Eversource Energy (ES) — Q1 2020 Earnings Call Transcript

Thank you, Richard. Good morning and thank you for joining us today. I'm Jeff Kotkin, Eversource Vice President for IR. During this call, we'll be referencing slides that we posted last night on our website, and as you can see on slide one, some of the statements made during this Investor Call may be forward-looking as defined within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking 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. These factors are set forth in the news release issued yesterday. Additional information about the various factors that may cause actual results to differ can be found in our Annual Report on Form 10-K for the year ended December 31, 2019. Additionally, our explanation of how and why we use certain non-GAAP measures and how those measures reconcile to GAAP results is contained within our news release and the slides we posted last night and in our most recent 10-K. Speaking today will be Phil Lembo, our Executive Vice President and CFO. Also joining us today are Joe Nolan, our Executive Vice President for Strategy, and Customer and Corporate Relations; John Moreira, our Treasurer and Senior VP for Finance and Regulatory; and Jay Buth, our VP and Controller. We are generally speaking from different locales this morning across Massachusetts and Connecticut. Now, I will turn to slide two, and turn over the call to Phil.

Thank you, Jeff, and we all hope that everyone on the phone is healthy and remains healthy and that your families also are safe and doing well. This morning, I'll review the results of the first quarter. I'll talk about our efforts to build and operate in our critical electric, natural gas, and water infrastructure during this COVID-19 pandemic. I'll talk a little bit about the recent regulatory developments, and finally, provide you an update on our offshore wind investment partnership with Orsted. I'll start with slide two and our significant and comprehensive efforts to deal with the impact of the coronavirus. Our country and our region are in the midst of an incredibly challenging period, and Eversource, as a provider of critical services for nearly half of New England, is taking its responsibility to its customers and employees extremely seriously. Massachusetts and Connecticut are two of the states most impacted by the virus. More than 100,000 cases have been confirmed in those two states and an additional 2,600 in New Hampshire. Our priority at Eversource starts with the health and safety of our employees, our customers, and our communities. We're closely following the guidance provided by the CDC and local health authorities in our daily work activities. Although we are actively accomplishing all of our essential work, we have suspended certain less time-sensitive work, such as upgrades to our work centers and offices, as well as, some work interior to customers' locations for energy audits and alike. We've undertaken extensive efforts to expand our facility sanitizing efforts and have enhanced the availability of personal protective equipment, including face coverings and masks, so our employees can continue to maintain our energy systems safely. We took early and aggressive actions in accordance with our well-defined pandemic action plan, and we have continuously refined and adjusted our playbook as we moved through the situation. Nearly all of our employees who normally work in an office setting are working remotely; a practice that's been in place since early March. Approximately 4,500 employees continue to work in the field to support the reliability and safety of our energy and water delivery systems, but significant changes have been made in their work patterns as well. They've been able to receive their daily work assignments without having to enter our buildings. Their line trucks and other vehicles are disinfected before and after every shift. Employees traveling in Eversource vehicles are now driving one person per vehicle, where previously there had been two persons, and when at the work site, they are maintaining a six-foot social distancing and wearing face coverings when conditions require them, and those are enforced as standard work practices. We've been very clear in our communications that if any employee feels ill, they should stay home while also implementing temperature checks and other health screening before anyone enters our electric and gas control rooms. We're equipped to initiate a quarantine process early to isolate those who potentially were exposed to COVID-19, either at work or at home. We believe this has resulted in very positive impacts on our ability to minimize the spread of the virus to others. To date, more than 400 employees have returned to work following their quarantine period and medical clearance. To date, we've had 30 employees who have been confirmed positive for COVID-19, and actually, 18 of those are now back to work. We've successfully maintained our high level of service and safety and also kept up with the necessary pace to achieve our capital investment work program for the year. I'll talk more about this in a minute. When we experienced significant weather events, we were able to deal with them safely, promptly, and effectively. A mid-March heavy wet snowstorm resulted in more than 56,000 New Hampshire customers losing power, but crews from all three states responded and restored power within 24 hours. Also, an intense Nor'easter battered our service territory and many others on April 13, but we were able to restore power to nearly all of the 240,000 impacted customers within the first 24 hours after the storm hit. There are many other areas where we changed our traditional practices to accomplish key work during the pandemic threat. We've moved all electronic permission-gathering programs for our annual clearance program in Connecticut. We held our first virtual annual meeting yesterday. Above all, we continue to execute our business plans and strategy successfully. As shown on slide three, our total return through the first four months of the year compares very favorably to our peers and to the broader market. This follows our very strong performance in 2019 and demonstrates that three-year, five-year, and 10-year total returns have far outpaced both the EEI index and the S&P 500. In this period of uncertainty, our business model resonates very well. Well over 90% of our business is revenue-decoupled. We have pension recovery trackers for our FERC transmission and Massachusetts distribution businesses. Much of our capital improvement program is tracked, and we are operating under multi-year rate plans for our three largest distribution franchises. Additionally, under existing approved mechanisms, we recover all bad debt associated with power supply or medical or financial hardship accounts. We continue to receive strong support from our customers, regulators, and policymakers in the face of this unprecedented challenge. Last week, Connecticut regulators issued an interim decision calling for utilities to offer payment programs during the COVID-19 crisis that are available to any customer requesting financial assistance, requiring no initial down payment and having a duration of 24 months, along with waiving any fees or interest in the calculation of the monthly payment amount, essentially what we've already been doing. Recognizing the possible increase in utilities receivable balances and bad debt expense, the Connecticut Power directed utilities to maintain a detailed record of the costs incurred and revenues lost as a result of implementing its orders and said it will allow utilities to establish a regulatory asset to track incurred costs. These costs will include working capital costs that will be calculated in accordance with the utilities' most recent rate case. However, as you can see on slide four, there have been some impacts on our regulatory dockets. In New Hampshire, the electric rate case schedule has been delayed. We were originally scheduled to receive a final order in May and implement permanent rates on July 1, 2020, but the governance executive order in late April now provides the New Hampshire PUC additional time, or up until November, to issue a final decision in our first general rate case in a decade. As you may recall, Public Service New Hampshire implemented a temporary $28 million rate increase effective July 1, 2019. That increase will remain in effect until permanent rates are set at the end of this case, and any difference between the temporary rates and the permanent rates will be reconciled back to that July timeframe. So, the delay will not affect our earnings over the long-term. In Massachusetts, we agreed to a one-month delay in our NSTAR gas rate case. So the decision is now expected at the end of October 2020, with rates effective on November 1. Since the transaction for Columbia Gas was announced shortly after our year-end earnings call, we've not had the opportunity to review it with many of you on this call. The key elements of our deal are reflected on slide five. We are acquiring the assets of Columbia Gas of Massachusetts, not any of the liabilities associated with the tragic September 2018 incident in the Merrimack Valley. We'll pay $1.1 billion for the net assets and assume none of the company's debt. The $1.1 billion is one times rate base. The transaction has received extensive support in Massachusetts, and we are highly confident it will close. We believe the transaction is an excellent one for customers, as Columbia Gas customers will now become part of a larger, well-respected local owner. We expect the transaction to be immediately accretive and continue to be accretive over the coming years as we complete our integration and transition to our operating systems at Eversource, as well as, making needed investments in the infrastructure to provide safe and reliable service. We expect to file the application with the Massachusetts Department of Public Utilities shortly. We filed in March with the U.S. Justice Department for review under the Hart-Scott-Rodino Act, and the 30-day waiting period expired a couple of weeks ago. We expect to finance the $1.1 billion initially with a combination of debt and equity issued at the Eversource parent. The percentage or the ratio of that financing will be roughly equivalent to the capitalization ratio on Eversource as a whole. The precise timing and size of the equity and debt will depend on market conditions as we go forward. Over time, we expect the new gas company to issue its own debt, most likely in the private market, similar to how NSTAR Gas or Yankee Gas currently raise long-term debt capital. Turning from Columbia Gas to slide six, we raised approximately $1.2 billion of cash in the first quarter. We sold $350 million of 30-year notes at Eversource parent and $400 million of green bonds at NSTAR Electric. Additionally, we closed out the forward element of last year's $1.3 billion block equity deal; we did that in late March, bringing in an additional $420 million in cash. And today, we are closing on a $190 million first mortgage bond offering at NSTAR Gas. Now, the new issuance will help repay short-term debt that was incurred when a $125 million, 4.46% NSTAR Gas bond matured in January. And the new issuance was at very attractive rates compared to that 4.46%. Our cash position is further enhanced by the fact that we have only $25 million of maturities remaining over the balance of the year 2020. Eversource and NSTAR Electric continue to meet their daily liquidity needs very effectively in the commercial paper market. Although borrowing rates increased late in the first quarter, rates today are well below those average first quarter levels, which bodes well for short-term debt interest expenses going forward. Our capital program remains on track for the year. As you can see on a slide in the appendix, we continue to project capital investment of approximately $3 billion in 2020. In large part because of the very mild winter weather, we had a very strong start for the year, with reliability enhancements and system improvements totaling $600 million in the first quarter of 2020, compared with about $550 million in the same period of 2019. Due to the critical nature of our infrastructure and regulated investments, we have continued to work safely and effectively throughout the stay-at-home requirements in place over our three states. Regulators recognize that some long-term initiatives will need to move forward to ensure that we have a grid capable of serving our customers' increasingly sophisticated needs. A new three-year grid modernization work plan for 2021 through 2023 will be filed in Massachusetts this summer. Just yesterday in Connecticut, Connecticut regulators issued an order requesting proposals on program designs for a number of initiatives related to grid modernization. These include topics such as advanced metering infrastructure, energy storage, and zero-emission vehicles. Proposals are due by the end of July, July 31st. We have included Massachusetts grid modernization expenditures in our five-year forecast, but we have not included grid modernization work in Connecticut in that forecast. Now let's turn to first quarter results, and that's on slide seven. We earned $1.02 per share in the first quarter of 2020, excluding $0.01 per share of expense related to our acquisition of the assets of Columbia Gas of Massachusetts. In all segments, the higher share count partially diluted the benefits of higher net income. In total, the share dilution for the quarter was $0.04. In each segment, let's go through that. Earnings for our electric distribution segment were $0.39 per share compared with earnings of $0.38 per share in the first quarter of 2019. The increase is primarily related to higher distribution revenues, partially offset by dilution and higher depreciation, interest, and property tax expenses. The transmission segment earnings rose to $0.38 per share in the first quarter of 2020 from $0.37 in 2019. The higher earnings primarily reflect an increased level of investment in our transmission facilities. Earnings from our natural gas segment totaled $0.25 per share in the first quarter of 2020 compared with $0.24 per share in the first quarter of '19. Higher distribution revenues were partially offset by higher O&M and higher depreciation expenses. Earnings in our water business were $2.1 million in the first quarter of 2020, up from $0.9 million in the first quarter of '19. Improved results were due to higher revenues from capital-tracking mechanisms and lower depreciation expenses in Connecticut. A small first quarter loss at Eversource parent of $0.01 per share in 2020, exclusive of the acquisition charge, compares to a loss of $0.02 per share in the first quarter of '19, and this was due in part to lower interest expenses. As you saw in our news release and on Slide 8, we continue to project earnings per share in 2020 of $3.60 to $3.70 and we continue to foresee earnings growth through 2024, around the middle of our 5% to 7% range, based on our regulated core business. Earnings from offshore wind and Columbia Gas of Massachusetts would be incremental to our long-term guidance. Turning to offshore wind in slide nine, there have been a few developments since our year-end call in February. On March 13th, we filed our construction and operations plan, or COP, with the Bureau of Ocean Energy Management for the 704-megawatt Revolution wind project. BOEM's review of that project has begun. We expect to have a full schedule for that review later this year. We have not yet received a new schedule from BOEM on its review of the 130-megawatt South Fork project. The COP on that was filed back in 2018, but the process was paused last year so that we could update the project for our new one-nautical mile by one-nautical mile configuration. We expect the new schedule to be posted by midyear. Additionally, due to travel and meeting restrictions stemming from the COVID-19 pandemic, the administrative law judge overseeing the New York Public Service Commission review of South Fork has extended the near-term schedule, adding another 10 weeks until the state hearings can begin. As a result, intervenor testimony will be due in early August, and hearings are now to commence at the end of September. As a result of these items and as Orsted said on its call last week, these delays will make it very unlikely that the South Fork project will enter commercial operation by the end of 2020. We continue to have a target filing date for our COP for Sunrise Wind with BOEM in the second half of this year. That timetable may be affected by New York's current restrictions on both onshore and offshore survey work. We expect to have more insight into the timing of that cost filing and the schedule for Sunrise by late this summer. Despite these near-term scheduling headwinds, we remain strongly convinced that the opportunities in offshore wind off the Northeast coast are excellent, with 15,000 megawatts likely to be built over the coming years to supply the significant clean energy needs of New England and New York. Our partnership with Orsted has won more than 1,700 megawatts of offshore wind contracts across the region. As any future RFPs are issued, we will continue to evaluate those opportunities and will exhibit the same financial discipline we've demonstrated time and time again for many, many years. We continue to view offshore wind initiatives as a unique and very positive opportunity to provide clean energy and significant economic development stimulus to the region while providing investors with very attractive long-term earnings and cash flow benefits. Let me emphasize that the earnings from offshore wind are incremental to the 5% to 7% EPS CAGR that we expect on our existing regulated business. Our regulated business model works because of the constructive regulatory environment we operate within and consistently high levels of execution we've achieved. This model is particularly attractive in uncertain times such as where we are today. I want to emphasize that a critical factor in our success over the past decade has been providing excellent service to our 4 million customers. This is accomplished by having a tremendous team of 8,300 employees who have a singular focus on providing safe and reliable service to our customers and addressing the energy policy imperatives of our region. I'm very proud of the early aggressive actions we took as a company over the past several months to protect employees, customers, and our communities. I'm very grateful for the dedication, innovation, and passion our employees have demonstrated as they have continued to work safely and effectively to execute our essential work on behalf of our 4 million customers, and as if the pandemic wasn't enough, they've also been called upon to respond very quickly to two significant storm events that blew through our three states over the last few weeks, and although the pandemic situation remains uncertain, Eversource is very well-positioned to be successful. We remain committed to the care and safety of our employees, our customers, and communities, while we continue to execute the essential services that our customers expect. Most importantly, I wish all of our listeners today and their families a safe and healthy spring, and I look forward to coming out on the back side of this pandemic as soon as practical and seeing you all again. Thanks again for your time. I'll turn the call back over to Jeff for Q&A.

And I'm going to turn the call over to Richard, just to remind you how to enter questions. Richard?

Thank you, Richard. Our first question this morning is from Shar Pourreza from Guggenheim.

Hey, it's actually Kody Clark on for Shar. Good morning.

Hey, Kody.

Good morning.

So, first on the offshore wind solicitation in New York, is that still on track for the second half of this year? Hasn't seen any headwinds given the COVID situation?

I think that's the expectation that's out there, although no official schedule has come out. But I think the direction is clear that that's where the state would like to go, but final dates haven't been established yet.

Got it, thank you. And then, could you give some color on how you're thinking about any water deals outside of New England? Are you seeing an increase in opportunities given the current macro backdrop?

I think the current macro backdrop really emphasizes the importance of size and scale and the ability of a company to have the financial capabilities for liquidity. We're able to access capital markets, and its ability to respond to storms when you have a pandemic going on. So, there may be some smaller entities out there that may find it difficult to move forward in a world like that where there's uncertainty, so there could be opportunities there. Going forward, there's nothing that is in front of us at this moment, but I can assure you that the water business is one that we like. The water business is one that we see as very synergistic to our electric and gas businesses and one that we think we can operate very effectively going forward. Whatever comes in front of us, we'll be disciplined about whatever financial characteristics are associated with a deal like that, as well as making sure that there are benefits for customers. So nothing in front of us right now, but given the situation, you could see some smaller companies looking for a way out.

Great, thanks so much. Congrats on the quarter and stay safe.

Thank you. You too.

Thanks, Kody. Our next question this morning is from Sophie Karp from KeyBanc. Good morning, Sophie.

Good morning, guys. Congrats on the quarter. Thanks for taking the question.

Thank you, Sophie. I hope you're well.

Yes. I was just curious if you could comment on the volume trend, even though you decoupled, but just to get a sense of what you've seen in the service sector as far as the economic hurt that's been experienced by the rate peers.

In terms of sales volume trends, is that your question, Sophie?

Yes.

Sales in the first quarter were down, with electric sales decreasing by nearly 6% and gas sales nearly 14%. Approximately 95% of this decline is attributed to the unusually mild weather we experienced in the first quarter, and it is unrelated to COVID impacts, as the pandemic was just beginning. The weather during this period had the lowest heating degree days in 50 years, around 18% or 19% less than the previous year and below normal. January saw the longest cold spell in 90 years. While this mild weather allowed us to execute effectively on our capital plan, it did not help our sales figures. Looking ahead, April was relatively cool in our region, so we might see an increase in our gas sales despite COVID. Although there may be downward pressure on commercial sales due to remote work, we could see some upside in residential electric sales. Importantly, over 90% of our revenues are not linked to sales that decoupled, and we have regulatory protections in place for distribution revenues, which are not reliant on sales volume. Overall, while the trends are concerning, we are well positioned from a regulatory and program standpoint.

Right. Thank you, helpful color. And then on NSTAR rate case, I'm just curious if it's been delayed by a month, right? Is that important for you as far as guidance and your projections that you have those rates in place before the winter season begins, or is that not material enough for guidance? Just how should we think about that in case there are future delays?

Yes, it's not material enough. I mean, we expect that the new rates will be in place, as I mentioned, that there is just a one-month delay and we're optimistic that we'll be hitting that target well ahead of the winter heating season. And really, the winter heating season is just getting started at the end of the year. So we're expecting the order to come out, as we've described, with a one-month delay, but if it didn't, we don't see that as being material to the guidance.

Got it. Terrific, thank you, this is all for me.

Great, thank you, Sophie. Our next question is from Mike Weinstein from Credit Suisse. Good morning, Mike.

Hi. Good morning, guys.

Hi.

Good morning.

And I just wanted to confirm, my understanding is that offshore wind, even if there are delays, right? That your guidance, your long-term guidance, growth rate is not affected by that, right? The offshore wind has always been additive and incremental, and the long-term guidance for EPS growth is really based on just the utilities in isolation. Is that right way to think about it?

That is correct, Mike. Your understanding is absolutely correct. The 5% to 7%, and being in the middle of that range, is from our core regulated business. Offshore wind would be incremental to that.

Is there any impact on financing plans? I think you've already issued all the equity in the five-year plan, right? So is there any impact at all in financing plans from any potential delayed projects?

No. If I heard you correctly, I think you may have said we've issued all of the equity from our long-term projections on that. We talked about issuing $2 billion of equity last year. We issued $1.3 billion. So we still had some of equity left over to issue during the remainder of our long-term plan. So, we'll be opportunistic about that and do that when the spending dictates. So, if we're not spending the money, that's going to affect the timing of when we do any kind of financing.

What's remaining? Is it just the equity from the ATM portion?

Yes. We said that the $1.3 million was the only block equity per se in our forecast, but I do want to be clear that subsequent to that guidance, we did announce the acquisition of Columbia Gas, and we will do equity and debt associated with that transaction.

Right. And that timing is this year, right?

Yes. That timing depends on the market conditions, but yes, this year, we're expecting to close on that transaction later on in the third quarter of 2020.

Got it. Have you gotten any sense as to any potential changes to grid monetization priorities as a result of COVID? Now that I understand those dockets are going on right now. The one in Connecticut is ongoing, but is there any sense that maybe those priorities might be different currently as a result of the crisis that we're all going through?

My personal view is that programs focused on social distancing and technology will be increasingly valuable to both customers and the grid. This could include Advanced Metering Infrastructure (AMI), which enhances system visibility without requiring physical presence. This certainly would improve our social distancing efforts. However, there haven't been any significant changes regarding the emphasis on grid modernization at this time. AMI has already been part of the discussion in Connecticut, which is progressing, and we expect to see some program designs and proposals by the end of July.

Great, okay, thanks very much.

Thanks, Mike. Our next question is from Caroline Bone from Evercore. Good morning, Caroline.

Good morning, guys and thanks for taking my questions. And I also just wanted to say thanks to all of your employees for all of their hard work right now. We're all really grateful.

Thank you, Caroline. That's very nice of you.

So, my first question is really on Columbia Gas. I was wondering if you could comment on what sort of spending you're anticipating going forward on these assets, and apologies if I missed this earlier in the call. I just want to get a sense of how that impacts your long-term capital plan.

Well, as I said, Columbia is really not in our guidance at this point. So, as we move through the approval process to closing, then we'll include that in our plans going forward. But I would say, if you just look at what we spend in the gas business, on the Yankee Gas or in Massachusetts already on NSTAR Gas, the capital spending programs are somewhat higher than they are currently at Columbia. So I would expect that once we get through our process and all of the integration efforts and we put everything down on paper, you're likely to see some higher capital spending requirements on that system than has historically existed.

Okay.

As we consider integration efforts, we will be including some corporate service activities into Eversource, which may result in some savings. However, I anticipate that the capital plans for Columbia will increase from previous expectations on a normal run basis. When we review our expenditures in the gas business, particularly with Yankee Gas and NSTAR Gas in Massachusetts, we find that capital spending programs are currently higher than those at Columbia. Therefore, once we complete our process and all integration efforts, we are likely to see higher capital spending requirements for that system compared to historical levels.

Okay, that's very helpful. And then my other question is just, do you guys expect these potential delays of the larger offshore wind projects to impact capital cost? Or is it really too early to say at this point?

I'm sorry, Caroline, I didn't catch that.

On the offshore wind, the Sunrise that might be delayed, do you expect that to impact the capital cost for that project?

I didn't talk about Sunrise. I will say that South Fork, and I may have said 2020, I'm not sure, but …

Oh, no. Yes. Okay. Sorry, I thought the information on the slide implied that Sunrise might be delayed as well.

We plan to file the Certificate of Public Convenience in the second half of this year, followed by the release of a schedule. The dates will remain unchanged. For South Fork, we initially anticipated the commercial operation date to be at the end of 2022. However, due to the COVID situation and other factors, it is unlikely that we will meet that timeline. There are currently no changes to the other dates.

Oh, got it. Okay, that's helpful. That's it for me. Thanks so much, guys.

Thanks, Caroline. Stay well.

Thanks, Caroline. Appreciate it. Next question is from Julian from Bank of America. Good morning, Julian.

It's Alex Morgan calling in for

Hey, Alex.

Thanks so much for taking my question. Hey, congrats on the results.

Thank you.

My first question is about Connecticut AMI. I know you spent a little bit of time talking about it with the prepared remarks. I was wondering if you could potentially take it a little step further and talk about what the potential timeline on this could be and maybe your expectation on the size of the first six of the RFPs.

What we've said in terms of AMI has been that a full rollout of AMI in Connecticut and Massachusetts is about $1 billion. And we have about the same amount of customers in each state. So even if you assume that that's a 50-50 split on that. So it's a program that would be a significant improvement in terms of visibility to the grid. It would be a significant opportunity for us to better manage distributed energy resources on the grid, and it would be, I think, a customer satisfier, and it is part of the ongoing discussions, probably ahead in Connecticut than where it is in Massachusetts right now. Although, Massachusetts will likely take up something to do with AMI in the near term. So, in Connecticut, I can't give you any more specifics than that other than it is on the agenda. Plans are being formulated and being filed in those first areas of interest for the Connecticut regulator, which are really advanced metering infrastructure is one of the items. So, along with energy storage and electric vehicles. I think you'll start to see more unfold on that as we get through the summer and into the year.

Okay. Thank you. And my second and last question is just a little more detail on the South Fork offshore wind project. I was wondering if you could talk through maybe some of the pros and cons of the project potentially being delayed because of COVID and BOEM. My expectation on the positive side would be you could share vessel CapEx with potentially Revolution Wind, but on the negative side, I was wondering how that might impact your contract details with LIPA and if there's any ability for that price to be renegotiated or revisited. And that's it from me. Thank you so much.

Thank you for your questions. As you mentioned, sharing vessel plans and capital expenditures could provide some advantages. Additionally, the introduction of larger turbine sizes may also be beneficial, as it would require fewer poles to be installed in the ocean. There are potential benefits in that area. The terms of our offshore wind contracts give us flexibility to adjust timelines due to delays beyond our control, such as those from BOEM or the impact of the pandemic. We are confident in the contract provisions that allow us to shift dates, ensuring we can still meet the power delivery timelines as outlined in the contract, and we foresee some benefits, as you noted.

All right, thank you so much. Thanks, Alex. Our next question this morning is from Neil Kalton from Wells Fargo. Good morning, Neil.

Good morning. Thanks. Two quick questions on offshore. First, I have it in my notes that the plan to make about $300 million to $400 million in investment this year in offshore. Is that correct? And then, should we think about that as being substantially shifted out, given the delays? And then second, any further thoughts about involvement in future offshore lease auctions going forward?

Thank you for your questions, Neil. I hope you're doing well. You mentioned our capital program, which we discussed in our disclosures and in the 10-K. We indicated a plan to invest between $300 million and $400 million in offshore wind. However, some of these costs may be postponed from this year to future years. Therefore, we could end up at the lower end of that range, or even below it. We will clarify those details as the year progresses. Regarding future auctions, as you know, there were past auctions where other bidders paid significantly higher prices than what we and Orsted considered reasonable. We would certainly explore any opportunities in New England, including those leased areas, but I want to stress that we will maintain the same financial discipline in our bidding as we always have.

So just a quick follow-up, so you said New England. Would you look at New York or no?

Right now, we're focused on the New England leases, Neil.

Right, thank you.

Good morning.

Good morning.

It's great to hear that things are going well for you. I have a question. Many of my inquiries have been addressed, but could you provide more details about the bill payment experience you've observed over the past month concerning your customers? Specifically, are there any notable regional differences or variations in how different utilities are being paid for?

Sure, Paul. I hope you’re doing well. I feel very positive about the regulatory frameworks we have established regarding delinquent accounts, delays, or bad debts. We already have mechanisms in place for hardship cases, meaning people who meet certain medical or income-related criteria are categorized accordingly. In Massachusetts and Connecticut, we have systems ready to collect on these cases, which were set up before COVID. Additionally, there has been a recent order in Connecticut indicating that we should collect all costs and defer them for future recovery related to COVID, and we have filed similar information in Massachusetts and New Hampshire. I feel confident in our regulatory mechanisms. Each company across the country might have variations, but I am satisfied with what we have implemented. Regarding our experience, it’s still early to gauge fully, but we have introduced long-term repayment plans. In Connecticut, these plans can extend for 24 months. We are not charging late fees, not disconnecting customers, and allowing flexible payment plans. We have not observed a significant decline in customer payments; our customers are managing to pay their bills adequately, and there hasn’t been a notable deterioration over the past month or so.

Answered too, thanks, again, have a great one.

Thanks, Paul.

All right, Paul. Thank you. Next question is from Travis Miller from Morningstar. Good morning, Travis.

Hi, how are you?

We're good, thank you.

I was wondering on that Columbia acquisition, how do you think about financing that $1.1 billion up at the parent level? I know you'll keep the utility structure the same, but how do you think about that at the parent level?

Good morning, Travis. I hope you're doing well. Thank you for your question. Our approach to financing the $1.1 billion will align with the Eversource capital structure, involving a mix of debt and equity. Moving forward, the debt issuances for that entity will likely take place in the private market, similar to our current financing strategy for the gas companies within the Eversource family. Initially, the financing will be handled at the parent level, but like our other franchises, they will also conduct their own debt financing and receive equity capital from the parent. This process will ultimately be consistent with our existing practices.

Okay. Just to clarify about the equity side, the $2 billion plan obviously did not include the potential equity financing for Columbia, correct?

That's correct.

So you'd have the Columbia acquisition, equity financing, plus that kind of $700 million, and then, plus anything that you'd want to do on the equity side for the offshore winds whenever material amounts of cash gets spent end of this year or next year. Is that the way I'm thinking about it correctly?

I believe you've included one extra element in your calculations. To clarify, our plan involves the remaining $700 million from the original $2 billion of equity announced last year. We have already executed $1.3 billion of that allocation. This means the base plan consists of $700 million. Regarding the acquisition of Columbia, we are looking at a capital structure that's approximately 60% debt and 40% equity, or more accurately, around 55% debt and 45% equity. We intend to finance the acquisition of Columbia based on this structure, and that's the complete picture.

Okay. And then offshore winds, would you'd be able to fund out of cash flow to the extent that you had any kind of cash on that later this year or early next year?

Yes. It would finance that in our current forecast period, that's correct.

Okay, great. Just one quick technical question regarding the revenue decoupling you mentioned. Is there a distinction when considering the impacts of weather compared to COVID-19 for regulators? Do those belong to two separate categories for decoupling, or is it simply full demand decoupling?

There's no difference in the buckets. It could be for any reason, economic, weather, or otherwise. So, it's full decoupled.

Okay, great. Appreciate it. Thank you.

Thank you, Travis.

Thanks, Travis. Next question is from Andrew Weisel from Scotia. Good morning, Andrew.

Hey. Good morning, everyone.

Good morning.

I want to clarify some of the points you just mentioned. If I remember correctly, the offshore financing plan involved having one project come online first, with the cash flows from that project financing the second, creating a forward momentum. My question is, if South Fork gets delayed, potentially for an unknown duration, will there be any short-term cash needs to support the construction of Revolution Wind before South Fork starts generating revenues?

No, that's not anticipated. If you recall, South Fork is a fairly small in size project. It's 130-ish megawatts versus Revolution Wind being 700 and Sunrise 880. So, the South Fork project is really the smaller of the cash requirements and smaller of the cash receipts also. So no, we don't see any bridge issue there.

Okay, great. Then next on the slide showing progress on major transmission projects, slide 12, the Eastern Massachusetts completion date moved forward by a couple of years to 2023 and some smaller delays for a couple of the other ones. Can you just talk about, most of the Eastern Massachusetts one, but also the other ones and what drove those pushing out of the completion dates?

Sure. I'd say that with our transmission projects, there are various factors like siting issues and applications that can cause changes. It's important not to read too much into it. In Eastern Massachusetts, we have a large number of projects, around 29. Out of those, about 22 are completed, and some are under construction. One of the projects has experienced a delay in starting as scheduled. This is typical in the siting process, as we work with towns to secure permits and navigate other requirements. So, there’s nothing major to be concerned about; sometimes projects get delayed while we advance other ones. We don’t expect any significant impact on our transmission plan as a result.

Okay. Thank you very much and I appreciate all the detail on the downside protection. It's a good time to have all of those tools.

Yes. Thank you, Andrew. Stay well.

Thanks, Andrew. There are no more questions in the queue, so we want to thank you so much for joining us this morning, and if you have any follow-ups on this busy day, please send me an email. Take care and be safe.

Thank you, all.