10-Q: Eversource Q2 Earnings Rise, Aquarion Sale Progresses

Eversource Energy reported increased second-quarter earnings and reaffirmed its 2025 guidance, while advancing the sale of its Aquarion water business and securing key rate adjustments across its regulated utilities.

Summary

• Net Income Attributable to Common Shareholders increased to $352.7 million ($0.96 per share) for Q2 2025, up from $335.3 million ($0.95 per share) for Q2 2024.
• For the first half of 2025, Net Income Attributable to Common Shareholders was $903.5 million ($2.45 per share), compared to $857.2 million ($2.43 per share) in the first half of 2024.
• Operating Revenues for Q2 2025 were $2,838.1 million, an increase of $304.6 million from Q2 2024.
• Operating Revenues for the first half of 2025 were $6,956.4 million, an increase of $1,090.3 million from the first half of 2024.
• Cash flows provided by operating activities significantly increased to $2.10 billion in the first half of 2025, up from $962.0 million in the first half of 2024.
• The sale of the Aquarion water distribution business is progressing, with an aggregate enterprise value of approximately $2.4 billion in cash, expected to close in late 2025.
• The New Hampshire Public Utilities Commission (NHPUC) approved a permanent rate increase of $100.7 million for Public Service Company of New Hampshire (PSNH), effective August 1, 2025.
• Eversource reaffirmed its 2025 earnings guidance range of $4.67 to $4.82 per share and a long-term EPS growth rate of 5% to 7% through 2029, using a 2024 non-GAAP EPS base of $4.57 per share.

Sentiment

Score: 7

Explanation: The filing indicates solid financial performance with increased earnings and strong operating cash flow. Strategic asset divestiture and favorable rate case outcomes are positive. However, ongoing regulatory uncertainties, particularly with FERC ROE complaints and storm cost recovery, coupled with rising interest expenses and a credit rating downgrade for a subsidiary, temper the overall positive outlook.

Positives

• Net income attributable to common shareholders increased by $17.4 million for the second quarter and $46.3 million for the first half of 2025 compared to the same periods in 2024.
• Operating revenues saw substantial increases of $304.6 million for the second quarter and $1,090.3 million for the first half of 2025, driven by base distribution rate increases and higher wholesale market sales.
• Cash flows provided by operating activities more than doubled in the first half of 2025 to $2.10 billion, primarily due to improved regulatory recoveries and reduced storm cost payments.
• The pending sale of the Aquarion water distribution business for approximately $2.4 billion is expected to provide significant cash proceeds to pay down parent company debt.
• PSNH received approval for a permanent rate increase of $100.7 million, effective August 1, 2025, and an alternative regulatory framework allowing annual revenue adjustments through 2028.
• The Massachusetts Energy Facilities Siting Board approved the Greater Cambridge Energy Program, a significant infrastructure project valued at approximately $1.84 billion, enhancing grid resiliency and supporting decarbonization goals.
• NSTAR Electric received approval for an interim cost recovery mechanism for its Electric Sector Modernization Plan, allowing for $139 million in grid modernization and resiliency investments.
• Yankee Gas received authorization to issue up to $360.0 million in long-term debt through December 31, 2026, and PSNH received authorization for up to $300.0 million through December 31, 2025, supporting capital needs.

Negatives

• Interest expense increased by $21.9 million for the second quarter and $71.9 million for the first half of 2025, primarily due to the absence of capitalized interest from offshore wind project sales and higher short-term debt costs.
• Moody's revised CL&P's corporate credit rating from A3 to Baa1 and its senior secured debt rating from A1 to A2, citing the Connecticut regulatory environment as the reason for the downgrade.
• The company recorded a contingent liability of $296 million as of June 30, 2025, related to post-closing purchase price adjustments for the South Fork Wind and Revolution Wind projects, including potential construction cost overruns and investment tax credit adjustments.
• Unrecovered storm costs of $247 million for PSNH were removed from the rate proceeding and will be considered in a separate prudency review, creating ongoing regulatory uncertainty for recovery.
• The Connecticut Public Act No. 25-173 aims to reduce electric rates for retail customers by up to $300 million over the next two years, which could impact future rate design and recovery mechanisms.
• The company made a $69 million construction cost post-close purchase price adjustment payment related to the South Fork Wind project in June 2025, a significant portion of which is disputed.

Risks

• Variability in costs and final investment returns of the Revolution Wind offshore wind project due to purchase price post-closing adjustments, including potential construction cost overruns and the eligibility/value of federal investment tax credits.
• Ongoing FERC ROE complaints, where the ultimate outcome could materially impact financial condition, results of operations, and cash flows, with no reasonable basis for a change to reserves or recognized ROEs at this time.
• Disruptions in capital markets or other events that make access to necessary capital more difficult or costly.
• Changes in economic conditions, including impacts on interest rates, tax policies, tariffs, and customer demand and payment ability.
• Actions or inaction of local, state, and federal regulatory, public policy, and taxing bodies, which could affect rate recovery and business operations.
• Substandard performance of third-party suppliers and service providers.
• Fluctuations in weather patterns, including extreme weather due to climate change, impacting energy usage and operational costs.
• Contamination of, or disruption in, water supplies for the water distribution business (though this business is pending sale).
• Changes in laws, regulations, Presidential executive orders, or regulatory policy, including compliance with environmental laws and regulations (e.g., OBBBA, CT Public Act No. 25-173).
• Changes in accounting standards and financial reporting regulations.
• Actions of rating agencies, such as the recent downgrade of CL&P's credit rating by Moody's.
• Cyberattacks or breaches that could compromise proprietary information and personal customer data.

Future Outlook

Eversource reaffirmed its projection to earn within a 2025 earnings guidance range of $4.67 to $4.82 per share. The company also reaffirmed its long-term EPS growth rate through 2029 will be in a 5% to 7% range, using 2024 non-GAAP EPS of $4.57 per share as the base year. The sale of the Aquarion water distribution business is expected to close in late 2025, with proceeds used to pay down parent company debt. Regulatory proceedings in Connecticut and New Hampshire are expected to finalize new rate frameworks and cost recovery mechanisms, which will influence future revenues and operational stability.

Management Comments

• We reaffirmed our projection to earn within a 2025 earnings guidance range of between $4.67 per share and $4.82 per share.
• We also reaffirmed our projection that our long-term EPS growth rate through 2029 will be in a 5 to 7 percent range, using 2024 non-GAAP EPS of $4.57 per share as the base year.

Industry Context

The utility sector continues to navigate a complex regulatory environment, balancing affordability for customers with the need for significant infrastructure investments to enhance reliability and support clean energy transitions. Eversource's focus on rate-regulated businesses in Connecticut, Massachusetts, and New Hampshire aligns with broader industry trends of stable, predictable returns from regulated assets. The ongoing FERC ROE complaints highlight the persistent tension between utilities seeking fair returns on transmission investments and consumer advocates pushing for lower rates. The passage of the One Big Beautiful Bill Act and Connecticut's Public Act No. 25-173 reflects a national and state-level push towards clean energy incentives and rate mitigation, which utilities must adapt to while maintaining financial health and investment capacity. The sale of the Aquarion water business indicates a strategic streamlining towards core energy delivery, a trend seen in some diversified utilities.

Comparison to Industry Standards

• The FERC ROE complaints involve a comparison of Eversource's (and other NETOs') base Return on Equity (ROE) of 11.14% (and later 10.57%) and incentive cap of 13.1% (and later 11.74%) against proposed methodologies, including a preliminary just and reasonable base ROE of 10.41% and incentive cap of 13.08% for NETOs, which FERC concludes are of average financial risk. This compares to the Midcontinent ISO (MISO) transmission owners' cases where FERC adopted a two-model approach utilizing the two-step discounted cash flow model and the capital asset pricing model, with directed refunds for certain periods.
• The authorized regulatory ROE of 9.5% for PSNH, with a 50% common equity ratio, is a specific benchmark set by the NHPUC for its distribution business segment, providing a clear standard for its performance within New Hampshire's regulatory framework.
• The Greater Cambridge Energy Program, with a total project cost of approximately $1.84 billion, represents a significant investment in grid modernization and resiliency, comparable in scale to major urban utility infrastructure upgrades aimed at supporting increased electric demand and decarbonization goals in metropolitan areas.

Legal Proceedings

• Four separate FERC ROE complaints are ongoing, challenging transmission base ROE and incentive caps, with significant uncertainty regarding their ultimate financial impact.
• CL&P is undergoing a prudency review proceeding by PURA for approximately $978 million in catastrophic storm and pre-staging event costs incurred between January 1, 2018, and December 31, 2023, plus $246 million in carrying charges.
• Aquarion opted into class-action settlements with 3M Company, E.I. DuPont de Nemours and Company, Tyco Fire Products LP, and BASF Corporation to resolve PFAS contamination claims, with proceeds to fund capital expenditures.
• AWC-CT's appeal of a PURA rate case decision is before the Connecticut Supreme Court, which recently overturned a disallowance of $1.5 million in water conservation program expenses but affirmed other parts of PURA's decision.

Related Party Transactions

• Eversource parent provides intercompany loans to its subsidiaries (e.g., PSNH, CL&P) to meet short-term borrowing needs, with interest charged at the same weighted-average rate as its commercial paper program.
• Yankee Gas, NSTAR Gas, and EGMA purchase natural gas transmission services from an Enbridge, Inc. natural gas pipeline project, in which Eversource has an equity ownership interest, totaling $77.7 million annually.

Stakeholder Impact

• Shareholders: Benefit from increased net income and reaffirmed EPS guidance, but face potential dilution from the ATM equity offering program and uncertainty from contingent liabilities related to offshore wind projects.
• Customers: Will experience rate increases from PSNH and NSTAR Gas, but may see future rate reductions in Connecticut due to Public Act No. 25-173 and potential benefits from energy efficiency programs.
• Employees: Affected by the establishment of a Cash Balance Pension Plan, replacing K-Vantage contributions for most participants.
• Creditors: Impacted by Moody's credit rating downgrade for CL&P, which could affect future borrowing costs, but also by the planned use of Aquarion sale proceeds to pay down parent debt.
• Regulators: Actively involved in numerous rate cases, prudency reviews, and the implementation of new regulatory frameworks (e.g., PBR, securitization), reflecting ongoing oversight of utility operations and financial health.

Next Steps

• PSNH will file its recoupment calculation for the permanent rate increase by August 11, 2025.
• CL&P will submit an Interim Performance Mechanism Filing with PURA by November 1, 2025, detailing results of reported metrics and scorecards.
• Annual reporting of scorecards and reported metrics to PURA for CL&P PBR will begin March 1, 2026.
• Yankee Gas expects a final decision from PURA on its distribution rate case in October 2025.
• DPU approval for NSTAR Gas's annual PBR Adjustment filing is expected by October 31, 2025.
• The DPU intends to conduct another phase of the NSTAR Electric ESMP proceeding to establish a long-term cost recovery mechanism.
• Initial briefs for the MISO ROE appeal are due August 14, 2025, with final briefs due January 26, 2026.
• PURA is expected to initiate proceedings related to securitization, renewable portfolio standard obligations, and other provisions in the newly enacted Connecticut Public Act No. 25-173.
• The sale of the Aquarion water distribution business is expected to close in late 2025, subject to regulatory approvals.

Key Dates

Recommendation

Eversource's Q2 2025 results show solid financial performance with increased earnings and robust operating cash flow, supported by favorable regulatory rate adjustments for its core utility businesses. The planned sale of Aquarion is a positive strategic move to deleverage. However, the company faces significant headwinds including rising interest expenses, a recent credit rating downgrade for a key subsidiary (CL&P), and ongoing, material uncertainties surrounding FERC ROE complaints and the contingent liabilities from its offshore wind divestitures. While the regulated nature of the business provides stability, these unresolved issues and increased costs warrant a cautious approach. The stock is likely to remain range-bound until greater clarity emerges on these regulatory and contingent financial matters.

Keywords

Eversource, Utility, Electric Distribution, Natural Gas Distribution, Electric Transmission, Water Distribution, SEC Filing, 10-Q, Earnings, Revenue, Net Income, EPS, Cash Flow, Regulatory Rates, Rate Case, FERC, PURA, NHPUC, DPU, Aquarion, Asset Sale, Offshore Wind, Revolution Wind, South Fork Wind, Greater Cambridge Energy Program, PFAS, Debt, Capital Expenditures, Connecticut, Massachusetts, New Hampshire, Credit Rating