10-QPeriod: Q3 FY2016

EVERSOURCE ENERGY Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 4, 2016For Securities:ES

Summary

Eversource Energy's (ES) Q3 2016 10-Q filing indicates a stable financial outlook with a focus on regulatory compliance and risk management. The company's regulated operations continue to pass on energy contract costs to customers, mitigating direct market risk exposure for these entities. Management has affirmed the effectiveness of their disclosure controls and procedures, though a new timekeeping and HR system implementation during the quarter necessitated a review of internal controls over financial reporting, which was found to be effective. Significant legal developments include the successful recovery of approximately $76.8 million in damages from the Department of Energy related to the Yankee Companies' lawsuits. Eversource anticipates receiving about $26 million of this award, with specific amounts allocated to its utility subsidiaries and expected to be refunded to customers. No new material risk factors or legal proceedings beyond those previously disclosed in their 2015 10-K have been identified.

Financial Highlights

45 data points
Beta

Revenue

$2.04B

Net Income

$267.20M

13.1% Net Margin

EPS (Diluted)

$0.83

Total Assets

$31.08B

Cash & Equivalents

$40.06M

Free Cash Flow

$181.93M

Financial Statements
Beta
Revenue$2.04B
Operating Expenses$1.53B
Operating Income$509.90M
Interest Expense$99.86M
Net Income$267.20M
EPS (Basic)$0.83
EPS (Diluted)$0.83
Shares Outstanding (Basic)317.79M
Shares Outstanding (Diluted)318.58M

Key Highlights

  • 1Regulated companies have no direct exposure to commodity price risk as contract costs are passed to customers.
  • 2Disclosure controls and procedures were deemed effective by management as of September 30, 2016.
  • 3Implementation of a new timekeeping and human resource system during Q3 2016 led to a review of internal controls over financial reporting, which were found to be effective.
  • 4Yankee Companies received approximately $76.8 million in damages from the DOE for Phase III claims, with the award becoming final in July 2016 and payments received in October 2016.
  • 5Eversource expects to receive approximately $26 million from the DOE award, with planned customer refunds by its utility subsidiaries.
  • 6No new material risk factors or legal proceedings have been identified beyond those disclosed in the 2015 10-K.
  • 7The company repurchased 121,941 shares of common stock during the third quarter of 2016.

Frequently Asked Questions

Eversource's regulated companies are insulated from direct commodity price risk. Energy contracts entered into to serve customers have their economic impacts passed on to customers, meaning these entities do not face losses in future earnings or fair values due to these market risk-sensitive instruments.

The Yankee Companies successfully sued the DOE for damages incurred between 2009-2012, receiving an award of approximately $76.8 million. This award became final in July 2016, and payments were received in October 2016. Eversource anticipates receiving around $26 million, which will be refunded to customers of its utility subsidiaries.

No new material risk factors have been identified, and previously disclosed risks remain relevant. The company did implement a new timekeeping and human resource system, which involved a review of internal controls over financial reporting to ensure their effectiveness during and after the implementation. Management concluded these controls remain effective.

Eversource manages interest rate risk by maintaining a mix of fixed and variable rate long-term debt according to written policies. Credit risk is managed by serving a diverse customer and supplier base and employing contractual structures and terms consistent with its risk management process. Specific practices are in place for managing credit risk with long-term or high-volume supply contracts, though no collateral was held from counterparties for standard service contracts as of September 30, 2016.