How large is the impairment charge and what drives it?

Eversource expects an after-tax other-than-temporary impairment of $1.4 to $1.6 billion in Q4 2023. About $800 to $900 million reflects higher construction forecasts across all three projects, driven by vessel availability and cost and foundation fabrication supply chain inflation. About $600 to $700 million is specific to Sunrise Wind after the NY PSC denied its OREC price increase and the state's new solicitation requires terminating the existing contract. The range is an estimate that may change before year-end financials are finalized.

Will the impairment affect Eversource's cash position?

According to the company, the impairment is non-cash and will not affect future cash flows or current cash balances. However, Eversource will continue to fund required cash contributions to the JV projects until the sale of its interests closes.

Is the sale of the offshore wind interests certain?

No. Eversource says it cannot provide assurance that a final agreement will be reached. Closing would require customary conditions, including HSR Act and FERC approvals, completion of partnership agreements between the Buyer and Ørsted, and resolution of the Sunrise Wind rebid process. Details will be announced once definitive documentation is executed.

What is the status of Sunrise Wind and how does it affect the sale?

Sunrise Wind's existing OREC price was not increased by New York regulators, so the project must decide whether to bid into the new expedited solicitation, which requires terminating its current OREC agreement. Eversource is working with Ørsted on whether to bid, at what price, and the probability of success. The outcome could change the scope of the transaction and the sale price.

What should investors watch for next?

Key catalysts include the announcement of definitive sale terms, the final Sunrise Wind rebid outcome, the finalized impairment amount in the 2023 annual financial statements, and the mid-February 2024 earnings call, where management will provide 2024 guidance, the long-term earnings growth rate, equity needs and a five-year capital forecast.

ES 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed January 8, 2024. Cited figures are marked; the original filing is the authoritative source.

Eversource Energy (NYSE: ES) disclosed on January 8, 2024 that it is in advanced, exclusive negotiations with a leading global private infrastructure investor to sell its 50%^a ownership interest in three offshore wind projects: South Fork Wind, Revolution Wind and Sunrise Wind.

The interests sit in two joint ventures with Ørsted (one holding South Fork Wind, the other holding Revolution Wind and Sunrise Wind), and Eversource also holds a separate tax equity investment in South Fork Wind. Eversource cannot assure that a final agreement will be reached, and closing would require HSR Act and FERC approvals, completion of new Buyer–Ørsted partnership agreements, and resolution of the Sunrise Wind rebid process. The central investor concern is a large fourth-quarter 2023 impairment.

Eversource expects an after-tax other-than-temporary impairment of $1.4 to $1.6 billion^b, comprising roughly $800 to $900 million from higher construction forecasts (vessel availability and cost, foundation fabrication supply chain) across all three projects and roughly $600 to $700 million specific to Sunrise Wind after New York State denied its OREC price amendment and the state issued a new solicitation requiring bidders to terminate existing OREC agreements. The company states the charge is non-cash and will not affect future cash flows or current cash balances, though it will keep funding required JV contributions until the sale closes. The figure is an estimate that may change before the 2023 financial statements are finalized.

Management also said the energy community ITC adder is now considered highly likely to be realized, preserving virtually all of the roughly $400 million^c in value within the anticipated purchase price. Eversource will provide 2024 earnings guidance, its long-term growth rate, equity needs and a five-year capital forecast on its mid-February 2024 earnings call.

02—Key points

Key Highlights

Eversource is in advanced, exclusive negotiations to sell its 50% stake in South Fork Wind, Revolution Wind and Sunrise Wind to a leading global private infrastructure investor, but no definitive agreement is assured.
Expected after-tax other-than-temporary impairment of $1.4 to $1.6 billion in Q4 2023: approximately $800 to $900 million from broad project cost increases and $600 to $700 million specific to Sunrise Wind.
Sunrise Wind faces uncertainty after the NY PSC denied its OREC price increase on October 12, 2023; participating in the new November 30, 2023 solicitation requires terminating the existing OREC agreement.
Construction cost pressures stem from installation vessel availability and cost and foundation fabrication supply chain inflation.
The impairment is non-cash and does not affect future cash flows or current cash balances, though required JV cash contributions continue until the sale closes.
The energy community ITC adder is now viewed as highly likely to be realized, preserving virtually all of the ~$400 million value in the anticipated purchase price.
2024 earnings guidance, long-term growth rate, equity needs and five-year capital forecast are expected on the mid-February 2024 Q4 earnings call.

03—Questions

Frequently Asked Questions

How large is the impairment charge and what drives it?
Eversource expects an after-tax other-than-temporary impairment of $1.4 to $1.6 billion in Q4 2023. About $800 to $900 million reflects higher construction forecasts across all three projects, driven by vessel availability and cost and foundation fabrication supply chain inflation. About $600 to $700 million is specific to Sunrise Wind after the NY PSC denied its OREC price increase and the state's new solicitation requires terminating the existing contract. The range is an estimate that may change before year-end financials are finalized.
Will the impairment affect Eversource's cash position?
According to the company, the impairment is non-cash and will not affect future cash flows or current cash balances. However, Eversource will continue to fund required cash contributions to the JV projects until the sale of its interests closes.
Is the sale of the offshore wind interests certain?
No. Eversource says it cannot provide assurance that a final agreement will be reached. Closing would require customary conditions, including HSR Act and FERC approvals, completion of partnership agreements between the Buyer and Ørsted, and resolution of the Sunrise Wind rebid process. Details will be announced once definitive documentation is executed.
What is the status of Sunrise Wind and how does it affect the sale?
Sunrise Wind's existing OREC price was not increased by New York regulators, so the project must decide whether to bid into the new expedited solicitation, which requires terminating its current OREC agreement. Eversource is working with Ørsted on whether to bid, at what price, and the probability of success. The outcome could change the scope of the transaction and the sale price.
What should investors watch for next?
Key catalysts include the announcement of definitive sale terms, the final Sunrise Wind rebid outcome, the finalized impairment amount in the 2023 annual financial statements, and the mid-February 2024 earnings call, where management will provide 2024 guidance, the long-term earnings growth rate, equity needs and a five-year capital forecast.

04—Continue

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