Eversource Energy capped off a stormy day Tuesday by announcing it will explore selling its Bridgeport-based Aquarion Water subsidiary, a move that could bring needed cash and limit regulatory exposure in Connecticut as the company exits offshore wind investments at a loss of $1.95 billion.
On the eve of an earnings call planned for Wednesday, Eversource announced the Aquarion plan and other developments: finalizing a deal to sell its 50% share in South Fork Wind and Revolution Wind for $1.1 billion, and posting a full-year loss of $442 million for 2023. Ørsted previously agreed to buy Eversource’s share in a third offshore project, Sunrise Wind.
Eversource acquired Aquarion for $1.675 billion in 2017, bringing a major regional water utility into a company whose core business is the transmission and distribution of electricity and natural gas in Connecticut, Massachusetts and New Hampshire.
A contested order by the Public Utilities Regulatory Authority to cut Aquarion’s rates is central to a campaign by Eversource and Avangrid, which also distributes electricity and natural gas in Connecticut, to convince Gov. Ned Lamont that regulators are discouraging investments by limiting the ability to recover costs.
As Eversource prepares Aquarion for a potential sale, it glossed over complaints about regulators and applied polish to an asset that can be sold without affecting its core business. Joe Nolan, the chairman and chief executive of Eversource, said Aquarion has been “a meaningful investment.”
“The company is well recognized and respected for its operational excellence in the water distribution business,” Nolan said.
Shahriar Pourreza, an analyst who tracks Eversource for Guggenheim Securities Research, said he did not think the company’s complaints about Connecticut’s regulatory environment would dissuade potential buyers.
“I think the buyers will take a longer view,” he said. “It’s a good asset.”
While many water companies are relatively small, Aquarion is one of the seven largest investor-owned water utilities in the U.S., with 236,000 customer accounts in 72 cities and towns, most of them in Connecticut, and 13 in Massachusetts and New Hampshire.
The Aquarion sale is the best way to raise cash and solidify its credit ratings, especially given its stock price, Pourreza said.
“Either Eversource can issue equity at very discounted levels, or they could sell a water utility at a much higher multiple and have more proceeds to redeploy,” Pourreza said.
Eversource’s stock closed at $54.50 a share Tuesday, down $26.86 from its 52-week high of $81.36. Analysts have been mixed in their advice to investors on Eversource stock, with 38% rating it a buy, 57% neutral and one advising selling it.
A Superior Court judge is currently weighing an administrative appeal of PURA’s decision to turn Aquarion’s requested $35 million rate increase into a $2 million reduction. At least a partial victory is assured, as regulators conceded they undervalued Aquarion’s tax liabilities.
“Lowering their exposure to Connecticut isn’t going to be perceived negatively by investors,” Pourreza said of Eversource.
Eversource would remain the largest regulated utility in the state. Its Connecticut Light & Power subsidiary provides electricity to the majority of the state, and its Yankee Gas is the largest distributor of natural gas in the state, serving 73 cities and towns.
In its announcement Tuesday, Eversource emphasized that its core businesses were profitable. Excluding the “impairments” of the devalued off-shore investments, Eversource had earnings of $1.5 billion in 2023 — a $100 million improvement over the previous year.
“Eversource’s core distribution and transmission businesses are well positioned to deliver solid operational and financial results as we move forward in supporting the region’s transition to a cleaner energy environment,” the company said.
While the company is balking at Connecticut regulators’ push for investments modernizing its grid, Eversource insisted it is committed to building the infrastructure for the “clean energy future that its customers and states desire.”
“We continue to work constructively with stakeholders to improve the regulatory environment in Connecticut,” the company said, “to provide customers with a high level of safe, reliable and cost-effective investments.”
