John M. Moreira
Executive Vice President, Chief Financial Officer and Treasurer at Eversource Energy
Thank you, Joe; and good morning, everyone. This morning, I will review our results for the third quarter of 2023, discuss the status of our offshore wind investments, and review our cash flow position.
Let me start with Slide 6. Our GAAP and recurring earnings were both $0.97 per share in the third quarter of 2022 compared with GAAP and recurring earnings of $1 per share and $1.01 per share respectively for the third quarter of 2022. GAAP results for 2022 include transition and transaction costs related to Eversource Gas Company of Massachusetts of approximately $2.2 million.
As a reminder, results for the third quarter of 2023 reflect a negative $0.08 per share impact for NSTAR Electric's rate design change, as shown on slide 7, adjusting the earnings for the third quarter of 2023 by this amount would result in both GAAP and recurring earnings of $1.05 per share. As I have previously mentioned, this rate design change does not impact full-year results.
Moving back to Slide 6 and looking at some additional details on the third quarter earnings by segment, starting with our Electric Transmission segment, which earned $0.46 per share in the third quarter of 2023 as compared with earnings of $0.44 per share in the third quarter of 2022. Improved results were driven by our continued investments in our transmission system.
Our third quarter 2023 Electric Distribution earnings were $0.50 per share, compared with earnings of $0.65 per share in the third quarter of last year. The earnings decrease is due primarily to the timing of the rate design change at NSTAR Electric that I mentioned earlier, as well as higher storm-related costs, higher interest costs, depreciation and property tax expense. These factors were partially offset by higher distribution revenues at NSTAR Electric and from capital trackers that we have in place.
Our Natural Gas Distribution segment lost $0.10 per share in the third quarter of 2023 as compared to a loss of $0.07 per share in the third quarter of 2022. The increased losses were due to higher regulatory and operating expenses, depreciation and interest expense, and were partially offset by higher revenues from the base rate increases at NSTAR Gas and EGMA, which took effect November 1 of 2022.
Our Water Distribution segment earned $0.05 per share in the third quarter of 2023, which is the same level we were in, in the third quarter of last year.
Eversource Parent and Other Companies' recurring earnings were $0.06 per share in the third quarter of 2023, as compared to a loss of $0.06 per share in the third quarter of 2022. The improved third quarter results primarily reflect a lower effective tax rate that was partially offset by higher interest expense.
Turning to Slide 8. Based on our financial results to-date and our strong cost discipline, we are narrowing our 2023 recurring earnings projection to between $4.30 to $4.43 per share compared with our previous range of $4.25 to $4.43 per share. Looking at our longer term earnings growth rate expectation, as you saw in our news release and can see on Slide 8, we are reaffirming our long-term EPS growth rate solidly in the upper half of the 5% to 7% range.
We are also reaffirming our $21.5 billion five-year regulated capital program, as shown on Slide 9. Current capital expenditures totaled approximately $3.2 billion in the first nine months of 2023.
Now, to further expand on what Joe covered, we reached an important milestone in our effort to exit our offshore wind business. On September 7th, Eversource completed the sale of its 50% interest in the lease area that includes approximately 175,000 developable acres to Orsted for $625 million in an all-cash deal.
We also closed on our tax equity investment in South Fork Wind with Orsted. We used $528 million of the proceeds from the lease area sale for our tax equity investment. As a current 50% equity partner in South Fork, half of this tax equity investment or $264 million was returned to us in October. We expect to recover the tax equity investment primarily in the form of tax credits once the turbines are placed in service. These tax credits will be utilized to reduce Eversource's federal income tax liability, including refunds from prior years expected over the next 12 to 18 months.
As Joe mentioned, we continue to make good progress on advancing the sale of our existing 50% interest in our three offshore wind projects. On our second quarter earnings call, I discussed one of our contingent considerations with the sale of the projects, that we expected a positive outcome from the Sunrise Wind OREC repricing petition, representing approximately $450 million in value to Eversource. Although we were very disappointed by the New York Public Service Commission's rejection of the pricing petition, we are encouraged by NYSERDA's quick reaction in its request to run an accelerated RFP process.
As I previously indicated, advancing the sales transaction was not contingent on a resolution of Sunrise's OREC repricing petition. As we assess our options for an OREC rebid for Sunrise, we could potentially see a scenario whereby we move forward with the sale for South Fork and Revolution Wind, followed by a transaction for the sale of Sunrise with the buyer. As we navigate through this accelerated RFP process, we will continue to look at every alternative to keep this sales process moving forward in an efficient and timely manner.
Now, I'd like to update you on our expectations for qualification for the two additional 10% investment tax credit adders under the Inflation Reduction Act or IRA. We had previously assumed a positive outcome regarding one additional 10% adder for Sunrise Wind and Revolution Wind that represented approximately $400 million in value to Eversource.
Let me start with the energy communities. We do believe there is a good path around the prospects for qualifying for the energy communities provision of the IRA for both Sunrise and Revolution, which would increase our potential ITCs to 40% of the eligible basis for these projects. Therefore, the energy communities' qualification would cover this contingent value that we have recognized. Also, we will continue to explore opportunities to engage with the Treasury Department, as they clarify the rules around the domestic content provisions of the IRA to qualify for an additional 10% investment tax credit.
As a reminder, the $400 million in value I just mentioned, is based on achieving a single qualification outcome between either the energy communities or the domestic content adders. As assumed in our second quarter offshore wind impairment charge, we only assume one additional 10% ITC adder as a contingent consideration. Should the projects qualify for both, the energy communities and the domestic content adders, it would result in upside to Eversource.
We will continue to monitor both the RFP process and the ability to qualify for one or more of the ITC adders and evaluate their impacts along with other potential impacts, as part of our continual review of our impairment models. As a part of this evaluation, an important consideration will be the likelihood of success of any future bid award for Sunrise Wind from this accelerated RFP.
Turning to cash flows. First, let me say that maintaining strong credit ratings is very important to us. Therefore, we are disappointed with the recent credit rating action taken by Moody's as the timing was a bit unfortunate. Our short-term ratings were not impacted by this action and therefore we should not see any impact on our commercial paper costs.
As it relates to future long-term financing costs, we see potentially minimal impact. We expect our cash flows will be enhanced and more specifically, an improvement in our ratio of funds from operation relative to debt or FFO-to-debt. Although we expect that our 2023 FFO-to-debt would be a bit weak primarily given the delay in closing the offshore wind sales transaction, however, moving forward, we expect our cash flow position to increase significantly. There are several factors we expect to contribute to enhancing our FFO-to-debt ratio well beyond the new threshold of 13% of FFO-to-debt by 2024 and beyond.
A key factor driving an improvement in cash flows are the proceeds from the sale of our offshore wind projects along with eliminating the project funding requirements. You may recall that as of June 30th of 2023, the carrying value of our offshore wind investment was $2.1 billion, net of the $401 million pre-tax impairment charge and the proceeds from the sale of the lease area. We have previously indicated that there are approximately $850 million of contingent considerations as part of the sale that is comprised of the $450 million pricing adjustment or now an RFP rebid for Sunrise OREC. If successful with the RFP award, this cash flow would be received when the transaction closes. In addition, as I previously discussed, a potential $400 million from the energy communities of a 10% ITC adder qualification would be received when the projects reach COD, which we expect in 2025.
Cash flows will be further enhanced from our core regulated businesses from electric and gas distribution rate adjustments primarily in Massachusetts and other cost recovery mechanisms. We anticipate additional deferred storm cost recovery of about $400 million to $500 million rolling into rates during 2024, that will be recovered over a five-year period. Also of note, we will fully monetize our $528 million of South Fork tax equity investment through lower tax payments and refunds, which will further contribute to an improvement in our cash flow and provide the ability to pay down debt, including a portion of the $1.4 billion of parent debt maturing in 2024.
Lastly, we are committed to completing the $1 billion equity as part of our ATM program. As shown on Slide 10, we have issued no additional equity under this program through October. We also anticipate raising an additional equity through our dividend reinvestment and employee incentive programs through October, and we have issued 900,000 shares under that program.
Thank you for joining us this morning, and I look forward to seeing many of you next week. I will now turn the call back over to Bob for Q&A.
