Avangrid, Inc.

Thank you for joining today's call. I would like to welcome you all to the Avangrid Third Quarter 2022 Earnings Conference Call. My name is Brica and I'll be your event specialist operating today's call. After the speaker's remarks, you have the opportunity to ask a question and to do so, please press star followed by the number one on your telephone keypad. If you change your mind at any time, please press star two and for operator assistance at any point, please press star zero. I would now like to hand the call over to our host, Alvaro Ortigo, Vice President of Finance, Investor Relations and Treasury to begin. So, Alvaro, please go ahead when you're ready.

Thank you, Brickham, and good morning to everyone. Thank you for joining us today to discuss Avanrid's third quarter 2022 earnings results. Presenting on the call today are Pedro Zagra, our Chief Executive Officer, and Patricia Joskel, our Chief Financial Officer. Also joining us today for the question and answer part of the call will be Katherine Stempian, President and Chief Executive Officer of Avangrid Networks, and Jose Antonio Miranda, Chief Executive Officer and President of Avangrid Renewables. Other members of the executive team are also joining us today and may be called upon to assist with the Q&A part of the call. You do not have a copy of our first 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 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 risk 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 earnest news release in the comments menu in this conference call, in the risk factor section of the accompanying presentation or in our latest reports and findings with 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 slide accompanying today's presentation for definitional information and reconciliations of no-gap financial measures to the closest gap financial measures. I will now turn the call over to Pedro.

Thank you, Álvaro, and good morning, everyone. Before I get started, I'd like to thank the many of you who were able to join us at our investor day last month in New York City. We were pleased to share our strategic plan for 22 to 25, defining a clear focus on regulated growth, consistent execution and value creation, And we look forward to updating you on our progress as we deliver on that strategy. So with that said, we appreciate you being here with us today for our nine-month results presentation. Let's turn to slide number five. We continue to make progress on our commitment to execution and operational excellence. In the first nine months, we have delivered double-digit growth in both our businesses and at the consolidated level. Our EPS has grown 22% year-over-year to $1.90 per share and adjusted EPS has grown 11% year-over-year to $1.94 per share. In networks, each of our planned rate cases have not been filed. Last week, we filed our response to a staff testimony in New York and have proposed to enter settlement negotiations starting next week. We expect a ruling on our settlement for our Berkshire gas company rate case in Massachusetts shortly. Regarding our New England Clean Energy Connect project, we were pleased to receive at the end of August a favorable decision clarifying vested rights jurisprudence from the Maine law court on our legal challenges to the Maine referendum that resulted in the halting of the construction of the transmission project. The matter was remanded to the trial court for the vested rights determination. The trial court recently denied reconsideration of its prior order, denying our request for a preliminary injunction that would allow construction to resume as the legal proceeding continues. We remain confident that the full process will find the referendum designed to block this project's construction is unconstitutional. The NCEC project will benefit Maine and all New England by reducing the region's dependence on fossil fuels and providing much-needed energy price stability, keeping fossil fuel generators from giving themselves an 80% or higher raise on the backs of Maine and New England families, while moving our region closer to a renewable energy future. In renewables, our 194 MW Landhill Solar project reached COD this month. raising the total capacity we brought into operations over the last 12 months to 475 megawatts. We are constructing approximately 600 megawatts of additional new capacity. We also continue to focus on mitigating risk and prudently addressing supply chain challenges. In addition to the panels we previously secured for projects with COD in 22 and 23, we have now also secured all required panels for 24. In our offshore business, construction on Vineyard Wind 1 is on track and is steadily progressing. We are proud to announce that the manufacturing of all major components for this landmark project is underway. In addition, we're taking strategic steps to advance opportunities for long-term growth beyond our strategic plan through 2025. This month, we executed a heads-up agreement with SEMPRE infrastructure to support the potential joint development of larger-scale green hydrogen and ammonia projects in the U.S., with an initial focus on the Gulf Coast and the West Coast. Given this positive trajectory and our operational achievements, we are confident in our ability to deliver results for the full year within our expectations. We are now reaffirming our outlook for net income and adjusted net income of $850 million to $920 million, or $2.20 to $2.38 per share. This adjusted net income range would imply year-over-growth versus 21, ranging between 9% and 11%. We are focused on setting reasonable and achievable goals, and most importantly, on following through, continuing to build a trend where we consistently meet the mark. Taking a closer look at our nine-month results on slide six, we are demonstrating a very solid earnings trajectory and further reinforcing of our trend of continued growth over the last two years. Since 2020, our nine-month net income and adjusted net income have each increased by over 70 percent. The net income and adjusted net income we were reporting today for the last time nine months have already surpassed the levels we were able to deliver for the full fiscal year 2020. These results have driven approximately 40% growth since 2020 in our earnings per share and adjusted earnings per share. Even with the impact of last year's equity issuance, our nine-month adjusted EPS has grown since 2020 at a strong compound owner growth rate of approximately 18%. Moving on to our businesses, on the network side, we are focused on execution and investments. We have filed rate cases in all jurisdictions this year, each seeking multi-year plans with new rates effective in 2023. As mentioned at our investor day, These rate cases combined with our FERC formula rates will provide regulatory agreements for approximately 90% of our rate base. Our requests aim to balance the investments needed to improve the system and deliver on a state climate policy with customer affordability. We have requested approval of approximately $10 billion in capital investments over the next three years, focusing on clean energy transformation, reliability, and resiliency and improving the quality of service to our customers, which will also create jobs in our local communities. The investments needed to modernize the system and meet the state policy goals are substantial, and the proposals we have put forward represent a balanced path to address those needs. As we work with regulators on these proceedings, we have taken a conservative approach to our long-term outlook. maintaining capital spending on average at historical, but ultimately insufficient levels to meet the full needs of the system into the future. As filed, the resulting bill impact will be around 13% in New York, with rates for our companies remaining among the lowest in the state, and between 4% and 5% for CNP-UI and Berkshire Gas, an increase that is lower than the current level of inflation. At CMP, our rates will remain among the lowest for investor-owned utilities in New England. Turning now to the process, in New York, we have filed our response to staff testimony, which supported an average rate increase across all four businesses of 20% versus 25% size. Evidencial hearings are scheduled to begin early next month. However, we have filed for a stay of those proceedings in order to enter into voluntary settlement negotiations shortly with all parties. In May, technical conferences on initial testimony are scheduled for November, and in Connecticut, the intervenor testimony is expected to be filed in December. In Massachusetts, our pre-filing settlement with the Attorney General is currently being considered by regulators, and an order is expected shortly. If approved, Our new rates will take effect in January. Turning now to our offshore business on slide number eight. As you know, Binger Wind One is the first utility-scale offshore wind farm in the U.S. and a key project, both for our company and for the country, which will generate clean, affordable energy for over 400,000 homes and businesses while reducing carbon emissions by over 1.6 million tons per year. The project is progressing well and remains on track with the construction plan. As we have discussed previously, the supply chain for Binger Wind 1 is fully contracted, and all labor costs are either fixed or capped, which protects the project from current market pressures. We have now issued all notices to proceed, and the manufacturing for all major components is now underway. We are happy to report that the offshore export cable installation will start this week. A steel erection for the onshore substation is 95% complete, and installation of equipment is ongoing. We are very encouraged by the excellent progress made here, and we get ever closer to delivering this milestone project in 2024. In Park City and Commonwealth Wind, our focus is on improving the project economics and renegotiating our PPAs because of the difficult environment. As you know, we beat this project in 2019 and 2021, respectively. Since then, the market experienced meaningful and anticipated changes due to high inflation, supply chain constraints, and higher capital and borrowing costs, making it necessary for us to pursue changes to the PPA terms. which we believe are modest and achievable. To facilitate this process, we have filed a motion with regulators in Massachusetts to suspend regulatory review of our Commonwealth wind PPAs for one month. As New England's largest offshore wind supplier, Avangrid is committed to developing this new American industry and bringing with it the wide range of benefits to our communities. Based on our report by PwC, we estimate that our investment in our three New England projects will generate tens of thousands of jobs during the construction phase, most of which will be in Massachusetts and Connecticut, where we will be also generating over 1,500 long-term sustained jobs during the operational life of the projects. As we deliver these benefits, our offshore activities will benefit from Iberdrola's development experience and proven track record of execution. Moving to slide nine, in onshore, over the last 12 months, we have achieved commercial operation of approximately 475 megawatts, including 281 megawatts of wind and 194 megawatts of solar. We have roughly an additional 600 megawatts under construction, including 106 megawatts of new onshore wind and 480 megawatts of new solar. In line with our focus on mitigating risk and ensuring we can deliver on our existing commitments, we have worked with our suppliers to secure the required panels for all of our projects with Plan COD in 2023 and 2024. In addition, we continue to work with our customers to renegotiate certain terms and conditions of our PPAs to address inflation pressures, accommodate the schedule impacts, and maximize project value. The Inflation Reduction Act will be a driving force for America's clean energy industry, not just in the next one or two years, but over the next decade. We expect the IRA will create the strong long-term tailwinds for additional investments in wind, solar, and other renewables. And subject to Treasury guidance, we are moving forward on plans to capture the opportunities the IRA brings. We are evaluating the best fit within our fleet to execute repowered projects as we have done in the past, and we will maximize the value proposal of new growth on a project-by-project basis by maximizing the contribution of tax credits in their different forms, as well as their monetization schemes. As we deliver near-term and future projects, we will also continue to benefit from the experience and scale of the Verdura Group, especially when it comes to purchasing power and new technologies like green hydrogen. Turning now to slide number 10, our top strategic priority is execution. And as you can see from the list, our team is taking action. Throughout the year, we have delivered a number of successes across the organization and in both our businesses. Above all, at Avangrid level, we are working to deliver on our 2022 earnings outlook. And given our strong trajectory through these first nine months, we are on track to do so. To date, we have delivered $2.1 billion in investments, an 11% year-over-year increase as compared to 2021. Last month, we presented our new strategic plan, which will provide a deeper focus on a steady, regulated growth and healthy but achievable results, while also identifying a robust set of opportunities to deliver incremental value over and above our assumptions. We'll also remain committed to creating sustainable value through our focus on ESG. As part of the nearly $800 million of debt we've closed on this year, $275 million were new green bonds. Reinforcing our commitment to climate action, we are now targeting to reach carbon neutrality in scope one and scope two emissions by 2030, putting us ahead of most other major U.S. utilities. In addition, we are advancing innovative new technologies such as green hydrogen that will support long-term decarbonization. Our efforts continue to be recognized by third parties, including Ethisphere, which named Avangrid one of the world's most ethical companies for the fourth year in a row. In networks, our team have worked hard to put forward thoughtful proposals for our rate case filings in each of our states, balancing investment needs with customer affordability. We've taken significant steps forward in Maine, With our improved customer service performance at CMP, leading to the removal of the 100 basis point ROE adjustment, and we received a fair ball ruling on NECC from the main Supreme Court. We have also achieved a number of positive regulatory outcomes, including an order in New York providing the state funds to help pay down the unpaid balances of our most vulnerable customers impacted financially by the COVID pandemic. We also received approval for additional storm amortization in Maine to recover our full 2021 deferred storm balance, and our utilities have been recognized by EEI for their outstanding performance helping Louisiana recover after Hurricane Ida. In recent weeks, our crews traveled north to help restore power to Nova Scotia after Hurricane Fiona. Lastly, for networks, We are accelerating our digital transformation and enhancing the customer experience. We have increased our e-bill enrollments by 22% year-over-year, reaching a 40% adoption rate among our customers, and have increased downloads of our mobile app by 76% year-over-year. In renewables, we completed the restructuring of our offshore wind joint venture partnership, which allowed us to take full ownership of our largest New England projects. and we reached COD on roughly 400 megawatts of new onshore capacity. We're taking action to mitigate macro pressure on the business by securing panel supply for our projects through 2024 and through the negotiation of the PPAs. We continue to make steady progress in the construction of our Landmark-Binger Wind 1 project, and this week we will start the installation of the offshore export cables. Furthermore, the passage of the IRA represents the largest federal investment in clean energy and climate in the U.S. history, providing long-term certainty on a range of incentives, unlocking transfer stability as an alternative to tax equity, and overall creating a strong growth signal for the industry. As we await additional guidance from the federal government, Our renewables team is focused on reviewing the impacts of the full package, ensuring we can swiftly respond and capture all benefits that align with our businesses. Finally, we committed tax equity for approximately 600 megawatts of onshore projects, and as mentioned, we continue to optimize our portfolio and development pipeline to maximize expected returns and reduce risk, including, you know, safe assets potentially. With these achievements, and a solid operational and earnest trajectory in hand, I'm confident that we are on firm footing to deliver future growth. To discuss that growth further on slide 11, I'd like to bring you back to the investments we expect to make through 2025, using a broader view that reflects our full contribution to U.S. growth and clean energy development. On the left are our planned investments without the PNM resources merger. The chart on the right shows our total investments with PNM resources. including the full enterprise value of the transaction and estimated CapEx from 23 to 25. In both cases, we have included 100% of the CapEx for Binger Win-1, where we have the opportunity to consolidate the project after COD pending a final business decision. After including the full CapEx for Binger Win-1, even without BNN resources, regulated networks accounts for roughly 60% of investment or $6.3 billion. If we exclude the non-controlling interest in Binger Win 1 without PNN resources, regulated networks will account for over 70%. PNN resources adds another $10.9 billion composed of our equity investment, projected capex, and debt, increasing network share of our total investments to 80%, or 88% if we exclude the non-controlling interest in Binger Win 1. Altogether, including PNM resources, our investment totals over 21 billion in regulated networks and contracted renewable assets. Across our existing utility footprint, we are holding CapEx steady at a level consistent with the prior three-year period, allowing us to grow at an even pace, balancing investments to improve reliability and resiliency with customer affordability. As a reminder, Our projections do not fully consider the proposed investments in our rate cases, including investments to meet the state policy goals. As mentioned previously, we are focused on taking a disciplined approach that prioritizes the strategic and profitable growth of both our networks and renewable businesses, and positions us to deliver healthy financial results, even through a presently challenging economic environment. Turning now to slide 12, over the last several months, we have engaged with many of you and have heard your feedback. I'd like to spend a few minutes here providing some additional color and explaining how our team and our new strategic plan are addressing those topics. First, as I continue to say, our number one objective is execution. Over the last two years, we have established a solid trajectory of sustainable and reliable earnings growth. and we are on track to deliver our 2022 guidance. Our investment plan through 2025 centers around our regulated network businesses, and we promote secure and stable growth over the coming years. Including the full enterprise value of PNM resources and 100% of Binger Win-Win CapEx, we're investing $21.5 billion to expand our footprint in both networks and renewables, or approximately $11 billion without PNM's enterprise value and organic CAPEX. Another of my top priorities is engagement and building constructive regular relationship with regulators and other key stakeholders. And we've made important progress over the years. We have been focused on making sustained improvements in customer service in Maine. And as a result, we are successfully removed the 100 basis points ROE adjustment on CMP. And as you know, we filed multi-year rate plans in each of our states, keeping the bill impact well below the current rate of inflation in Connecticut, Maine, and Massachusetts. We've designed our proposals to include mechanisms to reduce risk exposure, such as forward-looking test years, revenue decoupling, and trackers. A challenging macro environment and rising commodity cost puts pressure on our customers. And by driving an increased focus on operational excellence, Securing government assistance funds, proposing balanced rate plans, and developing low-income rates, our utilities are working hard to help support our customers. Our work has a real positive impact when we ask for a rate increase. It's to invest in our estates through additional capital projects that create economic benefits such as local jobs and additional tax base. whereas the March larger increases requested by social fewer generators are pure margin. We're also executing on our key projects with Binger Win One, progressing on time and on budget. We delivered both the multi-billion dollar financing for this project and finalized the term sheet for the tax equity. We are encouraged by the main law scores, recent ruling on NECC, and while the lower court decided not to grant a preliminary injection, we believe We have a strong standing and remain confident the full legal process will find that the references attractive blocking on any CEC is unconstitutional. We are 100% committed to profitable growth with a disciplined approach focused on value creation. Thanks to our early investments in offshore wind, we have built a large project pipeline at a lower cost than competitors entering the space today. We have 2.4 GW of owned and contracted capacity including the first commercial large-scale project under construction. This is part of a larger diversified 26-year-old pipeline combining onshore wind, solar, and offshore wind, which provides us incremental growth and value creation opportunities through asset rotation or partnerships. Lastly, as peers strive to create cleaner generation profiles and set stronger climate commitments, we already hit there and look very attractive from that perspective. Clean renewable resources account for over 90% of our portfolio, which is at least twice as much as the other two leading renewable operators in the US. And unlike those companies, we have no coal in our generation mix. We were the first utility to set up a carbon-neutral goal, and we've continued to raise the bar, now targeting neutrality in Scope 1 and Scope 2 emissions by 2030. If we continue to concentrate on each of these areas and drive a relentless focus on execution, I know we can deliver success. Now, I will hand it over to Patricia to provide more detail on our financial results.