01—Abstract
Summary
Summary of the 10-K filed April 2, 2001. Cited figures are marked; the original filing is the authoritative source.
Consolidated Edison, Inc. (Con Edison) reported 2000 net income for common stock of $582.8 milliona, or $2.74 per diluted share, down from $700.6 million ($3.13) in 1999.
Excluding a $130 millionb charge tied to the Indian Point 2 nuclear plant outage and $32.1 million of merger-related expenses, EPS would have been $3.23 diluted. The decline was driven mainly by electric rate reductions of $139.3 million, cooler summer weather, higher interest charges, and the Indian Point charge, partly offset by $157.1 million of increased pension credits and a favorable economy. Operating revenues rose to $9.4 billion, largely because of higher purchased power and gas costs passed through to customers, while operating income was essentially flat at $1.02 billion.
The balance sheet shows total assets of $16.8 billion and long-term debt rising to $5.4 billionc, as the company issued $1.03 billion of new long-term debt and repurchased about $1.0 billion of common stock under a program begun in 1998. The common equity ratio fell to 49.1% from 53.1%, reflecting the buyback and debt issuance. Pending transactions are significant: the sale of the Indian Point 2 nuclear unit to Entergy for about $602 million, the sale of the First Avenue properties for an expected $576 million to $680 million, and a proposed acquisition of Northeast Utilities, which was the subject of litigation filed in March 2001 after Con Edison contended the merger conditions were not met and Northeast Utilities countered with a breach claim.
For investors, the key issues are the earnings trajectory after the one-time 2000 charges, the pace of rate and regulatory developments under the October 2000 New York PSC agreement, the outcome of the Northeast Utilities dispute, and the company's exposure to Superfund and asbestos liabilities and the Indian Point 2 replacement power dispute. Con Edison of New York, the principal operating subsidiary, earned $570.1 milliond in 2000 and is also covered in this combined filing.
02—Key points
Key Highlights
- 2000 EPS of $2.74 diluted, down from $3.13 in 1999; ex-charges (Indian Point $130M, merger costs $32.1M) EPS would have been $3.23
- Net income for common stock fell to $582.8M from $700.6M, driven by $139.3M of electric rate cuts, weather, and higher interest charges, partly offset by $157.1M of higher pension credits
- Operating revenues rose to $9.43B (up about $1.9B) mainly from pass-through of higher purchased power and gas costs; operating income was flat at $1.02B
- Repurchased about $1.0B of common stock since 1998 and raised $1.03B of long-term debt in 2000; common equity ratio declined to 49.1% from 53.1%
- Pending sale of Indian Point 2 to Entergy for about $602M and sale of First Avenue properties for $576M-$680M, both subject to NYPSC approval
- Litigation with Northeast Utilities over the terminated $3.9B merger agreement, with Con Edison seeking a declaration that it has no further obligation
- Dividend declared at $0.55 per quarter in January 2001, up from $0.545 in 2000
03—Questions
Frequently Asked Questions
Why did Con Edison's earnings decline in 2000?
Earnings fell $117.8 million, mainly due to a $130 million charge tied to the Indian Point 2 nuclear outage, $139.3 million of electric rate reductions under the 1997 and 2000 rate agreements, cooler-than-normal summer weather, $48.3 million of higher interest charges, and $32.1 million of merger-related expenses. Pension credits of $157.1 million partly offset these headwinds.
What is the status of the Northeast Utilities acquisition?
The October 1999 agreement to acquire Northeast Utilities for about $3.9 billion is in dispute. In March 2001 Con Edison sued for a declaration that Northeast Utilities failed to meet merger conditions, and Northeast Utilities sued claiming Con Edison repudiated the deal. The company says it cannot predict whether the lawsuits will have a material adverse effect. Merger costs of $32.1 million were recognized in 2000.
How are the rising purchased power and gas costs affecting the company?
Higher energy costs increased revenues and working capital needs, with accounts receivable up $262.8 million and recoverable energy costs up $245.3 million at year-end 2000. Utilities generally recover prudently incurred energy costs from customers through rate provisions, which limits margin impact but increases short-term cash requirements and regulatory asset balances.
What are the main regulatory and financial risks to watch?
Key risks include the NYPSC's review of the Indian Point 2 outage and replacement power costs (a $40 million reserve was accrued), the scheduled April 2001 electric rate reduction of about $209 million, the NYPSC proceedings on gas and longer-term rates, and environmental exposure with about $118 million accrued for Superfund-related sites. The company also faces asbestos-related suits and a Washington Heights outage lawsuit.
What is the dividend and capital outlook for 2001?
Dividends are paid primarily from subsidiary distributions and the board declared a $0.55 quarterly dividend in January 2001. Estimated 2001 capital requirements total about $1.72 billion, including about $993 million of utility construction and $400 million of unregulated investment, with the East River repowering a major driver. The company expects to finance these with internal cash flow and external borrowings, including commercial paper.
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