Eversource Energy FY25: Offshore Wind Exit, $4.76 EPS

Thesis

Eversource Energy (NYSE: ES) closed FY25 (December 2025) having completed one of the largest strategic reversals in regulated utility history — the full exit from offshore wind development — and emerged as a pure-play "pipes and wires" regulated utility serving New England. Non-GAAP EPS $4.76 (FY25), up from $4.52 in FY24 (+5.3%), with GAAP EPS $4.56 recovering from -$1.27 in FY23. Operating cash flow $4.114B (+90%), bringing FCF near breakeven at -$45M vs -$2.3B in FY24 — the single most important financial improvement in the story. Total capital deployed in FY25: $4.1B, consistent with the $24.2B five-year capital investment plan.

The Eversource FY25-26 thesis is a regulated compounding story with three specific elements:

1. Rate base growth drives earnings compounding: Eversource's rate base — the capital invested in regulated electric and gas infrastructure on which it earns a state-allowed return on equity — is growing at approximately 8% per year. Rate base growth is the primary determinant of regulated utility earnings. At $24.2B committed over five years, the earnings path is largely mechanical: build infrastructure, file rate cases, earn the allowed return. The 5-7% long-term EPS growth target through 2029 is anchored to this math.

2. Operating cash flow inflection is structurally sustainable: The OCF nearly doubling from $2.16B to $4.11B in FY25 reflects two dynamics: (a) regulatory deferrals from prior periods becoming cash (storm cost and infrastructure investment recoveries), and (b) distribution rate increases in Massachusetts and New Hampshire flowing through. These are not one-time items — continued rate case filings and infrastructure investment create a repeating OCF expansion cycle. The FFO-to-debt ratio improved by over 400 basis points, materially improving the credit profile.

3. Connecticut regulatory environment normalizing: Connecticut was the primary investor concern in 2023-2024. Eversource's Connecticut Light & Power subsidiary had a difficult PURA relationship, leading to Moody's downgrading CL&P to Baa1 (from A3) and a CreditWatch negative on the parent. In 2025, new PURA commissioners were seated, management characterized a "constructive shift" in the regulatory landscape, and Connecticut Senate Bill 4 passed — enabling securitization of storm costs (a major source of cash flow uncertainty). The CT overhang is systematically clearing.

FY25 Numbers vs FY24 (Annual, USD; December year-end)

GAAP net income swing (+108%) reflects absence of FY23's offshore wind impairments (which still partially affected FY24's $812M vs normalized ~$1.7B). Non-GAAP EPS of $4.76 is the operative metric for regulated utility comparisons.

Business Model: Regulated Pipes and Wires

Eversource serves 4.4 million electric, gas, and water customers across Massachusetts, Connecticut, and New Hampshire. The economics are defined by state regulators:

• Rate base: The invested capital in the utility system. Regulators allow Eversource to earn a return (ROE) on this rate base, set in periodic rate cases. Rate base × allowed ROE × leverage structure = earnings
• Allowed ROE: Set by state utility commissions. Current allowed ROEs range from ~8.5-10% depending on jurisdiction and business unit
• Rate cases: Filed periodically when actual costs diverge from allowed revenue. New Hampshire filed constructively in 2025; Massachusetts electric distribution and gas cases ongoing; Connecticut recovering from adversarial period toward constructive outcome
• Capital trackers: In some jurisdictions, Eversource earns interim recovery on infrastructure investments without waiting for a full rate case — this reduces the regulatory lag between investing capital and earning the return

Segment Breakdown

Electric Transmission (~44% of Non-GAAP EPS)

Eversource owns and operates transmission infrastructure across New England under FERC jurisdiction. FERC-regulated transmission is the most predictable segment — formulaic returns on transmission rate base with annual true-ups.

FY25: $2.09/share (vs $2.30/share FY24 — declined due to higher interest expense and share dilution from equity issuance). Transmission rate base growing on new projects: Cambridge Underground Substation (Greater Cambridge Energy Project), 500 kV upgrades, and interconnection projects supporting new generation.

Load growth tailwind: New England electric demand is growing at 2%+ annualized — accelerating from near-flat prior years — driven by data center growth, electrification of heat (heat pumps replacing natural gas furnaces), and EV adoption. Each MW of new load requires transmission investment, which flows into rate base. Eversource is directly supporting over 2,500 MW of new generation interconnections in the next 12 months.

Electric Distribution (~38% of Non-GAAP EPS)

State-regulated distribution of electricity to customers. Rate increases in New Hampshire and Massachusetts drove the $1.80/share FY25 result (up from $1.77/share FY24).

AMI deployment: Advanced Metering Infrastructure (smart meters) rollout in Massachusetts reached 100,000+ installations in 2025. AMI enables demand response programs, reduces truck rolls, and creates new rate products — all driving distribution rate base growth. The communication network in Western Massachusetts is substantially complete; Eastern Massachusetts construction is underway.

Affordability pressures: Customer bills in Massachusetts are among the highest in the country, creating political pressure on rate increases. Eversource's response: gas customer discounts, seasonal heat pump rates, energy efficiency programs, and low-income discount rates. Managing affordability while investing in reliability is the core regulatory tension.

Natural Gas Distribution (~20% of Non-GAAP EPS)

Gas distribution in Massachusetts and Connecticut, growing consistently. FY25: $0.97/share (up from $0.81/share FY24 — +20%) on base distribution rate increases and capital tracking mechanisms.

Gas segment dynamics: Environmental pressure on natural gas (net zero goals) creates long-term uncertainty, but near-term demand for heating reliability in New England winters supports continued investment. Massachusetts gas utilities are investing in leak detection and infrastructure modernization. The 10% winter gas rate reduction for customers starting March 2025 reflects regulatory sensitivity to affordability.

Water Distribution (Aquarion — Being Divested)

Aquarion Water Company (Connecticut and Massachusetts water utility) was expected to close sale by year-end 2025. FY24 included an $0.83/share loss on pending sale. Post-close, Eversource becomes exclusively an electric and gas utility — simplifying the regulatory relationship and the capital allocation story.

Connecticut Regulatory Recovery

Connecticut was the key investor risk for three years. A summary of what happened and what's changing:

The problem: Connecticut PURA (Public Utilities Regulatory Authority) under prior commissioners was adversarial — denying or deferring storm cost recovery, implementing performance-based ratemaking adjustments that reduced earnings, and creating a climate of regulatory uncertainty that led to the Moody's downgrade of Connecticut Light & Power.

What changed in 2025:

• New PURA commissioners seated and confirmed
• Management characterized "constructive shift" in CT regulatory landscape
• Connecticut Senate Bill 4 passed — enabling securitization of storm costs (converting uncertain cash flows into bankable, bond-rated receivables)
• Moody's FFO-to-debt improvement of 400bp reduces pressure for further negative rating actions
• Yankee gas rate case (Connecticut natural gas) progressing toward resolution

The CT recovery is not complete — rate cases remain in-flight — but the trajectory from adversarial to constructive is a material de-risking of the equity story.

FY26 Framework and Long-Term Target

FY26 EPS guide of $4.80-$4.95 represents +1-4% vs FY25's $4.76 non-GAAP — management explicitly noted this reflects the "timing of key regulatory outcomes" as transitory. By 2027-2028, management expects an earnings growth inflection as regulatory outcomes (storm cost recoveries, distribution rate adjustments, CT rate cases) fully flow through to earnings. The 5-7% per year long-term target implies $5.50-$6.50 EPS by FY29 from a $4.76 FY25 base.

Multi-Year Strategic Position

New England energy transition creates secular rate base growth: New England is one of the most aggressive regions in the US on decarbonization — 100% renewable electricity mandates in Massachusetts and Connecticut by 2035-2050. Meeting these mandates requires massive transmission and distribution investment: new high-voltage transmission lines, grid-scale battery storage, offshore wind interconnections (Eversource is no longer the developer but still the interconnection utility), and load electrification infrastructure. Every kilowatt of this investment flows into Eversource's rate base and ultimately its earnings.

Formulaic earnings visibility: Unlike industrials or technology companies, regulated utility earnings are arithmetically derivable: rate base × allowed ROE × equity layer = earnings. With $24.2B in planned investment over five years growing rate base at 8% annually, and allowed ROEs of 8.5-10%, the earnings trajectory through 2029 has a predictable range. The primary variable is regulatory timing — when rate increases are approved — not whether they are approved.

Dividend growth as total return: Eversource raised its dividend to $3.01/share in FY25 (+5.2%), maintaining the 5% per year growth trajectory. At a ~3.5-4% dividend yield and 5-7% EPS growth, the total return framework is 8-11% annually — competitive with US utility peers and above the utility sector average when credit quality improves.

Credit quality repair as a catalyst: The Moody's FFO-to-debt 400bp improvement in FY25 is reversing the credit deterioration from the offshore wind era. If Moody's restores Connecticut Light & Power's rating to A3 and removes the negative outlook on the parent, Eversource's cost of debt financing declines — directly benefiting earnings on the $30B+ debt load.

Risks

• Connecticut regulatory reversion: While the regulatory environment improved, PURA remains a single-commissioner board; a future change in commissioners could revert to adversarial posture
• Massachusetts affordability and political risk: Customer bill pressures could result in Massachusetts legislators or regulators restricting rate increases, compressing allowed ROEs, or delaying distribution rate cases — the primary earnings driver
• Interest rate sensitivity: $30.3B in total debt; every 25bp increase in long-term rates increases refinancing costs on maturing debt; regulated utilities have traditionally benefited from declining rates and suffer under sustained high rates
• Tariff impact on capital costs: Management guided 3-6% capital cost increases from tariffs on steel, aluminum, and electrical components; at $4-5B/year CapEx, this is $120-300M in additional costs that must be recovered in rates — creating lag risk
• Aquarion sale execution: The water business sale must close cleanly; any complications or buyer financing issues could reintroduce uncertainty
• Load growth vs. affordability tension: Accelerating load growth requires front-loaded infrastructure investment, which pushes rates higher before demand fully materializes — creating political backlash risk
• Storm cost recovery timing: New England weather creates significant storm costs that must be recovered through regulatory proceedings; delays in recovery create cash flow and earnings timing risk

Citations

• ES FY25 financial statements (drillr financial_statements; period_end 2025-12 FY)
• ES FY24 financial statements (drillr financial_statements; period_end 2024-12 FY)
• Q4 FY25 earnings call (~2026-02): Non-GAAP EPS $4.76; FY26 guide $4.80-$4.95; dividends $3.01/share +5.2%; FFO/debt +400bp; $4B+ CapEx deployed; AMI 100,000 installations; 5-7% long-term EPS growth through 2029; 2027+ inflection expected
• Q3 FY25 earnings call (~2025-10): 5-year capital plan $24.2B; FFO/debt >13%; CT constructive regulatory shift; Aquarion sale closing year-end; Cambridge substation complete; $3.3B YTD CapEx
• Q2 FY25 earnings call (~2025-07): 2025 EPS guidance reaffirmed $4.67-$4.82; electric demand growth 2%+ in H1; CT Senate Bill 4 securitization passed; NH rate case constructive; AMI Western MA network complete
• Q1 FY26 expected: Track EPS trajectory vs $4.80-$4.95 guide; CT rate case developments; storm cost securitization execution