10-Q: Eversource Energy Reports Q2 2024 Earnings, Reaffirms Full-Year Guidance

Eversource Energy announces Q2 2024 earnings of $0.95 per share and reaffirms its full-year non-GAAP earnings guidance of $4.50 to $4.67 per share.

Summary

• Eversource Energy reported net income attributable to common shareholders of $335.3 million, or $0.95 per share, for the second quarter of 2024.
• This compares to $15.4 million, or $0.04 per share, for the second quarter of 2023.
• For the first half of 2024, net income attributable to common shareholders was $857.2 million, or $2.43 per share, compared to $506.6 million, or $1.45 per share, in the first half of 2023.
• The company reaffirmed its 2024 non-GAAP earnings guidance range of $4.50 to $4.67 per share, excluding the impact of offshore wind project sales and related transaction costs.
• Eversource also reaffirmed its long-term EPS growth rate projection of 5 to 7 percent through 2028.
• Cash flows from operating activities were $962.0 million in the first half of 2024, compared to $647.3 million in the first half of 2023.
• Investments in property, plant, and equipment totaled $2.22 billion in the first half of 2024, compared to $2.04 billion in the first half of 2023.
• The company completed the sale of its 50 percent ownership share of Sunrise Wind to rsted on July 9, 2024, receiving $118 million at closing with $34 million to follow upon completion of construction milestones.
• An agreement to sell the existing 50 percent interests in the South Fork Wind and Revolution Wind projects to Global Infrastructure Partners (GIP) for $1.1 billion is expected to close in the third quarter of 2024.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the strong earnings report, reaffirmed guidance, and progress on strategic asset sales. However, potential risks associated with the offshore wind project sales and regulatory uncertainties temper the overall sentiment.

Positives

• Significant increase in Q2 2024 earnings per share compared to Q2 2023.
• Reaffirmation of full-year non-GAAP earnings guidance and long-term EPS growth rate.
• Completion of the sale of Sunrise Wind, generating immediate cash proceeds.
• Expected closing of the sale of South Fork Wind and Revolution Wind, providing substantial cash inflow.
• Increase in cash flows from operating activities.

Negatives

• Electric distribution segment earnings decreased due to higher operations and maintenance expense.
• The sale of offshore wind assets may result in post-closing purchase price adjustments, including potential cost overrun sharing obligations and obligations to maintain GIP's internal rate of return for the Revolution Wind project.

Risks

• The closing of the sale of South Fork Wind and Revolution Wind to GIP is subject to customary conditions, including regulatory approvals and the completion of partnership agreements between GIP and rsted.
• The purchase price for the sale of South Fork Wind and Revolution Wind is subject to adjustments based on the progress, timing, and construction cost of Revolution Wind, including changes in actual versus forecasted capital spending between signing the agreement and closing of the transaction.
• Factors that could result in Eversource's total net proceeds from the transaction to be lower, resulting in post-closing adjustment payments owed to GIP, include the ultimate cost of construction and extent of cost overruns for Revolution Wind, delays in constructing Revolution Wind, which would impact the economics associated with the purchase price adjustment, and Revolution Wind's eligibility for federal investment tax credits at less than the value included in the purchase price.
• Total net proceeds could also be adjusted for a benefit due to Eversource if there are lower operation costs or higher availability of the projects through the period that is four years following the commercial operation date of the Revolution Wind project.

Future Outlook

Eversource reaffirmed its 2024 non-GAAP earnings guidance range of $4.50 to $4.67 per share and its long-term EPS growth rate projection of 5 to 7 percent through 2028.

Industry Context

The announcement reflects a strategic shift for Eversource, focusing on its core regulated utility operations and divesting its offshore wind investments. This aligns with a broader trend in the energy industry where companies are reassessing their investment strategies in renewable energy projects amid rising costs and regulatory uncertainties.

Comparison to Industry Standards

• The sale of offshore wind assets is comparable to moves by other utilities like Avangrid and Ørsted, who are also adjusting their renewable energy portfolios.
• The reaffirmed EPS growth rate of 5-7% is within the typical range for regulated utilities, reflecting a stable but not high-growth business model.
• The strategic shift to focus on regulated operations mirrors moves by other large utilities seeking to reduce risk and ensure predictable earnings.

Legal Proceedings

• The Yankee Companies have filed complaints against the DOE in the Court of Federal Claims seeking monetary damages resulting from the DOE's failure to accept delivery of, and provide for a permanent facility to store, spent nuclear fuel pursuant to the terms of the 1983 spent fuel and high-level waste disposal contracts between the Yankee Companies and the DOE.
• The court set dates for the DOE Phase V trial of October 28, 2024 through November 8, 2024.
• Four separate complaints were filed at the FERC by combinations of New England state attorneys general, state regulatory commissions, consumer advocates, consumer groups, municipal parties and other parties (collectively, the Complainants).

Related Party Transactions

• Yankee Gas, NSTAR Gas and EGMA purchase natural gas transmission services from the Enbridge, Inc. natural gas pipeline project. These affiliate transaction costs total $77.7 million annually and are classified as Purchased Power, Purchased Natural Gas and Transmission on the Eversource statements of income.

Stakeholder Impact

• Shareholders will benefit from the increased earnings and reaffirmed growth guidance.
• Customers may see changes in their rates due to the various regulatory filings and rate adjustments.
• Employees may be affected by the strategic shift and asset sales, although no specific details are provided.

Next Steps

• Closing of the sale of South Fork Wind and Revolution Wind to Global Infrastructure Partners (GIP) is expected in the third quarter of 2024.
• A final PURA decision in CL&Ps RAM filing is expected on August 14, 2024.
• PSNH filed an application with the NHPUC to request an increase in permanent base distribution rates of $181.9 million, which is inclusive of the temporary rate increase, and proposed to take effect August 1, 2025.
• A decision by the NHPUC on permanent rates is expected by August 1, 2025.

Key Dates

Keywords

Eversource Energy, earnings, offshore wind, financial results, Global Infrastructure Partners, rsted, South Fork Wind, Revolution Wind, Sunrise Wind, electric distribution, electric transmission, natural gas distribution, water distribution, capital expenditures, rate case, FERC, NHPUC, PURA, BOEM, NYSERDA