Q3 2024 Eversource Energy Earnings Call
The End
Alyssa: Good morning and thank you for attending the Ever Source Energy Q3 2020 for earnings call. My name is Alyssa and I will be your moderator today.
Alyssa: All lines will be muted during the presentation portion of the call, but then opportunity for questions and answers at the end. It is now my pleasure to pass the call to our host, Brema Heiter, VP of Investor Relations. Please go ahead, Brema.
Alyssa: Good morning and thank you for joining us. I'm Rima Hyder, a resource energy by President of the Investor Relations.
Alyssa: During this call, we'll be referencing slides that we posted yesterday on our website. As you can see on slide one, some of the statements made during this investor call, maybe forward-looking.
Alyssa: These statements are based on management's current expectations and are subject to risk and uncertainty, which may cause the actual results to defer materially from forecast and projections. We undertake no obligations to update or revise any of these statements.
Alyssa: Additional information about the various factors that may cause actual results to differ in our explanation of non-gap measures and how they reconcile and gap results is contained within our news release, the fly's we both should last night and in our most recent
Speaking today, we'll be Joe Nolan, our Chairman, President and Chief Executive Officer, in John Moreira, our Executive Vice President, CFO and Treasurer. Also joining us today's J-Boos, our Vice President and Controller, I will now turn the fellow Executive Joe.
Joe Nolan: Thank you, Rima, good morning everyone and thank you for joining us on this call. Let me begin today's call with the year-to-date progress we have made on our many priorities. And what has been accomplished as highlighted on slide three.
Alyssa: First, in the third quarter, we reached an important milestone with the sale of Revolution Wind and Southwark Wind to global infrastructure partners.
Alyssa: We have exited the offshore wind development business. We are now a pure play regulated pipes and wires utility that delivers superior service and value to our customers.
Alyssa: Offshore wind has been a complex and challenging journey, one where we made the decision to exit.
Alyssa: We will continue to be a leader in employing our strong transmission expertise to build our regulated onshore infrastructure that will support the clean energy transition in the region.
Alyssa: Second, we have a robust capital plan through 2028, where we expect to invest nearly $24 billion in our regulated electric, natural gas, and water business.
Alyssa: Our plan includes nearly $6 billion of transmission and over $10 billion of electric distribution infrastructure investments through 2028.
Alyssa: Third, we recognize that we have work to do to strengthen our balance sheet and improve our credit position.
Alyssa: We have made good progress towards improving our FFO to debt ratio through timely cost recovery, proceeds from the sales of our offshore wind investments, and our equity issuances.
Alyssa: As you expect, our financial strength is critical to continue providing safe, reliable service to our customers and to continue on the journey toward enabling the clean energy future.
Alyssa: Additionally, we will continue to advance the sale of Aquarian, work with key stakeholders to advance the need for timely recovery of costs, and maintain our continued focus on O&M cost opportunities to further enhance our cash flows.
Alyssa: Fourth, we are confident that our robust five-year capital forecast and our forecasted financing plan will enable us to drive our five to seven percent EPS long-term growth rate through 2028.
Alyssa: Lastly, we are a leader in clean energy transition with tremendous regulated opportunities ahead of us. As the largest utility in New England, Eversource is well positioned to meet our state's mandated clean energy goals.
Alyssa: Recently, working together with the six New England states, we secured approximately $90 million in federal funding for a clean energy hub in southeastern Connecticut.
Alyssa: We also received approximately $20 million from the U.S. Department of Energy to expand our battery energy storage project for Cape Cod area in Massachusetts.
Alyssa: We are grateful to the DOE for this exciting opportunity to take our battery energy storage system to the next level to enhance electric reliability for our customers on Cape Cod.
Alyssa: Our Electric Sector Modernization Plan, or ESMP, was recently approved by the Massachusetts Department of Public Utilities.
Alyssa: This plan is the roadmap for clean energy in the state, and we believe it can become the model blueprint for the nation.
Alyssa: The ESMP provides for an additional $600 million in distribution investment within our current forecast period and unlocks a significant amount of transmission investment for interconnection infrastructure to enable clean energy projects.
Alyssa: In developing our ESMP, we analyzed expected electric growth down to the circuit level to identify grid investments needed over the next five years and beyond.
Alyssa: These investments will increase electrification capacity by over 180%, thereby making Massachusetts a leader in delivering clean energy to its homes and businesses.
Alyssa: And finally, as we have stated before, we are very pleased with the progress of our Massachusetts AMI program, which we and other stakeholders know is critical to enabling a clean energy future for our customers.
Alyssa: We recently successfully implemented a new customer billing and information system in Massachusetts. The program is on track and we will begin the installation of the first smart meters next year.
Alyssa: In Connecticut, we recently received a draft decision from PURA for AMI. While the draft decision is a step in the right direction toward deploying AMI and achieving the state's
Alyssa: Clean Energy Goals, we have filed comments on certain provisions of the draft decision that would be challenging for us to move forward. We are hopeful that the final decision will provide a clearer path to allow us to make this important investment for our customers.
Alyssa: Turning to slide six, I want to highlight one of the most innovative low-growth solutions we are working on in Cambridge, Massachusetts.
Alyssa: The $1.5 to $1.6 billion Cambridge Underground Substation, the first of its kind and the largest underground substation in the United States, is another example of our progressive partnership with Massachusetts.
Alyssa: to address the growing electricity needs of Greater Cambridge and the region. This project has already received approval from the Energy Facility Siting Board.
Alyssa: The project consists of a brand new 35,000 square foot underground substation incorporated into a residential and commercial project led by Boston Properties.
Alyssa: It will be built 120 feet below ground and consists of eight new 115 KV underground transmission lines.
Alyssa: with capability for further expansion.
Alyssa: Construction is slated to begin in the first quarter of 2025.
Alyssa: I am pleased with our progress to date on all fronts and the dedication of our hard-working employees.
Alyssa: As a testament of this hard work, Eversource was recently recognized by Time Magazine as the number one utility in the United States.
Alyssa: In one of the best companies to work for in the world, we are honored to receive this strong reinforcement of our position as an energy industry leader.
Alyssa: Thank you for joining us on the call today. Eversource is uniquely positioned to leverage its skills, expertise, and scale to invest in utility infrastructure that provides a long runway of low-risk regulated investment opportunities and earnings growth potential.
Alyssa: We have spoken to many of you over the last few months, and we recognize the importance of sustainable growth, strengthening our balance sheet, and continuing to return value to our investors.
Speaker Change: Thank you, Joe. And good morning, everyone. This morning, I will discuss our third quarter earnings results, including the impact from our offshore wind divestiture.
Speaker Change: provide a brief regulatory update and review our financing activity.
Alyssa: In the third quarter, we completed the sale of the offshore wind investment. As a result, we recognized an aggregate net loss on the divestiture of $524 million.
Alyssa: Included in this loss was approximately $365 million related to obligations under the sale terms with GIP.
Alyssa: The majority of which is expected to settle once Revolution Wind reaches its commercial operation date in 2026.
Alyssa: Turning to the quarterly earnings results on slide 7, GAAP results for the third quarter were a loss of $0.33 per share. These results
Alyssa: include an after-tax loss of $1.46 per share related to the offshore wind divestiture.
Alyssa: Absent the offshore wind after tax loss, recurring earnings were $1.13 per share in the third quarter compared with GAAP and recurring earnings of $0.97 per share for the third quarter of last year.
Alyssa: Breaking down the third quarter earnings results by segment, starting with electric transmission, which earned $0.49 per share, compared with earnings of $0.46 per share in 2023. Electric transmission earnings increased due to our continued investment in infrastructure needs.
Alyssa: Electric distribution earnings were $0.57 per share for the quarter compared with earnings of $0.50 per share in 2023.
Alyssa: Improved results were primarily driven by base distribution rate increases at NSTAR Electric and at TS&H, offset by higher interest, depreciation, and property tax expenses.
Alyssa: Our natural gas distribution business lost 9 cents per share for the quarter compared with a loss of 10 cents per share last year.
Alyssa: The improved results were due to higher revenues from investments in natural gas infrastructure, partially offset by higher property taxes, depreciation, and interest expenses.
Alyssa: The water distribution segment contributed $0.07 per share this quarter compared with $0.05 per share last year.
Alyssa: The increase in earnings was primarily due to lower depreciation expense and higher revenues from a water company acquisition that closed in late 2023.
Alyssa: Eversource Parent and other companies excluding the loss from offshore wind earned nine cents per share this quarter compared with recurring earnings of six cents per share last year.
Alyssa: The improved third quarter results primarily reflect a lower effective tax rate, partially offset by higher interest expense.
Alyssa: Overall, our third quarter earnings results were in line with our expectations.
Alyssa: We are updating our full year 2024 Recurring EPS Guidance to a range of $4.52 to $4.60 due to a higher than anticipated interest expense.
Alyssa: We reaffirm our longer term 5-7% EPS growth rate.
Alyssa: Turning to our regulatory update on slide 8, starting with Massachusetts.
Alyssa: As Joe mentioned, we received a decision in August on our Electric Sector Modernization Plan, or ESMP.
Alyssa: As a reminder, we filed an initial draft of the ESMP with the Grid Modernization Advisory Council in September of 2023 for their 70-day review.
Alyssa: We held stakeholder workshops in November, followed by our final ESMT filing.
Alyssa: with the Massachusetts DPU in January of this year.
Alyssa: which incorporated feedback from the Advisory Council and stakeholder recommendations.
Alyssa: I'm pleased to report that this collaborative approach between the state's utilities,
Alyssa: and key stakeholders to enable the clean energy future resulted in the approval of an incremental 600 million of distribution investments to increase resiliency and to interconnect clean energy resources.
Alyssa: As a result, we have increased our five-year capital investment forecast to $23.7 billion.
Alyssa: Also in Massachusetts in late October, as per our settlement agreement, when we acquired EGMA, we received approval for our first rate-based reset filing.
Alyssa: This filing will incorporate the infrastructure investments that have increased our rate base from approximately $800 million to $1.7 billion as of the end of 2023.
Alyssa: This rate base reset is subject to a cap on revenue change.
Alyssa: With the application of this revenue cap, we will implement a revenue increase of $77 million this year and $62 million in 2025.
Alyssa: As a reminder, the next rate base reset is expected to be November 1 of 2027, covering investments through 2026.
Alyssa: Turning to New Hampshire, we are working through the cost prudency review of our late 2022 through early 2023 storm costs.
Alyssa: of $232 million.
Alyssa: where we expect a final decision in the first half of next year. As a reminder, the determination of the final storm cost or recovery will be incorporated into our June 2024 rate case filing and we anticipate final rates will be effective next summer.
Alyssa: As part of the New Hampshire General Rate Case Review, we have proposed to implement a four-year performance-based rate-making plan, including a capital support mechanism that would adjust rates annually.
Alyssa: Interim rates reflecting a 61 million dollar increase took effect on August 1st.
Alyssa: providing rate stability for customers and enhanced cash flows for the company.
Alyssa: Moving to Connecticut, as Joe mentioned, last week we filed written exceptions to Pura's draft decision in the AMI cost recovery proceeding.
Alyssa: The schedule calls for a final decision later this month, and we are hopeful that the decision will provide the transparency needed to undertake this critical investment.
Alyssa: Also in Connecticut, we expect to file a rate case for Yankee Gas Charlotte, where we have an operating revenue deficiency of approximately $210 million.
Alyssa: This reflects core capital investments made since 2021 and projected investments through late 2026. Approval of our rate request will allow us to recover those costs and continue to make important investments in the future.
Alyssa: Keeping our system safe and reliable for our 252,000 customers in Connecticut.
Alyssa: Turn into our balance sheet improvements.
Alyssa: We have provided several major drivers.
Alyssa: that we expect to enhance our FFO to debt metrics as shown on slide nine.
Alyssa: in place.
Alyssa: Effective July 1, our schedule distribution rate increases and closing of our offshore wind sales in the third quarter, along with additional regulatory rate recoveries and tax benefits, we continue to tick off a number of items to improve our cash flow position and make progress towards our FFO to debt target by 2025.
Alyssa: On the sale of our Aquarium Water business, we have recently launched the second phase of the process, which would enable closing a sale by the end of 2025.
Alyssa: Regarding our equity issuances, we have raised approximately $1 billion of equity through our ATM program and issued approximately 15.7 million common shares to date through October 24.
Alyssa: In addition, we have issued 1.1 million shares of Treasury stock.
Alyssa: In summary, as you can see on slide 11, we have a proven track record of earnings and dividend growth.
Alyssa: And we are confident that our updated $23.7 billion five-year capital forecast and our forecasted financing plan will enable us to drive a 5-7% EPS growth rate.
Alyssa: through 2028.
Alyssa: I will now turn the call back to Rima for Q&A.
Rima Hyder: Alyssa, we are now ready to take our questions, please.
Alyssa: Please see the complete disclaimer at https://sites.google.com
Alyssa: Thank you, Rima. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove your question from the queue, you may press star two.
Alyssa: If you are using a speakerphone, please remember to pick up your handset before asking your question.
Alyssa: Once again, please press star one to queue for questions, and please limit to one question and one follow-up.
Alyssa: We will pause as questions register.
Alyssa: Our first question is from the line of Char Perezza with Guggenheim Partners. Your line is now open.
Char Perezza: Hey, good morning, guys.
Speaker Change: Good morning, Char.
Char: Morning, Joe. Joe, I just wanted to maybe start really quickly on Millstone, just a lot of discussion in Connecticut on the public benefits charges. Now it sounds like the state of Massachusetts is involved in the dialogue. Are you involved in these conversations? Is the net positive for both sides with the state's bulk at pricing above the current $50?
Joe Nolan: Well, you know, I think it's interesting. I will tell you that there's a very strong working relationship between Rhode Island, Connecticut, Massachusetts, as it relates to clean energy. You know, everyone's trying to do their part to secure
Alyssa: Clean Energy for the region, given that we are capacity constrained here. You know, I've been involved only to the extent that I understand the objectives.
Alyssa: of these three parties. The three parties are my friends. So we do talk about what they're trying to achieve. I think you, you know, you have Governor Lamont that would like some of the other states to participate in Millstone. In terms of pricing, I have not been privy to what the thought is around pricing.
Alyssa: I only have been privy to the fact that everybody is trying to bring something to the table. As you know, Massachusetts has 1,100 megawatts coming in from Clean Energy Connect in Canada, which they're passionate about. They have wind.
Alyssa: We also have the Seabrook Asset which is under contract and we have obviously the Dominion. So those are some of the tools that we have available for a carbon-free New England.
Alyssa: and what I take great comfort in is the fact that these governors are all very mature governors. They all get along very, very well and I am very confident that they will come to a decision or a solution that is beneficial to all of the customers in New England.
Char Perezza: Got it. Perfect. And then just lastly, Joe, I mean, Oersted this morning took another impairment on construction contingency.
Speaker Change: and market prices with revolution, I think for another 250 million. What are your, I guess, reminds what are your obligations costs here under the GIP agreement? Is this morning's Orsted impairment included in your net loss for offshore wind? Under the GIP agreement, are you going to fund the contingency and cost increase? Thanks. Appreciate it.
Alyssa: I'm going to turn it over to John.
Alyssa: Hey Shar, it's John. Good morning. As you know, this quarter we did take a very sizable charge, a loss on REV to the tune of $900 million. Few exclude the gain for Sunrise.
Alyssa: We were aware of the monopile issue that was highlighted in Norstedt's commentary this morning, and we have factored
Alyssa: that concern into our, into that.
Alyssa: We will continue to work very closely with the parties, including G.I.P. and AUSTED to monitor the progress that they will continue to make to mitigate this exposure.
Speaker Change: Okay, got it. So everything's embedded in your chargers and no incrementals as of right now.
Alyssa: As of right now.
Alyssa: Okay. Okay. Perfect. Thank you guys. Appreciate it. See you in a couple days.
Alyssa: See you next week.
Speaker Change: Thank you. The next question is from the line of Carly Davenport with Goldman Sachs. Your line is now open.
Alyssa: Morning, Carly. Hey, good morning. Thanks so much for taking the questions. Hey, thanks for taking the time. Maybe just to start on the financing side, you know, you've now done about a billion dollars of equity for the year. Messaging has been sort of one up to 1.3 over the next several years. I guess can you just provide some color on the cadence?
Alyssa: looking into 25 and beyond on the equity side in the context of what you've now done so far in 2024.
Speaker Change: Unknown Speaker 00.00.00
Speaker Change: Sure, colleague, let me start by asking answering the question in this fashion. It's really all about our balance sheet improvement
Alyssa: We are focused on that, and I think the fact that we did issue a billion dollars is a testament to how passionate we are about improving our balance sheet position.
Alyssa: We will continue to update you as we progress, obviously, in the fourth quarter call, which is literally within months away. We will refresh our plan.
Alyssa: I'll give you a revised.
Alyssa: capital forecast, align it with our financing plan, and disseminate the equity needs over that forecast period. So be patient with us. We'll have more information in a couple of months.
Speaker Change: Could you give us a little bit of a sense of when we look at that three to four percent benefit to FFO to debt from those enhancements, sort of how far you can get with the known enhancements versus having the aquarium sale that's still kind of TBD built into those numbers?
Alyssa: Colleague, the purpose of this slide, once again, continues to be to highlight the major drivers of the enhancements to it at three to four percent improvement. I would say
Speaker Change: All of the items except for the one that we have highlighted at TBD are known and measurable. The rate adjustments was something that we were well along in this process. In my formal remarks, I mentioned that just a couple of days ago, we got the MassDPU to approve the EGMA which was $77 million. That went into rates November 1st.
Speaker Change: with a second rate adjustment happening 12 months from now. So all of those items are known and obviously we have closed on both offshore wind transactions and we highlighted the
Speaker Change: Of course, the billion dollars of equity that's also known. So I would say on these key major drivers, most of them are locked and loaded. The one that's still pending is the aquarium sale.
Speaker Change: Great to see the progress there. Thanks so much for the time.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Nick Campanella with Barclays. Your line is now open.
Speaker Change: Morning, Nick.
Nick Campanella: Hey, good morning. Morning, morning. So thanks for the time.
Nick Campanella: Just wanted to follow up on Char's question around the offshore wind costs. I just, I recall that you kind of had the 50-50 sharing agreement with GIP. And, you know, obviously, some of the costs of revolution have changed. Can you just kind of confirm?
Nick Campanella: You know, are you now taking on 100% or is there still more to go there and what's that level look like now?
Speaker Change: Sure, Nick. We are at that point where we have reached that cap. So you are correct. Any further exposure would be shared 50% by Eversource and 50% by Austin.
Nick Campanella: Okay, that's helpful. And then
Speaker Change: On the five to seven, I just wanted to kind of confirm, you know, you typically kind of rebase off of prior year actuals. So
Nick Campanella: Is that still kind of the plan as we get into the fourth quarter? So we would kind of take this new fiscal 24 guide and
Nick Campanella: Rebase off of that and then does that five to seven include the aquarium proceeds or is that upside to the plan and how should we think about that? Thank you.
Speaker Change: Sure, Nick. Well, let me let me start by saying that the aquarium was a key component of our financing plan
Nick Campanella: Thank you. The. Sure thing.
Speaker Change: See you at EI.
Speaker Change: Unknown Speaker 05.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Durgesh Chopra with Evercore. Your line is now open.
Speaker Change: Robert Becker, Unknown Executive, John Moreira, Robert Becker, Joseph Nolan, Robert Becker,
Durgesh Chopra: Good morning, you guys.
Durgesh Chopra: Hey, hey, good morning, Joe. Thank you for giving me time. Just a couple of clarification questions. One is that the Cambridge Underground Station investment is that incorporated in the current five year plan or would that be incremental?
Speaker Change: No, that has been incorporated in the five-year plan. So a lot of that spending will happen between 28, but the phase-in of the in-service dates will happen over, think of it as a three-year period, 29, 30, and 31.
Nick Campanella: But the bulk of the spend is on our current plan.
Speaker Change: Unknown Speaker 08.04.21
Speaker Change: Okay, thank you. So it's in the plan. Clear. How about the funding of the 600 million higher cap? I guess you'll, you know, that's, you'll give us an update on the Q4 call, I guess. So let me know if we're on time. Maybe just then.
Speaker Change: Okay. Yep. Yep. Understood. Okay. So then maybe just, can you, as you file this Yankee gas rate case here, you know, in the, in the, in the back half of the month, maybe just talk to your strategy there, what to expect, will you be filing for a sort of a PBR framework like you've done in the other states? And then just how do you view, you know, the risk to ROEs given sort of some of the data points and decisions we've, we've seen in the state?
Speaker Change: Sure, sure. You know, I would tell you that we are introducing PBR. We like that construct.
Nick Campanella: Unknown Executive, John Moreira, Robert Becker, Joseph Nolan, Robert Becker, Joseph Nolan,
Nick Campanella: We make investments that are needed to continue to provide safe and reliable gas service to the Connecticut customers.
Speaker Change: Connect connect Yankee gas has been under earning for for quite some time So cash flows are very important to the company and we would like to To enhance the cash flow position for Yankee in order to continue to make these needed investments
Speaker Change: Of course, we are.
Nick Campanella: practical and you know in our plan we will we will you know hope to plan for very constructive outcomes.
Speaker Change: Okay. Thank you. I appreciate the call.
Speaker Change: Thank you.
Nick Campanella: The next question is from the line of Bill Apatilli with UBS. Your line is now open.
Bill Apatilli: Hi, good morning. Good morning. Can you maybe just expand upon the comments around the Connecticut draft decision, the AMI docket? You mentioned some conditions that you'd like to see modified. Can you just expand upon what you'd like to see to make that a more acceptable outcome?
Bill Apatilli: Unknown Speaker 05.
Nick Campanella: Not only in our other jurisdictions, but in Connecticut, is to have, you know, a clear path for regulatory recovery of our costs.
Nick Campanella: as well as sound legal standards.
Nick Campanella: around any decision. It's a big investment. It's an important investment.
Nick Campanella: and you know the decision that we received you know it was a significant improvement but there are certain aspects
Nick Campanella: of that decision and certain elements of that decision.
Nick Campanella: for the AMI program in Connecticut. So we have commented, obviously, it's a very comprehensive docket. There's a lot of details, obviously the devils are in the details, but it just, the wind up is,
Nick Campanella: that we will get our money back.
Speaker Change: Okay, and so then how would it work after the final decision? I mean, do you, is it potential to scale some of the investment, you know, up or down, or would you have to sort of make a decision to do the program or not?
Speaker Change: Well, I mean, we'd have to make a decision to move forward and a couple, as you know, the elements of it, which has gone very, very smoothly here in Massachusetts.
Nick Campanella: I've been in this business for 40 years. I never thought that I would put in a billing system because, as you know, it always ends badly. But we just put in a billing system, SAS billing system, SAP I mean, and we've got tremendous, tremendous success.
Nick Campanella: I am very, very pleased with that, but that would be the first thing that we would need to invest. Obviously, we'd change out the billing system and then begin the implementation, but AMI is not something you can do piecemeal. You're either going to jump in.
Nick Campanella: and make the investment or you're going to wait until such time as
Nick Campanella: You have the regulatory certainty needed, but I will tell you that if you really want to enable the grid, you want to get to a clean energy future.
Nick Campanella: AMI is really the answer to that. The opportunities in AMI around allowing customers to understand how they're spending their money.
Nick Campanella: Folks that want to interconnect, you know, some of their distributed generation, whether it's solar panels, whether it's a vehicle, those things are very, very important. AMI is critical for, to enable that grid. So it's kind of an all or nothing. I don't, I don't see any kind of piecemeal there.
Speaker Change: Okay, and then just the second part on the the higher interest expense is that was that more timing related or rate being higher or just more debt being issued?
Speaker Change: I would say, well, obviously, because of the delay in offshore wind, we did need to be a bit more aggressive with our debt offering. So it's a combination of rates and volume, higher debt outstanding.
Nick Campanella: Thank you for watching.
Speaker Change: Okay. All right. Great. Thank you very much.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is from the line of Jeremy Tonette with JP Morgan. Your line is now open.
Speaker Change: Hey, Jeremy. Good morning, Jeremy. Good morning.
Jeremy Tonette: Hey, just want to dive into Aquarian a little bit more, if I could appreciate those limitations, what you can say at this juncture, but just any other high level comments that you could provide as far as I guess, level of interest, how processes tracking versus expectations and how you think about, I guess, you know,
Jeremy Tonette: value achieve versus timing of sales execution here just any other color would be great
Speaker Change: Sure, this asset received a lot of attention this summer.
Speaker Change: Unknown Executive, John Moreira, Robert Becker, Joseph Nolan, Robert Becker, Joseph Nolan,
Speaker Change: and we feel very confident that we will close this transaction in 2025.
Speaker Change: Got it. Great. That's very helpful there. Thanks. And just, you know, wanted to touch on the equity a little bit more.
Speaker Change: Remind us, maybe I missed it, apologies for that. If any of the equity issued was forward sale or just wanted to make sure I was straight on that.
Speaker Change: No, no, those are the equity issuances were not put on a forward.
Speaker Change: So the cash is in the door
Speaker Change: Great. That's it for me. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is from the line of Ross Fowler with Bank of America. Your line is now open.
Ross Fowler: Good morning, so just a couple of questions for me on sort of going forward looking at regulation. We've talked about Yankee and the deficiency there and moving that to PBR. Have you kind of
Speaker Change: Have you got an initial estimate or a feel for how the PBR shift would sort of layer that into customer rates over time?
Speaker Change: Well, you know, one of the reasons that we like PVR, it does create a nice rate stability for our customers.
Speaker Change: You know, you have these annual inflationary adjustments plus an additional performance.
Speaker Change: for for the utility. So we really like that aspect of it. And I think that having that PBR, that annual rate adjustment, it does, in fact, mitigate the volatility that would would be led from a general rate proceeding. So we very much like PBR.
Speaker Change: We're not afraid of having those performance tied into targets that we can achieve that are reasonable and practical for us. So we are a performance-based culture.
Speaker Change: and we look forward to that proceeding.
Speaker Change: Yeah, maybe on that point, John, just.
Speaker Change: kind of thinking about Massachusetts.
Speaker Change: and what you've got there in terms of a regulatory setup, how do you, you know, give us maybe some color on the process of full electrification. We've seen some policy statements that are pushing that forward in Massachusetts. How do you think about, you know, two things. One, there's
Speaker Change: Sure, I think the model
Speaker Change: The Investment Needs
Speaker Change: to achieve electrification.
Speaker Change: We think that that's a very great model for all parties involved.
Speaker Change: a bit more straightforward, if you will. So we are very supportive of that. What we are implementing now is that, think of it as that first wave, the first four...
Speaker Change: five years of spend.
Speaker Change: Massachusetts wanted to look beyond that period, look at what's going to happen in 10 years and beyond. So we think it's a very collaborative process and we're very much supportive of it.
Speaker Change: Yeah, it's perfect, John. Thank you.
Speaker Change: Thank you. The next question is from the line of Steve Fleischman with Wolf Research. Your line is now open.
Steve Fleischman: Morning, Steve. Yeah, hi everybody. Good morning, Joe, John. Thanks. Just wanted to close the loop first on the...
Steve Fleischman: Revolution. Orsted also mentioned higher vessel costs.
Speaker Change: for their impairment. I just wanted to clarify that that was also updated when you closed.
Speaker Change: We were aware of those issues when, at the time that we did the charge.
Speaker Change: and, you know, the pretzel issue has been.
Speaker Change: rectified, and we have that behind us. So we just need to keep monitoring the project development as we progress, Steve.
Speaker Change: Okay, and then a simple question. I'm not sure I missed this, but just...
Speaker Change: The guidance range for this year, you know, just the midpoint down a couple pennies, not a not a big deal. Is that is it fair to say that that's just the equity issuance maybe coming a little earlier in the plan?
Speaker Change: or is there some other driver this year?
Speaker Change: No, no, I would say the equity issuance was exactly, pretty much right on plan as to what we anticipated. It was really more of the interest.
Speaker Change: that, you know, the assumption that we had in the plan. We were hoping for further fed action to be taken sooner in the year. And that came a bit later. So it's really interesting.
Speaker Change: Okay.
Speaker Change: Thank you very much.
Speaker Change: Sure. Thanks, Steve. See you next week.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Travis Miller with Morningstar. Your line is now open.
Speaker Change: Good morning, everyone. Good morning, Travis. Hey, Travis.
Travis Miller: Hi there, just a little more on the ESMP and kind of higher level linking it with the whole clean energy idea.
Travis Miller: If you were to kind of put it in a percentage basis, how far does this get you just that program the 600 million get to get you to kind of either where you need to be or where you want to be in terms of clean energy electrification?
Travis Miller: And I guess another way to think about it is how much more is there to go to get to where you want to be. That makes sense.
Speaker Change: Yeah, no, I know exactly where you're going. I think it's the starting point. But once again, I want to remind you that it's not just the ESMP.
Speaker Change: Prior to the ESMP being implemented, we already had another program that the DPU had previously approved. Kind of the same investment needs, and that's interconnection of clean energy resources, primarily solar in Massachusetts.
Speaker Change: We refer to that as the CIP program, C-I-P, and that program that we filed for, it was six clusters throughout the state of Massachusetts, predominantly in the southeastern part of Massachusetts.
Speaker Change: So six individual clusters the DPU has approved five of the six
Speaker Change: and that program was approximately a billion dollars.
Speaker Change: of a combination of T and D investments that we would make.
Speaker Change: So that was kind of the first wave, if you will, and that was baked into our five-year plan. So ESMP is the second wave, but there is more to come.
Speaker Change: Okay. Be on the ESNP.
Speaker Change: Correct.
Speaker Change: Okay, and then Connecticut should be now you've been
Speaker Change: pretty forthright and public about the fact that you don't want to invest until you get better regulatory treatment there. Other than the AMI, what types of larger projects, or are there even larger projects?
Speaker Change: that are sitting on the sidelines right now that might come either a gas or electric if there were a positive at the Yankee Gas or on the electric side.
Speaker Change: So I would say, obviously, the AMI is one that we would like to see the pathway to move forward.
Speaker Change: But as it relates to other investment opportunities, obviously we have to be very mindful that
Speaker Change: The recovery mechanism absolutely needs to align.
Speaker Change: as to when and the extent of those investments that we make in
Speaker Change: whether they're O&M or capital. So that is critical for us as any utility would operate. You really need that cash flow to be coming in a bit more timely. Kicking the can down the road really doesn't accomplish net benefits for customers.
Speaker Change: It's short-sighted and we just need to work collaboratively with Connecticut.
Speaker Change: to be able to invest the necessary investments to continue to make the system reliable and safe.
Speaker Change: Sure thing. Okay. Thanks for the thought.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Julian DeMolies-Smith with Jeffries. Your line is now open.
Julian DeMolies-Smith: Oh, good morning. Hey, good morning team.
Speaker Change: Hey, hey, how you guys doing? Get in the chat.
Julian DeMolies-Smith: Thank you. So just wanted to follow up on a couple cleanup items here. I know earlier you were talking with Carly there about FFO to debt. Can you just give us a little bit of sense of where you stand as of your kind of year-to-date sense as you track towards that improvement? And I know you list out what the items are, but how are you doing against that target, if you will?
Speaker Change: It's increased significantly from where we were in 23.
Speaker Change: So we have been making improvements.
Speaker Change: I would prefer to leave it at that, Julian.
Speaker Change: Okay, I got you there. And then separately, a little bit of a cleanup item. You've talked a little bit about this elevated interest expense here.
Speaker Change: Can you give us a sense, like, what is that gross run rate, kind of year-end, you know, exiting or starting in at 25, if you will, just because that nets against the apparent positive here, if you think about it. Is there kind of any way to kind of give us a gross magnitude that you're thinking about there at this point?
Speaker Change: or even as a reporter run rate.
Speaker Change: Just so I'm clear, can you repeat that question again?
Speaker Change: Yeah, on the talk about elevated parent interest expense, maybe can you get a sense of like what that gross run rate is at this point, if you will, whether quarter end or entering 25 or what have you.
Speaker Change: and Unknown Speaker 11.00.00 Transcription by Transcription Outsourcing, LLC. Readers should consult with a professional before making any financial decisions. Transcription by Transcription Outsourcing, LLC.
Speaker Change: We were out there issuing equity the first half of the year.
Speaker Change: Okay, we didn't get the wind proceeds, we didn't get the cash flow, we didn't get the equity, the cash from the equity issuance until the second half, and it was predominantly in the third quarter that we issued the bulk of that equity. So it did create a drag, obviously having the billion dollars in the door, that has gone to offset some debt.
Speaker Change: and Enhance the Interest.
Speaker Change: Offer
Speaker Change: Yeah, absolutely. Just quickly on the new substation, kudos there. Interesting development there. How do you think about the cost provisions and recovery mechanisms there? Just give us a little bit of a larger size, if you're going to ask on that front.
Speaker Change: Yeah, again.
Speaker Change: You know, the Commonwealth of Massachusetts Public Utilities gives us clear line of sight. We've got solid estimates on that, and this is a transmission asset as well, the predominantly transmission, so FERC regulated, and we feel good about it.
Speaker Change: We've been working at that for several years in terms of estimates and pricing and so we don't anticipate any lag in terms of the recovery of even $1 of that expenditure over there.
Speaker Change: Got it. Okay, fair enough. Thank you guys very much. See you soon. Thank you. We'll see you next week
Speaker Change: Yeah.
Speaker Change: Morning, Andrew. Hi, Andrew. Good morning, everyone.
Andrew: First question I have for you is on the South Fork tax equity investment. You're still showing the $500 in the cash flow walk. My question though is given the timing of some of the losses and write-downs, do you still expect that full benefit to show up in about by year-end 25 or might some of that spill into 2026 or later?
Speaker Change: Andrew, I actually think that that'll spill into beyond 26 and let me explain why. And then the reason that we've left that number 500 million is not for the lack that we haven't found other tax benefits that we want to utilize.
Speaker Change: prior to tapping into the ITC bucket. So we have been fortunate to utilize other tax credits before tipping into that bucket. So that 500.
Speaker Change: Although there will be a shift out, but we've replaced that with other tax attributes.
Speaker Change: You'll be able to use those credits in later years, in other words, is that right? Correct. Correct. And that's one of the items that we'll give you an update on the fourth quarter call.
Speaker Change: Thank you. Thank you.
Speaker Change: Okay, great. That's helpful. Then more broadly on that walk, always appreciate the details, even though there's a lot of moving part, well, because there's a lot of moving parts.
Speaker Change: When I look at the bottom line there, obviously you're now showing 3.75 billion, that's up quite a bit from 2.6 billion last quarter. The punchline is still 14 to 15 percent. How do you trend though? Does that mean that you're more confident in that? Are you maybe thinking more of the higher end versus the low end? Or is it just more better visibility in getting to that range?
Speaker Change: Well, I would say that, you know, we didn't quantify, we had it as an item that says TBD, equity needs, the aquarium on sale and rate cases. So we've just included more known and measurable items such as the billion dollars of equity needs and the rate increases.
Speaker Change: But I would say that we're still in that 14 to 15% range.
Speaker Change: Okay, that's very helpful.
Speaker Change: Then last one, high level in Connecticut. You talked a lot about the AMI and more broadly, obviously, it's a tough environment, not only in terms of approvals, but there's a lot of concern about affordability. My question is, when you think about putting capital to work in Connecticut versus other states,
Speaker Change: What should we expect when we see the CapEx update in three months? I'm not looking for numbers. I know we have to be patient. But how do you think qualitatively about putting capital to work there versus in other more constructive states? And is there potential to maybe move more capital away from Connecticut like you did a few months ago?
Speaker Change: Yeah, well, that's, I mean, a few months ago, as you know, we took $500 million out of that plan and we will continue to monitor it and obviously if
Speaker Change: If things change down there and they decide they want to provide timely cost recovery and follow legal standards, we will redeploy the $500 million. But I will tell you, I take great comfort that there's a significant amount of opportunities for investment across the Eversource portfolio. We've got two jurisdictions, New Hampshire and Massachusetts.
Speaker Change: recovery of our costs. So again, we're staying very, very close to it. And, you know, I am an eternal optimist. The glass is half full. And I hope that we do see a change down in Connecticut so that we can make the investments that are needed for our customers.
Speaker Change: I would just add that our focus to get the balance sheet to where we need to be is really for the benefit of customers, and we're very focused on that. So it's important that we get timely recovery of these investments in our operating costs. Otherwise, utilities are just going to be forced to kind of pull back on both buckets.
Speaker Change: Thank you. The next question is from the line of Angie Storzinski with Seaport. Your line is now open.
Speaker Change: Morning, Angie. Thank you.
Angie Storzinski: Good morning. So lots of questions. So thanks for squeezing in. Just one question about your earnings benefit from the NECC transmission line. I remember in the past when we, you know, had waited for the project to come online, there was like a
Speaker Change: you know, an earnings benefit associated with the interconnection into this transmission line eventual. And I'm just wondering if that's...
Speaker Change: You know, if you could quantify the benefit and also if that benefit changed depending on the capital cost of this project, you know, given the recent increase that was approved in Massachusetts.
Speaker Change: Thank you. So, Angie, just to be clear, that's not one of the projects where we were seeking opportunities from an interconnection standpoint, if that's what you're referring to.
Speaker Change: The benefit that we get from executing the PPA agreement is the remuneration.
Speaker Change: That's right.
Speaker Change: Okay, so there's no like earnings benefit just okay. No, there is there is the earnings benefit is Because of the size of the PPA over a long period of time in order to preserve And strengthen our balance sheet we get a remuneration on the annual billing
Speaker Change: for that project. So it's about 2.225
Speaker Change: Yes, two and a quarter percent that we get. Okay.
Speaker Change: And that percentage is over the cost of power delivered or just, again, is it linked to the cost of the project?
Speaker Change: It's the value that we bill our customers.
Speaker Change: So that contract is all utilities in Massachusetts, all electric utilities have to execute the PPA. So if we bill a dollar to customers we get a dollar or two.
Speaker Change: I understand. Okay. Okay. I might blow up in the past. And also, I mean,
Speaker Change: and I understand that the saga associated with those transmission lines over the last couple of decades actually but but how are you I mean looking at these these projects you know going forward I mean would you consider maybe reviving your transmission line?
Speaker Change: from Canada. I mean, how do you actually see the supply backdrop for your, well, for New England and overall, you know, given the low growth that we're seeing, and granted, I understand that most of the other data centers are not going to be in New England, but I'm just wondering how you think about the supply-demand dynamics in New England.
Speaker Change: Yeah, well, you know, I'll just tell you that where we sit today we are a
Speaker Change: We are a pure play regulated utility. I've promised all of you on the call and many others in the world that we are not going to swing for the fences anymore. We're looking for the singles and the doubles. We'll look at it in the regulated space.
Speaker Change: So, I don't want anyone to worry that we are going to go and propose a transmission line to Canada as a merchant project, because that's not something that we would do. That would definitely deviate from this company's plan to be a purely regulated pipes and wires company.
Speaker Change: Thank you.
Speaker Change: Okay, see you guys soon. Thank you.
Speaker Change: Thank you. See you next week.
Speaker Change: Thank you. Our last question today comes from the line of Paul Patterson with Glen Rock Associates. Your line is now open. Good morning Paul.
Paul Patterson: Hey, good morning. Last but not least, hopefully. So really quickly on the
Paul Patterson: on the AMI. When I looked through your exceptions, I mean, I understood pretty much all of it. The only thing is, with the O&M, it seemed to me that this is, and correct me if it was wrong, you guys were concerned about just the ability to institute the rate increases. That's more of the issue than
Speaker Change: then with the incremental O&M, then they're being at dispute about the incremental O&M. Am I correct in that?
Speaker Change: Yeah, Paul, why don't you, why don't we have my investor relations team kind of take you through some of those details, if you don't mind.
Speaker Change: Okay, no problem. And then, and then with respect to...
Speaker Change: One of the things that we're, and I know this isn't necessarily directly associated with you guys, but there is this discussion about
Speaker Change: offshore wind, some some concerns about the impact of offshore wind costs on Connecticut. And I know this isn't specifically you guys are getting out of the business, obviously, and what happened, but but there's a discussion about swapping.
Speaker Change: Millstone, again, not your facility with perhaps offshore wind and what have you. And I was just wondering if if you.
Speaker Change: How you guys, I mean, from your perspective, are seeing these
Speaker Change: So basically Angie's kind of question here about the outlook for
Speaker Change: for power prices and
Speaker Change: and what have you in the state, even though they may not be directly associated with your business. Nonetheless, you guys are delivering the power to people and you guys are concerned about affordability. I know. So just what are you what are your thoughts about the discussions that you're that we're hearing about offshore wind and potentially the swap with nuclear?
Speaker Change: Yeah, well, I just will tell you that, you know, as I mentioned earlier in the call that you've got three governors
Speaker Change: that are very actively engaged around the clean energy story. And it's kind of like a potluck supper.
Speaker Change: You've got Connecticut wants to bring Nucleus at the table and
Speaker Change: Mass has the hydro coming in out of Canada, you've got
Speaker Change: Nuclear plant in New Hampshire. So there's a lot of folks that want to bring certain
Speaker Change: energy resources to the table.
Speaker Change: You know the governor of Connecticut would like to have some of the other states pay for
Speaker Change: Robert Becker, Joseph Nolan, Robert Becker, Joseph Nolan, Robert Becker, Joseph Nolan,
Speaker Change: They're all very, very cordial and I have no doubt in my mind that they'll come up with a solution.
Speaker Change: that will benefit all of the customers of New England. I mean, we are in a tough situation given our location and we are capacity constrained and we're not seeing new resources other than say the wind.
Speaker Change: and the hydro coming. Those are really the only injections that are taking place at this point. So I'm optimistic. We'll see how it plays out. But just know that that there is very constructive dialogue going on that everyone has to kind of take a piece of everyone else's
Speaker Change: I gotcha. And then just with respect to the climate bill.
Speaker Change: Yeah, you know, Highville, Massachusetts, you know, obviously, we're very pleased. We were certainly had a major seat at the table there. And I think it's the one understanding I think that everyone sees is
Speaker Change: If you want to have a clean energy future and you want to electrify, you know, infrastructure needs to be started in a timely manner, you can't you can't wait five, five years for something at 10 years. So, you know, one of the things that I'm most proud of is that, you know, we are we we have a
Speaker Change: Thank you. I would now like to turn the call back to Rima for closing remarks.
Rima Hyder: Thank you, Alyssa. Thank you everyone for joining us this morning. We will see many of you next week. This ends today's call. Thank you.
Speaker Change: This does conclude today's conference call. Thank you all for your participation. You may now disconnect your lines.