Avangrid(AGR) - 2023 Q4 - Annual Report

Investment and Infrastructure Development - Avangrid's Networks segment invested $9.9 billion over the last five years to enhance its delivery network, focusing on capacity, reliability, environmental security, and automation[31] - Networks' total rate base for 2023 was$13.9 billion, with $7.5 billion from New York,$2.9 billion from Maine, and $3.4 billion from Connecticut[37] - The NECEC transmission project, with an estimated construction cost of$1.5 billion, has capitalized $807 million as of December 31, 2023[35] - Networks' electricity transmission and distribution activities include 4,548 miles of transmission lines and 43,314 miles of total distribution lines for NYSEG[99] - Networks' natural gas transmission and distribution activities include 20 miles of transmission pipeline and 8,527 miles of distribution pipeline for NYSEG[100] - CNG's LNG plant can store up to 1.2 Bcf of natural gas and vaporize up to 90,000 Dth per day, while SCG's LNG facilities can vaporize up to 82,000 Dth per day[100] Renewable Energy Generation and Projects - Renewables produced 19,020,041 MWh of energy through wind power generation in 2023, representing 95$88.77/MWh[42] - Renewables holds rights to offshore wind lease areas with potential capacities of 2,600 MW off Massachusetts and 3,500 MW off North Carolina[40] - Renewables' largest turbine suppliers, Siemens-Gamesa and GE Wind, accounted for 69% of the company's installed wind capacity as of December 31, 2023[45] - Renewables owns two thermal generation facilities in Klamath Falls, Oregon with a combined nameplate capacity of 636MW as of December 31, 2023[48] - Renewables operates approximately 40 wind meteorological towers and 15 solar meteorological stations, along with 3 LiDAR and 6 SODAR remote sensing devices for wind project development[52] - Renewables is developing a large pipeline of wind and solar energy projects across the United States, with detailed resource assessments including wind speed, turbulence intensity, and solar energy availability[49] - Renewables' solar projects focus on delivering the lowest cost of energy, with detailed analysis of solar panel performance, reliability, and manufacturing quality assurance[51] - Renewables' wind projects include Dry Lake I with 63 MW installed capacity and Poseidon Wind with 33 MW installed capacity in Arizona[102] - Renewables' wind projects include Manzana with 189 MW installed capacity and Shiloh with 150 MW installed capacity in California[102] - Renewables' wind projects include Colorado Green with 162 MW installed capacity and Twin Buttes with 75 MW installed capacity in Colorado[102] - Renewables' wind projects include Streator Cayuga Ridge South with 300 MW installed capacity and Otter Creek with 158 MW installed capacity in Illinois[102] - Renewables' wind projects include Midland Wind with 104 MW installed capacity in Illinois and Barton with 158 MW installed capacity in Iowa[102] - Total installed capacity of the Flying Cloud project is 44 MW with 29 turbines (GE, 1.5 MW each)[104] - New Harvest project has a total installed capacity of 100 MW with 50 turbines (Gamesa G87, 2.0 MW each)[104] - Elk River project in Kansas has a total installed capacity of 150 MW with 100 turbines (GE, 1.5 MW each)[104] - Elm Creek II project in Minnesota has a total installed capacity of 149 MW with 62 turbines (Mitsubishi, 2.4 MW each)[104] - Farmers City project in Missouri has a total installed capacity of 144 MW with 72 turbines (Gamesa G87, 2.0 MW each)[104] - La Joya project in New Mexico has a total installed capacity of 306 MW with 76 turbines (GE 2.85 MW) and 35 turbines (Gamesa G114, 2.6 MW)[104] - Roaring Brook project in New York has a total installed capacity of 80 MW with 15 turbines (Gamesa G145, 4.5 MW each)[104] - Desert Wind project in North Carolina has a total installed capacity of 208 MW with 104 turbines (Gamesa G114, 2.0 MW each)[104] - Blue Creek project in Ohio has a total installed capacity of 304 MW with 152 turbines (Gamesa G90, 2.0 MW each)[104] - Karankawa project in Texas has a total installed capacity of 307 MW with 93 turbines (GE, 2.52 MW) and 22 turbines (GE, 2.3 MW)[106] - Total installed solar capacity across facilities is 588 MW, with the largest being Montague Solar at 205 MW and Lund Hill Solar at 194 MW[107] Environmental and Regulatory Compliance - Networks' distribution utilities in New York, Maine, Connecticut, and Massachusetts are subject to federal, state, and local environmental, health, and safety regulations, including pipeline safety and electric transmission line siting[70] - Renewables' projects are subject to federal, state, and local environmental review and permitting requirements, with offshore projects requiring approval from the Department of Interior's Bureau of Ocean Energy Management (BOEM)[74][78] - Networks' subsidiaries comply with EPA regulations under the Resource Conservation and Recovery Act (RCRA) for the handling, storage, treatment, and disposal of hazardous waste[73] - Renewables' projects may require avian and bat risk assessments and ongoing monitoring or mitigation activities due to potential impacts on wildlife from wind turbine operations[80] - Networks is subject to greenhouse gas reporting requirements under EPA regulations, particularly for electric transmission and distribution equipment emitting sulfur hexafluoride[82] - Renewables' projects located on U.S. Bureau of Land Management (BLM) lands require environmental reviews, development plans, and compliance with measures to protect biological, archeological, and cultural resources[78] - Networks' environmental goals include achieving carbon neutrality for Scopes 1 and 2 emissions by 2030, with 100% renewable electricity for corporate facilities and a 190% increase in emission-free generation capacity by 2030[87] - The company achieved a 28% reduction in CO2 emissions intensity in 2023 compared to a 2015 base year, with 8.7 GW of emissions-free installed capacity[113] - Nearly 395 MW of new wind and solar projects reached commercial operation in 2023, contributing to a 91% emissions-free generating capacity[113] - The company aims to increase emission-free generation capacity by 190% by 2030 and achieve carbon neutrality for Scopes 1 and 2 emissions by the same year[112] Financial and Risk Management - The average Value-at-Risk (VaR) for 2023 was $11.4 million, compared to$13.6 million in 2022, using a 95% probability level over a one-day holding period[435] - Total debt outstanding was $11,928 million at December 31, 2023, with$2,082 million having a floating interest rate. A 25 basis points change would result in an annual interest expense fluctuation of approximately $3 million[439] - The estimated fair value of long-term debt at December 31, 2023, was$10,266 million, compared to a book value of $10,596 million[439] - Approximately 97$2 billion commercial paper program, a $3,575 million Avangrid Credit Facility, and access to$750 million from an Iberdrola Group Credit Facility for liquidity management[443] - Networks' regulated utilities maintain equity ratios at or above regulatory minimums through dividend declarations or capital contributions from Avangrid[446] - Renewables uses fixed price power trades and gas trades to hedge price risk, with long-term hedges introducing some mark-to-market (MtM) volatility into yearly profit and loss accounts[434] - Networks manages commodity price risk through regulatory mechanisms and comprehensive risk management processes, passing market price fluctuations to customers[436] - The company employs Monte Carlo simulation VaR techniques to measure and control risk levels, with a focus on potential loss, probability, and portfolio holding period[434] - Renewables' outstanding financing lease balance was $39 million at December 31, 2023[447] - Renewables recorded a net non-cash dividend of$453 million to Avangrid, Inc. in March 2023 to zero out account balances[447] - Renewables' revenues and disbursements are concentrated in Avangrid, Inc., with net cash surpluses or deficits recorded as intercompany receivables or payables[447] Workforce and Diversity - Employee turnover in 2023 was 8.5%, with voluntary turnover at 6.0%, involuntary at 1.0%, and retirement at 1.6%[120] - As of December 2023, the company employed 7,999 full-time employees, with 91.3% based in five states: Connecticut, Massachusetts, Maine, New York, and Oregon[117] - The company has set a goal for women to represent 35% of executive positions and 50% of senior leadership positions by 2030[117] - Approximately 45.8% of employees are represented by collective bargaining agreements, with 24.1% of agreements expiring in the coming year[119] - Over 15% of employees participate in one of the seven Business Resource Groups, which hosted 97 events in 2023 to promote diversity and inclusion[123] - The workforce demographic breakdown shows 78.1% White, 8.5% Hispanic or Latino, 5.8% Black or African American, and 3.4% Asian employees[125] Safety and Operations - Networks completed over 35,000 safety observations in 2023 as part of its Leadership Field Safety Observation Program[134] Contract and Market Dynamics - Commonwealth Wind terminated its 1,200 MW PPAs with Massachusetts EDCs, paying a $48 million termination fee in 2023[43] - Park City Wind terminated its 804 MW PPAs with Connecticut EDCs, paying a$16 million termination fee in 2023[44] - Renewables has 78% of its capacity contracted under long-term PPAs as of December 31, 2023, with an average contract period of approximately 9 years, and an additional 11% of production hedged[91] - Renewables faces competition in securing long-term PPAs, identifying suitable sites, and participating in competitive energy markets, influenced by federal, state, and local energy legislation[94] - Networks' customer payment terms are regulated by state authorities in New York, Maine, Connecticut, and Massachusetts, with utilities required to provide payment arrangements for past due balances[90] Regulatory and Financial Incentives - The FERC established a base-level transmission ROE of 11.14% for regionally planned New England electric transmission projects, with additional incentives up to 125 basis points[56] - The FERC has civil penalty authority of up to $1.39 million per day for violations of the FPA and NGA, with additional penalties for market manipulation up to$1.9 million per day[59][62] - Renewables' tax equity financing structures allow third-party investors to receive tax benefits and cash distributions until a negotiated return is achieved, after which Renewables receives substantially all cash flows[47]