Executive Summary / Key Takeaways

• Eversource Energy is strategically pivoting to become a pure-play regulated electric and natural gas utility, divesting non-core assets like offshore wind and the Aquarion water business to strengthen its balance sheet and focus on core infrastructure investments.
• The company has outlined a robust $24.2 billion five-year capital plan (2025-2029), a 10% increase over the prior plan, primarily targeting electric transmission and distribution investments to enhance reliability, address aging infrastructure, and support the clean energy transition and electrification goals in its service territories.
• Key technological advancements like the Massachusetts AMI rollout, the innovative Cambridge underground substation project, and strategic investments enabled by the MA Electric Sector Modernization Plan (ESMP) are central to this capital plan, driving efficiency, grid modernization, and enabling future load growth and renewable integration.
• Despite facing regulatory challenges in Connecticut and risks associated with deferred storm cost recovery and contingent liabilities from past ventures, Eversource is focused on improving its financial position, targeting an FFO to debt ratio well above rating agency thresholds, supported by asset sales, regulatory recoveries, and planned equity issuances weighted towards the latter half of the forecast period.
• Management reaffirmed its 2025 EPS guidance range of $4.67 to $4.82 and a long-term EPS growth rate of 5% to 7% through 2029 off a 2024 non-GAAP base of $4.57, underpinned by rate base growth, constructive regulatory outcomes in key jurisdictions like Massachusetts and New Hampshire, and operational efficiencies.

Powering New England's Future: A Strategic Transformation Underway

Eversource Energy stands as a major regulated utility holding company in the Northeast, providing essential electric, natural gas, and water delivery services across Connecticut, Massachusetts, and New Hampshire. Its operational footprint spans electric distribution and transmission, natural gas distribution, and, until its pending sale, water distribution. The company's history is rooted in the integration of established regional utilities, evolving to serve approximately 4.60 million customers. This journey has recently entered a transformative phase, marked by a strategic pivot to sharpen its focus and strengthen its financial foundation.

Central to this transformation is Eversource's decision to exit non-core, higher-risk ventures, most notably its offshore wind development business. This strategic shift culminated in the sale of its interests in the Sunrise Wind, South Fork Wind, and Revolution Wind projects, completed in 2024. This move underscores a deliberate return to its core identity as a pure-play regulated pipes and wires utility. Further reinforcing this focus, the company entered into a definitive agreement in January 2025 to sell the Aquarion water distribution business. This pending sale, expected to close in late 2025, is explicitly aimed at reducing parent company debt and freeing up capital to reinvest in its regulated electric and natural gas operations. This strategic realignment is not merely a restructuring; it is foundational to enabling the significant infrastructure investments required to meet the evolving energy needs of New England, particularly in the context of ambitious clean energy and electrification goals across its service territories.

Eversource operates within a competitive landscape characterized by other large, diversified utilities and more specialized energy companies. Direct competitors like Consolidated Edison (ED) in New York and other regional utilities operate similar regulated electric and gas distribution and transmission networks. Midstream players like Oneok (OKE) and upstream producers like Southwestern Energy (SWN) represent different points in the natural gas value chain, indirectly competing on supply costs and infrastructure efficiency. Indirect competition also comes from the burgeoning distributed energy resources sector, including solar providers and battery storage companies like those enabled by technologies from firms like Tesla (TSLA), which offer alternatives to traditional grid services.

In this environment, Eversource's competitive advantages are primarily rooted in its extensive regulated asset base, geographic diversification across three states, and established customer relationships. Its regulated status provides a degree of revenue stability and predictability that non-regulated entities lack. However, the company faces competitive pressures related to operational efficiency and technological adoption speed compared to some peers. While Eversource's diversified portfolio across electric, gas, and water (until sale) historically offered revenue stability, it also introduced complexity. The strategic pivot aims to streamline operations and enhance focus on areas where regulated investment opportunities are most compelling.

Eversource is actively leveraging technology to enhance its competitive standing and meet future demands. A cornerstone of this effort is the Advanced Metering Infrastructure (AMI) rollout in Massachusetts. This technology is designed to enable near real-time communication across the electric grid, providing customers with granular data on their energy usage. The stated goal is to empower customers to make data-driven decisions, manage consumption, and potentially lower bills through dynamic rate designs. AMI also promises improved grid management, enhancing reliability by providing better visibility into outages and enabling faster restoration. The Massachusetts AMI program is on track, with the communication network deployment underway and smart meter installation expected to begin in July 2025, building upon the successful implementation of a new customer billing system.

Beyond AMI, Eversource is investing in innovative infrastructure projects. The Electric Sector Modernization Plan (ESMP) in Massachusetts, recently approved by the DPU, serves as a roadmap for addressing growth from electrification. This plan is expected to drive an additional $600 million in distribution investments through 2028, specifically for interconnecting clean energy resources and enhancing resiliency. The ESMP analyzed load growth down to the circuit level, identifying grid investments needed to increase electrification capacity by over 180%. This strategic investment in grid readiness is crucial for integrating the growing adoption of electric vehicles and heat pumps.

A prime example of this forward-looking investment is the Greater Cambridge Energy Program, which includes the construction of Eversource's first underground transmission substation in Cambridge, Massachusetts. This $1.84 billion project ($1.38 billion transmission, $460 million distribution) is designed to address increased electric demand in the region and enhance transmission system resiliency. The substation will be located in a 35,000 sq ft underground vault, supporting three distribution power transformers and thirty-six distribution circuits, connected by eight new 115 kV underground transmission lines. While the project received regulatory approval in June 2024, the initial in-service date is slated for June 2029, with full completion expected into 2031. As of March 31, 2025, $112.0 million has been spent on the project. This project demonstrates Eversource's capability to execute complex, large-scale infrastructure essential for urban load growth and grid hardening.

Furthermore, Eversource is exploring and deploying other advanced technologies. A network geothermal pilot in Framingham, Massachusetts, came online in June 2024, exploring innovative heating solutions. The company also secured federal funding for a clean energy hub in Southeastern Connecticut and received DOE funding to expand its battery energy storage project on Cape Cod, highlighting its engagement in integrating diverse energy resources and enhancing grid stability. These technological initiatives collectively contribute to Eversource's competitive moat by improving operational efficiency, enhancing reliability, enabling the clean energy transition, and positioning the company for future growth in a rapidly evolving energy landscape. The "so what" for investors is that these investments, supported by regulatory frameworks, translate into rate base growth and a clearer path to earning a return on capital, underpinning the company's long-term financial targets.

Eversource's outlook is anchored by its substantial capital investment plan and expected regulatory support. The updated five-year capital plan (2025-2029) totals $24.2 billion, representing an 8% growth in rate base from 2023 through 2029. This plan includes nearly $7 billion for transmission, over $10 billion for electric distribution (60% in MA), nearly $6 billion for natural gas, and $1.2 billion for technology and facilities. These investments are driven by the critical need to replace aging infrastructure ($3+ billion in transmission alone), accommodate load growth from electrification, and integrate clean energy resources. Management also sees potential for an additional $1.5 billion to $2 billion in investments within this period, including Connecticut AMI and solar/EV/LNG related projects.

In terms of recent financial performance, Eversource reported Net Income Attributable to Common Shareholders of $550.8 million, or $1.50 per share, for the three months ended March 31, 2025, compared to $521.8 million, or $1.49 per share, for the same period in 2024. This represented a 5.5% increase in net income attributable to common shareholders. Operating revenues for the first quarter of 2025 were $4.12 billion, up significantly from $3.33 billion in Q1 2024. This revenue increase was primarily driven by higher tracked revenues in the Electric Distribution and Natural Gas Distribution segments, reflecting the pass-through of higher energy supply costs and the impact of regulatory tracking mechanisms. Base distribution revenues also increased due to rate adjustments in Massachusetts and New Hampshire.

Segment performance in Q1 2025 showed growth across the core utility businesses. Electric Distribution earnings increased by $20.3 million, driven by base rate increases and capital tracking mechanisms, though partially offset by higher expenses. Electric Transmission earnings rose by $22.7 million, primarily due to a higher transmission rate base from continued infrastructure investments. Natural Gas Distribution earnings saw a notable increase of $27.8 million, benefiting from base rate increases and capital tracking mechanisms related to infrastructure investments, partially offset by higher expenses. The Water Distribution segment, soon to be divested, saw a decrease in earnings of $1.8 million, partly due to the absence of a prior year regulatory benefit. The "Other" segment experienced increased losses, primarily due to higher interest expense following the exit from offshore wind and increased long-term debt.

Eversource's liquidity position is supported by operating cash flows, available borrowing capacity, and access to capital markets. Cash flows provided by operating activities were strong in Q1 2025, totaling $1.04 billion, a significant increase from $291.3 million in Q1 2024. This improvement was largely driven by favorable timing of regulatory recoveries for various costs, including energy supply, energy efficiency, and transmission charges, as well as decreased storm cost payments. The company utilizes commercial paper programs ($2.0 billion for parent, $650.0 million for NSTAR Electric) backstopped by revolving credit facilities to manage short-term needs. Long-term debt issuances, such as the $1.20 billion issued in Q1 2025, are used to finance capital expenditures and manage debt maturities.

The company's focus on enhancing cash flows and reducing debt is aimed at improving its FFO to debt ratio, which ended 2024 in the low double digits (10.5%-11%) and is targeted to be well above the 13% Moody's downgrade threshold and within the 14%-15% range at S&P by 2025.

The company reaffirmed its 2025 EPS guidance range of $4.67 to $4.82. This guidance is supported by expected earnings contributions from the capital plan, recent and anticipated rate increases (e.g., NSTAR Electric effective Jan 2025, PSNH interim effective Aug 2024, EGMA effective Nov 2024, Yankee Gas effective Nov 2025), and a focus on O&M cost discipline. However, 2025 results are expected to be "a bit muted" relative to the long-term growth rate due to factors like the impact of equity dilution from shares issued in 2024 and the timing of the Aquarion sale proceeds, with the full benefit of debt reduction from that sale expected in 2026.

Eversource also reaffirmed its long-term EPS growth rate target of 5% to 7% through 2029, using the 2024 non-GAAP EPS of $4.57 as the base. This growth is expected to be fueled by the continued execution of the capital plan, recovery of deferred storm costs (approximately $2 billion on the balance sheet, with significant recovery expected over the forecast period), and ongoing O&M cost discipline. The financing plan for this growth includes approximately $1.2 billion in equity issuances over the next several years (2025-2029), with the majority anticipated in the latter half of the period, leveraging enhanced cash flows and debt reduction from asset sales. The expected effective tax rate for 2025 is between 22.5% and 23.5%.

Despite the positive outlook and strategic progress, Eversource faces notable risks. Regulatory uncertainty in Connecticut remains a significant challenge, potentially impacting the timing and recovery of necessary investments like AMI. The company has already reallocated $500 million in planned capital due to this environment and will continue to monitor the situation. The resolution of pending FERC ROE complaints could also materially impact financial results, although the company currently sees no basis for changing reserves based on available information. Contingent liabilities related to the offshore wind divestiture, particularly obligations under the GIP sale terms, could result in additional losses if construction costs or timelines for Revolution Wind deviate significantly from current estimates. While the company has diversified its supply chain, potential tariffs could still lead to a 3% to 6% increase in capital project costs, although the impact on O&M is expected to be minimal. Credit risk from counterparties is managed, but remains a factor. Environmental remediation costs, particularly for former MGP sites, are subject to estimation risk and could require future adjustments.

Conclusion

Eversource Energy is undergoing a significant strategic transformation, shedding non-core assets to focus intently on its regulated electric and natural gas utility operations. This pivot is supported by a substantial $24.2 billion capital plan aimed at modernizing infrastructure, enhancing reliability, and enabling the clean energy transition across New England. The company's investments in advanced metering, underground substations, and grid modernization technologies are critical differentiators positioning it to meet future load growth and integrate renewables. While regulatory challenges, particularly in Connecticut, and risks from past ventures present headwinds, management's focus on strengthening the balance sheet through asset sales, cash flow enhancement, and a disciplined financing plan provides a clear path to support this ambitious capital program. The reaffirmed 5% to 7% long-term EPS growth target, underpinned by rate base expansion and expected constructive regulatory outcomes in key states, suggests a compelling investment thesis centered on stable, regulated growth driven by essential infrastructure investment in the clean energy future. Investors should monitor the progress of key regulatory proceedings, the execution of the capital plan, and the successful completion of the Aquarion sale as key indicators of the company's ability to deliver on its strategic objectives and financial targets.