10-KPeriod: FY2012

EVERSOURCE ENERGY Annual Report, Year Ended Dec 31, 2012

Filed February 28, 2013For Securities:ES

Summary

Eversource Energy (ES), formerly Northeast Utilities, reported its fiscal year 2012 results, highlighting the significant impact of its merger with NSTAR, which closed on April 10, 2012. The company's financial performance was boosted by the inclusion of NSTAR's operations, contributing positively to earnings and operating revenues. Despite facing challenges such as warmer-than-normal weather impacting electric sales and increased pension and healthcare costs, Eversource Energy demonstrated resilience, with improved earnings driven by merger synergies and higher transmission segment earnings due to infrastructure investments. The company is actively investing in its infrastructure, projecting approximately $5 billion in capital expenditures from 2013 through 2015, with a substantial portion allocated to electric and natural gas distribution and electric transmission segments. Eversource Energy also addressed significant storm restoration costs related to Tropical Storm Irene, the October 2011 snowstorm, and Hurricane Sandy, which were deferred for future regulatory recovery. Regulatory proceedings, particularly concerning transmission return on equity (ROE) at FERC and storm cost recovery in various states, remain key areas to monitor for potential impacts on future earnings and financial position.

Financial Highlights

46 data points
Beta

Revenue

$6.27B

Net Income

$533.08M

8.5% Net Margin

EPS (Diluted)

$1.89

Total Assets

$28.30B

Cash & Equivalents

$45.75M

Free Cash Flow

-$311.04M

Financial Statements
Beta
Revenue$6.27B
Operating Expenses$5.16B
Operating Income$1.12B
Interest Expense$329.94M
Net Income$533.08M
EPS (Basic)$1.90
EPS (Diluted)$1.89
Shares Outstanding (Basic)277.21M
Shares Outstanding (Diluted)277.99M

Key Highlights

  • 1Completed merger with NSTAR on April 10, 2012, significantly expanding the company's scale and geographic reach across Connecticut, Massachusetts, and New Hampshire.
  • 2Reported 2012 earnings of $525.9 million, or $1.89 per share, with adjusted earnings (excluding merger-related costs) of $2.28 per share, showing a substantial improvement over 2011's $394.7 million.
  • 3Projected capital expenditures of approximately $5 billion from 2013 through 2015, focusing on electric and natural gas distribution and transmission infrastructure upgrades.
  • 4Managed significant storm restoration costs totaling approximately $570.2 million as of December 31, 2012, related to Tropical Storm Irene, the October 2011 snowstorm, and Hurricane Sandy, which are deferred for future regulatory recovery.
  • 5Transmission segment earnings increased due to higher investments, while the electric distribution segment saw improved results primarily from the inclusion of NSTAR's operations.
  • 6Navigated regulatory proceedings at FERC concerning transmission ROE and storm cost recovery mechanisms, with outcomes potentially impacting future financial performance.
  • 7Maintained compliance with financial covenants in credit facilities and indentures, demonstrating ongoing financial stability.

Frequently Asked Questions

The merger with NSTAR, completed on April 10, 2012, significantly impacted Eversource Energy's 2012 results by adding NSTAR's operations, which contributed $182.9 million to earnings in the period from April 10 to December 31, 2012. This inclusion boosted operating revenues and earnings, partially offsetting merger-related costs and higher operating expenses.

Eversource Energy projected approximately $5 billion in capital expenditures from 2013 through 2015. The primary focus of these investments is on its electric and natural gas distribution segments ($2.5 billion) and its electric transmission segment ($2.3 billion).

Eversource Energy incurred substantial storm restoration costs from major events like Tropical Storm Irene, the October 2011 snowstorm, and Hurricane Sandy, totaling approximately $570.2 million as of December 31, 2012. These costs were deferred as regulatory assets, and the company expected to recover them through future regulatory rate processes, though specific settlement agreements, like CL&P's waiver of $40 million in costs, had a minor impact.

Key regulatory risks include proceedings at the FERC concerning the base Return on Equity (ROE) for transmission services, which could lead to refunds retroactive to October 2011. Additionally, state-level regulatory decisions in Connecticut, Massachusetts, and New Hampshire regarding storm cost recovery, rate structures, and compliance with environmental regulations are critical for future financial performance.