Q1 2023 Avangrid Inc. Earnings Call
Good morning, Good afternoon, and welcome to you Yvonne Grid's first quarter 'twenty two 'twenty three earnings conference call, if you'd like to ask a question on todays call. Please press star followed by one on your telephone keypad to enter the queue.
I will now turn the call over to <unk>.
Uh Huh, Vice President of Finance Investor Relations and Treasury.
Thank you Adam and good morning to everyone. Thank you for joining us today to discuss <unk> first quarter 2023 earnings results.
On the call today are <unk>, our Chief Executive Officer, and Patricia Gil scale, our Chief Financial Officer also joining us today for the question and answer part of the call will be <unk>, President and Chief Executive Officer of hundred networks.
Antonio Miranda Chief Executive officer of unprecedented of angry renewables. Other members of the executive team are also joining us today I may be called upon to assist with Q&A part of the call.
You do not have a copy of our press release or presentation for today's call. They are available on our website at <unk> Dot com.
During today's call, we will make various forward looking statements within the meaning of the safe Harbor provisions of the US Private Securities Litigation Reform Act of 1095 based on current expectations and assumptions, which are subject to risks and uncertainties actual results could differ materially from our forward looking statements if any of our key assumptions are incurred.
Or because of other factors discussed in <unk> earnings news release, and the comments made during this conference call in the risk factors section of the accompanying presentation or in our latest reports and filings with the Securities and Exchange Commission each of which can be found on our website <unk> dot com we.
We do not undertake any duty to update any forward looking statements.
Today's presentation also includes references to non-GAAP financial measures you should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of non-GAAP financial measures to the closest GAAP financial measures I will now turn the call over to Pedro.
Thank you Albert and good morning, everyone.
Thank you for joining us today, what our first quarter results presentation.
Let's get started on slide five.
Overall <unk> had a solid start for the year with many important operational achievements and our team remains highly focused on the successful delivery of our strategic initiatives.
For the first quarter, our earnings per share and adjusted earning per shares were <unk> 63, and 64 cents per share respectively.
On a year over year basis. The comparison is driven by the absence of the 40 <unk> offshore wind restructuring gain recorded in the first quarter of last year.
Most importantly, we're taking meaningful steps forward on the strategic initiatives that will drive future growth across both businesses.
In networks, we are advancing on our rate cases in New York, Maine, and Connecticut, and we continue to anticipate having new rates in effect across all jurisdictions. This year.
In addition in February we received approval from the New York Public Service Commission for our <unk> phase II portfolio.
$2 billion to $5 billion investment that will reduce grid congestion create a pathway for nearly two gigawatts of renewable energy resources and play an integral growth in achieving new Europe's nation, leading climate goals.
Together with <unk> phase one the transmission investment opportunities in New York.
Beyond 2025 will reach over $3 billion.
For our new England clean energy connect project, the jewelry trial in <unk> business and consumer Court concluded last week.
NASA loosely found that the project can legally proceed.
This is another major success for any CEC following positive rulings over the last month from the main low court on FERC.
We're also progressing on PNM resources merger on in recent weeks, we have taken several key steps forward last month <unk> agreed PNM resources on the New Mexico Public Regulation Commission pilot joined motion with the Supreme Court in New Mexico. So this means the merger appeal on remand the case back to the PRC.
Additionally, we extended our merger agreement through July 20, reinforcing our continued commitment to PNM as we work through the legal and regulatory review process.
In renewables, we signed or renegotiated ppas for 524 megawatts of solar capacity projects and commissioned 205 megawatts in Oregon.
Additionally, we are advancing the construction of approximately one gigawatt of new onshore capacity for COPD over the next two years.
Construction on our <unk> when one of our project is progressing as planned keeping the project on track to deliver its first power later this year and reached full commercial operations next year.
We expect to install the first monetized during the second quarter, which will mark a major milestone for the construction works.
Throughout the year, we will continue working to close these core initiatives to which create a strong value proposition for <unk> and positions us well to deliver on our annual obligations on explanations.
As slide six illustrates one of our most essential priorities.
Developing trust and collaboration with our key stakeholders as well as establishment and constructive outcomes that accomplish bolted from our efforts.
As discussed on the previous slide during the first quarter, we delivered several significant accomplishments, including the positive court ruling on a knee CEC and progress from our PNM resources merger.
We have resumed collections in mid April while continuously advocating on behalf of our customers to reduce bill impact in response to the pandemic and supply cost challenges.
In addition to over $50 million and assist unsecured in 2022. This year, New York approved the second phase of its utility assistance program, which provides another 34 million to <unk> customers to help reduce substantial arrears that accumulated during and after the pandemic.
On the renewable side of the business, we are engaging with officials and regulators in new England on the solutions needed to ensure a healthy uncompetitive offshore wind market and economically viable projects.
Last week, we announced a new partnership with enough try both utility authority to explore opportunities to develop up to one gigawatt of renewable energy projects, including wind solar and storage within the Navajo nation in New Mexico and Arizona.
This partnership is a great example of how the IRS is unlocking.
In innovative investment opportunities on how we are committed to engaging our communities and the transition by delivering jobs and fostering economic growth and development.
Additionally, we have fully funded the tax equity for our 194 megawatt <unk> solar project and our focus on maintaining solid credit ratings recently pizza firm its rating four on grade and improved its outlook to stable.
We look forward to seeing more green check marks on this slide in the months to come our focus on engagement on the strong relationship building will continue to be essential.
As we work towards successful conclusion for our rate cases, new England offshore wind projects any CEC and PNM resources merger. We are encouraged by the strong correlations of support we have already built which include businesses and labor groups environmental organizations post policy leaders and others.
Let's turn now.
While our networks business on slide seven.
Across the business, we are focused on providing safe reliable and affordable service and investing to create a stronger more resilient grid that will be the backbone of a cleaner energy future.
We're making good progress in our our rate cases and.
Starting with New York, we continue to advance on our settlement negotiation on expect rates to be effective as of April 22nd with a make whole provision recently approved by the commission.
In Maine, we reached an agreement with market to enter into settlement negotiations in March we expect <unk> rates to be effective in August .
In Connecticut, we completed the beneficiary hearings and briefings are currently ongoing.
For <unk>, we expect new rates will be effective in September .
In Massachusetts, and new rates are already authorized and came into effect at the start of the year.
While we work to bring new rate plans into effect across our remaining states. We continue to drive our focus on operational excellence we.
We have planned our allowance several transformative multiyear investments that will modernize our operations and provide improved service to our customers.
This includes $2 5 billion in a post phase II CPA transmission investments.
Bringing the total transmission opportunities in new Europe become 2025 to over $3 billion.
Is that the deployment of $1 9 million smart meters across our New York service territories.
These meters will be essential to provide our customers with better access to data and insights to help manage costs.
Additionally, we are accelerating the digitalization of our customer experience.
Today more than 42% of our customers utilize E bills compared with under 30% in 2020.
Over at the same time, we increased use of our mobile app by a factor of 15 and I'll detail, Eric by a factor of six.
All of these help us to reduce cost to customers improve cash flow and reduce call volumes, while improving customer satisfaction.
We have had some issues with customer service and that is important to recognize but we are taking action to address those issues and in the last four months, we are getting back on track.
We have worked to overcome pandemic related staffing challenges and since October Hep hired nearly 250, new customer service representatives and billing, especially.
At our New York companies customer escalation rates have fallen considerably and costs are being answered more quickly.
And in Maine, we continue to meet or exceed every customer metric.
I am very proud of our team's commitment to our customers and to continuous improvement and the results. We have delivered so far.
Let's turn to our renewable business on slide eight.
We have increased our installed capacity to eight <unk>, including 205 megawatts from our Montana solar projects recently commissioned.
In total we have an additional one seven gigawatt of capacity under construction supporting the delivery of our long term plan.
This includes around 800 megawatts of solar one hundreds of megawatts of onshore wind on 806 megawatts of offshore wind.
Finance supply for also on our projects under construction has been secured.
Additionally, we are focused on building relationships that support our continued growth and drive operational excellence in.
In the first quarter, we executed a new PPA for our 321 megawatt <unk> solar project and successfully renegotiated an existing 203 megawatt PPA for Paula Creek.
In total we have renegotiated nearly one gigawatt of ppas over the last year, which has helped to address a challenging macroeconomic environment and keep planned growth on track.
Furthermore, we have recently joined the California, ISO <unk> Western energy imbalance market as its first generation only NTT.
Our participation in the market, we create operational efficiencies by supporting more cost effective resource balancing on enabling sales of excess power.
Turning to our offshore business our team continues to make excellent progress on the construction of our landmark <unk> one project.
This month, we received the types of ticket for our turbines initiating the 60 day period for volume approval to begin the installation campaign.
We plan to install Detroit's first mono file during the second quarter.
Regarding our new England projects, we are progressing development to achieved a record of decision and recently completed the Geo Tech savvy.
Empire, where continuum PPA discussions with stakeholders in Massachusetts, and Connecticut seeking the best way forward for these projects to help deliver the ambitious climate goals in both states.
Above all else the future of USB and energy looks right.
The inflation reduction act unlocks principal motifs incentives and significant untapped value for renewable development.
While we are awaiting guidance on its implementation, we believe the IRS provides along and visible runway for investment.
In response to these historic opportunity, we are planning to accelerate growth across renewable technologies on hydrogen and built on our long term outlook.
Turning now towards late 90.
At <unk>, we believe being a true sustainable leader requires transparent disclosures consistent reporting on science based targets.
Last week, we released our 2022 sustainability report, which demonstrates the strong progress we have made towards achieving our key environmental social governance and financial goals.
On this slide we have highlighted several of our key metrics as you can see we are performing very well in our major environmental or social for maintenance and we remain well on track to reach our 2025 goals.
We are also proud that our leadership has been consistently recognized and validated by external parties.
In 2023 have agreed was named one of the <unk> world's most ethical companies for the fourth consecutive year, one of just nine utilities and energy companies to receive the honor.
We are also listed as one of the just 100 for the third time consecutive year number one the environment category and.
We joined Bloomberg's gender equality index.
As part of the deeper dry growth, our ESG plus F commitments are a fundamental part of our company's strategy and vision.
For more than two decades, <unk> rollout and have a great Cup anticipated the transition to a more sustainable energy model and have invested substantially to accelerate that transition.
We're raising the bar with clear and ambitious goals, including achieving our scope one and two carbon neutrality by 2030, and we'll continue to build on these commitments to create value for customers communities shareholders and other stakeholders.
Now I'd like to hand, the call to Patricia to provide more detail on our financial results.
Thank you Pedro good morning, everyone.
Turning to our earnings performance.
For the first quarter of 2023, our EPS was <unk> 63.
<unk> 15 in the first quarter of 2022, and our adjusted EPS was <unk> 64, compared to $1 16 in the first quarter of 2022.
Our year over year performance lagging largely reflects the absence of the 47 <unk> recorded recorded in 2022, which is related to the restructuring our onshore wind leases in new England, giving us a 100% control over the park city wind incremental ethylene project.
Absent this gain our operating performance in the renewables business with strong supported by increases in renewables production in our claim Mcdonough plant you can see this in our renewables adjusted EBITDA with tax credit, which improved 182 million, a 15% increase compared to the same period last year.
While our networks business was impacted by higher cost in various areas. We anticipate improvement later in the year with the implementation of our pending rate cases that will capture the cost of the business and investments that support safety reliability and resiliency.
The next slide summarizes the results and the key drivers by business segment.
For the first quarter networks results by 51.
Lower by 15% quarter over quarter compared to the first quarter of 2022.
In the first quarter of this year, we benefited from rate changes, mainly due to the implementation of our rate plans in New York.
Joint utility advantage in Illinois, New York resulted in about a <unk> benefit to adjusted EPS.
Which was offset by higher uncollectible, mainly in New York.
Although with the Lincoln Electric I am now concluded we have commenced collections.
Additionally, we had higher cost year over year to implement our investment plans and operate the businesses, including O&M depreciation interest and taxes.
O&M includes the absence of a <unk> <unk> benefit from the true up of carrying charges at one of our utilities in the first quarter of 2022.
And in 2023, the remaining <unk> includes a penny per overtime related to additional storm activity in the quarter and <unk> <unk> per normal cost of the business.
The higher depreciation of two cents reflects assets placed in service and taxes reflects <unk> <unk> related to the previously discussed first quarter 2022 benefits of one time adjustments and utility valuation allowances with the other half related to normal tax expense and timing.
Finally, finance costs are higher year over year, reflecting higher interest rates and short term debt balances, but are in line with our expectations year to date.
Importantly, and not unexpectedly our constant investment needs supported supports the pending rate case components by until our utilities in the three states, which we'll update these cost of the businesses.
In our renewable segment reported 13 cents a share lower by 41 quarter over quarter is primarily.
Primarily reflected the absence of the 47 gain recorded in 2022 from the optional and restructuring.
In that quarter.
Excluding net renewables as solid earnings performance period over period.
Proved wind and solar operating performance, which includes the impact of pricing production and taxes benefits explained <unk> of the quarter over quarter improvement and we also had higher earnings from our Klamath thermal operations and asset management that increased by 10%.
This was due to wider spark spreads quarter over quarter compared to the first quarter of 2022 as a result of the demand and supply factors of cold weather and scarcity in the Pacific Northwest.
More specifically the scarcity is due to the retirement of the actual generation and an increase in variable generation in the region.
<unk> strategically positioned on the California, Oregon border with the ability to forecast from both the south and the north making it less prone to pipeline disruptions versus other plants in the area.
<unk> also has long term transmission contract to move the power to the Pacific Northwest economically.
Finally, we also wanted to point out that we have planned maintenance.
In the second quarter for our Klamath thermal plant, which is scheduled to conclude by mid July .
These positive.
Positive renewable performance in thermal impact will reduce by higher O&M cost of <unk> <unk>.
Planed by growth in the business primarily for offshore development as.
As well as maintenance cost and higher personnel related costs.
Corporate costs reflected an increase of <unk> quarter over quarter, primarily due to timing as a balance to our annual effective tax rate.
Moving now to the next slide we are affirming our 2023 outlook ranges for EPS of $1 90 to $2 10.
And adjusted EPS of $2 20 to $2 35.
Our ongoing focus remains on achieving these targets as we execute our investment plans with discipline in our risk management okay.
We also provide our expectations of opportunities and risks to the remainder of 2023 versus our outlook expectations.
This includes the implementation of new rates in New York, Connecticut, and Maine as a result of our pending rate cases, and the merger with PNM, which we had previously indicated with approximately 30 cents a share.
Along with approximately $4 3 billion of debt at the parent level to close and record transactions.
We call. It the transaction was financed primarily with into 'twenty, one with $4 billion of equity.
Additionally, the opportunities and risks include renewables production and pricing other regulatory adjustments any CEC thermal and asset management result, taxes interest O&M uncollectible and our asset rotation program.
And finally today, we are also reaffirming our 6% to 7% CAGR in our adjusted EPS through 2025% off a base that is the midpoint of our 2023 guidance.
Moving on to updates to our financing liquidity dividends in credit rating on the next slide.
As we noted on our Investor day, our organic capital expenditures for 2023 are expected to be $3 billion inclusive of approximately $4 billion for PNM resources.
In the first quarter, we have invested approximately $836 million of those investments.
Our cash and liquidity are key priorities supported by our ongoing cash from operations debt at the utility level and tax equity financing and tax credit transfer ability to finance.
The PNM merger.
Closing, which we have.
And we have used.
We have used we issued equity interest just to remind everyone. We issued the equity in 2021 to finance the PNM reset merger closing, which we have used to fund the capital investments in our networks and renewables business, we are leaving our need to raise capital.
At the parent level.
At the end of the first quarter, we had $7 2 billion of liquidity covering 13 months.
And this includes the $4 $3 billion commitment letter from Ebola that backs up the merger.
During the quarter, we closed on the funding of tax equity for our <unk> Solar project and we are evaluating our options for tax credit transferability pending IRS guidance, which provides an additional source of cash for the PTC that we have retained in lieu of tax equity for certain operating projects.
We are also evaluating all options potentially available from the IRI again pending guidance, we're using ptc's versus ITC additional credits related to domestic content for specific and specific energy communities and hydrogen investments as well as potential federal funding available through the infrastructure investment and jobs Act and the IRA.
Maintaining our solid credit ratings as a key objective at.
At the op and grid level all of our ratings are unstable outlook and.
And finally, our dividend policy remains unchanged.
Getting a payout of 65% to 75%.
<unk> recently declared a quarterly dividend of <unk> 44 cents a share payable on July three.
In summary, we have started the year focused on continuing to execute our long term financial plan.
We remain targeted on improving execution and maximizing our earnings growth opportunities demonstrating successes through our businesses that are not only short term achievements, but will have long term positive impact.
Thank you for joining us today for our financial update I will now hand, the call back to our operator Adam for questions.
Led by closing remarks from Pedro.
Thank you as a reminder, if you'd like to ask a question today. Please press star followed by one on your telephone keypad now.
Okay pants asked you a question. Please ensure your hudson's fully plugged in and on mutual legacy of Scott followed by one on your telephone keypad.
And our first question today comes from Richard Sunderland from JP Morgan Richard. Please go ahead. Your line is open.
Hi, good morning, and thank you for the time today.
The remaining hurdles here to restarting construction and when will you have clarity both on the start timing and the in service date.
I think we may have historically low Catherine took momentum for more on the construction angle I think let's all keep in mind that is still with us.
A decision that has to stop and so we are evaluating right now the next legally steps if any.
Which I think we need to conclude in the upcoming weeks and I think there will be in a much better position athene to be bulk punitive answer, but I think ethane potentially win incremental sure. Thanks Pedro.
Thanks for the question Richard to reiterate what Pedro said, we're really pleased and excited about the results of the new minute unanimous decision by the jury now if you remember we haven't been constructing for quite a long time, so while we work through the remaining legal issues, which include a potential appeal period.
We also have permits at issue that we're looking at we've also been keeping our partners meeting our contractors.
<unk> in Massachusetts, our partner Hydro Quebec.
All up to speed and talking with them about what needs to happen next in order to restart construction on this project. So we will be working over that over the next few weeks and months.
I expect it will have more information.
<unk> mid year about what the new construction.
Timeline will be but as I said, we're excited about the project. We still think it's the best project to build four Kinect four new England in order to help, Massachusetts, Maine, and all of New England meet its clean energy future and were excited to restart construction.
Okay.
Got it. Thank you very very helpful details there.
Maybe turning to park city and Commonwealth and offshore overall, how are you thinking about the progress there and your discussions around improving returns.
The outlook for Kitty Hawk in terms of monetization is that.
Is that still screening is an attractive opportunity.
Back again on Park City Commonwealth.
On when you might have a more detailed update there.
I think on the Kitty Hawk, we continue to seek and as you know asset rotation alternatives. So from that point of view, yes, we continue to work on that.
I think on them on the parts <unk> Commonwealth you know, we've always been very transparent on going into the public saying that the numbers.
There will be John <unk>.
Is acceptable I think as you know indications of Massachusetts, we already defaulted <unk> 91, and one of the steps studying the concept.
I think we're working with both the space on the different parties involved to seek.
Final resolution to these matters and I think we will also be able to clarify these in the upcoming weeks and months.
Yeah.
Yeah.
Got it got it. Thank you for your time today I'll leave it there.
Okay.
The next question comes from Michael Sullivan from Wolfe Research Michael. Please go ahead. Your line is open.
Hey, Ron good morning.
Just wanted to check.
On the PNM process.
Yes.
How realistic.
Reaching conclusion, but by the extended date of July at this point and.
Maybe if we could get a sense I think it's been alluded to in the past.
Modified merger stipulation being.
Put forth.
Relative to the original one you had a couple of years ago. It maybe at a high level you could just talk to.
How that may have.
Changed.
Yes, I think at this stage also as you know we are at the Supreme Court and we have requested the Supreme Court to rule two remanded to the public Commission I think what we need to do right. Now is just wait for the Supreme Court to take its decision and if the decision is to remind me to the public Commission David.
Schedule, our timetable will be requested to Republic Commission and they will take the decision by the schedule I think that will give us clarity on that timetable I think right now we need to be prudent on assignment and just let you know the Supreme Court to do two degradation the hemoglobin to take and then once it's back in the public Commission that we will be able to to have clarity on the timetable.
Okay.
Okay, and what are the options in terms of extending <unk>.
And that July date.
Cord or commission timeline extends beyond that.
I think we don't think is the right time to comment on that list wait to see what timetable the public Commission approves and I think we will have to react to that.
Let's go step by step I think we earned on the right track in our opinion just to pull back on the on the public Commission on the topic and then discuss our case. So let's just wait for the public commission to not to take it to simplify this week on first on the public Commission afterwards in terms of timetable of industrial moment to rehab.
Okay understood.
And then just shifting to New York you talked about these.
<unk> Cta approvals in the transmission opportunity.
Does any of that factor into to the pending rate case at all.
So how.
I think in our rate cases, only <unk> one so we will have <unk> and that's part of the discussions we're having right now I think let's keep in mind that in New York I'd like everybody to understand we have the rate case, but we have other discussions as well so I think they're going to be many of these workers were working with the public commission to improve.
Cash availability for the companies to tough certainty of when the returns are going to happen on those assets, but its only <unk>, one which is in the rate case most of <unk>.
Okay. So should we think of that is like that.
Yes.
That's kind of a known thing within the case and then there is other.
Items contributing to the rate request.
Outside of that.
Thank you.
Yes, okay.
Yes.
Let's take a step back we've got a total of <unk> PPA about $3 $4 billion worth of investment to be made through 2030 that split up into two phases phase one which is in the rate case in phase two which is outside of the rate case. The rate case encompasses both phase one investments.
And it covers additional investments that we need to make for the resiliency and the performance of our system. So all of that together phase one and those resiliency investments are being considered in the rate case and in April full settlement.
Okay.
Thank you.
The next question comes from David <unk> from Morgan Stanley . David. Please go ahead. Your line is open.
Alright, thanks, so much for taking my questions.
I was wondering if you could give your latest.
On the demand backdrop for new PPA signings it was encouraging to see the new contracts that you got in places.
This quarter.
What are you seeing in terms of renewables demand and do you have a target in mind for what we might expect in terms of additions to the backlog this year.
Our lips post Antonio to answer the question I am very pleased that we've been doing in the last nine months with the team cleaning up a lot of things fixing some issues that we had that's why those 500 megawatt plants that we have announced in terms of Ppas I'm very pleased about that we're backing off on the table to do profitable and long term.
Investments in renewables I'm also pleased about renegotiations and leases. So we're doing a lot of things I think will come back in the coming months with a revised business plan going forward for the business the renewable business and I think we are back on the table with nice growth ahead of US. We're pleased with some coding. Thank you Pedro good morning, David Yes, Espirito, saying, we see.
Quite important direction in terms of demand of renewable power and we're very glad to have been able to sign these PPA with meta.
A great contrast, <unk> hundred 20 megawatts. There is current in Texas, and North Dakota, and also we have successfully renegotiated.
<unk> Creek and recognizing that prices are different diagnose CODI has to be adjusted to the new supply chain situation.
Situations. So I assume that we are making progress on that sense about the backlog and work with video evolution. What I can say is that we have a healthy pipeline and we have projects that are.
We are working now very intensively to to be able to close them through our process always with a lot of rigor and always very prudent.
But it was commented before.
We are in the good track so far to our completion too and to deliver what we promised in the capital market day for 2020 one.
Okay.
Okay, great. Thanks for that color and I was wondering if you could give an update on the solar supply chain and your ability to secure panels.
To execute on our construction plan for this year and also just how you're thinking about domestic supply of solar panels too.
Yes, so first of all all of our contracts that are under construction they have already they supply the final security. So this is something that is.
<unk> is a must for us.
As we always say we are very prudent in we don't enter into PPA term contracts. If we don't have the supply chain secured so over the balance of securities.
Yes, so in terms of the.
The difficulty of getting panels.
It's true that the market is.
Struggling with that we are lucky because.
We are fortunate to be part of your color group and to have the possibilities.
To lever our position with the suppliers.
<unk>.
About the situation with the we grew forced Labor Act.
And we see that the CVP.
Suppliers the panel suppliers, the Io discussing about exactly what that of the documents and papers that they need in order to ensure that there is of course no no labor force.
Is used in the independence, but I assume that in the last weeks in the last months, we have seen a lot of progress on the understanding of what the documents I must be in with information.
Has to be delivered so hopefully we will see possibly in the mezz loans all in the industry. This.
Partners are discussing to be.
Being released and cross the border.
I think if we can comment on the supply chain in general I think probably being part of Hubert rollout has allow us in the transformers site to benefit from our presence in connections in Brazil to help out to us here in the U S business I think the presence that we have right now doing projects in Germany, and the UK and France.
Sure wind, it's allowing US also to have the right conversations for new construction projects being built right now.
That's a benefit.
And something that allow us to be comfortable for the future. There may be issues in the supply chain years, but I think we're very well positioned to trial to be ahead of almost anybody on getting the advantage of the opportunities that we have there.
Got it I appreciate it thanks, so much.
Okay.
The next question is from Julien Dumoulin Smith from Bank of America Julien. Your line is open. Please go ahead.
Hey, good morning. Thank you guys very much I appreciate it.
So just first on claim if theyre in the west.
Nicely done on the outperformance there what the 10 says just wanted to understand is that contemplated in your guidance here or is that actually upside. When you think about your FY2023 guidance range or are there other offsets like the planned maintenance that you described the second quarter here.
So the maintenance is scheduled smelter and is known and planned so that's not unexpected the clamor.
Is within the guidance range and Thats, why we give a range plus or minus.
And then Nicky.
It could be we will see what happens to the rest of the year.
Got it Okay fair enough. So that's at least that's incorporated within your guidance as it stands today, Alright, and then related here on the utility side, obviously, some O&M pressures here in the first quarter just wanted to come back to full year expectations on the network side.
When you think about the pressures that you've seen year to date.
You still see earnings increasing on a year over year basis.
Versus 22 here and what are some of the other offsets the extent to which that.
That you see that still materializing.
If I can comment on both on the customer and Patricia you can also complement.
Our networks and renewables I'm very pleased from the first quarter, how we have been.
Basically delivering according to our internal expectations. So I'm very pleased there I think you mentioned on O&M.
<unk> mentioned interest cost I think I'm very pleased we don't have any material deviations from where we would like to be and we have taken actions to compensate some things that we're deviating. So I'm very pleased there.
I think on the items right now as you can see we have several items and we had that last year as well that are going to be critical the rate cases, we're going to have PNM, we're going to have the offshore wind offshore projects I think we're going to have the transmission line any CEC I think that's going to define the next two or three months most of them. So that's why we're very close.
Two having a clear path in those items that will allow us to narrow that range that we gave to you last year and be more accurate political uncertainty. If you want to say thank you Pedro just to add a little bit on to that and if you listen to Patricia go through that quarter over quarter. Our performance there were some nonrecurring.
Issues in last year that is carrying charges as well as the tax benefit. So those were on recurring when you look at the core business as networks and we do have some increased costs, but thats. The exact reason why we are in rate cases, so all of those increased costs depreciation and O&M storm cost, we anticipate that those will be.
Resolved through our rate Eric through our rate cases, and the performance of the system continues to be very strong. Despite increased storms. So we're flat to increasing our performance on safety metrics and key metrics. Despite the fact that quarter to quarter, 13% increased number in storms again, those storm costs are going to be reflected.
In the rate cases, as we resolve them throughout the year. So we're we're pleased with the performance of networks and we're anticipating the results of the rate cases to impact our earnings through the rest of the year.
If I can give you an example.
How pleased I am with the work. The teams are doing is customer service and listen this focus on New York I think we have more than 20% attrition and Juno. Many reasons why people either they prefer not to continue working on their preferred to most other companies during the pandemic and right up to that I think we had it still unfortunately in parts of New York.
Meter readers. So we have to go and read the meters at home in Europe for a period of time, we were not given the access and you know there has been a huge increase in the supply part of the build totally unrelated to us when you see those factors on the actions we have taken in 234 months I am very pleased and this is exactly what we're supposed to be doing so thats whats autos are exempt.
But I think we are we need to continue doing nor reacting anticipate initial on fixed and then very quickly. So I'm very happy for those efforts.
Got it so it sounds like as you get offshore clarity <unk>, Oh, sorry go for it.
Sorry, Julian I, just wanted to add a couple of <unk>.
Okay, because I mentioned for example that we had rising uncollectable, but we had the benefit of our Newberry disorder that offset that in the period and at some point to note that we are.
We've completed the moratorium the winter moratorium.
In New York. So we have started the collections process, so that kind of helps us going forward as we move into <unk>.
The pending rate cases, alkaline alto mentioned on renewables, because we had rising O&M. Thank you visit to <unk> point.
That.
The businesses are operating well and we expect to see additional costs as we grow the business. So it's a lot of this is development its origination costs as we grow the business.
It also rewards for strong.
Strong origination in the business that are reflected in the LTM.
Got it and then it sounds like an update maybe in the next two to three months by second quarter. You guys are in a position to narrow that guidance.
Yes.
So hopefully for us.
Okay.
And then just if I can quickly just to clarify the prior question here it looks like the solar pipeline moderated a little bit here, especially on the solar side quarter over quarter can you comment about why that might be is that a function of <unk>.
<unk> pulling back here and just the opportunity or just what are you seeing out there I'm very curious.
Let me ask a little bit more going forward and I think until you can answer the specifics right now going forward I think is the other way around Julien I think we are actually.
Their it team right now to continue to focus on growth and our expectation is.
As you know in renewables there is not that much you can do in the next one or two years, because that's already something you have I'm very comfortable we're going to delivering those one or two years, but our expectation is when you will be John that to increase the pipeline <unk> megawatts, we're going to be developing I think just to comment on dose specific items.
I think probably we avoided $40 million to $50 million from penalties. When we were building assets in the last 12 months by renegotiating. The contracts I think we are extended the leases on signing additional leases that allow us to be positioned for the future.
So it seems to me that we have done things that probably are not in the public domain, but allows us to be in a much better position than we were a year ago and I think the growth more than happy to updating upcoming months, because we are going to have further growth in the future and especially three years from now, but I think it was antonio to implement on the currently thank you pivotal and just Julien.
Our solar filing now stands at about 13000.
Megawatts 13, Gigawatts of solar and we have put in place something that is important when you are developing because the figures are important but the most important thing is the health of the pipeline. So we wanted to have a pipeline that is really healthy and we put in place recently have brought on of what we call early detection of Photoshop. So we.
Wanted to be sure that the pipeline that is here is healthy and when we see something that in a very early stage.
<unk>.
Leading us to assume that the project could not be profitable in the future than we prefer to just get it out of the filings so.
The reflection of thesis mall drop is because we're putting these systems in place to ensure that only we invest in growing the pipeline that we have.
Certainty that will be profitable for us and in the last 12 months. We were asked several times that we were exiting the business. So we were stopping the development I think we made it clear note. We're fixing some things that we had on <unk>.
Strength has been the team on the.
Predictions going forward.
You know that we like to deliver I think we have delivered now with more than 500 megawatts I think more to come but I think the idea right now is to focus on being very very clear on the next few years with exactly what assets, we have where and when and then working already in two three years from now because Thats you know what we can focus on right now.
Alright, guys. Thank you very much I appreciate it.
The next question comes from Angie <unk> from Seaport Research partners.
Your line is open. Please go ahead.
Thank you so I wanted to ask about the Connecticut rate case.
We tried some public comments from.
For our presidents.
Our chairman to women that.
It sounded really scary and highly punitive for utilities in the state of Connecticut. So you are in the midst of your rate case on the electric side. The first one when she can demonstrate.
As fans.
That is concerning and on top of that we have poor has just issued a decision.
<unk> and its performance based ratemaking.
Not sure actually if it will impact.
The current rate case, but.
Just talk to us how you feel about this pending rate case.
Let me perhaps.
So first and Catherine you can complement the first one is.
We said this in our nine months ago. When we started this team working on everything our first obligation is to have relationships to being on top of things to know everybody. I think I'm very pleased we are working very well with the governor and his team will be working working very well with the department of energy.
Working very well with the AG and from that point of view, that's what we have to continue building relationships I think the legislature. We've been we've been working on our proposed legislation that has been put.
Put on the table right now we just need to continue I don't think we have resulted in a month, but I think once we have re initiated or historically many of those relationships I think now after six nine months I'm very pleased that we have the right access to everybody second I think we're very committed to Connecticut we.
We don't like to comment on other rate cases, we don't like to comment on on public Amit Commission Commissioners I think we are very pleased on our case. We believe we have a strong case and we can defend that the governor was have been already for two years working on this incentive based in our performance. Both in new I think we are hobby fee moves in the direction of other places.
In the U S and I think in our case would we like to focus on presenting things with no mistakes, making sure that we don't make any mistake to be blamed to us and I think we're working now on this rate case and we're also working on many other things we have offshore projects going on we have many other models that we're working with the administration. So we just need to continue working with them.
Catherine Yes, I'll just add.
And just a little bit of context around that Connecticut rate case, so as Patricia said, we don't anticipate rates are going into effect until later in the fourth quarter. So they don't have a material impact on this year's results, but in terms of an update we have breaks going in this week from all parties as you may recall, we had our hearing.
<unk> that took place last month about 17 days worth of hearings and I believe our team performed really well in those.
And those hearings and we'll be following that up with briefing reply briefing and then it will go to.
Two the authority. So we believe we put on a strong case and we look forward to working through the results.
Okay, Okay, and then separately on the PNM transaction I.
I understand that.
We are waiting for the Supreme Court to respond to the request to remand the case back to the commission.
The timeline has.
The merger has hasnt been extended quite considerably.
A completely different interest rate environment right now also defense evaluations of utility stocks.
How do you see this just pending merger.
Accretion.
How are you going to finance it and yes, I know you pre issued equity for it but just talk to us about the appeal of this transaction given the different financing the financing backdrop.
First of all I can remember.
As we detailed at the group level in a couple of other big transactions, we are very prudent and Thats why we need a capital increase a year and a half ago. So from that point of view from an accretion point of view. The calculation has to be done based on that capital includes being done now it's true that because of the additional capital expenditure.
Have done in the last 18 months and are part of that has been used but I think for purposes of our company to increase the main reason was PNM. So I think that was how we were calculating the accretion I think in terms of the interest we remain committed I think one of the important things for us we're not on a speaker to leave phenotypic securities in a financial investor.
The bison sales in a second we are long term and the value of our utilities long term I think to have you know just one year of interest rates going up or one year interest rates going down I think that doesn't change. The appetite. We believe you know we did a transaction with a very good presentation from a value point of view I can PNM has been delivering earnings.
Surely.
Better than they were expecting so there is no change to knowing the appetite and remember I think utilities on networks as our various cost resource.
That everybody would love to own we have a great partnership relationships in new Mexico on do we need to be patient, yes dispute. The people. They have failed 345 times doing deals I think in our case, we have a good track record of getting it done and especially because we deliver what we promise and we've spent a lot of time and effort in the local communities with local.
Decision makers, so from that point of view I would love to have been differently, but this is what it is and we just need to be patient.
Okay. Thank you.
As a final reminder, that star one on your telephone keypad to ask a question.
As we have no further questions I'll hand, the call back to Petronas Autograft for final remarks.
Okay.
Okay.
Thank you again for joining us for our first quarter earnings earnings earnings call as we close the quarter. Our team is focused on the path forward and on delivering our commitments to execution growth and value creation.
Our clean connected and growing regulated business represent an attractive investment opportunity at the center of the energy transition.
Here, we are working toward the constructive resolution of our rate cases balancing cash flow earnings and customer affordability progress on ACDC. Following the positive court ruling on the successful completion of our PNM resources merger.
On top of that our renewables business provides additional opportunity. So the continued expansion of our onshore footprint and the delivery of our offshore projects, including first power from video when one later this year.
As we pursue each of these objectives. Our efforts are guided by our core commitment to financial sustainability, including solid credit ratings Unhealth liquidity.
In summary, we believe that our grid has exceptional growth prospects in both the near and long term perspectives.
Our planning investments of $21 5 billion through 2025 are strengthened by an environment that provides long term on a stable support for the expansion of renewable energy resources and clean infrastructure.
By leveraging additional long term growth opportunities.
Like New York, <unk> and the IRI, we're confident <unk> will continue to drive value for our customers and shareholders.
We look forward to sharing our progress with you over the coming months and appreciate your continued support if you have any other questions. Please follow up with our growth on the IR team have a great day and thank you very much.
This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.
[music].
Okay.
Yeah.
Okay.