Eversource Energy Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 2, 2024

There are 13 speakers on the call.

Operator

Results is contained within our news release, the slides we posted last night and in our most recent 10 ks. Speaking today will be Joe Nolan, our Chairman, President and Chief Executive Officer and John Moreira, our Executive Vice President, CFO and Treasurer. Also joining us today is Jay Booth, our Vice President and Controller. I will now turn the call over to Joe.

Speaker 1

Thank you, Matt, and thank you all for joining us on the call this morning. Let me begin with an update on the sale of our offshore wind business. I am pleased to report that we are on track to close the sale of the 3 projects over the coming months. We are progressing well on the approvals necessary to close these transactions as shown on Slide 3. We have filed all regulatory approvals with the New York Public Service Commission and FERC for the sale of South Auk Wind and Revolution Wind to global infrastructure partners.

Speaker 1

And we recently executed the purchase and sale agreement for Sunrise Wind with For Sunrise Wind, we have also filed applications for regulatory approvals with the New York Public Service Commission and FERC. We anticipate these approvals will take about 90 days. On the construction front, I can't tell you how excited and proud I was of my Eversource colleagues as I stood alongside New York Governor Hochul to flip the switch to energize South Bock Wind in March. We will certainly capitalize on lessons learned from South Bock, a first of its kind project here in the United States. The same construction processes will be used for the Revolution Wind Project, where onshore and offshore construction is underway.

Speaker 1

Now that our offshore wind risk is largely behind us, we are very excited about the future of Eversource delivering safe and reliable electric, natural gas and water service to our 4,400,000 customers. Turning to Slide 4. Eversource is moving forward as a pure play regulated pipes and wires utility business, doing what we do best, delivering clean energy safely and reliably to our customers every day. When we are doing what we do best, our customers are the direct beneficiaries. A good example of this came in early April when a late winter storm caused significant damage across the Northeast.

Speaker 1

Through our investments in technology, including smart switches and other reliability innovations, we were able to restore 85,000 customers in New Hampshire within 5 minutes, greatly reducing the impact of the storm to many customers in that area. This amazing response received numerous accolades from customers and personal acknowledgment from Governor Sununu. We take tremendous pride in our emergency response organization and our ability to stand up our emergency response teams for timely restoration. Eversource teams from all three states responded to the storm damage in New Hampshire, minimizing customer outage time. Our resiliency investments help to minimize customer outage impacts.

Speaker 1

Our preparation enables us to hit the ground running in front of potential severe weather events and our emergency response plan supports scalable and efficient restoration for those customers who are impacted. And we work tirelessly to communicate that timely recovery of storm costs is critical to support these efforts. Turning to the clean energy future, as you can see on Slide 5, the states we serve have very aggressive greenhouse gas reduction goals. Both the transportation sector and residential and commercial heating sectors are the largest contributors to greenhouse gas emissions. Although the region has acted by reducing carbon emissions from power generation, we have a long way to go on heating and transportation to achieve the state's targets by 2,050.

Speaker 1

To meet these targets, we project that average household electric demand will double in the summer and more than triple in the winter. That's why it's critical that we all work collaboratively and get started today on making achievements of these targets a reality. Moving to Slide 6, achievement of Massachusetts decarbonization goals are being addressed in part through the Electric Sector Modernization Plans or ESMP. This is the most comprehensive clean energy plan in the nation with planning processes and requirements that will provide the pathway for the state to achieve its clean energy objectives. The Eversource ESMP is a product of our system planning process incorporating the state's assumptions for projected demand growth from electric vehicles and electric heating.

Speaker 1

To develop our ESMP, we have analyzed expected electric growth down to the circuit level to identify grid investments needed over the next 5 years and beyond. These infrastructure investments will convert our distribution grid into the platform for the clean energy transition. Will increase electrification capacity by 180% and will allow for the adoption of 2,500,000 electric vehicles, 1,000,000 heat pumps and 5.8 gigawatts of solar generation, thereby making Massachusetts a leader in delivering clean energy to its homes and businesses. In New Hampshire, we are focused on a number of regulatory initiatives and are evaluating ways to advance clean energy initiatives such as large scale utility owned solar development. For example, New Hampshire state legislators are working on a bill that would institute structural reforms to New Hampshire's Energy Facility Site Evaluation Committee or the SEC, reducing the size of the SEC from 9 members to 5 and eliminating unnecessary process to improve efficiency and to lead to more consistent outcomes.

Speaker 1

In turn, this will lead to an accelerated siting and permitting process for these clean energy initiatives. Turning to Connecticut. State policy leaders have a vision of solar expansion, electric vehicle adoption and future renewable purchase power agreements as part of its clean energy transition. We are a strong supporter of these efforts to enable the clean energy future for our customers And we certainly are looking to partner with the state collaboratively and productively to achieve this important vision for our customers. While we continue to work diligently to support state policy leaders on thoughtful and reasonable policies aimed at increased adoption of clean energy technologies and the reduction of carbon emissions.

Speaker 1

We have serious concerns with the lack of alignment between state policy and regulatory decisions implementing that policy. As it stands, regulatory policies in Connecticut discourage investment and utility innovation as well as our participation in a wide range of clean energy initiatives that rely on our balance sheet and our capital resources. Upfront program funding by the utilities does not work where cost recovery is continually deferred and delayed into the future on uncertain terms. Without recognition that our funding sources rely on a secure and predictable cost recovery path, we cannot move forward to put additional capital resources on the table. We are encouraged by PURA's decision last month to provide timely reimbursement of deferred public policy costs through the company's electric annual rate adjustment mechanism.

Speaker 1

Decisions that adhere to law and legislative policy are critical to assure a constructive regulatory environment in Connecticut and to make the vision of a clean energy future a reality for our customers. Looking forward to the future, we remain committed to our extensive outreach plan across Connecticut, furthering our efforts to engage collaboratively and productively with Connecticut's leadership. Lastly, I want to thank my Eversource colleagues for their unwavering commitment and dedication to our customers. I have the utmost confidence in our team to deliver safe and reliable energy service to our customers with daily progress toward a clean energy future. I will now turn the call over to John Marrero to walk through our financial results.

Speaker 2

Thank you, Joe, and good morning, everyone. This morning, I will discuss our Q1 financial results, give you a regulatory update and cover drivers for our cash flow enhancement. I'll start with the Q1 results on Slide 7. Our GAAP and recurring earnings for the quarter were $1.49 per share compared with GAAP and recurring earnings of $1.41 per share last year. Breaking down the Q1 earnings results of the 1 point $4.9 per share in 2 segments, our electric transmission earned $0.50 per share compared with earnings of $0.45 per share in 2023.

Speaker 2

Improved results were driven by our continued investments in our transmission system to address capacity growth for customers and connect clean energy resources to the region. Our electric distribution earnings were $0.48 per share compared with earnings of $0.47 per share in 2023. Higher revenues primarily due to a base distribution rate increase at NSTAR Electric were partially offset by higher operating expense, higher interest expense and increased property taxes and depreciation. Our natural gas distribution business earned $0.54 per share compared with $0.49 per share in 2023. Natural Gas Distribution earnings increased due to higher revenues from capital cost recovery mechanisms, a base rate increase at Enstar Gas and lower operating expenses.

Speaker 2

Our water distribution segment contributed $0.01 per share compared with flat earnings in 2023. Eversource parent and other company earnings were a loss of $0.04 per share compared to breakeven results in 2023. The lower results were due primarily to higher interest expense and the absence of a net benefit in the Q1 of last year from the liquidation of a renewable energy fund. Overall, our Q1 earnings were in line with our expectations and we are reiterating our 2024 EPS guidance of $4.50 to $4.67 per share as well as our longer term 5% to 7% EPS growth rate. Turning to regulatory items on Slide 8, starting with Massachusetts.

Speaker 2

We filed our electric sector modernization plan with the Massachusetts Department of Public Utility in January, and we expect to have a decision on our plan in the August timeframe. Our ESMP calls for an incremental $600,000,000 of capital investments for interconnection of solar resources through 2028. As a reminder, this $600,000,000 is incremental to our $23,100,000,000 capital investment forecast we announced back in February. In New Hampshire, we are very busy on the regulatory front. In March, we submitted our documentation for a prudency review of $232,000,000 of storm costs related to storm events from August 2022 through March of 2023.

Speaker 2

We anticipate that review will be completed later this year. In addition, we anticipate filing a rate review in New Hampshire this summer with temporary rate relief going into effect 90 days after the filing. Closing out the regulatory update is Connecticut, where we received the final decision on our annual rate adjustment mechanism 2 weeks ago for new rates to become effective July 1 this year. The major drivers of the $873,000,000 increase are recoveries of purchase power contracts and protected hardship uncollectible accounts, both of which are costs required by law. These under collected costs in Connecticut, which were approximately $400,000,000 in 2023, contributed significantly to a reduction in our 2023 FFO to debt ratio.

Speaker 2

This rate impact will be significantly offset by lower energy supply costs that will also go into effect July 1 this year. We appreciate PURA's decision to provide timely reimbursement to the company of these state policy costs as required by law, reducing the pressure on our balance sheet to finance these costs for a longer time period. Timely recovery of these costs reduces the total amount that customers will pay through avoidance of carrying charges on these balances. In March, we resubmitted our request for prudency review of approximately $635,000,000 of Connecticut storm costs relating to weather events that occurred from 2018 through 2021. The vast majority of these costs represent payments to outside line and tree crews to assist in the restoration, resulting from 24 significant storm events during that period.

Speaker 2

We are currently in the discovery phase of the proceeding. As a reminder, recovery of these costs will coincide with new distribution rates following our next general distribution rate proceeding. In early April, following the Superior Court decision on our Aquarion rate case, we filed for a review of that decision by the appellate court along with a request to transfer the appeal directly to the Connecticut Supreme Court. We are requesting that the Connecticut Supreme Court hear this case due to the critical legal issues raised by the Aquarion rate decision. Without proper resolution of these issues, there will be a negative impact on utility investment and customers long term.

Speaker 2

As Joe mentioned, we are committed to our extensive and ongoing outreach efforts that have been pivotal to educating key leaders and communities on the necessity for stable regulatory policies. We are also demonstrating our commitment to support the state's policy leaders who seek to move the state forward with thoughtful and reasonable policies aimed at reducing carbon emissions and achieving increased adoption of clean energy resources. A successful path to a clean energy future will require a substantial ramp up in planned proactive distribution infrastructure investment rather than piecemeal approach as well as sound public policies and adherence to legal principles to enable that investment. However, the existing gap between the state's vision of a transition to a clean energy future and the regulatory framework discouraging investment is an obstacle for Connecticut's progress on climate change, the clean energy transition and even core service goals. As a result, we have taken a hard look at our capital deployment priorities and are implementing necessary cuts to our Connecticut investment levels in 2024 and over the next 5 years.

Speaker 2

In 2024, we are reducing our capital expenditures by nearly $100,000,000 and we have notified PURA of our unwillingness to put capital at risk in relation to advanced meter infrastructure and electric vehicle programs. In total, we are expecting to reduce capital investment in Connecticut by $500,000,000 over the next 5 years until we see Connecticut's regulatory decisions come back into alignment with law and state policy, our decisions on the deployment of our valuable capital resources have to be based on our current experience with regulatory outcomes for utility investment. With that, I do want to emphasize that we are confirming our 5 year capital expenditure forecast of 23,100,000,000 dollars across all business units. Substantial, consistently emerging infrastructure needs across our system provide ample opportunity for capital deployment in lieu of using those valuable resources in Connecticut. I will now cover a number of drivers that are expected to enhance our FFO to debt ratio from 2023 to 2025.

Speaker 2

As you can see on Slide 9, the under collection of 2023 deferred state policy costs, which will now be recovered as a result of the 2024 annual rate adjustment decision in Connecticut, as well as other under recoveries of regulatory deferrals across all states of approximately 200,000,000 dollars contributed to the lower FFO to debt that we experienced in 2023. We expect other enhancements in 2024 2025 that include the sale of South Fork and Revolution Wind assets to GIP. Upon closing of the sale to GIP, we anticipate receiving approximately $1,100,000,000 of cash proceeds from this transaction. In addition to the GIP sale proceeds, we anticipate utilizing our tax equity investment in South Fork Wind, which we expect will bring around $500,000,000 of cash over the next 24 months. Lastly, collection of storm costs in Massachusetts and New Hampshire, planned rate increases at our utilities, the sale of our Sunrise Wind project to Orsted, equity issuances and cash flows from a potential sale of our water business will drive the enhancement of 2023 FFO to debt to 14 to 15 targeted by 2025.

Speaker 2

Moving on to our equity issuances. In the Q1 of 2024, we raised approximately 75,000,000 dollars through our existing ATM program and we issued 550,000 treasury shares. We continue to anticipate our equity needs to be up to $1,300,000,000 over the next several years. Also, as we announced in February, we are undertaking a review of our water distribution business. Proceeds from a successful sale are assumed in our long term financing plan, reducing the level of equity that would otherwise be needed.

Speaker 2

We continue to prepare materials needed to launch the first phase of this process. Closing out on Slide 10, as I mentioned earlier, our $23,100,000,000 5 year capital forecast and our forecasted financing plan drive our 5% to 7% EPS growth rate through 2028 based off of our 2023 recurring EPS of $4.34 per share. I'll now turn the call back to Matt for Q and A.

Operator

Thank you, John. Elisa, we are now ready for questions.

Speaker 3

Thank you. We will now begin the question and answer The first question comes from the line of Shar Pourreza with Guggenheim. Your line is now open.

Speaker 4

Hey guys, good morning.

Speaker 1

Good morning, Shar.

Speaker 5

Good morning, Shar.

Speaker 4

Good morning. Joe, I guess what just firstly, what CapEx are you guys actually cutting in Connecticut? Were you kind of redeploying? And is that redeployment actually accretive just given the cost of capital differences? Thanks.

Speaker 1

Thank you, Shahriar. Over the past decade, we've spent a significant amount of money on electric reliability for our Connecticut customers. Our best in class engineering has moved months between interruptions from 10 months to nearly 2 years. So clearly, our investments have paid huge dividends for our Connecticut customers. However, the regulatory decisions over the past few years are misaligned with the law and the state policy.

Speaker 1

And without a secure and predictable cost recovery path, we cannot continue to put additional capital resources on the table. So our investment objectives in Connecticut have been centered around safety and reliability. As you'd expect, we will not reduce our safety spending. Therefore, the reduction will likely come from reliability areas. As John has mentioned, we have ample opportunities for capital deployment on our system.

Speaker 1

So we feel very, very good about that. And yes, it would be accretive.

Speaker 4

Got it. And Joe, can you cut more if need be?

Speaker 1

Well, we are going to be very thoughtful and deliberate about it. Obviously, we've had a great track record down there. I will tell you that the reliability numbers in that state are best in class. I don't think you'll find it really anywhere else around the country. So I'm very proud of that.

Speaker 1

But if we continue to see this negative regulatory environment, we're going to have to look at everything.

Speaker 2

I would also add Shah that as a reminder, we do have a resiliency program in place, which we get timely recovery of up to $300,000,000 of distribution investments at CLMP, which has been very, very critical for us to achieve this performance level that Joe just mentioned.

Speaker 4

Got it. And then maybe just a quick one for John. John, just the up to $1,300,000,000 of equity is obviously still in plan and obviously that level is going to be dictated by the water sale outcome. I guess how are you thinking about the means of issuances? Are you thinking more in systematic terms or kind of prefunding spending and the balance sheet ahead of time?

Speaker 4

So ATMs versus maybe rip the bandage off block? Thanks.

Speaker 2

Our view and that will continue to be our position is to be opportunistic and exploring utilizing our ATM program to accomplish that. I said time and time again, an ATM program gives us tremendous flexibility and we were very successful in executing at least through March $75,000,000 we've done quite a bit more over the past couple of weeks.

Speaker 4

Okay, perfect. Thank you guys. Appreciate it.

Speaker 2

Thank you.

Speaker 3

Thank you. The next question comes from the line of Carly Davenport with Goldman Sachs. Your line is now open.

Speaker 6

Hey, good morning. Thanks for taking the questions.

Speaker 3

Good morning, Charlie.

Speaker 6

Good morning, Charlie. Good morning, Charlie. Morning, thanks so much for taking the time. I wanted to just start on the FFO to debt walk. Thanks for the details there.

Speaker 6

I guess, first, could you just remind us of the cadence of the 2023 under recoveries hitting the cash flow statement this year? And then how should we just think about as we think about the other drivers that you'd identified sort of the split between the impacts between the $1,800,000,000 and those other drivers?

Speaker 2

Sure. So the under recovery adds highlighted in Slide 9, Colley, for 2023 across all of the utilities with the biggest impact being CL and P in Connecticut was approximately $600,000,000 So if you were to normalize where we landed at the end of 2023 from an FFO to debt using at Moody's was approximately 9%. So that would drive that up as we've indicated on the slide about 200 basis points. So with the favorable order that we received a couple of weeks ago on the annual rate adjustment mechanism, we feel good that cash plus more related to 2024 costs will start to come in the door effective July 1 through April 30 next year. So a 10 month recovery, which is very helpful to us.

Speaker 2

And then the other items, what we've tried

Speaker 1

to do is to highlight

Speaker 2

where we as it relates to our offshore wind, what we have already identified and have disclosed to you all that would significantly move us up closer to the 14% to 15% range by the end of 2025. But certainly building up towards that range, towards that time period.

Speaker 6

Got it. Okay, great. Thank you. And then maybe just on the Massachusetts CSMP process, what are sort of the next milestones for us to look out for there? And then just more broadly, how do you think about opportunities for the other states that you serve to adopt sort of similar frameworks?

Speaker 2

Sure. So I'll start with Massachusetts. So hearings on that docket just basically concluded. So now we get into the briefs and reply briefs. But one thing I want to point out to, based on the legislation that was passed a couple of years ago, the clean energy legislation, the DPU does have to render a decision by that August timeframe that I stated in my formal remarks.

Speaker 2

So as we move forward, the $600,000,000 that I highlighted in my formal remarks is really what will materialize if we do get a favorable approval from the GPU that will materialize within our forecast period. But there's further investments that will be needed beyond our current forecast period that we've also have highlighted in our filing.

Speaker 3

Thank you.

Speaker 2

So obviously, Massachusetts continues to be very proactive in identifying opportunities to really make sure that the goals that the state has established is realistically and proactively accomplished. In Connecticut, as Joe mentioned, we would love to support their clean energy strategy. But as we have both indicated in our formal remarks, it will require a collaboration and cooperation by us, by the utilities in Connecticut as well as the authority. And then lastly, in New Hampshire, as we mentioned, we are having discussions with the state on utility owned solar. We'll likely be proposing an investment opportunity in the months to come.

Speaker 2

As I mentioned in my formal remarks, we do plan to file for a rate review this summer.

Speaker 1

And all of that solar investment, just to keep in mind, would be regulated investment, solar investment, utility owned, very similar to the model that we have here in Massachusetts, Kylie.

Speaker 3

Kylie. The next question comes from the line of Nick Campanella with Barclays. Your line is now open.

Speaker 1

Good morning, Nick. Good morning, Nick.

Speaker 7

Hey, good morning, everyone. Thanks for the time. Good morning. Hey, so just kind of sticking with Connecticut here and just the fact that you're cutting investment there, but you also had this rate order, this outcome on Aquarion. Just how do you kind of see that kind of affecting the process that you're running there to potentially monetize the asset?

Speaker 7

And just maybe you can kind of update us on that process, your confidence level that whatever happens there, there wouldn't be additional equity kind of coming into the plan that you outlined today?

Speaker 2

Well, the appeal process, obviously, we would love to have a positive data point, but the appeal process will continue to make its way. You're probably looking at least a year in the making, but we continue to move forward with launch in Phase 1 of the process relatively soon. And then we'll make the decision at that point.

Speaker 7

Okay. So still moving ahead it seems. I appreciate that. I guess just a follow-up on Carly's question just around the FFO to debt. Just the South Forks tax equity investment would probably be, I would guess, more one time in nature to the, I guess, cash flow improvement.

Speaker 7

But just I just wanted to kind of confirm like net of these kind of one time items, you still see this path getting you to 14% to 15%? And what's really kind of driving that net of the one time issues?

Speaker 2

Yes. No, we certainly do, Nick. The tax equity, we actually think, as I stated 24 months, that's probably a bit conservative. I think that will probably bleed into 2026. We do have other tax benefits that we want to utilize for us before we tap into those ITCs.

Speaker 2

So that can be elongated a bit, which is great. And then longer term, yes, that does fall off the cliff. But we have other items that will certainly kick in. We are sitting on a pretty large deferred storm balance. So I see those costs coming in, in potentially 'twenty six, certainly 'twenty seven and beyond to really maintain that high level of FFO to debt.

Speaker 7

Thanks. And then just one last one for me just on Sunrise. I know that you're not giving the price, but last quarter there was negative book value. I don't believe that the queue is out, But

Speaker 8

is that still the

Speaker 7

case or something that you can kind of talk about? Or do we have to wait for the sale agreement to be public for you to revise that?

Speaker 2

It does. And that's really we have to follow the accounting rules and the accounting rules basically says that if you have a contingent gain, you have to wait to get your cash, right? So therefore the transaction has to close. So we're probably, I would say, you should expect a true up of those balances to occur likely in the Q3 of this year.

Speaker 7

Thank you very much.

Speaker 2

Sure thing, Nick.

Speaker 3

Thank you. The next question comes from the line of Jeremy Tonet with JPMorgan. Your line is now open.

Speaker 1

Good morning, Jeremy. Good morning.

Speaker 8

Good morning. Thanks for having me. Maybe just continuing with Slide 10 here real quick. Thanks for all the color provided. Just wanted to confirm the major drivers, everything on the right hand of that slide, that's all treated as FFO and not debt reduction when you talk about the walk from into 14% to 15%?

Speaker 2

Yes. No, it's a mixed bag. So obviously what's more critical is that we have the cash coming in, right, which will displace debt and obviously enhance our operating cash flows.

Speaker 9

Got it.

Speaker 8

And so maybe just pivoting towards Aquarion here in just a little bit more detail, I guess, on where you guys are in the process right now and how you what you prioritize here, pace of

Speaker 2

transaction versus value that you

Speaker 8

can achieve or just any Sure. I would frame it

Speaker 1

this way. It's not about a mad dash

Speaker 2

Sure. I would frame it this way. It's not about a mad dash to the finish line. It's about a thoughtful process that we will run for the greatest value that we possibly can harvest. So that's what's important to us is obtaining the greatest maximum value we possibly can.

Speaker 2

So if it's transactions takes a bit longer, we are fine with that. The rating agencies are fully aware of the timeframe that we've mapped out with them. And obviously, they are comfortable with that.

Speaker 8

Got it. Thank you for that. And then just to confirm real quick here, the sales proceeds are going to be helping FFO in this illustration here. Just want to make sure I was straight on that.

Speaker 2

Absolutely, absolutely. Because it displaces debt.

Speaker 8

Got it. I'll leave it there. Thank you.

Speaker 3

Thank you. The next question comes from the line of Steve Fleishman with Wolfe Research. Your line is now open.

Speaker 5

Good morning, Steve. Hey, good morning. Joe, good morning. John, good morning.

Speaker 7

Good morning. So

Speaker 5

just maybe tie up one more question on Aquarion. On the you mentioned appealing to the Supreme Court. Is there like a timeline? I don't know if you already filed that or when would you file that and when would you know if they take the case?

Speaker 10

We filed that

Speaker 2

early April, that request. So we feel good that the Supreme Court will take the case, and that'll just expedite the whole process. Once the court accepts it, then you're probably looking at 9 to 12 month process is what we're estimating.

Speaker 5

Okay. But you're not going to hold off the sale process to wait for that? You just move forward?

Speaker 1

No, we're not. Yes.

Speaker 10

Okay. And then just

Speaker 2

I was going to say, Steve, in the meantime, we are expecting to implement the original rate change and we actually accounted for that in the Q1 of this year. Once we get that, then the company can move forward with the filing for their WICA program, which will give them much which will give them about 30%, 35% of their annual capital program cost recovery on.

Speaker 5

Okay. And then just on Connecticut regulatory environment, appreciate the decisions being made there. Early in the year, there had been talk about the governor maybe kind of expanding the commission and some changes there. And is that still being considered at all? And just I know you've been on an initiative to try to highlight these issues.

Speaker 5

Just do you feel like you're making any progress in resonating on the kind of quality of the regulatory environment being kind of investable?

Speaker 1

Yes. Steve, a couple of things. The governor has the ability to appoint 5 commissioners. He has vacillated over that and I'm not really sure at this point whether he wants to take it up to 5. As you know, all three commissioners remain in holdover status.

Speaker 1

And I'm not really quite sure what the current plan is around that. Obviously, we have grave concerns about the environment there. I think you know that. I think everyone knows that. We enjoy a very productive working relationship in our other two jurisdictions.

Speaker 1

We are so aligned that no light shines between kind of the state's initiatives in our initiatives. And when you collaborate, I think you should have tremendous outcomes. You look at the benefits that Massachusetts is achieving. You look at the progressive moves that are taking place up in New Hampshire as we collaborate with those folks and they really understand it. And it's going to take that type of collaboration as we look to electrify our system and move away from carbon fuels.

Speaker 1

But if we don't collaborate, it makes it very, very difficult. I mean, we've operated this way. In my 40 year history, we've always had strong working relations. So it's a disappointment to me and it's a priority to me as we try to focus on Connecticut and to see if we can't get aligned and get on the same page so that we can move the agenda. Connecticut has a phenomenal opportunity to be really a leader in clean energy.

Speaker 1

We built that port down there. We collaborated. That clean energy port down there should put them on the map for clean energy. But unfortunately, it's been a real challenge. But I just want to assure you and all of our investors that this is something I take very seriously and I will continue to work at it 7 days a week until such time as we can get some constructive change.

Speaker 5

Okay. Appreciate that. And then lastly on the New Hampshire solar opportunity, I know solar in New England tends to be decent amount kind of capital costs, just not as much available land, all that stuff. So just any sense on kind of size and investment opportunity there for the New Hampshire Solar?

Speaker 1

Yes. I got to tell you one of the challenges first of all, we don't really have a sizing at this point. We're really in the first inning of this game. But the fact that they are interested around utility on solar, I take great confidence. But I will tell you the one thing there's no shortage of in the state of New Hampshire is land.

Speaker 1

And so that's where I see great opportunity. And I also see the proximity to our infrastructure. It makes it very easy as well. One of the challenges that a lot of folks early in the solar days was folks would want to build, but they'd be in rural areas where there wasn't any load. But we have opportunities in New Hampshire with sizable tracts of land that would allow us to obviously collaborate.

Speaker 1

It has to be a partnership. It has to be a community that's interested in this. But I do see great opportunity up there. So we're really in the first thing. I think we'll be able to update you probably on the second, third quarter calls around how that's going.

Speaker 1

But I think the most important thing for us is to get a model in place in New Hampshire for utility owned solar that is fair for us and is fair for the customers.

Speaker 5

Okay, great. Thank you very much.

Speaker 2

Thank you, Steve.

Speaker 3

Thank you. The next question comes from the line of Andrew Weisel with Scotiabank. Your line is now open.

Speaker 1

Good morning, Andrew. Good morning.

Speaker 10

Hi, good morning guys. In Connecticut, another question here. I agree the state policies and regulatory environment are not aligned. So I understand your reluctance to put capital to work. My question is what exactly is it that you're looking for?

Speaker 10

What would it take to get you more comfortable with the regulatory setup? Is it a qualitative good faith kind of conversation? Or are you looking for something more explicit like preapprovals for spending on AMI and EVs?

Speaker 1

Yes. Well, we're looking for pre approval. We're looking for a regulatory recovery, a roadmap for the recovery of our dollars that we have spent. As you know, the RIM filing that we just got approved there for 800 plus 1,000,000 That was money we spent on behalf of the customers in Connecticut. These were state mandated requests that we did.

Speaker 1

And so we expect to get paid for that. And if the state wants to have AMI, we expect to have a orderly recovery process for our investments just like we have in Massachusetts. And that's all we're looking for. That if we spend dollars, we want to know we're going to get the dollars back. We don't want to be chasing those dollars.

Speaker 1

We don't want to have uncertainty around it. And I know that everybody on this call doesn't want uncertainty. And so you can have my assurance that we will not spend dollars until such time as we have a constructive regulatory environment that allows us to get fair treatment in the recovery of our dollars that we've spent on behalf of the customers in Connecticut to bring better service.

Speaker 10

Okay. Is that something you think could be done in the

Speaker 1

regulatory arena. You certainly I mean, we're aligned with the governor. We're aligned with this other agencies. So we can have a collaborative effort that we submit a filing for all on the same page. Even the attorney general, we have very, very strong relations there.

Speaker 1

But we just have to get PURA aligned with all of the other interests around the state, so that we can get a constructive roadmap to move forward.

Speaker 2

All

Speaker 10

right. Sounds good. Then on FFO to debt, if I could elaborate, I know this has been asked a few times and I appreciate the details in Page 9. Maybe this is a silly question, but if the 6 $1,000,000 from under recoveries adds 2%, you triple that to $800,000,000 How come the impact to FFO to debt goes up by double or less? What dumb guide math might suggest it would be a 3:one ratio in the dollars and the percentages.

Speaker 10

So what are the offsets there?

Speaker 2

Well, keep in mind that in that 300 basis points to 400 basis point movement, it does include other cash flow items that we have not quantified in that $1,800,000,000 Andrew. And then additionally, when the cash comes in, it's going to impact both the numerator and the denominator accordingly. So it's not a one for 1.

Speaker 10

Okay. Thank you very much.

Speaker 11

No problem.

Speaker 3

Thank you. The next question comes from the line of Anthony Crowdell with Mizuho. Your line is now open.

Speaker 12

Good morning, Andy. Good morning, Joe. Good morning, John. How's it going? Congrats on your Celtics last night, maybe some positive news to the

Speaker 1

Maybe the Bruins tonight. Maybe the Bruins tonight.

Speaker 8

Maybe not. Just quickly

Speaker 12

on Slide 12, you had issued some parent debt already for the year. Do I think that's going to that's for the maturities at the bottom of this slide or the maturities you may also refinance and that's going to be incremental debt? And let me know if that sounds good.

Speaker 2

No, you're thinking about it correctly. So it's for the maturities listed on that slide. We do have $900,000,000 that's due on June 27. And then we have another $450,000,000 in the fall. Also in January, early January, we have another $300,000,000 coming due.

Speaker 2

So it's more of the prefunding. So with the proceeds from the transactions that I highlighted, we should be out of the debt and capital markets for quite some time.

Speaker 12

Great. And then just to stay on the mark with Connecticut questions. I know sometimes when utilities ramp up CapEx or they may be doing some new projects, they talk to policymakers, some regulators prior to it and get a feel of just, hey, the policymakers are on board with this increased capital that they're spending. I'm curious if something happened in Connecticut where you had some discussions on actually the lowering of CapEx.

Speaker 1

Yes, we've had discussions about our investments. I mean, we started talking about AMI 3 years ago, and we're all on the same page that everybody wanted AMI. We talked about investment in EVs, electric vehicles, infrastructure. So we were totally aligned with certainly key leaders down there. So we continue to have that dialogue.

Speaker 1

And right now we have dialogue where we share with them that we can't keep moving forward unless we get the certainty around it. I mean costs have increased since the time we began talking about AMI. If we had got on with the show, that would have saved our customers money, but this delay doesn't help, Mattis. We're kicking it off here in Massachusetts. We're going to be putting in AMI, AMITAS and infrastructure and it's the customers are going to benefit from that.

Speaker 12

Great. Thanks for taking my questions and good quarter.

Speaker 9

Thank you. Thanks.

Speaker 3

Thank you. The next question comes from the line of Durgesh Chopra with Evercore. Your line is now open.

Speaker 1

Good morning, Durgesh.

Speaker 2

Hey, Durgesh.

Speaker 9

Hey, good morning, Joe. Hey, John. Good morning. Thanks for giving me time. Hey, John, just for investors and us trying to think about the implications if you don't move forward with the Aquarion water cell, Can you just help clarify what does that do to the equity?

Speaker 9

Could the equity if you don't move forward with the sale, could the equity be higher than $1,300,000,000 or is that the max? And then if you do a sale that number moves lower?

Speaker 12

Well, there's still a lot

Speaker 2

of things in flux and I'm not we're not moving off of the $1,300,000,000 equity needs until we have more clarity. So as things evolve over the coming year. But right now our position is to kind of work preparing the potential sale for Aquarion and get through Phase 1 and see what how that looks like.

Speaker 9

Understood. And then just to be clear on the FFO to debt, I know a lot of questions have been asked. You get to that 14% to 15% by 2025 with or without the Aquarian sale? Am I thinking about it the right way?

Speaker 2

No, no. If you look at the left hand side of that slide on the bottom, we have other drivers. Those other drivers are cash inflows that we have not quantified. But yes, yes, yes. No, we have assumed as I continue to reiterate in our financing plan, we have assumed the sale of Aquarion.

Speaker 9

Perfect. Okay. And then just one hopefully quick follow ups. Anything to kind of note in terms of the construction process or costs on Revolution and Sunrise? Any updates versus your past disclosures there?

Speaker 1

Yes, I know it's too early right now, but we continue to stay close to it and we'll keep you updated. We did start though. The good news is we're in the ground and construction is underway. So we're excited and we're going to utilize the same practices that we successfully deployed in the construction of the South Rock project, which as you all know, all 12 of the turbines are up and they're running. And we're very, very proud that we are the 1st offshore wind provider in the United States.

Speaker 9

Perfect. I appreciate you taking my questions and giving me time. Thank you again both.

Speaker 3

Thank you. Our final question comes from the line of Travis Miller with Morningstar. Your line is now open.

Speaker 12

Good morning. Travis.

Speaker 11

Good morning, everyone. Good morning. Thanks for taking my questions. Real quick one staying on CLNP here. If you take out your depreciation or maintenance CapEx, how much of that additional CapEx is covered under an existing rider or tracker or something like that outside of a Bates rate?

Speaker 11

You mentioned energy efficiency. Is there other CapEx?

Speaker 2

The biggest CapEx is the $300,000,000 system hardening that we've had in place for quite some time. So that has helped the timely cost recovery and it's helped Connecticut get to a much better situation from a reliability standpoint. So I would say that a good chunk of the as you pointed out, the maintenance depreciation would be covered by that.

Speaker 11

Okay. And then kind of real quick following on some of the other questions. Do you expect the clean energy policy overall, so not necessarily just the rate setting, but clean energy policy overall in Connecticut will be a political issue this year or is that something for years down the road?

Speaker 1

Yes. No, I mean the legislative session is going to end next week. So I don't expect that you could see anything at that point. But I think the dialogue will continue as we'll remain engaged for the rest of this year and into the future until such time as we are all on the same page and we can find out what's important to this state that we can invest in and get a fair return and fair really a level playing field. That's all we're looking for.

Speaker 11

Okay, perfect. Thanks so much for the time.

Speaker 2

Thanks, Travis.

Speaker 3

Thank you.

Speaker 10

I want to thank everybody. I

Operator

want to thank sorry, Alisa. I just want to thank everybody for their time. And please follow-up with IR with any additional follow-up questions that we can help out with, and I'll turn it back over to

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Earnings Conference Call
Eversource Energy Q1 2024
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