Eversource Energy (NYSE: ES), a leading utility company in the Northeast, has reported its financial results for the first quarter of 2024. The company's quarterly net income and revenue figures for this period are not provided in the given information. Eversource's annual operating cash flow was $1.65 billion, and its annual free cash flow was -$2.69 billion.

In the first quarter of 2024, Eversource reported GAAP and recurring earnings of $1.49 per share, compared to $1.41 per share in the same period last year. The company's electric transmission segment earned $0.50 per share, up from $0.45 per share in the prior-year quarter, driven by continued investments in the transmission system to address capacity growth and connect clean energy resources. The electric distribution segment earned $0.48 per share, compared to $0.47 per share in the first quarter of 2023, primarily due to higher revenues from a base distribution rate increase at NSTAR Electric, partially offset by higher operating expenses, interest expense, and taxes.

Eversource's natural gas distribution business earned $0.54 per share, up from $0.49 per share in the year-ago quarter, thanks to higher revenues from capital cost recovery mechanisms, a base rate increase at NSTAR Gas, and lower operating expenses. The water distribution segment contributed $0.01 per share, compared to flat earnings in the first quarter of 2023. Eversource parent and other companies reported a loss of $0.04 per share, compared to breakeven results in the prior-year period, primarily due to higher interest expense and the absence of a net benefit from the liquidation of a renewable energy fund.

The company is reiterating its 2024 EPS guidance of $4.50 to $4.67 per share, as well as its longer-term 5% to 7% EPS growth rate through 2028, based on its 2023 recurring EPS of $4.34.

Regulatory Developments and Outlook

In Massachusetts, Eversource filed its Electric Sector Modernization Plan (ESMP) with the Department of Public Utilities in January, which calls for an incremental $600 million in capital investments for the interconnection of solar resources through 2028. The company expects a decision on the ESMP in the August timeframe.

In New Hampshire, Eversource submitted documentation for a prudence review of $232 million in storm costs related to events from August 2022 through March 2023, with the review anticipated to be completed later this year. The company also plans to file a rate review in New Hampshire this summer, with temporary rate relief going into effect 90 days after the filing.

In Connecticut, Eversource received a final decision on its annual rate adjustment mechanism, which will result in a $873 million increase in rates effective July 1, 2024. The primary drivers of this increase are the recovery of power purchase contracts and protected hardship uncollectible accounts, both of which are required by law. The company has also resubmitted its request for a prudence review of approximately $635 million in storm costs from 2018 to 2021.

Eversource's Commitment to Clean Energy

Eversource is actively supporting the clean energy transition in the states it serves. In Massachusetts, the company's ESMP aims to increase electrification capacity by 180%, enabling the adoption of 2.5 million electric vehicles, 1 million heat pumps, and 5.8 gigawatts of solar generation.

In New Hampshire, Eversource is evaluating ways to advance clean energy initiatives, such as large-scale utility-owned solar development. The company is also closely monitoring regulatory developments in Connecticut, where it has serious concerns about the lack of alignment between state policy and regulatory decisions, which has discouraged investment and utility innovation.

Offshore Wind Divestment and Capital Allocation

Eversource has made significant progress in the sale of its offshore wind investments. The company announced that it has executed an agreement to sell its existing 50% interests in the South Fork Wind and Revolution Wind projects to Global Infrastructure Partners (GIP) for approximately $1.1 billion in cash proceeds. Additionally, Eversource has signed an agreement with Ørsted to sell its 50% share of the Sunrise Wind project.

As a result of the regulatory environment in Connecticut, Eversource has decided to reduce its capital investment in the state by nearly $100 million in 2024 and by $500 million over the next five years. The company will focus on deploying capital in areas with more constructive regulatory frameworks, such as Massachusetts and New Hampshire.

Liquidity

Eversource's cash flows provided by operating activities totaled $291.3 million in the first quarter of 2024, compared to $69.2 million in the same period of 2023. The company's investments in property, plant, and equipment amounted to $1.15 billion in the first quarter of 2024, up from $977.1 million in the prior-year quarter.

As of March 31, 2024, Eversource had $259.2 million in cash, and its available borrowing capacity under its commercial paper programs totaled $296.1 million. The company issued $1.35 billion of new long-term debt in the first quarter of 2024.

Eversource expects to utilize the proceeds from the sale of its offshore wind assets, as well as its tax equity investment in the South Fork Wind project, to enhance its FFO-to-debt ratio, which is targeted to reach 14% to 15% by 2025. The company also plans to issue up to $1.3 billion in equity over the next several years, with the potential sale of its water business expected to reduce the level of equity needed.

Business Overview

Eversource Energy is a public utility holding company primarily engaged, through its wholly-owned regulated utility subsidiaries, in the energy delivery business. The company's regulated utility subsidiaries consist of CL&P, NSTAR Electric, and PSNH (electric utilities), Yankee Gas, NSTAR Gas, and EGMA (natural gas utilities), and Aquarion (water utilities).

Eversource provides energy delivery and/or water service to approximately 4.4 million electric, natural gas, and water customers through twelve regulated utilities in Connecticut, Massachusetts, and New Hampshire. The company's operations are organized into four reportable segments: electric distribution, electric transmission, natural gas distribution, and water distribution.

Risks and Challenges

Eversource faces several risks and challenges, including the potential for cyberattacks or breaches, the ability to complete the offshore wind investments sales process on the expected timelines and terms, disruptions in the capital markets, changes in economic conditions, and the ability to commence and complete its major strategic development projects and opportunities.

Additionally, the company's operations are subject to regulation by local, state, and federal regulatory, public policy, and taxing bodies, which can impact its financial performance and future growth prospects. Eversource also faces risks related to the performance of third-party suppliers and service providers, as well as changes in weather patterns and climate-related events.

Conclusion

Eversource Energy continues to navigate a complex regulatory environment, particularly in Connecticut, while making progress on its clean energy initiatives and the divestment of its offshore wind assets. The company's focus on delivering safe and reliable energy and water services, coupled with its commitment to the clean energy transition, positions it well for long-term growth. However, Eversource's ability to execute on its strategic priorities will depend on its ability to work collaboratively with policymakers and regulators across its service territories.