Eversource Energy Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 2, 2024

Key Takeaways

  • Sale of offshore wind business is on track to close three projects over the next 90 days pending regulatory approvals, unlocking over $1.1 billion in proceeds from GIP and an expected additional ~$500 million tax equity contribution.
  • With a shift to a pure regulated pipes and wires utility, technology investments like smart switches enabled the restoration of 85,000 customers in 5 minutes after a late winter storm in New Hampshire, showcasing resilience and reliability.
  • The 5-year Electric Sector Modernization Plan (ESMP) will expand distribution capacity by 180%, accommodating 2.5 million EVs, 1 million heat pumps and 5.8 GW of solar to meet aggressive state greenhouse gas reduction goals.
  • Ongoing regulatory misalignment in Connecticut has led Eversource to cut nearly $500 million of 5-year capital expenditures and defer AMI and EV investments until secure, predictable cost recovery paths are established.
  • Q1 GAAP and recurring EPS were $1.49 versus $1.41 last year, in line with expectations, and the company reiterated 2024 EPS guidance of $4.50–4.67 and a 5–7% long-term growth rate while targeting a 14–15% FFO to debt ratio by 2025.
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Earnings Conference Call
Eversource Energy Q1 2024
00:00 / 00:00

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Matt Ferguson
Matt Ferguson
Program Marketing Manager at Eversource Energy

Results is contained within our news release, the slides we posted last night, and in our most recent 10-K. Speaking today will be Joe Nolan, our Chairman, President, and Chief Executive Officer, and John Moreira, our Executive Vice President, CFO, and Treasurer. Also joining us today is Jay Buth, our Vice President and Controller. I will now turn the call over to Joe.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Thank you, Matt, and thank you all for joining us on the call this morning. Let me begin with an update on the sale of our offshore wind business. I am pleased to report that we are on track to close the sale of the three projects over the coming months. We are progressing well on the approvals necessary to close these transactions, as shown on slide 3. We have filed all regulatory approvals with the New York Public Service Commission and FERC for the sale of South Fork Wind and Revolution Wind to Global Infrastructure Partners. We recently executed the purchase and sale agreement for Sunrise Wind with Ørsted. For Sunrise Wind, we have also filed applications for regulatory approvals, the New York Public Service Commission and FERC. We anticipate these approvals will take about 90 days.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

On the construction front, I can't tell you how excited and proud I was of my Eversource colleagues as I stood alongside New York Governor Hochul to flip the switch to energize South Fork Wind in March. We will certainly capitalize on lessons learned from South Fork, a first-of-its-kind project here in the United States. The same construction processes will be used for the Revolution Wind Project, where onshore and offshore construction is underway. Now that our offshore wind risk is largely behind us, we are very excited about the future of Eversource, delivering safe and reliable electric, natural gas, and water service to our 4.4 million customers. Turning to slide 4, Eversource is moving forward as a pure play, regulated pipes and wires utility business, doing what we do best: delivering clean energy safely and reliably to our customers every day.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

When we are doing what we do best, our customers are the direct beneficiaries. A good example of this came in early April, when a late winter storm caused significant damage across the Northeast. Through our investments in technology, including smart switches and other reliability innovations, we were able to restore 85,000 customers in New Hampshire within 5 minutes, greatly reducing the impact of the storm to many customers in that area. This amazing response received numerous accolades from customers and personal acknowledgment from Governor Sununu. We take tremendous pride in our emergency response organization and our ability to stand up our emergency response teams for timely restoration. Eversource teams from all three states responded to the storm of damage in New Hampshire, minimizing customer outage time. Our resiliency investments help to minimize customer outage impacts.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Our preparation enables us to hit the ground running in front of potential severe weather events, and our emergency response plan supports scalable and efficient restoration for those customers who are impacted. We work tirelessly to communicate that timely recovery of storm costs is critical to support these efforts. Turning to the clean energy future, as you can see on slide 5, the states we serve have very aggressive greenhouse gas reduction goals. Both the transportation sector and residential and commercial heating sectors are the largest contributors to greenhouse gas emissions. Although the region has acted by reducing carbon emissions from power generation, we have a long way to go on heating and transportation to achieve the state's targets by 2050. To meet these targets, we project that average household electric demand will double in the summer and more than triple in the winter.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

That's why it's critical that we all work collaboratively and get started today on making achievement of these targets a reality. Moving to slide 6, achievement of Massachusetts' decarbonization goals are being addressed in part through the Electric Sector Modernization Plans, or ESMP. This is the most comprehensive clean energy plan in the nation, with planning processes and requirements that will provide the pathway for the state to achieve its clean energy objectives. The Eversource ESMP is a product of our system planning process, incorporating the state's assumptions for projected demand growth from electric vehicles and electric heating. To develop our ESMP, we have analyzed expected electric growth down to the circuit level to identify grid investments needed over the next 5 years and beyond.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

These infrastructure investments will convert our distribution grid into the platform for the clean energy transition, will increase electrification capacity by 180%, and will allow for the adoption of 2.5 million electric vehicles, 1 million heat pumps and 5.8 gigawatts of solar generation, thereby making Massachusetts a leader in delivering clean energy to its homes and businesses. In New Hampshire, we are focused on a number of regulatory initiatives and are evaluating ways to advance clean energy initiatives such as large-scale, utility-owned solar development. For example, New Hampshire state legislators are working on a bill that would institute structural reforms to New Hampshire's Energy Facility Site Evaluation Committee, or the SEC, reducing the size of the SEC from 9 members to 5, and eliminating unnecessary process to improve efficiency and to lead to more consistent outcomes.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

In turn, this will lead to an accelerated siting and permitting process for these clean energy initiatives. Turning to Connecticut, state policy leaders have a vision of solar expansion, electric vehicle adoption, and future renewable purchase power agreements as part of its clean energy transition. We are a strong supporter of these efforts to enable the clean energy future for our customers, and we certainly are looking to partner with the state collaboratively and productively to achieve this important vision for our customers. While we continue to work diligently to support state policy leaders on thoughtful and reasonable policies aimed at increased adoption of clean energy technologies and the reduction of carbon emissions, we have serious concerns with the lack of alignment between state policy and regulatory decisions implementing that policy.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

As it stands, regulatory policies in Connecticut discourage investment and utility innovation, as well as our participation in a wide range of clean energy initiatives that rely on our balance sheet and our capital resources. Upfront program funding by the utilities does not work where cost recovery is continually deferred and delayed into the future on uncertain terms. Without recognition that our funding sources rely on a secure and predictable cost recovery path, we cannot move forward to put additional capital resources on the table. We are encouraged by PURA's decision last month to provide timely reimbursement of deferred public policy costs through the company's electric annual rate adjustment mechanism. Decisions that adhere to law and legislative policy are critical to assure a constructive regulatory environment in Connecticut, and to make the vision of a clean energy future a reality for our customers.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Looking forward to the future, we remain committed to our extensive outreach plan across Connecticut, furthering our efforts to engage collaboratively and productively with Connecticut's leadership. Lastly, I want to thank my Eversource colleagues for their unwavering commitment and dedication to our customers. I have the utmost confidence in our team to deliver safe and reliable energy service to our customers with daily progress toward a clean energy future. I will now turn the call over to John Moreira to walk through our financial results.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Thank you, Joe, and good morning, everyone. This morning I will discuss our first quarter financial results, give you a regulatory update, and cover drivers for our cash flow enhancement. I'll start with the first quarter results on slide 7. Our GAAP and recurring earnings for the quarter were $1.49 per share, compared with GAAP and recurring earnings of $1.41 per share last year. Breaking down the first quarter earnings results of the $1.49 per share in 2 segments, our electric transmission earned $0.50 per share, compared with earnings of $0.45 per share in 2023. Improved results were driven by our continued investments in our transmission system to address capacity growth for customers and connect clean energy resources to the region.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Our electric distribution earnings were $0.48 per share, compared with earnings of $0.47 per share in 2023. Higher revenues, primarily due to a base distribution rate increase at NSTAR Electric, were partially offset by higher operating expense, higher interest expense, and increased property taxes and depreciation. Our natural gas distribution business earned $0.54 per share, compared with $0.49 per share in 2023. Natural gas distribution earnings increased due to higher revenues from capital cost recovery mechanisms, a base rate increase at NSTAR Gas, and lower operating expenses. Our water distribution segment contributed $0.01 per share, compared with flat earnings in 2023. Eversource Parent and other company earnings were a loss of $0.04 per share, compared to breakeven results in 2023....

John Moreira
John Moreira
EVP and CFO at Eversource Energy

The lower results were due primarily to higher interest expense and the absence of a net benefit in the first quarter of last year from the liquidation of a renewable energy fund. Overall, our first quarter earnings were in line with our expectations, and we are reiterating our 2024 EPS guidance of $4.50-$4.67 per share, as well as our longer-term 5%-7% EPS growth rate. Turning to regulatory items on slide 8. Starting with Massachusetts, we filed our electric sector modernization plan with the Massachusetts Department of Public Utilities in January, and we expect to have a decision on our plan in the August timeframe. Our ESMP calls for an incremental $600 million capital investments for interconnection of solar resources through 2028.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

As a reminder, this $600 million is incremental to our $23.1 billion capital investment forecast we announced back in February. In New Hampshire, we are very busy on the regulatory front. In March, we submitted our documentation for a prudency review of $232 million of storm costs related to storm events from August 2022 through March of 2023. We anticipate that review will be completed later this year. In addition, we anticipate filing a rate review in New Hampshire this summer, with temporary rate relief going into effect 90 days after the filing. Closing out the regulatory update is Connecticut, where we received the final decision on our annual rate adjustment mechanism two weeks ago for new rates to become effective July 1 of this year.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

The major drivers of the $873 million increase are recoveries of purchased power contracts and protected hardship uncollectible accounts, both of which are costs required by law. These under-collected costs in Connecticut, which were approximately $400 million in 2023, contributed significantly to a reduction in our 2023 FFO-to-debt ratio. This rate impact will be significantly offset by lower energy supply costs that will also go into effect July first of this year. We appreciate PURA's decision to provide timely reimbursement to the company of these state policy costs as required by law, reducing the pressure on our balance sheet to finance these costs for a longer time period. Timely recovery of these costs reduces the total amount that customers will pay through avoidance of carrying charges on these balances.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

In March, we resubmitted our request for a prudency review of approximately $635 million of Connecticut storm costs relating to weather events that occurred from 2018 through 2021. The vast majority of these costs represent payments to outside line and tree crews to assist in the restoration, resulting from 24 significant storm events during that period. We are currently in the discovery phase of the proceeding. As a reminder, recovery of these costs will coincide with new distribution rates following our next general distribution rate proceeding. In early April, following the Superior Court decision on our Aquarion rate case, we filed for a review of that decision by the Appellate Court, along with a request to transfer the appeal directly to the Connecticut Supreme Court.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

We are requesting that the Connecticut Supreme Court hear this case due to the critical legal issues raised by the Aquarion rate decision. Without proper resolution of these issues, there will be a negative impact on utility investment and customers long-term. As Joe mentioned, we are committed to our extensive and ongoing outreach efforts that have been pivotal to educating key leaders and communities on the necessity for stable regulatory policies. We are also demonstrating our commitment to support the state's policy leaders who seek to move the state forward with thoughtful and reasonable policies aimed at reducing carbon emissions and achieving increased adoption of clean energy resources. A successful path to a clean energy future will require a substantial ramp-up in planned, proactive distribution infrastructure investment, rather than piecemeal approach, as well as sound public policies and adherence to legal principles to enable that investment.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

However, the existing gap between the state's vision of a transition to a clean energy future and the regulatory framework discouraging investment is an obstacle for Connecticut's progress on climate change, the clean energy transition, and even core service goals. As a result, we have taken a hard look at our capital deployment priorities and are implementing necessary cuts to our Connecticut investment levels in 2024 and over the next five years. In 2024, we are reducing our capital expenditures by nearly $100 million, and we have notified PURA of our unwillingness to put capital at risk in relation to advanced meter infrastructure and electric vehicle programs. In total, we are expecting to reduce capital investment in Connecticut by $500 million over the next five years.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Until we see Connecticut's regulatory decisions come back into alignment with law and state policy, our decisions on the deployment of our valuable capital resources have to be based on our current experience with regulatory outcomes for utility investment. With that, I do want to emphasize that we are confirming our five-year capital expenditure forecast of $23.1 billion across all business units. Substantial, consistently emerging infrastructure needs across our system provide ample opportunity for capital deployment in lieu of using those valuable resources in Connecticut. I will now cover a number of drivers that are expected to enhance our FFO-to-debt ratio from 2023 to 2025.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

As you can see on slide 9, the undercollection of 2023 deferred state policy costs, which will now be recovered as a result of the 2024 annual rate adjustment decision in Connecticut, as well as other under-recoveries of regulatory deferrals across all states of approximately $200 million, contributed to the lower FFO to debt that we experienced in 2023. We expect other enhancements in 2024 and 2025 that include the sale of South Fork and Revolution Wind assets to GIP. Upon closing of the sale to GIP, we anticipate receiving approximately $1.1 billion of cash proceeds from this transaction. In addition to the GIP sale proceeds, we anticipate utilizing our tax equity investment in South Fork Wind, which we expect will bring around $500 million of cash over the next 24 months.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Lastly, collection of storm costs in Massachusetts and New Hampshire, planned rate increases at our utilities, the sale of our Sunrise Wind project to Ørsted, equity issuances, and cash flows from a potential sale of our water business will drive the enhancement of 2023 FFO to debt to 14-15, targeted by 2025. Moving on to our equity issuances. In the first quarter of 2024, we raised approximately $75 million through our existing ATM program, and we issued 550,000 treasury shares. We continue to anticipate our equity needs to be up to $1.3 billion over the next several years. Also, as we announced in February, we are undertaking a review of our water distribution business. Proceeds from a successful sale are assumed in our long-term financing plan, reducing the level of equity that would otherwise be needed.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

We continue to prepare materials needed to launch the first phase of this process. Closing out on slide 10, as I mentioned earlier, our $23.1 billion five-year capital forecast and our forecasted financing plan drive our 5%-7% EPS growth rate through 2028, based off of our 2023 recurring EPS of $4.34 per share. I'll now turn the call back to Matt for Q&A.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Thank you, John. Alyssa, we are now ready for questions.

Operator

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. If for any reason you would like to remove your question or your question has been answered, please press star two. If you are using a speakerphone, please pick up your handset before asking your question. Once again, it is star one to queue. The first question comes from the line of Shahriar Pourreza with Guggenheim. Your line is now open.

Shar Pourreza
Shar Pourreza
Senior Managing Director at Guggenheim

Hey, guys. Good morning.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Good morning, Shar.

Shar Pourreza
Shar Pourreza
Senior Managing Director at Guggenheim

Good morning. Joe, just firstly, what CapEx are you guys actually cutting in Connecticut? Where are you kind of redeploying, and is that redeployment actually accretive, just given the cost to capital differences? Thanks.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

You know, thank you, Shar. You know, over the past decade, we've spent a significant amount of money on electric reliability for our Connecticut customers. You know, our best-in-class engineering has moved months between interruptions from 10 months to nearly 2 years. So clearly, our investments have paid huge dividends for our Connecticut customers. You know, however, the regulatory decisions over the past few years are misaligned with the law and the state policy, and without a secure and predictable cost recovery path, you know, we cannot continue to put additional capital resources on the table. You know, so our investment objectives in Connecticut have been centered around safety and reliability. As you'd expect, we will not reduce our safety spending. Therefore, the reduction will likely come from reliability areas.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

... You know, as John has mentioned, we have ample opportunities for capital deployment on our system. So, you know, we are, we feel very, very good about that, and yes, it would be accretive.

Shar Pourreza
Shar Pourreza
Senior Managing Director at Guggenheim

Got it. And Joe, can you cut more if need be?

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Well, we are going to be very thoughtful and deliberate about it. Obviously, you know, we've had a great track record down there. I will tell you that the reliability numbers in that state are best in class. I don't think you'll find it, you'll find it really anywhere else around the country. So I'm very proud of that. But, you know, if we continue to see this negative regulatory environment, you know, we're going to have to look at everything.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

I would also add, Shar, that as a reminder, we do have a resiliency program in place, which we get timely recovery of up to $300 million in distribution investments at CL&P, which has been very, very critical for us to achieve this performance level that Joe just mentioned.

Shar Pourreza
Shar Pourreza
Senior Managing Director at Guggenheim

Got it. And then, maybe just a quick one for John. John, just the up to $1.3 billion of equity is obviously still in plan, and obviously that level is going to be dictated by the, you know, the water sale outcome. I guess, how are you thinking about the means of issuances? Are you thinking more in systematic terms or kind of pre-funding spending and the balance sheet ahead of time? So ATMs versus maybe rip the bandage off, block. Thanks.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Our view, and that will continue to be our position, is to be opportunistic and exploring, utilizing our ATM Program to accomplish that. I've said time and time again, an ATM Program gives us tremendous flexibility, and we were very successful in executing at least through March, $75 million. We've done quite a bit more, you know, over the past couple of weeks.

Shar Pourreza
Shar Pourreza
Senior Managing Director at Guggenheim

Okay, perfect. Thank you, guys. Appreciate it.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Thank you.

Operator

Thank you. The next question comes from the line of Carly Davenport with Goldman Sachs. Your line is now open.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Hey, good morning.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Good morning, Carly.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Thanks for taking the questions.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Morning, Carly.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Morning. Thanks so much for taking the time. Wanted to just start on the FFO to Debt walk. Thanks for the details there. I guess first, could you just remind us of the cadence of the 2023 underrecoveries hitting the cash flow statement this year? And then how should we just think about, as we think about the other drivers that you'd identified, sort of the split between the impacts between the 1.8 and those other drivers?

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Sure. So the underrecovery, as highlighted in slide nine, Carly, for 2023, across all of the utilities, with the biggest impact being CL&P in Connecticut, was approximately $600 million. So if you were to normalize, you know, where we landed at the end of 2023 from an FFO to debt using at Moody's was approximately 9%. So that would drive that up, as we've indicated on the slide, about 200 basis points.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

So, with the favorable order that we received a couple of weeks ago on the annual rate adjustment mechanism, we feel good that that cash, plus, more related to 2024 costs, will start to come in the door effective July first through April thirtieth of next year. So a 10-month recovery, which is very, very helpful to us. And then the other items, what we've tried to do is to highlight where we, you know, as it relates to our offshore wind, what we have already identified and have disclosed to you all, that would significantly move us up closer to the 14%-15% range by the end of 2025. But certainly, building up towards that range, towards that time period.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Got it. Okay, great. Thank you. And then maybe just on the Massachusetts ESMP process, what are sort of the next milestones for us to look out for there? And then just more broadly, how do you think about opportunities for, for the other states that you serve to adopt sort of similar frameworks?

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Sure. So I'll start with Massachusetts. So hearings on that docket just basically concluded, so now we get into the briefs and reply briefs. But one thing I want to point out, too, based on the legislation that was passed a couple of years ago, the clean energy legislation, the DPU does have to render a decision by that August timeframe that I stated in my formal remarks. So as we move forward, the $600 million that I highlighted in my formal remarks is really what will materialize if we do get a favorable approval from the DPU that will materialize within our forecast period. But there's further investments that will be needed beyond our current forecast period that we've also have highlighted in our filing.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Thank you.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

So, obviously, you know, Massachusetts continues to be very proactive in identifying opportunities to really make sure that the goals that the state has established is realistically and proactively accomplished. In Connecticut, as Joe mentioned, you know, we would love to support their clean energy strategy, but as we have both indicated in our formal remarks, it will require a collaboration and cooperation by us, by the utilities in Connecticut, as well as the authority. Then lastly, in New Hampshire, as we mentioned, you know, we are having discussions with the state on utility-owned solar. We will likely be proposing an investment opportunity in the months to come.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

As I mentioned in my formal remarks, we do plan to file for a rate review this summer.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

All of that solar investment, just to keep in mind, would be regulated investment, solar investment, utility-owned, very similar to the model that we have here in Massachusetts, Carly.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Awesome. Appreciate that color.

Operator

Thank you. The next question comes from the line of Nick Campanella with Barclays. Your line is now open.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Good morning, Nick. Good morning, Nick.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Hey, good morning, everyone. Thanks for, thanks for the time. Good morning. Hey, so, just kind of sticking with Connecticut here and just, you know, the fact that you're cutting investment there, but you also had this, this rate order, this, this outcome on Aquarion, just how, how do you kind of see that kind of affecting the process that you're running there to potentially monetize the asset? And just maybe you can kind of update us on that process, your confidence level that, you know, whatever happens there, there, there wouldn't be, additional equity kind of coming into the plan that you outlined today.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Well, you know, the appeal process, obviously, we would love to have a positive data point, but, you know, the appeal process will continue to make its way. You're probably looking at least a year in the making, but, we are continuing to move forward with launching phase one of the process relatively soon. And then we'll make the decision, at that point.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Okay. So still moving ahead, it seems. I appreciate that. I guess just a follow-up on Carly's question, just around the FFO to debt, you know, like the South Fork tax equity investment would probably be, I would guess, more one-time in nature to the cash flow improvement. But just—I just wanted to kind of confirm, like, net of these kind of one-time items, you still see this path getting you to 14%-15%? And, you know—

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Yes.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

What's really kind of driving that net of the one-time issues?

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Yeah. No, we certainly do, Nick. You know, the tax equity, it we actually think, as I stated, 24 months, that's probably a bit conservative. I think, that will probably bleed into 2026. But we do have other tax benefits that we want to utilize for us before we tap into those ITCs. So that can be elongated a bit, which is great. And then, you know, longer term, yes, that does fall off the cliff. But we have other items that will certainly kick in. We are sitting on a pretty large deferred storm balance, so I see those costs coming in in twenty, you know, potentially 2026, certainly 2027 and beyond, to really, you know, maintain that high level of FFO to debt.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Thanks. And then just one last one for me, just on, on Sunrise. I know that you're not giving the price, but, you know, last quarter, there was negative book value. I don't believe that the Q's out, but is that, is that still the case or something that you can kind of talk about, or do we have to wait for the, for the sale agreement to be, to be public for you to revise that?

John Moreira
John Moreira
EVP and CFO at Eversource Energy

It does. And that's, that's really, you know, we have to follow the accounting rules, and the accounting rules basically says that if you have a contingent gain, you have to wait to get your cash, right? So that, therefore, the transaction has to close. So we're probably... I would say you should expect a, a true-up of those balances to occur likely in the third quarter of this year.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Thank you very much.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Sure thing, Nick.

Operator

Thank you. The next question comes from the line of Jeremy Tonet with JP Morgan. Your line is now open.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Good morning, Jeremy. Good morning.

Jeremy Tonet
Analyst at JPMorgan Securities

Good morning. Thanks for having me. Maybe just continuing with slide 10 here real quick. Thanks for all the color provided. Just wanted to confirm the major drivers, everything on the right-hand of that slide, that's all treated as FFO and not debt reduction when you talk about the walk from into 14%-15%?

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Yeah. No, it's, it's a mixed bag, so obviously, what's more critical is that we have the cash coming in, right? Which will displace debt and obviously enhance our operating cash flows.

Jeremy Tonet
Analyst at JPMorgan Securities

Got it. And so, maybe just pivoting towards Aquarion here in just a little bit more detail, I guess, on where you guys are in the process right now and how you... What you prioritize here, you know, pace of transaction versus value that you can achieve, or just, you know, any other thoughts on the parameters of how you see this process unfolding?

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Sure. I would frame it this way: It's not about a mad dash to the finish line. It's about a thoughtful process that we will run for the greatest value that we possibly can harvest. So that's what's important to us, is obtaining the greatest maximum value we possibly can. So if it's transactions takes a bit longer, we are fine with that. The rating agencies are fully aware of the time frame that we've mapped out with them, and obviously, they are comfortable with that.

Jeremy Tonet
Analyst at JPMorgan Securities

... Got it. Thank you for that. And then just to confirm real quick here, the sales proceeds are going to be helping FFO in this illustration here? Just want to make sure I was straight on that.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Oh, absolutely. Absolutely. Because it displaces debt.

Jeremy Tonet
Analyst at JPMorgan Securities

Got it. I'll leave it there. Thank you.

Operator

Thank you. The next question comes from the line of Steve Fleischmann with Wolfe Research. Your line is now open.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Good morning, Steve.

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

Yeah. Hey, good morning, Joe. Good morning, John. Good morning.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Good morning.

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

Just to maybe tie up one more question on Aquarion, you mentioned appealing to the Supreme Court. Is there, like, a timeline? I don't know if you already filed that, or when, when would you file that, and when would you know if they take the case?

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

We filed that early April request. So we feel good that the Supreme Court will take the case, and that it'll just expedite the whole process. Once the court accepts it, then you're probably looking at a 9-12-month process-

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

Okay

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

... is what we're estimating.

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

Okay. But you're not going to hold off the sale process to wait for that-

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

No.

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

you just move

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

No

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

... forward?

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

No, we're not.

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

Yep. Okay. And then just-

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Yeah, and I was going to say, Steve, in the meantime, you know, we are expecting to implement the original rate change, and we actually accounted for that in the first quarter of this year. Once we get that, then the company can move forward with the filing for their WICA program, which will give them, you know, which will give them about 30%-35% of their annual capital program cost recovery on.

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

Okay. And then just on Connecticut regulatory environment, appreciate the decisions being made there. Early in the year, there had been talk about the governor maybe kind of expanding the Commission and some change, you know, some changes there. And is that still being considered at all? And just, you know, I know you've been on an initiative to try to highlight these issues. Just, do you feel like you're making any progress in resonating on the kind of quality of the regulatory environment being kind of investable?

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Yeah, you know, Steve, a couple of things. The governor has the ability to appoint five commissioners. He has vacillated over that, and I'm not really sure at this point whether he wants to take it up to five. As you know, all three commissioners remain in holdover status. And you know, I'm not really quite sure what the current plan is around that. Obviously, we have, you know, we have grave concerns about the environment there. I think you know that. I think everyone knows that. You know, we enjoy a very productive working relationship in our other two jurisdictions. We are so aligned that no light shines between kind of the state's initiatives and our initiatives. And when you collaborate, I think you have tremendous outcomes.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

You look at the benefits that Massachusetts is achieving. You look at the progressive moves that are taking place up in New Hampshire as we collaborate with those folks, and they really understand it. And it's going to take that type of collaboration as we look to electrify our system and move away from carbon fuels. But if we don't collaborate, it makes it very, very difficult. I mean, we've operated this way, you know, my 40-year history, we've always had strong working relations. So, it's a disappointment to me, and it's a priority to me as we try to focus on Connecticut and to see if we can't get aligned and get on the same page so that we can move the agenda. Connecticut has a phenomenal opportunity to be really a leader in clean energy.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

We built that port down there, we collaborated. That clean energy port down there should put them on the map for clean energy, but unfortunately, it's been a real challenge. But I just want to assure you and all of our investors that, this is something I take very seriously, and I will continue to work at it seven days a week, until such time as we can get some constructive change.

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

Okay. Appreciate that. And then lastly, on the New Hampshire solar opportunity. I know, you know, you know, solar in New England tends to be, you know, a decent amount, you know, kind of, you know, capital cost, just not as much available land, all that stuff. So just any sense on kind of size and investment opportunity there for the New Hampshire solar?

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Yeah, you know, I got to tell you, one of the challenges, first of all, we don't really have a sizing at this point. We're really in the first inning of this game. But the fact that they are interested around utility-owned solar, you know, I take great comfort in. But I will tell you, the one thing there's no shortage of in the state of New Hampshire is land. And so,

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

Yeah

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

... that's where I see great opportunity. And I also see the proximity to our infrastructure. It makes it very easy as well. You know, one of the challenges that a lot of folks early in the solar days was folks would want to build, but they'd be in rural areas where there wasn't any load. But we have opportunities in New Hampshire with sizable tracts of land that would allow us to obviously collaborate. It has to be a partnership. It has to be a community that's interested in this, but I do see great opportunity up there. So we're really in the first inning. I think we'll be able to update you, you know, probably on the second, third or third quarter calls around, you know, how that's going.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

But I think the most important thing for us is to get a model in place in New Hampshire for utility-owned solar, that is fair for us, and is fair for the customers.

Steve Fleishman
Steve Fleishman
Stock Analyst at Wolfe Research

Okay, great. Thank you very much.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Thank you, Steve.

Operator

Thank you. The next question comes from the line of Andrew Weisel with Scotiabank. Your line is now open.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Good morning, Andrew. Good morning.

Andrew Weisel
Andrew Weisel
Analyst at Scotiabank

Hi, good morning, guys. In Connecticut, another question here. I agree the state policies and regulatory environment are not aligned, so I understand you're reluctant to put capital to work. My question is, what exactly is it that you're looking for? What would it take to get you more comfortable with the regulatory setup? Is it a qualitative, good faith kind of conversation, or are you looking for something more explicit, like pre-approvals for spending on AMI and EVs?

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Yeah, well, we're looking for pre-approval. We're looking for a regulatory recovery, a roadmap for the recovery of our dollars that we've spent. As you know, you know, the, the, the RAM filing that we just got approved there for $800+ million, you know, that was money we spent on behalf of the, the customers in Connecticut. These were state-mandated, requests that we did, and so we expect to get paid for that. And if the state wants to have AMI, we expect to have a orderly recovery process for our investments, just like we have in Massachusetts. And that's all we're looking for, that if we spend dollars, we wanna know we're gonna get the dollars back. We don't wanna be, chasing those dollars. We don't wanna have uncertainty around it.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

And I know, I know that everybody on this call doesn't want uncertainty. And so you can have my assurance that we will not spend dollars until such time as we have a constructive regulatory environment that allows us to get fair treatment in the recovery of our dollars that we've spent on behalf of the customers in Connecticut to bring better service.

Andrew Weisel
Andrew Weisel
Analyst at Scotiabank

Okay. Is that something you think could be done in the regulatory arena, or would that require legislation?

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

No, I think we can do it in the regulatory arena, or you certainly, I mean, we're aligned with the governor, we're aligned with his other agencies, so we can have a collaborative effort that we, we submit a filing. We're all on the same page. Even the Attorney General, we have, we have very, very strong relations there, but we just have to get PURA aligned with all of the other interests around the state, so that we can get a constructive roadmap to move forward.

Andrew Weisel
Andrew Weisel
Analyst at Scotiabank

All right. Sounds good. Then on FFO to debt, if I could elaborate, I, I know this has been asked a few times, and I appreciate the details on page 9. Maybe this is a silly question, but if the $600 million from under-recoveries adds 2%, you triple that to $0.8 billion, how come the impact to FFO to debt goes up by, you know, double or less? What dumb guy math might suggest it would be a 3-to-1 ratio in the dollars and the percentages. So what are the offsets there?

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Well, keep in mind that, in that 300-400 basis point movement, it does include other cash flow items that we have not quantified in that $1.8 billion, Andrew. And then additionally, when the cash comes in, it's gonna impact both the numerator and the denominator, accordingly. So, it's not a one for one.

Andrew Weisel
Andrew Weisel
Analyst at Scotiabank

Okay. Thank you very much.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

No problem.

Operator

Thank you. The next question comes from the line of Anthony Crowdell, excuse me, with Mizuho. Your line is now open.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Good morning, Anthony.

Anthony Crowdell
Anthony Crowdell
Analyst at Mizuho

Good morning, Joe. Good morning, John. How's it going? Congrats on your Celtics last night. Maybe some positive news this morning.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Thank you. Maybe, maybe the Bruins tonight. Maybe the Bruins tonight.

Anthony Crowdell
Anthony Crowdell
Analyst at Mizuho

And maybe not. Just quickly on slide 12, you had issued some parent debt already of in the year—for the year. Do I think that's gonna—that's for the maturities at the bottom of this slide, or the maturities you may also refinance, and that's gonna be incremental debt? Let me know if that's not clear.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

No, you're thinking... No, you're thinking about it correctly. So, so it's for the maturities listed on that, on that slide. We do have $900 million that's due on June twenty-seventh, and then we have another $450 million in the fall. Also, in, in January, early January, we have another three hundred and fifty, three hundred million coming due. So it's, it's more the pre-funding. So with the, with the proceeds from the transactions that I highlighted, we should be out of the debt and capital markets for quite some time.

Anthony Crowdell
Anthony Crowdell
Analyst at Mizuho

Great. And then, just to stay on the mark with Connecticut questions, I know sometimes when utilities, you know, ramp up CapEx or they may be doing some new projects, they talk to policymakers, some regulators prior to it and get a feel of just, hey, you know, the policymakers are on board with this increased capital that they're spending. I'm curious if something happened in Connecticut where you had similar discussions on actually the lowering of CapEx.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Oh, yeah, we've had discussions about our investments. I mean, we started talking about AMI three years ago, and we're all on the same page that everybody wanted AMI. We talked about investment in EVs, electric vehicles, infrastructure. So we were totally aligned with certainly key leaders down there. So, and we continue to have that dialogue. And right now, we have dialogue where we share with them that, you know, we can't, you know, we can't keep moving forward unless we get the certainty around it. I mean, you know, costs have increased, since the time we began talking about AMI. If we had got on with the show, you know, that would've saved our customers money, but this delay doesn't help matters. You know, we're kicking it off here in Massachusetts.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

We're gonna be putting in AMI meters and infrastructure and, you know, it's the customers are gonna benefit from that.

Anthony Crowdell
Anthony Crowdell
Analyst at Mizuho

Great. Thanks for taking my questions, and good quarter.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Thank you.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Thanks.

Operator

Thank you. The next question comes from the line of Durgesh Chopra with Evercore. Your line is now open.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Good morning, Durgesh.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Hey, Durges.

Durgesh Chopra
Durgesh Chopra
Analyst at Evercore ISI

Hey, good morning, Joe. Hey, John. Good morning. Thanks for giving me time. Hey, John, just for investors and us, you know, trying to think about the implications, if you don't move forward with the Aquarion water sale, can you just help clarify what does that do to the equity? Could the equity—If you don't move forward with the sale, could the equity be higher than $1.3 billion, or is that the max? And then if you do do a sale, that number moves lower.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Well, there's still a lot of things in flux, and we're not moving off of the $1.3 billion equity needs until we have more clarity, so as things evolve over the coming, you know, year. But right now, our position is to, you know, kind of work preparing the potential sale for Aquarion and get through phase one and see what - how that see what that looks like.

Durgesh Chopra
Durgesh Chopra
Analyst at Evercore ISI

Understood. And then just to be clear on the FFO to debt, I know a lot of questions have been asked. You get to that 14%-15% by 2025, with or without the Aquarion sale. Am I thinking about it the right way?

John Moreira
John Moreira
EVP and CFO at Eversource Energy

No, no. If you, if you look at the left-hand side of that slide on the bottom, we have other drivers. Those other drivers are cash inflows that we have not quantified. But yeah. Yeah, yeah. No, we, we have assumed, as I continue to reiterate, in our financing plan, we have assumed the sale of Aquarion.

Durgesh Chopra
Durgesh Chopra
Analyst at Evercore ISI

Perfect. Okay, then just one, hopefully quick follow-up. Anything to kind of note in terms of the construction process or costs, you know, on Revolution and Sunrise? Any updates versus your past disclosures there?

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Yeah, I know it's too early right now, but we continue to stay close to it, and we'll keep you updated. We did start, though.

Durgesh Chopra
Durgesh Chopra
Analyst at Evercore ISI

Okay. Perfect.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

The good news is we're in the ground, and construction is underway, so we're excited, and we're gonna utilize the same practices that we successfully deployed in the construction of the South Fork project, which, as you and all know, all 12 of the turbines are up, and they're running. And we're very, very proud that we are the first offshore wind provider in the United States.

Durgesh Chopra
Durgesh Chopra
Analyst at Evercore ISI

Perfect. I appreciate you taking my questions and giving me time. Thank you again, both.

Operator

Thank you. Our final question comes from the line of Travis Miller with Morningstar. Your line is now open.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Good morning, Travis.

Travis Miller
Travis Miller
Analyst at Morningstar

Good morning, everyone. Good morning. Thanks for taking my questions. Real quick one staying on CL&P here. If you take out your depreciation or maintenance CapEx, how much of that additional CapEx is covered under an existing rider or tracker or something like that outside of a base rate? You mentioned the energy efficiency. Is there other CapEx?

John Moreira
John Moreira
EVP and CFO at Eversource Energy

The biggest CapEx is the $300 million system hardening that we've had in place for quite some time. So that has helped the timely cost recovery, and it's helped Connecticut get to a much better situation from a reliability standpoint. So I would say that a good chunk of the, you know, as you pointed out, the maintenance depreciation would be covered by that.

Travis Miller
Travis Miller
Analyst at Morningstar

Okay. Okay. And, and then kind of real quick following on some of the other questions, do you expect the clean energy policy overall, so not necessarily, not necessarily just the rate setting, but clean energy policy overall in Connecticut will be a political issue this year, or is that something for years down the road?

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Yeah, no. I mean, the legislative session is gonna end next week, so I don't expect that you could see anything at this point. But I think the dialogue will continue. As you know, we'll remain engaged for the rest of, you know, this year and in the future, until such time as we are all on the same page and we can find out what's important to this state that we can invest in and get a fair, fair return and fair, really a level playing field. That's all we're looking for.

Travis Miller
Travis Miller
Analyst at Morningstar

Okay, perfect. Thanks so much for the time.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

Great. Great.

John Moreira
John Moreira
EVP and CFO at Eversource Energy

Thanks, Travis.

Operator

Thank you.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

I want to thank everybody.

Operator

This concludes the questions.

Joseph Nolan
Joseph Nolan
Chairman, President and CEO at Eversource Energy

I want to thank... Sorry, Alyssa, I just want to thank everybody for their time, and please follow up with IR with any additional follow-up questions that we can help out with, and I'll turn it back over to Alyssa.

Executives
    • Matt Ferguson
      Matt Ferguson
      Program Marketing Manager
    • Joseph Nolan
      Joseph Nolan
      Chairman, President and CEO
    • John Moreira
      John Moreira
      EVP and CFO
Analysts
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