10-K: Consolidated Edison Reports Strong 2023 Earnings Amidst Strategic Shift

Consolidated Edison, Inc. reports a significant increase in net income for 2023, driven by regulated utility operations and strategic asset sales.

Summary

• Consolidated Edison, Inc. reported a net income of $2,519 million, or $7.25 per share, for 2023, compared to $1,660 million, or $4.68 per share, in 2022.
• Adjusted earnings for 2023 were $1,762 million, or $5.07 per share, compared to $1,620 million, or $4.57 per share, in 2022.
• The Utilities invested $4,379 million in 2023 to upgrade their energy delivery systems, and Con Edison Transmission invested $49 million primarily in electric transmission.
• Planned investments for the Utilities are estimated at $4,822 million in 2024, $5,212 million in 2025, $5,879 million in 2026, $5,874 million in 2027 and $5,867 million in 2028.
• Con Edison plans to issue up to $3,250 million of long-term debt in 2024 and up to $1,000 million in 2025, and approximately $6,000 million in aggregate during 2026 through 2028.
• The company plans to issue common equity of approximately $1,300 million in 2025 and up to $2,800 million in aggregate during 2026 through 2028.
• CECONY forecasts an average annual increase in peak demand for electricity of approximately 0.7 percent and an average annual decrease in gas and steam peak demand of approximately 0.8 percent and 0.5 percent, respectively, over the next five years.
• O&R forecasts an average annual increase in electric peak demand of approximately 2.0 percent and an average annual decrease in gas peak demand of approximately 0.2 percent over the next five years.
• In March 2023, Con Edison completed the sale of all of the stock of the Clean Energy Businesses.
• In June 2023, the New York Independent System Operator selected the Propel NY Energy transmission project, in which Con Edison Transmission owns a 41.7 percent interest.
• In July 2023, the NYSPSC approved electric and gas rate plans for CECONY for the three-year period January 1, 2023 through December 31, 2025.
• In November 2023, the NYSPSC approved a steam rate plan for CECONY for the three-year period November 1, 2023 through October 31, 2026.
• In November 2023, CECONY and O&R filed petitions with the NYSPSC for approval to make long-term investments of $903 million and $411 million, respectively, between 2025 and 2029 to protect their electric systems from climate change.
• In January 2024, O&R filed a request with the NYSPSC for electric and gas rate increases of $18.1 million and $14.4 million, respectively, effective January 2025.
• In January 2024, the NYSPSC approved CECONY's petition to construct two new substations in Jamaica, Queens, with an estimated cost of $1,200 million and an estimated in-service date of May 2028.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results and strategic initiatives, but also acknowledges potential risks and challenges. The overall tone is optimistic and forward-looking.

Positives

• The company experienced a substantial increase in net income and adjusted earnings in 2023.
• The Utilities are making significant investments to upgrade and reinforce their energy delivery systems.
• Con Edison is actively transitioning to clean, renewable energy through strategic investments and projects.
• The company has secured approvals for new rate plans, providing a stable revenue framework.
• The sale of the Clean Energy Businesses has allowed the company to focus on its core regulated utility operations.

Negatives

• The company is planning to issue significant amounts of long-term debt and common equity, which may dilute shareholder value.
• The NYSPSC is conducting an audit of the Utilities related to income tax accounting, which could result in material adjustments.
• The company faces potential challenges related to the implementation of the Climate Leadership and Community Protection Act and the Climate Mobilization Act.
• The company is monitoring a gas supply constraint for the New York City portion of its service territory.

Risks

• The company is subject to extensive regulation and potential penalties for violations.
• The Utilities rate plans may not provide a reasonable return, and changes to rate plans could adversely affect the company.
• The company faces risks from the failure of or damage to its facilities, including those caused by climate change.
• A cyber attack could adversely affect the company's operations and financial systems.
• The company requires access to capital markets to satisfy funding requirements.
• The company is exposed to risks from the environmental consequences of its operations, including Superfund sites and climate change.
• The company's ability to pay dividends depends on dividends from its subsidiaries.
• Changes to tax laws could adversely affect the company.
• The company faces risks related to supply chain disruptions and inflation.

Future Outlook

Con Edison plans to meet its capital requirements for 2024 through 2028 through internally-generated funds and the issuance of long-term debt and common equity. The company anticipates that the Utilities will continue to provide substantially all of its earnings over the next few years. The company expects DERs and electric alternatives to gas and steam to increase, and for gas and steam usage to decrease, as the Climate Leadership and Community Protection Act and the Climate Mobilization Act continue to be implemented.

Management Comments

• Con Edison seeks to provide shareholder value through continued dividend growth, supported by earnings growth in regulated utilities and contracted electric transmission assets.
• The company invests to provide reliable, resilient, safe and clean energy critical for its New York customers.
• Con Edison is a responsible neighbor, helping the communities it serves become more sustainable.

Industry Context

This announcement reflects the ongoing trend in the utility industry towards clean energy transition and grid modernization. The company's strategic shift away from non-core businesses and focus on regulated utility operations aligns with broader industry trends. The company's investments in electric transmission projects and climate change resilience also reflect the industry's response to increasing environmental concerns and regulatory pressures.

Comparison to Industry Standards

• Con Edison's financial performance in 2023, with a significant increase in net income and adjusted earnings, positions it favorably compared to some of its peers in the regulated utility sector.
• The company's planned capital investments over the next five years are substantial and reflect a commitment to modernizing its infrastructure, which is in line with industry best practices.
• The company's strategic decision to sell its Clean Energy Businesses and focus on its core regulated utility operations is a move that is being seen across the industry as companies look to streamline their operations and focus on their core competencies.
• The company's efforts to enhance its electric systems' resilience to climate change are also in line with industry standards and reflect a growing awareness of the need to adapt to changing environmental conditions.
• The company's planned issuance of long-term debt and common equity is a common practice in the utility industry to fund capital expenditures, but the specific amounts and timing may vary depending on individual company circumstances.

Legal Proceedings

• The NYSPSC continued its focused operations audit of the Utilities related to income tax accounting.

Related Party Transactions

• CECONY and O&R have joint gas supply arrangements in connection with which CECONY sold to O&R $82 million, $144 million and $90 million of natural gas for the years ended December 31, 2023, 2022 and 2021, respectively.
• The Utilities perform work and incur expenses on behalf of New York Transco, a company in which Con Edison Transmission has a 45.7 percent interest in New York Transco's New York Energy Solution project and a 41.7 percent interest in New York Transco's share of the Propel NY Energy project that is jointly owned with the New York Power Authority.
• CECONY has a 20-year transportation contract with Mountain Valley Pipeline, LLC (MVP) for 250,000 dekatherms per day of capacity. Con Edison Transmission has an interest in MVP.

Stakeholder Impact

• Shareholders will benefit from the increased net income and potential for continued dividend growth.
• Employees will be impacted by the company's commitment to a diverse and inclusive workplace and ongoing training programs.
• Customers will benefit from the company's investments in reliable, resilient, safe, and clean energy.
• Communities will benefit from the company's efforts to improve the quality of life and promote sustainability.

Next Steps

• The company will continue to implement its capital investment plans for the Utilities and Con Edison Transmission.
• The company will seek approvals from the NYSPSC for its proposed climate change resilience investments.
• The company will continue to monitor and address the gas supply constraint in the New York City portion of its service territory.
• The company will continue to monitor and address the NYSPSC audit of the Utilities related to income tax accounting.

Key Dates

Keywords

Consolidated Edison, Utilities, Energy Delivery, Rate Plans, Clean Energy, Transmission, NYSPSC, Capital Investments, Climate Change, Financial Results