The Eversource Energy Q3 2023 Earnings Call has begun, with Alex as the operator and Bob Becker, Director for Investor Relations, as the host. Bob introduces the speakers, Chairman, President, and CEO Joe Nolan, Executive Vice President and CFO John Moreira, and Vice President and Controller Jay Buth. Bob mentions that some statements may be forward-looking and subject to risk and uncertainty. Joe gives an update on the sale of their Offshore Wind investment, stating that they have closed the sale of their 50% stake to Orsted and their South Fork Wind tax equity investment in September. He expresses their satisfaction with these transactions being completed.

The company has completed contract negotiations with a buyer for three projects and is finalizing documents for their joint-venture agreement. The South Fork Wind project is expected to be fully operational in early 2024 and the Revolution Wind project has reached its Final Investment Decision. The New York Public Service Commission recently denied petitions for pricing adjustments from renewable developers, including the company's Sunrise Wind Project.

The petition addressed challenges in the macroeconomic climate that affected the OREC agreement, leading to a decision by the New York PSC that was disappointing but supported by the company. New York is working on an accelerated rebidding process for the project, and the company is confident in its ability to deliver clean energy and support economic development. They will continue to evaluate ways to maximize project economics and ensure on-track schedules. Limited onshore construction has begun and solutions have been identified for the installation vessel. The company is also encouraged by recent actions from regional governors and the Biden administration to clarify tax benefits and provide relief for offshore wind projects.

In October, Connecticut Governor Ned Lamont announced a partnership between Connecticut, Massachusetts, and Rhode Island to seek offshore wind proposals. Eversource will play a key role in providing infrastructure for this project. Eversource has also made investments in their electric and gas systems to ensure reliability and adaptability for customers. They are also making progress towards their carbon neutrality goal by 2030. Customers continue to face high energy prices, but this winter's supply prices are expected to be lower than last year. Connecticut, Massachusetts, and New Hampshire have all procured energy at lower prices compared to last year.

Eversource is expecting lower winter supply rates this year due to current market conditions. They are also taking steps to help customers lower their bills, such as promoting energy efficiency and encouraging customers to sign up with competitive suppliers. They have also seen a decrease in the number of customers using their standard service in Connecticut. Eversource is investing in energy efficiency programs and working with states to access renewable energy sources. However, the shift towards electric vehicles and zero carbon heating is expected to significantly increase electric demand in New England by 2050.

Eversource is actively working towards a clean-energy future by filing their Electric Sector Modernization Plan (ESMP) and proposing additional investments to improve resiliency and integrate solar energy. This plan is expected to exceed Massachusetts' clean energy goals and the state is taking a leadership role in enabling decarbonization. Eversource is eager to engage with stakeholders to establish a framework for all customers to transition towards clean energy.

In the third quarter of 2023, Eversource's GAAP and recurring earnings were $0.97 per share, slightly lower than the same period in 2022. This was due to transition and transaction costs related to Eversource Gas Company of Massachusetts. However, if adjusted for a negative $0.08 per share impact from NSTAR Electric's rate design change, earnings would be $1.05 per share. The company remains focused on investing in offshore wind projects and is encouraged by the support from Governor Lamont in Connecticut. Overall, Eversource is confident in their ability to provide for their customers and contribute to a clean energy future.

In the third quarter of 2023, Electric Transmission earnings increased to $0.46 per share due to investments in the transmission system. Electric Distribution earnings decreased to $0.50 per share due to timing of rate design changes and higher expenses. Natural Gas Distribution losses increased to $0.10 per share due to higher expenses. Water Distribution earnings remained the same at $0.05 per share. Eversource Parent and Other Companies' earnings improved to $0.06 per share. The company has narrowed its 2023 recurring earnings projection to between $4.30 to $4.43 per share.

The company is reaffirming its long-term EPS growth rate and $21.5 billion regulated capital program. They have completed the sale of their offshore wind business and made a tax equity investment in South Fork Wind. They expect to recover the investment through tax credits and are making progress on selling their remaining interest in offshore wind projects. Although a pricing petition was rejected, they are encouraged by an accelerated RFP process.

The sale of South Fork and Revolution Wind is not dependent on the resolution of Sunrise's OREC repricing petition. Eversource is exploring all options to keep the sales process moving forward. They are also expecting to qualify for two additional 10% investment tax credit adders under the Inflation Reduction Act, which could potentially add $400 million in value to Eversource. They are confident in qualifying for the Energy Communities provision and will continue to explore opportunities to engage with the Treasury Department for the domestic content adders. If both adders are achieved, it would result in upside for Eversource.

The company will continue to monitor the RFP process and the potential impacts of qualifying for ITC adders, with a focus on the likelihood of success for Sunrise Wind. Maintaining strong credit ratings is important, and the recent credit rating action by Moody's may have minimal impact on long-term financing costs. Cash flows are expected to be enhanced by the sale of offshore wind projects and the elimination of project funding requirements. The company expects an improvement in their FFO to debt ratio by 2024, driven by the proceeds from the sale of the offshore wind investment and the elimination of project funding requirements. Approximately $850 million in contingent considerations are part of the sale, including $450 million for pricing adjustments or a potential rebid for Sunrise OREC.

The company is anticipating cash flow from various sources, including an RFP award, a potential ITC adder quantification, electric and gas distribution rate adjustments, and deferred storm cost recovery. They also plan to monetize their South Fork tax equity investment and raise additional equity through their ATM program. The call then turned to Q&A, with the first question addressing Orsted's recent impairment of $900 million for three projects.

The company's repricing petition for the Sunrise project was denied by the New York PSC, but they have responded to a recent RFI and will evaluate the RFP terms. The project is well-positioned to win the RFP due to its maturity in terms of citing, permitting, and early construction. In regards to the impairment charge, the company's partner took a similar charge last week, indicating alignment between the two companies' assumptions.

The speaker responds to a question about the potential sale of two projects, South Fork and Revolution, and mentions that it is still early in the process. They also mention the possibility of a second transaction with the buyer to wrap up the Sunrise project. The speaker clarifies that the company would need to be locked in on the revenue agreement for project financing and that they would continue to have a funding requirement for Sunrise. However, they may be reimbursed for extra funding at the time of closing. The speaker also notes that there is an expedited RFP process for the projects and a decision could be made before the sale is finalized.

Steve Fleishman, an analyst, asks about the recent Moody's action on the company's credit rating. John Moreira, the company's representative, explains that they value their strong credit ratings and are working towards improving their FFO-to-debt ratio. He also mentions that they may have been able to reach their target of 15% by 2024, but the recent storm activity has been a hindrance. However, they are still aiming to achieve this goal in the future and maintain a strong credit rating.

David Arcaro from Morgan Stanley asks a question about the company's outlook on interest rate exposure. John Moreira, the speaker, confirms that the company's current plan is conservative in terms of interest rate exposure and they will continue to focus on managing it. He also mentions that the company's cost discipline has allowed them to narrow their EPS guidance range. When asked if the plan can still achieve solid results if interest rates remain stable, Moreira confirms that this is the case.

Joseph Nolan discusses the company's cost-cutting initiatives and how they have compensated for potential interest rate changes in their long-term growth prospects. He mentions implementing technology and looking at shared services as ways to cut costs. David Arcaro asks about the FFO to debt trends and whether there is a natural trend downward after 2024, to which John Moreira responds that their core business will be a significant contributor and the rate adjustments in Massachusetts will help recover storm costs.

The company plans to file a cost review and a Prudency in Connecticut later this year. They have no plans to file a rate case until 2025, as per the settlement. The storm cost filing is in good shape and will be reviewed before being submitted. This will make the rate case simpler.

The speaker discusses the expected spending on offshore projects for the year, which is currently estimated to be around $1.5 billion but may come in below that due to delays in the project. They mention that $500 million was moved from 2023 to 2024 and that the current balance for offshore wind is $930 million.

The company has received $300 million in mid-October, bringing their year-to-date balance to roughly $2.2-2.3 billion. They plan to execute on the remaining $1.2 billion in equity over the next few years. During a recent conference call, they were unable to provide a specific timeline for the sales process announcement, but the buyer is familiar to their partner and negotiations are ongoing.

The speaker confirms that the terms of the transaction with Eversource have been completed and they are satisfied with the outcome. They remain focused on divesting their wind business and will continue to work through it. The speaker clarifies that the remaining external equity needs are $1 billion, assuming success on the $850 million contingent consideration. They will monitor stock prices before issuing any more equity.

During a conference call, Joseph Nolan, a representative from a company, expressed confidence in their offshore wind project, Sunrise, despite a competitor lowering their probability of success. He also mentioned that the project's pricing was attractive and could potentially change during the competitive bidding process. The company expects to see improvements in their FFO to debt ratio in 2024, but it is unclear if this will be a transition year or if the full transition to a regulated story will happen in 2025.

Julien Dumoulin-Smith asked about the status of capitalized interest for the offshore wind projects and the expected impact on the parent company going forward. John Moreira stated that the current capitalized interest is around $25-30 million and that with the cash inflows and proceeds from the offshore wind, they expect to turn the corner in 2024. He also mentioned that $1.4 billion will mature at the holding company in 2024.

The speaker asks a question about the break fees and proceeds related to a potential sale, and the company responds by stating that they would be responsible for 50% of the break fees and that the proceeds from the sale are a moving target. They also mention their total investment and contingent consideration in relation to the sale. The questioner thanks them for the details. The next question comes from Travis Miller of Morningstar.

Travis Miller from Glenrock Associates asks about Massachusetts' ESMP and clean energy investments. John Moreira responds that they are working with stakeholders and it is too early to speculate on cost recovery mechanisms. They expect a 70-30 mix of O&M and capital costs. They plan to maintain a 60% payout ratio for dividends. Paul Patterson from Glenrock Associates is the final questioner.

Paul Patterson asks about the timing of the potential transaction and its impact on the NYSERDA rebid process. Joseph Nolan responds that a transaction may be announced by the end of the year and closed in 2024, and that they are optimistic about providing clarity on Sunrise pricing. The management team thanks everyone for joining the call and looks forward to discussing further details at the EI Financial Conference.

The speaker thanks the audience for joining the call and reminds them that the investment relations team is available to answer any questions. The operator then concludes the call.

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