Avangrid Inc

NYSE:AGR

Earnings Call Analysis

Company Reaffirms Annual Growth and EPS Outlook

Avangrid reported a decline in earnings per share (EPS) to $0.15 in Q3 2023 from $0.27 in Q3 2022, with adjusted EPS also down to $0.27 from $0.31. Networks' modest quarter-over-quarter improvement was due to rate plan implementations, partly offset by higher operational costs. The Renewables segment saw a $0.03 increase per share from improved wind and solar performance. Avangrid reaffirmed its 2023 EPS guidance of $1.90 to $2.10 and adjusted EPS of $2.20 to $2.35. Moreover, the company is committed to achieving a 6% to 7% compound annual growth rate in adjusted EPS through 2025, based on the midpoint of the 2022 guidance.

Strategic Investments and Growth Projects

Avangrid has made strides in expanding its utilities and enhancing the electrical grid's safety and reliability. These efforts were highlighted by the Maine Public Utility Commission's (MPUC) approval of over $380 million in investments, which will lift the company's rate base to approximately $1.3 billion. Furthermore, Avangrid has made considerable progress on the New England Clean Energy Connect (NECEC), having already spent nearly $700 million with forecasts suggesting a contribution of almost $20 million to fourth-quarter earnings. Construction of Vineyard Wind 1 is well underway and is expected to provide clean, renewable energy to over 400,000 homes and businesses upon completion. Achieving pivotal milestones, such as the installation of wind turbines and substations, the project has lined up $1.2 billion in tax equity financing - a record-setting figure for a single-asset tax equity deal in the renewable energy sector.

Inflation Reduction Act Opportunities and ESG Achievements

The Inflation Reduction Act (IRA) brings fresh opportunities, aligning with Avangrid's plan to repower up to 1.6 gigawatts of renewable assets within the next decade. Expected benefits include a 30% increase in production, a 10% reduction in operational and maintenance costs, and the ability to claim tax credits for the full asset production. The company also continues to receive acclaim for its Environmental, Social, and Governance (ESG) commitments, with over 14 recognitions in the past year, emphasizing its sustainable and ethical business practices.

Financial Performance and Outlook

Avangrid reports a third-quarter EPS of $0.15 per share, a decrease from the previous year's $0.27 per share. Despite this, Networks segment earnings improved slightly, and the Renewables segment also demonstrated strong performance with earnings of $0.14 per share. The company reaffirms its 2023 EPS outlook, ranging from $1.90 to $2.10 per share, with an adjusted EPS forecast of $2.20 to $2.35 per share. This projection includes the positive impact of a New York rate case settlement and anticipated fourth-quarter achievements. Beyond 2023, the guidance suggests a compound annual growth rate in adjusted EPS of 6% to 7% through 2025.

Managing Financial Risks and Liquidity

Avangrid has acted prudently to manage its interest rate exposure, maintaining a majority of its debt at fixed interest rates. The company has taken measures to reduce variable debt and has hedged appropriately against potential fluctuations. In particular, the regulated utilities possess mechanisms that allow for the recovery of higher financing costs. Additionally, the company outlines its proactive approach to managing supply-chain costs, renegotiating contracts, and leveraging its affiliation with the Iberdrola Group to navigate macroeconomic challenges. Avangrid boasts $7.8 billion of liquidity and has no immediate need for equity in 2023, with a planned $1.9 billion outlook in 2024 potentially mitigated through asset divestiture or other financial tools. The company's credit ratings remain stable and the dividend policy is consistent with previous years, offering a quarterly dividend of $0.44 per share.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, ladies and gentlemen. Welcome to Avangrid's Third Quarter 2023 Earnings Conference Call. [Operator Instructions]

And now at this time, I would like to turn the call over to Mr. Alvaro Ortega, Vice President of Finance, Investor Relations and Treasury. Please go ahead, sir.

[Alvaro Sebastian, executive]

Thank you, Bob, and good morning to everyone. Before we start, our CEO, Pedro Azagra, would like to share a message. Pedro?

[Pedro Azagra Blázquez, executive]

Thank you, Alvaro. I think before we begin, I'd like to say some -- a few words about the horrific and mass shooting and loss of life in Lewiston, Maine. We have many central manpower employees in Lewiston, and all over Maine, who are likely severely impacted by this horrible act of [indiscernible] violence. We are monitoring the situation very closely, and we're prepared to provide every resource available to our employees and our affected communities. Our hearts and thoughts from all of us at CMP, Avangrid and Iberdrola are with the Lewiston community during this difficult time.

Let's move now to our third quarterly results presentation. Please, Alvaro, proceed.

[Alvaro Sebastian, executive]

Thank you for joining us today to discuss Avangrid's Third Quarter 2023 Earnings Results. Presenting on the call today are Pedro Azagra, our Chief Executive Officer; and Patricia Cosgel, our Chief Financial Officer. Also joining us today for the question-and-answer part of the call will be Catherine Stempien, President and Chief Executive Officer of Avangrid Headworks; Jose Antonio Miranda, President and Chief Executive Officer of Avangrid Renewables; and Justin Lagasse, Senior Vice President and Controller. Other members of the executive team are also joining us today and may be called up on to assist with the Q&A part of the call.

If you do not have a copy of our press release or presentation for today's call, they are available at our website, avangrid.com. During today's call, we will make various forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect or because of other factors discussed in Avangrid's earnings news release, in the comments made during this conference call, in the risk factors of the accompanying presentation or in our latest reports and filings with the SEC, each of which can be found on our website. 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 Pedro.

[Pedro Azagra Blázquez, executive]

Thank you, Alvaro. During the past months, Avangrid has continued working hard on building the foundation for a stronger and more resilient energy future, not only for our company, but also for the U.S. A year ago, we have many challenges ahead of us. I'm very pleased how the team has performed and we'll be updating during the presentation some of the major achievements we have been able to obtain at present.

If we move to Slide 5, earlier today, Avangrid reported third quarter results for 2023 net income of $59 million or $0.15 per share and an adjusted net income of $105 million or $0.27 per share. Over the 9 months, Avangrid reported net income of $389 million or $1 per share and an adjusted net income of $434 million or $1.12 per share.

In New York, our NYSEG and RG&E rate cases were approved by the Public Service Commission on October 12, with a positive after-tax impact of $136 million or $0.35 per share to be recognized in the fourth quarter this year. This includes $66 million of positive impact as if the joint proposal settlement was effective May 1 and $70 million for the mitigation of uncollectibles. We successfully terminated our offshore wind PPAs for Commonwealth Wind and Park City Wind with an after-tax payment of about $29 million in guarantees for this year. By terminating these contracts, we have improved the economics of our offshore wind projects and avoided billions in write-offs at minimal cost. This cost is excluded from our adjusted earnings.

Based on our year-to-date achievements and progress on key issues, we are reaffirming our 2023 EPS guidance of $1.90 to $2.10 and adjusted EPS of $2.20 to $2.35. This includes onetime extraordinary gains from potential transactions of $0.24 to $0.28.

Over the last months, we have successfully completed key challenges from '22. One year ago, we announced our plan to file multiyear rate cases to avoid gaps between rates, balancing earnings, cash flow and affordability. Just on October 12, we received a final decision on the rate case for our companies in New York, including over $6 billion of investment for past and future investments. Our rate base will increase by close to 40% from $6.6 billion in '22 to $9.2 billion in '26, reflecting increases in plant additions needed to enhance the grid reliability and resiliency.

The 3-year rate case will also improve cash flow up to $940 million -- or in excess of $940 million and enhance our net income to nearly $450 million in 2026. This will help us pay for vegetation management costs, improve our credit metrics and provide a fair return on historic investments up to '22 as well as those projected into '26. The decision also includes risk mitigation provisions for uncollectibles and changes in long-term debt rates as well as make-whole provision. This make-whole goes back to May 1, meaning that even though the new rates go into effect on November 1, we will be able -- we will make whole as the joint proposal settlement had been approved back on May 1.

The allowed return on equity is 9.2% and the equity ratio is 48%. Ultimately, the newer rate case will enable us to continue to deliver a high-quality service to our customers, accelerate vegetation management, work to improve system reliability and resiliency and accelerate the clean energy transition in New York.

If I remember last year, many people put into question rightly that we're not going to have a successful rate case. I think in the same case that in Maine, when you work hard, you have relationships, you spend time with the regulator, you explain your case correctly, and things deliver. So I'm very, very happy and proud of the work that has been done on this topic. Nobody could believe this outcome a year ago.

Turning to Slide 7. A year ago, Park City Wind and Commonwealth Wind were financially exposed to significant additional project costs due to [ unprecedented ] economic headwinds. Many of the things we said a year ago, I think now everybody comments on the same in the same way. The contracts did not allow unilateral termination or renegotiation and as promised in our last strategic plan in September '22, we took steps to improve the economics of the projects. Since that time, Avangrid has been transparent and collaborative working digitally with the state and further officials and stakeholders to find solutions.

Today, PPIs, PPAs for both projects have been successfully terminated at minimum cost and avoiding massive write-offs. As we said last year, we care about every dollar, every million as we care about billions, but we're not here to put in danger the money we received from our equity and debt investors. On Park City Wind, the electric distribution companies filed PPA termination documents with the Connecticut Public Utilities Regulatory Authority, PURA, they approved termination of the PPA's contract early this month. The impact was limited to the security deposit of almost $12 million after tax.

On Commonwealth Wind, the Massachusetts Department of Public Utilities, DPU approved the termination of the PPAs in August. The impact was limited to the security deposit of almost $18 million after tax this year. Over the last year, we continued to advance the permitting and development of these projects. Now we have 2 high valuable leases ready to leverage and experience as part of the Iberdrola Group developing, financing and constructing offshore projects like Vineyard Wind 1.

As in the case of the rate case in New York and the rate case in Maine, also in these 2 projects, I would like to congratulate the team. I think we have done a simply very difficult to believe work which is not even to initiate the construction in relation to the project and to be able to terminate 2 projects that otherwise, we will be now speaking of billions of losses today. So congratulations, and I'm very, very proud of the negotiations, and thank you also to all the legislatures, executive and other parties and constitutions we were with, because this is the best thing thinking of the company viability in the long term.

Turning to Slide 8. Earlier this year, we received approval for the first multiyear rate case in Maine for 15 years. The Maine Public Utility Commissions, MPUC, approved over $380 million of investments to improve safety, reliability and resiliency. This increases our rate base to nearly $1.3 billion in rate year 2, reflecting the plant additions necessary to improve and modernize the grid in Maine. This plan was designed to ensure that CMP can continue making progress towards upgrading the electric grid, improving vegetation management practices and enhancing the customer experience.

Having been selected this year, CMP, the best company to work in Maine -- to work for in Maine, I would say thank you to the team, terrific job. Again, very few people trusted a year ago, we were going to achieve a rate case like this one. I think we're doing this because it's necessary. We are happy now we're spending all the time needed with all the constitutions we need to deal with. I think this is what basically comes out when the work is done correctly. So congratulations, and let's continue.

On the next item, NECEC, we have successfully resolved key legal matters and restarted construction, enabling us to accrue AFUDC. The Massachusetts -- in Massachusetts, sorry, we are right now investing in this project, both in Mainland and then in Massachusetts. And as you know, we have the agreement with ADCs. We will be investing approximately $1.5 billion in this project. Through the end of the third quarter, we have the spend already almost $700 million. NECEC contributed $7 million on after-tax earnings in the third quarter and is expected to add earnings almost approaching $20 million in the fourth quarter.

On Slide 9, we move to key items that we continue to make progress on. On Vineyard Wind 1, construction is progressing, and we are on track for delivering first power before the end of the year and achieving commercial operation by the end of '24. Once online, this project will generate clean, renewable and affordable energy for over 400,000 homes and businesses in Massachusetts, while also reducing carbon emissions by over 1.3 million tons per year, which is equivalent to removing 325,000 cars from the road.

Nearly 60% of the construction has been successfully completed, and we have achieved key milestones, including the installation of the first 2 wind turbines, 25 monopiles (sic) [ 24 monopiles ] and 15 array cables to connect the turbines. We have also completed the installation of the offshore substation earlier this summer and the onshore substation has been energized. Additionally, we have fully secured the components needed to support construction and executed a first of its kind tax equity financing for $1.2 billion.

It represents the largest single asset tax equity financing closed and the first for a commercial scale offshore win. This allows us to monetize trade depreciation of the project, supporting the capital structure and project economics. We are proud of the work accomplished by the offshore team in pioneering a new industry in the U.S. The lessons learned will be invaluable as we continue developing this project and others in the U.S.

Finally, parties in the merger case related to PNM, presented our arguments to the New Mexico Supreme Court in September, and we are now awaiting a decision. We're also progressing in the divestiture plan that, as you know, is needed before the end of '24, and we continue to make progress there.

Turning to Slide 10 we will discuss our UI rate case and the challenging regulatory environment in Connecticut. Two months ago, the Public Utilities Regulatory Authority, PURA issued a final decision regarding the rate case. The decision departs without prior notice from over 25 years of PURA practices resulted in our inability to recover reasonably incur costs and earn a fair return on enough capital. The decision would hinder our ability to invest in the grid to improve the store resiliency and reliability and would slow down the state progress on its clean energy goals. For this reason, we have filed, among others, an appeal in the superior court of the Judicial District of New Britain on September 18.

Turning now to Slide 11. The IRA is bringing tremendous opportunities to the industry and will be crucial for Avangrid's plan to repower up to approximately 1.6 gigawatts (sic) [ 4.6 gigawatts ] of our renewable assets between '23 and '32. Repowering allows us to increase production of our existing assets by around 30% and reduced O&M costs by approximately 10%. Let's not forget that it allows for tax credits for 100% of the asset production, not only the increased production, including both as we commented for the next 10 years and light wind field projects, repowering does not require full development and permitting, allowing the project to reach completion much faster. In fact, we have already repowered very successfully in the last 3 years. This represents a low-risk opportunity to increase the value of our existing portfolio at least through 2032.

We have continued advancing in Slide 22 -- sorry, 12 in our priorities and achieve additional key milestones this year. On this slide, we have some examples. Within networks of CMP, we have secured the grant of $30 million awarded by the DOE grid development office under great resiliency and innovation partnership program. This brand was established by the Bipartisan Infrastructure Law and will position CMP to accelerate the deployment of smart grid technologies and reduce the frequency and impact of power outages.

CMP also delivered an exceptional response to Hurricane Lee, which affected the region of Northern New England on September 16. We successfully restored power to the vast majority of the 130,000 customers impacted within 24 hours. CMP has also been recognized as one of Maine's best places to work. This is a research-driven program from Best Companies Group that examines the practices programs and benefits of a company and perform surveys to its employees to evaluate their perspective.

Across all operating companies and networks, we have improved our system average interruption duration index or SAIDI, by 9% in '23, when compared to our average SAIDI between 2019 and 2022. We continue to put the customer experience at the core of our network business by expanding our digital platforms. Year-to-date, we have over 1.1 million app downloads, which represents an 8% increase on over 1 million customers on outage alert, which is a 46% increase. These tools and technologies will help increase customer satisfaction, reduce costs to customers and improved cash flow.

Moving on to renewables. We have reached an installed capacity of 8.6 gigawatts of wind and solar energy, and we are on track to install around 1.2 gigawatts between '23 and '25 as addressed in our strategic plan. Right now, we have close to 850 megawatts of solar energy projects under construction. Equipment and supply needed for these projects are fully contracted and secure, preventing CapEx variation. In the first 9 months, we have also secured 580 megawatts of new and renegotiated PPAs. In addition, earlier this year, we joined the CAISO Western Energy Imbalance Market, EIM as the first generationally entity.

Regarding our corporate accomplishments, we recently reached an agreement with Vito to transfer $100 million of PTCs in '23. The PTCs will come from 8 operating wind farms totaling over 1.1 gigawatts for projects that are not in tax equity. This is one of the first for tax transfers of PTC since the IRA allows for transferability of tax credits. Earlier this year, Fitch also upgraded Avangrid outlook to stable, improving our credit profile.

Related to ESG achievements, we hosted our first Supplier Diversity Summit this quarter with the objective of bringing our small and diverse businesses together to promote equitable and competitive business practices.

On innovation, we hosted our Annual Digital Summit this past quarter with technology leaders from around the country to showcase the latest digital solutions for the energy sector. This year's event featured disruptive technologies that will advance smart grids, improve operations and enhance the customer experience. Also related to innovation, Fortnightly recently awarded us with the Lewis Latimer Top Innovator Award in design. We were recognized for our projects, simulating cybersecurity threats and our response. Thanks to these achievements, Avangrid is well positioned for success, and I am confident that we are taking the premise steps to drive our future growth.

Turning to Slide 13. Avangrid continues to be recognized in the ESG-related indexes, reaffirming our strong efforts to meet our sustainability and governance goals. This year, we have received over 14 ESG recognitions. I would like to highlight the following 4, which aligns with our ESG goals. The World's Most Ethical Companies by Ethisphere, the Bloomberg Gender and Equality Index, the Financial Times Stock Exchange for Good by FTSE Russell and the '23 Sustainability Yearbook by S&P.

2023 marks the fifth consecutive year being recognized as one of the World's Most Ethical Companies by Ethisphere, a global leader in defining and advancing the standards of ethical business practices. We are one of the only 9 honorees globally in the energy and utility sector this year. The Bloomberg Gender-Equality Index connects with Avangrid's goal to build, maintain and improve a diverse workforce and inclusive culture, aligned with our ESG targets for women in executive and leadership positions.

This is the 6th time we have won the FTSE4Good award created by the global index and data provider, FTSE Russell. The FTSE4Good index measures the quality of each company's management of environmental, social and governance matters. Avangrid has also been included in S&P's 2023 Sustainability Yearbook, scoring more than twice the average of the industry. All these awards and accomplishments are a testament of the hard work and dedication of the teams to make this possible.

As such, I wanted to thank everyone in Avangrid, who works hard every day to continue to deliver excellent customer and employee experiences, innovative ideas and contribution to these ESG goals. In particular, I would like to thank you, Patricia, for your dedication and the many contributions you have made to Avangrid over the past 8 years. You didn't join us here. You were here for 8 years with us.

Earlier this week, we shared that Patricia will be leaving, retiring from Avangrid in November. She has been an integral part of our company, first working at UIL as Vice President and Treasurer and then as Vice President of Investor Relations. Patricia, we wish you all the best. And Justin, we welcome you now. You have been here also for long time, and it's a pleasure to have you now as interim CFO. And with that, let me return the call over to you.

[Patricia Cosgel, executive]

Thank you, Pedro. Good morning, everyone. Before I start with this quarter's financial performance, I want to comment on the recent announcement of my resignation from the company. It is for personal reasons, a family-related matter that requires my attention. I remain supportive of the company and Pedro as CEO, and I'm very thankful to Pedro, the Avangrid Board, the Chairman and Iberdrola for the opportunities I've had. I admire their support and commitment to the company.

I have really enjoyed my tenure here at Avangrid, and I am proud of all of the accomplishments we have achieved, including successfully managing through some real challenges in a complex business environment and the company's efforts to effectively promote our financial objectives and the advancement of the clean energy transition in the U.S. Thank you to everyone, and I look forward to seeing some of you at EEI in November.

Turning to earnings on Slide 15. For the third quarter of 2023, our EPS was $0.15 a share, compared to $0.27 in the third quarter of 2022, and our adjusted EPS was $0.27, compared to $0.31 in the third quarter of 2022. Networks results were $0.24, higher by $0.01 quarter-over-quarter, compared to the third quarter of 2022. The key drivers included a positive $0.06 due to the implementation of the third year of the existing rate plans for our New York companies and the implementation of our new rate plan in CMP.

These results do not include the $0.35 onetime benefit of the new rates approved in New York, which will be in our fourth quarter results. We also experienced lower uncollectibles, which had a positive $0.02 impact quarter-over-quarter due to higher bad debt write-offs in the third quarter of 2022 versus the third quarter of 2023, primarily in New York. The start of construction of our NECEC project in August resulted in an additional $0.02 of AFUDC earnings quarter-over-quarter. Offsetting the positive results at Networks were cost to implement our investment plans and operator businesses, including O&M, depreciation and interest costs.

Our Renewables business segment also reflected strong performance of $0.14 for the third quarter of 2023, higher by $0.03 quarter-over-quarter. Wind and solar operating performance, which includes the impact of pricing, production and tax benefits contributed $0.12 a share related to new projects and service, operating performance and tax spreads. We also benefited from higher earnings from our thermal operations and asset management of $0.05 a share, and taxes primarily reflected the implementation of the IRA in 2022. Corporate costs reflect a decrease of $0.08 a share quarter-over-quarter, primarily due to higher interest costs.

Moving now to the next slide. We are reaffirming our 2023 outlook ranges for EPS of $1.90 to $2.10 per share and adjusted EPS of $2.20 to $2.35 a share. Our ongoing focus remains on achieving these targets as we execute our investment plan with discipline and a risk management focus. We also provide our expectations for the remainder of 2023. This includes, first, the implementation of the New York rate case with a positive after-tax impact of $136 million or $0.35 a share from May 1 through November 1.

This reflects a make whole adjustment of $66 million for the incremental rate as if we -- the rate case has been implemented on May 1 and a onetime catch-up of uncollectible adjustment of $70 million to match existing reserve amounts. To explain further, this onetime adjustment reflects a new regulatory treatment allows for the deferral of uncollectibles to match the amounts set aside in our uncollectible reserve.

Our NECEC project has a range of $0.04 to $0.05, reflecting AFUDC earnings. Additionally, operational performance in our Networks and Renewables business in the fourth quarter is in the range of $0.41 to $0.49, which includes the ongoing impact from the implementation of rate cases for NYSEG and RG&E, CMP, and UI. And we have cost management initiatives in the range of $0.04 to $0.06. This brings us to expected results prior to our renewables transactions in the range of $1.95 to $2.08, which is the same as we indicated last quarter. Adding the renewable transactions that we've previously disclosed, which includes a partial sale of our Kitty Hawk lease area at a range of $0.24 to $0.28, reaching our 2023 outlook range of $2.20 to $2.35.

Note that the delay in the closing of our merger with PNM has had a minus $0.03 impact for the year, which is what we disclosed last quarter. Considering the net impact of PNM operations and interest rates on the cost of funding as our guidance had assumed $0.30 contribution in 2023 and $4.5 billion of debt to fund the closing of the transaction. Additionally, opportunities and risks impacting our 2023 results include renewables production and pricing, other regulatory adjustments, thermal and asset management results, taxes, interest, O&M, uncollectibles and asset rotation. And finally, today, we are reaffirming our 6% to 7% compound annual growth rate in our adjusted EPS through 2025 off a base that is the midpoint of our 2022 guidance.

Moving now to the next slide. We're very much aware of the macro environment and are focused on managing our interest rate exposure. Some of the key points that we wanted to highlight are on this slide. 93% of our long-term debt is fixed. Our variable debt exposure is limited to a hedge on an existing parent company bond and our commercial paper program, which we did pay down by $800 million with an Iberdrola intercompany 10-year term loan earlier in the quarter at a 5.45% rate.

Importantly, our regulated utilities can recover higher financing costs in their rates. For example, our New York utilities, which represents 58% of our rate base, allowed for the annual recovery of debt costs and our new rate case includes a fixed rate debt reconciliation mechanism. In UI and CMP, interest costs are reconciled at the end of each rate year. And when we issued debt of utilities in the private placement market, we were able to use a delayed draw feature that allows us to price in advance of taking the fund at a pre-issuance hedge.

Through 2024, our maturities include $600 million at the parent and at the utilities a $75 million bond at United Illuminating and a $12 million tax exempt note. Our renewables business does not have external debt, including project debt. Our offshore wind project, Vineyard Wind 1 is financed with variable debt with a swap to fixed for the construction loan and the project debt, hedged several years ago at very low rates. Overall, the weighted average interest cost of our debt is 3.94% as of September 30, and a sensitivity to our interest rate exposure was provided with our September '22 Investor Day materials with an estimated impact on a 50% -- a 50 basis point change in our interest rates through 2022 through 2025 of about $20 million.

We also want to highlight that we have strong processes in place to manage supply chain costs. Our onshore supply chain for our projects under construction is fully contracted and secured, presenting CapEx variations. We are also working with affiliates and suppliers to ensure the availability of transformers, panels and other equipment. We have renegotiated 1 gigawatt of PPAs to reflect inflation, supply chain disruptions and higher interest rates.

For offshore, our Vineyard Wind 1 project closed supply chain contracts in 2021, insulating the project from the current volatility in the global market. And as we have said, we exited our Commonwealth and Park City Wind contracts before securing supplies when we saw the unprecedented spike in cost and interest rates to avoid billions and write-offs.

Finally, an important distinction for Avangrid is that we are part of the Iberdrola Group, and we're leveraging their experience, synergies and supply chain network to drive efficiencies and mitigate the supply chain and macroeconomics that are impacting the sector. Overall, we are managing costs as well through savings and optimization initiatives across the business.

Moving on to our updates to our financing, liquidity, dividend and credit ratings. Just this week, we signed a milestone tax equity transaction for Vineyard Wind 1 for $1.2 billion to monetize project ITCs and accelerated depreciation. This is the first tax equity transaction for offshore wind and the largest single asset renewables transaction -- tax equity deal in the U.S.

For renewables, we recently -- we also recently executed a tax credit transfer agreement, one of the first in the sector to do so to monetize $100 million of tax credits from existing wind assets, not in tax equity financing structures, benefiting from the IRA. We expect to continue to use the transferability provisions enabled by the IRA to monetize as generated tax credits to enhance our cash flow and alternative to tax equity financing.

During the quarter, as I noted, we issued an $800 million 10-year green term loan with Iberdrola at a fixed rate of 5.45%. And we issued a $350 million 10-year note (sic) [ 5-year note ] at 5.68% (sic) [ 5.65% ] and a $400 million 30-year note (sic) [ 10-year note ] at 5.85% for NYSEG, each of which we used to refinance high-cost short-term debt. And encourage to fund the investments and growth of the businesses. We also recently remarketed United Illuminating tax-exempt bond for $64 million at an attractive rate of 4.50% through the maturity of the bond in 2033.

Finally, we have no equity expected in 2023. And as we presented in our September 2022 Investor Day, we had planned for $1.9 billion in our outlook in 2024. However, we are also looking at other levers to manage this need, including renewable divestiture options as well as other financing alternatives, including securitization transferability, tax equity, asset rotations and partnerships and other items to manage our targeted credit metrics. For the 9 months, we have $7.8 billion in liquidity, covering 14 months. This includes $4.3 billion commitment letter from Iberdrola that backstops our merger. Maintaining our solid credit ratings is a key objective. At the Avangrid level, all of our ratings are on stable outlook.

Finally, our dividend policy remains unchanged, targeting a payout of 65% to 75%, and our Board recently declared a quarterly dividend of $0.44 a share, payable on January 2, 2024.

In summary, we continue to focus on executing our long-term financial plan. There are timing impacts to recognize the results of rate cases, transmission construction and renewable asset monetization that we expect to materialize in the fourth quarter as we've demonstrated. As you can see, we have successes on -- we have had successes on many important milestones that will support the achievement of our financial goals.

Thank you for joining us today for our financial update. I'll now hand the call back to our operator for questions, followed by closing remarks from Pedro.

[Operator]

[Operator Instructions] And we'll take our first question this morning from Richard Sunderland of JPMorgan.

[Richard Sunderland, analyst]

Can you hear me?

[Patricia Cosgel, executive]

Yes.

[Richard Sunderland, analyst]

Looking at the repowering update and thinking about your onshore platform overall, when is the right time to give an update on kind of how that looks for the megawatts and development targets on a long-term basis? Curious if the asset sales that are contemplated in 2023, really the timing there factored into when you might want to give that update? And maybe since I brought up those asset sales, any progress you can provide in terms of where those processes are right now?

[Pedro Azagra Blázquez, executive]

I'll comment on that. I think on the second one on the asset sales, remember that in the strategic plan, we said that, that was something to basically to be done no later than '22 -- sorry, than '24, okay? Because that's when we had this $1.9 billion capital increase. If you do divestitures, you don't need to do it. If you don't do it, you need to do it. So that's why it's by the end of '24 when we need to do the divestitures not in '23. We are progressing well. I think we have options, but we need to finish that. When we have a final decision on some of the options we have, we'll come back.

I think on renewables is different. I think on renewables, what I would like to do is come back to you in the upcoming months with a full detailed plan. I think we're now -- as you can imagine, we have now more than $8 billion regulated investments in New York both in the rate case, RG&E, CPA . I think we have a huge amount of CapEx also in Maine. I think we have NECEC going on. I think we have Vineyard being completed. So we have a huge amount of things going on right now.

So I think our idea is to put that all together in the upcoming months to bring -- come back to you with a clear path beyond '25. And I think that's the time to go into a lot of detail in repowering. I think the good thing about repowering is we have 10 years to do it. So there is nothing that we need to rush and do it in a second. And we have identified all the assets on the pieces, what need to be changed. And I think we will come back with a very specific proposal.

[Richard Sunderland, analyst]

Got it. Got it. That's helpful. I did just want to circle back on the asset sales by '24 point, though. So the gain contemplated in the '23 guidance would that gain shift to '24 if you're doing the asset sales in '24? Or is there a path to announce something in '23 that would crystallize the gain, but I guess, leave the proceeds for '24?

[Pedro Azagra Blázquez, executive]

No, it's 2 separate things. If you remember, '23 was a year that we made it clear was a transition year. We had a huge amount of issues last year to deal with. I think we are almost doing everything that we had to do to get them right. So '23 was the year that I think some of you said, "Why do you put a gain there?" And we said, "Well, get the guidance with and without the gain. If we do the gain fine, we don't do the gain, that's okay as well." But '24 and '25, remember, '25, there was a very, very de minimus amount of gain there. But in '24, there was no gain.

So I think the approach right now that we have is very simple. We are working this year to finalize all these things to make sure that '24 and '25 [ turn ] smoothly as we have said they were going to. I think in '24, we were not contemplating any gain. So that's why we want to move in one to the other one.

I think in the case of the divestitures or rotation of assets, of course, we care about value, but semi structures will not mean any gain, because maybe we're not semi control. So the important thing about the divestiture is more the cash angle, basically, to avoid a capital increase or to make sure that we top it up the financing needs with asset rotation, what we have done in the group for the past 25 years, nonstop. So that's why it's 2 separate things. But we're not moving any gain to '24. I think we're very comfortable right now in '24, that it should be the business delivering as we expect, ordinary cost of business and no gains in -- for '24.

[Richard Sunderland, analyst]

Okay. Okay. Got it. That's very helpful. And just one quick follow-up here. The uncollectibles change, is this, I guess, a protection on a go-forward basis in terms of uncollectible deviating from baseline? Could you just parse a little bit more about what's changed and what that does for you going forward? And then I guess, just to break down the $70 million, how much of that covers 2023? And how much of that covers prior periods that are getting trued up?

[Pedro Azagra Blázquez, executive]

I'll let Catherine and Patricia to comment. But the answer is yes. I think that is a sign the very positive things on this rate case. And again, we didn't go through every single item we put in the presentation, but I think we'll follow up with each of you separately if needed. I think the rate case is not just the rate increase. But many of you remember last year, you said, well, we're going to have a 2% increase or 0% increase. Inflation is there. I think you have seen the rate increases. You have seen the recognition of our CapEx. And I haven't set it in the conversations in the last week very strongly starting what you're saying.

There are many more things in the rate cases that we have achieved, which is, I would say, what we should have achieved around technical, but let's not go backwards. We have achieved them right now. And this is one of them, because this allows going forward to be done. Keep in mind also the governor is helping in the budget. So that's why there are a combination of things going on right now that I think allows us to deal with examples like this one. So this is also very important. But Catherine and Patricia, you can comment.

[Catherine Stempien, executive]

Yes. Thank you, Pedro. So you should think about the uncollectible $70 million as a onetime this year, but ongoing mitigating the risk going forward on uncollectibles. So from an accounting perspective, it matches up our uncollectible reserves that we make when accounts go into default with the deferred amount acknowledging from the NYPSC that we will be able ultimately to collect on the write-offs that we need to make from the uncollectibles. So going forward, those 2 will match up, and you won't see increased risk on our balance sheet, but it will be matched with a deferral entry.

[Patricia Cosgel, executive]

Just to give a little more description to it. And the $70 million reference is a reserve amount that we've set aside for uncollectibles. It's not our full uncollectible balance. It's the amount that we set aside as a reserve that has a -- when we do that, that has a negative impact on earnings. So now with this new order, we're able to now set aside a deferral to match that reserve amount. And so going forward, these deferral will match reserve amounts and you'll mitigate the risk to your earnings upsetting aside incremental uncollectible reserves in the future.

But because it goes into effect now with the new rate case, we do get to do a catch-up where we had actually had the expense and to set up the reserve, now we're getting to set up that was $70 million to offset that. So there is a onetime catch-up expense and going forward, really no expected impact to P&L, but a risk mitigation going forward.

[Pedro Azagra Blázquez, executive]

If I can make a comment, I really want to say thank you to the leadership in the public commission, senior staff, administration in New York. I think when you see the decisions they have taken, they are fixing many things, which come from the past, okay? This is not something that is an issue now. And that's why I think this probably puts on the table New York as a very, very predictable regulatory environment. I think we hear many times that people say, "Well, this state that one." I think in New York, this is a very, very stable and predictable regulatory environment.

There are other things still that we have to deal with, and that's why we continue working with the public commission, but I think as Patricia said, this is not just this 1 time. This allows for the future similar situations to be dealt with, which I think is very, very positive, because it becomes recurrent. I think this help. But there are more things that we're working with the public commission. And again, congratulations to the team, but also thank you to the leadership to be able to fix things that come from the past.

I will remind people, the previous rate case, we had a 2% rate increase and we're now acknowledging by the public commission that impact, which it was the wrong thing to be done at that time. I think when you see right now, we are not only going forward, but going backwards getting '22 investments, they were still not being allowed. So many things that I think the leadership in the public commission, the senior staff understand the settlement rate. The parties that agree the settlement when you conclude something is you have the right to do so and you need to be compensated, I would encourage many of you to read the comments by the commissioner.

So if anybody thinks New York is an unpredictable regulatory environment that's not true. I think they should get all the credit, because I think the leadership in the administration on the [indiscernible] and senior staff at the public commission, they are doing a terrific job right now.

[Operator]

We'll go next now to Michael Sullivan at Wolfe Research.

[Michael Sullivan, analyst]

I wanted to just start where we left off there on uncollectibles. So when you were excluding from non-GAAP COVID costs the past couple of years, was there anything for uncollectibles in there that was being pulled out as well?

[Patricia Cosgel, executive]

No, this is not at all related to COVID. And it is really just about exactly what I said about the reserve amount that we set aside a portion of your uncollectibles as part of our normal business practice you set aside, but as they age, what you think you might need to write off in the future and you put a reserve there. And we get to collect that reserve. But in the interim, it's impacting our earnings. With this new order, where we get to do is put the regulatory deferral in place for the recovery of those and so that has a neutral impact on our earnings. It's not at all related to any specific type of uncollectibles like COVID, et cetera.

[Michael Sullivan, analyst]

Okay. And then just wanted to understand some of the moving pieces coming out of this New York case. It looked like a few things moved around. So just in the waterfall for the year to go, I think that went up about $0.05 from the slides last quarter. And then like in your fact book, I think the CapEx went up, but the rate days actually went down. So can you just give a little more color on what kind of moved from last quarter?

[Patricia Cosgel, executive]

I think the -- from the earnings perspective, it's really just a better handle on -- with the implementation of the rate cases going forward. And as we get closer to the end of the year, we can have better information on what we expect to achieve through the end of the year. In terms of the rate base, when we did a forecast of CapEx and rate base as part of our long-term outlook in the past, that included more generic items as we go through the rate case and work with the commission in determining what the projects are that we need to in place and what the prioritization of those projects are. Some of them have different time lines for construction and for COD. So that doesn't impact our rate base.

[Catherine Stempien, executive]

Yes. I'll just remind you that our CapEx spend right now included in the rate case has to do with CLCPA Phase 1, which are transmission projects that are going to be multiyear projects and won't go into rate base until outside of the current rate year in the GPA. So as Patricia said, it's kind of just a matching up of the CapEx that we're spending and win items to actually go into rate base. But along with CLCPA Phase 1 and the $2.3 billion for CLCPA Phase 2 that we will start spending this year up until 2030. There's a significant amount of CapEx that we will be deploying in New York for future recovery.

[Michael Sullivan, analyst]

Okay. I appreciate that. That's helpful. Also -- and then just another one on the gain assumed in the guidance for the rest of the year. So that $0.24 to $0.28 has stayed the same since you initially gave that out. Is that being like actively refreshed based on where things are going? Or is that kind of something you just put out in the beginning and we're not really sure? Does it still have to be Kitty Hawk or are there other options? Just trying to understand what's kind of evolved since you initially put that out?

[Pedro Azagra Blázquez, executive]

I think when you put some number as a guidance is based on specific potential transactions you are considering. So this is not a number that you cannot explain. And the answer in divestitures right now is very simple. If we get the right value, we'll go ahead and those are the numbers we're targeting. And if not, we will now go ahead. So I think again, since for '24 and '25, we don't need any gains. These were just what we thought it was important for this year from a cash point of view, and then that was coming with a gain. I think we had opportunities this year to sell specific assets. We decided not to with what it was better to go from a bigger transaction, which involves a massive amount of cash in order to go forward because of the CapEx.

I think Catherine just mentioned the example of CLCPA. I mean we have almost $3 billion additional CapEx we didn't have in the projections last year. So that's why we need to work on all those things going forward. I think in the case of the gain, if it happens this year, fine. If it doesn't happen, we don't need it for next year, that's okay as well. But we are working to try to see if we can get that done this year in the amounts. If there was to be a variation in the valuation of those potential transactions and basically, we were not to achieve those valuations, we will not go ahead. We will just wait because we don't have any rush to do it.

[Operator]

We'll go next to now to Sophie Karp at KeyBanc.

[Sophie Karp, analyst]

I wanted to ask you about Connecticut, like any color on the regulatory environment there, the way you see it and if there is a path to sort of improve it or for it to get improved anytime soon?

[Pedro Azagra Blázquez, executive]

I would love to say yes, but it doesn't depend on us. I think what we can do, and that's why perhaps with this, I'd like to say thank you to the employees, trade unions, suppliers, many other people very relevant that they have some support because of the change in precedent, changing past practice, noncompliance with law of the decision we suffer. I think the only thing we can do is to work.

I mean, keep in mind that, as you know, from an accounting point of view, because of the strong legal opinion is not having a lot of impact, but I think what our base case is, we need to turn around that regulatory decision, because we don't agree with that from a legal point of view. Some people try to take this into like personal matters in attacking people, no, we don't do that. We just disagree strongly from a legal point of view with that decision. And I think in the same way in New York, I think you hear comments by the commissioners about compliance with law in the case of termination of PPAs in offshore, you will remind people that companies need to be paid for the investments. I think we want to make sure that's the case in any jurisdiction where we do business.

So I think in the case of Connecticut, there has been a good decision in the run, in a rate of just mechanism after the rate case. I think we are working very hard in the appeal. We think we're going to take further action soon. We're going to continue. I think we're finding some rate cases right now. I would love to say that we have learned because of the prior decision how to file a rate case differently. But the problem is if you have read the decision, you say, well, you did improve this, but you also [indiscernible] you have proven it. okay? That's why we strongly disagree with the decision that was taken.

So the only thing we can do is work hard in the relationships where we put a lot of information on the table. And also, unfortunately, to follow the complaint angle in any manner we can think of. And I think when you do those things and you have done nothing wrongly and perhaps the decision is not correct. I think we just expect this to turn around in the future. Is there something we expect in the near future? I think we're working every single day. We do not stop. We continue to do many meetings. We continue to see additional legal actions. We continue to have employee actions, suppliers actions, management actions.

The good thing about this decision is to prove how close we are, how proud we are of being part of the Avangrid Iberdrola family. We are a company. There's no differentiation between management and employees. There is no differentiation between union workers and nonunion workers. I think when you have a decision like this, will affect everybody. And that's why we are strongly reactive to all of us. I think it's the same thing with governing control power. It's something that a lot of employees have reacted on their own against that approach.

So I think we're very proud of the reaction all of us have taken. But again, what we can do now is work, do as many actions as we can. And I think in the same way that last year, I think we told you you're asking us if we are going to get a 2% rate increase in New York or 0% rate increase in New York because of a comment by a governor or 1 comment by somebody else. I think we told you, let us work, okay? And I think right now, you're seeing the rate cases. You've seen this one. Again, this is very small. Keep in mind that $50 million less investment in Connecticut is compensated by $3 billion in New York that we have in the plan. So you multiply by pick up any number you want. So the whole [indiscernible] are affected.

But we simply do not accept having decisions where we believe are illegal, change of practice without notice, change of precedent. That's not the way to have -- to do business and invest in our sector. So from that point of view, I think we need to continue working. This is not personal matter. These are just objective matters that we need to deal with and give us some time to continue working.

[Sophie Karp, analyst]

Terrific. And my other question was kind of like a big picture question on offshore wind. You guys probably are the closest utility in the U.S. to the space and have the most expertise. So from where you sit, right, and from what you know about the cost of equipment, cost of capital, tax equity availability, et cetera, like the PPAs that you have been canceled, right? Can they be rebid in a way that's both economic given the current environment and also palatable for the rate payers in those states? I guess it's kind of like a question. Is the LCOE of offshore wind acceptable right now, I guess, for policymakers for other stakeholders as the things stand, like I'm just curious to hear your thoughts?

[Pedro Azagra Blázquez, executive]

I think in our case, to say offshore business, there are a lot of risk going on in Europe. They are a good project we are building here in the U.S. at present. So I don't -- we don't like the stereotypes or generic comments, because it's not true. I think you need to go case by case. I think in our case, the message last year was simple. And this is how we have done business in Iberdrola for 25 years. We're not going to put in danger of the financial health of the company. That's it. And I think we said that a year ago.

I think some people say that we have done a bad bid. Other people said that we didn't have any negotiation here, we didn't do this. It doesn't matter to us, what other people do. I think in our case, we were clear, we will not start a project if we already have information and we got -- as soon as we got it a week after we got information, we sat down with the leadership in those states, we kind of go ahead with the project that you already know you're going to have $1.6 billion write-off and $1.2 billion, because the contractors are renegotiating, they're opening the contracts and you cannot reopen the PPA so it doesn't work.

So that's why for us, the answer is you have to -- not a stop. I think a lot of people refer to stop this, do not to start. And that's what we did. We simply did not start. I think right now, you have a couple of leases that are very valuable, I think, if you see the new options, are we going to participate? Let's see. I think unless you have indexation unless you have, we will not be able to have any risk.

The important thing for us is we will not run risks. I think that's the message. Other people, we don't know. You need to check with everybody where they are. In our case, we don't have billions of losses right now. I think we have a very modest loss because of losing those guarantees. By the way, sometimes in renewables, you have those losses quite often in some projects that are compensating with other gains in other projects because you beat the budget. I think in this case, we have 2 beautiful leases. They are worth a lot right now. And I think we are in the right space.

I would encourage all of you to keep in mind, the President, Governor Hochul, Governor Healey, Governor Lamont, I think they're leading right now, the U.S. in terms of renewable, green transition, climate change, et cetera, and we are as well. We are building a transmission line from Canada into Massachusetts, and we are building the only project in larger scale right now in offshore. And will this continue? Well, sometimes things to stop for a year, sometimes it stop for 5 years, for 3 years. But in our case, what we're going to do at all is to put in risk billions of dollars coming from our shareholders and lenders basically get not only Avangrid, but the whole with rolling to danger, that's now how we do business. So I think in our case, we will go case by case.

[Operator]

We go next now to Julien Dumoulin-Smith at Bank of America.

[Julien Dumoulin-Smith, analyst]

Can you hear me?

[Patricia Cosgel, executive]

Yes.

[Julien Dumoulin-Smith, analyst]

Excellent. And congrats to both of you here on your successive moves here. So maybe actually starting with that, if you can, a little bit further. Can you just speak a little bit to the commentary in the 8-K the other day around the backdrop with the new committee here and just sort of the context of what drove that decision here, if you don't mind? It's certainly an intriguing release here, what precipitated it? And can you confirm that this was related at all to the latest decisions to see, obviously, the turnover in the CFO role, if you can affirm that as well?

[Pedro Azagra Blázquez, executive]

Okay. As long as that's your concern, I'm very happy, Julien. So I'm more than happy to speak about that. First, I will speak on the compliance and then Patricia, you can answer if that has anything to do with you retiring. I think on the compliance, we never stopped improving and enhancing our compliance unit. I think we believe there has been probably 6 to 9 months analysis of further improvement of the compliance. Basically, we're moving from just one compliance unit of the Avangrid level to put in compliance units in each of the businesses. So we are multiplying by 3 the focus right now in terms of how we're going to do compliance in the group.

So I think what we're doing is going to beyond. If somebody wants to say that this is related to 3, 4 years ago that we had a tax issuing the accounts. Well, maybe let's go back to '22 to 2002, maybe we also had something wrong there. This is something that we never stop at the group level, at the Avangrid level and at each subsidiary. We think we need to continue enhancing the compliance. A lot of people right now may say, well, because of Ukraine war and other dynamics, it's not ESG so important right now for us, it is.

We're not going to stop and one of the key things is to enhance compliance across the organization. And that's why we know -- there is not like a perfect time to announce this. This is not a matter of when. This is when we have finished the analysis, and we believe there is an improvement. We check with some of those agencies that basically validate and certificate the compliance units later. And we got a very positive reaction. They loved what we were proposing. I think probably we're the first company in the U.S. that is making this action. Maybe there are others, but at least in our analysis, we believe we're on the first ones to make this move.

So the whole rationale about that is very simple, to increase and enhance the compliance around the company, because for diversity reasons, for contractual reasons, for ESG reasons, is a must. And if we got ideas that our legal and compliance departments put on the table that we enhance our compliance, we put it on the table as soon as they are finished. And in this case, we're moving from 1 compliance to at least 3, because we're going to put one in renewables and other one in networks, I think it's beautiful to show how much commitment we have to that. We are announcing that right now because we finished the work some weeks ago as simple as that.

And again, Patricia, sad for me to be speaking about you on this topic and relating these things to you. But if you want to comment anything I'll leave it you.

[Patricia Cosgel, executive]

No, I'm only just going to add that it is really extremely disappointing to hear that. I think it's offensive. I had 0 basis. I've had a long career and throughout always in every [indiscernible] I defended law, defended regulation without hesitation. I just -- I feel like it's a personal character assassination and is completely [indiscernible].

[Julien Dumoulin-Smith, analyst]

Got it. Excellent. It's good to get the clarity on that front. I appreciate it. I know people at times confound things. Look, maybe just to talk about the third quarter call -- third quarter results, rather, can you just elaborate a little bit about what you're seeing in terms of West Power dynamics going on out there? Obviously, it's been a volatile and again, elevated market backdrop, seems like that's a fairly meaningful contributor here in terms of what's driving the year-over-year results. Can you perhaps clarify more precisely how much of that was West Power? And it seems like over $100 a megawatt hour realized in the quarter here, but if you don't mind.

[Pedro Azagra Blázquez, executive]

Sorry, Julien, we didn't understand very well the question. Do you mind to repeat?

[Julien Dumoulin-Smith, analyst]

Yes. Sorry. So to ask it more precisely, it seems like West Power and specifically, your asset out there drove a very meaningful benefit in the quarter here to the tune of over $100 a megawatt hour implied. Obviously, West has seen elevated results in recent years. I just want to confirm that, that is indeed what's really contributing to the segment results this quarter?

[Pedro Azagra Blázquez, executive]

Sorry, because we were not hearing the word West, so it was Antonio, so you can speak also in the [ court ] [indiscernible] answer.

[Jose Miranda Soto, executive]

Julien. So first, yes, when you compare year versus year and also quarter versus quarter, the West has been performing very well and this is one important or the most important contributor among the different regions. But also I would like to highlight climate and also our trading team that we're able also to win results way above our expectations. So all in all, this is the composition of the main contributors today in results.

[Pedro Azagra Blázquez, executive]

And keep in mind, we had planned not to stop because of a review that is mandatory. And that's why the results we're having right now, which were very good last year, very good this year. Keep in mind, it has not been working the whole year, okay? So going forward, I think please keep that in mind because unfortunately, you have to stop, and we take your [indiscernible] and CapEx very strongly. But I think it's back to full speed right now and again delivering us as it was.

[Jose Miranda Soto, executive]

And also, I'd like to highlight that this year is the first year that we are also performing as a new member of the CAISO Imbalance Market, and this is helping also a lot our costs in the West and driving also the good results.

[Patricia Cosgel, executive]

And just kind of to finalize, I think what we've always highlighted about the business and one of the benefits of our company in the renewable sector that we're diversified, and we have assets all over the country in multiple regions. So you will see period-to-period, 1 region does better than another and then that could change over time.

[Pedro Azagra Blázquez, executive]

I think Julien on renewables, again, we'll comment on this at the end of the year. But I think since sometimes people go back to 6 years ago or 7 years ago, things like that, when we are here since last year. So we can explain what we are doing. But I think in the case of renewables, there was a long history for El Niño and La Niña, many reasons why in a specific year was materially deviated. I think I'm very pleased that the planning we're doing right now, last year. That's why it took us 6 months. We stopped a lot of things for 6 months to put everything in the right direction.

So I'm very pleased that last year and this year, we are almost exactly where we thought we were going to be. I think that's something to take the credit of the renewable team that I'm very pleased. Also, I think just to make a comment, last year, we really think we were going to be probably around 300 megawatts a year. And I think all of people ask us, well, what are you doing solid, other people are doing 2,000. I think we made clear that we didn't believe in [indiscernible] when we were asked also that question. We said that 4 years ago at the [indiscernible] level, but we said that last year in November.

We also said we're not going to be in the race of growth per megawatts. We're in the race of making money. And from that point of view, I think we're going to put projects that deliver the right return. I think in this year, we already have 500 megawatts. So we have done 200 more than we said what we're going to do. And those ones, I think, have supply chain fix. We have very nice return. We have renegotiated PPAs, existing PPAs, I think at least 2 or 3 with material increases.

And in other 2 or 3, we have been able basically to renegotiate the penalties, which also is -- you can call it, we negotiate the penalties or increase the price, okay? Both things have the same impact. and its material impact that we have been able to do. And the new PPAs, perhaps making a comment, Alvaro, related to the debt. When you look at us, I think we have networks, which is a pass-through from interest rates. I think the existing PPAs and new PPAs are reflecting the new interest expense. And maybe we have a little bit of debt at the holding level that it still is floating, where basically interest rates may be affecting, but we don't have 100% of the business. It's a very small amount there.

So I think for us, interest rates it's something we're dealing with very nicely, because of past 3 [indiscernible] and adjustment -- adjusted -- revised PPAs for new assets. So I think I'm comfortable that we have less risk than otherwise the people. And we don't have acquisition that, that you bought something that has assets with flat fixed revenues. And then you have this acquisition that now turning around from 1% cost of debt to 5%, that's not us, okay? So from that point of view, it's also -- that's an item that helps in those results that you were mentioning in renewables. Sorry to expand, but I thought it was an opportunity to comment as well.

[Julien Dumoulin-Smith, analyst]

Excellent. And the gain just for this year, you're still expecting that here through the balance of the year. It's not in '24, right? I know we talked about it a little bit. I just wanted to clarify your earlier comment.

[Pedro Azagra Blázquez, executive]

Yes, '24, we don't need a gain. I think, remember, '23, it was the year that we call it transition year because, again, I'm very pleased, and I will make some comments on the end about the things we have done. But I think we could be here now with 2 or 3 of these items not being obtained. And we will be in a material different way from an earnings point of view, not only for '23, but going forward.

I think we have been able to achieve things that, in my opinion, were not credible a year ago. And from that point of view, remember '23 was the transition to a full '24 and '25 based on ordinary cost of business. I think many of you said last year, what did you put an extraordinary gain. And we said, well, you can do the numbers with and without because it's a onetime up. And if it happens, fine, and if not, we moved into -- so that's why for us. We continue to work on that. And if it happens fine. And if not, we will not need that for '24..

[Operator]

And we'll go next now to Angie Storozynski at Seaport Research.

[Agnieszka Storozynski, analyst]

So I have a question about transferability. You mentioned the $100 million from existing assets that you are monetizing using the IRA transferability. I was just wondering if you're changing the way you plan to finance renewable power projects going forward? I mean, do you expect to use tax equity versus transferability? And also how about levering projects basically at the project level instead of using [indiscernible]?

[Patricia Cosgel, executive]

Yes, sure. Well, definitely, Angie, we definitely see a huge backdrop from transferability that was enabled by the IRA. This initial transaction was our first foray into being able to early adopt some of those provisions of the IRA, because we do have a number of assets that are generating PTCs that we were there just retaining and holding on our books. These are assets that are not in tax equity structures, because we haven't always used tax equity. So now with IRA, we're able to monetize [indiscernible] and benefit from the cash, which actually has a material impact for our credit metrics.

So that was kind of the first step to do that. As they're generated, we can continue to sell those assets. But we have looked across the business, and we'll continue to do that to see where we can use transferability. We definitely think that there are -- in projects where we are doing PTC, it makes a lot of sense. Certainly, we have talked a lot about this large repowering plans that we have ahead of us. Those are assets where that could make a lot of sense, because those are assets where the CapEx is a lot lower than a new build where you already have depreciated assets that -- because they're existing assets. So you're not generating a lot more of tax losses. So PTCs and transferability makes a lot of sense.

Again, the transferability proceeds are cash from operations, so they actually have a big benefit to our credit metrics. We do think we'll still look at tax equity. I think it's important that we continue to monitor. There isn't sort of a one-and-done review, because we have to take a look at our tax capacity, and we do have a lot of NOLs on our balance sheet. So for large projects, particularly for ITC projects where we have a larger CapEx where ITC makes sense, tax equity can make more sense. So we're not just continuing to add to those NOLs. So I do think, in summary, it's a very valuable tool that we have, and we will look at it more, not only for these ad-generated PTCs, but for new projects and repowering.

[Agnieszka Storozynski, analyst]

Okay. And in those cases where you use transferability, the portion of CapEx that would usually be financed with tax equity would be financed with what additional debt? Again, just -- okay.

[Patricia Cosgel, executive]

Yes, it really depends on the asset, but we -- that's right. The other part of your question, we are looking at just future financing options. It depends on how much we -- and we grow the business. I think it has been historically cost effective for us to do green [indiscernible] at the parent company to support that business, but we are looking at options to fund with project debt as well.

[Agnieszka Storozynski, analyst]

Okay. And then changing topics to PNM. So we're obviously waiting for the decisions from the Mexico Supreme Court. And I'm just -- again, we don't know when exactly it happens or what it will be. But I'm just wondering, one, given how long this has been taken and that we are in a dramatically different PE multiples for utilities. So I'm asking, one, about potential renegotiation of the price? And number two, if you had to -- if the Supreme Court does not side with you what kind of route should we expect? Would you refile? And then again, would that give you a chance to potentially reprice this transaction?

[Pedro Azagra Blázquez, executive]

I think 2 comments. The first one is we're just waiting for the Supreme Court decision, and we prefer not to comment either in the outcome or potential things after that. Let's wait for that. The second one, I think when you do M&A transactions, you don't renegotiate the price in 1 year, things go up or down. So from that point of view, I think we always look at valuations on a present value basis and that's the approach to do it, okay?

So -- but I think we just need to wait for the Supreme Court. And there is a history of somebody makes a comment and then people say that we said it was going to be 4 months, 3 months, 2 months, I think we prefer to be silent. Let's respect the court decision, and let's wait for that decision and we go from there.

[Operator]

Ladies and gentlemen, that is all the time we have for questions this morning. I'd like to turn things back over to you Mr. Azagra for any closing comments.

[Pedro Azagra Blázquez, executive]

Okay. Thank you very much to everybody for being here today. I think in my case, the first thing I'd like to do is, as I said, to say thank you to the employees, to the union suppliers. Many of them have been supporting us not stopping some difficult matters we have on the table, some rate case decisions, government control power and I think it's a pleasure to see how committed they are being at the [indiscernible] Avangrid in a group. And from that point of view, I would say first, thank you.

The second comment I want to make is -- and again, we'll go back to this at the end of the year. But if a year ago, I was to be asked if I was comfortable we were going to have a rate case in New York as we have got a rate case in Maine, NECEC being built, Park City terminated and Commonwealth terminated, I think probably the answer from everybody, from me, would have been no, okay? So I think right now, to see that additional $3 billion in CLCPA, $6 billion approved in New York, $0.5 billion in Maine. I think this is beautiful, okay? I think this is basically the future being achieved this year and the foundation for the next 5 years.

So from that point of view, earnings, CapEx, rate base, projects in renewables, we said 300, we are right now in 500 megawatts, good returns, renegotiations everywhere. I think the dynamic is different. So the only comment I would make right now is that the success, I think, in the last 12 months is as simple as saying that's work. And let's make sure we need everybody nonstop. I think the teams right now are meeting legislatures, executive brands, public advocates, Attorney Generals, investors, rating agencies, public commissions, nonstop.

And from that point of view, when you work like this, I think the results come because there is nothing we have to take. We are proud of what we're doing, but also we're very objective on the needs that we have. So we have been able to solve many of the outstanding challenges that we had and clear the way for '24. I insist a lot we were very clear last year that '23 was a transition year. Again, we were trying to fix many things as much as we could. And I think we are being hopefully very successful in all of them or almost in all of them.

But in this case, I think with the rate cases in New York and Maine, the termination of these 2 offshore projects, mainly NECEC, I'm very, very happy about how we are putting the right thing for the years to come. I think still we have other things to be done. I think we have asset rotations I think we need to basically turn around the dynamics that we have right now in Connecticut. We need to make sure we complete Vineyard Wind 1 and NECEC on track, on time and on budget.

I think -- I'm very pleased about making sure we have a strong financial credit metrics, liquidity because that's also important where sometimes you don't get difficult. This is the moment to be. We're just waited for the PNM decision by the Supreme Court. And also, we're very keen also on developing and diversifying our talent. Talent continues to be critical, even when situations like the one with Patricia, she has to take a personal decision. As you can see, we are not for 2 months looking for anybody. We have a decision that is taking the same day, because we have a very strong and ready succession plan.

As a result, I would like also to comment that we believe we are very well positioned to fix issues and very well positioned for growth and the certainty in the opportunities ahead of us that we feel comfortable to generate long-term growth and continue building a better and more sustainable, any future not only for our company, but in general.

So thank you. I think if we have any other questions, I know we're going to have a follow-up with each of you separately. So please, Alvaro, I'll let you now to deal with the further Q&A or so on. And everybody, have a great day.

[Operator]

Thank you. Ladies and gentlemen, that will conclude the Avangrid's Third Quarter 2023 Earnings Conference Call. Again, I'd like to thank you all so much for joining us and wish you all a great day. Goodbye.