10-QPeriod: Q1 FY2013

EVERSOURCE ENERGY Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 6, 2013For Securities:ES

Summary

Eversource Energy (ES), formerly Northeast Utilities, reported strong financial performance for the quarter ended March 31, 2013, with Net Income Attributable to Controlling Interest more than doubling to $228.1 million ($0.72 per share) from $99.3 million ($0.56 per share) in the prior year period. This significant improvement was driven by the inclusion of NSTAR's operations following the April 2012 merger, higher retail sales due to colder weather, increased transmission segment earnings from infrastructure investments, and lower operating expenses. The company also benefited from the favorable resolution of a state income tax audit. Liquidity remained solid, with cash and cash equivalents increasing to $60.8 million from $45.7 million. Operating cash flows significantly improved, driven by the NSTAR acquisition, reduced storm restoration costs, and proceeds from a DOE damages claim. The company continued to invest in its infrastructure, with capital expenditures totaling $389.0 million for the quarter, up from $304.3 million in the prior year, reflecting ongoing transmission and distribution projects. The company reiterated its expectation that future operating cash flows and access to financial markets will be sufficient to meet its obligations and capital investment needs.

Financial Highlights

45 data points
Beta

Revenue

$2.00B

Net Income

$230.00M

11.5% Net Margin

EPS (Diluted)

$0.72

Total Assets

$28.33B

Cash & Equivalents

$60.82M

Free Cash Flow

$84.19M

Financial Statements
Beta
Revenue$2.00B
Operating Expenses$1.58B
Operating Income$418.90M
Interest Expense$76.25M
Net Income$230.00M
EPS (Basic)$0.72
EPS (Diluted)$0.72
Shares Outstanding (Basic)315.13M
Shares Outstanding (Diluted)316.00M

Key Highlights

  • 1Net Income Attributable to Controlling Interest more than doubled to $228.1 million ($0.72/share) from $99.3 million ($0.56/share) year-over-year, largely due to the NSTAR acquisition and improved operational performance.
  • 2The acquisition of NSTAR, completed in April 2012, significantly contributed to revenue and earnings growth across all segments (Electric Distribution, Transmission, and Natural Gas Distribution).
  • 3Higher retail sales volumes, particularly in electric distribution and firm natural gas, were driven by colder weather in Q1 2013 compared to Q1 2012.
  • 4Transmission segment earnings saw a notable increase due to higher investments in infrastructure and favorable regulatory tracking mechanisms.
  • 5Operating cash flows significantly improved, supported by NSTAR's inclusion, reduced storm restoration costs, and proceeds from a DOE damages claim.
  • 6Capital expenditures increased to $389.0 million, reflecting ongoing investments in crucial transmission and distribution infrastructure projects.
  • 7The company resolved a state income tax audit in March 2013, resulting in a favorable after-tax benefit of $13.6 million, positively impacting earnings.

Frequently Asked Questions

The primary driver was the full inclusion of NSTAR's operations for the entire first quarter of 2013, following its acquisition in April 2012. Additionally, colder weather boosted retail sales, infrastructure investments strengthened the transmission segment's performance, and operating expenses were well-managed. A favorable state income tax audit resolution also contributed positively.

The NSTAR acquisition significantly boosted revenues and earnings across all segments, contributing substantially to the reported net income. This impact was particularly evident in the electric distribution, transmission, and natural gas distribution segments. While NSTAR's results were partially included in Q1 2012 due to the merger closing date, its full-quarter contribution in Q1 2013 drove significant year-over-year growth.

Eversource Energy (ES) maintains a solid liquidity position, with cash and cash equivalents increasing to $60.8 million at the end of the quarter. Operating cash flows improved substantially due to NSTAR's inclusion and other operational efficiencies. The company expects that its ongoing operating cash flows and continued access to financial markets will be sufficient to fund its operational needs and planned capital expenditures.

Yes, a significant regulatory matter is the ongoing FERC complaint regarding the base Return on Equity (ROE) for transmission services. A reduction in the ROE could impact earnings. The company is also managing significant storm restoration costs, which are generally recoverable through regulatory mechanisms. While management believes these will be recovered, potential delays or regulatory decisions could have an impact. Additionally, there are ongoing discussions regarding safety and reliability programs and bad debt recovery mechanisms.