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Talen Energy Corporation’ (TLN) CEO Paul Farr on Q1 2016 Results – Earnings Call Transcript

Talen Energy Corporation (NYSE: TLN ) Q1 2016 Earnings Conference Call May 10, 2016 8:00 AM ET Executives Andrew Ludwig – Director of Investor Relations Paul Farr – Chief Executive Officer Jeremy McGuire – Chief Financial Officer Analysts Ali Ahga – SunTrust Julian Dumoulin-Smith – UBS Abe Azar – Deutsche Bank Srinjoy Banerjee – Barclays Operator Welcome to the Talen Energy First Quarter Result Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Andrew Ludwig. Mr. Ludwig, please go ahead. Andrew Ludwig Thanks Kate, and good morning everyone. Thank you for joining the Talen Energy Corporation conference call to discuss first quarter 2016 results. Today’s presentation is being webcast and we are providing slide to the presentation on our website at talenenergy.com. This presentation may contain forward-looking statements and we encourage you to review our filings with the SEC to a more about certain risk factors that could cause actual results to differ from these forward-looking statements. This presentation also will contain references to non-GAAP financial information that we use to measure our business. You can find the reconciliation between the non-GAAP financial measures we use and the most directly comparable GAAP measures in the schedules to our earnings release and the presentation that we posted on our website. With that, I’ll now turn the call over to Paul Farr, Talen Energy President and CEO. Paul Farr Thanks Andy, and thank you all for joining us on our first quarter earnings call. Joining me on the call today are; Jeremy McGuire, our CFO; Joe Hopf, who has lead our Commercial team and our non-nuclear Generation; as well as Tim Rausch, our Chief Nuclear Officer. After my prepared remarks, Jeremy will take you through a more detailed review of the financial performance and our forecast, and we’ll then take questions. We are about three week shiny anniversary of the spin and the acquisition of the RJS portfolio, and I’m extremely proud of the efforts and the accomplishments of our entire team over the past two years of planning and execution. We’ll touch on a number of initiatives that we have on our way to grow value for stockholders in our prepared remarks. So I’ll move right into Slide 4. The April 1 sale of the eastern hydro assets for $860 million marked the end of the FERC mitigation asset sales, all of which were executed at great values in competitive processes. Our Brunner Island co-fire project remains on schedule which should permit us to bring gas in Unit 3 by August and the smaller two units by the end of the year. We made significant progress on the Montana project evaluation as well and expect to have a final decision on that in the next two weeks. That project is expected to be executed all differently than Brunner Island and that we are working with the midstream company to finance, construct and operate the lateral pipeline. Since the Brunner Island project has a much smaller lateral, we are initially financing and constructing the gas line ourselves. Once the Brunner project is completed, we plan to assess the value of selling the line to a midstream company to free-up the capital we invested in that portion of the project. At Susquehanna, we safely and successfully completed our Unit 1 refueling outage, which included normal refueling and maintenance activities as well as major work to replace the original heat water heaters and the installation of shortened blades on the second Unit 1 LP turbine. That leaves the third and final LP turbine blade replacement on Unit 1 for the outage schedules in the spring of 2018. I want to thank the entire Susquehanna team for staying focused on safe execution of this work, all well keeping Susquehanna Unit 2 running at a capacity factor of 100% for 10 months in County, fantastic work by all. The great operating performance and the addition of assets to the portfolio over the past year allowed us to achieve comparable adjusted EBITDA performance for the quarter versus Q1 2015, despite significant declines in energy prices. As we noted when we provided you 2016 adjusted EBITDA and adjusted free cash flow guidance on our yearend call in late February, we excluded from that guidance, the financial contribution of the assets being sold to meet the FERC mitigation requirements. Our revised guidance ranges have been updated to reflect the actual financial contribution of those assets, which were sold and Jeremy will comment more on that in his remarks. On Slide 6, we begin the commercial and operational review. Given our fuel diverse portfolio, you can clearly see the impact low natural gas prices are having on generation assets in the region. Gas continues to gain additional runtime at the expense of coal, a major driver of our decision to invest in gasification of the Brunner Island plans and our evaluation of a similar investment at modular assets. Susquehanna generation was lower year-on-year primarily due to a difference in the timing of the 2015 and 2016 refueling outages. Our forced outage performance continues to be extremely strong, setting well for CP and pay for performance capacity constructs in both PJM and New England. We began the 2019, 2020 PJM capacity auction this week with results expected to be announced on May 24t. As usual, we are not providing a forecast to the auction results, but we see better behavior on economically and environmentally challenge assets as a key driver of the outcome. On the safety front, we continue to make meaningful strides to improve our safety track record as evidenced in the chart on the bottom right of the slide, but we remain highly focused on achieving even better levels of safety performance. Turning now to market updates, beginning with PJM on slide 7, I would broadly highlight that we’ve seen an improvement in forward gas and power pricing in all markets since the end of February. Outside of just the pricing improvement in PJM that you can see in the graph, we secured key victories at the U.S. Supreme Court in the Maryland and New Jersey litigation on subsidize new gas bills and from FERC in the Ohio attempt to subsidize existing merchant generation. Maintaining a level playing field among competitors is an essential element to having well structured, transparent and functioning markets that encourage sensible investments in existing and new generation resources. Now moving to ERCOT, the ERCOT market on Slide 8, pricing has improved from very low levels in late February, but continues to present challenges for coal and nuclear generators in that market. With wind penetration reaching almost 50% quick-start gas assets like ours that goes in our Texas portfolio become even more valuable for system reliability. Recent forecast of potential shortness in the market for the next few summers bodes well if we get any type of help from the weather, we saw that with just two weeks of heat last summer. In the New York ISO with the tempered weather and low seasonal gas pricing, we’re getting good runtimes in assets. We’ve seen some modest improvement in forward prices over the past two months, and even though the constitution pipeline is been delayed both spark spreads and energy prices have improved in the short term. Based on the public comments from the developers of the pipeline and the fact this pipeline is fully subscribed, we expect the developers will be pursuing options to move forward with that project. Finally, turning to New England, 2017-2018 power prices are up modestly since our last update with spark spreads slapped down on a recent spike and forward gas in the region. ISO New England will implement rental demand curves for the 2020-2021 forward capacity auctions. We expect this will gradual downward pressure on capacity prices due to the transition that was negotiated by the generators. On Slide 11, we’ll provide updated hedge levels and margin sensitivities. We have increased our 2016 generation hedge levels across the board, which reflects a combination of Q1 delivered results and some modest balance of your hedging. For 2017, we were on some additional hedges for the East nuclear and coal assets prior to the end of the quarter and we’re about a third hedge based on our projected output at March 31. Since that time, we have seen some additional improvement in pricing and have added additional hedges that take the hedge level to over 60% for East nuclear and coal. In the West, we added some hedges for the summer for both 2016 and 2017. I’ll now turn the call over to Jeremy for a more detailed look at financials. Jeremy? Jeremy McGuire Thanks Paul. On Slide 13, you will see some of the key drivers of our first quarter adjusted EBITDA as compared to the same quarter last year. Overall margins were higher due principally to the addition of RJS and MACH Gen margins. They were not part of last year’s first quarter results as well as higher capacity prices. Offsetting these positive margin drivers will lower realized energy prices, timing of the Susquehanna refueling outage in the early February sale of the Ironwood facility. The increase in O&M reflects the addition of RJS and MACH Gen operations, as well as the Susquehanna refueling outage timing. The increase in cost was partially offset by lower corporate costs following the separation from PPL. Let’s turn to Slide 14. As Paul previewed in his remarks, we’re affirming and updating our guidance of same time. We believe our solid operational performance, our hedging program and our continuous efforts to control costs we’ll keep this on track versus our 2016 guidance. If you recall when we initiated our 2016 guidance that we did not include any anticipated contribution from the mitigation assets. Now that the sales are complete, we know a certainty what they contributed towards our 2016 results. The net results as the $20 million increase to our 2016 adjusted EBITDA guidance and a $10 million increased to our 2016 adjusted free cash guidance. We’ve provided these adjustments so that our guidance will more closely aligned with our reported results as we move through the year. Before I turn it back to Paul, let spend just a minute on capital allocation on slide 15. Please note that we have updated the cash from operations in the chart on the bottom of the page reflect first quarter results, including the actual results for the asset sold in 2016 consistent with our guidance update. We continued to stay the course with respect to our capital allocation as discussed in the fourth quarter call. We closed our hydro sale last month which brought in $860 million from gross proceeds completing the FERC mitigation requirement. We are making good progress on the major potential projects that will influence our capital allocation decisions. We expect to have a decision on the Montana station project very soon as Paul indicated and we’ll continue our assessment with respect to the Harquahala station. We remain on discussions with various entities around potential local resource needs and we’re simultaneously refining plans to potentially move all or a portion of the capacity to the Northeast. As we’ve discussed in the past moving summer all of park would required capital investment beyond the current plan. Finally, we continue to review our liability management options, obviously on-prices have improve since our last update which will be factored into our analysis. However, there are other factors such as managing the maturity calendar and reducing interest expense, therefore consider. With that, I’ll hand it back to Paul. Paul Farr Thanks Jeremy. Our scripted remarks were fairly concise this morning as we gave you a pretty fulsome update in late February on the yearend call on many fronts. We’ve had a very solid financial start to the year, executed fully on the committed asset sales, identify further opportunities to reduce costs and continue to invest projects that we believe will improve the profitability and risk profile of our portfolio. Before we get in the Q&A session, given recent market rumors involving the company, I want to take the opportunity to remind you that we do not comment or speculate on market rumors, we never have and we never will. Please keep this in mind as you craft your questions for us this morning, operator we’re now ready to take those questions. Question-and-Answer Session Operator [Operator Instructions] The first question comes from Ali Ahga of SunTrust. Please go ahead. Ali Ahga Thank you and good morning. Paul Farr Good morning. Ali. Ali Ahga Good morning. First just a logistic question, so to be clear under your old way of reporting and showing us guidance, first quarter results would have excluded the 20 million that is associated with assets that were eventually sold. Is that the way to think about it apples-to-apples? Paul Farr Yeah, that’s correct, Ali. Ali Ahga Okay. Then second, Paul I wanted to get your perspective on this new joint venture that or venture whatever you call it, the Riverstone has harmed in Texas. From this reading it appears to be a direct competitor of Talen, and I am just wondering as they being your largest shareholder? Was there any discussion with you guys? I want to just get your perspective on how to look at that venture versus talent? And just excuse me to reading through that release. Paul Farr Ali, I don’t think we have any comments on what Riverstone is doing basically that’s just the Topaz team that was managing the RJS portfolio before we bought it, is our understanding. So beyond that and then renaming the team, we don’t have a perspective on what their – I don’t think they have assets, but I’m not sure what to read into that actually. Ali Ahga Okay. But am I right in thinking that they will be going after fossil fuel projects just like you guys in your regular course of business maybe looking for fossil fuel assets as well? Paul Farr Well, we had said at when we conceived the spin that this did not represent the spin of PPL portfolio and the merger or acquisition of RJS that did not mark the – that was not a Riverstone exiting the business and that they had the capability to pursue congressional generation assets in the future, which they had planned to do. Now they have market power limitations based upon being an affiliate of Talen, but beyond that they are free to continue to pursue those opportunities, nothing change there. Ali Ahga I see. Separately in the past in one of your presentations when you had talked about what could be uplifts to your EBITDA profile. You had mentioned that the add of money shall find in Longwood contracts expiring I believe at the end of the year would add about 60 million a year, and then you were still at that something in the Brunner dual-fuel would add about 25 million a year. Are those numbers still valid today? Paul Farr The first number will still be valid. I have to believe in Joe sitting here that Brunner for ’16 especially because we had originally planned to bring all three units on by yearend. We’ve now with strong execution and construction, we feel confident we can get Brunner 3 the big Unit to 750 megawatts unit on by August. That will provide an uplift, but gas prices have declined since, so the project is going add more gross margin and look more attractive. There will be an offsetting impact on the other solid fuel assets in the portfolio but that project will look better. Ali Ahga It looks better. Okay. Last question, not specifically trying to go after these rumors out there, but just conceptually your views on consolidation in the industry today versus where they were three to six months ago? Paul Farr I don’t think that I or we have necessarily a changed opinion, I think even with some improvement in the multiples of our three peers, this whole industry of four that the cash flows were compelling. I think that scale is important that driving out cost is important. I guess I would say that as I think back on our experience in going after cost here, in the way that we went after a cost as part of an integrated utility holding company it’s much difference. So I would say that from my perspective and looking at operators operating uneconomic plants in Ohio, and looking at some nuclear shutdown that’s going on in the industry, getting after costs is much more, I guess I’ll call it aggressive in an IPP context and inside of the utility holding company with common systems, common business processes, it’s just the different urgency in a different culture. So, I would expect and I would wholeheartedly support the remaining integrated, the disintegrating and becoming carefully, but I am not really sure you have to ask the other CEO is how they think about consolidation in the industry. Everything is obviously gets limited by ultimately market power, we’re going to grind to that at some point with only four companies in the key markets where there are market power concentrations. Ali Ahga Thank you. Operator The next question comes from Julian Dumoulin-Smith of UBS. Please go ahead. Julian Dumoulin-Smith Good morning. Paul Farr Good morning, Julian. Julian Dumoulin-Smith So let me follow-up on the questions there on capital allocation, Jeremy, what’s the timing this year on taking through when you would execute on a growth that stay back or what have you given the cash is now in the door? Jeremy McGuire Yeah. So I think the two key projects that pace our timing there are the Montana co-fire which just Paul said we expect in the coming weeks to have a final view on moving forward or not and then the other is Harquahala. If part of the path value there is moving summer all of that capacity that – what can represent a really attractive return to shareholders. It will certainly require some substantial capital investment. So I think we just want to have clarity on that before we take this all as capital and do something with it. I know the markets are – the financing markets are getting better than there were, but they are not all better yet. So I think we are very cautious about doing anything in the capital markets to shrink our debt, and then suddenly realize in weeks or months later, oh gosh we need to go on raise a bunch of debt again to fence a hard move. So we are just trying to sort, draw all that now, I think that still a first half of year decision in terms of where we are moving. So I wouldn’t really expect anything splashy on the capital allocation front before the first half of the year. Julian Dumoulin-Smith Got it. And just remind us what the hard CapEx figure you’re looking at as you sharpen the pencils? Paul Farr Yeah. We were originally at around 500 KW and we fine tune that down to $300 to $400 range so on, if all three trains were moved at 1080 megawatts, that’s call it 325 million to 450 million some more in that ZIP code, if all three trains are moved. So, again Julian, it’s free-up another $100 million or $200 million by selling it in-situ or move all three, those are kind of the bookends, but that’s a potential $600 million range there of outcomes. We are continuing the dialogue with load serving and other entities in that market on the potential for sale. So we’re simultaneously evaluating both sale and relocation to markets in the Mid-Atlantic and Northeast. Julian Dumoulin-Smith Got it. And just a clarification, I’m just going to stay away from the market rumors, but on the RMT what are the limitations in terms of change in ownership and any implications if any for PPL, if you don’t mind reminding us on where that stands post there? Paul Farr At this stage, there is not practically any limiting factors there. Jeremy McGuire We have a general safe harbor, I mean people have to ticker on tax advice, I mean there is always a tax disclaimer right, we are not your tax lawyers. But there is a general safe harbor that provided any future transaction was not pursuant to preconceived plan at the time of the spin or prior to the time of the spin, then you’re generally okay to do whatever. It’s just there is a coincidence in timing, the closer you are to that spin date, the more scrutiny there is and the more sort of inference that there was a preconceived plan. But in general, there was no preconceive plan to a transaction at the time of spin or prior to the spin then you’d have a general safe harbor proceed. Julian Dumoulin-Smith Got it. Can you comment briefly here on the kinds of unit in PJM in the upcoming auction there you’ve seen – I know you mentioned the economics here – like we saw on fuel, but can you elaborate a little bit more regionally or how you see that changing year-over-year obviously power prices down, any elaboration we appreciate? Paul Farr Well, I mean just look back on the 18-19 auction, there was a major unit in our neighborhood that that owner said did not clear the auction. The nuclear promise activities are underway, but those haven’t born yet substantial cost reduction fruit. Tim is leading one of the initiatives there and there are number clearly underway, but that’s going to take some time to get to. So, higher cost units in what remains a persistently low gas price market are going to be under pressure. The owners of the assets I believe in all the testimonies that I’ve seen in Ohio were all quote uneconomic generation in the absence of getting subsidies well then those units should shut. The market worked just fine. There are negative impacts to markets given what the actions EPA has taken and the impact of this cheap gas that exists and persists in the region, that’s not a problem of poorly functioning markets that has impact. So, they’ll be assets like Brunner and Montour that can be gasified. There will be nuclear plants that have margin to be able to cut costs, and then there will be solid fuel plants that are not in good locations and were cost cutting where the costs are either already at very low levels and not much more can be done it. People for trying to do certain things, but at the end of the day that is creating a – that subsidization activity across all these markets is preserving uneconomic generation which is having a downward pressure on both capacity and energy. So those owners and other owners that are facing the impact of Marcellus and now Utica gap need to take a hard look in the mirror and make some tough decisions. Julian Dumoulin-Smith Speaking to tough decisions, any update on Montana lastly? Paul Farr No. We are working constructively with the parties in the state as we speak. We are doing everything we can to try to find the path to a new owner of those assets, which will result at the end of the day in some form or fashion of our exit from that market. So we’re working diligently to try to execute that in the best way possible for all the stakeholders, for employees, for the state, industrial load, for all involved there to try to find the best solution that we can. Julian Dumoulin-Smith Great. Thank you. Operator The next question is from Abe Azar of Deutsche Bank. Please go ahead. Abe Azar Good morning. In the 2018-2019 PJM auctions, about 20% of your portfolio went uncleared with lower demand and expect the pricing in its upcoming auction. Should we expect the similar amount of megawatts will remain uncleared or have you revisited your risk assumptions for CP? Paul Farr Well, I would say, Abe, I’d like to say a couple of things. One, that amount that roughly 2200 to 2500 megawatt so that didn’t clear also included assets that we have now sold as part of the FERC mitigation process, so that will be one point. The second point I would say is that auction obviously concluded before the transitional auctions for the prior years and you’ll know that we cleared more capacity in those auction. So as we evaluated with the market did by way of bidding, we did modify or bidding behavior somewhat. So I think again, I don’t see us changing, think about the risk reward relationship and there are projects that we know and megawatts are cleared that have since been announced to be shuttered. So ultimately, there is going to be demand in subsequent auctions for the modest amount of capacity, net of FERC mitigation sales that we’ve got and the amount that we want to reserve for our own insurance, I am using my [indiscernible] so you can’t see four asset performance in the future, even though we’ve got assets that have a really good track record of reliability. Abe Azar Great. And shifting gears a bit, you mentioned that FERC were affiliate waivers as we have seen the company have not given out. Do you think the current proposed iteration impacts the market the same way, and if so, where and how do you plan to challenge? Paul Farr Well, maybe a couple of thoughts. I don’t think that even at the state level there is a resolution before the capacity auction, results are in – well, not just the result, you know the bidding activity is done the 17 th , and then the results come out May 24, so nothing is going to be finalized in two weeks. So they’ll have to do it accordingly and how they see risk reward there, I don’t think by changing the fact that there is no affiliate contract, the substance at the end of the day and the result is the same. Uneconomic generation is subsidized and it has an impact on wholesale pricing in the market, and that’s a FERC jurisdictional issue. We will to the extent that these things are filed, we will likely have to with our peers engage peers that are viewing subsidies as unwarranted and impermissible will bring another challenge back at the state and federal level, again in certain if they pursue. Abe Azar Okay. Thank you. Operator The next question is from Srinjoy Banerjee of Barclays. Please go ahead. Srinjoy Banerjee Hi. Thank you for taking my questions. Paul you could have been asked previously in the call, but just hypothetically and going into the debt language, it doesn’t change your controls, is it just a 25 which have a change of control? And then specifically, are there any callouts depending on you may hope hypothetically acquire the group? Paul Farr Is that $600 million and about little north of $200 million of IRB, industrial revenue bonds that are outstanding that would have a potential change of control acceleration, if there were to be a rating downgrade as a result of potential transaction. Jeremy McGuire That’s the rating of the issue itself not of the company. Paul Farr Correct. That’s all the…. Srinjoy Banerjee Right. Oaky. And then there are any callout as specific that you may acquire the group? Paul Farr Sorry. I missed that last piece. Srinjoy Banerjee There was a callout or exceptions to that change you can control being apply specific that you may acquire the group. Paul Farr No. Jeremy McGuire No. Srinjoy Banerjee Okay. Thank you. Paul Farr Sure. Operator There are no additional questions at this time. This concludes our question-and-answer session. Paul Farr Okay. Thanks Kate, and thank you all for joining us on the call today. We look forward to further dialogue as we get into potentially some road shows, and then later in the year as we get to the normal conference schedule. Thanks all and have a good day. Operator The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. 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Avangrid’s (AGR) CEO Jim Torgerson on Q1 2016 Results – Earnings Call Transcript

Avangrid, Inc. (NYSE: AGR ) Q1 2016 Results Earnings Conference Call April 26, 2016, 10:00 AM ET Executives Patricia Cosgel – VP IR Jim Torgerson – CEO Rich Nicholas – SVP & CFO Bob Kump – CEO of Avangrid Network Frank Burkhartsmeyer – CEO of Avangrid Renewable Analysts Andy Levi – Avon Capital Advisors Christopher Turnure – JPMorgan Paul Patterson – Glenrock Associates Joe Zhou – Avon Capital Operator Good morning. My name is Kissie. I would like to welcome everyone to the Avangrid First Quarter 2016 Earnings Conference Call. I would like to turn the call over to Ms. Patricia Cosgel. Patricia Cosgel Thank you, Kissie and good morning to everyone. Thank you for joining us to discuss Avangrid’s first quarter 2016 earnings results. I’m Patricia Cosgel, Vice President of Investor and Shareholder relations. Presenting on the call today are Jim Torgerson our Chief Executive Officer and Rich Nicholas our Chief Financial Officer; Bob Kump, our Chief Executive Officer for Avangrid Network and Frank Burkhartsmeyer, and our Chief Executive Officer of Avangrid Renewables will also be participating on the call. If you do not have a copy of our press release or presentation for today’s call, they’re on our website at www.avangrid.com. During today’s call we will make various forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Significant factors that could cause results to differ from those anticipated are described in our earning release and filings with the SEC. With that said, I’d turn the call over to Jim Torgerson. Jim Torgerson Thanks Patricia and good morning, everyone and thanks for attending our earnings conference call. We had an excellent first quarter at Avangrid and we had strong performance from all of our businesses. As you can see from our press release, the net income and earnings per share were up 24% to $212 million of net income and $0.69 per share. Now that’s up on a adjusted basis including UIL from 2015. So adjusted EBITDA grew 8% to $575 million and earnings growth in all of our business and we had very strong cash flow. Now this was a result of improvement in operating expense and the revenue decoupling we have at most of the utilities offset some of the milled winter weather. We did have some impacted at Berkshire Gas and Southern Connecticut Gas where the heating degree days were like 10.6% warmer than normal our fewer heating degree days than where would be normal. We did have higher wind production. It was up 13% over 2015, still down a little bit from what we would consider a normal wind production year, but it did help to increase our gross margin by 2.4% over the 2015 first quarter. The other thing we did was we extended the useful lives of our renewable assets and this was looking at component by component. It was down on a worldwide basis by Iberdrola. Based on Iberdrola’s experience and looking at the engineering analysis that we did, so each component we looked at and determine that we were really not depreciating it on an appropriate life and it really needed to be extended and we’ll get into that a little bit. So the first quarterly AVANGRID dividend was $43.2 a share. It was paid on April 1 of this year. And the second quarterly dividend of the same amount was declared by the Board on April 20 and payable July 1. And as a result of what we’re looking in for the rest of this year and into the future now, we expect our payout ratio to be declining a little faster clip and you can see that as of yesterday our dividend yield was 4.5%. 2016 earnings per share outlook now, we’re increasing it to the range of $2.10 to $2.20. Now looking at the first quarter and I’m on Page 7 of the presentation, which is on our website, the first quarter 2016 results were on target. Net income you can see, we had $212 million looking at some of the non-recurring items and we had a non-recurring item by the sale of the Iroquois Gas pipeline, which generated net income about $19 million, but taking that aside we were up 14%, but including that we were up 24% over the previous year’s first quarter. Earnings per share were up again the same amounts, earnings of $0.69 versus $0.56 in the previous year. So some of the things that impacted us obviously the higher wind production and then the extension of renewable asset useful life going from roughly 25 to 30 years and we’ll talk about that in a minute and then the non-recurring sale of the Iroquois pipeline. On the next page, we look at the key earnings and cash drivers, and we pay rigorous attention to the integration that’s been going on identifying planning for best practices in 2016. We’ve been making very good progress. The planning has been completed and it was done on-schedule. We had planned on getting that done by the end of the first quarter, which we did. And then we look at the results for that year. The net income was actually up 7% and weather did have an impact since we don’t have decoupling at Berkshire and Southern Connecticut Gas, but the good thing is those will be put in place since they are required to be implemented in our next rate case. And we have a continuous focus on our operating expenses and minimizing those to the extent we can and are possible. So renewal business, wind production was up 13%, energy prices on merchant projects, it was pretty flat actually down about a 1% and this includes directs along with the prices for energy. The PPA contracts were up about 3% over the previous year’s first quarter and we have included some information on the pricing and actually the roll off of some of these contracts. And when we look at our financial position, we’re in a great financial position with our very strong balance sheet. We’ve low leverage, which we can translate in the low interest cost and our consolidated credit facilities we executed a $1.5 billion credit facility, which is now in place giving us great liquidity on a short term basis that we can use it as we need. Now talking about the extension of the useful life of certain renewable assets, as I said we looked at a component by component basis and we determine that the towers from the transmission equipment that’s in place there, the depreciable life was really in excess of the 25 years. So on average we’ve moved up to about 30-year life for the wind farms that we have and again we have best-in-class technology, operational management and we have the world-wide experience of Iberdrola and based on that experience. We looked at the life of assets, particularly the ones that Iberdrola has in Scotland and recognize that they were useful life was going much beyond the 25 years that we’ve been using. In fact they’ve been in place for over 20 years already and have seen no deterioration. So with this worldwide experience and taking the worldwide view that the assets needed to be extended, Iberdrola across the Board has extended the useful life for renewable assets to about 30 years on average. And so which we also think is consistent with what some others in the industry are doing. Moving on to the merger integration summary, we’re making great progress on that. We launched it last October and that was focused really on day one implementation and in the merger integration planning. The first thing I want to do is to make sure we could operate effectively once the merger was completed, which we did do and did it successfully. The next step in Phase 1 was really to identify the plans and what we needed to do and then get our teams together, we had a dozen teams working on it with over 240 people — 270 people. We had 120 different projects that we looked at and so now we completed that phase and we’re moved into Phase 2. The next steps there are really the project teams are transitioning to implement the integration plans now. That will happen over the next 12 to 18 months as we put these in place, things can be faster, obviously we will do quicker, but a lot of it depends on software changes and integrating different computer software. And then also the thing we’re identifying and executing on operational best practices and aligning outline grid with the global business model where we can and where it makes sense and I think in many areas particularly purchasing, IT, other areas make a great deal of sense in aligning that on a global basis. Day One Readiness as I said was achieved and all the integration projects were on track. For our projections for the planning period, when we had the Investor Day back in February, we talked about a five-year plan. I kind of like to go over some of the aspects of our five-year strategic outlook and the progress we’re making. When you look at the projections, 70% of our investments will be in regulated activity and the other roughly 30% will be related to our renewal business. Adjusted EBITDA in the 2020 year about 26% will come from renewables and about 73% from our networks business. So when you look at EBITDA, 73% are coming from regulated activities, which is very stable and predictable for us. When you look at on Page 12 for Avangrid Networks, when we take a look at the regulatory to legislative and the FERC update we want to go through, the New York trends that was made up of initial three projects. We received FERC approval on March 17. Had a total ROE of 10% and that’s a combination of being an RTO and also having a base ROE. Equity ratio is at 53% and our initial investment is $44 million. We’re implementing settlement right and obtaining an asset transfer order from the New York Public Service Commission. The projects are on track, We expect to have rates in effect on June 1 of this year. The New York Rev, the final track one guidance has been released. The distributed system implementation plan and the benefit cost analysis is going to be filed by each of the utilities at the end of June of this year. And our New York rate case, which involves both our RG&E and NYSEG for both gas and electric rich company, the hearings have been completed. As we said before, we had a settlement that’s now in place. We expect the commission to decide this on May 19 and then the rates to go into place on June 1. For Connect New York, this is a new project that we’re going to be making a filing by the end of this month. It’s a 1,000 megawatt DC underground transmission line that we’re going to be making a filing to a pursue that. The New England RFP we bitter selection process, we’re expecting it to be by the end of July and as you know we have two projects in Maine, two proposals regarding transmission. One another project which is we would be providing the wind resources from our renewable businesses in New York on another transmission line have been proposed by Eversource. So we have three projects in this RFP and we’re very hopeful and confident that we should be successful on those. And then the FERC ROE compliant in the New England, the ALJ issued an order on March 22 which recommended a base ROE for the 15 month refund period in complain number two of an ROE of 9.59 and the cap of 10.2 for that 15 month period. Then for the Complaint 3 and going prospectively, his recommendation was for a base ROE of 10.9 with a cap of 12.19 for the 15 months refund period and then going forward. FERC is expected to make their final decision later this year, early in 2017 and if adopted as final the ALJ mid it’s decision, that would require a net increase in our reserve for complaints two and three of about $10.2 million net of tax based on what we know today from those proceeding. Moving on to some of the projects we have going on and keep in mind we’re focusing on improving our resiliency, replacing the aging infrastructure and automating our system. One of the great ones we have at the Cooper Mill Static Synchronous Compensator, which is being put in place into Maine and this was after a quest of ISO New England to make this investment to support the regional bulk electric system and really relates to upgrades in the Boston area that are being done by a Eversource and National Grid. Now it does require a substation expansion within the 200 MVAr STATCOM, which is the static synchronize compensator. The investment there is going to be over between 2016 to 2018 and an about $52 million. Also at Maine and also for about $52 million is our Customer Smart Care Data System upgrade and this is going to enhance our customer service and flexibility, allowing from more innovative rate design, allowing for dynamic pricing and then it’s also going to help us to optimize our AMI capabilities. And as you recall, we put in AMR entirely in CMP service territory. In Connecticut for our transmission projects we have the metro north railroad corridor where we’re replacing the transmission lines along the metro north corridor and keep in mind our transmission lines are on the catenary that provide the electricity to allow the trains to run. So if catenary is over 100 years old and are deteriorating, so we have concluded along with ISO England that we need to replace those. We’re putting along monopoles along the corridor and that investment in this five-year timeframe is going to total about a $150 million. Then in New York, we have the Guinea Retirement Transmission alternative and this is going to provide a 345 KV connections to the New York power grid, help ensure reliable service to the Rochester area and then also allow the ultimate retirement of the local generation plants. That investment again is $140 million. It’s started, its already spending money there and we started last year. It should be in operation by the end of ’17. Turning to our renewables business and looking at our projections for the next two years, we have currently 5.7 gigawatts in operation and another 744 megawatts are under construction. I will spend a minute going over which one of those projects are. If you keep in mind that the first one in North Carolina will be operational by the end of this year and that’s a 208 megawatt project, $375 million in capital spending, that’s a 13 year PPA with Amazon and it’s under construction as we speak. El Cabo is almost a 300 megawatt project in New Mexico that will be supplying power to California IRU and our people did a great job in piecing together the transmission that would be needed to move that power from New Mexico into California. This project is about $515 million. It will be completed by the end of 2017 and that has a 20-year PPA with the California IOU. Tulare is 132 megawatt project in California. Again that will be completed by the end of 2017. We’ll spend about $235 million on that and that has a 15 year PPA with the California IOU and we’re currently finalizing the off-take agreements, but that should be operational in that timeframe. We also have a smaller project in Vermont of 30 megawatts, $75 million in capital spending. Little more expensive in the Northeast to build these projects, but it has a 25-year PPA with an IOU and there we’re just waiting for the agency to give us the pre construction ruling, pretty much everything is in place. And then a 76 megawatt project in Colorado, again completed in the end of 2017. We’ll spend about $120 million there with a 25-year PPA with an IOU and we’re finalizing activity there. Now in total we’re going to spend about $1.3 billion in investments between 2016 and 2017 and that will increase our installed capacity to 6.5 gigawatts by end of 2017. On Page 16 we have a map that shows potential projects and these of the 6.1 gigawatts pipeline we have, we have about 2250 megawatts of wind and solar that we believe would be the ones that will provide the next opportunities in the 2018 to 2020 timeframe. These are the ones that are probably closest to coming in the final development either because we know there RFPs are going to be coming out amd we have more assets in place. We have the engineering done and so forth. But these are the ones we would say are most likely to be developed to supply the next 650 or so megawatts that we have planned for the 2018 to 2020 timeframe. Now I’m not going to go into detail, but you can see they’re spread out throughout the country giving us great diversity and there is a mix of both solar and wind that we have and so you can see this. These are real projects that can easily get developed. So let me highlight a couple of things. One, we had great performance in the first quarter. It gives a lot of visibility for the remainder of the year. Our strategic plan for the next five years through 2020 is clearly on track and we’re performing rather well to get that done. The integration and execution of our plan is in progress to integrate the UI oil in the old Iberdrola USA. We’ve extended the use of life of renewal of assets based on sound engineering and experience we have from Iberdrola worldwide and our 2016 earnings per share outlook we’ve increased it to 210 to 220 per share based on a lot of these factors. And so with that I’m going to turn it to Rich Nicholas, who is going to spend some time on the financial activities. Rich Nicholas Thank you, Jim. Good morning, everyone. Thanks for joining us today. As Jim said a very strong quarter for Avangrid and I am Slide 19, little more details are on the operating segments, while net income grew 24% quarter-over-quarter including UIL and the adjusted 2015 numbers. As you can see networks, was up 7.3% and renewables had a very strong quarter up 64% 2016 over 2015. The corporate and other segment does include gas as well as corporate and you can see positive results there. As a historical contract that was out of market that we rolled off and we see the benefit of that and positive earnings in the corporate segment. Moving to Slide 20, some of the key drivers in addition to the ones Jim had mentioned, we did benefit from decoupling in most of our companies. Southern Connecticut does not have decoupling but will in its next rate case per state statue and Berkshire Gas does not as well. However, the impact of those relatively small in the overall scheme of things from the warm weather, we do see the increase in cost related to the Reliability Support Agreement, but those are also offset in revenue and we did see lower employee related cost quarter-over-quarter. Turning to renewables, 13% improvement in wind production and that’s made up of both better wind quarter-over-quarter as well as additional capacity. Last year we did add roughly 200 megawatts with the back of wind form in Texas and the extension of renewable asset lives to new estimates there were positive by $13 million of net income for the quarter. In the other segment sale of the interest Iroquois that Jim mentioned for an after tax gain of $19 million and we did see some higher gas spreads for the contracted gas storage business. Moving to Slide 21, little more details geographically on the renewable load factor where we saw an increase from 28% last year to 31% this year and this is why being geographically diverse really helps. As you can see different results so in the West we were up to a 20% load factor versus what we would have been 16.6 last year. So a 3.4% percentage point increase. Slightly less wind in midcontinent and in Texas you can see there the big increase in part was driven to the additional capacity that I mention as well better wind. On Slide 22 looking at that 13% increase in wind production, that’s where you really see in the South Texas area, now 47% increase reflecting the additional wind farm in Texas spread pretty well across the geographic U.S. Turning to Slide 23 when we look at pricing in the renewable business this year versus last year, in total about a 1% increase and that was made up of about 3% better pricing on the PPA side, slightly lower pricing on the merchant side including the renewable energy certificates. Again slightly different results across the continent and when we look at overall, about 67% of our megawatts or PPAs 33% are in merchant and we also hedge some of our merchant where we can and so total about 80% is in PPA or hedges and about 20% in merchant. Turning to Slide 24, looking at our gross margin growth of 7% quarter-over-quarter. Again here we’ve provided some additional detail by both geography and wind versus solar, versus our thermal plant in Oregon. And you can see the effects of the various drivers on gross margin, better production increased by $26 million. We did have some PTCs that expired and the market-to-market of negative 9 is actually we still have positive mark-to-market in 2016 just less positive than we had in 2015. So overall a 7% growth, primarily driven by the production that we’ve been discussing. Turning to Slide 25 adjusted EBITDA, growing 8%. Again strong performance in renewables, renewables makes up about 25% of the EBITDA, but grew by 18% driven by the production and that works a good solid showing increase of 3% really helped by the lower employee cost and revenue decoupling.. As Jim mentioned, we have very strong cash flow for the quarter. On Slide 26, our free cash flow of Avangrid consolidated was about $175 million more than our CapEx requirements and CapEx as you know is very seasonal especially in the Northeast and the networks business as you come out of the winter so strong cash flow networks, but we would expect to see CapEx pick up. And on renewables, total cash from operations up $120 million and free cash flow of $50 million puts us in very good position moving into the rest of 2016. So when we look on Slide 27, our leverage is really primarily is the network segment of our business, UIL Holding company did have a $450 million note that continues and then little over $200 million of tax equity investments that we will be amortizing and expect to be fully amortized by 2019. We’ve got very manageable debt maturities over the next several years again at the networks business. So moving to Slide 28, that strong balance sheet results in net leverage of just under 24% in the first quarter of 2016 and net debt to adjusted EBITDA of 2.4 times. We don’t expect or there were no, excuse me, there were no new debt issuances in the first quarter and through the planning period through 2020, while we do expect net leverage to increase modestly into the low 30% range, we would also expect that net debt to EBITDA would remain relatively flat as we grow the earnings of business. In addition, AVANGRID was recently updated within the last several days by S&P and Fitch from BBB flat to BBB plus recognizing our strong financial position. As a result of first quarter results and the new estimates around useful lives, we did update our outlook for 2016 and increased it from $2 a share to a range of $2.10 to $2.20, primarily driven by the new estimates around the renewables business depreciable lines. So very strong performance to start the year and we look forward to your questions-and-answers I also look forward to seeing many of you at the AGA Conference in the next few weeks. So with that, I will hand it back to our operator Kissie for question-and-answer session. Thank you. Question-and-Answer Session Operator [Operator Instructions] Our first question comes from the line of Andy Levi with Avon Capital Advisors. Andy Levi Hi good morning. How are you? It was a really good rundown guys. Jim Torgerson Thanks Andy. How are you doing? Andy Levi I’m doing pretty well actually. [Done have someway]. Okay. So just a couple I guess easy questions. So just on the asset life to change on the renewals, so the $13 million is that we annualize at times by four or is that it — was there like a little bit of catch-up? I’m just trying to figure out on an annual basis how much we should add to earnings going forward? Jim Torgerson Yes the quarter would be annualized. Rich Nicholas Probably looking in $0.14, $0.15 annual earnings per share benefit. Andy Levi Okay. And that such $0.14 to $0.15 and that will go into next year. So we add that to next year and that was not contemplated I guess when you gave your Analyst Day, is that correct? Rich Nicholas Correct. Andy Levi Okay. That is additive. And then just as far as the because you gave more information on the renewable kind of drop off as far as contracts and things like that, I want to know really contract, but more kind of your hedge book. How should we think about pricing going forward and as far as because obviously when you re-contract the price will be lower and I think your average price I am guessing is around $55, so what is the timing of when the contracts drop off and having to re-contract those, that I don’t — right, you didn’t really give? Jim Torgerson Well we have on Page 34 you can see we have as the TPA expire and you can see it’s a graph I understand and what we’ll be doing when the contracts drop off its trying to re-contract in the first place, but other than that, they will be migrating to merchant and I would expect as the prices will be whatever the market will be at that point in time. Now it could be that obviously we’re going to sign a long term or a longer term PPA or an extension of some contract that would be at a higher price than the current market spot price, but we’ll have to see where the market is at different points in time. Andy Levi But do you give anywhere where you show the amount of megawatts and the hedge prices drop off or that’s I guess we have to figure that out ourselves. Jim Torgerson Yeah, we thought we would leave some of that work left to you guys and we didn’t do it Andy. Andy Levi Okay. Okay. So could you have this one benefit and then I’m just trying to figure out when these PPA will drop off and then what the earnings change would be. Okay, and then I’m sorry if I missed this, just what was the wind condition versus normal? Did you give that? Jim Torgerson No, but I think Frank can probably give you some idea what it was in the first quarter. Andy Levi Thank you. Jim Torgerson Frank you got. Frank Burkhartsmeyer Yeah Andy. The first quarter was still a bit below the long term average and around and it varies course by region, but somewhere around 5% below average still in the first quarter. January was very — was I think and we mentioned this when we were out January was quite down and then its normalized quite a bit since then but it’s still behind year-to-date. It’s hard though to just look at a three month slice. It’s — if you look long term that numbers moves around quite a bit by quarter. So, was …. Andy Levi Were there certain regions that were different as far as like where it was Texas above normal? Jim Torgerson I think West, I’d say the West is still behind where we were expecting — where we expect it long term. Andy Levi Okay. And what was Texas to you now? Jim Torgerson Texas was closure to long term, but I’m sorry I don’t know off the cuff here. Andy Levi Yeah, I am just being selfish. I am trying to figure out with some of the other guys out there so, other companies I should say. Okay. So just to summarize, so you increased the guidance by $0.10 to $0.20 and the change in accounting is $0.14 to $0.15 of that, is that what you’re saying? Jim Torgerson Right, so if you look at the midpoint of the guidance up $0.15 it’s really the effect of the new estimated useful lives. Andy Levi Great. And I guess that could be an industry-wide thing right. So like next era or something like that may end up benefiting from that as well. Jim Torgerson We believe next era is already at that. Andy Levi Are they, are they okay. It’s great. Jim Torgerson I think we’re catching up. Andy Levi Yeah, catching up okay. Thank you very much. That was a really great run down. Jim Torgerson Thanks Andy. Operator Our next question comes from the line of Christopher Turnure with JPMorgan. Christopher, your line is live. Christopher Turnure Good morning guys. Thanks for the extra details today, they’re very helpful. I wanted to may be understand some of the drivers that have changed for you over the past two months or so since the Analyst Day and the impact potentially on your long term earnings CAGR that you gave at the Analyst Day. And maybe you could give you color on the depreciation expense going down obviously that’s a help the AIJ decision from FERC prospectively may be assuming that in fact is the final decision and then even know it’s a small slice to your ownership stake in Northeast Energy Direct did have optionality for you guys to increase that and I was wondering if that has a material impact on your longer term guidance as well? Jim Torgerson Yeah, I think going forward we were — we’re on track with our strategic plan, I think for both this year and the longer term. The thing that changed on the earnings was really the depreciation modification that we did and it was really based on what Iberdrola was saying worldwide and their experience with wind farms in Scotland that they had for over 20 years. And then we did a lot of engineering analysis. So that was really the basis for the change. Everything else has pretty much been on track and I can’t say that there have been anything dramatically changed from what you heard at least from a long-term strategic standpoint and even for this year on from what you heard at Investor Day in February. As far as the FERC ROE, that’s got our ways to go yet. If it ends up being what the ALJ recommended prospectively, I think that would be plus because then we were looking at an ROE that would be slightly higher than the 10.57 and 11.74 cap that we currently have in place right now based on the FERC order from complaint number 1. So if they take complaint number 3 that will have a charge, we’ll have to set up a reserve for the complaint 2 basically and then moving forward though it would be positive for us. And on Northeast Energy Direct, we took really an immaterial charge and what we see is that it wasn’t going to be anything that was going to be in before 2019 at the earliest and so it really has a very minimal impact to our longer and short test. If anything at all, we’re still very comfortable with our 8% to 10% growth in net income over the five year period. And so I don’t see anything changing dramatically from that. And that is — we’ll see what happens going forward, but we were going to invest about $80 million over the five year horizon and so it really wasn’t going to impact us that much. Christopher Turnure Okay. So net, net really no change to that range that you gave and the optionality of that pipeline to go up to I think there was maybe a 12% ownership stake or something in that vicinity all kind of net backed to no change? Rich Nicholas Yes we could have got, it would have been up to 15%, but we never really — we didn’t factor that in because that was just the contract and depending on a lot of things happening with the RFPs and the EVC proposal that would have had to been consummated in New England for us to even get higher percentage. So net, net, we don’t see a change and we’re very comfortable with the 8% to 10% range. Christopher Turnure Okay. Great. And then maybe you could give us more detail on the Connect New York project. It’s I guess a 1,000 megawatts TC, but how long is it going to be? Could you give us any kind of CapEx numbers there and even though I guess it’s early stage and then maybe some information on how you’re thinking about timing and whether or not that’s in your current plan as well? Rich Nicholas Yes Bob Kump can fill in on that one. Bob Kump Yeah Chris, hi it’s Bob. So I think we spoke at our Investor Day back in February that this was not a project that at this point we had in our numbers, but one we were developed. As Jim mentioned in his remarks today, we are making a filing of that as part of a proceeding going on a public policy proceeding, a spin-off of the AC proceeding that’s been going on in New York. So that will be filed by the end of this month, in fact later this week. The details of the project itself in terms of cost and timing are to be determined, will not be made public as part of the instant proceeding, but we continue to move forward. The first phase of this would be let’s call an Article 7 filing to do that later this year. So everything remains on track with that. We’re having a lot of discussions with third parties about it. We continue to believe very strongly that this has a great fit given the situation as it exist currently in New York and that is insufficient transmission capabilities that stay, tremendous efforts by environmentalists to avoid anything overhead, excess capacity upstate and the threat of nuclear plants closing, which the Governor doesn’t want to see and so we really see this project solving a key issue facing New York State from a transmission standpoint. Christopher Turnure Great. Thank you very much. Rich Nicholas Thanks Chris. Operator Our next question comes from the line of [Felix Curman]. Unidentified Analyst Hi guys. Congratulations on a great quarter. Rich Nicholas Thanks. Unidentified Analyst Jim, I think you’ve touched on this in the last question, but you are still comfortable right with the 8% to 10% CAGR? Jim Torgerson Yes. Unidentified Analyst And then just mathematically speaking right, if we pick up $0.15, it’s roughly about 7.5% above your original ’16 guidance. If one were to just mathematically spread that out over the year 2014 through 2020 CAGR, can we pick up 1% on the CAGR over the term or no? Jim Torgerson What I’d say is we are looking at the 8% to 10% and we feel pretty comfortable with that. If you take 2014 where we were working off before and if you’re adding 7.5% at least in this year then we would probably say that its moving up a little bit, but we’re still 8% to 10% sounds pretty good right now. Unidentified Analyst Okay. Great, great and then just one quick question on the merchant PPA prices, can you just circle back and tell us how this price that you put here relates to the number you gave you in the Analyst Day and how you are thinking about that number going forward in your guidance. Jim Torgerson Well what we said in the Analyst Day is we were looking at something in the $27, $28 range. that was without the wrecks. So when you look at the merchant price you got to add the wrecks into that and the wrecks they vary in price from $5 and right now they were looking in the first quarter they were quite a bit higher. They were probably closer to $8 or $9 now across but they vary by region. I don’t know Frank do you want anything to do that? Frank Burkhartsmeyer No, that’s just in Jim we had that, you nailed it. Unidentified Analyst Okay. So this $30, $35 price here is higher than what you had expected at the Analyst Day? Frank Burkhartsmeyer No, no sorry, that’s consistent. Unidentified Analyst That’s consistent. And are you guys are assuming this phase flat through the period. Jim Torgerson Yes. Unidentified Analyst Okay. Okay. Thank you. Operator Our next question comes from the line of Paul Patterson. Paul your line is live. Paul Patterson Good morning. Jim Torgerson Hi Paul. Paul Patterson Just a few quick questions number one on the depreciable life change, was there any specific component or technology or one specific issue or couple of issues that led to that. Jim Torgerson The biggest thing was the dollars, they were laughing a lot longer than we would have expected, but then also you look at the transmission equipment that’s part of the wind farm whether they had transformers and sub stations and those type of things. Their average life was much longer and the towers were on the pads that we put in to support the towers were all of — would have a longer life. So basically the civil work and the transmission activity were the ones that we were looking not so much the turbine and the blades. Paul Patterson Okay. And was there anything that caused it to be revaluated specifically in the first quarter or just is that how it happens sort of coincidentally? Jim Torgerson Yes, it was more how it happens and how Iberdrola was looking at across the globe and all of their wind farms being what 15,000 megawatts that are operating and looking at their experience across the world and then doing the engineering analysis, so just so happened and came in the first quarter and we then applied it to what we have here in the U.S. and found it to be consistent and made sense to apply that change. Paul Patterson Okay. There was also another FERC ALJ ruling we expect to the California power crises that mentioned Iberdrola and Shell. Have you guys — does that have any impact on you guys and is there any reserve that’s been there before not that you could talk about? Jim Torgerson Paul, if there would have been a reserve, we really would have called it out. Certainly it has an impact from the stand but we’re going to have spend more of legal fees in order to keep pursuing this, but the fact of the matter is we believe our positions were well founded and we still believe that and FERC’s staff actually supported letting us out of that whole activity with the California. So we feel pretty strong with our position is sound and the ALJ came up with a recommendation we did not find that there was any market manipulation on our part and it was just a difference between what he felt was a contact price and what some stock prices were. That was the difference he was sitting and he felt that was high. So we believe in the end for the FERC Commission will find correctly and turn this around when the FERC, the whole Commission actually has the chance to look at it. Paul Patterson Okay. But if they did it, just because we do an ALJ ruling out there, how would — would it just be a one timer or something that you guys will have to deal with if they were to go with the ALJ rack or would that be an ongoing impact? Rich Nicholas It would be one time since we’re looking at the termination of what the — from the complaint what might have to be refunded and that’s something that hasn’t even been determined set. The ALJ didn’t even make that determination yet. There is no determination on that whatsoever. Paul Patterson Okay. Got it. Rich Nicholas Okay. Paul Patterson And then on the Guinea transmission retirement thing, if Guinea does not as you know New York is talking about keeping some of the new stuff and what have you, if Guinea was supported, would that impact Guinea retirement project at all? Bob Kump No this is Bob, that project as Jim mentioned is under construction as we speak and will be completed by the end of the first quarter of next year. There in the event that the plant closes, obviously our goal as an organization is to try to help the situation through things like Connect New York and improve transmission such that those plants can continue to operate have access to higher price markets. Paul Patterson And then just finally, the credit rating, what is the credit rating goal you guys have for the company? Jim Torgerson Well you just saw that we were upgraded from BBB flat to BBB plus. Our goal is to maintain a strong balance sheet and strong credit metrics. I wouldn’t say that we have an absolute target on any given agency or given rating. Paul Patterson Okay. But you want to expect it to change, you don’t have a substantially lower one or in general we should think that it’s general area that you’re now is pretty much where you want to be or is that safe to say or I don’t want to put words in your mouth? Rich Nicholas Well I think it reflects our financial position. Jim Torgerson We’re happy with where it is and obviously we could always see it go higher, but that’s what the rating agencies will determine but as Rich said we want to make sure we maintain a strong investment grade rating and that we can do finance all the projects we want to do. That’s the reason behind it. Paul Patterson Absolutely. Thanks so much. Operator Our next question comes from the line of [Andrew]. UnidentifiedAnalyst Thank you. Good morning guys. First a question on, you already talked a bit about the MED pipeline from an equity perspective what about for your LVT customers? Do you need to off-take agreements somewhere else now? Jim Torgerson Well the problem we have Andrew is that in Berkshire that the only pipeline that serves Berkshire. So we have a moratorium in place in Eastern division of our Massachusetts operation there and it’s small. But still we can’t add anymore customers up in Massachusetts in that Eastern division because we don’t have any more capacity. For the other utilities and the LDCs we have, we’re actually in very good shape and in Connecticut we have three pipelines starting on the New York, we’re in good shape. So we don’t really have that same issue. Where it’s going to be more significant is that the pipeline was thought to be more to be supplying for electric generation particularly in the winter when I think the capacity is all taken by the LDCs in New England. So that’s where we’re going to see some more problems potentially in the future. Our LDCs are in okay shape. We had all the supply we need to serve our existing customers. We’re not going to be able to grow as much in that one Eastern division of Massachusetts at this point because we don’t have additional capacity. We’ll be looking at alternatives, but some of them are going to clearly be higher price. If we have to put in more LNG or propane air, it’s going to cost more and is that something we should be doing to be able to serve additional customer, new customers and that’s I want to work out with the Massachusetts DPU. But for the other jurisdictions we’re in good shape. It’s just that we saw this pipeline is helping solve the problems in New England with electric generation. UnidentifiedAnalyst All right. Great. The next question is on integration. In the slides you mentioned Phase 1 and Phase 2, I know it’s early, but how many phases are there and do you have any sense how many years until you consider the two companies fully integrated? Jim Torgerson There is two phases, we’re in the Phase 2 now. I would expect that Phase 2 is going to vary, but I think we should be done with Phase 2 in let’s say 12 to 24 months timeframe and some of it are going to be significant software changes where we like our SAP system. We got to look at the configuration and the modules that are being utilized by each of the different companies and bring those together. They were all working off the same systems, modules and configurations. Now that’s going to take a little time and then the resources we have to build to do that along with all the other projects we have going on. So, I think the software activities will take a little longer, I think just integrating people, integrating processes and procedures, we’ll get that done this year. I would be pretty confident of that. Paul Patterson Great, next question we had asked at the Analyst Day about any guidance for effective tax rates, you had a chance to kindly go through that and give us a ballpark number a range what we can expect? Rich Nicholas When the 10-Q comes out for the quarter we’ll have an update on the effective tax rate for the quarter. Obviously the PTCs have an impact as you move forward in time but we haven’t put any specific effective tax rate guidance out there… Paul Patterson So that can be considered doing? James Torgerson We’ll take a look at it. Paul Patterson Okay. Fair enough. The last question, Jim I don’t mean to get personal here, but I know this has been new employment concept had some changes to the wording and particularly around change in control and severance plan. Is there anything that we should be reading into in terms of Avangrid either as a buyer or seller in this M&A market? Jim Torgerson Absolutely nothing to right in there. That’s just that the philosophy Avangrid has related to change in control and this is nothing new, nothing to read in. Paul Patterson Okay. Great. Thank you guys. And I was want to echo the comments, I appreciate the increased disclosure particularly around wind in the slide deck there. Jim Torgerson Thanks. Operator Our next question comes from the line of [Julian]. Unidentified Analyst Hi good morning. Jim Torgerson Hi, Julian, how are you doing? Unidentified Analyst Good, thank you for taking the time. So wanted to follow up on your connect line here, can you elaborate a little bit on the status of the project just vis-à-vis routing that’s been obtained the sliding etcetera. Then also I know you want to talk about cost per say, but elaborate at least on timing and it’s procedure to get this project approved. I suppose as part of the AC transmission our proposals do better. Jim Torgerson Correct, correct Julian. So yeah let me give a little more color. Obviously familiar with the base projects, it’s a 1,000 megawatt DC line eminating from essentially the Utica area utilizing the rights of oil along the true way down past the two congestion points into the New York City area, right that’s the general concept, it’s about 170, 180 miles roughly is the length of the project. Our view is as I mentioned we’ll submit as part of this AC proceeding on public policy, we will be working and filing the primary permitting application with the New York PSC 7 later this year. Everything went perfectly and how things are with the transmission projects, I would say the best you could hope for may be construction in the 18 and on timeframe. Unidentified Analyst Great. Excellent. And then can you elaborate a little bit on Upstate New York opportunities around the RPS expansion and what that means? I suppose obviously you were talking about New York Connect project today, but more holistically we’ve talked about nuclear earlier, but we’ve chipped in a little bit more on the emphasis on the eventual RPS and long term PPA opportunities in this that is forthcoming in the state. Jim Torgerson Yeah, I guess I’ll say beyond Connect New York we’ve mentioned the New York Transco. We’re working with other utilities on AC type transmission projects, again largely focused on system reliability as well as these congestion points from Upstate to Downstate. We’re working with the New York power authority on a project in the Western New York that would better enable hydro electricity access to the downstate region. So those are kind of transmission areas of focus. The other quite frankly is in addition to the nuclear looking for better markets. You have tremendous opportunities in around the park for wind and I will let Frank speak to that more, but we have a couple of operating farms already in that area and several I think were listed on the slide in this presentation in that area as well as potential opportunities for greater wind and as you correctly mention high on the radar screen of the government. So we’re tracking it from both ends. I don’t know Frank if you want to add anything else. Frank Burkhartsmeyer Well, just I’ll just affirm that we very actively maintained development opportunities in the New York area. We have to see how the rules play out in terms of the ability to do long-term contracts, which will make that more attractive to us. As we stated we’re only going to build where we can guarantee that we have long-term off take certainty. But we like the market obviously and we’ve got some really good development opportunities there that we’ve laid out on Slide 16. So we will stay tuned in and see how the policy changes there, but right now there is not a long-term energy market for renewables there but we’ll have to see how that evolves. Jim Torgerson And I guess the last thing I will then add is when you look at in particular our Connect New York project that emanates as I said. Unidentified Analyst You need something by 12. Jim Torgerson I am sorry. That project emanates in the Utica area and when you look at not only most of the nuclear facilities that are currently looking for better pricing, you’ve got up in Neymar 1 and 2, Fitzpatrick and then when you look at the projects that Frank has mentioned that are all off the Eastern edge of Ontario, I think again our project Connect New York fits well with where a lot of that potential generation both renewable and nuclear would reside. Rich Nicholas If you look at the renewable projects, as Frank mentioned we have almost, we have four projects potentially with almost 400 megawatts in the New York area that could add to the development of that. So as Frank said, we’re pursuing this pretty aggressively. Unidentified Analyst But any sense on timing for that PPA or an RFP in the state direction? Jim Torgerson I don’t think we’ve seen anything on RFP, at this point no. I think the key is going to be providing transmission access. And the other thing to keep in mind is the New York does have a renewable portfolio of standard now of 50% by 2030. So they’re going to be needing additional renewable resources and having those in state will be a plus and also them having the transmission to get it done in the marketplace in the New York City is going to be a plus. So I think all those factors are positive for us. Bob Kump And the Governor as you know has a keen interest in keeping those nuclear plants running and it’s proposal and the commission’s proposal around that specifically for the nuclear to support them, but we’re really looking at what’s the longer term option again for providing access to better priced markets for upstate generation. Unidentified Analyst All right, thank you. Jim Torgerson Thanks. Operator Our next question comes from the line of Andy Levi, Andy your line is on. Joe Zhou Hi this is Joe Zhou from Avon Capital. How are you? Jim Torgerson Good. Joe Zhou Just a follow up for the New York on the rent, is this a project that competing against the Compass project? Jim Torgerson I’m sorry which project? Joe Zhou Compass which developed by PBL? Jim Torgerson9 I guess to the extent that any project is looking to provide greater access for power to the New York City area, you could call it competing. Obviously that line my understanding of it, I don’t know lot about it but it is bringing power from PJM, not helping the market in Upstate, New York which is what the Governor is focused on. So from that perspective they’re very different project. But they’re all intending to provide greater access power. Obviously we are also focused on renewable energy and clean energy as part of this. Joe Zhou Okay. Great. Thank you. Jim Torgerson Okay. Operator There are no further questions in queue at this time. Jim Torgerson Okay. Well thank you everybody for participating to the extent you have other questions please don’t hesitate to contact our Investor Relations people, Patricia, Michelle, Carlotta would be very happy to answer your questions and thank you for participating today. Operator That concludes this morning’s teleconference. You may now disconnect your lines. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. 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The V20 Portfolio: Week #29

The V20 portfolio is an actively managed portfolio that seeks to achieve an annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read the last update here . Note: Current allocation and planned transactions are only available to premium subscribers . Over the past week, the V20 Portfolio climbed by 7.9% while the SPDR S&P 500 ETF (NYSEARCA: SPY ) rose slightly by 0.5%. Portfolio Update This week we saw significant volatility in our smallest holding, Dex Media (OTCMKT: OTCPK:DXMM ). Last week speculators drove up the price by more than 100% to a high of $0.28. After Wall Street Journal reported rumor of a planned bankruptcy, shares fell to where they traded prior to the run-up. Of course, the reason the V20 Portfolio holds the stock is not to trade these unpredictable swings. Ultimately the value of the equity will be dependent on the outcome of the negotiation. Prior to the management electing to miss an interest payment, the company still had enough liquidity to keep operations going. Intelsat (NYSE: I ) rallied as the high yield market recovered. Over the past month, shares climbed by almost 50%. As is the case with Dex Media, the company will be facing liquidity issues if it cannot refinance, which is why it is so dependent on the high yield market. The difference is that the company still has a good business that is growing. I believe that the discount arising from this issue will eventually disappear as the company deleverages. We also saw revised Q1 guidance from Spirit Airlines (NASDAQ: SAVE ) this week. Operating margin was increased from 19-20.5% to 21.5%. While it is still lower than what was achieved in Q1 2015, it is still a good sign given the intense competition in the market. Because Spirit Airlines mainly competes on price, I believe that exchanging a temporary dip in profitability for market share is a sound strategy. Our recent stake in an insurance company has not moved much since our purchase, though the company has most certainly continued to collect sizable premiums in the first quarter. I believe that one of the main reasons is the expectation that 2016’s hurricane season will be one of the worst in recent years . As the hurricane season approaches, the market may become increasingly nervous about Florida P&C insurers in general. It is important to remember that we were not betting on the occurrence (or rather absence) of a catastrophic hurricane when we purchased a stake in the company, we were buying its long-term profits. Our biggest position, Conn’s (NASDAQ: CONN ), continued to climb this week, rising 24%. While there were no company specific news, I believe that the stock may have benefited from the recent rally in the energy sector. Due to the company’s concentration in Texas, it is possible that the market perceives the commodity rally as a sign that the job market will improve, leading to more sales and lower delinquencies at Conn’s. Performance Since Inception Click to enlarge Disclosure: I am/we are long DXMM, CONN, I, SAVE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.