Avangrid, Inc.
Q4 2020 Earnings Call Transcript

Published: 24 Feb 2021

[Operator:]

Ladies and gentlemen, thank you for standing by. And welcome to AVANGRID 4Q 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now turn the conference over to your first speaker today, Patricia Cosgel, Vice President Investor Relations. Thank you. Please go ahead.

[Patricia Cosgel:]

Thank you, Julianne, and good morning to everyone. Thank you for joining us today, to discuss AVANGRID's fourth quarter 2020 earnings results. Presenting on the call today are Dennis Arriola, our Chief Executive Officer; and Doug Stuver, our Senior Vice President and Chief Financial Officer. Also joining us today for the question-and-answer part of the call will be Bob Kump, Deputy Chief Executive Officer and President of AVANGRID; Alejandro de Hoz, President and Chief Executive Officer of AVANGRID Renewables; and Tony Marone, President and Chief Executive Officer of AVANGRID Networks. Note that some of us will be together for the call today, keeping our social distancing, while others will be joining us remotely. If you do not have a copy of our press release or presentation for today's call, they are available on our website at www.avangrid.com. During today's call, we will make various forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements, if any of our key assumptions are incorrect or because of other factors discussed in AVANGRID's earnings news release and 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 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 Dennis.

[Dennis Arriola:]

Well, thanks, Patricia and good morning, everyone. We appreciate you joining us for the call. There's no doubt that 2020 was a challenging year for everyone as we work to address COVID and adapt our personal lives to this strange new reality. I want to start this year and call by thanking our employees across the country nearly 7000 strong for your unwavering commitment to safely serving our customers and for looking out after each other. Thank you for making a difference every day. Since I joined AVANGRID in July, we've been focused on driving alignment, accountability and execution to create long term value. At our Investor Day in November, we shared our new plans and strategy for the future. We discussed the need to set reasonable and achievable goals and the importance of delivering on our commitments.

[Doug Stuver:]

Thank you, Dennis. Good morning, everyone. And thank you for joining us today. Let's turn to the financial highlights for 2020. AVANGRID reported fourth quarter 2020 GAAP EPS of $0.54 per share, and adjusted EPS of $0.62 per share. For the full year 2020, AVANGRID reported GAAP EPS with $1.88 per share and adjusted EPS of $2.03 per share, which is above the $1.90 to $2 per share guidance range we affirmed at our November 5th Investor Day. Overall, our 2020 results in comparison to 2019 reflect the strong growth and contributions of our core Networks business. In the fourth quarter, we received regulatory approval for our New York company's multiyear rate plan, representing a very important step on the road to earning our authorized returns in Networks. For 2020, Networks rate agreements provided $0.34 of higher earnings per share with New York delivering $0.22 of this in the fourth quarter through our make-whole back to April 17 and $0.28 overall for the year. In 2020, we received regulatory approval for a transmission revenue decoupling in Maine that reduces our risk and fluctuations in customer volumes. This produced the positive $0.06 benefit for the quarter and year. In the Renewables business, you'll recall that we had a large asset sale in the fourth quarter of 2019 that delivered approximately $0.32 of adjusted EPS. In the fourth quarter of this year, we completed sale of the majority interest in the Tatanka Wind farm, allowing us to recycle approximately $240 million in capital and produce a $0.04 positive EPS impact. Excluding the effects of asset sales, Renewables full year 2020 adjusted EPS results are up approximately 14% made possible from the benefits of adding almost 1000 megawatts of new capacity in 2019 in the first part of 2020. Wind production and pricing, net of operating costs and depreciation contributed $0.04 of higher earnings per share in the fourth quarter and $0.09 for the full year. In our corporate segment, higher interest costs and income taxes negatively impacted the quarter and annual results by approximately negative $0.04 and negative $0.12 respectively. Higher interest costs resulting from the issuance of $1.5 billion in green bonds over 2019 and 2020 and income taxes increased primarily due to the prior year favorable discrete items. Looking forward to 2021, we are affirming our EPS and adjusted EPS outlook for $2.15 to $2.35 per share, reflecting net income and adjusted net income of $665 million to $727 million. In Networks, we expect rate base growth of approximately $500 million or 5%, along with the full year of new rates for our New York companies and CMP and a new rate year for CNG. We also benefit from AC/DC income related to NECEC starting construction in January of 2021. These advancements position Networks to earnings authorized returns in 2022 and significantly close the gap in 2021. In our Renewables business, we expect to benefit from nearly 1 gigawatts of new projects in repowering that occurred in 2020, and we will be bringing another 690 megawatts of wind and solar projects online in 2021. We also expect to reach an important milestone in 2021 for our offshore business with the start of construction of Vineyard Wind 1, the first large scale offshore wind farm in the U.S. During 2021, we expect to fund approximately $70 million for our 50% share of investments in this project. And with our offshore wind business, I'd also like to emphasize some additional points. First, we're confident that our projects will earn solid double digit levered return. We have strong partners in CIP and Iberdrola with track record of constructing offshore projects on time and on budget and with the practice of establishing and maintaining conservative assumptions. Our projects are in attractive lease areas with relatively short transmission lines to our landing point, and we benefit from existing port infrastructure. We also benefit from the new 30% offshore wind investment tax credit, which is applicable to each of our projects. You'll recall that within the blend, we originally assumed the mix of 24% and 18% ITC for the project. In the case of Park City, we did not assume ITC in our original pricing and with this extended tax benefit, we expect the sharing between the project and our customers. Then finally, we have the opportunity for meaningful economies of scale in procurement and operations due to the timing of our two projects and the contiguous lease areas. Now moving on to financing plans and liquidity, our strong balance sheet, predominantly regulated business mix and solid investment grade credit ratings provide us with excellent flexibility to finance our organic growth and the PNM Resources Merger. In late 2020, we entered into a very attractive $3 billion intercompany financing arrangement with Iberdrola, which significantly enhanced our liquidity position and provided a low-cost source of funds. We use these funds to pay down commercial paper borrowings and fund CapEx. This loan, along with the funding commitment letter for the PNM Resources merger and Iberdrola announced intent to participate at its 81.5% share in the 2021 equity offering demonstrated Iberdrola strong commitment to AVANGRID and support for the merger transaction. In 2021, we continue to be focused on maintaining a strong balance sheet and solid investment grade credit ratings. In support of this, we plan to issue approximately $4 billion in equity in 2021, which will strengthen our balance sheet and improve our share liquidity, of this amount, $3.6 billion is attributed to our merger with PNM Resources and $400 million will finance the attractive investments in our plan that contributes for the 6% to 8% EPS growth we outlined on our Investor Day last fall. We do not expect to issue any additional equity for 2022. We also expect to enter into long-term debt financing in the form of green bonds or sustainability linked bonds for our wholesale financing needs and tax equity financing for our Renewables projects. Well, not included in our plan, we will opportunistically consider value added capital recycling as another funding lever. We have ample additional liquidity available through our $2 billion commercial paper program supported by a $2.5 billion sustainability revolving credit facility and an additional $500 million bank credit facility, plus a $500 million credit facility available from Iberdrola. We have ambitious and achievable plans to become the leading sustainable energy company in the U.S. Our focus now is on executing those plans that drive value. This includes investing nearly $3 billion in our Networks and Renewables businesses - closing on a $4.3 billion merger in the second half of this year, and continuing to deliver solid and reliable dividends. Slide 24 provides an overview of our investment grade credit ratings and our dividend policy. We recognize that our robust growth program and the important commitments we made provide relief to our customers during this pandemic, through moratoriums and waivers of late payment and other fees will temporarily affect us. However, with a strong support of Iberdrola and our financing plans, we remain committed to maintaining solid investment trade credit. We have a strong Networks footprint. And with the addition of PNM, we will increase and diversify our regulated businesses further strengthening our credit profile. Over the next five years with over $12 billion of our $20 billion of investments in our Networks companies, we will further improve safety, reliability and predictability. We are communicating with our rating agencies about these plans. In addition, we remind you that S&P ties our ratings to Iberdrola's and S&P just reaffirmed that rating of triple B plus. And widened the FF loaded debt threshold from 18% to 20% to 17% to 20%. This was done in recognition of the resiliency shown during COVID and with accelerated growth, considering them as an energy transition champion. Our dividend policy remains unchanged, targeting a payout of 65% to 75% that we will grow into as our earnings increase overtime. Our board recently declared a quarterly dividend of $0.44 per share payable on April 1st. With that, thank you for joining us for today's fourth quarter 2020 earnings call. I'd like to close by saying that we're looking forward to adding PNM to our family later this year, and continuing to deliver sustainable growth and value creation by investing in a smarter and cleaner energy future. I will now hand the call back to our operator Julianne for questions, followed by brief closing remarks from Dennis.

[Operator:]

Thank you. Your first question will come from David Arcaro from Morgan Stanley. Please go ahead. Your line is open.

[David Arcaro:]

Hi, good morning. Thanks for taking the question.

[Dennis Arriola:]

Good morning David.

[David Arcaro:]

Morning. I was wondering if you could talk to Doug's thoughts on equity needs post 2022 through the rest of the plan?

[Dennis Arriola:]

Let me touch on that David. I mean, I think as you'll remember we provided some information at our Investors Day that laid out our expected sources and uses of funds from 2020 to 2025. And this did include the funding of the merger with PNM. And as Doug just touched on in his formal remarks that we will be planning the issue of the $4 billion in equity this year in association with the PNM merger and the expected CapEx and that'll happen by the end of the year. So, with this capital raise, I want to just to be really clear, we did not anticipate any additional equity needs through the end of 2022. And that capital raise is consistent with the 2022 financial outlook we provided to you in November. Now, when you think about beyond 2022 and through 2025, we've got a lot of different levers available to us to raise the necessary non-debt capital to fund our growth program. And to maintain our strong balance sheet including asset recycling, hybrid securities, we can raise equity, asset securitizations, and actually potentially monetizing some of our larger projects, if that makes sense. So, the 6% to 8% EPS CAGR growth through 2025 that we provided in November took into account the different levers available to us. And we looked at it under different market conditions. And we estimate that we would most likely raise approximately $2 billion in additional capital through those levers or a combination of them to help fund our growth from 2023 through 2025. Now, needless to say, with the 30% ITC collectibles of Vineyard Wind 1, our confidence level on the 6% to 8% EPS grows through 2025 is even stronger. So, hopefully that answers your question.

[David Arcaro:]

Yeah, great. That's super helpful color, I appreciate that. And just a question on Texas. I was wondering if there was any qualification you might be able to provide in terms of, it sounds like you may have had a gain with your very strong operational performance in the State in the weather event. And I was wondering if there was any quantification you might be able to provide, is that embedded in the 2021 guidance at this point?

[Dennis Arriola:]

I think what I would tell you is, first of all, we're really proud of our folks down in Texas. They had to not just work hard to get our turbines running again, but they were living there and their families were impacted by it as well. So, they did a great job to get the generation operating as quickly as possible. And I think, as we said in our statement, that we were able to meet our limited fixed obligations, and then provide the excess energy back into the market to help the people of Texas. At this point, we're not going to be providing more details on the financial impact. But what I will tell you is, it was positive, because we did have excess energy. And although it's still early in the year, I guess what I would tell you, it really adds to the confidence we have in the guidance that we just affirmed of $2.15 to $2.35 for 2021.

[David Arcaro:]

Great, thanks. That makes sense. Thanks very much.

[Operator:]

Your next question comes from Insoo Kim from Goldman Sachs. Please go ahead. Your line is open.

[Insoo Kim:]

Thank you. My first question is on, in Maine with the NECEC. Definitely appreciate the start of the construction that you guys had. It seems like more recently, there's been a second round of the citizen's initiative against the project and more recently, the Secretary of the State approved those signatures to proceed. So that an hour we're talking about round two of what we experienced last year, and how that ended up. How do you see this one - how it's laid out different or the same as the past? And whether you think that it presents a real threat to a project?

[Dennis Arriola:]

Yeah Insoo, let me start, then I'll pass it over to Bob, and he can provide some more color. No, I don't think there's any energy infrastructure project underway in the United States that doesn't have some opposition. I think it's very clear that with this the Biden administration, there's the realization, we need more transmission in this country to be able to get the clean energy to the load centers so that people can use it. And as we think about NECEC. It's that type of project that truly is going to provide clean energy into the New England area. It's going to provide jobs, it's an economic stimulus. And it's something that as we've been pulling more and more people, they are understanding the benefits to Maine into the region. So, are we surprised by the referendum? I'd say no. It's just going to be additional work that we've got to continue to educate people, and including the legislators on the importance of this transmission line. But we remain confident. But Bob, you may want to share some more than that.

[Bob Kump:]

Yeah, sure. Good morning, Insoo. So, a couple things particular to the referendum. First, we believe that that referendum is really bad public policy. Because it could have unintended consequences for other clean energy projects in Maine that will need transmission. And as Dennis said, secondly, I wouldn't draw conclusions from the number of signatures that the opponents collected. Remember that this is the second one. They learned from the first one, they knew who their supporters were. And we're able to be really more efficient in terms of collecting signatures. I'd also point out that the fossil fuel interests that are really behind this effort to impact NECEC paid $1.5 million to 350 individuals at $35 an hour to get these signatures. So, it's not a surprise to us, that they got the signatures. What's more important, I think, is where is consumer sentiment. And if you look at recent polling, that has been done, the opposition is in the minority. And we have continued to see improvements in support for the project over the past year. And we think that that sentiment and then the view of NECEC will continue as we begin to construct the line and demonstrate the jobs that are being created for maintenance and the economic benefits that project will bring to Maine. I think Dennis mentioned, we have right now about 275 maintenance employees, and that's really just the start. So again, as Dennis said, I don't expect the opposition to end, it's going to be there, probably till the project goes commercial operation. But the reality is, we've been successful in defeating every challenge that the opposition is put in front of us. It's really indicative of all of the work that has been done by the agencies, both state and federal, in issuing the permits and the quality of those permits that were issued. So, the bottom line the project is aligned with the Biden administration's goals, the governor continues to strongly support the project. In fact, just yesterday in her state of the budget, she referenced the benefits of NECEC twice. As we thought the project is fully permitted. And people are clearly aware of two things and realizing two things, one, the need for transmission, to bring Renewables to market and two, who's really behind the opposition to this project. So, again, we're really excited about getting started construction, and being able to show Mainers and for that matter, all of New England, the benefits the project will bring whether it's monies for low income consumers, jobs, EV infrastructure, we've committed to heat pumps, broadband property taxes, you name it. This is the largest events mentioned clean energy project in New England. And we're looking forward to bringing this online in the second quarter of '21.

[Dennis Arriola:]

And the other thing Insoo, this Dennis, that was interesting about the governor's comments yesterday. This is also going to provide access to additional internet and telecommunication systems for people throughout the state. So, there are a lot of really different benefits to this. And, again, now part of our job is to make sure that we're clearly articulating what those benefits are, and to move forward.

[Insoo Kim:]

Got it. That's really good color. My second question is on offshore wind, just more broadly, there's been, I think, increasing concerns just on a global scale with the interests of the oil majors. And investors worried that for developers, that you guys and Iberdrola is that the increased competition could drive returns lower. So, understanding that you guys will be very disciplined on the return profiles, I don't know, if you're willing to share, what type of returns you're willing to accept going forward for future projects? Or just more broadly, how do you think from a competitive standpoint, what type of edge you may have versus some of the other parties that can help you guys?

[Dennis Arriola:]

Sure, let me start now, I'll ask Alejandro to jump in and provide some color as well. I mean, look, I think there's no doubt that, with the entrance of some of the larger energy companies that have not traditionally been involved in the clean energy space, I think if anything, what it does is it just clarifies that this the offshore wind industry is for real. And it's a place where companies can put a lot of capital to work. So, competition is good, it's good for consumers, it's good for us, it makes us sharpen our pencils. But we're going to continue to be very disciplined in the bids that we make. We actually think that, given our experience, and an Iberdrola's experience, we're the type of company that some of these other major energy companies would want to partner with. So, we don't see that really, as a negative, as long as we continue to focus on making sure that we maintain our financial discipline. And the other thing I would say is, it's really going to be important going forward, that we're not just a power provider here, but that we provide energy and economic solutions. And I think with the lease areas that we have, and the work that we've been doing, especially in the New England, New York area, as well as down in the south, that's what how we're going to differentiate ourselves. It's not just going to be about providing cheap energy. It's got to be competitive energy. But it also has to do with what can we do to build jobs? What can we do to bring more manufacturing to that area? I think that's one of the things that differentiates AVANGRID in our experience, and I think it'll help differentiate us as we go forward. But Alejandro do you want to add to that?

[Alejandro de Hoz:]

Thank you. I mean, not much to add to everything you said, I will just say that well, in the U.S. the demand we are seeing that it's a really high for the next few years. The number of competitors is not a huge item. There are not many, many companies that can really engage into these kind of infrastructure projects. And then we have a track record, as Dennis was saying. We have some experience in construction and operation that gives us clearly a competitive advantage. So, I think that while being disciplined, as Dennis said, we will continue to have many opportunities to grow.

[Dennis Arriola:]

And Insoo, given that we can see who's on the call, and we may have some competition, we're not going to get into returns.

[Insoo Kim:]

Understood. Thank you so much.

[Operator:]

Your next question comes from Neil Kalton from Wells Fargo Securities. Please go ahead. Your line is open.

[Neil Kalton:]

Yeah. Hi, everyone. Thanks for taking the call. Great quarter.

[Dennis Arriola:]

Good morning Neil.

[Neil Kalton:]

Yeah. Kitty Hawk, wanted to start there. So, did I hear you right that the thought is that this could be COD by as early as 2026 and if so, what do we need to kind of get there? I think it's still there's no off takers yet, or it's not crystal clear how that's going to proceed. So just thoughts on that to start?

[Dennis Arriola:]

Sure, let me start and then Alejandro can jump in. I think one of the things that we've learned is with Vineyard Wind 1, we've been the beginning if you will, with BOM. So our expectation is that as we continue to go forward with Park City and with Kitty Hawk, the experience that we have and the comfort hopefully that BOM has with our process is going to help us as we go forward with our other projects, including Kitty Hawk. But Alejandro could you jump in?

[Alejandro de Hoz:]

Yeah, sure. So, I mean, it is clear that we need a route to market for that project to construct it and make it operational. But what we have seen is those are things that can evolve very, very quickly. And you have seen how much has happened in the region in 2020. We are developing the project as quickly as we can to be ready, so that it does not become the critical part once we find the route to market. And in terms of route to market, you know the objectives of Virginia, you know that North Carolina is showing a high interest in offshore wind as well. So, we want to be really very, very quickly. And 2026 is the timing of an offtake works as we expect is not unrealistic.

[Neil Kalton:]

Got it. Thanks. And then my second question, I apologize if I missed this, but on the Excelsior Project. Is there anything sort of - is that a pretty clear from a right away standpoint? Are there any considerations just having lived through New England the name line, other project means ranking that we need to be concerned about once residing here?

[Dennis Arriola:]

Let me start and I'll ask Tony to jump in. I think whenever you're working on a transmission project, there are challenges. They're not easy. The team's been working on this one for a while, looking at the most efficient and effective way, from where we think we can receive energy from Renewables developers to get it all the way down to New York. And I'd say that this project is beyond just a concept. It's got a lot of details behind it. But Tony, if you want to jump in?

[Tony Marone:]

Yeah, sure, Dennis, thank you. And, the right way is certainly one of many challenges that we've got to overcome here. But we feel really good about the project and the pathway that we've chosen, and our competitiveness in this. And as Dennis said earlier, it's not just about price, it's also about the flexibility of the assets that you're providing and economic development benefits as well. So, we feel really motivated about the package that we're putting together and bids are due on May 12th of this year, and we plan to be presenting very competitive proposal.

[Dennis Arriola:]

And look, I think it's been very public. The governor would like to get more Renewables power from the northern part of the state down to the city. And, we're really excited about the response we've got so far, based upon the announcement that we've made on the solicitation. Developers see this as a high priority project for them to be able to get their power down. So, it's early. It's not in our plan. So again, it's upside, but it's something that we're really excited about.

[Tony Marone:]

We also think what differentiates us here is, this is a New York solution and all New York solution.

[Dennis Arriola:]

Yeah, yeah.

[Neil Kalton:]

Okay, so and one last quick question on this, a follow-up. Do you have any wind sites in northern New York that could be on this line?

[Tony Marone:]

Yes, there's a number of wind farms in the Adirondacks and Southern Adirondacks. Hardscrabble comes to mind. It's just north of Utica. Maple Ridge is a couple more up close to the border north of the Adirondack Park that presumptively, along with many, many other wind farms would have access to this line.

[Neil Kalton:]

Okay, got it. It would be existing wind farms or would it be new projects that you guys could do?

[Tony Marone:]

There could be a combination of both. That's really what the RFP that we just put out is to solicit from generators. Who would want to tap into the line? One of the things I'll just mention, this is I think I saw someone asked this question in a research note, when we announced it. This is something we've been working on for a long time. We called it something different back four or five years ago, called Connect New York. So, it's a very similar concept, this new project. And so, there's a lot of work that has been done over the years that puts us in a kind of a more advanced stage than maybe you might think relative to having just .

[Neil Kalton:]

Yeah, remember that well, yes. Thank you.

[Dennis Arriola:]

Thanks, Neil.

[Operator:]

Your next question Julien Dumoulin-Smith from Bank of America. Please go ahead, your line is open.

[Julien Dumoulin-Smith:]

Good morning to you. Thanks for the time, opportunity.

[Dennis Arriola:]

Good morning Julie.

[Julien Dumoulin-Smith:]

Hey, thank you. So, if I can, I'll start with a couple small points here because I missed them. The ITC benefits. You guys flagged them earlier here. Obviously a positive. Can you talk a little bit about how much the ITC is flowing in, adding to your confidence on earnings? I know you don't traditionally necessarily talk about the offshore economics in earnings terms per se, but if you can elaborate however you can. And then related to that, if you don't mind, COVID impacts going into '21. Is there an ongoing impact there in the quarter?

[Dennis Arriola:]

Let me start with the easy one. On the COVID impacts, we did provide some information in our appendix that gives some sensitivities or assumptions on what we think. I mean, obviously we don't have the crystal ball there, but we do know what's going on right now. So, you've got some information there that I think will help you understand how we think about it. On the second question.

[Doug Stuver:]

Yes, Julian, this is Doug. Hi. Related to ITC as you know, we have the Vineyard Park City projects. With the Vineyard, we had originally assumed 24% ITC for the first half of that project and 18% for the second half. Now, when we're in a 30% ITC environment, that's obvious upside relative to our original economics. In the case of Park City, when we did that project, we didn't really have an anticipation of qualifying for ITC given the timeframe that it was scheduled to go into service. So now with the expansion of ITC at 30%, through the date of this project, that would be ITC benefits that were not planned. We do expect, though, with that project to have the share ITC benefits with the customers. So, there will be some allocation between the project and customers on that particular item.

[Dennis Arriola:]

The other thing I'd say, Julien, given that, we expect Park City and - excuse me, Vineyard and Park City to come online in '24 and '25. That's right at the tail end of our, the five-year plan that we have, I guess it gives us additional confidence in the 6% to 8% CAGR growth that we provided in November. So, at this point in time, we're not going to quantify exactly what that is. But it is a positive in both projects, more so in the Vineyard. And, we'll see the benefits of those in '24 and '25 and beyond.

[Julien Dumoulin-Smith:]

Right, got it. Okay, and sorry just clearing with COVID. You haven't provided, I see the appendix here, you provided a total estimated impact in '21 because it's unclear, right?

[Dennis Arriola:]

Yeah, at this point in time we haven't. I mean, look, every state is moving quicker on certain things. If you look at here in Connecticut, the governor just announced that vaccines are going to be available by age group, including starting on March 1st. People that are 55 and older, which I belong to that group, can now start making appointments to get their vaccines. New York is in a slightly different situation. All those things seem to be moving a little bit more there. So, we have not included a specific number. But as we have more information, as a year goes live, we'll provide updates.

[Julien Dumoulin-Smith:]

One final clarification on the balance sheet, I think I heard you clearly, but I want to make sure I heard this right. So, the financing plan through '25 hasn't changed. You're just providing clarity on '21. What's the total amount to come to market here? I know that there is a piece that isn't necessarily marketed per se. What's the total amount that you would be coming forward with here? If you can clarify that. And also, just affirm that this does not impact the total I think it was like the 47% of financing needed through '25. I think that's when you merger for…

[Dennis Arriola:]

Well let's break it up into two pieces. First of all, again, in 2021, we're assuming related to the merger and additional CapEx stage that we'll be issuing up to $4 billion in equity by the end of the year. And that was part of our I think we have the $3.6 billion originally in our plan, but the $4 billion work still within the range that we've given, with the outlook that we gave in 2022 in November. And then if you look at the next piece, what do we need beyond 2023 through 2025 what I said in my - when I answered one of the questions here is, that's still 3, 2.5, 3 years away. But based upon the plan and the sensitivities that we've done a large portion of our overall needs are going to be financed by debt and by tax equity. However, we'll probably need somewhere close to $2 billion in additional capital or proceeds. And we're looking to do those in the most beneficial way that we can whether it's through recycling existing assets, hybrid securities that could include equity and could include assets, securitizations, or in some of the major projects we're talking about, we could decide to monetize a piece of that to minority player, if it makes sense. So, there's a lot of different options that we have. But because I know that you've been interested in this and others have, we wanted to be very clear that those sources or those levers that we have would probably add up to about $2 billion. And that is included in the sensitivity around that $2 billion is included in that 6% to 8% CAGR growth for EPS and adjusted EPS for 2025.

[Julien Dumoulin-Smith:]

Got it. Okay, I'll leave it there. You guys have been kind.

[Dennis Arriola:]

Thanks, Julien.

[Operator:]

Your next question comes from Michael Sullivan from Wolfe Research. Please go ahead. Your line is open.

[Michael Sullivan:]

Hey, everyone. Good morning.

[Dennis Arriola:]

Good morning, Michael.

[Michael Sullivan:]

Hey, I just wanted to follow-up on what's going on in Connecticut, I think one of your old cases at UIL was reopened related to COVID. And just what your expectations are there. And if this turns into a more traditional rate case, or if there were plans for that at all, just the thinking of the Connecticut regulatory?

[Dennis Arriola:]

Sure, let me start. And I'll ask Tony, to jump in. I think one of the things that, we've continued to work closely with the regulators and the other intervenors to make sure that we understand what their sensitivities are related to COVID and the impact that it's had on customer bills and everything. So, we want to be part of the solution here. And I think that we have been. But Tony, if you want to add to that?

[Tony Marone:]

Yes. So, there's a few dockets that are underway, and certainly with respect to COVID and uncollectable that when we start collections and so forth, we've been fully engaged with all the parties there curative and others to make sure that whatever solution we put forward makes sense for rate payers. And so, we've been following that. There's nothing right now, with respect to any significant change associated with that, but we maintain to follow whatever the guidance from pure is as far as that goes. Connecticut was one of the first states that allowed for spending up regulatory assets related to COVID related costs. And so we're happy about that. And they continue to monitor that. So, we provide data on a regular basis. And we look forward to getting beyond this so that we get back to business as normal for our customers and our employees.

[Michael Sullivan:]

Okay, and just to clarify, though, outside of this, was there a plan to file a UI rate case in the near future?

[Tony Marone:]

So, UI is outside of its rate plan right now, last time rates were increased for UI was January of '19. So, we're evaluating that. UI has done reasonably well. And it's earning it's a lot of return. And so, we're happy about that. But as we look forward, there certainly will be a point in time where UI will need to go in for new rates, but at this point, we're still considering evaluating that.

[Michael Sullivan:]

Okay, great, thanks. And then shifting over to the Vineyard Wind process. I know you all said you're expecting resolution from BOM in the first half of the year, have we put out a specific schedule or any dates for milestone since you've resumed the permitting process there?

[Dennis Arriola:]

They have not put out a specific schedule or calendar. Our team is continuing to work very closely with their staff to get them the information that they need and but they have not. We're optimistic based upon all the work that has been done prior to us, temporarily pausing our application that they're moving forward. And I think that with the new BOM director being very familiar with wind, and this being, I think, the trophy marquee project for the Biden administration to say that they are totally supportive of wind. We're optimistic that this is going to happen sooner than later.

[Michael Sullivan:]

Great, that was it. Thank you.

[Operator:]

Your next question comes from Richard Sunderland from JP Morgan. Please go ahead. Your line is open.

[Richard Sunderland:]

Good morning. Thanks. Maybe quick clarification on the up to $4 billion in equity in 2021. That's Iberdrola intend to participate in the entirety of that, that their pro rata ownership. Is that correct?

[Dennis Arriola:]

Yes, they have communicated to us that they would like to maintain their current ownership interest at 81.5%. So, it's our expectation based upon what they participate on a pro rata basis.

[Richard Sunderland:]

Okay, got it. And then started off at a higher level here that sort of earned ROE improving or contemplating, I'm curious if you have any insight into the Maine process following the expected I think, September filing? I mean, I guess for '22 specifically, if you expect to earn your authorized ROE on a Networks wide basis, or add each individual utility?

[Dennis Arriola:]

But I think there's a couple of things there. Let's start with the second half of the question. Our plan is to be in the position, including with Maine to be able to earn our authorized that all utilities in 2022. We just got the New York rate case here in November, the outcome, I think was a really strong one for us and for our customers, and allows us to do a lot of things that, we can do more of now that, like vegetation management that increase the reliability and the resiliency, that helps us to avoid penalties. So, we think that in New York for example as the year goes through, we have the opportunity to at least earn our authorized ROE. In the case of Maine, as you mentioned, we're doing very well with the four metrics that we have to in order to be able to file an application to get the 100 basis point adjust downward adjustment lifted. We haven't made a decision yet, how early we may file that. But it's something that we obviously, we want to do, as soon as it makes sense. And we're continuing to work closely with the commission. They're following our results as well as they should. But I think, overall, we want to be in a position in 2022, to be able to at least earn our authorized ROE at all of our utilities.

[Richard Sunderland:]

Great, appreciate the color there. And then just one final one for me if I could. You saw the earnings restatement. Just curious if you have any color there sort of the work to improve internal controls?

[Dennis Arriola:]

Sure. Let me just clarify, it was not an earnings restatement. These were items from 2019 that the management and our outside auditors felt or 2019 items that should be reflected in the 2019 financial statements. And so we both agreed to make that adjustment. But there is as you know, there's a difference between a restatement and an adjustment to the prior period. And in the case of the controls, you know that we've had some challenges in the past, I think that we're continuing to make progress to improve the overall system of controls of the company. They can always be stronger, but there's something that we're focused on, and we're dedicating the resources to continue to have stronger controls going forward. I mean, Doug, I don't know if you have anything else?

[Doug Stuver:]

No, I think that's fair Dennis. Just to clarify that this is technically called a revision not a restatement. And so, it simply means we're revising the numbers in our filings for 2019 to reflect the changes that Dennis highlighted. These are mainly tax items. And we have made tremendous progress in tax with improving our processes and controls. And I would say this is really more a function of those enhanced processes and controls identifying this type of item and positioning us while going forward.

[Richard Sunderland:]

Great, appreciate the clarification there and thanks for time.

[Operator:]

Your next question comes from Sophie Karp from KeyBanc. Please go ahead. Your line is open.

[Sangita Jain:]

Hi, thanks for taking my question. It's actually Sangita for Sophie.

[Dennis Arriola:]

Hello there.

[Sangita Jain:]

How are you? A couple things. One is it seems to be a package of bills moving to the New York legislature dealing with COVID disconnects and penalties on storm outages? And I was wondering if you could elaborate a little bit on what you think if the disconnect get extended through the end of 2021, what that means for your guidance? And then I'll ask you a follow-up on the discounts for store marketing.

[Dennis Arriola:]

Sure. I think, in New York, we're watching this and monitoring it very closely. I think that there are new bills that are being considered in their legislature. There are discussions about continuing to extend the moratorium on turnoffs and what might happen with past two bills and everything. So at this point in time, it would be truly speculation from us to say what's going to happen there. I think, from an earnings perspective, we don't expect it to have any major impact there. If anything, it's more of a cash flow impact. But I think one of the things that we're continuing to do is look at different vehicles that we might be able to employ to be able to collect some of that cash sooner than later and yet not have an overall impact in the short term on customers.

[Sangita Jain:]

Okay, and if there's any color you can provide on the proposal to impose late discounts and their services connect or allowing the PSC to remove restriction for penalties?

[Dennis Arriola:]

Again, it's a new bill that's been introduced, I don't think it's been fully debated. I think that there is a recognition that you want to make sure that there's a level playing field and that reasonable judgment is included in any decisions that the utilities make. So, again, we're continuing to follow this. We have strong opinions, as I think other utilities do, not just in New York but throughout the country. The reasonable standard is one that is very common and allows companies like ours and other utilities to make long-term investments and they're using sound business practices given the situations they're dealing with.

[Sangita Jain:]

That's very helpful, thank you. And if I can move on to Texas, I understand that your turbines performed better than some of the others, but I just wanted to find out are your turbines that are England weatherized, if that's why they performed better, or do you have plans to weather them?

[Dennis Arriola:]

I'll ask Alejandro to have to jump in, but I think part of the reason why is most of our turbines are actually the southern part of Texas. So, I think just geographically where they were located, some of the cold weather lifted sooner than it did in other parts of Texas. But Alejandro if you want to add anything there.

[Alejandro de Hoz:]

Yeah, sure, Dennis. So, what you said is totally true, I mean, we have, as most of our assets in Texas are in the southeast. And obviously they were less affected by Poles than they affected further in the north. In terms of weatherize the turbines, the answer to that is they are weatherized platform for the Texas weather, which is more towards the high temperatures and the low temperatures. And just to make it clear, this is a - and it is a choice, you have to either decide whether you want them to be optimized for in warmer weather or colder weather. And so obviously, we optimize those two things for warmer weather. And therefore, that's why we have suffered and the whole industry, these difficulties, those days.

[Sangita Jain:]

Okay. That's very helpful, thank you.

[Operator:]

Your next question comes from Angie Storozynski from Seaport. Please go ahead. Your line is open.

[Angie Storozynski:]

Thank you. Okay, so just I have to talk about Texas because I feel like I've been writing about it so much. I mean, you guys have pretty much told us how much money you made. You said seven percent of wind power output during the cold snap. And we know what the wind power output was. So I'm just making sure that it's not as simple as that.

[Dennis Arriola:]

Well, I don't know that we've said how much money we've made, what we were trying to illustrate is that, when you look at the wind capacity that we have as it operates ordinarily, we were able to do better than we ordinarily would, at least, given what we represent as far as the capacity of the overall market. And that's would enable us to provide additional energy to the grid and to the customers of Texas. But I'm not sure that I think it would be very difficult to take that excess above our traditional capacity and try to ascertain what the financial implications are, because the price or the cost of the price of the power changes on an hourly basis. So, without knowing what was going on an hour-to-hour basis, I don't know how anybody would come up with that?

[Doug Stuver:]

So, this is our asset as to your portions of that generation are under power purchase agreement, they would not have been selling into that high price market, we would have been collecting the price that was negotiated under the power purchase agreement.

[Dennis Arriola:]

But Angie, I think, the important part for us is, we got these we got our wind farms up and running as quickly as we could. We we've served our fixed or limited fixed obligations that we provided excess power, and it gives us additional confidence that our 215 to 235 is very achievable.

[Angie Storozynski:]

Yeah, actually, speaking of that guidance, I mean, you're not providing us with breakdowns - mental breakdown. But again, even, heavily haircutting performance of your assets and accounting for the PPAs and the firm contract in Texas, the year-over-year comps for Renewables is really easy, then you have a number of assets that came online through the year through the year in 2020. Again, you have some benefit in Texas, I mean, frankly, for once I struggle with how conservative this guidance is? And I understand that you're trying to set it as such. But again, it would have probably helped if you showed us a segmental breakdown asset management right now.

[Dennis Arriola:]

Well, Andy first of all, nothing's easy in this business, you know that. But look, we did provide in our appendix a breakdown of what we expect from on a quarterly basis from both Networks and from Renewables. And I think you've got a pretty good sense, as we talked about, before we add on PNM at the end of the year, but Networks represents roughly 80% of the overall earnings contribution for AVANGRID. So, even though we haven't provided a specific range by business grouping, I think you've got a pretty good sense there.

[Angie Storozynski:]

Okay, and the last question is on this NECEC referendum, so I understand that you're optimistic that the project is supported. But this referendum will take place in November, you are building the project as we speak. So, what happens if the referendum goes against you in November? Yes, I mean, what happens with the spending?

[Doug Stuver:]

Yeah, Angie, it's Doug. How are you? We're not going to get into hypotheticals on what happens. But at this point, as I mentioned earlier, we're seeing consumer sentiment strengthen around this project, people are understanding who's really behind this, and the motives behind that in terms of the fossil fuel interested and they're concerned about losing money on their P&L as this energy comes out. And so, we are 100% focused on delivering the project on the schedule we have right now and ensuring that Maine and New England get the benefits from this project that we described.

[Dennis Arriola:]

The other thing as far as the way this referendum is structured, it's not specifically against NECEC, but it looks at transmission as a whole. And what it does is, it brings into the judgment of the legislature on what they think should happen going forward. So, it's not an automatic, if the referendum does pass, that stops the project, the legislature has to get involved there. And as Bob said, with the polling that we've been seeing from people, and the support of the governor, we remain optimistic that people are going to continue to understand the benefits of the springs, not just from a clean energy standpoint, but from an economic standpoint and job standpoint as well.

[Angie Storozynski:]

That's great. And then lastly, this app to $4 billion in equity. So, was it $4 billion or is there a way to shave off some of that equity, especially associated with PNM? I mean, you haven't really been by my count, fully committed to the financing structure of that acquisition. So, is there still some legal room?

[Dennis Arriola:]

Well, when we said originally was that, we were aiming for roughly $3.6 billion in equity and roughly $700 million in debt. And I don't think we've deviated from that. So, the $4 billion in equity, again, takes care of the merger, but also provides some additional funding to support the CapEx and also quite honestly, given, some of the cash delays we've had from COVID and some of the state support our balance sheet from that perspective.

[Angie Storozynski:]

Very good. Thank you.

[Operator:]

Our last question today will come from Michael Gaugler from Jenny Montgomery Scott. Please go ahead, your line is open.

[Michael Gaugler:]

Good morning, everyone.

[Dennis Arriola:]

Good morning.

[Michael Gaugler:]

To start off with so many wind projects coming online over the next several years, wondering if you've got any concerns about equipment or labor availability when you need it?

[Dennis Arriola:]

Michael it's a great question, with the growth in Renewables especially onshore, it's important to connect yourself with reputable and serious construction companies and contractors. And we're fortunate that given the scale of business that we do, being the third largest Renewables operator and developer in the country, we've got those relationships, but it is tight. And Alejandro you may want to touch on that.

[Alejandro de Hoz:]

No, thank you, Dennis. Yes, I agree with what you mentioned, it is true that 2020 as you know, has seen a huge increase in capacity construction, both in wind and solar. So, it is a tight market that is adaptable. That here is where our experience and our track record and our relation with the supply chain a placing. We are trying to anticipate for these coming years, closing our contracts with suppliers to be able to - not be caught in this market where as you say it's tied because of the level of development that we're seeing.

[Michael Gaugler:]

Okay. And then last one. And granted, look it's certainly early days, but just wondering if you see any opportunities in ERCOT for new investment post the storm impacts?

[Dennis Arriola:]

I think that, we like the state of Texas. I think that when we complete the merger with PNM, we'll have a utility there, PNM. We think it's a very constructive regulatory business friendly environment. You've seen a lot of companies moving to Texas, because the governor and then the legislature and the regulatory bodies are very welcoming there. And if the opportunity presents itself, we'd like to continue to expand in Texas. We think it's a good market. Obviously, what happened here, this recent weather events that nobody would have wished on anyone. The people in Texas are smart, they will figure out the best way to go forward. And we want to be a major part of that solution going forward.

[Michael Gaugler:]

All right, thank you.

[Operator:]

This will conclude today's question and answer session. I would like to turn the call back over to Dennis Arriola for closing remarks.

[Dennis Arriola:]

I want to thank everybody for listening to our call. We know that it is a busy time of year. There's a lot of other calls going on. But I really hope that our excitement about the future is coming across. AVANGRID is truly the sweet spot of the energy transition. And now it's time for our teams execute and to deliver by driving growth in our regulated Renewables businesses, like investing in a cleaner energy future and being a thought and innovation leader supported by a strong financial profile. Our ESG and our framework is what will drive our strategy and asset allocation decisions over the coming years. This is the new AVANGRID. We aspire to be the leading sustainable energy company in the U.S. And we're up to the challenge and we appreciate your support. If you have any other questions, please follow up with Patricia or Michelle, stay safe and have a great day.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.