Eversource Energy (ES) Business & Investor Dossier

Eversource Energy makes money as a regulated electric and gas distribution utility. The company distributes electricity to approximately 4.4 million customers across Connecticut, Massachusetts, and New Hampshire through its electric distribution subsidiaries (Eversource Connecticut, Eversource Massachusetts, and Eversource New Hampshire). It also distributes natural gas to approximately 1.7 million customers in Connecticut and Massachusetts through gas distribution operations. State utility regulators in all three states set the rates Eversource can charge customers, allowing a regulated return on its invested rate base. Revenue includes both distribution charges (earned by Eversource) and commodity pass-through charges for electricity and gas supply (passed through at cost with no margin). Eversource's earnings grow as it invests capital in grid reliability and modernization, expanding its rate base and earning a return on new investment.

Eversource made a significant strategic bet on U.S. offshore wind development beginning around 2016, forming a joint venture with Danish energy company Orsted to develop offshore wind projects off the New England and New York coasts. Key projects included South Fork Wind, Revolution Wind, and Sunrise Wind. However, rising project costs (driven by supply chain inflation, higher interest rates, and equipment costs), combined with fixed-price contracts that became economically unviable, turned the offshore wind portfolio into a major financial problem. Eversource ultimately decided to exit its offshore wind business, completing the sale of its offshore wind joint venture stakes to Orsted in 2023-2024 at a significant loss. The exit removed a major earnings drag and balance sheet risk, allowing management to refocus on the core regulated utility business. The offshore wind experience was a costly lesson in the risks of regulated utility companies undertaking merchant-risk development activities outside their traditional rate-based business.

Eversource operates in New England, one of the most expensive electricity markets in the United States. New England has limited in-region fuel production and relies heavily on pipeline-constrained natural gas, making the region particularly vulnerable to cold winter fuel price spikes and supply constraints. The region has aggressive renewable energy and decarbonization goals, with Massachusetts, Connecticut, and New Hampshire all having mandates for renewable energy as a percentage of electricity supply. These policy tailwinds support investment in grid modernization and electric vehicle infrastructure. New England also has relatively slow population and economic growth compared to Sun Belt states, which limits organic load growth. The region's wealthy, highly educated population and dense urban core (Boston metro, Hartford, New Haven) provide a stable customer base. New England's cold winters and hot summers create peak demand seasons that drive reliability investment needs.

Eversource was led for many years by CEO Jim Judge, who oversaw the company's offshore wind expansion and managed the integration of several acquisitions including Aquarion Water Company and National Grid's New England gas distribution assets. The offshore wind losses and balance sheet strain from that expansion created investor concerns and contributed to a period of underperformance relative to utility peers. Management had to write down offshore wind investments, cut the dividend growth rate, and issue equity to strengthen the balance sheet. The company's stock underperformed many peer utilities in 2022-2024 as the offshore wind problems unfolded. The transition to focusing on core regulated infrastructure, with a clear capital spending plan centered on electric distribution and transmission investments in New England, became the narrative path to restoring investor confidence. The gas distribution business in New England faces longer-term uncertainty as states push to transition homes from natural gas heating to electric heat pumps.

Eversource Energy's main risks include: regulatory risk from Connecticut, Massachusetts, and New Hampshire utility commissions that set rates and may not always approve adequate recovery of capital investments; gas distribution transition risk as state policy in Massachusetts (which mandated net-zero by 2050) may eventually phase out natural gas distribution, stranding gas infrastructure investment; balance sheet risk from the financial strain caused by offshore wind losses and the equity issuances needed to repair the balance sheet; storm cost risk from the New England climate which regularly produces hurricanes, nor'easters, and ice storms that cause grid damage; and interest rate sensitivity typical of capital-intensive utilities. The gas distribution business is a longer-term question as the region's decarbonization goals could eventually make natural gas distribution unviable, though this is a multi-decade transition.