Eversource Energy (ES) — Q3 2023 Earnings Call Transcript

Good morning, and thank you for joining us. I'm Bob Becker, Eversource Energy's Director for Investor Relations. During this call, we'll be referencing slides we posted on our website. And as you can see on Slide 1, some of the statements made during this investor call may be forward-looking. These 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. We undertake no obligation to update or revise any of these statements. Additional information about the various factors that may cause actual results to differ, and our explanation of non-GAAP measures and how they reconcile to GAAP results, is contained within our news release, the slides we posted this morning, and in our most recent 10-K and 10-Q. Speaking today will be Joe Nolan, our Chairman, President, and Chief Executive Officer; and John Moreira; our Executive Vice President and CFO. Also joining us today is Jay Buth, our Vice President and Controller. Now I will turn the call over to Joe.

Thank you, Bob, and thank you, everyone, for joining us on this call this morning. I look forward to our conversation today, and to seeing many of you at the EEI Conference next week. First, let me start with the topic that I'm certain is top of mind to all of you, which is an update on the sale of our Offshore Wind investment. We are very pleased to have closed the sale of our 50% stake in the uncommitted lease area to Orsted in September, along with our South Fork Wind tax equity investment. We are delighted to have these transactions behind us. As for the sale of our interest in the three projects which are under development, we have substantially completed our contract negotiations with a buyer and continued to make good progress on this front. What remains to be completed is for the buyer and Orsted to finalize several documents, such as their new joint-venture agreement. We expect this process to wrap up shortly, allowing us to execute our sales agreement with the buyer and announce the terms of the sale. As you see on Slide number 3, I'm very happy to report that our South Fork Wind project is expected to fully go into service in early 2024. The onshore construction is complete and connected to our export cable. While offshore construction is significantly advanced with the offshore substation and array cables installed and connected. Currently, the turbine installation is underway and we expect to have seven to nine turbines operationally complete by the end of this year, with the remaining turbines installed in January. This project will spearhead the US offshore wind industry and will be one of the country's first utility-scale offshore wind farms built by Connecticut labor from various unions. On October 31st, our joint venture announced that we have taken our Final Investment Decision or FID on Revolution Wind. This is an important project milestone that allows it to advance to full onshore and offshore construction and installation and have this project in service in late 2025. I'd like to now address the recent events in New York, which I know have been a source of great interest for many of you. On October 12th, the New York Public Service Commission denied petitions for pricing adjustments from several renewable developers, including the petition for our Sunrise Wind Project. The petition sought to address the extraordinary macroeconomic challenges from higher inflation and interest rates, along with supply chain disruptions that developed since our OREC agreement was executed in the fall of 2019. These factors were incorporated by the New York State Energy Research and Development Authority or NYSERDA in their recent offshore wind solicitation. While we are disappointed with the New York PSC's decision, especially given that NYSERDA had publicly advocated for pricing adjustments, we support their commitment to a transparent competitive RFP process. We are very encouraged to see that New York is working to establish an accelerated rebidding process, which includes an accelerated track, where winning bids could be announced as early as next year. Together with our JV partner Orsted, we responded to NYSERDA's request for information. Together, we will work towards developing a bid that will reflect the attractive nature of this project. We feel confident that Sunrise Wind will deliver clean and reliable energy to New York and support economic development in the region, much earlier than many other projects. We will continue to evaluate ways to maximize project economics and to ensure project schedules remain on track. We have begun limited onshore construction for Sunrise Wind and we have also identified solutions for our installation vessel, which many of you have been asking us about to maintain the project schedule for Sunrise Wind and Revolution Wind. We expect both projects to be in service in late-2025. We're excited by the recent actions taken by the six regional governors who asked the Biden administration to clarify tax benefits for current US offshore wind projects and provide relief on federal offshore wind lease costs, as well as encouraging an accelerated permitting process for offshore wind projects. In October, Connecticut Governor Ned Lamont announced a first-of-its-kind partnership between Connecticut, Massachusetts, and Rhode Island to seek offshore wind proposals that will expand the benefits for the region and help reduce costs. All three states have issued RFPs to procure over 6,000 megawatts with bids due in early 2024. Eversource will play a key role in providing the transmission and distribution infrastructure investment needed to connect these important resources to our grid. Moving over to our core business, as you know, everything we do here at Eversource is done with a focus to continue to enhance our service for customers. As shown at the top of Slide 4, we continue to serve customers well, delivering top-decile electric reliability performance at nearly two years between interruptions, and our gas emergency response is exceeding our internal target. These high-performance levels are the result of the investment we've made in our electric and gas systems over the past several years. Investments focused on ensuring our system is strong and resilient and ready to adapt to the needs of our customers for years to come. Looking at our clean energy focus, we continue to move forward on enabling clean energy in our region, and we continue to make good progress in reaching our carbon neutrality goal by 2030. In Massachusetts, we are investing nearly $2 billion in our electric transmission and distribution system to advance clean energy resources. Moving to the bottom of Slide 4, our customers continued to be burdened by high energy prices, particularly during peak winter months. While this winter's supply prices will be high compared to summer rates, they are expected to be significantly lower than last winter's; a welcome relief for our customers. To date, Connecticut is fully procured at prices significantly lower than last year. Massachusetts is at 50%, New Hampshire is procured through January. If current market conditions continue, the expectation is that the winter supply rates in all three states will be much lower than last year. Though prices across the region are lower than last winter, we recognize that our customers are feeling the pinch of high costs in many areas. That's why we're doing what we can today to help our customers lower their bills this winter. Along with our industry-leading energy efficiency programs, we also launched a new outreach campaign in Connecticut to encourage customers to sign up with competitive suppliers to save money. We're also educating customers on new energy assistance options. I'm happy to report that Connecticut residential customers have responded. The share of residential customers receiving standard service from Eversource has dropped from over 90% last winter to 70% heading into this winter. To serve our customers and ensure they optimize their energy use, we continue to build out our industry-leading energy efficiency programs. In fact, Eversource ranks number one as the best energy efficiency provider in the country. As you can see on the left side of the slide, we invested over $600 million in these programs last year, avoiding lifetime greenhouse gas emissions of nearly 3 million metric tons. We'll continue to build on this great foundation moving forward. By enabling energy efficiency, encouraging customers to shop for supply, and educating customers on energy assistance options, we're doing what we can to lower customer bills today. Longer-term, we are working with our states to provide the infrastructure investment necessary to access reliable renewable energy like offshore wind and solar generation. Turning to Slide 5, the shift to electric vehicles and zero carbon heating will add tremendous incremental electric demand to our grid. As you can see here, New England electric demand growth is expected to more than double by 2050, and winter peak demand is expected to grow significantly by 2050. This is in stark contrast to a relatively flat electric demand we've seen over the past decade. Along with the rest of the utilities across the country, we are aggressively planning for the clean-energy future here at Eversource. On September 1st, we filed our Electric Sector Modernization Plan or ESMP. This plan is a roadmap for our partnership with Massachusetts to enable the state's clean energy climate plan. The plan details how we'll continue to maintain safe and reliable service for our customers as we transition to a decarbonized future. In addition to our base investments necessary to increase distribution system capacity, including the implementation of AMI and other technology platforms, Eversource has proposed additional investment that goes beyond the nearly $2 billion of clean energy investment in Massachusetts through 2027. This investment will go towards improving the resiliency of our system, integrating additional solar generation, and implementing new technology to enable additional distributed energy resources. Our proposed plan is expected to exceed Massachusetts' 2040 goals and achieve 70% of the state's 2050 greenhouse gas emission goals. By requiring electric distribution companies to submit in a fully transparent manner, the long-term grid modernization plans, Massachusetts is taking a leadership role in enabling decarbonization. They're not just setting policies, but tying infrastructure, clean energy, and customer engagement together. We're excited to engage with environmental justice and consumer and business advocates to establish the right framework for all Massachusetts customers to advance towards the clean energy future. We look forward to engaging with all stakeholders as we work towards a final decision from the DPU next year. Moving on to Connecticut, the regulatory environment remains challenging as evidenced by Aquarion and United Illuminating rate case decisions, which produce returns that are value-destructive for investment, but we are encouraged by the recent actions by Governor Lamont supporting offshore wind investment in the region. We see the governor's support as a realization that investment at a reasonable return is necessary to provide the clean energy future that our region and country are moving toward. In closing, I couldn't be prouder of the effort that the Eversource team puts in every day, providing for our customers' needs. We have the experience and the expertise to guide our customers as we develop a bold and bright energy future for New England and the Northeast. Thank you again for your time. I will now turn the call over to John.

Thank you, Joe, and good morning, everyone. This morning, I will review our results for the third quarter of 2023, discuss the status of our offshore wind investments, and review our cash flow position. Let me start with Slide 6. Our GAAP and recurring earnings were both $0.97 per share in the third quarter of 2023 compared with GAAP and recurring earnings of $1 per share and $1.01 per share respectively for the third quarter of 2022. GAAP results for 2022 include transition and transaction costs related to Eversource Gas Company of Massachusetts of approximately $2.2 million. As a reminder, results for the third quarter of 2023 reflect a negative $0.08 per share impact for NSTAR Electric's rate design change; as shown on slide 7, adjusting the earnings for the third quarter of 2023 by this amount would result in both GAAP and recurring earnings of $1.05 per share. As I have previously mentioned, this rate design change does not impact full year results. Moving back to Slide 6 and looking at some additional details on the third quarter earnings by segment, starting with our Electric Transmission segment, which earned $0.46 per share in the third quarter of 2023 as compared with earnings of $0.44 per share in the third quarter of 2022. Improved results were driven by our continued investments in our transmission system. Our third quarter 2023 Electric Distribution earnings were $0.50 per share, compared with earnings of $0.65 per share in the third quarter of last year. The earnings decrease is due primarily to the timing of the rate design change at NSTAR Electric that I mentioned earlier, as well as higher storm-related costs, higher interest costs, depreciation, and property tax expense. These factors were partially offset by higher distribution revenues at NSTAR Electric and from capital trackers that we have in place. Our Natural Gas Distribution segment lost $0.10 per share in the third quarter of 2023 as compared to a loss of $0.07 per share in the third quarter of 2022. The increased losses were due to higher regulatory and operating expenses, depreciation, and interest expense, and were partially offset by higher revenues from the base rate increases at NSTAR Gas and EGMA which took effect November 1 of 2022. Our Water Distribution segment earned $0.05 per share in the third quarter of 2023, which is the same level we were at in the third quarter of last year. Eversource Parent and Other Companies' recurring earnings were $0.06 per share in the third quarter of 2023, as compared to a loss of $0.06 per share in the third quarter of 2022. The improved third quarter results primarily reflect a lower effective tax rate that was partially offset by higher interest expense. Turning to Slide 8. Based on our financial results to-date and our strong cost discipline, we are narrowing our 2023 recurring earnings projection to between $4.30 to $4.43 per share compared with our previous range of $4.25 to $4.43 per share. Looking at our longer-term earnings growth rate expectation, as you saw in our news release and can see on Slide 8, we are reaffirming our long-term EPS growth rate solidly in the upper half of the 5% to 7% range. We are also reaffirming our $21.5 billion five-year regulated capital program, as shown on Slide 9. Current capital expenditures totaled approximately $3.2 billion in the first nine months of 2023. Now, to further expand on what Joe covered, we reached an important milestone in our effort to exit our offshore wind business. On September 7th, Eversource completed the sale of its 50% interest in the lease area that includes approximately 175,000 developable acres to Orsted for $625 million in an all-cash deal. We also closed on our tax equity investment in South Fork Wind with Orsted. We used $528 million of the proceeds from the lease area sale for our tax equity investment. As a current 50% equity partner in South Fork, half of this tax equity investment or $264 million was returned to us in October. We expect to recover the tax equity investment primarily in the form of tax credits once the turbines are placed in service. These tax credits will be utilized to reduce Eversource's federal income tax liability, including refunds from prior years expected over the next 12 to 18 months. As Joe mentioned, we continue to make good progress on advancing the sale of our existing 50% interest in our three offshore wind projects. On our second quarter earnings call, I discussed one of our contingent considerations with the sale of the projects, that we expected a positive outcome from the Sunrise Wind OREC repricing petition, representing approximately $450 million in value to Eversource. Although we were very disappointed by the New York Public Service Commission's rejection of the pricing petition, we are encouraged by NYSERDA's quick reaction in its request to run an accelerated RFP process. As I previously indicated, advancing the sales transaction was not contingent on a resolution of Sunrise's OREC repricing petition. As we assess our options for an OREC rebid for Sunrise, we could potentially see a scenario whereby we move forward with the sale for South Fork and Revolution Wind, followed by a transaction for the sale of Sunrise with the buyer. As we navigate through this accelerated RFP process, we will continue to look at every alternative to keep this sales process moving forward in an efficient and timely manner. Now, I'd like to update you on our expectations for qualification for the two additional 10% investment tax credit adders under the Inflation Reduction Act or IRA. We previously assumed a positive outcome regarding one additional 10% adder for Sunrise Wind and Revolution Wind that represented approximately $400 million in value to Eversource. Let me start with the Energy Communities. We do believe there is a good path around the prospects for qualifying for the Energy Communities provision of the IRA for both Sunrise and Revolution, which would increase our potential ITCs to 40% of the eligible basis for these projects. Therefore, the Energy Communities qualification would cover this contingent value that we have recognized. Also, we will continue to explore opportunities to engage with the Treasury Department, as they clarify the rules around the domestic content provisions of the IRA to qualify for an additional 10% investment tax credit. As a reminder, the $400 million in value I just mentioned, is based on achieving a single quantification outcome between either the Energy Communities or the domestic content adders. As assumed in our second quarter offshore wind impairment charge, we only assume one additional 10% ITC adder as a contingent consideration. Should the projects qualify for both the energy communities and the domestic content adders, it would result in upside to Eversource. We will continue to monitor both the RFP process and the ability to qualify for one or more of the ITC adders and evaluate their impacts along with other potential impacts, as part of our continual review of our impairment models. As a part of this evaluation, an important consideration will be the likelihood of success of any future bid award for Sunrise Wind from this accelerated RFP. Turning to cash flows. First, let me say that maintaining strong credit ratings is very important to us. Therefore, we are disappointed with the recent credit rating action taken by Moody's as the timing was a bit unfortunate. Our short-term ratings were not impacted by this action and therefore we should not see any impact on our commercial paper cost. As it relates to future long-term financing costs, we see potentially minimal impact. We expect our cash flows will be enhanced and more specifically, an improvement in our ratio of funds from operation relative to debt or FFO to debt. Although we expect that our 2023 FFO to debt would be a bit weak primarily given the delay in closing the offshore wind sales transaction, however, moving forward, we expect our cash flow position to increase significantly. There are several factors we expect to contribute to enhancing our FFO to debt ratio well beyond the new threshold of 13% of FFO to debt by 2024 and beyond. A key factor driving an improvement in cash flows are the proceeds from the sale of our offshore wind projects along with eliminating the project funding requirements. You may recall that as of June 30th of 2023, the carrying value of our offshore wind investment was $2.1 billion, net of the $401 million pre-tax impairment charge and the proceeds from the sale of the lease area. We have previously indicated that there are approximately $850 million of contingent considerations as part of the sale that is comprised of the $450 million pricing adjustments or now an RFP rebid for Sunrise OREC. If successful with the RFP award, this cash flow would be received when the transaction closes. In addition, as I previously discussed, a potential $400 million from the energy communities of a 10% ITC adder quantification would be received when the projects reach COD, which we expect in 2025. Cash flows will be further enhanced from our core regulated businesses from electric and gas distribution rate adjustments primarily in Massachusetts and other cost recovery mechanisms. We anticipate additional deferred storm cost recovery of about $400 million to $500 million rolling into rates during 2024, that will be recovered over a five-year period. Also of note, we will fully monetize our $528 million of South Fork tax equity investment through lower tax payments and refunds, which will further contribute to an improvement in our cash flow and provide the ability to pay down debt, including a portion of the $1.4 billion of parent debt maturing in 2024. Lastly, we are committed to completing the $1 billion equity as part of our ATM program. As shown on Slide 10, we have issued no additional equity under this program through October. We also anticipate raising additional equity through our dividend reinvestment and employee incentive programs through October, and we have issued 900,000 shares under that program. Thank you for joining us this morning, and I look forward to seeing many of you next week. I will now turn the call back over to Bob for Q&A.

Thanks, John. I'll turn the call back to the operator to begin Q&A.

Hey, guys. Good morning. Can you hear me?

Good morning, Shar.

Good morning. Sorry, we just saw, obviously, your partner Orsted taking a total impairment of around $900 million for the three projects. Can you just talk a little more about why you didn't take an additional impairment this quarter? And maybe just provide more clarity regarding Sunrise and that accelerated RFP process in New York with the buyer? I guess, John, what alternatives were you referencing? Thanks.

Great. Well, thanks, Shar. Let me start with the RFP. While the merits of our repricing petition were in line with the recent NYSERDA RFPs and the resulting price ask from our petition was lower than the average price of recent New York awards, our repricing petition was denied, unfortunately by the New York PSC. The primary reason, Shar, they cited was that the pricing adjustments would have been done administratively rather than through competitive procurement, which is what they did not want to do. However, you'll see that NYSERDA then issued an RFP right after the denial for a future RFP for additional offshore wind. We have responded to that recent New York RFI and we'll evaluate the RFP terms. Given the maturity of Sunrise in terms of the citing, permitting, and early construction, this project is probably best positioned to win this RFP. John, you can hit on the impairment question for Shar, please.

Sure. Good morning, Shar. If you look at the impairment charge our partner took last week and what occurred in Q2, our pre-tax impairment charge of $401 million reflects the gain on the lease area and is quite comparable. I believe there is alignment between what we've experienced on these projects and what Orsted announced last week. Additionally, the assumptions are very similar to what we discussed back in June. Regarding the structural aspect of your question, as I mentioned in my formal remarks, it is still early in the process, but there is a possibility that we could proceed with the buyer on South Fork and Rev and then engage in a second transaction for Sunrise. From a project financing perspective, it's crucial to have a solid revenue agreement. If we can enhance the revenue agreement, even if it takes four or five months, we fully support a delay in closing for that project.

Got it. And then, John, you mentioned that the sale process could be split with Sunrise later, which is kind of helpful, I guess. What could that look like? How should we think about the implications for investing in the project and timing? Basically, will you be on the hook for it? And any contingencies? Thanks, guys.

Yes, we will have a funding requirement, but the negotiations with the buyer indicate we will be reimbursed for that extra funding when we finalize the deal. It's also important to note that based on information from NYSERDA, this is a fast-tracked RFP process, with two opportunities. We could potentially see a decision before we close the transaction on South Fork and Revolution. However, if there are any delays from NYSERDA in announcing the bidders for those RFPs, we still plan to proceed with the projects as outlined, followed by Sunrise.

Got it. Perfect. I appreciate, guys. I'll jump back in the queue. I know there's others that want to ask. Thanks.

Thank you.

Yeah. Hey, good morning.

Good morning, Steve.

So good morning, Joe and John. Regarding the Moody's action, the timing is unfortunate. Could you provide more insight into your thoughts on that comment? Additionally, from a corporate perspective, without considering the rating agencies, how should we evaluate the FFO-to-debt that you are expecting and targeting moving forward?

Sure, sure. As I said in my formal remarks, we pride ourselves in having very strong credit ratings, and that's important to us. And my remark on the unfortunate timing of it is that the fact that we do see a significant enhancement in 2024 that would get us well above the 13%, and quite honestly, probably exceeding the 15% threshold. But we fully understand the predicament that Moody's has been in with a negative outlook for quite some time. Storm activity, as I've mentioned, in the past three years has created a headwind for us from a cash flow perspective, but we do see that enhancing in the years to come.

Okay. You mentioned that you might have reached the 15% target in 2024. Do you have an idea, John, of what you're now aiming for in terms of the FFO to debt as we consider your overall financing plan?

Well, Steve, I want to start by saying that being at 13% right now provides us with a bit more flexibility to be opportunistic in terms of equity. However, I remain focused on our goal of maintaining a very strong credit rating. Based on our current plan, I anticipate that we will reach 15% by the end of 2024, assuming all other factors remain constant.

Okay, so from that standpoint, given that, do you not see any need for more equity in the plan beyond what you've already discussed?

That's what I confirmed in my formal remarks. That is correct.

Okay, great. Could you talk about your plan regarding interest rate exposure? I remember earlier this year you mentioned that your approach was somewhat conservative. Can you elaborate on that? I know you shared a slide with some details, but I’d like to hear your overall perspective on the plan in relation to interest rate exposure.

Yeah, I mean, we've done a great job in managing to the current year exposure, and we will continue to be focused on that. We are very disciplined in our O&M strategy, and we've been very successful, as a matter of fact. As a result of that cost discipline, we've been able to narrow our guidance range, our EPS guidance range. So, yes, I would say to frame it, when I started the year, I didn't think the Feds were going to move as rapidly as they did with the increase in rates. So it has put some further pressure on us, and we have a plan that will get us to where we need to be.

And is that true for not just for this year, but for the long-term growth rate? Is that..

That's correct. That is correct.

Okay. I'll let others ask. I appreciate the time. Thank you.

Thank you, Steve.

Thank you, Steve.

Hi, David, good morning.

Thanks so much for taking my question. Hey, good morning. Let's see. Maybe just following up on Steve's last question. If rates stay where they are, do you continue to see the ability to hit solidly in the upper half of your guidance range? And maybe could you elaborate on some of the cost-cutting initiatives where the opportunities are that you see going forward?

Sure. Thanks, David. So, yes, I mean, in our longer forecast, based on what consensus had interest rates moving and where the Fed is likely to be, we have factored that into our long-term growth prospects. The question is when will the Fed start to turn the corner, either stabilize or perhaps even go start reducing rates? So that's what we're looking at in our 2024 plan. But right now, as I've said, the cost-cutting that we have been very successful to implement has compensated for that. From a cost-cutting measure, we look at a multitude of things, right? We have done a great job in introducing technology that has lowered operational costs. We look at on the shared services side what can we do there? So those are some of the items that we are very focused on.

Okay, great. That's helpful. And then also just looking out at the FFO to debt trends you've got a couple or I guess I'm thinking of the tax equity payment in 2024, that's a bit of a one-time boost. But then post 2024, is there a trend off of that year where you expect FFO to debt to trend naturally just based on the core business outlook? Does it fall below 15% after that or are there ways to maintain it in that rough range? Thanks.

No, no. If you recall my formal remarks, I said, look, right now our prospects are to turn the corner in 2024 and beyond. So our core business is going to be a significant contributor to that. And the biggest driver of that will be the rate adjustments that we have in Massachusetts locked in. And while the pathway that we see to start recovering the nearly $1.6 billion of the first storm costs in Massachusetts and New Hampshire, as I've mentioned, we have about $400 million to $500 million kicking into rates in 2024 that will be recovered over a five-year period. And then we will be focused on the Connecticut deferred storm costs. And as we've said in the past, we look to file a Prudency, a cost review, and get that filing into PURA later this year.

Okay, got it. Thanks. Appreciate the color.

Thanks, David.

Hey, everyone.

Good morning, Nick.

Thanks for taking my question. Good morning. I just wanted to follow up on Connecticut. I think you started to hit it there, but obviously the governor, you're saying, has been more supportive, but it has been a challenging backdrop from a rate-making standpoint. Just how are you kind of thinking through the timing of a next CL&P rate case? And then secondly, just the strategy for deferred storm balances. I think you said that you're going to file later this year with recovery thereafter, but can you just kind of give us some more detail on what that process looks like? Thank you.

Sure, thanks, Nick. I'll address that and then John can chime in. To clarify, we do not plan to file a rate case in Connecticut. The current settlement prevents us from doing so until 2025, which is the earliest possible date, though it's not required then. Our storm cost filing is progressing well, and we can submit it at any time. However, this filing needs to undergo a review process, where all documents will be checked to ensure everything is in order. This is important since we want to handle it outside of a rate case. Once we finalize that, we'll establish the amount, making the subsequent rate case simpler. That's our current strategy. John, feel free to add any comments.

Sure. It's a significant amount that we will seek Prudency review for. Currently, we're looking to present about $650 million to PURA. From a timing perspective, I expect this process to take quite a while, likely 10 to 12 months. There's a lot of information and due diligence that the regulator needs to conduct.

That's helpful. And then just one follow-up on the assumptions underlying the 5% to 7% EPS CAGR here, like acknowledging that you're continuing to point to the high end of that range. You do have the ATM outstanding and you haven't issued a lot of that, and multiples are lower. So I'm just trying to understand, is this like a true mark to market of if the stock price stays where it is, you still see this as an executable 5% to 7% CAGR? Thanks.

Sure, sure. Yes, we do. Yes, we do. I mean, I'm hoping that the market and the whole sector doesn't stay at this level much longer. Then I'm hoping that things will start to move forward in the right direction for all of us, quite honestly. But yes, when we haven't issued any equity, it's not a mad dash to issue equity. So we will continue to monitor things and be opportunistic as we can.

Thank you.

Hey, good morning, team. Thanks for taking my questions. Hey, first, just can you tell us what's the expected spending on the offshore projects this year? I think you're targeting roughly $1.5 billion per the Q3 slides.

Yes, Durgesh, I believe we will be significantly below that. You might remember that earlier this year, we shifted $500 million from 2023 to 2024 and later. Currently, we are behind schedule. When you review our 10-Q, you'll see an offshore wind balance of about $930 million at the end of the period. It's important to note that we received a little over $300 million in mid-October, which brings our year-to-date balance, after accounting for the impairment charge, to approximately $2.2 billion to $2.3 billion.

Okay.

As compared to about a $2 billion balance at the end of the year.

Got it. Okay. Regarding the equity question, concerning the remaining amount of $1.2 billion, could you provide any insight on the timing of how you plan to execute that equity?

We'll have to wait and see where valuations are. But it's not, right now, it’ll be over the next several years to put it in the 2 time to 3 time window timeframe.

Okay. So not this year, right obviously?

No, no.

Okay. Thanks.

Hi, good morning.

Good morning, Jeremy.

Just starting off here, coming back to the sales process announcement and realize there are elements that are outside of your hands here. But if we're thinking about timing here, is this a matter of, like, days, weeks, or months? And are you able to identify any material gating items at this point or other risks around these negotiations? Just trying to get a sense for how the process could unfold at this point.

Yeah. Well, thanks. Obviously, this is on everyone's mind. It's a process we've been working through. And as we've mentioned we have completed the terms with the buyer. The buyer now is working with our partner, Orsted. As we've mentioned, this buyer is very familiar to Orsted; they've done transactions with them. And we just need to see that play out. So I can't give you a day, a week, or a month, unfortunately. All I can tell you is that all of the terms associated with the transaction with Eversource have been completed and that we feel very good about that. The buyer is still very eager on these projects, and we are going to work through it. And John and I will remain focused and disciplined around the execution of our divestiture of the wind business.

Got it. Very helpful there. Thank you. And then just pivoting back to equity. Just want to clarify a couple of points here to make sure I got it right. The $1.2 billion of external equity needs, is this kind of embedding, I guess, offshore wind sales price to a certain level, and does this assume higher New York price and success on one of the two IPC adders? Just trying to get clarity on what is factored in at that point. And then just to confirm, I guess, what you talked about earlier, the plan reaffirmation is based on current stock price levels, or does that need to be kind of reevaluated later for the 5% to 7% growth?

Sure. Let me address that. We actually have $1 billion remaining on our ATM, not $1.2 billion, as we've already executed $200 million. This estimate has been reaffirmed during the call and is based on the expectation that we will succeed with the $850 million contingent consideration I mentioned. We are confident about this outlook, as stated in the call. Regarding our stock price, we have not issued any equity this year due to its current valuation. We will keep an eye on this valuation as we proceed. As I mentioned, we have the flexibility and are not looking to issue it all this year or next year, but rather over time.

Got it. That's helpful. I'll leave it there. Thanks.

Good morning. I have a couple of questions. First, regarding Sunrise, I noticed that Orsted lowered their chances of success in a rebid last week. You all seem very optimistic about the rebid. Has there been any change in your perspective on Sunrise compared to last quarter?

Yeah. No, I mean, we still feel very good about Sunrise, given where it is in the gestation process. And the fact of the matter is, there is significant demand and appetite for offshore wind. And the pricing that we were seeking in our filing is less than what the average price was for others selected. The project is a great project. It's got so much economic development benefit, jobs benefits, location, and point of interconnection in New York that we feel very, very good about it. So that's our feeling on it. We feel it's a winner.

Great. And just curious, on the pricing, I don't know if you want to disclose it. But I just said the pricing you submitted to the New York Public Service Commission was attractive. On the rebid, could we assume that that price would exist on the rebid or through the rebid? There's a chance that pricing could even go up higher or lower? I mean, could the pricing change?

As you might imagine, this is a highly competitive process. There are other players in there, and that's something that we're not comfortable disclosing.

Great. And then just lastly, a whole bunch of moving pieces in this story. Big improvement in FFO to debt we should start seeing in 24. Just when we think about when all the dust settles, I mean, does 2024 look like it becomes a transition year and the offshore wind clears up? Or do you think that happens sooner, or does the cleanup to a fully regulated story happen more in 2025?

No, I feel very, very confident that 2024 is our year for a transition to a clean, pure, regulated utility seeking singles and doubles and keeping everybody on this call very comfortable.

Great. Thanks for taking my questions. I appreciate it.

Thank you.

Thanks, Paul.

Hey, good morning, team. Thank you guys very much for all the details so far. Just to clean up on a couple of things, if you guys don't mind. Just can we talk about capitalized interest year to date, where are we at the end of the day on the offshore wind projects? Can we talk about just what your expectations as you think about that new normal that you talked about singles and doubles? What is that parent level ongoing drag, if you want to call it that, in a kind of post-offshore world, if you will?

Sure, Julian. The capitalized interest currently stands at approximately $25 million, all at the parent company, possibly reaching $30 million.

Got it. I capitalized interest tied to the offshore projects at about $25 million to $30 million. How do you view the future in terms of that new normal at the parent company?

Well, with the cash inflows that I've mentioned, including some of the utilization of ITC, we can't lose sight over that, that I feel we would be able to harvest within the next 12 to 18 months, that's close to $500 million coming in the door, plus the proceeds from the offshore wind. We will turn the corner in 2024 and beyond. So, I do, as Joe mentioned, 2024 is the pivotal turning period for us.

Right. Fair enough. Oh, yeah, go for it.

And Julian, we have, as I mentioned in my formal remarks, is $1.4 billion that will mature at the holding company in 2024. And that's all back end half year, those maturities will take place June and October.

Right. Indeed. And just coming back to trying to compare notes between Orsted and yourselves, and I'm sorry to do this. I think they quoted a number like $450 million here for break fees if Sunrise doesn't have a positive ID. Again, I'm not sure what's in or out of that bucket. Where do you guys assess that metric here on your side, as far as you're concerned? What's your understanding? And also maybe what are the offshore proceeds assumed in the plan with the EPS CAGR reaffirm?

Okay, so the breakup fees that Orsted announced on their call, we're 50% partner. So we would be on the hook for that 50% as well.

Got it. And the proceeds just in the plan just to kind of think through super quickly?

The proceeds from the sale?

Yeah. Well, I mean, what are you reflecting in your plan as a placeholder, if you will? Right. I know you're reaffirming the CAGR here today, and maybe it's too close to a sale to be able to disclose. But how do you broadly think about that as a big piece of the puzzle?

Yeah. I mean, we haven't disclosed that, but I think you can certainly kind of assess that as to where we stand. And the reason is that it's a moving target as to when the transaction closes because we still have this funding commitment. But if you draw the line in the sand, as of $9.30 million, I mentioned that our total investment was $2.1 billion, and we have $850 million of contingent consideration that covers that balance. So the balance would kind of be in the range of what you would expect.

Okay, excellent, guys. I really appreciate the details. Thank you guys so much. All right. You guys take care.

Take care, Julien.

Thank you, Julien.

Good morning, everyone, and thank you.

Hey, Travis. Good morning.

Jump over to Massachusetts, the ESMP, and then the investments, the clean energy investments you have planned there. What's your thinking around either rate design or rate filing? Do you foresee all of these investments going into just traditional rate cases, like we've done in the past, or are you going to think about some unique rate design where you could wrap these in more timely?

Travis, we're so excited about that plan that we filed because it does differentiate Massachusetts as being very progressive in that regard. And we're working with the key stakeholders, as Joe mentioned in his formal remarks. I would say from a cost recovery mechanism, I think it's far too early for us to speculate as to what that would be. We need this process to continue to kind of play out a bit more. Right now, as per the legislation, it's before this council, this Grid Mod Council that's made up of key stakeholders and policymakers of Massachusetts. So that is still being reviewed by the Council, and we'll file that early 2024 with the DPU. So I think it's a bit premature to start speculating on the recovery mechanisms.

Okay. And about what's the rough mix in terms of O&M or variable-cost, operating costs, and capital costs in terms of your thinking about that?

I would say 70-30. 30 be in O&M.

Okay. Yes. Perfect. And then real quick on the dividend, still, that 60% payout ratio kind of target the way you're thinking about going into next year?

Yeah, I mean, consistently we've been at 62%, and our dividend policy supports that payout.

Okay, perfect. That's all I had. Thanks.

Thank you, Travis.

Hey, great to hear you guys. Just really..

Hi, Paul.

Just to clarify, most of my questions have already been addressed. I apologize for my delay in understanding the timing. It seems that we may have the final transaction details finalized by the end of the year. You mentioned the NYSERDA rebid process, and I would appreciate it if you could go over that again. I'm sorry for my lack of clarity. Can you share the expected timing on that and how it might affect the potential separation of the South Fork project from the other projects?

Sure. An announcement of a transaction by the end of the year would be ideal. However, we wouldn't finalize that until 2024. Regarding NYSERDA, they are indicating that the process would have a very quick turnaround. This is why we are considering the possibility that we might not have completed a transaction with the buyer, yet we already have visibility on pricing around Sunrise, which would be important for any buyer to understand the situation. So, it's very timely; we're looking at the end of this year for an announcement, and we are hopeful for a closing in 2024, along with some clarity on Sunrise pricing.

Okay, thank you for your response.

Thank you.

Thanks, Paul.