Eversource Energy (D/B/A)

Welcome to the Eversource Energy 2021 Year-End Results Conference Call. My name is John. I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During a question-and-answer session, if you do have a question, press star then 1 on your touchtone phone. Please note the conference is being recorded. And now I'll turn the call over to Jeff Kotkin.

Thank you, John. Good morning, and thank you for joining us. I'm Jeff Kotkin, Eversource Energy's Vice President for Investor Relations. 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 afternoon. 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 31st, 2021. 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 10K and 10Q. Speaking today will be Joe Nolan, our President and Chief Executive Officer, and Phil Lembo, our Executive Vice President and CFO. Also joining us today are John Marrera, our Treasurer and Senior VP for Finance and Regulatory, and Jay Booth, our VP and Controller. Now I will turn to slide three and turn over the call to Joe.

Good morning. Thank you, Jeff. I will start with an overview of our team's 2021 operating accomplishments, update you on offshore wind projects, and discuss recent progress executing our clean energy strategy. I will then turn it over to Phil for a review of our financial performance and new five-year forecast. We accomplished a great deal in 2021, as you can see on slide four. We had a terrific year operationally. We were able to put closure around a challenged set of regulatory proceedings in Connecticut. We made very significant progress on offshore wind projects, and we have enthusiastically engaged the entire company around our target of having operations be carbon neutral by 2030. Turning to slide five in operations, you can see that our electric service reliability and restoration performance were top decile and top quartile, respectfully. And our safety metrics, as well, were well above average. We continue to invest to enhance our customers' electric service reliability, and the results are apparent, even during a year when we had 20 major storm events and dozens of less severe events around our three states. We also continue to refine our emergency response efforts, which were on display again just two and a half weeks ago when a weekend blizzard clobbered southeastern Massachusetts with hurricane force winds and snow depths up to two and a half feet. Thousands of our employees and contractors worked through biting cold to restore about 300,000 outages. Winds were still howling after the snowfall ended. but our crews were able to get our customers back online within two days. Most of our storm damage was pre-related. We continue to work closely with our regulators in the communities we serve to ensure that we are installing more resilient equipment on our system and addressing the heavy vegetation along our roadways. We are committed to making the important investments needed to maintain high levels of electric service reliability and providing the grid resiliency needed to support our region's aggressive clean energy goals. In addition, we continue to accelerate the replacement of our most leak-prone natural gas and water infrastructure. Turning to slide six, you can see that despite strong results, we, like many other high-performing utilities, underperform both our peers in the broader markets in 2021 from a total return standpoint. This comes after some very strong years of relative outperformance by Eversource that continues to place our medium and long-term total return significantly above the EEI index. There are solid reasons for our strong long-term record. First, since the 2012 merger that created Eversource, we have consistently achieved short-term and long-term earnings per share growth of about 6 percent. Going forward, we continue to expect our regulated businesses to support EPS growth in the upper half of the range of 5 to 7 percent. That earnings growth has enabled us to achieve attractive long-term dividend growth as well. As you can see on slide seven, earlier this month, our board approved a 14-cent per share increase in our annualized dividend, an increase that is consistent with our long-term growth projection. Not only is that level of dividend growth attractive to our investors, the low 60s payout ratio that it represents allows us to reinvest more than $500 million of earnings annually back into our business, reducing our incremental debt needs and supporting our strong credit rating. Turning to slide eight, our offshore wind business had more positive developments over the past 13 months than we experienced over the previous three years combined. Last week, as you can see on the slide, New York Governor Hochul joined in breaking ground in South Fork, the first offshore wind project we are building under our 50-50 partnership with Orsted. Wind-based construction has commenced on Long Island where the 130-megawatt 12-turbine project will connect into Long Island Power Authority grid, providing a greatly needed source of clean power. We expect South Fork to begin operating in late 2023. and thank the federal, state, and local regulators and elected officials who have worked on the review of this project for years. 2021 also was a pivotal year of our two much larger projects, Revolution Wind and Sunrise Wind. As you can see on slide nine, we are well into the federal and state siting process for both projects. Last year, the Bureau of Ocean and Energy Management Set schedules for review of those two projects, which we expect will culminate in the final siting approvals in the second half of 2023. Assuming those schedules are met, we expect both projects to enter service in 2025, with Revolution Wind likely entering service first. We have made significant progress securing materials and services for our three projects. We have 80% of the cost of the portfolio locked in. It seems that every few weeks we are announcing another contract. Many of those contracts are with domestic manufacturers and service providers that are located in states where we are contracting for our offshore wind projects. Slide 10 has an overview of some of the publicly announced contracts. However, over just the past few months, we have seen higher than planned costs for such items as offshore wind foundations, certain installation vessels, and logistics, as well as offshore substations. Orsted referenced some of these cost increases during its investor call two weeks ago. The pandemic and global growth in offshore wind have rapidly tightened the market and supply chain for offshore goods and services. Fortunately, we procured the largest scopes of work prior to the inflationary pressure taking hold. Our wind turbine agreement with Siemens and wind turbine installation vessel charter with Dominion Energy, which makes up a significant portion of the project's costs, are two prime examples. Throughout the projects, we and our partner, Orsted, have been successful in finding ways to offset increases with savings in other areas. I am optimistic that our teams will find additional improvements, opportunities, as we move forward with the projects. One of our key contracts is for the Connecticut State Pier in New London. The state of Connecticut, Eversource, and Orsted are funding a $200 million project to create an important staging area for offshore wind construction, including our South Fork Wind, Revolution Wind, and Sunrise Wind projects. It is probably the best site for this work between Norfolk, Virginia and Halifax, Nova Scotia, in only 60 to 65 miles from our nearest turbine locations. As you can see on slide 11, the Connecticut Port Authority commenced onshore work last summer. And a couple of months ago, the authority received approval from the Army Corps of Engineers for the in-water construction. We consider the new London lease to be a tremendous source of future economic development for the state of Connecticut and a key strategic advantage for our partnership. The site is quite close to our 550 square mile area where we in Orsted expect to build projects with at least 4,000 megawatts over the coming years. We expect to continue to seek new opportunities for our lease area off Massachusetts while continuing to be disciplined and strategic in our bidding. In Massachusetts, Governor Baker has proposed new energy legislation that, among other items, could amend certain restrictive pricing language that contributed to having only two bidders in the state's most recent offshore wind RFP. The bill is currently in the House and is expected to move on to the Senate during the current legislative session that ends in mid-July. We will keep you apprised of its progress. Separately, as many of you are aware, the Eversource Orsted joint venture did not seek to be pre-qualified for next week's New York bite auction. We are very comfortable with our current uncommitted acreage and think it's strategically located to provide us with a competitive advantage in future RFPs in New England and New York. Once the bite auction is complete, our understanding is that New York likely will move swiftly to to its next offshore wind RFP. Our offshore wind partnership is just one of several major initiatives we have underway to help our states combat climate change. At the same time, we are focused on reducing emissions within our own operations. Slide 12 notes that the five key areas where we are seeking to reduce greenhouse gas emissions in our efforts to be carbon neutral by 2030. No US utility or natural gas utility has a more aggressive target date for achieving carbon neutrality for Scope 1 and Scope 2 admissions. We are currently looking to enhance our climate leadership by taking a closer look at emissions across the value chain, including examining what a science-based target would entail for a company with our profile. This includes downstream emissions from our customers' energy use. Clearly, our energy efficiency programs offer many benefits in this regard. Last year, we invested approximately $600 million on initiatives that will help our customers reduce their lifetime greenhouse gas emissions by approximately 4 million tons. Our new DPU-approved three-year energy efficiency plan will expand those efforts with a growing focus on electrification. It will provide our Massachusetts electric and natural gas customers with the tools necessary to meaningfully reduce their carbon footprint and help place the state on the path to be net GHG neutral by 2050. The $1.7 billion plan maintains our longstanding mission of helping all residents and businesses reduce their energy usage and manage energy costs. It is also focused on service to customers in environmental justice communities and low and moderate income households. Through our now approved programs, we expect to electrify more than 23,000 new and existing residential households. as well as more than 20 million square feet of commercial space. Separately, NSTAR Gas last month rolled out an innovative community geothermal project for Framingham, Massachusetts, that was enabled in our 2020 NSTAR Gas rate decision. It is shown on slide 13. We are also preparing an integrated program to combine our opportunity to build more rate-based solar in Massachusetts, with the potential to tie in storage in microgrids. We expect to file initial proposed projects with the DPU within a few months. This is part of our comprehensive climate resilience efforts that are consistent with the goals of state policymakers. Finally, I want to comment on our relationships in Connecticut. Compared with a year ago, I believe we are in a much better place. Our October rate settlement was approved by Pura and significant customer credits lowered CL&P customer bills in December of 2021 and January of 2022. Pura has issued final orders on storage and electric vehicle programs, which are now being launched. We sense a broad level of support for AMI as it lowers costs and improves service to customers. significantly advances the pace of integration of renewable energy resources and enables achievement of the state's clean energy goals. We believe Pura will move forward with the docket and approve its deployment at some point later this year. Thanks again for your time. I will now turn the call over to Phil Wemble.