Utilities also noted possible asbestos exposure above accrued amounts that they could not estimate. A July 2021 New Rochelle dielectric-fluid spill was not expected to materially affect financial condition, results or liquidity, though monetary sanctions could exceed $0.3 million.
- Other risks: The filing highlights extensive regulation, rate-plan outcomes, facility reliability, cybersecurity, climate and environmental obligations, pension liabilities, capital-market access, commodity and interest-rate exposure, and risks related to the Mountain Valley Pipeline. Management reported no material change in risk factors from the 2020 Form 10-K and concluded disclosure controls were effective.
Key facts investors should verify
- Completion and final proceeds of the Stagecoach sale’s remaining closing, and whether further investment impairment is required.
- Whether regulators approve requested rate increases and CECONY’s proposed recovery of deferred COVID-related charges.
- Customer collections, write-offs and the adequacy of credit-loss allowances as disconnection protections expire.
- Execution, cost and financing of the expanded capital program, including planned debt and equity issuance.
- Final costs and regulatory consequences of the July 2021 outage settlement, environmental matters and New Rochelle spill.