Eversource Energy — Q1 2024 Form 10-Q
Business context and reporting period
For the three months ended March 31, 2024, Eversource reported results for its regulated electric, natural gas and water delivery businesses, serving approximately 4.4 million customers in Connecticut, Massachusetts and New Hampshire. This combined filing also includes separate financial statements for CL&P, NSTAR Electric and PSNH. Figures below are consolidated Eversource amounts unless otherwise noted; dollar amounts are in millions.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Operating revenue | $3,332.6 | $3,795.6 | (12.2%) |
| Operating income | $846.0 | $749.6 | +12.9% |
| Net income attributable to common shareholders | $521.8 | $491.2 | +6.2% |
| Diluted EPS | $1.49 | $1.41 | +5.7% |
| Operating cash flow | $291.3 | $69.2 | +$222.2 |
| Cash capital investment | $1,149.4 | $977.1 | +$172.3 |
- Operating margin was approximately 25.4%, versus 19.7%; net income attributable to common shareholders was approximately 15.7% of revenue, versus 12.9%. These are simple calculations from reported figures.
- Revenue declined mainly because lower energy supply prices and volumes reduced pass-through energy procurement revenues. Related procurement costs also fell; these tracked costs are generally recovered from customers and their movements do not translate directly into earnings changes.
- Cash and cash equivalents were $259.2 at March 31, up from $53.9 at year-end. Cash and restricted cash reported in the cash flow statement totaled $360.4. Commercial paper borrowings were $1,934.9 at the parent and $419.0 at NSTAR Electric; combined remaining commercial-paper capacity was $296.1. The related revolving credit facilities had no borrowings outstanding.
- Balance-sheet debt, including notes payable, current and long-term debt, and rate reduction bonds, totaled approximately $28.3 billion. Long-term debt was $24.9 billion, compared with $23.6 billion at December 31, 2023. The company issued $1.35 billion of long-term debt during the quarter. Debt levels and cash requirements reflect ongoing investment and financing activity.
- Capital spending remained substantial: cash investment in property, plant and equipment was $1.15 billion, up from $977.1 million. Consolidated capital expenditures including certain non-cash and other items were $1.09 billion, compared with $789.2 million.
- Common dividends were $0.715 per share for the quarter. The board approved another $0.715-per-share dividend, payable June 28, 2024.
Material changes and management commentary
- Regulated-company earnings increased to $540.8 million from $492.4 million. Electric transmission earnings rose with the larger transmission rate base; natural gas distribution benefited from infrastructure tracking mechanisms and a rate increase; and NSTAR Electric benefited from a base-rate increase effective January 1, 2024. CL&P earnings declined $10.0 million, while NSTAR Electric and PSNH earnings rose $26.2 million and $8.1 million, respectively.
- Parent and other companies recorded a $19.0 million loss, versus a $1.2 million loss a year earlier, reflecting higher interest expense and the absence of a 2023 renewable-energy investment liquidation gain, partly offset by the absence of the related charitable contribution and a lower effective tax rate.
- Operating cash flow improved year over year, supported by timing of accounts-payable payments and customer collections, income tax refunds compared with tax payments in 2023, and lower regulatory under-recoveries. Management noted these timing effects were partly offset by working-capital movements and higher storm-cost vendor payments.
- Management reaffirmed 2024 non-GAAP EPS guidance of $4.50–$4.67 and long-term EPS growth of 5%–7% through 2028. The 2024 guidance excludes expected offshore-wind sale impacts and related transaction costs. The filing cautions that quarterly results are not necessarily indicative of full-year results.
Outlook, material transactions and risks
- Eversource is pursuing sales of its offshore-wind interests. The planned sale of its 50% interests in South Fork Wind and Revolution Wind to Global Infrastructure Partners is expected to generate approximately $1.1 billion at closing, subject to conditions and potential purchase-price adjustments. Eversource retains specified Revolution Wind cost-sharing and other adjustment exposure, including sharing certain overruns up to approximately $240 million under the stated arrangement. Closing was expected later in 2024.
- After quarter-end, Eversource and Ørsted executed an agreement for Ørsted to acquire Eversource’s 50% Sunrise Wind interest. Half of the negotiated purchase price is due at closing and the balance after onshore construction and specified milestones. Closing remained subject to approvals and other conditions; Eversource expected completion later in 2024. Sale proceeds are intended to reduce parent-company debt.
- Management expects operating cash flows, borrowing availability and access to debt and equity markets to fund working capital and forecast capital needs. However, S&P revised the outlook to negative for Eversource parent, CL&P, NSTAR Electric and PSNH on March 5, 2024.
- Key regulatory matters include pending FERC transmission return-on-equity complaints. Eversource retained a $39.1 million pre-tax reserve for the second complaint period, but said it cannot reasonably estimate a range of loss for the four proceedings. A 10-basis-point change in the base ROE would affect after-tax earnings by about $3 million per complaint period; a potential transmission-incentive rule change could reduce annual after-tax earnings by an estimated $19.5 million.
- CL&P’s approximately $634 million of 2018–2021 catastrophic-storm costs are under PURA prudency review; management believes recovery is probable and does not expect a material impact. CL&P also disputes aspects of PURA’s advanced-metering decision, and the final decision on the related cost-recovery proceeding was expected in Q4 2024.
- Other exposures include offshore-wind construction, permitting, tax-credit qualification and sale adjustments; environmental remediation reserves of $128.0 million at Eversource; and changing regulatory policy affecting the natural-gas business. The company also identified cyberattacks, extreme weather, capital-market access, interest rates, customer payment ability and regulatory actions among relevant forward-looking risks.
- Eversource began an exploratory assessment of a potential sale of its water distribution business. No sale outcome or timing is stated.
Important facts for investors to verify
- Progress, approvals, timing, net proceeds and remaining contingent obligations for the Sunrise Wind, South Fork Wind and Revolution Wind transactions.
- Whether the $4.50–$4.67 2024 non-GAAP EPS guidance remains achievable, including the treatment of offshore-wind sale impacts and transaction costs.
- Funding costs, commercial-paper capacity, credit ratings and the use of sale proceeds to reduce parent debt amid continued high capital spending.
- Resolution and potential customer-rate or earnings effects of the FERC ROE complaints, CL&P storm-cost review and AMI cost-recovery proceedings.
- Implications of the Aquarion rate-case appeal and any decision on a potential water-business sale.