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spk11: Welcome to OvenGrid's second quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I will now turn the call over to Alvaro Ortega, Vice President of Finance, Investor Relations, and Treasury. Please go ahead.
spk05: Thank you, Dennis, and good morning to everyone. Thank you for joining us today to discuss Avangrid second quarter 2023 earnings results. Presenting on the call today are Pedro Asagra, 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 Catherine Estampien, president and chief executive officer of Avangrid Networks, and Jose Antonio Miranda, president and chief executive officer 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. 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 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 made during this conference call, in the risk factors section of the accompanying presentation, or in our latest reports and filings with the SEC, each of which can be found on our website. 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 considerations of non-GAAP financial measures to the closest GAAP financial measures. I will now turn the call over to Pedro.
spk06: Thank you, Alvaro, and good morning to all. Thank you for joining us today on our second quarter results presentation. Let's get it started on slide number five. Having reported second quarter earnings per share of 22 cents and adjusted earnings per share of 21 cents. As we anticipated last year, you know, 23 would have timing effects, such as the implementation of key rate cases expected later in the year. This year, we have accomplished various important milestones in our core business and strategic initiatives. In networks, central main power received approval for a two-year rate case, effective July 1st. On the New England Clean Energy Connect Transmission, NECEC, in this quarter, we received favorable rulings from Maine's business board supporting the advancement of this project. We also have two new positive developments. First, the Massachusetts House and Senate have included legislation supporting cost recovery for change of law, the referendum, costs in a budget bill. And second, we have an agreement to extend the commercial operations date for the change in law delay if needed. We continue our discussions regarding price adjustments for the change of low cost. Today, we have provided with the regulator in Maine with the required notice that we will continue some critical path construction activities in August. On Commonwealth wind, the Massachusetts electric distribution companies have filed with the Department of Public Utilities for the termination of the PBA contracts, which will pave the way for Van Grief's participation in future offshore solicitations. In addition, we are progressing on our Binger Wind 1 offshore project, which is on track to deliver first power this year. Finally, our ESG efforts continue to be recognized by third parties. We have earned 11 sustainability and governance awards or recognition in the first half of the year. We have also made significant strides in our New Year rate case. We filed the joint proposal agreement with the Public Service Commission with new rates expected to go into effect in October with a Mayhold provision back to May 1st. We're also aiming to repower over half of our existing fleet beginning this year through 2032 to benefit from opportunities created by the IRA. And we continue to address with regulators and the electric distribution companies about a path forward for our Park City offshore wind project. Finally, We remain committed to the PNM merger. We extended the merger agreement to December 31st. This extension will enable us to work through the legal process in the coming months. Based on our year-to-date achievements and progress on key issues, we are reaffirming our full year 2023 EPS of $1.90 to $2.91, and adjusted EPS of $2.2 to $2.35. In the slide 6, In May, we have successfully completed the first multi-year rate case settlement in 15 years. We received approval from the Maine Public Utility Commission for our CMP rate case, which is centered around over $380 million of investments to improve safety, reliability, and resiliency. This will increase our rate base to $1.3 billion by rate year two. The plan also includes an authorized ROE of 9.35% and 50% equity, with an ability to earn up to 10.35% prior to sharing. The decision provides mechanisms that will reduce our risk exposure, such as the ability to charge pre-estation costs to storm reserves and protection against hyperinflation. Ultimately, this rate case will balance customer affordability with needed investments while strengthening our credit metrics. In addition to a successful rate case, we have also achieved another notable accomplishment in Maine. On the regulatory front, we received approval for our compliance filings, generating $80 million of additional cash for the second part of the year. These filings enable us to recover items like generation expenses on a timely basis. In customer service, we have met or exceeded our service quality indicators for over three years. In operations, we have conducted over 9,000 distribution line inspections and removed over 5,000 aging poles. Finally, we also closed the 2020 CMP management audit, resulting in no actions from the Commission. In the next slide, regarding our NECC project, We are very pleased that the jury in the Maine Business and Consumer Court unanimously determined that NECC cannot fully resume construction and that there are no appeals on the ruling. In May, the Maine Department of Environmental Protection lifted its permit suspension clearing the way for project construction. We are having ongoing discussions on cost adjustments and have reached an agreement with the counterparties to extend the COD timeline under the contracts if necessary. In addition, we will be working on critical path activities in the Lewiston substation as of August 3rd. The transmission project has an expected total capital expenditure at present of $1.5 billion, with $638 million already capitalized. Once complete, NECC will benefit all of New England by reducing the region's dependence on fossil fuels and providing more stable energy prices. Recently, the Massachusetts House of Representatives and the Senate included favorable legislation in a budget bill to provide the Department of Public Utilities the flexibility to approve amended transmission services agreements, which would support the recovery of cost increases. In slide number eight, we are proud of the partnership we have built with Massachusetts, and we lead the offshore wind industry in the United States. We remain committed to constructing our offshore wind pipeline and helping New England meet their ambitious 2030 climate targets for a better, brighter, clean energy future. On Commonwealth Wind, the electric distribution companies have filed termination documents with the Massachusetts Department of Public Utilities. Once approved, we plan to repeat in future solicitations. The termination agreement limits our financial impact solely to the project security deposits. This outcome is significantly better than our peers who have paid up to $350 million to terminate their respective offshore wind project contracts. Construction is progressing well on Binger Wind 1. The 806 MW project is on track for set power in 2023 and commercial operation in 2024. Once online, this project will generate clean, renewable, affordable energy for over 400,000 homes and businesses across Massachusetts, while reducing carbon emissions by over 1.6 million tons per year. We have achieved many construction milestones this summer on Virginia Wind 1, including energy of the onshore substation in Massachusetts. Construction has also started on the operation and maintaining facilities in Munster-Pingert. Offshore, we have installed six monopiles and transition pieces. And shown on this slide is one of the six completed turbine foundations. We have also completed the installation of the offshore substation and export cable, which connects the onshore and offshore facilities. In the next slide, in June, we filed the joint proposal agreement for the New York rate case with the Public Service Commission, which has been signed by eight parties. The record will be completed on August 4th so that it is ready for the Commission to act. Last week, the CONET joint proposal was approved almost as filed. Our joint proposal agreement requests $6.4 billion in capital expenditures over 2022-2026 including 634 million dollars for new york's climate leadership and community protection act clcpa phase one the new rates are expected to go into effect in october 2023 with a may hold provision back to may 1st 2023 the agreement includes an authorized roe of 9.2 percent and 48 and 50 50 earnings sharing above 50 basis points and contains a provision for fixed debt rate reconciliation. The rate case yields an additional $1.45 billion of authorized revenues. The three-year rate settlement also includes regulatory asset language for uncollectibles, providing risk mitigation against customer . There are also provisions for improved storm recovery and funding for vegetation management. Additionally, we've taken significant steps in customer service performance in New York with a positive trend over the last several months. Furthermore, we received approval to build transmission projects through CLCPA Phase 2 and New York Transco, bringing the total transmission opportunities in the state between 2025 to over $3 billion for these projects. Finally, our teams have worked to improve system reliability by enhancing vegetation management targeting infrastructure replacements for aging assets and modernizing the grid. As a result of this work, we're seeing a 12% improvement in NYSEG and 16% improvement in RG&E in system average interruption duration, or SADI, year over year as compared to 2022. In slide number 10, the Inflation Reduction Act has created an attractive environment for clean energy projects by extending tax credits. Due to the IRA, we are pursuing opportunities between 2023 and 2032 to improve the earnings profile of our renewable business by repowering over half of our fleet with about 4.6 gigawatts identified as of today. Repowering is a great opportunity for our renewable business. First, for technical reasons, The sweetest part of repowering is when turbines are between 13 and 20 years old, and over half of our existing fleet is in this range. Second, the technology has improved significantly, with new turbines producing 30% more energy than the aging turbines. Finally, the permitting process for repowering is simpler and faster, while the profitability is expected to be the same as new build. Thus, we are beginning the repowering process this year. by working to secure the supply chain and commencing development activities. We will begin by assessing our 80 MW Leaning Juniper Wind Project. Repowering these assets enable us to receive additional PTCs on existing assets under incremental production for 10 years. Extending our assets' useful life will help us avoid the diminished returns and performance of the aging fleet. We will provide additional details on these plans in the coming months. Slide number 11, in Connecticut, we filed the UI rate case with the Public Utilities Regulatory Authority in September 2022. The draft decision was received on July 21st, and we are preparing our response. We expect a final decision by August or September, with new rates in effect by September or October. In addition, as part of our earlier agreement with the Connecticut Office of Consumer Counsel, which was approved by the Public Utilities Regulatory Authority, we will be filing rate cases for Connecticut Natural Gas and Southern Canadian Gas this November. SB 7, a Senate bill to reform utility regulation, passed the legislature and was signed by the governor in June. It was a political response to increases that customers saw in their electric bills. Our team worked hard with the state regulators, and the outcome was much better than the original draft of the bill. Finally, for Park City Wind, we continue working to address the economic viability of the power purchase agreement with regulators and electric distribution companies with the goal of finding a path forward. Moving on to P&M, we continue working towards closing the merger with PNN Resources. We are committed to the merger and the benefits it will bring to the state of New Mexico. This merger agreement has been extended to December 31st as we work through the legal process. There is also an option to extend it for an additional three months if agreed. The merger has received approval from five federal agencies and the Public Utility Commission of Texas. The parties in the merger case will present arguments in front of the New Mexico Supreme Court in September. In slide 12, I am honored to mark my one-year anniversary as a BankGrid CEO. Over the past year, I appreciate the support of the chairman of the board and all my team in this task that we had ahead of us. We have navigated through unprecedented macroeconomic and supply chain challenges. As you have seen, we have made significant progress in most of our priorities and also achieved some additional important accomplishments. For example, in Connecticut, after eight months of discovery, our companies received an overall positive audit report and finalized the management audit with no material negative findings. We also made substantial strides in customer digitalization, which will help us drive further improvements in our customer service metrics. from our customer experience team have resulted in over 1.2 million customers enrolled in eBill, 10% increase year to year, plus over 1 million mobile application downloads, a 54% increase. In addition, we almost multiplied by four times the number of customers with outage alerts from 430,000 to over 1.6 million customers. We continue to prioritize customer service by automating net energy billing and the move-in process, and we launched a new electric vehicle portal and self-service payment tool. These tools and technology will help increase customer satisfaction, reduce cost to customers, and improve cash flow. In renewables, we reached 8.6 gigawatts of wind and solar capacity, signed 321 megawatts of new power purchase agreement, and renegotiated 1 gigawatt. We've achieved operational success by reaching 93 97.3 percent fleet wide availability in 2022 and are currently maintaining energy availability at 20 and 97 percent preparing for binger win one operation we've integrated the project into the national control center for remote operations we have also joined the california independent system operators western energy imbalance market as the first generation only entity, enabling Avangrid to optimize real-time trading in the energy balancing market and reduce curtailment. In addition, we have also signed a memorandum of understanding to explore opportunities to develop up to one gigawatt of green energy projects within the Navajo Nation in New Mexico and Arizona. Lastly, for accomplishments across the rest of the company, We have executed a transferability term sheet for 100 million tax credits for multiple projects that are not in tax equity. In addition, we've signed the tax equity term sheet for Binger Wind 1 and fully funded the tax equity for Landhill Solar. We also issued $575 million of long-term debt in networks and $800 million of a 10-year green loan with Iberdrola. Earlier this year, Fitch also upgraded Avangrid's outlook to stable, improving our ability to access the capital markets. Thanks to these achievements and a solid operational and earnings trajectory in hand, I'm confident that we are on firm footing to deliver future growth. Turning now to slide 13, in the first half of 23, Avangrid has earned awards and recognitions spanning various aspects of sustainability and governance. On our Q1 earnings call, I discussed Avangrid's inclusion in just 100 lists, Bloomberg's Gender Equality Index, and its fierce world's most ethical companies for the fifth consecutive year. We received another eight prestigious awards in 23. S&P Global 23 Sustainability Yearbook named Avangrid as one of the world's most sustainable companies. Avangrid is one of the only two U.S. electric utilities to be recognized. US Today recognized Avangrid as one of the nation's climate leaders. The Edison Electric Institute recognized Avangrid for exceptional storm restoration performance following winter storm Elliot in December 2022, as well as for mutual aid provided the Nova Scotia following Hurricane Fiona. This recognition serves as a testament to our continued commitment to customer reliability. This is the sixth consecutive year that Avangrid is included in the Food Seed for Good Index Series. We received top scores in climate and governance, which includes assessments of risk, management, corporate governance, and anti-corruption. As part of the Iberdrola Group, our sustainability commitments are central to our company strategy. So we are incredibly proud that our climate leadership is being recognized by third parties. Each of these awards and recognitions highlights our commitment to building a clean energy future while maintaining socially responsible businesses practices. Now, I will turn the call over to Patricia, our CFO, to provide more detail on our financial results.
spk01: Thank you, Pedro. Good morning, everyone. For the second quarter of 2023, our EPS was 22 cents compared to 48 cents in the second quarter of 2022. And our adjusted EPS was 46 cents compared to 21 cents in the second quarter of 2022. Network's results were 20 cents, lower by 14 cents quarter over quarter compared to our second quarter of 2022. The key drivers included a positive 4 cents due to the implementation of the third year of the existing rate plans for our New York companies. This does not include the proposed new rates in our joint proposal filed in New York, which we expect to go into effect in October with a May callback to May 1st. While we were supported by joint utility arrearages orders in New York in 22 and 2023 to reduce impacts from uncollectibles, the positive impact in 2022 was in the second quarter, and in 2023 it was in the first quarter, which explains the minus 3 cent impact this quarter related to the timing. We continue to experience higher uncollectibles, which had a negative 4 cent impact quarter over quarter. Additionally, we experienced higher costs to implement our investment plans and operate the businesses including O&M, depreciation, and interest costs. O&M includes new headcount and cost of the business. Higher depreciation represents new assets placed in service, and higher finance costs reflect higher interest rates and short-term debt balances. We anticipate improvement later in the year with the implementation of our rate cases, and that will update the cost of the business. Our renewables segment was $0.18, lower by a penny quarter over quarter. Wind and solar operating performance, which includes the impacts of pricing, production, and tax benefits, explained minus 1%, sorry, minus 1 cent, and was related to lower wind generation output and a decrease in merchant prices, partially mitigated by tax credits and new projects in service. While we had strong wind performance in the first quarter, our wind resource was low this quarter. Our net capacity factor for our fleet was 28.6% for the quarter, versus our long-term average of 33.4%, for the second quarter period from 2011 to 2022. Lower earnings from our thermal operations and asset management of $0.02 reflected the planned maintenance of our Klamath thermal plant, which concluded in mid-July. O&M costs are a positive $0.04 due to higher capitalized maintenance. Corporate costs reflect a decrease of $0.11 quarter over quarter, primarily due to tax timing as we balance to our annual expected tax rate and higher interest costs. Moving to the next slide, we are reaffirming our 2023 outlook ranges for EPS of $1.90 to $2.10 and adjusted EPS of $2.20 to $2.35. Our ongoing focus remains on achieving these targets as we execute our investment plans with discipline and a risk management focus. We also provide our expectations for the remainder of 2023. This includes the implementation of our New York joint proposal with a May callback to May 1st, as we previously mentioned, and the remaining months in our main final rate order, combined with a range of $0.28 to $0.32. The rate cases capture the cost of the business and investments that support safety, reliability, and resiliency. While we recently received the proposed final decision in our UI rate case, we are still evaluating that decision. We will be filing written exemptions and providing oral arguments I believe our testimony briefs and the many interrogatories that we filed fully support our rate filing. Therefore, the outlook does not reflect any adjustments related to this draft decision. Additionally, we're also anticipating the start of construction of our NECEC project with a range of six to seven cents per share, reflecting AFUDC earnings. Operating performance of our networks and renewables businesses in the second half of the year in the range of 72 cents to 78 cents. and cross-management initiatives of 4 to 6 cents. This brings us to expected results prior to our renewables transactions in the range of $1.95 to $2.08. Adding the renewables transactions as we have previously disclosed, which include the partial sale of our Kitty Hawk lease area and partnership transactions, at a range of 24 to 28 cents. And with that, we reach our 2023 outlook of $2.20 to $2.35. Note that the delay in the closing of our merger with PNM has a minus 3 cent impact on the year, considering the net impact of PNM operations and the interest rates on the cost of the funding, or the closing, funding to close the transaction. As our guidance assumes 30 cents contribution from PNM in 2023 and 4.5 billion of debt at the parent level to close the merger transaction mid-year. This amount is included in the second half business operations bar in the chart. Additionally, the opportunities and risks impacting our 2023 results include renewables production and pricing, other regulatory adjustments and final rate case outcomes, thermal and asset management results, taxes, interest, O&M, uncollectibles, and asset rotations. Finally, today we are also reaffirming a 6% to 7% compound annual growth rate in our adjusted EPS through 2025 off a base that is the midpoint of our 2022 guidance. On the next slide, we move on to updates for financing, liquidity, dividends, and credit ratings. In July, we signed a 10-year green term loan with eBidrola for $800 million at a rate of 5.45%. This highlights the unique benefit of our relationship with eBidrola, which provides us with flexible cost-effective access to capital. Similarly, we increased our intercompany credit facility with eBidrola from $500 million to $750 million. We do not have anything outstanding under that facility, but the higher amount enhances our available liquidity. We also recently remarketed a NYSEG tax exempt bond for $100 million at an attractive rate of 4% through maturity of that bond in 2034. For renewables, we recently executed a term sheet to monetize our over $100 million of tax credits from existing assets not in tax equity, benefiting from the transferability provisions enabled by the IRA. For the first half of the year, we have $7.4 billion in liquidity covering 16 months as we target to maintain at least 15 months of liquidity. This includes $4.3 billion from the commitment letter from Evadrola that backstops our PNM merger. Maintaining our solid credit ratings is a key objective. At the Auvengrid level, all of our ratings are on stable outlook. Finally, our dividend policy remains unchanged, targeting a payout of 65% to 75%. And our board recently declared a quarterly dividend of 44 cents a share, payable on October 2nd. In summary, we continue to focus on executing our long-term financial plan. There are timing impacts to the recognition of the results of rate cases, transmission construction, and renewable asset monetization that we expect to materialize in the second half of the year. As you can see, we've had successes in many important milestones that will support the achievement of our financial goals. Thank you for joining us today for our financial update. I'll now hand the call back to our operator, Dennis, for questions, followed by closing remarks from Pedro.
spk11: At this time, I would like to remind everyone, in order to ask a question, simply press star, then the number one on your telephone keypad. We'll pause for a moment to compile the Q&A roster. And your first question is from the line of Richard Sunderland with J.P. Morgan. Please go ahead.
spk07: Hi, good morning. Can you hear me?
spk02: Yes.
spk07: Great. Thank you for the time today.
spk08: Maybe I'll pick it up where you left off on the waterfall for the second half of the year. The 72 to 78 cents were for 2H business operations. I think you did around 70 cents last year for 2H. Could you walk through some of the drivers year over year within that bucket, just quantifying the positives and the negatives? Presumably there's some renewables, megawatts that are in service, but likely some other offsets as well. So could you quantify a few of those pieces?
spk01: Yes, certainly, Richard. I think just overall, the second half business operations is just our normal operations of the business. So we called out some specific items like rate case implementations that are new this year, NECC, but this reflects just the normal collection of revenues in our networks business, the normal production and operations in our renewables business, and the overall cost of the business, depreciation, interest, et cetera. So some of the impacts, you know, maybe year over year that are looking, if you're comparing to the last second half of 2022, would be some efforts that we have made to improve capitalization of labor and maintenance. costs, also normal wind production. We have incremental new assets and service. We actually added 405 megawatts since the second half of last year for our Lundhill and our Montag assets, and we have 899 megawatts in construction. On those new assets, we have incremental PTCs. PTCs are also inflation-adjusted. And then we also have strong thermal results now that our thermal plant, our Klamath plant is back in operation this July. So those are kind of the main incremental benefits, and then we have the normal costs of the business, as I mentioned, depreciation, interest, costs, factored in there.
spk08: Okay, got it. Got it. Very helpful. And sticking with the walk here, I know you mentioned that the UI draft decision is not factored in. at a high level here, if the draft decision holds or substantially close to the draft decision, would you look to find other offsets within the plan to stick with the 220 to 235 range, whether on the cost management side, the renewables transactions, or elsewhere?
spk06: Let me react to that. I think, you know, as one year ago, you know, when we had probably 10 things on the table, Probably all of them not easy to deal with. I think we told you we need to work and try to get these things done. I think in the case of Connecticut, there is a draft decision right now. Let us work. We're going to be filing briefings, hearings, working on that. And I think let's not forget, Connecticut is a very small part of our business. So if you compare, we're investing in Connecticut $150 million a year, more or less. I think that compares with $2 billion right now in New York. If you add CPL, it's even more. So it's a small part of the business as a whole, but it's important. We care about $1 million as we care about $1 billion. Let us work on that, you know, give us, you know, one or two months, that is, you know, we have pending, and then we'll come back to you. Of course, you know, we are always focused if, you know, something goes down to find ways of, you know, getting that up. You know, efficiency is on top of us, you know, 24 hours a day the whole year. But on Connecticut, I think we prefer not to comment right now, work. You know, we are not criticizing anybody, making, you know, public statements. We need to work, okay, and go there, you know, work with the different parties, you know, make sure we put our cases strongly. And then, you know, once that's done, we'll come back to you.
spk07: Very clear, Pedro. Thank you for the time today.
spk01: Thank you.
spk11: Your next question is from the line of Julian DeMoulin-Smith from Bank of America. Please go ahead.
spk09: Hey, good morning, team. Thank you guys very much for the time. Hope you guys are well. Maybe just taking a different tact on things, can we talk a little bit about the wind and maybe wind repowering opportunities? Obviously, with prices coming off here. You guys have perhaps a unique opportunity here to step in and pursue that versus many of your peers. How do you think about the timing, size, and sort of cadence of those investment opportunities here materializing post-IRA?
spk06: I think we intend to do a very detailed presentation in the months ahead of us, but we want it not to delay, to present an initial big picture of what we're going to be doing I think as we mentioned in the presentation, IRA allows right now for additional PTCs for 10 years. And, you know, those of us, there is very few of us that we have, you know, thousands of megawatts already in operation more than 13, 15, 17, almost 20 years. We are the perfect candidates to take care of this. I think we've been working now for months on a very detailed asset by asset, reviewing which ones, you know, we could do. And I'm very comfortable that between now and the end of the decade, you know, we are at least, you know, going to go ahead, you know, with this amount of megawatts. I think this is something important. As you know, the way in which the profile of the earnings works for U.S. renewable assets, You get PTCs upfront, accelerated depreciations. So the last part of the life of the asset, you actually have negative results. By doing this repowering, we turn that around. I think from a cash flow point of view, it's going to be very positive. It's going to be a business self-financed. So when you look at 2030, 2035 numbers, this business through the PTCs allows for a self-financing of that. So I think this is a very positive piece of news. I think this says that, you know, we're going to be doing, let's say, like new investments in renewable non-stop, you know, for the next eight years in a very simple manner. I don't know, Jose Antonio, if you want to compliment something.
spk04: Thank you, Pedro. And good morning, Julian. Yes, you are totally right. I think that, as you pointed out, we have a fleet that allow us, like no others, to profit from the IRA guidance on the repowering. Because remember that we have 30% of our assets in merchant. So it's a great opportunity. to reengage with new PTCs another 10 years for the whole production, plus also we see traction in off-takers telling us that they would be agreeable to sign PPAs for repowering. So all in all, I think that is a good opportunity thanks to our installed fleet.
spk09: Yeah, I agree. I'm curious to see when and how it happens. If I can come back to another side of the equation here, I mean, just given the delays in P&M, Does it have to be the next big update on your long-term outlook have to be after close or could we be seeing that sooner and later here as you think about 24 and beyond guidance? I just want to clarify when you think you'll come back with a more refreshed view. Does it need to be post that deal? And I got a quick clarification on that.
spk06: Yeah, I think, you know, now PNM, you know, we have the next step is the oral hearing in the Supreme Court in September 12th. So I think after that, we will wait for a decision. So I think the answer probably you're right. I think we have to wait until we have that because that's a very material part of the business going forward. But in that context, I think it's very interesting, you know, what we said before that we're going to be working on a three-year plan that we announced last year. We made clear 23 was the most difficult year for several reasons. First, because we had a lot of things on the table. And you've seen, you know, in page five, I'm very pleased with the work the team has done. You know, we have, you know, basically, you know, put out of the table things that had either billions of risk, you know, hundreds of millions of impact. So very pleased on many of the outcomes. I think the main rate case, I don't think a year ago anybody would think of having a 20-year actual cash rate increase in two years. I think, you know, we were, you know, expecting or a lot of people were expecting, I think, negative outputs, et cetera. So I think many things have happened. When you look at, you know, P&M, Compare that with the $6 billion capital expenditure in New York. That's almost a P&M. You think about the additional $3 billion. Now we are referring to 4,600 megawatts. So I think we're working on fixing the things that we need to fix in the short term. But as you can see, we are laying out a strong foundation probably for the next 10 years ahead of us. So that's why I think we're working in the long term as well, because those things need to happen right now.
spk09: Awesome. And just a quick clarification on timing, too. It seems like the next opportunity here is around the climate investments and proposals in New York. Can you talk a little bit about your expectations on timing there, especially with the JP still pending? And then, again, given the sort of the protracted process for your peer, what's the timing expectation for that JP approval too? So just, you know, really kind of getting at process here on the climate and the JP in parallel.
spk06: I think on the rate case in New York, and please, Catherine, no compliment, I think for me it's very simple. We've been working very well with the parties, with the public commission. I think you saw how in a very short period of time we reached a settlement with multi-party support. I'm very pleased with the work we've been doing with the staff of the public commission, trade unions with some of the key consumers, key parties also involved. And I think the case will be done in August. And after that, we just look forward to a rapid decision. I would not like to guarantee it's going to be one month or another one, but I think we've been working very well right now and making good progress in all the fronts we have in New York. So I'm very pleased on that. Catherine, if you want to... Sure, Pedro.
spk03: I'll just add some commentary on the CLCPA, both phase one and phase two. If you look at those investments, it's almost $3 billion worth of transmission investments that we'll be making between now and 2030. So 2030 is the date by which we'll have those projects complete per the legislation in New York. And we're already starting to work on preliminary engineering. There's over 684 million that are included in the JPA. And we've worked hard with the settling parties to work on how much of the phase one investments would be included in this rate case. And as I said, we're already starting our preliminary engineering on those projects. On the phase two projects, those, of course, are not subject to rate case approval. Those have already been approved through the phase two proceeding. And we've already provided our first update to the commission on the phase two projects. And again, we're already starting our preliminary engineering on those projects, and they are anticipated to be complete by 2030. Excellent.
spk02: Thank you, guys. Appreciate it. Good luck. Thank you.
spk11: Once again, if you would like to ask a question, simply press star, then the number one on your telephone keypad. Your next question is from the line of Michael Sullivan with Wolf Research. Please go ahead.
spk02: Hey, good morning. Can you all hear me? Yes.
spk10: Okay, great. I just wanted to go back to the with and without PNM scenario again. So I think you all talked about it being like a three cent swing factor this year netted against the debt. Can you maybe just explain how we think about that next year when you talked about the $1.9 billion of equity out there and how that gets you to the same place? I guess I'm just struggling with if you do close the deal and you do the equity, how that ends up being better versus not doing the deal and you're in the same place it seems this year and then you don't have to do the equity.
spk06: Let me answer more on the capital increase, and then you can answer more on the actual numbers there. I think, you know, remember we put a plan for three years, and the capital increase for next year, it was subject to two different things. The first one is whether P&M closes or not. You know, if it closes, you know, then you know it's different that if it does not close. And the second one was also our asset rotation. I think we continue to work on the asset rotation, so that's why in the update that we will give in the upcoming months, you know, for next year, we hope, you know, to have, you know, a final, you know, decision on that asset rotation. And then once we know if PNM closes or not, I think we will be able to put everything together. So that's, I think, the two things that will continue to drive that decision. I don't know, Patricia, if you want to.
spk01: Yeah, I think that covers it. I think the real important thing was that that $1.9 billion in 2024 was not related to PNM. It was really to fund the rest of the business. The funding for PNM was the prior capital equity issuance and then the debt to close the transaction. So I think we just need to understand what the timing is in terms of putting that all together. I mean, the additional equity was just to maintain our credit metrics over time. um and make sure we're at our targeted levels and maintain our investment grade reading so you know the timing may impact the timing of how we do the debt and the equity but the pieces are the same and for the same purposes okay okay thanks on the on the asset rotation and the renewables i guess why why now on that i mean obviously things seem pretty
spk10: pretty pressured in the offshore business right now, if we just look at what some of the peers are announcing and looking to do on the sale front. Why do it now if you don't have to, and why not wait until maybe things rebound a little to try and capture more value?
spk06: I'm going to answer based on the 25 years I've been at DivaDollar Group. I think we have done more than 100 deals in that period. We will never sell if the price is not right. We will never, you know, do a transaction if we cannot, you know, explain it's a good, you know, an attractive valuation for us. We will never do anything like that, okay? So feel comfortable that unless we have, you know, a right proposition on the table, you know, we will not go ahead. So that's how we have done always, you know, transactions. We continue to do this at the group level in the same way. I continue to think that the market, you know, in general, maybe the way you were commenting, But I can tell you, good assets and good platforms and good proposals always find, you know, the right buyer at the right price. And you may not have seven people competing, but I think you have, you know, some people, as we are the case when we want to buy things, very keen on good opportunities. So I think that the market that you have right now probably affects, you know, 90% of transactions going on, but you still have, you know, the good deals, the good platforms that is once in a time available. So people are ready to put the right price on those deals as well.
spk10: Okay. And specifically on the onshore piece, is it still more so you're looking at individual assets or you're looking at, you know, a larger portion of the portfolio, the portfolio of itself, or is it kind of all options on the table in terms of asset rotation?
spk06: All the options continue to be on the table. You know, we have been receiving offers for specific assets. I think we have, you know, interest in a stake in the business, in a partnership. I think we're just looking into what is the best option from a structuring point of view and from a value point of view. So we don't rule out any option.
spk02: Okay, great. Thank you very much.
spk11: At this time, there are no further questions. I will now turn the call over to Pedro Azagra for closing remarks.
spk06: Okay. So thank you again for joining us for the second quarter earnings call. Looking ahead, our team is focused on execution, growth, and value creation in order to deliver our 2023 guidance and the years to come. As such, ongoing priorities include the resolution of our New York and Connecticut rate cases, balancing cash flow, earnings, and customer affordability. And we will focus on achieving allowed ROEs in the different jurisdictions. Our priorities also include continuing to work towards the construction of NECC and the completion of our P&M merger. In renewables, we plan to execute on our repowering plan while continuing to bring new profitable projects. With regards to our offshore projects, we will begin exporting power from Vineyard Wind 1 later this year. On top of that, we are working with Connecticut stakeholders to find a path towards Park City Wind. And also, we are concentrated on terminating the Commonwealth Wind contracts and see the new opportunities in the RFP coming ahead of us. Additionally, we will remain focused on our commitment to financial sustainability, prioritizing the maintenance of solid credit ratings and strong liquidity. Cash flow is key for us. And we will continue developing and promoting talent and diversity, which will drive employee engagement across the organization. We believe that AvantGrid has exceptional growth prospects. Our business mix with a core regulated network mix and expanding renewable energy investments represents an attractive opportunity at the forefront of the energy transition. By leveraging additional long-term growth opportunities like the IRA and New York SEAL CPA, we are confident Urban Green will continue to provide value for our customers, communities, and shareholders. We look forward to sharing our progress with you over the coming months and appreciate your continued support. Thank you for joining us in today's call. If you have any other questions, please follow up with Alvaro and the IR team. Have a great day.
spk11: This does include Avangrid's second quarter 2023 earnings conference call. Thank you for participating. You may now disconnect.
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