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    Eversource Energy (ES)

    Q1 2024 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$61.51January 1, 2024
    Final Price$58.88April 1, 2024
    Price Change$-2.63
    % Change-4.28%

    What went well

    • Eversource expects to improve its FFO-to-debt ratio to 14% to 15% by 2025, supported by cash proceeds from asset sales, including the planned sale of Aquarion, strengthening its financial position.
    • The company reiterated its 2024 earnings guidance of $4.50 to $4.67 per share and a long-term EPS growth rate of 5% to 7%, demonstrating confidence in its financial outlook.
    • Eversource continues to invest in technology and infrastructure to enhance reliability, as evidenced by swiftly restoring power to 85,000 customers within 5 minutes during a storm, showcasing best-in-class performance.

    What went wrong

    • Eversource's plan to achieve an FFO to debt ratio of 14%-15% by 2025 relies on the successful sale of the Aquarion water business; if the sale is delayed or does not occur, this could negatively impact their financial metrics.
    • Challenging regulatory environment in Connecticut is causing Eversource to reduce capital investments in the state, particularly in reliability areas, which could affect future service quality and growth opportunities.
    • Uncertainty surrounding the Supreme Court appeal regarding Aquarion's rate case and its impact on the sale process adds risk to Eversource's financial plans and could potentially delay anticipated cash inflows.

    Q&A Summary

    1. Connecticut CapEx Cuts
      Q: What CapEx are you cutting in Connecticut, and is redeployment accretive?
      A: Due to unfavorable regulatory decisions misaligned with state policy, we're cutting capital expenditures in reliability areas while maintaining safety spending. We're redeploying capital elsewhere in our system where we have ample opportunities, and yes, the redeployment is accretive.

    2. Equity Issuance Plans
      Q: How are you approaching the up to $1.3 billion equity issuance, and does the water sale affect it?
      A: We plan to be opportunistic, primarily utilizing our ATM program, which gives us tremendous flexibility. The final equity amount depends on the outcome of the Aquarion water sale process. We've executed at least $75 million so far and more in recent weeks.

    3. FFO to Debt Improvement
      Q: Can you elaborate on the FFO to debt ratio improvement and the drivers?
      A: The 2023 under-recovery of approximately $600 million impacted our FFO to debt ratio, lowering it to around 9%. With regulatory approvals, we expect cash recovery starting July 1, improving the ratio by about 200 basis points. Other factors, including offshore wind investments, will move us closer to our target 14–15% FFO to debt ratio by the end of 2025.

    4. Aquarion Sale Process
      Q: How does the recent rate order on Aquarion affect the sale process?
      A: We're proceeding with the sale process to maximize value, despite appealing the rate order to the Supreme Court, which could take about a year. The appeal doesn't hinder our plans, and we're not rushing to the finish line. ** **

    5. Connecticut Regulatory Environment
      Q: Are you making progress in improving the regulatory environment in Connecticut?
      A: We continue working towards a constructive regulatory relationship. Without predictable cost recovery, we can't invest further. Collaboration is essential, and we're committed to engaging until we achieve aligned objectives for clean energy initiatives. ** **

    6. Massachusetts ESMP Process
      Q: What are the next milestones in the Massachusetts ESMP process?
      A: Hearings have concluded, and the DPU must render a decision by August due to clean energy legislation. We're focusing on a $600 million investment within our forecast period, with further investments needed beyond that.

    7. New Hampshire Solar Opportunity
      Q: Can you provide details on the New Hampshire solar investment opportunity?
      A: We're in early discussions with the state on utility-owned solar investments. While sizing isn't determined yet, we see great opportunities due to abundant land and proximity to infrastructure. We'll provide updates in future quarters.

    8. Sunrise Sale Accounting
      Q: How does the sale of Sunrise affect your financials?
      A: The transaction will be reflected upon closing, likely in the third quarter. Accounting rules require us to recognize the gain once cash is received, so adjustments will occur then.

    9. South Fork Tax Equity Investment
      Q: How does the South Fork tax equity investment impact cash flows?
      A: The tax equity investment will enhance our operating cash flows over approximately 24 months, potentially extending into 2026. While it's a one-time benefit, we have other items like deferred storm balances to maintain strong FFO to debt ratios beyond that period.

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