Good morning, and thank you for attending the Eversource Energy Q1 2024 Earnings Call. My name is Elissa, and I will be your moderator. [Operator Instructions] I would now like to pass the call to our host, Matt Fallon, Eversource Energy's Director for Investor Relations. Matt, please go ahead.

Good morning, and thank you for joining us. I am Matt Fallon, Eversource Energy's Director for Investor Relations. During this call, we'll be referencing slides that we posted yesterday on our website. As you can see on Slide 1, some of the statements made during this investor call may be forward-looking. These 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. We undertake no obligation to update or revise any of these statements. Additional information about the various factors that may cause actual results to differ and our explanation of non-GAAP measures and how they reconcile to GAAP results is contained within our news release, the slides we posted last night and in our most recent 10-K. Speaking today will be Joe Nolan, our Chairman, President and Chief Executive Officer; and John Moreira, our Executive Vice President, CFO and Treasurer. Also joining us today is Jay Buth, our Vice President and Controller. I will now turn the call over to Joe.

Thank you, Matt, and thank you all for joining us on the call this morning. Let me begin with an update on the sale of our offshore wind business. I am pleased to report that we are on track to close the sale of the 3 projects over the coming months. We are progressing well on the approvals necessary to close these transactions, as shown on Slide 3. We have filed all regulatory approvals with the New York Public Service Commission and FERC for the sale of South Fork Wind and Revolution Wind to Global Infrastructure Partners. And we recently executed the purchase and sale agreement for Sunrise Wind with Orsted. For Sunrise Wind, we have also filed applications for regulatory approvals with the New York Public Service Commission and FERC. We anticipate these approvals will take about 90 days. On the construction front, I can't tell you how excited and proud I was of my Eversource colleagues as I stood alongside New York Governor Hochul to flip the switch to energize South Fork Wind in March. We will certainly capitalize on lessons learned from South Fork, a first-of-its-kind project here in the United States. The same construction processes will be used for the Revolution Wind project where onshore and offshore construction is underway. Now that our offshore wind risk is largely behind us, we are very excited about the future of Eversource delivering safe and reliable electric, natural gas and water service to our 4.4 million customers. Turning to Slide 4. Eversource is moving forward as a pure-play regulated pipes and wires utility business, doing what we do best, delivering clean energy safely and reliably to our customers every day. When we are doing what we do best, our customers are the direct beneficiaries. A good example of this…

Thank you, Joe, and good morning, everyone. This morning, I will discuss our first quarter financial results, give you a regulatory update and cover drivers for our cash flow enhancement. I'll start with the first quarter results on Slide 7. Our GAAP and recurring earnings for the quarter were $1.49 per share compared with GAAP and recurring earnings of $1.41 per share last year. Breaking down the first quarter earnings results of the $1.49 per share into segments, our Electric Transmission earned $0.50 per share compared with earnings of $0.45 share in 2023. Improved results were driven by our continued investments in our transmission system to address capacity growth for customers and connect clean energy resources to the region. Our Electric Distribution earnings were $0.48 per share compared with earnings of $0.47 per share in 2023. Higher revenues primarily due to a base distribution rate increase at NSTAR Electric were partially offset by higher operating expense, higher interest expense and increased property taxes and depreciation. Our Natural Gas Distribution business earned $0.54 per share compared with $0.49 per share in 2023. Natural Gas Distribution earnings increased due to higher revenues from capital cost recovery mechanisms, a base rate increase at NSTAR Gas and lower operating expenses. Our Water Distribution segment contributed $0.01 per share compared with flat earnings in 2023. Eversource Parent & Other Company earnings were a loss of $0.04 per share compared to breakeven results in 2023. The lower results were due primarily to higher interest expense and the absence of a net benefit in the first quarter of last year from the liquidation of a renewable energy fund. Overall, our first quarter earnings were in line with our expectations, and we are reiterating our 2024 EPS guidance of $4.50 to $4.67 per share as well as our…

Thank you, John. Elissa, we are now ready for questions.

[Operator Instructions] The first question comes from the line of Shahriar Pourreza with Guggenheim.

Joe, I guess what -- just firstly, what CapEx are you guys actually cutting in Connecticut? Where are you kind of redeploying? And is that redeployment actually accretive just given the cost of capital differences?

Thank you, Shahriar. Over the past decade, we've spent a significant amount of money on electric reliability for our Connecticut customers. Our best-in-class engineering has moved months between interruptions from 10 months to nearly 2 years. So clearly, our investments have paid huge dividends for our Connecticut customers. However, the regulatory decisions over the past few years are misaligned with the law and the state policy. And without a secure and predictable cost recovery path, we cannot continue to put additional capital resources on the table. So our investment objectives in Connecticut have been centered around safety and reliability. As you'd expect, we will not reduce our safety spending. Therefore, the reduction will likely come from reliability areas. As John has mentioned, we have ample opportunities for capital deployment on our system. So we are -- we feel very, very good about that. And yes, it would be accretive.

Got it. And Joe, can you cut more if need be?

Well, we are going to be very thoughtful and deliberate about it. Obviously, we've had a great track record down there. I will tell you that the reliability numbers in that state are best-in-class. I don't think you'll find it. You'll find it really anywhere else around the country. So I'm very proud of that. But if we continue to see this negative regulatory environment, we're going to have to look at everything.

I would also add, Shahriar, that as a reminder, we do have a resiliency program in place, which we get timely recovery of up to $300 million of distribution investments at CL&P, which has been very, very critical for us to achieve this performance level that Joe just mentioned.

Got it. And then -- and maybe just a quick one for John. John, just the up to $1.3 billion of equity is obviously still in plan. And obviously, that level is going to be dictated by the water sale outcome. I guess how are you thinking about the means of issuances? Are you thinking more in systematic terms or kind of prefunding spending and the balance sheet ahead of time, so ATMs versus maybe rip the bandage off block?

Our view, and that will continue to be our position, is to be opportunistic in exploring and utilizing our ATM program to accomplish that. As I've said time and time again, an ATM program gives us tremendous flexibility. And we were very successful in executing at least through month $75 million. We've done quite a bit more over the past couple of weeks.

The next question comes from the line of Carly Davenport with Goldman Sachs.

I wanted to just start on the FFO to debt walk, thanks for the detail there. I guess, first, could you just remind us of the cadence of the 2023 under-recoveries hitting the cash flow statement this year? And then how should we just think about -- as we think about the other drivers that you'd identified, sort of the split between the impacts between the $1.8 billion and those other drivers?

Sure. So the under-recovery, as highlighted on Slide 9, Carly, for 2023 across all of the utilities with the biggest impact being CL&P and Connecticut, was approximately $600 million. So if you were to normalize, where we landed at the end of 2023 from an FFO to debt using -- at Moody's was approximately 9%. So that would drive that up as we've indicated on the slide about 200 basis points. So with the favorable order that we received a couple of weeks ago on the annual rate adjustment mechanism, we feel good that both that cash plus more related to 2024 costs will start to come in the door effective July 1 through April 30 of next year, so a 10-month recovery which is very, very helpful to us. And then the other items, what we've tried to do is to highlight where we -- as it relates to our offshore win, what we have already identified and have disclosed to you all, that would significantly move us up closer to the 14% to 15% range by the end of 2025, but certainly building up towards that range towards the -- towards that time period.

Got it. Okay. Great. And then maybe just on the Massachusetts ESMP process. What are sort of the next milestones for us to look out for their? And then just more broadly, how do you think about opportunities for the other states that you serve to adopt sort of similar frameworks?

Sure. So I'll start with Massachusetts. So hearings on that docket just basically concluded. So now we get into the briefs and reply briefs. But one thing I want to point out to, based on the legislation that was passed a couple of years ago, the Clean Energy legislation, the DPU does have to render a decision by that August timeframe that I stated in my formal remarks. So as we move forward, the $600 million that I highlighted in my formal remarks is really what will materialize if we do get a favorable approval from the DPU that will materialize within our forecast period, but there's further investments that will be needed beyond our current forecast period that we've also have highlighted in our filing. So obviously, Massachusetts continues to be very proactive in identifying opportunities to really make sure that the goals that the state has established is realistically and proactively accomplished. In Connecticut, as Joe mentioned, we would love to support their Clean Energy strategy. But as we have both indicated in our formal remarks, it will require collaboration and cooperation by us -- by the utilities in Connecticut as well as the authority. And then lastly, New Hampshire, as we mentioned, we are having discussions with the state on utility-owned solar. We will likely be proposing an investment opportunity in the months to come. As you -- as I mentioned in my formal remarks, we do plan to file for a rate review this summer.

In all of that solar investment, just to keep in mind would be regulated investment -- solar investment, utility-owned, very similar to the model that we have here in Massachusetts, Carly.

The next question comes from the line of Nick Campanella with Barclays.

So just kind of sticking with Connecticut here and just the fact that you're cutting investment there, but you also had this rate order -- this outcome on Aquarion, just how do you kind of see that kind of affecting the process that you're running there to potentially monetize the asset? And just maybe you can kind of update us on that process, your confidence level that whatever happens there, there wouldn't be additional equity kind of coming into the plan that you outlined today?

Well, the appeal process, obviously, we would love to have a positive data point. But the appeal process will continue to make its way. You're probably looking at, at least a year in the making, but we are continuing to move forward with launching Phase 1 of the process relatively soon. And then, we'll make the decision at that point.

Okay. So still moving ahead, it seems. I appreciate that. I guess just a follow-up on Carly's question just around the FFO to debt, just -- the South Fork's tax equity investment would probably be, I would guess, more onetime in nature to the, I guess, cash flow improvement. But just -- I just wanted to kind of confirm like net of these kind of one-time items, you still see this path getting you to 14% to 15%. And what's really kind of driving that net of the one-time issues?

Yes. No, we certainly do, Nick, the tax equity. We actually think, as I stated, 24 months. That's probably a bit conservative. I think that will probably lead into 2026. We do have other tax benefits that we want to utilize for us before we tap into those ITCs. So that can be elongated a bit, which is great. And then longer term, yes, that does fall off the cliff. But we have other items that will certainly kick in. We are sitting on a pretty large deferred storm balance. So I see those costs coming in, in potentially '26, certainly '27 and beyond to really maintain that high level of FFO to debt.

And then just one last one for me just on Sunrise. I know that you're not giving the price, but -- last quarter, there was negative book value. I don't believe that the queue is out, but is that still the case or something that you can kind of talk about? Or do we have to wait for the sale agreement to be public for you to revise that?

It does. And that's really -- we have to follow the accounting rules, and the accounting rules basically says that if you have a contingent gain, you have to wait to get your cash, right? So that, therefore, the transaction has to close. So where probably, I would say you should expect a true-up of those balances to occur likely in the third quarter of this year.

The next question comes from the line of Jeremy Tonet with JPMorgan.

Maybe just continuing with Slide 10 here real quick. Thanks for all the color provided. Just want to confirm the major drivers, everything on the right hand of that slide, that's all treated as FFO and not debt reduction when you talk about the walk from -- into 14% to 15%.

Yes. No, it's a mixed bag. So obviously, what's more critical is that we have the cash coming in, right, which will displace debt and obviously enhance our operating cash flows.

Got it. And so maybe just pivoting towards Aquarion here in just a little bit more detail, I guess, on where you guys are in the process right now and how you -- what you prioritize here, pace of transaction versus value that you can achieve or just any other thoughts on the parameters of how you see this process unfolding.

Sure. I would frame it this way. It's not about a mad dash to the finish line. It's about a thoughtful process that we will run for the greatest value that we possibly can harvest. So that's what's important to us, is obtaining the greatest maximum value we possibly can. So if its transactions takes a bit longer, we are fine with that. The rating agencies are fully aware of the timeframe that we've mapped out with them. And obviously, they are comfortable with that.

Got it. And then just to confirm real quick here, the sales proceeds are going to be helping FFO in this illustration here. I just want to make sure I was straight on that.

Absolutely, absolutely because it displaces debt.

The next question comes from the line of Steve Fleishman with Wolfe Research.

Just maybe tie up one more question on Aquarion on the -- you mentioned appealing to the Supreme Court. Is there like a timeline? I don't know if you already filed that or when would you file that and when would you know if they take the case.

We filed that early April, that request. So we feel good that the Supreme Court will take the case and that it will just expedite the whole process. Once the court accepts that, then you're probably looking at a 9- to 12-month process, is what we're estimating.

Okay. But you're not going to hold off the sale process to wait for that, you just move forward.

No. No, we're not. I was going to say, Steve, in the meantime, we are expecting to implement the original rate change, and we actually accounted for that in the first quarter this year. Once we get that, then the company can move forward with the filing for their WICA program, which will give them much -- which will give them about 30%, 35% of their annual capital program cost recovery on.

Okay. And then just on Connecticut Regulatory Environment. I appreciate the decisions being made there. Early in the year, there had been talk about the governor may be kind of expanding the commission and some changes there. Is that still being considered at all? And just -- I know you've been on an initiative to try to highlight these issues. Just do you feel like you're making any progress in resonating on the kind of quality of the regulatory environment being kind of investable?

Yes. Steve, a couple of things, the governor has the ability to appoint 5 commissioners. He has vacillated over that, and I'm not really sure at this point whether he wants to take it up to 5. As you know, all 3 commissioners remain in hold-over status, and I'm not really quite sure what the current plan is around that. Obviously, we have grave concerns about the environment there. I think you know that. I think everyone knows that. We enjoy a very productive working relationship in our other 2 jurisdictions where we are so aligned that no light shines between kind of the state's initiatives and our initiatives. And when you collaborate, I think you should have tremendous outcomes. You look at the benefits that Massachusetts is achieving. You look at the progressive moves that are taking place up in New Hampshire as we collaborate with those folks. And they really understand it. And it's going to take that type of collaboration as we look to electrify our system and move away from carbon fuels. But if we don't collaborate, it makes it very, very difficult. I mean we've have operated this way. In my 40-year history, we've always had strong working relation. So it's a disappointment to me, and it's a priority to me as we try to focus on Connecticut and to see if we can't get aligned and get on the same page so that we can move the agenda. Connecticut has a phenomenal opportunity to be really a leader in clean energy. We built that port down there. We collaborated. That clean energy port down there should put them on the map for clean energy. But unfortunately, it's been a real challenge. But I just want to assure you and all of our investors that this is something I take very seriously, and I will continue to work at it 7 days a week until such time as we can get some constructive change.

Okay. Appreciate that. And then lastly, on the New Hampshire Solar opportunity, I know -- solar in New England tends to be a decent amount, kind of capital cost, just not as much available land, all that stuff. So just any sense on kind of size and investment opportunity there for the New Hampshire Solar?

Yes. I've got to tell you, one of the challenges -- first of all, we don't really have a sizing at this point. We're really in the first inning of this game, but the fact that they are interested around utility on solar, I take great confidence. But I will tell you the one thing there's no shortage of in the state of New Hampshire is land. And so that's where I see great opportunity. And I also see the proximity to our infrastructure. It makes it very easy as well. One of the challenges that a lot of folks early in the solar days was folks would want to build, but they'd be in rural areas where there wasn't any load. But we have opportunities in New Hampshire with sizable tracks of land that would allow us to obviously collaborate. It has to be a partnership. It has to be a community that's interested in this, but I do see great opportunity up there. So we're really in the first inning. I think we'll be able to update you probably on the second, third quarter calls around how that's going. But I think the most important thing for us is to get a model in place in New Hampshire for utility-owned solar that is fair for us and is fair for the customers.

The next question comes from the line of Andrew Weisel with Scotiabank.

In Connecticut, another question here, I agree the state policies and regulatory environment are not aligned. So I understand you're reluctant to put capital to work. My question is, what exactly is it that you're looking for? What would it take to get you more comfortable with the regulatory setup? Is it a qualitative good faith kind of conversation? Are you looking for something more explicit like preapprovals for spending on AMI and EVs?

Yes. Well, we're looking for preapproval, looking for our regulatory recovery, a roadmap for the recovery of odd dollars that we have spent. As you know, the filing that we just got approved there for $800-plus million, that was money we spent on behalf of the customers in Connecticut. These were state-mandated requests that we did. And so we expect to get paid for that. And if the state wants to have AMI, we expect to have an orderly recovery process for our investments, just like we have in Massachusetts, and that's all we're looking for that if we spend dollars, we want to know we're going to get the dollars back. We don't want to be chasing those dollars. We don't want to have uncertainty around it. And I know that everybody on this call doesn't want uncertainty. And so you could have my assurance that we will not spend dollars until such time as we have a constructive regulatory environment that allows us to get fair treatment in the recovery of our dollars that we've spent on behalf of the customers in Connecticut to bring better service.

Okay. Is that something you think could be done in the regulatory arena or would that require legislation?

No, I think we can do it in the regulatory arena. Certainly -- I mean, we're aligned with the governor, we're aligned with this other agencies. So we can have a collaborative effort that we submit a filing for all on the same page. Even the Attorney General, we have very, very strong relations there. But we just have to get pure, aligned with all of the other interests around the state so that we can get a constructive roadmap to move forward.

All right. Sounds good. Then on FFO to debt, if I could elaborate, I know this has been asked a few times, and I appreciate the details on Page 9. Maybe this is a silly question. But if the $600 million from under-recoveries adds 2%, you triple that to $0.8 billion. How come the impact to FFO to debt goes up by -- double or less? What dumb guy math might have get, it would be a 3:1 ratio in the dollars and the percentages. So what are the offsets there?

Well, keep in mind that in that 300 to 400 basis point movement, it does include other cash flow items that we have not quantified in that $1.8 billion, Andrew, and then additionally, when the cash comes in, it's going to impact both the numerator and the denominator accordingly. So it's not a one for one.

The next question comes from the line of Anthony Crowdell with Mizuho.

Just quickly on Slide 12, you had issued some parent debt already in the -- for the year. Do I think that's going to -- that's for the maturities at the bottom of this slide or the maturities you may also refinance and that's going to be incremental debt? And let me know if that's not clear.

No, you're thinking about it correctly. So it's where the maturity is listed on that slide. We do have $900 million that's due on June 27, and then, we have another $450 million in the fall. Also, in January -- early January, we have another $350 million -- $300 million coming due. So it's more of the prefunding. So with the proceeds from the transactions that I highlighted, we should be out of the debt and capital markets for quite some time.

Great. And then just to stay on the mark with Connecticut questions. I know sometimes when utilities ramp up CapEx or they may be doing some new projects, they talk to policymakers, some regulators prior to it and get a feel of just the policymakers are on board with this increased capital that they're spending. I'm curious if something happened in Connecticut where you had similar discussions on actually to lowering of CapEx.

Yes, we've had discussions about our investments. I mean we started talking about AMI 3 years ago, and we're all on the same page, and everybody wanted AMI. We talked about investment in EVs, electric vehicles, infrastructure. So we were totally aligned with, certainly, key leaders down there. So we continue to have that dialogue. And right now, we have dialogue where we share with them that we can't keep moving forward unless we get the certainty around it. I mean, costs have increased since the time we began talking about AMI. If we would get on with the show, that would have saved our customers money, but this delay doesn't help matters. We're kicking it off here in Massachusetts. We're going to be putting in the AMI meters and infrastructure, and it's -- the customers are going to benefit from that.

The next question comes from the line of Durgesh Chopra with Evercore.

John, just for investors, and I was trying to think about the implications if you don't move forward with the Aquarion water sale. Can you just help clarify what does that do to the equity? Could the equity -- if you don't move forward with the sale, could the equity be higher than $1.3 billion? Or is that the max, and then if you do, do a sale, that number moves lower?

Well, there's still a lot of things in flux, and I'm not -- we're not moving off of the $1.3 billion equity needs until we have more clarity, so as things evolve over the coming year. But right now, our position is to kind of work preparing the potential sale for Aquarion and get through Phase 1 and see what -- how that -- see what that looks like.

Understood. And then just to be clear on the FFO to debt, I know a lot of questions have been asked, you get to that 14% to 15% by 2025 with or without the Aquarion sale? Am I thinking about it the right way?

No, no. If you look at the left-hand side of that slide on the bottom, we have other drivers. Those other drivers are cash inflows that we have not quantified. But yes, yes, yes. No, we have assumed -- as I continue to reiterate, in our financing plan that we have assumed the sale of Aquarion.

Perfect. Okay. And then just one hopefully quick follow-up. Anything to kind of note in terms of the construction process or costs on revolution in Sunrise? Any updates versus your past disclosures there?

Yes. No, it's too early right now, but we continue to stay close to it, and we'll keep you updated. We did start though. The good news is we're in the ground, and construction is underway. So we're excited, and we're going to utilize the same practices that we successfully deployed in the construction of the South Fork project, which, as you all know, though, all 12 of the turbines are up, and they're running. And we're very, very proud that we are the first offshore wind provider in the United States.

Our final question comes from the line of Travis Miller with Morningstar.

Real quick one, staying on CL&P here. If you take out your depreciation or maintenance CapEx, how much of that additional CapEx is covered under an existing rider or tracker or something like that outside of a base rate? You mentioned energy efficiency. Is there other CapEx?

The biggest CapEx is the $300 million system hardening that we've had in place for quite some time. So that has helped the timely cost recovery and has helped Connecticut get to a much better situation from a reliability standpoint. So I would say that a good chunk of the -- as you pointed out, the maintenance depreciation would be covered by that.

Okay. Okay. And then kind of a real quick follow-on on some of the other questions. Do you expect the clean energy policy overall, not necessarily just the rate setting, but clean energy policy overall in Connecticut will be a political issue this year? Or is that something for years down the road?

Yes. No. I mean the legislative session is going to end next week. So I don't expect that you could see anything at that point. But I think the dialogue will continue, as we'll remain engaged for the rest of this year and into the future until such time as we are all on the same page and we can find out what's important to this state that we can invest in and get a fair return and fair -- really a level playing field. That's all we're looking for.

Sorry, Elissa, I just want to thank everybody for their time, and please follow up with IR with any additional follow-up questions that we can help out with. And I'll turn it back over to Elissa.

Thank you. This will conclude today's conference call. Thank you all for your participation. You may now disconnect your lines.