Avangrid Annual Report 2021 Form 10-K (NYSE:AGR) Published: March 1st, 2021 PDF generated by stocklight.com UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-37660 Avangrid, Inc. (Exact name of registrant as specified in its charter) Securities registered pursuant to Section 12(b) of the Act: New York 14-1798693 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 180 Marsh Hill Road Orange, Connecticut 06477 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (207) 629-1190 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol Name of exchange on which registered Common Stock, par value $0.01 per share AGR New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer ☒ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the Avangrid, Inc.’s voting stock held by non-affiliates, computed by reference to the price at which the common equity was last sold as of the last business day of Avangrid, Inc.’s most recently completed second fiscal quarter (June 30, 2020) was $2,374 million based on a closing sales price of $41.98 per share. Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 309,371,591 shares of common stock, par value $0.01, were outstanding as of February 26, 2021. DOCUMENTS INCORPORATED BY REFERENCE Portions of the documents listed below have been incorporated by reference into the indicated parts of this report, as specified in the responses to the item numbers involved. Designated portions of the Proxy Statement relating to the 2021 Annual Meeting of the Shareholders are incorporated by reference into Part III to the extent described therein. TABLE OF CONTENTS GLOSSARY OF TERMS AND ABBREVIATIONS 1 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 5 PART I 6 Item 1. Business 6 Item 1A. Risk Factors 23 Item 1B. Unresolved Staff Comments. 37 Item 2. Properties. 37 Item 3. Legal Proceedings. 37 Item 4. Mine Safety Disclosures. 37 Information About our Executive Officers 38 PART II 41 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 41 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 42 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 73 Item 8. Financial Statements and Supplementary Data 76 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 162 Item 9A. Controls and Procedures. 163 Item 9B. Other information. 163 PART III 164 Item 10. Directors, Executive Officers and Corporate Governance. 164 Item 11. Executive Compensation. 164 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 164 Item 13. Certain Relationships and Related Transactions, and Director Independence. 164 Item 14. Principal Accountant Fees and Services. 164 Part IV 165 Item 15. Exhibits and Financial Statement Schedules. 165 Item 16. Form 10-K Summary 172 SIGNATURES 173 i GLOSSARY OF TERMS AND ABBREVIATIONS Unless the context indicates otherwise, references in this Annual Report on Form 10-K to “AVANGRID,” the “Company,” “we,” “our,” and “us” refer to Avangrid, Inc. and its consolidated subsidiaries. 2016 Joint Proposal Joint proposal of NYSEG and RG&E and certain other signatory parties approved by the NYPSC on June 15, 2016, for a three-year rate plan for electric and gas service commencing May 1, 2016. 2020 Joint Proposal Joint proposal of NYSEG and RG&E and certain other signatory parties approved by the NYPSC on November 19, 2020, for a three-year rate plan for electric and gas service commencing December 1, 2020. AMI Automated Metering Infrastructure AOCI Accumulated other comprehensive income ARHI Avangrid Renewables Holdings, Inc. ARP Alternative Revenue Programs ASC Accounting Standards Codification Asnat Asnat Realty, LLC Army Corps U.S. Army Corps of Engineers ARO Asset retirement obligation AVANGRID Avangrid, Inc. Bcf One billion cubic feet BGC The Berkshire Gas Company BGEPA Bald and Golden Eagle Protection Act BLM U.S. Bureau of Land Management BOEM U.S. Bureau of Ocean Energy Management CfDs Contracts for Differences CFTC Commodity Futures Trading Commission CFIUS Committee on Foreign Investment in the United States CL&P The Connecticut Light and Power Company CLCPA Climate Leadership and Community Protection Act CMP Central Maine Power Company CNG Connecticut Natural Gas Corporation CPCN Certificate of Public Convenience and Necessity CSC Connecticut Siting Council DCF Discounted cash flow DEEP Connecticut Department of Energy and Environmental Protection DE&I Diversity, Equity and Inclusion DIMP Distribution Integrity Management Program DER Distributed energy resources Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act DOE Department of Energy DOER Massachusetts Department of Energy Resources DOJ Department of Justice DPA Deferred Payment Arrangements DPU Massachusetts Department of Public Utilities DSIP Distributed System Implementation Plan DTh Dekatherm EAM Earnings adjustment mechanism EDC Massachusetts electric distribution companies English Station Former generation site on the Mill River in New Haven, Connecticut EPA Environmental Protection Agency EPAct 2005 Energy Policy Act of 2005 ERCOT Electric Reliability Council of Texas ESA Endangered Species Act ESC Energy Smart Community ESM Earnings sharing mechanism Evergreen Power Evergreen Power III, LLC Exchange Act The Securities Exchange Act of 1934, as amended FASB Financial Accounting Standards Board FCC Federal Communications Commission FERC Federal Energy Regulatory Commission FirstEnergy FirstEnergy Corp. FPA Federal Power Act Gas Enstor Gas, LLC GE General Electric GenConn GenConn Energy LLC GenConn Devon GenConn’s peaking generating plant in Devon, Connecticut GenConn Middletown GenConn’s peaking generating plant in Middletown, Connecticut HLBV Hypothetical Liquidation at Book Value HQUS H.Q. Energy Services (U.S) Inc. Iberdrola Iberdrola, S.A., which owns 81.5% of the outstanding shares of Avangrid, Inc. Iberdrola Group The group of companies controlled by Iberdrola, S.A. Installed capacity The production capacity of a power plant or wind farm based either on its rated (nameplate) capacity or actual capacity IRS Internal Revenue Service ISO Independent system operator ISO-NE ISO New England, Inc. ITC Investment Tax Credit Klamath Plant The Klamath gas-fired cogeneration facility located in the city of Klamath, Oregon kV Kilovolts kWh Kilowatt-hour LDC Local distribution company LIBOR London Interbank Offer Rate LNG Liquefied natural gas LUPC Maine Land Use Planning Commission MBTA Migratory Bird Treaty Act MDEP Maine Department of Environmental Protection MEPCO Maine Electric Power Corporation Merger The merger of PNMR with and into Merger Sub on the terms and subject to the conditions set forth in the Merger Agreement, with PNMR continuing as the surviving corporation and as a wholly-owned subsidiary of AVANGRID. Merger Agreement Agreement and Plan of Merger, dated as of October 20, 2020, among AVANGRID, PNMR and Merger Sub. Merger Sub NM Green Holdings, Inc., a New Mexico corporation and wholly-owned subsidiary of AVANGRID. MGP Manufactured gas plants MHI Mitsubishi Heavy Industries MISO Midcontinent Independent System Operator MNG Maine Natural Gas Corporation MPRP Maine Power Reliability Program MPUC Maine Public Utilities Commission MtM Mark-to-market MW Megawatts MWh Megawatt-hours NAV Net asset value NECEC New England Clean Energy Connect NEPA National Environmental Policy Act NERC North American Electric Reliability Corporation NETOs New England Transmission Owners Networks Avangrid Networks, Inc.