8-K: Eversource Energy Reports Q3 2024 Loss Amid Offshore Wind Divestiture, Updates Earnings Guidance

Eversource Energy reported a net loss for the third quarter of 2024, primarily due to the divestiture of its offshore wind business, while updating its full-year earnings guidance.

Summary

• Eversource Energy reported a net loss of $(118.1) million, or $(0.33) per share, for the third quarter of 2024, a significant decrease compared to earnings of $339.7 million, or $0.97 per share, in the same quarter of 2023.
• The company's earnings for the first nine months of 2024 totaled $739.1 million, or $2.08 per share, down from $846.2 million, or $2.42 per share, in the first nine months of 2023.
• Non-GAAP recurring earnings were $405.9 million, or $1.13 per share, for Q3 2024, compared to $339.7 million, or $0.97 per share, in Q3 2023.
• For the first nine months of 2024, non-GAAP recurring earnings reached $1.26 billion, or $3.56 per share, up from $1.18 billion, or $3.38 per share, in the same period of 2023.
• The results include a net after-tax loss of $524.0 million, or $1.48 per share, related to the sale and divestiture of its offshore wind investment.
• Eversource has updated its 2024 non-GAAP recurring earnings projection to a range of $4.52 to $4.60 per share, slightly down from the initial projection of $4.50 to $4.67 per share, due to higher than anticipated interest expenses.
• The company reaffirmed its long-term earnings per share growth rate within the range of 5 to 7 percent from a 2023 base of $4.34 per share.
• Capital investments have been increased from $23.1 billion to $23.7 billion for the period 2024 to 2028, due to the recently approved Electric Sector Modernization Plan (ESMP) in Massachusetts.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the reported net loss and the reduction in earnings guidance, although the company is taking steps to improve its financial position and focus on core regulated businesses. The divestiture of the offshore wind business is a significant negative, but the company's long-term growth prospects and increased capital investments provide some positive outlook.

Positives

• Non-GAAP recurring earnings for the third quarter of 2024 increased compared to the same period in 2023.
• The company reaffirmed its long-term earnings per share growth rate of 5 to 7 percent.
• Eversource has increased its capital investments, indicating a focus on growth and infrastructure development.
• The company has successfully exited the offshore wind business, streamlining its operations to focus on regulated utilities.
• The Electric Sector Modernization Plan (ESMP) approval in Massachusetts will drive future investments and growth.
• The company's electric transmission and distribution segments showed improved results due to increased investments and rate increases.
• The company is targeting a FFO to Debt ratio of 14% to 15% by 2025, indicating a focus on financial health.

Negatives

• Eversource reported a net loss of $(118.1) million for the third quarter of 2024.
• The company's overall earnings for the first nine months of 2024 decreased compared to the same period in 2023.
• The updated 2024 non-GAAP recurring earnings projection was slightly reduced due to higher than anticipated interest expenses.
• The company incurred a significant net after-tax loss of $524.0 million related to the divestiture of its offshore wind investment.
• The natural gas distribution segment reported a loss for the third quarter of 2024.
• Year-to-date results were impacted by the absence of a prior year regulatory benefit in New Hampshire, as well as higher interest, O&M, depreciation and property tax expense.

Risks

• The company faces risks related to cyberattacks and breaches that could compromise sensitive information.
• There is variability in the costs and projected returns of the Revolution Wind and South Fork Wind offshore wind projects.
• Disruptions in capital markets could make access to necessary capital more difficult or costly.
• Changes in economic conditions, including interest rates and tax policies, could impact the company's performance.
• The company is exposed to risks related to acts of war, terrorism, and physical attacks that could disrupt operations.
• Actions or inaction of regulatory bodies could impact the company's business.
• Fluctuations in weather patterns, including extreme weather due to climate change, pose a risk to operations.
• Changes in laws, regulations, and accounting standards could affect the company's financial reporting.
• The company is exposed to risks related to the performance of third-party suppliers and service providers.

Future Outlook

Eversource Energy has updated its 2024 non-GAAP recurring earnings projection to a range of $4.52 to $4.60 per share and reaffirmed its long-term earnings per share growth rate within the range of 5 to 7 percent from a 2023 base of $4.34 per share. The company also increased its capital investments to $23.7 billion for the period 2024 to 2028.

Management Comments

• Chairman, President and Chief Executive Officer Joe Nolan stated that the company posted solid operational and financial results during the third quarter.
• Joe Nolan also expressed pride in the Eversource crews who provided mutual assistance in Virginia after Hurricane Helene.
• Joe Nolan emphasized that following the exit from offshore wind development, Eversource is now a pure-play regulated utility focused on providing innovative technology and safe and reliable services.
• Management believes the impacts of the losses on the offshore wind investments, the loss on the disposition of land associated with an abandoned project, and transaction and transition costs are not indicative of Eversource Energy's ongoing costs and performance.

Industry Context

Eversource's move to become a pure-play regulated utility aligns with a broader trend in the energy sector where companies are focusing on core regulated businesses and divesting from riskier ventures like offshore wind development. The increased capital investments reflect the growing need for grid modernization and clean energy infrastructure, which is a common theme across the industry.

Comparison to Industry Standards

• Eversource's performance is mixed when compared to industry peers. While the company's regulated utility segments showed growth, the significant loss from the offshore wind divestiture is a notable deviation from peers who have not made similar divestments.
• Companies like NextEra Energy and Duke Energy, which also have significant regulated utility operations, have shown more consistent earnings growth in recent quarters, although they may have different exposure to offshore wind.
• The increase in capital expenditure to $23.7 billion is in line with the industry trend of investing in grid modernization and clean energy infrastructure, similar to what companies like American Electric Power and Southern Company are doing.
• Eversource's long-term EPS growth target of 5-7% is comparable to the industry average for regulated utilities, but the company's current performance is below this target due to the one-off losses.

Stakeholder Impact

• Shareholders will be impacted by the reported net loss and the reduction in earnings guidance.
• Customers will benefit from the company's investments in grid modernization and clean energy infrastructure.
• Employees will continue to be part of a company focused on regulated utility operations.
• Suppliers and creditors will be impacted by the company's financial performance and capital expenditure plans.

Next Steps

• Eversource Energy will host a conference call on November 5, 2024, to discuss the financial results.
• The company will continue to execute its capital plan, including investments in the Electric Sector Modernization Plan (ESMP) in Massachusetts.
• Eversource will focus on achieving its targeted FFO to Debt metrics of between 14% and 15% by 2025.
• The company will continue to monitor and manage risks related to cyberattacks, economic conditions, and regulatory changes.

Key Dates

Keywords

Eversource Energy, Utilities, Earnings, Offshore Wind, Capital Investments, Electric Transmission, Electric Distribution, Natural Gas Distribution, Water Distribution, Non-GAAP Earnings, EPS, Regulation, Clean Energy, Massachusetts, New Hampshire, Connecticut