Good morning, and welcome to today's Eversource Energy Third Quarter 2022 Earnings Conference Call. My name is Candice, and I will be your moderator for today's call. [Operator Instructions]. I would now like to pass the conference over to our host, Jeff Kotkin. Vice President of Investor Relations, to begin.

Thank you, Candy. Good morning, and thank you for joining us. During this call, we'll be referencing slides that we posted yesterday on our website. And as you can see on Slide 1, some of the statements made during this investor call may be forward-looking as defined within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and are subject to risk and uncertainty, which may cause the actual results to differ materially from forecasts and projections. These factors are set forth in the news release issued yesterday afternoon. Additional information about the various factors that may cause actual results to differ can be found in our annual report on Form 10-K for the year ended December 31, 2021, and our Form 10-Q for the 3 months ended June 30, 2022. Additionally, our explanation of how and why we use certain non-GAAP measures and how those measures reconcile to GAAP results is contained within our news release and the slides we posted last night and in our most recent 10-K and 10-Q. Speaking today will be Joe Nolan, our President and Chief Executive Officer; and John Moreira, our Executive Vice President and CFO. Also joining us today is our new Director of Investor Relations, Bob Becker. Now I will turn to Slide 2, and turn over the call to Joe.

Thank you, Jeff, and thank you, everyone, for joining us on this call this morning. I will provide you updates on the energy supply challenges facing New England this winter and the strategic review of offshore wind investments. Before turning over the call to John [Technical Difficulty] to review the quarter in various regulatory proceedings. But first, I will review our operating performance. We've had an excellent first 9 months of 2022 with our reliability indices remaining among the industry's best. Our safety ratings strong and our diversity and sustainability metrics looking quite favorable compared with our goals and our peers. Response time to natural gas service calls, a key safety and performance metric for our gas distribution business continues to be excellent. Our sustainability ratings at MSCI and Sustainalytics continue to be well within the top quartile among our peers, and we are in the final stages of reviewing how to best move forward with establishing aggressive goals for greenhouse gas reduction, including potentially setting a science-based target, something that only a handful of U.S. utilities are undertaking. While we continue to improve the service we are delivering to our 4.4 million customers. We understand that our customers have a significant concern over this winter's energy costs. Not only a fossil fuel prices much higher than they were a year ago. Our region continues to be challenged by the combination of heavy reliance on natural gas generation and inadequate infrastructure to supply sufficient natural gas to that generation during cold winter months. This [indiscernible] look particularly challenging for New England, given the disruptions in the global energy markets caused by the war in Ukraine. New England's access to reported LNG will be even more limited than in the past years. ISO New England has indicated that while our supply…

Thank you, Joe, and good morning, everyone. This morning, I will review our earnings results for the third quarter of 2022, discuss recent regulatory developments and review our finance and activity. I will start with Slide 5. Our GAAP earnings were $1 per share in the third quarter of 2022 compared with earnings of $0.82 in the third quarter of 2021. Third quarter results in 2021 included a charge of $0.19 per share to reflect last year's settlement agreement that resolved a number of regulatory issues at Connecticut Light and Power. Both years included the impact of $0.01 per share of charges related to transaction and transition costs associated with the former Columbia Gas asset acquisition. Excluding these charges, we earned $1.01 per share in the third quarter of 2022 compared with earnings of $1.02 per share in the third quarter of 2021. For the first 9 months of 2022, we earned $3.13 per share on a GAAP basis compared with earnings of $2.65 per share in the first 9 months of 2021. Excluding charges related to transaction and transition and the CL&P settlement charges that we recorded last year. We earned $3.17 per share in the first 9 months of 2022 compared with earnings of $2.95 per share in the first 9 months of 2021. Looking at additional details on the third quarter earnings by segment, starting with our electric transmission segment, which earned $0.44 per share in the third quarter of 2022 compared with earnings of $0.40 per share in the third quarter of 2021. Improved results were driven by a large level of higher investments in our transmission facilities. Moving on to our electric distribution segment, which earned $0.65 on per share in the third quarter of 2022 compared with earnings of $0.62 per share in the…

Thank you, John, and I'm going to return the call to to remind you how to enter your questions. Candice?

First question this morning is from Shar from Guggenheim.

So Joe, just on the offshore wind sale process, you indicated -- I think on prior calls, you were working on sort of the tax leakage offsets. Anything you have -- anything you've been able to identify there so far? And are we still thinking 100% sale, the leases in the projects, irrespective of what stages they're in, in their construction cycle, so no build own transfer scenarios?

Yes. So we're definitely looking at a complete exit of the projects. In terms of the tax, I'm going to turn that over to John Moreira that he's better equipped to answer that question.

Shar, so as I continue to communicate, we're looking at every alternative to minimize any tax leakage. I think at this point, we're still going through those assessments working with our advisors. I think it's a little premature. But we do have a plan to mitigate as much of that tax leakage as possible.

Okay. Perfect. And then, Joe, you previously indicated that you need to find roughly $3 billion of spend to offset the loss of the wind earnings. If I recall, correctly, you had about $1.5 billion that's been identified. So we're simply stepping up here to having a line of sight on roughly $2.4 billion out of the $3 billion with the DER spending you just released, or is there some overlap? And I guess where could we see the remaining opportunities, especially as we're thinking about this in the context of your overall growth guide as we look ahead to the sale and the next roll forward?

Yes. Well, good news is that number, we've got up to about $2.5 billion. John is going to fill in some of the details on how are we going to fill that in. So John, [indiscernible]

Yes. Shar, once again, we've mentioned about -- we've quantified and put on the table $1.5 billion of that $3 billion number that we have shared with you. So let me run -- take you through that. So $1 billion is AMI. And in my formal remarks, you heard me say that we do expect a decision now in Massachusetts by the end of this year, and Connecticut probably late this year or early 2023. So that's about $1 billion, $1.1 billion, okay? And then we also quantify it for you all, about $0.5 billion of transmission interconnection, of which we already have approval for $200 million of that. And today, we announced close to $900 million that we are very excited about to address this burning issue in Massachusetts to enable solar generation to connect into our grid. Those investment opportunities will enable up to 1 gigawatt of generation to connect into our infrastructure, both transmission and distribution. So right now, we have about 6 cluster projects that we have before the DPU. That amounts to that $900 million. And as I said in my home remarks primarily in Southeastern Massachusetts, where we are stretched from a capacity standpoint. So that is -- from a regulatory standpoint, that's well on its way. And we do have some -- we've been working, we think it's a very creative proposal that we put in front of the regulators to facilitate this need. So we're very excited about that. So that we see materializing between -- over the next 4 to 5 years, and we expect that, that full infrastructure will be in place by 2026 to allow for at least of that 1 gigawatt that I mentioned.

Got it. Terrific. So I guess the key message is you're chopping wood on that $3 billion that you're looking to backfill. So that's good.

Absolutely. I feel very -- I feel highly confident that once we update our 5-year capital plan that we'll share with you in February that we will get to that number.

Next question is from David Arcaro from Morgan Stanley.

Maybe following up on a couple of the topics that Shar raised. On the offshore wind, strategic review process. Could you just give an update on what interests you're seeing, whether anything has changed with the rising rate backdrop and overall kind of number and type of potential interested parties there?

Yes. So we've had -- the process is going on very well. We have several highly interested parties, and the interest rate has not caused any concern for them, and we're very, very optimistic and continue to be optimistic on the process.

Okay. Got it. And then on the level of cost that have been locked in, it looked like the percentage hasn't changed since the last quarter. What are you seeing in terms of the inflation in offshore wind kind of construction costs lately and your current thinking around willingness to lock in additional costs with the strategic review going on?

We are in the 80% range -- low 80, the contracts that we're talking about are not ones that I'm particularly worried about around costs or those types of things. And we do have competition in that space. So we're going to be strategic in any type of contracting that we do. But I feel very good about -- I have eyes on the remaining, say, 15% to 18%, and I'm not concerned about it.

Next question is from Steve Fleishman from Wolfe.

So just we're getting near the end on the Massachusetts case. Could you just give us a sense of just how you're feeling about getting a reasonable outcome there?

Yes. Steve, it's Joe. We feel very good about it. We had some very, very good hearings. We had a lot of good discovery, a lot of good exchanges. And we have been very actively engaged with multiple parties. So we are still extremely optimistic for a very favorable outcome in that proceeding. It's not a -- it wasn't a big number in terms of increases. And I think that folks recognize the extraordinary job we do for our customers see our Massachusetts. So we continue to be very optimistic.

Okay. Great. And then the -- maybe just in terms of asking a question from the beginning a little different way. Just when you announced the offshore wind sale, you talked about that net income that you'd hoped for in '26 and be able to kind of take the proceeds and get to that level with investment in the regulated business. And so obviously, you're starting to get the investments all lined up here. But just overall, how are you feeling about kind of getting to the kind of end game whatever your growth rate was plus the incremental net income?

Yes. Yes, good question. We are working on an update on our revised 5-year forecast taken into account -- or layering into our plan, the additional capital that we need to execute on for the reasons that I've stated. So we feel very confident that we'll be able to get into our zone of guidance that you all would expect from us. So I'm feeling very good about it.

Next question is from Nicholas Campanella from Credit Suisse.

I guess, Joe, just on the Biden letter and the winter scenario. Obviously, the fact that you're right in this letter, it's a serious situation. And I just wanted to ask, when you think about the ability to kind of deploy capital at the pace that you are in the current plan, does it change your thinking at all and the ability to spend capital with the pressure in customer bills from the fuel lines.

Yes. No. I mean, I think the investments that we want to make around transmission to unlock and tap into some renewable resources that cannot get on to the grid in a way that's meaningful for the operator. So that's something that will only reduce customers' cost at the end of the day, if we're able to get at some of those renewables. So I don't think that, that would have an adverse impact on our customers. So no, I don't feel it's going to impact it.

And then on IRA, good to see no AMT impact. And I think you're saying kind of cash uplift in the slides here. So can you maybe just update us on what your FFO to is in a post IRA world versus kind of where it is today?

It will head in the right direction. There's no doubt about it with the IRA given the deployment of our solar program in Massachusetts, where we get the ability to get that those tax benefits upfront and then as required flow it back to customers over time. So we do see an uptick in our FFO to debt.

Okay. So just directionally positive.

Yes.

Next question is from Durgesh from Evercore.

Guys, what are sort of the key dates for us to watch on these 6 DER-related projects in Massachusetts? I believe you said one of them is under consideration for approval here shortly. Just if you can give us a time line for us to kind of track that would be really helpful, for regulatory approval.

Sure. Durgesh, this is John. So we have filed all 6 proposals individually. And we expect the first one, which is about -- let's call it, $150 million opportunity. That's been -- on the Slide 8, it's the project. So we expect to see a decision from the DPU late by the end of the year. And then the remaining 5 will trickle in over 2023 .

Got it. So basically, by the time of your fourth quarter update, CapEx update, you would have received a decision on one of the projects, the remaining 5 will be layered in sometime next year?

That's correct. That's correct. And the construct, as I mentioned, is basically the same for all 6 projects. Obviously, there's varying degrees of investment for these 6, but the construct that we filed for is very consistent. .

Next question is from Jeremy Tonet [ph] from JPMorgan.

Just wanted to touch base on the offshore wind process a little bit more. And just want to see how is the process tracking toward that potential year-end announcement? Just trying to look at the language here is your slide language pointing to a slightly longer process versus prior expectations? Just trying to parse through this end of the year as you put it in the slides.

Sure. Yes, it's Joe. We're working very hot at this right now. We've got very interested . We would like to be able to have an announcement by year-end, but there's no guarantees around that. But I would tell you that there were a very strong group of buyers that are in there, and we feel very, very good about the process. So we're optimistic.

Got it. That's helpful. And then just pivoting, could you frame the impact of higher interest rate expense on growth within your EPS CAGR? Just wondering what levers are left to offset this higher expense? And how much of a headwind could it be? Same thing for pension, overall.

Yes. Yes, it will be a headwind, as you would expect. But we're on it, and we are working to mitigate that impact. Obviously, it's uncertain -- the time frame, and this higher interest rate environment will continue. But we -- as I mentioned earlier, we're focused on developing our plan for next year, and I feel very good that we'll have opportunities to mitigate that headwind. .

Next question is from Ross Fowler from UBS.

All my questions on offshore would have kind of been answered. So maybe we can look back to Joe, your comments at the front of the call about bill pressure across this winter. You said bills would be up an average of 20%, and that's given the pullback in natural gas. It's been in the 70s, and the way it went lately. So we had some good weather, too, which is nice. But growing up there, it's going to get cold at some point. So can you just remind us how you're hedged across the winter for that natural gas on price, like through January, February and March? And then maybe it's not even necessarily about hedging and price given your commentary, but more about even getting supply should it get colder than normal across this winter. So just maybe frame that risk for us a little bit more.

Sure, sure. Let's focus first on our gas business. We have -- we are hedged. We have LNG. We keep roughly 20-day supply available of LNG at our facilities. We have multiple LNG facilities. So I feel very good about the supply and the natural gas situation for Eversource customs. This went to. I have no concern around that. We begin planning for that in putting resources into storage starting May of the -- in the spring time we start. And we fill all our tanks and we're in very, very good shape this year for that. I think what I was -- what I'm pushing at is the issue around electric generators in the region, whether they are natural gas-fired or they are oil-fired, they do not have a firm fuel supply. And since they don't have a firm fuel supply, when we get these days for a protracted cold spells, they do not have fuel to run. And that is what my concern was. And that was -- that was really the letter that I had written to President Biden, looking for relief. Number one, with the petroleum reserves, he certainly has a significant resources to help with oil. And then really for around the Act, to allow vessels to foreign vessels to operate freely within the U.S. foreign vessels. Just this past week, there are probably 6 to 8 vessels down in the Gulf. They're filling up. These are foreign vessels and they head into Turkey, Japan, South Korea, Europe. And the fact that they can't come up to the Northeast with the U.S. natural gas, LNG. It's disturbing to me. So the President has the policies. He's done it before with the crisis in Puerto Rico, and he's been a real champion for energy issues and I don't believe he'll let us down here. I think the President will play an active role here, and help us get what we need to be sure that our customers have an event-free winter.

And then maybe winding back for a little bit more color on an earlier question. You mentioned that all of these capital programs you're deploying and filed for but aren't yet approved yet, some of them are really to sort of mitigate the rent pressure around electric bills because you're taking fuel costs out of the system. But if bills are going up in the near term, are you worried about bill pressure, maybe not certainly taking those programs away because that's where we're trying to get to is mitigating that bill pressure. But are you worried about regulators slowing the pace to alleviate some of that bill pressure?

Well, listen, we feel for our customers, this is a challenging time, but there's not anything new to this region. We have experienced this before, and we have a long track record of working with our customers. I think when the regulators see the type of investments that we want to make, and the benefits. I can list 10 transmission projects that have reduced customers' bills by billions of dollars. So these are all very, very -- very good projects to help our customers access lower price electricity. So you have to put -- to make the investments in order to get the savings. And I think that's what the regulators key decision-makers will we'll look at and decide that it's the right decision.

Next question is from Paul Patterson from Glenrock.

Can you hear me?

Yes.

So I wanted to follow up on a few things. First of all, on the preceding in Massachusetts by Commonwealth Edison asking for a delay. You guys filed a joint letter, I believe, on Tuesday with National Grid and [indiscernible], I think. -- basically indicating that you guys had no intention to renegotiate the contract. And then, I guess, I saw that yesterday the Governor of Massachusetts seemed a little bit more open to the idea. Just wondering if you could give us a little bit more color on how you see this. And I guess if you can, why you guys see yourselves in a different position with your projects as opposed to this one that's asking for renegotiation?

Yes. Keep in mind that our pricing is higher. It's in the 100 to 110 megawatt hour range. The project that we're talking about came in here and did very, very low pricing against projects that we had bid. I do not feel that like look at a success for any renegotiation. And keep in mind that what the government has said is that he would allow [indiscernible] grid to make a proposal. He didn't say that he was going to go and renegotiate with them. And so there's a lot of players that will have to decide on this. Certainly, it's our regulators. Now regulators at the end of the day are the ones that are going to decide what is best for the customers. And so that's the reason why you're not seeing any of our projects in there right now looking to renegotiate.

Okay. That's great. And then just I was wondering what kind of response you've gotten -- I mean you sort of answered it, I think, just now with respect to the White House, and your letter, which makes a lot of sense. But I'm just thinking in general, is this -- I'm just wondering, is this a wake-up call maybe that -- I mean you just sort of wonder, the fact that LNG is being imported as a significant part of New England's reliability situation. Is this any sort of a wake-up call that maybe infrastructure -- maybe the region should be more open to infrastructure or maybe the federal government should be sort of pushing the stuff along? Do you follow what I'm saying, whether it's done to go through Northern Pass or just a whole variety of projects that have been delayed. And it just -- you sort of wondered, is there any change in Washington that you're noting in the region with respect to perhaps sort of getting real about reliability? And do you follow what I'm saying and the need for significant infrastructure improvements to be streamlined and what have you? .

Well, yes, you appreciating the [indiscernible] here, absolutely. I do see that each of these governors realized the seriousness of this. I mean we are at fragile point in time as we transition to this clean energy environment. And so consequently, we're going to need some relief, whether it's the Jones Act relief or other types of projects, certainly, the -- it's disappointing. You know how hard we worked on Northern Pass to bring hydro down. Another great resource that this region could really use. So I do think -- I mean, we're all working collaboratively. We've -- we were up in Burlington, Vermont. We had all of the states along with the FERC, and we're looking at these issues. And listen, a lot of my people at the table, a lot of people understand the seriousness of it. And so I'm fully confident that we're going to be able to put steps in place that are going to allow us to transition uneventfully to a clean energy future. It's going to be challenging. It's going to be challenging. It's going to require a lot of work. But I know that the folks that -- and the people at the table can get this done.

Next question is from Paul Zimbardo from Bank of America.

Just a couple for me. on Jeremy's question, what interest rates are you assuming in the cost of debt on the offshore wind when you give those expected long-term average ROEs? And just how has that evolved since you gave that original target?

Well, the -- are you referring to next year?

The expected long-term average roles from the slides.

Okay. Well, just looking at it from a long-term perspective, the interest costs associated with offshore wind post close once we divest, those proceeds will be used to reduce our short-term as well as our long-term debt. For 2023, we have $1.2 billion of long-term debt that's maturing at the holding company, okay? So the timing cannot align any better for us. And then on another positive note, if you look at the total utility debt that's maturing, it's probably the lowest amount that I've seen in a long time. We only have about $800 million of debt maturing at the utilities. So that sets us up very nicely. But we still have -- nevertheless, we have to fund our capital program. So I'm not seeing a huge headwind and I'm not seeing a huge movement in our long-term guidance as a result of this environment that we are in from an interest rate perspective.

Okay. I was more referring to like the actual projects. I didn't know if the interest rates are pressure and there's an offsetting mitigation positive to compete the average ROEs intact.

Well, number one, the -- because these projects are under construction, the interest cost that we are incurring during construction is capitalized. So we're not seeing any impact from a financing standpoint for these projects. And then once we get the proceeds from the divestiture that will be used to offset the debt that we currently are carrying.

Yes. Yes. Understood. Okay. Great. And then briefly, I know you gave some commentary last call about pension. Just if you could give any updated thoughts there about pension returns or just your overall thoughts as we enter next year.

Sure. Sure. A lot to do so. So pension returns, just like our peers, I'm not heading in the right direction for us. But even with that said, there will be some headwinds. But once again, not anything material, not anything that we cannot overcome.

Next question is from Travis Miller from Morningstar.

Not to belabor the point here too much, but back to the idea about what might happen a harsh winter environment. In the past, on a regulatory standpoint, you guys have had some headwinds. We've had difficult weather events. Do you think something has changed? Are you trying to set up a scenario here where if there are issues in terms of energy delivery resilience, reliability? Is there a way you can turn that into a positive from a regulatory standpoint and get approval for more capital investment instead of getting penalized for not meeting a certain requirement?

Well, I think what we're focused on with the regulators now, our solutions to deal with this current winter. I don't know that maybe that would translate into some longer-term types of investments. But right now, this fuel security program where -- maybe these generators get given funds to have, say, a 7-day supply of fuel on-site. Those are the types of measures we're looking at short-term measures with our regulators. But I think that -- during that dialogue is where you can demonstrate to the regulator that a particular transmission investment would unlock potentially a certain number of megawatt hours in a region and lower the cost. So I think the fact is we have very good regulatory relationships. We have very good regulators that are very engaged and we're engaged with them on these issues. So any time you have an engaged parties you get much better solutions.

Okay. Great. And then one more on the governor's rates. Anything near term after the election that could be impacted either in programs that you're seeking approval for things you'd expect in the next year or so on the policy front, depending on the outcome?

Yes. No, I think we have eyes on all of the states. I think we've got pretty stable regulatory climate, and we have plans -- we have multiyear plans. We don't expect that any -- but everyone's agenda around clean energy, around AMI, those are all consistent, no matter who the candidate is. I think everyone recognizes that -- we need to have a grid that can enable all sorts of resources to operate on it whether it's your charging your electric vehicle, your solar panels or any type of a distributor resource -- so I don't -- I wouldn't expect any changes no matter who wins in what state.

Well, that was the last question that we have this morning. So we want to thank you all very much for joining us. We look forward to seeing you at the -- any of you at the EEI Annual Finance Conference. If you have any more follow-ups today, please send me an e-mail or give me a call. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines.