10-Q: Eversource Q3 Earnings Surge, Offshore Wind Liability Rises

Eversource Energy reported a significant increase in Q3 2025 earnings, driven by regulatory rate adjustments and improved operating cash flows, despite a substantial increase in its offshore wind contingent liability.

Summary

• Net income attributable to common shareholders for Q3 2025 was $367.5 million ($0.99 per share), a substantial improvement from a loss of $118.1 million ($-0.33 per share) in Q3 2024.
• For the first nine months of 2025, net income attributable to common shareholders reached $1.27 billion ($3.44 per share), up from $739.1 million ($2.08 per share) in the same period of 2024.
• Operating revenues increased by $157.4 million to $3.22 billion for Q3 2025 and by $1.25 billion to $10.18 billion for the first nine months of 2025, compared to the respective prior-year periods.
• Operating cash flows for the first nine months of 2025 totaled $3.20 billion, a significant increase from $1.52 billion in the first nine months of 2024, primarily due to improved regulatory recoveries.
• Eversource narrowed its 2025 non-GAAP earnings guidance to $4.72-$4.80 per share, excluding offshore wind impacts, and reaffirmed its 5-7% long-term EPS growth rate through 2029.
• A pre-tax charge of $284 million was recognized in Q3 2025 to increase the offshore wind contingent liability, primarily due to revised construction cost projections for the Revolution Wind project.
• The contingent liability for offshore wind projects stood at $507.7 million as of September 30, 2025, up from $365 million at December 31, 2024.
• The company partially reversed a valuation allowance on deferred tax assets, recording a $165 million benefit in Q3 2025, along with $118 million in state tax benefits and credits.
• Yankee Gas received approval for a $95.7 million distribution rate increase, effective November 1, 2025, with an authorized regulatory ROE of 9.32%.
• PSNH received approval for a permanent distribution rate increase of $100.7 million, effective August 1, 2025, with an authorized regulatory ROE of 9.5%.
• CL&P received $107.8 million in general obligation bond proceeds from the State of Connecticut for hardship and electric vehicle charging program costs.
• The sale of the Aquarion water distribution business for approximately $2.4 billion is expected to close in late 2025, with proceeds intended to pay down Eversource parent debt.
• Consolidated capital expenditures for the first nine months of 2025 were $3.34 billion, slightly down from $3.40 billion in the prior year.
• Eversource issued $2.04 billion in new long-term debt and repaid $750 million in long-term debt during the first nine months of 2025.
• An at-the-market (ATM) equity offering program issued 7,130,134 common shares, generating $465.4 million in net proceeds during the first nine months of 2025.

Sentiment

Score: 7

Explanation: The overall sentiment is positive due to strong earnings growth, improved operating cash flows, and favorable regulatory rate approvals for core utility businesses. The significant increase in offshore wind contingent liability and the Fitch credit outlook revision introduce notable concerns, but the core regulated business performance and strategic divestitures provide a strong foundation.

Positives

• Net income attributable to common shareholders significantly increased to $367.5 million in Q3 2025 from a loss of $118.1 million in Q3 2024.
• Operating cash flows for the first nine months of 2025 improved substantially to $3.20 billion from $1.52 billion in the prior year, driven by better regulatory recoveries.
• Eversource narrowed its 2025 non-GAAP earnings guidance range, indicating increased confidence in its core business performance.
• Regulatory approvals for rate increases at Yankee Gas ($95.7 million) and PSNH ($100.7 million) are expected to boost future revenues.
• CL&P received $107.8 million in state general obligation bond proceeds, which will help offset hardship and EV program costs.
• The partial reversal of a deferred tax asset valuation allowance resulted in a $165 million benefit, improving income tax expense.
• The planned sale of the Aquarion water distribution business for $2.4 billion is expected to reduce Eversource parent debt.
• Continued investment in transmission infrastructure led to a higher transmission rate base and increased electric transmission segment earnings.

Negatives

• A pre-tax charge of $284 million was recognized in Q3 2025 due to increased offshore wind contingent liability, reflecting higher construction costs and delays for the Revolution Wind project.
• The offshore wind contingent liability increased to $507.7 million as of September 30, 2025, indicating significant potential future payments.
• Fitch revised the outlook for Eversource parent and its subsidiaries from stable to watch negative due to the stop-work order for the Revolution Wind project.
• NSTAR Gas was denied a $45.0 million rate base reset for non-GSEP plant additions due to not achieving certain performance metrics under its PBR plan.
• Higher property tax, interest, and depreciation expenses partially offset earnings increases in various segments.
• The absence of capitalized interest in 2025, following the sale of offshore wind projects, contributed to higher interest expense for Eversource Parent and Other Companies.
• The impact of higher shares outstanding resulted in $0.03 EPS dilution in Q3 2025 and $0.14 EPS dilution in the first nine months of 2025.

Risks

• Cyberattacks or breaches could compromise proprietary information and customer data.
• Variability in costs and final investment returns of Revolution Wind and South Fork Wind offshore wind projects due to post-closing adjustments.
• Disruptions in capital markets could make accessing necessary capital more difficult or costly.
• Changes in economic conditions, including interest rates, tax policies, tariffs, and customer demand/payment ability.
• Ability or inability to commence and complete major strategic development projects and opportunities.
• Acts of war or terrorism, physical attacks, or grid disturbances damaging electric transmission and distribution systems.
• Actions or inaction of local, state, and federal regulatory, public policy, and taxing bodies, including potential changes to FERC ROE methodology.
• Substandard performance of third-party suppliers and service providers, particularly for large construction projects.
• Fluctuations in weather patterns, including extreme weather due to climate change.
• Changes in business conditions, including disruptive technology or alternative energy sources.
• Contamination of, or disruption in, water supplies for the Aquarion business (prior to sale).
• Changes in laws, regulations, Presidential executive orders, or regulatory policy, including environmental compliance.
• Changes in accounting standards and financial reporting regulations.
• Actions of rating agencies, such as Fitch's revised outlook to watch negative.
• Significant uncertainty regarding the applicability of FERC's MISO ROE order to NETOs' pending four complaint cases, with potential material impact on financial condition, results of operations, and cash flows.
• Potential for additional cost overruns, construction delays, or adverse changes in facts/regulations for Revolution Wind, leading to further increases in the offshore wind contingent liability.
• Risk that federal investment tax credits for Revolution Wind may be at a lower value or not qualify as assumed, impacting the purchase price adjustment.

Future Outlook

Eversource narrowed its 2025 non-GAAP earnings guidance to a range of $4.72 to $4.80 per share, excluding the impact of offshore wind investments, from its previous range of $4.67 to $4.82 per share. The company reaffirmed its expected long-term EPS growth rate of 5% to 7% through 2029, using a 2024 non-GAAP EPS base of $4.57 per share. The sale of the Aquarion water distribution business is expected to close in late 2025, with proceeds used to pay down parent company debt. Future regulatory proceedings are anticipated for CL&P's performance-based regulation framework, securitization of storm-related expenses, and renewable portfolio standard obligations. The Revolution Wind project's construction is expected to be completed in the second half of 2026, with ongoing monitoring of potential cost overruns and delays.

Management Comments

• We narrowed our projection to earn within a 2025 non-GAAP earnings guidance range of between $4.72 per share and $4.80 per share excluding the impact of the net charge resulting from our previous offshore wind investments, compared to the previous guidance range of $4.67 per share to $4.82 per share.
• We also reaffirmed our projection that our expected 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.
• We expect the future operating cash flows of Eversource, CL&P, NSTAR Electric and PSNH, along with existing borrowing availability and access to both debt and equity markets, will be sufficient to meet any working capital and future operating requirements, and capital investment forecasted opportunities.
• We continue to believe these deferred storm restoration costs were prudently incurred and are probable of recovery.

Industry Context

The utility sector continues to navigate complex regulatory environments and significant capital investment needs for infrastructure modernization and grid resilience. Eversource's focus on regulated utility operations, coupled with strategic divestitures like Aquarion and offshore wind, aligns with a trend towards de-risking and focusing on core regulated assets. The ongoing challenges in offshore wind development, as evidenced by the increased contingent liability for Revolution Wind and Fitch's negative outlook revision, reflect broader industry headwinds such as supply chain issues, inflation, and permitting delays impacting renewable energy projects. Regulatory bodies are increasingly scrutinizing utility performance and cost recovery, as seen in the detailed rate case decisions and the implementation of performance-based regulation frameworks, pushing utilities to balance investment with customer affordability.

Comparison to Industry Standards

• The authorized regulatory ROE of 9.5% for PSNH and 9.32% for Yankee Gas are within the typical range for regulated utilities in the U.S. Northeast, which often see ROEs between 9% and 10.5%. For example, National Grid's Massachusetts electric distribution business has an authorized ROE of 9.75%, while Avangrid's United Illuminating (UI) in Connecticut has an authorized ROE of 9.10%.
• The 50% common equity ratio for PSNH and 53% for Yankee Gas are standard for regulated utilities, aiming for a balanced capital structure that supports credit ratings and allows for reasonable cost recovery.
• The Greater Cambridge Energy Program's estimated cost of $1.84 billion for underground transmission and distribution infrastructure is comparable to other major urban grid modernization projects, reflecting the high costs associated with complex urban construction and advanced technology integration.
• The challenges faced by Revolution Wind, including vessel damage and stop-work orders, are not unique, as other offshore wind projects globally, such as Ørsted's Ocean Wind 1 and 2, have also encountered significant cost overruns and delays due to similar factors like supply chain disruptions, inflation, and permitting complexities.

Corporate Governance

Legal Proceedings

• Four separate FERC ROE complaints are ongoing, challenging the NETOs' base ROE and incentive cap. Eversource has recorded a reserve of $39.1 million for the second complaint period.
• The ultimate outcome of the FERC ROE proceedings is uncertain and could have a material impact on financial condition, results of operations, and cash flows.
• CL&P has ongoing prudency review proceedings with PURA for catastrophic storm costs totaling approximately $978 million (2018-2023) plus $246 million in carrying charges.
• Aquarion Water Company of Connecticut has appeals pending in the Connecticut Supreme Court and Superior Court regarding PURA's decisions on its rate case and revenue requirements.
• 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, receiving $11.7 million in proceeds in 2025.

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: Positive impact from increased earnings and reaffirmed long-term EPS growth guidance, but diluted by higher shares outstanding and potential risks from offshore wind liabilities and credit rating revisions.
• Customers: Impacted by approved rate increases (Yankee Gas, PSNH, NSTAR Electric) and potential future rate adjustments from CL&P's PBR framework. Benefits from state bond proceeds reducing hardship and EV charging costs (CL&P) and potential refunds from EGMA/NSTAR Electric settlement.
• Employees: Changes to pension plans with the establishment of a Cash Balance Pension Plan replacing K-Vantage contributions for most employees.
• Creditors: Fitch's revised outlook to 'watch negative' due to offshore wind project issues could impact borrowing costs and access to capital.
• Regulators: Active engagement in multiple rate cases and regulatory proceedings across Connecticut, Massachusetts, and New Hampshire, indicating ongoing oversight and influence on company operations and financial performance.

Next Steps

• Monitor the closing of the Aquarion water distribution business sale, expected in late 2025.
• Track the progress and cost management of the Revolution Wind project, with construction expected to complete in H2 2026.
• Observe the outcome of the NHPUC's separate prudency review for PSNH's unrecovered storm costs ($247 million).
• Follow PURA's final decisions on CL&P's performance-based regulation (PBR) framework, multi-year rate plan, performance metrics, and integrated distribution system planning.
• Monitor NSTAR Gas's motion for reconsideration regarding the DPU's decision to deny the rate base reset for non-GSEP plant additions.
• Await DPU approval of the EGMA/NSTAR Electric settlement agreement for PAM/RTW dockets and acquisition cost recovery, expected in Q4 2025.
• Continue to monitor the FERC ROE complaints and their potential material impact on financial condition, results of operations, and cash flows.
• CL&P is required to submit a comprehensive Integrated Distribution System Plan (IDSP) filing every four years, aligned with rate amendment applications, and an annual IDSP filing.
• PSNH is required to file its next base distribution rate case for effect in June 2029.

Key Dates

Recommendation

Eversource's Q3 2025 results show strong operational performance in its core regulated utility businesses, with significant earnings growth and improved cash flows. Favorable regulatory rate approvals for Yankee Gas and PSNH, along with the strategic divestiture of Aquarion, are positive steps towards de-risking and focusing on regulated assets. However, the substantial increase in the offshore wind contingent liability and Fitch's negative outlook revision introduce considerable uncertainty and potential future financial impacts. While the core business is robust, the unresolved offshore wind issues and ongoing FERC ROE complaints present material risks. A 'hold' recommendation is appropriate as investors should monitor the resolution of these contingencies and the execution of the Aquarion sale before making further investment decisions, balancing the strong core performance against the significant, albeit defined, offshore wind liabilities.

Keywords

Eversource Energy, Utility, Electric Distribution, Natural Gas Distribution, Electric Transmission, Water Distribution, SEC Filing, 10-Q, Quarterly Report, Earnings, EPS, Offshore Wind, Revolution Wind, South Fork Wind, Aquarion, Asset Sale, Regulatory Rates, FERC, PURA, NHPUC, DPU, Capital Expenditures, Debt Issuance, Equity Offering, Contingent Liability, Rate Case, Storm Costs, PFAS, Environmental, Credit Rating