Eversource: From Overhang to Optionality – But the Bear Case Isn't Dead
Aquarion exit and storm securitization clear the deck, yet FERC and the CL&P rate case keep the overhang alive.
ES · Earnings Call · 2026-07-31
Balance Sheet Fortress
Eversource's second-quarter call struck a distinctly more confident tone than recent quarters. The long-awaited close of the Aquarion sale – net proceeds of $1.7 billion – has finally given management the balance sheet headroom it has been chasing. As CEO Joe Nolan put it, the sale "was a significant milestone in furthering our strategic position as a pure play regulated pipes and wires utility." The market rewarded that clarity: Moody's flipped the outlook to stable, a tangible acknowledgment that the financing strategy is working. The financing plan remains unchanged – $800 million to $1.1 billion of equity over the next five years – but with Aquarion done and ~$2 billion of storm securitization proceeds likely in the door by early 2027, the urgency to issue has faded. CFO John Moreira was explicit: "We have no urgency to go to market right now." Even the FFO-to-debt ratio, a sore spot for years, now sits above 100 basis points of cushion at both agencies. The operating cash flow story is finally turning real.
Storm Cost Securitization: A Mixed Verdict
The storm cost saga reached a decision point. PURA approved roughly $870 million of the requested $975 million, but denied the carrying charges and deferred $60 million pending an audit. The denial stings, but the storm cost recovery is now on a clear path to securitization – about $700 million is expected to hit the balance sheet within a year. Moreira acknowledged the disappointment: "we are a bit disappointed with a couple of items... things like the $63 million that they deferred really does not make sense to us. And certainly the carrying charge." Yet he was careful not to let it derail the broader story. The company will “assess our options and next steps," but the reality is that the securitization machine is now moving, easing the cash crunch that has long weighed on the stock.
FERC and the Rate Base Battles
The FERC ROE decision remains the biggest swing factor. The company has appealed both the retroactive refund and the prospective rate, and expects a decision on the FERC decision by November 30. Moreira argued the case is distinct from the MISO precedent: "Our facts and circumstances from a legal standpoint are quite different than the MISO decision." The stakes are high – a full refund could reach $880 million, but the company has only booked the 15-month window it deems legally defensible. On the other side, the prospective ROE filing at 11.39% could add meaningful earnings if it survives the paper hearing. This regulatory uncertainty is precisely why the stock trades at a deep discount to peers.
Meanwhile, the company is positioning for growth beyond the noise. The preliminary selection of its joint transmission proposal with Avangrid – a $700 million share of a $2.2 billion project – is a vindication of its incumbency edge. Moreira noted that roughly half of that CapEx will fall within the current five-year forecast. And the CL&P rate case, filed in July, asks for a $451 million revenue deficiency, with only 11% of that tied to O&M. The proposed multiyear PBR mechanism and the $1 billion AMI investment signal a longer-term, constructive relationship with Connecticut regulators. As Nolan said, "If you look at the past 6 months of decisions... they are a very engaged regulatory body."
Outlook
Management reaffirmed guidance of $4.52–$4.72 for 2026 and the 5–7% long-term EPS growth, but now sees itself landing in the upper half of that range by 2028. The trajectory hinges on the FERC outcome and the pace of Connecticut recovery, but the building blocks are in place. The balance sheet is stronger, the overhangs are fading, and the capital plan is growing. The bull case is compelling, but the bear case – a FERC refund that still looms and a Connecticut rate case that could disappoint – keeps the risk alive. For investors, the story is no longer about survival, but about whether the optionality turns into tangible EPS growth.