01—Abstract
Summary
Summary of the 10-Q filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Consolidated Edison's first quarter 2024 results were sharply lower year over year, but the decline is almost entirely explained by the prior-year gain on the March 2023 sale of the Clean Energy Businesses.
Net income for common stock fell to $720 milliona ($2.08 per diluted share) from $1,433 million ($4.05) in Q1 2023, which included an $855 million pre-tax gain. Excluding the sale-related items, the regulated business performed well: CECONY net income rose to $694 million from $604 million, driven mainly by the new steam rate plan, higher gas and electric rate base, and a share repurchase benefit. Operating revenues were roughly flat at $4.28 billion, and CECONY's electric and steam operating income improved notably.
Cash flow and liquidity merit attention. Operating cash flow improved to $573 millionb from $92 million, but investing outflows of $1.34 billion (mainly utility construction at $1.24 billion) and dividends of $274 million drove cash down to $169 million. Management continues to cite slower recovery of aged customer receivables, which rose to $1.36 billion at CECONY, as a drag on liquidity.
Commercial paper of $2.3 billionc is outstanding at a weighted average rate of 5.5 percent, reflecting higher-rate borrowing costs. Long-term debt remained stable at about $21.9 billion, and the common equity ratio improved to 49.6 percent.
Looking ahead, the filing points to continued utility capital investment, pending O&R rate filings for 2025 to 2027, a clean energy transition that includes offshore wind interconnection and thermal energy network pilots, and an expected completion of the Mountain Valley Pipeline in May 2024. Investors should watch the NYSPSC's response to CECONY's customer billing system cost recovery petition ($88 milliond above the rate plan limit), the outcome of the income tax regulatory asset audit, and environmental and Superfund exposures that management says it cannot fully estimate.
02—Key points
Key Highlights
- Reported Q1 2024 EPS fell to $2.08 diluted from $4.05, mainly because Q1 2023 included the $791 million after-tax gain on the Clean Energy Businesses sale.
- CECONY net income rose 15 percent to $694 million, supported by the new steam rate plan (about $47 million after tax), higher gas and electric rate base, and share repurchase accretion.
- Operating cash flow of $573 million improved sharply from $92 million, largely from lower spending on regulatory assets and higher accounts payable.
- Utility construction expenditures reached $1.24 billion, and cash fell to $169 million at quarter end, reflecting heavy capital spending and $274 million in common dividends.
- Aged customer receivables at CECONY rose to $1.36 billion (over 60 days), a continuing liquidity drag that the company says is only partly offset by regulatory recovery mechanisms.
- Commercial paper outstanding was $2.3 billion at a 5.5 percent weighted average rate, and the $2.5 billion credit facility was extended to March 2029 with no borrowings.
- The Mountain Valley Pipeline is about 99 percent complete with a targeted completion around May 31, 2024, though Con Edison Transmission's $153 million carrying value carries ongoing impairment risk.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 2, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $4.28B$4.22B | +1.4% |
| Operating Expenses | $3.24B$3.52B | −8.0% |
| Operating Income | $1.01B$1.74B | −41.9% |
| Interest Expense | $289.00M$262.00M | +10.3% |
| Net Income | $720.00M$1.43B | −49.7% |
| EPS (Basic) | $2.08$4.06 | −48.8% |
| EPS (Diluted) | $2.08$4.05 | −48.6% |
| Shares Outstanding (Basic) | 345.50M352.90M | −2.1% |
| Shares Outstanding (Diluted) | 346.80M354.20M | −2.1% |
05—Questions
Frequently Asked Questions
Why did Con Edison's earnings decline so much compared with the first quarter of 2023?
The decline is primarily due to the prior-year gain on the sale of the Clean Energy Businesses, which contributed $791 million after tax (about $2.24 per share) in Q1 2023. Q1 2024 net income for common stock was $720 million, or $2.08 per diluted share, compared with $1,433 million, or $4.05 per share, in Q1 2023. Excluding the sale-related effects, the regulated utility businesses grew earnings.
How is the regulated utility business performing?
CECONY's net income rose to $694 million from $604 million, adding about $0.30 per share. Key drivers were the new steam rate plan effective November 2023, higher gas and electric rate base, and share repurchase accretion. O&R's net income also rose to $37 million from $31 million, helped by electric and gas base rate increases.
Is Con Edison's liquidity position under pressure?
Liquidity is adequate but tighter. Cash fell to $169 million from $1.19 billion at year-end, mainly due to $1.24 billion in utility construction spending and dividends. Commercial paper of $2.3 billion carries a 5.5 percent rate. Management says slower collection of aged customer receivables, which rose to $1.36 billion at CECONY, has affected liquidity and may continue to do so, though a $2.5 billion revolving credit facility remains undrawn.
What are the key regulatory and legal risks disclosed?
Key items include: a NYSPSC audit of past income tax understatements, with a regulatory asset of $1.09 billion that is not earning a return and for which the utilities cannot estimate a possible loss; a question on whether CECONY can capitalize $88 million of billing system costs above the $421 million rate plan limit; an investigation of non-conforming gas and steam main welds involving contractor misconduct; and asbestos suits where the company believes there is a reasonable possibility of loss above accrued amounts. Environmental remediation accruals for manufactured gas plant sites total $1.11 billion, with potential exposure up to $3.44 billion, and cannot be fully estimated.
What is the outlook for Con Edison's growth and capital plans?
The company is pursuing rate filings for O&R's electric and gas businesses effective January 2025 and in later years, plus CECONY's regulated investment program. Con Edison Transmission is bidding on new transmission projects, including a joint solicitation submitted in April 2024 for offshore wind transmission to New Jersey. Offshore wind interconnection for Empire Wind 1 was approved by FERC, and thermal energy network pilots were approved. Management expects capital needs to rise with these programs, which may increase borrowing and financing needs.
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