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January 11, 2024

Fitch downgrades Eversource’s credit rating as offshore wind uncertainty looms

HBJ FILE PHOTO Eversource offices in downtown Hartford.

Fitch Ratings downgraded utility company Eversource Energy’s long-term issuer default rating a notch from BBB+ to BBB on Thursday.

A BBB rating indicates that expectations of default risk are currently low, but adverse business or economic conditions are more likely to impair the business’ capacity for payment of financial commitments.

Also, Eversource's short-term issuer default rating was downgraded from F2, which means “a good capacity for timely payment,” to “F3,” or “adequate capacity for timely payment.”

Eversource’s senior debt was downgraded from BBB+ to BBB, as well.

Fitch said its decision reflects “continuing uncertainty around the sale of the three offshore wind projects under development.”

Earlier this week, Eversource announced an impairment of up to $1.6 billion in the fourth quarter of 2023 as it prepares to sell its 50% stake in three projects, known as South Fork Wind, Revolution Wind and Sunrise Wind.

All three projects are joint ventures with the Danish company Ørsted.

According to Fitch, Eversource’s offshore wind assets are expected to sell for less than previously anticipated.

The costs of the three projects have been increasing due to supply issues and power price adjustments, Fitch said.

New York regulators recently decided not to grant Sunrise Wind a rate increase. As a result, the project will be put up for bidding again.

“If the Eversource joint venture does not win the bid, which Fitch has assumed in its base case, the contract will be terminated resulting in sizable breakage fees both for contract termination and for counterparty contracts, resulting in a lower overall sale price,” Fitch said in its commentary on the downgrade.

Proceeds from the sale of Eversource’s offshore wind assets are expected to be a “key source of cash for parent level debt reduction, along with equity issuance,” according to Fitch. But now it appears the reduction in debt will be lower than previously thought.

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