During the Second Quarter 2023 Earnings Call, Robert Becker, the Investor Relations Director, discussed forward-looking statements, non-GAAP measures, and the 10-K and 10-Q. Joe Nolan, the Chairman, President, and Chief Executive Officer, then discussed the company's commitment to delivering value to customers, achieving ESG and diversity objectives, and closing the offshore wind sale process.

Eversource has invested significantly in the states it operates in and as a result, customers have seen an increase in the average months between interruption and a decrease in the average duration of outages. Additionally, customers in Connecticut, Massachusetts and New Hampshire have experienced a decrease in energy supply prices, with residential customers in Connecticut and Massachusetts seeing a 40% decrease per kilowatt hour from January to July 1 and a 40% decrease per kilowatt hour in New Hampshire from August 1.

Eversource has purchased power on behalf of customers in accordance with state guidelines, and customers have seen cost relief this summer. Eversource is engaging with policymakers to discuss long-term solutions and participated in a FERC-sponsored Forum in Portland, Maine. Additionally, Eversource has posted a sustainability report and a diversity, equity and inclusion report on its website. The company is focused on five key sources of emissions in order to reach its goal of carbon neutrality by 2030.

Eversource has implemented many initiatives to reduce emissions, such as enabling more capacity for renewables, replacing aging natural gas pipes, investing in hybrid vehicles, and procuring renewable energy for buildings. They are also exploring solutions such as a PILOT project featuring a sulfur hexafluoride free breaker and expanding their emission reduction efforts by committing to a science-based target. In 2022, they invested nearly $800 million in clean energy such as offshore wind, battery storage, electric vehicle charging, and geothermal energy. Massachusetts has a constructive regulatory framework that will facilitate over $2 billion of clean energy investments over the next five years.

Eversource is making progress on its offshore wind projects with South Fork Wind and Revolution Wind. Construction of the onshore substation and transmission cable is complete for South Fork Wind, and installation of the offshore substation and subsea transmission cable was recently completed. Additionally, wind turbine pre-assembly is underway in New London. Revolution Wind has received the environmental impact statement from BOEM and Eversource announced the sale of its uncommitted lease area to Ørsted for $625 million. These projects are on track to deliver enough clean renewable energy to power nearly 70,000 homes. Eversource is also focused on ensuring an equitable transition to clean energy.

Joe discussed the progress of the sale of the interest in the three development projects and the due diligence process that has been completed. He also discussed the expected spending and in-service dates for the three offshore wind projects and the procurement costs that have been achieved. Joe then discussed the commitment to invest in clean energy and the work that the Eversource team has done. John Moreira then took over the call to discuss the second quarter results, the offshore lease sale transaction, and the 2023 financing activity.

In the second quarter of 2023, Eversource Energy reported GAAP earnings of $0.04 per share, which included an after-tax impairment charge of $0.95 per share. Excluding these charges, their recurring earnings were $1 per share, an increase from $0.86 in the second quarter of 2022. This increase was largely driven by higher revenues from base distribution rate increases, an expected favorable regulatory decision in New Hampshire, and lower O&M costs due to lower storm restoration costs.

Eversource earned $0.03 per share in the second quarter of 2023, the same as the second quarter of 2022. The increased earnings were due to higher revenues and lower non-tracked O&M expenses, partially offset by higher depreciation, interest and property tax expense. Eversource parent and other companies earned $0.01 per share in the second quarter of 2023, improved from the second quarter of 2022 due to a lower effective tax rate and the residual benefit of a disposition of Eversource’s interest in a clean energy fund. Eversource has executed a letter of intent with Ørsted to use a portion of the proceeds from the lease area to provide tax equity to the South Fork Project. CFIUS approval was received on July 27 and the transaction is expected to close later this month or early September.

Eversource completed an Offshore Wind Strategic Review and determined that the carrying value of the offshore wind investment exceeded its carrying value, resulting in an after-tax impairment charge of $331 million. The company is now in the process of selling its 50% interest in the three contracted offshore wind projects, and is focused on completing the final phase of the process. The total offshore wind investment after the impairment charge is approximately $2.1 billion.

In this paragraph, the speaker reaffirms the company's long-term EPS growth rate in the upper half of the 5-7% range and their $21.5 billion five-year regulated capital program. They also highlight several factors that will contribute to an improvement in cash flows in 2023, such as the absence of one-time cash outflow items, net proceeds from the sale of their offshore wind investment, monetization of South Fork Wind investment tax credits, higher storm cost recoveries and distribution rate increases, and the remaining equity issuance. Additionally, the speaker mentions the significant storm events that have had an adverse impact on their cash flows, with a deferred storm balance of approximately $900 million at the end of June.

Joe Nolan was asked about the uncertainty surrounding offshore wind projects and their effect on the price of the transaction. He was asked how confident he was that the transaction could be completed at a reasonable price and what it would mean for the growth rate and the remaining portion of the ATM program. Joe discussed the debt issuance in early May and their commitment to completing the remaining $1 billion in the ATM program, as well as raising additional equity through dividend reinvestment and employee incentive programs.

Joe Nolan discusses the shift from natural gas to alternative energy sources, such as wind, in the region. He states that wind availability is high in the region, and that policy makers are very excited about the potential of wind energy. He also mentions that the company is actively building and will be the first to offer offshore wind services in the fall. He concludes that their offshore wind leases are prized assets and have all the necessary fundamentals to deliver great wind speeds for the future.

Joe Nolan and John Moreira of Ørsted are confident in the current financing and growth rate of the transaction and are focused on debt pay down. They reaffirmed their 1B equity issuance and are confident that the deal will be completed soon. They are negotiating the multitude of agreements that need to be executed in conjunction with the purchase and sale agreement.

John Moreira and Joe Nolan provided an update on the potential sale of their offshore wind assets to Ørsted. They mentioned that contingencies are still being negotiated, and while they cannot disclose the details, they are confident that the upside and downside of the agreement will be managed well. They also mentioned that the impairment taken assumes that the New York restructuring and ITC adders will be included, and on average these are estimated to be $400 million each. Finally, they suggested that the drivers of FFO to debt can be found in their 10-Q.

John Moreira discussed the one-time financial events that occurred in 2022 that would not be repeated in 2023, including a $250 million decrease, a $78 million refund, a $70 million property tax settlement, and a $400 million rate increase in Massachusetts. He also mentioned that the closing of the two offshore wind transactions would be the biggest immediate improvement in cash flow, and that there is still $1 billion left under the ATM program to be executed.

John Moreira discussed the process of repricing, which could render a decision by the end of 2020 and could be in the range of $400-450 million. He also discussed the deferred storm cost downs in Connecticut, which will be recovered during a general rate proceeding, but the earliest that will happen is the end of 2025. There will be no cash flow improvement from the recovery of those costs until then.

John Moreira addressed a question from David Arcaro regarding the capital expenditure plans for 2024-2026 for the offshore wind project, and the impairment of offshore wind assets. Moreira clarified that the capital expenditure plans are still the same as previously disclosed, and that the impairment charge was larger due to the completion of due diligence and current deal pricing.

Joe Nolan clarified that the 2021 settlement agreement allows for a four-year rate review which will expire in 2025. Andrew Weisel asked if SP7 allows regulators or interveners to call them in before October 25, to which Joe Nolan responded that their settlement agreement qualifies for the four-year review. Andrew Weisel also asked if they would wait for a determination from the State of New York on the sale price announcement, to which Joe Nolan responded that they would not wait for the determination.

Joe Nolan and John Moreira answered questions about the $1 billion in equity from the ATM program and the Aquarion rate case appeal. Nolan said the Aquarion rate case appeal is still in progress and is scheduled for oral arguments on December 14th. Moreira stated that the $400 million to $450 million referenced for New York is pre-tax.

John Moreira and Rich Sunderland discuss the New Hampshire retroactive piece and the parent tax item, with Moreira estimating the parent tax item to be a difference of 100 basis points in the quarter-over-quarter effective tax rate. Joe Nolan then discusses the draft decision on DUI's and how it affects the company's approach to the CLMP front for 2025, expressing concern for the decision but noting that they will have their day in court. He also notes that it is too soon to speculate on what will happen in 2025.

Joe Nolan and Rich Sunderland discuss the State of Connecticut's chill on clean energy investments and the potential negative impacts on startup companies. Joe is confident that the company can get to a better place, and Anthony Crowdell asks for a range of improvement in FFO to debt basis that the sale of offshore wind could bring. Joe provides a range of 100-150 basis points to 200-250 basis points.

Joe Nolan discussed the details of the contracted project transaction with the rating agency and clarified that there could be potential movements up or down after the sale is announced and closed. He also mentioned that he has a meeting scheduled with the rating agency to discuss the details, and Julien Dumoulin-Smith asked when Eversource plans to pursue their Connecticut Electric and Natural Gas rate cases.

Joe Nolan and John Moreira discussed the timeline for Connecticut rate changes and Yankee Gas plans. They also discussed the forecast period for FFO to debt, with offshore wind providing a kick start to the improvement of the metrics, and Massachusetts rate mechanisms driving enhanced operating cash flows and storm cost recovery for CL&P.

John Moreira and Joseph Nolan discussed the cash flows in Massachusetts and how they will be impacted by the rate case, the $1 billion equity program, and the tax equity. They clarified that the FFO will benefit from these items in 2024 and beyond. Julien Dumoulin-Smith thanked them for the details and wished them luck. Robert Becker concluded the call.

This summary was generated with AI and may contain some inaccuracies.