Con Edison(ED) - 2023 Q2 - Quarterly Report

PART I—Financial Information This section presents the unaudited financial statements, management's analysis, market risk disclosures, and internal controls Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for Con Edison and CECONY, highlighting the impact of the Clean Energy Businesses sale and new rate plans Con Edison Financial Statements Con Edison's net income significantly increased due to the Clean Energy Businesses sale, impacting cash flows and reducing total assets | Indicator | For the Six Months Ended June 30, 2023 (Millions of $) | For the Six Months Ended June 30, 2022 (Millions of $) | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | 7,347 | 7,475 | (1.7%) | | Gain on sale of the Clean Energy Businesses | 867 | — | N/A | | Operating Income | 2,022 | 1,185 | +70.6% | | Net Income for Common Stock | 1,658 | 857 | +93.5% | | Net Income per common share—diluted | $4.72 | $2.41 | +95.9% | | Cash Flow Activity | For the Six Months Ended June 30, 2023 (Millions of $) | For the Six Months Ended June 30, 2022 (Millions of $) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 1,164 | 1,957 | | Net Cash from (used in) Investing Activities | 1,452 | (2,118) | | Net Cash from (used in) Financing Activities | (2,190) | 255 | - Investing activities were primarily driven by $3,927 million in proceeds from the sale of the Clean Energy Businesses, net of cash sold Financing activities included a $1,000 million repurchase of common shares[20] - Total assets decreased to $63.8 billion as of June 30, 2023, from $69.1 billion at year-end 2022, mainly due to the sale of the Clean Energy Businesses, which reduced 'Assets held for sale' from $7.2 billion to $161 million[23][25] CECONY Financial Statements CECONY's net income increased due to higher revenues, while operating cash flow decreased, supported by a significant capital contribution from its parent | Indicator | For the Six Months Ended June 30, 2023 (Millions of $) | For the Six Months Ended June 30, 2022 (Millions of $) | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | 6,697 | 6,423 | +4.3% | | Operating Income | 1,071 | 991 | +8.1% | | Net Income | 793 | 645 | +23.0% | | Cash Flow Activity | For the Six Months Ended June 30, 2023 (Millions of $) | For the Six Months Ended June 30, 2022 (Millions of $) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 1,140 | 1,727 | | Net Cash used in Investing Activities | (2,162) | (1,883) | | Net Cash from Financing Activities | 1,314 | 308 | - Financing activities were significantly impacted by a $1,701 million capital contribution from the parent company, Con Edison, during the first six months of 2023[33] Notes to the Financial Statements (Unaudited) These notes detail accounting policies, regulatory updates including new rate plans, the Clean Energy Businesses sale, capitalization changes, and COVID-19 related customer arrears - On March 1, 2023, Con Edison completed the sale of substantially all assets of the Clean Energy Businesses This transaction is a key event impacting the financial statements[41][61] - In July 2023, the NYSPSC approved a joint proposal for CECONY's electric and gas rate plans for the three-year period from January 2023 through December 2025, reflecting a 9.25% return on common equity[67] - CECONY issued $500 million of 5.20% debentures due 2033 in February 2023 Con Edison initiated a $1 billion accelerated share repurchase program in March 2023, which was completed in the second quarter[102][103][104] - The company details various COVID-19 arrears assistance programs, including the issuance of $343.2 million in net credits by CECONY and $2.6 million by O&R in the first six months of 2023 to reduce customer accounts receivable balances[85] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and H1 2023 financial results, highlighting Con Edison's gain from asset sale, CECONY's rate-driven growth, and challenges like customer arrears | Period | Con Edison Net Income for Common Stock (Millions $) | Con Edison EPS | CECONY Net Income for Common Stock (Millions $) | | :--- | :--- | :--- | :--- | | Q2 2023 | 226 | $0.65 | 189 | | Q2 2022 | 255 | $0.72 | 170 | | H1 2023 | 1,658 | $4.74 | 793 | | H1 2022 | 857 | $2.42 | 645 | - The significant increase in Con Edison's H1 2023 earnings was primarily driven by the gain on the sale of the Clean Energy Businesses, which contributed $804 million after-tax, or $2.30 per share[263][269] - CECONY's earnings growth in H1 2023 was mainly due to electric and gas base rate increases, contributing $0.20 and $0.17 per share, respectively[269] - A key operational challenge is the high level of aged customer accounts receivable, which stood at $1,031 million for CECONY as of June 30, 2023, compared to $408 million pre-pandemic Regulatory mechanisms are in place to manage the recovery of these balances[247] Quantitative and Qualitative Disclosures About Market Risk The company details its primary market risks, including interest rate, commodity price, and investment risks, and outlines mitigation strategies - The company's primary market risks are identified as interest rate risk, commodity price risk, and investment risk[424] - A 10% increase in interest rates on variable-rate debt would increase annual interest expense by an estimated $12 million[425] - A 10% decline in market prices would decrease the fair value of commodity derivative instruments by $172 million, but this is expected to be largely offset by lower physical energy costs[428] Controls and Procedures Management concluded that the company's disclosure controls and procedures are effective, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the quarterly period[435] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[436] PART II—Other Information This section covers legal proceedings, risk factors, equity security sales, and a list of exhibits Legal Proceedings Information on legal proceedings is incorporated by reference from various notes to the financial statements and the MD&A section - Information regarding legal proceedings is incorporated by reference from other sections of the report, including Notes B, G, and H of the financial statements and the MD&A[437] Risk Factors There were no material changes to the company's risk factors compared to those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - There were no material changes in the company's risk factors from those disclosed in the most recent Form 10-K[438] Unregistered Sales of Equity Securities and Use of Proceeds This section details Con Edison's completed $1 billion accelerated share repurchase program initiated in March 2023 - In March 2023, Con Edison initiated a $1 billion accelerated share repurchase (ASR) program[439] - The final settlement of the ASR contracts occurred in Q2 2023, with dealers delivering an additional 1,812,497 shares to Con Edison The entire $1 billion repurchase authorization was completed by June 30, 2023[440][441][443] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and Con Edison's 2023 Long Term Incentive Plan - The report includes standard exhibits such as CEO and CFO certifications under Rule 13a-14(a) and Section 1350 for both Con Edison and CECONY[445][446] - Con Edison filed its 2023 Long Term Incentive Plan as Exhibit 10.1[445]