Avangrid, inc (AGR) Q3 2021 Earnings Call Transcript

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Avangrid, inc (AGR 0.56%)
Q3 2021 Earnings Call
Oct 27, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the AVANGRID's Third Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your speaker today, Patricia Cosgel, Vice President of Investor and Shareholder Services. Thank you. Please go ahead.

Patricia Cosgel -- Vice President of Investor Relations and Shareholder Services

Thank you Erica, and good morning to everyone. Thank you for joining us today to discuss AVANGRID's third 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; Catherine Stempien, President and CEO of AVANGRID Networks; Jose Antonio Miranda, Co-CEO and President, Onshore and Co-CEO and President Onshore; and Bill White, Co-CEO and President Offshore.

If you do not have a copy of our press release or presentation for today's call, they are available on our website at www.avangrid.com. During today's call we will make various forward-looking statements within the meaning of the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995 based on current expectations and assumptions which are subject to risks and uncertainties. Actual results may 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 and the Risk Factors section of the accompanying presentation or in our latest reports and filings with 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 us for our third quarter earnings call. Overall, I'm really pleased with our operating and financial performance year-to-date. We set some ambitious goals at our Analyst Day in November 2020 with a plan to drive increased accountability, execution and performance of our company. At AVANGRID, we're focused on building a company that works to make everyday better for our customers, our employees, our communities and our shareholders. We're headed in the right direction and focused on generating consistently improving results and delivering on our commitments, and our third quarter results continue the positive momentum of the journey we started last year.

In the third quarter, our net income is up 28% year-over-year and up 31% year-over-year through the first nine months. Adjusted net income is up 33% for the quarter versus 2020 and increased 40% through the first nine. months. Our strong results were driven by the solid performance of our Networks business as we continue to execute on our Road to Authorized ROE plan and as we implement the terms of the New York rate case, which was approved last year. And thanks to our excellent performance throughout the year, we are affirming our earnings guidance for 2021. You'll recall that we increased our guidance twice from our original numbers in the beginning of the year. And from where we stand right now, I'm confident we will deliver. In addition to our strong financial performance, we continue to execute on our strategic objectives. In Maine, we're delivering on our commitment to improve customer service. Over the last 18 months, we've met and exceeded all of the service quality metrics established by the Maine Public Utilities Commission and subsequently we filed to remove the 100 basis point ROE adjustment. In New Mexico we're awaiting the final approval from the Public Regulation Commission for our PNM Resources merger and continue to expect to receive that approval and to close the transaction in Q4. Our Vineyard Wind one crossed a historic milestone recently becoming the first commercial scale offshore wind project in the US to achieve financial close and begin construction. We're also pursuing opportunities to secure additional growth through our bids to Massachusetts' most recent RFP and by restructuring our assets with our partners CID. When we complete the partnership restructuring, AVANGRID renewables will have access to 4.9 gigawatts of lease areas along the East Coast, including Kitty Hawk. In onshore wind and solar, we have approximately 1.4 gigawatts of projects with PPAs including nearly 1 gigawatt actively under construction with a substantial near-term pipeline behind it. In addition, we continue to strengthen our executive team as we position the company for future success. We recently appointed Maine [Indecipherable] Joe Purington as Central Maine Power's new President and CEO. We also announced changes that will further strengthen our renewables Executive team by providing focused leadership for the offshore and onshore businesses through our two Co-Presidents and CEOs, Jose Antonio Miranda for our onshore business, and Bill White for our offshore business. Altogether, Joe, Bill, and Jose Antonio bring roughly four decades of executive experience to the AVANGRID team. Now, I also want to thank Alejandro de Hoz, our former CEO of AVANGRID Renewables for all of his hard work over the years and we all wish him all the best as he returns back to Spain to join his family. I am however saddened to report the recent passing of David Flanagan, our former Executive Chairman of CMP. David was an exceptional person. He was selfless, passionate, a dedicated leader, and a mentor to many. David epitomized the definition of [Indecipherable] leadership, and he is going to be missed not only by our employees, but also by the people of Maine.

In September, we released our first ESG&F webinar to provide insight into our approach to sustainability as well as our key goals and priorities as we seek to become the leading sustainable energy company in the US. And lastly, we issued our first green bonds at the utility level totaling $625 million and we experienced extremely strong demand from the market for even more. So all in all, another strong quarter focused on execution and delivering on our commitments. I'm really proud of our team for their hard work to get us to where we are today, but I'm even more excited for all the opportunities that lie ahead for AVANGRID.

So let's turn to slide 6. Our Networks business is the foundation of our capital plan and earnings making up close to 80% of our business today and approximately 85% by 2022 after the close of the PNM Merger. As we mentioned at our November 2020 Investor Day, we plan to invest over $12 billion in Networks through 2025 to better serve our customers, drive operational excellence, and make the critical system enhancements needed to support the clean energy transition. Bolstering those investment plans is our road to authorized ROE for our utilities. By implementing our rate plans and cultivating a continuous improvement culture, we're driving long-term investment at all of our company. Also, our targeted resiliency spending in vegetation management and equivalent modernization is helping us improve our [Indecipherable] our earned ROEs over time. We're continuing our focus on improving safety, reliability, resiliency and affordability with specific projects in each of our states, as well as focusing on successful store planning and restoration as we did for tropical storm Henri and Hurricane Ida. And while our growing rate base, new rate plans and investments will support future earnings growth, we still have a lot more work to do.

Turning to slide 7. We're putting our commitment to the customer in action with the Sadler's customer listening counsel at each of our network utilities to help us better serve our customers and our local communities every day. In Maine, CMP has not only achieved but exceeded in service quality metrics over the last 18 months. And with this, we filed to remove the 100 basis point ROE adjustment. We're hopeful to have this resolved by the Maine Commission in early 2022. But let's be clear, our filing is not an end to the good work our team has done in Maine. But rather it's a pledge, a pledge to do even more because our customers expect it and we're focused on making every day better for them in the future. And to reinforce our commitment, CMP will submit a plan to Maine regulators to maintain reliability and customer service quality and to keep our positive momentum going. And I'm confident that under Joe Purington's leadership, we will continue to raise the bar and deliver excellent service for our customers in Maine. Now, we're also going to continue to collaborate with regulators on ongoing COVID 19 response and cost recovery. In New York and Connecticut, we've been able to defer COVID 19 costs allowing us to support our customers and addressing continued challenges relating to the pandemic. We recognize that we need to be part of the solution and are actively working with key stakeholders in each of our states to address the issues facing our customers. Lastly, construction is well underway on our New England Clean Energy Connect or NECEC project and we're making good progress. Over 75% of the corridor has been cleared with the majority of the transmission line going through existing rights of way, and around 100 poles have been installed so far. These construction activities have supported approximately 650 jobs to date, while Maine towns are already benefiting from tax payments tied to NECEC. We remain encouraged by the support we've seen for NECEC over the last several months as our team continues to share the facts and combat misinformation spread by companies that own fossil fuel generation in New England. We're focused on defeating the November 2nd referendum related to the project, and our growing grass roots campaign is working hard every day to help voters better understand the benefits of the project to Mainers, the economy, the environment and the region. So corridors of NECEC and parties against the referendum include Governor Janet Mills, former Governor Paul Lepage, the two largest and most influential newspapers in the state the Portland Press Harold and the Bangor Daily News, Labor leaders including the AFL-CIO and the IBEW, the Maine Chamber of Commerce, and the Conservation Law Foundation just to name a few. And our team is going to remain focused on getting out the vote and informing voters of what this referendum is all about.

Let's turn to slide 8. We remain on track to close our merger with PNM Resources this quarter. With just one approval remaining from the New Mexico Public Regulation Commission. When combined, AVANGRID and PNM will together serve 9 million people across six states with an attractive regulated business mix and a rate base of over $14 billion. Our strong ESG&F commitments and support for renewables growth will bolster both New Mexico and Texas as the leaders in the clean energy transition. The merger will create attractive regulated and of renewables growth opportunities for our business and we expect the transaction to be over 3% accretive in the fourth -- first full year. This transaction makes sense for the customers of PNM in New Mexico, and we're pleased that 23 of the 24 filing interveners either support the merger directly or have decided not to oppose the approval.

Moving to slide 9. AVANGIRD renewables, the third largest developer and operator of renewables in the US, has the scale, expertise, pipeline, and people to continue our growth into the future. I'm very excited that we'll have Jose Antonio's experience and leadership focused on the continued growth of our onshore business, and Bill White leading our growing offshore business. We recognize that our projects need to help address the challenges and opportunities faced by our customers and organization continues to evolve in order to be part of that solution. We're continuing to make progress on approximately 1.4 gigawatts of near-term solar and onshore wind projects with PPAs of which nearly 1 gigawatt is actively under construction. And early this year, our [Indecipherable] wind project was fully commissioned, is now producing clean energy for the people of New York. But Doug is going to touch on later on inflation, but overall our wind projects are contracted through 2023 including Vineyard Wind 1, and our solar modules are contracted through 2022. Regarding our long-term growth in our onshore business, we have another 2.5 gigawatts of mature projects shortlisted for the bilateral negotiations for PPAs in our approximately 18-gigawatt onshore pipeline.

Now let me turn to our offshore wind business on slide 10. September was an extraordinary month, both in the history of the industry and of AVANGRID. Our joint venture Vineyard Wind brought the first commercial scale offshore wind project in US waters Vineyard Wind 1 to financial close. The project has closed $2.3 billion dollars of construction in term loan financing with nine global lending banks. This vote of confidence from the financial community in our pioneering project validates our approach and underscores the economic value created by Vineyard Wind 1. Now construction has already started for the onshore substation an export cable route and we expect to begin offshore construction in the first half of 2022. We will start delivering clean power to Massachusetts in 2023 and reach full commercial operation in 2024. We secured and have under contract 100% of the equipment for Vineyard Wind 1 which will continue to be owned 50/50 by AVANGRID Renewables and CIP. On September 15, Vineyard Wind submitted two proposals in response to Massachusetts third offshore wind request for proposals, offering options of approximately 800MW and 1200MW. We're calling this project Commonwealth Wind, and it includes the development of an on -- offshore wind project in an area just south of the Vineyard Wind 1 and Park City Wind projects. We put forward two very strong bids with exceptional economic and social benefits for the Commonwealth of Massachusetts. As part of the proposal, our JV company announced a partnership with the City of Salem and Crowley Maritime Corporation to transform Salem Harbor into the State's second major offshore wind port. Vineyard Wind also announced a first of its kind partnership with 20 municipal electric utilities in Massachusetts that will allow them to purchase up to 150 gigawatt hours a year of electricity in addition to renewable energy credits, and this is going to enable them to green their portfolios across the state. We expect the results of the Massachusetts RRP in mid December.

Please turn to slide 11. As we mentioned earlier, we also recently announced changes to our Vineyard Wind joint venture that will further position AVANGRID Renewables as an undisputed leader in the offshore wind industry. As a result of the restructuring, AVANGRID will have 100% ownership of 4.9 gigawatts of offshore wind capacity. Now, this includes the 2.4 gigawatts of available capacity in New England from our current partnership which will be fully contracted before year-end if our largest bid option in Massachusetts is selected, and an additional 2.5 gigawatts in North Carolina and Virginia from our Kitty Hawk project. The partnership restructuring requires approval from the Bureau of Ocean Energy Management as well as the Connecticut electric distribution companies. We expect approvals to be completed during the first quarter of next year. This restructuring is aligned with our long-term growth strategy and our aspiration to lead the nation's offshore wind industry.

Now turning to slide 12. With offshore wind, we're uniquely positioned to play a leadership role with our 4.9 gigawatt lease areas. In addition to our strong offshore team, our affiliation with Iberdrola provides us a deep bench of offshore wind expertise to leverage. Iberdrola has a very well proven track record in offshore wind globally as we've constructed 1.5 gigawatts on time and on budget. These projects are now being operated with strong availability and production figures. And building on the successful track record Iberdrola has 2.9 gigawatts in advance development [Indecipherable] and 23 gigawatt global pipeline. To be successful in offshore wind, you have to have more than just leases and even PPA. You also need to have an experienced team, know-how in dealing with contractors and construction and access to capital. And our affiliation with Iberdrola gives AVANGRID a competitive advantage in offshore wind.

Let me finish on slide 13. As one of the nation's cleanest utilities and a leader in renewable energy, AVANGRID stands at the forefront of the transformational change in how we generate and use energy. Our ESG&F practices are core to our sustainable value proposition and our long-term success. And to showcase what we're doing to reach our key goals including renewables growth and emission reduction, supplier sustainability and diversity in equity and inclusion, we recently released AVANGRID's first ever sustainability webinar titled Clean and Connected. The webinar is available through this presentation or on the AVANGRID website. Our track record in this area has been recognized by multiple external parties and we are honored to have recently joined the S&P Global Clean Energy Index, which highlights AVANGRID as one of up to a 100 companies worldwide that can best benefit from the clean energy transition.

Now, I'll turn it over to Doug who will take you through the financial results.

Doug Stuver -- Senior Vice President and Chief Financial Officer

Thank you, Dennis, and good morning everyone. Turning to our financial performance on slide 15, AVANGRID reported strong consolidated results for the third quarter and first nine months of 2021 producing adjusted net income of $133 million for the third quarter, a 33% increase from the third quarter of 2020, and $609 million for the first nine months of the year, a 40% increase from the first nine months of 2020. The improvement in the third quarter results was led by strong performance in Networks, our largest business segment, and investment growth in line with our rate plans. AVANGRID's consolidated investments for the first nine months were $2.1 billion, which were up 13% compared to the same period in 2020. Renewables adjusted EBITDA including the benefit of tax credits for the first nine months of 2021 increased 25% year-over-year reflecting the increase in value of that business.

Turning to slide 16, for the first nine months of the year a key driver of our 25% year-over-year adjusted EPS growth has been the implementation of the Networks rate plan predominantly in New York to enhance reliability, resiliency, customer service, and safety. Networks AFUDC income related to investment growth was also an important driver partially reduced by higher depreciation from our growing asset base. Importantly, our outage restoration costs have flattened year-over-year. As you'll recall, outage restoration costs were rising in prior years and a major driver for Networks under-earnings. With the New York rate plans, we're benefiting by recovering these costs at the more recent higher levels and the additional vegetation management and resiliency investments authorized in the New York rate plan are improving our system and helping to flatten these costs. Our adjusted EPS growth for the year-to-date period also included the benefits in renewables of our strong operations and asset management during the first quarter Texas weather event, improved energetic availability, higher pricing, additional PPPs, and thermal and asset management earnings. Those positive impacts were partially offset by lower wind production from weak wind resource and curtailments that persisted through the third quarter. Our consolidated results also reflect a negative $0.16 per share dilution impact from the May equity offering.

Turning to slide 17. We added 409 megawatts of new capacity year-over-year from September 2020 September 2021 and we've improved the energetic availability of our existing projects to over 97%. However, wind production continues to trend below our long-term averages due to low wind resource as well as curtailments which were impacted by COVID 19 and transmission congestion. Our curtailments are partially reimbursed to approximately 15% levels through our PPAs. The lower production levels for existing assets during the first nine months of 2021 compared to 2020 were primarily in the north and the east regions with the central region helping to partially offset those impacts.

On slide 18. We're pleased with our continued strong year-to-date results, a reflection of our commitment to execution. Therefore we are affirming our 2021 net income, adjusted net income, earnings per share and adjusted EPS outlooks. As a reminder, our outlook for EPS and adjusted EPS reflects $78 million shares issued in May to primarily fund the PNM acquisition which resulted in $358 million weighted average shares outstanding for 2021. Our outlook also assumes that we did not close on the PNM merger until the end of the year with no PNM Resources earnings or associated merger closing costs. Finally, recall that in the fourth quarter of 2020, we recognized the cumulative $0.19 benefit retroactive to April 17, 2020 from the settlement of the New York rate case. Our ongoing focus remains to achieve these targets as we progress on a road to authorized ROE, execute our investment plans with discipline and risk management focus, and continuously drive for operational excellence.

Moving to slide 19. With inflation and rising commodity prices impacting the sector, we wanted to give you a sense of where AVANGRID stands in its management of these risks. Importantly, one of the several benefits we have as a member of the larger global Iberdrola family is access to their significant purchasing power and economies of scale. As a point of reference, Iberdrola has a capital spend of approximately $10 billion per year. In part of this large organizations with significant buying power is a tremendous benefit helping to mitigate our exposure to rising prices and access to supply. In Network, our largest business segment, our exposure is not material. Energy suppliers either source directly to customers by third parties or pass through costs for us. We actively manage the cost when we are the supplier through effectively contracting and hedging practices. For NECEC substantially all of the equipment has been purchased and the exposure to additional commodity cost inflation is minor. In renewables, capital investments for the Vineyard Wind 1 project are 100% contracted, and for the Park City Wind project with the 2026 COD we expect to lock in our supply in 2023. In our onshore wind business, our projects under construction are substantially secured. Regarding our exposure in our solar business, we have framework agreements executed for the modules for our 2022 projects under construction and we are currently working to lock in exposure to the 2023 plus projects. We're also actively involved through trade organizations on discussions related to solar tariffs and we're managing through the uncertainties impacting the solar sector. While 2021 was the transition year for us as we pivoted more toward solar development from our traditional onshore wind focus, we have a material number of megawatts expected to come online in the near future and we have significant opportunities for growth. While our current projects through 2022 for solar and 2023 for wind are contracted, we're seeing a temporary mismatch between supply and demand. Demand for renewables is strong and PPA prices are rising as increases in raw material prices are translated along the value chain. Directionally, growth will continue with supportive state and potentially new federal policies and we're optimistic about our onshore and offshore renewables opportunities.

Moving to slide 20. We're also focused on the rising gas prices nationwide and how we can mitigate the impacts on our utility customers. Our utilities are well positioned as commodity procurement processes in the gas and electric businesses are well established, long-standing, and in line with regulatory policy and guidance. In our gas distribution companies, gas costs are a pass-through and we do not expect supply issues this winter. Customers bear the impacts however so we procured gas supply in spring-summer months through supply storage and transportation contracts to use in the winter months. In New York we also entered into financial hedges. With deregulation in our service territories, the cost of generation for our electric distribution companies are also a pass-through. Keeping our customers in mind though, we also procure supply by [Indecipherable] the purchase of supply during the spring and summer months for winter usage in New York and Connecticut. This acts as a natural hedge. Maine's procurement is managed by the state and not Central Maine Power. As we monitor this trend and manage the potential impacts, we work for continuous improvement in the business as an offset. We will also work closely with our key stakeholders to ensure we keep them informed about the drivers of the price trends and available programs that provide payment assistance.

Now moving to slide 21. With our liquidity and financing, we have terrific access to sustainable liquidity resources and demonstrated support from Iberdrola. With the equity issuance this past May, we have a strong $1.4 billion cash position and we do not expect to issue additional equity in 2022. We're committed to maintaining our solid investment grade credit ratings. As we previously announced, we expect to fund the PNM merger with $700 million in debt in the fourth quarter. In the third quarter, we closed on the construction and loan financing for our Vineyard Wind project raising $2.3 billion from a group of banks. We're committed to sustainable financing, and as Dennis mentioned earlier, issued $625 million of green bonds out of a total of $900 million, which were our first green bond issued at the utility level. This raised our ranking in the US among all issuers of green, social and sustainability bonds to number nine. Our strong long-standing commitment to and leadership in clean energy was also evident by our addition this month to the S&P Global Clean Energy Index, which includes up to 100 companies that are similarly focused on the low carbon transition and sustainability.

To summarize, we had another strong quarter with our focus on the achievement of our financial targets and strategic initiatives and success with sustainable financing execution and recognition. As a result we are affirming our guidance for 2021. We have risk management and a customer focus at the top of our mind as we manage the emerging risks and profitably grow to achieve our goal of adding sustainable value. Thank you for joining us today with our update on third quarter results, and now I hand the call back to our operator Erica for questions followed by closing remarks from Dennis.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of David a with Morgan Stanley.

David Arcaro -- Morgan Stanley -- Analyst

Great. Hi, thanks so much for taking my question. I was wondering if you could maybe elaborate just a little bit on the supply chain particularly around the solar projects that are underway. And you mentioned the framework agreements. Do those -- is that essentially you've got the volume contracted [Indecipherable] accessible, and is pricing locked in for that as well?

Dennis Arriola -- Chief Executive Officer

Sure. Thanks, David for the question. Look, I think that one of the things that we're seeing being one of the largest developers out there, although we are growing fast in solar, is that people want to do business with us. And I think especially given the relationships that we have globally through Iberdrola, we're able to enter into these framework agreements which allow for flexibility and best pricing that we can get. We're obviously sensitive to what's going on in the markets not only from a supply chain standpoint but what's happening also with the tax and tariff Implications. So, those are things that we're watching closely. But Jose Antonio, you may want to provide a little bit more color on how we think about the framework agreements.

Jose Antonio Miranda -- President Onshore

Yes. Thank you, Dennis. And good morning everyone. Very good question, David. Yes, I have to go back to what Dough mentioned before about our 2020 projects already secured -- substantially secured from a [Indecipherable] point of view. Being part of the family of Iberdrola, we have frame agreements that we can execute in order to get the [Indecipherable] prices. Also of course I can share with you that an important amount of panels have already decide in active construction now that they are free of this inflation risk. But for the future, the situation as Dennis mentioned is fluid and it will will depend on what is finally the regulation and the tariffs imposed on the panels. But we will be attentively watching it and negotiating with our supply [Indecipherable]

Dennis Arriola -- Chief Executive Officer

David, I think the other thing, and Doug touched on this as well given the changing market, the growing demand and in some cases tight supply, we are seeing that reflected as you would expect in PPA prices. And obviously as we're dealing with very sophisticated customers, they recognize that as well. So, what we're doing is making sure that as we enter into new PPAs that they reflect the current market realities, whether it be through price adjustments or indices that may be tied to what's going on in commodity prices, but also on the labor side, because contractors are busy right now and they want to do business with people that are going to pay them and give them consistent work. So we're looking at all those aspects and really trying to manage it from a risk management standpoint the best we can.

Doug Stuver -- Senior Vice President and Chief Financial Officer

I'd just add to that is that as we look at new projects, we also -- as we think about capex drove contingencies into the the cost estimates and that's a buffer for these types of events as well.

David Arcaro -- Morgan Stanley -- Analyst

Great. No, that's a ton of very helpful color, I appreciate you for elaborating on all of those factors I guess. Maybe two, just one quick follow-up on that and to drill down a little bit more, do you anticipate any -- or do you see the risk of any projects getting delayed, the ones that are in the kind of near-term contracted pipeline as it pertains to solar? Obviously a lot of moving pieces here, just wondering how you think about specifically the risk of pushing out any projects or if it might make sense economically to consider that as we get into next year.

Dennis Arriola -- Chief Executive Officer

I think the way that we look at this, we obviously manage each project closely individually. We look at this as a portfolio as well. And I think that having that flexibility where it might make sense to proactively delay things because of what's going on on the labor side or modules and things like that. But overall, and I think directionally, things continue to move in the same direction. Could there be some delays because of our contractor shortages of labor [Indecipherable] But I think that overall we're moving in the right direction.

David Arcaro -- Morgan Stanley -- Analyst

Understood. Great, thanks so much.

Dennis Arriola -- Chief Executive Officer

Thanks.

Operator

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

Michael Sullivan -- Wolfe Research -- Analyst

Yeah, hey good morning. First...

Dennis Arriola -- Chief Executive Officer

Good morning, Michael.

Michael Sullivan -- Wolfe Research -- Analyst

Hey, Dennis. First question just on the earnings for Q3. Can you give any more color on what drove the increase of the corporate segment? And then also on the COVID exclusion, can you just remind us how much to date has been excluded and what the status of recovery on that is?

Dennis Arriola -- Chief Executive Officer

Sure. Let me hand it over to Doug and he can provide a little more detail.

Doug Stuver -- Senior Vice President and Chief Financial Officer

Sure. Hi, yes so for Q3 at corporate, there were really two drivers. One is, you may recall last year in Q3, we took a reserve for a New York State tax audit that was roughly $7 million of impact in 2020, and that's something that hasn't recurred in 2021. So that's giving us a year-over-year benefit. And then the other element is really just lower interest expense. We had the Iberdrola loan in effect for the early part of the year through May that had very attractive interest rates and so that was helpful. And then we issued the equity in May and that's helped us to avoid having the same level of debt compared to last year. So it's really just a combination of interest and taxes that are driving those corporate results.

Dennis Arriola -- Chief Executive Officer

And then on COVID.

Doug Stuver -- Senior Vice President and Chief Financial Officer

Yeah, so on COVID, in our year-to-date results we've adjusted out of our GAAP earnings in arriving at adjusted earnings about $23 million to $24 million. From a recovery standpoint, we've begun deferring our COVID costs in Connecticut, that's been something that's been in effect even in last year. And in New York in the second quarter we began deferring COVID cost just for rate year one we have not deferred any such costs for rate year two. Again, with Maine, we've not been deferring any COVID related costs.

Michael Sullivan -- Wolfe Research -- Analyst

Okay, thank you. And then just circling back on some of the renewables commentary, just looking at the fact book that you guys have out there, the latest one, it seems to indicate some timelines being pushed out on the solar now showing '22 to '23. Any color you can give there and should we think about that as having any impact on the 2022 guide you gave last year?

Dennis Arriola -- Chief Executive Officer

I think the way that I would look at it Michael is that there could be some shifting of months here and there, they go over the calendar year and everything. But I think that's one of the reasons why when we give a range of earnings and that -- when we talked about at the the November Analyst Day, we gave directionally the 6% to 8% growth year-over-year for the five year period, and we gave you the -- what we were thinking about for 2022. So I think it falls within the range overall. We still feel -- we haven't reaffirmed our 2022 numbers. We're going to be doing that at the end of the fourth quarter. But I think directionally any shifts in projects don't have any material impact to the overall direction we're headed. But Jose Antonio, I don't know if you want to add anything to that.

Jose Antonio Miranda -- President Onshore

Yes, actually if you -- very positive and all the [Indecipherable] our sites [Indecipherable] construction. Of course we have nothing new than -- as all the other players to industrywide issues like they call it in their [Indecipherable] or the labor payments that you referred before. But the situation now is that we have to deploy it in an advanced stage of construction for sure a lot of that is going to be our first one big projects and which we're very positive about, and also we are progressing wind project. So we will see additions of capacities to our in solar and also in green and [Indecipherable]

Dennis Arriola -- Chief Executive Officer

And both Jose Antonio and myself were out actually visiting those sites over the last couple of weeks. I can tell you, there is a lot of work going on, there are a lot of people, there are a lot of panels. So we're excited about the progress we're making.

Michael Sullivan -- Wolfe Research -- Analyst

Awesome. Thanks a lot.

Dennis Arriola -- Chief Executive Officer

Thanks, Michael.

Operator

Your next question comes from Insoo Kim with Goldman Sachs.

Insoo Kim -- Goldman Sachs -- Analyst

Yeah, thank you. Both of my questions are actually related to offshore wind. The first one for Vineyard Wind 1, I might be a little bit late to this at least looking at the fact book and maybe the last one in September. It seems like the total financing that you achieved I think you got was around $4 billion or $3.9 billion. In my head, I thought the original range was around $3 billion to $3.5 billion earlier this year. Is that reflecting on increasing the overall project cost? And if so, what's driving from that increase?

Dennis Arriola -- Chief Executive Officer

Sure, let me pass it over to Doug.

Doug Stuver -- Senior Vice President and Chief Financial Officer

Yes. So, thank you. We are looking at roughly $3.9 billion in total cost for the project. And we've done the construction loan financing and that's $2.3 billion from a additional financing standpoint. We do expect to enter in the tax equity financing as we get closer to mechanical completion for the project. And then the remainder would be sponsors equity being infused into the project. From an overall cost standpoint, the $3.5 billion that you pointed earlier I think is a good number in terms of the pure construction costs but then there is also contingency and financing costs, transaction costs, et cetera that add to that and that's how we get up to $3.9 billion.

Insoo Kim -- Goldman Sachs -- Analyst

Okay. And just a follow-up to that, if some of those contingencies do end up playing out, is there any flexibility in your secure PPAs or is that largely set from the the escalator perspective?

Doug Stuver -- Senior Vice President and Chief Financial Officer

Yeah. The PPAs are set.

Insoo Kim -- Goldman Sachs -- Analyst

Okay, got it. Just my second question is on the Jones Act compliant by Forbes, I know -- I think you had mentioned in the past, again that for Vineyard 1 that the ships are 100% secured. Just wondering for your other projects what the status of that is, and I'm curious on how those contracts are structured and how much flexibility or control you have on the timing and usage of those usable ships. And then, just related to that, are they large enough and have the ability to carry the larger GE turbines, I believe the 14 mega-watt ones.

Dennis Arriola -- Chief Executive Officer

Yeah, let me start that and I'll ask Bill to provide some additional color. I mean as far as you know for Park City Wind, we have not entered into the the contracts for the equipment or the ships and everything. I think that one of the things that we're looking at is with the recent bids that we put in place for Massachusetts 3, there could be the opportunities to have synergies during the construction as well as the procurement phases. So we're looking at that and as a result we haven't made the final determination of of who is getting the business, what it's going to cost? The ships as you mentioned in the case of Vineyard Wind one are being supplied by the contractors themselves. And we anticipate that that's probably going to be the same case when it comes to Park City and perhaps Commonwealth Wind as well But I think everyone's excited about the large size. The larger turbines that are being produced out there, they recognize the ship builders that they have to -- that there is a market that they have to adjust to. So a lot of those discussions are underway. But Bill. I don't know if you want to provide any additional color there.

Bill White -- President Offshore

Just briefly, I think in addition, there is an enormous amount of activity right now. Obviously, you're aware that Dominion is building ships down in Texas right now, but there is an enormous amount of planning underway for US built vessels, including the CTV, the crude transfer vessels, the SOVs which is the service operating vessels. And so lots of activity going on right now. A lot of players coming into the market and so a lot of developments over the next couple of years expected on a good [Indecipherable] for Jones Act compliance.

Insoo Kim -- Goldman Sachs -- Analyst

Okay, I'll leave it there. Thank you so much.

Dennis Arriola -- Chief Executive Officer

Thank you, Insoo.

Operator

Your next question comes from the line of Richard Sunderland with JPMorgan.

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

Hi, good morning. [Technical Issues] circle back to some of the earlier commentary on the onshore pipeline. Really just the pace of your onshore renewables origination this year and timing considerations around the 2.5 gigawatts of near-term opportunities, you said earlier about kind of managing on a portfolio basis, are you already managing a little of that around some of these challenges the broader industry has seen, just curious about the pace of activity versus your expectations.

Dennis Arriola -- Chief Executive Officer

Sure. Let me start and I'll ask Jose Antonio to jump in. Look, I think that we've got a strong existing pipeline. We've got projects underway. We're seeing some of the same things that others are in the industry as far as labor tightness when it comes to contractors. In the case of the solar projects that Jose Antonio talked about we've got what we need here in '21 and we've contracted through our framework agreements through '22. But there are some risks out there, but I think we're managing them well. And as I said, when we look at each individual project, we're focused on bringing it in on time and on budget and focused on those things that we can control, and those things that that we don't have as much control how can we influence. Are there things that we can leverage off of the relationships that we have through Iberdrola to try to get panels faster if they're not coming in and things like that. But Jose Antonio, see if you want to add any color to that.

Jose Antonio Miranda -- President Onshore

Yes. Thank you, Richard for the question. Well, first of all, I have to say that the market momentum is -- I think is right. We are in a high demand situation and that is of course helping to other players to see traction in the business, and we are not an exception. We are very active in negotiating these two [Indecipherable] and some of them are really [Indecipherable] on negotiation in some others. Of course, we, the whole industry are watching closely what is going to happen with an [Indecipherable] condition case and that we can have an impact on keeping negotiations across the industry, but we will see after the November 27 what is the situation and we will adjust it.

Dennis Arriola -- Chief Executive Officer

Yeah. And the other thing I'd say Richard is, look, we're sensitive to how some of the sell side community looks at each of the projects and if there is a one-week delay or one month delay, but I can tell you we're in this for the long run and whether there is a shifting of some projects by a month and so over a calendar end, year end, yeah. But would we like to bring everything in exactly the way that we projected it? Absolutely. But I think that as long as we're continuing to focus on those things that we can control and we are focused on continuous improvement to get our cost controlled to bring these things in on time, we're going to be successful here.

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

Understood. I appreciate the color. And maybe just separately on the wind resource seen on the quarter, maybe just the wind resource broadly. In terms of your plan, do you typically just taken the long-term average and so as averages come down the delta has narrowed between recent production and what's baked into plan, or do you risk-adjust that average at all in light of some of the recent performance?

Dennis Arriola -- Chief Executive Officer

Historically what we've done is looked at a long-term average. And obviously as a good year or bad year just gets has taken off of that, it's reflected in the new base that we're considering. But we're also looking at shorter trends. And thinking about that, how that may impact our numbers on the positive or on the negative side. But we think that looking at the long-term trends is probably still the smart way to do it. But I think the key for us is making sure that our energetic availability continues to improve. But something that candidly several years ago is not something we could really boast about but as Doug mentioned in his comments, we're now above 97%. So that means our machines are ready so that when the wind blows, and it is going to blow, we'll be able to deliver the results that we expect either consistent with the historical averages or even better.

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

Thank you for the time.

Dennis Arriola -- Chief Executive Officer

Thanks, Richard.

Operator

Your next question comes from the line of Julien Dumoulin-Smith with Bank of America.

Dennis Arriola -- Chief Executive Officer

Good morning, Julien.

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

[Technical Issues] Thanks for the opportunity. Hey, hey.

Dennis Arriola -- Chief Executive Officer

Yeah.

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

Pleasure. Hey. So my first off on your originations [Technical Issues]

Dennis Arriola -- Chief Executive Officer

Hey, Julian you're cutting in and out. Julian, we can't hear you. Operator, let's do the -- go to the next caller and then we can bring Julien back.

Operator

Your next question comes from the line of Angie Storozynski with Seaport Research Partners.

Dennis Arriola -- Chief Executive Officer

Good morning. Angie.

Angie Storozynski -- Seaport Research Partners -- Analyst

Hi, how are you? Hopefully you can hear me.

Dennis Arriola -- Chief Executive Officer

We can.

Angie Storozynski -- Seaport Research Partners -- Analyst

That's great. Okay. I always ask about any NECEC, and it's lots of lots of activity both from a regulatory perspective and construction perspective. So please give us an update on what's happening at FERC and also legal challenges to that 1.5 mile corridor.

Dennis Arriola -- Chief Executive Officer

Sure. Let me do this. First of all, as I said in my opening comments, things are going really well from a construction standpoint. Those areas where we can construct, the crews have been doing a great job. As I said about 75% of the transmission areas have been cleared. We've got over 100 poles now installed. We've got the equipment basically on site to be able to continue to go forward. But we do have that one mile piece of the line where again we already have transmission line there, and I think that we're confident that that's going to be addressed in a satisfactory manner. But [Indecipherable] hand it over to you and you can provide a little bit more color on what's going on with FERC and some of the other activities.

Unidentified Speaker

Sure. Thanks, Dennis. And you're absolutely right. On the lease, the issue is whether or not putting this transmission line for one mile on this lease represents a substantial alteration in the use of the land. And as Dennis said there is already like an existing CMP transmission line on that lot. So we don't see that that represents, and quite frankly [Indecipherable] that it represents a substantial alteration.

Doug Stuver -- Senior Vice President and Chief Financial Officer

On [Indecipherable] we were pleased that they came out and asked a series of questions, interveners in the case with respect to how to think about this breaker at Seabrook and whether or not it's generation or whether it's transmission. We think that's helpful in framing issue and ultimately getting to a satisfactory resolution for us. So we're hoping that that gets done on expedited basis. Having said that, we also have ongoing discussions with the New York ISO -- I'm sorry, the New England ISO, to determine whether there are alternatives to see -- to Seabrook Breaker replacement to allow the project to move forward. So I think we have options there. But again, we're optimistic in our -- we're positive in terms of the types of questions that FERC asked in that proceeding that will get a resolution here in the near term.

Dennis Arriola -- Chief Executive Officer

Hey, Angie. The other thing that I'd add to this is and we've talked about this before. Yeah, there probably isn't one energy infrastructure project including transmission that isn't challenged in different ways. And I think that given the ambitious goals that we have as a country to increase the amount of renewables in this country, we're going to need to have more transmission built. And the challenges that there are certain parties that may not want that because it impacts their livelihood, and I'd like to say, in the clean energy transition there are winners and losers. In this case the winners from this project are going to be the people of Maine, the environment, the local economies, climate change in total. But the losers in this are going to be those that basically are providing the fossil fuel generation. And so we shouldn't expect that these types of projects aren't going to be challenged. They are, but I think in this case, there has been so much work done within the state and even within that -- the review that took place on that one mile lease that we feel confident that this thing is going to be addressed in a satisfactory manner.

Doug Stuver -- Senior Vice President and Chief Financial Officer

Yeah, and as Dennis said, Angie, we continue to see growing support and recognition around the importance of the project, not just for New England and transitioning to clean energy, but for the country. Because this is really a benchmark project or what's needed to transition our economy to clean energy. So as Dennis mentioned, we've had support now from the three largest papers [Indecipherable] in the State of Maine. We have labor unions, we have the current governor, the former Governor. He recently had if you saw there was an update in the Washington Post by William Reilly, who is the former EPA administrator speaking just to the fact that this project is really key and projects like this are key to transformation of our energy sector. So we feel good about that growing support and continue to push forward and make sure people understand not only the benefits of the project but as Dennis mentioned who's really behind the opposition and what's the motive there.

Dennis Arriola -- Chief Executive Officer

Angie, we probably gave you more color than you wanted.

Angie Storozynski -- Seaport Research Partners -- Analyst

Yes. Oh yeah, I mean. Yes, just one follow-up. And that's more for Doug. So how much money has been spent thus far on this billion dollar project. And then just the earnings recognition during construction AFUDC and how that changes once that the COD of the project is reached.

Doug Stuver -- Senior Vice President and Chief Financial Officer

Hi, Angie. Yeah. So through September 30, we've spent a little over $400 million on the NECEC project. In 2021 from an AFUDC standpoint when we gave our guidance for 2021, it was in the range of $20 million to $25 million. In terms of the earnings profile for the project, as we continue to construct and the construction work in progress balance grows, the level of AFUDC income will grow as well after the date where we put the project in service. And then as you know, this is a contracted project and we've essentially levelized the price for the transmission service agreement and the associated revenue requirement such that you see a different earnings profile for this project than you would at traditional FERC rate based type project. So, you do see a dip once the project goes in service. There are price escalators in the transmission service agreement that are annual adders. So that's the general shape of the earnings profile for this.

Angie Storozynski -- Seaport Research Partners -- Analyst

Very good. Thank you. Thank you, guys.

Dennis Arriola -- Chief Executive Officer

Thanks, Angie.

Doug Stuver -- Senior Vice President and Chief Financial Officer

Thanks.

Operator

Your next question comes from the line of Julien Dumoulin-Smith with Bank of America.

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

Hey, good morning, team. I swear it's working this time. [Indecipherable] But on origination, would love to hear what kind of expectation do you have as you think about like an annualized pace of renewable build especially on solar considering the commodity deck in the backdrop we're looking at today, but also considering sort of the modest adds of very late in the backdrop.

Dennis Arriola -- Chief Executive Officer

It's hard to be specific on that Julien because it's really driven by the customers. I mean we have some expectations and we've included in the plan that we articulated in November that we expect that overall from a portfolio standpoint to grow to roughly 13.2 gigawatts in total capacity by 2025. And I'd say that a good part of our overall growth going forward onshore is in solar, because we're seeing that more and more customers are looking for that. One of the things that we have in the pipeline is making sure that we've got the right positioning and transmission hookups to be able to give the customers what they want. But Jose Antonio, I don't know if you want to provide anymore color just generally how you see that?

Jose Antonio Miranda -- President Onshore

Yeah. Thank you. Yes, I mean, reaffirming you, it's true that our [Indecipherable] is much more focused on wind and it was a strategic decision to shift to solar, and our pipeline is built now with a majority of solar project panels. So in the future we will see solar projects being built by us and compensating -- diversifying our current [Indecipherable] fleet of wind. About numbers, it's difficult to give specific dollar numbers, but again I want to repeat that we are going to see something that is an important milestone in the next months to come that are already 2B projects. When I say 2B project, it's projects of around 200MW at time in advanced stage of construction in the solar activity.

Dennis Arriola -- Chief Executive Officer

One thing I can say Julien is we want to go faster and part of that is dependent upon customers. As we talked about with what's going on in the market with PPA prices, with concerns about inflation and and other commodity costs, customers are also taking a little bit more time to determine what they want because they're seeing the impact of PPA prices. Having said that, we think we've got a really rich pipeline of opportunities. As we said, we're in advanced discussions, bilateral discussions with many on being able to sign many of these deals going forward. So again, I think we're headed in the right direction. I'm less concerned about individual projects on one month or two months, do we sign the PPA in the first quarter versus the second quarter, because I think that the trajectory that we're on is the right one given the dynamics of the market. Got it. And just a quick nuance if you will. I know you obviously deviate a little bit from your capacity factor expectation. Any expectation to update for long term capacity factors that you've talked about in the past versus historical levels? Yeah, I'm not sure I'd say that we've deviated. What I'd say is that as far as we look at the portfolio and what we expect going forward, we're in the midst of completing our 2022 and long-term plan for the next five years here in the next couple of months. So we will elaborate a little bit more on what the assumptions are behind our projections at the -- on our fourth quarter call. But I think that directionally again, we're actually really pleased with what's going on with our fleet is. As Doug mentioned, our energetic availability is above 90%. We couldn't have said that a couple of years ago. And so things are moving in the right direction.

Doug Stuver -- Senior Vice President and Chief Financial Officer

Yeah, I'd just add Dennis to your point that we're very well poised that when the wind does -- when resource does recover, we will be generating very positive results.

Dennis Arriola -- Chief Executive Officer

Yeah.

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

And just a quick nuance on the NECEC arrangement, the sale arrangement. If that's what changed here in the final approval process, that wouldn't impact your decision to close right, on that deal, on the PNM acquisition?

Dennis Arriola -- Chief Executive Officer

I'm sorry, you broke up there on...

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

Sorry, on NECEC here, just if they changed some of the arrangements around the sale, that doesn't impact your decision to close on PNM, right?

Doug Stuver -- Senior Vice President and Chief Financial Officer

You're talking about 4 corners?

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

Yeah, yeah. I don't know that could -- there could be some nuances that change there. I'm just curious, none of that matters there to PNM close.

Dennis Arriola -- Chief Executive Officer

Correct. It's a totally separate proceeding from the merger proceed.

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

Thank you for clarifying, Dennis.

Dennis Arriola -- Chief Executive Officer

Yeah, I think what's key there Julien is that that transaction was entered into by PNM and the regulators before the announcement of our merger deal. Getting out of that ownership is something PNM has been pushing for. It's consistent with where they want to go from an ESG&F standpoint. It's consistent with what we want to do in order to make our overall portfolio cleaner, so -- but it's also important to remember they own only 13% and they don't manage four corners. And I think that there is sometimes some information out there that sounds like they own the whole thing and they can make the decision. They're basically a minority owner and basically what they're doing is getting rid of their ownership.

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

No, I thought as much. I just wanted to make sure that was consistent. Thank you so much again.

Dennis Arriola -- Chief Executive Officer

Thank you, Julien.

Operator

At this time I will turn the conference to Dennis Arriola for any closing remarks.

Dennis Arriola -- Chief Executive Officer

Well, thank you. And we appreciate everybody joining us today. Well, look, I'm really proud to say we're continuing on the momentum we started last November, and we're working hard and smart to make everyday better for our customers and the communities we serve. And you've heard me say this before. One, two, or even three quarters don't make a trend, but you can't start a trend without a solid year behind you. And I'm really proud not only what our team has accomplished in the last 12 months, but more so of how we're doing it. We're continuing to build a company that's focused on accountability, execution, performance and results. We're building on a strong culture that values diversity and inclusion and that recognizes that we've got to invest in our people as well as in technology and innovation in order to stay ahead of the game. Our customers remain at the forefront of everything we do and we must be a part of the energy transition solution for them.

So I know that we still have a lot of work ahead, and I can tell you I am excited and confident about our AVANGRID's future. And we look forward to meeting with many of you in person at EEI. If I ask you to bring your math sounds like [Indecipherable] handsome or pretty face, please do that, but then put your mask back on. We look forward to chatting with you more about our business and if you have any other questions please follow up with Patricia on the shelf. Stay safe and have a great day.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Patricia Cosgel -- Vice President of Investor Relations and Shareholder Services

Dennis Arriola -- Chief Executive Officer

Doug Stuver -- Senior Vice President and Chief Financial Officer

Jose Antonio Miranda -- President Onshore

Bill White -- President Offshore

Unidentified Speaker

David Arcaro -- Morgan Stanley -- Analyst

Michael Sullivan -- Wolfe Research -- Analyst

Insoo Kim -- Goldman Sachs -- Analyst

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

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

Angie Storozynski -- Seaport Research Partners -- Analyst

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