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    Eversource Energy (ES)

    Q2 2024 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$59.71April 1, 2024
    Final Price$56.56July 1, 2024
    Price Change$-3.15
    % Change-5.28%

    What went well

    • Eversource Energy is successfully progressing in selling its offshore wind assets, which will strengthen its balance sheet and allow focus on regulated growth. The sale of Sunrise Wind project to Orsted closed on July 9, 2024 , and the sale of South Fork and Revolution Wind projects to Global Infrastructure Partners is expected to close in Q3 2024. Construction on Revolution Wind is progressing well, with 50% of foundations installed.
    • Favorable legislation in New Hampshire supports Eversource's growth in capital expenditures, enhancing infrastructure investments and benefiting customers. The company views the Integrated Distribution Plan (IDP) as a positive development that aligns with its operations.
    • Significant rate base increases in Eversource Gas of Massachusetts (EGMA) are expected to boost revenues and cash flows. EGMA's rate base is increasing from $770 million to approximately $1.7 billion, with proposed revenue increases of $78.7 million this year and $67.5 million effective November 1, 2025.

    What went wrong

    • Eversource may face regulatory delays and challenges in recovering significant storm-related costs, such as the $634 million in Connecticut, which could negatively impact cash flows and financial ratios.
    • The company plans to issue up to $1.3 billion in equity over the next several years, which may lead to shareholder dilution and suggests financial pressure due to high capital expenditure needs.
    • There are potential risks associated with the sale of Revolution and South Fork Wind projects to GIP, including possible capital expenditure adjustments and contingencies related to construction that may affect the expected proceeds and impact Eversource's ability to reduce debt.

    Q&A Summary

    1. Offshore Wind Sale Timing
      Q: What's the latest on the offshore wind sale closing?
      A: Management stated that the sale of Sunrise Wind closed on July 9, and they expect to close the GIP deal in this quarter. The timeline has not shifted, and they affirmed that construction activities are progressing very well. , ,

    2. Equity Plan and Funding Needs
      Q: Is the up to $1.3 billion equity plan still accurate?
      A: The $1.3 billion equity need remains the right number until certain items in flux reach closure. Factors like the Sunrise Wind sale and avoided breakage costs could impact this figure, but it's too early to provide further guidance. Management emphasized that this need is over the next several years. ,

    3. FFO to Debt Enhancements
      Q: Have there been changes in FFO to debt enhancements?
      A: Management highlighted additional tax refunds of about $120 million not included in the slides, which would enhance operating cash flows. They also mentioned pending rate increases that have not yet been quantified, providing potential upside to FFO to debt metrics. ,

    4. Storm Cost Recovery
      Q: What's the status of storm cost recovery and its impact on FFO?
      A: The $200 million in FFO enhancements is related to Massachusetts and New Hampshire, with recovery periods of five years. The $634 million Connecticut storm cost request is under prudency review, expected to conclude around September 2025, aligning with potential rate case filings. ,

    5. Connecticut Regulatory Environment
      Q: Are there positive developments in Connecticut?
      A: Management is working to improve relationships in Connecticut but is taking a wait-and-see approach. They acknowledge efforts to strike a balance with the governor and are committed to achieving regulatory stability for future investments, especially in AMI. ,

    6. Amortization Period for Storm Costs
      Q: Over what period will Connecticut storm costs be recovered?
      A: The historical amortization period in Connecticut has been six years. Upon approval, approximately $100 million per year could enhance cash flows after the next rate case.

    7. EGMA Rate Base Step-Up
      Q: Any issues anticipated with the EGMA rate base increase?
      A: Management expects to hit the cap but feels confident due to prior agreements with regulators and stakeholders. The first rate base roll-in takes effect on November 1 of this year, with a second on November 1, 2027.

    8. Delay in Connecticut PBR Case
      Q: What's causing the delay in the Connecticut PBR case?
      A: The delay allows management to collaborate with key stakeholders to reach a constructive PBR structure. They are pleased with the postponement as it enables better alignment with stakeholders.

    9. Construction Status on Revolution Wind
      Q: What's the status of construction on Revolution Wind?
      A: Construction is progressing well, with about 50% of monopiles or foundations installed as of a week ago. Management continues to work on updates but maintains that current cost estimates are sound. ,

    10. Potential Clawbacks in GIP Deal
      Q: Are any clawbacks expected in the GIP deal?
      A: Management stated that upon closing, funding obligations flip to GIP. While there's potential for contingencies related to construction, they currently do not see material adjustments affecting financing plans.

    11. Gross vs. Net Proceeds in FFO Metrics
      Q: Any adjustments from gross to net proceeds in FFO metrics?
      A: They do not anticipate material adjustments from gross proceeds to net that would affect FFO to debt metrics, as funding obligations transfer to GIP upon closing.

    12. Tax Refund Benefits
      Q: Are tax refunds contributing to FFO improvements?
      A: Yes, tax refunds amounting to $120 million in 2024 have enhanced operating cash flows, providing an upside not reflected in prior FFO to debt enhancement slides.

    13. Storm Cost Recovery in MA and NH
      Q: Is the $200 million storm recovery related to New Hampshire?
      A: The $200 million encompasses both Massachusetts and New Hampshire. In New Hampshire, they filed for $240 million, currently under prudency review, with recovery aligned with permanent rates effective in 2025.

    14. Grid-Enhancing Technologies
      Q: How is the company approaching grid-enhancing technologies?
      A: Eversource is actively participating in forums on grid-enhancing technologies and is committed to being at the forefront of deploying new transmission technologies. ,

    15. Aquarion Sale Timeline
      Q: Any updates on the Aquarion sale timeline?
      A: The sale process has recently launched, and they aim to wrap up the transaction by the end of 2025, with no change in that timeframe.

    16. Changes in PURA Size
      Q: Could the number of PURA commissioners increase?
      A: The governor is now at four commissioners, which will go down to three in January. There's a possibility he may expand to five to strike a balance and bring regulatory certainty to Connecticut.

    17. Yankee Gas Filing in Connecticut
      Q: How might the Yankee Gas filing foreshadow future cases?
      A: Management acknowledges the upcoming Yankee Gas filing and is watching for elements that could impact future rate cases, noting differences between electric and gas proceedings.

    18. FERC's Stance on Grid Technologies
      Q: Thoughts on FERC's push for grid technologies?
      A: Eversource is actively involved with FERC and sees opportunities in deploying grid-enhancing technologies that align with their transmission operations.

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