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

Presenting today are Dennis Arriola, our Chief Executive Officer; Doug Stuver, our Senior Vice President and Chief Financial Officer; Tony Marone, President and Chief Executive Officer of AVANGRID Networks; Bob Kump, Chief Executive Officer, Deputy Chief Executive Officer and President of AVANGRID; and Alejandro de Hoz, President and Chief Executive Officer of AVANGRID Renewables. All of them will be available for a question-and-answer session following all of the presentations. As you will see, we are hosting this presentation from our corporate offices, which are in Orange, Connecticut. We will be socially distant and following all our safety protocols during the entire production of this webcast. 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 1995 and 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 incorrect or because of other factors discussed in AVANGRID's earnings news release, in 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, avangrid.com. We do not undertake any duty to update any forward-looking statements. Today's presentations also include 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. If you do not have a copy of today's presentation, it is available on our website at www.avangrid.com. I will now turn the presentation over to Dennis.

Well, thank you, Patricia, and welcome, everyone, to its 2020 Investor Day. We really appreciate you joining us here, especially knowing that there have been quite a few earnings calls earlier in the day. I think we've got a really robust virtual program for you over the next couple of hours. And our goal is that each of you are going to leave today with a better understanding of our strategic priorities over the next couple of years, the actions that we're taking to deliver our results and our financial outlook through 2025. Now let me start with a quick overview of the response we've had since COVID-19 pandemic took place. No doubt, 2020 has been an incredibly challenging year for our customers, our employees and all the communities we serve as well as our nation. Safety and reliability are at the heart of AVANGRID's core values, and we recognize our critical duty as first responders to provide essential electric and gas service and to deliver clean energy for millions of people in our country. Now since the early days of the pandemic, AVANGRID has focused on the needs of our customers while aiming to protect our employees and contractors and serving our communities with critical financial support and donations of personal protection equipment to key institutions like hospitals. I'm extremely proud of the AVANGRID team for everything that they've done to go above and beyond during this pandemic, but especially during severe weather impacts like tropical storm Isaias. And while no one knows for certain, how long we'll be living under these circumstances, AVANGRID will continue to serve our customers and communities while keeping health and safety top of mind. Now during my first 100 days as CEO of AVANGRID, our team has been conducting a detailed and thorough review of the company's operations, priorities and financial outlook. Our focus has been to drive clarity of the opportunities and challenges facing the company. But also alignment and accountability across our businesses so that we could put together a plan that we could execute and deliver results that were consistent with our commitments. Our strategic plan is centered around our view and definition of sustainability, and that includes environmental, social and governance factors, but also financial performance. So at AVANGRID, sustainability equals ESG+F, financial performance. We believe that you cannot make a material and lasting impact if you're not also delivering long-term and reasonable financial returns. To be a leader in sustainability, we'll use this ESG+F framework to help drive our strategy and help inform our asset allocation decisions. It's about balance and prioritizing. And I'm proud that we've been recognized by many external organizations, including just recently the Forbes JUST 100 list for our leadership in ES&G. And now it's time for AVANGRID to be a leader in financial performance as well. Now I'd like to spend a couple of moments on Slide 8, discussing how we see the events and factors that are impacting the energy transition that's taking place, not just in the U.S., but globally as well. And regardless of which part of the energy value chain you participate in, change is happening faster than I think anyone has ever imagined. The focus to decarbonize how we generate and distribute energy is -- it's not a trend or a flavor of the day. It's a reality, and that's only going to intensify. With the increasing frequency of destructive weather events and fires, we're feeling the urgency to move faster and do more. New technologies and falling costs as well as new entrants in our sector are also driving the pace of change. Legislators and regulatory policymakers are helping to drive this transition, and they're holding our sector accountable and responsible for delivering on policy goals. Now at the same time, customers are demanding cleaner, reliable and more affordable energy. They want it now, and they want it cheap. Now this transition hasn't slackened as a result of the pandemic or the economic softness we've witnessed in certain parts of our country. If anything, utilities and energy producers have been even more in the spotlight, given the role they play in providing jobs and stimulating the economy with investments. And finally, multiple stakeholders are demanding companies like utilities to engage more actively in societal challenges, to be part of the solution, not just stand on the sidelines. And that's why having a clear ESG+F framework to help guide our strategy is critical. Now all evidence of the energy transition points to the conclusion but there will be continued growing demand for renewable electricity in the U.S., especially as we see new breakthroughs in storage technology and costs continue to fall. During this transition, coal generation will continue to be displaced by renewables. And according to the U.S. Energy Information Administration, renewables generation growth over the next decade could approach nearly 70% above 2020 levels while coal and nuclear power are each projected to fall approximately 15% over the same period. We also believe natural gas will continue to play an important and critical role in the energy transition for years to come. It's abundant in the U.S., relatively clean and affordable. Natural gas generation and infrastructure is a key enabler for renewables growth in the U.S. and most studies show that customers still prefer natural gas in their homes for cooking and heating. Now falling costs, along with policy pressures will help drive the growth in solar and wind over the next decade. And the emergence of offshore wind in the U.S. will open up a new market, a large growing new market for companies like AVANGRID. And depending upon what studies you read, the levelized costs for both solar and wind generation are expected to fall another 40% and 30%, respectively, over the next 10 years to below $30 per megawatt hour. And onshore wind levelized cost of energy is expected to drop more than 45% over the next 10 years to approximately $60 per megawatt hour. To support this trend in renewables, we expect to see huge growth in clean and connected energy infrastructure over the next 2 years -- or excuse me, over the next 2 decades, with approximately $120 billion invested per year in North America through 2040, and that's according to the International Energy Agency. Transmission and distribution investments are going to be critical to modernize and enhance the grid and to support renewables growth. And we're expecting anywhere close to $44 billion per year required in North America over the next 20 years from T&D. And investments to maintain the safety and reliability of existing U.S. natural gas infrastructure will continue for the foreseeable future. Now we also believe that green hydrogen will play an important role in the energy transition, although it probably won't make a material impact in our fuel mix for at least another 5 to 10 years. At AVANGRID, we plan to use part of our merchant wind to produce green hydrogen through electrolysis during times of low energy pricing. This green hydrogen can be used to support the transportation sector and meet energy needs associated with industrial processes and heating that are difficult to electrify with available clean technologies. These uses represent approximately 15% of all global energy demand. Now IBERDROLA has defined a comprehensive strategy for green hydrogen with existing projects in Europe and our plan at AVANGRID is to leverage off of IBERDROLA's pioneering investments and experience, so we can jump-start our efforts in the U.S. at the appropriate time. Now we're building a sustainable business model that provides a road map to leadership through the energy transition. We believe that by investing in clean energy technologies, serving our customers and communities, building an engaged and vibrant workforce, operating under the highest ethical standards with a purpose-driven culture of accountability and maintaining strong financial performance, we build a virtuous circle that benefits all stakeholders. This new sustainable business model is based on cleaner energy and green electrification, supporting the need for decarbonization solutions to help electrify the industrial and transportation sectors. It's enabled by technological progress and innovation leading to significant cost optimization and process improvement as well as creating major disruptions and new business opportunities. And it's enhanced by customer empowerment, creating new opportunities for energy products and services. AVANGRID's sustainable business model puts us in the right places at the right time. Our existing footprint of businesses and assets helps address the need for more clean energy and the demand for green electrification. The focus on decarbonization will only continue to grow, making our renewables business a major part of the solution. Technological progress and innovation will enable the transition through continuous improvements in green technologies, such as larger turbine sizes, which will help drive costs down. And the deployment of new technologies will require enhanced capabilities and unique solutions using big data analytics. And our investments in smart grids and digitalization will improve our operational performance and allow us to better serve our customers. We'll also continue to make smart and efficient investments in cybersecurity and physical security that will protect our customers, our people, our data and our infrastructure. Existing and new customer connectivity will also play a key role in our future success. Our networks business, already a major player in 4 states, serving approximately 3.3 million customers, will only get stronger and bigger with our announced merger with PNM Resources. This connectivity, combined with new investments in smarter grids provides a competitive advantage as we develop and deliver new products and services to our customers. Now I'm excited about our future. AVANGRID is uniquely positioned to help lead the clean and connected energy transition in this country. Our association with the IBERDROLA Group is a competitive advantage for AVANGRID as we leverage off of their global experience, investment in innovation, financial strength and their leadership in the green energy transition. Our current platform of businesses will be even stronger with additional geographic, regulatory and earnings diversity once we complete our merger with PNM Resources later in 2021. And as we look to the future, we'll continue to deploy new technology like smart meters, grid automation, battery storage and electric vehicle charging infrastructure that will further enhance our relationship and connectivity with our customers. And we'll get all this done while maintaining strong liquidity and access to the capital markets. AVANGRID is already the eighth largest green bond issuer in the U.S. with a total of $2.1 billion issued. We'll continue to focus on maintaining solid investment-grade credit ratings and access to the capital markets to support our growth plans. Now over the last 100 days, I've had the opportunity to meet many people, mostly virtually and most of -- many of people on this call as well as other investors, rating agencies and key stakeholders. Now this word cloud attempts to capture some of the issues, themes, opportunities and concerns we've heard from all of you. The larger and bolder the font, the more the issue was emphasized. And our plan today is to address most, if not all, of these issues during this conference here together. Now as a leadership team, we've worked together to develop our key priorities for the coming years. First and foremost, we're focused on delivering on our commitments, including achieving operational excellence and delivering financial results that are consistent with our goals. Next, we're committed to continue building a culture of innovation and performance to attract and retain a diverse and talented workforce. This also means a culture of accountability. When we say we're going to do something, we need to deliver. We know we must also invest in the future today, using our ESG+F framework to help prioritize our investments in innovation, excellence and efficiency to benefit our customers, communities, employees and shareholders. We're also focused on maintaining the strong financial position. From a balance sheet perspective, credit metrics and liquidity. In the energy transition, the strong will have more options and more opportunities. And lastly, we need to successfully close the PNM Resources merger in 2021. Delivering in these areas is key to leading the energy transition in the U.S. This is what the new AVANGRID is all about. Now our ESG+F framework is integral to AVANGRID's strategy, and it's how we'll differentiate ourselves in the future. If you want to be the leading sustainability energy company in the U.S., you need to aspire to be great, and you need to set bold and ambitious goals. And while we're still working on finalizing these goals, this slide gives you a glimpse to the types of initiatives and objectives we're developing. Our plan is to share more details in the second quarter of 2021 with you. Now one thing I did want to share is the progress we're making in the area of diversity on our leadership team. Over the last 100 days, we've hired or promoted from within 14 people on our leadership team, of which 70% are women or people of color. And of that group, 60% are women. Now we have a long ways to go, but we're definitely moving in the right direction, and I'm totally a champion of this. Now I want to briefly touch on our recently announced transaction with PNM Resources. This is a strategic transaction that furthers our growth in both clean energy distribution and transmission businesses, and it's going to help expand our growing leadership in renewables. The transaction has an enterprise value of approximately $8.3 billion with our all cash offer of $50.30 for each share of PNM resources. This is a great fit for AVANGRID for the following reasons. First, we expect this transaction to be EPS accretive in the first full year, possibly more than 3% accreted, depending upon the final funding mix. Second, it increases the share of regulated earnings to over 85%, providing predictability and visibility to our future results. It also adds geographic and regulatory diversity to our existing portfolio. Finally, both AVANGRID and PNM Resources are built on strong commitments to ESG+F, including carbon neutrality goals. This truly is a win-win outcome for all our shareholders and stakeholders. The resulting company is going to have assets of over $40 billion, 10 regulated electric and gas utilities with a strong distribution and transmission footprint in 6 different states and significant growth prospects. We project to have approximately $14.4 billion in combined rate base, serving nearly 4.1 million customers and 9 million people in this nation. And the combined adjusted net income based on 2019 results would have been about $846 million. The new AVANGRID will be very well positioned to lead the clean energy transition and to deliver long-term sustainable growth for our shareholders in both regulated networks and contracted renewables. Now the merger transaction is subject to approval by federal and state authorities, including regulatory commissions in New Mexico and Texas. And we'll be working closely with the PNM Resources team to obtain the required approvals, and we expect to close the transaction in the fourth quarter of 2021. Now I want to turn to our guidance for 2021 and our financial outlook for 2020 to 2025. For purposes of this presentation, we're including PNM in our projections starting in 2022 with a full year of earnings in our consolidated outlook. The information for PNM is based on both public and internal information. Let me start with CapEx. Over the next 5 years, our future growth will be driven by a disciplined capital investment plan of over $20 billion through 2025. And these investments in regulated and contracted businesses are going to generate predictable earnings and growing cash flows. We expect to grow our investments over time with an average annual investment of $4.5 billion in the period of 2023 through 2025, following the PNM consolidation. In networks, we'll invest $12.4 billion approximately, including investments for PNM and our NECEC transmission project, advanced meter infrastructure, grid resiliency and other transmission projects. And in renewables, we're going to invest over $8 billion, including our 50% share in the first large-scale offshore wind projects in the U.S. of Vineyard Wind and Park City Wind. An important part of our capital plan and our improving financial performance is related to our networks business. We've spent a lot of time over the last 3 months, focusing on why we weren't earning our authorized returns on equity in both New York and Maine and how we could change that going forward. And Tony is going to get into more details about our road map to authorized ROE. But the focus is on implementing our rate plans, improving reliability and resiliency, enhancing operational efficiency and customer satisfaction and leveraging big data in automation to make better decisions. It's a lot of work, and it's not going to happen overnight, but we have plans and how to improve, and we're going to be focused on this, and now it's time to perform and deliver results. And over the next 5 years, we expect rate base, including PNM to grow roughly 14% annually from 2020 to 2025 or nearly 90% from $10.9 billion to $20.6 billion. From 2022 to 2025, we expect annual growth of approximately 6% through 2025. These investments will help us operate more efficiently, improve our reliability, improve our customer service and satisfaction and help generate more predictable earnings in the future. Now in renewables, they're equally exciting prospects over the next 5 years. Our focus is on the development and converting our identified 20 gigawatt pipeline into contracted projects and improving the operating efficiency of our existing fleet of renewables. In addition, our goal is to reduce our overall merchant exposure from our existing portfolio and to deliver on our exciting offshore wind prospects that Alejandro is going to talk about. Over the next 5 years, we expect to grow our renewables business and diversify our mix by making significant investments in solar and offshore wind, delivering additional contracted capacity of 5.6 gigawatts. And with these additions, we'll reach a total installed capacity of 13.2 gigawatts by 2025. That's an increase of approximately 74% compared to 2020. And by 2025, our portfolio will be more diverse, with solar increasing from roughly 2% of today's installed capacity to 19%. And offshore wind will make up approximately 12% of the capacity mix. Vineyard Wind and Park City are planned to reach COD in 2024 and 2025, respectively. These are the drivers behind our 2021 guidance and our financial outlook through 2025. Again, we've included a full year of expected earnings from PNM in 2022 and through 2025. Now in order to give a frame of reference for our expected annual growth in the future, we're using a rebase 2020 adjusted EPS as the starting point for our compounded annual growth rate or CAGR assumptions. So to calculate the rebase 2020 starting EPS, we're simply taking the midpoint of our 2020 outlook of $1.90 to $2 per adjusted share of EPS or $1.95 per share. And we're adding back roughly $0.10 of tax impacts and another $0.05 of other impacts, partially offset by asset sales. This gives us a 2020 adjusted EPS reference base of $2.10 per share. Now our guidance for 2021 adjusted EPS is a range of $2.15 to $2.35 or about 7% growth to the midpoint of that range from the 2020 reference base of $2.10 per share. The guidance assumes the major assumptions identified on the slide and also assumes that any equity associated with the PNM transaction isn't issued until the end of 2021. Once we fully consolidate PNM Resources in 2022, we expect the combined earnings range of $2.36 to $2.60 per share in 2022, assuming the transaction closes by the end of '21. This would represent close to $1 billion adjusted net income by the end of 2022. We also expect to continue to grow the company -- the combined company going forward, adjusted earnings per share at a 6% to 8% CAGR from 2020 to 2025. And also at a 6% to 8% range from 2022 to 2025 with P&L. We'll maintain a strong balance sheet, and after the merger with PNM, our regulated earnings will represent over 85% of the total. Now let me turn for a moment to our dividend strategy. Our financial outlook assumes that we are going to maintain our current annual dividend of $1.76 per share for 2021 and 2022, subject to Board approval. And going forward, we're targeting a 65% to 75% payout ratio over time, which we expect to achieve over the next couple of years. And as our earnings grow in the future, we'll have the opportunity to grow our dividend, consistent with our target payout of 65% to 75%, subject to Board approval. We know that our dividend is an important part of our overall shareholder proposition and that we need to keep competitive with the market over the long term. Now I know that many of us are probably still recovering from staying up late on election night, and you might be wondering, well, how is the final outcome going to impact AVANGRID? Well, we don't know the final results yet. But regardless of who wins the election, the energy transition is going to continue. Renewables demand is expected to increase as costs for renewable technologies continue to decline. Customer connectivity and enhancing the grid with distribution and transmission investments is going to continue to be critical to support this transition and to provide safe, reliable and affordable energy to our customers. AVANGRID is in the right place at the right time. And we expect the election regardless of who wins the presidency to be a win-win outcome for our customers, our company and our shareholders. So with that, I'm now going to turn it over to Tony Marone, the President and Chief Executive Officer of AVANGRID Networks. Tony?

Thanks, Dennis. I'm excited to share our strategy for driving growth in the Networks business. Networks is responsible for safely operating, maintaining and investing in the infrastructure, which -- of our 8 utilities, representing about 3.3 million customers and a population of about 7 million. Our current service territory includes portions of New York, Maine, Connecticut and Massachusetts. We're very excited about the addition of PNM Resources to the Networks family. We anticipate this transaction will add value for customers and all stakeholders as we expand operations and invest across our larger geographic footprint. Everything we do in networks is centered on serving our customers and improving the customer experience. This is the guiding principle across each of our operating companies, and it shapes and establishes how we safely operate and maintain our energy delivery systems every day, how we plan and invest in the infrastructure and new technologies to modernize our grid, making it more reliable, resilient and secure. And how we develop innovative solutions to meet the needs of our customers and the environment by enabling the transition to a clean energy future across all the regions we serve. Moving on to Slide 29. Our top priority in networks is to ensure the safe and reliable operation of our energy delivery systems. We do this by placing customers first as we plan, operate and invest in our infrastructure. By ensuring our people have the right tools and training necessary to perform their job, effectively executing our storm response plan, by sharing our strong capabilities across the region and leveraging innovative solutions and modernizing the grid to enable electrification and executing on investments that improve reliability and resiliency, working collaboratively to champion state climate policies and clean energy pilots. Moving on to Slide 30. Tropical storm Isaias offers us a recent example of our focus on meeting customer needs through operational excellence. Additionally, it showcases the AVANGRID advantage of being able to leverage resources and capabilities across our entire organization. The damage from this storm was significant, and it impacted all of our utilities in New York, Connecticut and Maine. I'm extremely proud of our team, how they came together to place our customers first. We effectively implemented our storm plans across each of the companies to make sure we restored power to customers quickly and safely. We worked -- we planned the work and then we worked the plan. This included early and ongoing monitoring of the weather forecast, extensive customer and media outreach, mobilization of our employees and contractors and deployment of mutual aid and internal support from across our entire organization. I'm happy to report substantial completion of customer restoration at each operating company was achieved earlier than the guidelines established for this level event in our storm response plans. We achieved this despite the challenges presented by our COVID operating restrictions. Our storm response is a true testament to our teamwork and overall commitment to our customers. As is typical with storms of this magnitude, we're now participating in regulatory proceedings in Connecticut and New York to review our performance. We remain fully confident that those reviews will validate the performance and the many improvements that we have deployed. On Slide 31, you see the Networks CapEx out over time. The investments in our rate plans are targeted to improve safety and reliability, harden our infrastructure and enable a clean energy future. As shown in the bar charts, the majority of these investments are in our electric companies, including AMI in New York, reliability and resiliency projects, modernization of substations. Drivers across the gas business include replacement of aging infrastructure and the continuation of leak-prone pipe replacement programs. These investments will ensure that current needs are being addressed, while also creating the foundation our customers will need for tomorrow. Moving on to Slide 32. The Networks rate base investment shown on the previous slide, drive our rate base growth, producing approximately a 14% CAGR over the 2020 to '25 period, including the addition of PNM Resources. The largest rate base growth is planned at our NYSEG and RG&E Opcos, as detailed in our pending joint proposal agreement in New York. On to Slide 33. Dennis had mentioned the road to authorized ROE. And for us, delivering value for all of our stakeholders includes a commitment to operate our business aligned with approved regulatory decisions, including earning our authorized ROEs. Our path to authorized ROE incorporates customer and clean energy commitments while improving the predictability and sustainability of results. Achieving this outcome is built on 4 strategic pillars; operational excellence, improving our quality of supply, accountability and governance and planning and execution of our rate case strategy. Beneath each pillar are numerous ongoing initiatives designed to deliver results and improve our financial performance. For example, within operational excellence pillar is our One networks initiative. This program is designed to build a strong and fully integrated networks organization that will deliver top-tier quality and customer service that meets or exceeds stakeholder expectations and deliver efficiency and improve results to the company by transforming operational and management processes. Detailed initiatives will focus on such areas as resource planning, process optimization, our contracting models, cost management, storm processes and more. On to Slide 34. Just as an example, within our networks quality of supply effort, we're advancing actions on our short-term worst-performing circuits. These strategies to improve reliability of our systems have several targeted initiatives, focusing on things such as prioritization of vegetation management, increasing the installation of reclosers and animal guards to protect animal -- circuits from animal contacts. Additionally, our medium- to long-term health asset strategy focuses on identifying infrastructure issues before an asset fails and rectifying those to limit customer impacts. Our focus is to reduce the impact of outages on our customers by lowering the frequency of unplanned outages and minimizing their duration when they do occur. This will reduce operational impacts and costs, maximize the value of our investments and ultimately, reduce customer exposure to outages. As mentioned earlier, our top priority is the safe and dependable delivery of energy that our customers rely on. We also recognize, though, that the importance of looking to the future to evolve and modernize our systems to enable a smarter and cleaner energy future. These are a few examples of the many areas of innovation and exploration that we are focusing on, from energy storage pilots, advancement of EV charging programs, support and collaboration with major universities, to defining the technology platforms necessary to modernize our grid for better customer reliability with new energy products and services in the markets that are needed to support them. Moving to the next slide. We see a bit deeper dive on some of the EV programs and pilots underway across our networks operating companies. We view our role as an enabler of the electrification of transportation. Our primary objective is to ensure our delivery infrastructure is ready and able to support charging and access points where customers require them based on EV adoption and endpoint charging market maturity. We do this through make-ready investments and shaped by collaborating with all the stakeholders who are part of the value chain. To further enhance our capabilities in this space, I'm happy to report we've recently signed a Memorandum of Understanding with EV Connect. This partnership will help us collaborate on forecasting EV load impacts support our utility make-ready programs and assist us our efforts to electrify our fleet vehicles. On to Slide 37, another angle of the focus that we have is our agility on AVANGRID's core values, and it drives our passion for innovation. We're constantly seeking to innovate with a purpose, to enhance our performance, become more efficient and improve the overall customer experience. One area where we're leveraging innovation is to enhance decision-making and troubleshooting, reducing outage restoration, time and cost. We're leveraging innovative approaches across our business to better serve our customers, including new technologies that enhance system monitoring of key operating characteristics, to identify trouble spots, to be able to better estimate time of restoration predictions for outages and using machine learning that targets technologies for the optimal deployment of vegetation resources. Additionally, in our customer service area, we're deploying robotics, or bots. This technology uses computer coded software that enables automation of repetitive rule-based processes. These enhancements have successfully increased efficiency and already improved service to customers. Dennis mentioned before, and I think it's important to reemphasize this point, we believe natural gas has an important role to play as an enabler of our clean energy future, and we remain committed to providing safe and reliable gas service. We are well positioned to ensure our delivery infrastructure is prepared for the future. This is accomplished by continuing to make investments to support safety and reliability of our systems, by meeting ongoing customer demand for natural gas as a clean and economical energy choice, an enabler of renewable penetration. We also recognize that renewable natural gas and hydrogen can enhance the value and cleanliness of the gas supply. As such, we're exploring those opportunities through pilot projects, partnerships and collaborations. For example, at NYSEG, we currently have 3 RNG locations in New York that are currently under development. Moving on to Slide 39. We can see here that transmission investments play a critical role in enabling states to achieve their ambitious RPS goals. Interconnecting large amounts of renewable power within the next 10 years, it will require significant transmission development to avoid curtailments and to maintain the highest level of reliability for our customers. We have a dedicated team and a well-disciplined investment approach to evaluate potential opportunities and help grow our transmission portfolio, both in and outside of our incumbent areas. We are in an excellent position to leverage our unique expertise such as IBERDROLA's HVDC experience and collective experience on our own NECEC project to propose creative ideas in our core markets as well as in new areas. This use of DC technology will enable larger amounts of renewable power to interconnect into the regions with little environmental impact. Thank you, and I will now turn it over to Bob Kump, Deputy Chief Executive Officer and President of AVANGRID, who will give you an update on the NECEC transmission project.

Well, thank you, Tony. Good afternoon, everyone. I'm truly pleased to report that we have made excellent progress on NECEC this year and expect to begin construction shortly on this critical clean energy project for the region as states all across the Northeast looks to decarbonize and meet their renewable energy goals. NECEC is the largest clean energy project in New England, and it will help ensure that we have fuel diversity, system reliability and lower costs for consumers. Nearly 9.5 million megawatt hours of clean energy will be injected annually into New England once this project enters commercial operation in 2023. This represents about 10% of New England's electricity needs and almost 80% of Maine's. And NECEC will reduce carbon emissions by over 3 million metric tons per year or the equivalent of taking 700,000 cars off the road. This project will also provide significant economic stimulus to the region at a time when it is needed most, providing an estimated $560 million in GDP growth, and 1,600 jobs for Maine over the construction period. And $450 million in electricity price savings in Maine and nearly $4 billion for the region over the 20-year PPA period. So clearly, NECEC is a win-win for Maine and for New England. Now as I said, and as you can see on the right-hand side of this slide, we have made great progress this year moving the project through the permitting phase, including just yesterday when we received the U.S. Army Corp. permit. This is the last permit needed to start construction. Now we're awaiting the approval of the transfer of our Maine DEP permit from CMP to NECEC and plan to start construction in early December. The only remaining permit is a Presidential Permit from the DOE. And that's to cross the border into Canada, which we expect in the next 60 to 90 days. But as I've said, that permit is not needed to start construction. Now from a financial perspective, on this slide, we've included the key PPA details for you to model the expected revenues from this project. In total, we expect to invest about $950 million, excluding AFUDC and have invested over $100 million so far. Now 1 point I want to emphasize is that the return on this project will not have a revenue and income trajectory that you would typically see for a traditional rate base investment. The way the TSA pricing was negotiated, revenues and income in the early years will be less than what you would typically see with a rate base investment. But this will reverse over time as there are escalators in the contract price. While in a rate base scenario, returns would decline as the assets depreciated. So you should expect to see a decline in earnings in the first full year when the project goes commercial operation as revenues based on the initial contract pricing will be less than AFUDC recorded in the last year of construction. So what are our priorities as we look ahead to the next year or so? Well, as I said, we expect to start construction shortly. We're mobilizing our construction contractors as we speak. And the last step is the transfer of the main DEP permit from CMP to NECEC, which we expect to be completed later this month. Now that we have the Army Corp. permit, we expect the DOE to put its environmental assessment out for public comment for a 30 day period, after which we would expect the permit from the DOE within 30 to 60 days. Meanwhile, we will continue to focus on communicating with Maine consumers on the many environmental and economic benefits that this project will bring to the state. There has been a lot of misinformation spread by opponents to the project, which, quite frankly, has created significant confusion. But by beginning construction, we will be able to visibly demonstrate the tangible benefits that the project will bring to Maine, including jobs and hundreds of millions of dollars in economic stimulus at a time when the state needs it most. So I'd just like to end my remarks by thanking everyone on the NECEC team. They've done a tremendous job this year in steering the project to where it is today in a very challenging environment. And I truly look forward to reporting back to you as construction progresses. So with that, I will now turn it over to Alejandro de Hoz, President and CEO of AVANGRID Renewables, to discuss some of the exciting projects we have going on in our renewables business. Thank you.

Thank you, Bob. Good afternoon, ladies and gentlemen. I'm going to share with you today why we strongly believe AVANGRID Renewables is ideally positioned to deliver significant growth over the next 5 years and how we plan to continue as leaders in the U.S. renewables sector. We will leverage our existing footprint and track record and drive the evolution of renewables by investing in innovative technologies and value-added solutions. With 7.6 gigawatts of consolidated renewable generation, AVANGRID Renewables is the third largest onshore wind and solar player today. We have strong development expertise, solid client relations in origination and a track record of efficient construction and operations of our assets. These ambitions are well supported by a pipeline of around 20 gigawatts of onshore wind, solar and offshore wind, giving us visibility on our growth plans for the next 5 years. Onshore, we are building a more diverse portfolio with solar taking an increasing share of our growth. Our development capabilities and stakeholder relations places us ideally to be successful in this technology. Offshore wind plays a key role in our growth strategy and will be one of the drivers of long-term value creation for our company. AVANGRID Renewables is a leader in U.S. offshore wind with 1,600 megawatts of signed PPAs through our joint venture with Vineyard Wind. And we are delivering the first large-scale offshore wind project in the U.S. And thanks to our expertise with firm and shaped products in the northwest through our balancing authority, we are able to bring unique solutions to our customers. So what is our starting point? AVANGRID has an excellent platform for growth, and we are in a great position to be the leading sustainable energy company in the U.S. Our geographic diversity is a strategic advantage for our growth as the different wind regimes and electricity markets where we present, bring stability to our earnings. We have stronger presence in 3 areas: the Pacific Northwest, South Texas and MISO, where we concentrate half of our installed capacity. We benefit from economies of scale and we leverage our strong relations with customers and communities. We took the strategic step to be our own balancing authority in the Pacific Northwest, where our Klamath thermal plant plays a fundamental role. We also have energy management capabilities in all the markets in which we operate another added value for our customers. So let's shift to the landscape for renewables overall. Technological improvements, increasing efficiency and decreasing costs have led to a dramatic reduction in levelized cost of energy over the last decade, making new wind and solar generation not only a bet for sustainability, but the right economic decision for an ever-expanding group of customers. In addition, state renewable portfolio standards as well as increased interest in corporate social responsibility and sustainability goals have driven up demand. AVANGRID is already well positioned to take advantage of these favorable trends and succeed even in an increasingly competitive marketplace. So diving into our competitive advantages. In renewables, we follow a rigorous characterization process of our pipeline, focus on aligning permitting, grid access certainty, technical definition and route to market. Within our 20 gigawatt pipeline, we have 1.4 gigawatts of onshore projects that are under construction or secured to be built in the next 2 years, and an additional 7.5 gigawatts with enough confidence to easily source our targeted growth in solar and onshore wind through 2025. This onshore pipeline covers the key markets in which we will focus in the growth in next years, including the Southeast, where we intend to increase our solar presence. Offshore, our share of Vineyard Wind and Park City Wind projects accounts for 800 megawatts of secured pipeline. And we have additional 4.2 gigawatts with high level of confidence to be delivered in the next decade. We have clearly defined our priorities to deliver growth in the coming years. The slide is self-explanatory, but I would like to emphasize the relevance of the human capital as a fundamental pillar to our success. To ensure we deliver on those priorities, we are building the best-in-class team by growing our talent in all areas of our business, attracting developers, originators, engineers, project managers, or field technicians in the different technologies in which we want to excel. We have developed a plan that reflects our confidence in being a key player in the renewable energy transition in the U.S. and we are investing behind our capability to deliver and execute on that plan. After sustained growth of 1.5 gigawatts since 2018, Our renewables portfolio will reach 7.6 gigawatts of consolidated capacity at the end of 2020. In the next 5 years, we expect to add 5.6 gigawatts to reach a total consolidated capacity of 13.2 gigawatts by 2025, an increase of 74% compared to 2020 figures. With the strategy to build a more diverse portfolio, we will continue to steadily increase our onshore wind fleet while boosting our growth in solar and offshore wind throughout the '21, '25 period. In the next 2 years, despite the challenges that we are all facing due to COVID, we will add 1.6 gigawatts of wind and solar projects to our operating portfolio. And over the 3-year period, '23, '25, we plan to add new 4 gigawatts of installed capacity, including the 1.6 gigawatts of offshore wind from the Vineyard Wind and the Park City Wind projects, both consolidating capacity in 2024 and 2025, respectively. With these additions, our portfolio will be more diverse by 2025, with solar increasing from 2% today to 19% at the end of the period and offshore wind entering our mix with 12% of our consolidated capacity by the end of 2025. And this growth will be achieved by investing over $8 billion between 2021 and 2025, with $3 billion in our offshore wind projects and around $1 billion per year in onshore wind and solar. Over the next 2 years, we plan to invest a total of $2 billion with solar being the key driver with 55% of our new capacity investments. And between 2023 and 2025, we plan to invest the remaining $6 billion with offshore wind accounting for half these investments over these 3 years with [ accumulated ] amount of $3 billion, which represents our 50% share of those 2 projects. And as we grow, we plan to reduce the volatility of our earnings by reducing our merchant exposure, our goal is to increase contracted generation to a range between 85% and 95% from the current 75%, 85% range. With our expected growth through contracted assets and despite 1.2 gigawatts of existing PPAs terminating over the period, we expect our merchant exposure to decrease to around 10% by the end of 2025. Looking at further reducing that exposure, we will continue delivering on our strategy of closing multiyear contracts and existing assets with expiring PPAs. And we will also explore the possibility of delivering renewables generation to Iberdrola's retail operations in Texas and Pennsylvania as their business grows. I mentioned innovation at the beginning of the presentation. Success in the renewable energy industry is impossible without a deep commitment to continuous innovation. And our approach is to innovate in every aspect of our business. Our strong position in onshore wind is a result of this commitment, and we are applying the same principles to deliver on our technology diversification whether it is solar storage, offshore wind or hybrid solutions. And I will move directly to illustrate specific samples of this in the next slides. By combining storage with solar or wind as well as co-locating new solar installations at operating wind farms, we generate efficiencies in time and cost for project development and construction. This enables us to lower cost and create shape and tailored products for our offtake clients to meet their specific needs. We have already executed one colocated solar and storage PPA for our Camino project in Southern California, and we continue to pursue additional storage colocation opportunities and capitalize on our global experience to ensure value generated investments based on solid fundamentals and acceptable levels of risk. And on solar and wind combinations, we are currently developing 500 megawatts of solar projects that will be operational in '21 and '22, which benefits from the existing infrastructure of operating win assets. Moving into offshore wind. This is a truly exciting new clean energy sector that is emerging rapidly due to its ability to deploy at scale, create jobs and economic development benefits and help states meet their climate goals. Our Vineyard wind project is establishing the pathway for permitting offshore wind in the U.S. and is well underway with contractors engaged in manufacturing activity. And Park City Wind is following behind. We continue to pursue near-term growth opportunities through the Vineyard Wind joint venture. On October 20, Vineyard Wind submitted bids for up to 1,300 megawatts to the New York Energy Research and Development authorities competitive offshore wind solicitations. If selected, the Project Liberty Wind will be the largest offshore wind project in the United States and one of the largest in the world. States along the East Coast are seeking a staggering 30 gigawatt of offshore wind capacity by 2035. And with our additional lease areas, we could add to our already awarded 1,600 megawatts as much as 6 gigawatts of offshore wind to customers in the Northeast and Mid-Atlantic. In the Northeast, the 2 Vineyard Wind joint venture leases areas are strategically located to respond to 3.4 gigawatts of near-term solicitations in New England and the expected 1 gigawatt of annual solicitations from New York. And in the last year the market for offshore wind on the Atlantic coast has continued to advance. This is especially true in the Mid-Atlantic region where Virginia has declared 5.2 gigawatts of offshore wind in the public interest. And our Kitty Hawk lease area is extremely well positioned to contribute to this opportunity by delivering up to 2.5 gigawatts to serve both Virginia and North Carolina markets. And with excitement that offshore wind development normally generates, I close the renewable section, and I turn things over to our CFO, Doug Stuver. Thank you very much for your attention.

Thank you, Alejandro, and good afternoon, everyone. I realize it's late in the day, and there have been several other earnings calls today, plus EEI is fast approaching. So thank you all for joining us on this very busy day. I'll start out on Slide 57 by providing an overview of the financial management strategy we are following to support our strategic and operational plans. Dennis has outlined earlier in our presentation, AVANGRID's ESG+F strategy with the +F being a new dimension to most of you. The F component represents financial performance and is critically important. I'll go into that more on this slide. To enable the F, we're following a sound financial management strategy revolving around 4 key areas. The first area is maintaining a strong financial position. Specifically, we're focused on having solid investment-grade credit ratings to support the important strategic and operational initiatives in the Networks and Renewables businesses. The second key area is financing our growth CapEx. Our focus here is executing our financing plans at attractive rates and with structures that support our business and financial objectives, including continuing to use sustainable financing. The third area is enabling liquidity and sustainable dividends. As we grow our businesses, we will ensure that we maintain our strong liquidity with access to working capital through bank lines of credit, commercial paper, and a credit facility with our strong parent company, Iberdrola. We're also continuing to target a 65% to 75% dividend payout ratio over time, subject to our Board's approval. Finally, the fourth key area is growing and consistent financial performance. The PNM transaction and our organic investment opportunities provide us with significant opportunities for growth and ESG leadership with a 6% to 8% EPS CAGR from 2020 to 2025. Moving to the next slide. As Dennis mentioned, we've been busy preparing our financial forecast and developing detailed and thorough strategic and operational plans that will drive their execution. Over the period from 2020 to 2022, we expect our adjusted net income to grow from a rebased level in 2020 of approximately $650 million or $2.10 per share to between $0.9 billion and $1.0 billion. Roughly 96% of this growth will come from our Networks business, driven by our exciting merger with PNM Resources, along with entering the second year of the New York rate plan and removal of the management efficiency adjustment in central power. This growth also reflects our continued progress on the road to authorized returns that Tony covered earlier. Renewables is expected to grow approximately 10% from 2020 levels, reflecting continued investment to build on our strong position in U.S. onshore wind and expansion of our footprint in solar. And then corporate is expected to contribute a minus 6% to AVANGRID's growth through 2022 due to additional debt. I also want to highlight on this slide though, the high percentage of Networks adjusted net income within AVANGRID's business mix. We start in 2020 with a very solid 90%, and we expect this to grow even higher to 92% by 2022, in part aided by the PNM merger. This allows AVANGRID to benefit from predictable and reliable cash flows and gives us a solid platform to continue to grow our renewables onshore and offshore business. Moving to the next slide. We show our sources and uses of funds for the 2020 to 2025 forecast period. Over that time, we expect to generate or raise approximately $31 billion to fund our growing networks and renewables businesses. Cash from operations will provide almost half of that amount and another 7% will come from net contributions from noncontrolling interest related to our tax equity financing. We expect to raise about 1/3 of our funding needs to support AVANGRID's organic growth initiatives through financing in the capital markets. Another 14% will be the funds raised through the debt and equity markets to execute the PNM Resources merger. As we indicated on our third quarter earnings call, for purposes of modeling the PNM Resources accretion estimate, we assumed approximately $700 million of debt financing and $3.6 billion of equity, although the actual financing plan could differ from this. We anticipate using almost 3/4 of these funds for our own organic capital investments in the Networks and Renewables businesses, including the NECEC project and our investments in offshore wind, plus 14% for the merger and the remainder primarily for dividends. Moving to Slide 60. Sustainable financing will continue to be a critical part of our fundraising and reflects our commitment to the ESG+F framework. In addition to standing as one of the largest green bond issuers in the United States, we also have a $2.5 billion sustainable credit facility with a pricing mechanism linked to our reductions in our emissions intensity. With our growing renewables portfolio, we'll continue to use tax equity financing for our projects. To date, we've issued approximately $600 million in tax equity financing and estimate an additional $2 billion to fund wind and solar projects in our forecast through 2025. On Slide 60. We'll stay focused on enhancing our credit metrics and maintaining strong liquidity as we fund the exciting growth opportunities in our business, such as the NECEC transmission project; offshore and onshore renewables projects; and the safety, reliability and resiliency investments in our networks business. Through the forecast period our debt to total capital ratio increases somewhat, but remains at a strong level. Our cash flow metric of cash from operations, pre-working capital to debt, is expected to improve, and we're targeting a greater than 14.5% ratio. The strategic and operational plans we discussed today, such as our rate cases and the road to earning our authorized ROE contribute to the strengthening of these ratios over time. In addition, the merger with PNM will further strengthen our business mix profile by adding regulated businesses that bring geographic and regulatory diversity. Finally, as I've mentioned, we will enhance access to our already strong liquidity to facilitate and provide financing flexibility for our [ plants. ] We currently have liquidity facilities totaling $3.5 billion, and we'll consider what additional liquidity may be needed post PNM closing. Slide 62 highlights our current credit rating for AVANGRID and all of our subsidiaries. Those are in the A to high BBB range. We reiterate our commitment to maintain solid investment-grade credit ratings with the intention to support that credit rating as necessary to maintain mid- to high BBB level ratings. With that, I want to thank you all for joining us today. We look forward to taking your questions during our Q&A session, and I'll now turn it over to Patricia to provide instructions.

Thank you, Doug. Thank you again for listening, and we are now going to take a short 3-minute break before the question-and-answer portion of our day. Following the question-and-answer segment, Dennis will return to provide closing remarks. At this time, from members of the investor community wanting to ask the AVANGRID executive team a question, please use the participant dial-in which was previously provided. [Operator Instructions] Thank you, and we will resume in a few minutes. [Break]

Ladies and gentlemen, welcome back to AVANGRID's Virtual Investor Day. [Operator Instructions] Your first question today comes from the line of Insoo Kim with Goldman Sachs.

Just my first question is on the guidance for 2022 range. What type of -- I guess, what range of PNM accretion is embedded in that guidance range?

Yes. Good afternoon, and thanks for joining us today. What we've assumed is that just over 3% at this point in time. As Doug said -- and actually, we said on our third quarter call, and Doug reemphasized, we're assuming that there's roughly $3.6 billion of equity used as part of the transaction, $700 million of debt. So we're assuming just over 3% accretion.

Got it. And your confidence in earning your authorized ROEs over the next couple of years. Is that stemming mainly from just disciplined O&M management?

Let me hand it over to Tony, but I think it's a lot of different things. There's been a lot of work going on over time. And I think that what we've tried to do is break it down to the basics into small parts that we could tackle for each of the utilities. There's been a lot of really good work and analysis done. But I think it's really about grinding it out. I mean, none of this stuff is impossible. When you get a decision from a regulatory commission that you have an authorized return, you should be able to earn it. We've had some challenges, and we've got -- have some things, for example, at CMP, where we've had a 1% reduction or adjustment from a revenue standpoint. That doesn't go away until September of 2021. So we're working to continue to improve customer satisfaction and reliability. And we'll have the opportunity to have that go away in 2021, which obviously helps with the actual authorized ROE -- excuse me, actual ROE that we can earn relative to the authorized. But Tony, you may want to touch on that.

Sure. Thanks, Dennis. So I think you covered it well. But a lot of it is on operational focus, right? It's -- I'd mentioned in the slide, the 4 pillars. A lot of that is really focusing on our processes, our operational activities, how we manage our vegetation management, the overtime practices, and it goes on and on, but it's really about moreand more discipline in the business and aligning to the regulatory decisions, first and foremost. So we feel pretty good about the path that we're on to be able to achieve those authorized ROEs.

Understood. And on financing, I appreciate the details there in terms of PNM's acquisition and the potential equity that you would need for the offshore wind projects. But when you lay out your [ other] debt targets and all the different investments that you have through 2025, how should we think about the mix of debt and equity for investments outside of those couple of larger project or transactions?

Yes. Let me start on that, and I'll hand it over to Doug. The financial outlook that we gave you that includes the 6% to 8% CAGR in overall earnings assumes a different mix of, obviously, capital that we need to raise, and it was -- the total amount was outlined in the sources and uses slide that Doug gave. At this point in time, we're not going to break it down. But you do need to know that whatever the mix is that we're assuming is included in the 6% to 8% CAGR from an adjusted EPS standpoint. But Doug, I don't know if you want to add anything?

Yes. Thank you, Dennis. I'd just add, all of our assumptions are internally consistent in terms of the debt to total capitalization metric, the credit metrics, the adjusted net income and the EPS that Dennis mentioned. So everything is in alignment. And our focus is really maintaining a strong balance sheet, financing our business with supportive credit metrics and continuing to allow the company to grow in a very consistent and well-financed manner.

Your next question today comes from the line of David Arcaro with Morgan Stanley.

I guess maybe just following up on the last question a little bit. Can you talk a little bit about -- does your forecast assume that you're going to earn at the authorized level in each year going forward? Or is there a kind of pickup over time that you could describe?

Yes, David, it does not assume that day 1 in 2021, we start earning it. As the example that I gave on CMP, we've got a 1% adjustment on revenues that doesn't come off or we have the opportunity to take it off based upon performance in September of 2021 at CMP. And what we're assuming is that over the next couple of years, both in New York and in Maine, that we'll work to get to the authorized level. So it's not day 1, but it's a gradual improvement at all of our utilities, so that we earn at least the authorized.

Okay. Got it. And I was thinking maybe on the New York side of things too, obviously, Maine's got that little bit of a unique situation where you're in a bit of a holding pattern there. But as soon as you get new rates into place in New York, assuming the settlement gets approved, is that the enabling factor to get you to earn the allowed or is there still wood to chop to get there as you see it?

And Tony can obviously jump in here. Look, I think we've had some challenges with some penalties and things that we're working our way out of. So again, not day 1, we're not assuming in New York that we're going to be at the authorized. But I think over the next year or so, we're working towards, and we've got the programs and plans in place to get us there.

Dave, I'll just add. I like your expression, there's still wood to chop. Yes, there's still wood to chop. Especially when you think about it from the perspective of the vegetation management aspects of New York, one of the key drivers of our joint proposal is a significant increase in vegetation management programs. And that's going to be important in the overall success of the business. It's one of many pieces that are really fundamental for the JPA. But we've already started to ramp up the vegetation management in New York, and that really helps with the reliability, the impact of storms and so forth. So yes, a lot of wood to chop, a lot of things to do to. As Dennis said, that we've got a good solid plan on that road to earning our authorized ROEs.

Okay. Understood. I just also wanted to ask about the renewables outlook, and I'm thinking about the 2022 renewables proportion of net income. Could you just talk about that, if I'm understanding it correctly, at the midpoint around $150 million of adjusted net income, in the view of the historical performance, that segment and the growth that you had previously laid out? I know it was several quarters ago and hasn't been for a little bit now. But just how does that compare to the previous guidance and just the historical performance of the segment?

Yes, David, let me start, and I'll hand it off to Alejandro. I think as we said -- or I said earlier in my comments, we've taken, I think, a very exhaustive and holistic view of all of our businesses, including our renewables business, the assumptions that we've used in the past, what we're using in the future. And I think that going forward, the assumptions that we're using are -- there's never a guarantee in life, but we feel that they're realistic given current conditions, the portfolio that we have as well as the assets that we're adding to the portfolio in the future. Alejandro, you may want to touch on whether there's any additional color regarding how we think about the assumptions going forward.

Thank you, Dennis. So yes, I would just add that, I mean, our 2021 budget is done on a very thorough way and very much in line with our life-to-date expectation for our existing assets. We are obviously adding to that some capacity from the last couple of years, as you know. And then for 2022, we are going to see the benefit of 600 megawatts of additional assets in 2021. The 1,000 megawatts of additional assets in 2022 will not be really reflecting on the 2022 accounts. So I don't know if, Doug, you want to add something to add to that?

Yes. I would just add, Alejandro, that really, it's almost 1,000 megawatts when you think about the assets we put in service at the end of 2020 in addition to the 2021 assets. So we're getting quite a good capacity bump that's helping to drive that growth. And then going the opposite, we do have PPA expirations that somewhat mitigate that growth. So we think we've done a thorough look at how to best forecast our 2022 outlook considering all those relevant factors.

Your next question comes from the line of Sophie Karp from KeyBanc.

I have a couple of questions. I'll start by maybe asking you about the growth rate. I'm a little surprised to not be see a more detailed breakdown maybe between different business lines here, as far as what the growth rates would be. Can you maybe speak about your decision to not provide those breakdowns, so what was it driven by? And I'm trying to do some math -- on back of envelope math. It seems like the implied growth in the renewables business would be around 6% to 8% maybe to take you -- to get you over the 6% total growth rate given the mix. Is that in the ballpark? Like is that fair to say?

Well, Sophie, let me start with the first part of your question. We did give you some additional detail through 2022 by business segment. At this point in time, we're not going to give it for the rest of the financial outlook through '25. Look, we think it's important to deliver on our short-term commitments. That's what's going to build confidence and trust in whatever we give you going forward. So we're focused on delivering in '21 and '22 and setting ourselves up for future success through 2025. As we look at the 6% to 8% throughout that financial outlook period, again, there's been a lot of work that's been done to get comfortable with those numbers, to test them, to push them both on the network side and on the renewal side. So at this point in time, we're comfortable providing that information through 2022. And as we go forward, we'll be providing more information. But Doug, I don't know whether you want to focus on the rest?

Yes, just on your question, Sophie, about the growth rate. So through 2022, it represents roughly 5% to 6% per year, the compound annual growth rate is in that range. So I think that's a pretty reasonable and healthy growth rate considering the renewables capacity that we're adding as I mentioned in the earlier part of the discussion.

Great. And then my other question was about the acquisition rate. So I'm struggling to get excited about this acquisition, honestly, at this point. Could you maybe give us some color about -- well, a couple of areas there. First, why do you think that PNM is going to grow going forward, right? And maybe I just don't know the company that well, but that is one of the companies that struggled [ to cope ] historically. So could you give us more color on what's going to change there, right, going forward and maybe under your leadership? And secondly, you mentioned that this acquisition could help you to accelerate renewable deployment. But how exactly? Because you've been active in that region before the acquisition and what is exactly the connection between having a regulated footprint and growing your unregulated presence in that area?

Well, first of all, Sophie, I'm going to put on the hat for the New Mexico and Texas tourism agency. You got to go visit the states. They're wonderful states, great people, great food. So you got to get out there. But no, seriously, when we look at PNM, we're really excited. I think that, as I said, it's adding about 750,000 residential customers to our network platform. They're in 2 states that are prone to have good growth going forward. I think if you look at what's been going on in Texas and in New Mexico, and to a certain extent, PNM probably hasn't had the capital to grow as quickly as it would have wanted to. So I think being part of the AVANGRID family is going to be a benefit there. But I think the other thing from a strategic standpoint for us, it adds, as I mentioned before, geographic and regulatory diversity. I think it's good to have some assets outside of the Northeast. I think it helps with what's going on from an earnings standpoint because it grows networks more, which allows us for different reasons to continue to grow our renewables business fast and supports our balance sheet. So we're excited. We're going to be making our filings both in Texas and New Mexico before the end of the year, and we're in the process of working on those as well as all the federal approvals that are required. But we think it really does fit in well with AVANGRID and our strategy of being clean and connected. And we look forward to showing you in the future why it's going to be such a great acquisition and merger, excuse me. I don't sense your excitement. Sophie, come on.