10-QPeriod: Q2 FY2012

EVERSOURCE ENERGY Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 7, 2012For Securities:ES

Summary

EVERSOURCE ENERGY (ES) filed its Form 10-Q for the quarterly period ended June 30, 2012. The report details significant financial performance and operational updates, heavily influenced by the recent merger with NSTAR, which closed on April 10, 2012. The merger has substantially increased the company's asset base and operational scope, providing energy delivery services to approximately 3.5 million electric and natural gas customers across Connecticut, Massachusetts, and New Hampshire. Financially, the second quarter and first half of 2012 showed reduced net income and EPS compared to the prior year, largely due to substantial merger-related costs and the dilutive impact of issuing new shares. However, excluding these one-time costs, earnings showed improvement driven by the inclusion of NSTAR's operations and increased investment in transmission infrastructure. Management is focused on integrating NSTAR's business and managing regulatory matters across its service territories.

Financial Highlights

47 data points
Beta

Revenue

$1.63B

Net Income

$46.20M

2.8% Net Margin

EPS (Diluted)

$0.15

Total Assets

$27.51B

Cash & Equivalents

$28.48M

Free Cash Flow

-$74.50M

Financial Statements
Beta
Revenue$1.63B
Operating Expenses$1.47B
Operating Income$159.50M
Interest Expense$89.05M
Net Income$46.20M
EPS (Basic)$0.15
EPS (Diluted)$0.15
Shares Outstanding (Basic)301.05M
Shares Outstanding (Diluted)301.82M

Key Highlights

  • 1The merger with NSTAR was completed on April 10, 2012, significantly expanding the company's customer base and operational footprint.
  • 2Net income for the second quarter of 2012 was $44.3 million ($0.15/share), down from $77.3 million ($0.44/share) in Q2 2011, primarily due to merger and related settlement costs and the dilutive effect of new shares.
  • 3Excluding merger-related costs, adjusted net income for Q2 2012 was $135.8 million, showing improvement driven by NSTAR's contribution and higher transmission segment earnings.
  • 4Transmission segment earnings increased significantly, reflecting higher investment in infrastructure and the inclusion of NSTAR's transmission business.
  • 5Electric distribution segment earnings declined, impacted by merger costs, lower retail sales due to milder weather, and increased operational expenses.
  • 6The company refinanced significant credit facilities, enhancing liquidity and financial flexibility.
  • 7Regulatory proceedings are ongoing, including investigations into storm response, potential ROE adjustments for transmission services, and program cost recovery mechanisms for NSTAR Electric.

Frequently Asked Questions

The merger with NSTAR, completed on April 10, 2012, significantly impacted the financial results. While NSTAR's operations contributed positively to revenue and earnings, the issuance of approximately 136 million new shares diluted earnings per share. Additionally, the company incurred substantial merger and related settlement costs totaling $91.5 million after-tax in the second quarter, which negatively affected reported net income and EPS.

The transmission segment showed strong performance with increased earnings due to higher investments in infrastructure and the inclusion of NSTAR's transmission assets. Conversely, the electric distribution segment experienced a decline in earnings, impacted by merger-related costs, higher operating expenses, and a slight decrease in retail sales due to milder weather. The natural gas distribution segment's performance was mixed, with some entities showing reduced earnings due to warmer weather impacting sales.

Key regulatory developments include ongoing investigations into CL&P's storm response performance, potential adjustments to the base Return on Equity (ROE) for transmission services by FERC, and various cost recovery mechanisms for NSTAR Electric's safety and reliability programs (CPSL). PSNH also faced regulatory reviews regarding its energy service rates and the Clean Air Project costs.

The company's liquidity improved, with cash and cash equivalents increasing to $28.5 million as of June 30, 2012, from $6.6 million at the end of 2011. This was supported by stronger operating cash flows, though reduced by significant cash outflows for storm costs, pension contributions, merger transaction costs, and customer bill credits. The company also entered into new, larger revolving credit facilities in July 2012 to support its commercial paper programs and enhance financial flexibility.