Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2024, for Eversource Energy and its wholly-owned regulated utility subsidiaries: The Connecticut Light and Power Company (CL&P), NSTAR Electric Company, and Public Service Company of New Hampshire (PSNH). Eversource operates as a public utility holding company providing electric, natural gas, and water distribution and transmission services to approximately 4.4 million customers in Connecticut, Massachusetts, and New Hampshire.
Key Financial Metrics (Six Months Ended June 30, 2024)
- Operating Revenues: $5.87 billion (down 8.7% from $6.42 billion in 2023).
- Net Income Attributable to Common Shareholders: $857.2 million ($2.43 diluted EPS), compared to $506.6 million ($1.45 diluted EPS) in the prior year.
- Operating Income: $1.45 billion, an increase of $138.3 million year-over-year.
- Cash Flows from Operating Activities: $962.0 million, up from $647.3 million in the prior year.
- Capital Expenditures (Investing Activities): $2.22 billion invested in property, plant, and equipment.
- Debt and Liquidity:
- Total Long-Term Debt: $25.84 billion.
- Cash and Restricted Cash: $132.6 million.
- Available Borrowing Capacity (Commercial Paper): $1.21 billion.
- Dividends: $0.715 per share paid in June 2024.
Material Changes Versus Prior Period
- Earnings Improvement: The significant increase in net income compared to the first half of 2023 is primarily due to the absence of a $401 million pre-tax (approx. $331 million after-tax) impairment charge on offshore wind investments recorded in Q2 2023.
- Revenue Decline: Operating revenues decreased primarily due to lower energy supply procurement costs passed through to customers (tracked revenues) and lower average wholesale market prices, partially offset by rate increases in Massachusetts and New Hampshire.
- Expense Increases: Operations and Maintenance expenses rose by $45.5 million, driven by higher storm restoration costs and vegetation management. Interest expense increased by $120.3 million due to new debt issuances and higher interest rates.
- Segment Performance:
- Electric Transmission: Earnings increased $49.6 million due to a higher rate base and FERC billing adjustments.
- Natural Gas Distribution: Earnings increased $35.7 million due to rate increases and lower O&M expenses.
- Electric Distribution: Earnings decreased slightly due to higher storm costs and interest expense, offset by rate increases.
Guidance, Outlook, and Risks
- Guidance: Management reaffirmed its 2024 non-GAAP earnings guidance of $4.50 to $4.67 per share, excluding the impact of offshore wind sales. Long-term EPS growth is projected at 5% to 7% through 2028.
- Offshore Wind Divestiture:
- Sunrise Wind: Completed the sale of its 50% interest to Ørsted in July 2024 for $118 million (with $34 million remaining contingent on milestones).
- Revolution Wind & South Fork Wind: Agreed to sell 50% interests to Global Infrastructure Partners (GIP) for approximately $1.1 billion. Closing is expected in Q3 2024. Proceeds will be used to pay down parent company debt.
- Regulatory Matters:
- FERC ROE Complaints: Four pending complaints regarding Return on Equity (ROE) for transmission rates. Eversource maintains a reserve of $39.1 million for the second complaint period but cannot estimate a range of loss for all proceedings.
- Rate Cases: Approved rate increases for NSTAR Electric (effective Jan 2024) and NSTAR Gas (effective Nov 2023). PSNH received approval for a temporary rate increase effective August 2024.
- Risks: Key risks include the timing and terms of offshore wind sales, construction cost overruns on remaining wind projects, regulatory outcomes on ROE complaints, and extreme weather events impacting infrastructure.
Investor Verification Checklist
- Verify the closing date and final proceeds of the Revolution Wind and South Fork Wind sales to GIP in Q3 2024.
- Monitor the status of the FERC ROE complaints and any potential adjustments to the $39.1 million reserve.
- Track the impact of approved rate increases in Massachusetts and New Hampshire on future revenue streams.
- Review the company's capital expenditure plan for 2024, particularly regarding grid resilience and storm restoration costs.
- Assess the impact of rising interest rates on future debt refinancing and interest expense.