Avangrid, Inc. [AGR] Filings

10-Q 1 agr-20230930.htm 10-Q agr-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to i

Commission File No. 001-37660

Avangrid, Inc.

(Exact Name of Registrant as Specified in its Charter)


New York		14-1798693
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
180 Marsh Hill Road
Orange,	Connecticut	06477
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (207) 629-1190

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.01 per share

AGR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 25, 2023, the registrant had 386,770,915 shares of common stock, par value $0.01, outstanding.

Avangrid, Inc.

REPORT ON FORM 10-Q

For the Quarter Ended September 30, 2023

INDEX


GLOSSARY OF TERMS AND ABBREVIATIONS		3
PART I. FINANCIAL INFORMATION		4
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	75
Item 4.	Controls and Procedures	75
PART II. OTHER INFORMATION		77
Item 1.	Legal Proceedings	77
Item 1A.	Risk Factors	77
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	77
Item 3.	Defaults Upon Senior Securities	77
Item 4.	Mine Safety Disclosures	77
Item 5.	Other Information	77
Item 6.	Exhibits	78
SIGNATURES		79

GLOSSARY OF TERMS AND ABBREVIATIONS

Unless the context indicates otherwise, the terms “we,” “our” and the “Company” are used to refer to Avangrid, Inc. and its subsidiaries.


2023 Joint Proposal						Joint proposal of NYSEG and RG&E and certain other signatory parties approved by the NYPSC on October 12, 2023, for a three-year rate plan for electric and gas service with effective date November 1, 2023.
Adjusted Daily Compounded SOFR						The rate per annum equal to (a) the Daily Compounded SOFR for such U.S. Government Securities Business Day and (b) the SOFR adjustment; provided that if Adjusted Daily Compounded SOFR as so determined shall ever be less than the Floor, then Adjusted Daily Compounded SOFR shall be deemed the Floor.
Adjusted Term SOFR						The rate per annum equal to (a) Term SOFR for such calculation plus (b) the SOFR adjustment; provided that if Adjusted Term SOFR as so determined shall ever be less than the Floor, then Adjusted Term SOFR shall be deemed to be the Floor.
AOCI						Accumulated other comprehensive income
ARHI						Avangrid Renewables Holdings, Inc.
ARP						Alternative Revenue Programs
ASC						Accounting Standards Codification
Avangrid						Avangrid, Inc.
BGC						The Berkshire Gas Company
PBR						Performance-Based Regulation
CfDs						Contracts for Differences
CBP						U.S. Customs and Border Protection
CFIUS						Committee on Foreign Investment in the United States
CL&P						The Connecticut Light and Power Company
CMP						Central Maine Power Company
CNG						Connecticut Natural Gas Corporation
DEEP						Connecticut Department of Energy and Environmental Protection
DIMP						Distribution Integrity Management Program
DOC						Department of Commerce
DPA						Deferred Payment Arrangements
DPU						Massachusetts Department of Public Utilities
EBITDA						Earnings before interest, taxes, depreciation and amortization
ESM						Earnings sharing mechanism
Evergreen Power						Evergreen Power, LLC
English Station						The former generation site on the Mill River in New Haven, Connecticut
Exchange Act						The Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
FCC						Federal Communications Commission
FERC						Federal Energy Regulatory Commission
FirstEnergy						FirstEnergy Corp.
Form 10-K						Avangrid, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 22, 2023.
HLBV						Hypothetical Liquidation at Book Value
HSR						Hart-Scott-Rodino Antitrust Improvements Act of 1976
IRA						Inflation Reduction Act
Iberdrola						Iberdrola, S.A.
Iberdrola Group						The group of companies controlled by Iberdrola, S.A.
Installed capacity						The production capacity of a power plant or wind farm based either on its rated (nameplate) capacity or actual capacity.
ISO						Independent system operator
Klamath Plant						Klamath gas-fired cogeneration facility located in the city of Klamath, Oregon.
KW						Kilowatts
Merger						The merger of PNMR with and into Merger Sub on the terms and subject to the conditions set forth in the Merger Agreement, with PNMR continuing as the surviving corporation and as a wholly-owned subsidiary of Avangrid.
Merger Agreement						Agreement and Plan of Merger, dated as of October 20, 2020 and as amended and modified as of June 19, 2023 among Avangrid, PNMR and Merger Sub.
Merger Sub						NM Green Holdings, Inc., a New Mexico corporation and wholly-owned subsidiary of Avangrid.
MNG						Maine Natural Gas Corporation
MPUC						Maine Public Utility Commission
MtM						Mark-to-market
MW						Megawatts
MWh						Megawatt-hours
Networks						Avangrid Networks, Inc.
NMPRC						New Mexico Public Regulation Commission
Non-GAAP						Financial measures that are not prepared in accordance with U.S. GAAP, including adjusted net income, adjusted earnings per share, adjusted EBITDA and adjusted EBITDA with tax credits.
NRC						Nuclear Regulatory Commission
NYPSC						New York State Public Service Commission
NYSE						New York Stock Exchange
NYSEG						New York State Electric & Gas Corporation
NYSERDA						New York State Energy Research and Development Authority
OCI						Other comprehensive income
PJM						PJM Interconnection, L.L.C.
PNMR						PNM Resources, Inc.
PUCT						Public Utility Commission of Texas
PURA						Connecticut Public Utilities Regulatory Authority
Renewables						Avangrid Renewables, LLC
RDM						Revenue Decoupling Mechanism
RG&E						Rochester Gas and Electric Corporation
ROE						Return on equity
SCG						The Southern Connecticut Gas Company
SEC						United States Securities and Exchange Commission
Side Letter						A side letter agreement dated as of April 15, 2021 and as amended and modified as of July 19, 2023 between Avangrid and Iberdrola concerning items
SOFR						Secured Overnight Financing Rate
Tax Act						Tax Cuts and Jobs Act of 2017 enacted by the U.S. federal government on December 22, 2017
TEF						Tax equity financing arrangements
UFLPA						Uyghur Forced Labor Prevention Act
UI						The United Illuminating Company
UIL						UIL Holdings Corporation
U.S. GAAP						Generally accepted accounting principles for financial reporting in the United States.
VIEs						Variable interest entities

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Avangrid, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
(Millions, except for number of shares and per share data)
Operating Revenues	$	1,974	$	1,838	$	6,027	$	5,765
Operating Expenses
Purchased power, natural gas and fuel used	482		535		1,844		1,716
Operations and maintenance	924		758		2,319		2,102
Depreciation and amortization	303		279		868		811
Taxes other than income taxes	176		154		516		501
Total Operating Expenses	1,885		1,726		5,547		5,130
Operating Income	89		112		480		635
Other Income and (Expense)
Other income	42		18		96		38
(Losses) Earnings from equity method investments	(1)		2		5		261
Interest expense, net of capitalization	(107)		(76)		(301)		(226)
Income Before Income Tax	23		56		280		708
Income tax (benefit) expense	(8)		(50)		(17)		14
Net Income	31		106		297		694
Net loss (income) attributable to noncontrolling interests	28		(1)		92		40
Net Income Attributable to Avangrid, Inc.	$	59	$	105	$	389	$	734
Earnings Per Common Share, Basic	$	0.15	$	0.27	$	1.00	$	1.90
Earnings Per Common Share, Diluted	$	0.15	$	0.27	$	1.00	$	1.90
Weighted-average Number of Common Shares Outstanding:
Basic	386,869,341		386,736,774		386,788,279		386,724,035
Diluted	387,322,281		387,280,621		387,122,498		387,200,882

The accompanying notes are an integral part of our condensed consolidated financial statements.

Avangrid, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
(Millions)
Net Income	$	31	$	106	$	297	$	694
Other Comprehensive Income (Loss)
Gain for defined benefit plans, net of income taxes of $0 for the three months ended, and $0 and $3 for the nine months ended, respectively	—		—		—		8
Amortization of pension cost, net of income tax of $0 and $0 for the three months, and $1 and $0 for the nine months ended, respectively	—		—		2		1
Unrealized (loss) gain from equity method investment, net of income taxes of $0 and $(5) for the three months ended, respectively, and $1 and $(1) for the nine months ended, respectively	(1)		(13)		4		(2)
Unrealized gain during the period on derivatives qualifying as cash flow hedges, net of income taxes of $11 and $1 for the three months ended, respectively, and $22 and $1 for the nine months ended, respectively	30		3		62		3
Reclassification to net income of losses on cash flow hedges, net of income taxes $15 and $7 for the three months ended, respectively, and $39 and $13 for the nine months ended, respectively	40		19		107		36
Other Comprehensive Income	69		9		175		46
Comprehensive Income	100		115		472		740
Net loss (income) attributable to noncontrolling interests	28		(1)		92		40
Comprehensive Income Attributable to Avangrid, Inc.	$	128	$	114	$	564	$	780

The accompanying notes are an integral part of our condensed consolidated financial statements.

Avangrid, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)


	September 30,		December 31,
As of	2023		2022
(Millions)
Assets
Current Assets
Cash and cash equivalents	$	75	$	69
Accounts receivable and unbilled revenues, net	1,417		1,737
Accounts receivable from affiliates	5		5
Notes receivable from affiliates	3		3
Derivative assets	48		60
Fuel and gas in storage	197		268
Materials and supplies	279		235
Prepayments and other current assets	464		386
Regulatory assets	570		447
Total Current Assets	3,058		3,210
Total Property, Plant and Equipment ($2,663 and $2,707 related to VIEs, respectively)	32,068		30,994
Operating lease right-of-use assets	196		159
Equity method investments	514		437
Other investments	43		49
Regulatory assets	2,487		2,321
Other Assets
Goodwill	3,119		3,119
Intangible assets	290		281
Derivative assets	192		140
Other	419		413
Total Other Assets	4,020		3,953
Total Assets	$	42,386	$	41,123

The accompanying notes are an integral part of our condensed consolidated financial statements.

Avangrid, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)


	September 30,		December 31,
As of	2023		2022
(Millions, except share information)
Liabilities
Current Liabilities
Current portion of debt	$	55	$	412
Notes payable	952		566
Notes payable to affiliates	6		2
Interest accrued	103		66
Accounts payable and accrued liabilities	1,517		2,007
Accounts payable to affiliates	47		39
Dividends payable	170		170
Taxes accrued	61		61
Operating lease liabilities	15		13
Derivative liabilities	73		133
Other current liabilities	693		593
Regulatory liabilities	235		354
Total Current Liabilities	3,927		4,416
Regulatory liabilities	2,838		2,915
Other Non-current Liabilities
Deferred income taxes	2,406		2,234
Deferred income	1,013		1,062
Pension and other postretirement	450		491
Operating lease liabilities	197		161
Derivative liabilities	141		164
Asset retirement obligations	296		273
Environmental remediation costs	258		279
Other	566		563
Total Other Non-current Liabilities	5,327		5,227
Non-current debt	9,111		8,215
Non-current debt to affiliate	808		8
Total Non-current Liabilities	18,084		16,365
Total Liabilities	22,011		20,781
Commitments and Contingencies
Equity
Stockholders’ Equity:
Common stock, $.01 par value, 500,000,000 shares authorized, 387,872,787 and 387,734,757 shares issued; 386,770,915 and 386,628,586 shares outstanding, respectively	3		3
Additional paid in capital	17,699		17,694
Treasury stock	(47)		(47)
Retained earnings	1,789		1,910
Accumulated other comprehensive loss	(5)		(180)
Total Stockholders’ Equity	19,439		19,380
Non-controlling interests	936		962
Total Equity	20,375		20,342
Total Liabilities and Equity	$	42,386	$	41,123

The accompanying notes are an integral part of our condensed consolidated financial statements.

Avangrid, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Nine Months Ended September 30,
	2023		2022
(Millions)
Cash Flow from Operating Activities:
Net income	$	297	$	694
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	868		811
Regulatory assets/liabilities amortization and carrying cost	(48)		(37)
Pension cost	(11)		(6)
Earnings from equity method investments	(5)		(261)
Distributions of earnings received from equity method investments	21		19
Unrealized loss on marked-to-market derivative contracts	19		17
Deferred taxes	53		10
Other non-cash items	(49)		(28)
Changes in operating assets and liabilities:
Current assets	170		(360)
Noncurrent assets	(107)		8
Current liabilities	(408)		95
Noncurrent liabilities	(43)		(68)
Net Cash Provided by Operating Activities	757		894
Cash Flow from Investing Activities:
Capital expenditures	(2,078)		(1,940)
Contributions in aid of construction	101		90
Proceeds and refund from disposal of assets	48		16
Proceeds from notes receivable from affiliates	—		(1)
Distributions received from equity method investments	4		4
Other investments and equity method investments, net	(99)		(189)
Net Cash Used in Investing Activities	(2,024)		(2,020)
Cash Flow from Financing Activities:
Non-current debt issuances	842		216
Non-current debt issuance with affiliate	800		—
Repayments of non-current debt	(303)		(332)
Receipts of other short-term debt, net	390		209
Repayments of financing leases	(3)		(8)

Issuance of common stock	(3)		(1)
Distributions to noncontrolling interests	(13)		(8)
Contributions from noncontrolling interests	79		146
Dividends paid	(510)		(510)
Net Cash Provided by (Used in) Financing Activities	1,279		(288)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	12		(1,414)
Cash, Cash Equivalents and Restricted Cash, Beginning of Period	72		1,477
Cash, Cash Equivalents and Restricted Cash, End of Period	$	84	$	63
Supplemental Cash Flow Information
Cash paid for interest, net of amounts capitalized	$	217	$	200
Cash (refund) paid for income taxes, net of transferred tax credits (Note 16)	$	(30)	$	13

The accompanying notes are an integral part of our condensed consolidated financial statements.

Avangrid, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity

(unaudited)



(Millions, except for number of shares )	Number of shares (*)	Common Stock		Additional paid-in capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total
As of June 30, 2022	386,624,231	$	3	$	17,687	$	(47)	$	2,003	$	(236)	$	19,410	$	976	$	20,386

Net income	—	—		—		—		105		—		105		1		106
Other comprehensive income, net of tax of $3	—	—		—		—		—		9		9		—		9
Comprehensive income																115
Dividends declared, $0.44/share	—	—		—		—		(170)		—		(170)		—		(170)



Stock-based compensation	—	—		1		—		—		—		1		—		1
Distributions to noncontrolling interests	—	—		—		—		—		—		—		(2)		(2)
Contributions from noncontrolling interests	—	—		—		—		(4)		—		(4)		8		4
As of September 30, 2022	386,624,231	$	3	$	17,688	$	(47)	$	1,934	$	(227)	$	19,351	$	983	$	20,334
As of June 30, 2023	386,645,258	$	3	$	17,695	$	(47)	$	1,900	$	(74)	$	19,477	$	966	$	20,443

Net income (loss)	—	—		—		—		59		—		59		(28)		31
Other comprehensive income, net of tax of $26	—	—		—		—		—		69		69		—		69
Comprehensive income																100
Dividends declared, $0.44/share	—	—		—		—		(170)		—		(170)		—		(170)
Release of common stock held in trust	—	—		—		—		—		—		—		—		—
Issuance of common stock	125,657	—		—		—		—		—		—		—		—

Stock-based compensation	—	—		4		—		—		—		4		—		4
Distributions to noncontrolling interests	—	—		—		—		—		—		—		(6)		(6)
Contributions from noncontrolling interests	—	—		—		—		—		—		—		4		4
As of September 30, 2023	386,770,915	$	3	$	17,699	$	(47)	$	1,789	$	(5)	$	19,439	$	936	$	20,375



(Millions, except for number of shares )	Number of shares (*)	Common Stock		Additional paid-in capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total
As of December 31, 2021	386,568,104	$	3	$	17,679	$	(47)	$	1,714	$	(273)	$	19,076	$	885	$	19,961

Net income (loss)	—	—		—		—		734		—		734		(40)		694
Other comprehensive loss, net of tax of $16	—	—		—		—		—		46		46		—		46
Comprehensive income																740
Dividends declared, $1.32/share	—	—		—		—		(510)		—		(510)		—		(510)

Issuance of common stock	56,127	—		(