Eversource Energy — FY2022 Form 10-K Summary
Business context and reporting period
Fiscal year ended December 31, 2022; this is an annual report, not a standalone fourth-quarter filing. Eversource is a regulated utility holding company serving approximately 4.4 million electric, natural gas, and water customers in Connecticut, Massachusetts, and New Hampshire. Its reportable segments are electric distribution, electric transmission, natural gas distribution, and water distribution. The filing is a combined report that also includes separate financial statements for CL&P, NSTAR Electric, and PSNH.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Operating revenue | $12.289 billion | $9.863 billion |
| Operating income | $2.198 billion | $1.993 billion |
| Net income attributable to common shareholders | $1.405 billion | $1.221 billion |
| Diluted GAAP EPS | $4.05 | $3.54 |
| Non-GAAP adjusted earnings / diluted EPS | $1.420 billion / $4.09 | $1.330 billion / $3.86 |
| Cash from operating activities | $2.401 billion | $1.963 billion |
| Investments in property, plant and equipment | $3.442 billion | $3.175 billion |
| Cash and cash equivalents at year-end | $374.6 million | $66.8 million |
Operating margin was approximately 17.9% and net margin attributable to common shareholders approximately 11.4%, based on reported revenue and income. Operating cash flow less property, plant, and equipment investment was approximately negative $1.041 billion. Revenue growth substantially reflected higher energy supply and wholesale market prices and associated pass-through costs; these tracked costs generally do not contribute to earnings.
At December 31, 2022, long-term debt was $19.724 billion and the current portion was $1.320 billion; rate-reduction bonds totaled $453.7 million. Notes payable were $1.442 billion. Eversource reported $557.8 million of available capacity in its parent commercial-paper program and $650 million at NSTAR Electric. Current liabilities exceeded current assets by $2.58 billion. The company said operating cash flows, borrowing availability, and access to debt and equity markets should meet expected needs. Approximately 98% of long-term debt was fixed-rate.
Material changes versus the prior comparable period
- Revenue rose 24.6%, operating income 10.3%, and common-shareholder net income 15.1%. Diluted GAAP EPS increased from $3.54 to $4.05.
- Adjusted EPS increased from $3.86 to $4.09. FY2021 included $86.1 million after tax of CL&P settlement and storm-performance charges; FY2022 had no comparable charge. FY2022 adjusted earnings exclude $15.0 million of after-tax transaction and transition costs.
- Operating cash flow increased by $438.7 million. Management cited working-capital timing, regulatory collections, lower pension contributions, and lower income-tax payments, partly offset by customer credits, property-tax payments, and storm-related spending.
- Investments in property, plant, and equipment increased by $266.8 million. Long-term debt increased from $17.024 billion to $19.724 billion; the company issued $4.045 billion and repaid $1.175 billion of long-term debt during 2022.
- Transmission and natural-gas distribution earnings increased, supported by higher rate base, capital tracking mechanisms, and rate increases. Water distribution earnings were flat. Electric distribution earnings increased, including because FY2021 contained the CL&P charges noted above.
Guidance, outlook, risks, and unusual items
- Management projected 2023 non-GAAP EPS of $4.25–$4.43, excluding potential effects of the offshore-wind strategic review, and long-term EPS growth through 2027 in the upper half of a 5%–7% range.
- Planned regulated-company capital expenditures for 2023–2027 total approximately $21.52 billion. Offshore-wind investment estimates were $1.9–$2.1 billion in 2023 and $1.6–$1.9 billion for 2024–2026, subject to project schedules and the strategic review.
- Eversource was reviewing its 50% offshore-wind partnership interest with Ørsted and exploring a potential sale of all or part. The review was expected to conclude in Q2 2023. The company reported a $1.947 billion offshore-wind investment balance and said adverse delays, cost increases, higher interest rates, or a lower-value or unsuccessful sale could lead to impairment.
- Approximately $1.40 billion of deferred storm costs remained unfiled, pending approval, or subject to prudency review at year-end, including about $235 million related to Tropical Storm Isaias at CL&P. Any disallowance could affect results; management said the amount, if any, could not be estimated.
- Four FERC transmission return-on-equity complaints remained unresolved. Eversource retained a $39.1 million pre-tax reserve for the second complaint period and said it could not reasonably estimate the range of loss for the proceedings.
- Environmental remediation liabilities were $122.6 million for 59 sites, of which $112.6 million related to former manufactured-gas-plant sites. Additional costs may arise as site conditions and remediation requirements become clearer.
- Other material risks include regulatory cost-recovery decisions, severe weather and climate impacts, cyberattacks, supply-chain inflation and delays, water-supply adequacy and contamination, higher financing costs, and customer affordability. Management identified regulatory accounting and recovery judgments as a critical audit matter.
- CL&P’s approved rate-relief plan included temporary customer credits and a $10 million energy-assistance contribution expensed in 2022. NSTAR Electric received approval for a $64 million base distribution-rate increase effective January 1, 2023.
- The financial statements received an unqualified audit opinion; management and the auditor reported effective internal control over financial reporting as of year-end.
Important facts for investors to verify
- Track the offshore-wind review outcome, any sale terms, project permitting and construction schedules, funding commitments, guarantees, and potential impairment.
- Review regulatory proceedings and the timing and recoverability of deferred storm costs, especially Isaias-related costs, alongside the FERC ROE complaints.
- Assess whether operating cash flow can support the large capital program, dividends, debt maturities, and offshore-wind obligations without materially increasing borrowing or equity issuance.
- Separate pass-through energy procurement and wholesale-price-driven revenue changes from underlying regulated earnings and rate-base growth.
- Monitor 2023 EPS delivery against guidance, interest expense, credit ratings and outlooks, customer arrears and uncollectible reserves, and environmental remediation estimates.