Good day, and thank you for standing by. Welcome to the Eversource Energy Q2 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker, Rima Hyder, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today on the second quarter 2025 earnings call for Eversource. During this call, we'll be referencing slides that we posted this morning 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-Q and 10-K. Speaking today will be Joe Nolan, our Chairman and President and Chief Executive Officer; and John Moreira, our Executive Vice President, Chief Financial Officer 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, Rima, and good morning, everyone. Thank you for being with us today. Starting on Slide 4. We have made great progress halfway through the year, executing our key strategic priorities while maintaining our commitment to being a pure-play pipes and wires regulated utility. As anticipated, electric demand continues to rise, both in the near term and throughout our 10-year forecast horizon. We recognize this growth trajectory early on and worked closely with key stakeholders to position ourselves to effectively meet the challenge. In several regions, demand is expected to outpace existing infrastructure capacity, underscoring the critical need for strategic upgrades and new development. The accelerating electrification of transportation and heating sectors, driven by decarbonization efforts is further fueling this upward trend. Notably, low growth through the first half of 2025 has exceeded 2%, nearly double the rate observed during the same period last year, reinforcing our expectations in validating the investments we've made to capitalize on this momentum. A clear indication of this is the 10% increase in our 5-year infrastructure investment plan that we announced in February. Our balance sheet is strengthening and our FFO to debt ratio continues to improve as a result of constructive regulatory outcomes as well as our execution on cash flow enhancements that we laid out last year, such as exiting the offshore wind business and the planned divestiture of our water business. Turning to our quarterly accomplishments on Slide 5. Once again, this quarter, we saw solid earnings growth from our transmission and distribution businesses versus last year's results. Earnings for the second quarter were $0.96 a share, in line with our expectations. We are reaffirming our 2025 EPS guidance range of $4.67 per share to $4.82 per share as well as our long-term EPS growth projection of 5% to 7%…

Thank you, Joe, and good morning, everyone. This morning, I will review second quarter earnings results, provide a regulatory update and discuss our balance sheet and credit metrics progress. I'll start with our second quarter results on Slide 9. GAAP and recurring earnings results for the second quarter were $0.96 per share compared with GAAP and recurring earnings of $0.95 per share last year. Higher utility earnings were largely offset by a decrease in parent and other earnings. Looking at the quarter results, starting with transmission, higher electric transmission earnings of $0.02 per share were due to increased revenues from continued investments in the transmission system and lower interest expense, partially offset by the impact of share dilution. Next, we have higher electric distribution earnings of $0.02 per share that benefited from distribution rate increases in New Hampshire and Massachusetts providing cost recovery of infrastructure investments in our distribution system. These higher revenues were partially offset by higher property taxes, interest, depreciation and the impact from share dilution. The improved results of $0.02 per share at Eversource's Natural Gas segment were due primarily to base distribution rate increases at both Massachusetts utilities, to also provide timely recovery of investment in our natural gas segment. These revenue increases were partially offset by higher O&M, interest, depreciation, property tax expenses and the impact from share dilution. Water distribution earnings improved $0.02 per share year-over-year as a result of higher revenues and lower interest expense. Eversource parent losses increased $0.07 per share for the quarter. Lower results were as expected, primarily due to higher interest expense resulting from the absence of capitalized interest after the sale of our offshore wind business. Overall, our second quarter earnings were in line with our expectations, and we are pleased with this solid performance. Moving to our…

Michelle, we're ready to begin our Q&A session.

[Operator Instructions] Our first question is going to come from the line of Carly Davenport with Goldman Sachs.

Maybe just to start on the balance sheet. I appreciate the updates there. So the 11.5% FFO to debt at the end of 1Q, just can you walk us through kind of the confidence levels in hitting that 14% level by the end of the year and some of those drivers in addition to the asset sales, which, if I recall, was expected to add about 100 basis points to that ratio?

Carly, it's John. Very highly confident. The biggest driver to enhance our FFO to debt is in rates, and that is the recovery of the deferrals. Albeit, I don't expect to see the significant sizable improvement in the second half of the year because we have already recovered the $900 million that went into rates July 1 of last year. So we're on track. It's not just the public benefits. We also have cost recovery of deferrals, as I mentioned, storms in my formal remarks and other regulatory assets that we have coming into rates in the other jurisdictions. The -- in my formal remarks, I mentioned that we will monitor the progress that we're making on the regulatory approval for Aquarion. That in and of itself with at about 100 basis points. So highly confident that we'll reach the 13 handle with the Aquarion closing towards the end of the year, that will contribute approximately 100 basis points to get us to that nice cushion.

Got it. Great. And then just on Connecticut. You mentioned, obviously, the securitization of the storm cost was not in your base plan. So could you talk a little bit about how that potentially could impact the longer-term FFO to debt levels? And then just from a logistics perspective, how should we think about the timing to filing for that securitization and when that could ultimately have an impact on the balance sheet?

Sure. Sure. Let me start with your first question. First question is, how that impacts? Right now, we're not moving from the $1.2 billion need. Clearly, everything else being equal, that would certainly have an impact on our financing needs. The fact of the matter is within 6 months, we're going to do a clean refresh. And in February, we'll give you an update of what our revised equity needs. And when we roll out our equity needs at that point in time, we'll certainly take into consideration the securitization aspects of those costs. Your second question as to how it would work, where we stand right now, we just 2 weeks ago filed another wave of storm costs of about $171 million into PURA. So that puts the total cost, storm costs under the prudency review close to $1 billion. So that is a very sizable amount for the authority to review and go through it. In light of that filing, that latest filing, PURA did update their schedule, their procedural schedule to take us out through March of next year with hearings and briefs being filed. So I don't -- right now, we don't have an approval date for those -- for that review. But once we get the review, which is the most critical aspect of it, we already have the legislation, we will be off to the running with the securitization process, which we expect would take in and of itself about 12 to 18 months to get complete. So likely now, and we were hoping that we would be able to get that cash in the door by the end of '26. So with this push out in the schedule, it's looking more like 2027.

Our next question is going to come from the line of Jeremy Tonet with JPMorgan Securities.

I just wanted to kind of follow up with some of the points that we discussed there. I think the slides highlight the ending first quarter FFO to debt. I was just wondering if you could share updated metrics for the second quarter for Moody's and S&P and how you stand against those thresholds at this point?

Well, for Moody's -- for S&P, we're already in a strong position there. So let me speak to Moody's. So we have line of sight I would tell you that every quarter, we'll continue to make progress. As I've said, this quarter on a 12-month basis, rolling basis, we improved over 200 basis points, which is very, very sizable just in 1 quarter. I expect that momentum to continue. And I would say in the coming quarters, we'll be at that 13%.

Got it. And I was just wondering if we could turn to New Hampshire a little bit here. If there's any other, I guess, process takeaways that you have from the outcome there and views, I guess, on settlements versus full litigation and how you think things progressed there?

Yes. No. Jeremy, I think it was fantastic. We had been in the rate arena since 2018. Every single case that we had had been settled prior to that. I talked to a lot of the folks, we don't have any recollection of any time we've had a litigated case. But I think it was a very, very good case that allowed us to flush a lot of the issues out. And I think that the regulatory climate there is very favorable. Obviously, in a situation like that, you don't get everything you want. But the fact of the matter was constructive, it was fair. It was transparent. We asked for after we netted out storms, we asked for 103. We ended up getting -- we got 100. We got an ROE of 9.5%. But what I like about it is it's very constructive, not only with the commission, but with all of the parties that were involved. So going forward, I think it's an example for other jurisdictions that this is really a nice way to kind of handle a rate case in a professional manner. So we're pleased. Obviously, we're looking at the order and -- there's some puts and takes and some things that we might like to have tweaked. But at the end of the day, it's a good order for not only the customers, but it's a good order for the company as well.

And I would just add, let's not lose sight that we did get the PBR structure, which was important to us, and we hope that, that prevails. And very pleased that ultimately the revenue level was that we -- that the rate case provided for us is very supportive as that is kind of the cast off basis, if you will, for future rate increases as we move into this our PBR environment.

Our next question is going to come from the line of Andrew Weisel with Scotiabank.

One more on the balance sheet. So the ATM issuances of about $220 million during the quarter after where it was off during the first quarter. I know the commentary still shows the majority of equity towards the back half of the forecast period. So how should we think about that? What made you turn it on during the last quarter? And I know last year, you had that similar run rate of $1 billion over the year, about $250 million per quarter on average. So what should we expect going forward? And at a minimum, were you active in July?

Well, you'll see that when the third quarter happens, [ Jeremy. ] So obviously, in my formal remarks, I said, look, our equity needs for this year will be dictated by how the Aquarion approval progresses and what our short-term debt balances are. So we saw a window of opportunity in June, and we did that raise all in the month of June as a way to provide liquidity for us, which is very important to us. So I've said that time and time again, what we need for this year is going to be based on the timing of the Aquarion and our short-term balances. So once again, I think the guidance that I just reiterated still holds. Once we close Aquarion, I don't see the need to raise any equity for some time.

Okay. That's helpful. Then longer-term question on Connecticut. Between the legislative updates and the Connecticut court ruling, do you think you're positioned to redeploy some of the capital back into the state? In the past, you diverted some money away from Connecticut into other states, given the uncertainty. Do you think you're ready to reallocate? Or would you want to see some more constructive data points from the commission itself first?

We would like to see some more constructive data points coming out of the commission before we reassess our capital redeployment.

Okay. Do you think there's opportunity between now and the year-end update when you formally refresh the capital forecast? Or do you think it will take a little more time than that?

That's difficult to predict, but one of the events that we're watching very closely is what the outcome of the Yankee Gas case proceeding.

And we also have a reconsideration on AMI, if we get some clarity around that and some rules of the road that are fair to us, then that's also an opportunity as well.

Our next question will come from the line of Anthony Crowdell with Mizuho.

Joe, I don't want to start off on a bad foot, but the last earnings call, I made a call that Knicks would beat the Celtics.

Yes. I know, you're good, you're good. I thought you were going to tell me happy 40th anniversary, today is my 40th anniversary at the company. I start my 41st year, Anthony. I mean, I thought you'd have something nice like that.

I worked at a utility, and people were very fortunate. Like, there's a lot of, like, you do a lot of different jobs. Like, your career really moves to different things. How many different jobs do you think you had over the 40 years?

Oh, it was heartbroken. I had a start in customer service, I thought I was terrible. I wanted to be in communications, and look what happened. It was probably the best job I ever had starting in customer service because I end up going back and running it, and I've done everything. There's not really a job that I haven't done. So it's been a great, great run.

Well, congratulations, 40 years is very impressive. I just had some housekeeping questions in New Hampshire. What's the percentage breakout in rate base in New Hampshire? I think you guys have a decent amount of FERC the rate base there, just a percentage between, I guess, what's regulated by the New Hampshire regulators and what's regulated by FERC. And then just a follow-up, the equity layer in -- at FERC assets in New Hampshire. Are they based on an actual equity ratio or what's set in rates, like a hypothetical structure?

Anthony, on the FERC side, the FERC side is based on a tariff for all of New England, and it's based on the actual.

Great. And then in New Hampshire, how much of if I think of PSNH, how much of that rate base is state-regulated versus FERC-regulated?

Stat-regulated is about $2.1 billion on the distribution side. And on the FERC side, subject to check, I think it's 1.7, 1.8, if my memory serves me correct. But I can double check that.

That's great. Just -- sorry, go ahead.

No, I was just going to say, Rima can follow up with you and confirm that for you.

Joe, I mean John, how many years do you have with Eversource or even the predecessor companies?

25, going on my 26th year. And I've had numerous jobs, Anthony, not as exciting as Joe, so.

Our next question is going to come from the line of Agnie Storozynski with Seaport.

Okay. So just one question about the equity needs vis-a-vis the storm cost recovery in Connecticut. Obviously, we're waiting to see the outcome of the Aquarion sale. But I'm just -- again, I'm trying not to get too excited here, but we will have lower equity needs. I mean because you are mentioning also additional CapEx, right? So assuming that at least a portion of that $1.5 billion to $2 billion comes in, that would carry additional equity needs, right? So it's not likely even with the sale of Aquarion and with securitization that there is a reduction in the total equity amount just that the equity is not going to rise meaningfully along with higher CapEx. Is this how I should think about it?

I think you're thinking about it correctly. As I said, -- and then the last question, within, in February, we're going to do a refresh. As you know, there's a lot of puts and takes. And in February, we will know exactly where the Aquarion transaction, and I'm hoping that it closes. Our guidance is still to close that transaction by the end of the year. So we'll have that. And that's obviously assumed in our plan already. And then securitization, we'll see, we'll have better clarity on the timing and the amount by that point in time. And we'll also do a refresh of our 5-year capital plan added another year. So -- and we'll know we had a $1.5 billion to $2 billion potential adds. As Joe mentioned, a good portion of that is the AMI in Connecticut. So we'll see how that progresses. So we'll have much more clarity certainly by the end of this year.

Okay. And then on the Yankee Gas rate case vis-a-vis SB4. So I mean, we obviously saw the comments from the Attorney General and Connecticut. You've been out of for quite, what is it, 7 years, right? Since the last rate case.

2018.

Yes. And so, I mean, again, is the -- so are we -- so this SB4 is going to apply here. So all of the commissioners need to apply on the rate case? So this is more like a test case, how future rate cases in the state are likely to go?

Yes. I think it's highly unlikely, they'll see two more in the time that this decision will be coming out. Keep in mind, the Attorney General is an elected official. He's -- a lot of it is, is related to, messaging for other audiences. I don't -- and we have a good working relationship with the Attorney General, and we're going to continue to work hard out that case to get a decision that's fair. It's fair for us and it's fair for our customers.

Yes. And, Angie, as I said in my formal remarks, the team did a phenomenal job in presenting the justification for the investments that we've made to maintain that system very safe and reliable for our customers. So we did an excellent job taking into account some of the issues that PURA had raised in other rate proceedings. So we put a very, very strong case in front of them. We knew we had to, and we did. And I'm very, very pleased with how that progress -- how that process has progressed.

And then the last one on Aquarion, given the pushback. So I understand that the plan is to sell the assets. But are we -- I mean if this route doesn't work, how we -- I mean, are we going to -- are you going to restart the sale process? Or is it just that -- if the commission doesn't approve the current transaction, you're just going to keep the asset and just address the funding needs with more equity.

Yes. I mean, I think that case is going very, very well. The hearings finished last week, and I don't see any challenges around that. I think it's highly unlikely that we don't see that approved. I think the team did a phenomenal job. And, keep in mind, you've got to keep in mind that the legislature and the governor enacted a law to allow this entity to buy that asset. So for that to shift or something to happen there is the likelihood is highly unlikely. If it does, obviously, we'll cross that bridge when it comes to it. But I'm very optimistic that, that transaction will close this year, and we'll be in great shape.

[Operator Instructions] Our next question is going to come from the line of Ryan Levine with Citi.

Congratulations on 40 years. Just one clarifying question. In terms of the Connecticut Courts clarification around prudency standards, can you maybe unpack that a little bit more in detail around the implications for your business and how that could impact whether it's an AMI decision or other decisions that would be coming before in the future?

Sure, sure. We were very pleased with the court. The court's decision kind of reiterating the prudency standard as it exists today in law, but the clarifying provision that we were very appreciative of is the fact that the commission that cannot apply hindsight in the rate recovery process. So prudency needs to be set at the time management makes the investment decision. And -- when you go in for the prudency review, which could be numerous years later, you can't introduce new facts and circumstances that existed after that period. So that was very, very encouraging for us.

Great. And does that have any implications for any AMI decision or any of the other upcoming decisions that would impact you?

Well, I think it will have a lot of effect on that because at the end of the day, we're making decisions based on the facts that are on the table today. And so if we pull the trigger and we decided to make the investment, it's not going to be something that 2 or 3 years from now that somebody is going to say, well, I think the rules have changed now and circumstances are different. So I think it has changed. I think it's improved. It's certainly improved my feeling around making that investment, that we wouldn't have to be concerned that the rules could change down the road. So I think very much so. I think it helps.

Our last question is going to come from the line of Julien Dumoulin-Smith with Jefferies.

Good morning, Paul.

Hey, good morning. No, it is Paul and happy anniversary.

Oh, thank you, Paul. You're so thoughtful.

Yeah, no, I am for 40 years. That is -- that is a high milestone. I hope I can make it that long.I have two quick follow-ups just to make sure I heard it right. So is the plan no additional equity needs in 2025 after you did your plan for June.

No, no. No, it's not what I said. What I said was we did the $200 million raise, and we will monitor our CP balances and also the progress that we're making on the Aquarion to maintain an appropriate level of liquidity. So -- but I don't see any -- that amount being significant this year. And obviously, having the proceeds from the Aquarion happen later this year, I'm not anticipating a big amount of equity, if any, issued in 2026.

And then the last one I had -- and just with respect to the quarterly and cadence of earnings, could you just describe some of the building blocks for the second half of the year? Just I noticed that the corporate was negative $0.34. I think it was in the first half and you had a positive driver at corporate in third quarter. So just overall, if you could help on some of the building blocks on...

Sure, Paul. So as I've -- for the last couple of quarters, I've highlighted the fact that interest costs are going to be a headwind. And I've also said that in the first half of 2025, it will be a far greater headwind. Because we closed on the sale of the transaction, a portion in July and then we closed on the GIP sale in -- on September 30. So that's why it's -- the parent impact is a bit higher than it otherwise would have been. So the second half of the year, I'm not anticipating it being at least the interest component as being as significant as it was for the first half. So that's one item. And then typically, the tax -- the true-ups that we typically do is always happens in the third quarter. So that could have an impact on the parent. But on your point on the utility side, I think it's kind of steady state. I've given you guidance as to what the rate adjustments are going to be on November 1 for the gas companies. So that's pretty much locked in.

Thank you. And this will be concluding our question-and-answer session. And I would now like to hand the conference back over to Joe Nolan for closing remarks.

Well, thank you very much. Thanks, everybody, for joining us today on the call. We're very excited about the future, and we want to thanks for taking the time this morning, and enjoy the rest of the summer.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.