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Avangrid, Inc. (NYSE:AGR) This fall 2023 Earnings Convention Name February 22, 2024 9:00 AM ET
Firm Contributors
Charlotte Ancel – Vice President, Investor Relations
Pedro Azagra – Chief Government Officer
Justin Lagasse – Chief Monetary Officer & Controller
Catherine Stempien – President & Chief Government Officer, Avangrid Networks
Convention Name Contributors
David Arcaro – Morgan Stanley
Julien Dumoulin-Smith – Financial institution of America
Anthony Crowdell – Mizuho Securities
Michael Sullivan – Wolfe
Angie Storozynski – Seaport Analysis Companions
Operator
Welcome to Avangrid’s Fourth Quarter and Full 12 months 2023 Earnings Convention Name. I might now like to show the decision over to Charlotte Ancel, Vice President of Investor Relations. Please go forward.
Charlotte Ancel
Thanks, Eric and good morning to everybody. Thanks for becoming a member of us immediately to debate Avangrid’s fourth quarter and full 12 months 2023 earnings outcomes. Presenting on the decision immediately are Pedro Azagra, our Chief Government Officer; and Justin Lagasse, our Chief Monetary Officer and Controller. Additionally becoming a member of us immediately for the question-and-answer a part of the decision can be Catherine Stempien, President and Chief Government Officer of Avangrid Networks; and Jose Antonio Miranda, President and Chief Government Officer of Avangrid Renewables. Different members of the manager crew are additionally becoming a member of us immediately and could also be referred to as upon to help with the Q&Part of the decision.
In case you should not have a replica of our press launch or presentation for immediately’s name, they’re obtainable on our web site at avangrid.com. Throughout immediately’s name, we are going to make numerous forward-looking statements inside the which means of the secure harbor provisions of the US Non-public Securities Litigation Reform Act of 1995 based mostly on present expectations and assumptions, that are topic to dangers and uncertainties. Precise outcomes may differ materially from our forward-looking statements. If any of our key assumptions are incorrect or due to different components mentioned in Avangrid’s earnings information launch, and the feedback made throughout this convention name within the Threat Elements part of the accompanying presentation or in our newest experiences and filings with the SEC, every of which will be discovered on our web site.
We don’t undertake any obligation to replace any forward-looking statements. At present’s presentation additionally consists of references to non-GAAP monetary measures. You must discuss with the knowledge contained within the slides accompanying immediately’s presentation for definitional info and reconciliations of non-GAAP monetary measures to the closest GAAP monetary measures.
I’ll now flip the decision over to Pedro.
Pedro Azagra
Thanks, Charlotte, and good morning everybody. I am happy to share with you our firm’s fourth quarter and full 12 months 2023 outcomes, which exhibit our sturdy dedication to delivering sustainable worth for our shareholders, prospects and communities. All through 2023, Avangrid has continued reaching vital milestones on its initiatives, on the forefront of the clear vitality transition within the US. Our dedication to operational excellence and long-term worth creation stays unwavering.
Let’s start on Slide quantity 4. In 2023, we delivered our monetary and operational goals regardless of the challenges confronted. We achieved an earnings per share of $2.03 and adjusted earnings per share of $2.09 above our outlook vary. 12 months-over-year, we delivered a 19% adjusted earnings progress, excluding $181 million from the 22 offshore wind acquire and $37 million from the Inflation Discount Act upfront tax advantages in 2022. We additionally delivered on our dividend dedication by paying $1.76 per share in 2023.
Turning to Slide quantity 5. 2023 has been a transformational 12 months, which is able to arrange the corporate for the long run. We executed on our core companies and eliminated legacy and uncertainties. First, regardless of the best inflation atmosphere in latest historical past, we acquired approvals for $9 billion investments, together with multiyear price case plans in New York and Maine enabling greater than $7 billion of regulated investments and an extra $2.3 billion in incremental investments for Local weather Management and Neighborhood Safety Act, or CLCPA Section 2 licensed by the New York Public Fee.
In New York, our NYSEG and RG&E three-year price case plans have been unanimously accepted by the Public Service Fee on October 12. The brand new price plans have a optimistic after-tax affect of $136 million, or $0.35 per share was as soon as acknowledged within the fourth quarter in 2023. This consists of $66 million of optimistic make-whole affect, which put the corporate in the identical place as if the joint proposal settlement was efficient Might 1 and $70 million for the mitigation of uncollectibles.
We additionally acquired the approval for the primary multiyear price case for a utility in Maine in 15 years. The Maine Public Utilities Fee accepted over $380 million of investments to enhance security, reliability and resiliency.
In Might, there was additionally a optimistic consequence on the referendum on authorities management energy a mirrored image of the improved dynamics within the state. Voters rejected to suggest state possession of Maine chosen utilities with a 70% of the vote. Roughly, 400,000 folks voted within the election and 98% of Maine cities and cities rejected this initiative.
Additionally in 2023, CMP was acknowledged as one among Maine finest locations to work. These networks achievements occurred in tandem with our operational enhancements in customer support and reliability metrics. In 2023, we’ve improved nearly all of customer support metrics 25 out of a complete of 31.
We additionally delivered our greatest reliability efficiency since 2019 exceeding seven out of eight regulatory targets. On renewables, we efficiently terminated our energy buy settlement for Commonwealth Wind and Park Metropolis Wind avoiding billions of {dollars} of potential write-offs. This enables us to keep up future worthwhile alternatives with these leases.
We incurred solely $29 million after tax to exit these initiatives versus our friends’ multibillion-dollar write-offs which proceed to mount. We’re additionally executing on our disciplined plan for selective and worthwhile progress in onshore renewables with over 300-megawatt put in capability in 2023 and 728 megawatts of recent FIDs taken this 12 months.
We renegotiated three PPA contracts totaling 470 megawatts, rising costs and avoiding greater than $30 million of penalties. As well as, we’ve one other 998 megawatts in new initiatives underneath development all able to construct all of them with PPAs.
Notably, roughly 700 megawatts of those initiatives are to assist knowledge facilities with clear vitality from onshore wind and photo voltaic. This 12 months, we additionally introduced our plan to repower greater than 4,600 megawatts of our present portfolio within the coming years, which is able to symbolize in our a lot long-term outlook replace.
On Winery Wind 1, we have been making important progress within the mission development and efficiently began the primary turbine in 2023. Additionally in 2023, we closed the primary ever US tax fairness financing of $1.2 billion and the primary funding on that landmark deal has been issued.
We additionally made a strategic choice to not proceed with our PNM Sources merger as a consequence of our ultimate regulatory approvals not being acquired by December 31, 2023. Due to that call there isn’t any want for an fairness issuance beforehand introduced for 2024.
Through the time of the merger pending, we’ve secured greater than $9 billion further natural investments above these introduced in our 2022 Capital Markets Day. This consists of primarily the repowering plant, incremental regulated investments in New York and Maine, and transmission investments like CLCPA.
Lastly, we’re persevering with to succeed in cybersecurity successes from creating the Avangrid crew. No matter our safety, Avangrid rating 97 out of 100 from safety scorecard, a cyber scores group that evaluates threats, vulnerabilities and danger mitigations to over 25,000 corporations. This rating surpasses common trade figures in community and utility safety.
We achieved substantial good points in our variety, fairness and inclusion targets together with reaching our goal of over 35% girls in govt positions. We need to proceed creating our workforce and senior management crew that displays the varied communities that we serve.
Turning to slip 6 our 2023 price instances one other regulatory proceedings secured $9 billion in new CapEx. We acquired ultimate choice on the speed case for our New York corporations, which incorporates over $6 billion of investments. Moreover, we additionally acquired authorization to speculate greater than $2 billion in New York CLCPA Section 2. These are essential transmission upgrades mandatory for New York state to fulfill its local weather motion targets.
Individually, the Maine Public Utilities Fee accepted over roughly $400 million of investments to enhance security, reliability and resiliency. These multiyear price plans present predictable natural long-term progress.
Shifting to slip quantity 7. We’re executing on our strategic plan on progress alternatives and selective investments in our onshore renewable enterprise. Over the previous 12 months, we’ve commissioned 311 megawatts rising our working capability from 8.3 gigawatts final 12 months to eight.6 gigawatts immediately.
As well as, a complete of 990 megawatts are at current underneath development. This consists of 472 megawatts of renegotiated PPAs and 526 megawatts of recent PPA signed in 2023. As a part of the rising partnership between Avangrid renewables and expertise corporations, this consists of practically 700 megawatts to assist knowledge facilities.
Turning now to Slide quantity 7 and quantity 8, Avangrid continues to be acknowledged as a pacesetter in sustainability and company governance. Most lately, Avangrid was ranked primary within the utility trade class in JUST 100 and quantity 12 general.
JUST 100 evaluates corporations based mostly on the problems that matter most in defining simply enterprise habits immediately, together with paying a good wage, creating jobs, and supporting workforce retention and coaching. It’s a enormous honor to make this prestigious checklist for the fourth consecutive 12 months and this milestone displays our values and likewise our imaginative and prescient.
Moreover, Avangrid ranked among the many Nation’s High 2 Utilities within the Nationwide Public Utilities Council’s 2023 Decarbonization report. This report analyzes the decarbonization efforts of the USA largest investor-owned utilities.
Avangrid improved from its prior 2022 rating with the best potential rating in gas combine whole carbon emissions, emissions for buyer, and low-carbon investments. Lastly, Central Maine Energy was acknowledged as one among Maine’s Finest Locations to Work by Finest Corporations Group. With greater than 1,100 initiatives in Maine the CMP crew works tirelessly to make sure our prospects have secure dependable and clear vitality on daily basis as we do in each state the place we serve.
All these awards and accomplishments are a testomony to the dedication of our crew, all the pieces we do from serving to our prospects to constructing renewable vitality and property displays our imaginative and prescient to steer the clear vitality transition with a robust dedication to sustainability, group governance, and our staff.
Now, I’ll cross it to Justin to evaluation the outcomes and focus on the outlook. Justin all yours and congratulations to turn out to be our CFO.
Justin Lagasse
Thanks, Pedro and good morning everybody. Turning to our earnings efficiency on Slide 9. For the fourth quarter of 2023, our earnings per share was $1.03 in comparison with $0.38 within the fourth quarter of 2022 and our adjusted earnings per share was $0.97 in comparison with $0.39 within the fourth quarter of 2022.
Networks outcomes have been $0.94, that is greater by $0.53 quarter-over-quarter in comparison with the fourth quarter of 2022. The important thing drivers embrace $0.22 from price adjustments, primarily as a result of implementation of our new price plans in New York. This features a make-whole adjustment again to Might 1, 2023.
Moreover in New York, uncollectibles defined $0.19 from efficiently receiving new regulatory therapy for the deferral of uncollectibles to match the quantities put aside in our uncollectible reserve.
With the restart of development of our NECEC mission in August 2023, we had an extra $0.04 of AFUDC earnings quarter-over-quarter. Moreover, we had greater prices quarter-over-quarter to implement our funding plans and to function our companies together with O&M and curiosity prices, however they’re consistent with our estimates for the quarter.
Lastly, taxes are decrease by $0.09 quarter-over-quarter, primarily as a result of optimizing of tax deductions, which is in line once more with our beforehand shared estimates for the quarter.
Our Renewables section was minus $0.02 for the fourth quarter of 2023 decrease by $0.23 quarter-over-quarter. We had greater earnings from our thermal operations and asset administration of $0.07, which displays wider spark spreads quarter-over-quarter on account of the demand and provide components of chilly climate and shortage within the Pacific Northwest.
Wind and photo voltaic working efficiency which incorporates the impacts of pricing, manufacturing, and tax advantages defined minus $0.07, which was actually as a consequence of decrease wind technology output and a lower in service provider costs. And once more partially mitigated by tax credit and new initiatives in service.
Our wind useful resource was low for the quarter producing a decrease internet capability issue. Nonetheless, it is vital to needless to say thermal and asset administration operations are in a position to seize this worth when energy costs are excessive and gasoline costs are low. When the wind useful resource is low in occasions of excessive demand as a consequence of occasions like climate, our thermal and asset administration seize this chance.
O&M prices are optimistic $0.01 as a result of optimization of our O&M and price financial savings and efficiencies offset by depreciation from new property in place. Taxes, primarily replicate a discount in contrast towards 2022 for the quarter, from greater state tax price changes, which once more is compensated by state unitary tax changes in company.
Shifting on to Slide 10, to replace to our financing, liquidity, dividends and credit score scores. Throughout 2023, we’ve diversified our financing to fund investments in progress of our companies. For renewable, we signed a tax fairness transaction for Winery Wind for $1.2 billion to monetize mission ITCs and accelerated depreciation.
As well as, we executed a tax credit score switch settlement to monetize as much as $100 million of tax credit from present wind property, not in tax fairness financing buildings. The tax transferability transaction was very profitable for us and we are going to look to proceed executing comparable transactions in 2024 and past.
For our utilities, we issued $1.3 billion of inexperienced bonds and $115 million of notes at our utility subsidiaries. And we additionally issued an $800 million 10-year inexperienced time period mortgage with Iberdrola. Our inexperienced financing emphasizes our technique dedication of long-term stability and resilience.
Money and liquidity are key priorities, supported by our ongoing money from operations and profitable price foundation. On the finish of 2023, we’ve $3 billion in liquidity protecting 15 months. Sustaining our stable credit score scores is a key goal. On the working group degree, all of our scores are on secure outlook and we proceed to mission secure credit score metrics with out the necessity for fairness issuance in 2024, based mostly on the profitable outcomes of our main price instances in 2023 and our continued self-discipline and selective progress in our renewables enterprise.
Lastly, our dividend coverage stays unchanged. We’re focusing on a payout of 65% to 75%. As Pedro talked about, we delivered on our dividend dedication by paying $1.76 per share in 2023 and our board lately declared a quarterly dividend of $0.44 per share payable on April 1 2024.
Shifting now to the subsequent slide. We’re introducing our 2024 outlook ranges for earnings per share and adjusted earnings per share of $2.17 to $2.32 per share. On an adjusted earnings per share foundation, the midpoint of our outlook for 2024 represents, an 8% enhance from 2023. Our ongoing focus stays on attaining these targets, as we execute our funding plan with self-discipline and a danger administration focus.
Our 2024 outlook consists of incremental revenues from our price plans primarily in Maine and New York. We goal fairness ratios and ROEs near our at present licensed ranges. We can even have further manufacturing from 311 megawatts of wind and photo voltaic initiatives positioned in service in 2023 together with, the associated PTCs. For the remainder of our fleet, we’re assuming regular wind capability issue. And additional, our 2024 outlook additionally consists of earnings utilizing historic averages from our thermal operations and asset administration.
Keep in mind, as I beforehand shared, thermal operations and asset administration seize the worth and wind manufacturing is low, successfully appearing as a pure hedge to enrich our fleet. We remind you that in 2023, we acquired favorable regulatory therapy to take away earnings publicity from uncollectibles by permitting us to defer our reserve balances. Particularly in New York and due to this fact, have this assumption included in our forecast.
Our NECEC transmission mission can also be anticipated to generate further earnings whereas underneath development for AFUDC, and we predict further CapEx spending of over $600 million in 2024 to think about this. We’re additionally anticipating O&M optimization and better depreciation and curiosity prices. Lastly, there isn’t any assumed fairness issuance in 2024 and no extraordinary good points from renewable partnerships or divestitures in 2024, as we beforehand dedicated.
Our 2024 outlook assumes that we keep our present annual dividend of $1.76 per share topic to our Board’s approval. Typical with our alternatives and dangers impacting our 2024 outcomes, we’ve our renewables manufacturing and pricing. We have now our price instances and different regulatory actions, storms and weather-related occasions, thermal and asset administration outcomes, curiosity and enterprise prices. As we’ve talked about, we’re very targeted on delivering our ends in 2024, contemplating many uncertainties have been eliminated in 2023.
Thanks for becoming a member of us immediately for our monetary replace. I’ll now hand the decision again to Pedro.
Pedro Azagra
Thanks, Justin. We transfer to Web page 12, I feel it is vital now to suppose somewhat bit about 2024, okay? And the place are we targeted when it comes to priorities for the 12 months. First, we will be targeted on persevering with to ship outcomes by demonstrating on a robust monetary efficiency, on the core earnings and the core enterprise.
Second, we are going to execute our commitments within the multiyear price plans that drove our success in 2023 together with attaining our ROEs that Justin talked about. Subsequent we are going to proceed selective and worthwhile onshore progress.
Turning to main initiatives. We’ll proceed the regular course of – progress in establishing Winery Wind 1 and NECEC. We’ll stay targeted on our steadiness sheet to make sure the monetary well being and long-term stability of the corporate and purpose to shut out the continued issues in Connecticut.
Within the final slide, Slide quantity 13, I wish to thank our Board and Chairman Galán and the remainder of our Avangrid crew but additionally all of the Iberdrola Group that with out them we won’t be right here they usually have efficiently helped us in lots of, lots of the issues that we’ve been in a position to obtain this 12 months.
We sit up for persevering with to execute on our commitments, focusing our steadiness sheet and delivering ends in 2024. We’re excited to announce that Avangrid can be holding a long-term outlook replace by way of webcast on Thursday March, 21. This can embrace an replace on our multiyear strategic plan and monetary outlook offered by members of the manager crew.
I’ll now hand the decision again to our operator for additional questions.
Query-and-Reply Session
Operator
We’ll now start the question-and-answer session [Operator Instructions] Your first query comes from the road of David Arcaro with Morgan Stanley. Please go forward.
David Arcaro
Hey, good morning. Thanks very a lot for taking my questions. Let’s have a look at, I used to be questioning can we get an replace simply on the way you’re desirous about asset gross sales? That is a financing method that you’ve got talked about earlier than however I feel the financing outlook has clearly modified fairly a bit now heading into 2024. So how strategic would you be or opportunistic on asset gross sales?
Pedro Azagra
I feel the approaches it has not modified. I imply we’re all the time keeping track of potential divestitures, potential partnerships. I imply since 2001, we have been doing that on the Iberdrola Group degree continuous. You may see the final two years, what number of partnerships and divestitures have been performed as properly. And in our case, if we’ve additional alternatives to develop past what we’ll be asserting in March – within the March’s long-term presentation, we are going to proceed to search for partnerships with the intention to dilute our monetary publicity and have the ability to do much more.
In order that’s not out of the desk however we need to give attention to a funds for 2024 and the steering we’ve offered with none acquire or any divestiture being contemplated. That is why I feel we return to how we all the time have introduced steering, which is specializing in the core enterprise with out good points. However we are going to proceed analyzing partnerships we are going to proceed analyzing alternatives of divestitures, on the proper value and on the proper time even strategically we expect that is one thing we should always do. So that does not cease that method as properly.
David Arcaro
Okay. Acquired it. That is smart. That is useful. And perhaps an identical query simply with PNM within the rearview now, you have got been acquisitive prior to now. How are you desirous about M&A, as you look ahead any curiosity in persevering with to think about M&A alternatives going ahead?
Pedro Azagra
I feel as we’ve performed on Iberdrola for a few years, there are moments within the cycles that when you have got such an enormous quantity of natural progress, I feel that is sufficient. I imply I feel the $9 billion funding above what we already informed you 1.5 years in the past I imply that is quite a bit, okay? That is twice the dimensions of a few 4 billion fairness market cap firm acquisitions. So from that perspective when you have already got now the $7 billion funding, now you have got $9 billion extra.
Appears to me that permit’s give attention to that natural progress. I do not see that a lot progress in lots of elements of the world, in lots of elements of the US, from a regulated perspective. I do not see — I see an enormous alternative for them as much as 2023 on the repowering facet. So we’ve good eight years forward of us to learn from that. It appears to me when you have got the subsequent three to 5 to 6 years with multibillion investments that we did not have even 1.5 years in the past on the desk, I feel let’s give attention to that, okay? So let’s get that performed after which we’ll go for additional alternatives. When a few of you requested concerning the consumption progress et cetera in a number of the states, you all know that the states the place we do enterprise there’s an absolute want of infrastructure improve. So consumption is second. Consumption could also be a difficulty 10 years from now, 15 years from now. However now you have to improve these networks and that is why the infrastructure wants that we’ve in New York, the infrastructure want that we’ve in Maine. That appears to me along with the repowering simply that I feel is unbelievable enormous for the years to come back.
David Arcaro
Okay. Nice. Thanks a lot for the colour. I admire it.
Operator
Your subsequent query comes from the road of Julien Dumoulin-Smith with Financial institution of America. Please go forward.
Julien Dumoulin-Smith
Hey, good morning, crew. Thanks very a lot to your time. I admire it. Simply needed to observe up on a few gadgets right here within the launch and your feedback right here if you happen to can. Simply first, on the close to time period right here. Simply how are you desirous about a number of the gadgets in 2024 particularly the Winery Wind nonetheless the and particularly the ITCs or presumably some quantity of ITCs mirrored in 2024 in addition to simply are you able to remark year-end 2023 price base got here in at $600 million above unique steering. It looks as if it is break up out between New York and Maine. Are you able to remark somewhat bit about these components as they pertain to 2024? After which lastly, simply how a lot O&M are you desirous about right here relating to a optimistic driver in 2024 as properly? Thanks guys.
Pedro Azagra
Okay. Thanks, Julien. We could not hear that properly, however I will attempt to reply the query. I feel when it comes to Winery Wind 1, I feel — okay. Are you able to hear me properly?
Julien Dumoulin-Smith
Yeah.
Pedro Azagra
Okay. Good. So when you concentrate on Winery Wind 1, what we’ve discovered within the final 12 months is our focus generally on particular deadlines which aren’t so related. Whenever you’re doing these large initiatives NECEC is one other instance. If you are going to have COD in November of a 12 months or February the next 12 months is completely related. The vital factor is to complete the mission. I feel in Winery Wind 1, proper now we’ve turned generators put in, as of immediately, which is gorgeous out of 62, 5 of them in full operation proper now 62 megawatts. In order that’s a good looking additionally consequence precisely immediately.
I imply you will notice — most likely you have got already seen in a press launch by the governor in Massachusetts, very pleased with the standing proper now we’ve within the initiatives. I feel we’ve 48 — 47 monopiles put in. I feel we’re on observe proper now for additional transition items installment. I feel we’ve the suitable contracts to terminate all the pieces we want from vessels foundations monopiles transition items blades in generators. So from that perspective, what we have to do is end the mission. And for me, it would not matter if we end in November this 12 months or in February subsequent 12 months. The vital factor is to complete. ITC, as you appropriately stated is vital. That is what we’re engaged on proper now to seek out out precisely the ultimate quantity of ITCs that we expect that we will obtain. After which as quickly as we end that work, we’ll come again to you.
When it comes to the speed instances, I feel particularly and also you have been involved 1.5 years in the past, rightly so and a 12 months in the past concerning the inflation potential affect within the price instances and the way only a few folks — no person thought we have been going to have greater than a really low single-digit price will increase. I feel I am very happy concerning the management in Maine, each within the administration within the public fee and the employees each the management the commissions as properly additionally the employees within the Public Fee. I am very happy concerning the management in New York and the administration within the Public Fee of the senior employees, employees and commissions degree. As a result of as you’ll be able to see proper now that they’ve a imaginative and prescient that infrastructure is required, but additionally you have to pay for the infrastructure.
That is one thing that comes collectively and generally when the coverage turns into okay, you do not need to pay proper now and you’ll pay you do not know when, however simply nonetheless one investments it would not work, okay? So you have got proper now the suitable management within the States, as a result of that infrastructure is required. You need knowledge facilities you want infrastructure. You need further capability. You want investments within the infrastructure. So I feel the highway map particularly in New York after all as properly in Maine, it is clear for the years to come back is in the suitable route to get these networks upgraded to the suitable degree. And that is why we’re very comfy on the natural progress and the investments wanted in these states to proceed.
I feel the final one you stated concerning the a number of issues occurring in 2024, we’ll be extra particular in our March presentation. However I feel the important thing highlights, as I feel we’ve been talked about proper now’s we should be both at or very near the licensed ROEs. That’s one thing that that is a legacy for a lot of, a few years. I feel generally you’re over incomes, generally you have got a proof. However I feel proper now, with the work in price instances, particularly when you have got New York, you have got the Maine, you have got the referred regulated property, you have got greater than 80% of our price base.
And with investments, we’re at present going to be doing within the years to come back in New York for instance, that is going to be, these group of property greater than 90%. So Connecticut goes to turn out to be a really small a part of our enterprise. So I feel once you give attention to these ones, I feel the ROEs achievement is a should. I feel we’re completely on observe. If I transfer to the 2 initiatives that you simply talked about, you talked about Winery, however I wish to add NECEC is should to us to make these initiatives worthwhile. I feel we’re engaged on NECEC on the change of low price at shut, however we’ve the suitable within the PPA.
And I feel in Winery, we simply talked about proper now ITCs and ending the work is our precedence for the remainder of the 12 months. And I feel in renewables, let’s simply say focus. For 2 years proper now, we’ve been in a position to ship the funds in renewables promoting networks that is a should. I feel predictability and supply within the underlying earnings with no good points or something like that’s going to be our precedence now for two years in a row. And I feel we’re delivering double digit in each years within the underlying progress. In order that’s a precedence to proceed delivering on our inner budgets.
So I feel that the main target is that one, to focus. And I would really like additionally to remind keep in mind the opposite gadgets we additionally talked about, we’re very pleased with being a really inexperienced firm. We’re very pleased with our ESG commitments. Even in occasions that appears to not be on high of the checklist, we consider there isn’t any come again. That is why very proud about our variety, inclusion parity, goals being achieved and to proceed with that to ensure that our crew displays a society the place we have been.
And by the way in which, we’re targeted on shareholders. I feel the chance aversion that you already know we’ve. We don’t dare to take troublesome choices. And in the identical manner that we introduced price instances that only a few ideas we have been going to achieve success. We additionally took the choice to not provoke some initiatives that in any other case, we’ll be right here with an enormous mess. And to keep away from capital will increase due to our mess, in our case, there was a capital enhance due to a transaction, properly, we’ve prevented that. However I feel we’ve prevented to be now right here in entrance of you with an enormous onetime loss that in any other case would have occurred.
So I feel the crew is taking troublesome choice, however the suitable ones, not just for us, for us, for the shareholders, for the banks, for the lenders, for the bondholders, for the society, for the management within the state, and we will proceed doing so.
Julien Dumoulin-Smith
Wonderful. Thanks, Pedro. Is there a particular vary that you simply’re desirous about these ITCs. Simply to return to Winery, the Winery query. After which individually, when you concentrate on the long run that you’ll be offering subsequent month, what number of years ahead are you desirous about rolling ahead? And is there a possible to lift that dividend ultimately as a part of the larger long-term outlook or at the least handle the dividend?
Pedro Azagra
I feel on the primary one, I feel we’re comfy. We have now secured 30% of the ITCs. I feel we’re working proper now on the alternatives we’ve on the IRA to hunt some further ITCs. That is why we have to end the work. And when it comes to dividends, I wish to say that the dividend we’ve maintained could be very sturdy.
And once you see the underlying progress of our earnings, the complementation — to have such a pleasant dividend to be complemented with such a pleasant progress in our earnings, I feel that is the suitable story, okay? And particularly, when you have rates of interest proper now on the way in which down, versus the way in which up, I feel that ought to ship when it comes to worth creation. So I feel we might like to remain there. However once more, that is topic to the Board to take the selections.
Julien Dumoulin-Smith
All proper. Staff, thanks very a lot.
Pedro Azagra
Thanks.
Operator
Your subsequent query comes from the road of Anthony Crowdell with Mizuho Securities. Please go forward.
Anthony Crowdell
Hey, good morning, crew. Simply hopefully, a few cleanup questions. I am simply questioning if you happen to’re in a position to disclose what AFUDC price you are assuming in 2024 for the NECEC line?
Justin Lagasse
Sure, we are able to disclose that. In order that’s at 8.5%, which once more is a publicly filed doc in addition to a part of the NECEC stipulation settlement, in order that’s a public doc, however that’s the price that we’re utilizing for AFUDC.
Anthony Crowdell
Nice. After which, I admire the slide 6, you gave a pleasant breakout of the jurisdictions and I do know Connecticut is simply 19%. So, it is a smaller jurisdiction for you. However I feel there’s two very small price instances occurring in Connecticut proper now. Employees had lately really helpful perhaps a price lower. Simply curious if you happen to may touch upon simply interactions with the Connecticut regulatory atmosphere, and likewise potential to perhaps deploy capital from Connecticut into the opposite jurisdictions?
Pedro Azagra
I feel we’ve made it clear. Connecticut, it was very disappointing the speed case. You realize, we’re in litigation proper now in enchantment in numerous fronts. I feel we’re very pleased with the management within the state, the governor instructing all people to work collectively. I feel even a number of the legislature proper now are literally requesting additionally all people to work collectively. We have been saying so for a very long time.
And once more, even when it is a small a part of our enterprise we hear about that. That is why we’re defending our staff, so we’re defending our unions, we’re defending our funding. And I feel the one factor we are able to do right here is to proceed being on high of it. I feel these — that price case that you simply talked about the case, we consider we’ve introduced a really sturdy case and I feel we will argue that till the very finish.
So from that perspective, I feel we simply have to proceed as all the time to be very skilled very clear. This isn’t private. We by no means make any feedback about any particular person specifically, however we defend the outcomes of the corporate the investments, as a result of in any other case what’s in peril is reliability within the medium-term of the corporate. So we have seen this many, many occasions in our expertise in lots of different locations the place an identical method was taken.
So from that perspective, the one factor we are able to proceed to place our case very legally and to request that individuals adjust to regulation. And that is a elementary key standards once you do investments and when buyers and banks and bondholders make investments, which is compliance with regulation. And if regulation goes to be modified, which can be okay, that is why you have got a stranded price and you’ve got some ways to do this. However what isn’t acceptable is to alter in the course of price instances or all of a sudden what has been already the case and the way in which issues have been performed for a few years in accordance with regulation.
That is why we are going to proceed to litigate as wanted. However we expect that the phrases lately by the governor requesting to work collectively and to have conversations even with the legislature as quickly as two days in the past. That appears to me the suitable route, as a result of there’s nothing to cover right here, okay? And also you see how provide price will increase are uncontrolled.
I feel you see how choices by legislature have an effect on additionally the charges. And in our case, the UI charges weren’t elevated for seven years. So I feel we’ve a really sturdy case that we are able to defend and we’re doing so. And we’re an important employer within the state. We’re doing a variety of financial improvement. And an important factor right here is to adjust to regulation and to ship what we’ve to do.
Anthony Crowdell
Nice. And simply if I may squeeze one final one. I feel Julien touched on it. I’ll have missed the response. Simply once you present a longer-term steering vary or an EPS progress price on the decision on — in March, can you disclose now how far out you are going to go to? Is it 2026, 2027 otherwise you’re not keen to state that proper now?
Pedro Azagra
No. I feel at the least we are going to go to 2025, what we’re contemplating proper now’s whether or not we can even point out 2026, okay? So, that’s what…
Anthony Crowdell
Nice. Thanks for taking my questions.
Pedro Azagra
Sure. Thanks.
Operator
Your subsequent query comes from the road of Michael Sullivan with Wolfe. Please go forward.
Michael Sullivan
Hey. Good morning. Simply following-up on how to consider the time line of the monetary outlook on the Investor Day, is it honest to consider this 2024 information as a clear base to information long-term progress off of?
Pedro Azagra
Sure. I feel that we began July final 12 months. I feel we heard so many occasions that why to present steering with together with good points, et cetera, that again in July we already determined that we have been going with and with out the acquire. In order that was the primary time we communicated additionally in October. And now as you’ll be able to see we proceed that development. So we need to be quite simple year-to-year. And on this case this 12 months, we’re not — for that proposal of working we’re not contemplating any good points. There was to be any good points, as a result of there was to be any transactions so be it. However I feel the steering is with none good points. So I feel the reply is sure. I feel the steering we’re proposing proper now, we began again in July is that manner.
Michael Sullivan
Okay. Nice. After which are you able to simply touch upon the place FFO to debt completed for 2023 and what you goal on that?
Justin Lagasse
Sorry, are you able to make clear are you asking the place the debt place ended? Is that what you requested?
Michael Sullivan
FFO to debt.
Justin Lagasse
Sure. So FFO to debt clearly this can be a key precedence for us from a financing perspective. Be mindful as we stated 2023 was fairly a transition 12 months for us with the closing of the speed instances specifically New York finalized in October. And finally, we noticed the outcomes from there. So from — and along with that we even have the NECEC mission and the Winery Wind one mission with excessive CapEx that we’ve that should not have money circulate but. So from an FFO to debt from 2023, if you happen to professional forma these changes you are wanting someplace round 14%. Nonetheless, holding in thoughts these caveats that we’ve. So I feel from there we need to construct from that time ahead. I feel we’ve had very profitable price instances which have been targeted on money which is able to enhance our FFO. And so actually wanting in direction of the subsequent couple of years of enhancing these and getting the metrics again to the degrees that we might count on and are displaying the expansion that we’re anticipating right here.
Michael Sullivan
Okay. Very useful. After which one final fast one. I feel somebody requested, however I am undecided I caught the reply. The O&M optimization in ’24, are you able to quantify what that’s? And whether or not you see potential to do much more past that?
Justin Lagasse
Sure. So for O&M, I feel two feedback to make there. One, as Pedro talked about for our — reaching our licensed ROEs that embeds in it attaining sure efficiencies that we’ve. For instance we’ve AMI in New York that we’re , in addition to different expertise developments that we’ve whether or not it’s in our IT house or in any other case. So once more I feel the important thing precedence for us after we contemplate O&M is attempting to be at a price decrease than inflation. So that is what we goal for our O&M efficiencies and simply all avenues that we’re ready to do this.
On the renewables facet, it is extra based mostly off of course of and prioritization of duties for instance, so actually doing O&M that present a manufacturing uplift or an earnings uplift from that perspective, so holding that precedence. So I feel that is actually what we take a look at. I feel we’ll come again to you with extra element at our Investor Day in a month from now with extra specificity round that and what we goal. However these are a number of the common themes that we’re significantly in ’24 and past.
Michael Sullivan
Okay. Very useful. Thanks for all the colour.
Operator
The subsequent query comes from the road of Angie Storozynski with Seaport Analysis Companions. Please go forward.
Angie Storozynski
Thanks. So, first on the wind repowering I perceive that you’ll speak about it at size throughout the Analyst Day. However I am simply questioning, so that you talked about clearly engaging returns, however we’re additionally listening to that older wind property are beginning to see some diminished profitability from a money perspective due to greater OpEx and CapEx. And I am simply questioning if this plan the repowering is pushed by mainly an try to retain the present earnings energy of those property or if there is a true money profit related to that?
Pedro Azagra
The reply is sure to each. I feel once you see the accounting path of property in — of renewable property within the US, due to makers accelerated depreciation, ITC, there are a lot of, many explanations. I feel within the final a part of the 12 months these earnings are destructive. It is not that you simply lose worth. It is simply the way in which it’s. So from an earnings perspective and money circulate perspective, the reply is 100% sure. That is one of many foremost explanation why repowering could be very, essential and we’re fortunate that we’ve now an personal fleet that permit us to do such a fabric quantity of repowering.
Angie Storozynski
Okay. However there’s additionally this earnings profit proper related to the sale of the tax credit and the way that mainly trickles into earnings. And I am simply questioning, if — once more, that is the principle driver of these repowering? Or is it that — once more, there’s like a real money or worth creation profit related to these repowering?
Pedro Azagra
I feel you have got a monetary purpose and an industrial purpose. I imply the economic purpose is we proceed to have prospects that they need to have prolonged PPAs. As you’ll be able to see, they’re renegotiating PPAs. And the suggestions we’ve for many of the property, we will contemplate repowering is that, they’d like to broaden and have new PPAs et cetera. So from that perspective, there’s a want from the shopper facet and there is a chance for us to have new property.
From a monetary perspective, it is clear, that when you have got a lot of these property after 15, 18 years you have got a difficulty within the P&L. And due to this fact, money circulate is completely different, as a result of you already have the money circulate again due to different causes.
However I feel when you have got the chance to create a brand new asset and that asset you’ll be able to make investments from a CapEx perspective a lot lower than a brand new asset. You are going to have a rise on manufacturing. That most likely goes to be 30% enhance at the least, versus the outdated asset.
And you may have an enhancement in O&M and PTCs for 100% of the manufacturing, not simply from the incremental manufacturing appears to me that that is a no brainer, okay? In order that’s why the mixture of all these issues is why we have to go forward with the repowering.
Once more it is a very lengthy time frame. And we will be very opportunistic. Take into consideration when is the suitable second from a money circulate perspective, from a P&L perspective, from an funding perspective, debt perspective however the plan is there.
Angie Storozynski
Okay. After which simply shifting on to offshore wind, so Iberdrola and Kitty Hawk after which we had these two updates from Eversource and Dominion about their offshore wind transactions. So we’ve some value factors, I suppose for these property.
I imply do you suppose that that impacts the chance of the sale of your stake on Hitty Hawk — Kitty Hawk, I’m sorry — and the way once more, if there’s like a viewpoint based mostly on these knowledge factors that you’ve got on offshore wind within the US.
Pedro Azagra
I feel the advantage of these knowledge factors is that, if you happen to keep in mind a lot of you requested very often properly there isn’t any physique concerned with offshore. And we informed fairly often, I am certain there’s not — the lengthy lease you had two years in the past three years in the past however the curiosity continues to be there. I feel it is good to have folks concerned with offshore.
I — we have no idea the small print of all these different transactions. I feel Dominion transaction that is our regulated asset. In order that’s a special animal. And I feel within the case of the Eversource based mostly on public info, I feel the acquirer is being assured some kind of return, okay?
That is not our case. I imply why talking concerning the lease, okay? And the lease market as you already know they have been in an public sale in California and really efficiently in the course of all of the Ukraine et cetera et cetera.
In order that’s why you are — it is not likely comparable. Within the different instances it is actually property which can be being constructed proper now developed and is multibillion kind of method. I feel the case is a lease. I feel we are going to proceed to hunt alternatives to promote the lease to do a partnership within the lease, as we do in lots of different property.
Final 12 months, we offered a number of property within the onshore renewable enterprise. Some initiatives we did not need to do and we thought it was higher to promote them. So we by no means stopped. However I do not suppose to promote a lease is similar to these offers. And once more, this isn’t an asset that we’ve a CapEx deviation or we’ve a write-off or we’ve to do one thing it is a completely different animal in comparison with these.
Angie Storozynski
Okay. After which lastly on NECEC, so if you happen to may present an replace on the development course of and likewise how comfy you’re feeling spending the cash provided that NextEra continues to problem the circuit breaker improve at Seabrook?
Pedro Azagra
I’ll let Catherine, to reply on the development progress. I feel our focus there’s quite simple. It is first, on the change of regulation that is a precedence for us this 12 months to ensure that we get that finalized. And second on NextEra appears to me that NextEra there’s a change of management. I feel the way in which they behaved in Maine for my part on the finish is the suitable one.
And I feel you’ve got seen some information there on different issues issues that have been taking place in Maine. So the Seabrook I feel we’re working with them. I feel we’re very near having a schedule on the breaker the problem that you’ve got — they’ve to resolve. And I am certain they may get that performed okay? So — however I feel Catherine, if you wish to touch upon the development?
Catherine Stempien
Yeah. Certain. Thanks Pedro. So we’re doing rather well on development on NECEC. We have now 25% of our foundations have been set and 20% of our poles. We have already began stringing conductor really on the hall. We have additionally been doing substantial development laying the inspiration for our HVDC converter station and for the stack comp.
And we have actually been in a position to profit from the facility of Iberdrola within the provide chain by with the ability to negotiate actually good contracts for many of our distributors together with with Hitachi for the STATCOM and HVDC converter in addition to a variety of our civil engineering works and the opposite work that must be performed on the positioning. So we’re actually happy with the progress proper now and we proceed full velocity forward.
Angie Storozynski
Nice. Thanks.
Operator
I’ll now flip the decision again over to, Pedro Azagra. Please go forward.
Pedro Azagra
Okay. So thanks to all people. A pleasure to have spoken with all of you, I feel we will observe up on one-on-ones now with every of you and looking out ahead to seeing you within the upcoming days and weeks. Thanks very a lot.
Operator
Women and gents, that concludes immediately’s name. Thanks all for becoming a member of. And you might now disconnect your traces.
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