Morningstar | Eversource's Constructive Regulatory Outlook, Investment Opportunities Drive Growth
Eversource Energy became one of the largest utilities in the Northeast U.S. with its April 2012 merger with NStar and 2017 acquisition of Aquarion. As the region moves toward a mix of natural gas and renewable energy, we think Eversource is well positioned to continue growing 6% at least through 2022.We expect Eversource to invest an average $2.6 billion of capital in 2019-23 with plans to upgrade its electric, gas, and water infrastructure while continuing to grow its transmission network. Eversource's partnerships in three offshore wind projects offer another avenue of long-term growth. We think Eversource could add another $1 billion or more of investment in its five-year plan.Distribution and renewable energy investments are key for Eversource to meet its 6% earnings and dividend growth target. Its natural gas and water distribution utilities offer strong customer and infrastructure growth potential. Gas pipeline replacement programs and upgrades will drive near-term earnings growth.Connecticut regulation has historically been challenging, but we think Eversource has achieved constructive regulatory outcomes in its most recent rate cases. A rate settlement in early 2018 sets annual rate increases through mid-2020. Massachusetts is also an increasingly attractive area for investment. Eversource enjoys rate-decoupling, forward-looking rates, and support for grid modernization investment through 2023, all of which support cash flow growth.Electric transmission has been Eversource's primary earnings growth driver recently. Transmission now contributes more than one third of consolidated earnings after $3 billion of investment in 2016-18. We expect transmission growth to slow with the $1.6 billion Northern Pass project on hold and the potential for federal rate cuts. However, Eversource's plans to invest $2.3 billion in transmission projects the next three years should keep transmission near one third of earnings.Eversource Energy is a public utility holding company. Through its subsidiaries, the company has four segments: electric distribution, which is engaged in the distribution of electricity to retail customers in Connecticut, Massachusetts and New Hampshire; electric transmission, which owns and maintains transmission facilities that are part of an interstate power transmission grid over which electricity is transmitted throughout New England; natural gas distribution, which distributes natural gas to communities in Massachusetts and cities and towns in Connecticut; and water distribution, which provides water services in towns and cities in Connecticut, Massachusetts and New Hampshire.
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