# Eversource Energy (ES) Financial Model Free Excel 3-statement financial model and company analysis for Eversource Energy. - Canonical: https://finamodel.com/companies/eversource-energy - Industry: Utilities - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/ES.xlsx ## Model Purpose This model forecasts rate base growth, allowed returns, and equity valuation for Eversource Energy to determine if the company's transition to a pure-play regulated utility and its $26.5 billion capital expenditure programme will generate sufficient earnings growth to support its dividend and valuation targets. ## Company Overview Eversource Energy is a public utility holding company that operates regulated energy delivery businesses across Connecticut, Massachusetts, and New Hampshire. The company provides electricity, natural gas, and water services to approximately 4.6 million customers, focusing heavily on grid modernisation and clean energy integration. Business segments include: * Electric Distribution (approx. 45-50% of earnings) * Electric Transmission (approx. 35-40% of earnings) * Natural Gas Distribution (approx. 10-15% of earnings) * Water Distribution (Aquarion, approx. 2-3% of earnings) The business model is an asset-heavy, regulated monopoly where earnings are driven by capital investments (rate base) and allowed returns on equity (ROE) set by state and federal regulators. Eversource is the largest utility in New England and operates in a highly regulated environment with predictable, albeit capped, return profiles. Recently, the company completed a major strategic pivot by fully exiting its offshore wind joint ventures (South Fork, Revolution Wind, and Sunrise Wind) in 2024, taking over $2.5 billion in cumulative impairment charges to refocus entirely on regulated pipes and wires. ## Revenue Deep Dive ### Electric Distribution * **Segment name:** Electric Distribution * **Revenue driver formula:** (Average Rate Base x Equity Thickness x Allowed ROE) + Pass-Through Power Costs + O&M Recovery * **Historical growth rate:** 4-6% CAGR * **Key growth levers and headwinds:** Driven by grid hardening, smart meter deployment, and electrification trends. Headwinds include state-level regulatory pushback on rate increases and severe weather restoration costs. * **Pricing dynamics:** Regulated by state public utility commissions (PURA in CT, DPU in MA, PUC in NH). * **Revenue recognition notes:** Billed monthly based on volumetric usage, though revenue decoupling mechanisms in some states separate core earnings from actual volumetric sales. * **Seasonality:** Higher in summer (Q3) due to air conditioning load. ### Electric Transmission * **Segment name:** Electric Transmission * **Revenue driver formula:** Average Transmission Rate Base x Equity Thickness x FERC Allowed ROE * **Historical growth rate:** 7-9% CAGR * **Key growth levers and headwinds:** Driven by regional decarbonisation mandates requiring new transmission lines. A major headwind is the recent 2026 Federal Energy Regulatory Commission (FERC) ruling that cut the base ROE to 9.57%. * **Pricing dynamics:** Federally regulated by FERC using formula rates that adjust annually based on capital spending. * **Revenue recognition notes:** Recognised over time as services are provided to the regional grid operator (ISO New England). * **Seasonality:** Generally stable across the year as it is based on fixed capital recovery rather than volumetric throughput. ### Natural Gas Distribution * **Segment name:** Natural Gas Distribution * **Revenue driver formula:** Base Distribution Rates + Pass-Through Gas Costs + Capital Tracker Revenue * **Historical growth rate:** 3-5% CAGR * **Key growth levers and headwinds:** Growth driven by gas system enhancement programmes (replacing leak-prone pipes). Headwinds include state-level pushes towards electrification and bans on new gas hookups. * **Pricing dynamics:** Regulated by state commissions with periodic base rate cases. * **Revenue recognition notes:** Includes purchased gas adjustment clauses that pass commodity costs directly to consumers with zero margin markup. * **Seasonality:** Highly seasonal, with the vast majority of earnings generated in Q1 and Q4 due to winter heating demand. ### Water Distribution * **Segment name:** Water Distribution * **Revenue driver formula:** Average Rate Base x Allowed ROE * **Historical growth rate:** 2-4% CAGR * **Key growth levers and headwinds:** Driven by infrastructure replacement. The company attempted to sell this segment (Aquarion) for $1.6 billion, but Connecticut regulators rejected the sale, leaving its long-term status uncertain. * **Pricing dynamics:** State-regulated base rates. * **Revenue recognition notes:** Billed based on metered water usage. * **Seasonality:** Slightly higher in summer (Q3) due to irrigation and outdoor water use. ## Cost Structure ### Variable Costs / COGS * **Line-by-line breakdown:** Purchased Power, Purchased Natural Gas. * **Gross margin range:** Not a relevant metric for utilities. Fuel and power costs are direct pass-throughs. The focus is on "Gross Margin after Fuel" or "Net Revenue". * **Key input costs and commodity exposures:** Natural gas prices and wholesale electricity prices. While the company does not take commodity risk on these (costs are passed to ratepayers), high commodity prices increase customer bills and create political friction during rate cases. * **How COGS scales with revenue:** Scales exactly 1:1 with the commodity portion of revenue due to pass-through tracking mechanisms. ### Operating Expenses * **Operations and Maintenance (O&M):** Covers labour, vegetation management, routine repairs, and storm restoration. Typically grows at or slightly below inflation. * **Depreciation & Amortisation:** Extremely high (typically 12-15% of total revenue) due to the massive $20+ billion property, plant, and equipment base. * **Property Taxes:** A significant and growing expense as the asset base expands. * **Restructuring / one-time charges:** The company recorded massive impairment charges related to its offshore wind exit ($1.95 billion in 2023, $524 million in 2024, and a $75 million liability adjustment in 2025). These must be excluded from recurring operating expenses. ### Margin Profile * **Operating margin:** Typically 18-22% (excluding pass-through fuel volatility and one-time wind impairments). * **Margin trend:** Stable to slightly expanding as capital trackers allow for concurrent recovery of investments without waiting for full rate cases. * **Segment-level margins:** Transmission has the highest operating margin due to lower O&M requirements compared to the distribution businesses. ## Balance Sheet Structure * **Total assets:** Approximately $50 billion to $55 billion. * **Key asset categories:** Property, Plant and Equipment (PP&E) makes up the vast majority of assets. Regulatory Assets are also highly material. * **Goodwill & intangibles as % of total assets:** Low (typically under 10%), stemming from historical mergers (e.g., NSTAR). * **Working capital profile:** * **Days Sales Outstanding (DSO):** 35-45 days. * **Days Inventory Outstanding (DIO):** Relevant only for stored natural gas ahead of winter; peaks in autumn. * **Days Payable Outstanding (DPO):** 30-40 days. * **Net working capital as % of revenue:** Typically negative or near zero. * **Is working capital positive or negative?** Utilities often operate with negative working capital, using customer deposits and deferred taxes as sources of zero-cost financing. * **PP&E:** Consists of substations, poles, wires, transformers, and gas mains. Useful lives range from 30 to 60 years. * **Regulatory Assets:** Represents costs incurred (like storm damage or under-recovered fuel) that regulators have approved for future recovery from customers. ## Capital Expenditure & Investment * **Capex as % of revenue:** Extremely high, often 30-40% of revenue, as revenue is not the primary driver of utility valuation (rate base is). * **Maintenance capex vs. growth capex:** Approximately 40% maintenance (replacing aging infrastructure) and 60% growth (grid modernisation, decarbonisation, new transmission lines). * **Major capex programmes underway:** A $26.5 billion five-year capital plan (2026-2030) focused on electric transmission and distribution to support artificial intelligence data centre load and regional electrification. * **M&A pattern:** Currently divesting non-core assets (offshore wind sold in 2024, Aquarion sale attempted but blocked). The company is a pure-play organic grower at this stage. ## Debt & Capital Structure * **Total debt:** Approximately $20 billion to $24 billion. * **Debt/EBITDA ratio:** Typically runs between 5.0x and 6.0x, standard for a regulated utility. * **Credit rating:** Typically BBB+ / Baa1, though closely monitored by agencies due to recent offshore wind write-offs and regulatory friction in Connecticut. * **Key debt instruments:** Long-term first mortgage bonds at the operating subsidiary level, and senior unsecured notes at the holding company level. * **Maturity profile:** Laddered over 10 to 30 years to match the long-dated nature of utility assets. * **Interest rate profile:** Predominantly fixed-rate long-term debt. * **Share repurchase programme:** Inactive. The company issues equity rather than repurchasing it to fund its massive capex programme. * **Dividend policy:** Target payout ratio of 60% to 70% of non-GAAP earnings. The current annualised dividend is $3.15 per share (yielding approx. 4.6%). ## Cash Flow Characteristics * **Operating cash flow conversion:** OCF is strong and predictable, typically exceeding Net Income due to high non-cash depreciation and deferred taxes. * **Free cash flow margin:** Free cash flow is consistently negative. This is a feature, not a bug, of a growing utility. * **Major non-cash items:** Depreciation, deferred income taxes, and regulatory asset amortisation. * **Working capital cash flow impact:** Seasonal swings based on winter gas purchases and summer electricity usage. * **Capex intensity:** Consumes 100% of operating cash flow and requires external financing. * **Cash tax rate vs. GAAP effective tax rate:** Cash taxes are significantly lower than GAAP taxes due to accelerated depreciation on massive capital investments. ## Sheet Structure 1. **Assumptions:** Hardcoded inputs for rate base growth, allowed ROEs, equity thickness, capex plans, and debt financing rates. 2. **Scenarios:** Toggles for base case, adverse regulatory outcomes (e.g., further FERC ROE cuts), and high load growth (AI/data centre expansion). 3. **Rate Base & Capex (Utility Specific):** Roll-forward schedules for Electric Distribution, Electric Transmission, Natural Gas Distribution, and Water Distribution rate bases. 4. **Income Statement:** Consolidated view with revenue and operating income broken out by the four reporting segments. 5. **Balance Sheet:** Highlighting Utility Plant in Service, Regulatory Assets, and Regulatory Liabilities. 6. **Cash Flow Statement:** Standard indirect method, highlighting the massive capex outflows and corresponding debt/equity inflows. 7. **Debt & Interest Schedule:** Tranches of holding company and subsidiary debt, calculating weighted average interest cost. 8. **Regulatory Mechanisms:** Tracking under/over-recovered fuel costs and deferred storm costs. 9. **Valuation (DCF & DDM):** Dividend Discount Model (primary for utilities) and standard DCF, referencing the 60-70% payout ratio target. ## Key Financial Relationships 1. "Electric Distribution Earnings = Average Electric Distribution Rate Base x Equity Thickness (approx. 50%) x State Allowed ROE" 2. "Electric Transmission Earnings = Average Transmission Rate Base x Equity Thickness x FERC Allowed ROE (9.57% base)" 3. "Natural Gas Distribution Earnings = Average Gas Rate Base x Equity Thickness x State Allowed ROE" 4. "Ending Rate Base = Beginning Rate Base + Segment Capex - Segment Depreciation - Deferred Taxes" 5. "Total Revenue = Pass-Through Fuel Costs + Distribution Revenue + Transmission Revenue" 6. "Purchased Power Expense = Pass-Through Power Revenue" (Zero margin impact) 7. "Purchased Gas Expense = Pass-Through Gas Revenue" (Zero margin impact) 8. "Interest Expense = (Average Holding Company Debt x HoldCo Rate) + (Average OpCo Debt x OpCo Rate)" 9. "Dividends Paid = Prior Year Non-GAAP EPS x Target Payout Ratio (65%) x Share Count" 10. "New Equity Required = Total Capex + Dividends Paid - Operating Cash Flow - Net New Debt Issued" ## Cross-Sheet Dependencies The **Rate Base & Capex** sheet is the engine of the model. Segment Capex feeds into the Rate Base roll-forward. The calculated Average Rate Base feeds the **Income Statement** to generate Segment Earnings. Segment Earnings flow to Net Income, which feeds the **Cash Flow Statement**. The massive Capex outflow on the Cash Flow Statement creates a funding shortfall, which triggers the **Debt & Interest Schedule** to issue new debt and equity. The new debt generates Interest Expense, which creates a circularity by reducing Net Income and Operating Cash Flow, thereby requiring slightly more debt. ## Sign Convention * **Revenue and Income:** Positive. * **Assets:** Positive. * **Liabilities and Equity:** Positive. * **Operating Expenses (O&M, D&A, Taxes):** Negative on the Income Statement. * **Capital Expenditures:** Negative on the Cash Flow Statement and Rate Base schedules. * **Dividends Paid:** Negative on the Cash Flow Statement. * **Debt Issuance:** Positive on the Cash Flow Statement. ## Things Most Likely to Go Wrong * **Including offshore wind in forward estimates:** The company completely exited offshore wind in 2024. Historical financials include massive impairment charges ($1.95 billion in 2023, $524 million in 2024, and $75 million in 2025) that must be excluded from go-forward recurring earnings. * **Ignoring the FERC ROE cut:** FERC recently cut the base ROE for New England Transmission to 9.57% (capping incentives at 12.09%). Using historical transmission margins will overstate 2026 earnings by approximately $70 million. * **Misunderstanding fuel pass-throughs:** Purchased power and natural gas costs are pass-through items. Modelling them as a fixed percentage of revenue will cause margin volatility that does not exist in reality. * **Modelling positive free cash flow:** Utilities in heavy investment cycles do not generate positive free cash flow. Forcing the model to balance without external debt/equity issuance will break the capital structure. * **Assuming the Aquarion sale closed:** Connecticut regulators rejected the $1.6 billion sale of the water business. It must remain in the operating model and rate base calculations for the foreseeable future. * **Applying a standard corporate tax rate to cash flows:** Utilities benefit from massive accelerated depreciation, creating large deferred tax liabilities. Cash taxes are a fraction of the GAAP effective tax rate. * **Ignoring equity dilution:** Eversource plans to issue $800 million to $1.1 billion in equity between 2026 and 2030. Failing to increase the share count will artificially inflate EPS. ## Validation Checks * "Dividend payout ratio should remain between 60% and 70% of non-GAAP earnings based on stated policy." * "Consolidated rate base growth should approximate 8% annually through 2028." * "Free cash flow after dividends must be negative, reflecting the $26.5 billion five-year capital expenditure programme." * "Transmission ROE should not exceed the 12.09% FERC incentive cap." * "Debt to EBITDA should remain between 5.0x and 6.0x to maintain the current credit rating." * "Purchased power and gas expenses must exactly equal their corresponding pass-through revenue lines." * "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Transmission Base ROE | 9.57 | % | Recent 2026 FERC ruling | | Consolidated Rate Base CAGR | 8.0 | % | Management guidance through 2028 | | 5-Year Capex Programme | 26.5 | $ Billions | 2026-2030 investment plan | | Annual Dividend | 3.15 | $ / Share | Q1 2026 declared rate ($0.7875 quarterly) | | Target Payout Ratio | 65.0 | % | Midpoint of 60-70% management target | | Long-Term EPS Growth | 6.0 | % | Midpoint of 5-7% management target | | Planned Equity Issuance (5-Year) | 950 | $ Millions | Midpoint of $800M - $1.1B guidance | | Electric Distribution Equity Thickness | 50.0 | % | Standard regulatory capital structure | | Natural Gas Distribution Equity Thickness | 50.0 | % | Standard regulatory capital structure | | Effective Tax Rate | 22.0 | % | Historical average excluding one-time impairments | ## Data Sources & Benchmarks * **Filings:** SEC EDGAR (Form 10-K, 10-Q, 8-K), Eversource Investor Relations presentations. * **Regulatory Data:** Federal Energy Regulatory Commission (FERC) dockets, Connecticut Public Utilities Regulatory Authority (PURA), Massachusetts Department of Public Utilities (DPU). * **Key Peers:** National Grid (NGG), Consolidated Edison (ED), Avangrid (AGR), and American Electric Power (AEP). * **Consensus Estimates:** Bloomberg, FactSet, or S&P Capital IQ for EPS and rate base growth validation. ## Sources * Eversource Energy 2025 Form 10-K and Earnings Release (February 2026) * Eversource Energy 8-K regarding FERC ROE Reset (March 2026) * Seeking Alpha: Eversource Energy Double-Digit Annual Return Potential (March 2026) * Simply Wall St: What Eversource Energy's FERC ROE Reset Means For Shareholders (March 2026) * Investing.com: Eversource Energy approves quarterly dividend of $0.7875 per share (January 2026) * CommonWealth Beacon: Eversource exits wind business, reports massive loss (February 2024) --- ## Frequently asked questions ### What does Eversource Energy do? Eversource Energy is a public utility holding company providing electricity, natural gas, and water services to approximately 4.6 million customers across Connecticut, Massachusetts, and New Hampshire. The company focuses on operating regulated energy delivery businesses, including electric distribution, electric transmission, natural gas distribution, and water distribution. ### How does Eversource Energy generate revenue? Eversource Energy operates as an asset-heavy, regulated monopoly where earnings are primarily driven by its capital investments, known as the rate base, and the allowed returns on equity (ROE) set by state and federal regulators. The company's business model relies on predictable, capped return profiles from its regulated utility operations. ### What is Eversource Energy's capital expenditure strategy? Eversource Energy has a significant $26.5 billion five-year capital plan for 2026-2030, with capex often representing 30-40% of revenue. This investment is approximately 40% for maintenance and 60% for growth, focusing on grid modernization, decarbonization, and new transmission lines to support regional electrification. ### What are the key financial assumptions in an Eversource Energy financial model? Key assumptions for an Eversource Energy financial model include a revenue growth rate of about 8.9%, COGS at 55% of revenue, and SGA at 15% of revenue. Additionally, capital expenditure is modeled at approximately 33% of revenue, reflecting the company's asset-heavy nature and significant investment plans. ### What drives the valuation of Eversource Energy? The valuation of Eversource Energy is primarily driven by its rate base growth and allowed returns, as its business model is a regulated utility. The financial model aims to determine if the company's substantial capital expenditure program and transition to a pure-play regulated utility will generate sufficient earnings growth to support its dividend and valuation targets. ### Can I download an Excel financial model for Eversource Energy? Yes, an Excel financial model for Eversource Energy is available for download, forecasting financial performance from FY2026 to FY2030. This model helps analyze the company's rate base growth, allowed returns, and equity valuation in light of its strategic capital investments. [Interactive forecast calculator](https://finamodel.com/companies/eversource-energy/forecast)