United States, June 11, 2020 – Eversource Energy (Baa1 stable) announced that it plans to sell 6 million shares of its common stock, which would raise about $517.6 million in gross proceeds based on the previous day’s closing offering price of $86.26 per share. Eversource intends to grant the underwriters a 30-day option to purchase up to an additional 900,000 common shares. Should the full over-allotment be exercised, total proceeds from the offering could reach $595 million.
The planned equity issuance is credit positive because we expect that Eversource will use the net proceeds to pay down outstanding short-term debt, reduce the amount of debt it would have needed to fund future investments and fund a portion of the utility assets acquisition later this year. Consequently, the company’s cash flow coverage metrics will improve.
The equity issuance is part of a plan Eversource announced last year to issue $2.5 billion of equity. It comes as the company increases its capital investment program and acquires utility assets later this year. The company intends to spend $17.3 billion in its core regulated businesses up to 2024, beginning with more than $3 billion last year. The company also plans to invest significantly in clean energy initiatives during this period, particularly offshore wind.
In February, Eversource announced the acquisition of the Massachusetts natural gas assets of Columbia Gas from NiSource Inc. (Baa2 stable) for $1.1 billion. We expect Eversource to finance the transaction with roughly 50% equity and 50% debt. The company expects the transaction to close by the end of the third quarter. The Columbia Gas assets will become a subsidiary of Yankee Gas Energy System, Inc., an Eversource intermediate holding company.
For the 12 months that ended 31 March, Eversource’s ratio of cash flow from operations pre-working capital changes (CFO pre-W/C) to debt was approximately 14.5%, up from 13% in 2018. Eversource’s 2018 financial results were adversely affected by tax reform, as well as $636 million of securitization bonds issued by utility subsidiary Public Service Company of New Hampshire (A3 stable) in May 2018. Including the benefit of the recently announced equity issuance, increased cash flow generation at its utilities and pro forma for the Columbia Gas acquisition, we expect Eversource’s ratio of CFO pre-W/C to debt to improve to about 15% in 2020 and remain in the mid-teens in the coming years.
Headquartered in Hartford, Connecticut, and Boston, Eversource is a utility holding company of mostly regulated utilities including electric, gas and water transmission and distribution companies. With a total rate base of about $19.6 billion, Eversource is the largest utility system in the New England region, serving approximately 4 million electric, natural gas and water customers.
Credit Outlook: 15 June 2020. Pg. 10
Moodys
Atlantic Investors Service 