Avangrid, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Avangrid's third quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this time, you will need to press star, then one on your telephone. If you require any further assistance, please press star, then zero, and an operator will come back on to assist you. I would now like to hand the conference over to your first speaker today, Patricia Costell. Please go ahead.

Thank you, Amy, and good morning to everyone. Thank you for joining us today to discuss Avangard's third quarter 2020 earnings results. Presenting on the call today are Dennis Areola, our Chief Executive Officer, and Doug Stuver, our Senior Vice President and Chief Financial Officer. Also joining us today for the question and answer part of the call will be Bob Kumpf, Deputy Chief Executive Officer and President of Avangrid, Alejandro Dehos, President and Chief Executive Officer of Avangrid Renewables, and Tony Marone, President and Chief Executive Officer of Avangrid Network. Note that some of us will be together for the call today, keeping our social distancing, while others will be joining us remotely. If you do not have a copy of our press release or presentation for today's call, they are available on our website at www.avangrid.com. During today's call, we will make various forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our legal assumptions are incorrect or because of other factors discussed in Avangard's earnings news release, in the comments made during this conference call, in the risk factors section of the accompanying presentation, or in our latest reports and filings of the Securities and Exchange Commission, each of which can be found on our website, avangard.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of non-GAAP financial measures to the closest GAAP financial measures. I'll now turn the call over to Dennis.

Well, thanks, Patricia, and good morning, everyone, and thanks all for joining us this morning. I also want to welcome any of our Avangrid and future PNM resource employees that may be joining us. Well, as you can see, we've been busy in the last 90 days, and I'm pleased to give you an overview of some of the highlights. When we last spoke during our second quarter earnings call in July, I indicated that we would be conducting a detailed and thorough review of the company's operations, business model, and financial projections. That work is nearly completed, and we look forward to sharing our updated strategy and financial forecast with you on November 5th during our Investor Day. In the meantime, I'm truly excited to announce our agreed-upon merger with PNM Resources. This strategic transaction will help further advance Auburn Grid's mission to grow both our distribution and transmission businesses, as well as our leadership position in renewables. Now, before I get into more of the details of this important transaction, let me discuss some of the highlights of the third quarter. During this pandemic, we've continued to operate in a safe and reliable manner, focusing on the health and the needs of our employees and customers. In our networks business, we successfully prepared for and responded to several major storms during the quarter, including Tropical Storm Isaias, leveraging resources from the different operating grid companies across our service territories. I'm proud of the work by Team Oven Grid and appreciative of all of the contractors and third-party support we received in safely restoring power to our impacted customers. In regards to our New England Clean Energy Connect transmission project, we're on track to start construction in Q4 2020 once we receive the approval of the U.S. Army Corps of Engineers, which we expect by the end of this month. In renewables, We also continue to execute on our strategy to build our portfolio of clean generation throughout the U.S. We recently executed two new long-term PPAs for a total of 170 megawatts of wind and solar projects, and we secured multi-year RECs and hedge transactions that will help reduce market exposure on over 200 megawatts. In offshore wind, Park City wind contracts were approved in July by the Connecticut Public Utilities Regulatory Authority, and we've submitted the commercial operations plan with the Bureau of Ocean and Energy Management. I'm also pleased to inform you that yesterday, our Liberty Wind Project submitted multiple bids for over one gigawatt to the New York Offshore Wind RFP. The winning bids are expected to be selected within the next several months. We've also worked out an arrangement with our partner, CIP, which could provide Avangrid with even more control over these projects if we're successful in our New York bids. Now, we've included some slides in the appendix that provide additional information and updates on both our networks and renewables businesses, and we'd be happy to answer any questions regarding this information during our Q&A period. I'm also proud to share that we were recognized for our leadership as a company driven by our purpose to serve our customers and society. And just last week, we announced that Avangrid was named one of America's most just companies on the Forbes Just 100 annual list. And we ranked number one within the utility industry for our commitment to the environment and the communities we serve. We were also recognized in Connecticut as part of Forbes annual list of America's best in state employers in 2020. Now for third quarter earnings, our networks business had a solid quarter overall. Although our consolidated results were negatively impacted by the timing of expenses incurred in advance of receiving final rate approvals in New York, as well as our higher outage restoration costs in networks. In addition, In our renewables business, we experienced lower wind production from existing assets and unfavorable market pricing. At corporate, we reported interest expense related to our debt issuances in the last year. For the third quarter of 2020, net income was $87 million, or $0.28 a share. And on a year-to-date basis, net income was $415 million, versus $1.34 a share, $415 million. Our adjusted net income in the third quarter was $100 million, or $0.32 a share, and on a year-to-date basis, adjusted net income was $434 million, or $1.40 a share. If the New York rate case had been approved as outlined in the joint settlement, it would have mitigated the expenses already recorded in New York, and it would have contributed approximately 14 cents year-to-date on a pro forma adjusted earnings per share basis. We expect New York's Public Service Commission to address the joint settlement in November. Now, based on year-to-date results and our review of our business prospects for the remainder of the year, We expect our 2020 consolidated results for both GAAP and adjusted EPS to be in the range of $1.90 to $2 per share. This outlook reflects the impacts of lower-than-expected wind and merchant pricing on renewables, higher-than-anticipated outage restoration and other costs and tax impacts. It also assumes approval of our New York rate case before year-end. And Doug's going to provide some additional details on our third quarter performance in this section. Now I'd like to turn to slide six and provide some additional color on our announced transaction with PNM Resources this morning. This is a strategic transaction for Auburn Grid, and it will add important growth for both our distribution and transmission business, as well as our clean, renewable generation business. Overall, the transaction has an enterprise value of approximately $8.3 billion, with our all-cash offer of $50.30 for each share of PNM resources. The PNM Resources Board approved the transaction yesterday, and based on the required federal and state approvals, we're optimistic that we can consummate the merger by the end of 2021. And as part of the merger agreement, Avangrid would add two new directors from PNM Resources to the Board of Directors when the deal closes. We're also pleased to announce that our majority shareholder, Iberdrola, has provided Avangrid with a funding commitment letter for the full amount of the transaction. And as a result, Iberdrola is expected to retain their 81.5% ownership position once the final transaction is complete. This funding commitment by Iberdrola will allow Avangrid to put in place an optimal capital structure that will help fund the transaction with PNM resources. Now this transaction is strategic and a great fit for Avangrid for the following reasons. First, we expect this transaction to be EPS accreted in the first full year after we close. It could be more than 3% accreted depending upon the final funding mix. And next, as a result of P&M's earnings from regulated distribution and transmission assets, we expect that Ovingridge regulated earnings post-transaction will exceed 80%, providing predictability and visibility to our future earnings. And it also gives us additional earnings diversity, geographic diversity in our network's business. Now, this higher proportion of regulated earnings will also support our fast-growing renewables business over the next decade. As P&M's utilities become part of the Avangrid family of companies, we have naturally strong alignment because we both have strong commitments to the environment, social, and governance issues that matter to our customers, our employees, regulators, the communities that we serve, and our shareholders. Both companies have carbon neutrality goals, and P&M has already defined its pathway to becoming coal-free. This truly is a win-win outcome for all of our stakeholders. On slide seven, you can get a better picture of what our combined companies look like after the transaction closes. PNM Resources, with operations in New Mexico and Texas, is comprised of two regulated utilities, PNM and TNMP, serving approximately 790,000 customers, or 2 million people, and with a total rate base of 4.1 billion and 2.8 gigawatts of regulated generation. Together, we'll have 10 regulated electric and gas utilities with a strong distribution and transmission footprint in six different states and significant growth prospects. The combined adjusted net income based on 2019 pro forma basis was $846 million, and the current combined market cap is approximately $20 billion. Now, we'll have approximately $14.4 billion in combined rate base, serving nearly 4.1 million customers and 9 million people, with over 100,000 miles of transmission and distribution lines. In addition, Avangrid already has renewable operations in both New Mexico and Texas, and so we're comfortable and knowledgeable of these environments, and this transaction will make us an even more impactful clean energy player for our customers and the local economies. Looking at generation on a post-closing basis, Auburn Grid will have nearly 11 gigawatts of capacity, with over 74% coming from wind, solar, and hydro generation, and about 9% coming from natural gas. Now, approximately 762 megawatts are related to coal generation, of which 562 megawatts are scheduled to be shut down by 2022 with the costs collected in rates. and PNM currently plans to exit the remaining 200 megawatts of coal generation as soon as practicable, and Ovingrid will support that effort. Slide 8 provides a detailed list of the regulatory approvals required to finalize this transaction. The key milestones are federal approvals including FERC, the Hart-Scott-Rodino Clearance, the Committee on Foreign Investment in the U.S., CIFIUS, the Federal Communications Commission, and the Nuclear Regulatory Commission. and regulatory approvals in the states of New Mexico and Texas. No regulatory approvals are required in the other existing states where we have utilities. And we'll obviously be working closely with PNM Resources CEO, Pat Vincent Collins, and her team to obtain the necessary approvals. And as I said, we expect to close the transaction in the fourth quarter of 2021. The resulting company will have $42 billion in assets. and the new oven grid will be very well positioned to lead the clean energy transition and to deliver long-term sustainable growth for our shareholders in both regulated networks and contracted renewables. Now, we're going to be sharing more information with you on the strategic transaction and our long-term outlook very soon at our investor day in November. So with that, I'll pass it to Doug to discuss third quarter financial results in more detail.