Ladies and gentlemen, thank you for standing by. And welcome to AVANGRID’s Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to turn the conference over to your speaker today, Patricia Cosgel, Vice President of Investor and Shareholder Services. Thank you. Please go ahead.

Thank you, Erica, and good morning to everyone. Thank you for joining us today to discuss AVANGRID’s third quarter 2021 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; Catherine Stempien, President and CEO of AVANGRID Networks; Jose Antonio Miranda, Co-CEO and President Onshore; and Bill White, Co-CEO and President Offshore. 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.

Well, thanks Patricia, and good morning, everyone. We appreciate you joining us for our third quarter earnings call. Overall, I'm really pleased with our operating and financial performance year-to-date. We set some ambitious goals at our Analyst Day in November, 2020 with a plan to drive increased accountability, execution, and performance at our company. At AVANGRID, we're focused on building a company that works to make everyday better for our customers, our employees, our communities, and our shareholders. We're headed in the right direction and focused on generating consistently improving results and delivering on our commitments. And our third quarter results continue to positive momentum of the journey we started last year. In the third quarter, our net income is up 28% year-over-year and up 31% year-over-year through the first nine months. Adjusted net income is up 33% for the quarter versus 2020 and increased 40% through the first nine months. Our strong results were driven by the solid performance of our Networks business, as we continue to execute on our road to authorized ROE plan and as we implement the terms in New York rate case, which was approved last year. And thanks to our excellent performance throughout the year, we are affirming our earnings guidance for 2021. You'll recall that we increased our guidance twice from our original numbers in the beginning of the year, and from where we stand right now, I'm confident we'll deliver. In addition to our strong financial performance, we continue to execute on our strategic objectives. In Maine, we're delivering on our commitment to improve customer service. Over the last 18 months, we've met and exceeded all of the service quality metrics established by the main public utilities commission. And subsequently we filed to remove the 100 basis point ROE adjustment. In New Mexico, we're awaiting the final approval from the Public Regulation Commission for our PNM Resources merger, and continue to expect to receive that approval and to close the transaction in Q4. Our Vineyard Wind 1 project crossed the historic milestone recently, becoming the first commercial scale offshore wind project in the U.S. to achieve financial close and begin construction. We're also pursuing opportunities to secure additional growth through our bids to Massachusetts most recent RFP, and by restructuring our assets with our partner CIP. When we complete the partnership restructuring, Avangrid Renewables will have access to 4.9 gigawatts of lease areas along the East Coast, including Kitty Hawk. In onshore wind and solar, we have approximately 1.4 gigawatts of projects with PPAs, including nearly one gigawatt actively under construction with a substantial near-term pipeline behind it. In addition, we've continued to strengthen our executive team as we positioned the company for future success. We recently appointed at Maine, our Joe Purington as Central Maine Power’s new President and CEO. We also announced changes that will further strengthen our Renewables’ executive team by providing focused leadership for the offshore and onshore businesses through our two Co-Presidents and CEOs, Jose Antonio Miranda for our Onshore business and Bill White for our Offshore business. Altogether, Joe, Bill and Jose Antonio bring roughly four decades of executive experience to the AVANGRID team. Now, I also want to thank Alejandro de Hoz, our former CEO of Avangrid Renewables for all of his hard work over the years. And we all wish him all the best as he returned back to Spain to join his family. I’m however saddened to report the recent passing of David Flanagan, our former Executive Chairman of CMP. David was an exceptional person. He was selfless, passionate, a dedicated leader, and a mentor to many. David epitomized the deprivation of servant leadership. And he's going to be missed not only by our employees, but also by the people of Maine. In September, we released our first ESG&F webinar to provide insight into our approach to sustainability, as well as our key goals and priorities as we seek to become the leading sustainable energy company in the U.S. Lastly, we issued our first green bonds at the utility level, totally $625 million. And we experienced extremely strong demand from the market for even more. So all-in-all, another strong quarter focused on execution and delivering on our commitments. I'm really proud of our team for their hard work to get us to where we are today, but I'm even more excited for all the opportunities that lie ahead for AVANGRID. So let's turn to Slide 6. Our Networks business is the foundation of our capital plan and earnings, making up close to 80% of our business today and approximately 85% by 2022, after the close of the PNM merger. As we mentioned at our November 2020 Investor Day, we plan to invest over $12 billion in Networks through 2025 to better serve our customers, drive operational excellence and make the critical system enhancements needed to support the clean energy transition. Bolstering those investment plans is our road to authorized ROE for our utilities. By implementing our rate plans and cultivating a continuous improvement culture, we're driving long-term investment at all of our companies. Also our targeted resiliency spending in vegetation management and equivalent modernization is helping us improve our earned ROEs over time. We're continuing our focus on improving safety, reliability, resiliency, and affordability with specific projects in each of our states, as well as focusing on successful store planning and restoration as we did with tropical storm honoree and hurricane items. And while our growing rate base new rate plans and investments will support future earnings growth. We still have a lot more work to do. Turning to Slide 7, we're putting our commitment to the customer in action. We've established Customer Listening Councils at each of our network utilities to help us better serve our customers and our local communities every day. In Maine, CMP has not only achieved, but exceeded in service quality metrics over the last 18 months. And with this, we filed to remove the 100 basis point ROE adjustment. We are hopeful to have this resolved by the main commission in early 2022. Well, let's be clear. Our filing is not an end to the good work our team has done in Maine, but rather it's a pledge, a pledge to do even more because our customers expect it and we're focused on making every day better for them in the future. And to reinforce our commitment, CMP will submit a plan to main regulators to maintain reliability and customer service quality, and to keep our positive momentum going. And I'm confident that under Joe Purington’s leadership, we'll continue to raise the bar and deliver excellent service for our customers in Maine. And we're also going to continue to collaborate with regulators on ongoing COVID-19 response and cost recovery. In New York and Connecticut, we've been able to defer COVID-19 costs, allowing us to support our customers and addressing continued challenges relating to the pandemic. We recognize that we need to be part of the solution and are actively working with key stakeholders in each of our states to address the issues facing our customers. Lastly, construction is well underway on our New England Clean Energy Connect or NECEC project, and we're making good progress. Over 75% of the corridor has been cleared with the majority of the transmission line going through existing rights of way. And around 100 poles have been installed so far. These construction activities that supported approximately 650 jobs to-date while main towns are already benefiting from tax payments tied to NECEC. We remain encouraged by the support we've seen for NECEC over the last several months as our team continues to share the facts and combat misinformation spread by companies that own fossil fuel generation in New England. We're focused on defeating the November 2nd referendum related to the project and our growing grassroots campaign is working hard every day to help voters better understand the benefits of the project to Mainers, the economy, the environment, and the region. Supporters of NECEC and parties against the referendum include Governor Janet Mills, former Governor Paul LePage, the two largest and most influential newspapers in the state, the Portland Press Herald and the Bangor Daily News, labor leaders including the AFL–CIO and the IBEW, the Maine Chambers of Commerce and the Conservation Law Foundation, just to name a few, and our team is going to remain focused on getting out to vote and informing voters of what this referendum is all about. Let's turn to Slide 8. We remain on track to close our merger with PNM Resources in this quarter, with just one approval remaining from the New Mexico Public Regulation Commission. When combined AVANGRID and PNM, we together serve 9 million people across the state with an attractive regulated business mix and a rate base of over $14 billion. Our strong ESG&F commitments and support the renewables growth will bolster both New Mexico and Texas as leaders in the clean energy transition. The merger will create attractive regulated and renewables growth opportunities for our business. And we expect the transaction to be over 3% accreted in the first full year. This transaction makes sense for the customers of PNM in New Mexico. And we're pleased that 23 of the 24 filing interveners either support the merger directly or have decided not to oppose the approval. Moving to Slide 9. Avangrid Renewables, the third largest developer and operator of renewables in the U.S. has the scale, expertise, pipeline, and people to continue our growth into the future. I'm very excited that we'll have Jose Antonio’s experience and leadership focused on the continued growth of our onshore business and Bill White leading our growing offshore business. We recognize that our projects need to help address the challenges and opportunities faced by our customers and our organization continues to evolve in order to be part of that solution. We're continuing to make progress on approximately 1.4 gigawatts of near-term solar and onshore wind projects with PPAs of which nearly one gigawatt is actively under construction. And early this year, our [indiscernible] wind project was fully commissioned, is now producing clean energy for the people of New York. That does, we're going to touch on later on inflation, but overall, our wind projects are contracted through 2023, including Vineyard Wind 1. And our solar modules are contracted through 2022. Regarding our long-term growth in our onshore business. We have another 2.5 gigawatts of mature projects, shortlisted or in bilateral negotiations for PPAs in our approximately 18 gigawatt onshore pipeline. Let me turn to our offshore wind business on Slide 10. September was an extraordinary month, both in the history of the industry and of AVANGRID. Our joint venture Vineyard Wind brought first commercial scale offshore wind project in U.S. Waters, Vineyard Wind 1 to financial close. The project has closed $2.3 billion of construction and term loan financing with nine global lending banks. This mode of confidence from the financing community and our pioneering project validates our approach and underscores the economic value created by Vineyard Wind 1. Now construction has already started for the onshore substation and export cable routes, and we expect to begin offshore construction in the first half of 2022. We’ll start delivering clean power to Massachusetts in 2023 and reach full commercial operation in 2024. We secured and have under contract 100% of the equipment for Vineyard Wind 1, which will continue to be owned 50-50 by Avangrid Renewables and CIP. On September 15, Vineyard Wind submitted two proposals in response to Massachusetts’ third offshore wind request for proposal offering options of approximately 800 megawatts and 1200 megawatts. We’re calling this project Commonwealth Wind and it includes the development of an offshore wind project in an area just south of the Vineyard Wind 1 and Park City Wind projects. We put forward two very strong bids with exceptional economic and social benefits for the Commonwealth of Massachusetts. As part of the proposal our JV company announced a partnership with the city of Salem and Crowley Maritime Corporation to transform Salem Harbor into the state’s second major offshore wind port. Vineyard Wind also announced a first of its kind partnership with 20 municipal electric utilities in Massachusetts that will allow them to purchase up to 150 gigawatt hours a year of electricity in addition to renewable energy credits. And this is going to enable them to grain their portfolios across the state. We expect the results of the Massachusetts RFP in mid December. Please turn to Slide 11. As we mentioned earlier, we also recently announced changes to our Vineyard Wind joint venture that will further position Avangrid Renewables as an undisputed leader in the offshore wind industry. As a result of the restructuring AVANGRID will have 100% ownership of 4.9 gigawatts of offshore wind capacity, now this includes the 2.4 gigawatts of available capacity in New England from our current partnership, which will be fully contracted before year end with our largest bid option in Massachusetts and select it and an additional 2.5 gigawatts in North Carolina and Virginia from our Kitty Hawk project. The partnership restructuring requires approval from the Bureau of Ocean Energy Management, as well as the Connecticut electric distribution company. We expect approvals to be completed during the first quarter of next year. This restructuring is aligned with our long-term growth strategy and our aspiration to lead the nation’s offshore wind industry. Now turning to Slide 12. With offshore wind we’re uniquely positioned to play a leadership role with our 4.9 gigawatt lease areas. In addition to our strong offshore team, our affiliation with Iberdrola provides us a deep bench of offshore wind expertise to leverage. Iberdrola has a very well proven track record in offshore wind globally as they’ve constructed 1.5 gigawatts on-time and on-budget. These projects are now being operated with strong availability and production figures. And building on this successful track record, Iberdrola has 2.9 gigawatts in advanced development backed by a 23 gigawatts global pipeline. To be successful in offshore wind, you have to have more than just leases and even PPAs. You also need to have an experienced team know-how and dealing with contractors and construction and access to capital. And our affiliation with Iberdrola gives AVANGRID a competitive advantage in offshore wind. Let me finish on Slide 13. As one of the nation’s cleanest utilities and a leader in renewable energy, AVANGRID stands up at the forefront of the transformational change in how we generate and use energy. Our ESG&F practices are core to our sustainable value proposition and our long-term success. And to showcase what we’re doing to reach our key goals, including renewables growth and emissions reduction, supplier sustainability and diversity and equity and inclusion, we recently released AVANGRID’s first ever sustainability webinar titled Clean and Connected. The webinar is available through this presentation or on the AVANGRID website. Our track record in this area has been recognized by multiple external parties, and we’re honored to have recently joined the S&P Global Clean Energy Index, which highlights AVANGRID as one of up to 100 companies worldwide that can best benefit from the clean energy transition. Now, I’ll turn it over to Doug to take you through the financial results.

Thank you, Dennis and good morning everyone. Turning to our financial performance on Slide 15. AVANGRID reported strong consolidated results for the third quarter and first nine months of 2021, producing adjusted net income of $133 million for the third quarter, a 33% increase from the third quarter of 2020 and $609 million for the first nine months of the year, a 40% increase from the first nine months of 2020. The improvement in the third quarter results was led by strong performance in Networks, our largest business segment and investment growth in line with our rate plans. AVANGRID’s consolidated investments for the first nine months were $2.1 billion, which are up 13% compared to the same period in 2020. Renewables adjusted EBITDA including the benefit of tax credits for the first nine months of 2021 increased 25% year-over-year, reflecting the increasing value of that business. Turning to Slide 16. For the first nine months of the year a key driver of our 25% year-over-year adjusted EPS growth has been the implementation of the network’s rate plans predominantly in New York to enhance reliability, resiliency, customer service and safety. Networks PTC income related to investment growth was also an important driver partially reduced by higher depreciation from our growing asset base. Importantly, our outage restoration costs have flattened year-over-year. As you’ll recall, outage restoration costs were rising in prior years and a major driver for networks under earnings. With the New York rate plans, we’re benefiting by recovering these costs at the more recent higher levels and the additional vegetation management and resiliency investments authorized in the New York rate plan for improving our system and helping to flatten these costs. Our adjusted EPS growth for the year-to-date period also included the benefits in renewables of our strong operations in asset management during the first quarter Texas weather event, improved energetic availability, higher pricing, additional PTCs and thermal and asset management earnings. Those positive impacts are partially offset by lower wind production from weak wind resource and curtailments that persisted through the third quarter. Our consolidated results also reflect a negative $0.16 per share dilution impact from the May equity offering. Turning to Slide 17. We added 409 megawatts of new capacity year-over-year from September 2020 to September 2021. And we’ve improved the energetic availability of our existing projects to over 97%. However, when production continues to trend below our long-term averages due to low wind resource, as well as curtailments, which are impacted by COVID-19 and transmission congestion. Our curtailments are partially reimbursed to approximately 15% levels through our PPAs. The lower production levels for existing assets during the first nine months of 2021 compared to 2020 were primarily in the north and the east regions with the central region, helping to partially offset those impacts. On Slide 18 we’re pleased with our continued strong year-to-date results, a reflection of our commitment to execution. Therefore, we are affirming our 2021 net income, adjusted net income, earnings per share and adjusted EPS outlooks. As a reminder, our outlook for EPS and adjusted EPS reflects the 78 million shares issued in may to primarily fund the PNM acquisition, which results in 358 million weighted average shares outstanding for 2021. Our outlook also assumes that we did not close on the PNM merger until the end of the year with no PNM resources earnings or associated merger closing costs. Finally, recall that in the fourth quarter of 2020, we recognized the cumulative $0.19 benefit retroactive to April 17, 2020 from the settlement of the New York rate cases. Our ongoing focus remains to achieve these targets as we progress on our road to authorized ROE, execute our investment plans with discipline and a risk management focus and continuously drive for operational excellence. Moving to Slide 19. With inflation and rising commodity prices impacting the sector, we wanted to give you a sense of where AVANGRID stands in its management of these risks. Importantly, one of the several benefits we have as a member of the larger global Iberdrola family is access to their significant purchasing power and economies of scale. As a point of reference, Iberdrola has a capital spend of approximately $10 billion per year. Being part of this large organization with significant buying power is a tremendous benefit helping to mitigate our exposure to rising prices and access to supply. In Networks, our largest business segment, our exposure is not material, energy supply either sourced directly to customers by third-parties were a pass-through cost for us. We actively manage the cost when we are the supplier through effectively contracting and hedging practices. For NECEC, substantially all of the equipment has been purchased and the exposure to additional commodity costs inflation is minor. In renewables, capital investments for the Vineyard Wind 1 project are 100% contracted and for the Park City Wind project with a 2026 DOD, we expect to lock in our supply in 2023. In our Onshore Wind business, our projects under construction are substantially secured. Regarding our exposure in our solar business, we have framework agreements executed for the modules for our 2022 projects under construction and we are currently working to lock in exposure to the 2023 plus projects. We’re also actively involved through trade organizations on discussions related solar tariffs, and we’re managing through the uncertainties impacting the solar sector. While 2021 was a transition year for us as we’ve pivoted more towards solar development from our traditional onshore wind focus, we have a material number of megawatts expected to come online in the near future and we have significant opportunities for growth. While our current projects through 2022 for solar and 2023 for wind are contracted, we’re seeing a temporary mismatch between supply and demand. Demand for renewables is strong and PPA prices are rising as increases in raw material prices are translated along the value chain. Directionally growth will continue with support of state and potentially new federal policies and we’re optimistic about our onshore and offshore renewables opportunity. Moving to Slide 20. We’re also focused on the rising gas prices nationwide and how we can mitigate the impacts on our utility customers. Our utilities are well-positioned as our commodity procurement processes in the gas and electric businesses are well-established, longstanding and in line with regulatory policy and guidance. In our gas distribution companies, gas costs are a pass-through and we did not expect supply issues this winter. Customers bear the impact, however, so we procure gas supply in the spring and summer months, financial hedges. With deregulation in our service territories, the costs of generation for our electric distribution companies are also a pass-through. Keeping our customers in mind though, we also procure supply by laddering the purchase of supply during the spring and summer months for winter usage in New York and Connecticut. This acts as a natural hedge, Maine’s procurement is managed by the state and not Central Maine Power. As we monitor this trend to manage the potential impacts, we’ll look for continuous improvement in the business as an offset. We’ll also work closely with our key stakeholders to ensure we keep them informed about the drivers of the price trends and available programs that provide payment assistance. Now moving to Slide 21 with our liquidity and financing. We have terrific access to sustainable liquidity resources and demonstrated support from Iberdrola. With the equity issuance this past May, we have a strong $1.4 billion cash position and we did not expect additional equity in 2022. We’re committed to maintaining our solid investment grade credit ratings. As we previously announced, we expect to fund the PNM merger with $700 million in debt in the fourth quarter. In the third quarter, we closed on the construction and loan financing for our Vineyard Wind project raising $2.3 billion from a group of banks. We’re committed to sustainable financing and as Dennis mentioned earlier, issued $625 million of green bonds out of a total of $900 million, which were our first green bond issued at the utility level. This rates our ranking in the U.S. among all of issuers of green social and sustainability bonds to number nine. Our strong long standing commitment to and leadership in clean energy was also evidenced by our addition this month to the S&P Global Clean Energy Index, which includes up to 100 companies that are similarly focused on the low carbon transition and sustainability. To summarize, we had another strong quarter with our focus on the achievement of our financial targets and strategic initiatives and success with sustainable financing execution and recognition. As a result, we’re affirming our guidance for 2021. We have risk management and a customer focused at the top of our mind as we manage emerging risks and profitably growth to achieve our goal of adding sustainable value. Thank you for joining us today with our update on third quarter results. I’ll now hand the call back to our operator, Erica for questions followed by closing remarks from Dennis.

[Operator Instructions] Your first question comes from the line of David Arcaro with Morgan Stanley.

Great. Hi. Thanks so much for taking my question. I was wondering, if you could maybe elaborate just a little bit on the supply chain, particularly around the solar projects that are underway. You mentioned the framework agreements, do those – is that essentially you’ve got the volume contracted or at least accessible and is pricing locked in for that as well?

Sure. Thanks David for the question. Look, I think that one of the things that we’re seeing being one of the largest developers out there, although we’re growing fast in solar, is that people want to do business with us. And I think especially given the relationships that we have globally through Iberdrola, we’re able to enter into these framework agreements, which allow for flexibility and best pricing that we can get. We’re obviously sensitive to what’s going on in the markets not only from a supply chain standpoint, but what’s happening also with the tax and tariff implications. So those are things that we’re watching closely. But Jose Antonio, you may want to provide a little bit more color on how we think about the framework agreements.

Yes. Thank you, Dennis and good morning everyone. Very good question, David. Yes, I have to go back to what Doug mentioned before about our 2020 project already secured – substantially secured from a supply point of view. We embarked on this and we will rollout. We have some agreements that we can execute in order to get the panels. Also, of course I can share with you that’s an important amount of panels are already inside not just construction now. They are bringing up this inflation risk. And for the future, the situation, as Dennis mentioned is fluid and it will depend on what is finally the regulation and the tariffs imposed on the panels. But we will be actively watching it and negotiating with our suppliers.

David, I think the other thing and Doug touched on this as well as given that the changing market, the growing demand and in some cases, tight supply, we are seeing that reflected as you would expect in PPA prices. And obviously, as we’re dealing with the very sophisticated customers, they recognize that as well. So what we’re doing is making sure that as we enter into new PPAs, that they reflect the current market realities whether it be through price adjustments or indices that may be tied to what’s going on in commodity prices. But also on the labor side, because, contractors are busy right down. They want to do business with people that are going to pay them and give them consistent work. So we’re looking at all those aspects and really find to manage it from a risk management standpoint. The best we can.

I’ll just add too Dennis. As we look at new projects, we also – as we think about CapEx, build contingency into the cost estimate, and that’s a buffer for these types of events as well.

Great. No, that’s a ton of very helpful color. I appreciate you elaborating on all of those factors. I guess, maybe to – just one quick follow-up on that and to drill down a little bit more. Do you anticipate any or do you see the risk of any projects getting delayed the ones that are in the kind of near-term contracted pipeline as it pertains to solar? Obviously, a lot of moving pieces here. Just wondering how you think about specifically the risk of pushing out any projects or if it might make sense economically to consider that as we get into next year?

I think the way that we look at this, we obviously manage each project closely individually, but we look at this as a portfolio as well. And I think that having that flexibility where it might make sense to proactively delay things because of what’s going on, on the labor side or modules and things like that. But overall and I think directionally things continue to move in the same direction. Could there be some delays because of contract shortages of labor? There could be. But I think that the overall we’re moving in the right direction.

Understood. Great. Thanks so much.

Thanks.

The next question comes from the line of Michael Sullivan with Wolfe Research.

Yes. Hey, good morning.

Good morning, Michael.

First – hey, Dennis. First question, just on the earnings for Q3. Can you give any more color on what drove the increase at the corporate segment and then also on the COVID exclusion? Can you just remind us how much to date has been excluded and what the status of recovery on that is?

Sure. Let me hand it over to Doug and he can provide a little more detail.

Sure. Hi, David. Yes. So for Q3 at corporate there were really two drivers. One is you may recall last year in Q3, we took a reserve for a New York state tax audit that was roughly $7 million of impact in 2020. And that’s something that hasn’t recurred in 2021. So that’s giving us a year-over-year benefit. And then the other element is really just lower interest expense. We had the Iberdrola alone in effect for the early part of the year through May that had very attractive interest rates. And so that was helpful. And then we issued the equity in May and that’s helped us to avoid having the same level of debt compared to the last year. So it’s really just the combination of interest and taxes that are driving those corporate results.

And then on COVID.

Yes. So on COVID in our year-to-date results, we’ve adjusted out of our GAAP earnings in arriving at adjusted earnings about $23 million to $24 million. From a recovery standpoint, we’ve begun deferring our COVID costs in Connecticut that’s been something that’s been in effect even in last year. And in New York in the second quarter, we began deferring COVID costs just for rate year one, we’ve not deferred any such costs for rate year two. And with Maine, we’ve not been deferring any COVID-related costs.

Okay. Thank you. And then just circling back on some of the renewables commentary, just looking at the Fact Book that you guys have out there the latest one seems to indicate some timelines being pushed out on the solar now showing 2022 to 2023. Any color you can give there. And should we think about that is having any impact on the 2022 guide you gave last year?

I think the way that I would look at it Michael, is that there could be some shifting of months here and there. They go over the calendar year and everything. But I think that’s one of the reasons why when we give a range of earnings when we talked about at the November Analyst Day, we gave directionally the 6% to 8% growth year-over-year for the five-year period. And we gave you the – what we were thinking about for 2022. So I think it falls within the range overall, we still feel – we haven’t reaffirmed our 2022 numbers. We’re going to be doing that at the end of the fourth quarter. But I think directionally any shifts and projects don’t have any material impact to the overall direction we’re headed. But Jose Antonio, I don’t know if you want to add anything to that.

Yes. I actually feel very positive and all of our sites in the solar of construction. Of course, we have nothing new and so the other players through industry wide issues like they call it in the early months for the labor payments that Dennis referred before. But there’s a situation now that we have two employers in an advanced stage of construction for solar and we feel very positive about that. And also we are progressing in wind project, so we will see additional installer and ultimately win in most of them.

And both Jose Antonio and myself were out actually visiting those sites over the last couple weeks. I can tell you, there is a lot of work going on. There are a lot of people, there are a lot of panels, so we’re excited about the progress we’re making.

Awesome. Thanks. Thanks, everyone.

Thanks, Michael.

Your next question comes from Insoo Kim with Goldman Sachs.

Yes. Thank you. Both of my questions are actually related to offshore wind. The first one for Vineyard Wind 1, I was – I might be a little bit late to this at least looking at this Fact Book and maybe the last one in September. It seems like the total financing that you achieved – that you got was around $4 billion or $3.9 billion. In my head, I thought the original range was around $3 billion to $3.5 billion earlier this year. Is that reflecting on increasing the overall project costs? And if so, what’s driving some of that increase.

Sure. Let me pass that over to Doug.

Yes. So, thank you. We are looking at roughly $3.9 billion in total costs for the project and we’ve done the construction loan financing and that’s $2.3 billion from an additional financing standpoint. We do expect to enter into tax equity financing as we get closer to mechanical completion for the project. And then the remainder would be sponsors equity being infused into the project. From an overall cost standpoint, the $3.5 billion that you pointed earlier, I think is a good number in terms of the pure construction costs, but then there’s also contingency and financing costs, transaction costs, et cetera that adds to that and that’s how we get up to $3.9 billion.

Okay. And just to follow-up to that. If some of those contingencies do end up playing out, is there any flexibility in your secure PPAs or is that largely set from the escalator perspective?

Yes, the PPAs are set.

Okay. Got it. Just my second question is on the Jones Act compliant vessels. I know, I think you had mentioned in the past, again, that for Vineyard 1, that those ships are 100% secured. Just wondering for your other projects with the status of that is and I’m curious on how those contracts are structured and how much flexibility or control you have on the timing and usage of those – use of those ships. And then just related to that, are they large enough and have the ability to carry the larger GE turbines, I believe the 14 megawatt ones.

Yes. Let me start on that and I’ll ask Bill to provide some additional color. I mean, as far as for Park City Wind, we have not entered into the contracts yet for the equipment or the ships and everything. I think that one of the things that we’re looking at is with the recent bids that we in place for Massachusetts 3, there could be the opportunities to have synergies during the construction, as well as the procurement phases. So we’re looking at that. And as a result, we haven’t made the final determination of who’s getting the business, what it’s going to cost. The ships, as you mentioned, in the case of Vineyard Wind 1 are being supplied by the contractors themselves. And we anticipate that that’s probably going to be the same case when it comes to Park City and perhaps Commonwealth Wind as well. But look, I think everyone’s excited about the large size or the larger turbines that are being produced out there. They recognize the ship builders that they have to – that there’s a market that they have to adjust to. So a lot of those discussions are underway. But Bill, I don’t know if you want to provide any additional color there.

Just briefly I think in addition there’s an enormous amount of activity right now, obviously you’re aware that Dominion is building the ship down and it’s down in Texas right now. But there’s enormous amount of planning underway for U.S. build the vessels, including the CTVs known as the crude transfer vessels, the SOVs, which is the service operating vessels. So lots of activity going on right now, a lot of players coming into the market. And so lots of developments over the next couple years expected on a good front for Jones Act compliance.

Okay. I’ll leave it there. Thank you so much.

Thanks, Insoo.

The next question comes from the line of Richard Sunderland with JPMorgan.

Hi. Good morning. I wanted to circle back to some of the earlier commentary on the onshore pipeline really just the pace of your onshore renewables origination this year and timing considerations around the 2.5 gigawatts of near-term opportunities. You spoke earlier about kind of managing on a portfolio basis. Are you already managing a little of that around some of these challenges the broader industry has seen? Just curious about the pace of activity versus your expectations.

Sure. Let me start and I’ll ask Jose Antonio to jump in. Look, I think that we’ve got a strong existing pipeline. We’ve got projects underway. We’re seeing some of the same things that others are in the industry as far as labor tightness when it comes to contractors. In the case of the solar projects that Jose Antonio talked about, we’ve got what we need here in 2021 and we’ve contracted through our framework agreements through 2022. But there are some risks out there, but I think we’re managing them well. And as I said, when we look at each individual project, we’re focused on bringing it in on time and on budget and focused on things that we can control and those things that we don’t have as much control. How should we influence other things that we can leverage off of the relationship that we have through Iberdrola to try to get panels faster, if they’re not coming and things like that. But Jose Antonio, we’ll see if you want add any color to that?

Yes. Thank you, Richard for the question. Well, first of all, I have to say, the market momentum is, I think is right. Yes, we are in a high demand situation that is of course helping to all the players to see traction in the business and we not an extension. We are very active in receiving this 2.5 gigawatt. These are restricted to some of them or really by capital negotiation in some others. Of course, we – the whole industry are watching closely what is going to happen with an unbiased convention case that we can have an impact on people negotiation sector of the industry. But we will see out there in November 27, what is the situation and we will adjust it.

Yes. The other thing I'd say Richard is look, we're sensitive to how some of the sell-side community looks at each of the projects and if there's a one week delay or one month delay but I got to tell you, we're in this for the long run and whether there's a shifting of some projects by a month or so or over a calendar end, a year-end. We like to bring everything in exactly the way that we've projected it. Absolutely, but I think that as long as we're continuing to focus on those things that we can control and we're focused on continuous improvement to get our costs control to bring these things in on time. We're going to be successful here.

Understood. Appreciate the color. And maybe just separately on the wind resourcing on the quarter, maybe just the wind resource broadly, in terms of your plan, do you typically just bake in the long-term average, and so as it averages come down, the Delta has narrowed between recent production and what's baked into plan or do you risk adjust that average at all in light of some of the recent performance?

Historically, what we've done is looked at a long-term average and obviously as a good year or bad year, it gets taken off of that. It's reflected in the new base that we're considering. But we're also looking at shorter trends and thinking about that, how that may impact our numbers on the positive or on the negative side. But we think that looking at the long-term trends is probably still the smart way to do it. But I think that the key for us is making sure that our energetic availability continues to improve at something that candidly several years ago is not something we could really boast about. But as Doug mentioned in his comments, we're now above the 97%. So that means our machines are ready so that when the wind blows and it is going to blow, we'll be able to deliver the results that we expect either consistent with historical averages or even better.

Thank you for the time.

Thanks Richard.

Your next question comes from the line of Julien Dumoulin-Smith with Bank of America.

Good morning, Julien. Julien Dumoulin-Smith: Thanks for the opportunity. If you don’t mind, first off, on your origination…

Julien, you're cutting in and out. Julien, we can't hear you. Operator, let's do this. Let's go to the next caller and then we can bring Julien back.

Your next question comes from the line of Angie Storozynski with Seaport Research Partners.

Good morning, Angie.

Hi. How are you? Hopefully, you can hear me.

We can.

That's great. Okay. I always ask about NECEC and its lots of lots of activity both from a regulatory perspective and construction perspective. So please give us an update to what's happening at FERC and also legal challenges to that one and a half mile corridor?

Sure. Let me do this. First of all, as I said, in my opening comments, things are going really well from a construction standpoint. On those areas where we can construct, the crews have been doing a great job. As I said, about 75% of the transmission areas have been clear, we’ve got over 100 poles now installed, we've got the equipment basically on site to be able to continue to go forward, but we do have that one mile piece of the line, where again, we already have transmission line there. And I think that, we're confident that that's going to be addressed in a satisfactory manner. But Bob, let me hand it over to you and you can provide a little bit more color on what's going on with FERC and some of the other activities.

Sure, thanks, Dennis. And you're absolutely right on the lease. The issue is whether or not I'm putting this transmission line for one mile on the lease represents a substantial alteration in the use of the lands. And as Dennis said, there's already an existing CMP transmission line on that lot. So we don't see that that represents. And quite frankly, the PPL doesn't see it either that it represents a substantial alteration. On FERC, we were pleased that they came out and asked us a series of questions of interveners in the case with respect to how to think about this breaker at Seabrook and whether or not it's generation or whether it's transmission. We think that's helpful in framing the issue and ultimately getting to a satisfactory resolution for us. So we're hoping that that gets done on an expedited basis. Having said that, we also have ongoing discussions with the New York ISO, I'm sorry, the New England ISO to determine whether there are alternatives to see the Seabrook breaker replacement to allow the project to move forward. So I think we have options there, but again, we're optimistic and really we're positive in terms of the types of questions that FERC asked in that proceeding that we'll get a resolution here in the near-term.

Angie, the other thing that I'd add to this and we've talked about this before, there probably isn't one energy infrastructure project, including transmission that isn't challenged in different ways. And I think that given the ambitious goals that we have as a country to increase the amount of renewables in this country, we're going to need to have more transmission bills. And the challenge is that there are certain parties that may not want that because it impacts their livelihood. And as I like to say in the clean energy transition, there are winners and losers. In this case, the winners from this project are going to be the people of Maine, the environment, the local economies, climate change as in total. But the losers in this are going to be those that basically are providing the fossil fuel generation. And so we shouldn't expect that these types of projects aren't going to be challenged, they are. But I think in this case, there has been so much work done within the state. And even within that, the review that took place on that one mile lease that we feel confident that this thing's going to be addressed in a satisfactory manner.

Yes. And as Dennis said, Angie, we continue to see growing support and recognition around the importance of the project, not just for New England and transitioning to clean energy, but for the country, because this is really a benchmark project for what's needed to transition our economy to clean energy. So as Dennis mentioned, we've had support now from the three largest pacers, they’re out op-eds in the state of Maine, we have labor unions. We have the current governor, the former governor he recently had, if you saw, there was an op-ed in the Washington Post by William Reilly who was a former EPA administrator. Speaking just to the fact that this project is really key and projects like this are key to transformation of our energy sector. So we feel good about that grow and support, and then continue to push forward and make sure people understand not only the benefits of the project, but as Dennis mentioned, who’s really behind the opposition and what’s the motive there.

Angie, we probably gave you more color than you want it.

Yes. Yes, I mean, yes, just one follow-up and that’s also Doug. So how much money has – have been spent thus far on this billion dollar project and then just the earnings recognition during construction ACDC and how that changes once the COD of the project is reached.

Hi, Angie, yes. So through September 30, we’ve spent a little over $400 million on the NECEC project. In 2021 from an AF-PDC standpoint when we gave our guidance for 2021, it was in the range of $20 million to $25 million. In terms of the earnings profile for the project, as we continue to construct, and the construction work in progress balance grows. The level of AF-PDC income will grow as well up through the date where we put the project in service. And then as you know, this is a contracted project and we’ve essentially levelized the price for the transmission service agreement and the associated revenue requirement such that you see a different earnings profile for this project than you would a traditional rate-based type project. So you do see a dip once the project goes in service, there are price escalators in the transmission service agreement that are annual adders. So that’s the general shape of the earnings profile for this.

Very good. Thank you. Thank you, guys.

Thanks, Angie.

Thanks.

Your next question comes from the line of Julien Dumoulin-Smith with Bank of America. Julien Dumoulin-Smith: Hey, good morning, teams. I swear it’s working this time.

Hi, of course that. Julien Dumoulin-Smith: Second time this gentlemen, sorry. But on origination would love to hear what kind of expectation do you have as you think about like an annualized pace of renewable build, especially on solar, considering the commodity deck and the backdrop we’re looking at today, but also considering sort of the modest ads of a very late in the back half.

It’s hard to be specific on that Julien, because it’s really driven by the customers. I mean, we have some expectations and we’ve included in the plan that we articulated in November that we expect overall from a portfolio standpoint to grow to roughly 13.2 gigawatts in total capacity by 2025. And I’d say that a good part of our overall growth going forward onshore is in solar, because we’re seeing that more and more customers are looking for that. One of the things that, that, that we have in the pipeline is making sure that we’ve got the right positioning and transmission hookups to be able to give the customers what they want. But Jose, I’ll tell you, I don’t know if you want to provide any more color, just generally how you see that.

Yes, thank you. Yes. I mean yes, [indiscernible] it’s true that our 60 fleet is much more focused on wind and it was a strategic decision to shift the solar. And our pipeline is now with a majority are start doing. Yes, so in the future, we will see so our program has been built by us. And compensating diversifying our recovery manage all free that wind. About the numbers, it’s difficult being a specific on numbers, but again, I want to repeat that we are going to see something that is an important milestone in the next months to come that are already two big projects. When I say two big projects is probably as around 200 megawatts that are in an advance stage of construction in this activity.

One thing I can say, Julien is we want to go faster. And part of that is dependent upon customers, as we talked about with what’s going on in the market with PPA prices, with concerns about inflation and other commodity costs, customers are also taking a little bit more time to determine what they want, because they’re seeing the impact of PPA prices. Having said that, we think we’ve got a really rich pipeline of opportunities, as we said, we’re in advanced discussions bilateral discussions with many on, being able to sign many of these deals going forward. So again, I think we’re headed in the right direction. I’m less concerned about individual projects on one month or two months. Do we sign the PPA in the first quarter versus the second quarter, because I think that the trajectory that we’re on is the right one, given the dynamics of the market. Julien Dumoulin-Smith: Got it. And just the quick nuance to be well, I know you’re obviously deviating a little bit from your – on your capacity factor expectation, any expectation to update the long-term capacity factors that you’ve talked about in the past versus historical levels?

Yes. I’m not sure that I’d say that we deviated. When I’d say is that as far as, as we look at the portfolio and what we expect going forward, we’re in the midst of a completing our 2022 and long-term plan for the next five years here in the next couple of months. So, we’ll elaborate a little bit more on what the assumptions are behind are our projections at the – on our fourth quarter call. But I think that directionally again, we’re actually really pleased with what’s going on with our fleet is, as Doug mentioned, our energetic availability is above 97%. We couldn’t have said that a couple of years ago. And so things are moving in the right direction.

Yes, just that Dennis, for your point, that we’re very well-poised that when the wind does, wind resource does recover to generating very positive results. Julien Dumoulin-Smith: And just a quick nuance on the Entech arrangement, the sale arrangement, if that’s changed here in the final approval process, that wouldn’t impact your decision to close right on that deal on the PNM acquisition?

I’m sorry, you broke up there on… Julien Dumoulin-Smith: Sorry, on Entech here. Just if they changed some of the arrangements around the sale that doesn’t impact your decision to close on PNM right?

You’re talking about four quarters? Julien Dumoulin-Smith: Yes. Yes, yes, yes. I know that that could be some nuances that change there. I’m just curious, none of that matters to PNM close.

Correct. It's a totally separate proceeding from the merger proceeding.

Yes, I think what's key there, Julien is that, that transaction was entered into by PNM and the regulators before the announcement of our merger deal. Getting out of that ownership is something PNM has been pushing for it's consistent with where they want to go from an ESG and that standpoint. It's consistent with what we want to do in order to make our overall portfolio cleaner. So but it's also important to remember they all only 13% and they don't manage four corners. And I think that there is sometimes some information out there that sounds like they own the whole thing and they can make the decision. They're basically a minority owner and basically what they're doing is getting rid of their ownership. Julien Dumoulin-Smith: No, I thought as much. I just want to make sure that was consistent. Thank you so much again.

Thanks, Julien.

And at this time, I'll turn the conference to Dennis Arriola for any closing remarks.

We'll thank you. And we appreciate everybody joining us today. Like I'm really proud to say we're continuing on the momentum. We started last November and we're working hard and smart to make everyday better for our customers and the communities we serve. And you've heard me say this before one, two or even three quarters don't make a trend, but you can't start a trend without a solid year behind you. And I'm really proud not only what our team has accomplished in the last 12 months, but more so of how we're doing it. We're continuing to build a company that's focused on accountability, execution, performance, and results. We're building on a strong culture that values diversity and inclusion, and that recognizes that we've got to invest in our people as well as in technology and innovation in order to stay ahead of the game. Our customers remain at the forefront of everything we do, and we must be a part of the energy transition solution for them. So I know that we still have a lot of work that had, but I got to tell you, I am excited and confident about AVANGRID’s future. And we look forward to the meeting with many of you in person at EEI. If I asked you to bring your mask down so I can see your handsome and pretty face. Please do that, but then put your mask back on. We look forward to chatting with you more about our business, and if you have any other questions, please follow-up with Patricia or Michelle. Stay safe and have a great day.

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