Avangrid, Inc. (AGR) Q4 2023 Earnings Call Transcript
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Overview
The earnings call highlights operational improvements and strategic investments, such as Vineyard Wind's progress and increased rate base, which are positive indicators. The Q&A section reveals a focus on organic growth and O&M optimization, with management addressing challenges like the Connecticut regulatory environment. While some uncertainties remain, the overall sentiment is optimistic, particularly with the company's focus on infrastructure needs and financial metrics improvement. The positive operational achievements and strategic focus outweigh the concerns, suggesting a likely positive stock price movement.
Key Financial Performance
Earnings Per Share (EPS) $2.03 (19% growth year-over-year) due to operational excellence and successful rate case approvals.
Adjusted Earnings Per Share $2.09 (19% growth year-over-year) excluding $181 million from offshore wind gain and $37 million from tax benefits in 2022.
Dividend per Share $1.76 (no year-over-year change mentioned) reflecting commitment to shareholders.
Investments Approved $9 billion (new investments) including $7 billion in regulated investments and $2.3 billion for CLCPA Phase 2.
Positive After-Tax Impact from Rate Plans $136 million ($0.35 per share) recognized in Q4 2023 due to new rate plans in New York.
Maine Investments Approved $380 million (new investments) to improve safety, reliability, and resiliency.
Cash and Liquidity $3 billion in liquidity covering 15 months, supported by cash from operations and successful rate basis.
Green Bonds Issued $1.3 billion (new financing) to fund investments in growth.
Tax Equity Financing $1.2 billion (for Vineyard Wind) to monetize project ITCs and accelerated depreciation.
Operating Capacity Increased from 8.3 gigawatts to 8.6 gigawatts with 311 megawatts commissioned in 2023.
New Projects Under Construction 998 megawatts (all ready to build with PPAs) including 700 megawatts for data centers.
Tax Credit Monetization Up to $100 million from existing wind assets, successful execution of tax credit transfer agreement.
O&M Costs Positive $0.01 due to optimization and cost savings, offset by depreciation from new assets.
Credit Ratings All ratings on stable outlook, projecting stable credit metrics without the need for equity issuance in 2024.
Operating Highlights
New Projects: In 2023, Avangrid executed on its disciplined plan for selective and profitable growth in onshore renewables with over 300-megawatt installed capacity and 728 megawatts of new FIDs taken this year.
Power Purchase Agreements: Renegotiated three PPA contracts totaling 470 megawatts, increasing prices and avoiding more than $30 million of penalties.
Vineyard Wind 1: Significant progress in project construction with the first turbine successfully started in 2023.
Market Expansion: Received approvals for $9 billion investments, including multiyear rate case plans in New York and Maine, enabling over $7 billion of regulated investments.
Regulatory Approvals: First multiyear rate case for a utility in Maine in 15 years approved, allowing over $380 million of investments to improve safety, reliability, and resiliency.
Operational Improvements: Improved customer service metrics with 25 out of 31 metrics showing progress and best reliability performance since 2019.
Cybersecurity: Achieved a score of 97 out of 100 from Security Scorecard, surpassing average industry figures.
Strategic Decision: Decided not to proceed with the PNM Resources merger due to lack of final regulatory approvals, eliminating the need for previously announced equity issuance for 2024.
Diversity Goals: Reached target of over 35% women in executive positions.
Risk or Challenges
Regulatory Risks: The company faced challenges in obtaining final regulatory approvals for the PNM Resources merger, leading to the decision not to proceed with the merger.
Supply Chain Challenges: The company successfully terminated power purchase agreements for Commonwealth Wind and Park City Wind, avoiding billions in potential write-offs, indicating prior supply chain challenges.
Economic Factors: The company operated in a high inflation environment, which posed challenges but was managed through strategic rate case approvals.
Competitive Pressures: The company is focused on maintaining competitive pricing and operational efficiency in the renewable energy sector, particularly in light of lower wind generation output and decreased merchant prices.
Weather-Related Risks: The company acknowledged the impact of weather on wind resource availability, which can affect production and pricing.
Cybersecurity Risks: Despite achieving a high cybersecurity score, the company remains vigilant about potential threats and vulnerabilities.
Operational Risks: The company is focused on optimizing operational and maintenance costs while managing depreciation from new assets.
Guidance & Outlook
Investments Approved: Received approvals for $9 billion investments, including multiyear rate case plans in New York and Maine.
Rate Case Plans: New rate plans in New York have a positive after-tax impact of $136 million, or $0.35 per share.
Renewable Energy Projects: Executed a disciplined plan for selective and profitable growth in onshore renewables with over 300-megawatt installed capacity in 2023.
Cybersecurity: Achieved a score of 97 out of 100 from Security Scorecard, surpassing average industry figures.
Diversity Goals: Reached target of over 35% women in executive positions.
Vineyard Wind 1: Significant progress in project construction with the first turbine started in 2023.
Tax Equity Financing: Closed the first ever US tax equity financing of $1.2 billion.
2024 EPS Guidance: Introduced 2024 outlook ranges for EPS of $2.17 to $2.32, representing an 8% increase from 2023.
CapEx for 2024: Anticipating additional CapEx spending of over $600 million in 2024.
Dividend Policy: Targeting a payout of 65% to 75%, maintaining the annual dividend of $1.76 per share.
Financial Health: No equity issuance is assumed in 2024, focusing on maintaining stable credit metrics.
Revenue Expectations: Incremental revenues from rate plans primarily in Maine and New York.
Operational Focus: Focus on delivering results through strong financial performance and executing commitments in multiyear rate plans.
Shareholder Return Plan
Dividend per share: Avangrid paid a dividend of $1.76 per share in 2023.
Quarterly dividend: The board declared a quarterly dividend of $0.44 per share payable on April 1, 2024.
Dividend payout target: The company targets a dividend payout of 65% to 75%.
Share repurchase program: None
Key Q&A
Earnings Word Cloud
AGR Transcript
The earnings call highlights operational improvements and strategic investments, such as Vineyard Wind's progress and increased rate base, which are positive indicators. The Q&A section reveals a focus on organic growth and O&M optimization, with management addressing challenges like the Connecticut regulatory environment. While some uncertainties remain, the overall sentiment is optimistic, particularly with the company's focus on infrastructure needs and financial metrics improvement. The positive operational achievements and strategic focus outweigh the concerns, suggesting a likely positive stock price movement.
AGR Report
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