other participants...company name: avangrid inc company ticker: agr us equity date: 2020-04-29 page...

Company Name: Avangrid IncCompany Ticker: AGR US EquityDate: 2020-04-29

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Alejandro De Hoz, President and Chief Executive Officer, Avangrid Renewables, LLC

Douglas Stuver, Chief Financial Officer, Senior Vice President

James P. Torgerson, Chief Executive Officer, Director

Patricia Cosgel, Vice President, Investor Relations and Shareholder Services

Robert D. Kump, Deputy Chief Executive Officer and President

Unidentified Speaker

Durgesh Chopra

Insoo Kim

Julien Dumoulin-Smith

Paul Patterson

Sophie Karp

Steve Fleishman

Operator

Patricia Cosgel {BIO 19726425 <GO>}

Q1 2020 Earnings Call

Company Participants

Other Participants

Presentation

Thank you for standing by and welcome to the Avangrid First Quarter 2020 EarningsConference Call. At this time, all participants are in a listen-only mode. After the speaker'spresentation, there will be a question-and-answer session. (Operator Instructions). Pleasebe advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker for today, Ms.PatriciaCosgel. Thank you. Please go ahead.

Thank you, Paulie, and good morning to everyone. Thank you for joining us to discussAvangrid's first quarter 2020 earnings results. Presenting on the call today are JimTorgerson, our Chief Executive Officer; and Doug Stuver, our Senior Vice President andChief Financial Officer. Also joining us today for the question-and-answer portion of thecall will be Bob Kump, Deputy Chief Executive Officer and President of Avangrid;Alejandro De Hoz, President and Chief Executive Officer of Avangrid Renewables; andTony Marone, President and Chief Executive Officer of Avangrid Networks.

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James P. Torgerson {BIO 1457278 <GO>}

If you do not have a copy of our press release or presentation for today's call, they areavailable on our website at www.avangrid.com.

During today's call, we will make various forward-looking statements within the meaningof the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995based on current expectations and assumptions, which are subject to risks anduncertainties. Actual results could differ materially from our forward-looking statements. Ifany of our key assumptions are incorrect or because of other factors discussed inAvangrid's earnings news release, in the comments made during the comments madeduring 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 ofwhich can be found on our website www.avangrid.com. We do not undertake any duty toupdate any forward-looking statements.

Today's presentation also includes references to non-GAAP financial measures. Youshould refer to the information contained in the slides accompanying today's presentationfor definitional information and reconciliations of non-GAAP financial measures to theclosest GAAP financial measures.

I will now turn the call over to Jim Torgerson.

Thanks, Patricia, and good morning, everyone, and thanks for joining us today. I amhappy to report that Avangrid delivered strong results in the first quarter and earningsimproved year-over-year, driven primarily our Renewable business. And while we arepleased with this solid start of the year, the key focus has been and will continue to be theCOVID-19 pandemic and its potential impact on our businesses and our key stakeholders.

We recognize the challenges that the situation poses for our workers, some of whom areat home managing work, families, and even the illnesses of those close to them, includingmembers of -- of -- or our workforce who are personally dealing with the virus.Fortunately, that's very few in number at this time, and we appreciate the great work thatthey continue to do to support not only the Company, but the essential role that we servein the community.

Now, we're actively monitoring and addressing COVID-19 impacts and are implementingplans to address such impacts on our business. Even as the COVID-19 pandemic hasupended our everyday lives, our operations and investments continue. But during thispandemic, our top priority is to ensure the health and safety of our employees, suppliersand community, which is critical to our ability to deliver reliable electric and gas service toour customers and to generate clean energy.

We have a critical duty to our community as first responders to provide essential electricand gas service to the 3.3 million customers that depend on us. We need to ensure thatthe hospitals, nursing homes and critical care facilities we serve have sufficient reliable

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service. We need to support our residential customers as they transition into remote workand distance learning.

In this unprecedented crisis, many of our customers are facing economic hardship andour operating companies have announced the suspension of service shut offs and latefees. And Avangrid will also continue to support the economic recovery and job creationby providing stable quality jobs and continuing to invest in our clean energy futurethrough our Renewables portfolio and our grid infrastructure. Our solid liquidity andaccess to capital will facilitate our strategic plans through the pandemic challenges.

Our business model is resilient, and we have leverage to mitigate many of the impacts ofthe pandemic in our businesses. For instance, our regulated utilities have revenuedecoupling, and our renewable assets target 75% to 85% of their production undercontractor heads, and currently, for the balance of 2020, that number is about 79%.

Our key projects continue to advance in our offshore wind business, and Vineyard Wind'spermitting process is on track, but no changes to the Bureau of Ocean EnergyManagement latest timeline and final record of decision, which is expected by December2020. Our Park City Wind offshore wind project is also moving forward with thenegotiation of contracts with Connecticut utilities in process.

In addition to this, we have 900 megawatts of onshore wind and repowering projectsunder construction that are all on track to come online in 2020. In our onshore windbusiness, we commissioned in March, the 158-megawatt Otter Creek wind project locatedin Illinois. Our New England Clean Energy Connect project received the draft approvalfrom the Maine Department of Environmental Protection with final decision expectedshortly. The project also awarded key contracts of over $320 million using Maine workersto build a new high voltage DC transmission line from the Canadian border to asubstation in Lewiston.

Now turning to Slide 6. The first quarter results improved year-over-year reflecting windresources in line with our historical average in Renewables. Our net income for thequarter was $240 million or $0.78 per share, up $0.07 or 10.6% above first quarter of '19.The adjusted net income amounted to $236 million or $0.76 per share, up $0.06 or 8%versus the first quarter of '19.

Now the key drivers for the quarter-over-quarter results by business really are in Networks,adjusted earnings per share for the first quarter of 2020 decreased by $0.01 per share to$0.64 as the positive contribution was from our rate increases of about $0.01 was offset bythe impact of higher depreciation of $0.03 and outage restoration cost of $0.01.

In Renewables, the adjusted earnings per share increased by $0.13 to $0.15 per share,driven by the contribution of 831 megawatts of the new wind projects that werecommissioned during 2019, adding about $0.04 a share and higher wind production fromexisting assets, we were 19% above the previous year's quarter and added about $0.07 ashare, and this was driven by better wind resource and improved availability. Total

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production, including new capacity, was 36% above 2019 and this was really partiallyoffset by lower merchant pricing.

To give you where we're at through April 26, so month-to-date, we're above 17% versusour life-to-date average, but 7% above 2019, and year-to-date, we're now running about3.6 % versus our life -- down versus our life-to-date average, but 29% above 2019.

On a consolidated basis, there was a positive tax impact quarter-over-quarter thatcontributed to our earnings. This is -- the net impact of a benefit in the business isprimarily Renewables due to the PTCs, which are really offset than in Corporate.

Now moving to Slide 7. On our COVID-19 response, we're actively monitoring andaddressing the key covid-19 impacts on our businesses. Avangrid has instituted severalcompany-wide measures to protect the health and safety of our customers, communitiesand employees. To assist our customers, we implemented customers disconnectmoratoriums and waiver of late payment fees. We also minimized exposure between ourcustomers and our employees. We discontinued in-home meter readings and suspendednon-emergency in-residence work.

For our community, together with Avangrid Foundation, the Company is donating inexcess of $2 million, to support response and recovery, including over $1 million tosupport the state and local responses in the 24 states where we operate and an additional$1 million from Avangrid Foundation to support response at a national and regional scale,focused on disaster response, livelihoods and basic needs. In addition, 31,000 protectivemasks have been donated to hospitals across Avangrid service territories, and we'recoordinating a public response to the pandemic with legislators and regulators.

To protect our employees, we've activated emergency response business continuityplans, emergency op centers, our unified command and executive level crisismanagement teams.

We're also working closely with our federal and state regulatory and governmentalauthorities and communicating daily with our employees. We have over 4,700 employeesthat are able to work from home, which is more than 70% of our total employees.

For crews, grid operators and customer service employees that cannot work from home,they are maintaining social distancing and using personal protective equipment such asface coverings. We've enhanced cleaning in all of our facilities and deferred non-emergency work in customer homes. As an essential energy provider, we're ensuring thecontinuity of our electric and gas service to customers that depend on U.S. during thispandemic while maintaining safety, reliability and responding quickly to storms. We aresupporting emergency services in hospitals by helping them prevent service interruptionsduring an emergency. We will continue to support our economy by continuing to invest incritical infrastructure and our clean energy future.

Now going to Slide 8. During the COVID-19 pandemic, our top priority is to protect andsupport our customers, employees, contractors, and the communities in which we

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operate. Now due to the critical business needs at this time, we've decided to postponeour Investor Day until the fourth quarter of 2020. Considering this postponement andseveral assumptions that have changed since our original long-term guidance wasintroduced in February 2019, we're withdrawing our current long-term guidance for the2018 to 2022 period, as well as the supporting assumptions until we provide a new long-term outlook later this year that will give us better clarity on our major projects, NECECand the Vineyard Wind, the New York rate case, hopefully, we'll have a settlement that --by them, hopefully sooner than that. And then we'll be able to determine if we're -- howwell we're doing in meeting the metrics and meaning that could restore the 100 basispoints to our ROE.

For 2020, we are affirming our 2020 earnings per share of $2.06 to $2.26 and adjustedearnings per share of $2.17 and $2.37 per share. As our current expectations are that wewill be able to absorb the impacts of COVID-19 on our businesses, we will be closelymonitoring and addressing the potential COVID in risks and mitigation, which DougStuver will address later in this presentation.

Overall, despite the risks resulting from the pandemic, the potential impacts on demand,overdue debt or merchant prices, our business model remains resilient, and we'reconfident in our ability to deliver on our targets.

Financially, we're well positioned with sufficient liquidity and continued access to capitalmarkets. From a regulatory perspective, we are actively engaging our regulators as theCOVID-19 crisis continues. We're also working with our suppliers to ensure minimaldisruption to our capital programs.

Now moving on to the highlights from Networks on Slide 9. In New York, due to thepandemic settlement negotiations have been extended to May, now the company hasfiled a request to extend the suspension period to September 13, 2020. For rates effectiveSeptember 1, 2020, and requested a make whole provision to April 17th. The Public UtilityLaw Project filed a motion to halt settlement negotiations to introduce new testimony onthe pandemic impact. And April 7th ruling denied the motion and lot of parties to addressthe pandemic impacts during settlement negotiations.

In Maine, Central Maine Power was authorized $17.4 million or about almost 7% rateincrease effective March 1st with storm recovery effective January 1st of 2020. It had 50%authorized equity, 9.25% ROE and 100-basis point downward adjustment until customerservice metrics achieved -- were achieved for 18 months. Now we are meeting thosemetrics as we speak. CMP proposed delayed collection of storm costs and Tier 2 stormreserve funding to reduce the impact of customers of COVID-19.

Concerning FERC, on March 20th, the commission issued a notice of proposedrulemaking, that would expand electric transmission ROE incentives. The proposal wouldincrease the RTO participation incentive from 50 to 100 basis points and include 250-basis point cap on total ROE incentives for new projects, and comments are due on thatJuly 1st.

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Concerning our $950-million New England Clean Energy Connect transmission project,that's going to deliver 1,200 megawatts of Canadian hydropower to the New Englandgrid. The project continues to advance through the permitting process. On January 8th,we received the site law certification from the Maine Land Use Planning Commission. TheMaine Department of Environment Protection draft approval was received on March 13thand final decision is expected shortly. This is the last state that we need in order to moveforward.

The U.S. Army Corps of Engineers' approval is expected in early third quarter, 90 daysafter the Maine DEP final decision. And the ISO New England I.3.9 approval is expected inthe second quarter of 2020. The presidential permit which really is needed to startconstruction -- is just needed across the border, is expected to be issued approximately60 days after the Army Corps of Engineers and ISO New England approvals. In additionto the project, has recently awarded over $320 million in contracts to several companies,including Maine-based Cianbro in a joint venture with Irby Construction, Sargent electricand Northern Clearing to build and upgrade transmission and provide land clearing forthe project.

The clean energy corridor is projected to inject more than $570 million in the Maine'seconomy to deliver high-quality jobs for Mainers. Pending the necessary permits and anassessment of the potential of a referendum, we will be in a position to start constructionin the third quarter of 2020 and to start operation by the end of '22. NECEC will bringclean energy to our customers, reduce regional carbon dioxide emissions, which wouldbe equal to about 700,000 fewer cars on the road and reduced energy costs in May.

The $1 billion investment in infrastructure in Maine would yield $250 million in localbenefits for Mainers and support local economic development and employment bycreating an average of about 1,600 jobs per year during construction.

Now moving on to Slide 10. On our Renewables business, we have several excitingprojects that continue to keep Avangrid at the forefront of renewables energy in thiscountry and will continue to drive the long-term performance of our business. Concerningour onshore wind projects, during the first quarter, we commissioned a 158-megawattOtter Creek wind project in Illinois with T-Mobile. We also completed the repowering oftwo wind projects, our 100 megawatt Trimont wind project in Minnesota and our 22-megawatt Mountain View project in California. Additionally, we have approximately 542megawatts of onshore wind under construction and 243 megawatts of wind repoweringprojects underway on track to be operational in 2020.

In offshore wind, our 800-megawatt Vineyard Wind offshore wind project in joint venturewith Copenhagen Infrastructure Partners is on schedule with no changes to the mostrecent Bureau of Ocean Energy Management timeline. The draft supplement to the EIS isextended and expected to be completed by June 12th with final approval expected byNovember 13th, and the record of decision and approval is targeted for December 18th.

BOEM officials have recently indicated that the agency is overall on track and on scheduleto deliver its final decision by year-end as expected. Our 804-megawatt Park City Wind

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offshore wind project submitted the initial environmental and fisheries mitigation plan tothe Connecticut Department of Energy and Environmental Protection, execution of PPA isexpected in early May.

Our Kitty Hawk offshore wind project off the coast of North Carolina with a potentialcapacity of up to 2.5 gigawatts is also moving forward to as planned. The site assessmentplan was approved by BOEM in late February and we're now preparing to deployinstrumentation to commence wind, wave and tidal monitoring programs.

In addition, we're seeing upcoming opportunities for our offshore wind portfolio in NewYork and Virginia. In New York, the New York Public Service Commission authorized NewYork Energy Research and Development Authority or NYSERDA to issue a solicitation for1,000 megawatts or more up to 2,500 megawatts of offshore wind capacity in 2020. Andin Virginia, the governor signed legislation on April 5th for 5.2 gigawatts of offshore windby 2035.

Now moving to Slide 11, during this pandemic, we remain committed to our vision ofbuilding a cleaner and smarter energy future. In 2016, we pledged for our generation fleetto be carbon neutral by the end of 2035, making Avangrid the first U.S. utility to set a goalfor carbon neutrality.

This week, we are releasing our fourth annual sustainability report, highlighting ourcontinued progress and leadership in promoting sustainable energy and sustainablecommunities through our purpose and values. Highlights from the report include in 2019the emissions intensity from our own generation was 6x lower than the U.S. utility averagein 2019.

In 2019, we also continued to expand our wind generation fleet, the nation's third-largest.We've increased are renewable capacity by over 1,700 megawatts since Avangrid wascreated and currently have approximately 7,500 megawatts of capacity. And we're aleader in the emerging offshore wind industry.

Notable achievements for Networks include ongoing investments to replace agingtransmission and distribution infrastructure. These investments will not only improve thesafety and reliability of the electric and gas distribution system, but also will reducemethane emissions, incorporate advanced technology, improve resiliency, and enablecustomers to adopt distributed energy solutions.

We're also collaborating with states on electric vehicles advancement. Avangrid Networkslaunch TV demonstration pilot project and has also proposed investing $34 million in NewYork and Maine to build charging infrastructure and expand access to electric vehicles.We're committed to the United Nation's sustainable development goals as a best-in-classenergy company. We're focused on the goals targeting affordable and clean energy andclimate action.

We're also directly contributing to promoting innovation and education, protectingbiodiversity, and supporting gender equality, particularly the empowerment of women.

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Douglas Stuver {BIO 16368062 <GO>}

We've incorporated these goals into our Company's strategy and corporate governancesystem. Our corporate governance has been recognized and awarded by various externalparties for being best-in-class.

On April 7th, Avangrid completed its third green bond issuance with $750 million five-year bond. Avangrid is now the seventh large green bond issuer in the U.S. with a total of2.1 billion issued.

In summary, we remain focused on delivering clean, reliable, and affordable service to allour customers through our commitment to innovation and safety. And as previouslyannounced, I decided to retire the day after our Annual Meeting of Shareholders,between now and then, we'll continue navigating these unprecedented public health andeconomic challenges, due to the pandemic. Avangrid is fully committed to the health andsafety of our customers and employees, supporting our communities and being part ofthe economic and job recovery. And I believe, I'll be leaving the Company well-positioned for the future.

Now, I'm going to hear from our CFO, Doug Stuver.

Thank you, Jim. Good morning, everyone, and thank you for joining us today. I hope allon the call and your families are healthy and doing well during these challenging times.

I'm now on Slide 13. On this slide, we roll forward earnings per share from the first quarterof 2019 to the same period in 2020 on a U.S. GAAP basis and on a non-U.S. GAAPadjusted basis. Adjusted EPS reflects the exclusion of favorable mark-to-marketadjustments in the Renewables segment, restructuring charges and accelerateddepreciation related to the repowering of four wind projects, the combined impact ofwhich was only $0.01 per share on a quarter-over-quarter basis. We have the fullreconciliations of this in our appendix to the earnings presentation.

As you can see on both the U.S. GAAP and adjusted basis, we had significantly improvedresults for the first quarter of 2020, compared to the first quarter of 2019. This is primarilydue to the positive impacts in our Renewables business of $0.15 on a U.S. GAAP and $0.13on an adjusted basis from the 831 megawatts of new assets placed in service in 2019,including the PTCs for those projects, as well as from improved wind production andavailability on existing assets.

For the first quarter of 2020, our net capacity factor including new resources was 33.7% ascompared to 28.1% in the first quarter of 2019 and above the 2011 to 2019 first quarteraverage of 31.8%. The slight decline in Networks results for the quarter of 2020 ofnegative $0.01 compared to the first quarter of 2019 was due to higher depreciation andoutage restoration costs offsetting small positive rate increases. Lower Corporate earningsin the quarter-over-quarter period related to consolidating tax adjustments which areoffset primarily in Renewables.

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Now the next several slides provide more detail on the business segment impacts. Onslide 14, we summarize the results and key drivers for the Networks, Renewables andCorporate business segments. For the first quarter, you can see that the Network's resultswere lower by $0.01 quarter-over-quarter with $198 million of adjusted net income and$0.64 earnings per share.

We've received the benefit of $0.01 quarter-over-quarter due to new rates or Connecticutnatural gas which is in the second year of a three-year rate plan and Southern ConnecticutGas, which is in the final year of its three-year rate plan as well as a small amount of -- fornew rates in CMP that were effective March 1st. These incremental revenues were offset byhigher depreciation of $0.03 due to new assets placed in service and outage restorationcosts of $0.04, which were a $0.01 higher than the first quarter of 2019.

The taxes and other category primarily includes the tax reform related excess deferred taxbenefits of $0.04 that is spread over 12 months and will reverse in future periods as thesebenefits are returned to customers. In the first quarter of 2020, we did not see a materialimpact related to COVID-19 on sales and uncollectibles as the state disconnectmoratoriums and stay-at-home requirements didn't begin to go into effect until mid tolate March, and we have decoupling at our utilities to mitigate the lower demand.

As I mentioned earlier, our Renewables segment was the key driver for the quarter-over-quarter improvement in earnings. Quarter-over-quarter Renewables adjusted net incomeincreased by $41 million or $0.13. Performance period-over-period was significantlyimpacted by 19% higher production from our existing wind assets due to higher windresource and availability along with new assets that went into service in 2019 in the firstquarter of 2020.

The west region, which is the region that has the highest average PPA prices, experiencedthe largest increase in total production, followed by the south with both regionsbenefiting from improved wind resource and new assets placed in service in 2019.

Improved wind production from existing assets and new assets explained (31:00) $0.11 ofthe quarter-over-quarter improvement, while PTCs from the new projects added another$0.04. Reducing these positive impacts was a $0.04 negative impact to earnings fromKlamath Thermal Plant operations in trading, and this is the category that benefited in2019 from a very cold winter, price volatility and the Canadian pipeline rupture that droveup prices. A negative impact from pricing of $0.01 reflected a lower merchants pricing inall regions.

Renewables, taxes and other includes a positive $0.08 tax impact quarter-over-quarter,that's primarily offset in Corporate as a consolidating tax adjustment that will be spreadover the year. In Renewables, this tax benefit was reduced by several other smaller itemssuch as incremental personnel, external services and depreciation expense with theaddition of new plant, minority interest and other.

The Corporate segment includes the negative offsetting, consolidating tax adjustment asthe driver of the quarter-over-quarter comparison. While we did have approximately $10

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million of higher interest expense in the first quarter of 2020 due to the issuance of agreen bond in May of 2019, this was offset by an increase of $8 million of intercompanyinterest income quarter-over-quarter.

In 2020, we expect to carry forward the forward 2020 plus savings of $75 million pre-taxthat we accomplished in 2019. And for 2020, we anticipated in our guidance incrementalsavings of about $5 million to $10 million for total 2020 expected savings of $80 million to$85 million, while continuing to target a long-term run rate of approximately a $100million.

Avangrid's consolidated effective tax rate for the first quarter was approximately $0.07 --7% before discrete items. This is lower than the 12% before discrete items that we quotedin our 2020 guidance and is largely due to additional permanent items in Networks, aportion of which is offset in rates, and hence, has no earnings impact.

Now moving to Slide 15, this is where we highlight our solid liquidity position and ouraccess to capital. We believe both our sources of strength that will help us not only growour business, but also cushion the impacts of COVID-19. We have approximately $2.91billion in liquidity available, we've secured liquidity through $2.5 billion credit facility, thebacks are $2 billion commercial paper facility. And as of April 24th, we haveapproximately $87 million of commercial paper borrowings outstanding against thatfacility, plus we have access to $500 million line of credit with our parent company,Iberdrola, which is undrawn.

Since COVID-19 emerged in March, we've been able to access the commercial papermarkets except for three days in March, when the market was disrupted. And at that time,we used our credit facility to meet our funding needs. While spreads -- the LIBORincreased since COVID-19, overall short-term funding costs had not been adverselyimpacted due to an offsetting drop in the LIBOR rates. We've also accessed long-termclean energy funding in the first quarter placing $237 million of tax equity financing inissuing our third green bond to finance our Renewables projects.

This green bond of $750 million brings our total green bond debt green bond debt to$2.1 billion, which makes us a seventh largest issuer of -- in the U.S. of green social andsustainability bonds and the fifth largest in the sector. The transaction was very successfulbeing 2.8x oversubscribed and with 58% of the proceeds allocated to ESG-focusedinvestors.

While treasury rates had dropped due to COVID-19, the spreads were wider than we hadexpected pre-COVID bringing our financing costs higher than originally estimated andincreasing the potential for higher financing costs on future financings in 2020, whichwe've estimated at approximately $9 million pre-tax including this green bond.

Now moving to Slide 16. We highlight our financing expectations for the remainder of2020. We have approximately $710 million of maturities in 2020, including a $450 millionbond at the parent company, which was originally the UIL Holding company bond. We've

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also forward sold our $200 million NYSEG private placement to an underwriter and havesmall maturities at the other operating companies.

We expect to issue another $2 billion of new debt at the operating and parent companiesby the end of the year. Our dividend policy remains unchanged, targeting 65% to 75% ofnet income. And on Monday, April 27th, the Board declared a quarterly dividend to $0.44per share payable on July 1st of 2020.

Now I'll turn to Slide 17 and give some more color on our current expectations of the areasof risk and the mitigation measures we have related to COVID-19. As Jim noted, this is akey area of focus for our entire company and it highlights our responsibilities as anessential service and partner to the communities in which we operate, and the resiliencyof our team and our business.

With careful ongoing planning and diligence, we were able to quickly and verysuccessfully mobilize to enable our -- over 70% of our workforce to work remotely, andwe've also implemented enhanced measures to social distance and compartmentalizekey operations and work areas. Fortunately to date, this has benefited our workforce byimpeding the spread of the virus and regions of the country that have been hotspots.

As I've noted, our liquidity and access to capital puts us in a position to work through thefunding needed, to continue to implement our strategic plans even in light of expectedCOVID-19 impacts. We have decoupling in all of our utilities except for CMP transmissionand Maine natural gas, which significantly removes the impacts of lower demand in ourservice territories.

We're working closely with suppliers in our Networks and Renewables business --businesses as we implement our capital plans for the year and we do not anticipatedelays in our 2020 wind projects, which are expected to reach their commercial operationdates at the end of the year. We've included in our appendix some sensitivities to risks Iwill highlight on the next few pages and those are intended to include potential pre-taxincome and cash impacts we are working to mitigate and address and not cumulativeimpacts. As you'll see, the potential pre-tax income -- impacts based on our currentassumptions are relatively modest.

On Slide 18, we look at the impacts of COVID-19 on our Networks business and themitigation measures that are in place for which we are currently pursuing. Our currentexpectation is for three months of stay-at-home policies in place in the four states in whichour electric and gas utilities operate and disconnect moratoriums ease by June 30th.

In terms of demand, we're seeing drops and commercial and industrial load with thevarious stay-at-home policies, but increases in residential load, which was approximately63% of our revenues for 2019. We expect to continue to see lower demand from C&I,customers as the pandemic progresses and assume in our modeling roughly a three-month recovery period with some lasting demand destruction continuing beyond 2020as businesses try to recover from the shutdown and communities adjust to new norms ofsocial distancing.

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However, as I mentioned previously, all of our distribution utilities, except for MaineNatural Gas, have full revenue decoupling mechanisms across all customer classes. OurUI and CMP transmission rates reset annually and UI transmission also has a decouplingmechanism. These decoupling mechanism substantially stabilize revenues limiting theupside when load exceeds approved revenues, but also insulating the companies in timessuch as this.

With disconnect moratoriums in place in each of our regulatory jurisdictions and ascustomers delay bill payments due to the economic hardships associated with COVID, weexpect to see an increase in overdue receivables, a portion of which, we expect will turninto uncollectible expenses.

With the assumption of a three-month duration of disconnect moratoriums for all of ourregulatory jurisdictions, we currently do not expect a net income impact as we will seek todefer and expect to achieve regulatory recovery for the estimated potential uncollectibleexpenses, which we estimate at roughly $18 million for that period. There are alsopotential COVID related regulatory impacts in New York and Maine.

In New York, we're currently in confidential settlement discussions to address the impactsof COVID-19 and have requested a deferral of the effective date to September 13th, with amake-whole provision to April 17th. To address the COVID-19 impacts in Maine, we'veproposed to mitigate our rate increase with the delayed recovery of $34 million ofdeferred storm costs and recovery over two to three years.

We're also closely working with our suppliers as we implement our capital programs inour Networks businesses. With the social distancing and compartmentalization of work,we anticipate that there could be lower than anticipated capital spending for the year,although we are actively working on mitigation strategies across our asset portfolio.

Moving to Slide 19, we review the potential impacts of COVID-19 on our Renewablesbusiness. We have four projects with commercial operation dates at the end of the year.We do not currently expect delays in these projects due to COVID-19. Work continues onthese sites with social distancing and segregated teams, but we do not expect turbinedeliveries until later in the year. Our repowering projects, as noted, are lower risk andlargely completed. While delays are not currently expected, we recognize that with theforce majeure notices we've received from suppliers, there is a potential risk of delaydepending on the length and severity of the pandemic and its global impacts.

However, we highlight that the 100% PTC qualification is turbine-by-turbine though itwould apply to turbines completed in 2020 even if the project in its entirety does notreach COD. With the 5% safe harbor elected for these projects, we're confident ofqualifying for the PTC even if the turbine installations lapse into 2021 through ourdemonstration of continuous efforts.

Finally, the industry is working on seeking an extension of the safe harbor provisions byone year for projects started in 2016. Reviewing other risks in the Renewables business,we note potentially small impacts from merchant prices due to low demand. And we do

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Operator

Q - Insoo Kim {BIO 19660313 <GO>}

A - James P. Torgerson {BIO 1457278 <GO>}

Operator

not currently expect credit defaults on our high-quality portfolio of counterparties, 97% ofwhich are investment grade.

On Slide 20, we conclude highlighting the long-term value of our Company. We haveattractive investment opportunities in our Networks and Renewables businesses. Theseinclude, our leadership in offshore wind in the U.S. as we develop three lease areas on theeastern seacoast, providing further value and diversification to our business, whilesolidifying our position as a major sustainable energy company in the U.S. Our target ofcarbon neutral generation by 2035 also supports that position.

Importantly, we believe our strong balance sheet and solid investment grade creditratings prove to be a strong asset, particularly in this challenging COVID-19 environment.And lastly, I want to end with a recognition that has Jim noted, this will be his last earningscall prior to his retirement on June 23rd. I want to thank him and wish him well. It's been apleasure working with you, Jim. Congratulations on your upcoming retirement and thankyou on behalf of all of our employees for your leadership and contributions to thebusiness. Thank you.

I will now hand the call back to our operator, Paulie, for questions.

Questions And Answers

(Question And Answer)

(Operator Instructions) And your first question comes from the line of Insoo Kim withGoldman Sachs.

Thank you. Maybe first question. Acknowledging the benefits that you do have withdecoupling, can you just give a little more color in your jurisdictions, the magnitude ofdemand impact and you're seeing by customer class?

Yes. We can -- maybe Tony Marone, he's here, can give you a quick update on what we'reseeing. It's --obviously, we're seeing an increase in residential and C&I is down. Tony, doyou want to --

Yes, so what we're seeing, especially where we have the smart meter to be able to captureaccurate data is increases on the residential side in the 67% range. C&I loads are down,they vary quite a lot from jurisdiction to jurisdiction. But we're seeing anywhere from 10%to even 15% of some of the C&I loads that we've experienced so far. As Doug mentioned

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Operator



before, with decoupling that -- there will be the marginizing of that across the board, butwe are seeing those impacts.

The other thing I might add --

Got it.

To that too, Insoo, we have on Slide 31, the COVID impacts, and this is one of them interms of the demand and decoupling. We're showing a very modest pre-tax incomeimpact of only $1 million from a cash standpoint, roughly $17 million. Tony mentionedpercentages that for residential, commercial and industrial. We're actually using moreconservative assumptions in this modeling. We've assumed a 5% improvement inresidential and about a 15% reduction in commercial and industrial. And residential is thehigher tariff customer class. So that's where we're getting the mitigation by, even thoughresidential is a smaller percentage increase in terms of price, it has a significant benefit tooffset commercial and industrial.

Got it. And then in terms of collecting on the cash for the decoupling, are more -- most ofthe decoupling mechanisms set up so that it's kind of more of an annual true up or is itkind of half-half, semi-annual, annual ?

Yes. So we have a reconciliation mechanism and jurisdiction is a little bit different, in termsof the exact timing, but the true up, whether it's positive or negative is typically connectedmidpoint of the following year over 12 months. There are some nuances with eachlocation.

Understood. And correct me, if I'm wrong, but I believe, Iberdrola in its recent earningscall said it that Vineyard may -- Vineyard Wind could be delayed until 2024. Are you guysgetting any sense just on the permitting side? I know you've mentioned that BOEM hasn'tchanged the dates on the supplemental as it's the final EIS processes. But any sense justthat you're seeing that it could be delayed a little bit longer than that?

At this point, we're still believing -- we said all along, it wouldn't be any earlier than 2023.I think, we're still on track with that. They might have been hedging a little bit because ofthe COVID-19. But right now, we're not seeing a whole lot of delays. I don't know,Alejandro is on the phone, maybe he can expand a little bit on what we're seeing.

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A - Alejandro De Hoz {BIO 21312268 <GO>}








Operator

Q - Durgesh Chopra {BIO 20053859 <GO>}


Thanks, Jim. No, indeed, as you were mentioning we can actually deliver the project in2024, and still be perfectly on time in terms of the PPA validity just by posting additionalsecurities, but our intent is to deliver the project as quickly as possible. And as we said inthe past, we know now that it cannot be earlier than 2023. We're going to do the best todo it as quickly as possible in that frame in a period of '23, '24. So it's certainly too early,because of all the moving parts to say exactly when it will be.

And just one more add on if I could. So if it is delayed beyond 2023 into 2024, are youstill confident that you could qualify for the 18% ATC?

Yes.

Well, the 18% ATC -- sorry, Jim, go ahead.

No. Go ahead, Alejandro.

Yes. The 18% ATC, it's also valuable in 2024. So there is no difference in that sensebetween 2023 and 2024.

Got it. Thank you. And Jim, congratulations on your upcoming retirement.

Thank you. Looking forward to it.

And your next question comes from the line of Durgesh Chopra with Evercore.

Hey, good morning, guys, and Jim, congratulations as well and all the very best to you.

Thank you.

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A - Douglas Stuver {BIO 16368062 <GO>}







Operator

So just wanted to -- a lot of moving pieces on income taxes. Maybe Doug, what sort of --what one-time items drove the 7% effective tax rate versus the 12% guide and what shouldwe be modeling for Q2 through Q4 this year?

Yes, I would say really the couple of items that are driving the effective tax rate down fromthe 12% originally in our guidance to the roughly 7% we're seeing right now. One is justhigher ATDC [ph] equity, that's an item that would not be offset in rates. So that would fallto the bottom line. And then there's also higher excess deferred income tax amortizationthat is something that over the course of the year does get offset in rates. This is wherewe've got the deferred income tax liabilities from the tax reform act that will be passedback to customers. Beyond that, there's also some higher PTCs that we're seeing. So thatwould be on the Renewables side and would fall to the bottom line. And I'd say, those arereally the major items to speak of.

Got it. And then how -- what should be -- should it be closer to the 12% for the rest of theyear or it should be for the -- from Q2 to Q4 in 2020.

No, it should be still at that roughly 7% as the overall consolidated effective tax rate for theyear. So, yes, that's what I would suggest.

Got it. Okay, understood. And then maybe just one quick -- and I think you've put thisinformation on the slides previously, but -- so in terms of merchants exposure on theRenewables business, what percentage of perhaps your PPA contracts or margins are -- orPPA versus merchant in the Renewables business?

Yes, I think, we were saying that, we target 75% to 85% between the PPA and hedges. Thisyear, for the balance of the year, we'd be at 79%, that's already fixed, whether it's a PPA ora hedge. So we have about 21% merchant exposure.

Got it. Thank you very much guys.

Sure.

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Q - Sophie Karp {BIO 19699392 <GO>}



A - Unidentified Speaker



Operator


And your next question comes from the line of Sophie Karp with KeyBanc.

Hi. Good morning, guys.

Hi, Sophie.

Good morning.

Good morning.

Couple of questions from me. So first is on New York settlement negotiations, right, andso that's been going on for a while and now we have the pandemic. And so I'm justwondering if -- kind of the impact of COVID on the -- on rate players is factoring in in anyway in these negotiations right now? Or is -- do you think it's yours -- is it your expectationthat this will be completely kept separate from the ongoing kind of rate case?

Yes, I think, we said that there was a filing by one of the participants to update everythingand then -- and not include the COVID-19 and just redo everything. And the judge said,no, you can go ahead, include the COVID-19 in the settlement discussions. So yes, theywere being included and we're having discussions about that. And as you might expect,the governors and the utility commissioners and the staff are looking to, how do wemitigate some of these costs that people are going to be bearing? And so we're havingfurther discussions about how to deal with the COVID-19. Tony, do you want to addsomething?

No, Jim. I think you characterized it well. Clearly, the COVID is impactful on ourcustomers, and I think, all the parties, selling parties want to make sure that we take theopportunity in the settlement to put any adjustments or tweaks necessary to considersome of that. So that's what we're working through right now.

Got it. And then -- thank you. And the second question from me is on the Renewablesside. Are you seeing any pressures on your book as far as off takers may be experiencingdeterioration in their credit quality or in their business? Should we begin thinking aboutthat as a potential risk or do you see that as like more or less insulated? Thank you.

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Operator

Q - Julien Dumoulin-Smith {BIO 15955666 <GO>}




Yes, we're pretty comfortable what the off take is. We have 97% of those that areinvestment grade credit. So we feel pretty good about it. Now, we do -- we watch them allvery closely, we have a group that's their responsibility, we have a risk group that looks atcredit constantly and it's monitored daily. So we're keeping good track of it. But right now,we feel pretty good about it. Alejandro, anything else there?

No, I think that's exactly the case, Jim. I would maybe just add that in terms of future offtake opportunities, we are not seeing actually any slowdown in the appetite in the market.So we are having a lot of conversations with many parties for future off take opportunities.

Great, thank you. Thank you, Jim. Congratulations on your retirement. You will be missed.

Thanks, Sophie. I'll miss you guys too.

Okay. I'm going to jump back into the queue. Thank you, guys.

And your next question comes from the line of Julien Dumoulin-Smith with Bank ofAmerica.

Very good morning, team, and congratulations, Jim.

Thanks, Julien.

Maybe if I could just -- absolutely, it's been a pleasure. Okay, so to actually start with thatsubject back. When you think about your succession, public details on successionplanning, Jim. What is the plan? Especially you might have some of the changes inschedule for the year at the outset. And then maybe the core question I'd be curiousabout is how do you think about the balance sheet? And obviously you took away thelong-term guide here, but how do you think about positioning (inaudible) debt in light ofmoving to action on (inaudible)?

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A - Robert D. Kump {BIO 1511943 <GO>}

On the succession plan, I think, that's what you were asking, you were breaking up a little,Julien. But --

Yeah.

The Board is looking at it right now and they're evaluating internal and external candidate.So I expect there'll be hopefully an announcement too, but I -- the Board is working on itright now. And as far as the liquidity, Doug, do you want to --

Yes. Just on the credit metrics topic, going back to the fourth quarter earnings call, I think,I mentioned that in 2019, we saw cash from operations pre working capital to debt ofabout 16%, and in 2020, we were projecting to be about 16.6%, so some improvement.With the cash flow impacts of COVID-19, that's a bit of an unpredictable variable, but youcan see in our slides that basically some of the working capital negatives that we wouldsee are offset by potential capex reductions that would bring us to a largely net neutralposition.

So overall, I don't see that COVID-19 based on our current outlook is necessarily going tomaterially negatively impact our cash flows overall or our credit metrics. But obviously,that's a fuzzy crystal ball at this point.

Absolutely. Just a quick on mitigating the risk around transmission. Obviously, there's a lotof question over hurdles that you've become still. How do you think about mitigating riskin the spending that you all want to do to the extent of building of the NECEC?

You're talking about NECEC, Julien?

Yes. How do you think about mitigating risk around any given some of the pendinguncertainties, specifically the (inaubible)

Yes. There's a lot of things we have going on right now. When we formed the PAC inorder to get the facts out about NECEC -- I don't know, Bob, you may want to just talkabout some of the things we're doing.

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Operator

Q - Steve Fleishman {BIO 1512318 <GO>}







Yes. Sure. So as Jim was saying, Julien, a lot of work being done to have the folks in Mainerecognize the many benefits that come with this project, and in particular, the economicbenefits that come with this project considering the situation we find ourselves in now. AsJim mentioned, the estimates are -- we inject over a $0.05 billion of economic benefitsover the construction period, and 1,600 jobs and -- of 3,000 include indirect and jobsassociated with it. We saw this when we bid in PRP [ph] a number of years ago, was atremendous boost to the economy. So we think the economic benefits are going to betremendous and at a timing that the states going to need it most. In terms of the permits,as Jim said, we're really waiting any day now for the final state permit and then we havethe Army Corps and the DOE presidential permit. But our goal right now is to focus ongetting all those permits done so to be able to start construction in the summer.

Excellent. Well, thank you guys.

And your next question comes from the line of Steve Fleishman with Wolfe Research LLC.

Hi, good morning. I had a question on the same topic on (59:39). Just first on the ArmyCorps approval, is there any potential impact from the NWP 12 decision in Montana? Isthat related to you?

Yes. No. No, we were on a fast track.

Is it why? Okay.

I think that you talked about (Multiple Speakers)

And then -- so -- because I thought they've kind of halted all permits.

It doubles to our fast track (inaudible) project. We are not in that category, and so there'sno impact to us.

Okay, great. And then, just on, I think you're going to challenge the decision by the court,up to the Supreme Court in terms of the validity of the signatures. Is there any update on

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timing and process of that to the Supreme Court?

Yes. Yes, we did file an appeal to the law court, which is the Supreme Court in Maine. Oralarguments were actually held yesterday, and the decision is supposed to be -- by the lawcourt by May 13th. So that's the current process with the appeal of the Secretary of State'sapproval of the signatures for the referendum. And we are challenging it for a lot of goodreasons. We found, what we believe, are a lot of irregularities. People doing notary, publicwork, when they're also doing work for the campaign to push the referendum. So we feel,we have a good case, but obviously, the Secretary of State approved enough sufficientsignatures and the superior court judge went along with what the Secretary of State said,but -- so we appeal to the Supreme Court in May.

Okay, great. And then a last question on different topic. The uncollectibles deferral inNew York or I guess maybe more than just New York, but I guess specific New York. Hasthere been anything that the commission has said or precdent that you're able to do thatdeferral?

So, at this point, we do not have mechanism in the New York for uncollectible deferral.And if there's -- it's possible that there could be a generic proceeding which we wouldobviously be a part of and this is also an issue that we are looking at as part of thesettlement discussions that are still ongoing right now. We do anticipate though that oneway or another that there'll be some mechanism or recovery or unexpected uncollectiblecosts and there's a few pathways whereby which we could achieve that, but there has notbeen unlike, say Connecticut for example, to set up a specific document related toCOVID-19 impacts on customers in the business. Similarly, just yesterday afternoon, theMaine PC also put forth the docket. New York, at this time, does not have a similar docket.So we'll pursue different strategies there.

Steve, I will say that there is -- to your point around precedent, you recall back in 2008,2009 for example, there was a generic proceeding instituted and ultimately in order theycame out that provided some protection for costs associated with that time period. Sothere's a precedent for it and we'll see what happens.

And considering that the commission and the governor really wanted the utilities tovoluntarily, call it voluntarily, stop the any shut offs and continue the moratorium basicallyand then not send disconnect orders and so forth that there is basis to say that we shouldbe able to get recovery of that, and we -- we believe we will.

Great. Thank you very much.

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Operator

Q - Paul Patterson {BIO 1821718 <GO>}











And your final question comes from the line of Paul Patterson with Glenrock Associates.

Hey. Congratulations, Jim.

Thanks, Paul.

So just to follow up on a few things. The Supreme Court -- when do you expect the MaineSupreme Court to rule on this.

According to the constitution of Maine, they have to rule within a certain time frame andthat date happens to be May 13th. So they have to rule by then.

Awesome. And then on the (inaudible) NLPR [ph] could you tell us -- could you quantifywhat the what the potential upside would be if NLPR [ph] basically is approved as itcurrently stands, as they currently propose it?

Yes, I think, our people looked at it and said if it goes into effect as proposed. And it'sgoing to depend on what the ROE is too, but it would be $0.01 a share.

That just reflects the 50 basis points --

Yes.

Additional adder for RTO, from 50 to 100.

Right.

That'll be the only benefit associated with it?

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Operator


Well, only potentially on future projects, but the other potential incentives wouldn'tretroactively apply to prior investments.

The only thing that can -- will impact current investments is that 50 basis points adder forthe RTO.

Okay, great. And then, in Connecticut, just. What's --could you give us a little sense aswhat the arrearages been inside of your service territories? I guess, in particular I waswondering about Connecticut, because it seems like that's been sort of high for NewEngland, and what have you. Just what the -- what you've seen so far in April or any sort ofcolor you could give, and I know you're planning on deferring and what you, just -- butjust sort of give us a sense as to what your expense has been?

Yes, this is Doug. In March, for example, what we saw is roughly about an $8 millionincrease overall with Networks in terms of arrearages versus February. And if we look backa year, that was roughly about $1 million increase that we saw in March of 2019. Soarguably, you could say roughly a $7 million net increase in arrearages year-over-year thatcould be potentially attributed to COVID. Through the first half of April, frankly, we've notreally seen any abnormal increase in arrearages thus far. Now we do expect that tohappen, but so far, it's relatively muted in the first half of April.

And that increase was overall the utilities, Paul.

Yes. (Multiple Speakers)

Okay. That's -- it's great to hear. Once again, congratulations, Jim, and best wishes foreverything.

Thanks, Paul. Appreciate it.

And at this time, there are no further audio questions.

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Operator

Okay. Well, I want to thank everybody for participating and thanks for the best wishes thatyou gave me and look forward to seeing -- that the company does great into the future.So thanks again and everybody else we'll be talking to you. And we'll see you at the, Iguess, the AGA Virtual Conference. Have a great day.

And thank you. This concludes today's conference. You may now disconnect.

This transcript may not be 100 percent accurate and may contain misspellings and other inaccuracies. This transcript is provided "as is", without express or implied warranties of any kind. Bloomberg retains all rights to this transcript and provides it solely for your personal, non-commercial use. Bloomberg, its suppliers and third-party agents shall have no liability for errors in this transcript or for lost profits, losses, or direct, indirect, incidental, consequential, special or punitive damages in connection with the furnishing, performance or use of such transcript. Neither the information nor any opinion expressed in this transcript constitutes a solicitation of the purchase or sale of securities or commodities. Any opinion expressed in the transcript does not necessarily reflect the views of Bloomberg LP. © COPYRIGHT 2020, BLOOMBERG LP. All rights reserved. Any reproduction, redistribution or retransmission is expressly prohibited.

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