Q1 2025 Earnings Summary
- Mature Offshore Expansion with Minimal Tariff Risk: Executives emphasized that key equipment for the Revolution offshore project is already procured and onshore, reducing exposure to tariff-related delays or cost increases, which supports confidence in its steady progress.
- Balance Sheet Strengthening via Aquarion Sale: The anticipated closing of the Aquarion transaction in 2025 is expected to reduce debt significantly and enhance the FFO to debt ratio, building a stronger financial foundation for future investments.
- Robust Regulatory and Rate-Setting Environment: Management’s discussion on timely recovery mechanisms—including performance-based ratemaking proposals and proactive rate case filings—suggests a favorable regulatory landscape that can drive revenue and sustain long-term EPS growth.
- Regulatory Uncertainty: Several pending rate proceedings and regulatory reviews—in New Hampshire with upcoming hearings and in Connecticut with the Yankee Gas rate case—create uncertainty about the pace and extent of revenue recoveries, potentially pressuring future earnings.
- Tariff and Cost Inflation Risks: Although management downplays the risk, exposure to tariffs (e.g., on the one under‐construction monopile) and inflationary pressures on capital projects could lead to higher-than-expected cost increases, adversely affecting margins.
- Corporate Drag Concerns: The reported increase in parent losses (evidenced by a $0.16 per share drag in Q1) and uncertainty around the full realization of anticipated tax benefits suggest that corporate burdens could continue to dampen overall profitability if improvements are delayed.
Metric | Period | Previous Guidance | Current Guidance | Change |
---|---|---|---|---|
EPS | FY 2025 | $4.67 to $4.82 | $4.67 to $4.82 | no change |
Long-Term EPS Growth Rate | FY 2025 | 5% to 7% | 5% to 7% | no change |
Rate Base Growth | FY 2025 | 8% | 8% | no change |
FFO to Debt Targets | FY 2025 | no prior guidance | well above 100 basis points over rating agency thresholds | no prior guidance |
Topic | Previous Mentions | Current Period | Trend |
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Regulatory and Rate‐Setting Environment | In Q4 2024, the discussions focused on rate base adjustments, multiple state filings (Massachusetts, New Hampshire, Connecticut) and efforts to resolve regulatory uncertainty. Q3 2024 emphasized the introduction of performance‐based ratemaking and highlighted rate case filings and legal clarity for investments. Q2 2024 detailed comprehensive state‐by‐state regulatory filings and prudency reviews. | In Q1 2025, Eversource outlined detailed performance‐based ratemaking plans (e.g., the 4‐year plan in NH and inflation adjustments in MA) and provided updated timelines for rate case decisions in Connecticut and New Hampshire, stressing proactive efforts to manage regulatory uncertainty. | Continuity with increased specificity. The topic remains consistently discussed with evolving details and tighter timelines, signaling a maturing regulatory strategy. |
Financial Restructuring and Balance Sheet Management | Q4 2024 discussions centered on asset sales (Aquarion and offshore wind), equity issuance to support a stronger FFO‐to‐debt ratio, and addressing credit rating concerns. In Q3 2024, emphasis was on divestitures from offshore wind projects and progress in equity issuances and FFO improvements. Q2 2024 provided detailed plans on asset sales, including proceeds from offshore wind and Aquarion, and a clear roadmap for improving FFO‐to‐debt. | In Q1 2025, the focus continues on the Aquarion Water sale (expected to close by year‑end), improved operating cash flows (with a Q1 improvement of $50 million) and conversations with rating agencies about moving off negative watch; credit metrics are highlighted with expectations that the FFO‐to‐debt ratio will exceed regulatory thresholds. | Positive progression with continuous emphasis on debt reduction. The strategy remains consistent while refining focus on strong cash flow generation and credit rating improvement. |
Offshore Wind and Renewable Asset Strategies | In Q4 2024, the focus shifted towards exiting the offshore wind business and emphasizing the status of the Revolution Wind project while recognizing losses from divestiture. Q3 2024 detailed divestitures, quantifying losses and discussing cost exposures and shared risk on Revolution Wind. Q2 2024 reiterated asset sales (Sunrise, South Fork, Revolution) and reported notable construction progress on Revolution Wind. | In Q1 2025, attention is on the robust construction progress of the Revolution Wind project (onshore substation and procurement milestones), minimal tariff risk due to proactive supply chain management, and overall confidence in project execution with only minor tariff-related concerns. | Shift from divestiture to measured oversight. While the divestiture strategy remains, there is increased focus on managing construction progress and tariff risk, reflecting a more granular execution of renewable asset strategies. |
Capital Investment and Infrastructure Projects | Q4 2024 detailed an updated 5‐year capital plan of $24.2 billion with increased investments in transmission and distribution and clear recovery plans for deferred storm costs. Q3 2024 highlighted a $23.7 billion forecast with specific projects such as ESMP and large transmission investments. Q2 2024 offered an even earlier perspective with a $23.1 billion forecast and extensive infrastructure modernization plans including new substations and distribution investments. | In Q1 2025, the capital plan is reinforced with a 5‑year forecast of $24.2 billion – a 10% increase from the previous plan – and includes investments in transmission (nearly $7 billion), electric distribution (over $10 billion), and key integrated projects such as AMI deployment and deferred storm cost recoveries in rate cases in CT and NH. | Gradual upward revision. There is a clear trend of increasing capital commitment along with advanced integration of technology and infrastructure investments, indicating strategic emphasis on modernization alongside storm cost recovery improvements. |
Tariff and Cost Inflation Risks | In Q3 2024, tariff issues were only indirectly touched on via the benefits of performance‐based regulation and cost recovery mechanisms; no explicit details were discussed in Q2 2024 and Q4 2024 did not mention the topic. | In Q1 2025, the company explicitly discussed strategies to minimize tariff exposure on key projects (e.g., the Revolution Offshore Wind project) through diversified supply chains, stockpiling of components, and an inflation adjustment mechanism in its PBR structure (with caps at 5%). | Emergence of more detailed commentary. Whereas earlier periods had limited direct discussion, Q1 2025 reflects a more explicit acknowledgment and mitigation strategy for tariff and inflation risks, demonstrating enhanced operational foresight. |
Interest Rate Exposure and Economic Sensitivity | Q4 2024 featured optimistic Fed assumptions with expectations of favorable interest rate movements and highlighted planning adjustments for lower borrowing costs. Q3 2024 discussed the impact of delayed Fed actions and higher interest expense due to increased debt—thereby affecting guidance. Q2 2024 did not address this topic in detail. | In Q1 2025, although the documents note increased interest expense (with parent losses rising due to higher interest expense and new debt issuance), there is less emphasis on Fed assumptions compared to Q4 2024; the focus is more on the direct impact of higher borrowing costs and the absence of capitalized interest from the offshore wind investment. | Mixed signals. Earlier upbeat Fed assumptions have moderated in Q1 2025, with a greater focus on managing the direct impacts of interest rate increases and debt-related costs, signaling a cautious approach toward economic sensitivity. |
Storm‐Related Cost Recovery Challenges | Q4 2024 emphasized a $2 billion deferred storm cost balance with regulatory recovery plans in NH and improved cash flow expectations, while Q3 2024 discussed the pending $232 million storm cost review in NH and Q2 2024 described complex prudency reviews in CT and NH with defined recovery windows. | In Q1 2025, storm cost recovery challenges were discussed in detail with updates on securitization potential in CT, pending rate proceedings in NH (with decisions expected by July 2025), and active filings to recover a $209 million revenue deficiency in CT, indicating broad multi‐state focus. | Consistent challenge with gradual progress. The topic remains a significant regulatory hurdle, but efforts are increasingly structured with defined timelines and legislative backing, reflecting an enduring complexity yet steady progress in recovery efforts. |
Corporate Structural Concerns | Q4 2024 focused on GAAP losses and corporate drag from higher interest expenses and previous wind investment benefits, accompanied by equity issuances to mitigate structural issues. Q3 2024 discussed the challenges of higher interest expenses due to delayed Fed actions and the timing of equity proceeds, while Q2 2024 mentioned a modest loss of $0.11 per share driven by higher interest expense. | In Q1 2025, corporate structural concerns are clearly expressed with a noted increase in parent losses by $0.12 per share and a $0.16 drag attributed to missing capitalized interest from the offshore wind investment and the impact of a $1.4 billion debt issuance; however, management expects these issues to normalize over the year as tax benefits and other adjustments take effect. | Persistent but improving. While corporate drag and parent losses have been a consistent concern, corrective financial measures are beginning to take effect, suggesting that structural issues are being actively managed toward normalization over time. |
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FFO to Debt
Q: What FFO to debt improvements do you expect?
A: Management projects an improvement of over 100 basis points by leveraging stronger operating cash flows—highlighted by a $50 million QoQ increase and substantial debt reduction from the $2.4 billion Aquarion sale—to comfortably exceed both S&P and Moody’s thresholds. -
Tariff Exposure
Q: What tariff risks affect the Revolution project?
A: They confirmed that nearly all equipment is secured—with only one monopile still under construction—minimizing any notable tariff exposure and mitigating supply chain risks. -
Aquarion Timeline
Q: When is the Aquarion divestiture expected to close?
A: The transaction remains on track, with management expecting the deal to close by year-end 2025 and Connecticut regulatory approval anticipated around October. -
CT Regulatory
Q: How will CT storm cost recovery and securitization impact equity plans?
A: While pending legislation on storm cost recovery and securitization is under review, management does not foresee an immediate alteration to current equity plans. -
Tax and Corporate Drag
Q: What tax rate and corporate drag effects are expected?
A: Management anticipates a full-year tax rate between 22.5% and 23.5%, with corporate drag decreasing as one-off expenses normalize, easing future results. -
Rate Case Timing
Q: When might the CL&P rate case be filed?
A: The company is assessing its timing, with a potential filing in fall 2025, though details are still under evaluation.
Research analysts covering EVERSOURCE ENERGY.