J.P.Morgan 2018 Energy Conference June 20, 2018

Transcription

1 J.P.Morgan 2018 Energy Conference June 20, 2018

2 Legal Notice FORWARD LOOKING STATEMENTS Certain statements in this presentation may relate to our future business and financial performance and future events or developments involving us and our subsidiaries that are not purely historical and may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements may be identified by the use of forward-looking terms such as may, will, should, would, could, can, expect(s,) believe(s), anticipate(s), intend(s), plan(s), estimate(s), project(s), assume(s), guide(s), target(s), forecast(s), are (is) confident that and seek(s) or the negative of such terms or other variations on such terms or comparable terminology. Such forward looking statements include, but are not limited to, statements about our plans, objectives and intentions, outlooks or expectations for earnings, revenues, expenses or other future financial or business performance, strategies or expectations, or the impact of legal or regulatory matters on our business, results of operations or financial condition. Such statements are based upon the current reasonable beliefs, expectations and assumptions of our management and are subject to significant risks and uncertainties that could cause actual outcomes and results to differ materially. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, without limitation, the risks and uncertainties set forth under the section entitled Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2017, which is on file with the Securities and Exchange Commission (SEC) and available on our investor relations website at and on the SEC website at Additional information will also be set forth in subsequent filings with the SEC. You should consider these factors carefully in evaluating for-ward looking statements. Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may vary in material respects from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. About AVANGRID AVANGRID, Inc. (NYSE: AGR) is a leading, sustainable energy company with $31 billion in assets and operations in 24 U.S. states. AVANGRID has two primary lines of business: Avangrid Networks and Avangrid Renewables. Avangrid Networks owns eight electric and natural gas utilities, serving 3.2 million customers in New York and New England. Avangrid Renewables owns and operates 7.1 gigawatts of electricity capacity, primarily through wind power, with a presence in 22 states across the United States. AVANGRID employs approximately 6,500 people. AVANGRID supports the U.N. s Sustainability Development Goals, received a Climate Development Project climate score of A-, the top score received in the utilities sector, and has been recognized for two consecutive years by Ethical Boardroom as the North American utility with the best corporate governance practices. For more information, visit Investors@AVANGRID.com 2

3 Legal Notice Use of Non-U.S. GAAP Financial Measures To supplement our consolidated financial statements presented in accordance with U.S. GAAP, AVANGRID considers certain non- GAAP financial measures that are not prepared in accordance with U.S. GAAP, including adjusted net income, adjusted EPS, adjusted gross margin and adjusted EBITDA. The non-gaap financial measures we use are specific to AVANGRID and the non- GAAP financial measures of other companies may not be calculated in the same manner. We use these non-gaap financial measures, in addition to U.S. GAAP measures, to establish operating budgets and operational goals to manage and monitor our business, evaluate our operating and financial performance and to compare such performance to prior periods and to the performance of our competitors. We believe that presenting such non-gaap financial measures is useful because such measures can be used to analyze and compare profitability between companies and industries because it eliminates the impact of financing and certain noncash charges as well as allow for an evaluation of AVANGRID with a focus on the performance of its core operations. In addition, we present non-gaap financial measures because we believe that they and other similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance. We provide adjusted net income and adjusted earnings per share, which are adjusted to reflect the effect of mark-to-market changes in the fair value of derivative instruments used by AVANGRID to economically hedge market price fluctuations in related underlying physical transactions for the purchase and sale of electricity, adjustments for the non-core Gas Storage business including certain losses related to its sale, and restructuring charges primarily associated with reorganizing to better align our people resources with business demands and priorities as part of the Forward program. We define adjusted EBITDA as net income attributable to AVANGRID, adding back income tax expense, depreciation, amortization, impairment of non-current assets and interest expense, net of capitalization, and then subtracting other income and earnings from equity method investments. We also define adjusted gross margin as adjusted EBITDA adding back operations and maintenance and taxes other than income taxes and then subtracting transmission wheeling. The most directly comparable U.S. GAAP measure to adjusted EBITDA and adjusted gross margin is net income. We believe that presenting these non-gaap financial measures is useful in understanding and evaluating actual and projected financial performance and contribution of AVANGRID core lines of business and to more fully compare and explain our results. The most directly comparable U.S. GAAP measure to adjusted net income is net income. We also provide adjusted EPS, which is adjusted net income converted to an earnings per share amount. The use of non-gaap financial measures is not intended to be considered in isolation or as a substitute for, or superior to, AVANGRID s U.S. GAAP financial information, and investors are cautioned that the non-gaap financial measures are limited in their usefulness, may be unique to AVANGRID, and should be considered only as a supplement to AVANGRID s U.S. GAAP financial measures. The non-gaap financial measures may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools. Non-GAAP financial measures are not primary measurements of our performance under U.S. GAAP and should not be considered as alternatives to operating income, net income or any other performance measures determined in accordance with U.S. GAAP. 3

4 Highlights 4

5 The utility of the future AVANGRID is a Leading, Sustainable U.S. Energy Company Regulated Utilities & Contracted Renewables 8 regulated utilities in 4 states 3.2 million customers & $9B rate base ~6.5 GW wind & solar in operation with ~75%-85% contracted/hedged Strong Growth Prospects Transmission, electric & gas distribution growth New England Clean Energy Connect (NECEC) transmission project selected in the MA RFP Vineyard Wind selected in the MA Offshore RFP ~8 GW onshore wind & solar pipeline ~4 GW offshore wind pipeline Attractive Financial Strength Sector-leading strong balance sheet & low leverage Expected to increase the dividend in 18 Divested non-core businesses 5

6 Focus on Sustainability & Strong Corporate Governance Delivering energy in a sustainable manner CO 2 emissions intensity 8 times lower than average U.S. utility industry in 16 (1) Emission Free Capacity o AVANGRID (2) ~89% o U.S. Average (3) ~19% Ambitious targets to reduce CO 2 emissions intensity o 25% reduction by 20 vs. 15 o Carbon neutral by 35 Carbon Disclosure Project Score of A- One of only 6 U.S. Utilities Thomson Reuters 2017 Top 100 Global Energy Leader One of only 7 companies globally that earned > 60% of their revenues from environmentally beneficial products & services Committed to ethical principles, transparency & leadership Controlled company with: Majority voting in uncontested elections (implemented in 17) Eight directors not affiliated with Iberdrola, six of which are Independent Separate Compensation, Nominating & Corporate Governance Committee (1) Source: U.S. Energy Information Administration 2016 figures (2) Includes 118 MW hydro (Networks) (3) EIA report, YE 17 summer capacity utility scale Named 2017 North American utility with the best corporate governance for 2 nd consecutive year by Ethical Boardroom publication Finalist in the 2016 NYSE Governance Awards 6

7 Highlights Long Term Outlook is on Target to Meet Expectations SOLID EARNINGS PERFORMANCE New wind projects in operation & multi-year rate plans for NYSEG, RGE, UI & SCG Continue to employ Best Practices & achieve cost mitigation Implementing tax reform in all regulatory jurisdictions COMPLETED SALE OF NON-CORE BUSINESS Gas Trading - completed March 1; Gas Storage completed May 1 WELL-POSITIONED FOR LONG-TERM GROWTH OUTSIDE OF PLAN NECEC transmission project selected in MA RFP Vineyard Wind project selected in the MA Offshore RFP Positioned for growth in Offshore wind, with lease ownership & multiple New England region offshore wind targets & RFPs On April 23 rd, affirmed 18 EPS Outlook: EPS $2.16-$2.46 & Adjusted EPS (1) $2.22-$2.50 ( 18 Guidance is based on Adjusted EPS) (1) See Appendix for reconciliation of adjusted EPS to EPS. 7

8 Building the Grid of the Future - Networks Transmission Solutions - NECEC Overview: 1,200 MW Transmission project delivering Canadian hydropower $950M investment at CMP (T), excluding AFUDC; Not in Long-Term Outlook Fixed, levelized price for years 1-20 & Construction Expect all state permits by 1Q 19 & final approvals by YE 19 Strong support from Maine Governor, Local Communities (95%) & Environmentalists Provides enough clean electricity for up to 1.5 million homes in New England Key Permits/Approvals/Reviews: MA PUC Approval of Contracts Announced execution of contracts June 14 ME PUC Certificate of Public Convenience and Necessity Maine DEP Approval Presidential Permit ISO-NE System Impact Study Army Corps of Engineers Environmental Assessment FERC Approval of Tariff 8

9 Building the Grid of the Future - Networks Transmission Solutions NECEC Route Map A Map B Map A: Blue line is in existing transmission corridor; green line is in industrial forest. Dashed lines outline environmentally-sensitive areas Map B: All of the towns but New Sharon are shaded, indicating that CMP has received letters of support from their respective boards of selectmen, councilors or commissioners. The section from Windsor to Wiscasset is not part of the 145-mile transmission line. 9

10 Focus on Clean Energy - Renewables Offshore Wind AVANGRID is well-positioned for leadership in U.S. Offshore Market Significant, Proven U.S. Onshore Renewables & Transmission Experience Renewables has 3 rd largest installed capacity in U.S. Recent completion of >$1B Transmission project on-time & on-budget Significant, Proven Global Offshore Experience Avangrid affiliates & Vineyard Wind partner Copenhagen Infrastructure Partners (CIP) have significant expertise with offshore wind o Deep technical knowledge & engineering experience o Well developed supply chain & relationships o Experience managing offshore O&M Strong financing capabilities AVANGRID s robust balance sheet & CIP s experience investing in offshore wind Vineyard Wind, MA 50% Ownership with Copenhagen Infrastructure Partners (CIP) of 166,866 acre lease south of Martha s Vineyard Lease area has potential capacity of ~3.0 GW Kitty Hawk, NC 100% Ownership of 122,405 acre lease off coast of Kitty Hawk, NC Lease area has potential capacity of ~2.5 GW Project timeline second half 20 s 10

11 Focus on Clean Energy - Renewables Offshore Wind Vineyard Wind Growth Opportunities in an Early-Stage U.S. Market with Strong Potential 800MW selected in MA RFP (1) Future Opportunities in MA, NY & NJ Key Vineyard Wind Approvals Filing Status Expected Completion Federal: BOEM Site Assessment Plan (SAP) Filed March 17 Approved May 18 Construction & Operation Plan (COP) Filed Dec 17 Anticipate Spring 20 Record of Decision - Environmental Impact Study (EIS) Notice of Intent March 18; 30- day comment period expired Anticipate: Draft Fall 18 Final Spring 19 State (for MA RFP): MA Environmental Policy Act (MEPA) Environmental Notification Filed Dec 17 Environmental Impact Report (EIR):Draft April 18; Certificate Issued Feb 18 EIR Final Pending MA Energy Facilities Siting Board (EFSB) Filings in Dec 17 & Feb 18 Pending (1) Two 400MW projects 11

12 Executing Opportunities to Achieve our Strategic Goals Exited Gas Trading & Storage Businesses Removes volatility related to commodities & trading, eliminates ongoing net losses from the business March 1, 18: Completed Sale of Gas Trading Business May 1, 18: Completed Sale of Gas Storage Business Continuing to Progress on Execution of Renewables Growth Plans Highly Likely projects increased by ~100 MW (1) ; Secured plus Highly Likely ~1,746 MW Entered into Contract for 100 MW Klamath Peaking Plant in the 1Q 18 Renewables entered into a contract with Portland General Electric for 100 MW from its Klamath Peaking Plant; Contract term is 5 years, beginning in 2019 Moving Forward with Targeting of Transmission in New Regions Networks registered to submit Transmission bids into RFPs in the MISO (1) Long-term Outlook unchanged, ~2.7 GW 12

13 Networks Regulatory Highlights 2017 Tax Cut & Jobs Act Reviewing impacts & methodology for ensuring ratepayer benefit NY March Staff recommendation - net benefits to be deferred & passed back to customers through current rate case or sur-credit effective October 1, 18 Company proposal to offset storm costs & AMI revenue requirements ME Proposing Tax Act savings to offset recovery of October 17 major storm costs in July 1, 18 annual true up CT/MA FERC Proceedings in process New England Transmission Owner formula rate will automatically capture benefits (UI & CMP); FERC opened proceedings & is addressing comments Other NY AMI discussions ongoing anticipate approval later in 18; Earnings Adjustment Mechanism discussions impacted by ongoing storm activity, AMI discussions, etc. CT/MA FERC BGC filed rate case 5/17/18 for rates effective 1/1/2019 CNG filed letter of intent to file rate case on 5/30/18, for rates effective 4/1/2019 ALJ recommended no change in the ROE for Complaint IV existing ROE not shown to be unjust & unreasonable (1) No progress on Complaint I remand or Complaint II/III (1) 10.57% Base ROE; 11.74% maximum. 13

14 2018 Outlook as of April 23, Guidance 18 Guidance is based is Based on adjusted on: EPS (1) AVANGRID EPS $ $2.46 AVANGRID Adjusted $ $2.50 EPS (1) Networks $ $1.86 Networks $ $1.86 Renewables $ $0.70 Renewables $ $0.70 Corporate ($0.15) ($0.05) Corporate ($0.15) ($0.05) Gas Storage ($0.06) ($0.03) Sale of Gas Trading on 3/1/18; Sale of Gas Storage on 5/1/18 Sale of Gas Trading and Storage businesses closed in 1Q 18 & 2Q 18, respectively ~($0.06/share) loss of interest income at Corporate (recapitalization due to Gas Storage sale) Normal wind Earning allowed returns & into the sharing bands at the utilities through the implementation of best practices & cost management Renewables 590 MW COD in 17 (1) Adjusted EPS excludes the Gas Storage & Trading businesses. Renewables MTM is not excluded because it cannot be estimated. For 2018 management uses adjusted EPS in determining its outlook. 14

15 Dividend Policy Expect to increase Dividend beginning in 18 (1) Floor Annual $1.728/share Payout Targeting 65%-75% Increases Expect to achieve pay As out target & begin dividend increases determined 18 by Board (1) Subject to authorization by the AVANGRID Board of Directors. 15

16 Appendix 16

17 Building the Grid of the Future - NECEC Overview: 1,200 MW Transmission project delivering hydro-power from Canada $950M investment at CMP (T); Not in Long-Term Outlook Construction Expect Maine permits by end of 18 & other approvals by end of 19 Strong support from Maine Governor, Legislators, Local Communities (95%) & Environmentalists Project Benefits: 100%-owned right of way, with ~2/3 in existing transmission corridor CMP s proven ability to deliver a commercial-scale transmission project on-schedule & on-budget Lowest cost solution to deliver Canadian hydro (shortest route, over-head DC line) o Largest wholesale energy market savings of ~$3.9B over 20-year contract o Customer savings: $150M annually (MA) & $40M annually (ME) Significant economic benefits, adding jobs & increasing GDP in MA, ME & New England, & property taxes in ME Provides enough clean electricity for up to 1.5 million homes in New England 17

18 Focus on Clean Energy Onshore Renewables Highly Likely projects in Long-Term Outlook ( 17-22) increase Secured - COD/PPA/Contract (1) : Highly Likely - Advanced -stage contract negotiations Likely - Engineering, site assessments, applications Previous Current 2,744 2,744 1,088 38% % 210 9% % 1,446 53% 1,446 53% Secured Highly Likely TOTAL Likely (1) See FACTBOOK for additional detail on Secured projects Secured Highly Likely Likely TOTAL 18