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18. Eversource Energy (NYSE:ES)

Number of Hedge Fund Investors In Q2 2024: 26

Sector: Utilities

Eversource Energy (NYSE:ES) is a large and diversified utility that distributes electricity and natural gas. Out of the firm’s $5.8 billion revenue in H1 2024, almost 51% came through residential customers. This means that Eversource Energy (NYSE:ES) is heavily dependent on regulators to ensure that it is able to secure beneficial return on equity (ROE) for its power generation projects. The firm is also currently divesting its renewable wind power generation businesses to raise cash and focus on power generation. These sales, along with another sale of Eversource Energy (NYSE:ES)’s Aquarion water business are crucial to one of the key drivers of the firm’s hypothesis. This is its funds from operations to debt ratio, and Eversource Energy (NYSE:ES) is targeting a FFO/debt ratio of 14% to 15% in 2025.

Eversource Energy (NYSE:ES)’s management shared key details about how it expects to manage this ratio during the Q2 2024 earnings call:

“I’ll now provide an update on some of the items shown on Slide 11 that will enhance our FFO to debt ratio from 2023 to 2025. First, the 2024 annual rate adjustment in Connecticut became effective July 1 of this year, recovering approximately $900 million of several costs, including public benefits related costs. The July 1st rate adjustment is recovering under collections from 2023 and has reset rates to a level matching recurred cost that we expect in 2024. Public benefit costs include the cost of energy supply contracts with the Millstone and Seabrook nuclear power plants and uncollectible hardship costs. Second, with the closing of our sale of Sunrise Wind to Ørsted, we received net proceeds of $152 million that will be used to pay down debt.

Third, the closing of our sale of Revolution and South Fork Wind to Global Infrastructure Partners, we anticipate receiving gross proceeds of approximately $1.1 billion, subject to adjustments for capital expenditures. These proceeds will also be used to pay down debt. As a reminder, there is no impact to our financing plan from these capital expenditure adjustments. In addition, the filings for distribution rate increases at PSNH and at EGMA will provide additional cash flow enhancement. And lastly, regarding our equity issuances, we have raised approximately $250 million of equity through our ATM program and issued approximately 819,000 treasury shares in the first half of this year. We continue to anticipate equity means of up to $1.3 billion over the next several years, as shown on Slide 12.”