Avangrid, Inc.

Welcome to today's Avangrid second quarter 2022 earnings call. Please remember, all lines will remain muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. It is now my pleasure to pass the conference over to our host, Alvaro Ortega, Vice President of Finance, Investor and Shareholder Relations and Risk. Please proceed.

Thank you, Foren, and good morning to everyone. Thank you for joining us today to discuss Avangrid's second quarter 2022 earnings results. Presenting on the call today are Pedro Asagra, our chief executive officer, and Patricia Yoskel, our chief financial officer. Also joining us today for the question and answer part of the call will be Catherine Estampien, president and chief executive officer of Avangrid Networks, Jose Antonio Miranda, co-CEO and president onshore, Sai Oitan, Senior Vice President Offshore, and other members of the leadership team. If you do not have a copy of our press release or presentation for today's call, they are available on our website at avangrid.com. During today's call, we will make various forward-looking statements with 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 news release, in the comments made during the conference call, in the risk factor section of the accompanying presentation, or in our latest reports and filings within the Securities and Exchange Commission, each of which can be found on our website, avangrid.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 Pedro.

Thank you, Álvaro, and good morning, everyone. We appreciate you joining us for our second quarter earnings call. Let's get started on the slide number five. First, I would like to say how honored I am to have the opportunity to lead this company as CEO. Over the last 25 years with Ipetrola, I have had the privilege of working closely with our U.S. team. As I stepped into this role, I became both proud of the foundation we have already laid and confident in our ability to become the industry leader. With a diverse business mix combining a strong regulated footprint with additional value from onshore wind and solar, significant and top potential in offshore wind, and the backing of a global best-in-class leader as Iberdrola, AvantGrip is in a unique position to drive continued growth. I believe there is huge potential for AvantGrip, and I'm prepared to take with the team this company to the next level with three key principles guiding us, execution and delivery of strong results, sustainable growth, and value creation for the benefit of our customers and all our stakeholders. Our results in the second quarter and first half of the year show that this company's next phase is off to a solid start, even with the current challenging macro environment. We have had an excellent quarter and six months, with a strong double-digit growth recorded in both businesses. At the consolidated level, EPS and adjusted EPS rose 69% and 31% year-over-year in the second quarter. And in the first half, rose 24% and 12% year-over-year, respectively. In addition to our financial achievements, we have worked over the last few months to strengthen our leadership team. ensuring we have the right people with deep knowledge of our business and the expertise we need to deliver, and we've enhanced our focus on relationship building through regulatory and government affairs outreach. Last week, Avant-Garde Board Chairman Ignacio Galán had the privilege to join President Biden in Somerset, Massachusetts, as he announced new executive actions to combat climate change and support U.S. offshore wind at Brayton Point, the future site of Massachusetts' first offshore cable manufacturing facility made possible by our Commonwealth Wind Project. In networks, we are focused on making the investments needed to upgrade critical and aging infrastructure, to enhance resiliency, and to deliver on-state clean energy commitments. We're moving forward on rate cases in several of our jurisdictions. Over the last few months, we filed rate cases for our newer companies, issued a notice of intent to file in Maine, and reached a settlement in Massachusetts with Attorney General's Office. These rate cases will support thousands of jobs each year over the next several years. In renewables, we placed our 201 megawatt Golden Hills Wind Farm into operation and are steadily progressing on the construction of approximately 1,600 megawatts of new renewable capacity both on and offshore. We have maintained our high operational standards with 97 percent energetic availability in the first half of the year. And amid record inflation and a challenging macro environment, putting pressure on all companies, avant-garde resilient business mix, strong liquidity, focus on continuous improvement, and support as part of a leading group, global group, will help us effectively navigate those challenges. Turning now to slide number six. Patricia will discuss our financial results in greater detail later, but I want to emphasize one important point. we're not just delivering extremely strong results this quarter, but also continuously over the last few years. I am proud to have supported these efforts since our board of directors appointed me as a special advisor to the CEO in June 2020. As compared with our first half 2020 results, both net income and adjusted net income have grown nearly 90%. Furthermore, In just the first six months of 2022, we have managed to achieve adjusted net income on a similar level to the full year net income we reported six years ago, $632 million. These are outstanding results we have translated into increasing earnings per share. Since the first half of 2020, both EPS and adjusted EPS have grown approximately 50%. Even with the impact of last year's equity issuance, our adjusted EPS has grown of 2020 at that impressive 22.5 compound annual growth rate. And our first half EPS has grown at a very healthy compound annual rate of approximately 8% since 2016. Our strong performance has allowed us to maintain our guidance for the year of $850 to $920 million in adjusted net income and $2.20 to $2.38 per share in adjusted EPS. Turning to the network business, on slide seven, we have been focused on operational excellence to deliver improved reliability and customer service. Despite a higher number of minor storms in New York, which are up by 9% year over year, we are meeting all of our KD regulatory targets and have improved our safety by 12%. Our improved performance is driven by our ongoing reliability programs, including vegetation management, asset condition projects, grid modernization, operations patrols, and other reliability and resilience investments. We're working to improve our safety in New York, which we are addressing through our rate cases. Four of our operating companies, CMP, NYSEC, RG&E, and UI, have received EI emergency response and mutual assistance awards. These accomplishments are a testament to the hard work and dedication of the teams who made the long journey down to Louisiana to lend support to the Hurricane Ida recovery efforts last September. as well as those who stayed closer to home to support our customers and keep the lights on. In addition, we thank everyone in Avangrid who worked so diligently, particularly in the field, to support our customers and communities and keep the lights on during the COVID-19 pandemic. In customer service, CMP has continued to deliver significant improvements, enable us to meet our service quality indicators in Maine. and improve our ROE by 100 basis points. We have also been engaging customers with our digital offerings, increasing our e-bill adoption by 25% year over year from $880,000 in June 2021 to $1.1 million in June 2022. Turning to slide eight, we have been making significant progress on regulatory matters in networks. In New York, We filed four rate cases in May for the electric and gas operating companies. We're submitting a one-year rate case plan consistent with the New York Commission requirements. The $1.8 billion for 2023 responds to the state's clean energy and climate goals and includes infrastructure investments for a more modern, resilient, sustainable, and smart grid, resources to support customers and local communities, energy efficiency programs and economic development proposals, as well as infrastructure investments that align with our ESG plus F strategy. Our proposal fully supports a multi-year rate plan with 8.6 billion of investments, including 2.9 billion to support the state clean energy commitments. Even with these newly proposed rates, Effective May 2023, they will still be among the lowest in New York. We will be filing updated testimony and exhibits shortly. In addition to our rate filings, the New York Public Service Commission approved the Electric and Gas Bill Relief Program, which provides up to $51 million of bill credits to customers who have past due bills or are income eligible. The Commission also approved a petition allowing for the searcher's recovery of $10 million in late payments charges lost due to COVID. In Massachusetts, we successfully negotiated a pre-fining settlement with the Attorney General, which is quite exceptional. We will be making incremental investments annually through 2022 and beyond. Our settlement includes a stay out through November 2025. We expect the Commission will rule on the settlement this fall. Rates will be effective January 2023. In May, we filed a notice of intent to file our electric rate case. We will be proposing a three-year rate case plan to mitigate customer bill impacts and ensure price stability. These investments would help make the distribution system more resilient to storms, restore power faster after outages, and enable more renewable power generators to connect to the grid as the state transitions to more clean energy. Even with these proposed rates, the customer bill increase would be below the current rate of inflation, and our new rates would be the lowest in New England. Additionally, CMP's approved settlement in the annual compliance filing authorized our conciliation of stranded costs that has allowed us to reduce residential bills by 2.7% and amortize $60 million of deferred stone costs over 12 months. In Connecticut, we are working on a rate case filing for UI, which will be filed as soon as next quarter, and we are evaluating the right timing to file for our gas companies. Turning now to slide number nine, We continue to lead the U.S. offshore wind industry with three contracted projects in New England that we deliver 2.8 kilowatt of installed capacity, 2.4 kilowatt owned. Our 806 milliwatt Binger Wind One, the first larger scale offshore wind project in the U.S., is progressing on track with the 2022 Kiel Mice Pools with a fully contracted supply chain and fixed or capped labor costs. We have completed the project's drilling and landfall connection activities, and in parallel, manufacturing of the array cables has started. We are on track to start export cable installation by the end of 2022, and to begin producing power in the second half of 2023. In May, we achieved an important milestone for our Park City Wind project by signing a host community agreement with the Town of Parks table. which will support the onshore connection of our transmission cables. Importantly, execution of this agreement demonstrates the strong local support for the project and our commitment to community engagement, which in turn meaningfully reduces potential development and litigation risk. We have also received approval from FERC for our transmission support agreement, which will ensure necessary upgrades to the onshore grid are made and have filed a state and local permit. We continue to make steady progress on Commonwealth Wind. Recently, we secured a queue position that enabled us to fully interconnect the project in Cape Cod, creating synergies with Park City Wind and streamlining our project schedule. We have also secured our PPA for 1.2 gigawatt with the Massachusetts Utilities and have filed those contracts with the state regulators for final approval. Our strategy for Park City and Commonwealth Wind is to execute these two wind farms as a single 2 gigawatt project. By doing so, we will be able to maximize economies of scale and efficiencies in project execution, optimize operations, and leverage increased purchasing power, which will ensure we deliver these projects in the most cost-effective way. We expect to receive a record decision for the combined lease area during the second half of 2023. Avangrid's offshore wind endeavors will also benefit from the experience and the scale of the Ventura Group, with their 1.3 GW of offshore wind in operation, 5.5 approximately GW under construction or secured, and a pipeline of over 30 GW. Turning now to onshore renewables business on In-Flight 10. Over the last 12 months, we have installed 421 megawatts of new capacity, including our 201 megawatt Golden Hills project, which entered operations in the second quarter. We also have approximately 780 megawatts of additional capacity under construction, with planned operation in 2022 and 2023. This incremental capacity, 106 mW, is included of offshore wind and 674 mW of solar, for which we have already contracted or required solar panels. The 674 mW of planned solar represents a significant expansion to our solar portfolio in the U.S., roughly doubling our existing installed capacity, 370 mW at present. Like our offshore endeavors, Our onshore business will also benefit substantially from the Verdola Group's best-in-class renewables expertise and global scale. As worldwide leaders in onshore renewables for over two decades, the group has now approximately 23 gigawatts in operation, approximately 5.1 gigawatts under construction, and a pipeline approaching 66 gigawatts. In combination with delivering on our new capacity, our team is also deeply focused on mitigating risk and ensure profitability. To date, we have successfully renegotiated certain terms and conditions for 480 megawatts of PPAs to address inflation pressures and accommodate the schedule impact, and we'll continue to work with our customers and suppliers to be proactive and further minimize macro impacts to the extent possible. Turning to slide 11, I wanted to share with you a few key priorities I have set for our team to drive alignment and ensure we continue to execute and build our strong momentum over the remainder of the year and beyond. Broadly speaking, our efforts will be directed in three places. First, on the delivery of our existing commitments and working through the current macroeconomic situation. Here, we will be looking at multiple levers, including continuous improvement, operational excellence, and earning our ROEs. Onshore construction and asset profitability, offshore execution on time and on budget, enhancing the customer experience, and actively managing our supply chain. Secondly, on developing our team and building relationships by focusing on talent retention, development, and engagement. continuing to drive alignment and accountability across organizations, and enhancing our engagement with regulators and other key stakeholders. And lastly, we must always be focused on growth and seek out profitable opportunities to grow and to create value. What I would like to highlight here is our commitment to close our merger with PNM Resources, our rate cases, and the critical investments in our system that they propose, potential value-add opportunities for asset rotation and partnerships, and our focus on innovation and promising new technologies such as green hydrogen by leveraging our capacities and capabilities and assets across the U.S., as well as the expertise of Iberdrola, who already has two projects in operation. In support of this goal, we have established a cross-business team that is collaborating with the strategic partners and regional stakeholders to build coalitions for the DOE's $8 billion Clean Hydrogen Hub program. Every step of the way, our actions will be guided by our commitment to ESG plus F leadership. Over the last year, we've taken further steps to progress on our goals and commitments, including working towards gender parity and targeting a scope one neutrality by 2035. Today, 31% of our senior leaders are women, and our generation is 91% emission-free, approximately. Avant-Grid is well-positioned for success, and we have many opportunities ahead. Now it's up to us to translate those opportunities into actions and deliver success. I look forward to sharing our results in the months and years to come. Now I will hand it over to Patricia to take you through the financial results.