Eversource Earnings: Offshore Wind Sale Imminent; Utilities’ Growth on Track

We are reaffirming our $74 per-share fair value estimate for Eversource ES after the company announced it earned $1.41 per share on an adjusted basis during the first quarter of 2023, up from $1.30 during the first quarter of 2022. We are reaffirming our no-moat and stable moat trend ratings for Eversource.

Making an additional adjustment for new electric rate design in Massachusetts, earnings were up 5% during the quarter. Management reaffirmed its 5% to 7% annual long-term growth rate, in line with our outlook. Management’s $4.25 to $4.43 EPS guidance for 2023 is also in line with our outlook.

Higher electric rates at Nstar in Massachusetts following a major regulatory ruling last year helped boost electric distribution segment earnings by $0.02, or 4%, after adjusting for rate design changes implemented this year. Higher electric transmission rates in the first quarter resulted in similar earnings growth. Eversource’s usage-decoupled gas rates helped eliminate any material impact from a warmer-than-normal winter.

We continue to assume Eversource invests at least $17 billion excluding remaining offshore wind investments in 2023-26 with additional growth investment potential beyond 2024 depending on regulatory developments, particularly in Connecticut.

Management said it expects to announce a deal by the end of June that would allow it to exit its offshore wind joint venture, which owns the largest portfolio of offshore wind capacity in the U.S. As we’ve said since management announced its exit intention in May 2022, this should reduce risk for investors albeit removing a large source of potential growth. We also think it is a positive that Eversource was able to shift $500 million of payments to 2024 from 2023, potentially reducing near-term financing needs pending the sale. Deal pricing remains a key uncertainty that could have a slight impact on our fair value estimate.