Which of Its Businesses Does Eversource Expect Will Drive Growth?



Sales growth

Eversource Energy (ES) has posted subdued sales growth for the last couple of years. Weather plays an immense role in utilities’ sales (PUI). In 2015, many utilities (RYU) reported negative sales growth due to unfavorable weather in the United States. Eversource posted a nearly 11% fall in revenue compared to 2014.

Energy efficiency programs also lower electricity usage per customer, which further dents the sales of utilities. However, in the last five years, Eversource’s top line rose more than 70%, and it clocked revenues worth $8 billion in 2015.

The chart above shows Eversource Energy’s year-over-year sales growth over the last three years. Its healthy sales growth in 1Q13 was due to its acquisition of NSTAR Gas & Electric.

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Dull growth in core business

Eversource is experiencing flat growth opportunities in the electric business. Therefore, it’s planning to focus on its transmission and midstream businesses. Its transmission business accounted for nearly 15% of its total revenues in 2015.

In the next few years, Eversource expects its transmission business to contribute much more to its revenues. Like Eversource, ITC Holdings (ITC) and DTE Energy (DTE) have strong focuses on their transmission segments.

Distribution could offer diversification

Eversource’s ongoing Northern Pass Transmission and Access Northeast pipeline projects are expected to boost its sales. It may also achieve diversification from its core electric distribution business. However, growth in this segment depends on the regulatory approvals and in-service dates of projects.

Eversource Energy is the largest utility company in New England. Its customer base growth of 2%–3% yearly for the last couple of years has partially compensated for the negative impact of unfavorable weather conditions. We’ll discuss Eversource Energy’s earnings and its drivers in the next article.


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