10-QPeriod: Q2 FY2008

CONSOLIDATED EDISON INC Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 7, 2008For Securities:ED

Summary

Consolidated Edison, Inc. (Con Edison) reported strong financial performance for the second quarter and first half of 2008, with net income significantly increasing year-over-year. This improvement was driven by several factors, including a substantial gain from the sale of competitive energy generation projects and positive mark-to-market adjustments in its competitive energy businesses. The regulated utility operations also contributed, benefiting from recent rate adjustments and milder weather conditions. Despite the positive overall results, investors should note the differing impacts across segments. While competitive energy businesses saw a significant boost from asset sales and market fluctuations, regulated utility operations, though steady, experienced increased operating expenses, particularly in pensions and post-retirement benefits, and depreciation. The company continues to manage its capital structure effectively and is engaged in ongoing regulatory proceedings for rate adjustments, which are crucial for future earnings stability. Overall, the filing indicates a solid quarter, with notable one-time gains bolstering the bottom line.

Key Highlights

  • 1Net income for the second quarter of 2008 was $552 million ($2.02 per share), a significant increase from $154 million ($0.58 per share) in the same period of 2007.
  • 2The first six months of 2008 saw net income of $854 million ($3.14 per share), up from $410 million ($1.57 per share) in the prior year's comparable period.
  • 3A substantial after-tax gain of $248 million was realized from the sale of Con Edison Development's generation projects, contributing significantly to the period's profitability.
  • 4Competitive energy businesses reported increased earnings due to mark-to-market gains and the sale of generation assets.
  • 5Regulated utility operations benefited from favorable rate plans and milder weather, although operating expenses, particularly for pensions and other post-retirement benefits, increased.
  • 6Con Edison of New York filed for a new three-year electric rate plan, proposing level annual increases and including mechanisms to mitigate customer impact.
  • 7The company's cash flow from operating activities increased significantly, driven by higher deferred income taxes and collateral received for derivative instruments.

Frequently Asked Questions

The significant increase in net income was primarily driven by a substantial after-tax gain of $248 million from the sale of Con Edison Development's generation projects, along with positive mark-to-market adjustments and improved performance in the competitive energy businesses. The regulated utility operations also contributed positively due to rate adjustments and milder weather.

The regulated utility operations of Con Edison of New York and O&R remain steady, benefiting from approved rate plans that allow for cost recovery and provide a regulated return on equity. However, operating expenses, particularly for pensions and other post-retirement benefits, and depreciation have increased due to higher capital expenditures and actuarial adjustments.

Con Edison of New York has filed for a new three-year electric rate plan to be effective April 2009, proposing level annual increases and customer impact mitigation strategies. Joint proposals have also been made for steam service rates, and O&R's electric and gas rate plans are in effect through mid-2011.

The sale of generation projects by Con Edison Development resulted in a significant after-tax gain of $248 million, which was a major contributor to the strong net income reported for the second quarter and first half of 2008. The results of some of these projects were classified under 'discontinued operations' due to the nature of the sale and continued involvement.