10-QPeriod: Q2 FY2014

EVERSOURCE ENERGY Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 1, 2014For Securities:ES

Summary

Eversource Energy (formerly Northeast Utilities) reported a decrease in net income attributable to controlling interest for the second quarter and first half of 2014 compared to the same periods in 2013. This decline was primarily driven by a significant after-tax reserve established due to unfavorable FERC orders concerning transmission rates, as well as higher depreciation and property taxes. Despite the net income decrease, operating revenues saw an increase, particularly in the natural gas distribution segment, driven by customer growth and colder weather. The company's liquidity remained stable, supported by strong operating cash flows, though investments in property, plant, and equipment continued to be substantial. Management anticipates meeting future operating requirements and capital investments through operating cash flows and access to financial markets.

Financial Highlights

46 data points
Beta

Revenue

$1.68B

Net Income

$129.20M

7.7% Net Margin

EPS (Diluted)

$0.40

Total Assets

$27.79B

Cash & Equivalents

$34.10M

Free Cash Flow

$27.52M

Financial Statements
Beta
Revenue$1.68B
Operating Expenses$1.38B
Operating Income$294.00M
Interest Expense$92.50M
Net Income$129.20M
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)315.95M
Shares Outstanding (Diluted)317.11M

Key Highlights

  • 1Net income attributable to controlling interest decreased to $127.4 million ($0.40/share) in Q2 2014 and $363.3 million ($1.15/share) in H1 2014, down from $171.0 million ($0.54/share) and $399.1 million ($1.26/share) respectively in 2013.
  • 2A significant after-tax reserve of $32.1 million was recorded in Q2 2014 due to unfavorable FERC orders regarding transmission rates (ROE complaints), impacting the transmission segment's earnings.
  • 3Operating revenues increased by 2.5% to $1,677.6 million in Q2 2014 and by 9.3% to $3,968.2 million in H1 2014, driven by higher energy supply costs recovered through rates and increased natural gas sales.
  • 4Cash flows provided by operating activities improved by $127.7 million in H1 2014 to $896.7 million, largely due to $126 million in DOE Phase II Damages proceeds and the absence of major storm restoration costs.
  • 5The company issued $650 million of new long-term debt in H1 2014 to repay existing debt and short-term borrowings, while maintaining access to its revolving credit facilities.
  • 6Capital expenditures remained substantial, with $724 million invested in property, plant, and equipment in H1 2014, reflecting ongoing investments in transmission and distribution infrastructure.
  • 7A CL&P rate increase application for $116.7 million, effective December 1, 2014, is pending with the PURA.

Frequently Asked Questions

The primary driver for the decrease in net income was the establishment of an after-tax reserve of $32.1 million due to unfavorable FERC orders concerning transmission rates (ROE complaints). Additionally, higher depreciation expenses and property taxes contributed to the decline.

Operating revenues increased in both Q2 and H1 2014. This increase was mainly due to higher energy supply costs that are recovered from customers through rates, and a rise in natural gas sales driven by customer growth and colder weather. Transmission revenues saw a decrease due to the impact of the FERC ROE reserve.

The company's liquidity remains stable. Cash and cash equivalents were $34.1 million as of June 30, 2014. Operating cash flows improved in H1 2014, supported by DOE Phase II Damages proceeds and the absence of storm restoration costs. The company has access to revolving credit facilities and issued new long-term debt to manage its capital structure and meet investment needs.

Yes, the company is significantly impacted by the FERC's orders on base ROE complaints, which led to the recording of a substantial reserve. Additionally, CL&P has filed for a rate increase in Connecticut, and PSNH's generation assets are under review for potential divestiture. A new Massachusetts law addresses natural gas leak classification and infrastructure replacement.