The Eversource Energy Q4 and Full Year 2023 Earnings Call is about to begin, with Bob Becker, Director for Investor Relations, coordinating the call. During the call, they will be referencing slides posted on their website and making forward-looking statements. Speaking on the call will be Joe Nolan, Chairman, President and CEO, and John Moreira, Executive Vice President and CFO, along with Vice President and Controller Jay Buth. Nolan will begin by discussing the pathway for a full exit of their offshore wind business, which began in 2016 with the goal of bringing renewable energy to the region and reducing reliance on gas. The high supply prices in the Northeast are causing difficulties for customers.

The company faced challenges in their offshore wind investment due to the pandemic and other factors, leading them to refocus on their utility business. They have reached an agreement to sell their interest in two projects and have taken a noncash impairment charge of $1.95 billion. They are on track to fully exit the offshore wind business.

The speaker discusses the impairment charge related to the Sunrise Wind project and the company's exit from offshore wind. They provide an update on the construction progress of the South Fork Wind and Revolution Wind projects and mention the joint submission with Orsted for the Sunrise Wind project. They then move on to discuss the company's water distribution announcement, highlighting the success of their water business.

Eversource plans to sell its water business in order to reduce equity needs and improve regulatory diversity. The company aims to deliver value to both customers and investors through this transaction. In 2023, Eversource saw a 6% growth in reoccurring earnings and a 6% increase in dividend level. The company's electric reliability ranks in the top decile among its peers and it has outperformed its target injury rate.

Eversource is committed to maintaining safe work practices and has exceeded regulatory requirements for natural gas safety. The company has also submitted an Electric Sector Modernization Plan to enable a transition to a Clean Energy future in Massachusetts, with a goal of reducing greenhouse gas emissions by 85% by 2050. The plan is expected to be finalized in August 2024 and includes approximately $600 million in proposed investments. Eversource is seen as a leader and trusted partner in this endeavor.

In Connecticut, Eversource is working on an outreach plan to educate stakeholders on the importance of infrastructure investment and the affordability programs they offer. They are also preparing for regulatory initiatives in New Hampshire and are committed to being a leader in environmental, social, and governance practices. Eversource has expanded the oversight of their Board's governance committee to include climate-related matters and is making progress towards their goal of carbon neutrality by 2030. They have been recognized as one of America's Most JUST Companies for the fifth consecutive year and are focused on a bright future.

John Moreira is discussing the financial results for 2023, including a loss of $1.26 per share due to an offshore wind impairment and nonrecurring costs. Excluding these charges, non-GAAP recurring earnings were $4.34 per share, with electric transmission earning $1.84 per share, electric distribution earning $1.74 per share, and natural gas distribution earning $0.64 per share. These results were driven by investments in the transmission system and lower income tax expense, but partially offset by higher expenses in other areas.

The paragraph discusses the financial results of Eversource in 2023, including increases in depreciation and interest expense, a higher effective tax rate, and the impact of certain reconciliation charges. The water distribution segment saw lower results due to higher expenses, and the parent company saw improved results due to a lower tax rate and gains from liquidating a renewable energy fund. The paragraph also mentions the sale of South Fork and Revolution Wind to GIP, with a capital cost sharing agreement in place. The paragraph concludes by mentioning an offshore wind impairment charge and its impact on the company's long-term financing plan.

In 2023, the company recorded a significant impairment charge on their offshore wind investment due to lower-than-expected sales values and adverse developments in the fourth quarter. The Sunrise Wind project drove a majority of the impairment charge, primarily due to the denial of an OREC pricing petition and the potential abandonment cost if the project is unsuccessful in a New York RFP solicitation. The company factored in these potential losses and termination costs in their impairment analysis. However, if Sunrise is successful in the RFP, the company will sell its ownership interest in the project to Orsted.

The company will not face any additional construction costs or project cancellation fees for its offshore wind business. The carrying value of the offshore wind investment as of December 31, 2023 reflects a fourth quarter impairment charge, which assumes potential construction contingencies for Revolution Wind and the abandonment of Sunrise Wind. The company is comfortable with these assumptions and has reflected them in their long-term financial plan. However, the ultimate carrying value of the offshore wind investment may change depending on the outcome of the sale of these projects and the recent New York RFP 4. In terms of regulatory updates, the company received approval to recover storm costs in Massachusetts and also received approval for its first annual revenue adjustment under NSTAR Electric's PBR plan.

The company received a final order of $47 million for storm cost recovery in New Hampshire and expects to file a general rate review later this year to recover investments made to improve reliability. They also filed a request for a prudency review of $635 million in storm costs in Connecticut and are awaiting a court decision on Aquarion's appeal. The company plans to invest $23.1 billion in regulated electric, natural gas, and water businesses over the next 5 years, with a focus on transmission infrastructure.

The company is making significant investments in its infrastructure to improve reliability and resiliency during extreme weather events. This includes innovative projects such as building an underground substation in Cambridge and replacing aging infrastructure. The company is also focusing on electrification and clean energy resources. For electric distribution, the company plans to invest nearly $10 billion in infrastructure, including a program to allow customers to save money and experience higher service levels. On the natural gas side, the company plans to invest nearly $5.5 billion in reliability and safety, with a focus on replacing bare steel and cast iron pipes. In the water segment, the company plans to invest over $1 billion in improving water quality through upgrades to treatment facilities and water mains.

The Eversource capital plan includes investments in technology and facilities totaling $1.1 billion. This plan also reflects a $1.6 billion increase in utility infrastructure investments from 2024 to 2027. There are potential infrastructure investments not currently included in the plan, totaling $2 billion. These investments are expected to result in a 7.7% growth in rate base from 2022 to 2028. Eversource is projecting a non-GAAP recurring earnings per share range of $4.50 to $4.67 for 2024. These projections are driven by transmission investments, distribution base rate increases, and cost control measures. Offshore wind is expected to have a positive impact on cash flow in the long-term.

The company's wind impairment reflects assumptions that are also embedded in their long-term financing plan. They expect cash inflows from the sale of South Fork and Rev Wind, as well as tax equity investment and potential sale of their water business. They anticipate enhancing their FFO to debt ratio from 2023 to 2025 through planned rate increases, storm cost deferrals, equity issuances, and potential sale of their water business. They expect to issue up to $1.3 billion of equity through their existing ATM program and are undergoing a review of their water distribution business. These factors drive their projected 5% to 7% EPS growth rate through 2028, based off their 2023 recurring EPS of $4.34.

Joe is confident in the $1.3 billion equity target for Eversource, despite the potential for increased proceeds from the Aquarion sale. He sees Aquarion as a valuable and well-managed asset and is considering the timing and means of raising the equity.

The company has estimated that they could potentially harvest up to $1.3 billion in equity from a potential sale. They plan to issue equity over the next few years and will use their ATM program for flexibility. The company is also proud of their work on the South Fork project, which has allowed them to understand the process of installing offshore wind farms.

In the fall, the company reviewed the costs associated with constructing the South Fork project and accounted for the use of a feeder barge and European vessel. The lack of American vessels has caused increases in offshore wind costs for everyone. The project is expected to be completed in March and the company is confident in their cost estimates for the Revolution project. The company plans to use the ATM program, but will also consider other options if they encounter a favorable market.

In response to a question about the FFO to debt slide, John Moreira explains that the company has faced challenges with operating cash flow due to a turnaround and guidance from PURA. For 2023, they expect to be in the low double digits, but moving forward, they anticipate a 14-15% FFO to debt ratio. The tax equity investment for the South Fork project will contribute to this improvement, but the utilization will depend on taxable income and storm costs. The storm cost recovery mentioned on the slide is related to Massachusetts and New Hampshire.

The speaker reaffirms the company's growth aspiration of 5% to 7%, but does not specify where they will ultimately land on the spectrum. The potential sale of Aquarion is factored into this guidance. The company will continue to update on their long-term growth as things progress. The company is trying to find ways to mitigate equity issuance and is confident in another sales process for Aquarion.

The speaker discusses the time line and agency's willingness for another asset sale, specifically the Aquarion asset. He mentions that the Aquarion asset is less complex than the wind assets and is attractive to many potential buyers. He also mentions that the cost savings initiatives will result in lower O&M in 2024 and discusses the levers being pulled and future plans for cost savings.

The speaker discusses the Aquarion sale and how it will impact their 5-year plan. They mention that the 5% to 7% incorporates the Aquarion sale and that the CapEx for Aquarion is already included in the 5-year plan.

The speaker is discussing the potential earnings hole for Aquarion and how it will be filled. They mention a combination of debt reduction and redirecting CapEx, as well as potential earnings not included in the forecast. They also mention a dip in ROEs in Connecticut and that they will stay out for at least another year. The speaker does not provide specific details on how they are modeling ROEs for their 5% to 7% growth target. The speaker is then asked about the assumptions behind the equity needs.

The speaker discusses their expectations for Aquarion's equity and credit ratings in light of the $1.3 billion acquisition. They also mention a court case and their confidence in the outcome, which they believe will have no impact on the transaction. They have communicated with the governor about the potential sale, but are being mindful of regulations.

John Moreira confirms that the dividend growth profile of the company mirrors the earnings growth. The Board has approved a 6% dividend increase on an annualized basis. Anthony Crowdell asks about the amount of ITCs booked in 2023 and the forecast for 2024. John Moreira clarifies that the ITCs relate to the South Fork equity investment and have not been recognized. He also explains that the 8-K filed this morning guarantees a 13% IRR to the buyer, which has already been factored into the transaction.

The speaker clarifies that the impairment has already been factored into the return expected from the offshore wind investment. They also mention that the forecast for capital investment into offshore wind before the transaction closes is not significant. The effective tax rate is expected to be in the high teens in 2024, similar to 2023. The speaker explains that any cash payments for cost sharing or earnout clawback would be resolved at COD, which is planned for the fall of 2025.

The company plans to issue equity over a multiyear period and the timing of this will not be affected by the uncertainty of contingent payments. The water sale process has not yet started. The company does not plan to change its dividend policy and will continue to be actively involved in the operational construction of Revolution to ensure costs stay in line with estimates.

The speaker discusses their involvement in the construction of a substation and their active role in the project until it is completed. They also mention their strategy for reducing exposure to Connecticut and their pursuit of a transaction for Aquarion. The speaker clarifies that there will be no earnings impact associated with offshore wind in 2023 and 2024 on a non-GAAP basis. They also mention a PBR case that was withdrawn and reinitiated as a new type of case.

The speaker discusses a recent case that has been delayed and expresses disappointment. They state that it is too early to speculate on the outcome and there is still more work and discussion to be done. The call then concludes with final remarks from the speaker.

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