01—Abstract
Summary
Summary of the 10-Q filed August 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Eversource Energy's second-quarter 2024 10-Q shows a quarter that swung back to solid profitability after the 2023 offshore wind impairment.
GAAP net income attributable to common shareholders was $335.3 milliona, or $0.95 per diluted share, versus $15.4 million, or $0.04, a year earlier. For the first half, GAAP EPS was $2.43 against $1.45. The prior-year comparison is distorted by a $401 million pre-tax (about $331 million after-tax) offshore wind impairment, so non-GAAP earnings are the better guide: Q2 2024 non-GAAP EPS was $0.95 versus $1.00 in Q2 2023, and first-half non-GAAP EPS rose to $2.43 from $2.41.
Regulated companies earned $373.8 millionb in Q2 (about $1.06 per share), with electric transmission the standout, up $28 million on a larger rate base. Electric distribution earnings fell on higher storm and interest costs. The balance sheet grew quickly to $58.4 billion in total assets, with long-term debt up to $25.8 billion.
Eversource issued $3.85 billionc of long-term debt in the first half and retired $900 million, and it raised $248 million through its at-the-market equity program. Capital spending was $2.22 billion in the first half, up from $2.04 billion. Operating cash flow was $962 million, versus $647 million a year earlier, helped by timing of payables and tax refunds.
Notes payable fell sharply, and the company reports $1.21 billiond of available commercial paper capacity. Cash was only $33 million, which is typical for a utility that relies on short-term borrowing. The main investor catalysts are the offshore wind exit and regulatory matters.
Eversource sold its 50% Sunrise Wind stake to Orsted on July 9, 2024, receiving $118 million at closing with $34 million more deferred. A sale of South Fork and Revolution Wind to Global Infrastructure Partners for $1.1 billion is expected to close in Q3 2024, with post-closing adjustments and cost-sharing obligations still open. Management does not expect a material 2024 earnings impact and plans to use the proceeds to pay down parent-company debt.
Management reaffirmed 2024 non-GAAP EPS guidance of $4.50 to $4.67 and a 5% to 7% long-term growth rate through 2028. Moody's revised CL&P's outlook to negative on June 18, 2024, a credit item to monitor. The company also has a pending PSNH rate case seeking a $181.9 million permanent increase, with a temporary $61.2 million increase effective August 1, 2024.
02—Key points
Key Highlights
- Q2 2024 GAAP EPS of $0.95 vs. $0.04 in Q2 2023, which included a $331 million after-tax offshore wind impairment; Q2 2024 non-GAAP EPS was $0.95 vs. $1.00 a year earlier, a modest decline.
- First-half 2024 GAAP EPS of $2.43 (vs. $1.45) and non-GAAP EPS of $2.43 (vs. $2.41), with regulated companies contributing $914.6 million of earnings.
- Electric transmission earnings rose to $189.0 million in Q2 (up $28.0 million year over year) on a higher transmission rate base; natural gas distribution earnings also improved.
- Total assets reached $58.4 billion, up about 4.9% from year-end 2023, driven by $2.22 billion of first-half capital investment; long-term debt rose to $25.8 billion.
- Offshore wind exit progressing: Sunrise Wind sale closed July 9, 2024 ($118 million received, $34 million deferred); South Fork and Revolution Wind sale to GIP for $1.1 billion expected to close in Q3 2024.
- Operating cash flow improved to $962 million in the first half (vs. $647 million), and the company raised $248 million of common equity under its at-the-market program.
- Reaffirmed 2024 non-GAAP EPS guidance of $4.50 to $4.67 and a 5% to 7% long-term EPS growth rate through 2028; Moody's revised CL&P's outlook to negative on June 18, 2024.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 2, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $2.52B$2.63B | −4.2% |
| Operating Expenses | $1.93B$2.07B | −6.7% |
| Operating Income | $602.50M$560.66M | +7.5% |
| Interest Expense | $271.30M$207.30M | +30.9% |
| Net Income | $337.22M$15.42M | +2086.6% |
| EPS (Basic) | $0.95$0.04 | +2275.0% |
| EPS (Diluted) | $0.95$0.04 | +2275.0% |
| Shares Outstanding (Basic) | 353.21M349.46M | +1.1% |
| Shares Outstanding (Diluted) | 353.42M349.73M | +1.1% |
05—Questions
Frequently Asked Questions
Why did Eversource's earnings swing so dramatically between Q2 2023 and Q2 2024?
The swing is mainly due to a $401 million pre-tax ($331 million after-tax) impairment of offshore wind investments recorded in Q2 2023. That charge reduced Q2 2023 GAAP EPS to $0.04. Excluding it, Q2 2023 non-GAAP EPS was $1.00, compared with $0.95 in Q2 2024, so underlying earnings were roughly flat to slightly lower.
How much debt is Eversource carrying, and is it financing growth responsibly?
Long-term debt rose to $25.8 billion from $23.6 billion at year-end 2023, and notes payable fell to $1.4 billion from $1.9 billion. In the first half, the company issued $3.85 billion of new long-term debt and retired $900 million. Utilities carry high leverage because they finance long-lived infrastructure, and Eversource's capital spending is largely recoverable through rates. Investors should watch the pending offshore wind proceeds, which management plans to use to pay down parent-company debt, and the negative Moody's outlook on CL&P.
What are the main risks and open items from the offshore wind divestiture?
The GIP transaction for South Fork and Revolution Wind is still subject to closing conditions and post-closing adjustments. These include Eversource sharing up to about $240 million of Revolution Wind cost overruns with GIP, a requirement to maintain GIP's internal rate of return, and the project's eligibility for investment tax credits. Net proceeds could fall if construction costs rise or the project is delayed. Management does not expect a material 2024 financial impact, but it is still evaluating the combined effect.
What regulatory developments could affect future earnings?
PSNH has requested a permanent base distribution rate increase of $181.9 million, including $247 million of storm costs to be recovered over five years, with a decision expected by August 1, 2025. A temporary $61.2 million increase took effect August 1, 2024. At FERC, the New England transmission owners' ROE complaints remain unresolved, and a 10-basis-point change in the base ROE would affect future annual earnings by about $5.5 million. The Connecticut RAM decision was expected on August 14, 2024.
Is the dividend and capital plan sustainable given the cash needs?
The quarterly dividend was $0.715 per share, or about $2.86 annualized, and the first-half cash dividend payout was $490.9 million. Operating cash flow of $962 million covers the dividend, but capital spending of $2.22 billion in the first half is far larger, so the company depends on debt and equity issuance. The $1.2 billion equity program and the offshore wind proceeds are the key funding sources. Growing dividend payouts from utility earnings is typical, but investors should monitor cash coverage as capital spending continues to rise.
06—Continue