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    ES
    Earnings call· Dec 2024(Q4 FY24)

    EVERSOURCE ENERGY ES

    Feb 12, 2025 Source

    Executive summary

    Eversource Energy Q4 FY24 — Strong Earnings Growth and Strategic Portfolio Optimization

    Eversource Energy closed FY24 with robust financial results, driven by strategic balance sheet actions and continued infrastructure investments. The company announced the sale of Aquarion Water, which will significantly reduce debt and fund regulated utility growth. While 2025 earnings growth is projected to be muted due to prior share dilution and the timing of sale proceeds, management expects to regain momentum towards its 5-7% long-term EPS growth target through an expanded capital plan and regulatory recoveries.

    Highlights

    5

    • Achieved 5.3% year-over-year earnings per share growth, exceeding the midpoint of revised guidance.

    • Strengthened balance sheet through $1 billion equity issuance and agreement to sell Aquarion Water for $2.4 billion enterprise value (1.7x rate base).

    • Increased first quarter 2025 dividend by 5.2% on an annualized basis.

    • Unveiled an updated 5-year capital investment plan of $24.2 billion, a 10% increase from the prior plan, driving 8% rate base growth through 2029.

    • Maintained top decile electric reliability metrics and improved safety metrics by 6% year-over-year.

    Concerns

    3

    • 2025 EPS guidance of $4.67-$4.82 implies a muted growth rate below the long-term 5-7% target, primarily due to 2024 share dilution and delayed full benefit from Aquarion sale proceeds.

    • Higher interest costs, depreciation, property taxes, and effective tax rate are expected to partially offset positive drivers in 2025.

    • Ongoing regulatory uncertainty in Connecticut, including pending PURA decisions on the Yankee Gas rate review and reconsideration of AMI.

    Guidance & targets

    5
    CategoryTargetConfidence
    Adjusted EPS
    $4.67 to $4.82 per share
    high materiality
    High
    Long-term Adjusted EPS Growth Rate
    5% to 7%
    high materiality
    High
    First Quarter 2025 Dividend Increase
    5.2%
    medium materiality
    High
    Equity Needs
    approximately $1.2 billion
    high materiality
    High
    Holding Company Debt Issuances
    no incremental debt issuances
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Electric Transmission
    Improved results driven by continued investments in the electric transmission system to address service reliability.
    Earnings per share: $2.03 (2024)Earnings per share: $1.84 (2023)
    		————
    Electric Distribution
    Higher results due to increased revenues from base distribution rate increases in Massachusetts and New Hampshire, partially offset by higher O&M, interest expense, depreciation, and property taxes.
    Earnings per share: $1.77 (2024)Earnings per share: $1.74 (2023)
    		————
    Natural Gas Distribution
    Improved results due to higher base distribution rate increases in Massachusetts and continued investments in the gas system to replace aging infrastructure, partially offset by higher depreciation, interest, and property tax expenses.
    Earnings per share: $0.81 (2024)Earnings per share: $0.64 (2023)
    		————
    Water Distribution
    Increase in earnings primarily due to lower depreciation expense from a final rate case decision, partially offset by lower authorized revenues. The segment is pending sale.
    Earnings per share (excluding loss on sale): $0.12 (2024)Earnings per share: $0.09 (2023)Loss on pending sale: $0.83 per share (2024)
    		————
    Parent and Other
    Lower non-GAAP results due to higher interest expense and the absence of a prior year net benefit from the sale of an interest in a clean energy fund, partially offset by a lower effective tax rate.
    GAAP Loss per share: $1.63 (2024)GAAP Loss per share: $5.57 (2023)Non-GAAP Loss per share: $0.16 (2024)Non-GAAP Earnings per share: $0.03 (2023)
    		————

    Operational metrics

    29
    Adjusted EPS
    $4.57up 5.3% YoY
    FY24

    Excluding aggregate net after-tax losses related to offshore wind and Aquarion sale.

    GAAP EPS
    $2.27vs. GAAP loss of $1.26 per share in 2023
    FY24

    Includes an aggregate net after-tax loss of $2.30 per share related to offshore wind and Aquarion sale.

    FFO to debt
    10.5-11%
    FY24

    Management is focused on improving this ratio to change Moody's negative outlook to stable.

    Dividend per share growth
    5.2%annualized basis
    Q1 FY25

    Increased for the first quarter of 2025.

    Equity issued via ATM program
    $1 billion
    FY24

    Used to strengthen the balance sheet.

    Deferred storm costs
    $2 billion
    current balance

    Expected to be substantially recovered over the forecast period, contributing to the financing plan.

    O&M expenses
    reducing from 2024 level
    FY25

    Strong focus on O&M cost discipline as a positive driver for 2025 earnings.

    Cash tax payments
    minimal
    through 2028

    Expected to be minimal due to utilization of tax credits, with normal annual obligation around $150M-$170M.

    Holding company debt maturities
    $600 million
    FY25

    Assumes paying off with internally generated cash and Aquarion sale proceeds.

    Shares issued (DRIP and employee programs)
    1.3 million
    FY24

    Expected to go up slightly in 2025 and beyond, contributing $100M-$120M in annual cash savings.

    Cash savings from DRIP and employee programs
    $100 million to $120 million
    annual basis

    Expected on an annual basis.

    Electric reliability metrics
    top decile performance
    FY24

    Achieved among industry peers.

    Safety metrics improvement
    6%over last year's
    FY24

    Exceeded industry average and improved year-over-year.

    Average time between interruptions
    nearly 2 yearsvs. 12 months 12 years ago
    current

    Reflects past infrastructure investments.

    EGMA revenue increase
    $77 million
    effective Nov 1, 2024

    Key component of 2020 settlement agreement.

    EGMA revenue increase
    $62 million
    effective later this year

    Second rate base roll-in expected in 2027.

    NSTAR Gas revenue increase
    $12.7 million
    effective Nov 1, 2024
    NSTAR Electric revenue increase
    $56 million
    effective Jan 1, 2025
    New Hampshire distribution rate increase request
    $182 million
    effective Aug 1, 2025

    Includes $61 million interim rate increase and recovery of $247 million deferred storm costs.

    New Hampshire interim rate increase
    $61 million
    effective Aug 1, 2024

    Part of the $182 million permanent rate request.

    New Hampshire deferred storm costs recovery
    $247 million
    over 5-year period

    Decision expected in July for rates effective August 1, 2025.

    Yankee Gas revenue deficiency application
    $209 million
    since 2018

    Final decision expected in October.

    Capital plan increase
    $1.9 billion
    2025-2028

    Reflects greater visibility into work needed to serve customers.

    Capital plan increase
    $2.1 billion10% increase from previous $22.1 billion plan
    2025-2029

    Excluding Aquarion from both time frames.

    Transmission infrastructure investments
    nearly $7 billion
    next 5 years

    Greatly enabled by Massachusetts clean energy bill and DPU approval of ESMP.

    Electric distribution infrastructure investments
    over $10 billion
    planned

    Includes $850 million for AMI program in Massachusetts.

    Natural gas infrastructure investments
    nearly $6 billion
    2025-2029

    Focused on thoughtful engagement with states for an affordable clean energy transition.

    Technology and facilities investments
    $1.2 billion
    2025-2029
    Incremental investment opportunities
    $1.5 billion to $2 billion
    within forecast period

    Will update plan as these opportunities materialize.

    Industry KPIs

    2
    MetricValueDetails
    Ffo to debt10.5-11%%
    Regulatory rate base growth8%%

    Deals & partnerships

    3
    Aquarion Water AuthoritySale of water distribution businessapproximately $2.4 billion (aggregate enterprise value, including $1.6 billion cash and $800 million net debt)

    Eversource built on Aquarion's track record, adding nearly 30,000 customers across 6 acquisitions. Change of control applications to be filed in all 3 states within 30-45 days.

    undisclosedAcquisition of Mystic site in Everett, Massachusetts

    Strategic location, flexibility, and existing infrastructure make it a promising multi-use interconnection point for large-scale energy resources in New England. Acquired in December.

    6 New England statesFederal funding for clean energy hub (Huntsbrook offshore wind hub)

    Supports New England's clean energy transition and improves grid reliability across the region.

    Capital programs

    4
    5-year Utility Infrastructure Investmentsunderway$24.2 billion
    Funding: internally generated cash, Aquarion sale proceeds, $1.2 billion equity
    Start: 2025

    Benefit: 8% rate base growth (2023-2029), safe and reliable service, meet load growth, achieve clean energy objectives

    This plan reflects a $2.1 billion (10%) increase from the previous $22.1 billion plan (excluding Aquarion) and includes projects with clear line of sight on regulatory approval. It includes nearly $7 billion for transmission, over $10 billion for electric distribution, and nearly $6 billion for natural gas.

    Massachusetts AMI Programunderway$850 million

    Benefit: near real-time communications, operating system and application environment for distributed intelligence at the meter, enhanced customer participation in energy transformation

    Included in planned electric distribution investments.

    Greater Cambridge Energy Projectbroke ground$1.8 billion

    Benefit: first fully underground electrical substation in the U.S., enhanced reliability and resilient energy future

    Mostly a transmission investment led by Eversource, in collaboration with Boston Properties, Cambridge Redevelopment Authority, and the city of Cambridge.

    Bare Steel and Cast Iron Pipe Replacement Programsunderway

    Benefit: improved reliability and safety of natural gas system

    Highlighted within the nearly $6 billion of natural gas infrastructure investments in Massachusetts and Connecticut.

    Risks & headwinds

    5
    Uncertainty and lack of transparency in Connecticut regulatory environment (PURA)Ongoing, with key decisions expected in 2025

    Yankee Gas rate review application for $209 million revenue deficiency pending final decision in October; reconsideration of CT AMI approval pending.

    Mitigation: Extensive efforts to improve regulatory paradigm, seeking education, collaboration, and consensus; filed lawsuit with Avangrid for transparency.

    Muted 2025 Earnings GrowthFY25

    2025 EPS guidance of $4.67-$4.82, below 5-7% long-term target. $0.10 per share dilution from 2024 equity issuance.

    Mitigation: Expected to regain momentum in 2026 as full benefits of Aquarion sale proceeds materialize and strategic plan execution continues.

    Higher Operating CostsFY25

    Quantified as partial offsets to positive drivers in 2025 EPS guidance.

    Mitigation: Strong focus on reducing O&M expenses from 2024 levels; debt reduction from Aquarion sale proceeds.

    Massachusetts Gas Line Extension ProposalPending DPU decision

    Discussed, but no specific financial impact quantified yet.

    Mitigation: Company is formulating comments and will be active in the proceeding.

    Aquarion Sale Approval RiskExpected closing late 2025

    Discussed, but no specific financial impact quantified.

    Mitigation: Management feels confident due to the legislative body enacting the law that allowed the buyer to bid; will play an active role in proceedings.

    What to watch in Q1 FY25

    5

    Yankee Gas Rate Case Decision

    October
    CurrentIn discovery phase, hearings scheduled for May
    TargetFinal decision expected

    Why it matters

    The outcome will determine recovery of $209 million revenue deficiency and impact future earnings for the natural gas distribution segment.

    In Connecticut, the Yankee Gas rate review application to recover a revenue deficiency of $209 million, reflecting critical investments and cost increases since our previous rate review in 2018 continues to move along. We are in the discovery phase of the proceeding with a scheduled call for hearings in May and a final decision expected in October.

    Q&A highlights

    7

    Inquired about Eversource's stance on the number of PURA commissioners (3 or 5) and the pathway for broader reforms like PURA independence and public benefits.

    Joe Nolan stated Eversource is indifferent to the number of commissioners, only seeking a fair, transparent, and lawful process. He noted the governor's nominations are pending legislative hearings and that the company is awaiting news on the schedule.

    “From our perspective, we just want a fair transparent and lawful process. That's all we've ever asked for.”

    asked by Shar Pourreza · answered by Joseph Nolan

    2 min read6 chapters

    Detailed Narrative

    01

    Aquarion Water Sale

    Eversource Energy announced the agreement to sell Aquarion Water for an aggregate enterprise value of approximately $2.4 billion, including $1.6 billion in cash and $800 million of net debt. This represents a multiple of 1.7x 2024 rate base and approximately 35x expected 2025 earnings. Proceeds will reduce parent company debt and strengthen the balance sheet, allowing reinvestment into regulated utilities. The sale is expected to close in late 2025, pending change of control applications in three states.

    02

    Balance Sheet Strengthening

    A top priority for 2024 and 2025, Eversource made progress by improving its FFO to debt ratio through constructive rate outcomes, issuing $1 billion of equity via an ATM program, and exiting the offshore wind business. The Aquarion sale is a key component, with proceeds earmarked for debt reduction. The company aims to maintain a healthy FFO to debt ratio well above Moody's 13% downgrade threshold.

    03

    Massachusetts Energy Initiatives

    Eversource is advancing energy diversification in Massachusetts, including implementing AMI, receiving approval for the Electric Sector Modernization Plan (ESMP), and constructing a geothermal pilot. The acquisition of the Mystic site in Everett provides a strategic multi-use interconnection point for large-scale energy resources. The Greater Cambridge Energy project, a $1.8 billion initiative, includes the construction of the first fully underground electrical substation in the U.S., enhancing resilience and sustainability.

    04

    Connecticut Regulatory Environment

    Eversource is actively engaging with regulators in Connecticut to improve the regulatory paradigm, seeking transparency, collaboration, and consensus. The Yankee Gas rate review application, seeking to recover a $209 million revenue deficiency, is in the discovery phase with a final decision expected in October. The company also filed a lawsuit with Avangrid seeking transparency from PURA regarding orders.

    05

    Expanded Capital Investment Plan

    The updated 5-year capital plan (2025-2029) totals approximately $24.2 billion, a $2.1 billion (10%) increase from the previous plan, excluding Aquarion. This plan focuses on regulated electric and natural gas businesses, driving an 8% rate base growth from 2023 through 2029. Investments target aging infrastructure replacement, system resiliency, load growth, and clean energy objectives, with significant increases in electric transmission and distribution.

    06

    Operational Excellence and Sustainability

    Eversource achieved top decile electric reliability metrics and improved safety metrics by 6% year-over-year in 2024. The company was recognized by Newsweek as one of America's most responsible companies and by TIME as one of the World's Best Companies for its environmental, social, and corporate governance commitments, including greenhouse gas emission reduction and workforce diversity.

    AI-generated summary of the company’s earnings call. Not investment advice.