Q1 2022 Eversource Energy Earnings Call

Good morning, ladies and gentlemen, thank you for joining gun being present at the ABA source energy first quarter 2022 earnings call.

My name is Irene and I would be coordinating today's call. If you would like to ask a question. During the presentation. You may do so by pressing star one on your telephone keypad. In case, you have joined US online that you have the possibility to press the fracs. The flag icon on your web browser to ask a question I will now hand over to your host.

Rick Cot, Vice President for Investor Relations to begin Jeffrey Please go ahead.

Thank you Irene and good morning, and thank you all for joining us today I'm, Jeff Kotkin ever <unk> Energy's Vice President for Investor Relations. During this call, we'll be referencing slides that we posted yesterday on our website and as you can see on slide one some of the statements made during this investor call maybe forward looking as defined.

Within the meaning of the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995. These forward looking statements are based on management's current expectations and are subject to risks and uncertainty, which may cause the actual results to differ materially from forecasts and projections. These forecasts are.

And factors are set forth in the news release issued yesterday afternoon.

That's general information about the various factors that may cause actual results to differ can be found in our annual report on Form 10-K for the year ended December 31, 2021. Additionally, our explanation of how and why we use certain non-GAAP measures and how those measures reconcile to GAAP results is contained.

Within our news release and the slides, we posted last night and in our most recent 10-K and 10-Q speak.

Speaking today will be Joe Nolan, our president and Chief Executive Officer, Phil Lembo, our senior strategic advisor and outgoing CFO and John Moreira, our treasurer and incoming CFO also joining us today is Jay Buth, our VP and controller now I will turn to slide two and turn over the call to Joe.

Thank you, Jeff and thank you everyone, who was on the call. This morning, it's been a very busy start of the year. So let me get right to it.

First and most importantly, we have continued to deliver very safe and reliable service to our 4.4 million customers. The average number of months between power interruptions continues to place us in a reliability in the top decile of the electric industry in a relatively short average.

Ration of outages continues to place us in the top quartile. We also responded promptly to damage caused by a number of northeast is that seem to be arriving in new England every weekend from mid January through February .

Despite that inclement weather response time to natural gas service calls, our key safety and performance metric.

For our gas distribution business was excellent I'm also pleased with our continued work to support our state's efforts to significantly reduce their carbon footprint.

Our sustainability ratings at M C MSCI and sustain Olympics remains among the industry's best when compared to our peer utilities. Our updated 2021 sustainability report will be published midyear, along with enhanced disclosures on our diversity equity and inclusion metric.

X.

We are also currently working to determine how an energy and water delivery company such as ever source should address scope three emissions.

Turning to slide three.

As many of you know the Massachusetts Department of public utilities is conducting an in depth inquiry into the role that gas will serve as the state moves to reduce its greenhouse gas emissions by at least 85% by 2050 in March we submitted a lengthy filing in support of the deal.

Use inquiry.

That filing has been posted on our Investor website and its key elements are included on this slide.

As you can see reducing energy demand by vigorously pursuing energy efficiency in both the electric and natural gas business is a cornerstone of our strategy.

Additionally, we are recommending pursuing multiple options to reduce carbon emissions from our approximately 650000 natural gas customers in Massachusetts.

They include developing a hybrid electrification pilot.

In a community, where we share of both electric and natural gas customers.

Building on the network geothermal pilot, we announced early this year in Framingham, Massachusetts, initiating a renewable natural gas program through purchases and in state on system injection and piloting the potential use of hydrogen which certain commercial and industrial customers.

<unk>.

There is no question that our natural gas distribution infrastructure will play a critical role in ensuring a successful transition to the state's clean energy future.

The D. P O is targeting a decision in this inquiry later this year.

Turning to offshore wind in slide four I'm sure most of those on this call have read our news release last night announcing that we have commenced a strategic review of our offshore wind investments well, we are partnering with or stead.

It is clear that the landscape for offshore wind continues to evolve in many energy and infrastructure firms and investors both inside and outside North America are extremely interested in investing in the northeast United States offshore wind market.

The extremely strong prices paid for New York bite leases in February attest to this.

We plan to evaluate our 50% interest in our partnership with worst it together with the significant investment requirements. We have already we have we have ahead of us for a regulated.

Energy and water delivery systems.

We have more than $18 billion five year regulated capital investment program that needs to be financed and additional capital projects that are likely to arise in the coming years. We have concluded that now is an appropriate time to explore monetization of our offshore wind investments.

The strategic review, we have launched was formally endorsed yesterday by the <unk> board of trustees.

It could result in potential sale of all or part of our offshore wind interest.

We fully expect that given the strong interest for offshore wind assets.

We will be able to replace the offshore wind earnings per share that we would realize after our two larger projects reach commercial operation. This could result from either greater levels of regulated investment.

Less financing needs are a combination of the two.

Finally, I just want to thank Phil for his decades of service to our company and our customers I have worked with field for more than 30 years, playing on the softball team with him back in my early years and he will be greatly missed you know he has been a proven leader and a consummate financial.

<unk> he.

He has been our CFO for the past six years and has steered us through acquisitions significant equity issuances and a pandemic, while being transparent with the street supportive of his staff and wise and his counsel to senior management and the board one can readily understand why are investors have rated Phil one of the.

Top cfos in the industry. The past few years I am truly thankful that he is remaining and a senior strategic adviser role with us for the near term to help us with this evaluation of our offshore wind investments.

We do not have a specific timeline.

For the review.

For the review of our offshore wind project. During this process, we will continue to focus.

On a successful execution of our three offshore wind projects and will continue to lead the onshore portion of the project during siting and construction.

One key element that may amplify market interest in our 50% interest is the strong national and regional policy support.

For offshore wind. The current administration has targeted 30000 megawatts of offshore wind in the Atlantic by 2030, and the four states.

They are the most likely buyers of energy generated by offshore tracks continue to ratchet up their support for this clean energy source with.

We strongly believe that offshore wind.

Will play a very important role in southern New England, and New York's aggressive decarbonization efforts in Austin is recognized world leader in engineering constructing and operating offshore wind. Moreover, the sites. We are developing are among the best in North America in terms of consistent wind speeds.

Moreover.

We have moderate what water depths and the proximity to the electric load.

In terms of our active active projects.

As illustrated on slide four onshore onshore cable and state installations beneath the roads of East Hampton on long Island is largely complete ahead of schedule.

Major offshore work.

Well will take place in 2023 and will continue.

The project, bringing 130 megawatt 12 turbine project into service by the end of next year, citing and permitting on our two larger projects Revolution wind and Sunrise Wind also continues to progress we continue to expect to receive final federal and state approvals in 2023.

And bring both projects into service in 2025.

Slide six shows.

That there had been no changes to the cost estimates our schedules we discussed during our year end earnings call in February with contracts now essentially fully secured for South Fork, we continued to focus on negotiating contracts for the two larger projects, which we expect to be built in 2024 and 2025 in aggregate.

About 80% of these projects cost are now locked in we are making good progress on procuring additional agreements and expect that that percentage to rise over the balance of the year I want to add how thrilled I am that yesterday, our board elected John Moreira to be <unk>, New CFO .

Jon will hit the ground running having a leadership position throughout the finance organization over the past two decades, including Treasury accounting budgeting regulatory and Investor Relations.

He has also headed up.

Our Investor Relations.

And our strategic initiatives, including our water acquisitions in the offshore wind business.

Review, we announced yesterday, he knows ever source inside and out and we will and will provide us with experience financial leadership as we invest on behalf of our customers. Thanks again for your time I will now turn it over to Phil.

Thanks, Joe.

Good morning, everyone.

This morning, I'll cover the results for the first quarter of 2022.

And then John will discuss our recent regulatory developments and our 2022 financing activities. So I'll I'll start with slide seven and our GAAP earnings were $1 28 per share in the first quarter of 2022 and this compares to earnings of $1 <unk> in the first quarter.

<unk> 2021.

First quarter results for both years include <unk> <unk> per share of after tax costs associated with acquisitions, primarily related to the assets acquired from the Columbia gas of Massachusetts deal.

Results in the first quarter of 2021 also include a charge of <unk> <unk> per share related to our performance in August of 2020, following tropical storm ESI, yes.

Excluding the acquisition and the transition costs in the first quarters of 2022, and 2021 as well as the storm related charge in 2021, we earned $1 30 per share in the first quarter of 2022 compared with $1 15 in the same quarter of 2021.

Our first quarter electric distribution earnings were <unk> 41 per share in the first quarter of 2022 compared with earnings of 34.

In the first quarter of 2021.

This was largely a this excludes the storm charge improved results were driven largely by higher revenues in new Hampshire, and Massachusetts, and lower pension costs.

Our electric transmission segment earned <unk> 43 per share in the first quarter of 2022 compared with earnings of 39 cents in the first quarter of 2021 and.

Improved results were driven by a higher level of investments in our transmission facilities that we used to provide safe and reliable service.

Our natural gas distribution segment earnings were 47 per share in the first quarter of 2022.

Compared with earnings of 43 in the first quarter of 2021.

Improved results were due primarily to higher revenues, partially offset by an increase in O&M costs.

Our water distribution segment earned <unk> <unk> per share in the first quarters of both 2022 and 2021.

You may recall that the winter quarter is the weakest of the year for water utilities in the Northern U S.

<unk> parent and other companies lost <unk> <unk> per share in the first quarters of both 2022 and 2021.

And this is excluding the acquisition and transition costs I mentioned earlier.

We are encouraged with the positive first quarter results, but believe it is a bit too early in the year to revisit our $4 to $4 17 per share EPS range.

We will continuously evaluate this guidance range as we move through the year as we would typically do in past years I think it is important to keep a few things in mind.

A significant percentage of our incremental gas business earnings come in the first quarter.

Also we expect to commence our ATM equity issuance during the second quarter, depending on market conditions.

Like everyone else, we're seeing a dramatic increase in borrowing rates short term rates are up 75 basis points, depending on the day.

The 10 year is nearly double where it was a year ago or so rates are higher and storm response and restoration costs are a significant O&M item for the company each year.

With three quarters of the year still ahead, we believe its appropriate to see how the year progresses.

Before before turning the call to John I will just discuss our capital plan.

I wanted to touch on a few.

I wanted to touch on a few of ever sources initiatives first <unk> gas of Massachusetts or <unk>.

The process for transitioning <unk> into every source business systems is nearly complete.

And we expect charges to the transition to tail off.

After the second quarter of 2022.

Systems have been transitioned since the start of 2020 to include multiple work management systems natural gas dispatch system.

<unk> and <unk> systems, and a new customer information system.

This has been just a great effort by the entire <unk> team to get all 300 business processes transitioned over from the nice source to have resource.

Quickly and effectively over the past 18 months.

Second.

Aquarium water continues to grow earlier this year Aquarian announced an agreement to purchase a 10000 customer water system that serves five communities in northwestern Connecticut.

The transaction would result in Torrington water holders receiving approximately 900000 every source shares in exchange for their Torrington stock Torrington as a <unk>.

Well run water delivery system, who service territory is highly complementary to aquarians existing footprint.

Assuming timely regulatory approvals, we expect to close the transaction by the end of this year and for it to be accretive in 2023.

I'm going to turn over the call to John in a in a moment, but first I wanted to say how grateful I am for all the relationships I've had with members of the financial community during my career.

This has been especially true over the past six years, when I was fortunate enough to serve as ever sources CFO .

Our customer our company is in a strong financial position and a great pipe because of your confidence in us I look forward over the coming months to helping Joe and other members of the every source leadership team.

Can execute a strategic review of our offshore wind investments. So thank you all and now I'd like to turn the call over to John .

Thank you Phil and congratulations on your retirement and I personally want to thank you for your leadership of the finance team and for you of mentoring of me over the past couple of decades.

I also want to thank Joe.

Jim Judge and the entire <unk> board of Trustees for Entrusting me with the CFO position.

I am honored by the confidence you have shown in me and look forward to supporting ever source energy, leading efforts to serve our customers and prepare for new England clean energy future.

As you saw in our news release and can see on slide eight we are reaffirming our long term EPS growth rate in the upper half of 5% to 7% range on slide nine nine we also reaffirm the 18 billion.

Five year regulated capital program that we disclose.

During our February earnings call, including our $3 9 billion regulated capital investment projections for this year alone.

You will recall that in February we noted a couple of additional areas, where we may see incremental regulated investment over the next five years.

During turning to slide 10, we have provided the status updates on our a M I.

Program for both and Starr Electric and Connecticut light and power at this time regulators in both Connecticut and in Massachusetts are actively working through dockets.

With discussions a decision expected later this year.

Briefing has been completed in Connecticut and is scheduled to wrap up in Massachusetts over the next couple of months.

Separately in March and Starr Electric filed an application with FERC on a new innovative recovery structure to help promote offshore wind development off the coast of Massachusetts.

The application references.

Park City wind, which is a 800 megawatt outbound grid project that was selected as part of years ago as part of years ago as the winner of Connecticut's most recent offshore wind RFP like the vineyard wind project.

Park City win.

We will connect to the massive new England grid through and Star Electric's facilities in the Cape and the Cape Cod in Massachusetts.

Park City would connect.

<unk>.

And Star Electric's $3 45 kv system, where we are already planning some upgrades to meet rising electric loads.

By working on the two projects together, we can reduce costs for customers.

In addition, the incremental upgrades would be approximately 200 million, which the vast majority being collected from park city with FERC based returns.

We also have we also have asked FERC to approve our application in an expedited fashion we.

We expect there will be other opportunities that will emulate.

Emulate this type of offshore wind transmission interconnection agreement structure going forward.

Together, Massachusetts, Connecticut, and Rhode Island, Hiseq, and approximately 9000 megawatts of such offshore projects.

On the regulatory side, our only active rate case is and Starr electric and we continue to expect a decision around December <unk> with new rates going into effect January one of 2023. We are currently going through the discovery phase of this proceeding.

At some point over the next couple of months, we do expect Aquarian, Connecticut.

To file for its first rate review in about 10 years, Aquarian kinetics, Connecticut regulatory Roe.

Is about seven 7% for 2021.

And well below the allowed rate of return of 963%.

In terms of financings and recent.

Credit rating agency decisions, we have we have completed a $1 3 billion five year and 10 year issuances at <unk> parent company, we did that in late February .

Proceeds were used to meet.

Meet the maturity of $750 million at the parent company that matured in March.

And with the balance of the proceeds being used to reduce short term debt.

Fitch has completed its annual review of ever source system of companies last month and raised its outlook on sealing paid from negative to stable. The stable outlooks also fitch reaffirmed the stable outlook for all of our family of companies.

We have recently conducted our planned meetings with Moody's and S&P as well.

And brief them on the status of our offshore wind initiative, our five year financial projections and our equity needs.

We look forward to the conclusion of these reviews later this year.

In terms of upcoming equity issuances as you can see on slide 11, we expect to commence the issuance issuance of new ever source shares this quarter through our previously announced at the market or ATM program. As we said in February we plan to issue one 2 billion.

Equity through this 80 ATM program over the next few years. Additionally, we will continue to issue Treasury shares to fund our dividend reinvestment are optional share purchase and employee stock.

Plans.

Excuse me. This is expected to result in approximately.

$120 million worth of Treasury shares per year through these plans during our forecast period. It is important to note that our planned issuance of one 2 billion of equity through the ATM program and the drip. She is issuance are not impacted by the strategic assessment of our.

Offshore win that we announced yesterday.

At this stage of our strategic assessment. It is too soon to comment on how any potential sale of all or a portion of our offshore wind investment would impact our financing plans in the future.

Thank you very much for joining us this morning, and I look forward to seeing all of you very soon I will now turn the call back to Jeff for Q&A, Jeff.

Thank you John and I'm going to return the call to Irene just to remind you how to enter questions Irene.

Ladies and gentlemen, if you would like to ask a question. Please don't hesitate to press star followed by the number one on your telephone keypad now in case you changed your mind. Please press star followed by the number two for those who have joined online. Please press the flag icon on Europe that promise them all.

So when preparing to ask a question. Please make sure you are on mute locally now I will hand over to Jeff Lee, who will coordinate the correct questions and answers.

Jeffrey Please go ahead.

Thank you Irene are first question. This morning is from Shar <unk> from Guggenheim Good morning Shar.

Good morning, guys good morning.

Good morning, good morning.

So Phil I'm, a little conflicted about your retirement announcement and you know on one end.

No really pumped for you and John for Phase, two but I'm going to Miss are definitely with MSR steak dinners and Interstate road trips. So hopefully we can still do that.

Yes, nothing says.

Sure.

Yeah.

Right so.

So Joe just.

A question here on the sale process and maybe first two parts and I've got a quick follow up there first what kind of options. You know we're looking at I know you mentioned it could be piecemeal. So just your interest in the unused leases or everything are you sort of leaning one way or the other and to what.

Is the timing for this process kind of in your mind I know you said within 'twenty, two but with the latest Atms set to start this quarter.

How should we start thinking about this.

Yeah, well, thank you and it's a it's great to hear your voice and look forward to seeing you in person. So listen we just we just are starting this process. We did have our board in here yesterday. Obviously this was a was a decision that you know had a lot of thought going into it. So we are we're going to look at all of our options and the impact that the.

C L. A part or all seal will have on our business. So I think I.

I don't have an answer for you right now its not something that I have them withholding I just I don't have it so.

I will tell you that is as this evolves, we definitely will keep everybody informed.

And we will we will obviously be very thoughtful and deliberate about any type of review and any kind of next steps on wind.

Yeah.

Got it and then just.

What prompted this is did you actually did you where you feel that offers you know I guess.

This prompted by any insurance from inbounds.

Well I guess I don't think Theres been an analyst that you know I'm looking at the list of folks on the call and I'm. Obviously, you folks have always asked US. This question about are we going to monetize you know.

Our our wind assets and you know I feel used to always say to folks you know if somebody backs up a brink's truck you know obviously, we will look at that.

The New York bite leases were a point of inflection for this company.

You know I think I was actually doing all day meetings that day, and we started to see some of the pricing and as you know listen we're here for the shareholders.

And we are going to do the right thing by ice shareholders and our investors and our customers and this is the right thing to take a look at this and I think we heard many of you loud and clear about what are you going to do around wind so.

That's what really was the driver around the shop.

Got it got it and then just lastly.

Obviously in the context of your base, 775% to 7% growth.

Is this just a kind of dilution avoidance or do you kind of have a line of sight to incremental opportunities right. Now that you are kind of excited to fund with the potential proceeds right and then what's the tax impact of a full sales as we're thinking about it.

Sean This is John let me, let me, let me start with the latter question. So.

It's too early to tell as Jos mentioned, we are looking at multiple Stu.

Structures and options to mitigate any any tax leakage. So too early on that front, but we are focused on that.

On your.

Latter question.

Our.

Former question I should say the the financial.

Impact of this once again.

We were still continuing to.

To review it and assess it but we feel very optimistic.

With opportunities on the regulated side to continue to.

Develop clean energy investment strategies I mentioned, one on the call in my formal remarks to support connecting offshore wind off the coast into Cape Cod, We think theres more to come. This recent bids in Massachusetts that have been won that one to connect into Massachusetts, and we are the incumbent.

<unk> in that area. So we're very optimistic.

We have a solar sizable sola deployment program in Massachusetts, which were just kicking off the ground right now.

Part of it will land in this forecast period and part of it could go beyond that forecast period. So we're very we're very optimistic about what lies ahead to to deploy the use of the proceeds but just to emphasize what John said their showers. We are focused on regulated assets. So we are not going to go from one unregulated eventually to one.

<unk>.

Yeah.

Terrific, Thanks, again, John and Philip.

Phil Congrats on phase two and Mr. Nolan and I'll see you soon thanks guys. Thank.

Thank you thank you Sir.

Thanks. Our next question is from Steve Fleishman from Wolfe Good morning, Steve.

Yeah, Hey, good morning.

Phil wish you the best.

Hope to see that handicap keeps getting lower.

So.

Okay.

Just maybe first could you clarify the messaging on your equity needs because.

It's a one time.

Are you.

Keeping the ATM in place.

And just.

Just no matter what year are you just kind of doing this for now until you see the outcome.

Of this and then deciding whether some of this would reduce equity needs just better clarity there would be helpful.

Sure Steve as we mentioned in February the one point too.

Program would be executed over.

Several years right. So it sounds as though we're going to be executing it immediately I'll, let juan all at once in the quarter. So.

As you all know our core capital program that we continue to rollout is going one direction.

It's been increasing very nicely for us.

Right now we're looking at an $18 billion capital investment program that takes us through 2026.

So we view that 1.2 is as supportive of that capital investment portfolio, but we will continue to monitor and as I've said in my formal remarks, it's too early to too.

Determined what impact.

The sale the potential sale could have on our future financing plans.

Okay.

Is it.

Is it fair to say that.

Uh huh.

You bet.

You need to use the proceeds mainly to reduce debt or is it just more.

Premature to determine.

Use of proceeds.

Yes. So you know we are very focused on maintaining an appropriate capital structure.

So with these with these potential investments that we have discussed.

A few minutes ago.

What happened over time, so we are looking at.

Reducing our debt we are maintaining a.

Pretty high level of short term debt.

Our forecast does have some.

Further debt issuances that we can certainly take off the table.

And if I could add Steve.

We've always talked about financing our growth in a balanced manner and.

So.

Can't do it all one way or the other and this helps support that balanced.

Financing approach and it's really again to finance the growth that's in the in the capital plan.

Got it okay that makes sense. Thank you and then one.

One other question just on the.

Uh huh.

Announced sales could you maybe.

Give us a little flavor of what what worst ads rights are with respect to the partnership like do they have a right of first offer or refusal.

Do they have any say on who their new partner is.

To be candid anyway. So you know if they don't like somebody or.

Could you talk a little bit about that.

Well first let me just tell you that <unk> is probably is a great partner I mean, they're my very good friends I've spent time in Denmark with Matt's you know I've got a great relationship with with Martin and with their U S. President David Hardy So.

We have played a very valuable role in that partnership we continue to play that role and we expect.

To continue to help wash that as they make landfall here with with any projects. So.

We are a valued partner we I was in New York the other night for a for an event in long Island, we are making significant progress that weren't based construction was supposed to take two years, we ended up doing it in one.

So I think that the relationship will continue the structural in some form of us helping them as they as they kind of grow this business.

In terms of the commercial terms as to whether they can buy us out or how that all works you know it is confidential at this point.

But that will begin we will begin to.

To shed that as we are able to share it with you.

Okay. Thank you and congrats and fill an issue that we should the very best.

Thanks, Steve.

Thank you.

Thanks, Steve. Our next question is from Nick Campanella from Credit Suisse. Good morning, Nick.

Hey, good morning, Thanks for taking my questions Congrats to bill on the retirement announcement.

Just wanted to <unk>.

Expand a little on Steve's question I was just curious on just like what your your flexibility is on the 50 50 JV like are you able to sell just lease bed or is the contract structured where you have to monetize an entire kind of.

Part of the JV I just wasn't sure if there's kind of hurdles to what your flexibility is here.

Yes, so I guess it will.

Flexibility is is great and our ability to make decisions on all of our heart are very flexible.

And again, we will evaluate.

What what the results are and what makes the most sense for our business and for our shareholders. So.

We are not handcuffed.

In any way.

Okay.

Got it and then if I could just ask like a non offshore question just on an Uninflated and I think you just talked to some higher you are seeing higher financing costs across the board just where else are you kind of seeing pressure.

A couple of quarters of pretty hot CPI prints and you know how do you feel on just overall cost containment within the five to seven thank you.

Sure sure. This is John so.

Interest rates, obviously is here in front of us and we have to manage that and we have a plan to.

To compensate for that we're also seeing some pressure I wouldn't I wouldn't characterize it as significant challenges or hurdles, but we are seeing some some challenges in the supply chain and more recently on the fuel component side and there again, we are trying to.

To work now to work that challenge through and find opportunities to offset that impact.

I can add a little to that.

You know some some of the items that you see.

If it's commodities or cable or certain types of equipment. It mostly would it impact our capital plan. These are sort of items that would be used to advance.

Our capital program, so as John mentioned sort of the fuel and and whatnot.

Is there and I think it's important to keep in mind too on the on the offset some of our rate plans.

Incremental revenues are based on an inflation or PBR adjusted Formula So that that would help to offset cost increases should they occur going forward.

Got it thanks, if I can squeeze just one more in I'm, sorry, but I know that you talked about.

You know I don't know if I heard you right you think that you can replace all of the offshore wind earnings.

As we get to 'twenty six here. So is that just is that net of full that's net a full proceeds and then and then and then future investment in purely regulated opportunities can you just clarify that.

Sure. So we have to wait and see what the ultimate.

Transaction or transactions or whether it's whole or in part.

But we feel very optimistic that we can replace those earnings just given the runway of regulated opt.

Opportunities that we have ahead of us.

Thanks for the time today everyone.

Thank you.

Thanks, Nick.

Next question is from Angie <unk> from Seaport morning J&J.

Good morning, so I'm going to start with.

On offshore wind.

Question.

About Connecticut. So you guys mentioned that acquiring is going to be filing a rate case Stan.

We saw that.

PURA denied.

With the filing of the utility, which probably was assigned that have a case is coming but can you give us a sense what's.

The latest.

Status, Oh, no seal our regulatory relationships.

Connecticut.

Yeah sure. So good morning, Tom our relationships are a very positive I mean, we've had.

We had hearings are weak. It you will go on am I, you know very very constructive discussions are very engaged commission.

So you know I would say that things are good we'll get very good relationship with the government with the attorney General down there.

I think things are are very very much.

Much improved obviously from a from some of our challenging times. So I feel good about the climate down there.

And how is.

Your expectations for the future electric rate case in the state given the inflationary pressures that you on ITC array will continue to feel is there any change in the timeline on when you would expect to file the next rate case.

Sure sure Angie this is John so per the settlement agreement, we cannot change rates any earlier than January one 2024.

But it's part of the settlement agreement, we did put the stake in the ground that.

Right, we that review qualified for the four year.

Come in and show Us. So we can actually stay I'll, probably until 2025. So we have to it's too early to determine when we would file when we file early are allowed to because of that point. So we will continue to monitor or your earned returns on offer a ceiling pay and make a dish.

<unk> accordingly.

Okay. Thank you and then lastly on offshore wind so I you know.

I understand that you are just beginning the process, but just.

Looking at the reasons for the promises made to the New York offshore auction, which would imply that you are thesis I probably.

North of $2 billion and then the amount of Capex that you will have spent on offshore wind up by the end of this.

This year I mean, it's.

Again.

Sort of struggling to see how much those regulated capex you can generate in order to deploy that the potential proceeds here again, where we're talking company up again by my account modem estimates more than $4 billion of potential capex with.

And again.

Am I spending in all of these other projects that you mentioned and go not even anywhere close to the amount of money that you might have.

Yes.

Yeah, well, what audit questions, there, but let's just start with our offshore wind decision obviously.

Is this a.

Strategic review as you know is designed to kind of Derisked. This business I mean, you look at the market conditions that occurred.

With the bite leases and you just have to.

You have to take a good look at that in terms of the $4 billion number I don't know John if you want to sure sure Angie.

I think it's important to note that that 4 billion is not going to happen all at once so I'm going to come in in one year, but we feel very optimistic that over towards the latter half of our forecast period and beyond as you know the two major projects that we had forecasted would kick in in earnest for the first full year of 2026, so looking.

At our 10 year view of investments, we feel very optimistic that we could get to a sizeable investment opportunity.

As you know is approximately $1 billion, which is not enough $18 billion forecast yeah. We have other opportunities on the transmission side to facilitate and accommodate.

Clean energy connections into our service territories.

And.

And I gave the example of one from an offshore developer and we see more happening.

Certainly in Massachusetts with the with the recent bids that were awarded earlier this year. So once again, we feel very optimistic that over.

Over time, we will certainly get to.

That $4 billion number that you cited.

But it would be probably twice as much now because it.

It's just the equity component right of the future growth right. So it would have to be more like 8 billion of Capex right to deploy this cash again I understand it's already innings something off the top.

Yes, so we can get a simple math here.

No I understand and Angi, where where you know where the states in the region is going from a clean energy and clean goals setting.

Will be a need to accommodate.

Further down.

Development certainly on the electric side, both on the distribution side and on the transmission side. So we.

We have the decarbonization strategy I think that we're seeing some of that happen in our service territory, where loans are increasing and we have to address those loads in the short term.

And you layer on further demands that we see that as a window of opportunity once again.

It's probably too early for us to put pen to paper, but given what we see and what we hear from our from our state policies, we feel very optimistic about it.

Okay, great. Thank you guys congratulations thanks.

Thank you Angie next question is from Doug <unk> from Evercore good morning their gas.

Hey, good morning, Jeff. Thank you team for taking my questions.

First just as we think about and try to model the valuation future valuation of these assets.

Are you still using the 6% to 8% net income off of the 26 is that sort of a a good estimate still for the you know as the representative of earnings from these assets.

Yes that is correct.

Got it and then just one question Joe like I'm thinking strategically.

If you lets say exit all of the potentially all of the offshore assets harder.

Does that impact your onshore.

Its mission and distribution investments I guess that the impetus of this question is does it help you.

Owning offshore assets would be onshore wind you know, our onshore transmission and distribution investments or.

Or it doesn't matter I'm, just thinking about the implications on your on your onshore plan as it relates to these assets and other offshore assets for that matter.

Yeah, you know one of the one of the.

Interesting.

Aspects of this wind development has been.

That even when we the unregulated business has lost bidding in different states health, we ended up winning the interconnection and the transmission.

<unk> built for for these developers so that continues and I'm very very optimistic about so I think we will continue to play a role on the Orange. We will I can tell you. We will I don't think we will we will play a role on the regulated onshore wind transmission construction and operation for.

All of these offshore wind developers in the appetite is extraordinary.

Yes.

Got it. Thank you for that sounds like Europe , Europe pretty optimistic and bullish on those prospects.

So onshore investments okay.

And Phil and Jim Congrats to you both thanks for taking my questions.

Thank you alright, thank you jure dash.

Our next question is from Jeremy <unk> from JP Morgan Good morning, Jeremy.

Hey, good morning, it's actually Ryan <unk> on for Jeremy Thanks for taking my questions.

Hey, Ryan I'll, just I'll start with just.

Just start with the future of gas proceeding and Massachusetts, maybe thinking through the potential regulated capex opportunities there and just any kind of high level thoughts on kind of the level of capex that might enable you to kind of bring into the plan and then just over what timeframe these might materialize.

Yes. So you know we're playing an active role obviously in that proceeding.

We continue to feel very good about the gas business I'll, let John maybe you can weigh in on around the kind of the Capex plan, but we still feel very very good about it and we're playing a key role in that in that proceeding. So John yeah. So on that specific question that once again I think it's too early we just filed this couple of months ago, but I.

Can tell you that while we do have is we do have about a $10 million investment opportunity in Framingham that we mentioned that we're looking.

Two.

To test from a geothermal standpoint.

But once again I think it's too early for us to size the bread box at this point.

Yes.

No I totally understand and then just one on offshore maybe tackling the financing side from a different perspective, but I mean, you talked about in our prepared is about.

Having discussions recently with the agencies, but just kind of wondering at any kind of high level. How you think about you know potential partial or full sell down to what it might do to kind of your credit thresholds and you know how should we think about that kind of impacting the financing plan.

Yes.

Well, we feel comfortable with the.

But what we have announced a $1.2 billion equity needs.

And as we've said, it's regardless of what we what we you know the ultimate proceeds awesome from this initiative.

Now that's not likely to change at this point, we still need to continue to evaluate it.

But we we.

We feel pretty optimistic as to where we are.

As I've mentioned Fitch.

Kind of reaffirmed all of our ratings and we're optimistic that Moody's and <unk>.

S&P will follow suit.

If I, if I can add to that.

We alluded to the fact of.

Making the visit and whatnot.

I would add that.

This would be viewed as credit positive in a sense.

Whether it be from a proceed standpoint, or where you fall on their risk grid types of things so.

We'll have to work over the next few months for their or they'll have to work on there or analysis over the next few months, but I think in the overall big picture sense.

A credit positive outlook from this announcement.

Yeah.

Oh got it understood it makes sense I'll leave it there.

Okay. Thank you Ryan appreciate it.

Next question is from ensue, Kim from Goldman Good morning, and so.

Hey, good morning, guys.

First question.

Just touching a little bit more on whether it's the transmission or other opportunities related to offshore development in your area. Just as you think about the next five years of their 10 year build out of the Gigawatts in your service territories.

Is there any way to frame or size the opportunity set again, whether it's transmission or others related to offshore wind that are more income into your and you have more of a right to those investments versus.

Uh huh.

Those made that may be more competitive in nature.

Yeah I guess.

First of all good morning.

When you look at you know one of the things that we have.

Looked at in that business as you know if you're on offshore wind developer and youre going to make landfall.

It makes a lot of sense for you to go to the host utility.

Granted there might be some competitive aspect to it but just like our project in Rhode Island, obviously national grid would be our partners we made landfall.

Look at our partners in New York, as well and it's generally the host utility could somebody go another way yesterday certainly good.

But I think that when you look at our operations in our transmission business I don't think youll find that our operators I think we demonstrated that here with a reliability project here that was competitive in Boston, We did team up with national grid in folks came in from around the country and we won that and we were able to execute it.

And our pricing was far better than anybody else. So I think we have the best team in this in this space and I'm not concerned about somebody coming in and trying to cut digress.

That makes sense, but so are you is there any way to frame kind of the magnitude of those investments just based on the development of projects that are supposed to come online in your areas over the next five to 10 years.

Well I got to tell you I mean, we have visibility around the projects that have won.

But as you know each time, a project wins and kind of where it has to locate.

Used to be you know a lot of transmission planning ISO studying around the interconnection. So I wish I did I would love to be able to tell you that it's a $5 billion or it's a $10 billion, but I will tell you it is significant.

All want to get into our territory. This is the load centers. So.

It's just a it's not a matter of.

What state that coming into this region and theyre going to come into our territory. So the number I just it's too early for me to tell you if I knew it I'd tell you.

I'm sure you won't yeah, no. Thanks for that my other question.

Just thinking about the potential use of the proceeds I know, it's too early from the strategic review, but.

Is the low hanging fruit I guess, a combination of looking at your balance sheet or the organic capex they were talking about or.

Could this open up potentially just from a capital perspective some.

On the inorganic side of the business on.

On the utility side.

Yeah, I guess all of those I think it's a combination of all of that I think you know that that when we get into the kind of acquisition market is always we're always just kind of smart investors were not going to do anything crazy in occupancy as you'll go across the country and you're not going to see us make.

Make a poor decision we make very good decisions and I think it's a combination of all of those factors.

That we would use any proceeds from from wind.

Got it.

That's all for me, Phil it's been a pleasure John Congratulations and looking forward to it.

Thank you.

Yeah, Thanks and soup. Our next question is from David Arcaro from Morgan Stanley Good morning, David.

Hey, good morning. Thanks, so much for taking my question and congratulations Phil and John .

In terms of just the inflationary backdrop here could you give any sense of what youre seeing for the year over year increase in your bills. So far in your customer bills. So far this year I know everybody is facing and I'm just curious if you're.

If you've got any level of quantification you could you could offer for what we were seeing for year over year increase.

Well overall with.

The energy component would probably in the 7% range that we're seeing in the year over year net.

Yep.

Got it Okay. That's helpful and then on the let's see the $200 million transmission opportunity that you alluded to in the script is that in the plan yet and could you remind me when that would come into service.

It's not in our $18 billion.

Capital forecast that we are disseminated in February if you recall David in February We said in addition to the 18.

$1 billion, we were seeing some opportunities and we had quantified a potential opportunity for offshore into connection in Massachusetts.

Approximately $500 million.

So this $200 million filing that we did with <unk> is 200 million of that 5%. So we as I've said, we're confident that there'll be more to get us to at least five if not over.

And the timing of that would be I would say.

And the next year, you could see them materialize. This year as these ppas and now being filed with the GPU and the.

The studies are in front of ISO New England already.

Fabrizio.

Got it and then just.

Last quick question on the offshore wind costs in terms of the percentage that's locked in what would you anticipate to be yet towards the end of the year from that 80% level currently.

Yeah, what we should be closer to 100%, we've got EIS on that remaining piece of it we feel good about it has done anything that's keeping me up at night.

Okay got it understood. Thanks, so much.

Alright. Thank you David next question is from Andrew Weisel from Scotia.

Hi, Good morning, everyone and thank you for squeezing me in there about the hour Mark.

First just another congratulations so and John next want to elaborate just on a couple of things talked about first potential buyers you've been clear that you would only be interested in offshore wind awesome because of your region, let's say the northeast pseudo sale happened with the buyer also be restricted to that region or could they worked with the worsted projects in other parts of.

Of the country.

Yeah, I don't I don't see anything that would restrict them.

From that I think that you know if.

They could they could operate anywhere they want it to operate but again.

Pretty pretty early in the process.

Okay I just wanted to know if there was anything in your contract with <unk>.

No. It sounds like you know just keep in mind I guess I guess I just wanted to keep in mind that.

That whole philosophy around sticking to your knitting in this region because that's what we know we're good at it I mean, we just want it that really was our mantra because that is where we feel comfortable this is our space. We know the space. So that's what we talked about it wasn't a contractual situation that was more that we didn't want folks to walk.

Worried that we were going to head to California, or the Midwest I mean, we're going to stick to where we know and we know this region very very well and we feel good about it so that was kind of the caveat that we had around win.

Okay. Thank you for clarifying that.

Next on financing.

Potentially might get a lot of cash proceeds here you talked a lot about mitigating or offsetting the $1 2 billion of ATM equity what about the drip I believe that's about $120 million per year could you turn that off if you had this good cash position.

This is John the Andrew So, yes, I mean you.

Confirm that the one point to where we will be executing over the next several years.

Starting this quarter, but you're absolutely right.

<unk>.

The drip we have much more flexibility to turn on and off but right. Now we were looking to to execute and that'll be reassessed. Once we once we see when as we get closer to closing on its potential transit.

Okay, great. Thank you very much.

Alright, Thank you Andrew.

Next question is from Julian from Bank of America. Good morning.

Hey, good morning. Thank you team Congrats again, Phil John It's Bill.

Pleasure.

Forward Tomorrow.

And maybe with that you know.

Again, I know a lot of lots of things have been asked and answered, but I wanted to come back to this tension on on how much offshore net income where are you expecting and are you expecting to offset by 2026 I know earlier in response to Steve's question, you, specifically kind of fly debt pay down is an element or the bulk of what proceeds would be used for but how should we.

Think about what that increment was.

Again last quarter, we spent a bunch of time talking about ROE and you know how much net income was attributable here you talked about holding yourself sort of even against that original expectation I'm just trying to reconcile the math this quarter and last quarter.

Sure sure Julien This is Jonathan Thank you for your comment.

<unk>.

So once again as we said I'm very confident that we could.

Find those opportunities given to policies that are you know.

Policymakers in our states that we operate in we've already given you a lot of information being one of them that will in and of itself. As you know is about $1 billion and on the transmission side. There's also the opportunities that I laid out to you and Thats just for sure for Massachusetts for what.

But what awards have been have been issued for Massachusetts, So theres still a lot more space out there for further development and as Joe mentioned, you know people, who are looking to interconnect and southern Connecticut and in Massachusetts. So so we feel confident that we will have the opportunities to a combination of investments comp.

Nation of finding and lower financing requirements that we would need otherwise so we feel very.

Confident that we'll be able to size size those opportunities as we move forward right now its still too early to tell.

Theres no attention Julien no catch you don't worry about that.

Thank you Joe.

And let me if I can just rephrase it slightly differently, especially coming off those rating agency conversations you know I know you talked about the $1 2 billion in ATM here.

How should we think about the need for equity beyond the one point of view, especially in the context of those offshore I was just.

I'm just trying to understand like how much further equity is needed that would be allocated from these these proceeds again, obviously, you're not building something so that you know that changes the financing land, but just just to try to level set on that incremental equity piece that seems to be here.

Against the backdrop of earnings growth, if I can ask it slightly differently really appreciate your clarity here.

Sure and I would say, it's far too early for us to make that determination as to what those financing plans look like because we don't know exactly what what will be the ultimate outcome of this review that we're going through and the timing of those investment opportunities that I've mentioned.

So we have no plans to do further equity Julian if that's clear that.

And just to be clear to use the word incremental so that this is what we've talked about this morning, there's not incremental it was part of.

What we discussed in February so that.

Plan of the one two plus the two minor shares or the dollars that come in from drip.

And there are there are no incremental.

Equity plans in the plan.

Got it got it just doesn't satiated <expletive> and really great. Thank you for that clarity. So I appreciate it.

You're welcome Alright. Thanks. Thank you. Thank you good luck guys.

Thank you. Our next question is from Ryan Levine at that Citi. Good morning, Ryan.

Good morning.

I appreciate the valuation argument for potential monetization, but can you talk about any strategic synergies or synergies that would impact any decision, making about a potential deal structuring.

Are there any practical reasons forever source to maintain ownership of play a part in ongoing onshore wind operations at least from a contractual standpoint and then in this context why is now the right thing.

Yes, so a couple of things. Thanks for the question Joseph Dis synergies absolutely not I mean, this piece of the business as it relates to what we were focused on which is the onshore that was what that was the kind of.

The piece that we brought to the table and that continues to happen it happens both.

And our unregulated businesses as well as regulated for for other folks that want to interconnect. So that will not be the case you know in terms of why why now I think I think we all saw what happened in the New York White leases and the appetite is extraordinary.

Pricing is extraordinary.

And it's just something that is it's right for us to do for our shareholders.

And that's why we made this decision again. This is a decision was made to take a look at it as a strategic review.

And I feel it's the right thing to do and so those are all our board members.

So the evaluation is a primary consideration.

How do you would you prefer to just get a valuation marker on a minority sale as opposed to selling your entire stake outright.

Given some of the cash proceeds question that you articulated earlier in the call.

No I think that we've shared with folks the opportunities in the regulated space there are available to us and we.

We think that we think the opportunities are extraordinary so I don't think I don't think it would make any sense for a for a partial if if if the number is right on a full then we will make that decision and we will exit it.

Appreciate it look forward to seeing you in Boston next week.

Yeah, great. Thanks, Brian appreciate it.

Our next question is from Sophie <unk> from Keybanc Good morning Sophie.

Hey, good morning.

So I can't help but try and ask you didn't ask for question maybe from a different angle here.

I guess I understand the logic behind each individual.

Keith and his father right it makes sense to you.

You know try and monetize that given where the relations alright et cetera right.

Mike.

Thank you.

The strategic picture.

You seem like Youre selling that asset.

You don't need to sell.

Even though you also don't need don't have an immediate need in our funding right. So you didn't have the need for that money.

All of that.

Yeah.

Equity.

And you are yet to kind of quantify where those go.

So I think strategically I guess, what did you think he says merit.

Struggling absolutely there's discussion too.

Clearly are going to.

Matt.

Okay.

Yes, sure I guess the strategic narrative.

Is this extraordinary opportunity in the regulated space.

We know we are very very good at number one and number two.

We have some assets that are worth significantly more.

Then that we paid or invested in and we see an opportunity to rotate and de risk on behalf of our shareholders, which is really what the mission is.

And we see that opportunity as being advantageous for all the parties and that's why we made that decision and again. The reason why is the appetite in offshore wind is extraordinary.

And also the needs in offshore wind for in terms of interconnection or extraordinary that's what we're very very good at and we're gonna play to watch strength.

Yeah.

Okay.

You used this word a few times, you and I like to do.

There is business right and I get it but the question is do you think that there is worthwhile.

<unk> has changed.

We have entered into this contract originally.

The profile of the pricing has it changed risks.

Risks the risk well no I mean, there's obviously a great deal of you know.

There's additional lease areas that have been put out there is additional players in the market place and as you know I think.

Everybody on this call knows how disciplined we are in terms of our investments and we are going to remain disciplined so if youre going to bring a significant number of undisciplined.

Folks into this equation, then that's really not a place for for this company.

Okay. Thank you I'll jump back into queue.

Alright. Thank you Sophie next question is from Paul Patterson from Glen Rock Good morning, Paul.

Good morning.

Can you hear me.

Yeah, Yeah yeah.

Yeah.

Okay.

Preamble.

Congratulations Bill and John .

Uh huh.

Just congratulations bill.

I feel yourself getting getting off easy here somehow, but I don't know why.

Good for you.

Just just on the review I mean, almost everything has been asked here, but just I know this is.

Wondering have you had any.

Indications or expressions of interest and I apologize if I missed this so for me I know that your board took action just now, but but has there been.

Have you had any preliminary indications of interest.

No we have not and.

Because that was we just made the announcement yesterday. So we do expect that there'll be significant interest they'd probably already is at this point.

We've been focused on this earnings call, but we do anticipate significant interest in this in these assets.

I still expect it to have.

You can review those two through the rest of this year so is that should.

Should we expect something I know its early but sort of December where we might hear an announcement or where could it happen earlier or.

Yes, it could happen earlier I think you'll have some updates as things progress I think we will have a better understanding as to are folks that are going to show up and I think as you know we were very transparent and we will share as things become available.

Awesome.

It sounds really smart and.

And again, congratulations Phil it's like asking you questions about program or something but.

[laughter], but but.

Congratulations again and best wishes to you.

Paul I appreciate it.

Alright.

Thank you Paul I think we're going to wrap up with this last question from Travis Miller from Morningstar Travis.

Good morning, everyone. Thanks for taking my question here and again, congratulations Phil drum I appreciate all the information you guys given over the years.

Real quick a follow up to follow up to follow up.

You've talked about offshore wind returns being higher than the regulated returns you're getting just wondering if anything has changed that as you look out in terms of supply chain or inflation on the worker side or materials et cetera.

Yeah, So I'll take that I guess I will tell you that the returns remain higher than regulated returns today. So.

So we still we still feel that way about it and that is the case in all of our estimates and our projections are they are higher than our regulated returns yes.

Okay, Great and then just one quick follow up again on the Massachusetts does England.

Spirit of the deep deep use, let's say investigation or request has to do with some of the political and legal.

It's stuff that's happened over the last couple of years in Massachusetts regarding yes bands and other.

Other fossil fuel bands.

Yeah, no absolutely I think that was.

Just demonstrated governor bakers leadership around gas.

And his desire to at least let everyone have a fee hearing and tried to sort. This out so no I think its we actually.

Welcomed it obviously, it's a very thoughtful and deliberate process that we have a seat at the table and we will see this through in and it will happen it will happen this year.

Okay, great. Thanks, so much I appreciate all the extra time you guys still go today.

Yeah. Thank you. Thank you. Thank you Travis we appreciate it.

I don't see any other folks in the queue, but if you have any further.

Further questions. Please either reach out by email or phone to us today, we really appreciate you being with us.

And I'm going to turn it back to Irene for for any closing any closing instructions.

Yes.

Thank you Jeffrey currently we have no further questions.

In case, Jesse would not like you have any closing remarks, then ladies and gentlemen. This concludes today's conference call. Thank you for being US today have a lovely day you may disconnect your lines now.

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Sure.

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Yes.

Yeah.

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Yeah.