Eversource(US:ES)2021-11-04 16:00PART I – FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited) This section presents Eversource Energy's unaudited condensed consolidated financial statements for the period ended September 30, 2021, along with detailed notes on significant accounting policies and regulatory matters EVERSOURCE ENERGY AND SUBSIDIARIES Financial Statements Eversource Energy reported a slight decrease in net income attributable to common shareholders for the nine months ended September 30, 2021, while total assets increased due to investments in property, plant, and equipment Eversource Energy Consolidated Income Statement Highlights (Unaudited) | Metric | Q3 2021 (in thousands) | Q3 2020 (in thousands) | 9 Months 2021 (in thousands) | 9 Months 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $2,432,794 | $2,343,642 | $7,381,172 | $6,670,497 | | Operating Income | $483,331 | $561,230 | $1,520,503 | $1,534,006 | | Net Income Attributable to Common Shareholders | $283,166 | $346,260 | $913,829 | $933,244 | | Diluted Earnings Per Common Share | $0.82 | $1.01 | $2.65 | $2.76 | Eversource Energy Consolidated Balance Sheet Highlights (Unaudited) | Metric | As of Sep 30, 2021 (in thousands) | As of Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Assets | $48,014,055 | $46,099,598 | | Total Liabilities | $37,442,444 | $32,036,032 | | Common Shareholders' Equity | $14,411,611 | $14,063,566 | - Net cash provided by operating activities remained relatively stable at $1.52 billion for the first nine months of 2021, while net cash used in investing activities increased to $2.42 billion, primarily due to higher investments in property, plant, and equipment21 Combined Notes to Condensed Financial Statements The notes detail key accounting policies, significant financial events, and regulatory developments, including the impact of COVID-19 on uncollectible accounts, the CL&P storm settlement, and ongoing FERC ROE complaints - The allowance for uncollectible accounts increased due to the COVID-19 pandemic, with $57.0 million related to the pandemic expected to be recovered from customers in future rates71 - CL&P's settlement agreement for Tropical Storm Isaias resulted in a cumulative pre-tax impact of $103.6 million and an after-tax earnings impact of $85.8 million, or $0.25 per share, for the nine months ended September 30, 202197189 - The company recorded a $39.1 million pre-tax reserve for the second FERC ROE complaint period, with the outcome of four pending complaints remaining uncertain, where a 10 basis point change to the base ROE would impact after-tax earnings by approximately $3 million for each 15-month period170178 Long-Term Debt Issuances and Repayments (First 9 Months 2021) | Entity | Issuance/(Repayment) (Millions) | Type | | :--- | :--- | :--- | | CL&P | $425.0 | 2.05% First Mortgage Bonds | | | ($120.5) | 4.38% Series A PCRB | | NSTAR Electric | $300.0 | 3.10% 2021 Debentures | | | ($250.0) | 3.50% Series F Senior Notes | | | $300.0 | 1.95% 2021 Debentures | | PSNH | ($122.0) | 4.05% Series Q First Mortgage Bonds | | | ($160.0) | 3.20% Series R First Mortgage Bonds | | | $350.0 | 2.20% Series V First Mortgage Bonds | | Eversource Parent | ($450.0) | 2.50% Series I Senior Notes | | | $350.0 | 2.55% Series S Senior Notes | | | $300.0 | 1.40% Series U Senior Notes | | | $350.0 | Variable Rate Series T Senior Notes | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, including a decrease in GAAP EPS primarily due to CL&P charges, while non-GAAP EPS increased, covering segment performance, liquidity, capital expenditures, and significant regulatory developments Executive Summary and Earnings Overview Eversource's GAAP earnings decreased due to CL&P settlement and storm penalty costs, while non-GAAP earnings showed growth, and the company reaffirmed its long-term EPS growth forecast GAAP vs. Non-GAAP Earnings Per Share (EPS) | Period | GAAP EPS | Non-GAAP EPS | YoY Change (Non-GAAP) | | :--- | :--- | :--- | :--- | | Q3 2021 | $0.82 | $1.02 | 0.0% | | Q3 2020 | $1.01 | $1.02 | - | | 9 Months 2021 | $2.65 | $2.95 | +5.4% | | 9 Months 2020 | $2.76 | $2.80 | - | - The company reaffirmed its long-term EPS growth rate projection through 2025 to be in the upper half of the 5 to 7 percent range from its regulated utility businesses227 - Key drivers for segment performance in the first nine months of 2021 include a higher transmission rate base, the addition of EGMA earnings in the natural gas segment, and the negative impact of the CL&P settlement on the electric distribution segment240241243 Liquidity and Capital Resources Operating cash flow remained stable in the first nine months of 2021, while the company increased investments in property, plant, and equipment, funding operations through new long-term debt issuances and maintaining substantial borrowing capacity Key Cash Flow and Liquidity Metrics (First 9 Months) | Metric (in billions) | 2021 | 2020 | | :--- | :--- | :--- | | Cash from Operations | $1.52 | $1.50 | | Investments in PP&E | $2.21 | $2.10 | | New Long-Term Debt Issued | $3.15 | N/A | | Long-Term Debt Repaid | $1.14 | N/A | - As of September 30, 2021, the company had $1.86 billion in available borrowing capacity under its commercial paper programs228 Business Development and Capital Expenditures Consolidated capital expenditures increased in the first nine months of 2021, driven by investments in major transmission projects and a strategic focus on offshore wind partnerships, with significant equity investment in key projects - Total equity investment in the offshore wind business reached $1.13 billion as of September 30, 2021, an increase from $887.1 million at year-end 2020286 Major Offshore Wind Projects | Wind Project | State Servicing | Size (MW) | Contract Status | | :--- | :--- | :--- | :--- | | Revolution Wind | Rhode Island / Connecticut | 704 | Approved | | South Fork Wind | New York (LIPA) | 130 | Approved | | Sunrise Wind | New York (NYSERDA) | 924 | Approved | - Projected in-service dates are the end of 2023 for South Fork Wind, and 2025 for both Revolution Wind and Sunrise Wind, contingent on permitting schedules297 Regulatory Developments and Rate Matters This section details significant regulatory activities, including unresolved FERC ROE complaints, the CL&P settlement regarding Tropical Storm Isaias, and mitigation plans filed by NSTAR Gas and EGMA to defer rate increases - CL&P entered a settlement agreement resolving Tropical Storm Isaias regulatory proceedings, agreeing to $75 million in customer credits and assistance and a freeze on base distribution rates until at least January 1, 2024, which resolves PURA's proposed ROE reduction penalties232320322 - Four FERC complaints regarding the New England Transmission Owners' (NETOs) Return on Equity (ROE) remain pending, with Eversource maintaining a $39.1 million pre-tax reserve for the second complaint period298300 - FERC's Supplemental NOPR proposes to eliminate the 50 basis point RTO ROE incentive, which, if finalized, would have an estimated annual negative impact of approximately $15 million on Eversource's after-tax earnings312 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk The company manages market risks, including commodity price, interest rate, and credit risk, with commodity price risk largely mitigated for regulated operations and credit risk managed through collateral from counterparties - The company's regulated subsidiaries have no material earnings exposure to commodity price risk as economic impacts of energy contracts are passed on to customers through approved rates425 - To manage credit risk, the regulated companies held $108.5 million in collateral from counterparties as of September 30, 2021428 ITEM 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal controls over financial reporting during the quarter - Management concluded that the disclosure controls and procedures for Eversource and its key subsidiaries are effective as of September 30, 2021430 - No changes in internal controls over financial reporting occurred during the quarter that materially affected or are reasonably likely to materially affect these controls431 PART II – OTHER INFORMATION ITEM 1. Legal Proceedings The company reported no material legal proceedings or significant changes to those previously disclosed in its 2020 Form 10-K - There have been no material legal proceedings identified and no material changes with regard to the legal proceedings previously disclosed in the 2020 Form 10-K434 ITEM 1A. Risk Factors This section incorporates risk factors from the 2020 Form 10-K, highlighting updated regulatory, legislative, and compliance risks, particularly the potential negative impact of adverse actions by state and federal regulators on earnings and liquidity - The company highlights the risk that adverse actions by regulators, including the inability to recover prudently incurred costs, adverse decisions on rates of return, or the imposition of penalties, could negatively affect financial results436438439 - The four pending FERC complaints against New England transmission owners regarding allowed ROEs are cited as a specific risk, where an adverse decision could negatively impact financial position, results of operations, and cash flows442 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of 2021, the company purchased a limited number of its common shares at an average price of $82.25 per share, primarily for matching contributions under its 401k Plan Issuer Purchases of Equity Securities (Q3 2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2021 | — | $— | | August 2021 | 21 | $89.05 | | September 2021 | 2,377 | $82.19 | | Total | 2,398 | $82.25 | ITEM 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including supplemental indentures for debt offerings, CEO and CFO certifications, and interactive data files