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NRG Yield’s (NYLD) CEO Mauricio Gutierrez on Q1 2016 Results – Earnings Call Transcript

NRG Yield, Inc. (NYSE: NYLD ) Q1 2016 Earnings Conference Call May 5, 2016 10:30 AM ET Executives Kevin Cole – Senior Vice President-Investor Relations Mauricio Gutierrez – Interim President and Chief Executive Officer Christopher Sotos – Head of Strategy and Mergers & Acquisitions, Director of NRG Yield Kirkland Andrews – Executive Vice President, Chief Financial Officer and Director Analysts Grier Buchanan – KeyBanc Capital Markets Inc. Angie Storozynski – Macquarie Group Shahriar Pourreza – Guggenheim Partners Michael Morosi – Avondale Partners Steve Fleishman – Wolfe Research Operator Good day, ladies and gentlemen. And welcome to the First Quarter 2016 NRG Yield Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded. I would now like to hand the meeting over to Kevin Cole, Head of Investor Relations. Please go ahead. Kevin Cole Thank you, Karen. Good morning and welcome to NRG Yield’s first quarter 2016 earnings call. This morning’s call is being broadcasted live over the phone and via the webcast, which can be located on our website at www.nrgyield.com, under Presentations & Webcasts. As this is the earnings call for NRG Yield, any statements made on this call that may pertain to NRG Energy will be from the perspective of NRG Yield. Please note, that today’s discussion may contain forward-looking statements, which are based on assumptions that we believe to be reasonable as of this date. Actual results may vary differently. We urge everyone to review the Safe Harbor in today’s presentation as well as Risk Factors in our SEC filings. We undertake no obligation to update these statements as a result of future events, except as required by law. In addition, we’ll refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and the reconciliation to the most directly comparable GAAP measures, please refer to today’s presentation and press release. Now, with that, I’ll turn the call over to Mauricio Gutierrez, NRG Yield’s Interim President and Chief Executive Officer. Mauricio Gutierrez Thank you, Kevin, and good morning, everyone. Joining me and also providing remarks this morning are Chris Sotos, the incoming CEO; and Kirk Andrews, NRG Yield’s Chief Financial Officer. I am very excited about today’s call. We are reporting strong result for the first quarter announcing the transition of the CEO position and moving forward with our growth objectives. I’m sure many of you have participated in NRG’s first quarter earnings call, given the relationship between NRG and NRG Yield. But let me just repeat what I said on that call. NRG Yield remains a critical part of the overall NRG Energy strategic platform and NRG is committed to certainty and visibility in both conventional and renewable development to reinvigorate the virtuous cycle between the two companies. In my last quarterly call, I discussed my goal for 2016, deliver on our financial commitment to grow our dividend by over 15% in 2016, enhance our growth pipeline through access to NRG’s development efforts, ensure confidence in governance and management structure of NRG Yield, and to evaluate alternative financial solutions to facilitate growth during this period of equity market dislocation. I’m glad to report that we have or are on track to achieve many of these goals. Turning to Slide 3 for the business updates, NRG Yield continues to validate its value-proposition through offering a steady high-performing source of dividend growth to our shareholders. During the first quarter of 2016 the company achieved $188 million of adjusted EBITDA and $43 million of cash available for distribution. Additionally, I am pleased to say we are also increasing our quarterly dividend for the 10th consecutive time, and are reaffirming our full year guidance including our target dividend growth of 15% annualized. Next, I am pleased to say that we continue to push forward on our growth plans in concert with NRG. In addition to executing across our distributed generation, which now stands at $141 million invested through the first quarter, NRG has announced its intention to offer its remaining 51% interest in the 250 megawatt California Valley Solar Ranch project. You should expect an update on this transaction during the second quarter earnings call. As interim CEO, I evaluated with the NRG Yield Board of Directors what we believe is the optimal management structure, and today announced that Chris Sotos, NRG Energy’s current Head of Strategy and Mergers & Acquisitions and current Director of NYLD, will be the dedicated CEO for NRG Yield, employed solely by NRG Yield. While over the next several weeks we will be conducting an outreach with investors to introduce Chris. He has had a long and successful career in the power sector with over 20 years of experience, 12 of which at NRG Energy. Chris has managed the team that created NRG Yield, been part of the board since its IPO, and was responsible for identifying, evaluating and executing on many of the acquisitions that make up Yield today and its ROFO portfolio. Chris will assume the CEO role effective from May 6 and be able to focus entirely on the company strategy, capital structure and path forward by the end of the second quarter. Representative of the strong strategic alignment between two companies, I will assume the role of Chairman of the NRG Yield board. John Chlebowski will return to his role as the Lead Independent Director. And the board appointed John Chillemi, NRG’s Head of Business Development to fill the existing vacancy on the board. Of course, I and the board will ensure a seamless transition of the CEO position. Chris is the first fulltime employee of NRG Yield, and he will continue to evaluate the optimal management structure and perhaps field out additional few dedicated roles. I appreciate our investors have been through a lot in the past year. And as you all know well, the top priority of mine and the NRG family is to offer investors a simpler and more visible story with consistent and regular interactions with the investment community. As so, in this vein, Chris, I ask that he will be able share a few words to share our visibility and strategy to shareholders, of this intention to lead Yield with the same dividend growth-oriented principals set forth at our IPO. Chris? Christopher Sotos Thank you, Mauricio, and good morning. It gives me great pleasure to address you as not only the incoming CEO, but as the dedicated CEO to NRG Yield. Mauricio has given you a good look at my background and fit for the role, so I won’t repeat his comments. Instead, I’ll keep my remarks brief, but I did want to reassure the investor community that you should expect the continuation of the core fundamental drivers and objectives behind the value proposition of NRG Yield that have made it successful. As Mauricio highlighted earlier, I played a key role in the creation and execution of NRG Yield’s goals and objectives. And we should expect this strategy to remain consistent, although I will explore the possibility of expanding its dedicated team to ensure that NRG Yield is always focused on consistent value creation for our shareholders, to take advantage of opportunities throughout all parts of the cycle. Now, let me turn the call back over to Mauricio. But again, I want to thank you for the time today. I look forward to meeting and interacting with you over the weeks and months ahead. Mauricio Gutierrez Thank you, Chris. And with that, let me turn it over to Kirk, for a more detailed discussion on our financial result. Kirkland Andrews Thank you, Mauricio. Beginning with the left slide on Slide 5 of the presentation, during the first quarter NRG Yield delivered favorable financial results with adjusted EBITDA of $188 million and CAFD of $43 million. Our performance in the first quarter was positive across all of our settlement. And NRG Yield continues to benefit from the diversification of this platform, where approximately 45% of our adjusted EBITDA comes from the conventional and thermal segment, and 55% from renewable. Specifically, in the renewable segment, first quarter results benefitted from strong production across both our solar and wind fleet. This especially indicates that also wind during the quarter, where production about 17% above our median expectation. The wind resources also continues to exhibit significant volatility however, and while the first quarter was quite strong, production during the month of April was peak relative to our expectation. Today, NRG Yield is also reaffirming full-year guidance, including adjusted EBITDA of $805 million and CAFD of $265 million. Finally, consistent with our commitments to investors to reach $1 of annualized dividend per share by the fourth quarter of 2016, NRG Yield paid dividends of $0.225 per share in the first quarter. We are pleased to announce the 10th consecutive quarterly increase to $0.23 per share in the second quarter of 2015, placing us on a trajectory to meet that goal by the fourth quarter. Moving to the right on Slide 5, NRG Yield also continued to execute on commitments to its business renewable and residential solar partnerships with NRG Energy. In the first quarter, NRG Yield invested in incremental $40 million and $11 million into those two partnerships respectively. As you can see, we have now cumulatively deployed approximately $115 million of capital into those partnerships. Resulting in joint ownership of nearly 1,000 megawatt of long-tenure, fully contracted, strong credit quality, geographically diversified, and most importantly, strong cash flow producing disturbed solar assets. NRG Yield maintains an additional $135 million of capital commitment to these partnerships, including $53 million for residential solar. However, given NRG’s pivot with respect to the residential solar business, as was discussed on the NRG earnings call earlier. NRG Yield now expects to invest only around $20 million more in the residential partnership. Importantly, this change does not affect NRG Yield’s perspective on residential solar as an investable asset class nor does it affects our 2016 financial guidance or impacts our ability to meet our objectives of 15% annualized dividend growth through 2018. As a result of our reduced expectation for capital deployment for the residential solar partnership near-term liquidity will be enhanced providing flexibility to invest across other areas of the business. Now turning to Slide 6, I want to take a moment to emphasize an aspect of NRG Yield’s capital structure that is often underappreciated, which is the natural deleveraging effect which results from the fact that a majority of our balance sheet debt was with amortizing non-recourse project financing. As many of you know this project debt is sized relative to the tenure and cash flows of the long-term contracts of our projects, which are with investment-grade counterparties, all while committing project distributions that underlie the dividends we then pay to our shareholders. This benefit is not reflected in our cash available for distribution metric, which represents cash available after debt service and that is both principle and interest. As shown on the chart over the next five years alone, based on the current portfolio NRG Yield will repay approximately $1.5 billion out of this project debt across its existing portfolio, an amount that is over 50% of today’s equity market capitalization, to put this in perspective. Second, this natural deleveraging also increases NRG Yield’s long-term flexibility on growing the platform, as it provides increase in capacity, finance, future accretive growth, especially at times when the equity markets may not be as accommodating. With that, I’ll turn it back to Mauricio for closing remarks or Q&A. Mauricio Gutierrez Thank you, Kirk. And before we turn to Q&A, let me provide some closing thoughts. I hope my excitement for Chris becoming the new dedicated CEO is coming through on today’s call. I have known and worked closely with Chris over my entire career at NRG. And I know he’s the right person at the right time for NRG Yield. As I move to Chairman of the Board I am in a unique position of being able to say that from the perspective of both companies that fundamental drivers behind the value proposition of NRG Yield have not changed, nor would I expect them to change with the naming of Chris Sotos as a CEO. Chris will not be available during Q&A, but I can assure you he is eager to engage with you in the days and weeks to come. So with that, operator, we’re ready to open the line for questions. Question-and-Answer Session Operator Thank you. [Operator Instructions] our first question comes from the line of Matt Tucker from KeyBanc. Grier Buchanan Hey, guys. This is Grier Buchanan on for Matt. Nice quarter and thanks for the question. Just a couple of follow-ups on home solar restructuring, one, on the monetization of those assets, could you just share your thoughts from the NRG perspective on why third-parties and Sunrun and Spruce rather than NRG Yield. And then, two, any chance you could quantify the expected unit economics on those residential system sales? Thanks. Kirkland Andrews Sure. It’s Kirk. I will address the first part of that question. Certainly, we are mindful of the opportunity around residential solar energy NRG Yield is concerned. But with respect to the partnerships, I think they achieved two objectives. One of which I’ll make reference to in the remarks that were made by NRG on the earnings call earlier today. And that is that it comports a lot more closely with the financial metrics that NRG’s investors are familiar with and value, and that is EBITDA. As you probably know, in the dropdown context, NRG is still consolidating to all of that. And so the long-term lease revenues and expenses associated with that will continue over the course of the remaining life of the lease, rather than in the monetizing open area. The other important thing is from a financial complexity standpoint, it is simpler. And that is certainly a benefit for NRG Yield. The partnerships that was announced this morning does not include any ongoing relationship or importantly taxed equity. It is simply a monetize and hold. And because we see a more robust opportunity going forward, especially through the distributed generation of what NRG calls business renewable, as I said in my remarks this is an opportunity to free up capital as we expand and diversify the portfolio, not only to take advantage of the growing portfolio that we see from NRG on the renewable side, business renewables and utility scale, but also expanding the opportunities across the asset class. So I think this arrangement and certainly in the near-term works for both parts of the production. Grier Buchanan That makes sense, and certainly consistent with the announcement back in February. Along those lines, could you just clarify – I’m looking at Slide 5, the remaining capital of $135 million in that partnership. There is $53 million earmarked for residential solar, but you disclosed that only expect to invest another $20 million. So will that $33 million, I think you mentioned that could be – that’s liquidity that could be used for other purposes, will that be allocated to business renewables or should we just think about that as TBD. Kirkland Andrews Yes. When I talked about that – when I referred to enhancing liquidity, obviously, liquidity is both the function of where it currently stands and prospectively from a financial planning standpoint. On the previous trajectory, as we would, given the magnitude of the capital remaining under that program that $135 million, our financial forecast in the use of about liquidity as we roll forward reflects the anticipation of utilizing that. We revised that anticipation that all but about $30 million, if you just do the math there, it’d be more than $35 million we’re now going to use, that gives us incremental financial flexibility as move forward because we are not deploying that $30 million. And so it’s certainly the use of proceeds, but it’s less likely we see the complete, the remainder, under the business renewables, because that’s already part of our financial. And that’s $82 million that’s referred to in the [page that you referred] [ph]. It’s more likely to be used for other opportunities. As NRG has announced its intention and has made that intention known to NRG Yield in the second quarter. CVSR certainly can be used to fund that, but importantly relative to the path we were on board that does turn out to be the case. That’s $30 million of incremental capital for existing, example, CVSR. That would not further tapped into, if you will, the liquidity reserve relative to the path we are on there. So on that first $30 million, it’s neutral to the plan and yet expands the portfolio. Grier Buchanan Got it. Thanks for the time. Mauricio Gutierrez Thank you. Kirkland Andrews You bet. Operator Thank you. And our next question comes from the line of Angie Storozynski from Macquarie. Angie Storozynski Thank you. So I have two questions, one is you mentioned a potential alternative finance inclusion, so I wanted to know, what they are? And, secondly, would you consider teaming up with some developer or, I don’t know, an infrastructure investor to provide NYLD with more of a visibility into long-term growth? Thank you. Mauricio Gutierrez Hi… Kirkland Andrews Sure, Angie. Go ahead. Mauricio Gutierrez Hi, Angie. So I will say that to your latter part of that question, the answer is, yes. We are exploring opportunities to potentially partner with infrastructure funds or additional developers that can enhance the growth and the – for the pipeline that we have. But, clearly, going forward, that will be Chris’ priority. For the first part of the question, Kirk? Kirkland Andrews What I’ll say in the near-term and I’m going to talk about this in the context of CVSR. And I think, I mentioned this on the last call, in our fourth quarter earning call. CVSR is among the assets currently, although I referenced in my prepared remarks the fact that we have a natural deleveraging portfolio. Where CVSR currently stands today, the level of debt there, which I believe a little less than $800 million, and that’s across the entirety of CVSR. Relative to the overall cash flow there is incremental debt capacity there as it is today. And that is probably the best example in terms of alternative uses of capital to help finance dropdowns or free up capital as we move forward. But we are certainly leaving no stone unturned, but I think in terms of near-term execution opportunities, it’s reasonable to expect that that is probably most likely among them and that is taking advantage of that excess debt capacity of CVSR. Angie Storozynski So there’s no project-level debt, but doesn’t it eat into cash flows, because that set amortizes? Kirkland Andrews Yes, it certainly would be lower than the existing cash flows today. But we’d only do so if it was ultimately accretive, so the way to think about it is, there is an existing level of CAFD at CVSR today. Some portion of that would be used for debt service. The remainder, you can think about as equity in cash flow on the dropdown. And, of course, what that means is, the remaining portion of the purchase price not funded by debt is also lower. So we’re obviously very focused on making sure that we can see a path clear on CVSR as well as future dropdowns or acquisitions that we can enhance the CAFD. So that the CAFD along the equity cash flow on the excess capital above and beyond that project financing is accretive relative to the current CAFD. That’s deal is probably the highest level of importance for us. Angie Storozynski Okay. Thank you. Operator Thank you. And our next question comes from the line of Shahriar Pourreza from Guggenheim. Kirkland Andrews Good morning, Shahriar. Shahriar Pourreza Hi, everyone. How are you? Just real quick, just one question, on the delevering slide that you have on slide 6, so when you think about sort of the residential reduction and then solar spend plus the natural delevering you’re seeing at the business through amortization of the debt, you’re kind of making comments around CVSR and being able to have some additional capacity at the project level. Is it fair to say that given sort of where this amortization is heading and the delevering is heading, can you fund the growth beyond 2018, without hitting the equity markets, for tapping the equity markets? Kirkland Andrews I would say, we could certainly use that as supplement. But I would not over the long run in terms of really funding substantial amount of growth using loans [ph] for example on the 15%. I think that is certainly necessary and helpful, but is not sufficient to really continue that as meaningfully beyond anything. Shahriar Pourreza Any room to back-lever? Kirkland Andrews Yes, it’s something – I mean, that’s something, so that’s the best way I’m trying to think about that, that’s a variation of it I think can get also true. But if you think about back-levering at our corporate level, very importantly, that is not something that we would do today, because we are very focused on maintaining adherence to our balance sheet principles and the metrics that we laid out there. But that’s certainly an opportunity, but we’d have to do so without tapping into corporate debt at the current CAFD level. Shahriar Pourreza And then just, Kirk, one last thing on the equity market, is it still sort of remaining closed? Kirkland Andrews Well, I think closed is a function of two things. One, in terms of the efficiency, I mean, obviously we haven’t seen a whole lot of Yield paper coming out in the last year. And it’s certainly – our concern is sort of the file to offer spread in terms of the discount. We want to have confidence if that’s manageable, because we’re very focused on raising equity we can deploy creatively. And the other component is just the overall cost in capital that’s implied by the current share pricing. I said in the past, and I continue to feel that based on where we’re trailing are today we’re not in a hurry to issue at these prices. But our equity issuance is both the function of an absolute and a relative. Absolute, I just spoke to. Relative means that the equity we issue at whatever price, the use of proceeds have to represent clear accretion both from a CAFD standpoint and on total return standpoint. Shahriar Pourreza Excellent. Thanks guys. Operator Thank you. And our next question comes from the line of Michael Morosi from Avondale Partners. Michael Morosi Hi, guys. Thank you for taking the question. Should I interpret the commitment to growth or the renewed commitment to dividend growth as saying that, NRG Yield is kind of stepping away from the notion of the Yield co. as asset manager or that NRG yield is willing to kind of trade around its portfolio and basically view its existing asset base as a potential source of funds? Kirkland Andrews Sorry, Mike, I am not completely clear on your question, with respect to NRG Yield. Can you clarify? Michael Morosi Yes, I mean, basically doing your – basically being a buyer and seller of assets, as a way to manage shareholder return? Kirkland Andrews Yes. So with real state overall, although we have no current intentions to monetize an asset if that’s what you’re thinking about. But the best way to think about it is the principle or the philosophy behind that is, we are not wed to assets. We are wed to growing CAFD per share. And so, if there is an opportunity to monetize an asset at value, we are certainly agnostic in terms of the portfolio. But we are not indifferent as to be effect of that transaction or any. It has to be accretive to grow that CAFD per share. Michael Morosi That’s fair. Thanks. And then, as it relates to other potential equity offerings. We’re hearing more and more about companies looking at ATM-type offerings. Is that something that you consider? Kirkland Andrews We have, yes. I certainly think that’s a tool in the tool-chest. But, obviously, in terms of order of magnitude it’s helpful. But I don’t think at this juncture it’s something that that we’re in a massive hurry to put in place. I think as we can – hopefully, we need to see their trajectory in terms of the appreciation in the share price. And that is certainly a lever that we would pull, but it doesn’t substantially move the needle in the near-term in terms of building dry powder for a significant acquisition, but it is certainly helpful. Michael Morosi Very good. Thanks a lot, guys. Operator Thank you. And we are approaching the end of the call. We have time for one more question. Our final question for today comes from the line of Steve Fleishman from Wolfe Research. Steve Fleishman Hi, good morning. Mauricio Gutierrez Hi, Steve. Steve Fleishman Kirk, just on the slide with the debt pay-down, and the like, project debt pay-down, I don’t know if there is a way to give a sense. But obviously you – because the PTAs don’t last forever, you really need the debt on the projects to be paid down over the life. So it’s hard to kind of judge, how much, if any, extra debt capacity is really created by that versus the debt reduction that you actually need. Is there a way to kind of think of a sense of that? Kirkland Andrews Yes, I think that’s a fair question, Steve. So I’ll answer it in two ways. One, certainly I gave the example of CVSR today. And that is something that I continue expect to see us if we’re able to quantify by action. But let me think back on a way that we can give you some sense of what that capacity is. That said the other part of that equation, which I’ve been very mindful of and was at the time that we came out the IPO and continue to be, in addition to that debt capacity piece, the natural delevering nature of those particular assets means that we remove the debt service. Basically, it’s the same point as the contract rolls off, which gives us a tremendous amount of flexibility on a re-contracting basis as we move forward. Obviously, they continue, that’s CAFD. And if it has to be on a non-levered basis, they will be it, but there is a lot of cushion with the removal of that debt burden on an asset-by-asset basis. And the other thing I’d say is that, I think you’ll find in that – although we didn’t go through in the specific part of the – the first part of your question, behind that Page 6, which we included, I think the pro-rata share of the equity method part of the portfolio, CVSR currently among them, but I think we gave you an asset-by-asset table in the appendix, back on I think Page 13. So that at least gives you more granularity behind that. But let me think on a way that we can give you a little bit better sense of that debt capacity on what I’ve alluded to on CVSR. Steve Fleishman That’s helpful. Maybe I’d ask the question in a more simplistic way, which is that, based on your view of the portfolio, you would say that there is room for excess – for additional project debt overall. Kirkland Andrews Yes. Steve Fleishman And that’s part of it, so what the exact number is, fine. But you believe there is room to kind of add project add. Kirkland Andrews Yes. Steve Fleishman Okay. Kirkland Andrews And I would be willing to add to that that I think that CVSR is probably the most substantial example of that right now. Steve Fleishman Okay. Okay. Thank you. Kirkland Andrews You bet. Mauricio Gutierrez Thank you. Operator Thank you and that concludes our question-and-answer session for today. I would like to turn the conference back over to management for any closing comments. Mauricio Gutierrez No, I think that’s it. Thank you for your time. Christopher Sotos Thank you. Operator Thank you, ladies and gentlemen. Thank you for your participation in today’s conference. This does conclude the program. And you may now disconnect. Everyone have a good day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. 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Eversource Energy (ES) James J. Judge on Q1 2016 Results – Earnings Call Transcript

Eversource Energy (NYSE: ES ) Q1 2016 Earnings Call May 05, 2016 9:00 am ET Executives Jeffrey R. Kotkin – Vice President-Investor Relations James J. Judge – President & Chief Executive Officer Philip J. Lembo – Senior Vice President, Chief Financial Officer and Treasurer Leon J. Olivier – EVP-Enterprise Energy Strategy and Business Development Analysts Michael Weinstein – UBS Securities LLC Travis Miller – Morningstar, Inc. (Research) Caroline V. Bone – Deutsche Bank Securities, Inc. Operator Good morning, and welcome to the Eversource Energy First Quarter Earnings Conference Call. My name is Brandon, and I’ll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is being recorded. And at this time, I will turn it over Jeff Kotkin. You may begin, sir. Jeffrey R. Kotkin – Vice President-Investor Relations Thank you, Brandon. Good morning, and thank you for joining us. I’m Jeff Kotkin, Eversource Energy’s Vice President for Investor Relations. As you can see on slide one, if you’ve gone into our slides, which are on our website, some of the statements made during this investor call may be forward-looking as defined within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and are subject to risk and uncertainty, which may cause the actual results to differ materially from forecasts and projections. Some of these factors are set forth in the news release issued yesterday. Additional information about the various factors that may cause actual results to differ can be found in our Annual Report on Form 10-K for the year ended December 31, 2015. Additionally, our explanation of how and why we use certain non-GAAP measures is contained within our news release and the slides we posted last night on the website under Presentations & Webcasts and in our most recent 10-K. Turning to slide two, speaking today will be Jim Judge, who yesterday became Eversource Energy’s President and CEO; and Lee Olivier, our Executive Vice President for Enterprise Energy Strategy and Business Development. Also joining us today are Werner Schweiger, our Executive Vice President and Chief Operating Officer; Phil Lembo, our new Senior Vice President and CFO; Jay Buth, our Vice President and Controller; and John Moreira, our Vice President of Financial Planning and Analysis. Now, I will turn to slide three and turn over the call to Jim. James J. Judge – President & Chief Executive Officer Thank you, Jeff, and thank you all for joining us this morning. I also wanted to thank many of you on our call today for the notes you’ve sent me since our announcement last month of Tom’s retirement. Tom’s record of providing value and service to customers and investors as CEO first of Boston Edison, then NSTAR, Northeast Utilities and Eversource Energy, was unsurpassed in our industry. I was both honored and tremendously excited by being our Board’s choice to succeed him. This company has a tremendous future ahead. We continue to identify investment opportunities to enable our region to successfully implement the state and federal energy policies that continue to shape our region. We also have what I consider to be the best group of 8,000 employees in the industry and a very talented and very experienced management team. I look forward to continuing to work closely with our investors as our company continues to deliver to you attractive returns by providing the highest level of service to customers. As Jeff mentioned, pleased to share with you that yesterday the Eversource Board of Trustees elected Phil Lembo as the company’s Senior Vice President, Chief Financial Officer and Treasurer. Most of you know Phil well. He’s been a key contributor for us for years. So congratulations, Phil, and I’d like you to say a few words. Philip J. Lembo – Senior Vice President, Chief Financial Officer and Treasurer Yeah. Thank you, Jim. I would echo Jim, thank you for those notes and congratulations and calls I received. So thank you very much. I know I’ve known a lot of you for many years going back to the investor relations days several years ago. But I’m looking forward to meeting those of you who I haven’t had a chance to meet yet and working with you closely over the weeks and months ahead. I know I have some big shoes to fill and I’m excited about the opportunity. Just also want to close it and say I’ll be part of the Eversource team that’s at the AGA Conference down in Naples and I hope that I’ll get to meet you in person at that event. So thank you, Jim, and I’ll turn it back to you. James J. Judge – President & Chief Executive Officer Thanks, Phil. Today, I will cover our first quarter financial results, strong operating performance results for the quarter, an update on certain transmission projects and regulatory dockets. Starting with our financial result in slide four, we earned $244 million or $0.77 per share in the first quarter of 2016, compared with earnings of $253 million or $0.80 per share in the first quarter of 2015. Both of those are GAAP numbers since we are no longer separating our merger integration costs in reporting our results. These results represent a solid start to 2016 despite the very mild weather in the first quarter. These results also support our full year EPS estimate of $2.90 to $3.05 per share as well as our long-term earnings growth rate of 5% to 7%. Our transmission segment earned $0.27 per share in the first quarter of 2016 compared with $0.21 per share in the first quarter last year. The first of two principle drivers of that increase was the absence of a $0.04 charge we recorded in the first quarter of 2015 after FERC issued its final decision in the first New England Transmission ROE complaint. The second factor was the earnings growth we are experiencing as a result of our continued investment in the reliability of the New England power grid. That rate case growth added $0.02 per share in the first quarter of 2016. On the electric distribution side, we earned $0.34 per share in the first quarter this year compared with earnings of $0.41 per share in the first quarter of 2015. Three principle factors contributed to this $0.07 per share reduction in earnings. The primary driver was the absence in 2016 of about $0.09 of benefits we realized in the first quarter last year from settling several longstanding dockets at NSTAR Electric. Milder weather in the first quarter of 2016 reduced earnings at NSTAR Electric and PSNH where distribution revenues are not fully decoupled, and that cost us about $0.02 per share. Partially offsetting those impacts were lower O&M and other items, including our second quarter 2015 accumulated deferred income tax settlement at Connecticut Light and Power. Altogether, those factors added about $0.04 per share in the first quarter. On the natural gas distribution side, we earned $0.16 per share in the first quarter this year compared with earnings of $0.18 per share in the first quarter of 2015. Warmer weather was a principle factor with lower gas revenues costing us $0.05 per share despite a nearly $16 million annualized rate increase at NSTAR Gas. We had a very cold first quarter in 2015 and a very mild first quarter in 2016. Heating degree days in the Boston area were 21% above normal in the first quarter of 2015 when NSTAR Gas did not yet have decoupling. In Connecticut, where Yankee Gas is not yet decoupled, heating degree days were about 10% below normal in the first quarter this year compared with 18% above normal in the first quarter of 2015. The weather impact was partially offset by lower O&M, a rate increase at NSTAR Gas and other factors that together added $0.03 per share to earnings. Turning from our financial results to operations, our transmission investments totaled $140 million in the first quarter of 2016, and we continue to target transmission capital investments of $911 million for the full year. As you can see on slide five, we continue to move ahead on our major reliability transmission projects across the system. We are making solid progress on our two large families of reliability projects, the Greater Boston Reliability Solutions and the Greater Hartford/Central Connecticut Solutions. We have now invested more than $130 million in those projects with many elements now completed, under construction, or before regulators for approval. By 2019, we expect to invest $900 million in these comprehensive solutions to our region’s energy – long-term reliability challenges. The New Hampshire Site Evaluation Committee has a number of projects before it, including Northern Pass. Last month, we filed our application with the Site Evaluation Committee to build the $77 million Seacoast Reliability Project in Southeastern New Hampshire. We expect a decision on our application by mid-2017, and to complete the Seacoast project by the end of 2018. We also continue to expand our natural gas delivery system in the first quarter. We’ve added about 2,500 natural gas heating customers in the first quarter, up about 20% from the 2,050 we added in the first quarter of 2015, and very consistent with our full year 2016 goal of 12,500 new heating customers. We added a 72nd town to the Yankee Gas service territory, the town of Bozrah in Eastern Connecticut. And despite the mild winter, we did have one frigid weekend around President’s Day, when both Yankee Gas and NSTAR Gas set all-time records for the amount of natural gas delivered in a single day. On February 14, NSTAR Gas delivered over 8.5% more natural gas to our customers than the previous record set back in January, 2014. Now, I will turn to our regulatory calendar in slide six. We are awaiting a decision from the New Hampshire PUC on our comprehensive settlement with numerous state officials and other parties to divest PSNH’s generating assets. To remind you, PSNH generating rate base, including under-appreciated plants, fuel and inventory, totals approximately $700 million. Any investment we have in our generation business that is not recovered through the plant sale process will be recovered through securitization. We continue to expect the entire sale and securitization process to be completed by this time next year. Moving from New Hampshire to Washington, on March 22, the administrative law judge at FERC handling complaints number two and complaint number three involving the ROEs earned by all New England transmission owners issued his initial recommendation. For the 15-month refund period ended in March 2014, the 400-page recommendation called for a base ROE of 9.59% and a cap of 10.42%. For the 15-month period ending October 2015, the decision called for a base ROE of 10.9% and a cap of 12.19%. Our currently allowed ROE is 10.57% and our current cap is 11.74%. So if the FERC were to adopt the ALJ recommendation, we would find ourselves under-reserved for the earlier refund period by $34 million after tax and over reserved for the later refund period by $8 million after tax. Because we cannot be certain how FERC commissioners will ultimately decide the case, we didn’t book any charges this quarter due to the ALJ recommendation. We will reexamine the issue as this process moves forward. If FERC were to adopt the ALJ recommendation, we would have a one-time net charge of approximately $0.08 per share. Going forward, however, we would earn a higher ROE of 10.9% compared with the current base of 10.57%. Parties to the case filed comments on the ALJ recommendation on April 21. We continue to expect the final FERC decision around the end of this year or early 2017. I should note that after six months of no additional complaints, a fourth complaint was filed this past Friday by Eastern Massachusetts Municipal Electric Companies. We await FERC action on this fourth complaint. Turning to financing, Eversource parent issued $500 million of senior notes in March, $250 million of five-year notes with a coupon of 2.5%, and $250 million of 10-year notes with a coupon of 3.35%. Proceeds were used to pay down short-term debt. The issuances were several times oversubscribed, and we’re very pleased with the rates we received. Now, I’ll turn the call over to Lee. Leon J. Olivier – EVP-Enterprise Energy Strategy and Business Development Okay. Thank you, Jim. I’ll provide you with a brief update on our major investment initiatives and then turn the call back to Jeff for Q&A. Let’s start with Northern Pass on slide eight. The review process for Northern Pass continues to move along according to schedule. March was an important month from the standpoint of receiving public input on our project. A total of seven public meetings were held around this date in the month, three by the New Hampshire Site Evaluation Committee, two by the U.S. Department of Energy, and two jointly between these two primary permitting agencies. The Site Evaluation Committee will hold two additional public meetings on some follow-up items, one later this month and another in June. April 4 was the deadline for the written comments on the draft environmental impact statement, and we expect a final environmental impact statement from the DOE in the fourth quarter of this year. On the state side, the New Hampshire SEC recently established a near-term schedule through the end of June, providing for commencement of the discovery process in mid-May. The dates are similar to what we had proposed. Under the state statute, we would expect the New Hampshire SEC to hold evidentiary hearings and issue a decision before the end of the year. We are aware that some interveners have requested a more prolonged review period, and we expect a ruling soon on those requests and establishment of a firm schedule. Assuming the final schedule is consistent with the statutory deadline, as you can see on slide nine, it would support the issuance of a presidential permit from the Department of Energy early next year and the commencement of construction shortly thereafter. We continue to see support for the project building in New Hampshire, and we were gratified by the number of favorable comments in the public meetings, particularly from the labor and business communities of New Hampshire. We believe this is a sign of growing public support for the project and the billions of dollars of benefits it will bring to New Hampshire. As stated in our February Earnings Call, we bid both Northern Pass and the Clean Energy Connect into the three-state electric RFP. Clean Energy Connect would allow 600 megawatts of carbon-free energy to flow from New York into New England. The review process for our projects and the other approximately 20 that were bid into the process continues, and we expect the states involved in the RFP, Massachusetts, Connecticut and Rhode Island, to announce the winning bids this summer. I will now turn to slide 10 and the Access Northeast project we plan to build with our partners Spectra Energy and National Grid. To remind you, Access Northeast is a $3 billion project to upgrade the existing Algonquin pipeline and add 6.8 billion cubic feet of LNG storage in Acushnet, Massachusetts, to bring firm natural gas supplies to power generators in New England. Our share of Access Northeast is 40%, or $1.2 billion. The project is designed to provide 900 million cubic feet per day of additional natural gas supplies to serve the region’s power generators during cold winter periods. That will allow up to 5,000 additional megawatts of the region’s most efficient low-cost units to remain online when winter temperatures drop, saving New England customers approximately $1.5 billion to $2 billion in a typical winter and approximately $3 billion in an extreme winter such as the 2013 and 2014 period. Access Northeast builds up the existing Algonquin footprint which already touches 60% of the power generation in New England, a percentage that will soon grow as nearly 2,600 megawatts of new proposed plants are built and connected to the project. Access Northeast allows direct last-mile deliveries to the power plants to ensure greater reliability and cost benefits. Business model is that electric utilities sign long-term contracts with Access Northeast and then retain an independent capacity manager to market that capacity to generators out of market price. Without Access Northeast, those generators are frequently without fuel to run their units during cold winter weather when the region’s existing pipeline capacity is used primarily to heat homes and businesses. If a large amount of new pipeline capacity is set aside to meet the fuel supply needs of natural gas generators, we can depend less on more costly and higher emitting coal and oil plants that typically operate when the region’s natural gas suppliers are short. We continue to make significant progress on securing and seeking approval of contracts with New England Electric distribution companies. The current status of the state reviews is on slide 11. You will recall the following in RFP this past fall, NSTAR Electric, Western Mass Electric, and two National Grid electric distribution companies filed with the Massachusetts DPU seeking approval of contracts for pipeline and storage capacity with Access Northeast. Our two utilities asked for a decision by October 1 of this year. The DPU has established a schedule to review that filing that would support a decision in the early fall. Evidentiary hearings on all of the contracts are scheduled for this summer. Once approved by the Department of Public Utilities, these contracts will account for more than 40% of Access Northeast targeted capacity. In Connecticut, we expect the State Department of Energy and Environment Protection to issue request for proposals for natural gas capacity shortly. We expect this process to be complete with approved contracts late this year or early in 2017. In New Hampshire, you may recall that the Public Utilities Commission issued an order on January 19 in which they accepted a staff report that concluded that the Public Utility Commission had sufficient authority to approve electric distribution contracts, financial gas supplies if those contracts were shown to be in customers’ interests. On February 18, Public Service of New Hampshire filed with state regulators a natural gas contract with Access Northeast that was similar to what the four Massachusetts electric utilities filed in their state. If the New Hampshire Public Utility Commissioners agree with the staff that they have sufficient authority to approve such agreements, they would then determine whether the specific contracts submitted were in the customer’s best interest. A technical session on the docket scheduled was held yesterday. We are optimistic that the commissioners will agree with the staff that they have authority to approve a contract with Public Service of New Hampshire and Access Northeast. The PUC’s consideration of whether the contracts provide benefits to customers would follow its legal ruling on the issues. In Maine, where regulators have been engaged in natural gas contracting issue for some time, state regulators are scheduled to reach a decision on recommended solutions by the early fall. In Rhode Island, National Grid issued in RFPs in the fall with bids received November 13, around the same time as the Massachusetts electric distribution companies had their RFP. We expect the National Grid to make a decision and file with Rhode Island regulators by early this summer. In Vermont, the state has expressed support for additional natural gas infrastructure, but its level of participation is yet to be determined. We expect that the state processes will be sufficiently advanced by the end of this year so that we can promptly file a formal application with FERC and bring additional natural gas supplies into New England for the winter 2018 to 2019. We continue to believe that Access Northeast offers an excellent near-term and long-term answer to the region’s intensifying winter energy challenges. And now, I’d like to turn the call back over to Jeff for any Q&As. Jeffrey R. Kotkin – Vice President-Investor Relations All right. And I’m going to turn it back to Brandon just to remind you how to answer questions. Question-and-Answer Session Operator Thank you, sir. Jeffrey R. Kotkin – Vice President-Investor Relations All right. Thank you. Our first question this morning is from Mike Weinstein from UBS. Good morning, Mike. Michael Weinstein – UBS Securities LLC Hey. Good morning. I was just wondering if we could talk about the – whether the current status of the RFPs and expected approvals for gas contracts support beginning construction in 2017 for getting major sessions with the pipe online for the winter of 2018 and 2019, generally speaking broadly. Leon J. Olivier – EVP-Enterprise Energy Strategy and Business Development Yeah, Mike. This is Lee Olivier. The construction period would start for the project in 2018, will start in early 2018, approximately the April-May timeframe and then the first sections would go in on the piping for the winter of 2018. So you’re talking about the November timeframe of 2018. I would say right now we’re still on schedule. We will be prepared to file the comprehensive filing at FERC in the November-December timeframe. We believe the timing in and around the other states, including Connecticut, even though Connecticut is built inside of their process, they have 90 days to negotiate precedent agreements with the EDCs, we think that could be done in approximately 30 days or 35 days. Their approval process through their regulatory body PURA is a very short term, it’s about 60 days. So we think all of these schedules line up right now for conclusion by the end of this year and filing with FERC and start with construction in the spring of 2018 for the first phase of the pipeline. Michael Weinstein – UBS Securities LLC Are you seeing more support for the project, just broadly speaking, as a result of the cancellation of Northeast Energy Direct? Leon J. Olivier – EVP-Enterprise Energy Strategy and Business Development I would say, although, the two projects were designed somewhat differently, we were designed to supply gas to generators to firm up 5,000 megawatts and they – ostensibly the (24:55) all around providing LDC power supplies. I think the fact that they’re not going to be there obviously puts more pressure on the overall gas supplies of the region. So I believe that there is more support firming up around Access Northeast, both in the business community and with policymakers as well. Michael Weinstein – UBS Securities LLC And just one last one. Can you give us an update on Massachusetts legislation and work for renewables in the state, how that might impact things like the Clean Energy Connect project, things like that? James J. Judge – President & Chief Executive Officer Sure, Mike. This is Jim. We had solar legislation that was approved in Massachusetts that increases that needling cap and actually extends the opportunity for utilities to consider a utility-owned solar. There is also proposed legislation that the governor is endorsing which recommends hydroelectric commitments as well as offshore wind is being discussed as well. Those are only in draft form of proposed, it’s only until the solar legislation is passed today. Michael Weinstein – UBS Securities LLC Okay. Thanks a lot. Jeffrey R. Kotkin – Vice President-Investor Relations All right. James J. Judge – President & Chief Executive Officer Thank you. Jeffrey R. Kotkin – Vice President-Investor Relations Thanks, Mike. Our next question this morning is from Travis Miller from Morningstar. Good morning, Travis. Travis Miller – Morningstar, Inc. (Research) Good morning. Thanks. I was wondering just on the demand, so electric demand in particular. How much of that was weather do you estimate? I know it’s tough to do. James J. Judge – President & Chief Executive Officer Travis, it’s a tough question because you have such an extreme change from one year to the next, a very, very cold winter in the first quarter, a very mild winter this quarter resulting in a sales decline in the electric side of 8.5%. I would say that virtually all of that is weather-driven. I think without the – if we had had normal weather, I think the sales would have been close to flat, is my estimate. Travis Miller – Morningstar, Inc. (Research) Correct. Is that – remind me what your outlook is for this year in terms of electric sales growth. James J. Judge – President & Chief Executive Officer Flat is the estimate that we provided. Travis Miller – Morningstar, Inc. (Research) Okay. And is that – if we look out, call it five years or something, what kind of trends are you seeing in terms of what would keep electric demand flat or 0.5%, something well below what we’ve seen historically? Are there particular specific trends and programs perhaps that you would see depressing that type of demand? James J. Judge – President & Chief Executive Officer Yeah. We’re estimating the long-term growth rate on the electric side to be flat as well. As you know, we are decoupled in a number of our franchises. And as we have future rate cases, we’ll be decoupled everywhere, I expect. But we are forecasting flat on the electric side, but because of the gas conversions going on, we think there’ll be 2% to 3% growth in gas sales annually. And really I think the primary driver to that flat growth has got nothing to do with the economy, in particular in the Boston area the economy is moving. There’s lots of construction going on. But we as a company spend $500 million a year, $0.5 billion a year on energy efficiency, and I think that has a significant impact – 2% impact on the sales results for the company. Now, fortunately, the rate-making mechanism for energy efficiency spending makes us whole, either decoupling our loss-based revenues reimburse us. If we actually do a good job on the projects, we’re able to earn an incentive. And at the same time, we’re recovering our costs as we incur them each year. So the cash flow is positive as well. So, yeah, were it not for energy efficiency, I think we’d be looking at 2% or higher sales volume growth. Travis Miller – Morningstar, Inc. (Research) Okay, great. I appreciate the thoughts. Thanks. Jeffrey R. Kotkin – Vice President-Investor Relations Thank you, Travis. Our next question is from Caroline Bone from Deutsche Bank. Good morning, Caroline. Caroline V. Bone – Deutsche Bank Securities, Inc. Hey. Good morning, and first of all congratulations, Jim and Phil. That’s wonderful news. James J. Judge – President & Chief Executive Officer Thank you very much. Philip J. Lembo – Senior Vice President, Chief Financial Officer and Treasurer Thank you. Caroline V. Bone – Deutsche Bank Securities, Inc. You’re welcome. So I just have one question. Last call, I believe you guys discussed the possibility of share buybacks. And I was just wondering if you could kind of review with us the circumstances in which we might see such a program? James J. Judge – President & Chief Executive Officer Sure. We have a lot of positive cash flow items, right? Our fundamental business is strong to begin with. We’ve got bonus depreciation that’s been extended. We have $700 million of cash coming in the door next year from the divestiture and securitization. And what we have said in the past is that to the extent that we can’t find additional projects to pursue, to redeploy that cash, ultimately it’s shareholders’ monies and so obviously we would pay off some debt as well. But we would consider a share buyback if there wasn’t a better use of the proceeds. That being said, I wouldn’t expect any announcement this year. I mean, we are certainly executing to our plan for 2016. As we reaffirm guidance today, we continue to believe that we’re going to be able to achieve those results and those results for 2016 do not assume a buyback is in place. Caroline V. Bone – Deutsche Bank Securities, Inc. Okay. Thank you. That’s very clear. Jeffrey R. Kotkin – Vice President-Investor Relations Thanks, Caroline. We don’t have any other questions this morning. So we want to thank you for joining us. We look forward to seeing you at many conferences over the next couple of weeks, and have a good rest of the day. Operator Ladies and gentlemen, this concludes today’s conference. Thank you for joining. You may now disconnect. Jeffrey R. Kotkin – Vice President-Investor Relations Thanks, Brandon. Operator You bet. Take care. Jeffrey R. Kotkin – Vice President-Investor Relations All right. 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