Avangrid, Inc. (AGR) Earnings Call Transcript & Summary

The time is now 8:36 a.m., and I declare the polls open. [Voting]

Those shareholders who wish to vote electronically on the virtual meeting platform, please do so now. Proxies previously received will be voted by ballot.

Okay. The time is now 8:37 a.m., and I hereby declare the polls closed, and ask that the secretary collect the ballots for tabulation. I'm advised that the ballots have been counted. Will the secretary please report the preliminary results of the voting?

On behalf of the inspector of elections, I wish to report the following. As to the first proposal, in excess of the majority of the votes of the shares of the voting stock present in person or represented by proxy and entitled to vote at this meeting were cast in favor of the election of each of the 13 nominees to the Board of Directors, and each such nominee is hereby duly elected. As to the second and third proposals, in excess of the majority of the votes of the shares of the voting stock present in person or represented by proxy and entitled to vote at this meeting were cast in favor of each such proposal, and each such proposal is hereby approved.

Thank you. Since there is no further business, we will now adjourn the meeting. This concludes the formal part of the 2020 Annual Meeting.

As we say any time we make forward-looking statements, these statements reflect management's intentions, plans, beliefs, expectations or forecasts for the future. The company's actual results may differ materially from these statements. The factors that may affect the risks and uncertainties regarding our expectations are included in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission. These statements, of course, are only as of this date, and we do not undertake any obligation to revise or update them.

Good morning, and thank you for joining us and participating in AVANGRID's 2020 Annual General Meeting. Considering the ongoing COVID-19 pandemic and to protect the health and safety of AVANGRID employees, customers, community and shareholders, we are hosting this year's meeting virtually. Throughout the pandemic, we have focused on ensuring reliable electric and gas service and generating clean energy to keep our cities and communities going. I am extremely proud of the AVANGRID team for going above and beyond to make sure that service is restored and energy is delivered while keeping public health and safety our first priority. Looking back, 2019 was an important year for AVANGRID as we advanced our goal to lead the sector to a competitive clean energy future. In the Networks business, we filed rate cases in New York for rate plans expected to be in effect this year. And in Maine, we received a final decision earlier this year. Our New England Clean Energy Connect transmission project received several key permits, and we are continuing to progress towards starting construction this year. For health and safety, we reduced employees' lost time accidents by 11%. In the Renewables business, we continue to execute on our clean energy strategy. We reached commercial operation for 831 megawatts of wind projects. We were also awarded the 804 megawatt Park City wind offshore project in Connecticut. This contract, executed last month, is the biggest single PPA in the history of AVANGRID Renewables, and we expect to see synergies with our Vineyard Wind project once constructed. During 2019, Renewables also executed 480 megawatts of new PPA contracts in both wind and solar. As part of our Forward 2020+ program, we achieved pretax savings of $75 million. This strategy has delivered positive results and driven process, organizational and technology enhancements across the company. Additionally, we issued $750 million in 10-year green bonds in 2019 and another $750 million in 5-year green bonds earlier this year. AVANGRID is now the seventh largest green bond issuer in the U.S., with a total of $2.1 billion in aggregate principal amount issued. In 2019, we increased our investments by 73% to $3 billion. Investments in Renewables amounted to approximately $1.4 billion, increasing by approximately $1 billion year-over-year driven by projects under construction, repowering and offshore wind developments. Networks' investments amounted to $1.6 billion and were the largest in the company's history driven by ongoing asset replacement, system automation and technology upgrades. We expect these increased investments to drive AVANGRID's future growth and support the economic recovery needed in our country. In 2019, AVANGRID's consolidated U.S. GAAP net income increased by approximately 18% year-over-year to $700 million or $2.26 per share. Our 2019 non-U.S. GAAP consolidated adjusted net income, excluding mark-to-market and other onetime items, amounted to $673 million or $2.17 per share. Year-end U.S. GAAP earnings reflected incremental rate increases at some of our regulated utilities, the sale of renewable assets, efficiencies and favorable mark-to-market and thermal and trading activities, which helped to partially offset the negative impacts of lower-than-expected wind resource, outage restoration costs and lower-than-expected transmission revenues. We remain fully devoted to shareholder value creation. For fiscal year 2019, AVANGRID's dividend per share increased to $1.76 per share, a 1.4% increase over 2018. The unprecedented recent events in 2020 have demonstrated how critical it is to access clean energy from stable domestic sources and deliver to customers via a smart grid capable of adapting to changing customer needs. While the Forward 2020+ effort has resulted in significant operational savings, we need to continue looking at how we can work better and smarter. Our goal is to establish a customer-centric culture of excellence that is focused on performance. We aim to be equipped with innovative tools, efficient processes and the best people to help us continue to be a top-tier clean energy company. AVANGRID remains committed to delivering sustainable value for our shareholders in our regulated businesses and contracted assets. During the pandemic, we are committed to growing our core businesses by investing in clean energy, leading the development of onshore and offshore wind in the U.S. and building the grid of the future. Finally, after a long career, I will be retiring tomorrow after this annual meeting of shareholders. I am grateful to Chairman Galan and the Board of Directors for allowing me to lead this company during its first 5 years. I want to thank our employees for their commitment and dedication to helping establish AVANGRID as a leading sustainable energy company in the United States. I have full confidence that the company will be successful in delivering a cleaner and more accessible energy model for customers and communities every day and delivering long-term sustainable growth.

Thank you, Jim. I would like to start by saying a few words of recognition of the great contribution that our CEO, Jim Torgerson, has made to AVANGRID. Building -- our great building of his career as CEO, Jim has a decisive role for the success of the merger that create this group. He then lead the extremely successful integration of 8 utilities and dozen of renewable facilities in 24 states into a leading diversified innovative company with a great future ahead. Jim, let me express the deepest gratitude personally, on behalf of the Board of Directors. Thank you for these magnificent years working side by side. This group will always be your home. Dear shareholders, we are living in unprecedented times for our country and the world. In moment like this, all organizations show their true contribution to the society, and I can proudly say AVANGRID has delivered. Since the early stage of the pandemic, the company implemented a comprehensive set of measures to protect and support our customers, employees, contractors and the communities in which we operate, ensuring the quality of service we provide to millions of Americans, even under challenging circumstances, like the [ several storms suffered ] in Maine, as well as the continuity of the generation of clean electricity for our wind and solar facilities with maximum safety and reliability standards. Our people have made all effort required to deliver this energy required by critical infrastructures such as hospital, and we have supported our residential customer through disconnect moratoriums and with special payment conditions. Over the pandemic, we have also reaffirmed our commitment to the health and safety of our employees and contractors. We have now over 4,700 employees, 70% of our total workforce, working from home, thanks to our investment in digitalization. For the remaining 30% corresponding to crews, grid operators and customer-serving employees, we are procuring all the personal protective equipment, and we have adapted facilities and protocols to ensure social distancing. Finally, we have promoted 7 initiatives to support response and recovery effort in the 24 states where we operate, having donated $2.5 million and 31,000 protective masks across AVANGRID service territories. But the COVID-19 is also having deep social and economic implication for our communities. Rebuilding the economy would require the contribution of all agents. In this context, the massive investment required in energy sector are a great opportunity to improve the resilience of our infrastructures, increase energy independence, reduce carbon emission and pollution and create high-quality jobs along the supply chain. This is the right moment, the right sector and the right company to achieve it. In 2020, AVANGRID will invest $3 billion, up 35% compared to average of the last 4 years. This investment will apply a similar amount in purchases of growth and service, 97% of which come from United States companies. Only in the last 3 months, we have anticipated contracts to our suppliers worth $1 billion, providing them visibility to continue supporting the 60,000 jobs that rely on our activity in the United States. In Networks, we expect to dedicate $2 million to improve the safety, reliability and resiliency of our transmission and distribution system. We will also continue focusing on innovation, promoting smart grids and developing solution for electric mobility, battery storage and other distributor resources. In Renewables, we are adding 1 gigawatt of offshore wind to reach 8 gigawatts by the end of 2020. During the first quarter, we commissioned 158 megawatts corresponding to the Otter Creek we farm in Illinois and completed repowering of 2 wind projects in Minnesota and California. Additionally, we have more than 500 megawatts of onshore wind under construction and close to 150 megawatts of repowering of trucks to be in operation in 2020. On top of this, we have 670 megawatt of contracted solar in 40 states to be commissioned in '21 and '22. In addition, we are leading the emerging offshore wind industry in the United States with 2 development zones totaling more than 7,000 megawatts of potential capacity. The first one, Vineyard, off the coast of New England, with close to 5,000 megawatt of potential capacity, has already 2 projects under the advanced development, Vineyard Wind and Park City Wind, that will be in operation in 2023 and 2024 -- '25, sorry, for combined capacity of 1,300 megawatts. And the third one, Kitty Hawk, off the coast of North Carolina, in which the potential capacity is 2,500 megawatt, is also moving forward as planned. Over the last years, AVANGRID has consolidated its position as a leading sustainable energy company. Back in 2017, we became the first United States utility to set the goal for carbon neutrality. We are strongly committed to United Nations' Sustainable Development Goals, with a primary focus on affordable and clean energy and climate action, but also contributing directly to our other goals such as promoting innovation and education, protecting biodiversity and supporting gender equality. AVANGRID is also fully committed to development on inclusive and multicultural working environment, with increased diversity in general and ethnically, that guarantees equal opportunity. Our talent acquisition approach enable us to attract the right people and increase ethnically and gender-diverse employees at the top levels of the organization. Through our Avangrid Foundation, we collaborate with more than 300 organizations through investment in supporting education, preserving our culture and heritage, protecting the environment and improving the quality of life of the most vulnerable. All these goals are fully incorporated in our corporate governance system, with this year once again recognized and awarded by multiple external bodies. To conclude, I would like to thank you, our shareholders, for your ongoing support, which is essential for us to continue aiming at excellence in our operation and financial results; and to our employees, who continue to demonstrate year after year the commitment to the best service for our customers, even during in challenging times as this. Let me also extend my appreciation to all the members of the Board of Directors for their firm commitment to these companies in very -- especially to Jim Torgerson, as I said. Following Jim's retirement, we have already announced the appointment of a new CEO for the company, Dennis Arriola, who will join the company next month. He has an extensive track record in the power and gas industry in the United States, and I assure that he will be the right person to succeed Jim. Dear shareholders, we have a unique opportunity ahead us to combine the implementation of a secure, clean and competitive energy model in the United States, with the creation of the growth and job around the country. The current circumstances only increase the urgency to take this model forward. You can be sure the -- all the women and men working in AVANGRID will rise to the challenge. Thank you very much.

Thank you. That concludes today's presentation. Thank you for dialing in. You may now disconnect your lines.