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ACQUISITION OF ASSETS OF COLUMBIA GAS OF MASSACHUSETTS | 12 Months Ended
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Dec. 31, 2021
Business Combinations [Abstract] |
ACQUISITION OF ASSETS OF COLUMBIA GAS OF MASSACHUSETTS | ACQUISITION OF ASSETS OF COLUMBIA GAS OF MASSACHUSETTS On October 9, 2020, Eversource acquired certain assets and liabilities that comprised the NiSource Inc. (NiSource) natural gas distribution business in Massachusetts, which was previously doing business as CMA, pursuant to an asset purchase agreement (the Agreement) entered into on February 26, 2020 between Eversource and NiSource. The cash purchase price was $1.1 billion, plus a working capital amount of $68.6 million, as finalized in the first quarter of 2021. Eversource financed the acquisition through a combination of debt and equity issuances in a ratio that was consistent with its consolidated capital structure. The natural gas distribution assets acquired from CMA were assigned to EGMA, an indirect wholly-owned subsidiary of Eversource formed in 2020. The LNG assets acquired from CMA were assigned to Hopkinton LNG Corp. The transaction required approval by the DPU, the Maine Public Utilities Commission, the FERC, and the Federal Communications Commission, and review under the Hart-Scott-Rodino Act. The liabilities assumed by Eversource under the Agreement specifically excluded any liabilities (past or future) arising out of, or related to, the fires and explosions that occurred on September 13, 2018 in Lawrence, Andover and North Andover, Massachusetts related to the delivery of natural gas by CMA, including certain subsequent events, all as described and in the DPU's Order on Scope dated December 23, 2019 (D.P.U. 19-141) (the Greater Lawrence Incident or GLI). The liabilities assumed also excluded any further emergency events prior to the closing of the acquisition related to the restoration and reconstruction with respect to the GLI, including any losses arising out of, or related to, any litigation, demand, cause of action, claim, suit, investigation, proceeding, indemnification agreements or rights. Eversource did not assume any of CMA's or NiSource Inc.'s third party debt obligations or notes payable. On October 7, 2020, the DPU approved a rate settlement agreement with Eversource, EGMA, NiSource, Bay State, the Massachusetts Attorney General's Office, the DOER and the Low-Income Weatherization and Fuel Assistance Program Network, which requested approval of the February 26, 2020 Agreement, as well as a rate stabilization plan, among other items. Purchase Price Allocation: The allocation of the total purchase price to the estimated fair values of the assets acquired and liabilities assumed has been determined based on the accounting guidance for fair value measurements, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The final purchase price allocation reflects measurement period adjustments recorded in 2021 to reduce the fair values of certain regulatory and plant assets and certain liabilities acquired, resulting in a corresponding increase to Goodwill, based on new information received during the measurement period. The allocation of the cash purchase price as of October 9, 2020 is as follows:
(Millions of Dollars) |
Current Assets | $ | 138 |
Restricted Cash | 57 |
PP&E | 1,182 |
Goodwill | 52 |
Other Noncurrent Assets, excluding Goodwill | 131 |
Other Current Liabilities | (81) |
Other Noncurrent Liabilities | (310) |
Cash Purchase Price | $ | 1,169 |
The fair values of CMA's assets and liabilities were determined based on significant estimates and assumptions, including Level 3 inputs, that are judgmental in nature. The allocation of the total purchase price includes adjustments to reflect plant that will not earn a return and to reduce rate base to the allowed $995 million as specified in the rate settlement agreement. Eversource also recorded a $6.7 million liability for the future refund to customers for CMA's overcollection of the lower income tax rate beginning in 2018. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was recognized as goodwill. The goodwill reflects the value paid by Eversource primarily for expanding its natural gas infrastructure. The goodwill resulting from the acquisition has been assigned to the Natural Gas Distribution reporting unit. Under the terms of the rate settlement agreement, a portion of the proceeds of the sale due to NiSource was withheld and used to establish an Energy Relief Fund comprised of two components, an Arrearage Forgiveness Fund and a fund which is restricted for energy efficiency and clean energy measures in the Merrimack Valley. As a result, Eversource funded restricted cash accounts and established a liability totaling $56.8 million on the acquisition date. By December 31, 2020, $15.4 million of the Arrearage Forgiveness Fund was credited back to customers and the remainder was paid back to NiSource. The purchase price included in investing cash outflows on the statement of cash flows of $1.11 billion reflects the payment to NiSource, excluding the restricted cash funds. Pro Forma Financial Information: The following unaudited pro forma financial information reflects the pro forma combined results of operations of Eversource and the CMA business acquired and reflects the amortization of purchase price adjustments assuming the acquisition had taken place on January 1, 2019. The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved or the future consolidated results of operations of Eversource. Pro forma net income excludes the impact of assets and liabilities not assumed by Eversource, such as amounts directly associated with the GLI incident, and non-recurring costs associated with the transaction.
| For the Years Ended December 31,
(Pro forma amounts in millions, except share amounts) | 2020 |  | 2019
Operating Revenues | $ | 9,273 |  |  | $ | 9,103 |
Net Income Attributable to Common Shareholders | 1,265 |  |  | 909 |
Basic EPS | 3.73 |  |  | 2.83 |
Diluted EPS | 3.72 |  |  | 2.82 |
Revenues and Net Income: The impact of CMA on Eversource's accompanying consolidated statement of income included operating revenues of $154.8 million and net income attributable to common shareholders of $13.9 million for the year ended December 31, 2020. Transactions recognized separately from the business combination: Eversource has entered into Transition Services Agreements (TSAs) with NiSource, under which NiSource is providing certain administrative functions. Eversource has recorded $21.4 million in Operating Expenses on the statement of income related to TSA costs for the year ended December 31, 2021 and $15.9 million of TSA and pre-TSA costs in Operating Expenses in 2020. In addition, Eversource recorded $2.0 million in Energy Efficiency expense related to the implementation of new energy efficiency programs as specified in the rate settlement agreement in the fourth quarter of 2020.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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