1、 Electric and Gas Utilities 3Q19 Preview:Cleaning Up for Orlando Utilities|Earnings Mostly misses this 3Q19 earnings season,we expect more misses than beats,with favorable weather this summer in many jurisdictions nevertheless offset with even more favorable weather last year.Notable misses for BKH,
2、NWE,and CMS,although we dont expect these companies to change 2019 guidance(NWE may be considering initiating 2019 guidance despite the timing given a partial rate settlement in Montana).We only have one notable beat for NEE,driven by a reversal of weak wind last year and Gulf Power.We are changing
3、TPs and estimates across our sector in this report.Figure 1:3Q19 Estimates CS vs.Consensus Source:Company data,Credit Suisse estimates,IBES consensus Not too many surprises for the EEI Financial Conference in Orlando this year,but we expect to see investors key in on carbon reduction plans and clean
4、 energy opportunities,along with the potential impact of a left-wing Democratic victory in 2020,and the possible implications from a strengthening mood against natural gas,even as a transition fuel to a carbon free energy economy.We see many utilities(XEL,DUK,DTE,among others)citing 2050 as the targ
5、et for carbon neutral electric production,in line with a broader“net-zero”goal that environmental advocates cite as necessary to keep global warming below an incremental 1.5 degrees Celsius.To reach that goal,most are also relying on natural gas and turbine technology to balance intermittent renewab
6、les until an alternative technology is available to do the job.However,we see a disturbing trend against any use of natural gas among environmental organizations,with legal fights against fracking and pipeline projects.Among our concerns:battery technology will eventually become cheap enough to supp
7、ort daily wind and solar variability,but it will never be able to scale enough to store seasonal power requirements for entire cities and industries(e.g.,summer solar for winter heating).Even more concerning is the lack of support for nuclear power,with advocates citing a risk for early retirement o
8、f as many of 21 nuclear facilities in the next decade and a corresponding 4%-6%rise in carbon emissions by 2035 as a result.A potential winner here could be EXCs merchant nuclear fleet if natural gas and electric prices rise in response to a fracking ban being advocated by some Democratic candidates
9、.Please contact us for meeting slots at EEI see our schedule below.CompanyTickerTicker3Q19 EPS/3Q19 EPS/EBITDAEBITDA3Q19 Cons./3Q19 Cons./EBITDAEBITDA%Diff%Diff2019 EPS/2019 EPS/EBITDAEBITDA2020 EPS/2020 EPS/EBITDAEBITDA2019 Cons./2019 Cons./EBITDAEBITDA2020 Cons./2020 Cons./EBITDAEBITDARatingRating
10、TPTPNisourceNI$0.09$0.0814.76%14.76%$1.32$1.40$1.31$1.38N$30NextEra EnergyNEE$2.39$2.284.67%4.67%$8.38$9.01$8.38$9.07O$242Spire SR-$0.54-$0.514.31%4.31%$3.78$3.74$3.79$3.94U$76Eversource EnergyES$0.98$0.962.67%2.67%$3.43$3.63$3.46$3.65O$87VistraVST$1,061$1,0550.56%0.56%$3,380$3,488$3,334$3,364O$32So
11、uthern CompanySO$1.15$1.150.03%0.03%$3.00$3.04$3.05$3.16U$60Pinnacle WestPNW$3.01$3.04-1.14%-1.14%$4.75$5.02$4.77$5.04O$105Dominion ResourcesD$1.11$1.14-2.42%-2.42%$4.19$4.40$4.19$4.39O$85Duke EnergyDUK$1.64$1.69-2.87%-2.87%$4.95$5.18$4.97$5.16N$98Consolidated EdisonED$1.54$1.58-2.95%-2.95%$4.36$4.5
12、6$4.35$4.56U$90Exelon CorpEXC$0.86$0.90-3.77%-3.77%$3.07$3.01$3.14$3.10O$50WEC EnergyWEC$0.71$0.73-3.81%-3.81%$3.53$3.77$3.53$3.76U$85CenterpointCNP$0.41$0.44-6.23%-6.23%$1.65$1.76$1.65$1.77O$32CMS EnergyCMS$0.63$0.70-10.15%-10.15%$2.52$2.68$2.50$2.68O$65Northwestern CorpNWE$0.57$0.65-12.21%-12.21%$
13、3.48$3.59$3.53$3.60U$71Black Hills CorpBKH$0.36$0.50-28.62%-28.62%$3.45$3.66$3.47$3.68N$7721 October 2019 Equity Research Americas|United States DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALY
14、STS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single fac
15、tor in making their investment decision.Research Analysts Michael Weinstein,ERP 212 325 0897 w.weinsteincredit- Maheep Mandloi 212 325 2345 maheep.mandloicredit- 21 October 2019 Electric and Gas Utilities 2 Table of Contents Executive Summary and Tables 3 Sector Valuation and Commodity Price Impacts
16、 7 Black Hills Corp 23 CenterPoint Energy Inc 27 Consolidated Edison 31 CMS Energy Corp 35 Dominion Energy 39 Duke Energy 43 Eversource Energy 47 Exelon Corporation 51 NextEra Energy Inc.57 NiSource Inc.61 NorthWestern Energy 65 Pinnacle West Capital Corp.70 Southern Company 77 Spire Inc.82 Vistra E
17、nergy 86 WEC Energy 91 21 October 2019 Electric and Gas Utilities 3 Executive Summary and Tables Figure 2:Expected Total Return(Upside/Downside to Target Price plus Dividend Yield)Source:Company data,Credit Suisse estimates,IBES Consensus Figure 3:Estimates CS vs.Consensus Source:Company data,Credit
18、 Suisse estimates,IBES Consensus 21.3%15.8%15.2%15.1%9.9%7.8%6.8%6.2%4.1%3.9%2.2%1.6%0.5%-2.1%-6.0%-7.0%-15.0%-10.0%-5.0%0.0%5.0%10.0%15.0%20.0%25.0%VST(O)CNP(O)EXC(O)PNW(O)NI(N)D(O)DUK(N)NEE(O)ES(O)CMS(O)SO(U)ED(U)BKH(N)NWE(U)WEC(U)SR(U)Stock GrowthDividend YieldCompanyTickerTicker3Q19 EPS/3Q19 EPS
19、/EBITDAEBITDA3Q19 Cons./3Q19 Cons./EBITDAEBITDA%Diff%Diff2019 EPS/2019 EPS/EBITDAEBITDA2020 EPS/2020 EPS/EBITDAEBITDA2019 Cons./2019 Cons./EBITDAEBITDA2020 Cons./2020 Cons./EBITDAEBITDARatingRatingTPTPNisourceNI$0.09$0.0814.76%14.76%$1.32$1.40$1.31$1.38N$30NextEra EnergyNEE$2.39$2.284.67%4.67%$8.38$
20、9.01$8.38$9.07O$242Spire SR-$0.54-$0.514.31%4.31%$3.78$3.74$3.79$3.94U$76Eversource EnergyES$0.98$0.962.67%2.67%$3.43$3.63$3.46$3.65O$87VistraVST$1,061$1,0550.56%0.56%$3,380$3,488$3,334$3,364O$32Southern CompanySO$1.15$1.150.03%0.03%$3.00$3.04$3.05$3.16U$60Pinnacle WestPNW$3.01$3.04-1.14%-1.14%$4.75
21、$5.02$4.77$5.04O$105Dominion ResourcesD$1.11$1.14-2.42%-2.42%$4.19$4.40$4.19$4.39O$85Duke EnergyDUK$1.64$1.69-2.87%-2.87%$4.95$5.18$4.97$5.16N$98Consolidated EdisonED$1.54$1.58-2.95%-2.95%$4.36$4.56$4.35$4.56U$90Exelon CorpEXC$0.86$0.90-3.77%-3.77%$3.07$3.01$3.14$3.10O$50WEC EnergyWEC$0.71$0.73-3.81
22、%-3.81%$3.53$3.77$3.53$3.76U$85CenterpointCNP$0.41$0.44-6.23%-6.23%$1.65$1.76$1.65$1.77O$32CMS EnergyCMS$0.63$0.70-10.15%-10.15%$2.52$2.68$2.50$2.68O$65Northwestern CorpNWE$0.57$0.65-12.21%-12.21%$3.48$3.59$3.53$3.60U$71Black Hills CorpBKH$0.36$0.50-28.62%-28.62%$3.45$3.66$3.47$3.68N$7721 October 20
23、19 Electric and Gas Utilities 4 Figure 4:Credit Suisse EEI Meeting Schedule,Orlando Nov 2019 Source:Credit Suisse BKH:Expect a miss for 3Q at$0.36 vs consensus$0.51,largely the result of a seasonal shift of revenues into 1Q and 4Q due to a higher mix of gas utility assets with rate increases(Arkansa
24、s).With TTM projected to be$3.38 and a stronger 4Q,we dont expect anything more than a narrowing of 2019 guidance from the current$3.40-$3.60(vs CS/consensus$3.45/$3.47).Guidance Updates.Normally the company would initiate 2020 guidance on this call,but since this was initiated last year,we expect t
25、he current$3.50-$3.80 to be narrowed too(vs CS/consensus$3.66/$3.68).Expect an update to the five-year capital plan with an increase to outer years beyond 2020.A full roll-forward to 2024 wont come until February with the yearend report.The current forecast is for$777M of capital investments in 2019
26、 and$582M in 2020 despite flooding issues this year.The company also plans for$80-100M equity in 2019($70M completed in 1H19;$49M in 2Q alone)and$40-80M in 2020 under the at-the-market(ATM)program.CNP:Expect a small miss for 3Q19 at$0.41 vs consensus$0.44 with favorable weather and rate increases of
27、fset by higher financing costs.Dont expect much of a guidance update on either the 3Q call or at the EEI conference,with TTM projected to be$1.58 vs 2019 guidance$1.60-$1.70 and CS/Consensus$1.65/$1.65.We dont expect any change to managements plan to re-initiate fresh 2020 guidance in February.ED:We
28、 expect a nickel miss for 3Q19 at$1.54 vs consensus$1.60,driven by dilution from the purchase of Sempras solar portfolio last year,high stock-based compensation expense,and a$5M revenue adjustment associated with a July power outage.With TTM projected to be$4.28 vs 2019 guidance$4.25-$4.45(CS/Consen
29、sus$4.36/$4/35),we dont expect any changes at the EEI Financial Conference in November,especially while the CECONY ratecase continues to await a settled outcome.CMS:We expect a miss for 3Q19 at$0.63 vs consensus$0.74,with favorable weather heavily offset by an even more favorable 3Q18(-$0.12 to norm
30、alize).We dont expect any change to guidance(perhaps up a penny)despite TTM projected to be$2.11 vs guidance$2.47-2.51(CS/Consensus$2.52/$2.50).Expect a strong 4Q with higher rates and lower reinvestment vs last year($0.23).Major 10-year update and 2020 guidance initiation likely.The company intends
31、 to update the 10-year capital plan,which now stands at$18B but we expect it to increase to at least$23B.D:Expect an in-line result for 3Q19 at$1.11 vs guidance$1.00-$1.20 and consensus$1.14.Major drivers are favorable weather,$0.18 from Southeast Energy Group(before dilution),-$0.07 absence of farm
32、out benefits vs last year,-$0.23 of dilution from shares issued for the acquisition of SCANA,and a few pennies benefit from reduced O&M.Expect no change to the midpoint of 2019 guidance$4.05-$4.40(could be narrowed)and Sunday Nov 10Monday Nov 11Tuesday Nov 127:00-7:45 AM8:00-8:45 AMPEGSO9:00-9:45 AM
33、DHE10:00-10:45 AMNEEAES11:00-11:45 AMPNWCMS12:00-12:45 PMDTE1:00-1:45 PMNIWEC2:00-2:45 PMBKHXELEXC3:00-3:45 PMESNWEDUK4:00-4:45 PMED5:00-5:45 PMCS Hosted DinnersCNPTakeaways21 October 2019 Electric and Gas Utilities 5 no change to the targeted 6-8%EPS CAGR for 20172020 and 5%+post-2020.Headcount red
34、uctions save$0.10-0.12 annually,helping to de-risk guidance.DUK:Expect a nickel miss for 3Q19 at$1.64 vs consensus$1.70,with-$0.03 of hurricane preparation costs and the absence of a$0.03 transmission settlement last year as drivers.With TTM at$4.84,we expect the company to maintain the midpoint of
35、2019 guidance$4.80-$5.20 vs CS/Consensus$4.95/$4.97.ES:Expect an in-line 3Q19 at$0.98 vs consensus$0.96,driven largely by rate increases at NSTAR and CL&P as well as a recent$28M hike at PSNH.With TTM projected at$3.41 vs 2019 guidance$3.40-$3.50(CS/consensus$3.43/$3.45),we dont expect any change to
36、 guidance.For the EEI Financial Conference in November,we dont expect a significant update perhaps news from Mass and CT on winners in their offshore wind solicitations(Mass targeting Nov 8 announcement)as well as details on a forthcoming NSTAR Gas rate filing,the first since 2015.Typically the comp
37、any would will guidance for next year(2020)with a long-term capital plan and growth update on the 4Q call in Feb.EXC:We expect an in-line 3Q19 at$0.86 vs consensus$0.89 and guidance$0.80-$0.90.Major drivers include favorable weather offset by lower nuclear generation(Oyster Creek retirement last yea
38、r).With TTM projected at$2.91,we dont expect any change to current 2019 guidance$3.00-$3.30,although lower half of the range appears more likely(CS$3.07 vs consensus$3.14).Selloff on legal concerns is well-overdone EXC is much more than Illinois.Even applying a 1.5x discount to ComEd for the possibl
39、e elimination of formula rates(HB 3152 is pending now to reauthorize after 2022)and a 50%probability of loss of Illinois ZECs only reduces our TP$3,landing at$50 and still a solid Outperform rating,especially after a$5 drop this month.NEE:We are forecasting a strong beat for 3Q19 at$2.39 vs consensu
40、s$2.28,driven by new investment growth at FP&L and NEER,the normalization of wind at NEER(was-$0.07 last year),and the contribution of Gulf Power net of higher interest expense and dilution.With TTM projected to be$8.43,we dont expect any change to 2019 guidance of$8.00-$8.50(CS/consensus$8.38).With
41、 the analyst day just a few months ago,we dont expect any significant changes to guidance for 2020/2021 nor long-term EPS and dividend growth projections from management on either the 3Q call or at the EEI Financial Conference in November.NI:We expect an in-line 3Q19 at$0.09 vs consensus$0.08.With T
42、TM projected at$1.34,we see 2019 earnings tracking toward the upper end of guidance$1.27-$1.33,but we dont expect management to adjust the range with the 4Q winter heating season still ahead.Raising our estimates for insurance recoveries and pension asset values.Company will initiate 2020 guidance w
43、e expect continuation of 5%-7%EPS growth,although with insurance recoveries from the 2018 Lawrence incident coming in faster than initially expected and pension asset values catching up vs low market pricing at the end of 2018,we also expect the company to raise the baseline for 2020+from the curren
44、t$1.30 midpoint of 2019 guidance to$1.32.We are also raising our 2019 estimate$0.02 to$1.32 and our 2020 and 2021 estimates a penny to$1.40 and$1.49,respectively.We continue to expect NI to return to the original guidance glidepath(5%-7%off a 2018 base$1.30)by 2022 or perhaps sooner given positive t
45、rends mentioned above.For equity needs,we see no change to prior guidance for$200-$300M/year in 2020.NWE:We expect a miss for 3Q19 at$0.57 vs consensus$0.65,driven by higher employee benefits cost and tree trimming expense as provided for in the Montana income tax settlement reached last year.Our an
46、nual estimates are unchanged and grow at 4%vs.peers in the 4%-7%range,modelling that compares with 4%-5%implied EPS growth within company guidance for 6%-9%total return over the long-term(including dividend yield).Will issue 2020 guidance at the EEI Financial Conference and possibly 2019 guidance to
47、o,although 2019 would be predicated on approval of the Montana rate settlement.With TTM projected to be$3.37,we expect a tight range for 2019 at$3.48-$3.54(2.5%-4.5%growth vs 2018),essentially bracketing our estimate at the low end 21 October 2019 Electric and Gas Utilities 6 and consensus at the hi
48、gh end.For 2020,our$3.59 estimate and consensus$3.60 are both consistent with a 3.1%CAGR from 2018 results,and we expect a wider range of$3.50-$3.70(2%-4.5%CAGR vs 2018).On the margin,a$9.4M reduction in annual depreciation in the partial Montana rate settlement helps boost ratebase growth.PNW:We ex
49、pect an in-line 3Q19 at$3.01 vs consensus$3.04,driven by new transmission rates,favorable weather,lower operating expense,and improved pension asset performance partially offset by reduced AFUDC and the timing of FERC tax adjustments.With TTM projected to be$4.68 vs guidance for the low end of$4.75-
50、$4.95(CS/consensus$4.75/$4.77),we dont expect any change to the range with 3Q in-line and 4Q still ahead and cost reduction levers still available to pull.Guidance for 2020 likely deferred as the utility enters a ratecase.We dont expect the company to initiate guidance for 2020,although management m
