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���������ֳ� - New York - 15 Apr 2024: ���������ֳ� has assigned a 'BBB' rating to Eversource Energy's (Eversource) $1.5 billion issuance of Series FF and Series GG, unsecured and unsubordinated notes. The notes rank pari passu with Eversource's other existing unsecured and unsubordinated debt. Net proceeds from the issuance will be used to repay a portion of Eversource's short-term debt.

Eversource's Long-Term Issuer Default Rating (IDR) is 'BBB' with a Stable Rating Outlook.

Key Rating Drivers

Offshore Business Exit: The sale of two remaining projects and recent New York regulator's announcement that Sunrise Wind won the rebidding in the NY offshore wind solicitation at a higher power price are positive steps forward in the company's plan to fully exit the business, in ���������ֳ�'s view. In February 2024, in accordance with its goal to fully exit offshore wind, Eversource announced an agreement to sell its 50% ownership interest in the South Fork Wind and Revolution Wind projects to Global Infrastructure Partners (GIP). The sale requires an approval of NY Public Service Commission and is expected to be completed by 3Q24. The proceeds of about $1.1 billion, which include $170 million of the 10% ITC adder for Revolution Wind are expected to be used for parent debt repayment.

The company previously announced an agreement to sell its 50% ownership stake in the Sunrise Wind to Orsted A/S (BBB+/Stable), which owns the other 50% share in all three projects. Assuming successful completion of Sunrise Wind sale, Eversource no longer expects to have any risk exposure related to Sunrise Wind, a credit positive. In addition, the winning bid removes the Sunrise Wind abandonment costs that were assumed in the impairment charges the company took at 4Q23 earnings.

On-Going Risks Remain: Eversource will retain some risk post-sale at Revolution Wind, which is expected to be completed in 2025. Under the sale agreement, Eversource would share equally with GIP in GIP's funding obligations for up to approximately $240 million of incremental capital expenditure overruns, after which GIP's obligations for any additional overruns would be borne by Eversource. Eversource expects South Fork Wind will be fully operational prior to the close of this transaction, limiting any potential financial exposure.

In the current framework, the construction costs are not fully locked-up under a date-certain fixed price EPC contract covering the entire project. Additionally, in an uncertain industry environment, with a complex construction process, counterparty risks remain.

Weak Financial Profile: Eversource's financial profile is weak, even though it derives stable cash flows from its regulated utility subsidiaries. Leverage has been elevated in recent years due in part to the acquisition of utility companies, high capex and cost escalation in its offshore wind growth projects, resulting in leverage averaging over 7.5x over the last three years.

Deleveraging Reliant on Equity Issuance: ���������ֳ� expects further deleveraging beyond offshore wind asset sales is needed to bring the metrics in line with the current ratings. Eversource expects to issue $1.3 billion in equity, over and above $100 million-$120 million of equity issued through dividend reinvestment plans, to adjust its balance sheet. Equity proceeds will be supplemented by the announced intention to sell Aquarion Water, its water distribution utility in Connecticut. The proceeds from the sale of Aquarion Water could reduce the amount of equity issuance.

���������ֳ� expects proceeds of the asset sales and equity issuances resulting in FFO leverage in the 5.5x area, which is consistent with other 'BBB'-rated utility parent companies. Failure to issue adequate equity or sell assets in a timely manner would result in a negative rating action.

Large Utility Capex Plan: Eversource raised its projected five-year capex plan by $1.6 billion over the prior five-year plan announced in February 2023. The new plan targets $23.1 billion of investments across electric transmission and electric, gas and water distribution from 2024 to 2028. This utility capex is a relatively low-risk growth plan, including $8.0 billion in electric distribution, $4.4 billion in natural gas distribution, $4.6 billion in Federal Energy Regulatory Commission (FERC) regulated electric transmission and approximately $0.825 billion in water distribution. Most of Eversource's planned utility capex will be recovered with limited lag, reflecting FERC construction work in progress, electric distribution trackers and natural gas distribution infrastructure expansion cost-recovery mechanisms.

Regulatory Diversification: Eversource's three-state service territory provides regulatory diversification that is further enhanced by significant investments in electric transmission projects regulated by FERC. ���������ֳ� considers FERC to be among the most constructive regulatory bodies due to timely cost recovery and formulaic rates of return. FERC-regulated electric transmission operations account for more than one-third of Eversource's consolidated rate base; Connecticut and Massachusetts each account for a little less than one-third of the company's consolidated rate base, with New Hampshire accounting for the remainder.

���������ֳ� considers the regulatory environment for electric utilities in Connecticut to be challenging. Recent actions by the Connecticut Public Utilities Regulatory Authority to implement performance-based regulation, enactment of Senate Bill 7 and authorized ROEs that are lower than the national average result in a meaningfully less constructive regulatory environment for electric utilities.

Parent-Subsidiary Linkage: There is a PSL between Eversource and its rated utility subsidiaries. ���������ֳ� determines Eversource's Standalone Credit Profile (SCP) based upon consolidated metrics. ���������ֳ� considers the utility subsidiaries to have stronger SCPs than Eversource. As a result, the linkage between Eversource and the utility subsidiaries is assessed following weak parent/strong subsidiary factors. Emphasis is placed on the subsidiaries' status as regulated entities. Legal ring-fencing is porous, given the general protections afforded by economic regulation, and access and control are also porous.

Eversource centrally manages the treasury function for all of its utility subsidiaries and is the sole source of equity; however, subsidiaries issue their own long-term debt. Due to the aforementioned assessment, ���������ֳ� will limit the difference between Eversource and any of its higher-rated regulated subsidiaries to two notches.

Derivation Summary

Eversource compares adequately with other 'BBB'-rated utility parent companies: Exelon Corp. (Exelon; BBB/Stable) and American Electric Power (AEP; BBB/Stable). Eversource derives all its cashflows from regulated operations as does Exelon, post-genco spin compared with approximately 90%-95% for AEP. Exelon is significantly larger than its peers. AEP has a more geographically diverse asset mix with operations in 11 state, compared with Eversource's three state jurisdictions and Exelon's six state jurisdictions.

���������ֳ� expects Eversource to be more levered initially than its peers with FFO leverage of over 7.0x improving to around 5.5x by the end of the forecast period. ���������ֳ� currently expects both Exelon's and AEP's FFO leverage to average approximately 5.8x over the forecast period.

Exelon's parent level debt is expected to be approximately 27% over the forecast period, which is higher than AEP's parent level debt of 23%. Eversource's parent level debt is expected to be higher around 40%, which includes approximately $2.15 billion of debt issued at the parent level for the wind subsidiary, the service company and other miscellaneous non-regulated subsidiaries.

Key Assumptions

--Terms of the sale of the offshore business finalized within 2Q24 with the entire proceeds applied towards debt reduction;

--Clearly laid out plan for equity issuance as needed, in order to reach leverage targets;

--No incremental liabilities post the sale of offshore business;

--Consolidated core business capex and rate base growth in-line with company's guidance;

--O&M expense relatively flat;

--Normal weather.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

--FFO leverage expected to remain less than 5.2x on a sustained basis;

--Demonstrated mitigation of retained risk associated with offshore wind divestitures.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

--Significant delays in the completion of the sale of the offshore business; significantly weaker terms, including retained risk; lower net proceeds from the sale; or allocation of the proceeds toward uses other than debt reduction;

--Failure to issue equity each year over the 2024-2025 timeframe to support deleveraging;

--Sustained FFO leverage exceeding 6.0x, after the divestiture of the offshore wind assets;

--Adverse regulatory actions or other events that result in downgrades to Eversource's utility subsidiaries.

Liquidity and Debt Structure

Adequate Liquidity: ���������ֳ� considers liquidity for Eversource and each of its regulated utility subsidiaries to be adequate. Eversource has a $2.0 billion CP program that the company uses to provide its subsidiaries with intercompany loans. Eversource had $1.8 billion of CP borrowings outstanding at Dec. 31, 2023, leaving $228.1 million of available borrowing capacity. Eversource, CL&P, PSNH, NSTAR Gas, Yankee Gas Services Company (not rated), Eversource Gas Company of Massachusetts (EGMA; not rated) and Aquarion Water Company of Connecticut (not rated) participate in a joint $2.0 billion revolving credit facility (RCF) that terminates on Oct. 13, 2028.

Under the RCF, CL&P has a $600 million borrowing sublimit; PSNH, NSTAR Gas, EGMA and Yankee Gas each have a $300 million sublimit; and Aquarion Water Company of Connecticut has a $100 million sublimit. The RCF serves to backstop Eversource's CP program. There were no RCF borrowings outstanding as of Dec. 31, 2023. NSTAR Electric maintains its own $650 million CP program backstopped by an equal-sized RCF. NSTAR Electric's $650 million RCF is separate from the shared RCF of parent Eversource and the other utilities but also terminates on Oct. 13, 2028. As of Dec. 31, 2023, there was $365.8 million outstanding, leaving $284.2 million of available borrowing capacity. Eversource and its utility subsidiaries require modest cash on hand and had $53.9 million of unrestricted cash as of Dec. 31, 2023.

Manageable Debt Maturities: Long-term debt maturities over the next five years are manageable. At the parent level, maturities are $900 million of 4.20% senior unsecured notes due June 27, 2024; $450 million of 2.9% senior unsecured notes due Oct. 1, 2024; $300 million of 3.15% senior unsecured notes due Jan. 15, 2025; $300 million of 0.8% senior unsecured notes due Aug. 15, 2025; $250 million of 3.35% senior unsecured notes due March 15, 2026; $450 million of 4.75% senior unsecured notes due May 15, 2026; $300 million of 1.4% senior unsecured notes due Aug. 15, 2026; $650 million of 2.90% senior unsecured notes due March 1, 2027; $600 million of 4.60% senior unsecured notes due July 1, 2027; $450 million of 3.3% senior unsecured notes due Jan. 15, 2028; and $1.3 billion of 5.45% senior unsecured notes due March 1, 2028. 2024 maturities are to be refinanced with the proposed issuances.

Issuer Profile

Eversource is a holding company that owns seven regulated utilities serving electric T&D, natural gas distribution and water distribution customers in Massachusetts, Connecticut and New Hampshire.

Date of Relevant Committee

10 January 2024

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ���������ֳ�'s ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on ���������ֳ�'s ESG Relevance Scores, visit /topics/esg/products#esg-relevance-scores.

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APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

• Corporate Monitoring & Forecasting Model (COMFORT Model), v8.1.0 (1)

ADDITIONAL DISCLOSURES

• Solicitation Status
• Endorsement Policy

ENDORSEMENT STATUS