10-QPeriod: Q3 FY2012

EVERSOURCE ENERGY Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 7, 2012For Securities:ES

Summary

EVERSOURCE ENERGY (ES), formerly Northeast Utilities (NU), reported a significant increase in financial performance for the nine months ended September 30, 2012, largely driven by the acquisition of NSTAR on April 10, 2012. The company's net income attributable to controlling interest increased to $351.2 million from $281.4 million in the prior year period. This growth was fueled by contributions from NSTAR and higher earnings in the transmission segment due to increased infrastructure investments. Capital expenditures remain substantial, with approximately $7 billion projected from 2012-2015, primarily directed towards the distribution and transmission segments. The company's liquidity improved, with cash and cash equivalents increasing significantly, and robust access to financial markets for refinancing. However, the company is also facing regulatory scrutiny regarding its transmission ROE, with potential future impacts on earnings.

Financial Highlights

46 data points
Beta

Revenue

$1.86B

Net Income

$209.50M

11.3% Net Margin

EPS (Diluted)

$0.66

Total Assets

$27.76B

Cash & Equivalents

$73.45M

Free Cash Flow

$84.23M

Financial Statements
Beta
Revenue$1.86B
Operating Expenses$1.45B
Operating Income$412.90M
Interest Expense$90.36M
Net Income$209.50M
EPS (Basic)$0.66
EPS (Diluted)$0.66
Shares Outstanding (Basic)314.81M
Shares Outstanding (Diluted)315.81M

Key Highlights

  • 1Net income attributable to controlling interest for the nine months ended September 30, 2012, was $351.2 million, a notable increase from $281.4 million in the same period of 2011.
  • 2The acquisition of NSTAR on April 10, 2012, significantly contributed to revenue and earnings growth, with NSTAR's operations included in the results from the second quarter onwards.
  • 3Transmission segment earnings saw a significant boost, driven by increased investments in transmission infrastructure and the inclusion of NSTAR's transmission business.
  • 4Capital expenditures are projected at approximately $7 billion from 2012-2015, with substantial investments planned for both distribution and transmission infrastructure.
  • 5The company successfully managed its liquidity, with cash and cash equivalents increasing to $73.4 million from $6.6 million at the beginning of the year, supported by strong access to financial markets.
  • 6EVERSOURCE ENERGY is actively involved in regulatory proceedings, including a key FERC complaint regarding transmission ROE, which could have future financial implications.
  • 7Hurricane Sandy caused significant storm damage, impacting approximately 1.5 million customers, with restoration costs estimated but expected to be recoverable through regulatory mechanisms.

Frequently Asked Questions

The primary driver was the acquisition of NSTAR on April 10, 2012, which significantly boosted revenues and earnings. Higher investments in transmission infrastructure also contributed positively to the results.

The acquisition was structured as a tax-free exchange of shares, and the company issued approximately 136 million NU common shares to NSTAR shareholders. While debt levels increased due to the transaction and ongoing capital expenditures, the company maintained strong credit ratings and access to financial markets for refinancing and managing its debt obligations.

A complaint filed with FERC alleges that the current transmission ROE is unreasonable and seeks a reduction. While the outcome is uncertain, any reduction in the ROE could negatively impact annual consolidated earnings by approximately $2.1 million for every 10 basis point change. Decisions are expected in 2014.

The company is managing liquidity through operating cash flows and access to financial markets. It has a $1.15 billion revolving credit facility in place and successfully redeemed debt and issued new debt to manage its capital structure. Management expects that operating cash flows and market access will be sufficient to meet future requirements.