Why did Eversource's reported EPS swing so sharply between Q2 2023 and Q2 2024?

Q2 2023 included a $331 million pre-tax (about $0.95 per share) impairment of the company's offshore wind investment, so reported GAAP EPS was only $0.04. Q2 2024 had no comparable charge, producing GAAP EPS of $0.95. On an adjusted basis, Q2 EPS actually declined from $1.00 to $0.95.

Is Eversource on track to meet its 2024 earnings guidance?

The company reaffirmed 2024 non-GAAP EPS guidance of $4.50 to $4.67. First-half adjusted EPS of $2.43 is roughly 54% of the midpoint, which implies the back half must be somewhat stronger than the first. The filing does not explicitly address this seasonality, so investors should weigh it against typical utility earnings patterns.

What is driving the decline in electric distribution earnings?

Electric distribution earnings fell $15.8 million in the quarter. Causes cited include higher non-tracked operations and maintenance expense, $16.2 million of pre-tax storm restoration costs, the absence of a prior-year New Hampshire regulatory benefit, and higher interest, depreciation and property tax expense. These were partly offset by higher revenue from the January 2024 Massachusetts base rate increase.

How is the offshore wind exit affecting Eversource's financial position?

The company says the exit lets it concentrate capital on regulated growth. The sales are expected to generate about $230 million gross proceeds from Orsted and $1.1 billion from GIP, and the South Fork Wind tax equity investment is expected to contribute about $500 million of cash flow. These items are part of about $2.6 billion of known cash flow enhancements supporting its 2025 FFO/debt target of 14% to 15%. Closing of the GIP transaction remains subject to conditions and is not assured.

What are the key risks to watch from this filing?

Key risks include rising interest expense, which increased about 31% year over year in the quarter; regulatory outcomes, such as the Massachusetts Electric Sector Modernization Plan final decision expected in August 2024 and the New Hampshire and Connecticut storm cost prudence reviews; the timing and terms of the offshore wind sales; and storm and weather-related costs. The filing also notes Connecticut storm prudence reviews covering $634 million of 2018 to 2021 costs, which remain open.

ES 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed July 31, 2024. Cited figures are marked; the original filing is the authoritative source.

Eversource Energy (NYSE: ES) reported GAAP earnings of $335.3 million^a, or $0.95 per diluted share, for the second quarter of 2024, versus $15.4 million, or $0.04 per share, in the prior-year quarter.

The comparison is distorted by a $331 million^b pre-tax offshore wind impairment in 2Q 2023. For the first half of 2024, GAAP EPS was $2.43 versus $1.45 a year earlier. Excluding the 2023 charges, second-quarter EPS was $1.00 in 2023 and $0.95 in 2024, a $0.05 decline, while first-half adjusted EPS rose modestly to $2.43 from $2.41.

Management reaffirmed its 2024 non-GAAP EPS guidance of $4.50 to $4.67^c and its 5% to 7% long-term EPS growth target from a 2023 base of $4.34. The quarter's operating picture is mixed. Electric transmission earnings rose 17% year over year to $189.0 million, driven by higher investment and the annual rate reconciliation.

Electric distribution earnings fell to $149.7 million^d, pressured by higher non-tracked O&M, $16.2 million of pre-tax storm costs, the absence of a prior-year New Hampshire regulatory benefit, and higher interest and depreciation. Natural gas distribution improved to $27.1 million. Parent and other companies lost $38.5 million, largely because of higher interest expense, which rose to $271.3 million in the quarter from $207.3 million.

Strategically, the company closed the sale of its Sunrise Wind interest to Orsted and expects to close the sale of its Revolution and South Fork Wind interests to Global Infrastructure Partners later in the quarter, which management says completes its exit from offshore wind. The company projects $23.1 billion of capital expenditures over 2024 to 2028 and targets a 2025 FFO/debt of 14% to 15% (S&P estimate), supported by roughly $2.6 billion of identified cash flow enhancements. Investors should watch the pending offshore wind closings, the Massachusetts Electric Sector Modernization Plan final decision expected in August 2024, and the rising interest burden.

02—Key points

Key Highlights

Q2 2024 GAAP EPS of $0.95 vs. $0.04 in Q2 2023; the prior-year figure was depressed by a $331M pre-tax offshore wind impairment
First-half 2024 GAAP EPS of $2.43 vs. $1.45; adjusted first-half EPS rose to $2.43 from $2.41
2024 non-GAAP EPS guidance of $4.50 to $4.67 reaffirmed; long-term 5% to 7% EPS growth target maintained off a $4.34 2023 base
Electric transmission earnings up 17% YoY to $189.0M on higher capital investment and the annual rate reconciliation
Electric distribution earnings down to $149.7M from $165.5M, driven by higher O&M, $16.2M pre-tax storm costs, and higher interest and depreciation
Offshore wind exit: Sunrise Wind sale to Orsted closed; Revolution and South Fork Wind sales to GIP expected to close in Q3 2024
Interest expense rose to $271.3M in Q2 from $207.3M, weighing on parent results (a $38.5M loss in Q2)

03—Questions

Frequently Asked Questions

Why did Eversource's reported EPS swing so sharply between Q2 2023 and Q2 2024?
Q2 2023 included a $331 million pre-tax (about $0.95 per share) impairment of the company's offshore wind investment, so reported GAAP EPS was only $0.04. Q2 2024 had no comparable charge, producing GAAP EPS of $0.95. On an adjusted basis, Q2 EPS actually declined from $1.00 to $0.95.
Is Eversource on track to meet its 2024 earnings guidance?
The company reaffirmed 2024 non-GAAP EPS guidance of $4.50 to $4.67. First-half adjusted EPS of $2.43 is roughly 54% of the midpoint, which implies the back half must be somewhat stronger than the first. The filing does not explicitly address this seasonality, so investors should weigh it against typical utility earnings patterns.
What is driving the decline in electric distribution earnings?
Electric distribution earnings fell $15.8 million in the quarter. Causes cited include higher non-tracked operations and maintenance expense, $16.2 million of pre-tax storm restoration costs, the absence of a prior-year New Hampshire regulatory benefit, and higher interest, depreciation and property tax expense. These were partly offset by higher revenue from the January 2024 Massachusetts base rate increase.
How is the offshore wind exit affecting Eversource's financial position?
The company says the exit lets it concentrate capital on regulated growth. The sales are expected to generate about $230 million gross proceeds from Orsted and $1.1 billion from GIP, and the South Fork Wind tax equity investment is expected to contribute about $500 million of cash flow. These items are part of about $2.6 billion of known cash flow enhancements supporting its 2025 FFO/debt target of 14% to 15%. Closing of the GIP transaction remains subject to conditions and is not assured.
What are the key risks to watch from this filing?
Key risks include rising interest expense, which increased about 31% year over year in the quarter; regulatory outcomes, such as the Massachusetts Electric Sector Modernization Plan final decision expected in August 2024 and the New Hampshire and Connecticut storm cost prudence reviews; the timing and terms of the offshore wind sales; and storm and weather-related costs. The filing also notes Connecticut storm prudence reviews covering $634 million of 2018 to 2021 costs, which remain open.

04—Continue

← View all 8-K filings