Avangrid, inc (AGR) Q2 2021 Earnings Call Transcript

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Avangrid, inc (AGR 0.49%)
Q2 2021 Earnings Call
Jul 21, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the AVANGRID Second Quarter 2021 Earnings Conference Call. [Operator Instructions].

I'll now turn today's call over to Patricia Cosgel, VP of Investor and Shareholder Services. Please go ahead.

Patricia Cosgel -- Vice President of Investor Relations

Thank you, Stephanie, and good morning to everyone. Thank you for joining us today to discuss AVANGRID's second quarter 2021 earnings results. Presenting on the call today are Dennis Arriola, our Chief Executive Officer; and Doug Stuver, our Senior Vice President and Chief Financial Officer. Also joining us today for the question and answer part of the call will be Bob Kump, Deputy Chief Executive Officer and President of AVANGRID; Alejandro de Hoz, President and Chief Executive Officer of AVANGRID Renewables; and Catherine Stempien, President and Chief Executive Officer of AVANGRID Networks.

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

During today's call, we will be making various forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect or because of other factors discussed in AVANGRID's earnings news release and the comments made during this conference call, in the Risk Factors section of the accompanying presentation or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website avangrid.com. We do not undertake any duty to update any forward-looking statements.

Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of non-GAAP financial measures to the closest GAAP financial measures.

I will now turn the call over to Dennis.

Dennis Arriola -- Chief Executive Officer

Well, thanks, Patricia, and good morning, everyone. We appreciate you joining our second quarter earnings call. Well, it's hard to believe but yesterday was my one-year anniversary at AVANGRID and I want to start by saying thanks to all of you for your support and a special thanks to those of you that provided me and the team with candid and constructive feedback on how we could be a better company.

Over the last 12 months, we've worked hard to build a company that focuses on accountability and execution, on developing goals that are realistic above all, on delivering results that are consistent with our commitments, while focusing on our customers, on safety and continuous improvement. While I am pleased with our progress so far, we still have a long ways to go. And I'm proud of all we've accomplished, but even more excited for what lies ahead. And I believe our first half performance is indicative of what our team can deliver when we're aligned, focused and executing.

For the second quarter of 2021, our net income was $98 million, up 11% year-over-year and our adjusted net income was $122 million, up 25% year-over-year. For the first half, our total net income was $432 million, up 32% year-over-year and our adjusted net income for the first half was $476 million, up 43% year-over-year. Both businesses are delivering excellent growth. Networks' bottom-line results are growing at a double-digit rate, as we execute on our Road to Authorized ROE, while focusing on providing excellent service to our customers. In Renewables, we're pleased with our strong operating and asset management performance, improved pricing and the availability of our fleet, which has helped to compensate for weaker wind resource as compared with the previous year.

Based on our excellent performance in the first half and our outlook for the rest of the year, we're raising our adjusted net income guidance by 5% from the midpoint of our previous range of $696 million to $758 million to our new guidance of $730 million to $795 million for 2021. Now remember, this is the second time we've increased guidance this year since we raised our earnings guidance by 4% at the end of the first quarter. With this most recent revision, our guidance is now up around 10% from our original outlook we provided in February.

We're also updating our adjusted EPS guidance to a range of $2.04 to $2.22 per share, which reflects the additional 78 million common shares issued on May 18, which increased our weighted average shares to 358 million for 2021 and this compares with the 310 million reflected in previous guidance in prior results.

In addition to our strong financial performance, we continue to execute on our strategic plan objectives. In Connecticut, we finalized UI settlement agreement with regulators and other key stakeholders. In New York, recently passed legislation, which we expect Governor Cuomo to sign, would enable AVANGRID to propose incremental 10-year storm hardening investment plans to increase resiliency. In Maine, our New England Clean Energy Connect or NECEC transmission project is progressing well with construction ongoing on all segments. In New Mexico, we're awaiting the final approval to our PNM Resources merger from the New Mexico Public Regulation Commission. All other approvals have been received.

In offshore renewables, we receive BOEMs Record of Decision for Vineyard Wind 1 and the Notice of Intent for preparation of a draft environmental impact statement for Park City Wind. In onshore renewables, we contracted 210 megawatts of solar in PJM with a commercial and industrial customer and entered into 254 megawatts of contracts to reduce our uncontracted capacity.

On the financing side, we successfully issued $4 billion of common equity in May at no discount, which removes the equity financing risk from the pending PNM merger transaction. And as we look to build a green hydrogen future, we submitted several concepts for hydrogen projects nationwide as part of the U.S. Department of Energy's request for information to enable low-cost clean hydrogen at scale. We see this as an additional opportunity for long-term growth, which will leverage our existing assets and capabilities and the global experience of the Iberdrola Group.

Now driving further into Networks on Slide 6. We remain focused on safety, customer service and operational excellence as we continue down our road to achieve our Authorized ROEs at all of our utilities. We're making good progress across the board at each of our utilities. In Connecticut, PURA approved our settlement agreement in the interim rate decrease and rate adjustment mechanism dockets, largely preserving the initial terms that we have agreed to with no change to ROE or capital structure. The agreement was the result of multiple key stakeholders coming together to bring rate relief and stability to UI customers for years to come. And we're pleased to see it move forward.

In New York, we're implementing NYSEG and RG&Es three-year rate plans and we're tracking toward earning the Authorized ROEs at both utilities. Additionally, the legislature recently passed a bill directing utilities to create and implement 10-year storm hardening and resiliency plans outside of the rate base. This bill, which we expect Governor Cuomo to sign, will provide an important opportunity to holistically and thoughtfully plan for the long-term challenges for storage folks. The plan will identify the right investments to enhance resiliency and to ensure reliable service continues for our customers.

In Maine, CMP continues to perform well on its customer service metrics, and we expect to file to remove the 100 basis points adjustment later this year. In addition, the findings of the Management Audit released last week echo that we've made real improvements in customer service, while identifying certain places where we can still do more. We're committed to fully meeting our customers' expectations, as well as those of our regulators. We're focused on ensuring power is delivered safely, affordably and reliably and making the investments Maine needs to meet its ambitious climate goals, while driving economic growth and creating good paying jobs.

Now in that vein, we're making steady progress on our New England Clean Energy Connect project. Construction is now ongoing in all parts, as the Segment 1 injunction was lifted in May. Our construction activities have employed roughly 800 Mainer's to date, which we expect to ramp up to 1,600 workers as construction continues. We see NECEC remaining on track for COD in 2023. Our team is doing a great job, sharing the facts and the positive benefits of this clean energy project for Maine and Mainer's and we're seeing growing support from the unions, business groups, small and large, and residents. And across all our network utilities, we continue to collaborate with our regulators and customers on ongoing COVID-19 challenges and cost recovery.

But before we continue, I want to recognize our Networks team's great efforts responding to storms that impacted each of our Northeastern states over the last two weeks, including Tropical Storm Elsa. Storm response is never easy and our crews continuously go above and beyond to ensure service is efficiently and effectively restored to our customers, while working safely. To our AVANGRID team, your work makes the difference. Thank you from all of us.

Now turning to PNM Resources on Slide 7. The merger process continues to move forward with six of the seven government approvals needed to close the transaction now in hand. The New Mexico Public Regulation Commission is the only remaining approval necessary to close the merger. Evidentiary hearings are set for mid-August on the stipulated agreement among PNM, AVANGRID and 13 other parties. New Mexico's Governor Michelle Lujan Grisham has also expressed support for the merger agreement. And while we're continuing to work with other stakeholders to have them join the stipulation agreement, we expect the approval of the PRC and for the transaction to close by year end.

Now turning to Renewables on Slide 8. We continue to execute on our long-term plan by developing and converting our identified approximately 23 gigawatt pipeline into contracted projects and improving the overall operating performance of our existing fleet. We've recently executed a PPA contract for our 210 megawatt solar project in PJM to be commissioned in 2023. This new PPA is with a commercial and industrial customer. Now, one of the commitments we made in November at our Analyst Day was our focus to de-risk our asset portfolio by reducing the percentage of uncontracted capacity. We're continuing to make progress on that commitment as we've signed a reg sale contract for a 39 megawatt Manzana Wind project in California. And during the second quarter, we executed a PPA on 254 megawatts of existing uncontracted portfolio capacity for the Blue Creek Wind Farm in Ohio. At the end of 2020, approximately 20% of our portfolio capacity was uncontracted and susceptible to market price fluctuations. We're now on track to end 2021 at around 11%.

As for new capacity, we have the 1,300 megawatts of solar and onshore wind projects for construction in 2021 through 2022, with 690 megawatts already under construction, including Roaring Brook Wind in New York with 81 megawatts; Golden Hills Wind in Oregon with 202 megawatts; Lund Hill Solar in Washington with 194 megawatts; and Montague Solar in Oregon with 211 megawatts. In addition, we've got 2.5 gigawatts of mature projects in our approximately 18 gigawatt onshore pipeline that will provide future growth and we are optimizing the value of our overall portfolio with the sale of the 780 megawatt development solar project. Now, as always, we will continue to evaluate the strategic importance and the risk of the pipeline projects and optimize assets when it makes sense.

On Slide 9. Another exciting part of our growing company is our offshore wind business. AVANGRID is leading the emerging U.S. offshore wind industry, starting with the first large-scale wind farm in the country; our 800 megawatt Vineyard Wind 1 project. In May, the Bureau of Ocean Energy Management or BOEM gave Vineyard Wind the green light to go forward. We intend to reach financial close and begin construction soon in the second half of 2021, to start delivering clean electricity to Massachusetts in '23 and reach full commercial operation in 2024. We're really excited and proud to be a part of the birth of an incredibly important new industry for the U.S.

Offshore wind is a key part of America's clean energy future and Vineyard Wind 1 is a major step forward to the clean and connected future we envision and we work toward every day. The project is progressing well. We have all major construction contracts with suppliers and contractors secured and we've executed a Project Labor Agreement with the unions that was celebrated last week in New Bedford, Massachusetts with senators Markey and Warren, as well as National Climate Adviser, Gina McCarthy in attendance. The approximately 500 jobs created with this PLA will be a critical backbone for Vineyard Wind as we progress through construction. We'll be using best-in-class technology from GE, where just one rotation of their Haliade-X turbine can power an entire Massachusetts house for a day. We'll deliver clean energy to 400,000 families. And this is only the start.

For Park City Wind, our 804 megawatt contracted project that will serve the State of Connecticut, the Bureau of Ocean Energy Management published its Notice of Intent to prepare an environmental impact statement enabling the road in Q3 of 2023. We expect to start generating clean electricity from the project in 2025 and intend to reach full commercial operation in 2026. And earlier this week, we celebrated the opening of our offshore wind office in Connecticut and we were honored to have Governor Ned Lamont in attendance to help cut the ribbon.

AVANGRID Renewables is also developing the Kitty Hawk offshore project, which has the potential to deliver 2,500 megawatts of clean energy into Virginia and North Carolina. We expect to receive a Notice of Intent for Kitty Hawk North soon and we're continuing discussions with potential energy offtakers.

Now, in total, we have access to lease areas with as much as 7.5 gigawatts of offshore wind capacity, including our 50% share of the 5 gigawatts of lease areas supporting 1.6 gigawatts of contracted projects in the Northeast, and another 2.5 gigawatt lease area off the coast of North Carolina, which AVANGRID wholly owns.

In terms of future opportunities, Massachusetts has released its third RFP for up to 1.6 gigawatts bids due in September. We expect that this will be followed by more than 3 gigawatts in Rhode Island, New York and Connecticut starting next year. We received more good news regarding our lease area recently when BOEM granted an extension of the operations term for Vineyard Wind from 25 years to 33 years, starting at COP approval, in alignment with the terms of the latest leases auctioned by BOEM. The extension will also apply to Park City and Vineyard Wind South. And last month, in support of its 30 gigawatt by 2030 target, the Biden administration proposed the sale of eight lease areas in the New York Bight with a potential capacity of approximately 7 gigawatts. Final sale notice is expected after a 60-day comment period.

Now we expect to participate in most of these auctions, but as I've noted before, we will continue to be disciplined in our bidding approach since we already have a significant footprint with our existing leases.

Now turning to Slide 11. As we aim to decarbonize this country on a large scale, we know we have to think bigger and bolder and continuously develop the tools we have in our toolbox. That's why we're excited to have submitted our responses to the Department of Energy's Hydrogen Energy Earthshot RFI. We see AVANGRID is well-positioned to be a leader in the emerging clean hydrogen space, thanks to several unique advantages, which gives us a leg up.

On the utility side, our operating companies have deep local knowledge and roots in the states and communities we serve. We have existing expertise as a leading renewables developer and operator nationwide. And our colleagues at Iberdrola are already delivering commercial-scale green hydrogen projects in Spain and the UK. We expect to tap into the key learnings from these efforts to streamline the development process here in the U.S. and enhance our projects' cost competitiveness in support of the DOEs goal to achieve a cost of $1 per kilogram by 2030.

Now the concepts we provided to the DOE envision hydrogen stretching from coast to coast. In the Northeast, we're looking at multiple applications for hydrogen, ranging from transportation to manufacturing and industrial use to create what we call a Hydrogen Valley. There may be opportunities to potentially leverage our offshore wind and NECEC to power electrolyzers in Connecticut and in Maine. The Northeast states have a long history as industrial hubs and our proposal is build on these historic strengths, while bolstering local investments and creating thousands of jobs that can provide in a green economy.

Shifting out West, we're in the early stages of an ambitious commercial scale project in Corpus Christi, which would convert our low cost taxes on contracted winds into green hydrogen to support green ammonia productions and industrial needs. Our aim with projects like this is to demonstrate hydrogen scalability and value and to continue to further our country's domestic energy leadership. And in Oregon, we're proposing co-locating green hydrogen production at our Klamath Cogeneration Plant. This project will help create a cleaner source of grid resiliency and flexibility as Klamath balances the incremental generation from our Northwest wind fleet.

So in total, we expect these projects could deploy approximately 350 megawatts of electrolyzer capacity to generate an estimated 30 million kilograms of clean hydrogen per year, reducing emissions by over 140,000 tons of carbon dioxide a year. Now, while these projects are still concepts, they're part of our vision for green hydrogen as a viable clean energy fuel, as well as a key avenue for future growth for AVANGRID in the years to come.

American innovation has always been a driving force for progress and we at AVANGRID are committed to being part of the climate solution. It's who we are as a company and how we'll continue to lead into the future. We look forward to continuing to engage with the DOE and stakeholders in our states to make green hydrogen the next game-changing technology like offshore wind.

Now, I've said this before, but our strategy and business model is grounded in strong environmental, social, governance and financial practices or ESG&F. Using these filters at the front-end of our investment process is a better and balanced way to do business; doing good by doing well for our customers, employees, communities and shareholders. AVANGRID is already an established leader in sustainability and good corporate governance with a track record of recognition from reputable third-parties like Forbes and Just Capital where AVANGRID was ranked as the Best Utility for the environment and for communities. Our best practices earned Ethisphere's Compliance Leader Verification and the World's Most Ethical Companies award for multiple years.

Now, last November when we set out our ESG&F business model, we laid out our commitments in a number of areas, including: increasing our Renewables capacity; achieving Scope 1 carbon neutrality by 2035; lowering our carbon emissions; promoting diversity, equity and inclusion in our organization; increasing diversity and sustainability among our suppliers; and increasing employee volunteers.

Since then, we've been taking concrete steps to further articulate and progress on our commitments and goals. We've introduced unconscious bias training for our leaders with the goal of making the training available to all of our employees by end of the year. We're actively tracking our supplier sustainability and identifying diverse suppliers as part of our procurement process and we're implementing our plan to reduce consumable energy usage and the CO2 footprint for our office facilities with a plan to upgrade and consolidate our workspaces.

In May, we also announced the appointment of our first Chief Sustainability Officer, Zsoka McDonald. Zsoka will help spearhead the achievement of these goals enterprisewide as we deliver on our aspiration to be the leading sustainable energy company in the U.S. You can find additional detail on our progress in the sustainability and ESG reports on our website.

So now I'll turn it over to Doug to take you through the financial results.

Doug Stuver -- Senior Vice President and Chief Financial Officer

Thank you, Dennis, and happy one-year anniversary with AVANGRID. Good morning everyone and thank you for joining us today.

Turning to our financial performance for the second quarter and first half of 2021, I'm pleased to report that AVANGRID continues to execute well against its financial targets, building on the great start we had in the first quarter. We're making excellent progress on our plans to earn our allowed ROEs and on our wind and solar PPA execution, project construction and energetic availability.

In the second quarter of 2021, we produced net income of $98 million and our adjusted net income was $122 million, increases of 11% and 25%, respectively from the second quarter of 2020. For the first half of 2021, our net income was $432 million and our adjusted net income was $476 million, increases of 32% and 43%, respectively from the first half of 2020.

Investment growth in our businesses was a key driver of our results. In the first half of 2021, we invested $1.4 billion, an increase of 14% from 2020, which included $1 billion of investments in Networks, and a little under $400 million of investments in Renewables. This reflects our continued spending to improve Networks' reliability and resiliency and enhance the safety of our electric and gas systems. We also continue to construct our NECEC transmission line to bring clean energy into New England.

In Renewables, our spending was for the ongoing construction of the 1.3 gigawatts that will be in service in 2021 and 2022. In our Networks business, on an adjusted basis, we earned $108 million for the second quarter, a $26 million or 33% [Phonetic] increase from 2020. The execution of our planned investments benefited our Networks earnings as we had higher capitalized interest in labor of $14 million on larger average construction balances, including NECEC.

The improvement in the quarterly earnings for Networks was also largely due to the successful implementation of the New York rate agreements that we settled in the fourth quarter of 2020, adding $15 million effective May 1. We had a great year two of the New York rate plan, further enhancing our quarterly comparison against last year, which largely excluded the effects of the New York rate plan and build a make-whole to recognize in the fourth quarter. The second quarter results were also impacted by higher personnel costs related to the successful implementation of our New York rate plans and higher depreciation.

In Renewables, adjusted net income for the second quarter also increased meaningfully. We continue to construct our wind and solar projects and benefit from improvements to our operations and energetic availability. In the second quarter, adjusted net income was $41 million, an increase of $11 million or 36% compared to 2020. Key impacts in Renewables during the second quarter included: improved pricing of $11 million; earnings from successful thermal and asset management of $17 million; PTC's of $8 million; and contributions from new capacity of $4 million. These positive impacts were reduced by $19 million in the second quarter comparison, primarily due to decreased wind resource and un-reimbursed curtailments. Taxes also reduced the positive impacts in the second quarter compared to the second quarter of 2020 by $11 million, representing timing differences.

Finally, we highlight a 42% increase in Renewables' adjusted EBITDA in the first half year-over-year, which includes tax credits as reflective of the increasing value of that business. Our focus remains on achieving our growth targets by delivering high-quality projects to produce our targeted returns and earnings accretion.

Moving to Slide 15. In May, we successfully completed the issuance of $4 billion in equity to fund our PNM acquisition and ongoing investments. We were very pleased to complete this offering in a robust market at no discount to our stock price, removing the market risk in advance of our merger with PNM. As we previously noted, this completes our equity needs through 2022. We completed the equity offering through two private placements that resulted in the issuance of slightly under 78 million shares.

We received a strong vote of confidence from Iberdrola who maintained its 81.5% interest in AVANGRID shares with the offering and are quite pleased to add Qatar Investment Authority, an outstanding new long-term investor in AVANGRID for the remaining 18.5% of the shares issued. Qatar Investment Authority is Iberdrola's largest shareholder, and is well-aligned with Iberdrola and AVANGRIDs ESG+F focus and strategy. Since the equity offering, we've seen all shareholders benefit with our share price outperforming the sector by roughly 190 basis points. The equity offering proceeds were used in part to repay our $3 billion intercompany loan from Iberdrola, removing a modest amount of interest costs for the remainder of the year and increased our total share count to approximately 387 million shares.

We've included on Slide 15, the weighted average shares outstanding that will be used for our earnings per share calculation throughout 2021, to ensure you have accurate share counts for future EPS calculations. For the second quarter of 2021, our adjusted EPS, after reflecting the dilution from the May equity issuance, was $0.35 up 9% versus the second quarter of 2020 and for the first half of 2021, our adjusted earnings per share was $1.45, up 34% versus the first half of 2020. Both the quarter and first half are up strongly when measured from an adjusted net income or adjusted earnings per share standpoint.

Now moving to Slide 16. We're pleased with our continued strong results in the second quarter and for the first half of this year, a reflection of our commitment to execution. As a result, we're increasing our 2021 net income outlook from a range of $696 million to $758 million to $700 million to $765 million. And our adjusted net income outlook from a range of $696 million to $758 million to $730 million to $795 million. Adjusted net income reflects the exclusion of mark-to-market, merger and COVID-19 costs. As Dennis noted, this is the second increase in our outlook this year with our progress on the Road to Authorized ROEs, the execution of our Renewables growth plans and our focus on operational excellence provide us with the confidence to raise our expectations for the year.

As a reminder from our fourth quarter 2020 and first quarter 2021 earnings calls, our guidance had assumed an equity issuance to finance the PNM merger at the end of the year. With our earlier issuance, our increased net income and adjusted net income guidance results in updated 2021 EPS and adjusted EPS guidance ranges of $1.95 to $2.14 and $2.04 to $2.22, respectfully. As noted on Slide 15, this is based on weighted average shares outstanding in 2021 of 358 million shares.

We continue to assume in our outlook for 2021 that the PNM merger will close at the end of the year. The principal driver of this second increase in our outlook is our strong operational performance year-to-date. We're seeing solid financial improvements through execution of our investment plans, implementing our plans to achieve Authorized ROEs and improved energetics availability in our Renewables business. We achieved the very modest interest rate savings and strengthened our balance sheet through repayment of the $3 billion intercompany loan from Iberdrola with proceeds of the equity issuance, positioning us well for the future.

Now, moving on to our liquidity, credit ratings, financing and dividends on Slide 17. Our strong liquidity is demonstrated by our $2 billion commercial paper program, which is backed by a $2.5 billion sustainability-linked credit facility. Additionally, Iberdrola has provided a $500 million credit facility, another clear example of their strong support, in addition to their $3 billion intercompany loan to AVANGRID that was a low-cost bridge to our equity issuance in May. Finally with the equity issuance, we now have a strong $1.7 billion cash position at the end of the second quarter.

We're committed to maintaining our solid investment-grade credit ratings. AVANGRID has BBB+ ratings with S&P and Fitch and with Moody's rating action yesterday of Baa2 rating with Moody's, all looks stable outlooks. We believe our strong balance sheet and these ratings along with Iberdrola's demonstrated support provide excellent access to the capital needed to fund our strategic growth plans at attractive financing costs, including for our major projects.

We remind everyone that we have a commitment to green financing, not only with the $2.5 billion sustainability-linked credit facility supporting our working capital needs, but also with the issuance of 2.1 billion of green bonds to date making us the number 11 green bond issuer in the United States. We've also disclosed that we plan to fund the PNM merger with an additional $700 million in debt and expect to reach financial close on our Vineyard Wind project very soon in the second half of the year.

Finally, we note that the Board recently declared a quarterly dividend of $0.44 per share, payable on October 1. In summary, we highlight our strong earnings growth through the first half of this year as a testament to our focus on the execution of our financial targets and strategic initiatives. Our primary objective continues to be executing on those plans to drive sustainable value as a leading sustainable energy company.

Thank you for joining us today for our update on the second quarter results and execution on our plans. I'll now hand the call back to our operator, Stephanie, for questions, followed by closing remarks from Dennis.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And your first question's from the line of Insoo Kim with Goldman Sachs.

Insoo Kim -- Goldman Sachs -- Analyst

Hey, good morning. My first question is just related to the PNM deal. Congrats on getting the equity financing done in May. It seems like, it gives you -- it shows that you have confidence in the deal closing. Just hypothetically, I'm curious if somehow the PNM deal doesn't go through as planned, what are some of the options that you would consider in relation to capital allocation with the equity that you raised?

Dennis Arriola -- Chief Executive Officer

Good morning, Insoo. Look, we're not going to speculate because we are confident this thing is going to close. I think we've got 13 different interveners that have signed the stipulation agreement. We're continuing to have discussions with the remaining four or five, and I think we're continuing to make progress with at least a couple of them. So all indications are we're going to have the evidentiary hearings, as we've said, in the middle of August and with the support that we have -- and it's very broad support, we think this is going to go through. So rather than speculate, what might be, we're really focused on what we're going to make happen.

Insoo Kim -- Goldman Sachs -- Analyst

Got it. Fair enough. My second question, on offshore wind, it seems like, correct me if I'm wrong, that the Park City Wind COD date is now moved back about a year. Just some thoughts on or clarity on the reason for that. Is it more just the timing of the BOEM permitting process or could it -- potentially because of some considerations due to cost inflation that you're seeing on some of the commodity cost side. And just related to that, how are you seeing the current cost inflation of a bunch of the sourcing costs, if they do get sustained impact in potential offshore returns?

Dennis Arriola -- Chief Executive Officer

Sure. Let me start, I'll provide some color and then we can have Alejandro and Doug jump in as well. Specifically to just the overall timing, we don't really think about it as a year. We think about it as months. As I said, in my opening remarks, we expect to start generating electricity in 2025 and to complete -- have COD finished in 2026. So it's not really inconsistent with what we had, but that probably shift by months, not a year. The other thing is it really does come down to the BOEM schedule.

And I think that we're being conservative here based upon the Notice of Intent that came out. I think one of the things that gives us confidence that we're going to get through this again is because we're the first ones with Vineyard Wind. We know how the process works, they're comfortable with how we provide information and we've learned a lot and they have as well. So I think the slight shift in timing, we're still looking for, again, generating electricity in 2025, but having COD in 2026.

Alejandro, do you want to talk just a little bit more just about the process and what you're seeing there?

Alejandro de Hoz -- President and Chief Executive Officer, AVANGRID Renewables

Sure. Thank you, Dennis. So maybe the only thing I would add is that, I mean, as we have already proved with Vineyard Wind 1, these projects that are in industries that are still in early phases of maturation, delays are normally compensated by additional maturity of, say, either the technology or local content. So in the case of Park City, as Dennis was mentioning, we have received the Notice of Intent from BOEM, but at the same time after receiving that, we have received more clarity on the overall permitting process. So we think that delay in the project by a few months will give us a better float to get to things done on time. And also it's probably going to give us much more certainty in being able to access the newest generation of wind turbines that with the previous schedule were maybe a little bit tight. So, all in all, we think that the project will benefit from these few months of pushback.

Insoo Kim -- Goldman Sachs -- Analyst

And perhaps just on the -- a follow-up question I had on the commodity cost inflation in general, I understand Vineyard Wind having much of their capex secured already with the cost, but as it relates to, let's say, Park City Wind and some of the other projects, how are you seeing the current environment potentially impacting returns or when do you expect to, I guess, secure some of the project costs for some of the more future project?

Dennis Arriola -- Chief Executive Officer

Alejandro, you want to cover that?

Alejandro de Hoz -- President and Chief Executive Officer, AVANGRID Renewables

Yeah, sure. So I -- in the case of Vineyard Wind, we said it last quarter, we were in a very good hedging position in terms of commodity and currency. Now this quarter we are -- we have made a good progress in relation to last quarter. So right now we can say that commodity is almost hedged a 100%, there is a very small part that is still unhedged and that we intend to hedge prior to financial close. So in the case of Vineyard Wind 1, everything is secure. In the case of Park City, what I would say is that commodity price evolution is cycling -- is cyclic. And so we really don't know what the situation will be by the time we really have to fix prices on all the procurement of Park City Wind. So we don't see these as a major risk at this point. And once we get a little bit closer to having to lock the technology and therefore the capex associated to the project, then we will look at this in more detail.

Dennis Arriola -- Chief Executive Officer

But Insoo, I think the other thing that I'd add there is, that's why we do add a -- I'd say a healthy contingency to this for the unknowns. I think one of the things that's a benefit of Park City is that we'll have the experience of having started the construction and really completing the construction of Vineyard Wind, which hopefully will give us additional synergies and learnings that we'll adapt to Park City. So as Alejandro said, at this point in time, we're not concerned. So we think we've got a really good project. We think it's going to move along and we'll address the cost as they come. And Doug?

Doug Stuver -- Senior Vice President and Chief Financial Officer

Yeah, I would just add too, Dennis, that we talked about Park City, and as you mentioned, we're talking about months, not a year's worth of delay. The effect on 2025 and our outlook is not material. As we put our outlook together, 2026 was always assumed to be the first full year of operation for Park City. So we only have a partial impact to the 2025 period, and it's not material to our outlook.

Insoo Kim -- Goldman Sachs -- Analyst

Got it. Thank you so much.

Dennis Arriola -- Chief Executive Officer

Thanks, Insoo.

Operator

Your next question is from the line of Richard Sunderland with J.P. Morgan.

Richard Sunderland -- J.P. Morgan -- Analyst

Hi. Good morning. Maybe starting with the Renewables project sale, could you quantify the impact there either on the quarter or baked into '21 guidance and give a little more color on the process?

Dennis Arriola -- Chief Executive Officer

Sure, Richard. Let me just tell you. This was part of a -- as we look at our pipeline, we're always looking at the quality of the projects. Are they still strategic to us? Are they more important to somebody else? And this was something that we just decided was more important to somebody else. But the financial impact was less than $0.01. And it's -- I'm sorry.

Doug Stuver -- Senior Vice President and Chief Financial Officer

And I would just add, as far as our guidance is concerned. We didn't make any assumptions on asset sales in our guidance, so it's immaterial in both accounts.

Dennis Arriola -- Chief Executive Officer

Yeah.

Richard Sunderland -- J.P. Morgan -- Analyst

Got it. That's very clear. And then just returning to the financing comments on Slide 17, you laid out a little bit of the incremental PNM financing. Could you speak to the rest of the consideration there including any more equity this year or next?

Doug Stuver -- Senior Vice President and Chief Financial Officer

Yeah, this is Doug. I think as we mentioned on the first quarter call, nothing's really changed in terms of our expectations for equity. We did the $4 billion offering. We're very pleased with the outcome of that. We feel like that satisfies our equity needs through 2022. And then as we look forward to 2023 through 2025, we anticipate approximately $2 billion of non-debt financing that will occur in that timeframe that can come in the form of equity, hybrids, asset recycling, any of that mix.

Richard Sunderland -- J.P. Morgan -- Analyst

Got it. Thanks. And if I can just squeeze in one more, the 2.5 gigs of mature projects that you spoke to, you see those as like imminent PPAs, or could you provide any other color on those?

Dennis Arriola -- Chief Executive Officer

Let me start, we'll have Alejandro come in. I can tell you that our folks are working hard with customers to turn those into PPAs. They are in a lot of different stages. But I think that one of the things that we're seeing because of the very public publicity that we're getting on our offshore wind, people are paying a lot more attention to us. I mean, we are the third largest operator and developer of Renewables, but I think with what we're doing in Vineyard Wind and the publicity we're getting in Park City, we've got some new players, customers are paying attention to us. So we're urging our origination people to be out there as much as they can to start turning these opportunities into PPAs. But Alejandro?

Alejandro de Hoz -- President and Chief Executive Officer, AVANGRID Renewables

Yeah. The only thing I would add, Dennis, is that from that 2.5 gigawatts of projects that are in either short lease states or an RFP sort of bilateral discussions, I could say, we have about a 1 gigawatt of projects that are already in advanced negotiations. So as you know, in our long-term plan, we are targeting around 800 megawatts per year of growth. So we think that we are very well positioned to deliver on that long-term plan.

Richard Sunderland -- J.P. Morgan -- Analyst

Great. Thank you for the call, Dennis.

Dennis Arriola -- Chief Executive Officer

Thanks, Richard.

Operator

The next question is from the line of Angie Storozynski from Seaport Global Securities.

Angie Storozynski -- Seaport Global Securities -- Analyst

Hello. So I have two questions about PNM. So the first one about the Board composition. I think you guys made it clear that you want to have, I think, 40% of all of the Directors independent versus I think 70% is what the staff of the commission is asking for, and so how do you see that? And also, secondly, assuming that the transaction does close, can you give us some sense of the like earnings seasonality for PNM? If we were to, lets say, incorporate, just, say, the fourth quarter earnings of PNM into your numbers, roughly what percentage of annuals of PNM will it be?

Dennis Arriola -- Chief Executive Officer

Is this Angie? We couldn't hear you. You broke up at the beginning.

Angie Storozynski -- Seaport Global Securities -- Analyst

Yes, it is Angie. I'm sorry. It's Angie Storozynski.

Dennis Arriola -- Chief Executive Officer

All right. Thanks, Angie. Let me start on the first part of the question. I think that as I mentioned in my comments, we've got 13 different interveners that have signed on to the stipulation agreement. We're continuing to have discussions with the remaining four or five. Of the 13 that have signed on, the composition of the Board has not been an issue. They've been very comfortable with the commitments that we've made. What you're referring to is, I think, a desire from the staff but we're having discussions with them to better understand why they believe they need that, given the commitments that we've already made in the stipulation agreement. But Bob, you may want to just give a little bit more color on...

Bob Kump -- President and Deputy Chief Executive Officer

Yeah, no. Angie, it's, Bob, how are you? I would just echo what Dennis said. We have strong support from 13 folks that have signed on to the joint proposal. We have another three that provided testimony. They still have some concerns, but not related to this issue of a majority independent Board. And then we look at staff's comments and their areas of concern. We think there are ways to address those, maybe not necessarily directly through an independent Board, but we'll continue to work with the parties.

Doug Stuver -- Senior Vice President and Chief Financial Officer

I would just add from a seasonality standpoint, really the fourth quarter is one of the smaller quarters for PNM. The third quarter is really one of their bigger drivers for the earnings throughout the year.

Angie Storozynski -- Seaport Global Securities -- Analyst

Okay. Okay, thank you.

Dennis Arriola -- Chief Executive Officer

Thanks, Angie.

Operator

Your next question is from the line of Michael Sullivan with Wolfe Research.

Michael Sullivan -- Wolfe Research -- Analyst

Hey, everyone, good morning.

Dennis Arriola -- Chief Executive Officer

Good morning, Michael.

Michael Sullivan -- Wolfe Research -- Analyst

Wanted to start off with just the guidance update, a couple of moving pieces there, but if I just try to normalize things, you guys went up $0.10 last quarter, and then if I look at it on the old share count, you went up another $0.10 this quarter. And then you also talked about a $0.27 yearly benefit in Q1 last year. Am I thinking about the moving pieces right here? Or are there some other aspects to this just kind of ignoring the equity issuance?

Dennis Arriola -- Chief Executive Officer

Yeah. Michael, let me start. I think if some people have asked on an apples-to-apples basis, what is the increase in guidance look like? And I'm using the same math that you guys are looking at, but if you would've taken the midpoint of our prior adjusted earnings forecast of $727 million and use the 309.5 million shares as the denominator, that gave you the prior guidance midpoint of $2.35. And then if you look at the guidance midpoint of our new adjusted income of $763 million roughly using again, on a pro forma basis, the 309.5 million, that gives you a pro forma EPS of $2.47. So we're really increasing is about $0.12 on a pro forma basis from where we were previously. As far as the -- Doug, do you want to jump in on the second piece there?

Doug Stuver -- Senior Vice President and Chief Financial Officer

Well, I guess, maybe just to translate it also, adjusted net income because I think that's maybe an easier way to think of it with earnings as opposed to the share issuance. We've got a combined increase in our guidance, midpoint of roughly $66 million. The impact of the Texas event was above that. If you look at what's happened in the first half of this year, I would say that the wind production really has been roughly 2 percentage points below last year and that's really been, I'll say, the drag on our outlook for this year and why we're not seeing the full benefits thus for the Texas weather event.

Dennis Arriola -- Chief Executive Officer

But I think, Michael, if you look at the fundamental business, and specifically in Networks, which is still the predominant piece of AVANGRID, we're doing really well. The team is continuing to progress on our Road to Authorized. We're doing very well and implementing the new rate plans in New York that were approved in November. We like the momentum that we have in Connecticut with our settlements and we're seeing -- our customer service metrics continue to perform extremely well in Maine.

So I'd say that with what's going on in Networks and what's happening in Renewables, adding the capacity and getting increased effectiveness out of our existing operating fleet, we feel really good about the first half and we feel really confident about the second half based upon those factors. There isn't one single thing that really drives us and I think that's the benefit of having a diversified portfolio, not just within Networks and Renewables, but it's all the moving pieces working together are working nicely.

Michael Sullivan -- Wolfe Research -- Analyst

Okay. Thanks. And, yeah, that was actually one thing I wanted to follow-up on was, you guys referenced a couple of times, improved energetic availability at Renewables. Can you just give a little more color on that, particularly as Doug just mentioned wind production is actually down year-over-year, so just any more color on what you guys mean by that.

Dennis Arriola -- Chief Executive Officer

Doug, why don't you...

Doug Stuver -- Senior Vice President and Chief Financial Officer

Yeah. I can start and Alejandro, feel free to jump in, but we think of the energetic availability as -- is the resource available to operate as the wind is blowing. And if we look at it year-over-year, we're up about 0.7 percentage points. So we've seen meaningful improvement year-over-year and all that translates into additional production capability. So we're very focused on the operations and being as effective as we can with being able to generate as the wind is blowing.

Dennis Arriola -- Chief Executive Officer

Yeah. While we can't control the wind, we can control and influence our effectiveness when the wind does blow. And I think that was another reason why in Texas, we're able to take advantage of the situation and be able to provide power when customers really needed it, because we were able to get our machinery up and working and our teams did a great job there and they continue to get more juice out of our existing portfolio.

Michael Sullivan -- Wolfe Research -- Analyst

Okay. Thanks a lot. Appreciate it.

Dennis Arriola -- Chief Executive Officer

Thanks, Michael.

Operator

Your next question is from the line of Sophie Karp with KBCM.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Hi, good morning. Thank you for taking my questions.

Dennis Arriola -- Chief Executive Officer

Good morning, Sophie.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Hey, good morning. First, on the New York legislature potential for increased hardening spend. I'm curious, if you -- and clearly it's early days, but I'm curious if you have sort of a host of projects that you were already contemplating that could fall under the preview of that program outside of rate case. Or is that something that you would have to go to the drawing board and develop once that becomes a reality? And what other projects...

Dennis Arriola -- Chief Executive Officer

Yeah, let me turn it over to Catherine, but I can tell you, with a company that has a lot of engineers, there's always lot of great ideas that don't necessarily make it into the rate cases. And they're always looking to see what they can do to improve the overall effectiveness and resiliency of the system. So I can tell you, we're not starting from scratch. But Catherine?

Catherine Stempien -- President and Chief Executive Officer, AVANGRID Networks

Thanks, Dennis, and hi, Sophie. So first of all, let's talk a little bit about timing. We anticipate that we will -- the regulatory authority needs to promulgate some regulation. So we anticipate we'll -- we won't be filing anything with the commission until 2022 at the earliest. And of course we're already in a rate plan right now with new rates not being able to go into effect until 2023. That being said, we are definitely planning right now and thinking in the future about those storm resiliency types of matters that we can make.

Let me tell you, this year has been a tough year for many of our customers in the New York area, where we have seen a lot of storms coming through. And we know from experience that if we build resiliency into our system, that can really help with restoration efforts and it can help minimize the number of outages.

So we're examining things like increased automation on our grid, so that we can reduce the number of customers that are impacted by any one particular outage. And we're looking at other types of investments that we can make. But these are -- I really appreciate what New York has done, because they're looking at the long-term here. What we'll be filing with the commission, we'll be looking at a 10-year plan for resiliency expenditures. And those costs from the legislation will be able to be recovered outside of rate cases, to the extent they're incremental to our rate case filings, and they'll be recovered through a tracker mechanism.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Thank you. Thank you. And then my next question was on hydrogen. I think, again, early days, but could you maybe give us a little more context on what this phrase means? I think I heard $1 per kilogram, maybe I misheard, but what does that translate into in terms of the cost of energy on the other hand maybe compared to other storage systems or peakers or offshore wind that is currently in existence?

Dennis Arriola -- Chief Executive Officer

Yeah, it's a good question, Sophie. And I will tell you that we are on the early stage. What we're looking -- and it really depends on the project and who the off-taker is going to be, how they're going to use it, what fuel source they may be replacing. So there isn't one easy answer there. I guess the real takeaway here is, there are customers that are interested in using hydrogen, not just because it's a clean fuel, but I think that with the support that we expect to get from the DOE and other agencies to be able to drive down the overall cost, it's going to make them more competitive.

And if you just look at in the Gulf area, where a lot of the chemical producers are, they use a lot of natural gas today and we support the use of natural gas, but as they're trying to decarbonize their fuel sources, hydrogen is going to be something that they use going forward. So we're working on things like that.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Awesome. Thank you.

Operator

Your next question is from the line of Peter Bourdon of Mizuho.

Peter Bourdon -- Mizuho Securities -- Analyst

Hi, thanks for taking my question. Dennis, happy one year.

Dennis Arriola -- Chief Executive Officer

Thank you, sir. I even got a cake.

Peter Bourdon -- Mizuho Securities -- Analyst

There you go. In regards to the adjusted net income guidance, obviously, you increased to 31 in Q1 and then 36 here in Q2. Just trying to understand the breakdown of how much of that is Renewables versus Networks, I guess, in aggregate for the year. And then secondly, how much of that is setting up as a base to grow off into 2022? Or is there an offset to be thinking of, I guess, storm [Indecipherable] that just to be aware of that brings that back down?

Dennis Arriola -- Chief Executive Officer

Yeah. Peter, we're not going to break it down between Networks and Renewables, but I'll tell you though is -- Doug went through the details. Both of our businesses are really performing well. We like what's going on from the investment side in Networks, especially as it's driven by the New York rate case. We like the progress we're making to improve the return from an ROE perspective at all of our utilities and what we said in November and, knock on wood, we're tracking to this is that 2021 would be the year where we narrow the gap on those utilities, where we weren't fully earning our Authorized ROE. And I like the direction we're going in. And for 2022, we see that continuing to improve.

From a Renewables standpoint, we've got capacity coming on. As Doug mentioned, the energetic availability is continuing to improve. Wind hasn't been our best friend here, but when there is wind, we're taking advantage of it. So I'd say that both pieces of our business are performing well. And then, as we prepare to add PNM, we'll have a full year of their earnings in 2022. So without necessarily breaking it up by segments of where that growth is coming from, I'll tell you it's coming from all parts of our business and we're excited about having PNM join us as well.

Peter Bourdon -- Mizuho Securities -- Analyst

Okay. Fair enough. And then just in regards to 2022, just the guidance you had previously rolled out, I think it was $236 million to $260 million, does that still hold?

Dennis Arriola -- Chief Executive Officer

Yeah. We gave that out in November and we talked about it at the end of the year, and we're not going to be updating guidance at this point in time. What I can tell you is we liked the direction that we talked about in November of having 6% to 8% EPS growth over that five-year time period. And there's nothing that we see today, including the trajectory through 2022, that tells us that we're not going to be able to meet that.

Peter Bourdon -- Mizuho Securities -- Analyst

Okay. Thank you.

Dennis Arriola -- Chief Executive Officer

Thanks, Peter.

Operator

Your next question is from the line of David Arcaro of Morgan Stanley.

David Arcaro -- Morgan Stanley -- Analyst

Hi. Good morning. Thanks so much for taking my questions. I'm wondering if you could just briefly touch on Central Maine Power. Maybe first on the audit, how you expect that to play out from here in the regulatory arena? And then secondly, on the recent efforts to municipalize. Would you consider that to be done at this point? Or do you think there could be follow-on efforts in the state to move in that direction? Thanks.

Dennis Arriola -- Chief Executive Officer

David, we appreciate your comments. Let me have Catherine jump in. I think what I'd start though with the audit -- to a certain extent it was backward-looking, but I think that there was also a lot of recognition of the improvements that we've made in management and processes and our focus on customer service. So to a certain extent, the audit was a validation of the things that we've been focused on, and kudos to the team. I'd also say that there are certain areas that we can continue to improve on and we're focused on those. But, Catherine?

Catherine Stempien -- President and Chief Executive Officer, AVANGRID Networks

Sure. Thanks, Dennis. Let's start -- I'll start with the government controlled power legislation. Now just on history, this process has been going on for a couple of years, it's been driven by a couple of legislators. And last year, in fact, the legislature agreed that more study needed to be done, given the real risks and potential costs to customers in Maine, but no study was performed. So when they came back and reintroduced this legislation this year, it went back and forth, we succeeded and then it was passed, but ultimately we're glad that Governor Mills set the legislation recognizing that there are some real questions about government control power for Mainer's with significant potential costs of up to $13.5 billion, years of litigation, and really no improved reliability for customers in Maine.

On the reliability front, CMP has the same, or if not better reliability than other heavily [Indecipherable] IOUs, end consumer utilities and affordability, we've got the lowest rates in New England. So we don't see that moving to government controlled power is a benefit and a good thing for Mainer's. In fact, we see that there's a lot of problems there. But to Dennis' point on the audit, we were grateful that the auditors recognized our significant improvement on customer service, as well as on reliability. But that's where we're focused. We're focused on remaining committed to our customers in Maine and remaining committed to those improvements that we've made, making the right investments to improve our grid with vegetation management, animal guards, automation. These improvements are going to take some time. But we know that that's what we are committed to for our customers.

One of the things that we're also doing is we're instituting some customer listening councils throughout all of our service territories to make sure that we're getting closer to the voice of our customers. And those councils will be made up of a broad swath of different kinds of our customers for us to really listen to our customers, the feedback they're giving us, and also to work with them, to talk about the way that we are looking toward improvements in our systems to balance the reliable, safe, increasingly clean and affordability for our customers. So those are the things that we're going to be focused on as we think that government controlled power issues in Maine are likely to continue to be a part of the conversation in Maine with legislators potentially looking for a referendum in the future. We know our best defense is to make sure that we're focused on customer and our reliability improvements in helping Mainer's bring that cleaner, affordable energy future.

David Arcaro -- Morgan Stanley -- Analyst

Great. That's helpful color. Thanks so much.

Dennis Arriola -- Chief Executive Officer

Thanks, David.

Operator

And your next question is from the line of Julien Dumoulin-Smith with Bank of America.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Hey, good morning, team. Thanks for the time.

Dennis Arriola -- Chief Executive Officer

Julien, welcome.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Absolutely. Listen, just wanted to clarify a couple of things here, if you don't mind. So first on the guidance, if you can just go back here -- very quickly here. So I hear the puts and takes in some respect, because I just want to make sure I'm hearing it right. So clearly the bulk of the increase here related to the one-time benefits in taxes with a slight offset in the context of wind being 2% below performance. Is there any change in the underlying Networks business here? I just want to make sure, as you think about the composition of the updated net income guidance here.

Dennis Arriola -- Chief Executive Officer

Well, let me start by -- when you talk about the one-time taxes, we've got the facilities down there and they were uncontracted, a good portion of them, and therefore they were available to be able to produce wind and profits during these time periods. So I wouldn't necessarily say it's one-time. I think it's a fundamental part of our business. We have said that we're looking to reduce the amount of uncontracted capacity, because I think that'll help us with investors as we talk about the sustainability and predictability of our earnings. But I think that when we look at the overall business and specifically on the Renewables side, things are going well there.

From a network standpoint, we touched on the fact that we're executing very well the New York rate plans. We're continuing to focus on improving our thoughts and our effectiveness, which leads to us narrowing the gap on the ROEs. So, I think that, again, I don't think it's one thing that says, hey, this is why we're confident in increasing our guidance for the rest of the year. But it's really that the business is humming, people are performing, we've got some tough challenges every now and then with wind and even with storms. But I got to tell you, I'm really proud of the way that people have pulled together and focused. And that gives -- that's what gives us the confidence to raise the guidance in the second half of the year.

Julien Dumoulin-Smith -- Bank of America -- Analyst

When you say it's not one thing, it's not just the Renewables business that's contributing, though.

Dennis Arriola -- Chief Executive Officer

That's correct. I think if you look at the Networks business and a part of this is consistent with what we expected from the New York rate case, but also the improvements we're making in all parts of our business, whether it's in Connecticut, whether it's in Maine. So I'd say, the preponderance of our business is still Networks. Networks helps drive the overall stable growth that we have. And that's what gives us additional confidence in the second half of the year.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Excellent. Thank you. And then if I can pivot to the balance sheet in brief here, obviously Moody's made their action here. But curious on reconciling the numbers here, I know there's a lot of different figures flying around. But you all talked about 14.5% F voted debt as a target here across your forecast period. They talked about it declining down to 13% in '22 and then moving subsequently a little bit higher from there. Can you talk a little bit about how this -- how the balance sheet health compares versus when you did the PNM deal and relative to the initial Analyst Day guidance that reconcile there's been a meaningful shift?

Doug Stuver -- Senior Vice President and Chief Financial Officer

Yes. This is Doug, Julien. I would say there's really not a meaningful shift. What we're looking at as the outlook -- and this goes back to our Investor Day, we were saying, we target 14.5% over the guidance period. And that's really, I'd say, in the middle of what this updated rating is for Moody's. I think their downgrade threshold is 13%, their upgrade threshold is 16%. So we're right in the middle of that, and it's a stable outlook from here. So I feel like we're on solid footing with all the rating agencies with this latest update and well-positioned for financing our growth going forward.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Right. Got it. So the point is not looking to get back higher, what have you, Baa2 works with you and it's still intact at that mid-14.5% range through -- by the end of the forecast period.

Doug Stuver -- Senior Vice President and Chief Financial Officer

Yes. And I would just remind you, so really Moody's is the outlier at this point, we have a BBB+ ratings with S&P and Fitch. So it's really a split rating at this point.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Yes. Understood. Excellent. Well, best of luck, thanks for the time.

Dennis Arriola -- Chief Executive Officer

Thanks, Julien.

Julien Dumoulin-Smith -- Bank of America -- Analyst

You're welcome.

Operator

And at this time there are no further questions. I'll turn the call over to Dennis Arriola for any closing remarks.

Dennis Arriola -- Chief Executive Officer

Well, we really appreciate everybody joining us today. We've come off another very successful quarter to close the first half of the year. And I want to make sure that I thank again, our team here at AVANGRID for their continued efforts to serve our customers, to deliver results and to further our ESG&F leadership. Thanks to our team, I see AVANGRID becoming a stronger and better company each and every day with an attractive business mix, compelling growth opportunities and close alignment with federal and state clean energy policies and priorities.

As we move forward, we're driving customer service, execution and consistent results to make everyday better for our customers, our employees, and all of our different stakeholders. And that's why we're focused on this commitment to excellence. That's what it's going to take to become the leading sustainable energy company in the U.S. And I've said this before, one quarter doesn't make a trend, but now we have some momentum of delivering strong results over several quarters. So having said that, I know that we still have a lot of work ahead, but I got to tell you I'm confident the best is yet to come.

So if you have any other questions, please follow up with Patricia or Michelle. Thanks for joining us and stay safe and have a great day.

Operator

[Operator Closing Remarks]

Duration: 72 minutes

Call participants:

Patricia Cosgel -- Vice President of Investor Relations

Dennis Arriola -- Chief Executive Officer

Doug Stuver -- Senior Vice President and Chief Financial Officer

Alejandro de Hoz -- President and Chief Executive Officer, AVANGRID Renewables

Bob Kump -- President and Deputy Chief Executive Officer

Catherine Stempien -- President and Chief Executive Officer, AVANGRID Networks

Insoo Kim -- Goldman Sachs -- Analyst

Richard Sunderland -- J.P. Morgan -- Analyst

Angie Storozynski -- Seaport Global Securities -- Analyst

Michael Sullivan -- Wolfe Research -- Analyst

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Peter Bourdon -- Mizuho Securities -- Analyst

David Arcaro -- Morgan Stanley -- Analyst

Julien Dumoulin-Smith -- Bank of America -- Analyst

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