Eversource Energy (D/B/A)

Hello, everyone, and welcome to the Eversource Energy Q4 and Fall Year 2022 Earnings Call. My name is Nadia, and I'll be coordinating the call today. If you would like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. I will now hand over to your host, Jeff Kofkin, Vice President for Investor Relations for Eversource Energy. To begin, Jeff, please go ahead.

Thank you, Nadia. And we apologize for the delay in starting the call. We were having a problem with our webcast link, and it had to be reset. We couldn't just start the call with only the dial-ins working. So we appreciate your patience greatly, and we look forward to your questions after the intro remarks. So let me start. Good morning. Thank you for joining us. During this call, we'll be referencing slides that we posted yesterday 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 forecasts 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, and our Form 10-Q for the three months ended September 30th, 2022. I'm sorry, the 10K was for 21. Additionally, our explanation and 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 Chairman, President, and Chief Executive Officer, and John Marrera, our Executive Vice President and CFO. Also joining us today is Jay Booth, our Vice President and Controller. Now I will turn to slide four and turn over the call to Joe.

Thank you, Jeff, and thank you, everyone, for joining us on this call this morning. We had a very strong 2022 operationally, financially, and advancing the clean energy policies of the states we serve. As we look ahead to 2023, we consider ourselves to be extremely well positioned to deliver on our customers' expectations, whether it relates to providing them with safe and reliable service, helping communities address the impacts of climate change, or standing ready and fully prepared to respond to emergencies. The work that thousands of Eversource employees undertook following a severe windstorm two days before Christmas last year, working in bitter temperatures up to 16 hours a day before and during the holiday to ensure our customers had power exemplifies the selflessness of our 9,600 colleagues. We treasure the hundreds of appreciative comments we've received from our customers. On our ESG efforts, we published a new diversity, equity, and inclusion report, and we're recognized as a leader in this area among the thousand largest U.S. corporations by As You Sow, a nation-leading shareholder advocacy nonprofit focused on environmental and social corporate responsibility. and values aligned investing. We are now completing a new initiative on equity training across the entire company. In November, we announced that we had committed to setting a science-based target, making us one of only a few US electric or gas utilities to take that challenging step. We continue to receive very positive feedback from many of our investors on that commitment and believe it will become an increasingly differentiating factor for Eversource in both the US and non-US investment portfolios. Slide five illustrates some of our key operational metrics, starting with two key gauges of electric service reliability. Our customers' average number of months between interruptions remained in the highest decile of the industry, and our speed of restoration when outages did occur was in the top quartile. Our key safety metrics also remain strong. In terms of our 2022 financial performance, we continue to grow our non-GAAP earnings in dividend by approximately 6%, something that we have done consistently since Eversource was formed nearly 11 years ago. As shown on slide six, our board approved an additional 6% increase in our quarterly dividend earlier this month. John will discuss some of the factors that we expect will move earnings per share growth over the next five years to solidly in the upper half of our long-term 5% to 7% range. While our longer-term total shareholder return compares favorably with our peers, our 2022 return was disappointing. We understand that much of that is related to the uncertainty over our offshore wind investments. We expect to resolve that uncertainty in the coming months as our strategic review progresses. There is continued interest in both our three offshore wind projects in the nearly 175,000 acres of uncommitted lease areas that are part of our 50-50 joint venture with Orsted. The process continues to move forward and is progressing through extensive due diligence. We expect an announcement concerning the outcome of the strategic review in the second quarter of this year. In the meantime, our work on the three projects is moving ahead. Slide 7 provides a quick overview of the significant progress in recent months. As you know, construction of our first project, South Fork Wind, commenced a year ago. Installation of the onshore conduit system, including cable vaults and town roads and along the Long Island Railroad is now complete, as is the installation of the sea to shore conduit that will hold the transmission cable as it transitions to land. Installation of onshore cable is now underway and construction of our new onshore substation is on track to be completed this summer. Installation of the South Block subsea transmission cable will begin later this quarter, and installation of the foundations, wind turbines, and offshore substation will begin this summer off the coast of Massachusetts. We expect that South Block will be fully operational by the end of the year. Our two larger offshore wind projects, Revolution Wind and Sunrise Wind, continue to advance through siting and permitting, and we expect to commence construction of both projects in the second half of this year. The Bureau of Ocean Energy Management, or BOEM, issued a draft environmental impact statement for the 704 megawatt Revolution Wind project in September. We expect a final EIS in the second quarter of 2023, and to have all permits in hand in the second half of 2023. We continue to target a 2025 in-service date. We had two major developments late last year for Sunrise Wind, our largest offshore wind project. The project received a key New York Public Service Commission permit, and BOEM published a draft EIS for the project. As of the end of 2022, we had invested $1.95 billion in offshore wind. We made significant progress late last year procuring equipment and services and have approximately 90% of costs locked in, up from 82% as of September 30th. On one of the slides in our appendix, you can see our updated total cost estimates for the three projects. The range is somewhat higher and narrower than it was a year ago. This is due to the fact that we have locked in much higher percentage of the cost, and that some of the now locked in costs, especially those related to foundation, transportation, and installation, are higher than we had estimated earlier. I should reemphasize that we consider offshore wind to be cost effective source of significant clean energy supplies for the Northeast. We expect our electric utilities to build much of the FERC regulated onshore transmission infrastructure needed to connect the offshore generation to load, regardless of the outcome of our strategic review. Those investments will be closely aligned with our commitment to be a leading catalyst for clean energy development in our region. It is one of the many ways we are helping the region decarbonized, and we have seen very significant progress on a number of our Massachusetts initiatives over the past year. Turning to slide eight, on December 30th, the Massachusetts Department of Public Utilities approved the first of six proposals to unlock third-party solar generation that is currently stalled in the interconnection queue as a result of inadequate transmission and distribution capacity. If all six proposals approved, a total of 1,000 megawatts could ultimately be built and connected. As you can see on slide 9, the first approved project is Marion Fairhaven. Commission proceedings are active for the other five proposals, and we expect deep view decisions on them this year. Our proposed investment in these six clusters would be approximately $980 million, of which about $310 million would be reimbursed over 15 to 20 years by solar developers as they fully subscribe to the unlocked hosting capacity. Also late last year, as shown on slide 10, the DPU approved the implementation of AMI with a new customer information system for our nearly 1.5 million electric customers in Massachusetts. The DPU also approved our proposed continued investment in grid modernization. Today, these investments will enable customers to better manage their usage and provide us with significantly improved visibility into power flows and conditions on our electric distribution system. This will be critical for us as more distributed energy resources are connected to our system and as more of the state's space heating and transportation is electrified. We expect the new customer information system to be installed primarily over the next two years with meter installation in 2025 through 2027 time period. We hope that Connecticut regulators will conclude their AMI review this year and approve its rollout to 1.3 million of the state's electric customers. Aside from these projects, we have many other initiatives in Massachusetts. In December, the DPU authorized a four-year plan for electric vehicle charging infrastructure that is profiled on slide 11. On slide 12, we described three other initiatives, including a 38-megawatt-hour battery storage facility that went online in Provincetown on Cape Cod last year and can supply up to 11,000 customers this time of year with power should an outage occur on a principal distribution feed serving the outer Cape. The slide also provides you with the status of a highly innovative network geothermal project in Framingham, Massachusetts, which is now 90% designed with construction to start this spring. Additionally, We have three proposals into the Department of Public Utilities to expand our solar generation with an additional focus on storage in equity justice communities. We are very excited about all of these proposals as they help Massachusetts achieve its very aggressive clean energy agenda and keep our region at the forefront of innovative solutions to the challenges of climate change. We hope that Connecticut and New Hampshire will embrace some of these clean energy programs and our involvement in delivering solutions. In Connecticut, there are clear signals from the Lamont administration and the Governor's Department of Energy and Environmental Protection that they are looking to promote significant investment in clean energy initiatives with both federal and utility support. To this end, we have three grid scale battery storage projects pending before Connecticut regulators that would improve grid reliability and enable integration of clean energy resources. These proposed investments, which are not in our current capital forecast, were enabled by recent state legislation. We hope that workable regulatory frameworks will be advanced to support such investments. Finally, I want to address power supplies and energy bills this winter. As you know, we were quite concerned entering this winter about the impact of higher energy prices in New England, as well as uncertain supplies of natural gas, LNG, and oil for the region's generation. In fact, I wrote to President Biden before the heating season commenced, asking that his administration invoke certain emergency measures to ensure that we had sufficient resources this winter. Fortunately, the mild temperatures this winter have reduced customers' energy consumption and tempered the impact on bills. They also have contributed to a sharp reduction in natural gas prices, which has started to lower natural gas bills for some customers. New Hampshire electric customers are seeing a rate decline this month. For most of our electric customers, lower power supply costs will start to be reflected in bills in July. Thanks again for your time. I will now turn the call over to John.