Eversource Energy (ES) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

Eversource Energy's earnings call highlights strong financial performance with increased EPS and improved FFO-to-debt ratio. The raised earnings guidance and substantial capital investments in grid modernization and decarbonization are positive indicators. Despite some uncertainties in project timelines, the company's strategic focus on infrastructure and clean energy initiatives is likely to drive stock price growth. The Q&A session reveals optimism about future projects and financial stability, supporting a positive outlook.

Key Financial Performance

Non-GAAP Earnings Per Share (EPS) Full year EPS of $4.76, representing an increase from $4.57 in 2024. The increase was driven by improved results in electric transmission and natural gas distribution segments, as well as base distribution rate increases in Massachusetts and New Hampshire.

Dividends Per Share Dividends of $3.01 per share, representing a 5.2% increase year-over-year. This reflects the company's commitment to returning value to shareholders.

Electric Transmission Earnings Earnings of $2.09 per share in 2025, up from $2.03 per share in 2024. The increase was driven by continued investments in the electric transmission system to address service reliability and demand growth.

Electric Distribution Earnings Earnings of $1.80 per share in 2025, up from $1.77 per share in 2024. The increase was primarily due to increased revenues from base distribution rate increases in Massachusetts and New Hampshire, partially offset by higher O&M, interest costs, depreciation, and property taxes.

Natural Gas Distribution Earnings Earnings of $0.97 per share in 2025, up from $0.81 per share in 2024. The increase was due to base distribution rate increases and continued investment in the gas system to replace aging infrastructure, with a focus on safety. This was partially offset by higher O&M, depreciation, interest, and property tax expenses.

Capital Investments Over $4 billion deployed in 2025, focusing on grid modernization, energy efficiency programs, and decarbonization goals. This reflects the company's commitment to infrastructure improvements and clean energy initiatives.

FFO-to-Debt Ratio Improved by more than 400 basis points at Moody's over the last 12 months ending September 30, 2025. This improvement was driven by cash flow enhancements and reflects a focus on strengthening the balance sheet.

GAAP Earnings Per Share (EPS) GAAP EPS of $4.56 in 2025, compared to $2.27 in 2024. The increase includes a net loss of $75 million related to future obligations to global infrastructure partners, offset by improved operational performance.

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Operating Highlights

Advanced Metering Infrastructure (AMI): Reached over 100,000 smart meter installations in Massachusetts, aiming to upgrade more than 1.5 million meters statewide.

Cambridge Underground Substation: Broke ground on a $1.8 billion investment, the largest underground substation in the nation, to strengthen the electric system in a high-demand area.

Revolution Wind Project: Completed the onshore substation; project is 87% complete and expected to achieve first power soon.

Rate Relief Plan in Massachusetts: Implemented a plan to provide customer discounts during peak winter usage, partly funded by the state.

Aquarion Water Company Sale: Engaged with regulators on the potential sale of Aquarion Water Company, with a revised decision expected in March.

Capital Investments: Deployed over $4 billion in 2025, focusing on grid modernization, energy efficiency, and decarbonization goals.

Storm Cost Recovery: Progressed on storm cost proceedings, with 98% of $2 billion in deferred storm costs pending prudence reviews.

Operational Metrics: Achieved top decile performance in MBI and SAIDI metrics, with electric customers experiencing an outage only once in nearly 2 years.

5-Year Capital Investment Plan: Increased to $26.5 billion, focusing on electric and natural gas distribution, grid modernization, and resiliency projects.

Artificial Intelligence (AI) Integration: Exploring AI applications in safety, system planning, customer service, and regulatory proceedings to optimize operations and reduce costs.

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Risk or Challenges

Regulatory Challenges: The company faces ongoing regulatory challenges, including the need for approval of the Aquarion Water sale and storm cost recovery in Connecticut. These delays create uncertainty in financial planning and cash flow.

Affordability Concerns: Affordability remains a critical issue, with the company needing to balance infrastructure investments and customer rate impacts. This includes implementing rate relief plans and managing customer discounts.

Storm Cost Recovery: The company has $2 billion in deferred storm costs pending prudence reviews, which could impact cash flow and financial metrics if not resolved favorably.

Aging Infrastructure: Significant investments are required to replace aging electric and natural gas infrastructure, which could strain financial resources and operational capacity.

Debt and Financing Needs: The company anticipates $8.5 billion to $9 billion in incremental debt and other financing solutions over the next five years, which could increase financial risk.

Aquarion Sale Uncertainty: The potential sale of Aquarion Water remains uncertain, with regulatory hurdles and the possibility of needing to file a rate case for additional revenues if the sale does not proceed.

Offshore Wind Commitments: The company is under pressure to complete offshore wind projects like Revolution Wind, which are critical but face construction and cost challenges.

Economic and Interest Rate Risks: Higher interest costs and economic uncertainties could impact the company's financial performance and ability to fund investments.

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Guidance & Outlook

2026 Priorities: Eversource aims to deliver top-tier operational performance, maintain high reliability, enhance customer experience, and ensure workforce and public safety. The company will advance infrastructure investment programs, including grid modernization, resiliency projects, and targeted upgrades to support reliability and clean energy transition. A new 5-year capital investment plan of $26.5 billion has been introduced, with a $2.3 billion increase over the previous plan, focusing on electric and natural gas distribution investments.

5-Year Capital Investment Plan (2026-2030): Eversource plans to invest $26.5 billion in regulated electric and natural gas businesses, representing a $2.3 billion increase compared to the prior plan. The investments will focus on system resiliency, reliability, and clean energy objectives, with $11 billion allocated to electric distribution and $7 billion to natural gas distribution. The plan also includes $1.2 billion for technology and facilities, including cybersecurity and AI tools.

2026 Earnings Guidance: Eversource projects earnings per share (EPS) in the range of $4.80 to $4.95 for 2026. Earnings growth is expected to be moderate due to the timing of key regulatory outcomes, including the potential sale of Aquarion and storm cost recovery in Connecticut and New Hampshire. Positive drivers include transmission investments, distribution rate increases, and O&M expense management, partially offset by higher depreciation, property taxes, interest costs, share dilution, and a higher effective tax rate.

Long-Term Earnings Growth: Eversource expects a 5% to 7% long-term EPS growth rate based on 2025 non-GAAP recurring EPS of $4.76. The company anticipates achieving earnings growth towards the upper half of this range by 2028, driven by improved regulatory outcomes, storm cost recovery, alternative financing opportunities, and distribution rate adjustments.

Regulatory and Financing Updates: Eversource plans to address financing needs of $34.5 billion to $35 billion over the next 5 years, with $8.5 billion to $9 billion coming from incremental debt and alternative financing solutions. The company is also pursuing storm cost securitization in Connecticut, which could provide up to $1.5 billion in proceeds. Regulatory outcomes, including the potential sale of Aquarion and storm cost recovery, are expected to impact financial performance in 2026.

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Shareholder Return Plan

Dividend per share: $3.01 per share

Dividend growth: 5.2% increase in 2025

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Key Q&A

Q:What is the impact of the Aquarion sale approval and storm cost recoveries on financing needs?

A:The Aquarion sale approval and storm cost recoveries will eliminate the need for hybrids and reduce straight equity requirements. However, even with the Aquarion sale, the company still plans to issue junior subordinated debt, which is accretive compared to straight equity. Storm cost recoveries are expected in 2027, with cash inflow likely in Q3 2027.

Q:What is the status of Revolution Wind and potential liabilities to Orsted?

A:The first power for Revolution Wind is expected in the next few weeks, but the trigger for liability is COD (Commercial Operation Date). The company has no liability to Orsted, only to GIP. All land construction responsibilities have been completed, and the project is progressing well.

Q:What are the plans for minority interest sales and regulatory approval?

A:The company is exploring alternatives for minority interest sales, including traditional equity interest or minority interest capital structure deals. However, it is premature to discuss details as these plans are not immediate and are considered a tool in their toolkit.

Q:What is the status of the Connecticut AMI project and its potential impact?

A:The company is optimistic about the Connecticut AMI project and plans to meet next week to discuss prudent standards and implementation schedules. They have installed 100,000 meters in Massachusetts and are ready to implement in Connecticut once recovery mechanisms are clarified. The $1 billion placeholder cost estimate for the project is being updated.

Q:What is the base year for the 5%-7% growth trajectory and its implications?

A:The base year for the 5%-7% growth trajectory is 2027, with expectations to be in the upper half (over 6%) of the range by 2028. This growth is based on normalized earnings power in 2027.

Q:What are the tax benefits from South Fork and their impact on earnings?

A:The company has not utilized the $500 million ITC credits from South Fork yet. These credits will allow the company to remain a noncash taxpayer at the federal level for several years. The ITC credits do not generate a P&L impact and are strictly a cash benefit.

Q:What are the major drivers for earnings growth in 2027?

A:Major drivers for 2027 earnings growth include the Aquarion transaction, storm cost recovery, Aquarion rate case, securitization, and resolution of Revolution Wind. The CL&P rate case is expected to be filed mid-2026, with rate adjustments starting mid-2027.

Q:What is the timeline for Revolution Wind's COD and updates?

A:The COD for Revolution Wind is targeted for the second half of 2026. Updates will be provided as more clarity is achieved, but Orsted, as the lead, will disclose specific details.

Q:What is the impact of the Aquarion sale on equity needs?

A:The Aquarion sale would provide $1.6 billion in equity, reducing the need for alternative financing. If the sale does not proceed, the company plans to file for a rate case to improve earnings from the Aquarion asset.

Q:What is the reason for the Eversource Gas benefit being recorded at the parent level?

A:The Eversource Gas benefit relates to integration costs incurred by the parent company during the EGMA acquisition. The recovery will come from EGMA customers, but the benefit is recorded at the parent level to reimburse the parent for those costs.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the structure and timing of minority interest sales, stating it was premature to discuss. Additionally, they did not provide a clear timeline for Revolution Wind's COD beyond targeting the second half of 2026, deferring to Orsted for updates.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

ES Transcript

Eversource Energy (ES) Q4 2025 Earnings Call Transcript

Positive2-13

Eversource Energy (ES) Q3 2025 Earnings Call Transcript

Positive11-5

The earnings call indicates strong financial performance with increased non-GAAP recurring earnings and improved cash flows. Positive regulatory developments and infrastructure investments support future growth. Despite a GAAP loss due to sale transactions, optimistic guidance and ongoing projects like the Revolution Wind Project bolster investor confidence. The Q&A section reveals some uncertainties, but the overall sentiment remains positive, particularly with the reaffirmation of EPS guidance and infrastructure plans. Considering the lack of market cap information, a moderate positive stock reaction is expected.

Eversource Energy (ES) Q2 2025 Earnings Call Transcript

Positive8-1

The earnings call highlights strong financial performance with improved cash flows, FFO to debt ratio, and positive regulatory outcomes like the New Hampshire rate case. Management expressed high confidence in achieving financial targets and provided optimistic guidance. Despite some uncertainties in capital redeployment and equity needs, the overall sentiment is positive, supported by constructive regulatory environments and strategic transactions like the Aquarion sale. The Q&A section reinforced confidence in financial metrics and regulatory processes, suggesting a positive stock price movement in the short term.

Earnings call transcript: Eversource Energy Q1 2025 shows strong revenue

Unknown5-2

The earnings call presented mixed signals: slight EPS growth, positive infrastructure investments, and a rate reduction for customers are positive. However, increased equity issuance, unclear project timelines, and higher parent losses raise concerns. The Q&A session revealed management's uncertainty on several issues, which may cause investor hesitation. Overall, these factors suggest a neutral stock price movement.

ES Slides

Eversource Energy Q4 2025 slides: $26.5B investment plan to drive 5-7% EPS growth

2026-02-12

Eversource Q2 2025 slides: Modest earnings growth amid regulatory progress

2025-07-31

ES Report

EVERSOURCE ENERGY 10-Q

10-Q

2024-08-02

EVERSOURCE ENERGY 10-Q

10-Q

2024-05-03

EVERSOURCE ENERGY 10-K

10-K

2024-02-14

EVERSOURCE ENERGY 10-Q

10-Q

2023-11-07

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