Fitch Rates NSTAR Electric Company's Debentures 'A'

Published: 2026-05-12 06:51:20 ET ES

Published on 05/12/2026 at 06:51 am EDT

Fitch Ratings has assigned an 'A' rating to NSTAR Electric Company's (NEC) proposed senior unsecured debenture issuance.

The debentures rank pari passu with NEC's existing senior unsecured debt. Net proceeds of the offering will be used for refinancing of debt maturities, repayment of short-term debt, and funding of capital programs.

NEC's current Long-Term Issuer Default Rating (IDR) is 'A-'. The Rating Outlook is Negative. The Negative Outlook reflects that of parent, Eversource Energy (Eversource; BBB/Negative) and the application of Fitch's Parent-Subsidiary Linkage criteria (PSL). A downgrade at Eversource would result in downgrades at NEC.

Key Rating Drivers

Balanced Regulatory Environment: Fitch considers the regulatory environment overseen by the Massachusetts Department of Public Utilities (DPU) to be relatively balanced, supporting NEC's financial profile. NEC operates under a five-year performance-based regulation (PBR) plan that runs through Dec. 31, 2027.

NEC benefits from full revenue decoupling and several cost-recovery mechanisms, which enhance cash flow stability and predictability. The DPU permits recovery outside of general rate cases for pension and post-retirement benefits, energy efficiency program costs, and the associated lost revenue and storm costs.

Adequate Financial Metrics: NEC's 2025 FFO leverage was 4.3x, consistent with Fitch's expectation and reflects annual PBR rate adjustment of $56 million effective on Jan. 1, 2025. The company has a large capex program, more than 4x of depreciation expense, that will continue to pressure credit metrics. Ongoing investments in FERC-regulated transmission projects that receive timely cost recovery and above-average returns should enable the utility to maintain its financial strength. Over the forecast period, Fitch estimates NEC's FFO leverage to average around 4.2x through 2027.

Large Capex Plan: Fitch expects capex to remain elevated through the forecast plan due to significant investments in FERC-regulated regional transmission projects. Management forecasts transmission capex to total approximately $1.3 billion through 2027. Investments in the company's distribution system to support the state's clean energy goals will also contribute to the large capex in the near term. Fitch expects capex to be funded in a credit support manner. Investments beyond core distribution capex will be recovered through various trackers, including advanced metering, grid modernization, and solar.

Low-Risk Business Profile: NEC's ratings largely reflect the low business risk and stable cash flow of its regulated electric transmission and distribution operations. The company has no commodity exposure and a decoupling mechanism that eliminates the effect of weather and usage patterns on revenue. A significant and growing share of the rate base is derived from electric transmission investments regulated by FERC.

2022 Multiyear Rate Case Settlement: Fitch deems the outcome of NEC's last rate case constructive and supportive of credit quality. DPU authorized a $64.3 million increase based on a return on equity (ROE) of 9.8%, with 53.21% equity capital and a five-year PBR plan that began on Jan. 1, 2023. Earnings over 10.8% are to be shared with ratepayers. The decision implements storm fund refinements and advanced metering infrastructure tariffs and is aligned with the state's electrification policy.

Parent-Subsidiary Linkage: There is a parent subsidiary linkage between Eversource and its rated utility subsidiaries, including NEC. Fitch believes the utility subsidiaries have stronger Standalone Credit Profiles (SCPs) than Eversource. Therefore, the linkage between Eversource and the utility subsidiaries follows a weak parent/strong subsidiary approach. Eversource centrally manages the treasury function for all utility subsidiaries and is the sole source of equity. However, subsidiaries issue their own long-term debt. As such, Fitch limits the difference between Eversource and its higher-rated regulated subsidiaries to two notches.

Peer Analysis

NEC compares adequately with peers with an 'A-' Long-Term IDR. The company operates in a balanced regulatory environment in Massachusetts and benefits from a significant amount of FERC-regulated electric transmission assets, which are relatively low risk and provide stable and predictable cash flows. NEC and peers The Connecticut Light and Power Company (CL&P; A-/Negative) and Consolidated Edison Company of New York, Inc. (CECONY; BBB+/Stable) all have revenue decoupling, and CL&P has a significant amount of FERC-regulated electric transmission assets.

However, CL&P and CECONY operate in regulatory environments in Connecticut and New York, which Fitch considers less constructive than those in Massachusetts. NEC further benefits from a stronger financial profile. Fitch expects NEC Electric's FFO leverage to average around 4.2x through 2027.

Fitch's Key Rating-Case Assumptions

Capex in line with the company's guidance;

O&M expense is relatively flat;

Normal weather;

Transmission earnings reflect allowed ROE and capital structure;

Distribution earnings reflect annual increases under performance-based ratemaking mechanism.

Corporate Rating Tool Inputs and Scores

Fitch scored the issuer as follows, using our Corporate Rating Tool (CRT) to produce the Standalone Credit Profile (SCP):

Business and financial profile factors (assessment, relative importance): Management (bbb+, Lower), Sector Characteristics (a, Higher), Market and Competitive Positioning (bbb+, Moderate), Diversification and Asset Quality (bbb+, Moderate), Company Operational Characteristics (a-, Moderate), Profitability (bbb+, Moderate), Financial Structure (a-, Higher), and Financial Flexibility (a, Moderate).

The quantitative financial subfactors are based on standard CRT financial period parameters: 20% weight for the latest historical year 2024, 40% for the forecast year 2025 and 40% for the forecast year 2026.

The Governance assessment of 'Good' results in no adjustment.

The Operating Environment assessment of 'aa-' results in no adjustment.

The SCP is 'a-'.

To derive the IDR:

Application of Fitch's Parent Subsidiary Linkage Rating Criteria results in a consolidated profile+2 approach.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

A downgrade to parent Eversource's Long-Term IDR, given Fitch's maximum allowed two-notch differential between the Long-Term IDRs of the entities;

FFO leverage expected to exceed 4.5x on a sustained basis.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

An upgrade to parent Eversource's Long-Term IDR, given that NEC's ratings upside is restricted by a maximum two-notch differential between the Long-Term IDRs of NEC and Eversource;

FFO leverage expected to remain below 4.0x on a sustained basis.

Liquidity and Debt Structure

Fitch considers NEC's liquidity adequate. The company maintains its own $650 million CP program backstopped by an equal-sized RCF. NEC's $650 million RCF is separate from the shared RCF of parent Eversource and the other utilities, and it matures on Oct. 11, 2030. As of Dec. 31, 2025, there was $245.4 million outstanding, leaving $404.6 million of available borrowing capacity. NEC has about $8 million cash available as of Dec. 31, 2025. The company has manageable debt maturities of $300 million in 2026, which Fitch expects the company to refinance.

Issuer Profile

NEC is a regulated electric transmission and distribution utility that serves approximately 1.62 million customers in Massachusetts.

Date of Relevant Committee

09-Feb-2026

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

Climate Vulnerability Signals

The results of our Climate.VS screener did not indicate an elevated risk for NSTAR Electric Company.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

RATING ACTIONS

Entity / Debt

Rating

NSTAR Electric Company

senior unsecured

New Rating

Page

of 1

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PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.

APPLICABLE CRITERIA

Corporates Recovery Ratings and Instrument Ratings Criteria (pub. 03 Aug 2024) (including rating assumption sensitivity)

Corporate Hybrids Treatment and Notching Criteria (pub. 08 Apr 2025)

Parent and Subsidiary Linkage Rating Criteria (pub. 28 Jun 2025)

Corporate Rating Criteria (pub. 10 Jan 2026) (including rating assumption sensitivity)

Sector Navigators - Addendum to the Corporate Rating Criteria (pub. 10 Jan 2026)

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

Corporate Monitoring & Forecasting Model (COMFORT Model), v8.2.0 (1)

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