14(1° 1611° Joseph J. Syta NYSEG RGEtE Vice President – Controller & Treasurer
April 1, 2019
VIA ELECTRONIC SERVICE
Honorable Kathleen Burgess, Secretary New York State Public Service Commission Three Empire State Plaza Albany, NY 12223-1350
Re: Case 07-M-0906 – Joint Petition of Iberdrola, S.A., Energy East Corporation, RGS Energy Group, Inc., Green Acquisition Capital, Inc., New York State Electric & Gas Corporation, and Rochester Gas and Electric Corporation for Approval of the Acquisition of Energy East Corporation by Iberdrola, S.A.
Dear Secretary Burgess:
New York State Electric & Gas Corporation and Rochester Gas and Electric Corporation, subsidiaries of AVANGRID, Inc., hereby submit the AVANGRID, Inc. credit rating agency presentation dated March 20, 2019.
If you have any questions, please contact me.
Respectfully submitted,
Joseph J. Syta
Attachment
89 East Avenue, Rochester, NY 14649-0001 Telephone 585.724.8003 11111. www.nyseg.com, www.rge.com, [email protected] AVANGR I D
An equal opportunity employer
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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 1995. 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, 2018, which is on file with the Securities and Exchange Commission (SEC) and available on our investor relations website at www.Avangrid.com and on the SEC website at www.sec.gov. 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 approximately $32 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 7.2 gigawatts of electricity capacity, primarily through wind power, with a presence in 22 states across the United States. AVANGRID supports the achievement of the Sustainable Development Goals approved by the member states of the United Nations, and earned the Compliance Leader Verification certification from the Ethisphere Institute, a third party verification of its ethics and compliance program. AVANGRID employs approximately 6,500 people. For more information, visit www.avangrid.com.
Oils AVANGRID Avangrid, “utility of the future” 2 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 non-cash 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, restructuring charges primarily associated with reorganizing to better align our people resources with business demands and priorities as part of the Forward 2020+ program, impact from measurement of deferred income tax balances as a result of the Tax Act enacted by the U.S. federal government on December 22, 2017, impact of accelerated depreciation on the repowering of certain Renewables assets and the impairment of equity method investments.
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.
Oils AVANGRID Avangrid, “utility of the future” 3 Avangrid Background
Avangrid, “utility of the future” 4 AVANGRID
AVANGRID is a Leading, Sustainable U.S. Energy Company Regulated Utilities • 8 regulated utilities in 4 states • 3.2 million customers & ~$9.8B rate base Contracted Renewables • ~6.6 GW wind & solar in operation • Target ~75%-85% contracted and/or hedged Strong Growth Prospects • Electric transmission, electric & gas distribution growth • New England Clean Energy.. Connect (NECEC) • Vineyard Wind(1) 800 MW offshore wind project • Access to 3 offshore wind leases through Vineyard Wind, MA & Kitty Hawk, NC • 13.8 GW onshore & offshore wind & solar pipeline(2) Attractive Financial Strength • Strong balance sheet with low leverage • Dividend increased in 3Q ’18 • Non-core gas storage & trading businesses divested in ’18
(1) Renewable’s 50/50 partnership with Copenhagen Infrastructure Partners (CIP). (2) Does not include MW from Vineyard Wind’s new offshore lease. Oild AVANGRID Avangrid, “utility of the future” 5 AVANGRID Geographic Presence
~$32 billion in assets with operations in 24 states
AVANGRID Wind Operations Solar Thermal Headquarters in Orange, CT Networks
3rd largest wind operator in the U.S. ~6.6 GW Wind & Solar in Operation(1) (1) Including JVs. iik„,, AVANGRID Avangrid, “utility of the future” 6 AVANGRID is the utility of the future
AVANGRID is Investing in a Smarter & Cleaner Energy Future…
Third largest wind operator ~90% Emission free capacity Focus on Clean ~13.8 GW Renewables pipeline Energy U.S. Leader in Offshore Wind…
Transmission/Non- Wires Alternative Building the Grid Smart Customer Smart Community solutions of the Future Solutions AMI & DSIP(1) Smart grids C&I solutions… EV infrastructure, resiliency & battery storage…
… to Deliver Sustainable Growth & Value Creation Through ’22 & Beyond
(1) Automated metering infrastructure & distributed system implementation plan. Oils AVANGRID Avangrid, “utility of the future” 7 AVANGRID Digital supports the “utility of the future”
Intelligent Grid Operations • Over 600 digitized substations remotely monitored & controlled • 1.2M smart meters in ’18 increasing to ~3.0M with implementation in NY • Advanced grid analytics & big data; digitization of customer interactions • Smart Community, Battery Storage & EV Infrastructure
Renewables Digital Asset Management • National 24/7 Control Center: ~3,400 wind turbines, solar, gas generation • Mature in-house O&M model and digital field workers • Balancing Authority in Northwest, managing a portfolio of 1,300 MW • Implementing production boost software for wind turbines
Advanced Corporate Services • Building asset management & fleet telematics • Advanced analytics for cybersecurity • Consolidation & upgrade of data control centers • Securing advanced skillset with Agile Talent
400,0 AVANGRID Avangrid, “utility of the future” 8 Economic Environment
United States • Broader economy sustained its steady expansion that began in late 2009 as Real GDP rose at an annualized rate of 2.6% in the fourth quarter of ’18 • Inflation, as measured by the Consumer Price Index, remained stable at +1.9% YoY in December ’18 • Labor market strength continued, with the Unemployment Rate at 3.9% in December ’18, compared to 4.1% in December ’17 • Job recovery rate through December ’18 was 236%(2) Major Cities/Geographic Regions in AVANGRID Service Territories
12/31/2018 State Major Cities
Bridgeport New Binghamton- Lewiston- -Stamford- Hartford, Haven- Rochester Pittsfield, Elmira- Auburn, Employment CT NY ME MA Norwalk, CT Milford, , NY MA Ithaca, NY ME CT CT
Unemployment 3.8% 3.9% 3.5% 3.1% 3.2% 3.3% 3.1% 4.0% 3.9% 3.0% 3.8% Rate(1) Job Recovery 93.5% 250.6% 85.9% 259.1% 91.7% 130.4% 116.8% 52.0% 149.6% 100.0% 40.4% Rate(2) Housing
New Housing 0.5% -5.0% 3.9% -13.9% -35.7% 6.7% 5.5% 4.1% 20.6% 57.0% 14.3% Permits(3)
(1) State unemployment data is seasonally adjusted; Metro area unemployment data is not seasonally adjusted (2) Recovery Rate is defined as percentage of jobs recovered vs. those lost on a peak to trough basis (Peak: Early 2008, Trough: Early 2010) using monthly nonfarm payroll data (3) New privately owned housing units authorized annually, YoY Sources: U.S. Bureau of Labor Statistics; CT Dept. of Labor; NY State Dept. of Labor; ME Dept. of Labor; MA Dept. of Labor; U.S. Census Bureau
Oils AVANGRID Avangrid, “utility of the future” 9 Strategic Plan
Avangrid, “utility of the future” 10 Key Messages
CONTINUING TO EXECUTE ON OUR STRATEGIC PLAN
Executing on • Long-Term Outlook ’18-’22: ~12-14% EPS CAGR favorable long- ~8-10% Adjusted EPS CAGR(1) term growth • Networks business provides ~9% Rate Base CAGR • Strong Renewables growth, already achieved wind & solar target for ’22
• Successfully awarded projects in two RFPs: NECEC transmission & Moving forward with Vineyard Wind Offshore Wind (included in the Long-Term Outlook) strategic • ~1 GW(2) wind under construction projects • Developing 3 offshore lease areas ai • Implementing Transforming Energy resiliency program
• Adding value in Renewables & diversifying from ‘energy at the bus-bar’: Focusing on o Leading the U.S. offshore wind industry innovation & o Continuing to execute PPAs with value added services efficiencies o Optimizing our pipeline through strategic sales, alliances or partnerships • Developing Smart Grid, AMI, Electric Vehicle & battery solutions • Forward 2020+: focus on best-in-class operational efficiency
(1) See Appendix for reconciliation of non-GAAP adjusted EPS to EPS. (2) Includes 80% interest in 97 MW project sold to 3rd party. 40 AVAN GR I ❑ Avangrid, “utility of the future” 11 Long-Term Outlook
Long-Term Outlook – Base Year ’18(1)
EPS(1) Adjusted EPS(2)
~12-14% ~8-10% CAGR CAGR ~$3.00 0 to ~$3.00 ~$3.25 to ~$3.25 $1.92 $2.21
’18 ’22 ’18 ’22 Updates from prior year’s Long-Term Outlook, primarily reflect: • Rebasing off ’18 results • Changes to wind resource forecasting methodology • Re-assessments of PPA & merchant pricing • Delays in certain regulatory outcomes (e.g. AMI) & forecast earning allowed ROEs • Use of tax equity financing (costlier, but monetizes the value of PTCs) • Addition of NECEC (includes AFUDC) & Vineyard Wind (1) As of February 26, 2019. (2) See Appendix for calculation of Adjusted EPS and reconciliations to EPS. Oils AVANGRID Avangrid, “utility of the future” 12 Long-Term Outlook Earnings Drivers
Revising EPS and Adjust EPS(1) CAGRs – ’22 EPS
EPS ~12-14% CAGR Adjusted EPS(1) ~8-10% CAGR
EPS $1.92 EPS $3.00-$3.25 Adjusted EPS(1) $2.21 Adjusted EPS(1) $3.00 - 3.25
Renewables CAGR EPS ~14-15% Adjusted EPS(1) ~7-9% Networks CAGR EPS ~14-16% Adjusted EPS(1) ~13-15%
2018 Networks Renewables Corporate 2022
(1) See Appendix for calculation of Adjusted EPS and reconciliation to EPS.
4. i AVANGRID Avangrid, “utility of the future” 13
’19-’22 Investments
Long-Term Outlook Investments Average Annual Investment ($B)
Renewables $2.94B
$0.91 31% Renewables $3.6B 0 Total ~$11.8B 69% Networks $2.04 0
$8.1B
Networks
Includes NECEC & Vineyard Wind investments
Amounts may not add due to rounding. fata AVANGRID Avangrid, “utility of the future” 14 Strategic Focus: Execution of Long-Term Outlook
8-10% Growth in Adjusted EPS ’18-’22(1)
st Implementing Focusing on Best Practices Core Delivering Businesses sustainable value
Maintaining Financial Strength
Growth with sustainable value creation in regulated businesses & contracted assets & focus on strategic projects (1) See Appendix for calculation of Adjusted EPS and reconciliations to EPS. Oils AVANGRID Avangrid, “utility of the future” 15 Networks
Avangrid, “utility of the future” 16 Avangrid Networks
Business Highlights
Building the Grid Smart Customer of the Future Solutions
Ongoing capital program Investing in smart communities & solutions
Primarily related to ongoing, customer & • Ithaca, NY Smart Community pilot system investments to ensure safety, reliability, resiliency & to enable renewables growth • AMI & smart grid proposals in NY
Stable, diverse regulatory environments & Actively involved in developing & shaping ability to earn allowed returns new technologies that will impact our industry & our companies • Revenue decoupling for all utilities • Multiple trackers/recovery mechanisms • Enabling EV through infrastructure & pricing mechanisms Experience with successful development of • Testing and implementing grid-side batteries large transmission projects & other non-wires alternatives
Oils AVANGRID Avangrid, “utility of the future” 17 Avangrid Networks
Long-Term Outlook is supported by key achievements in ’18
• Moving forward with investment program to support safety, reliability, & Executing on support state renewable energy goals favorable long- • Successfully completed two rate cases (CNG and BGC) term growth • Completed two transmission projects in ME & an LNG modernization project in CT
• Successfully awarded contracts for 1,200 MW NECEC transmission Moving forward project, delivering energy from Canadian hydro-power to Massachusetts with strategic • Received FERC approval projects • Implementing Transforming Energy resiliency program; initial Maine investments included in CMP rate case request, filed October ’18
• Moving forward with AMI & including in upcoming rate cases in NY, with a Focusing on fully supported benefit-cost analysis innovation & efficiencies • Developing Smart Grid & Electric Vehicle solutions • Initiated four battery storage pilot projects in New York
Providing ~9% Rate Base CAGR
4. J AVANGRID Avangrid, “utility of the future” 18 Networks Investments & Rate Base
Key Investments ’19-’22 ($M) Capex ’19-’22 AMI in NY $426 NECEC 3% DSIP & Resiliency $543 Other(1) 13% Gas leak-prone pipe replacement programs $486 & expansion programs Gas Metro North Railroad in CT $62 11% $8.1B NECEC $950 Other FERC Transmission projects in ME & CT, including: MEPCO Strategic Rebuild $87 18% Electric FERC Brightline(2) $634 55% Transmission
Rate Base ($Billions) Operating Highlights
Rate Base 43% Investments
CAGR ~9% Return of excess deferred tax assets per regulatory $14.1 requirements (determined in next rate cases for NYSEG, RGE, UI, SCG & CMP) $9.8 Depreciation ROE’s Distribution ROEs forecasted at allowed levels (except NY in ’19) ’18 ’22 Transmission ROEs forecasted at FERC proposed levels
(1) Includes facilities, IT, security, fleet, other. (2) NERC Reliability Standard Compliance Oils AVANGRID Avangrid, “utility of the future” 19 Resiliency Program
'l Transforming ic jENERGY We're investing ... $2.5 BILLION
Avangrid Networks is working to make our New York and Maine electric grids safer, more reliable and more storm resilient. r o ii
[I SYSTEM SMART METERS CONFIGURATION TREE RESILIENT VEGETATION NETWORK ENHANCEMENT HARDENING WIRE ei *AUTOMATION MANAGEMENT
Comprehensive resiliency plan to address the impact of storms on our infrastructure
Capital costs of $2.0B, including AMI in New York Vegetation management of ~$500M 10 year program through ~’30 Subject to Regulatory Approval Initial amounts included in October ’18 CMP rate case in Maine Will include in next rate filings in New York in 2Q ’19 • Garnering support from local communities
iftisur AVANGRID Avangrid, “utility of the future” 20 Networks Experience with Large Projects
Networks leverages its experience successfully executing large, complex Transmission projects with its NECEC project
New England Clean Energy CLEAN ENERGY Maine Power Reliability Project (MPRP) Connect (NECEC) CONNECT
$1.4B upgrade to CMP’s transmission 1,200 MW Transmission project delivering system, including: Canadian hydro-power to Massachusetts EDCs $950 million capital cost(1) • 5 new 345 kV substations Timing & approval process ON TRACK • 1 new 115 kV substation Expect all state permits by 2Q ’19 & final project approvals by YE ’19 • 440 miles of new transmission lines Expect to begin construction in late ’19 with COD by year-end ’22 Completed in 2015 to ensure reliable delivery of clean energy resources. Already control 100% of rights of way
MPRP was the ONLY large Transmission • 73% in existing transmission corridor project of its scale completed ON TIME • 27% in industrial forest and ON BUDGET in New England in Reached settlement with key parties in ME recent years CPCN proceeding, including the Governor of ME, OCA & environmental groups (1) Does not include AFUDC.
40/ta AVANGRID Avangrid, “utility of the future” 21 Rate Plans
Settlements approved for CNG and BGC; CMP rate case ongoing Company Avg. Rate Current Rate Allowed ROE Allowed Decoupling Energy Storms Other(2) Base Plan Equity Supply $9.8B Costs
NYSEG – E 2.1 3 YR Through 9.0% 48% April ’19
NYSEG – G 0.6 3 YR Through 9.0% 48% April ’19
RGE – E 1.4 3 YR Through 9.0% 48% April ’19
RGE – G 0.5 3 YR Through 9.0% 48% April ’19
CMP – D 0.9 Filed 1 YR TBD TBD N/A Case Oct ’18 Current 9.45% Current 50%
UI – D 1.0 Through Dec 9.10% 50% ’19
SCG – G 0.6 Through Dec 9.25% ~52% N/A ’20 CNG – G 0.5 Through Dec 9.30% 54%-55% N/A ’21
BGC – G 0.1 Through Dec 9.70% 54% N/A ’21
MNG – G 0.1 --- 9.55% 50% N/A
CMP – T 1.5 FERC Formula 10.57% (11.74% cap)(1) Actual Formula rates & costs fully reconciled; revenues reset annually based on prior year sales UI – T 0.6 FERC Formula 10.57% (11.74% cap)(1) Actual Formula rates & costs fully reconciled; revenues reset annually based on prior year sales (1) FERC is currently reviewing ROE methodology & new approach applied preliminary to Complaint I (base 10.41% & cap 13.08%); Current 11.74% cap applies to ~64% of rate base. (2) Pension, low income/bad debt, leak prone pipeline replacement, gas system expansion, vegetation management, environmental, variable-rate debt, property taxes, net plant, etc., varying by company. Oils AVANGRID Avangrid, “utility of the future” 22 Managing Storm Impacts and Costs Strategy – Mitigate the impact of storms
Vegetation Management: Plan to request cycle trim at NYSEG in ’19 rate case (all other businesses on cycle trim). Targeted ground to sky to reduce outages & damage.
Resiliency Investments in the Network:
Topology: Reduce circuit lengths & improve backup capability
Automation: Automate substations & circuits to reduce scope of outages & allow for quicker restoration
Hardening: Stronger Materials through new design standards
Lean In: Ensure crews are mobilized in advance of weather to ensure quick response
24x7 Trouble: Expand 24x7 troubleshooters to 3 largest NYSEG divisions
Storm Costs Treatment: Lean-In / Pre-Stage: Expand pre-staging rules in NY (move to unlimited occurrences from 3 & 2 annually for NYSEG & RG&E, respectively)
Minor Storms: Lower threshold per event in ME from $3.5M to $1.5M Expected to propose increased minor storm allowance for NY
Oils AVANGRID Avangrid, “utility of the future” 23 Renewables Update
Avangrid, “utility of the future” 24 Avangrid Networks
Business Highlights
Focus on Clean Smart Customer Energy Solutions
Continuing to execute on development strategy, Broad customer base while pursuing innovative approaches to maximize • Growing interest of C&I counterparties allows us to offer value, & to address competition & changes in tax PPAs with value-added services impacts • Continued opportunities with utilities satisfying RPS goals Development pipeline, Safe Harbor & Tax Equity: • Global impact, with Iberdrola leveraging U.S. relationships • Supports ~2 GW new project target for ’19-’22 with with C&I counterparties PPAs Strong pipeline • Allows us to monetize tax credits to address PTC • Enables value-creating opportunities for partnership & phase-outs & Tax Reform build-to-sell projects with counterparties • Includes opportunities to diversify from delivering • Continuing attractive build-own-operate projects lowest cost of energy at the bus-bar into the U.S. New technologies offshore wind business, where we have significant • Bidding battery storage with wind/solar in RFPs experience through our affiliates & partners & (accomplishing similar load following with our thermal access to 3 offshore lease areas plants & access to hydro rights in Northwest) • Deploying new 10 MW battery in our new role as Balancing Authority in the Northwest Oils AVANGRID Avangrid, “utility of the future” 25 Avangrid Renewables
Long-Term Outlook leverages key accomplishments in ’18
• Strong Renewables growth - achieved wind & solar target for ’22 Executing on • Executed 594 MW of new PPAs of renewables & 400 MW offshore wind favorable long o Added additional 168 MW with contracts for NY RECs in ’19 term growth • Added contracts to 212 MW merchant in ’19 • Wy’East 10 MW solar online (under budget and 2.5 months early)
• ~13.8 GW Pipeline (~6.1 GW onshore wind, ~3.7 GW solar, ~4 GW Moving forward offshore wind, not including ~1 GW for new MA lease) with strategic • Developing 3 offshore lease areas (capacity for Renewables up to projects ~5 GW) • ~1 GW(1) wind under construction • Moving forward with repowering 284 MW
• Successfully implemented an independent Balancing Authority for 1,300 Focusing on MW of wind generation in Northwest innovation, digitization & • Added over 1,700 MW boost software to wind turbines best practices • Added value with equity sale of 80% of Coyote Ridge wind project to WEC • Optimizing our pipeline through strategic sales, alliances or partnerships
(1) Includes 80% interest in 97 MW project sold to 3rd party. 011 AVANGRID Avangrid, “utility of the future” 26 Business Highlights
Key Investments ’19-’22 ($M) Capex ’19-’22 Other(1) • ~2 GW COD ’19-’22 Repowering 7% • Onshore wind & solar: 8% o ’19-’22: 1,631 MW
• Offshore wind: 46% o ’19-’22: 400 MW 39% $3.6B • Repowering: 325 MW (284 MW in process) • Safe Harbor PTCs: o 100% ~1.0 GW Offshore Onshore o 80% ~0.5 GW Wind Wind & Solar o 60% ~0.5 GW
Installed Capacity (GW)(2) Operating Highlights
Wind NCF to 34% by ’22 31% Change in wind forecasting methodology 8.6 New projects at higher NCF 6.6 Wind ‘boost’ software added in 4Q ’18 & ongoing Repowering Offshore wind NCF ~46% Average wind NCF ’19-’22 ~33% Average solar NCF ’19-’22 ~28% ’18 ’22 (1) Primarily related to Thermal, Corporate, capitalized interest & labor, & other. (2) Includes JVs & Renewables 50% ownership of Vineyard Wind’s 800 MW project). Oils AVANGRID Avangrid, “utility of the future” 27
Average wind NCF ’19-’22 ~33% Average solar NCF ’19-’22 ~28% ’19-’22 Renewables Investments
New MW Target ~2 GW ~212 MW of contracts added to merchant assets Project ST MW Counterparty Colorado Green CO 162 Xcel Energy Repower Project with 20 year PPA ~100% UPSIDE Complete Moraine II MN 50 Northern States PPA extension for 10 Power years
BASE ~284 MW of repowering in process Progress Toward Target MW (87% of 325 MW in Long-Term Outlook)
In Construction 989(1) Project ST MW Counterparty Additional Executed Contracts 642 Colorado Green – CO 162 Xcel Energy NEW Vineyard Wind 400 COD 1H ’20 Total with Contracts 2,031 Mountain View III CA 22 Merchant COD 1H ’20 Repowering Project Mid- 100 Midwest Renewables ’22 Target(1) 2,052 COD Late ’20 West Cooperative
(1) Includes 97 MW Coyote Wind project
Oils AVANGRID Avangrid, “utility of the future” 28 Renewables Development & Investment Strategy
Driving optimal value includes partnerships and sales
• Development pipeline is approximately double installed capacity o More viable projects that can be completed prior to PTC phase-out than contemplated in Long-Term Outlook
• Provides attractive opportunities to optimize our pipeline through partnership strategies, strategic sales, & alliances Example is sale of Coyote Wind project to WEC in 80/20 partnership o Although not currently in our forecast beyond ’19, it is expected that it will occur with a similar impact in future years
• Continued focus on additional new build – develop, own, operate
• Storage is increasingly important & combined with nearly all solar RFPs o Constructing new 10 MW, 2-hour battery to help with balancing as ti part of our new Balancing Authority in the Northwest
AVANGRID Avangrid, “utility of the future” 29 Offshore Wind
AVANGRID is Well-Positioned for Leadership in U.S. Offshore Market
Significant, Proven U.S. Onshore Renewables Experience
Significant, Proven Global Offshore Experience Iberdrola & Scottish Power Vineyard Wind partner Copenhagen Infrastructure Partners (CIP)
• Deep technical knowledge & engineering experience • Well developed supply chain, relationships & purchasing power • Experience managing offshore O&M
Diversification from onshore wind & solar markets
Oils AVANGRID Avangrid, “utility of the future” 30 Other Offshore Wind Lease Areas
Vineyard Wind 1st MA Lease 50/50 Partnership with Renewables & CIP OSS-A. MASA. V USA .09'. • Lease area has potential capacity of up to 3 GW VINEYARD WIND • Executed 800 MW PPA in Massachusetts RFP • Construction & Operations Plan (COP) filed with BOEM; first live U.S. Offshore Wind farm that applied for the COP • Timing & approval process ON TRACK
nd OtS-A V MASS Vineyard Wind 2 MA Lease 50/50 Partnership with Renewables & CIP OSSI USA VINEYARD WIND • Lease area has potential capacity of up to 2 GW • 132,370-acre area; 16.7 nautical miles from Nantucket & 44.5 nautical miles from Block Island • Awarded to Vineyard Wind in December ’18 auction ($135.1M investment) • Used to bid Liberty Wind project (400–1,200 MWs) into NY RFP
Kitty Hawk - 100% Ownership by Avangrid Renewables • Lease area has potential capacity of up to 2.5 GW • 122,405 acres; 24 nautical miles from shore • Grid connection application at Virginia Beach for 3x800 MW submitted to PJM Project has secured a queue position for 2.4 GW in area where high demand is expected • Virginia issued its ’18 Energy Plan, with an objective of deploying 2 GW of Offshore Wind by ’28 • Expected timeframe as early as ’25
filia /WA NGRID Avangrid, “utility of the future” 31 Offshore Wind – Current Opportunities in the Northeast U.S.
The Northeast U.S. has significant Offshore Wind Targets
State Targets (MW) Selections to Date New RFPs
MA 1) 1,600 by ’27 MA I: 800 MW MA II: 800 MW expected in ’19 2) 1,600 by ’35 (Vineyard Wind May ’18)
NY 9 GW by ’35 N/A NY I: Bids submitted Feb ’19 for +800 MW (Vineyard Wind submitted proposals for 400, 800 & 1200 MW)
RI 1,000 MW Renewables RI I: 400 MW (Awarded RI II: 400 MW (Vineyard Wind submitted proposals for 200 by ’20 May ’18) MW & 350 MW)
NJ 3,500 MW by ’30 N/A NJ I: 1,100 MW (Vineyard Wind not a participant)
Vineyard Wind is participating in RI and NY RFPs for Offshore Wind
Rhode Island New York Renewables RFP Offshore Wind RFP Issue RFP 9/12/2018 11/8/2018 Submit Notice of Intent to Bid 9/26/2018 12/20/2018 Submission of Proposals 10/29/2018 2/14/2019 Selection of bidder(s) 5/2/2019 April 2019 Negotiation of contracts 7/29/2019 June 2019 Submit contracts for Regulatory Approval 8/30/2019 N/A
Oils AVANGRID Avangrid, “utility of the future” 32 Financial Impacts
Avangrid, “utility of the future” 33 Financial Position ’18–’22
Maintaining financial strength while delivering strong growth
Strong balance sheet
Debt increases ~$5B(1) Additional ~$1.3B in Tax Equity No new equity issuances in Long-Term Outlook
Continued focus on maintaining strong credit ratings 10 BBB+ S&P 0Baa1 Moody’s 0BBB+ Fitch Dividend policy targets 65-75% payout, growing with earnings
$0.44/ share Quarterly dividend, increased in 3Q ’18
(1)1Does not include0 Tax Equity financing. Oh AVANGRID Avangrid, “utility of the future” 34 Earnings Growth in Long-Term Outlook
EPS CAGR ’18-’22 of 12-14% Adjusted EPS CAGR ’18-’22 8-10%(1)
Adjusted EPS(1) ’18 ($2.21) Adjusted EPS(1) ’22 (~$3.00-3.25)
27% 27% 2% 100% 100% 85% 71% -12%
Networks Renewables Corporate AVANGRID Networks Renewables Corporate AVANGRID
Earnings contributions from Networks increase; Corporate in ’22 primarily includes interest on holding company debt
(1) See Appendix for calculation of Adjusted EPS and reconciliation to EPS. Amounts may not add due to rounding.
Oils AVANGRID Avangrid, “utility of the future” 35 Key Assumptions for Long-Term Outlook
• Earning our allowed ROEs (except for NY in ’19); All subsidiaries have decoupling • Rate base growth ~9% Networks • ROEs for CMP-T & UI-T at 10.41% Base (13.08% Cap) proposed by FERC • No earnings adjustment mechanism (EAM) • Minor storm impacts – assumed at ~50% of ’18 level in ’19; normal impact thereafter • • Capital base tax & overheads allocated to Networks in ’18 continue through ’22 • Includes NECEC investment of $950 million. AFUDC earned through ’22
• Adding ~2 GW renewables, incl. 400 MW for Vineyard Wind • Revised wind resource methodology - Existing assets - ($0.08) impact in ’19 Renewables • Average NCF ’19-’22: o Onshore ~33% (incl. New Build ~40%); Solar ~28%; Offshore ~46% • 325 MW repowering • Partnerships, strategic sales & alliances o ~$0.05-$0.10 in ’19; No assumption for 2 ’20-2 ’22, but expect up to $0.10 annually • Thermal & trading business average annual revenues less cost of goods sold ~$65M • Maintenance capital spending ~5% of annual capital spending • Average Pricing ’19-’22: o Merchant plus RECs $32/MWh; Existing PPA $53/MWh o New PPA incl. Vineyard Wind $32/MWh (excl. Vineyard Wind $27/MWh) • Assumes tax equity financing on new projects in ’19 & ’20
• Primarily internal & external financing costs & interest Corporate • Consolidated effective tax rate ~15-20% Federal & State • Pursuing efficiencies throughout the businesses through ’22 with Forward 2020+
•OA/ AVANGRID Avangrid, “utility of the future” 36 Long-Term Outlook Sensitivities
AVANGRID EPS & Adjusted EPS(1) for ’22
Networks Transmission ROE changes by .50% ~ +/- $0.02 Distribution ROE changes by .50% ~ +/- $0.09 Rate Base +/- $100M ~ +/- $0.02 w/o AMI + DSIP & Resiliency Capex incl. ~ - $0.07 Corporate finance impacts
Renewables Merchant Prices +/- $1/MWh ~ +/- $0.02 NCF +/- 0.5pp ~ +/- $0.04 +/- 100 MW New Onshore Wind ~ +/- $0.015-$0.02 Sale of Assets / Build to Sell ~ + $0.10/$0.05
Other Interest Rates +/- 0.50% on non-utility debt ~ +/- $0.04
(1) See Appendix for calculation of Adjusted EPS and reconciliation to EPS.
Oils AVANGRID Avangrid, “utility of the future” 37 Forward 2020+ Vision: Best-in-Class in Industry Implementing Best Practices to drive top tier performance
FORWARD • Talent Attraction & Agile Organization 2C130 Er
Driving Innovation with Cost Management Targets Technology Deployment & Digitization • Manage O&M to achieve best in class operational efficiency as Delivery of Customer we grow the business Solutions & Quality of Service • Mitigate rate impacts of the capital plan
Focus on Safety, Reliability & Conducting Mid-Period Assessment Resiliency of Forward 2020+
Oki AVANGRID Avangrid, “utility of the future” 38 Long-Term Outlook Sources & Uses – Business Segments
Net Funding Need ~$6.4B
AVANGRID Networks ($Billions) ($Billions) $3.2 ~($8.1)
$6.4 ($2.4) $4.9 ($11.8)
Cash from Net Capex $7.7 Operations Funding Need Renewables ($Billions) $0.7J ~($3.6) $2.9
Cash Net
from Funding Dividends Capex Need(1) Operations A (1) Includes ~$5.1B in debt and ~$1.3B in tax equity. Cash from Net Capex Amounts may not add due to rounding. Operations Funding Need Oils AVANGRID Avangrid, “utility of the future” 39 Debt Portfolio & Financing Needs
Total Debt as of 12/31/2018 Long-Term Debt Portfolio ’18
Notes, other Weighted Average Life ~8.6 Years $3.3 Weighted Average Coupon ~4.35%
$6.3B FMB $2.4 CP: $0.6
Debt Maturities ($Millions)(1) New Debt ’19 – ’22 (~$5.1B)(1)
$713 $M 1,716 1,543
$346 $365 $302 902 994 Plan includes additional~$1.3B of tax equity
2019 2020 2021 2022 2019 2020 2021 2022
(1) Includes non-current debt including sinking funds; ’20 includes $450 million at AVANGRID (former UIL Holding Company Debt). AVANGRID Avangrid, “utility of the future” 40 Balance Sheet & Liquidity
Our strong balance sheet & liquidity support our organic growth
New Funding $6.4B Net, $8.1B Gross Liquidity at 12/31/2018 ($M) Cash $43 Revolving Credit Facility $2,500 Commercial Paper Balance ($590) AVAILABLE LIQUIDITY $1,953 AGR/IBE Credit Facility $500 TOTAL Liquidity $2,453
Cash Flow Metric Net Debt(1)/ Total Capitalization
’18 ’22 Est.
(1) CFO Pre-WC/Debt 22.3% Mid-Teens 40.2% 41.9% 36.4% 32.4%
(1) Company calculation, does not include rating agency adjustments. Net Debt does not include tax equity. Please see 2019 2020 2021 2022 appendix for details.
Oils AVANGRID Avangrid, “utility of the future” 41 Environmental Social Governance
Oils AVANGRID Avangrid, “utility of the future” 4242 Commitment
Investing in a Smarter, Cleaner and More Sustainable Future By the numbers
6.6 GW 13.8 GW 89% Installed Wind $9.8B 3.2M pipeline Emissions & Solar Rate Base Customers (inc. 4GW -free Capacity offshore)
As of the end of 2017, Avangrid Renewables produced ~ 15,737 GWh of clean, renewable energy The energy delivered from our facilities has allowed our customers to avoid 7.93 million metric tons of carbon, which is equivalent to removing 1.7 million cars from the road
We have pledged to be Carbon Neutral by 2035
(1) o CO2 emissions intensity almost 9 times lower than the U.S. Utility Average in ’17 o Short-term goal: 25% reduction by ’20 vs. ’15
(1) The environmental and green attributes attributable to the electric generation from the Avangrid Renewables’ facilities have been or likely will be sold or transferred to third parties, who are solely entitled to the reporting and other rights to all renewable energy credits, emissions reductions, offsets, allowances and the avoided emissions of greenhouse gas pollutants, collectively environmental attributes. Avangrid Renewables is not claiming ownership of any environmental attributes from its renewable generation fleet for any purpose, including compliance with any federal or state law or reporting to any federal or state agency, or any other present or future federal, state, local, international, foreign, or voluntary renewable energy, emission reduction, or emissions trading program. Oils AVANGRID Avangrid, “utility of the future” 43
Sustainability
Sustainable Development Goals AVANGRID’s sustainable policy is built to support the Sustainable Development Goals spearheaded by the United Nations. Goals that the company aims to achieve across all business and philanthropic activities:
gi GOODMNA "POEM IL MIER 3 ANDICIESEING Ckk AVANGRID is committed to sustainable MEER CLEAN Wril ER 4 EDUCATION 5 EQUILlir 6 AHD SANITATION development and respect for the environment and these important values guide our strategy and actions. 7 s; II CIENINORKAM1 MUM Nemo tLLAN Earl? UECuf4o 1i OCHOWTH 9 WO IffIASTRUCTIIK '16 / Corporate Environmental Policy , 11111
11 SUSIAINABLECITIIS 111) RESPORINLE Biodiversity Policy lo Min/1111111rES I I .111,11MAIMUMDIS IL CONSUMPTION MRPRODUCTION - ► Climate Change Policy AldM 00 CAME tin Sustainability Report 13 glION 14 wtDEMME 15 ON MD •••••■•••MPRO http://www.avangrid.com/wps/portal/avangrid/sustainabi lity/SustainableBusiness/SustainabilityReport
la PEACEJUSIICE /7 POTIMERVIIPS IU MVO& I/ FORTHEICOALS ItitTITUTIONS m
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O, AVANGRID Avangrid, “utility of the future” 44 Recognized Leader for Sustainability
Early & Aggressive Pledge to be Carbon Neutral by 2035
11NCDP CDP Score of “B” DRIVING SUSTAINABLE ECONOMIES
Constituent of the FTSE4Good Index Series(1)
FTSE4Good
2017 THOMSON REUTERS TOP100 Thomson Reuters 2017 Top 100 Global Energy Leader GLOBAL ENERGY LEADER
One of only 7 companies globally that earned >60% of revenues from environmentally beneficial products & GREEN RANKINGS services
(1) Created by the global index provider FTSE Russell, the FTSE4Good Index Series is designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices.
fata AVANGRID Avangrid, “utility of the future” 45 AVANGRID, a “controlled company”
Publicly Traded NYSE: AGR 18.5% 81.5%
11161.1 AVANGRID Avangrid Networks Avangrid Renewables
* AVANGRID, Inc. common stock is listed on the New York Stock Exchange. IBERDROLA, S.A. owns 81.5% of the issued and outstanding shares of AVANGRID common stock. The AVANGRID system of corporate governance establishes a framework of strengthened autonomy that insures that the interest of minority shareholders of AVANGRID are properly protected. Oils AVANGRID Avangrid, “utility of the future” 46 Focus on Strong Corporate Governance
Committed to ethical principles, transparency & leadership
Controlled company with: • Majority voting in uncontested elections • Eight directors not affiliated with Iberdrola, six of which are independent • Separate Compensation, Nominating & Corporate Governance Committee
2019 GOVERNANCE. RISK. AND COMPLIANCE Finalist in ETHISPHERE arETHICAL boardroom AWARDS NYSE COMPLIANCE BEST CORPORATE 2016 FINALIST Governance rl GOVERNANCE 'UTILITIES Awards NORTH AMERICA CORPORATE Finalist in ,2017 GOVERNANCE Received prestigious AWARDS Corporate Named North American 2018 third party BRIGHT TO YOU BY Secretary utility with the best corporate secretary Award certification of corporate governance compliance program
AVANGRID Avangrid, “utility of the future” 47 AVANGRID Corporate Governance System
I. Certificate of Incorporation Social Responsibility Policies II. Amended and Restated By-Laws o General Corporate Social Responsibility III. Governance Rules Policy o Corporate Governance Guidelines o Biodiversity Policy o ACC Charter o Climate Change Policy o CNCGC Committee Charter o Corporate Security Policy o Management Committee Charter o Environmental Policy IV. Corporate Policies o Sustainability Policy Corporate Governance and Regulatory o Human Resources Framework Policy Policies o Equal Opportunity Policy o Anti-Corruption Policy o Executive Compensation Recovery Policy o Corporate Tax Policy o Human Rights Policy o Crime Prevention Policy o Innovation Policy o Fair Disclosure Policy o Knowledge Management Policy o Insider Trading Policy o Occupational Health and Safety Policy o Related Party Transaction Policy o Personal Data Protection Policy o Personal Data Privacy Policy o Recruiting and Hiring Policy Risk Polices o Social Media Policy (New Policy) o General Risk Control and Management o Quality Policy (New Policy) Policy V. Compliance Rules o Corporate Risk Policies Summary o Code of Business Conduct and Ethics o Summary of the Specific Risk Policies for o Supplier Code of Ethics the Various Group Businesses o Regulations of Compliance Division
Oils AVANGRID Avangrid, “utility of the future” 48 Director Nominees “By the Numbers”
Our board members have broad and diverse experience Committed to representing the long-term interests of all shareholders
Diversity Experience and Skills Two directors are women and six directors are 1 citizens of countries other than the US Senior Leadership
Risk Management
Unaffiliated with Iberdrola
Finance/ Financial Average Tenure v Average Age Disclosure / Accounting ~4.8 years ~63 years Government / Regulatory Years of service ≤ 55 ≤ 3 4 ≥ 5 Global Perspective / 56-60 International 61-65 66-70 Environmental / Utility >70 Public Company Board Experience
0 2 4 6 8 10 12
AVANGRID Avangrid, “utility of the future” 49 AVANGRID Board of Directors
AVANGRID Board of Directors • • • • • tifinArt Chairman Ignacio • • • • * Galán Awn Vice Chairman Carol Folt •••• John Baldacci 'limn Jim Torgerson John Lahey 13 directors overwhelmingly reelected by shareholders in 2018 Pedro Azagra Arnold Chase Blázquez
Secretary José Sáinz Armada R. Scott Mahoney Alan Solomont a Independent
Unaffiliated, Non-Executive Chief Compliance Santiago Martinez Alfredo Elías Ayub Officer Garrido • Non-Executive Alistair Raymond
Juan Carlos Executive Elizabeth Timm Internal Audit Rebollo Liceaga Ray Cardella
1,, AVANGRID Avangrid, “utility of the future” 50 Appendix
Oils AVANGRID Avangrid, “utility of the future” 51 Reconciliation AVANGRID 4Q ’18 & FY ’18 Adjusted Net Income
Three Months Ended Year Ended December 31, 2018 December 31, 2018 AVANGRID AVANGRID CONS Networks Renewables Corporate Gas Storage CONS Networks Renewables Corporate Gas Storage (in millions) Net Income (Loss) Attributable to Avangrid, Inc. $ 119 $ 103 $ 7 $ 8 $ 1 595 $ 478 $ 148 $ (12) $ (19) Adjustments: Add: Mark-to-market adjustments - Renewables 16 — 16 — — 25 — 25 — — Restructuring charges (1) 2 2 — — — 4 4 — — — Loss from held for sale measurement (2) — — — — — 16 — — — 16 Impact of the Tax Act (3) 40 5 16 18 — 46 5 16 25 — Accelerated depreciation from repowering (4) 3 — 3 — — 3 — 3 — — Income tax impact of adjustments (5) (5) (1) (5) — — 6 (1) (7) — 14 Gas Storage & Transportation adjustment, net of tax (6) (1) — — — (1) (11) — — — (11) Adjusted Net Income $ 173 $ 110 $ 37 $ 26 $ — $ 684 $ 486 $ 185 $ 13 $ — Add: Net income attributable to noncontrolling interests (3) — (3) — — 3 2 1 — — Income tax expense 9 47 (12) (25) — 111 165 (40) (14) — Depreciation and amortization 208 129 79 — — 852 503 349 — — Interest expense, net of capitalization 83 71 5 7 — 302 260 33 9 — Less: Other income and (expense) (8) (19) 12 (1) (66) (79) 18 (5) — Earnings (losses) from equity method investments 2 3 (1) — — 10 13 (3) — — Adjusted EBITDA $ 477 $ 372 $ 95 $ 9 $ — $ 2,008 $ 1,482 $ 513 $ 13 $ —
(1) Restructuring charges relate to costs resulted from restructuring actions involving targeted voluntary workforce reductions within the Networks segment. (2) The amount of loss from measurement of assets and liabilities held for sale of Gas Storage & Transportation activity. (3) The amount of the impact from measurement of deferred income tax balances as a result of the Tax Cuts and Jobs Act of 2017, (Tax Act) enacted by the U.S. federal government on December 22, 2017. (4) The amount of accelerated depreciation derived from repowering of a windfarm (5) Income tax impact of adjustments: $(4.2) million and $(6.6) million from mark-tomarket (MtM) adjustment,$(0.8) million and $(1.1) million from restructuring charges, $(0.1) million and $14.4 million from loss from held for sale measurement, $0 and $(0.7) million from accelerated depreciation for the three and twelve months ended December 31, 2018. (6) Removal of the impact from Gas Storage & Transportation activity in the reconciliation of Net Income to adjusted EBITDA and adjusted gross margin.
Oils AVANGRID Avangrid, “utility of the future” 52 Reconciliation AVANGRID 4Q ’17 & FY ’17 Adjusted Net Income
Three Months Ended Year Ended December 31, 2017 December 31, 2017 AVANGRID AVANGRID CO NS Networks Renewables Corporate Gas Storage CO NS Networks Renewables Corporate Gas Storage
(in millions) Net Income (Loss) Attributable to Avangrid, Inc. $ (77) $ 124 $ 218 $ 53 $ (472) $ 381 $ 496 $ 333 $ 60 $ (508) Adjustments: Mark-to-market adjustments - Renewables 17 — 17 — — 15 — 15 — — Restructuring charges (1) 18 18 — — — 20 20 — — — Loss from held for sale measurement (2) 642 — — — 642 642 — — — 642 Impact of the Tax Act (3) (328) (2) (301) (5) (20) (328) (2) (301) (5) (20) Impairment of equity method investment (4) 49 — 49 — — 49 — 49 — — Income tax impact of adjustments (5) (162) (7) 24 — (179) (162) (8) 24 — (179) Gas Storage & Transportation adjustment, net of tax (6) 29 — — — 29 64 — — — 64 Adjusted Net Income $ 188 $ 133 $ 6 $ 49 $ $ 682 $ 507 $ 120 $ 55 $ — Add: Net income attributable to noncontrolling interests — — — — — 1 1 — — — Income tax expense 44 96 (4) (47) — 245 326 (43) (37) Depreciation and amortization 209 122 87 — — 799 474 325 — — Interest expense, net of capitalization 70 61 5 4 — 256 244 28 (16) Less: Other income and (expense) (12) (19) 3 4 — (67) (72) 4 1 — Earnings (losses) from equity method investments 6 3 3 — — 9 15 (6) — — Adjusted EBITDA $ 516 $ 427 $ 87 $ 1 $ — $ 2,041 $ 1,608 $ 432 $ 1 $ —
(1) Restructuring charges relate to costs resulted from restructuring actions involving targeted voluntary workforce reductions and related costs in our plan to vacate a lease, predominantly within the Networks segment. (2) The amount of loss from measurement of assets and liabilities held for sale of Gas Storage & Transportation activity. (3) The amount of the impact from measurement of deferred income tax balances as a result of the Tax Cuts and Jobs Act of 2017, (Tax Act) enacted by the U.S. federal government on December 22, 2017. (4) The amount of other than temporary impairment (OTTI) on equity method investment (5) Income tax impact of adjustments: $(6) million and $(5) million from mark-tomarket (MtM) adjustment for the three and twelve months ended December 31, 2017, respectively, $(7) million and $(8) million from restructuring charges for the three and twelve months ended December 31, 2017, $(13) million from other than temporary impairment (OTTI) on equity method investment, $(179) million from loss from held for sale measurement for the three and twelve months ended December 31, 2017 and $43 million from adjustment to unitary income taxes at Renewables as a result of expected future sale of Gas for the three and twelve months ended December 31, 2017. (6) Removal of the impact from Gas Storage & Transportation activity in the reconciliation of Net Income to adjusted EBITDA and adjusted gross margin.
Oils AVANGRID Avangrid, “utility of the future” 53 Reconciliation AVANGRID ’18 & ’17 Adjusted EPS
Avangrid, Inc. Reconciliation of Adjusted Non-GAAP Earnings (Loss) Per Share (EPS) (Unaudited)
Three Months ended December 31, Year ended December 31, 2018 2017 '18 vs '17 2018 2017 '18 vs '17 Networks $ 0.33 $ 0.40 $ (0.07) $ 1.54 $ 1.60 $ (0.06) Renewables 0.02 0.70 (0.68) 0.48 1.07 (0.60) Corporate 0.02 0.17 (0.15) (0.04) 0.19 (0.23) Gas Storage 0.00 (1.53) 1.53 (0.06) (1.64) 1.58 Earnings Per Share $ 0.38 $ (0.25) $ 0.63 $ 1.92 $ 1.23 $ 0.69 Adjustments: Restructuring charges 0.01 0.06 (0.05) 0.01 0.07 (0.05) Mark-to-market adjustments - Renewables 0.05 0.05 (0.00) 0.08 0.05 0.03 Loss from held for sale measurement - 2.08 (2.08) 0.05 2.08 (2.02) Accelerated depreciation from repowering 0.01 - 0.01 - 0.01 Impairment of equity method investment - 0.16 (0.16) - 0.16 (0.16) Impact of the Tax Act 0.13 (1.06) 1.19 0.15 (1.06) 1.21 Income tax impact of adjustments* (0.02) (0.52) 0.51 0.02 (0.52) 0.54 Gas Storage, net of tax (0.00) 0.09 (0.09) (0.04) 0.21 (0.24) Adjusted Earnings Per Share $ 0.56 $ 0.61 $ (0.05) $ 2.21 $ 2.20 $ 0.01
Weighted-avg # of Shares (M): 309.5 309.5 309.5 309.5 Amounts may not add due to rounding
* 2018: EPS Income tax impact of adjustments: $(0.02) from mark-tomarket (MtM) adjustment - Renewables, $(0.01) from restructuring charges - Networks, $0.05 from loss from held for sale measurement.
* 2017: EPS Income tax impact of adjustments: $(0.01) from mark-tomarket adjustment, $(0.04) from other than temporary impairment (OTTI) on equity method investment - Renewables and $(0.03) from restructuring charges - Networks, $(0.58) from loss from held for sale measurement, $0.14 from adjustment to unitary income taxes at Renewables as a result of expected future sale of Gas.
Non-GAAP Adjusted Earnings (Loss) Per Share
Three Months ended December 31, Year ended December 31, Adjusted Adjusted '18 Adjusted 2018 Adjusted 2017 '18 vs '17 Adjusted 2018 Adjusted 2017 vs '17 Networks $ 0.35 $ 0.43 $ (0.07) $ 1.57 $ 1.64 $ (0.07) Renewables 0.12 0.02 0.10 0.60 0.39 0.21 Corporate 0.08 0.16 (0.07) 0.04 0.18 (0.13) Adjusted Earnings Per Share $ 0.56 $ 0.61 $ (0.05) $ 2.21 $ 2.20 $ 0.01
Weighted-avg # of Shares (M): 309.5 309.5 309.5 309.5 Amounts may not add due to rounding
Oils AVANGRID Avangrid, “utility of the future” 54 Reconciliation – AVANGRID Net Debt
The Net Debt quantitative reconciliation as of December 31, 2018 and 2017 is as follows $M 2018 2017
Non-current debt $ 5,368 $ 5,196 Add: Current portion of debt 394 183 Notes payable (including affiliates) 588 786 Other notes payable - long-term 40 42 Debt 6,389 6,207 Add: Tax equity financing arrangements — 98 Interest accrued 62 57 Less: Cash and cash equivalents 36 41 Net Debt $ 6,416 $ 6,321
Oils AVANGRID Avangrid, “utility of the future” 55 Reconciliation – AVANGRID CFO Metric
2018 CFO pre-WC / Debt 22.3%
Cash Flow From Operations 1,791 Changes in Working Capital (4) CFO pre-WC 1,787 Distributions to noncontrolling interests (76) Employer Contributions, Net of Service Cost 4 Capitalized Interest (26) Depreciation on Operating Leases 35 CFO pre-WC, Adj. 1,724
Short-term Debt 587 Long-term Debt - Gross 5,762 Debt 6,349 Tax equity financing arrangements - VIEs - Unamortized Debt 35 Pension Liability 830 Operating Leases 522 Debt, Adj. 7,736
Oils AVANGRID Avangrid, “utility of the future” 56 Financial Expectations - Networks
Key Impacts & Long-Term Outlook Assumptions
2018 2019 2020 2021 2022 EPS $1.54 ~$1.75~$1.75-$1.88- ~14-16% Adjusted EPS(1) $1.57 ~$1.75$1.88-$1.88 ~13-15% Normal Normal Normal ~ 50% of ’18 (expect resiliency investments & storm enhanced Impacts of costs related to minor storms ($0.14) level cost recovery mechanisms starting in’20)
No EAM EAM None None None None ($0.03) Increase capital base tax & overheads allocated Continues Continues Continues at Continues at ($0.06) to Networks at ~($0.05) at ~($0.05) ~($0.05) ~($0.05) Rate Impacts/ROEs & equity ratios (E & G) Earn Allowed Earn Earn Earn NY filings est. 1H’19; CMP filed Oct ’18 ROEs Allowed Allowed Allowed CNG & SCG in multi-year rate periods (ex-NY) ROEs ROEs ROEs Rate Base $B: ~9% CAGR ’18-’22 $10.7 $11.6 $12.9 $14.1 $9.8 (Annual Increase %) (9.2%) (8.4%) (11.2%) (9.3%) FERC ROE Current Proposed Proposed ’19 assumes FERC decision as proposed with Proposed Proposed 10.57% 10.41% 10.41% one-time impact of $0.06 & annual impact of 10.41% base 10.41% base base base base ~$0.01 Not Not AMI Included Included Included Included Included Not NECEC AFUDC until project in service Included
(1) See Appendix for calculation of Adjusted EPS and reconciliation to EPS.
Oils AVANGRID Avangrid, “utility of the future” 57 Financial Expectations - Renewables
Key Impacts & Long-Term Outlook Assumptions
2018 2019 Guidance 2020 2021 2022 EPS $0.48 ~$0.45-$0.53 ~14-15% Adjusted EPS(1) $0.60 ~$0.52-$0.60 ~7-9% ~$(0.08) vs. prior Wind resource Revised Revised Revised ($0.10) years due to (Revised methodology ’19-’22) forecast forecast forecast reforecast FES bankruptcy/other impacts ~$0.06-$0.07 N/A N/A N/A N/A 1H’18 start-up issues at new ($0.05) N/A N/A N/A N/A wind plants No No No assumption assumption assumption in Long- in Long- in Long- Partnerships, strategic sales, & +$0.04 ~$0.05 - $0.10 Term Term Term alliances Outlook; Outlook; Outlook; expecting expecting expecting up to $0.10 up to $0.10 up to $0.10 Added New onshore wind & solar Adding ~2 GW 10 MW • Onshore Wind ~33% Average NCF Onshore Wind NCF ~31% • Solar ~28% 200 MW in- 200 MW in- Vineyard Wind(2) N/A N/A N/A service service
(1) See Appendix for calculation of Adjusted EPS and reconciliation to EPS. (2) Includes Renewable’s 50% ownership of the 800 MW Vineyard Wind project. Oils AVANGRID Avangrid, “utility of the future” 58 Main Drivers of Capital Spending in Long-Term Outlook
($Millions) Networks 2019 2020 2021 2022 2019-22 Ongoing $1,397 $1,381 $1,270 $1,279 $5,327 AMI, DSIP, Resiliency & Other $57 $202 $370 $364 $978 Other Transmission $54 $202 $213 $272 $740 NECEC $77 $376 $438 $187 $1,079 TOTAL $1,585 $2,161 $2,291 $2,103 $8,140
Renewables 2019 2020 2021 2022 2019-22 Onshore Wind & Solar $1,102 $543 $297 $287 $2,288 Vineyard Wind $58 $340 $741 $261 $1,400 TOTAL $1,160 $883 $1,038 $548 $3,629
TOTAL $2,745 $3,044 $3,329 $2,651 $11,769
Oils AVANGRID Avangrid, “utility of the future” 59 NECEC Project Economics
NW IN OtANO CLEAN ENERGY KEY PROJECT CRITERIA A CONNECT Capacity: 1,200 MW Transmission project Contract Price: $9.16/kW month(1) Year 1 (2023) with ~2% Annual Inflation through Year 20 $7.38/kW month(2) Years 21-40 Depreciation: 40-Year Straight Line (GAAP) / 15-Year MACRS (Tax) Tax Rate: 21% (Federal) / 8.93% (State-ME) (1) Equivalent to $12.55/MWh for a 100% load factor (2) Equivalent to $10.11/MWh for a 100% load factor
Capex ($M):
$378 $353
$72 $105
2019 2020 2021 2022 Note: Chart does not include AFUDC. Project economics are based on levelized, fixed-price transmission service agreements; therefore, capital spending amounts are not added to rate base & collected through a FERC tariff. ROEs are expected to start lower and than allowed and increase over contract life to achieve and equivalent 10.57% levelized average. Amounts may not add due to rounding.
Oils AVANGRID Avangrid, “utility of the future” 60 Project Schedule
2018 2019 2020 2021 2022
-1 EGLA i .NIERGY NECEC (CMP - USA) A C(,NNE r
STATE & FEDERAL APPROVALS
ENGINEERING
HVDC CONVERTER CONTRACT
CONSTRUCTION & COMMISSIONING
COMMERCIAL OPERATION DATE DECEMBER 2022 4 Appalaches - Maine (HQ - Canada)
PROVINCIAL & FEDERAL APPROVALS > ENGINEERING
HVDC CONVERTER CONTRACT
CONSTRUCTION & COMMISSIONING
COMMERCIAL OPERATION DATE DECEMBER 2022 4
AVAN GR I D Avangrid, “utility of the future” 61 NECEC Approvals & Permitting On Track
NECEC Filing Status Expected Completion MA DPU Approval of Contracts Filed July ’18 e Mid ’19 FERC Approval Filed August ’18 e October ’18 (Completed Early) e ME PUC Certificate of Public Filed September ’17 Early ’19 Convenience & Necessity (CPCN) g Maine DEP Approval Filed September ’17 g Mid ’19 Presidential Permit Filed July ’17 c) End of ’19 ISO-NE System Impact Study Filed April ’17 g Study Started On Time in August Expect Completion Mid-End ’19 Army Corps of Engineers Environmental Filed September ’17 c) Mid-Late ’19 Assessment Local/Municipal Construction Approvals Est. beginning in ’19 Timing as needed through construction period
AVANGRI ❑ Avangrid, “utility of the future” 62 Projects Under Construction
Renewables has ~989 MW(1) Under Construction with COD by Late ’19
Coyote Ridge(1)
97 MW Otter Creek 158 MW Montague 201 MW
AVANGRID Renewables Operations
Karankawa #1 & #2 307 MW Patriot Wind 226 MW
(1) 80% of 97 MW project sold to third party (~77 MW). (2) Does not include the newly acquired second Vineyard Wind lease. Oils AVANGRID Avangrid, “utility of the future” 63 Projects with Additional Executed Contracts
~1,042 MW Additional Executed Contracts in Long-Term Outlook
Project ~MW Counterparty ~COD e.r•
00r;IiMail Tatanka Ridge (SD) 97 Google Late ’20 Agamm ik 0 Wind ror mi La Joya (NM) 166 Public Service of Late ’20 varmiumnimmoft Wind New Mexico Lund Hill (WA) 150 Northwest IOU Late ’20 Solar Bakeoven (OR) 60 Portland General Late ’20 Solar Electric Company Roaring Brook (NY) 78 NYSERDA Late ’20 Wind – REC Mohawk (NY) 91 NYSERDA Late ’21 Solar – REC Vineyard Wind(1) (MA) 400 MA EDCs ’21 & ’22 Offshore
AVANGRID Avangrid, “utility of the future” 64 Global Offshore Wind Experience
Deep experience of the teams that are building Vineyard Wind provides full confidence in the project
IBERDROLA (IBE) Copenhagen Infrastructure Partners (CIP)
Beatrice 588 MW(2) Baltic Eagle North Sea 48610W0)
Veja Mate 402 MW(2)
AO Projects in Operation: 545 MW Projects in Operation: 402 MW 19E West of Duddons Sands (195 MW) Veja Mate (402 MW)(2) . Wikinger (350 MW) Work in progress: 588 MW FY, • Work in progress: 1 700 MW Beatrice (588 MW)(2), COD 2019
N.7 East Anglia 1 (714 MW), COD 2019/2020 IISaint Brieuc (496 MW), COD 2023 Pipeline: ~4,500 MW Baltic Eagle (486 MW)(11, COD 2023
• Pipeline: >3,100 MW
(1) Including 10 MW corresponding to Wikinger Sud. (2) CIP funds own 23% of Veja Mate and 35% of Beatrice.
AVANGRID Avangrid, “utility of the future” 65 Vineyard Wind Project Economics
.„_..__ y .... KEY PROJECT CRITERIA VINEYARD WIND
Capacity: 800 MW (Phase 1: 400 MW COD 2021 / Phase 2: 400 MW COD 2022) JV Ownership: 50% Avangrid Renewables / 50% Copenhagen Infrastructure Partners Contract Price: Phase 1: $74/MWh Year 1 escalating 2.5% annually through Year 20 Phase 2: $65/MWh Year 1 escalating 2.5% annually through Year 20 Net Capacity Factor: ~46% ITC Rate: 21% Average (Phase 1: 24% / Phase 2: 18%) Tax Rate: 21% (Federal) / 8% (State-MA) Capital Structure: Equity / Debt / Tax Equity
Capex:
$M
a Investment $741
$340 $58 $261 I 2019 2020 2021 2022
Note: Project economics are based on assumptions, including but not limited to turbine selection, exceedance probability, site characteristics, and development. Amounts may not add due to rounding. Oils AVANGRID Avangrid, “utility of the future” 66 Project Schedule 0501 V use VINEYARD WIND
2018 2019 2020 2021 2022
Vineyard Wind 800 MW Project
STATE & FEDERAL APPROVALS
FINANCING
ENGINEERING
AWARD LONG LEAD ITEMS
CONSTRUCTION & COMMISSIONING
COMMERCIAL OPERATION DATE 400MW 2021 COMMERCIAL OPERATION DATE 400MW 2022 •
sjt, AVANGRI ❑ Avangrid, “utility of the future” 67 Vineyard Wind Approvals & Permitting On Track
KEY Vineyard Wind Approvals Filing Status Expected Completion Federal: BOEM Site Assessment Plan (SAP) Filed March ’17 10 Approved May ’18 Construction & Operation Plan (COP) Filed Dec ’17 g COP Completeness & Sufficiency Review Completed Anticipate Fall ’19 Record of Decision Environmental Impact Study (EIS) 30-day Comment Period Expired Notice of Intent March ’18 Draft Filed for Comment Dec. ’18 Expect Final Spring ’19 State (for MA RFP): MA DPUC Approval of Contract with Filed July ’18 Expected Spring ’19 EDCs MA Environmental Policy Act (MEPA) Environmental Notification Filed Certificate Issued Feb ’18 COMPLETE Dec ’17 C) (I) Environmental Impact Report 0 Final Submitted (EIR): Draft April ’18; Final EIR Received Feb ’19 g MA Energy Facilities Siting Board (EFSB) Filings in Dec ’17 & Feb ’18 g Expected Spring ’19
C340. AVANGRI ❑ Avangrid, “utility of the future” 1 68 Vineyard Wind Financing
Familiar approach to renewables financing with some differences in construction phase enabled by Sponsors’ financial strength
Planning to finance in two separate phases to optimize tax equity structure (ITC for Phases 1 & 2)
Vineyard Wind has attracted substantial interest from tax equity and lenders
Long-Term Outlook assumes the tax equity structure; back leverage project finance opportunities that are not included in the Long-Term Outlook can be layered on to the structure
Turbines to be financed to COD Tax equity by supply chain finance arrangement with Sponsors’ guarantee
Construction loan that bridges back Back leverage leverage
Sponsors’ equity ~30%
Construction COD Phase
AVANGRID Avangrid, “utility of the future” 69 Offshore Wind –Lease Areas
Virginia Beach •
Virginia
Block Island North Carolina
OCS-A 501
Kitty Hawk OCS-A 522 Albemarle Sword •
Vineyard Wind, MA Kitty Hawk, NC 50% (Joint with CIP) 100% Avangrid OCS-A 0501 Renewables Vineyard Wind, MA 50% (Joint with CIP) OCS-A 0522
AVANGRI ❑ Avangrid, “utility of the future” 70 Projects Under Construction
Projects Under Construction (~989 MW)(1)
Project ST ~MW Type PPA Counterparty / Other COD Montague OR 201 Wind Large C&I Late ’19 Karankawa #1(1) TX 207 Wind Austin Energy Late ’19 Karankawa #2(1) TX 100 Wind Nike Late ’19 Coyote Ridge(2) SD 97 Wind Google, Inc. Late ’19 Otter Creek IL 158 Wind Large C&I Late ’19 Patriot Wind TX 226 Wind Project with Hedge (Dev. By NRG) Mid ’19 TOTAL 989
Additional Executed Contracts (~2,031 MW)
Project ST ~MW Type PPA Counterparty / Other COD
ADDITIONAL EXECUTED CONTRACTS in Long-Term Outlook Tatanka Ridge SD 97 Wind Google, Inc. Late ’20 La Joya NM 166 Wind Public Service of New Mexico Late ’20 Vineyard Wind #1(2) MA 400 Offshore Wind Massachusetts Electric Distribution ’21 & ’22 Companies Lund Hill Solar WA 150 Solar Northwest IOU Late ’20 Bakeoven Solar OR 60 Solar Portland General Electric Co. Late ’21 Roaring Brook NY 78 Wind–REC NYSERDA Late ’20 Mohawk NY 91 Solar–REC NYSERDA Late ’21 TOTAL 1,042
Oils AVANGRID Avangrid, “utility of the future” 71 (1) Includes additional 19 MW (5 MW at Karankawa #1 and 14 MW at Karankawa #2) (2) 80% of 97 MW project sold to third party (~77MW), 20 MW Renewables installed capacity. Repowering
Long-Term Outlook includes 325 MW of Repowering
Repowering Project ST ~MW PPA Counterparty / Other Completion
REPOWERING Colorado Green–NEW CO 162 Public Service Company of Colorado Late ’19 Mountain View III CA 22 Merchant Late ’19 Repowering project Midwest 100 N/A Late ’20 TOTAL 284 Percent of 325 MW Long-Term Outlook 87% Target
Oils AVANGRID Avangrid, “utility of the future” 72 Avangrid Renewables CA Utility Exposure
PG&E (160 MW) Shiloh I Wind Klondike III State CA OR MW 75 85 Production Start Date July 2006 April 2007 Production End Date June 2021 March 2023 Contract Price ($/MWh) $56.62(1) $58.50
San Diego G&E (189 MW) Manzana Wind State CA MW 189 Production Start Date September 2012 Production End Date August 2032 Contract Price ($/MWh) $95.00
Southern CA Edison (474 MW) Dillon El Cabo Tule State CA NM CA MW 45 298 131 Production Start Date December 2007 December 2017 January 2018 Production End Date November 2027 November 2037 January 2033 Contract Price ($/MWh) $81.12(1) $50.25(1) $61.04(1)
(1) Effective PPA price under each PPA could be impacted by time of day adjustments and the amount of generation during specific hours. Oils AVANGRID Avangrid, “utility of the future” 73