Q3 2021 Avangrid Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to Avon Grids 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.
Ask a question during this session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to turn the conference over to your speaker today Patricia Costco.
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 <unk> third quarter 2021 earnings results.
Anything on the call today are Dennis Arriola, 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 Malvern grid, Catherine Campion, President and CEO of Boston Grid Network for me Antonio Miranda co CEO and president onto it and.
Bill White, <unk>, CEO and president option there.
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 Dot <unk> dot 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 1095 based on current expectations and assumptions, which are subject to risks and uncertainties.
<unk> actual results to differ materially from our forward looking statements if any of our key assumptions are incorrect or because of other factors discussed in <unk> earnings news release, and the comments made during this conference call and the risk factors section of the accompanying presentation.
Our latest reports and filings with the Securities and Exchange Commission each of which can be found on our website oven green Dot com.
We do not undertake any duty to update any forward looking statements.
Today's presentation also includes references to non-GAAP financial measures.
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 Dan.
At all of the grid, we're focused on building a company that works to make every day 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 the positive.
The momentum of the journey, we started last year in.
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 was 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 V plan and as we implement the terms with New York rate case.
<unk>, which was approved last year.
And thanks to our excellent performance throughout the year, we are affirming our earnings guidance for 2021, Youll recall that we increased our guidance twice from our original numbers at the beginning of the year and firm, 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.
Followed the service quality metrics established by the Maine 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 PNM resources merger and continue to expect to receive that approval and to close the transaction in Q4.
Our vineyard wind one project cross 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 to our bids to Massachusetts, most recent RFP and by restructuring.
Our assets with our partner CIP.
When we complete the partnership restructuring often grid renewables will have access to four nine gigawatts of lease areas, along the east coast, including Kitty Hawk.
In onshore wind and solar we have approximately one four 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 position the company for future success.
We recently appointed main or 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 focus 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 oven grid team.
Now I also want to thank all of Honeywell before our former CEO of <unk> renewables for all of his hard work over the years and we always see them all the best as he returns back to Spain to join his family.
I am however, saddened to report the recent passing of David Flanagan, our former executive chairman of CMP.
David was an exceptional person he was selfless passion of a dedicated leader and a mentor to many data.
David Epitomize, the desperation of certain leadership and he is going to be missed not only by our employees, but also by the people of me.
In September we released our first ESG Nf 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.
And lastly, we issued our first green bond at the utility level totaling $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 Robyn.
So, let's turn to slide six.
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 of 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 load the authorized ROE for our utilities.
By implementing our rate plans and cultivating a continuous improvement culture, we are 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 arens are earned ROE 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 and planning and restoration as we did with tropical storm Henri 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 seven we're putting our commitment to the customer in action with.
We've established customer listening counsels that each of our network utilities, so help us better serve our customers and our local communities every day in.
In Maine, CMP has not only achieved but exceeded in service quality metrics over the last 18 months and with this we file to remove the 100 basis point ROE adjustment worth plus we're hopeful to have this resolved by the Maine Commission in early 2022.
Well, let's be clear our filing is not an end to the good work. Our team has done in may but rather it's a pledge of pledged to do even more because our customers expect it and we're focused on making everyday 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 <unk> leadership, we will continue to raise the bar and deliver excellent service for our customers in may.
Now 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 <unk> 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 calls have been installed so far.
These construction activities have supported approximately 650 jobs to date, while main towns are already benefiting from tax payments tied to any CPUC.
We remain encouraged by the support we've seen for any CEC 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 grass roots campaign is working hard every day to help voters better understand the benefits of the project's domainers the economy, the environment and the region.
Supporters of any CEC and parties against the referendum include Governor Janet Mills, former Governor recall the page the two largest and most influential newspapers in the state the Portland pressed Harold and the bank are daily news labor leaders, including the AFL CIO and the IBEW.
The main chamber of Commerce, and the Conservation Law Foundation, just to name a few and our team is going to remain focused on getting out the vote and informing voters of what this referendum is all about.
Let's turn to slide eight.
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 oven grid in PNM will together served 9 million people across six states with an attractive regulated business mix and a rate base of over $14 billion, our strong ESG Nf commitment and support for renewables growth will bolster both new Mexico, and Texas as leader.
And then 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% accretive in the full first full year.
This transaction makes sense for the customers of PNM in New Mexico, and we're pleased that 23 of the 24 finally intervenors either support the merger directly or have decided not to oppose the approval.
Moving to slide nine.
I've been grid 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 am very excited that we'll have Jose antonio's experience and leadership focus on the continued growth of our onshore business and bill white, leading our growing offshore business.
We recognize that our projects needed 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 one four gigawatts of near term solar and onshore wind projects with Ppas, which nearly one gigawatt is actively under construction.
And early this year are Roaring brought wind project was fully commissioned is now producing clean energy for the people of New York.
That does it going to touch on later on inflation, but overall, our wind projects are contracted through 2023, including vineyard wind one and our solar modules are contracted through 2022.
Regarding our long term growth in our onshore business. We have another two five gigawatts of mature projects shortlisted or in bilateral negotiations for Ppas and are approximately 18 gigawatt onshore clients.
Now, let me turn to our offshore wind business on slide 10.
September was an extraordinary extraordinary month, both in the history of the industry and evolving grid.
Our joint venture Vineyard wind brought the first commercial scale offshore wind project in U S waters Vineyard wind one to financial close the project is close to $3 billion.
Construction and term loan financing with nine global lending banks.
This vote of confidence from the financial community and our pioneering project validates our approach and underscores the economic value created by vineyard wind one.
Now construction has already started for the onshore substation and export cable route and we expect to begin offshore construction in the first half of 2022, we will 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, one which will continue to be owned 50, 50 by often grid renewables and CIP.
On September 15 Vineyard wind submitted two proposals in response to Massachusetts third offshore wind request for proposal operating options of approximately 800 megawatts and 200 megawatts.
We're calling this project Commonwealth wind and it includes the development of an onshore offshore wind project in an area just south of the vineyard wind, one and park City Wind project.
We look forward to very strong bids with exceptional economic and social benefits for the Commonwealth of Massachusetts.
As part of the proposal.
The JV company announced a partnership with the city of Salem, and Crowley Maritime Corporation to transform Salem Harbor into the states second major offshore wind port.
Vineyard wind also announced a first of its kind Parcher 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 green their portfolios across the state we.
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 <unk> renewables as an undisputed leader in the offshore wind industry.
As a result of the restructuring Ami grid will have 100% ownership of four nine gigawatts of offshore wind capacity. Now. This includes the two four gigawatts of available capacity in new England from our current partnership which will be fully contracted before year end, if our largest bid option in Massachusetts.
Selected and an additional two five 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 companies.
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 more uniquely positioned to play a leadership role with our $4 nine gigawatt lease areas.
In addition to our strong offshore team our affiliation with Ebix roll. It provides us a deep bench of offshore wind expertise to leverage.
<unk> has a very well proven track record in offshore wind globally as we've constructed one five gigawatts on time and on budget.
These projects are now being operated with strong availability and production figures.
And building on our successful track record EBIT rollout has two nine 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. Yes, you also need to have an experienced team.
How in dealing with contractors and construction and access to capital and our affiliation with the virtual gifts often grid a competitive advantage in offshore wind.
Let me finish on slide 13.
One of the nation's clean as utilities and a leader in renewable energy.
And grid stands at the forefront of the transformational change in how we generate and use energy.
Our ESG.
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 in emissions reduction supplier sustainability and diversity equity and inclusion. We recently released <unk> first ever sustainability webinar titled Clean and connected the Webinars available through this presentation or on the <unk> group.
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 Aman grid is one of up to 100 companies worldwide that can best benefit from the clean energy transition now.
Now I'll turn it over to Doug and he'll take you through the financial results.
Thank you Dennis and good morning, everyone.
Turning to our financial performance on slide 15.
100 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.
$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 refinance.
Avon grids consolidated investments for the first nine months were $2 1 billion, which were 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 decreased 25% year over year.
Selecting 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.
With the implementation of the networks rate plans predominantly in New York to enhance reliability resiliency customer service and safety net.
Network <unk> 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 were 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 are improving our system and helping to flatten lease costs.
Our adjusted EPS growth for the year to date period also includes the benefits and renewables of our strong operations and asset management.
During the first quarter, Texas weather events.
Proved energetic availability higher pricing additional ptc's.
Asset management earnings.
These positive impacts were 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 <unk> 16 per share dilution impact from the may equity offering.
Turning to slide seven new team, we added 490 megawatts of new capacity year over year from September 2020 to September 2021.
We've improved the energetic availability of our existing projects to over 97%.
However, wind production continues to trend below our long term averages due to low wind resource as well as curtailments, which were impacted by COVID-19 and transmission congestion.
Our curtailments were partially reimbursed through approximately 15% levels through our ppas.
The lower production levels for existing assets during the first nine months of 2021 compared to 2020, we're primarily in the north and east regions with the central region, helping to partially offset those impacts.
On slide 18, we are pleased with our continued strong year to date results are 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 a 78 million shares issued in May to primarily fund the PNM acquisition, which resulted in 358 million weighted average shares outstanding for 2021.
Our outlook also assumes that we do 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 19th.
Benefit retroactive to April 17, 2020 from the settlement of the New York rate case.
Our ongoing focus remains to achieve these targets as we progressed on our road to authorized ROE.
Execute our investment plans with discipline and risk management focus and continuously drive for operational excellence.
Moving to slide 19.
Inflation and rising commodity prices impacting the sector. We wanted to give you a sense of where <unk> stands in its management of these risks.
Importantly, one of the several benefits we have is a member of the larger global Zebra drove a family with access to their significant purchasing power and economies of scale.
As a point of reference deeper drill at how the capital spend of approximately $10 billion per year.
Being part of this larger 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 through effectively contracting and hedging practices.
For any CEC substantially all of the equipment has been purchased and the exposure through additional commodity cost inflation is minor.
Renewables capital investments for the Vineyard wind one project and for the Park City Wind project with a 2026th Vod.
We expect to lock in our supply.
2023 and.
Our onshore wind business our projects under construction are substantially secured.
Regarding our exposure in our solar business.
Have framework agreements executed for the modules for our 2022 projects under construction.
We are currently working to lock and exposure of the 23 plus project.
We're also actively involved through trade organization when discussions related to solar tariffs and we're managing through the uncertainties impacting the solar sector.
While 2021 was the transition year for us as we've pivoted more towards solar development from our traditional onshore wind focus.
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 silver 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.
Our translated along the value chain.
Directionally growth will continue we're supportive state and potentially new federal false and offshore renewables opportunities.
Moving to slide 'twenty, we're also focused on the horizon.
I think gas prices nationwide and how we can mitigate the impact on our utility customers are.
Our utilities are well positioned as a commodity procurement processes and the gas and electric businesses are well established long standing and in line with regulatory policy guidance.
In our gas distribution companies gas costs are a pass through and we do 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 and our service territories the cost of generation for our electric distribution companies are also a pass through.
Keeping our customers in mind, though we also procure supply not or in the purchase of supply during the spring and summer months for winter usage, and New York and Connecticut. This acts as a natural hedge.
Men's procurement is managed by the state and not central Maine power.
As we monitor this trend and manage the potential impacts we'll look for continuous improvement in the business as an offset.
We will also work closely with our key stakeholders to ensure we keep them informed about the drivers of the price terms and available programs that provide payment systems.
Now moving to slide 21.
With our liquidity and financing.
Have terrific access to sustainable liquidity resources and demonstrated support for me for Dror.
With the equity issuance. This past may we have a strong $1 $4 billion cash position and we did not expect to issue additional equity in 2022.
We're committed to maintaining our solid investment grade credit rating.
Okay, and a merger with 700.
$3 million of debt in the fourth quarter.
In the third quarter, we closed on a construction loan financing for our vineyard wind project, raising $2 3 billion from a group of banks.
We're committed.
Total of $900 million.
Which were our first green bonds issued at the utility level.
This raised our ranking in the U S. Among all 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 be 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.
As a result, we are affirming our guidance for 2021, we.
We have risk management and a customer focus at the top of our mind as we manage emerging risks and profitably grow to achieve our goal of adding sustainable value.
Thank you for joining us today with our update on our third quarter results I'll now hand, the call back to our operator Erica for questions followed by closing remarks from benefits.
As a reminder to ask a question you will need to press star one on your telephone.
<unk> your question press, the pound or hash key.
Your first question comes from the line of David <unk>.
<unk> with Morgan Stanley.
Great. 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 agreement.
Is that essentially you get the volume.
Contracted released successful pricing.
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 and solar is that people wanted to do business with us and I think especially given the relationships that we have globally through either drill 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 the things that we're watching closely but San Antonio you may want to provide a little bit more color on how we think about the framework agreements, yes. Thank you Tony and good morning, everyone.
Good question, David Yes.
I have to go back to what Doug mentioned before about our 'twenty affiliates already secured essentially secure wood from the supply point of view being thoughtful as.
Because of the rollout we have frame agreements.
We can execute in order to get that.
Panels are also of course.
I can share with you with us on important amongst the partners have already site.
Active construction melba.
The.
Inpatient please.
The future of the situation as I just mentioned.
And I think it will depend on what we supply.
Regulation.
Imposed on the panels.
But we will be I think.
Launching at negotiating with our suppliers and rolling leases, David I think I think the other thing and Doug touched on this as well as given that.
The changing market.
A growing demand 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 are indices that may be tied to what's going on in commodity commodity prices, but also on the on the labor side because contractors are busy right now.
They want to do business with people that are going to pay them and gives them consistent work. So we're looking at all of those aspects and really trying to manage it from a from a risk management standpoint. The best we can I would just add to that as we look at new projects. We also as we think about capex build contingency into the the cost estimate.
That's a buffer for these types of events as well.
Great.
That's very helpful color I appreciate your Apple collaborating on on all of those factors I guess.
Maybe two.
Just one quick follow up on that.
Drill down a little bit more do you anticipate any but you see the risk of any projects getting delayed the ones that are.
And the kind of near term contracted pipeline as it pertains to silver.
Obviously, a lot of moving pieces here just wondering how you think about specifically the rich because 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 when we look at this as a portfolio as well and I think that having that flexibility where it might make sense to you.
No.
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 the contractor shortages of labor for could be but I think overall, we're moving in the right direction.
Understood.
Thanks, so much.
Thanks.
Your next question comes from the.
The line of Michael Sullivan with Wolfe Research.
Yeah, Hey, good morning.
Good morning, Michael.
Dennis first question just on the.
On the earnings for Q3.
Any more color on what drove the <unk>.
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 let me.
I'll 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 or a new York State tax audit that was roughly $7 million of impact in 2020.
That's something that Hasnt recurred and.
In 2021, so that's giving us a year over year benefit.
And then the other element of it is really just lower interest expense.
We had to <unk> alone in effect for the early part of the year through May.
Had very attractive interest rates and so that was helpful. And then we issued the equity in May and Thats helped us to avoid having the same level of debt.
Paired to last year. So it's really just the combination of interest and taxes that are driving those.
Corporate results.
And then on Covid so on Covid.
And our year to date results.
Adjusted out of our GAAP earnings and arriving at adjusted earnings about 23% to $24 million.
From a recovery standpoint.
We've begun deferring our COVID-19 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-19 costs.
Just for rate year, one we have not deferred any any such costs.
Right you are too.
And with me, we have not been deferring any COVID-19 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 22 to 'twenty three.
Any color you can give there and should we think about that as having any impact on the 2022 Guide you gave last year.
Yes.
I think the way that I would look at it Michael is that there could be some shifting of months here and there that go over the calendar year and everything but I think thats one of the reasons why when we give a range of earnings.
When we talked about it.
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 2020.
Two numbers, we're going to be doing that at the end of the fourth quarter, but I think directionally any any shifts in projects don't have any material impact to the overall direction we are headed.
Samsung I don't know if you want to add anything to that yes, actually we feel very positive about the broad as ours.
Sites have been soft construction.
We are of course, we have nothing new investigators.
As holding other payers to industry wide issues like that.
All we can do a demand on the labor payments Madhu referred before but the situation now.
We have.
To deploy units in an advanced stage of construction for still a lot of that that are going to be networks with Proteus, which was I'll make a couple of items also we are provisioning. We component. So we will see additions of capacity of installed useful or and also <unk>.
Okay.
And both of those.
Myself without actually visiting those sites over the last couple of 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 <unk>, Kim with Goldman Sachs.
Yes. Thank you most of my questions are actually relate to offshore wind the first one for vineyard wind one.
I might be a little bit late to this at least looking at the fact book and maybe the last one in September it seems like.
Total financing that you achieve that.
Some round 4 billion or $3 9 billion.
In my head I thought the original range was around three to three and a half earlier. This year is that reflecting on increasing the overall project costs and if so what's driving that increase.
Sure Let me, let me pass it over to Doug Yes. Thank you.
We are looking at roughly $3 9 billion.
Total.
Cost for the project and we've done the construction loan financing and Thats $2 3 billion.
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 <unk>.
<unk> and <unk>.
Financing costs transaction costs et cetera that add to that and that's how we get up to three nine.
Okay, and just a follow up to that.
So all of those contingencies to end up playing out is there any flexibility in your secured ppas or is that largely set from escalator perspective.
Kevin.
The Ppas are set.
Okay got.
Got it.
Just my second question is on the.
The Jones Act compliant vessels I know I think you had mentioned in the past again thats for vineyard, one that the ships are 100% secure.
Just wondering for your other projects, what's the status of that is and I'm curious on how does.
Contracts are structured and how how much flexibility or control you have on the timing and the usage of Costar.
You said for ships and then just related to that or are they.
Large enough.
The ability to carry the the larger GE turbines I believe before turning the call lines.
Yes, let me start on that and I'll ask bill to provide some additional color 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 thats one of the things that we're looking at is with the recent bids that we put in place for Massachusetts.
It's three there could be the opportunity to have synergies during the construction as well as <unk>.
The procurement phases. So we're looking at that and as a result, we haven't made the final determination of who is getting the business, what it's going to cost.
<unk> as you mentioned in the case of Vineyard wind one are being supplied by the contractors themselves and the answer is we anticipate that that's probably going to be the same case when it comes to park city, and perhaps Commonwealth wind as well.
I think everyone's excited about the large size.
The larger turbines that are being produced out there.
They recognize the shipbuilders that they have to that there is a market that they have to adjust to so a lot of those discussions are underway with bill I don't know if you want to provide any additional color to just briefly I think.
In addition, there is enormous amount of activity right. Now obviously you are aware that Dominion is sure got it got it.
Texas right now, but there is an enormous amount of planning underway for.
U S builds and vessels, including the <unk>.
CTV the crude transfer of vessels.
<unk>, 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 of you had expected on a good Frac four Jones Act compliance.
Okay I'll leave it there. Thank you so much.
Thank you.
Your next question comes from the line of Richard Southern line with J P. Morgan.
Hi, good morning.
I wanted to circle back to some of the earlier commentary on the onshore pipeline.
Really it's just the pace of your onshore renewables origination sphere and timing considerations around the two gigawatts of near term opportunities you see.
Think earlier about kind of managing on a portfolio basis are you already manley.
Managing a little of that around some of these challenges the broader industry is seeing 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 tight this when it comes to contractors.
In the case of the solar projects that Jose Antonio talked about we've got what we need here.
Here in 'twenty, one and we've contracted through our framework agreements at $3 22, but there are 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 focus on those things.
We can control and those things that.
We don't have as much control how can we influence are there things that we can leverage off of the relationships that we have through either drill is to try to.
Get panels faster, if theyre, not coming and things like that but.
Let's say if you want to add any color to that yes. Thank you Richard for the question well first of all I have to say the market momentum I think we are in high demand situation.
That piece of course, hoping to all the players to see traction.
In the business.
We are not an exception.
Our very active being negotiated these two complex deal visual listed some of them or evening by lepton negotiation and some others.
Of course.
The whole industry.
Watching closely what is going to happen until the situation case.
But we can have an impact won't begin negotiations across the industry, but.
We will see after December 2700, I think the situation will be adjusted.
Yes.
The other thing I would say Richard is.
We're sensitive to how some of the sell side community looks at each of the projects and get us if theres, a one week delay or one month delay, but I can tell you. We are in this for the long run and whether there is a shifting of some projects by a month or so over a calendar end.
Year end.
Yes would we like to bring everything in exactly the way that we 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 cost control to to bring these things in on time.
We're going to be successful here.
Understood I appreciate the color and maybe just separately on the wind resource on the quarter, maybe just the wind resource broadly.
In terms of your plan do you typically just taken the the.
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 our long term average and obviously is.
A good year bad year to gets taken off of that it's reflected in the new the new base that we're considering but we're also looking at shorter trends.
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.
So again I think the key for us is.
Making sure that our energetic availability continues to improve at something that candidly several years ago was not something we could really boast about but as Doug mentioned in his comments, we're now above 97%. So that means our machines are ready so that when the wind blows and it is going to blow will be <unk>.
Well to the.
To deliver the results that we expect either consistent with our historical averages or even better.
Thank you for the time thanks.
Thanks Richard.
Your next question comes from the line of Julien Jpmorgan Smith with Bank of America.
Good morning, Joe.
Thanks for the opportunity.
Yes.
Sure.
Yes.
If you don't mind first off on your origination.
Hey, Julien you are cutting in and out.
Julien we can hear you.
Operator, let's do this let's go to the next caller and that we can bring Julian back.
Your next question comes from the line of Angie sorry density with Seaport Research partners.
Good morning Angie.
How are you hopefully you can hear me.
<unk>.
That's great Okay.
I always asked about MCC lobster block activity, both from a regulatory perspective on construction.
Please give us an update on what's happening at FERC and also <unk>.
<unk> challenges to that.
One five 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 cleared we've got over 100 Poles now installed and 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.
Youre absolutely right on the on the lease.
The issue is whether or not putting this transmission line for one mile honestly.
It presents a substantial alteration in the use of the land and its benefit there is already an existing CMP transmission line on that line. 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 a series of questions.
Intervenors 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.
Satisfactory resolution for us.
So we're hoping that that gets done on 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 are really positive in terms of the types of questions that FERC asked in that proceeding that we will get a resolution here in the near term.
Hey, Andy the other thing that I'd add to this and we've talked about this before they are probably isn't one.
Energy infrastructure projects, including transmission that isn't challenged in different ways and I think that given the 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 built in.
The challenges that there are certain parties that may not want that because it impacts.
But 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 that people have made the environment.
Our local economies climate change.
In total, but the losers in this are going to be those that day.
Basically.
Providing the fossil fuel generation and.
So we shouldnt 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.
We feel confident that this thing is going to be addressed in a satisfactory manner and incentives incentives that 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.
Or what's needed to transition our economy to clean energy so.
As Dennis mentioned, we've had support now from the three largest papers their outfits.
In the state of Maine, we have labor unions.
The current governor the former Governor. He recently had to is if you thought there was an op Ed in the Washington Post by William <unk>, former EPA administrator speaking just to the fact that this project is really key in projects like this are key to transformation of our energy sector.
We feel good about that growing support and continue to push forward and make sure people understand not only the the benefits of the project, but as Dennis mentioned, who is really behind the acquisition and what's the motive there.
Andrew We probably gave you more color that you want it yes, yes, yes.
Yes, just one follow up and most of that so how much money has been spent thus far on this.
Project and then just the earnings recognition during.
During construction.
And how how that changes one that the <unk>.
The project has reached.
Hi, Angie.
Yes. So through September 30, we have spent a little over $400 million on the <unk> project.
In 2021 from an <unk> standpoint.
When we gave our guidance for 2021 it was in the range of 20% to $25 million.
Now 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 MTBC income will grow as well up to date, where we put the project in service and then as you know this is a contracted projects and we've essentially level lives the price for that.
Transmission service agreement.
And the associated revenue requirement such that you see.
A different earnings profile for this project and you would a traditional FERC rate base type of project.
You do see a dip once the project goes in service there are price escalators.
In the transmission service agreements that are annual adders.
So thats the general shape of.
The earnings profile for this very good. Thank you. Thank you guys.
Thanks Angie.
Your next question comes from the line of Julien.
Smith with Bank of America.
Good morning, James.
And at this time.
Coming back on.
Secondly, John Im 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 bill, especially on solar considering the commodity deck in the backdrop. We're looking at today, but also considering sort of the modest adds a very late.
And the backlog, it's hard to be specific on that Julien because it's really driven by the customers. I think we have we have some expectations that we've included.
And the plan that we.
We articulated in November.
We expect that overall from a portfolio standpoint to grow the roughly $13 two gigawatts in total.
Passively by 2025, and I'd say that a good part of our overall growth going forward onshore is.
Because we're seeing that more and more customers are looking for that.
One of the things that.
We have in the pipeline is 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 Antonio I don't know if you want to provide any more color.
Generally how you see that yes. Thank you yes.
Yes.
Three of prudent it is true that our six completed these much more focused on wind and it was a strategic decision to shift to solar and our pipeline now.
A majority of soft Brexit deal so in the future we will see.
<unk> is being built by us and compensating.
Diversifying our counting and its hopefully to win.
All numbers in particular being a specific dollar 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 projects when I say too deeply into his plans of around 200 megawatts.
A bunch of stage II stage of construction and industrial activity.
One thing I can say Julien as we wanted to go faster and part of that is dependent upon customers.
As we've 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 are seeing the impact of PPA for instance.
<unk> said that we think we've got a really rich pipeline of opportunities as we said we are 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 signed the PPA.
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.
Got it and just a quick nuance if you will I know you, obviously deviate a little bit from your on your capacity factor expectations.
Expectation of updates to long term capacity factors.
You've talked about in the past versus historical levels.
Yes, I'm not sure I'd say that we deviated what 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.
Completing our 2022 and long term plan for the next five years here in the next couple of months. So we will elaborate a little bit more on what the assumptions are behind our our projections at the time.
On our fourth quarter call, but I think that Directionally again.
We're actually really pleased with what's going on with our fleet as Doug mentioned, our energetic availability is above 97%. We couldnt have said that a couple of years ago and so things are moving in the right direction, Yes, I'd just add Dennis to your point that we're very well poised when the windows when resource does recover.
We'll be generating very good.
A positive result.
And just a quick nuance on the amtech arrangement to sell arrangement.
Swift changed here on the final approval process that wouldn't impact your decision to close rate on that deal on the P&I Michael Sousa.
I'm sorry.
Broke up there.
Sorry.
And Jack here, Joe Steve did change some of the <unk>.
Arrangements around the sale that doesn't impact your decision to close on PNM right.
You're talking about four corners.
Yeah.
I know there could be some nuances that change there I'm just curious none of that matters PNM closed.
Correct, that's a totally separate proceeding from the merger pursuit, yes.
Verified.
Yes, I think what's key there Julian 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.
It's something PNM has been pushing for its consistent with where they want to go from an ESG 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 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 are doing is getting rid of their ownership.
Yes.
No I thought as much I just wanted to make sure that was that was consistent. Thank you so much again.
Thanks Julien.
Sure.
And at this time I will turn the conference to Dennis Arriola for any closing remarks.
Well, thank you and we appreciate everybody joining us today.
I am really proud to say we are 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 him.
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 our strong culture that values diversity and inclusion and it 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 are 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 ahead, but I would tell you I am excited and confident about <unk> future and we look forward to meeting with many of you in person at EI.
If I ask you to bring your math sounds like I'm, the senior and some are pretty face. Please do that but then put <unk> 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 Michele stay safe and have a great day.
Thank you for participating you may disconnect at this time.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.