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spk02: Good day and thank you for standing by. Welcome to the Avant-Garde first quarter 2020 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 the session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Patricia Cosgall, Vice President of Investor and Shareholder Services. Please go ahead.
spk01: Patricia Cosgall Thank you, Jason, and good morning to everyone. Thank you for joining us today to discuss Auburn Bridge's first quarter 2021 earnings results. Presenting on the call today are Dennis Areola, our Chief Executive Officer, and Doug Stuber, our Senior Vice President and Chief Financial Officer. Also joining us today for the Q&A part of the call will be Bob Kump, Deputy Chief Executive Officer and President of Avangrid, Alejandro Dehos, President and Chief Executive Officer of Avangrid Renewables, and Catherine Stepien, President and Chief Executive Officer of Avangrid Network. 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 key assumptions are incorrect or because of other factors discussed in Avangrid's earnings release in the comments made during this conference call, in the risk factor section of our accompanying presentation, or in our latest reports and filing for the Securities and Exchange Commission, each of which can be found on our website, AubinGrid.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 will now turn the call over to Dennis.
spk10: Well, thanks, Patricia, and good morning, everyone. We appreciate you joining our earnings call. Now, over the last 10 months, you've heard our team talk a lot about the importance of execution and focusing on delivering strong and consistent results. These are the elements that build trust, confidence, and deliver sustainable long-term value. Now, building on the encouraging direction set in Q4 of 2020, Our results in Q1 demonstrate the progress we've made by prioritizing our resources and building a culture of high performance and accountability. Now, we realize that one or two quarters don't make a trend, but you can't start a trend without a couple quarters. So I'm pleased with the excellent start of the year driven by strong execution and solid operating performance in both our networks and renewable businesses. Our net income in the first quarter was $334 million, or $1.08 per share, up 40% over the first quarter of 2020. And adjusted net income for the quarter was $354 million, or $1.14 per share, up 50% year over year. Now, even if we exclude the impact of the Texas weather event, our adjusted EPS was still a strong 87 cents per share, representing growth of approximately 15% year over year. We delivered double-digit growth in our regulated business, driven by our New York rate cases, and solid progress on our ROJA-authorized ROEs at all our utilities. In the first quarter, we started construction of our $1 billion New England Clean Energy Connect transmission line, which will be the largest clean energy project in New England. And I'm also pleased to officially welcome to the team Catherine Stempion as our new president and CEO of Auburn Grid Networks. Catherine is here with us in Orange, Connecticut, safely socially distanced, and she brings solid leadership experience in the utility business. Her track record of success and innovation are a great addition to our leadership team, and I'm confident that she's going to help raise the bar for all of us as we continue to improve our customer service and focus on reliable and efficient operations. Welcome, Catherine. Now, with regard to our P&M resources merger, we're pleased with our continued progress on the required regulatory approvals, including our all-party settlement in Texas and our multi-party stipulation in New Mexico, as well as the recent FERC approval. We are on track to close the transaction in the second half of the year. In renewables, our adjusted EPS was up by 25 cents compared with the previous year, thanks to the strong operating performance and availability of our fleet, including through the Texas weather event. During the winter storm, we met all of our delivery obligations and produced excess energy, contributing to the solution during the crisis. In offshore wind, we received BOEM's final environmental impact statement in March for our 800 megawatt Vineyard Wind 1 project, and we're on track to break ground in the second half of the year. We currently have 690 megawatts of wind and solar under construction, with 640 megawatts starting construction in 2022. Lastly, based on our strong performance in Q1 and our outlook for the rest of the year, we are raising our EPS and adjusted EPS guidance by $0.10 from our previous range of $2.15 to $2.35 to our new guidance of $2.25 to $2.45 for 2021. This guidance assumes that we close the PNM resources merger along with the required financing at year end. Now, let me provide a little more detail on our operating businesses. In networks, we're focused on operational excellence, customer service, and earning our authorized ROEs at all of our utilities by meeting our commitments in our rate plans, enhancing our operating effectiveness, and continuing to focus on enhancing the customer experience. Our regulated investments during the first quarter were up 40% to nearly half a billion dollars, and we're on track to invest about $2 billion this year. These investments will go toward continuing to improve the reliability and resiliency of our grid, including investments in AMI, automation, and substation upgrades. In New York, we're implementing our three-year rate plans approved in 2020 for NYSEG and RG&E, which are going to enable us to make critical investments in automation, reliability, and smart grids. Now, beyond the three-year rate plans, we're also encouraged by the 10-year resiliency bill proposed in New York's current legislative session. This legislation would provide the opportunity to look holistically at the next 10 years, allowing for critical investments to reduce storm impact and to shorten the duration of outages when they do occur. In Maine, we've consistently met or exceeded our customer service quality metrics at CNP on a 12-month rolling basis through April, and we expect to file to remove the 100 basis point downward adjustment in ROE in the second half of the year. And I'm also pleased to announce that last week we reached an agreement with our union leadership to renew our labor agreement for CNP. We expect the agreement to be voted on by members later this week. In Connecticut, we reached a historic settlement agreement in March with five key parties, including the Attorney General, in our rate reduction proceeding. The proposal provided for rate stability for our customers by agreeing to a base rate freeze until May 1, 2023, which would offset the increase that otherwise would have gone in to recover planned public policy costs. On April 26th, Pura, the regulator, issued a procedural order suspending the docket until July 2nd to allow parties to address comments that they had on specific components of the settlement. Now, we're going to continue to collaborate with the settling parties and with Pura's staff with the hope of getting a deal that can be ultimately approved by Pura and be good for customers. Across our networks group, we're actively working with regulators and customers on continuing COVID challenges and providing payment support options and referrals to social service agencies for customers who are facing financial hardship. We currently expect moratoriums will be extended in New York. Now, I'm really proud of how our employees have continued to focus on their own personal safety and health, as well as the safety and health of our customers and the communities we serve. In addition, we're also making great strides on our transmission and distribution projects, improving the efficiency of our operations, investing in the grid of the future, and enabling the clean energy transition. We recently completed and energized our 10-year Rochester Area Reliability Project, a $390 million investment to upgrade the electricity transmission system in the Rochester region. Close to 1,000 people have worked on this site during this project, which involved the rebuild of 28 miles of transmission lines, the construction of a new 345-115 KV substation, and upgrades to five other substations. In January, we initiated construction of our New England Clean Energy Connect project. This 1,200-megawatt project will deliver clean renewables generation to Maine and New England while creating 1,600 Maine jobs during construction and contributing over $200 million for Maine's economic development, which will support educational programs, broadband, heat pumps, EV charging stations, and much, much more. We recognize that building any new transmission in this country has its challenges, but we're encouraged by the growing support we're seeing from Mainers as they learn more about the benefits of this clean energy project and as we address the misinformation spread by the anti-project minority. Now let's turn to our merger with PNM Resources. I'm pleased with the progress our team is making in getting the key approvals for the merger. Earlier this year, we received approvals from PNM Resources shareholders and the Federal Communications Commission, as well as regulatory clearance from the Committee on Foreign Investment in the United States, or CFIUS, and under the Hart-Scott-Rodino Antitrust Improvements Act. And then on April 21st, we received Federal Energy Regulatory Commission approval. The last outstanding federal approval is from the Nuclear Regulatory Commission, and it's expected by June. At the state level, we recently announced a unanimous stipulation of agreement among parties before the Public Utility Commission of Texas. The merger is on the Commission's agenda in Texas on May 6th, and we could receive a form of approval that day. In New Mexico, we've made equally positive progress with a multi-party stipulation agreement that provides significantly enhanced economic development and customer benefits. The stipulation agreement was originally signed by key stakeholders, including the New Mexico Attorney General, and was publicly supported by Governor Michelle Lujan Grisham. Now, while we're continuing to work with other stakeholders to have them join the stipulation agreement, we do expect the approval of the New Mexico Public Regulatory Commission in the second half of the year and for the entire transaction to close before year end. Turning to renewables, our 23-gigawatt pipeline of projects and leadership in offshore wind will drive significant growth opportunities supported by favorable federal policy and strong demand for clean energy. Avangrid is pioneering the emerging U.S. offshore wind industry by starting with the first large-scale wind farm in our country, our 800-megawatt Vineyard Wind One project. In total, our lease area represents as much as seven and a half gigawatts of offshore wind capacity in the Northeast and Mid-Atlantic, including the 1.6 gigawatts we've already contracted. Avangrid's share of this total pipeline is five gigawatts. Our strategic offshore wind investments are positioned to deliver growth and financial results beginning in 2024 and 2025. For Vineyard Wind, the U.S. Bureau of Ocean Energy Management, or BOEM, issued the final environmental impact statement in March, and a record of decision is expected very soon here in May. We intend to reach financial close and begin construction in the second half of 2021 and reach full commercial operation in 2024. The project is progressing well. We have all major construction contracts with suppliers and contractors secured, and we're finalizing the evaluation of optimal financing structures, including tax equity and project financing. In addition, Park City Wind, our 804-megawatt contracted project that will serve the state of Connecticut, is also on track. Now, Avangrid Renewables is also developing the Kitty Hawk offshore project, which has the potential to deliver 2,500 megawatts of clean energy into Virginia and North Carolina. In terms of future opportunities, we expect one auction this year in Massachusetts with an estimated 1.6 gigawatt of demand, followed by more than three gigawatts expected in Rhode Island, New York, and Connecticut starting next year. BOEM also plans to release new lease areas in the New York Bight between Long Island and the New Jersey coast. We expect to participate in most of these auctions, but as I've noted before, we'll continue to be disciplined in our bidding approach. Now, we have equally exciting opportunities in our onshore portfolio. In 2021, we commissioned the first PPA of our 300 megawatt La Jolla project in New Mexico and expect to commission the second PPA in May. We have an additional 1.3 gigawatts of projects under construction in 2021 and 2022, weighted for the first time towards solar. Approximately 690 megawatts of the 1.3 gigawatts are already under construction, including Roaring Brook Wind in New York with 81 megawatts, Golden Hills Wind in Oregon with 202 megawatts, Lund Hill Solar in Washington with 194 megawatts, and Montague Solar in Oregon with 211 megawatts. Now, as we look forward and learn more about President Biden's ambitious clean energy goals, I believe Avangrid is in the sweet spot to help lead the clean and connected energy transition in this country. Our expertise and business strategy position us extremely well to help lead the charge to a cleaner energy future. Recently, at the Earth Day Climate Summit, President Biden pledged that the United States will aim to cut economy-wide greenhouse gas emissions 50% to 52% by 2030 relative to 2005 levels. Now, this is aligned with the administration's target to decarbonize the power sector by 2035 and reach net zero economy-wide by 2050. We see these environmental commitments as an opportunity to further drive economic recovery and create jobs. It's a cornerstone of the administration's $2.3 trillion infrastructure plan, including a $100 billion infrastructure plan for upgrades and build-out of our nation's aging and regionally siloed electric transmission systems. The infrastructure plan includes many beneficial proposals to drive decarbonization, including extensions and expansions to tax incentives, support for additional financing tools, funding for R&D, education, and workforce development, and the creation of a national clean energy standard targeting 100% carbon-free power by 2035. In addition, offshore wind is taking the leap from concept to reality in the U.S., with a national goal to deploy 30 gigawatts of offshore wind by 2030. The new coordination plan directs various federal agencies to identify wind energy areas released in the New York Bight. They'll work to complete permitting reviews of 16 pending projects by 2025 and open funding opportunities for wind and transmission developers while also upgrading U.S. ports. These definitely are exciting times in our sector, and Auburn Grid is poised to play an important role in leading the clean energy transition. In recognition of Earth Week, we recently released Aubin Grid's fifth annual sustainability report titled Clean and Connected. The report highlights all the activities from 2020 that are helping us reach our aspiration to be the leading sustainable energy company in the U.S. Every step of the way, our actions are guided by our environmental, social, governance, plus financial framework, or what we call ESG-NDEF. We believe it's a better and balanced way to do business, doing well by doing good for our customers, employees, communities, and shareholders. We've got a great base from which to build going forward. We're already the third largest wind and solar operator in the U.S., having grown our install capacity by over 30% since Auburn Grid was formed in 2015. And throughout the COVID-19 pandemic, our foundation and family of companies have donated $2.5 million to support response efforts nationwide and help our communities recover. Last year, we strengthened our commitment to diversity, equity, and inclusion with a number of initiatives, including a focus on increasing gender and racial balance in our senior roles. In the past 15 months, 57% of our directors and above hires have been women or people of color, and we've hired or promoted nine women into key vice president and above roles. We're proud to be a part of both CEO action and Paradigm for Parity, whose members have committed to 50-50 gender parity in senior operating roles by 2030. And we're also looking to enhance our supplier sustainability and diversity programs while building a more robust employee volunteer program. Each of these goals and our commitments will help Avangrid deliver sustainable value to all of our key stakeholders in the long term. And going forward, we plan to more than double our installed clean energy capacity by 2025 compared to 2015 and further reduce our scope one emissions intensity to reach net zero by 2035 and convert the majority of our fleet to cleaner energy vehicles by 2030. We've made great progress, but we've got a lot more work to do. Now, at Aubin Grid, we're fully committed to our ESGNF strategy. It's central to our long-term value proposition, guiding our investments and resource allocation in a smarter and cleaner energy future. Now, I've said it before, but I think it's worth saying again, we truly are in the right place at the right time in the energy transition. We've got a healthy balance of growing regulated businesses on the network side, along with P&M resources, combined with strong value opportunity in our renewables business, which will support the 6% to 8% adjusted EPS CAGR through 2025 off of our 2020 reference year. We're well aligned with the priorities of the new administration, and states are moving faster than ever with their own clean energy plans. Through our investments of over $20 billion through 2025 in our utilities, clean generation, offshore wind, transmission, and new technologies, and with our merger with PNM Resources and the backing of the Iberdrola Group, we're focused on execution and delivering on our commitment. Now, I'll turn it over to Doug to take you through the financial results. Thank you, Dennis. Good morning, everyone, and thank you for joining us today. Turning to our financial performance and highlights for the first quarter of 2021, I'm pleased to report that Avangrid is continuing to execute on its financial targets with a great start to the year. We're making excellent progress on our plans to earn our allowed ROEs, and we're realizing the benefits of our efforts to improve the operations and energetic availability of our renewables fleet. In the first quarter of 2021, we produced net income of $334 million, or $1.08 per share. Our adjusted net income was $354 million, or $1.14 per share, an increase of 50% from the first quarter of 2020. On an adjusted basis, networks earned $0.74 per share for the first quarter, representing solid growth of 16% compared to the first quarter of 2020. Key drivers of the strong network's results include the successful rate agreements in the fourth quarter of last year in our New York companies, which added $23 million, or six cents per share, and the implementation of our CMP rate plan in March of last year, which added another $3 million, or one cent per share. Outage restoration costs in the first quarter are flat to down slightly compared to the first quarter of 2020, Although it's still early to draw conclusions, we're encouraged by this result, suggesting that the higher vegetation management spend and focus on addressing the worst performing circuits may be helping to stem the growth in outage restoration costs. The significant quarter over quarter increase in renewables EPS to 40 cents per share in the first quarter of 2021 from 15 cents in the first quarter of 2020 was largely due to our focus on safety, operational excellence, and proactive risk management during the Texas weather event, helping us to meet our fixed obligations and deliver excess energy to the grid, as we were an important part of the solution for the state. Wind production during the quarter was lower than 2020's strong first quarter, primarily due to wind resource and curtailment, driving the net capacity factor for the first quarter of 2021 of 30.6 percent. About 45 percent of these curtailments were reimbursed under our PPA contract. Importantly, OnGrid's first quarter adjusted EPS excluding the Texas weather event would have been 87 cents, a 15 percent increase compared to the first quarter of 2020 and exceeding our expectations. Investments in our business contribute to their ongoing growth and earnings potential. Networks, which represent 75% to 80% of our business mix, invested over $489 million to benefit our customers by enhancing safety, reliability, and resiliency in the first quarter of 2021, approximately 40% higher than the first quarter of 2020. While renewables investments were lower in the first quarter of 2021, this reflects the timing of investments and transitions versus wind project installations in 2021 and 2022. Finally, we highlight the 73% increase in renewables adjusted EBITDA, which includes tax credits, as reflective of the increasing value of that business and our focus on delivering high-quality projects that produce our targeted returns and contribute to achieving our growth targets. Now, moving on to our liquidity, credit ratings, and dividends, With our financial resources, predominantly regulated business mix, and clear support from Iberdrola, we have the financial strength to finance our growth while maintaining a solid balance sheet and credit ratings. As we discussed on our fourth quarter earnings call, we plan to issue approximately $4 billion of equity this year, which will further strengthen our balance sheet and improve our share of liquidity. Of this amount, $3.6 billion will be used to fund our acquisition of P&M resources, which we remain confident will be over 3% accretive. The remaining $400 million of equity will be used to finance the attractive investments in our long-term plan that support the 6% to 8% earnings per share compound annual growth rate that we outlined on our investor day last November. We also noted that we did not expect to issue any additional equity in 2022, and we will add another $2 billion approximately of non-debt funding sources in 2023 to 2025 to further support our growth, potentially including equity, hybrid securities, asset sales, securitizations, or some combination of these. Our ample liquidity also supports our strategic initiatives. In the fourth quarter of last year, Iberdrola provided a $3 billion intercompany loan at very attractive rates, that serves as a bridge to the acquisition financing. This, along with Iberdrola's $4.3 billion funding commitment letter for the PNM transaction, highlights the unique benefits of a strong parent and Iberdrola's clear commitment to Avangrid and the PNM merger. We also have additional liquidity available through our $2 billion commercial paper program, supported by a $2.5 billion sustainability link revolving credit facility and an additional $500 million credit facility available from Iberdrola. Our robust growth plans will benefit from our liquidity, access to capital, and credit ratings. With our significant network footprint, access to multiple sources of funding, strong liquidity profile, and the backing of our parents, we are committed to maintaining solid investment-grade credit ratings. Finally, our dividend policy remains unchanged, targeting a payout of 65% to 75% that we will grow into as our earnings increase over time. Our board recently declared a quarterly dividend of $0.44 per share, payable on July 1st. We're pleased with our strong results this quarter and are increasing our EPS and adjusted EPS outlook range by $0.10 to $2.25 to $2.45 per share, reflecting a range of net income and adjusted net income of $696 million to $758 million. As a reminder, our outlook assumes that we close on the PNM merger transaction and its financing at the end of 2021. The key drivers of our earnings growth that will support the delivery of this guidance are mostly unchanged from what we discussed on our fourth quarter call, with the additional impacts of our performance during the Texas weather event and our overall first quarter financial results. In summary, we have ambitious and achievable plans to become the leading sustainable energy company in the U.S. Our focus continues to be on executing on those plans to drive sustainable values. Thank you for joining us today with our update on the first quarter results and execution on our plans. I'll now hand the call back to our operator, Jason, for questions following my closing remarks from Dennis.
spk02: At this time, as a reminder, if you would like to ask a question, please press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of David Acaro from Morgan Stanley. Your line is open. Oh, hi. Thanks for taking my question.
spk07: Obviously, very strong earnings quarter, and it's nice to see the increase in the guidance for the year for the 10 cents. I was wondering if there might be any further benefit that we might see if there's even more kind of excess earnings from this quarter that you could put to use later in the year in terms of potentially accelerating, you know, things like O&M projects into this year from 2022 and start to help set yourself up for a strong 2022 as well from here.
spk10: David, this is Dennis. Thanks for your question. Look, as Doug said, we're really pleased with the first quarter. I think starting off in a strong way here gave us confidence as well as with the outlook that we have with the rest of the year, gave us confidence to increase our guidance. I think rather than saying how we're going to use, you know, proceeds from the first quarter, this is really still about just execution. We've got a plan that we've set up, you know, that we need to continue to demonstrate that we can deliver at our networks business and our renewables business. And I think that the solid foundation that we've built here in the first quarter gives us additional room to continue to perform well. So, you know, it's early in the quarter. We're early in the year. We've got one quarter under us. We'll continue to evaluate, you know, how the year looks quarter after quarter. But we're really pleased with the start of the year.
spk07: Okay, got it. Thanks for that, Culler. And then separately, you know, I was curious if you could comment on the future, how you see the future of the gas system, particularly in New York. Dennis, appreciating your background in that area. Just wondering how you see evolving there, the commission's kind of evaluating how to think about, you know, recovery and long-term strategic planning for the gas system. Do you see heat pumps coming into play over time in that area? Would be curious your perspective there.
spk10: It's a great question, David, and I think it really depends upon who you ask, both from a regulator standpoint, legislative standpoint. I mean, I think as we think about natural gas, you could probably break it down into two different markets. There's the generation side of the business, and there's the distribution side of the business. There's no doubt that natural gas on the generation side has been part of the solution in helping to decarbonize the energy sources that we have here in the country, basically displacing coal. And I think that's going to continue to happen, although we expect that renewables will grow much faster than you'll see coming from gas-fired generation. If you think about the distribution side of the business, depending upon where you're at, whether you're in New York or Connecticut or Maine, having natural gas distribution is not just a nicety, but I think in many cases it's a necessity. It's a clean, efficient, affordable source of energy. And so we expect that over the many decades to come that natural gas is going to continue to be a fuel of choice for those that want it. From a regulatory standpoint, you know, we're going to continue to work with the regulators in each of the states, including New York, to make sure that they understand the benefits and what customers want. I mean, I think, you know, sometimes there's a discussion about energy justice, and we think it's important that, you know, that all of our customers be able to participate in the clean energy transition, and we see natural gas as part of that clean energy transition. So, will we see more heat pumps? The answer is probably yes. But I think that we actually see natural gas continuing to play an important role in serving our customers. And we're looking at ways where we can further decarbonize the natural gas, whether it's through renewable natural gas, whether it's using green hydrogen to blend to bring down the carbon content. and basically trying to be more efficient with our overall systems and helping customers use whatever energy they use more efficiently, which obviously reduces their carbon footprints as well. So we're focused on working with our customers, working effectively with our regulators, but also introducing new technologies when appropriate.
spk07: Okay, great.
spk02: Thanks very much. Your next question comes from the line of Peter Bourdon from Missoula. Your line is open.
spk11: Hi, thanks for taking my question.
spk02: Morning.
spk11: Morning. Two for you, if that's all right. So first, just on the renewables business, obviously the growth year over year is pretty substantial. Should we be considering any of that one-time issue in nature as a result of the Texas winter storms?
spk10: You know, Peter, I think as we see it, you know, we like the Texas market. We've been there for quite a while. We've got about 1,250 megawatts of renewable generation in Texas. We're not a huge part of the Texas market, but we're an important part of it. And so as we see it, this is part of our ordinary course of business. When you think about the ERCOT framework, it's meant to, you know, It's a no-capacity payments market, so they want renewables to be a part of their energy mix, and we're an important part of that. We're a price taker for our non-contracted capacity, so it's during times like this where we're part of the solution in providing that uncontracted energy to customers, and they desperately needed it, and we We were happy that our teams could perform extremely well and get our turbines up and running at a time when the state really needed that energy. So we consider this part of our ordinary course of business going forward.
spk11: Okay. Thank you for that. And then secondly, just on the PNM deal, in terms of the approval process in New Mexico, can you just give us a sense of what are the issues that are preventing some of the other intervening parties from joining the stipulation?
spk10: Sure. Well, first of all, we're really happy with the progress we've made. We mentioned that in Texas, we're on the agenda here on May 6th, and it could get voted out. But in New Mexico, there are multiple parties. I think there were close to 25 different parties that had filed for status as interveners. But, you know, when we look at the progress that we've made with the Attorney General, with the support of the governor and several other interveners, we're really pleased. Look, a lot of the things that people are looking for have to do with governance, how we're going to be treating customers. So we're continuing to have discussions with all of the interveners that are interested in chatting. You know, we're working towards getting this through the commission with as many interveners on board with the stipulation as possible. Would we like to get 100%? Absolutely. Will we be surprised if we don't get 100%? Look, you get those that you can. and you go through the process. But we feel really good about the modifications that we made to get to the stipulation agreement with the Attorney General and the other parties, and we're confident that this will ultimately be approved by the Commission.
spk11: Okay. Thank you for the color, and congrats on the quarter.
spk10: Thanks, Peter.
spk02: Your next question comes from the line of Neil Colton from Walls Fargo Securities. Your line is open.
spk04: Hi, guys. Hope all is well. So a couple of questions on my end. First, just on the Texas, I think you mentioned in the prepared comments that ex-Texas, the EPS would have been 87 cents. Is that a GAAP or non-GAAP number? That's a non-GAAP number. Okay. Thank you. And then second, on the pipeline, On the onshore pipeline, if I'm looking at things correctly, it looks like the onshore pipeline grew by about 2,000 megawatts since the last update. A, is that correct? And B, seems like a pretty healthy increase. Is there anything sort of unusual in there that we should be aware of?
spk10: Yeah, let me hand it off to Alejandro, and he can give you a little bit more color on the pipeline. Yeah, thank you, Denis.
spk03: So yeah, that is correct. Those two gigawatts is additional pipeline versus the last communication of 21 gigawatts we did about this. So it's fundamentally solar pipeline, and it does reflect our continued interest in the solar growth in different areas of the country. It comes also with maturation of other projects of our pipeline that are progressing across the pipeline. And to show that we are progressing at all the levels of the pipeline, not only bringing pipeline from the bottom, but also progressing the top one. We are right now in 2.5 gigawatts of either bilateral or shortlisted discussions for potential PPAs for the next years. Got it. Thank you. Very helpful.
spk02: Your next question comes from the line of Insoo Kim from Goldman Sachs. Your line is open.
spk12: Thank you. My first question is on Vineyard Wind. Do you have a sense of whether the record of decision from the Department of Interior is likely to be issued imminently, or is there some back and forth between you and you know, the DOI before that decision could be made, just trying to gauge when this year we could see that decision.
spk10: Yeah, thank you, too. Look, the team has been working very closely with BOEM and others that have requested information. We are very optimistic that this will be coming out soon. You know, we can't, you know, predict a specific day, but we're very optimistic it's going to happen very soon.
spk12: Got it. My second question, just on NECC, could you give a little bit more color on since the last time we spoke on the various litigation and the cases that are attached to them? And I guess is the assumption still that the construction will continue and commence throughout the year while these are going on?
spk10: Sure. Let me hand it over to Bob Kump, and he can give you a little bit more color on those issues. Good morning. How are you? We feel really good about the progress we've made here in the first quarter. Obviously, Dennis spoke in his remarks about completing the permitting and starting construction. Where we are now on construction is we have about a third of the 150 miles completed. right away cleared. It's in what we call segments two and three. Segment one is the one where we still have this temporary injunction, but we hope to have that lifted shortly. So we've been focusing on segments two and three, both in terms of clearing and beginning to erect the poles. So on the construction side, things are going well. In terms of consumer sediment, if you would, you know, we've done a lot of work through our PAC, making sure that... Consumers in Maine understand the truth about the project. I think the opposition has, most of their campaign has been around myths and, quite frankly, lies. So our focus has been on first debunking, if you would, those myths. But more importantly, with the project now under construction, people realize and see the benefits the project will bring to Maine. And I think that's why, as we continue to do polling, we continue to see more and more support, as Dennis mentioned in his remarks, for the project in Maine, which I think is really important. Now, there continues to be – I mean, I think every permit we've gotten has been challenged. That continues. But we're moving through that process, and we're very confident that, you know, this will be a successful project. We're still looking at the second quarter of 2023 for our commercial operation date. As of first quarter, we've invested a little over $250 million. And, you know, so we feel very good about where we are. We had some real milestones here in the first quarter, and we're moving forward.
spk12: Just one additional, do you think the case with the Army Corps and that temporary stay, do you expect that to be resolved or, I guess, have some progress over the next few months here this year?
spk10: In terms of the challenge of the Army Corps permit, you know, those unfortunately take a long time to ensue. And the fact is, though, that every permit, starting with the CPCN in Maine, starting with the TSAs down in Massachusetts, you name the main DEP, they're all being challenged, and we've been successful on them because we think the record that has been made by these various agencies have been very, very good and very careful and deliberate, full knowing that it's likely to be challenged. I mean, these types of challenges, as you know, is part and parcel of the large infrastructure, but we feel really good in terms of the quality of the permits and where we are.
spk12: Congratulations on a great quarter. Thank you. Thank you.
spk02: Your next question comes from the line of Michael Sullivan from Wolf Research. Your line is open.
spk09: Hey, everyone. Good morning. Good morning, Michael.
spk10: First question, just wanted to clarify, it seemed like the implied Texas benefit just based on the adjusted earnings number you gave was about 28 cents. Why the guidance only up 10 cents for 2021? Yeah, it was approximately 27 cents. But look, we're one quarter into the year. There's a lot of things that we need to do to continue to execute, and we're confident that we'll continue to execute. But we can revisit in the second and third quarter should it make sense to increase the guidance. I'll tell you that personally, I would be very disappointed if we don't end up at least at the high end of the range. But look, we've got three more quarters to go, and we think it's prudent and appropriate at this time just to raise the guidance by 10 cents. Okay. And just to be super clear, though, that the raise is entirely tied to Texas and the base business is kind of just on track, not better or worse. Is that fair? No, I think if you look at it, you know, our networks business is doing very well. Our renewables business, even without Texas, I mean, we were at $1.14. Say $0.27 of that was related to Texas, so we're at $0.87 today. We're nearly 15% higher than we were in the first quarter of 2020, and that first quarter of 2020 had a really strong renewables quarter. So we feel good about not just the first quarter, but the outlook for both renewables and with networks, both including and excluding Texas. Okay, fair enough. I just wanted to get a little more color on thoughts on the –
spk09: on the Pura order, basically, rejecting the settlement? And, you know, what else can be done there? What are some of the things you guys are thinking about that could maybe yield in a different type of settlement that they'd accept?
spk10: Sure. Well, let me do this. Let me put it in context, and I'll have Catherine jump in on this. I think it's important to recognize that this type of settlement before had not been done with the Attorney General, with the Office of the Governor, with various other parties. So we feel really good, not just about the absolute settlement, but how it came about and the fact that we were able to get together with multiple parties and find a solution to that, you know, we didn't have to do, but that we were able to, through collaboration and, I think, building trust and building the relationship with these different parties. The fact that it wasn't wholeheartedly embraced by CURA, I think, was candidly a little disappointing to everyone. But I think that we're looking to, and we've already started collaborating, continuing to collaborate with the settling parties and having discussions with Pura. But let me see if, Catherine, if you want to provide some more color to that.
spk05: Thanks, Dennis. You know, I think when we look at the decision, as Dennis said, the important part is our ability to work with our other stakeholders. And we'll sit down with them and talk about the Pura decision and talk about whether or not there are areas – that we can take a look at the settlement and, you know, improve it from their perspective. But Connecticut's got an ambitious agenda, and we're really happy that we've got strong relationships with our stakeholders there, and we can work with them to collaboratively to come up with solutions that are both good for the state and good for our customers.
spk09: Okay. Anything you could say on what
spk10: Those solutions might be just any more specifics there. You know, we'd rather not negotiate in public other than to say that we want a solution that makes sense for the multiple parties that came together as well as our customers. And we recognize that, you know, PIRA may look at things slightly differently than we did, but part of our job is to make sure that we can, you know, advocate for our customers and get them up to speed on why we feel strongly for the original settlement. Got it. Okay.
spk09: Thanks a lot.
spk02: Your next question comes from the line of Julian Dumoulin-Smith from Bank of America. Your line is open.
spk09: Excellent. Good morning, team. Thanks for the opportunity and the time.
spk00: Julian, how are you?
spk09: Quite well. Thank you. It looks like you guys are doing quite well as well, I see. It was a good quarter, Julian. Absolutely. Well, listen, I wanted to kick things off first on the renewable side and renewable development side. Just talk about procurement opportunities. I mean, we're seeing accelerated corporate involvement across the space. Just curious as to how you think about the opportunity. I know you guys gave your kind of grand vision only. a handful of months ago, but I'm just curious how the start of the year is shaping up as well as if the ITC dynamics are resulting in any shift in your backlog, maybe pushing out projects slightly, et cetera, just as best you at least understand it today.
spk10: Sure. Let me start and I'll ask Alejandro to jump in as well and provide some more color. I think that what we were seeing even before the Biden administration has only picked up, both from a customer standpoint and from individual states. I think that, you know, we're continuing to see more customers want to be part of the clean energy transition. You know, it makes sense because costs continue to come down because they, you know, I think for their stakeholders, it's important for them to represent that they're getting cleaner. So that's all positive. I think from a state standpoint, you know, we saw this momentum with renewable portfolio standards start well before this administration, but I think this administration and their ambitious goals is only given as a shot in the arm. So that's all positive. Alejandro, do you want to add any color on just from a, you know, what's going on with the pipeline and conversion from a customer standpoint?
spk03: Yeah, sure. Thank you, Dennis. Hi, Julian. From our side, as you know, we have a plan that we presented in November with clear objectives for the next few years until 2025, and we are going to continue delivering on that plan. And this current situation right now, the only thing that it makes is that it gives more certainty that we will be able to deliver according to that plan. So I have mentioned about our pipeline. We are increasing our pipeline and bringing new projects into it, but we are also maturing it by being in, as I mentioned, 2.5 gigawatts of negotiations for future PPAs. We are delivering on 1.3 gigawatts of projects that will be constructed this year and the next. And so all in all, a solid presence for the coming years, a robust plan that we really believe we can deliver with the support of the Biden administration and all the legislative changes that are probably going to happen in the next or through the year will certainly be helpful for us.
spk10: And you also talked about just what's happening from an ITC standpoint. Look, we're not necessarily delaying projects just because of that. I think if it makes sense to go forward and customers want it and we have all the permits and approvals to go forward with the PPA, we're going to do that. But I think that different customers are also going to look at the tax incentives that are being proposed. And the other thing that we're obviously looking at that could be very beneficial to us and to our customers is direct pay. So there's a lot moving around, which I think is all positive. And with the quality of the pipeline that we have, we're excited.
spk09: Excellent. And if I can, can you comment a little bit on the latest in Maine again on NECC? You know, obviously there's noise again this year again, but how does it differ, if you will, or how are you thinking about it differently from last year, if you don't mind? I'll leave it open-ended.
spk10: Let me start, and Bob can jump in. I think one of the things that's changed, and candidly, we've been spending more time on the ground educating people on the benefits of the project. We think that it's not only good from a clean energy standpoint, but also from an economic standpoint, the jobs. We're seeing, you know, local businesses, whether it's restaurants, whether it's hotels, general stores, are saying we're getting more people coming in because of the construction workers that are there. And, you know, when people were previously talking about, well, are there going to be jobs coming to Maine, we're seeing that the jobs are coming to Maine, and there's definitely an economic impact. So we're having to communicate that more effectively. And I think as people in Maine and the local communities understand that this is for real, it's a Maine project that benefits Maine with energy and with economic development, we're seeing people support the project. Look, any type of transmission in this country is difficult. And in a wonderful state like Maine that has beautiful forests, there's obviously going to be some opposition. But I think our job, what's changed from last year, is more and more momentum of recognizing the importance of this to the state, the benefit to the local people in Maine. And quite honestly, I think the opposition is running out of arguments. Yeah, Dennis, I agree. I think the fact that the project is now under construction is huge in terms of people physically seeing the benefits that come to Maine as compared to, you know, a promise in the future. The other thing I will say is the recognition of late, both by the Biden administration and the country as a whole, and Dennis touched on in his remarks, about the need for transmission if we're going to achieve our goals around decarbonization. is becoming very well known. Take a look. There was an article actually yesterday that AP put out just about this, and it talks about, if you would, strange bedfellows between some environmental groups that just like to say no, with fossil fuel generators that, you know, stand to lose millions of dollars a day when other transmission and more supply comes online. So there's a number of influences that we think just puts us in a much better position today than we were a year ago.
spk09: Excellent. Thank you guys for your time. All the best. Thanks, William.
spk02: Your next question comes from the line of Richard Sunderland from J.P. Morgan. Your line is open. Good morning.
spk05: Thanks for the time today.
spk09: Good morning. Just thinking about your momentum around the PMM deal and the financial plan upside coming out of the quarter, have you evaluated pulling forward the equity at all, or is your timeline really about aligning the equity with the PMM deal close?
spk10: Let me – I'm going to hand it to Doug, but I just want to be clear again that for planning purposes, we assumed that the deal closes at the end of the year and the funding for it happens at the end of the year. We thought that was the easiest way to model so that you knew what the overall – power of our earnings are for Avangrid on a standalone basis. But Doug? Yeah, I would just add, Dennis, you know, our overall objective with equity is to maintain a strong balance sheet and solid investment grade credit ratings. You know, things that we think about from a timing standpoint with the equity issuance, you know, just the capital market conditions at the time and also just the status of regulatory approvals. I think those are the two main points. Got it. That makes sense. And then separately, you referenced direct pay earlier. I'm just curious if you could speak more to the potential impacts. Would this primarily be around, I guess, financing flexibility or maybe any broader market impacts you would expect on your direct pay? Yeah, this is Doug. Direct pay for us is very attractive, and it's not abundantly clear at this time what form that will take. There have been some forms that would monetize existing tax credit carry-forwards, others that would be applied on a go-forward basis. But I think just starting with the go-forward direct pay, it helps quite a bit in terms of a very economic substitute for tax equity financing. So I think it can help our overall project returns by having that form of funding. From a historical standpoint, if there's a means to monetize existing tax credits through direct pay, we have a large carry-forward position, and that would also be quite attractive for us. Yeah, Richard, I'd say that the only people that probably don't like the direct pay are the banks because they don't get the fees from the tax equity. Understood. Thank you for the call there.
spk02: Your next question comes from the line of Michael Gugler from Jeanne Montgomery. Your line is open. Good morning.
spk04: Morning.
spk08: I'm just wondering if you're having any supply chain issues across your various projects and how you're thinking about project costs in an escalating commodity price cycle.
spk10: Well, in general, I think the supply chain isn't as challenging as it was, say, six months ago or nine months ago. But I think that depending upon what we need for either on the network side, whether it's cable or pipe and everything, we seem to be getting everything that we're looking for right now. And on the renewable side, Alejandro, I don't know if you want to comment on that.
spk03: Yeah, on the renewable side, I think that as of now, we are getting what we need. And in terms of the commodity prices, well, it is true that it's part of the negotiations with suppliers, but normally this is a risk that is transferred to the suppliers by the time we sign NTPs. And as of now, for our projects for 2021 and 2022, we are comfortable.
spk08: All right. That's all I had, gentlemen. Thank you. Thanks, Michael.
spk02: Your next question comes from the line of Angie Storzinski from Seaport. Your line is open.
spk06: Thank you. Thank you for squeezing me in. Okay, so I have two questions. First, given the recent update from Orsted about some excessive wear and tear on cables related to their offshore wind farms, is this something that's um you guys uh you know are aware of and and how is it going to be incorporated in your upcoming offshore wind projects about where we're on cables and where students report
spk03: So, I mean, I am not aware of that particular issue from Ørsted, but, I mean, we don't have any issues of wear on cables in our existing wind farms. The ones that the Iberdora Group is operating in Europe, there is no such thing in any of those issues with the cables they're wearing out, and so I can really not comment on that one.
spk06: Okay, I understand. And then secondly, you mentioned about a growing support for NECC. I remember you showed the results of a survey conducted, I think, by Hydro-Quebec back in January. So can you please tell us, by your view, is the project now polling above 50% in Maine, given that the referendum is coming?
spk10: Let me have Bob touch on that. Yeah, I don't know if I want to get into details of polling. Obviously, there's important aspects of that. But I will say we've seen consistent improvement in the polling since a year ago. We've done, I believe, three polls. HQ has done at least one, possibly two.
spk11: So the trend line is good.
spk06: And then lastly, the changes in the transmission ROE, the removal of the RTO adder, or the likely removal from the RTO adder, how it will impact the returns on this project and any other transmission projects that you already have?
spk10: We looked at that, Angie, and look, I think that there are definitely transmission lines or new projects where that adder makes a difference because it's difficult to get these done and because the length of period that it takes to get the approvals adds risk. For AubinGrid, we've taken a look at it. It's not material, should that happen, and it falls within the range of guidance that we've given. But we're not going to go into more specifics than that.
spk06: Okay. Thank you. Thank you, Angie.
spk02: That concludes our Q&A for today. I would now like to turn the call over to Dennis Areola for closing comments.
spk10: Well, we appreciate everybody joining us today. And, again, I'm really pleased with our quarter. But we know we've got a lot of work ahead of us. Success is contagious, and our job is to keep this positive momentum going, making every day better for our customers, employees, and stakeholders. And by focusing on execution and building on a culture of high performance and accountability, I'm confident that we're going to deliver on our long-term goals that we've outlined for you. I truly believe that Avangrid is uniquely positioned to be the leading sustainable energy company in the U.S., So I look forward to sharing our progress with you over the coming quarters, and we appreciate your continued support. If you have any other questions, please follow up with Patricia or Michelle. Have a safe day, and we'll talk to you soon.
spk12: Bye-bye.
spk02: That concludes today's conference call. Thank you, everybody, for joining today. You may now disconnect.
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