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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                   to                  i
Commission File No. 001-37660
AGR-20200630_G1.JPG
Avangrid, Inc.
(Exact Name of Registrant as Specified in its Charter)
New York 14-1798693
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
180 Marsh Hill Road
Orange, Connecticut 06477
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (207) 629-1200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of exchange on which registered
Common Stock, par value $0.01 per share AGR New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  
Large Accelerated Filer Accelerated Filer
Non-accelerated Filer Smaller Reporting Company
Emerging Growth Company    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
As of July 30, 2020, the registrant had 309,005,485 shares of common stock, par value $0.01, outstanding.



Avangrid, Inc.
REPORT ON FORM 10-Q
For the Quarter Ended June 30, 2020
INDEX
 
3
5
Item 1.
5
Item 2.
51
Item 3.
66
Item 4.
66
68
Item 1.
68
Item 1A.
68
Item 2.
69
Item 3.
69
Item 4.
69
Item 5.
69
Item 6.
70
71
2


GLOSSARY OF TERMS AND ABBREVIATIONS
Unless the context indicates otherwise, the terms “we,” “our” and the “Company” are used to refer to Avangrid, Inc. and its subsidiaries.
AOCI   Accumulated other comprehensive income
ARHI   Avangrid Renewables Holdings, Inc.
ARP   Alternative Revenue Programs
ASC   Accounting Standards Codification
AVANGRID   Avangrid, Inc.
Bcf   One billion cubic feet
BGC   The Berkshire Gas Company
Cayuga   Cayuga Operating Company, LLC
CfDs   Contracts for Differences
CL&P   The Connecticut Light and Power Company
CMP   Central Maine Power Company
CNG   Connecticut Natural Gas Corporation
DEEP   Connecticut Department of Energy and Environmental Protection
DIMP   Distribution Integrity Management Program
DOE   Department of Energy
DPA   Deferred Payment Arrangements
EBITDA   Earnings before interest, taxes, depreciation and amortization
ESM   Earnings sharing mechanism
Evergreen Power   Evergreen Power, LLC
English Station The former generation site on the Mill River in New Haven, Connecticut
Exchange Act   The Securities Exchange Act of 1934, as amended
FASB   Financial Accounting Standards Board
FERC   Federal Energy Regulatory Commission
FirstEnergy   FirstEnergy Corp.
Form 10-K Avangrid, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 2, 2020.
Gas   Enstor Gas, LLC
HLBV   Hypothetical Liquidation at Book Value
Iberdrola Iberdrola, S.A., which owns 81.5% of the outstanding shares of Avangrid, Inc.
Iberdrola Group The group of companies controlled by Iberdrola, S.A.
Installed capacity The production capacity of a power plant or wind farm based either on its rated (nameplate) capacity or actual capacity.
ISO   Independent system operator
Joint Proposal Approved by the NYPSC on June 15, 2016, by NYSEG, RG&E and certain other signatory parties for a three-year rate plan for electric and gas service at NYSEG and RG&E commencing May 1, 2016.
Klamath Plant Klamath gas-fired cogeneration facility located in the city of Klamath, Oregon.
KW Kilowatts
LDCs   Local distribution companies
LIBOR   The London Interbank Offered Rate
MNG   Maine Natural Gas Corporation
MPUC   Maine Public Utility Commission
MtM   Mark-to-market
MW   Megawatts
MWh   Megawatt-hours
Networks   Avangrid Networks, Inc.
New York TransCo   New York TransCo, LLC.
Non-GAAP Financial measures that are not prepared in accordance with U.S. GAAP, including adjusted net income and adjusted earnings per share.
NYPSC   New York State Public Service Commission
NYSEG   New York State Electric & Gas Corporation
NYSERDA   New York State Energy Research and Development Authority
OCI   Other comprehensive income
PJM   PJM Interconnection, L.L.C.
PURA   Connecticut Public Utilities Regulatory Authority
Renewables   Avangrid Renewables, LLC
RDM   Revenue Decoupling Mechanism
RG&E   Rochester Gas and Electric Corporation
ROE   Return on equity
RSSA   Reliability Support Services Agreement
SCG   The Southern Connecticut Gas Company
SEC   United States Securities and Exchange Commission
Tax Act   Tax Cuts and Jobs Act of 2017 enacted by the U.S. federal government on December 22, 2017
TEF   Tax equity financing arrangements
UI   The United Illuminating Company
UIL   UIL Holdings Corporation
U.S. GAAP   Generally accepted accounting principles for financial reporting in the United States.
VIEs   Variable interest entities
3


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
Avangrid, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
(Millions, except for number of shares and per share data)        
Operating Revenues $ 1,392    $ 1,400    $ 3,181    $ 3,242   
Operating Expenses
Purchased power, natural gas and fuel used 265    259    740    822   
Operations and maintenance 584    573    1,154    1,126   
Depreciation and amortization 242    222    493    444   
Taxes other than income taxes 146    139    312    302   
Total Operating Expenses 1,237    1,193    2,699    2,694   
Operating Income 155    207    482    548   
Other Income and (Expense)        
Other income (expense)     (1)   (5)  
Earnings (losses) from equity method investments     (4)    
Interest expense, net of capitalization (89)   (76)   (165)   (154)  
Income Before Income Tax 70    134    312    391   
Income tax (benefit) expense (6)   29      70   
Net Income 76    105    306    321   
Net loss attributable to noncontrolling interests 12      22     
Net Income Attributable to Avangrid, Inc. $ 88    $ 110    $ 328    $ 327   
Earnings Per Common Share, Basic $ 0.28    $ 0.36    $ 1.06    $ 1.06   
Earnings Per Common Share, Diluted $ 0.28    $ 0.36    $ 1.06    $ 1.06   
Weighted-average Number of Common Shares Outstanding:
       
Basic 309,506,595    309,491,082    309,498,838    309,491,082   
Diluted 309,547,451    309,512,752    309,551,660    309,509,620   
The accompanying notes are an integral part of our condensed consolidated financial statements.
4


Avangrid, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
(Millions)        
Net Income $ 76    $ 105    $ 306    $ 321   
Other Comprehensive Income (Loss)
Loss on nonqualified pension plans —    (1)   —    (1)  
Unrealized gain (loss) during the period on derivatives qualifying as cash flow hedges, net of income tax of $3 and $1 for the three months ended, respectively, and $(5) and $(10) for the six months ended, respectively
    (16)   (27)  
Reclassification to net income of loss on cash flow hedges, net of income taxes of $1 and $0 for the three months ended, respectively, and $1 for both the six months ended
       
Other Comprehensive Income (Loss)     (13)   (25)  
Comprehensive Income 84    107    293    296   
Net loss attributable to noncontrolling interests 12      22     
Comprehensive Income Attributable to Avangrid, Inc. $ 96    $ 112    $ 315    $ 302   
The accompanying notes are an integral part of our condensed consolidated financial statements.
5


Avangrid, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
 
  June 30, December 31,
As of 2020 2019
(Millions)    
Assets    
Current Assets    
Cash and cash equivalents $ 46    $ 178   
Accounts receivable and unbilled revenues, net 969    1,082   
Accounts receivable from affiliates   10   
Derivative assets 27    11   
Fuel and gas in storage 86    110   
Materials and supplies 148    141   
Prepayments and other current assets 151    199   
Regulatory assets 282    294   
Total Current Assets 1,713    2,025   
Total Property, Plant and Equipment ($1,665 and $787 related to VIEs, respectively)
25,882    25,218   
Operating lease right-of-use assets 66    70   
Equity method investments 666    645   
Other investments 55    63   
Regulatory assets 2,579    2,567   
Other Assets
Goodwill 3,119    3,119   
Intangible assets 310    314   
Derivative assets 84    84   
Other 382    311   
Total Other Assets 3,895    3,828   
Total Assets $ 34,856    $ 34,416   
The accompanying notes are an integral part of our condensed consolidated financial statements.
6


Avangrid, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
  June 30, December 31,
As of 2020 2019
(Millions, except share information)    
Liabilities    
Current Liabilities    
Current portion of debt $ 523    $ 730   
Notes payable 617    560   
Notes payable to affiliates 11    —   
Interest accrued 74    72   
Accounts payable and accrued liabilities 1,213    1,361   
Accounts payable to affiliates 27    64   
Dividends payable 136    136   
Taxes accrued 61    56   
Operating lease liabilities 13    12   
Derivative liabilities 21    20   
Other current liabilities 290    334   
Regulatory liabilities 249    242   
Total Current Liabilities 3,235    3,587   
Regulatory liabilities 3,332    3,281   
Other Non-current Liabilities
Deferred income taxes 1,828    1,814   
Deferred income 1,239    1,274   
Pension and other postretirement 1,054    1,100   
Operating lease liabilities 41    65   
Derivative liabilities 84    85   
Asset retirement obligations 205    190   
Environmental remediation costs 338    338   
Other 425    380   
Total Other Non-current Liabilities 5,214    5,246   
Non-current debt 7,159    6,716   
Total Non-current Liabilities 15,705    15,243   
Total Liabilities 18,940    18,830   
Commitments and Contingencies
Equity    
Stockholders’ Equity:    
Common stock, $.01 par value, 500,000,000 shares authorized, 309,794,917 and 309,752,140 shares issued; 309,005,485 and 309,005,272 shares outstanding, respectively
   
Additional paid in capital 13,664    13,660   
Treasury stock (14)   (12)  
Retained earnings 1,733    1,681   
Accumulated other comprehensive loss (108)   (95)  
Total Stockholders’ Equity 15,278    15,237   
Non-controlling interests 638    349   
Total Equity 15,916    15,586   
Total Liabilities and Equity $ 34,856    $ 34,416   
The accompanying notes are an integral part of our condensed consolidated financial statements.
7


Avangrid, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended June 30,
  2020 2019
(Millions)
Cash Flow from Operating Activities:
Net income $ 306    $ 321   
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 493    444   
Regulatory assets/liabilities amortization and carrying cost 39    32   
Pension cost 40    45   
Earnings (losses) from equity method investments   (2)  
Distributions of earnings received from equity method investments    
Unrealized gain on marked-to-market derivative contracts (16)   (23)  
Deferred taxes   (22)  
Other non-cash items (12)   (14)  
Changes in operating assets and liabilities:
Current assets 175    295   
Noncurrent assets (93)   (34)  
Current liabilities (61)   (247)  
Noncurrent liabilities (9)   20   
Net Cash Provided by Operating Activities 884    817   
Cash Flow from Investing Activities:
Capital expenditures (1,345)   (1,337)  
Contributions in aid of construction 19    21   
Proceeds from sale of assets    
Proceeds from notes receivable from affiliates   —   
Distributions received from equity method investments    
Other investments and equity method investments, net (37)   (143)  
Net Cash Used in Investing Activities (1,352)   (1,452)  
Cash Flow from Financing Activities:
Non-current debt issuances 744    1,188   
Repayments of non-current debt (503)   (194)  
Receipts (repayments) of other short-term debt, net 67    (54)  
Repayments of financing leases (6)   (25)  
Repurchase of common stock (2)   —   
Issuance of common stock (1)   —   
Distributions to noncontrolling interests (4)   (10)  
Contributions from noncontrolling interests 312    131   
Dividends paid (272)   (272)  
Net Cash Provided by Financing Activities 335    764   
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash (133)   129   
Cash, Cash Equivalents and Restricted Cash, Beginning of Period 184    43   
Cash, Cash Equivalents and Restricted Cash, End of Period $ 51    $ 172   
Supplemental Cash Flow Information
Cash paid for interest, net of amounts capitalized $ 148    $ 125   
Cash paid for income taxes $   $  
The accompanying notes are an integral part of our condensed consolidated financial statements.
8


Avangrid, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Equity
(unaudited)


  Avangrid, Inc. Stockholders      
(Millions, except for number of shares ) Number of shares (*) Common Stock Additional paid-in capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders’ Equity Noncontrolling Interests Total
As of March 31, 2019 309,005,272    $   $ 13,658    $ (12)   $ 1,620    $ (111)   $ 15,158    $ 298    $ 15,456   
Net income (loss) —    —    —    —    110    —    110    (5)   105   
Other comprehensive income, net of tax of $1 —    —    —    —    —        —     
Comprehensive income 107   
Dividends declared, $0.44/share —    —    —    —    (136)   —    (136)   —    (136)  
Stock-based compensation —    —      —    —    —      —     
Distributions to noncontrolling interests —    —    —    —    —    —    —    (7)   (7)  
Contributions from noncontrolling interests —    —    —    —    —    —    —    128    128   
As of June 30, 2019 309,005,272    $   $ 13,659    $ (12)   $ 1,594    $ (109)   $ 15,135    $ 414    $ 15,549   
As of March 31, 2020 309,005,485    $   $ 13,667    $ (12)   $ 1,784    $ (116)   $ 15,326    $ 582    $ 15,908   
Net income (loss) —    —    —    —    88    —    88    (12)   76   
Other comprehensive income, net of tax of $4 —    —    —    —    —        —     
Comprehensive income 84   
Dividends declared, $0.44/share —    —    —    —    (136)   —    (136)   —    (136)  
Issuance of common stock 42,777    —    (1)   —    —    —    (1)   —    (1)  
Repurchase of common stock (42,777)   —    —    (2)   —    —    (2)   —    (2)  
Stock-based compensation —    —    (2)   —    —    —    (2)   —    (2)  
Distributions to noncontrolling interests —    —    —    —    —    —    —    (3)   (3)  
Contributions from noncontrolling interests —    —    —    —    (3)   —    (3)   71    68   
As of June 30, 2020 309,005,485    $   $ 13,664    $ (14)   $ 1,733    $ (108)   $ 15,278    $ 638    $ 15,916   
9


Avangrid, Inc. Stockholders
(Millions, except for number of shares ) Number of shares (*) Common Stock Additional paid-in capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders’ Equity Noncontrolling Interests Total
As of December 31, 2018 309,005,272    $   $ 13,657    $ (12)   $ 1,528    $ (72)   $ 15,104    $ 299    $ 15,403   
Adoption of accounting standards —    —    —    —    11    (12)   (1)   —    (1)  
Net income (loss) —    —    —    —    327    —    327    (6)   321   
Other comprehensive loss, net of tax of $(9) —    —    —    —    —    (25)   (25)   —    (25)  
Comprehensive income 296   
Dividends declared, $0.88/share —    —    —    —    (272)   —    (272)   —    (272)  
Stock-based compensation —    —      —    —    —      —     
Distributions to noncontrolling interests —    —    —    —    —    —    —    (10)   (10)  
Contributions from noncontrolling interests —    —    —    —    —    —    —    131    131   
As of June 30, 2019 309,005,272    $   $ 13,659    $ (12)   $ 1,594    $ (109)   $ 15,135    $ 414    $ 15,549   
As of December 31, 2019 309,005,272    $   $ 13,660    $ (12)   $ 1,681    $ (95)   $ 15,237    $ 349    $ 15,586   
Adoption of accounting standards —    —    —    —    (1)   —    (1)   —    (1)  
Net income (loss) —    —    —    —    328    —    328    (22)   306   
Other comprehensive loss, net of tax of $(4) —    —    —    —    —    (13)   (13)   —    (13)  
Comprehensive income 293   
Dividends declared, $0.88/share —    —    —    —    (272)   —    (272)   —    (272)  
Release of common stock held in trust 213    —    —    —    —    —    —    —    —   
Issuance of common stock 42,777    —    (1)   —    —    —    (1)   —    (1)  
Repurchase of common stock (42,777)   —    —    (2)   —    —    (2)   —    (2)  
Stock-based compensation —    —      —    —    —      —     
Distributions to noncontrolling interests —    —    —    —    —    —    (4)   (4)  
Contributions from noncontrolling interests —    —    —    —    (3)   —    (3)   315    312   
As of June 30, 2020 309,005,485    $   $ 13,664    $ (14)   $ 1,733    $ (108)   $ 15,278    $ 638    $ 15,916   
(*) Par value of share amounts is $0.01
The accompanying notes are an integral part of our condensed consolidated financial statements.
10


Avangrid, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1. Background and Nature of Operations
Avangrid, Inc., formerly Iberdrola USA, Inc. (AVANGRID, we or the Company), is an energy services holding company engaged in the regulated energy transmission and distribution business through its principal subsidiary, Avangrid Networks, Inc. (Networks), and in the renewable energy generation business through its principal subsidiary, Avangrid Renewables Holding, Inc. (ARHI). ARHI in turn holds subsidiaries including Avangrid Renewables, LLC (Renewables). Iberdrola, S.A. (Iberdrola), a corporation organized under the laws of the Kingdom of Spain, owns 81.5% of the outstanding common stock of AVANGRID. The remaining outstanding shares are publicly traded on the New York Stock Exchange and owned by various shareholders. 
Note 2. Basis of Presentation
The accompanying condensed consolidated financial statements should be read in conjunction with the Form 10-K for the fiscal year ended December 31, 2019.
The accompanying unaudited financial statements are prepared on a consolidated basis and include the accounts of AVANGRID and its consolidated subsidiaries, Networks and ARHI. Intercompany accounts and transactions have been eliminated in consolidation. The year-end balance sheet data was derived from audited financial statements. The unaudited condensed consolidated financial statements for the interim periods have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the interim condensed consolidated financial statements do not include all the information and note disclosures required by U.S. GAAP for complete financial statements.
Preparation of the accompanying unaudited financial statements requires management to make estimates and assumptions that affect the amounts reported during the periods covered by the related financial statements and accompanying disclosures. We continue to utilize information reasonably available to us; however, the business and economic uncertainty resulting from the global pandemic of the novel coronavirus (COVID-19) has made such estimates and assumptions more difficult to assess and calculate. Impacted estimates include, but are not limited to, evaluations of certain long-lived assets and goodwill for impairment, expected credit losses and potential regulatory deferral or recovery of certain costs. While there were no material impacts from COVID-19 on financial results, actual results could differ from those estimates which could result in material impacts to our consolidated financial statements in future reporting periods.
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly our condensed consolidated financial statements for the interim periods described herein. All such adjustments are of a normal and recurring nature, except as otherwise disclosed. The results for the three and six months ended June 30, 2020, are not necessarily indicative of the results for the entire fiscal year ending December 31, 2020.
Note 3. Significant Accounting Policies and New Accounting Pronouncements
The new accounting pronouncements that we have adopted as of January 1, 2020, and reflected in our condensed consolidated financial statements are described below. There have been no other material changes to the significant accounting policies described in our Form 10-K for the fiscal year ended December 31, 2019, except for those described below resulting from the adoption of new authoritative accounting guidance issued by Financial Accounting Standards Board (FASB).
Goodwill
Goodwill represents future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the fair value of any noncontrolling interest and the acquisition date fair value of any previously held equity interest in the acquiree over the fair value of the net identifiable assets acquired and liabilities assumed.
Goodwill is not amortized, but is subject to an assessment for impairment performed in the fourth quarter or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. A reporting unit is an operating segment or one level below an operating segment and is the level at which we test goodwill for impairment. In assessing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether a quantitative assessment is necessary. If we determine, based on qualitative factors, that the fair value of the reporting unit is more likely than not greater than the carrying amount, no further testing is required. If we bypass the qualitative assessment, or perform the qualitative assessment but determine that it is more likely than not that its fair value is
11


less than its carrying amount, we perform a quantitative test to compare the fair value of the reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, we record an impairment loss as a reduction to goodwill and a charge to operating expenses, but the loss recognized would not exceed the total amount of goodwill allocated to the reporting unit.
Accounts receivable and unbilled revenue, net
We record accounts receivable at amounts billed to customers and we record unbilled revenues based on an estimate of energy delivered or services provided to customers. Certain accounts receivable and payable related to our wholesale activities associated with generation and delivery of electric energy and associated environmental attributes, origination and marketing, natural gas storage, hub services, and energy management, are subject to master netting agreements with counterparties, whereby we have the legal right to offset the balances and they are settled on a net basis. We present receivables and payables subject to such agreements on a net basis on our consolidated balance sheets.
Accounts receivable include amounts due under Deferred Payment Arrangements (DPAs). A DPA allows the account balance to be paid in installments over an extended period without interest, which generally exceeds one year, by negotiating mutually acceptable payment terms. The utility companies generally must continue to serve a customer who cannot pay an account balance in full if the customer (i) pays a reasonable portion of the balance; (ii) agrees to pay the balance in installments; and (iii) agrees to pay future bills within 30 days until the DPA is paid in full. Failure to make payments on a DPA results in the full amount of a receivable under a DPA being due. These accounts are part of the regular operating cycle and are classified as short term.
We establish our allowance for credit losses, including for unbilled revenue, by using both historical average loss percentages to project future losses, and by establishing a specific allowance for known credit issues or for specific items not considered in the historical average calculation. Due to our adoption of Accounting Standards Codification (ASC) 326 effective January 1, 2020, we now also consider whether we need to adjust historical loss rates to reflect the effects of current conditions and forecasted changes considering various economic indicators (e.g., Gross Domestic Product, Personal Income, Consumer Price Index, Unemployment Rate) over the contractual life of the accounts receivable. We write off amounts when we have exhausted reasonable collection efforts.
Adoption of New Accounting Pronouncements
(a) Measurement of credit losses on financial instruments, amendments and updates
The FASB issued an accounting standards update in June 2016 that requires more timely recording of credit losses on loans and other financial instruments (ASC 326). The amendments affect entities that hold financial assets and net investment in leases that are not accounted for at fair value through net income (loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, etc.). They require an entity to present a financial asset (or group of financial assets) that is measured at amortized cost basis at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods appropriate in its circumstances. The FASB subsequently issued various updates to ASC 326 to clarify transition and scope requirements, make narrow-scope codification improvements, including in March 2020, and corrections and provide targeted transition relief. We adopted the amendments effective January 1, 2020, including the narrow-scope improvements issued in March 2020, and recorded a cumulative-effect adjustment of $1 million to retained earnings at the beginning of the period of adoption, with no material effect to our condensed consolidated results of operations, financial position, cash flows and disclosures.
(b) Simplifying the test for goodwill impairment
In January 2017, the FASB issued amendments to simplify the test for goodwill impairment, which are required for public entities and certain other entities that have goodwill reported in their financial statements. The amendments simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test, which requires the valuation of assets acquired and liabilities assumed using business combination accounting guidance. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; but the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Also, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. Certain requirements are eliminated for any reporting unit with a
12


zero or negative carrying amount; therefore, the same impairment assessment applies to all reporting units. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. We adopted the amendments effective January 1, 2020, with no material effect to our condensed consolidated results of operations, financial position, cash flows and disclosures. As required, we will apply the amendments on a prospective basis.
(c) Changes to the disclosure requirements for fair value measurement and defined benefit plans
In August 2018, the FASB issued amendments related to disclosure requirements for both fair value measurement and defined benefit plans.
The amendments concerning fair value measurement remove, modify and add certain disclosure requirements in order to improve the overall usefulness of the disclosures and reduce unnecessary costs to companies to prepare the disclosures. We adopted the amendments effective January 1, 2020, with no material effect to our disclosures. Certain amendments are to be applied prospectively, and all others are to be applied retrospectively.
The amendments concerning disclosure requirements for defined benefit plans are narrow in scope and apply to all employers that sponsor defined benefit pension or other postretirement plans. The amendments change annual disclosures requirements, including removal of disclosures that are no longer considered cost beneficial, adding certain new relevant disclosures and clarifying specific requirements of disclosures concerning information for defined benefit pension plans. We adopted the amendments effective January 1, 2020, and they will not materially affect the disclosures for our fiscal year ending December 31, 2020. As required, our application will be on a retrospective basis.
(d) Targeted improvements to related party guidance for VIEs
In October 2018, the FASB issued amendments that affect reporting entities that are required to determine whether they should consolidate a legal entity under the consolidation guidance applicable to VIEs. The targeted improvements specifically applicable to public business entities clarify that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. We adopted the amendments effective January 1, 2020, with no material effect to our condensed consolidated results of operations, financial position, cash flows and disclosures.
(e) Clarifying guidance for certain collaborative arrangements with respect to revenue recognition
The FASB issued amendments in November 2018 to clarify the interaction between the guidance for certain collaborative arrangements and the guidance applicable to ASC 606. A collaborative arrangement is a contractual arrangement under which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activity’s commercial success. The targeted improvements clarify that certain transactions between collaborative arrangement participants are within the scope of ASC 606 and thus subject to all of its guidance. We adopted the amendments effective January 1, 2020, with no material effect to our condensed consolidated results of operations, financial position, cash flows and disclosures. As required, we retrospectively applied the amendments to the date of our initial application of ASC 606.
Accounting Pronouncements Issued But Not Yet Adopted
The following are new accounting pronouncements not yet adopted, including those issued since December 31, 2019, that we have evaluated or are evaluating to determine their effect on our condensed consolidated financial statements.
(a) Simplifying the accounting for income taxes
In December 2019, the FASB issued an accounting standards update that is intended to reduce complexity in accounting for income taxes. The amendments remove specific exceptions to the general principles in ASC 740, Income Taxes, eliminating the need for an entity to analyze whether the following apply in a given period: (1) exception to the incremental approach for intra-period tax allocation; (2) exceptions to accounting for basis differences in equity method investments when there are ownership changes in foreign investments; and (3) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The amendments also improve financial statement preparers’ application of income-tax related guidance and simplify U. S. GAAP for: (1) franchise taxes that are partially based on income; (2) transactions with a government that result in a step up in the tax basis of goodwill; (3) separate financial statements of legal entities that are not subject to tax; and (4) enacted changes in tax laws in interim periods. The amendments are effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued, with adoption of all amendments in the same period. Application is on a retrospective and/or modified retrospective basis, or a prospective basis, depending on the amendment aspect. We expect our adoption will not materially affect our consolidated results of operations, financial position and cash flows.
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(b) Facilitation of the effects of reference rate reform on financial reporting
In March 2020, the FASB issued amendments to provide temporary optional guidance to entities to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. The amendments respond to concerns about structural risks of interbank offered rates, and particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR). The guidance is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform, around the end of 2021. The guidance applies to contracts that have modified terms that affect, or have the potential to affect, the amount or timing of contractual cash flows resulting from the discontinuance of the reference rate reform. The amendments are effective for all entities as of March 12, 2020, through December 31, 2022, although the FASB has indicated it will monitor developments in the marketplace and consider whether developments warrant an extension. We expect our adoption will not materially affect our consolidated results of operations, financial position and cash flows.
Note 4. Revenue
We recognize revenue when we have satisfied our obligations under the terms of a contract with a customer, which generally occurs when the control of promised goods or services transfers to the customer. We measure revenue as the amount of consideration we expect to receive in exchange for providing those goods or services. Contracts with customers may include multiple performance obligations. For such contracts, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers. Certain revenues are not within the scope of ASC 606, such as revenues from leasing, derivatives, other revenues that are not from contracts with customers and other contractual rights or obligations, and we account for such revenues in accordance with the applicable accounting standards. We exclude from revenue amounts collected on behalf of third parties, including any such taxes collected from customers and remitted to governmental authorities. We do not have any significant payment terms that are material because we receive payment at or shortly after the point of sale.
The following describes the principal activities, by reportable segment, from which we generate revenue. For more detailed information about reportable segments, refer to Note 13.
Networks Segment
Networks derives its revenue primarily from tariff-based sales of electricity and natural gas service to customers in New York, Connecticut, Maine and Massachusetts, with no defined contractual term. For such revenues, we recognize revenues in an amount derived from the commodities delivered to customers. Other major sources of revenue are electricity transmission and wholesale sales of electricity and natural gas.
Tariff-based sales are subject to the corresponding state regulatory authorities, which determine prices and other terms of service through the ratemaking process. Maine state law prohibits the utility from providing the electricity commodity to customers. In New York, Connecticut and Massachusetts, customers have the option to obtain the electricity or natural gas commodity directly from the utility or from another supplier. For customers that receive their commodity from another supplier, the utility acts as an agent and delivers the electricity or natural gas provided by that supplier. Revenue in those cases is only for providing the service of delivery of the commodity.
Transmission revenue results from others’ use of the utility’s transmission system to transmit electricity and is subject to Federal Energy Regulatory Commission (FERC) regulation, which establishes the prices and other terms of service. Long-term wholesale sales of electricity are based on individual bilateral contracts. Short-term wholesale sales of electricity are generally on a daily basis based on market prices and are administered by the Independent System Operator-New England (ISO-NE) and the New York Independent System Operator (NYISO) or PJM Interconnection, L.L.C. (PJM), as applicable. Wholesale sales of natural gas are generally short-term based on market prices through contracts with the specific customer.
The performance obligation in all arrangements is satisfied over time because the customer simultaneously receives and consumes the benefits as Networks delivers or sells the electricity or natural gas or provides the delivery or transmission service.
Certain Networks entities record revenue from Alternative Revenue Programs (ARPs), which is not ASC 606 revenue. Such programs represent contracts between the utilities and their regulators. The Networks ARPs include revenue decoupling mechanisms (RDMs), other ratemaking mechanisms, annual revenue requirement reconciliations and other demand side management programs.
Networks also has various other sources of revenue including billing, collection, other administrative charges, sundry billings, rent of utility property and miscellaneous revenue. It classifies such revenues as other ASC 606 revenues to the extent they are not related to revenue generating activities from leasing, derivatives or ARPs.
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Renewables Segment
Renewables derives its revenue primarily from the sale of energy, transmission, capacity and other related charges from its renewable wind, solar and thermal energy generating sources. For such revenues, we will recognize revenues in an amount derived from the commodities delivered and from services as they are made available. Renewables has bundled power purchase agreements consisting of electric energy, transmission, capacity and/or renewable energy credits (RECs). The related contracts are generally long-term with no stated contract amount, that is, the customer is entitled to all of the unit’s output. Renewables also has unbundled sales of electric energy and capacity, RECs and natural gas, which are generally for periods of less than a year. The performance obligations in substantially all of both bundled and unbundled arrangements for electricity and natural gas are satisfied over time, for which we record revenue based on the amount invoiced to the customer for the actual energy delivered. The performance obligation for stand-alone RECs is satisfied at a point in time, for which we record revenue when the performance obligation is satisfied upon delivery of the REC.
Renewables classifies certain contracts for the sale of electricity as derivatives, in accordance with the applicable accounting standards. Renewables also has revenue from its energy trading operations, which it generally classifies as derivative revenue. However, trading contracts not classified as derivatives are within the scope of ASC 606, with the performance obligation of the delivery of energy (electricity, natural gas) and settlement of the contracts satisfied at a point in time at which time we recognize the revenue. Renewables also has other ASC 606 revenue, which we recognize based on the amount invoiced to the customer.
Other
Other, which does not represent a segment, includes miscellaneous Corporate revenues and intersegment eliminations.
Contract Costs and Contract Liabilities
We recognize an asset for incremental costs of obtaining a contract with a customer when we expect the benefit of those costs to be longer than one year. We have contract assets for costs from development success fees, which we paid during the solar asset development period in 2018, and will amortize ratably into expense over the 15-year life of the power purchase agreement (PPA), expected to commence in December 2021 upon commercial operation. We also have a contract asset for costs incurred to cancel a PPA, which we will amortize over the 10-year contract period of the replacement PPA that will commence upon completion of the project. Contract assets totaled $12 million at both June 30, 2020 and December 31, 2019, and are presented in "Other non-current assets" on our condensed consolidated balance sheets.
We have contract liabilities for revenue from transmission congestion contract (TCC) auctions, for which we receive payment at the beginning of an auction period, and amortize ratably each month into revenue over the applicable auction period. The auction periods range from six months to two years. TCC contract liabilities totaled $12 million and $10 million at June 30, 2020 and December 31, 2019, respectively, and are presented in "Other current liabilities" on our condensed consolidated balance sheets. We recognized $5 million and $10 million as revenue during the three and six months ended June 30, 2020, respectively, and $4 million and $9 million for the three and six months ended June 30, 2019, respectively.
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Revenues disaggregated by major source for our reportable segments for the three and six months ended June 30, 2020 and 2019 are as follows:
  Three Months Ended June 30, 2020 Six Months Ended June 30, 2020
  Networks Renewables Other (b) Total Networks Renewables Other (b) Total
(Millions)
Regulated operations – electricity
$ 844    $ —    $ —    $ 844    $ 1,717    $ —    $ —    $ 1,717   
Regulated operations – natural gas
237    —    —    237    744    —    —    744   
Nonregulated operations – wind
—    228    —    228    —    439    —    439   
Nonregulated operations – solar
—      —      —    10    —    10   
Nonregulated operations – thermal
—      —      —    14    —    14   
Other(a)   19    —    26    26    47    —    73   
Revenue from contracts with customers
1,088    257    —    1,345    2,487    510    —    2,997   
Leasing revenue   —    —        —    —     
Derivative revenue —    16    —    16    —    86    —    86   
Alternative revenue programs
29    —    —    29    85    —    —    85   
Other revenue   (1)   (1)   —        (1)   10   
Total operating revenues
$ 1,121    $ 272    $ (1)   $ 1,392    $ 2,582    $ 600    $ (1)   $ 3,181   
Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Networks Renewables Other (b) Total Networks Renewables Other (b) Total
(Millions)
Regulated operations – electricity
$ 802    $ —    $ —    $ 802    $ 1,715    $ —    $ —    $ 1,715   
Regulated operations – natural gas
249    —    —    249    874    —    —    874   
Nonregulated operations – wind
—    221    —    221    —    403    —    403   
Nonregulated operations – solar
—      —      —    13    —    13   
Nonregulated operations – thermal
—    —    —    —    —    16    —    16   
Other(a) 18    24    —    42    55    17    (4)   68   
Revenue from contracts with customers
1,069    253    —    1,322    2,644    449    (4)   3,089   
Leasing revenue   —    —        —    —     
Derivative revenue —    48    —    48    —    89    —    89   
Alternative revenue programs
19    —    —    19    35    —    —    35   
Other revenue     —      14    11    —    25   
Total operating revenues
$ 1,093    $ 307    $ —    $ 1,400    $ 2,697    $ 549    $ (4)   $ 3,242   
(a)Primarily includes certain intra-month trading activities, billing, collection and administrative charges, sundry billings and other miscellaneous revenue.
(b)Does not represent a segment. Includes Corporate and intersegment eliminations.
As of June 30, 2020 and December 31, 2019, accounts receivable balances related to contracts with customers were approximately $931 million and $1,050 million, respectively, including unbilled revenues of $283 million and $345 million, which are included in “Accounts receivable and unbilled revenues, net” on our condensed consolidated balance sheets.
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As of June 30, 2020, the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) were as follows:
As of June 30, 2020 2021 2022 2023 2024 2025 Thereafter Total
(Millions)              
Revenue expected to be recognized on multiyear retail energy sales contracts in place
$   $   $   $   $ —    $ —    $  
Revenue expected to be recognized on multiyear capacity and carbon-free energy sale contracts
38    23    15    12    11    75    174   
Revenue expected to be recognized on multiyear renewable energy credit sale contracts
18    12            48   
Total operating revenues $ 57    $ 36    $ 22    $ 17    $ 14    $ 80    $ 226   
As of June 30, 2020, the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for the remainder of 2020 was $45 million.
Note 5. Regulatory Assets and Liabilities
Pursuant to the requirements concerning accounting for regulated operations, our utilities capitalize, as regulatory assets, incurred and accrued costs that are probable of recovery in future electric and natural gas rates. We base our assessment of whether recovery is probable on the existence of regulatory orders that allow for recovery of certain costs over a specific period, or allow for reconciliation or deferral of certain costs. When costs are not treated in a specific regulatory order, we use regulatory precedent to determine if recovery is probable. Our operating utilities also record, as regulatory liabilities, obligations to refund previously collected revenue or to spend revenue collected from customers on future costs. The primary items that are not included in rate base or accruing carrying costs are regulatory assets for qualified pension and other postretirement benefits, which reflect unrecognized actuarial gains and losses; debt premium; environmental remediation costs, which are primarily the offset of accrued liabilities for future spending; unfunded future income taxes, which are the offset to the unfunded future deferred income tax liability recorded; asset retirement obligations; hedge losses; and contracts for differences. The total net amount of these items is approximately $1,687 million.
CMP Rate Case
In an order issued on February 19, 2020, the MPUC authorized an increase in CMP's distribution revenue requirement of $17 million, or approximately 7%, based on an allowed ROE of 9.25% and a 50% equity ratio. The rate increase was effective March 1, 2020. The MPUC also imposed a 1.00% ROE reduction (to 8.25%) for management efficiency associated with CMP’s customer service performance following the implementation of its new billing system in 2017. The management efficiency adjustment will remain in effect until CMP has demonstrated satisfactory customer service performance on four specified service quality measures for a period of 18 consecutive months which commenced on March 1, 2020. CMP is currently satisfying all four of these quality measures.
The order provided additional funding for staffing increases, vegetation management programs and storm restoration costs, while retaining the basic tiered structure for storm cost recovery implemented in the 2014 stipulation. The MPUC order also retained the RDM implemented in 2014. The order denied CMP’s request to increase rates for higher costs associated with services provided by its affiliates and initiated a management audit to assess the quality of these services as well as the impacts of the AVANGRID management structure on the quality of CMP’s customer service.
CMP Revenue Decoupling Mechanism Investigation
On June 9, 2020, the MPUC issued a Notice of Investigation to open an investigation into the effects of the COVID-19 pandemic on customers’ electricity-usage patterns and whether CMP’s RDM should be suspended for the annual distribution rate change that is expected to occur on July 1, 2021, for electricity delivered in calendar year 2020. On June 24, 2020, the MPUC issued a procedural order setting forth initial steps in this proceeding. On July 21, 2020, CMP filed testimony presenting electricity-usage data for its two RDM classes (residential and commercial/industrial) through June 2020, along with testimony explaining the data and the reasons why the current RDM should remain in place without alteration. We cannot predict the outcome of this matter.
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NYSEG and RG&E Rate Plans and Rate Case Filings
Current Rate Plan
On June 15, 2016, the New York State Public Service Commission (NYPSC) approved the Joint Proposal filed with the NYPSC by New York State Electric & Gas Corporation (NYSEG) and Rochester Gas and Electric Corporation (RG&E) and by certain other signatory parties on February 19, 2016, in connection with a three-year rate plan for electric and gas service at NYSEG and RG&E effective May 1, 2016. Following the approval of the Joint Proposal, most of the regulatory deferrals related to NYSEG are amortized over a five-year period, except a portion of storm costs to be recovered over ten years, unfunded deferred taxes being amortized over a period of 50 years and plant-related tax items which are amortized over the life of associated plant. Annual amortization expense for NYSEG is approximately $16.5 million per rate year. RG&E items that are being amortized are plant-related tax items, which are amortized over the life of associated plant, and unfunded deferred taxes being amortized over a period of 50 years. A majority of the other items related to RG&E, which net to a regulatory liability, remain deferred and will not be amortized until future proceedings.
The approved Joint Proposal provides for annual rate increases and allowed rates of return on common equity of 9.0% for NYSEG and RG&E. The equity ratio for each company is 48%; however, the equity ratio is set at the actual up to 50% for earnings sharing calculation purposes. The customer share of any earnings above allowed levels increases as the ROE increases, with customers receiving 50%, 75% and 90% of earnings over 9.5%, 10.0% and 10.5% ROE, respectively, in the first rate year covering the period May 1, 2016 – April 30, 2017. The earnings sharing levels increase in rate year two (May 1, 2017 – April 30, 2018) to 9.65%, 10.15% and 10.65% ROE, respectively. The earnings sharing levels further increase in rate year three (May 1, 2018 – April 30, 2019) to 9.75%, 10.25% and 10.75% ROE, respectively. The rate plans also include the implementation of a rate adjustment mechanism (RAM) designed to return or collect certain defined reconciled revenues and costs, new depreciation rates, and continuation of the existing RDM for each company.
Rate Case Filing Update
On May 20, 2019, NYSEG and RG&E filed rate cases with the NYPSC for new tariffs.
On March 23, 2020, the Public Utility Law Project (a party to the cases) submitted a letter motion requesting that the NYPSC administrative law judges assigned to preside over the rate cases require NYSEG and RG&E to pause settlement discussions and to provide new and accurate calculations based on the current and future expected economic impact of the COVID-19 pandemic. On March 31, 2020, NYSEG and RG&E, Multiple Intervenors (a party to the cases) and NYDPS staff each filed a response in opposition to the motion. On April 7, 2020, the NYPSC administrative law judges issued a Ruling Denying Public Utility Law Project’s Motion, allowing settlement negotiations to continue. On April 22, 2020, the Public Utility Law Project and AARP filed an interlocutory appeal requesting that the NYPSC review the determination of the administrative law judges. We cannot predict the outcome of this proceeding.
On June 22, 2020, NYSEG and RG&E filed a joint proposal with the NYPSC for a new three-year rate plan. The proposed effective date of new tariffs is November 1, 2020 with a make-whole provision back to April 17, 2020. The proposed rates facilitate the companies’ transition to a cleaner energy future while allowing for important initiatives such as COVID-19 relief for customers and additional funding for vegetation management, hardening/resiliency and emergency preparedness. The joint proposal bases delivery revenues on an 8.80% ROE and 48% equity ratio; however, for the proposed earnings sharing mechanism, the equity ratio is the lower of the actual equity ratio or 50%. The below table provides a summary of the proposed delivery rate increases and delivery rate percentages, including rate levelization and excluding energy efficiency, which is a pass-through, for all four businesses:
Year 1 Year 2 Year 3
Rate Increase Delivery Rate % Rate Increase Delivery Rate % Rate Increase Delivery Rate %
Utility (Millions) Increase (Millions) Increase (Millions) Increase
NYSEG Electric $ 34.7    4.6  % $ 71.51    9.1  % $ 79.4    9.1  %
NYSEG Gas $ —    —  % $ 1.58    0.8  % $ 3.3    1.6  %
RG&E Electric $ 10.7    2.4  % $ 22.92    5.2  % $ 25.4    5.2  %
RG&E Gas $ —    —  % $ —    —  % $ 2.4    1.3  %
The rate plans continue the RAM designed to return or collect certain defined reconciled revenues and costs, have new depreciation rates and continue existing RDMs for each business. Statements in support or opposition and reply statements were filed in July 2020, and a final decision by the NYPSC is expected in October 2020. We cannot predict the outcome of this proceeding.
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UI, CNG, SCG and BCG Rate Plans
In December 2016, the Connecticut Public Utilities Regulatory Authority (PURA) approved new distribution rate schedules for The United Illuminating Company (UI) for three years, which became effective January 1, 2017 and which, among other things, provide for annual tariff increases and an ROE of 9.10% based on a 50% equity ratio, continued UI’s existing earnings sharing mechanism (ESM) pursuant to which UI and its customers share on a 50/50 basis all distribution earnings above the allowed ROE in a calendar year, continued the existing decoupling mechanism and approved the continuation of the requested storm reserve. Any dollars due to customers from the ESM continue to be first applied against any storm regulatory asset balance (if one exists at that time) or refunded to customers through a bill credit if such storm regulatory asset balance does not exist.
In December 2017, PURA approved new tariffs for the Southern Connecticut Gas Company (SCG) effective January 1, 2018 for a three-year rate plan with rate increases of $2 million, $5 million and $5 million in 2018, 2019 and 2020, respectively. The new tariffs also include an RDM and Distribution Integrity Management Program (DIMP) mechanism similar to the mechanisms authorized for Connecticut Natural Gas Corporation (CNG), ESM, the amortization of certain regulatory liabilities (most notably accumulated hardship deferral balances and certain accumulated deferred income taxes) and tariff increases based on a ROE of 9.25% and approximately 52% equity level. Any dollars due to customers from the ESM will be first applied against any environmental regulatory asset balance as defined in the settlement agreement (if one exists at that time) or refunded to customers through a bill credit if such environmental regulatory asset balance does not exist.
In December 2018, PURA approved new tariffs for CNG effective January 1, 2019 for a three-year rate plan with rate increases of $10 million, $5 million and $5 million in 2019, 2020 and 2021, respectively. The new tariffs continued the RDM and DIMP mechanism. ESM and tariff increases are based on an ROE of 9.30% and an equity ratio of 54.00% in 2019, 54.50% in 2020 and 55.00% in 2021.
On January 18, 2019, the DPU approved new distribution rates for BGC providing for a $2 million distribution base rate increase effective February 1, 2019 (with a make-whole provision back to January 1, 2019), and an additional $1 million base distribution increase effective November 1, 2019, if certain investments are made by BGC. The distribution rate increase is based on a 9.70% ROE and 55% equity ratio. The new tariffs provide for the implementation of an RDM and pension expense tracker and also provide that BGC will not file to change base distribution rates to become effective before November 1, 2021.
Regulatory assets and liabilities
The regulatory assets and regulatory liabilities shown in the tables below result from various regulatory orders that allow for the deferral and/or reconciliation of specific costs. Regulatory assets and regulatory liabilities are classified as current when recovery or refund in the coming year is allowed or required through a specific order or when the rates related to a specific regulatory asset or regulatory liability are subject to automatic annual adjustment.
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Regulatory assets as of June 30, 2020 and December 31, 2019, respectively, consisted of:
June 30, December 31,
As of 2020 2019
(Millions)
Pension and other post-retirement benefits cost deferrals $ 106    $ 125   
Pension and other post-retirement benefits 995    1,061   
Storm costs 364    272   
Rate adjustment mechanism 21    79   
Revenue decoupling mechanism 67    19   
Transmission revenue reconciliation mechanism    
Contracts for differences 93    92   
Hardship programs 25    29   
Plant decommissioning    
Deferred purchased gas   25   
Deferred transmission expense 23    11   
Environmental remediation costs 281    277   
Debt premium 90    97   
Unamortized losses on reacquired debt 27    29   
Unfunded future income taxes 406    399   
Federal tax depreciation normalization adjustment 152    153   
Asset retirement obligation 21    17   
Deferred meter replacement costs 26    27   
COVID-19 cost recovery   —   
Other 152    139   
Total regulatory assets 2,861    2,861   
Less: current portion 282    294   
Total non-current regulatory assets $ 2,579    $ 2,567   
“Pension and other post-retirement benefits” represent the actuarial losses on the pension and other post-retirement plans that will be reflected in customer rates when they are amortized and recognized in future pension expenses. “Pension and other post-retirement benefits cost deferrals” include the difference between actual expense for pension and other post-retirement benefits and the amount provided for in rates for certain of our regulated utilities. The recovery of these amounts will be determined in future proceedings.
“Storm costs” for CMP, NYSEG, RG&E and UI are allowed in rates based on an estimate of the routine costs of service restoration. The companies are also allowed to defer service restoration costs resulting from major storms when they meet certain criteria for severity and duration. As of June 30, 2020, deferred storm costs include $72 million and $23 million at NYSEG being recovered over ten-year and five-year periods, respectively, beginning in 2016, and $155 million and $61 million at NYSEG and RG&E, respectively, not included in the Joint Proposal. The amounts not included in the Joint Proposal will be recovered through RAM or determined as part of the current rate proceedings.
“Rate adjustment mechanism” represents an interim rate change to return or collect certain defined reconciled revenues and costs for NYSEG and RG&E following the approval of the Joint Proposal by the NYPSC. The RAM, when triggered, is implemented in rates on July 1 of each year for return or collection over a twelve-month period.
"Revenue decoupling mechanism" represents the mechanism established to disassociate the utility's profits from its delivery/commodity sales.
"Transmission revenue reconciliation mechanism" reflects differences in actual costs in the rate year from those used to set rates. This mechanism contains the Annual Transmission True up (ATU) which is recovered over the subsequent June to May period.
“Contracts for Differences” (CfDs) represent the deferral of unrealized gains and losses on contracts for differences derivative contracts. The balance fluctuates based upon quarterly market analysis performed on the related derivatives. The amounts, which do not earn a return, are fully offset by a corresponding derivative asset/liability.
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“Hardship Programs” represent hardship customer accounts deferred for future recovery to the extent they exceed the amount in rates.
“Deferred Purchased Gas” represents the difference between actual gas costs and gas costs collected in rates.
“Deferred Transmission Expense” represents deferred transmission income or expense and fluctuates based upon actual revenues and revenue requirements.
“Environmental remediation costs” includes spending that has occurred and is eligible for future recovery in customer rates. Environmental costs are currently recovered through a reserve mechanism whereby projected spending is included in rates with any variance recorded as a regulatory asset or a regulatory liability. The amortization period will be established in future proceedings and will depend upon the timing of spending for the remediation costs. It also includes the anticipated future rate recovery of costs that are recorded as environmental liabilities since these will be recovered when incurred. Because no funds have yet been expended for the regulatory asset related to future spending, it does not accrue carrying costs and is not included within rate base.
“Debt premium” represents the regulatory asset recorded to offset the fair value adjustment to the regulatory component of the non-current debt of UIL at the acquisition date. This amount is being amortized to interest expense over the remaining term of the related outstanding debt instruments.
“Unamortized losses on reacquired debt” represent deferred losses on debt reacquisitions that will be recovered over the remaining original amortization period of the reacquired debt.
“Unfunded future income taxes” represent unrecovered federal and state income taxes primarily resulting from regulatory flow through accounting treatment and are the offset to the unfunded future deferred income tax liability recorded. The income tax benefits or charges for certain plant related timing differences, such as removal costs, are immediately flowed through to, or collected from, customers. This amount is being amortized as the amounts related to temporary differences that give rise to the deferrals are recovered in rates. These amounts are being collected over a period of fifty years, and the NYPSC staff has initiated an audit, as required, of the unfunded future income taxes and other tax assets to verify the balances.
“Federal tax depreciation normalization adjustment” represents the revenue requirement impact of the difference in the deferred income tax expense required to be recorded under the IRS normalization rules and the amount of deferred income tax expense that was included in cost of service for rate years covering 2011 forward. The recovery period in New York is from 27 to 39 years and for CMP 32.5 years beginning in 2020.
“Asset retirement obligations” (ARO) represents the differences in timing of the recognition of costs associated with our AROs and the collection of such amounts through rates. This amount is being amortized at the related depreciation and accretion amounts of the underlying liability.
“Deferred meter replacement costs” represent the deferral of the book value of retired meters which were replaced by advanced metering infrastructure meters. This amount is being amortized over the initial depreciation period of related retired meters.
"COVID-19 cost recovery" represents deferred COVID-19-related costs in the state of Connecticut based on the order issued by PURA on April 29, 2020, requiring utilities to track COVID-19-related expenses and lost revenue and create a regulatory asset.
“Other” includes post-term amortization deferrals and various items subject to reconciliation including hedge losses and deferred property tax.
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Regulatory liabilities as of June 30, 2020 and December 31, 2019, respectively, consisted of:
June 30, December 31,
As of 2020 2019
(Millions)
Energy efficiency portfolio standard $ 68    $ 72   
Gas supply charge and deferred natural gas cost 13    11   
Pension and other post-retirement benefits cost deferrals 72    80   
Carrying costs on deferred income tax bonus depreciation 38    49   
Carrying costs on deferred income tax - Mixed Services 263(a) 12    15   
2017 Tax Act 1,552    1,548   
Revenue decoupling mechanism   17   
Accrued removal obligations 1,183    1,173   
Asset sale gain account 10    10   
Economic development 27    27   
Positive benefit adjustment 35    37   
Theoretical reserve flow thru impact 11    14   
Deferred property tax 49    17   
Net plant reconciliation 23    23   
Debt rate reconciliation 77    67   
Rate refund – FERC ROE proceeding 33    32   
Transmission congestion contracts 24    23   
Merger-related rate credits 15    16   
Accumulated deferred investment tax credits 26    13   
Asset retirement obligation 17    14   
Earning sharing provisions 26    28   
Middletown/Norwalk local transmission network service collections 18    18   
Low income programs 30    33   
Non-firm margin sharing credits 13    16   
New York 2018 winter storm settlement 11    11   
Other 190    159   
Total regulatory liabilities 3,581    3,523   
Less: current portion 249    242   
Total non-current regulatory liabilities $ 3,332    $ 3,281   
“Energy efficiency portfolio standard” represents the difference between revenue billed to customers through an energy efficiency charge and the costs of our energy efficiency programs as approved by the state authorities. This may be refunded to customers within the next year.
"Gas supply charge and deferred natural gas cost" reflects the actual costs of purchasing, transporting and storing of natural gas. Gas supply reconciliation is determined by comparing actual gas supply expenses to the monthly gas cost recoveries in rates. Prior rate year balances are collected/ returned to customers beginning the next calendar year.
“Pension and other postretirement benefits” represent the actuarial gains on other postretirement plans that will be reflected in customer rates when they are amortized and recognized in future expenses. Because no funds have yet been received for this, a regulatory liability is not reflected within the rate base. They also represent the difference between actual expense for pension and other postretirement benefits and the amount provided for in rates. Recovery of these amounts will be determined in future proceedings.
“Carrying costs on deferred income tax bonus depreciation” represent the carrying costs benefit of increased accumulated deferred income taxes created by the change in tax law allowing bonus depreciation. A portion of this balance is amortized
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through current rates, the remaining portion will be refunded in future periods through future rate cases. The amortization period in current rates is five years and began in 2016.
"Carrying costs on deferred income tax - Mixed Services 263(a)" represent the carrying costs benefit of increased accumulated deferred income taxes created by Section 263 (a) IRC. A portion of this balance is amortized through current rates, the remaining portion will be refunded in future periods through future rate cases. The amortization period in current rates is five years and began in 2016.
“2017 Tax Act” represents the impact from remeasurement of deferred income tax balances as a result of the Tax Act enacted by the U.S. federal government on December 22, 2017. Reductions in accumulated deferred income tax balances due to the reduction in the corporate income tax rates from 35% to 21% under the provisions of the Tax Act will result in amounts previously and currently collected from utility customers for these deferred taxes to be refundable to such customers, generally through reductions in future rates. The NYPSC, MPUC, PURA and DPU have instituted separate proceedings in New York, Maine, Connecticut and Massachusetts, respectively, to review and address the implications associated with the Tax Act on the utilities providing service in such states.
"Revenue decoupling mechanism" represents the mechanism established to disassociate the utility's profits from its delivery/commodity sales.
“Accrued removal obligations” represent the differences between asset removal costs recorded and amounts collected in rates for those costs. The amortization period is dependent upon the asset removal costs of underlying assets and the life of the utility plant.
“Asset sale gain account” represents the net gain on the sale of certain assets that will be used for the future benefit of customers. The amortization period for the majority of the balance will be determined in future proceedings.
“Economic development” represents the economic development program which enables NYSEG and RG&E to foster economic development through attraction, expansion and retention of businesses within its service territory. If the level of actual expenditures for economic development allocated to NYSEG and RG&E varies in any rate year from the level provided for in rates, the difference is refunded to customers. A portion of this balance is amortized through current rates, the remaining portion will be refunded in future periods through future rate cases. The amortization period in current rates is five years and began in 2016.
“Positive benefit adjustment” resulted from Iberdrola’s 2008 acquisition of AVANGRID (formerly Energy East Corporation). This is being used to moderate increases in rates. A portion of this balance is amortized through current rates, the remaining portion will be refunded in future periods through future rate cases. The amortization period in current rates is five years and began in 2016.
“Theoretical reserve flow thru impact” represents the differences from the rate allowance for applicable federal and state flow through impacts related to the excess depreciation reserve amortization. It also represents the carrying cost on the differences. A portion of this balance is amortized through current rates, the remaining portion will be refunded in future periods through future rate cases. The amortization period in current rates is five years and began in 2016.
"Deferred property tax" represents the difference between actual expense for property taxes recoverable from customers and the amount provided for in rates.
"Net plant reconciliation" represents the reconciliation of the actual electric and gas net plant and book depreciation to the targets set forth in the Joint Proposal.
"Debt rate reconciliation" represents the over/under collection of costs related to debt instruments identified in the rate case. Costs would include interest, commissions and fees versus amounts included in rates.
"Rate refund - FERC ROE proceeding" represents the reserve associated with the Federal Energy Regulatory Commission (FERC) proceeding around the base return on equity (ROE) reflected in ISO New England, Inc.’s (ISO-NE) open access transmission tariff (OATT). See Note 8 for more details.
"Transmission congestion contracts" represents deferral of Nine Mile 2 Nuclear Plant transmission congestion contract at RGE.
“Merger-related rate credits” resulted from the acquisition of UIL. This is being used to moderate increases in rates. During the three and six months ended June 30, 2020, respectively, $0 and $1 million of rate credits were applied against customer bills. During the three and six months ended June 30, 2019, respectively, $0 and $1 million of rate credits were applied against customer bills.
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"Asset retirement obligation" represents the differences in timing of the recognition of costs associated with our AROs and the collection of such amounts through rates. This amount is being amortized at the related depreciation and accretion amounts of the underlying liability.
"Earning sharing provisions" represents the annual earnings over the earning sharing threshold.
"Middletown/Norwalk local transmission network service collections" represents allowance for funds used during construction of the Middletown/Norwalk transmission line which is being amortized over the useful life of the project.
“Low income programs” represent various hardship and payment plan programs approved for recovery.
"New York 2018 winter storm settlement" represents the settlement amount with the NYSPSC following the comprehensive investigation of New York’s major utility companies’ preparation and response to March 2018 storms.
“Other” includes cost of removal being amortized through rates and various items subject to reconciliation including excess generation service charge, rate change levelization, RAM and transmission revenue reconciliation mechanism.
Note 6. Fair Value of Financial Instruments and Fair Value Measurements
We determine the fair value of our derivative assets and liabilities and non-current equity investments associated with Networks’ activities utilizing market approach valuation techniques:
Our equity and other investments consist of Rabbi Trusts for deferred compensation plans and a supplemental retirement benefit life insurance trust. The Rabbi Trusts primarily include equity securities and money market funds. We measure the fair value of our Rabbi Trust portfolio using observable, unadjusted quoted market prices in active markets for identical assets and include the measurements in Level 1. We measure the fair value of the supplemental retirement benefit life insurance trust based on quoted prices in the active markets for the various funds within which the assets are held and include the measurement in Level 2.
NYSEG and RG&E enter into electric energy derivative contracts to hedge the forecasted purchases required to serve their electric load obligations. They hedge their electric load obligations using derivative contracts that are settled based upon Locational Based Marginal Pricing published by the NYISO. NYSEG and RG&E hedge approximately 70% of their electric load obligations using contracts for a NYISO location where an active market exists. The forward market prices used to value the companies’ open electric energy derivative contracts are based on quoted prices in active markets for identical assets or liabilities with no adjustment required and therefore we include the fair value measurements in Level 1.
NYSEG and RG&E enter into natural gas derivative contracts to hedge their forecasted purchases required to serve their natural gas load obligations. The forward market prices used to value open natural gas derivative contracts are exchange-based prices for the identical derivative contracts traded actively on the New York Mercantile Exchange (NYMEX). Because we use prices quoted in an active market we include the fair value measurements in Level 1.
NYSEG, RG&E and CMP enter into fuel derivative contracts to hedge their unleaded and diesel fuel requirements for their fleet vehicles. Exchange-based forward market prices are used, but because an unobservable basis adjustment is added to the forward prices, we include the fair value measurement for these contracts in Level 3.
UI enters into CfDs, which are marked-to-market based on a probability-based expected cash flow analysis that is discounted at risk-free interest rates and an adjustment for non-performance risk using credit default swap rates. We include the fair value measurement for these contracts in Level 3 (See Note 7 for further discussion of CfDs).
We determine the fair value of our derivative assets and liabilities associated with Renewables activities utilizing market approach valuation techniques. Exchange-traded transactions, such as NYMEX futures contracts, that are based on quoted market prices in active markets for identical products with no adjustment are included in fair value Level 1. Contracts with delivery periods of two years or less which are traded in active markets and are valued with or derived from observable market data for identical or similar products such as over-the-counter NYMEX, foreign exchange swaps, and fixed price physical and basis and index trades are included in fair value Level 2. Contracts with delivery periods exceeding two years or that have unobservable inputs or inputs that cannot be corroborated with market data for identical or similar products are included in fair value Level 3. The unobservable inputs include historical volatilities and correlations for tolling arrangements and extrapolated values for certain power swaps. The valuation for this category is based on our judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists.
We determine the fair value of our foreign currency exchange derivative instruments based on current exchange rates compared to the rates at inception of the hedge. We include the fair value measurement for these contracts in Level 2.
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The carrying amounts for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, notes payable, lease obligations and interest accrued approximate their estimated fair values and are considered Level 1.
Restricted cash was $5 million and $6 million as of June 30, 2020 and December 31, 2019, respectively, and is included in "Other Assets" on our condensed consolidated balance sheets.
The financial instruments measured at fair value as of June 30, 2020 and December 31, 2019, respectively, consisted of:
As of June 30, 2020 Level 1 Level 2 Level 3 Netting Total
(Millions)          
Equity investments with readily determinable fair values $ 37    $ 11    $ —    $ —    $ 48   
Derivative assets
Derivative financial instruments - power $   $ 52    $ 123    $ (74)   $ 106   
Derivative financial instruments - gas   30    31    (60)    
Contracts for differences —    —      —     
Derivative financial instruments – other —      —    —     
Total $   $ 83    $ 156    $ (134)   $ 111   
Derivative liabilities
Derivative financial instruments - power $ (20)   $ (40)   $ (38)   $ 91    $ (7)  
Derivative financial instruments - gas —    (18)   (6)   24    —   
Contracts for differences —    —    (95)   —    (95)  
Derivative financial instruments – other —    (2)   (1)   —    (3)  
Total $ (20)   $ (60)   $ (140)   $ 115    $ (105)  
As of December 31, 2019 Level 1 Level 2 Level 3 Netting Total
(Millions)          
Equity investments with readily determinable fair values $ 38    $ 13    $ —    $ —    $ 51   
Derivative assets
Derivative financial instruments - power $   $ 23    $ 120    $ (54)   $ 93   
Derivative financial instruments - gas —    40    31    (71)   —   
Contracts for differences —    —      —     
Total $   $ 63    $ 153    $ (125)   $ 95   
Derivative liabilities
Derivative financial instruments - power $ (28)   $ (43)   $ (29)   $ 92    $ (8)  
Derivative financial instruments - gas (4)   (26)   (5)   33    (2)  
Contracts for differences —    —    (94)   —    (94)  
Derivative financial instruments - other —    (1)   —    —    (1)  
Total $ (32)   $ (70)   $ (128)   $ 125    $ (105)  
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The reconciliation of changes in the fair value of financial instruments based on Level 3 inputs for the three and six months ended June 30, 2020 and 2019, respectively, is as follows:
Three Months Ended June 30, Six Months Ended June 30,
(Millions) 2020 2019 2020 2019
Fair Value Beginning of Period, $ 15    $ (22)   $ 25    $ (15)  
Gains recognized in operating revenues   14    17    37   
(Losses) recognized in operating revenues (3)   —    (13)   (11)  
Total gains recognized in operating revenues   14      26   
Gains recognized in OCI       —   
(Losses) recognized in OCI (1)   —    (6)   (13)  
Total gains (losses) recognized in OCI —      (4)   (13)  
Net change recognized in regulatory assets and liabilities     (1)   —   
Purchases   (26)     (26)  
Settlements (2)   (1)   (8)   (4)  
Transfers out of Level 3 (a) (1)   —    (1)   —   
Fair Value as of June 30, $ 16    $ (32)   $ 16    $ (32)  
Gains for the period included in operating revenues attributable to the change in unrealized gains relating to financial instruments still held at the reporting date
$   $ 14    $   $ 26   
(a) Transfers out of Level 3 were the result of increased observability of market data.
For assets and liabilities that are recognized in the condensed consolidated financial statements at fair value on a recurring basis, we determine whether transfers have occurred between levels in the hierarchy by re-assessing categorization based on the lowest level of input that is significant to the fair value measurement as a whole at the end of each reporting period. There have been no transfers between Level 1 and Level 2 during the periods reported.
Level 3 Fair Value Measurement
The table below illustrates the significant sources of unobservable inputs used in the fair value measurement of our Level 3 derivatives and the variability in prices for those transactions classified as Level 3 derivatives.
As of June 30, 2020        
Instruments Instrument Description Valuation Technique Valuation
Inputs
Index Avg. Max. Min.
Fixed price power and gas swaps with delivery period > two years Transactions with delivery periods exceeding two years Transactions are valued against forward market prices on a discounted basis Observable and extrapolated forward gas and power prices not all of which can be corroborated by market data for identical or similar products NYMEX ($/MMBtu) $ 2.84    $ 4.90    $ 1.48   
Indiana hub ($/MWh) $ 30.14    $ 61.12    $ 16.36   
Mid C ($/MWh) $ 24.78    $ 105.00    $ (0.50)  
Minn hub ($/MWh) $ 24.70    $ 52.17    $ 11.52   
NoIL hub ($/MWh) $ 26.92    $ 55.39    $ 12.70   
Ercot S hub ($/MWh) $ 31.28    $ 248.39    $ 11.41   
Our Level 3 valuations primarily consist of NYMEX gas and fixed price power swaps with delivery periods extending through 2024 and 2032, respectively. The gas swaps are used to hedge merchant wind positions. The power swaps are used to hedge merchant wind production in the West and Midwest.
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We performed a sensitivity analysis around the Level 3 gas and power positions to changes in the valuation inputs. Given the nature of the transactions in Level 3, the only material input to the valuation is the market price of gas or power for transactions with delivery periods exceeding two years. The fixed price power swaps are economic hedges of future power generation, with decreases in power prices resulting in unrealized gains and increases in power prices resulting in unrealized losses. The gas swaps are economic hedges of merchant generation, with decreases in gas prices resulting in unrealized gains and increases in gas prices resulting in unrealized losses. As all transactions are economic hedges of the underlying position, any changes in the fair value of these transactions will be offset by changes in the anticipated purchase/sales price of the underlying commodity.
Two elements of the analytical infrastructure employed in valuing transactions are the price curves used in the calculation of market value and the models themselves. We maintain and document authorized trading points and associated forward price curves, and we develop and document models used in valuation of the various products.
Transactions are valued in part on the basis of forward price, correlation and volatility curves. We maintain and document descriptions of these curves and their derivations. Forward price curves used in valuing the transactions are applied to the full duration of the transaction.
The determination of fair value of the CfDs (see Note 7 for further details on CfDs) was based on a probability-based expected cash flow analysis that was discounted at risk-free interest rates, as applicable, and an adjustment for non-performance risk using credit default swap rates. Certain management assumptions were required, including development of pricing that extends over the term of the contracts. We believe this methodology provides the most reasonable estimates of the amount of future discounted cash flows associated with the CfDs. Additionally, on a quarterly basis, we perform analytics to ensure that the fair value of the derivatives is consistent with changes, if any, in the various fair value model inputs. Significant isolated changes in the risk of non-performance, the discount rate or the contract term pricing would result in an inverse change in the fair value of the CfDs. Additional quantitative information about Level 3 fair value measurements of the CfDs is as follows:
Range at
Unobservable Input June 30, 2020
Risk of non-performance
0.76% - 0.98%
Discount rate
0.29% - 0.49%
Forward pricing ($ per KW-month)
$2.00 - $5.30
Fair Value of Debt
As of June 30, 2020 and December 31, 2019, debt consisted of first mortgage bonds, unsecured pollution control notes and other various non-current debt securities. The estimated fair value of debt amounted to $8,917 million and $8,168 million as of June 30, 2020 and December 31, 2019, respectively. The estimated fair value was determined, in most cases, by discounting the future cash flows at market interest rates. The interest rates used to make these calculations take into account the credit ratings of the borrowers in each case. All debt is considered Level 2 within the fair value hierarchy.
Note 7. Derivative Instruments and Hedging
Our Networks and Renewables activities are exposed to certain risks, which are managed by using derivative instruments. All derivative instruments are recognized as either assets or liabilities at fair value on our condensed consolidated balance sheets in accordance with the accounting requirements concerning derivative instruments and hedging activities.
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(a) Networks activities
The tables below present Networks' derivative positions as of June 30, 2020 and December 31, 2019, respectively, including those subject to master netting agreements and the location of the net derivative positions on our condensed consolidated balance sheets:
As of June 30, 2020 Current Assets Noncurrent Assets Current Liabilities Noncurrent Liabilities
(Millions)        
Not designated as hedging instruments        
Derivative assets $   $   $   $  
Derivative liabilities (4)   (1)   (30)   (86)  
    (26)   (84)  
Designated as hedging instruments
Derivative assets —    —    —    —   
Derivative liabilities —    —    (3)   (1)  
—    —    (3)   (1)  
Total derivatives before offset of cash collateral     (29)   (85)  
Cash collateral receivable —    —    13     
Total derivatives as presented in the balance sheet
$   $   $ (16)   $ (83)  
As of December 31, 2019 Current Assets Noncurrent Assets Current Liabilities Noncurrent Liabilities
(Millions)        
Not designated as hedging instruments        
Derivative assets $   $   $   $  
Derivative liabilities (1)   (2)   (39)   (86)  
—      (38)   (84)  
Designated as hedging instruments
Derivative assets —    —    —    —   
Derivative liabilities —    —    (1)   (1)  
—    —    (1)   (1)  
Total derivatives before offset of cash collateral —      (39)   (85)  
Cash collateral receivable —    —    27     
Total derivatives as presented in the balance sheet
$ —    $   $ (12)   $ (84)  
The net notional volumes of the outstanding derivative instruments associated with Networks activities as of June 30, 2020 and December 31, 2019, respectively, consisted of:
  June 30, December 31,
As of 2020 2019
(Millions)    
Wholesale electricity purchase contracts (MWh) 4.6    5.1   
Natural gas purchase contracts (Dth) 7.7    8.5   
Fleet fuel purchase contracts (Gallons) 1.9    2.2   
Derivatives not designated as hedging instruments
NYSEG and RG&E have an electric commodity charge that passes costs for the market price of electricity through rates. We use electricity contracts, both physical and financial, to manage fluctuations in electricity commodity prices in order to provide price stability to customers. We include the cost or benefit of those contracts in the amount expensed for electricity purchased when the related electricity is sold. We record changes in the fair value of electric hedge contracts to derivative assets and/or liabilities with an offset to regulatory assets and/or regulatory liabilities, in accordance with the accounting requirements concerning regulated operations.
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NYSEG and RG&E have purchased gas adjustment clauses that allow us to recover through rates any changes in the market price of purchased natural gas, substantially eliminating their exposure to natural gas price risk. NYSEG and RG&E use natural gas futures and forwards to manage fluctuations in natural gas commodity prices to provide price stability to customers. We include the cost or benefit of natural gas futures and forwards in the commodity cost that is passed on to customers when the related sales commitments are fulfilled. We record changes in the fair value of natural gas hedge contracts to derivative assets and/or liabilities with an offset to regulatory assets and/or regulatory liabilities in accordance with the accounting requirements for regulated operations.
The amounts for electricity hedge contracts and natural gas hedge contracts recognized in regulatory liabilities and assets as of June 30, 2020 and December 31, 2019 and amounts reclassified from regulatory assets and liabilities into income for the three and six months ended June 30, 2020 and 2019 are as follows:
(Millions) Loss or Gain Recognized in Regulatory Assets/Liabilities Location of Loss Reclassified from Regulatory Assets/Liabilities into Income Loss Reclassified from Regulatory Assets/Liabilities into Income
As of Three Months Ended June 30, Six Months Ended June 30,
June 30, 2020 Electricity Natural Gas 2020    Electricity Natural Gas Electricity Natural Gas
Regulatory assets $ 15    $ —    Purchased power, natural gas and fuel used $ 12    $ —    $ 33    $  
Regulatory liabilities $ —    $ (1)  
December 31, 2019 2019   
Regulatory assets $ 24    $   Purchased power, natural gas and fuel used $   $ —    $ 10    $ —   
Pursuant to a PURA order, UI and Connecticut’s other electric utility, The Connecticut Light and Power Company (CL&P), each executed two long-term CfDs with certain incremental capacity resources, each of which specifies a capacity quantity and a monthly settlement that reflects the difference between a forward market price and the contract price. The costs or benefits of each contract will be paid by or allocated to customers and will be subject to a cost-sharing agreement between UI and CL&P pursuant to which approximately 20% of the cost or benefit is borne by or allocated to UI customers and approximately 80% is borne by or allocated to CL&P customers.
PURA has determined that costs associated with these CfDs will be fully recoverable by UI and CL&P through electric rates, and UI has deferred recognition of costs (a regulatory asset) or obligations (a regulatory liability), including carrying costs. For those CfDs signed by CL&P, UI records its approximate 20% portion pursuant to the cost-sharing agreement noted above. As of June 30, 2020, UI has recorded a gross derivative asset of $2 million ($0 of which is related to UI’s portion of the CfD signed by CL&P), a regulatory asset of $93 million, a gross derivative liability of $95 million ($93 million of which is related to UI’s portion of the CfD signed by CL&P) and a regulatory liability of $0. As of December 31, 2019, UI had recorded a gross derivative asset of $2 million ($0 of which is related to UI’s portion of the CfD signed by CL&P), a regulatory asset of $92 million, a gross derivative liability of $94 million ($92 million of which is related to UI’s portion of the CfD signed by CL&P) and a regulatory liability of $0.
The unrealized gains and losses from fair value adjustments to these derivatives, which are recorded in regulatory assets, for the three and six months ended June 30, 2020 and 2019, respectively, were as follows:
Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
(Millions)        
Derivative assets $ —    $ (2)   $ —    $ (3)  
Derivative liabilities $   $   $ (1)   $  
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Derivatives designated as hedging instruments
The effect of derivatives in cash flow hedging relationships on Other Comprehensive Income (OCI) and income for the three and six months ended June 30, 2020 and 2019, respectively, consisted of:
Three Months Ended June 30, Gain (Loss) Recognized in OCI on Derivatives (a) Location of Loss Reclassified from Accumulated OCI into Income Loss Reclassified from Accumulated OCI into Income Total amount per Income Statement
(Millions)
2020
Interest rate contracts $ —    Interest expense $   $ 89   
Commodity contracts   Purchased power, natural gas and fuel used   265   
Foreign currency exchange contracts
  —   
Total $   $  
2019
Interest rate contracts $ —    Interest expense $   $ 76   
Commodity contracts (1)   Purchased power, natural gas and fuel used —    259   
Foreign currency exchange contracts
  —   
Total $ —    $  
Six Months Ended June 30, (Loss) Gain Recognized in OCI on Derivatives (a) Location of Loss Reclassified from Accumulated OCI into Income Loss Reclassified from Accumulated OCI into Income Total amount per Income Statement
(Millions)
2020
Interest rate contracts $ —    Interest expense $   $ 165   
Commodity contracts (1)   Purchased power, natural gas and fuel used   740   
Foreign currency exchange contracts
(2)   —   
Total $ (3)   $  
2019
Interest rate contracts $ —    Interest expense $   $ 154   
Commodity contracts —    Purchased power, natural gas and fuel used —    822   
Foreign currency exchange contracts
  —   
Total $   $  
(a) Changes in accumulated OCI are reported on a pre-tax basis.
The net loss in accumulated OCI related to previously settled forward starting swaps and accumulated amortization is $53 million and $55 million as of June 30, 2020 and December 31, 2019, respectively. We recorded $1 million and $2 million in net derivative losses related to discontinued cash flow hedges for the three and six months ended June 30, 2020, respectively and $2 million and $4 million for the three and six months ended June 30, 2019, respectively. We will amortize approximately $2 million of discontinued cash flow hedges for the remainder of 2020.
Unrealized losses of $4 million on hedge derivatives are reported in OCI because the forecasted transactions are considered to be probable as of June 30, 2020. We expect that $1 million of those losses will be reclassified into earnings within the next twelve months. The maximum length of time over which we are hedging our exposure to the variability in future cash flows for forecasted fleet fuel transactions is 10 months.
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(b) Renewables activities
We sell fixed-price gas and power forwards to hedge our merchant wind assets from declining commodity prices for our Renewables business. We also purchase fixed-price gas and basis swaps and sell fixed-price power in the forward market to hedge the spark spread or heat rate of our merchant thermal assets. We also enter into tolling arrangements to sell the output of our thermal generation facilities.
Renewables has proprietary trading operations that enter into fixed-price power and gas forwards in addition to basis swaps. The intent is to speculate on fixed-price commodity and basis volatility in the U.S. commodity markets.
Renewables will periodically designate derivative contracts as cash flow hedges for both its thermal and wind portfolios. The fair value changes are recorded in OCI. For thermal operations, Renewables will periodically designate both fixed-price NYMEX gas contracts and natural gas basis swaps that hedge the fuel requirements of its Klamath Plant in Klamath, Oregon. Renewables will also designate fixed-price power swaps at various locations in the U.S. market to hedge future power sales from its Klamath facility and various wind farms.
The net notional volumes of outstanding derivative instruments associated with Renewables activities as of June 30, 2020 and December 31, 2019, respectively, consisted of:
June 30, December 31,
As of 2020 2019
(MWh/Dth in millions)    
Wholesale electricity purchase contracts    
Wholesale electricity sales contracts    
Natural gas and other fuel purchase contracts 33    29   
Financial power contracts 12    10   
Basis swaps – purchases 43    42   
Basis swaps – sales —     
The fair values of derivative contracts associated with Renewables activities as of June 30, 2020 and December 31, 2019, respectively, consisted of:
June 30, December 31,
As of 2020 2019
(Millions)    
Wholesale electricity purchase contracts $ (4)   $ 10   
Wholesale electricity sales contracts 26     
Natural gas and other fuel purchase contracts   (2)  
Financial power contracts 78    73   
Total $ 101    $ 85   
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The tables below present Renewables' derivative positions as of June 30, 2020 and December 31, 2019, respectively, including those subject to master netting agreements and the location of the net derivative position on our condensed consolidated balance sheets:
As of June 30, 2020 Current Assets Noncurrent Assets Current Liabilities Noncurrent Liabilities
(Millions)
Not designated as hedging instruments
Derivative assets $ 36    $ 119    $ 45    $ —   
Derivative liabilities (1)   (18)   (52)   —   
35    101    (7)   —   
Designated as hedging instruments
Derivative assets   24       
Derivative liabilities —    (19)   (9)   (2)  
    —    (1)  
Total derivatives before offset of cash collateral 37    106    (7)   (1)  
Cash collateral (payable) receivable (11)   (25)     —   
Total derivatives as presented in the balance sheet $ 26    $ 81    $ (5)   $ (1)  
As of December 31, 2019 Current Assets Noncurrent Assets Current Liabilities Noncurrent Liabilities
(Millions)
Not designated as hedging instruments
Derivative assets $ 23    $ 110    $ 42    $ 13   
Derivative liabilities (1)   (7)   (48)   (18)  
22    103    (6)   (5)  
Designated as hedging instruments
Derivative assets —    18       
Derivative liabilities —    (9)   (13)   (6)  
—      (8)   (2)  
Total derivatives before offset of cash collateral 22    112    (14)   (7)  
Cash collateral (payable) receivable (11)   (30)      
Total derivatives as presented in the balance sheet $ 11    $ 82    $ (7)   $ (1)  
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Derivatives not designated as hedging instruments
The effects of trading and non-trading derivatives associated with Renewables activities for the three and six months ended June 30, 2020, consisted of:
Three Months Ended Six Months Ended
June 30, 2020 June 30, 2020
Trading Non-trading Total amount per income statement Trading Non-trading Total amount per income statement
(Millions)
Operating Revenues
Wholesale electricity purchase contracts $ (1)   $ —    $ (2)   $ —   
Wholesale electricity sales contracts       15   
Financial power contracts (3)   (8)   (3)   14   
Financial and natural gas contracts —    (5)   —    (5)  
Total (loss) gain included in operating revenues
$ (2)   $ (9)   $ 1,392    $   $ 24    $ 3,181   
Purchased power, natural gas and fuel used
Wholesale electricity purchase contracts $ —    $ —    $ —    $ (11)  
Financial power contracts —      —    (1)  
Financial and natural gas contracts —      —     
Total gain (loss) included in purchased power, natural gas and fuel used
$ —    $ 10    $ 265    $ —    $ (9)   $ 740   
Total (Loss) Gain $ (2)   $   $   $ 15   
The effects of trading and non-trading derivatives associated with Renewables activities for the three and six months ended June 30, 2019, consisted of:
Three Months Ended Six Months Ended
June 30, 2019 June 30, 2019
Trading Non-trading Total amount per income statement Trading Non-trading Total amount per income statement
(Millions)
Operating Revenues
Wholesale electricity purchase contracts $ (2)   $ —    $ (1)   $ —   
Wholesale electricity sales contracts       (5)  
Financial power contracts   22    —     
Financial and natural gas contracts —      (1)   —   
Total gain included in operating revenues
$   $ 28    $ 1,400    $ —    $   $ 3,242   
Purchased power, natural gas and fuel used
Wholesale electricity purchase contracts $ —    $ (3)   $ —    $ 17   
Financial power contracts —    (3)   —    (2)  
Financial and natural gas contracts —    (3)   —     
Total (loss) gain included in purchased power, natural gas and fuel used
$ —    $ (9)   $ 259    $ —    $ 19    $ 822   
Total Gain $   $ 19    $ —    $ 23   
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Derivatives designated as hedging instruments
The effect of derivatives in cash flow hedging relationships on accumulated OCI and income for the three and six months ended June 30, 2020 and 2019, respectively, consisted of:
Three Months Ended June 30, Gain Recognized in OCI on Derivatives (a) Location of (Gain) Reclassified from Accumulated OCI into Income (Gain) Reclassified from Accumulated OCI into Income Total amount per Income Statement
(Millions)
2020
Commodity contracts $   Operating revenues $ (1)   $ 1,392   
2019
Commodity contracts $   Operating revenues $ —    $ 1,400   
Six Months Ended June 30, Gain (Loss) Recognized in OCI on Derivatives (a) Location of (Gain) Reclassified from Accumulated OCI into Income (Gain) Reclassified from Accumulated OCI into Income Total amount per Income Statement
(Millions)
2020
Commodity contracts $   Operating revenues $ (1)   $ 3,181   
2019
Commodity contracts $ (15)   Operating revenues $ —    $ 3,242   
(a) Changes in OCI are reported on a pre-tax basis.
Amounts are reclassified from accumulated OCI into income in the period during which the transaction being hedged affects earnings or when it becomes probable that a forecasted transaction being hedged would not occur. Notwithstanding future changes in prices, approximately $4 million of gains included in accumulated OCI at June 30, 2020, are expected to be reclassified into earnings within the next twelve months. We did not record any net derivative losses related to discontinued cash flow hedges for both the three and six months ended June 30, 2020 and 2019.
(c) Interest rate contracts
AVANGRID uses financial derivative instruments from time to time to alter its fixed and floating rate debt balances or to hedge fixed rates in anticipation of future fixed rate issuances.
On January 31, 2020, AVANGRID entered into two treasury locks, with a total notional amount of $600 million, to hedge the issuance of forecasted fixed rate debt. The treasury locks were designated and qualified as cash flow hedges and were settled upon the second quarter debt issuance described in Note 15. The $27 million loss on the treasury locks is reported as a component of accumulated OCI and is being reclassified into earnings during the periods in which the related interest expense of the forecasted debt is incurred.
The net loss in accumulated OCI related to previously settled interest rate contracts is $62 million and $38 million as of June 30, 2020 and December 31, 2019, respectively. We amortized into income $2 million and $3 million of the loss related to the settled interest rate contracts for the three and six months ended June 30, 2020, respectively, and $0 for the three and six months ended June 30, 2019. We will amortize approximately $5 million of the net loss on the interest rate contracts for the remainder of 2020.
The effect of derivatives in cash flow hedging relationships on accumulated OCI for the three and six months ended June 30, 2020 and 2019, respectively, consisted of:
Three Months Ended June 30, Gain (Loss) Recognized in OCI on Derivatives (a) Location of Loss Reclassified from Accumulated OCI into Income Loss Reclassified from Accumulated OCI into Income Total amount per Income Statement
(Millions)
2020
Interest rate contracts $   Interest expense $   $ 89   
2019
Interest rate contracts $ (4)   Interest expense $ —    $ 76   
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Six Months Ended June 30, (Loss) Recognized in OCI on Derivatives (a) Location of Loss Reclassified from Accumulated OCI into Income Loss Reclassified from Accumulated OCI into Income Total amount per Income Statement
(Millions)
2020
Interest rate contracts $ (27)   Interest expense $   $ 165   
2019
Interest rate contracts $ (24)   Interest expense $ —    $ 154   
(a) Changes in OCI are reported on a pre-tax basis. The amounts in accumulated OCI are being reclassified into earnings over the underlying debt maturity periods.
(d) Counterparty credit risk management
NYSEG and RG&E face risks related to counterparty performance on hedging contracts due to counterparty credit default. We have developed a matrix of unsecured credit thresholds that are applicable based on the respective counterparty’s or the counterparty guarantor’s credit rating, as provided by Moody’s or Standard & Poor’s. When our exposure to risk for a counterparty exceeds the unsecured credit threshold, the counterparty is required to post additional collateral or we will no longer transact with the counterparty until the exposure drops below the unsecured credit threshold.
The wholesale power supply agreements of UI contain default provisions that include required performance assurance, including certain collateral obligations, in the event that UI’s credit rating on senior debt were to fall below investment grade. If such an event had occurred as of June 30, 2020, UI would have had to post an aggregate of approximately $13 million in collateral.
We have various master netting arrangements in the form of multiple contracts with various single counterparties that are subject to contractual agreements that provide for the net settlement of all contracts through a single payment. Those arrangements reduce our exposure to a counterparty in the event of a default on or termination of any single contract. For financial statement presentation purposes, we offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim or the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement. The amounts of cash collateral under master netting arrangements that have not been offset against net derivative positions were $16 million and $21 million as of June 30, 2020 and December 31, 2019, respectively. Derivative instruments settlements and collateral payments are included throughout the “Changes in operating assets and liabilities” section of operating activities in our condensed consolidated statements of cash flows.
Certain of our derivative instruments contain provisions that require us to maintain an investment grade credit rating on our debt from each of the major credit rating agencies. If our debt were to fall below investment grade, we would be in violation of those provisions and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit risk related contingent features that are in a liability position as of June 30, 2020 is $15 million, for which we have posted collateral.
Note 8. Contingencies
We are party to various legal disputes arising as part of our normal business activities. We assess our exposure to these matters and record estimated loss contingencies when a loss is likely and can be reasonably estimated. We do not provide for accrual of legal costs expected to be incurred in connection with a loss contingency.
Transmission - ROE Complaint – CMP and UI
On September 30, 2011, the Massachusetts Attorney General, DPU, PURA, New Hampshire Public Utilities Commission, Rhode Island Division of Public Utilities and Carriers, Vermont Department of Public Service, numerous New England consumer advocate agencies and transmission tariff customers collectively filed a joint complaint with the FERC pursuant to sections 206 and 306 of the Federal Power Act, against several New England Transmission Owners (NETOs) claiming that the approved base ROE of 11.14% used by NETOs in calculating formula rates for transmission service under the ISO-New England Open Access Transmission Tariff (OATT) was not just and reasonable and seeking a reduction of the base ROE with refunds to customers for the 15-month refund periods beginning October 1, 2011 (Complaint I), December 27, 2012 (Complaint II), July 31, 2014 (Complaint III) and April 29, 2016 (Complaint IV).
On October 16, 2014, the FERC issued its decision in Complaint I, setting the base ROE at 10.57% and a maximum total ROE of 11.74% (base plus incentive ROEs) for the October 2011 – December 2012 period as well as prospectively from October 16,
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2014. On March 3, 2015, the FERC upheld its decision and further clarified that the 11.74% ROE cap will be applied on a project specific basis and not on a transmission owner’s total average transmission return. The complaints were consolidated and the administrative law judge issued an initial decision on March 22, 2016. The initial decision determined that, (1) for the fifteen month refund period in Complaint II, the base ROE should be 9.59% and that the ROE Cap (base ROE plus incentive ROEs) should be 10.42% and (2) for the fifteen month refund period in Complaint III and prospectively, the base ROE should be 10.90% and that the ROE Cap should be 12.19%. The initial decision in Complaints II and III is the administrative law judge’s recommendation to the FERC Commissioners.
CMP and UI reserved for refunds for Complaints I, II and III consistent with the FERC’s March 3, 2015 decision in Complaint I. Refunds were provided to customers for Complaint I. The CMP and UI total reserve associated with Complaints II and III is $26 million and $7 million, respectively, as of June 30, 2020, which has not changed since December 31, 2019, except for the accrual of carrying costs. If adopted as final by the FERC, the impact of the initial decision by the FERC administrative law judge would be an additional aggregate reserve for Complaints II and III of $17 million, which is based upon currently available information for these proceedings.
Following various intermediate hearings, orders and appellate decisions, on October 16, 2018, the FERC issued an order directing briefs and proposing a new methodology to calculate the NETOs ROE that is contained in NETOs’ transmission formula rate on file at the FERC (the October 2018 Order). Pursuant to the October 2018 Order, the NETOs filed initial briefs on the proposed methodology in all four Complaints on January 11, 2019 and replied to the initial briefs on March 8, 2019.
On November 21, 2019, the FERC issued rulings on two complaints challenging the base return on equity for Midcontinent Independent System Operator, or MISO transmission owners. These rulings established a new zone of reasonableness based on equal weighting of the DCF and capital-asset pricing model for establishing the base return on equity. This resulted in a base return on equity of 9.88% as the midpoint of the zone of reasonableness. Various parties have requested rehearing on this decision, which was granted. On May 21, 2020, FERC issued a ruling, which, among other things, adjusted the methodology to determine the MISO transmission owners’ ROE, resulting in an increase in ROE from 9.88% to 10.02% by utilizing the risk premium model in addition to the DCF model and capital-asset pricing model under both prongs of Section 206 of the FPA, and calculated the zone of reasonableness into equal thirds rather than employing the quartile approach. We cannot predict the outcome of these proceedings, including the potential impact the MISO transmission owners' ROE proceeding may have in establishing a precedent for our pending four Complaints.
California Energy Crisis Litigation
Two California agencies brought a complaint in 2001 against a long-term power purchase agreement entered into by Renewables, as seller, to the California Department of Water Resources, as purchaser, alleging that the terms and conditions of the power purchase agreement were unjust and unreasonable. The FERC dismissed Renewables from the proceedings; however, the Ninth Circuit Court of Appeals reversed the FERC's dismissal of Renewables from the proceeding.
Joining with two other parties, Renewables filed a petition for certiorari in the United States Supreme Court on May 3, 2007. In an order entered on June 27, 2008, the Supreme Court granted Renewables’ petition for certiorari, vacated the appellate court's judgment, and remanded the case to the appellate court for further consideration in light of the Supreme Court’s decision in a similar case. In light of the Supreme Court's order, on December 4, 2008, the Ninth Circuit Court of Appeals vacated its prior opinion and remanded the complaint proceedings to the FERC for further proceedings consistent with the Supreme Court's rulings. In 2014, the FERC assigned an administrative law judge to conduct evidentiary hearings. Following discovery, the FERC trial staff recommended that the complaint against Renewables be dismissed.
A hearing was held before a FERC administrative law judge in November and early December 2015. A preliminary proposed ruling by the administrative law judge was issued on April 12, 2016. The proposed ruling found no evidence that Renewables had engaged in any unlawful market conduct that would justify finding the Renewables power purchase agreements unjust and unreasonable. However, the proposed ruling did conclude that the price of the power purchase agreements imposed an excessive burden on customers in the amount of $259 million. Renewables position, as presented at hearings and agreed by the FERC trial staff, is that Renewables entered into bilateral power purchase contracts appropriately and complied with all applicable legal standards and requirements. The parties have submitted briefs on exceptions to the administrative law judge’s proposed ruling to the FERC. There is no specific timetable for the FERC's ruling. In April 2018, Renewables requested, based on the nearly two years of delay from the preliminary proposed ruling and the Supreme Court precedent, that the FERC issue a final decision expeditiously. We cannot predict the outcome of this proceeding.
Class Action Regarding LDC Gas Transportation Service on Algonquin Gas Transmission
PNE Energy Supply LLC v. Eversource Energy and Avangrid, Inc. - Class Action. On August 10, 2018, PNE Energy Supply LLC, a competitive energy supplier located in New England that purchases electricity in the day-ahead and real time wholesale
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electric market, filed a civil antitrust action, on behalf of itself and those similarly situated, against the Company and Eversource alleging that their respective gas subsidiaries illegally manipulated the supply of pipeline capacity in the “secondary capacity market” in order to artificially inflate New England natural gas and electricity prices. These allegations were also based on the conclusions of the whitepaper issued by EDF. The plaintiff claims to represent entities who purchased electricity directly in the wholesale electricity market that it claims was targeted by the alleged anticompetitive conduct of Eversource and the Company. On September 28, 2018, the Company filed a Motion to Dismiss all of the claims based on federal preemption and lack of any evidence of antitrust behavior, citing, among other reasons, the results of the FERC staff inquiry and the dismissal of the related case, "Breiding et al. v. Eversource and Avangrid," by the same court in September. The plaintiffs filed opposition to the motion to dismiss on October 26, 2018 and the Company filed a reply on November 15, 2018. The district court heard oral arguments on the motion to dismiss on January 18, 2019. On April 26, 2019, the Company filed a brief in support of its motion to dismiss, and on June 7, 2019, the district court granted the Company’s Motion to Dismiss and dismissed all claims. On July 3, 2019, the plaintiffs filed notice of appeal in the U.S. Court of Appeals for the First Circuit and, on October 18, 2019, filed a brief in support of appeal. On January 2, 2020, the Company and Eversource filed a joint motion in opposition and on January 23, 2020, the plaintiffs filed a reply brief. On April 9, 2020, the U.S. Court of Appeals for the First Circuit canceled oral arguments of the appeal and ordered the case to be decided on the briefs without oral argument. We cannot predict the outcome of this class action lawsuit.
Gas Storage Indemnification Claims
On May 1, 2018, ARHI closed a transaction to sell our gas storage business to Amphora Gas Storage USA, LLC. On October 30, 2019, ARHI received notice of a claim for indemnification from Amphora Gas Storage USA, LLC under the purchase agreement with respect to such sale in the amount of approximately $20 million related to, among other things, certain alleged violations of occupational, health and safety requirements, the condition and sufficiency of assets and a third party intellectual property infringement claim. Pursuant to the terms of the purchase agreement, the aggregate amount for which ARHI may be responsible to indemnify Amphora Gas Storage USA, LLC for all claims arising under the purchase agreement, other than those related to certain fundamental representations, tax matters and claims involving fraud, shall not exceed 15% of the purchase price, or approximately $10 million. ARHI has disputed this claim for indemnification. We cannot predict the outcome of this matter.
Guarantee Commitments to Third Parties
As of June 30, 2020, we had approximately $439 million of standby letters of credit, surety bonds, guarantees and indemnifications outstanding. These instruments provide financial assurance to the business and trading partners of AVANGRID and its subsidiaries in their normal course of business. The instruments only represent liabilities if AVANGRID or its subsidiaries fail to deliver on contractual obligations. We therefore believe it is unlikely that any material liabilities associated with these instruments will be incurred and, accordingly, as of June 30, 2020, neither we nor our subsidiaries have any liabilities recorded for these instruments.
PILOT Program Commitment
In June 2020, Renewables entered into a Payment In Lieu of Taxes (PILOT) agreement related to two of its projects with Torrance County, New Mexico. The agreement requires PILOT payments to Torrance County through 2049. No payments are due until 2021.
Note 9. Environmental Liabilities
Environmental laws, regulations and compliance programs may occasionally require changes in our operations and facilities and may increase the cost of electric and natural gas service. We do not provide for accruals of legal costs expected to be incurred in connection with loss contingencies.
Waste sites
The Environmental Protection Agency and various state environmental agencies, as appropriate, have notified us that we are among the potentially responsible parties that may be liable for costs incurred to remediate certain hazardous substances at twenty-six waste sites, which do not include sites where gas was manufactured in the past. Sixteen of the twenty-six sites are included in the New York State Registry of Inactive Hazardous Waste Disposal Sites; five sites are included in Maine’s Uncontrolled Sites Program; one site is included in the Brownfield Cleanup Program and one site is included on the Massachusetts Non-Priority Confirmed Disposal Site list. The remaining sites are not included in any registry list. Finally, six of the twenty-six sites are also included on the National Priorities list. Any liability may be joint and several for certain sites.
We have recorded an estimated liability of $6 million related to twelve of the twenty-six sites. We have paid remediation costs related to the remaining fourteen sites and do not expect to incur additional liabilities. Additionally, we have recorded an
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estimated liability of $9 million related to another twelve sites where we believe it is probable that we will incur remediation and/or monitoring costs, although we have not been notified that we are among the potentially responsible parties or that we are regulated under State Resource Conservation and Recovery Act programs. It is possible the ultimate cost to remediate these sites may be significantly more than the accrued amount. Our estimate for costs to remediate these sites ranges from $13 million to $23 million as of June 30, 2020. Factors affecting the estimated remediation amount include the remedial action plan selected, the extent of site contamination, and the allocation of the clean-up costs.
Manufactured Gas Plants
We have a program to investigate and perform necessary remediation at our fifty-three sites where gas was manufactured in the past (Manufactured Gas Plants, or MGPs). Six sites are included in the New York State Registry; three sites are included in the New York State Department of Environmental Conservation Multi-Site Order on Consent; three sites are part of Maine’s Voluntary Response Action Program with two such sites part of Maine’s Uncontrolled Sites Program and one site is pending application into the Brownfield Cleanup Program. The remaining sites are not included in any registry list. We have entered into consent orders with various environmental agencies to investigate and, where necessary, remediate forty-one of the fifty-three sites.
Our estimate for all costs related to investigation and remediation of the fifty-three sites ranges from $185 million to $393 million as of June 30, 2020. Our estimate could change materially based on facts and circumstances derived from site investigations, changes in required remedial actions, changes in technology relating to remedial alternatives and changes to current laws and regulations.
Certain of our Connecticut and Massachusetts regulated gas companies own or have previously owned properties where MGPs had historically operated. MGP operations have led to contamination of soil and groundwater with petroleum hydrocarbons, benzene and metals, among other things, at these properties, the regulation and cleanup of which is regulated by the federal Resource Conservation and Recovery Act as well as other federal and state statutes and regulations. Each of the companies has or had an ownership interest in one or more such properties contaminated as a result of MGP-related activities. Under the existing regulations, the cleanup of such sites requires state and at times, federal, regulators’ involvement and approval before cleanup can commence. In certain cases, such contamination has been evaluated, characterized and remediated. In other cases, the sites have been evaluated and characterized, but not yet remediated. Finally, at some of these sites, the scope of the contamination has not yet been fully characterized; no liability was recorded related to these sites as of June 30, 2020 and no amount of loss, if any, can be reasonably estimated at this time. In the past, the companies have received approval for the recovery of MGP-related remediation expenses from customers through rates and will seek recovery in rates for ongoing MGP-related remediation expenses for all of their MGP sites.
As of June 30, 2020 and December 31, 2019, the liability associated with our MGP sites in Connecticut was $96 million and $97 million, respectively, the remediation costs of which could be significant and will be subject to a review by PURA as to whether these costs are recoverable in rates.
Our total recorded liability to investigate and perform remediation at all known inactive MGP sites discussed above and other sites was $348 million and $349 million as of June 30, 2020 and December 31, 2019, respectively. We recorded a corresponding regulatory asset, net of insurance recoveries and the amount collected from FirstEnergy, as described below, because we expect to recover the net costs in rates. Our environmental liability accruals are recorded on an undiscounted basis and are expected to be paid through the year 2056.
FirstEnergy
NYSEG sued FirstEnergy under the Comprehensive Environmental Response, Compensation, and Liability Act to recover environmental cleanup costs at sixteen former MGP sites, which are included in the discussion above. In July 2011, the District Court issued a decision and order in NYSEG’s favor, requiring FirstEnergy to pay NYSEG approximately $60 million for past and future clean-up costs at the sixteen sites in dispute. On September 9, 2011, FirstEnergy paid NYSEG $30 million, representing their share of past costs of $27 million and pre-judgment interest of $3 million.
FirstEnergy appealed the decision to the Second Circuit Court of Appeals. On September 11, 2014, the Second Circuit Court of Appeals affirmed the District Court’s decision in NYSEG’s favor, but modified the decision for nine sites, reducing NYSEG’s damages for incurred costs from $27 million to $22 million, excluding interest, and reducing FirstEnergy’s allocable share of future costs at these sites. NYSEG refunded FirstEnergy the excess $5 million in November 2014.
FirstEnergy remains liable for a substantial share of clean up expenses at nine MGP sites. Based on current projections, FirstEnergy’s share is estimated at approximately $21 million. This amount is being treated as a contingent asset and has not
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been recorded as either a receivable or a decrease to the environmental provision. Any recovery will be flowed through to NYSEG customers.
English Station
In January 2012, Evergreen Power, LLC (Evergreen Power) and Asnat Realty LLC (Asnat), then owners of a former generation site on the Mill River in New Haven (English Station) that UI sold to Quinnipiac Energy in 2000, filed a lawsuit in federal district court in Connecticut related to environmental remediation at the English Station site. This proceeding was stayed in 2014 pending resolutions of other proceedings before the Connecticut Department of Energy and Environmental Protection (DEEP) concerning the English Station site. In December 2016, the court administratively closed the file without prejudice to reopen upon the filing of a motion to reopen by any party.
In December 2013, Evergreen Power and Asnat filed a subsequent lawsuit related to the English Station site. On April 16, 2018, the plaintiffs filed a revised complaint alleging fraud and unjust enrichment against UIL and UI and adding former UIL officers as named defendants alleging fraud. On February 21, 2019, the court granted our Motion to Strike with respect to all counts except for the count against UI for unjust enrichment. The counts stricken include all counts against the individual defendants as well as against UIL. The plaintiffs have appealed the court's decision to strike. We cannot predict the outcome of this matter.
On April 8, 2013, DEEP issued an administrative order addressed to UI, Evergreen Power, Asnat and others, ordering the parties to take certain actions related to investigating and remediating the English Station site. This proceeding was stayed while DEEP and UI continue to work through the remediation process pursuant to the consent order described below. Status reports are periodically filed with DEEP.
On August 4, 2016, DEEP issued a partial consent order (the consent order), that, subject to its terms and conditions, requires UI to investigate and remediate certain environmental conditions within the perimeter of the English Station site. Under the consent order, to the extent that the cost of this investigation and remediation is less than $30 million, UI will remit to the State of Connecticut the difference between such cost and $30 million to be used for a public purpose as determined in the discretion of the Governor of the State of Connecticut, the Attorney General of the State of Connecticut and the Commissioner of DEEP. UI is obligated to comply with the terms of the consent order even if the cost of such compliance exceeds $30 million. Under the terms of the consent order, the State will discuss options with UI on recovering or funding any cost above $30 million such as through public funding or recovery from third parties; however, it is not bound to agree to or support any means of recovery or funding. UI has initiated its process to investigate and remediate the environmental conditions within the perimeter of the English Station site pursuant to the consent order.
As of June 30, 2020 and December 31, 2019, the amount reserved for this matter was $17 million and $16 million, respectively. We cannot predict the outcome of this matter.
On April 24, 2020, ACV Environmental Services Company (ACV) filed a lawsuit in Connecticut Superior Court against UI arising out of a contract dispute for services rendered by ACV in the demolition of the Station B at the English Station site. The complaint seeks damages in the amount of $5 million on claims of breach of contract, breach of the covenant of good faith and fair dealing, quantum merit, and unjust enrichment. The claims arise from the alleged non-payment of certain change order requests. We cannot predict the outcome of this matter.
Note 10. Post-retirement and Similar Obligations
We made $15 million and $25 million of pension contributions for the three and six months ended June 30, 2020, respectively. We expect to make additional contributions of $59 million for the remainder of 2020.
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The components of net periodic benefit cost for pension benefits for the three and six months ended June 30, 2020 and 2019, respectively, consisted of:
Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
(Millions)        
Service cost $ 11    $ 10    $ 23    $ 20   
Interest cost 27    32    54    65   
Expected return on plan assets (50)   (48)   (100)   (96)  
Amortization of:
Prior service costs —    (1)   —    (1)  
Actuarial loss 32    27    63    57   
Net Periodic Benefit Cost $ 20    $ 20    $ 40    $ 45   
The components of net periodic benefit cost for postretirement benefits for the three and six months ended June 30, 2020 and 2019, respectively, consisted of: 
Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
(Millions)        
Service cost $ —    $ —    $   $  
Interest cost        
Expected return on plan assets (2)   (2)   (4)   (4)  
Amortization of:
Prior service costs (2)   (2)   (4)   (4)  
Actuarial loss   (1)     (1)  
Net Periodic Benefit Cost $ —    $ (1)   $ —    $ —   
Note 11. Equity
As of June 30, 2020 and December 31, 2019, we had 485,597 and 485,810 shares of common stock held in trust, respectively, and no convertible preferred shares outstanding. During the three and six months ended June 30, 2020 we released 0 and 213 shares of common stock held in trust, respectively. During both the three and six months ended June 30, 2019, we released no shares of common stock held in trust.
We maintain a repurchase agreement with J.P. Morgan Securities, LLC. (JPM), pursuant to which JPM will, from time to time, acquire, on behalf of AVANGRID, shares of common stock of AVANGRID. The purpose of the stock repurchase program is to allow AVANGRID to maintain the relative ownership percentage by Iberdrola at 81.5%. The stock repurchase program may be suspended or discontinued at any time upon notice. In May 2020, 42,777 shares were repurchased pursuant to the stock repurchase program. As of June 30, 2020, a total of 303,835 shares have been repurchased in the open market, all of which are included as AVANGRID treasury shares. The total cost of all repurchases, including commissions, was $14 million as of June 30, 2020.
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Accumulated Other Comprehensive Loss 
Accumulated Other Comprehensive Loss for the three and six months ended June 30, 2020 and 2019, respectively, consisted of:
As of March 31, Three Months Ended June 30, As of June 30, As of March 31, Three Months Ended June 30, As of June 30,
2020 2020 2020 2019 2019 2019
(Millions)            
Change in revaluation of defined benefit plans
$ (12)   $ —    $ (12)   $ (13)   $ —    $ (13)  
Loss on nonqualified pension plans (7)   —    (7)   (6)   (1)   (7)  
Unrealized gain during period on derivatives qualifying as cash flow hedges, net of income tax expense of $3 for 2020 and $1 for 2019
(36)     (29)   (20)     (18)  
Reclassification to net income of losses on cash flow hedges, net of income tax expense of $1 for 2020 and $0 for 2019(a)
(61)     (60)   (72)     (71)  
Gain on derivatives qualifying as cash flow hedges
(97)     (89)   (92)     (89)  
Accumulated Other Comprehensive (Loss) Income
$ (116)   $   $ (108)   $ (111)   $   $ (109)  
As of December 31, Six Months Ended June 30, As of June 30, As of December 31, Adoption of new accounting Six Months Ended June 30, As of June 30,
2019 2020 2020 2018 standard 2019 2019
(Millions)            
Change in revaluation of defined benefit plans
$ (12)   $ —    $ (12)   $ (11)   $ (2)   $ —    $ (13)  
Loss on nonqualified pension plans (7)   —    (7)   (6)   —    (1)   (7)  
Unrealized loss during period on derivatives qualifying as cash flow hedges, net of income tax benefit of $(5) for 2020 and $(10) for 2019
(13)   (16)   (29)     —    (27)   (18)  
Reclassification to net income of losses (gains) on cash flow hedges, net of income tax expense of $1 for both 2020 and 2019(a)
(63)     (60)   (64)   (10)     (71)  
Loss on derivatives qualifying as cash flow hedges
(76)   (13)   (89)   (55)   (10)   (24)   (89)  
Accumulated Other Comprehensive Loss
$ (95)   $ (13)   $ (108)   $ (72)   $ (12)   $ (25)   $ (109)  
(a)Reclassification is reflected in the operating expenses line item in our condensed consolidated statements of income.
Note 12. Earnings Per Share
Basic earnings per share is computed by dividing net income attributable to AVANGRID by the weighted-average number of shares of our common stock outstanding. During the three and six months ended June 30, 2020 and 2019, while we did have securities that were dilutive, these securities did not result in a change in our earnings per share calculations.
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The calculations of basic and diluted earnings per share attributable to AVANGRID, for the three and six months ended June 30, 2020 and 2019, respectively, consisted of:
Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
(Millions, except for number of shares and per share data)        
Numerator:        
Net income attributable to AVANGRID $ 88    $ 110    $ 328    $ 327   
Denominator:
Weighted average number of shares outstanding - basic 309,506,595    309,491,082    309,498,838    309,491,082   
Weighted average number of shares outstanding - diluted 309,547,451    309,512,752    309,551,660    309,509,620   
Earnings per share attributable to AVANGRID
Earnings Per Common Share, Basic $ 0.28    $ 0.36    $ 1.06    $ 1.06   
Earnings Per Common Share, Diluted $ 0.28    $ 0.36    $ 1.06    $ 1.06   
Note 13. Segment Information
Our segment reporting structure uses our management reporting structure as its foundation to reflect how AVANGRID manages the business internally and is organized by type of business. We report our financial performance based on the following two reportable segments:
Networks: includes all of the energy transmission and distribution activities, any other regulated activity originating in New York and Maine and regulated electric distribution, electric transmission and gas distribution activities originating in Connecticut and Massachusetts. The Networks reportable segment includes eight rate regulated operating segments. These operating segments generally offer the same services distributed in similar fashions, have the same types of customers, have similar long-term economic characteristics and are subject to similar regulatory requirements, allowing these operations to be aggregated into one reportable segment.
Renewables: activities relating to renewable energy, mainly wind energy generation and trading related with such activities.
The chief operating decision maker evaluates segment performance based on segment adjusted net income defined as net income adjusted to exclude restructuring charges, mark-to-market earnings from changes in the fair value of derivative instruments, accelerated depreciation derived from repowering of wind farms and costs incurred in connection with the COVID-19 pandemic.
Products and services are sold between reportable segments and affiliate companies at cost. Segment income, expense and assets presented in the accompanying tables include all intercompany transactions that are eliminated in our condensed consolidated financial statements. Refer to Note 4 - Revenue for more detailed information on revenue by segment.
Segment information as of and for the three and six months ended June 30, 2020, consisted of:
Three Months Ended June 30, 2020 Networks Renewables Other (a) AVANGRID Consolidated
(Millions)        
Revenue - external $ 1,120    $ 272    $ —    $ 1,392   
Revenue - intersegment   —    (1)   —   
Depreciation and amortization 147    94      242   
Operating income 148        155   
Earnings (losses) from equity method investments   (1)   —     
Interest expense, net of capitalization 68    (1)   22    89   
Income tax expense (benefit) 12    (16)   (2)   (6)  
Adjusted net income $ 82    $ 30    $ (14)   $ 98   
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Six Months Ended June 30, 2020 Networks Renewables Other (a) AVANGRID Consolidated
(Millions)        
Revenue - external $ 2,581    $ 600    $ —    $ 3,181   
Depreciation and amortization 295    197      493   
Operating income 457    17      482   
Earnings (losses) from equity method investments   (9)   —    (4)  
Interest expense, net of capitalization 136    —    29    165   
Income tax expense (benefit) 55    (46)   (3)    
Adjusted net income 280    76    (22)   334   
Capital expenditures 830    515    —    1,345   
As of June 30, 2020
Property, plant and equipment 16,298    9,574    10    25,882   
Equity method investments 139    527    —    666   
Total assets $ 23,467    $ 12,447    $ (1,058)   $ 34,856   
(a) Includes Corporate and intersegment eliminations.
Segment information for the three and six months ended June 30, 2019 and as of December 31, 2019, consisted of:
Three Months Ended June 30, 2019 Networks Renewables Other (a) AVANGRID Consolidated
(Millions)        
Revenue - external $ 1,092    $ 307    $   $ 1,400   
Revenue - intersegment   —    (1)   —   
Depreciation and amortization 135    87    —    222   
Operating income 155    49      207   
Earnings (losses) from equity method investments   (1)   —     
Interest expense, net of capitalization 66        76   
Income tax expense (benefit) 25    (18)   22    29   
Adjusted net income 66    64    (29)   101   
Six Months Ended June 30, 2019 Networks Renewables Other (a) AVANGRID
Consolidated
(Millions)        
Revenue - external $ 2,692    $ 549    $   $ 3,242   
Revenue - intersegment   —    (5)   —   
Depreciation and amortization 269    175    —    444   
Operating income 486    62    —    548   
Earnings (losses) from equity method investments   (3)   —     
Interest expense, net of capitalization 135      12    154   
Income tax expense (benefit) 89    (17)   (2)   70   
Adjusted net income 267    69    (16)   319   
Capital expenditures 678    659    —    1,337   
As of December 31, 2019        
Property, plant and equipment 15,840    9,368    10    25,218   
Equity method investments 139    506    —    645   
Total assets $ 23,250    $ 13,163    $ (1,997)   $ 34,416   
(a) Includes Corporate and intersegment eliminations.
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Reconciliation of Adjusted Net Income to Net Income attributable to AVANGRID for the three and six months ended June 30, 2020 and 2019, respectively, is as follows:
Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
(Millions)        
Adjusted Net Income Attributable to Avangrid, Inc. $ 98    $ 101    $ 334    $ 319   
Adjustments:
Mark-to-market earnings - Renewables (1) (2)   20    16    23   
Restructuring charges (2) (1)   (2)   (4)   (2)  
Accelerated depreciation from repowering (3)   (5)   (6)   (10)  
Impact of COVID-19 (4) (13)   —    (13)   —   
Income tax impact of adjustments   (3)     (3)  
Net Income Attributable to Avangrid, Inc. $ 88    $ 110    $ 328    $ 327   
(1)Mark-to-market earnings relates to earnings impacts from changes in the fair value of Renewables' derivative instruments associated with electricity and natural gas.
(2)Restructuring and severance related charges relate to costs to implement an initiative to mitigate costs and achieve sustainable growth.
(3)Represents the amount of accelerated depreciation derived from repowering of wind farms in Renewables.
(4)Represents costs incurred in connection with the COVID-19 pandemic.
Note 14. Related Party Transactions
We engage in related party transactions that are generally billed at cost and in accordance with applicable state and federal commission regulations.
Related party transactions for the three and six months ended June 30, 2020 and 2019, respectively, consisted of:
Three Months Ended June 30, 2020 2019
(Millions) Sales To Purchases From Sales To Purchases From
Iberdrola Renovables Energía, S.L. $ —    $ (2)   $ —    $ (5)  
Iberdrola Financiación, S.A. $ —    $ (1)   $ —    $ (1)  
Iberdrola, S.A. $ —    $ (11)   $ —    $ (10)  
Vineyard Wind $   $ —    $   $ —   
Other $ —    $ (1)   $   $ —   
Six Months Ended June 30, 2020 2019
(Millions) Sales To Purchases From Sales To Purchases From
Iberdrola Renovables Energía, S.L. $ —    $ (4)   $ —    $ (9)  
Iberdrola Financiación, S.A. $ —    $ (2)   $ —    $ (1)  
Iberdrola, S.A. $ —    $ (21)   $ —    $ (20)  
Vineyard Wind $   $ —    $   $ —   
Other $ —    $ (1)   $   $ (1)  
In addition to the statements of income items above, we made purchases of turbines for wind farms from Siemens-Gamesa, in which Iberdrola had an 8.1% ownership interest until Iberdrola sold its interest in February 2020. After the sale, the turbine purchases are no longer considered related party transactions. The amounts capitalized for transactions while Siemens-Gamesa was considered a related party were $11 million and $18 million for the periods ended June 30, 2020 and December 31, 2019, respectively.
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Related party balances as of June 30, 2020 and December 31, 2019, respectively, consisted of:
As of June 30, 2020 December 31, 2019
(Millions) Owed By Owed To Owed By Owed To
Iberdrola, S.A. $ —    $ (20)   $   $ (42)  
Iberdrola Renovables Energía, S.L. $ —    $ (4)   $ —    $ —   
Iberdrola Financiación, S.A. $ —    $ (2)   $ —    $ —   
Vineyard Wind $   $ —    $   $ —   
Iberdrola Solutions $ —    $ (11)   $ —    $ —   
Siemens-Gamesa (a) $ —    $ —    $ —    $ (18)  
Other $   $ (1)   $   $ (4)  
(a) After Iberdrola's sale of its interest of Siemens-Gamesa in February 2020, transactions with Siemens-Gamesa are no longer considered related party.
Transactions with Iberdrola, our majority shareholder, relate predominantly to the provision and allocation of corporate services and management fees. All costs that can be specifically allocated, to the extent possible, are charged directly to the company receiving such services. In situations when Iberdrola corporate services are provided to two or more companies of AVANGRID, any costs remaining after direct charges are allocated using agreed upon cost allocation methods designed to allocate such costs. We believe that the allocation method used is reasonable.
We have a bi-lateral demand note agreement with Iberdrola Solutions, LLC, which had a notes payable balance of $11 million and $0, respectively, as of June 30, 2020 and December 31, 2019.
There have been no guarantees provided or received for any related party receivables or payables. These balances are unsecured and are typically settled in cash. Interest is not charged on regular business transactions but is charged on outstanding loan balances. There have been no impairments or provisions made against any affiliated balances.
See Note 19 - Equity Method Investments for more information on Vineyard Wind, LLC (Vineyard Wind).
AVANGRID manages its overall liquidity position as part of the Iberdrola Group and is a party to a liquidity agreement with a financial institution, along with certain members of the Iberdrola Group. Cash surpluses remaining after meeting the liquidity requirements of AVANGRID and its subsidiaries may be deposited at the financial institution. Deposits, or credit balances, serve as collateral against the debit balances of other parties to the liquidity agreement. The balance at June 30, 2020 and December 31, 2019, was zero and $150 million, respectively.
AVANGRID has a credit facility with Iberdrola Financiacion, S.A.U., a company of the Iberdrola Group. The facility has a limit of $500 million and matures on June 18, 2023. AVANGRID pays a facility fee of 10.5 basis points annually on the facility. As of June 30, 2020 and December 31, 2019, there was no outstanding amount under this credit facility.
Note 15. Other Financial Statement Items
Accounts receivable and unbilled revenue, net
Accounts receivable and unbilled revenues, net as of June 30, 2020 and December 31, 2019 consisted of:
As of June 30, 2020 December 31, 2019
(Millions)
Trade receivables and unbilled revenues $ 1,054    $ 1,151   
Allowance for credit losses (85)   (69)  
Accounts receivable and unbilled revenues, net $ 969    $ 1,082   
The change in the allowance for credit losses for the three and six months ended June 30, 2020 and 2019 consisted of:
Three Months Ended June 30, Six Months Ended June 30,
(Millions) 2020 2019 2020 2019
As of Beginning of Period, $ 73    $ 66    $ 69    $ 62   
Current period provision 22    26    41    47   
Write-off as uncollectible (10)   (19)   (25)   (36)  
As of June 30, $ 85    $ 73    $ 85    $ 73   
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The Deferred Payment Arrangements (DPA) receivable balance was $59 million and $65 million at June 30, 2020 and December 31, 2019, respectively. The allowance for credit losses for DPAs at both June 30, 2020 and December 31, 2019 was $34 million and $33 million respectively. Furthermore, the change in the allowance for credit losses associated with the DPAs for both the three and six months ended June 30, 2020, was $1 million and for the three and six months ended June 30, 2019, $1 million and $2 million, respectively.
Prepayments and other current assets
Included in prepayments and other current assets are $92 million and $123 million of prepaid other taxes as of June 30, 2020 and December 31, 2019, respectively.
Property, plant and equipment and intangible assets
The accumulated depreciation and amortization as of June 30, 2020 and December 31, 2019, respectively, were as follows:
  June 30, December 31,
As of 2020 2019
(Millions)    
Property, plant and equipment    
Accumulated depreciation $ 9,493    $ 9,059   
Intangible assets    
Accumulated amortization $ 311    $ 305   
Debt
As of June 30, 2020 and December 31, 2019, "Notes Payable" consisted of $619 million and $562 million, respectively, of commercial paper outstanding, presented net of discounts on our condensed consolidated balance sheets.
On April 9, 2020, AGR issued $750 million aggregate principal amount of unsecured notes maturing in 2025 at a fixed interest rate of 3.20%.
On May 1, 2020, NYSEG remarketed $200 million aggregate Pollution Control bonds with maturity dates ranging from 2026 to 2029 at fixed interest rates of 1.40% to 1.61%. The remarketing was a non-cash transaction to reset the interest rates.
On June 29, 2020, we entered into a revolving credit agreement with several lenders (the 2020 Credit Facility), that provides maximum borrowings up to $500 million. We will pay an annual facility fee, which ranges from 15 to 30 basis points, dependent on AVANGRID’s credit rating. As of June 30, 2020, the facility fee is 20 basis points. The 2020 Credit Facility matures on June 28, 2021. We have the right to extend, and the banks are obligated to extend, the commitments and loans outstanding under the facility for one year at a cost of 75 basis points. We may also request an extension of the facility for one year, which the banks may grant at their discretion for a fee that will be determined at the time of the request. As of June 30, 2020, there were no borrowings outstanding under this credit facility.
Disposition
On July 24, 2020, Renewables reached an agreement to transfer 85% ownership in one South Dakota wind farm for a purchase price of $236 million, subject to closing adjustments as applicable. The transaction, which is subject to the satisfaction of customary closing conditions, including FERC approval, is expected to be completed during the fourth quarter of 2020.
Note 16. Income Tax Expense
The effective tax rates, inclusive of federal and state income tax, for the three and six months ended June 30, 2020, were (8.6)% and 1.9%, respectively. The effective tax rates for the three and six months ended June 30, 2020 are below the federal statutory tax rate of 21%, primarily due to the recognition of production tax credits associated with wind production and the effect of the excess deferred tax amortization resulting from the Tax Act.
The effective tax rates, inclusive of federal and state income tax, for the three and six months ended June 30, 2019, were 21.6% and 17.9%, respectively. The effective tax rate for the three months ended June 30, 2019 is higher than the federal statutory tax rate of 21%, primarily due to unfavorable discrete income tax adjustments recorded in the period, partially offset by production tax credits associated with wind production. The effective tax rate for the six months ended June 30, 2019 is below the federal statutory tax rate of 21%, primarily due to the recognition of production tax credits associated with wind production.
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Note 17. Stock-Based Compensation Expense
The Avangrid, Inc. Amended and Restated Omnibus Incentive Plan (the Plan) provides for, among other things, the issuance of performance stock units (PSUs), restricted stock units (RSUs) and phantom share units (Phantom Shares).
In June and October 2018, 60,000 and 8,000 RSUs, respectively, were granted to certain officers of AVANGRID. The RSUs vest in full in one installment in June and December 2020, respectively, for each award, provided that the grantee remains continuously employed with AVANGRID through the applicable date. The fair value on the grant date was determined based on a price of $50.40 per share for the June 2018 awards and $47.59 per share for the October 2018 awards. In June 2020, 60,000 RSU's, plus dividend equivalents accrued through the vesting period, were settled for $3 million in cash.
In February 2020, a total number of 208,268 PSUs, before applicable taxes, were approved to be earned by participants based on achievement of certain performance metrics related to the 2016 through 2019 plan and are payable in three equal installments, net of applicable taxes, in 2020, 2021 and 2022. The remaining unvested PSUs were forfeited. In May 2020, 42,777 shares of common stock were issued to settle the first installment payment and 2,605 PSUs were forfeited from the originally approved total number of PSUs.
On March 18, 2020, 167,060 Phantom Shares were granted to certain AVANGRID executives and employees. These awards will vest in three equal installments in 2020, 2021 and 2022 and will be settled in a cash amount equal to the number of Phantom Shares multiplied by the closing share price of AVANGRID’s common stock on the respective vesting dates, subject to continued employment. The liability of these awards is measured based on the closing share price of AVANGRID’s common stock at each reporting date until the date of settlement. In June 2020, $2 million was paid to settle the first installment under this plan. As of June 30, 2020, the total liability is $1 million, which is included in other current and non-current liabilities.
Total stock-based compensation expense, which is included in "Operations and maintenance" in our condensed consolidated statements of income, for the three and six months ended June 30, 2020 was $4 million and $11 million, respectively, and for the three and six months ended June 30, 2019 was $1 million and $2 million, respectively.
Note 18. Variable Interest Entities
We participate in certain partnership arrangements that qualify as variable interest entities (VIEs). Consolidated VIE's consist of tax equity financing arrangements (TEFs) and partnerships in which an investor holds a noncontrolling interest and does not have substantive kick-out or participating rights.
The sale of a membership interest in the TEFs represents the sale of an equity interest in a structure that is considered a sale of non-financial assets. Under the sale of non-financial assets, the membership interests in the TEFs we sell to third-party investors are reflected as noncontrolling interest on our condensed consolidated balance sheets valued based on an HLBV model. Earnings from the TEFs are recognized in net income attributable to noncontrolling interests in our condensed consolidated statements of income. We consolidate the entities that have TEFs based on being the primary beneficiary for these VIEs.
On March 2, 2020, we closed on two TEF agreements, receiving $237 million from two tax equity investors related to two wind farms that reached commercial operation. On May 8, 2020, we closed on a TEF agreement, receiving $70 million from the same tax equity investors related to a wind farm that reached commercial operation. The three wind farms are part of a portfolio of companies called Aeolus Wind Power VII, LLC (Aeolus VII). One more wind farm undergoing a repowering will become a part of Aeolus VII once the project is complete and the TEF agreement is finalized. The four wind farms expected to be part of Aeolus VII will total 681 MW of wind power.
The assets and liabilities of the VIEs totaled approximately $1,728 million and $102 million, respectively, at June 30, 2020. As of December 31, 2019, the assets and liabilities of VIEs totaled approximately $806 million and $29 million, respectively. At June 30, 2020 and December 31, 2019, the assets and liabilities of the VIEs consisted primarily of property, plant and equipment.
At June 30, 2020, El Cabo Wind, LLC (El Cabo), Patriot Wind Farm LLC (Patriot) and Aeolus VII are our consolidated VIEs.
Wind power generation is subject to certain favorable tax treatments in the U.S. In order to monetize the tax benefits, we have entered into these structured institutional partnership investment transactions related to certain wind farms. Under these structures, we contribute certain wind assets, relating both to existing wind farms and wind farms that are being placed into operation at the time of the relevant transaction, and other parties invest in the share equity of the limited liability holding company. As consideration for their investment, the third parties make either an upfront cash payment or a combination of upfront cash and payments over time. We retain a class of membership interest and day-to-day operational and management control, subject to investor approval of certain major decisions. The third-party investors do not receive a lien on any assets and have no recourse against us for their upfront cash payments.
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The partnerships generally involve disproportionate allocations of profit or loss, cash distributions and tax benefits resulting from the wind farm energy generation between the investor and sponsor until the investor recovers its investment and achieves a cumulative annual after-tax return. Once this target return is met, the relative sharing of profit or loss, cash distributions and taxable income or loss between the Company and the third party investor flips, with the sponsor generally receiving higher percentages thereafter. We also have a call option to acquire the third party investors’ membership interest within a defined time period after this target return is met.
Our El Cabo, Patriot and Aeolus VII interests are not subject to any rights of investors that may restrict our ability to access or use the assets or to settle any existing liabilities associated with the interests.
See Note 19 - Equity Method Investments for information on our VIE we do not consolidate.
Note 19. Equity Method Investments
Renewables holds a 50% voting interest in Vineyard Wind, a joint venture with Copenhagen Infrastructure Partners (CIP). Vineyard Wind acquired an easement from the U.S. Bureau of Ocean Energy Management containing rights to develop offshore wind generation in a 260 square-mile area located southeast of Martha’s Vineyard. The area subject to easement has the capacity for siting up to approximately 3,000 MW. In May 2018, Vineyard Wind was selected by the Massachusetts Electric Distribution Companies (EDCs) to construct and operate Vineyard Wind’s proposed 800 MW wind farm and electricity transmission project pursuant to the Massachusetts Green Communities Act Section 83C RFP for offshore wind energy projects. Under the provisions of the LLC agreement, Renewables has contributed $149 million to Vineyard Wind. Contributions were made to a second offshore development project of $108 million to enter into the easement contract and for development costs. We expect to provide additional capital contributions.
In 2019, DEEP selected Vineyard Wind to provide 804 MW of offshore wind through the development of its Park City Wind Project. Pursuant to a joint bidding agreement between Renewables and CIP, CIP holds a right to sell all or a portion of its 50% ownership interest to Renewables for up to $70 million, subject to certain conditions. CIP also holds a right to repurchase its previously held interest in Park City Wind at a later date, if they exercise their right to sell, at a pre-determined price.
Vineyard Wind cannot finance its activities without additional support from its owners or third parties so Vineyard Wind is considered a VIE. We are not the primary beneficiary since we do not have a controlling interest in Vineyard Wind, and therefore we do not consolidate Vineyard Wind. Renewables' investment in Vineyard Wind was $250 million and $227 million as of June 30, 2020 and December 31, 2019, respectively.
Networks holds an approximate 20% ownership interest in New York TransCo, LLC (New York TransCo). Through New York TransCo, Networks has formed a partnership with affiliates of Central Hudson Gas and Electric Corporation, Consolidated Edison, Inc., National Grid, plc and Orange and Rockland Utilities, Inc. to develop a portfolio of interconnected transmission lines and substations to fulfill the objectives of the New York energy highway initiative. In 2019, New York Transco was selected as the developer for Segment B of the AC Transmission Public Policy Project by the NYISO. The selected project, New York Energy Solution (NYES), replaces nearly 80-year old transmission assets located in the upper to mid-Hudson Valley with streamlined, modernized technology, to enable surplus clean energy resources in upstate New York and help achieve the State’s energy goals. The total project cost is $600 million, plus interconnection costs. Networks’ contribution as 20% co-owner is $120 million. As of June 30, 2020 and December 31, 2019, respectively, the amount receivable from New York TransCo was $1 million and $0.
Note 20. Restructuring and Severance Related Expenses
In 2019, we announced changes across the Company aimed to mitigate costs and deliver sustainable growth, including among others, outsourcing and insourcing of certain areas of the Company and technology initiatives that help improve efficiency and reduce costs. Those decisions and transactions resulted in restructuring charges of $0 million and $2 million recorded for the three and six months ended June 30, 2020, respectively, and $2 million for both the three and six months ended June 30, 2019, which are included in "Operations and maintenance" in our condensed consolidated statements of income. "Depreciation and amortization" in our condensed consolidated statements of income includes $1 million and $2 million for the three and six months ended June 30, 2020, respectively, and $0 for both the three and six months ended June 30, 2019 for restructuring activities.
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As of June 30, 2020, our severance and lease restructuring charges reserves, which are recorded in "Other current liabilities" and "Other liabilities" on our condensed consolidated balance sheets, consisted of:
  Six Months Ended June 30, 2020
  (Millions)
Beginning Balance $  
Restructuring and severance related expenses
 
Payments (3)  
Ending Balance $  
Note 21. Subsequent Event
On July 14, 2020, the board of directors of AVANGRID declared a quarterly dividend of $0.44 per share on its common stock. This dividend is payable on October 1, 2020 to shareholders of record at the close of business on September 1, 2020.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements as of December 31, 2019 and 2018, and for the three years ended December 31, 2019, included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission, or the SEC, on March 2, 2020, which we refer to as our “Form 10-K.” In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. The foregoing and other factors are discussed and should be reviewed in our Form 10-K and other subsequent filings with the SEC.
Overview
AVANGRID is a leading sustainable energy company with approximately $35 billion in assets and operations in 24 states. AVANGRID has two primary lines of business - Avangrid Networks and Avangrid Renewables. Avangrid Networks owns eight electric and natural gas utilities, serving approximately 3.3 million customers in New York and New England. Avangrid Renewables owns and operates 8.1 gigawatts of electricity capacity, primarily through wind power, with a presence in 22 states across the United States. AVANGRID supports the achievement of the Sustainable Development Goals approved by the member states of the United Nations, and was named among the World’s Most Ethical companies in 2019 by the Ethisphere Institute. AVANGRID employs approximately 6,600 people. Iberdrola S.A., a corporation (sociedad anónima) organized under the laws of the Kingdom of Spain, a worldwide leader in the energy industry, directly owns 81.5% of outstanding shares of AVANGRID common stock. AVANGRID's primary business is ownership of its operating businesses, which are described below.
Our direct, wholly-owned subsidiaries include Avangrid Networks, Inc., or Networks, and Avangrid Renewables Holdings, Inc., or ARHI. ARHI in turn holds subsidiaries including Avangrid Renewables, LLC, or Renewables. Networks owns and operates our regulated utility businesses through its subsidiaries, including electric transmission and distribution and natural gas distribution, transportation and sales. Renewables operates a portfolio of renewable energy generation facilities primarily using onshore wind power and also solar, biomass and thermal power.
Through Networks, we own electric generation, transmission and distribution companies and natural gas distribution, transportation and sales companies in New York, Maine, Connecticut and Massachusetts, delivering electricity to approximately 2.3 million electric utility customers and delivering natural gas to approximately 1.0 million natural gas public utility customers as of June 30, 2020.
Networks, a Maine corporation, holds our regulated utility businesses, including electric transmission and distribution and natural gas distribution, transportation and sales. Networks serves as a super-regional energy services and delivery company through the eight regulated utilities it owns directly:
New York State Electric & Gas Corporation, or NYSEG, which serves electric and natural gas customers across more than 40% of the upstate New York geographic area;
Rochester Gas and Electric Corporation, or RG&E, which serves electric and natural gas customers within a nine-county region in western New York, centered around Rochester;
The United Illuminating Company, or UI, which serves electric customers in southwestern Connecticut;
Central Maine Power Company, or CMP, which serves electric customers in central and southern Maine;
The Southern Connecticut Gas Company, or SCG, which serves natural gas customers in Connecticut;
Connecticut Natural Gas Corporation, or CNG, which serves natural gas customers in Connecticut;
The Berkshire Gas Company, or BGC, which serves natural gas customers in western Massachusetts; and
Maine Natural Gas Corporation, or MNG, which serves natural gas customers in several communities in central and southern Maine.
Through Renewables, we had a combined wind, solar and thermal installed capacity of 8,102 megawatts, or MW, as of June 30, 2020, including Renewables’ share of joint projects, of which 7,337 MW was installed wind capacity. As of June 30, 2020, approximately 70% of the capacity was contracted for an average period of 9.2 years, and 12% of installed capacity was hedged. Being among the top three largest wind operators in the United States based on installed capacity as of June 30, 2020, Renewables strives to lead the transformation of the U.S. energy industry to a sustainable, competitive, clean energy future. Renewables currently operates 62 wind farms and four solar facilities in 21 states across the United States.
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COVID-19
The continued spread of the novel Coronavirus, or COVID-19, has led to global economic disruption and volatility in financial markets and the United States economy. AVANGRID is one of the many companies providing essential services during this national emergency and we communicate regularly with federal and state authorities and industry resources to ensure a coordinated response. We have implemented business continuity and emergency response plans to continue to provide service to our customers and support our operational needs. We continue to monitor developments affecting both our workforce and our customers and will take precautions that we determine are necessary or appropriate. We regularly communicate with our customers regarding the tools and resources available and to help our customers stay informed during this public health crisis. In addition to measures to protect our workforce and critical operations, we have established a cross-functional task force to plan for a safe and effective return to office. AVANGRID is actively monitoring potential supply chain and transportation disruptions that could impact the Company’s operations and will implement plans to address any such impacts on our business.
This is a rapidly evolving situation that could lead to extended disruption of economic activity in our markets, which could adversely affect our business. Given the uncertain scope and duration of the COVID-19 outbreak and its potential effects on our business, we currently cannot predict if there will be a material impact to our business, results of operations or financial condition.
For more information, see the risk factor under the heading “The outbreak of COVID-19 and its impact on business and economic conditions could negatively affect our business, results of operations or financial condition.” in Item 1A. Risk Factors in this Form 10-Q.
Summary of Results of Operations
Our operating revenues decreased by 1%, from $1,400 million for the three months ended June 30, 2019 to $1,392 million for the three months ended June 30, 2020.
Networks business revenues increased mainly due to increased customer rates and pass-through to customers of increased purchased power and gas driven by higher commodity prices and volumes in the period. Renewables had a decrease in revenues mainly due to unfavorable mark to market, or MtM, changes on energy derivative transactions entered into for economic hedging purposes, offset by an increase in wind generation output from new capacity in the period.
Net income attributable to AVANGRID decreased by 20% from $110 million for the three months ended June 30, 2019 to $88 million for the three months ended June 30, 2020, primarily due to decreased revenue from Renewables in the period.
Adjusted net income (a non-GAAP financial measure) decreased by 3% from $101 million for the three months ended June 30, 2019 to $98 million for the three months ended June 30, 2020. The decrease is primarily due to a $34 million decrease in Renewables driven by unfavorable results from decreased pricing, higher depreciation, prior year positive asset sales and adjustments that did not recur and unfavorable income taxes (offset in Corporate), offset by a $16 million increase in Networks driven primarily by customer rate increases in the period and a $15 million increase in Corporate mainly driven by higher income tax benefits in the period (offset in Renewables).
For additional information and reconciliation of the non-GAAP adjusted net income to net income attributable to AVANGRID, see “—Non-GAAP Financial Measures”.
See “—Results of Operations” for further analysis of our operating results for the quarter.
Legislative and Regulatory Update
We are subject to complex and stringent energy, environmental and other laws and regulations at the federal, state and local levels as well as rules within the independent system operator, or ISO, markets in which we participate. Federal and state legislative and regulatory actions continue to change how our business is regulated. We are actively participating in these debates at the federal, regional, state and ISO levels. Significant updates are discussed below. For a further discussion of the environmental and other governmental regulations that affect us, see our Form 10-K for the year ended December 31, 2019.
Customer Disconnections
Due to the COVID-19 pandemic, all of our regulated utilities suspended customer disconnections during March 2020. In New York, we had voluntarily suspended disconnections for non-payment. In June 2020, the New York state legislature passed a bill stating moratoriums on residential customer disconnections shall remain in place until 180 days after the COVID-19 state of emergency in New York is lifted, or until no later than March 31, 2021, whichever comes first.
In Connecticut and Maine, disconnections for non-payment have been suspended per regulatory orders from PURA and the MPUC, respectively.
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NYSEG and RG&E Rate Cases
On May 20, 2019, NYSEG and RG&E filed rate cases with the New York State Public Service Commission, or NYPSC, for new tariffs.
On March 23, 2020, the Public Utility Law Project (a party to the cases) submitted a letter motion requesting that the NYPSC administrative law judges assigned to preside over the rate cases require NYSEG and RG&E to pause settlement discussions and to provide new and accurate calculations based on the current and future expected economic impact of the COVID-19 pandemic. On March 31, 2020, NYSEG and RG&E, Multiple Intervenors (a party to the cases), and NYDPS staff each filed a response in opposition to the motion. On April 7, 2020, the NYPSC administrative law judges issued a Ruling Denying Public Utility Law Project’s Motion, allowing settlement negotiations to continue. On April 22, 2020, the Public Utility Law Project and AARP filed an interlocutory appeal requesting that the NYPSC review the determination of the administrative law judges. We cannot predict the outcome of this proceeding.
On June 22, 2020, NYSEG and RG&E filed a joint proposal with the NYPSC for a new three-year rate plan. The proposed effective date of new tariffs is November 1, 2020 with a make-whole provision back to April 17, 2020. The proposed rates facilitate the companies’ transition to a cleaner energy future while allowing for important initiatives such as COVID-19 relief for customers and additional funding for vegetation management, hardening/resiliency and emergency preparedness. The joint proposal bases delivery revenues on an 8.80% ROE and 48% equity ratio; however, for the proposed earnings sharing mechanism, the equity ratio is the lower of the actual equity ratio or 50%. The below table provides a summary of the proposed delivery rate increases and delivery rate percentages, including rate levelization and excluding energy efficiency, which is a pass through, for all four businesses:
Year 1 Year 2 Year 3
Rate Increase Delivery Rate % Rate Increase Delivery Rate % Rate Increase Delivery Rate %
Utility (Millions) Increase (Millions) Increase (Millions) Increase
NYSEG Electric $ 34.7    4.6  % $ 71.51    9.1  % $ 79.4    9.1  %
NYSEG Gas $ —    —  % $ 1.58    0.8  % $ 3.3    1.6  %
RG&E Electric $ 10.7    2.4  % $ 22.92    5.2  % $ 25.4    5.2  %
RG&E Gas $ —    —  % $ —    —  % $ 2.4    1.3  %
The rate plans continue the RAM designed to return or collect certain defined reconciled revenues and costs, have new depreciation rates and continue the existing revenue decoupling mechanisms, or RDMs, for each business. Statements in support or opposition and reply statements were filed in July 2020, and a final decision by the NYPSC is expected in October 2020. We cannot predict the outcome of this proceeding.
CMP Rate Case
In an order issued on February 19, 2020, the MPUC authorized an increase in CMP's distribution revenue requirement of $17 million, or approximately 7%, based on an allowed ROE of 9.25% and a 50% equity ratio. The rate increase was effective March 1, 2020. The MPUC also imposed a 1.00% ROE reduction (to 8.25%) for management efficiency associated with CMP’s customer service performance following the implementation of its new billing system in 2017. The management efficiency adjustment will remain in effect until CMP has demonstrated satisfactory customer service performance on four specified service quality measures for a period of 18 consecutive months which commenced on March 1, 2020. CMP is currently satisfying all four of these quality measures.
The order provided additional funding for staffing increases, vegetation management programs and storm restoration costs, while retaining the basic tiered structure for storm cost recovery implemented in the 2014 stipulation. The MPUC order also retained the RDM implemented in 2014. The order denied CMP’s request to increase rates for higher costs associated with services provided by its affiliates and instead initiated a management audit to assess the quality of these services as well as the impacts of the AVANGRID management structure on the quality of CMP’s customer service.
CMP Metering and Billing Investigation
On February 19, 2020, the MPUC issued an order in CMP’s distribution rate case proceeding discussed above and on February 24, 2020 issued an order in the metering and billing investigation. Each order reflected the MPUC’s conclusion that CMP’s Metering and Billing system is accurately reporting data, there is no systemic root cause for high usage complaints and errors related to CMP’s metering and billing system are localized and random, not systemic. However, the MPUC orders imposed a reduction of 100 basis points in ROE, as a management efficiency adjustment, to address the MPUC Commissioners’ concerns with CMP’s customer service implementation and performance following the launch of its new billing system in 2017.
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The management efficiency adjustment will remain in effect until CMP has demonstrated satisfactory customer service performance on four specified service quality measures for a period of 18 consecutive months with measurement commencing on March 1, 2020. On April 27, 2020, the MPUC issued an order requiring that CMP pay for the costs of the metering, billing, and customer service practices audit, which were less than $1 million. CMP is currently satisfying all four of these quality measures.
CMP Disconnection Notices Investigation
On January 22, 2020, the MPUC initiated an investigation into certain customer notices of CMP that reference service disconnection. The purpose of this investigation is (1) to determine whether CMP provided customers notices that violated Commission rules or that contained incorrect or misleading information and, (2) if it did, to order CMP to show cause why it should not be subject to administrative penalties for those violations. CMP has responded to data requests and party testimony was filed on March 2, 2020. Hearings were suspended to allow for settlement discussions that began in March 2020. On April 27, 2020, CMP filed a proposed stipulation to resolve all issues in this proceeding and requested that the Hearing Examiner convene a settlement conference to discuss the proposed Stipulation. A settlement conference was held on April 30, 2020 and May 5, 2020. A revised Stipulation was filed with the MPUC on May 8, 2020, and was deliberated and rejected by the MPUC on June 2, 2020, due to the Office of the Public Advocate’s lack of authority to perform the tasks required by the revised Stipulation. A written order rejecting the Stipulation was issued on June 8, 2020. A litigation schedule has been established with deliberations scheduled for August 4, 2020. We cannot predict the outcome of this proceeding.
CMP Revenue Decoupling Mechanism (RDM) Investigation
On June 9, 2020, the MPUC issued a Notice of Investigation to open an investigation into the effects of the COVID-19 pandemic on customers’ electricity-usage patterns and whether CMP’s RDM should be suspended for the annual distribution rate change that is expected to occur on July 1, 2021, for electricity delivered in calendar year 2020. On June 24, 2020, the MPUC issued a procedural order setting forth initial steps in this proceeding. On July 21, 2020, CMP filed testimony presenting electricity-usage data for its two RDM classes (residential and commercial/industrial) through June 2020, along with testimony explaining the data and the reasons why the current RDM should remain in place without alteration. We cannot predict the outcome of this matter.
CMP Annual Compliance Filing
On March 31, 2020, CMP submitted its annual compliance filing in accordance with the Commission’s February 19, 2020 decision in Public Utilities Commission, Investigation into Rates and Revenue Requirements of Central Maine Power Company. In its filing, CMP proposed an overall increase in its distribution delivery revenues of $14.5 million, or 5.56% over current rates, effective July 1, 2020. This increase is due primarily to storm costs, RDM and excess deferred income taxes. As a result of the COVID-19 pandemic, CMP’s filing proposed cost recovery provisions designed to minimize the rate impacts on customers including, without limitation, an extended period for recovery of storm costs incurred in 2019. On June 18, 2020, the MPUC approved a partial stipulation, which adopted CMP’s proposal to recover 2019 major storm costs over a three-year period commencing on July 1, 2020, but denied CMP’s proposed recovery of costs related to its legacy billing system, which are less than $1 million. On June 18, 2020, CMP made a compliance filing with revised tariffs, which was approved by the MPUC on June 23, 2020, and the new rates took effect on July 1, 2020.
New York State Department of Public Service Investigation of the Preparation for and Response to the March 2018 Winter Storms
In March 2018, following two severe winter storms that impacted more than one million electric utility customers in New York, including 520,000 NYSEG and RG&E customers, the NYDPS commenced a comprehensive investigation of the preparation and response to those events by New York's major electric utility companies. The investigation was expanded in the spring of 2018 to include other 2018 New York spring storm events.
On April 18, 2019, the NYDPS staff issued a report (the 2018 Staff Report) of the findings from their investigation. The 2018 Staff Report identifies 94 recommendations for corrective actions to be implemented in the utilities Emergency Response Plans (ERP). The report also identified potential violations by several of the utilities, including NYSEG and RG&E.
Also on April 18, 2019, the NYPSC issued an Order Instituting Proceeding and to Show Cause directed to all major electric utilities in New York, including NYSEG and RG&E. The order directs the utilities, including NYSEG and RG&E, to show cause why the NYPSC should not pursue civil penalties, and/or administrative penalties for the apparent failure to follow their respective ERPs as approved and mandated by the NYPSC. The NYPSC also directs the utilities, within 30 days, to address whether the NYPSC should mandate, reject or modify in whole or in part, the 94 recommendations contained in the 2018 Staff Report. On May 20, 2019, NYSEG and RG&E responded to the portion of the Order to Show Cause with respect to the recommendations contained in the 2018 Staff Report. The Commission granted the companies a series of extensions to respond to the portion of the Order to Show Cause with respect to why the Commission should not pursue a penalty action. A
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petition requesting Commission approval of a joint settlement agreement was filed with the Commission on December 17, 2019. On February 6, 2020, the Commission approved the joint settlement agreement, which allows the companies to avoid litigation and provides for payment by the companies of a $10.5 million penalty ($9.0 million by NYSEG and $1.5 million by RG&E). The proposed joint settlement provides for payment of these penalties as rate modifiers during the term of the proposed rate plans for NYSEG Electric and RG&E Electric, respectively. The company cannot predict the outcome of the rate cases and the provisions for payment of these penalties.
NYPSC directs Counsel to commence Judicial Enforcement Proceeding against NYSEG
On April 18, 2019, the NYPSC issued an Order Directing Counsel to the Commission to commence a special proceeding or an action in New York State Supreme Court to stop and prevent ongoing future violations by NYSEG of NYPSC regulations and orders. On December 24, 2019, the Commission filed a verified petition to commence the action against NYSEG. At the same time, NYSEG and the Commission settled the causes of action asserted in the verified petition and entered into a consent and stipulation and also submitted a joint motion to the court requesting that the court approve and enter a consent order and judgment reflecting the settlement. The consent order and judgment were issued by the court on January 24, 2020.
Power Tax Audits
Previously, CMP, NYSEG and RG&E implemented Power Tax software to track and measure their respective deferred tax amounts. In connection with this change, we identified historical updates needed with deferred taxes recognized by CMP, NYSEG and RG&E and increased our deferred tax liabilities, with a corresponding increase to regulatory assets, to reflect the updated amounts calculated by the Power Tax software. Since 2015, the NYPSC and MPUC accepted certain adjustments to deferred taxes and associated regulatory assets for this item in recent distribution rate cases, resulting in regulatory asset balances of approximately $152 million and $153 million, respectively, for this item at June 30, 2020 and December 31, 2019.
In 2017, audits of the power tax regulatory assets were commenced by the NYPSC and MPUC. On January 11, 2018, the NYPSC issued an order opening an operations audit on NYSEG and RG&E and certain other New York utilities regarding tax accounting. The NYPSC audit report is expected to be completed during 2020. In January 2018, the MPUC published the Power Tax audit report with respect to CMP, which indicated the auditor was unable to verify the asset “acquisition value” used to calculate the Power Tax regulatory asset. The audit report requires that CMP must provide support for the beginning balance of the regulatory assets or it will be unable to recover the value of the assets, which is approximately $11 million, excluding carrying costs. CMP responded to the audit report in its rate case filing by providing additional acquisition value support and, therefore, requested full recovery of the Power Tax regulatory asset. MPUC staff expressed concerns about the value CMP has attributed to this issue. The MPUC also had an outside firm conduct an audit of CMP's filing and acquisition values, and the auditor found CMP's information was reasonable. In September 2019, CMP filed a report in response to the audit report and addressed MPUC staff concerns. On December 17, 2019, CMP filed a stipulation with the MPUC providing for recovery of the Power Tax regulatory asset and adjusting the carrying costs values for the period of July 1, 2017 through June 30, 2019. The MPUC approved the stipulation on January 21, 2020 and CMP will begin collecting the Power Tax Regulatory asset beginning in July 2020 over 32.5 years.
New England Clean Energy Connect
The New England Clean Energy Connect, or NECEC, transmission project includes a 145-mile transmission line linking the electrical grids in Québec, Canada and New England. The project, which has an estimated cost of approximately $950 million, would add 1,200 MW of transmission capacity to supply New England with power from reliable hydroelectric generation. On March 13, 2020, the FERC approved the transfer of jurisdictional facilities from CMP to NECEC Transmission LLC with regulatory approval from the MPUC expected in the third quarter of 2020. On May 11, 2020, the Maine Department of Environmental Protection issued its final approval of the project. On July 9, 2020, ISO-NE issued its final approval. The Army Corps of Engineers permit is expected to be issued in the third quarter of 2020.
In 2019, certain opponents of the NECEC began an effort to have a referendum ballot question to enact legislation (i.e., a Maine Citizens Initiative) entitled “Resolve, To Reject the New England Clean Energy Transmission Project,” which, if passed by Maine voters, would require the MPUC to amend its May 3, 2019 "Order Granting Certificate of Public Convenience and Necessity and Approving Stipulation” and deny the certificate of public convenience and necessity for the NECEC transmission project (the NECEC Referendum). On March 4, 2020, the Maine Secretary of State qualified the NECEC Referendum for the ballot in the November 3, 2020 general election in Maine. A challenge of the Secretary of State’s determination that the NECEC Referendum qualified for the ballot was filed in the Maine Superior Court on March 13, 2020, alleging that the proponents violated Maine’s signature gathering laws. The Superior Court upheld the Maine Secretary of State’s determination and the matter was appealed to the Maine Supreme Judicial Court. On May 13, 2020, the Maine Supreme Judicial Court upheld the Superior Court’s ruling. On May 13, 2020, Networks filed a constitutional challenge for injunctive relief to prevent the NECEC Referendum from being included on the ballot in the Maine November 3, 2020 general election. On June 29, 2020, the Superior Court denied Networks request for an injunction. On July 1, 2020, an appeal of the denial of the constitutional
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challenge was filed with the Maine Supreme Judicial Court. We cannot predict the outcome of this proceeding and, if submitted to Maine voters, the NECEC Referendum.
Construction could begin as early as the third quarter of 2020 following issuance of the Army Corps of Engineers permit, if we are successful in our constitutional challenge.
Results of Operations
The following tables set forth financial information by segment for each of the periods indicated:
Three Months Ended Three Months Ended
June 30, 2020 June 30, 2019
Total Networks Renewables Other(1) Total Networks Renewables Other(1)
(in millions)
Operating Revenues $ 1,392    $ 1,121    $ 272    $ (1)   $ 1,400    $ 1,093    $ 307    $ —   
Operating Expenses
Purchased power, natural gas and fuel used
265    207    58    —    259    197    62    —   
Operations and maintenance 584    486    102    (4)   573    478    97    (2)  
Depreciation and amortization 242    147    94      222    135    87    —   
Taxes other than income taxes 146    133    14    (1)   139    128    12    (1)  
Total Operating Expenses 1,237    973    268    (4)   1,193    938    258    (3)  
Operating Income 155    148        207    155    49     
Other Income (Expense)
Other income (expense)     (1)           (4)  
Earnings (losses) from equity method investments
    (1)   —        (1)   —   
Interest expense, net of capitalization
(89)   (68)     (22)   (76)   (66)   (2)   (7)  
Income (Loss) Before Income Tax 70    85      (18)   134    92    51    (8)  
Income tax (benefit) expense (6)   12    (16)   (2)   29    25    (18)   22   
Net Income (Loss) 76    73    19    (16)   105    67    69    (30)  
Net loss (income) attributable to noncontrolling interests
12    —    12    —      (1)     —   
Net Income (Loss) Attributable to Avangrid, Inc.
$ 88    $ 73    $ 31    $ (16)   $ 110    $ 66    $ 75    $ (30)  
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Six Months Ended Six Months Ended
June 30, 2020 June 30, 2019
Total Networks Renewables Other(1) Total Networks Renewables Other(1)
(in millions)
Operating Revenues $ 3,181    $ 2,582    $ 600    $ (1)   $ 3,242    $ 2,697    $ 549    $ (4)  
Operating Expenses
Purchased power, natural gas and fuel used
740    601    139    —    822    723    99    —   
Operations and maintenance 1,154    952    211    (9)   1,126    946    184    (4)  
Depreciation and amortization 493    295    197      444    269    175    —   
Taxes other than income taxes 312    277    36    (1)   302    273    29    —   
Total Operating Expenses 2,699    2,125    583    (9)   2,694    2,211    487    (4)  
Operating Income 482    457    17      548    486    62    —   
Other Income (Expense)
Other (expense) income (1)   —      (6)   (5)   —      (7)  
Losses (earnings) from equity method investments
(4)     (9)   —        (3)   —   
Interest expense, net of capitalization
(165)   (136)   —    (29)   (154)   (135)   (7)   (12)  
Income (Loss) Before Income Tax 312    326    13    (27)   391    356    54    (19)  
Income tax expense (benefit)   55    (46)   (3)   70    89    (17)   (2)  
Net Income (Loss) 306    271    59    (24)   321    267    71    (17)  
Net loss (income) attributable to noncontrolling interests
22    (1)   23    —      (1)     —   
Net Income (Loss) Attributable to Avangrid, Inc.
$ 328    $ 270    $ 82    $ (24)   $ 327    $ 266    $ 78    $ (17)  
(1)"Other" represents Corporate and intersegment eliminations.
Comparison of Period to Period Results of Operations
Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019
Operating Revenues
Our operating revenues decreased by $8 million, or 1%, from $1,400 million for the three months ended June 30, 2019 to $1,392 million for the three months ended June 30, 2020, as detailed by segment below:
Networks
Operating revenues increased by $28 million, or 3%, from $1,093 million for the three months ended June 30, 2019 to $1,121 million for the three months ended June 30, 2020. Electricity and gas revenues increased by $7 million, primarily due to the impact of increased customer rates in the three months ended June 30, 2020 compared to the same period of 2019, increased by $7 million from unfavorable earnings sharing and net plant reconciliation recorded in the second quarter of 2019, increased by $3 million due to regional network services revenue offset by a $1 million decrease due to other. Electricity and gas revenues changed due to the following items that have offsets within the income statement: an increase of $9 million in purchased power and purchased gas (offset in purchased power) and an increase of $3 million in flow through amortizations (which are offset in operating expenses).
Renewables
Operating revenues decreased by $35 million, or 11%, from $307 million for the three months ended June 30, 2019 to $272 million for the three months ended June 30, 2020. The decrease in operating revenues was primarily due to unfavorable mark to market, or MtM, changes of $40 million on energy derivative transactions entered into for economic hedging purposes, a decrease of $5 million in merchant pricing, a $3 million decrease in thermal revenue driven by lower volumes and average prices in the period and an $8 million decrease in other revenues, offset by an increase of $21 million driven by wind generation output increase of 400 GWh from new capacity in the current period.
Purchased Power, Natural Gas and Fuel Used
Our purchased power, natural gas and fuel used increased by $6 million, or 2%, from $259 million for the three months ended June 30, 2019 to $265 million for the three months ended June 30, 2020, as detailed by segment below:
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Networks
Purchased power, natural gas and fuel used increased by $10 million, or 5%, from $197 million for the three months ended June 30, 2019 to $207 million for the three months ended June 30, 2020. The increase is primarily driven by a $9 million increase in average commodity prices and an overall decrease in electricity and gas units procured due to an increase in degree days along with a $1 million increase in other power supply purchases in the period.
Renewables
Purchased power, natural gas and fuel used decreased by $4 million, or 6%, from $62 million for the three months ended June 30, 2019 to $58 million for the three months ended June 30, 2020. The decrease is primarily driven by favorable MtM changes on derivatives of $18 million due to market price changes in the period and a decrease of $1 million in thermal purchases driven by the decrease in volume and unit cost in the period, offset by an increase of $15 million in power purchases in the current period.
Operations and Maintenance
Our operations and maintenance increased by $11 million, or 2%, from $573 million for the three months ended June 30, 2019 to $584 million for the three months ended June 30, 2020, as detailed by segment below:
Networks
Operations and maintenance increased by $8 million, or 2%, from $478 million for the three months ended June 30, 2019 to $486 million for the three months ended June 30, 2020. The increase is driven by a $5 million increase in uncollectible expenses, a $3 million increase due to additional cleaning and personal protective equipment resulting from COVID-19, $3 million increase in regional network services expenses, and an increase of $3 million in flow through amortizations (which is offset in revenue). These were offset by a $6 million decrease in medical expenses.
Renewables
Operations and maintenance expenses increased by $5 million, or 5%, from $97 million for the three months ended June 30, 2019 to $102 million for the three months ended June 30, 2020. The increase is primarily due to $4 million of increased costs resulting from higher personnel and operations costs, which are primarily attributed to new capacity.
Depreciation and Amortization
Depreciation and amortization for the three months ended June 30, 2020 was $242 million compared to $222 million for the three months ended June 30, 2019, representing an increase of $20 million. The increase is primarily due to an increase of $26 million in depreciation expense from plant additions in Networks and Renewables in the period, offset by a $7 million decrease of accelerated depreciation from the repowering of wind farms in Renewables.
Other Income (Expense) and Earnings (Losses) from Equity Method Investments
Other income (expense) and equity earnings (losses) increased by $1 million from $3 million for the three months ended June 30, 2019 to $4 million for the three months ended June 30, 2020. The increase is primarily due to a $2 million favorable change in allowance for funds used during construction in Networks, $2 million of interest income in Renewables, $1 million of favorable equity earnings in the current period, offset by a $5 million gain from the sale of assets recorded in the same period of 2019.
Interest Expense, Net of Capitalization
Interest expense for the three months ended June 30, 2020 and 2019 was $89 million and $76 million, respectively. Networks decreased $2 million from carrying costs on regulatory deferrals in the current period. Other added $11 million of interest expense from new debt issued in 2020 and 2019. This is offset by an interest expense decrease in Renewables of $4 million primarily driven by higher capitalized interest in the current period.
Income Tax Expense
The effective tax rate, inclusive of federal and state income tax, for the three months ended June 30, 2020, was (8.6)%, which is lower than the federal statutory tax rate of 21%, primarily due to the recognition of production tax credits associated with wind production and the effect of the excess deferred tax amortization resulting from the Tax Act. The effective tax rate, inclusive of federal and state income tax, for the three months ended June 30, 2019 was 21.6%, which is higher than the federal statutory tax rate of 21% primarily due to unfavorable discrete income tax adjustments recorded in the period, partially offset by production tax credits associated with wind production.
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Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019
Operating Revenues
Our operating revenues decreased by $61 million, or 2%, from $3,242 million for the six months ended June 30, 2019 to $3,181 million for the six months ended June 30, 2020, as detailed by segment below:
Networks
Operating revenues decreased by $115 million, or 4%, from $2,697 million for the six months ended June 30, 2019 to $2,582 million for the six months ended June 30, 2020. Electricity and gas revenues increased by $11 million, primarily due to the impact of increased customer rates in the six months ended June 30, 2020 compared to the same period of 2019, increased by $7 million from unfavorable earnings sharing and net plant reconciliation recorded in the second quarter of 2019, increased by $3 million due to regional network services revenue and $2 million increase due to other. These were offset by a decrease of $10 million from a pension deferral write-off, and a $4 million decrease due to an electric reliability penalty. Electricity and gas revenues changed due to the following items that have offsets within the income statement: a decrease of $123 million in purchased power and purchased gas (offset in purchased power) offset by an increase of $3 million in flow through amortizations (which are offset in operating expenses).
Renewables
Operating revenues increased by $51 million, or 9%, from $549 million for the six months ended June 30, 2019, to $600 million for the six months ended June 30, 2020. The increase in operating revenues was primarily due to an increase of $88 million with wind generation output increasing 1,870 GWh from existing and new capacity in the current period and favorable MtM changes of $21 million on energy derivative transactions entered into for economic hedging purposes, offset by a decrease of $16 million in merchant pricing, a $35 million decrease in thermal revenue driven by lower volumes and average prices in the period and a $7 million decrease in other revenues.
Purchased Power, Natural Gas and Fuel Used
Our purchased power, natural gas and fuel used decreased by $82 million, or 10%, from $822 million for the six months ended June 30, 2019 to $740 million for the six months ended June 30, 2020, as detailed by segment below:
Networks
Purchased power, natural gas and fuel used decreased by $122 million, or 17%, from $723 million for the six months ended June 30, 2019 to $601 million for the six months ended June 30, 2020. The decrease is primarily driven by a $123 million decrease in average commodity prices and an overall decrease in electricity and gas units procured due to a decline in degree days, offset by a $1 million increase in other power supply purchases in the period.
Renewables
Purchased power, natural gas and fuel used increased by $40 million, or 40%, from $99 million for the six months ended June 30, 2019 to $139 million for the six months ended June 30, 2020. The increase is primarily driven by an increase of $23 million in power purchases, $4 million in RECs and unfavorable MtM changes on derivatives of $28 million due to market price changes in the period, offset by a decrease of $15 million in thermal purchases driven by the decrease in volume and unit cost in the period.
Operations and Maintenance
Our operations and maintenance increased by $28 million, or 2%, from $1,126 million for the six months ended June 30, 2019 to $1,154 million for the six months ended June 30, 2020, as detailed by segment below:
Networks
Operations and maintenance increased by $6 million, or 1%, from $946 million for the six months ended June 30, 2019 to $952 million for the six months ended June 30, 2020. The increase is driven by $1 million in outage restoration costs, a $5 million increase in uncollectible expenses, a $3 million increase due to additional cleaning and personal protective equipment resulting from COVID-19, a $3 million increase in regional network services expenses, an increase of $3 million in flow through amortizations (which is offset in revenue) and a $2 million increase in other. These were offset by a decrease of $5 million in unfavorable write-off of deferred storm costs in the six months ended June 30, 2019, which did not recur in 2020 and a $6 million decrease in medical expenses.
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Renewables
Operations and maintenance expenses increased by $27 million, or 15%, from $184 million for the six months ended June 30, 2019 to $211 million for the six months ended June 30, 2020. The increase is primarily due to $25 million of increased costs resulting from higher personnel and maintenance costs which are primarily attributed to operations of new capacity. Additionally, operations and maintenance expense increased by $10 million driven by an asset retirement obligation adjustment in the same period of 2019, offset by $3 million decrease due to a favorable provision release in the six months ended June 30, 2020, and $4 million in other expenses.
Depreciation and Amortization
Depreciation and amortization for the six months ended June 30, 2020 was $493 million compared to $444 million for the six months ended June 30, 2019, an increase of $49 million. The increase is driven by $50 million from plant additions in Networks and Renewables in the period, offset by a $3 million decrease of accelerated depreciation from the repowering of wind farms in Renewables.
Other Income (Expense) and Earnings (Losses) from Equity Method Investments
Other income (expense) and equity earnings (losses) decreased by $2 million from $(3) million for the six months ended June 30, 2019 to $(5) million for the six months ended June 30, 2020. The change is primarily due to $6 million of unfavorable equity earnings in the current period, offset by a $2 million favorable change in allowance for funds used during construction in Networks and $2 million of other.
Interest Expense, Net of Capitalization
Interest expense for the six months ended June 30, 2020 and 2019 was $165 million and $154 million, respectively. Networks had a $1 million increase in interest expense from higher average debt balances in the current period. Other added $18 million of interest expense primarily from new debt issued in 2020 and 2019. This is offset by interest expense decrease in Renewables of $8 million primarily driven by higher capitalized interest in the current period.
Income Tax Expense
The effective tax rate, inclusive of federal and state income tax, for the six months ended June 30, 2020 was 1.9%, which is below the federal statutory tax rate of 21%, primarily due to the recognition of production tax credits associated with wind production and the effect of the excess deferred tax amortization resulting from the Tax Act. The effective tax rate, inclusive of federal and state income tax, for the six months ended June 30, 2019 was 17.9%, which is below the federal statutory tax rate of 21% primarily due to the recognition of production tax credits associated with wind production.
Non-GAAP Financial Measures
To supplement our consolidated financial statements presented in accordance with U.S. GAAP, we consider adjusted net income and adjusted earnings per share as non-GAAP financial measures that are not prepared in accordance with U.S. GAAP. The non-GAAP financial measures we use are specific to AVANGRID and the non-GAAP financial measures of other companies may not be calculated in the same manner. We use these non-GAAP financial measures, in addition to U.S. GAAP measures, to establish operating budgets and operational goals to manage and monitor our business, evaluate our operating and financial performance and to compare such performance to prior periods and to the performance of our competitors. We believe that presenting such non-GAAP financial measures is useful because such measures can be used to analyze and compare profitability between companies and industries by eliminating the impact of certain non-cash charges. In addition, we present non-GAAP financial measures because we believe that they and other similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance.
We define adjusted net income as net income adjusted to exclude restructuring charges, mark-to-market earnings from changes in the fair value of derivative instruments used by AVANGRID to economically hedge market price fluctuations in related underlying physical transactions for the purchase and sale of electricity, accelerated depreciation derived from repowering of wind farms and costs incurred in connection with the COVID-19 pandemic. We believe adjusted net income is more useful in understanding and evaluating actual and projected financial performance and contribution of AVANGRID core lines of business and to more fully compare and explain our results. The most directly comparable U.S. GAAP measure to adjusted net income is net income. We also define adjusted earnings per share, or adjusted EPS, as adjusted net income converted to an earnings per share amount. 
The use of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, AVANGRID’s U.S. GAAP financial information, and investors are cautioned that the non-GAAP financial measures are limited in their usefulness, may be unique to AVANGRID, and should be considered only as a supplement to AVANGRID’s
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U.S. GAAP financial measures. The non-GAAP financial measures may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools.
Non-GAAP financial measures are not primary measurements of our performance under U.S. GAAP and should not be considered as alternatives to operating income, net income or any other performance measures determined in accordance with U.S. GAAP.
The following tables provide a reconciliation between Net Income attributable to AVANGRID and Adjusted Net Income (non-GAAP) by segment for the three and six months ended June 30, 2020 and 2019, respectively:
  Three Months Ended June 30, 2020 Six Months Ended June 30, 2020
  Total Networks Renewables Corporate* Total Networks Renewables Corporate*
  (in millions) (in millions)
Net Income Attributable to Avangrid, Inc. $ 88    $ 73    $ 31    $ (15)   $ 328    $ 270    $ 82    $ (24)  
Adjustments:
Mark-to-market earnings - Renewables   —      —    (16)   —    (16)   —   
Restructuring charges     —    —          —   
Accelerated depreciation from repowering (4)   —    (4)   —      —      —   
Impact of COVID-19 13    11    —      13    11    —     
Income tax impact of adjustments (1) (3)   (3)   —    —    (2)   (4)     —   
Adjusted Net Income (2) $ 98    $ 82    $ 30    $ (14)   $ 334    $ 280    $ 76    $ (22)  
  Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
  Total Networks Renewables Corporate* Total Networks Renewables Corporate*
  (in millions) (in millions)
Net Income Attributable to Avangrid, Inc. $ 110    $ 66    $ 75    $ (30)   $ 327    $ 266    $ 78    $ (17)  
Adjustments:
Mark-to-market earnings - Renewables (20)   —    (20)   —    (23)   —    (23)   —   
Restructuring charges   —    —        —    —     
Accelerated depreciation from repowering   —      —    10    —    10    —   
Income tax impact of adjustments (1)   —      —      —      —   
Adjusted Net Income (2) $ 101    $ 66    $ 64    $ (29)   $ 319    $ 267    $ 69    $ (16)  
(1)Income tax impact of adjustments: 2020 - $(1) million and $4 million from MtM earnings, $0 and $(1) million from restructuring charges, and $1 million and $(2) million from accelerated depreciation from repowering, $(3) million and $(3) million for the three and six months ended June 30, 2020, respectively; 2019 - $5 million and $6 million from MtM earnings, $(1) and $(1) from restructuring charges and $(1) million and ($2) million from accelerated depreciation from repowering for the three and six months ended June 30, 2019, respectively.
(2)Adjusted Net Income is a non-GAAP financial measure and is presented after excluding restructuring charges, accelerated depreciation derived from repowering of wind farms, costs incurred in connection with the COVID-19 pandemic and the impact from mark-to-market activities in Renewables.
        * Includes corporate and other non-regulated entities as well as intersegment eliminations.
Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019
Adjusted net income
Our adjusted net income decreased by $3 million, or 3%, from $101 million for the three months ended June 30, 2019 to $98 million for the three months ended June 30, 2020. The decrease is primarily due to a $34 million decrease in Renewables driven by unfavorable results from decreased pricing, higher depreciation, prior year positive asset sales and adjustments that did not recur and unfavorable income taxes (offset in Corporate), offset by a $16 million increase in Networks driven primarily by customer rate increases in the period and a $15 million increase in Corporate mainly driven by higher income tax benefits in the period (offset in Renewables).
Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019
Adjusted net income
Our adjusted net income increased by $15 million, or 5%, from $319 million for the six months ended June 30, 2019 to $334 million for the six months ended June 30, 2020. The increase is primarily due to a $13 million increase in Networks driven primarily by customer rate increases in the period, $7 million increase in Renewables as a result of increase in production and income tax benefits in the period, offset by $6 million decrease in Corporate mainly driven by higher interest expenses in the period.
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The following tables reconcile Net Income attributable to AVANGRID to Adjusted Net Income (non-GAAP), and EPS attributable to AVANGRID to adjusted EPS (non-GAAP) for the three and six months ended June 30, 2020 and 2019, respectively:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2020 2019 2020 2019
Networks $ 73    $ 66    $ 270    $ 266   
Renewables 31    75    82    78   
Corporate (1) (15)   (30)   (24)   (17)  
Net Income $ 88    $ 110    $ 328    $ 327   
Adjustments:
Mark-to-market earnings - Renewables (2)   (20)   (16)   (23)  
Restructuring charges (3)        
Accelerated depreciation from repowering (4) (4)       10   
Impact of COVID-19 (5) 13    —    13    —   
Income tax impact of adjustments (3)     (2)    
Adjusted Net Income (6) $ 98    $ 101    $ 334    $ 319   
Three Months Ended Six Months Ended
June 30, June 30,
  2020 2019 2020 2019
Networks $ 0.24    $ 0.21    $ 0.87    $ 0.86   
Renewables 0.10    0.24    0.27    0.25   
Corporate (1) (0.05)   (0.10)   (0.08)   (0.06)  
Net Income $ 0.28    $ 0.36    $ 1.06    $ 1.06   
Adjustments:
Mark-to-market earnings - Renewables (2) 0.01    (0.06)   (0.05)   (0.07)  
Restructuring charges (3) —    0.01    0.01    0.01   
Accelerated depreciation from repowering (4) (0.01)   0.02    0.02    0.03   
Impact of COVID-19 (5) 0.04    —    0.04    —   
Income tax impact of adjustments (0.01)   0.01    (0.01)   0.01   
Adjusted Earnings Per Share (6) $ 0.32    $ 0.33    $ 1.08    $ 1.03   
(1)Includes corporate and other non-regulated entities as well as intersegment eliminations.
(2)Mark-to-market earnings relates to earnings impacts from changes in the fair value of Renewables' derivative instruments associated with electricity and natural gas.
(3)Restructuring and severance related charges relate to costs to implement an initiative to mitigate costs and achieve sustainable growth.
(4)Represents the amount of accelerated depreciation derived from repowering of wind farms in Renewables.
(5)Represents costs incurred in connection with the COVID-19 pandemic.
(6)Adjusted net income and adjusted earnings per share are non-GAAP financial measures and are presented after excluding restructuring charges, accelerated depreciation derived from repowering of wind farms, costs incurred in connection with the COVID-19 pandemic and the impact from mark-to-market activities in Renewables.
Liquidity and Capital Resources
Our operations, capital investment and business development require significant short-term liquidity and long-term capital resources. Historically, we have used cash from operations and borrowings under our credit facilities and commercial paper program as our primary sources of liquidity. Our long-term capital requirements have been met primarily through retention of earnings and borrowings in the investment grade debt capital markets. Continued access to these sources of liquidity and capital are critical to us. Risks may increase due to circumstances beyond our control, such as a general disruption of the financial markets and adverse economic conditions.
We and our subsidiaries are required to comply with certain covenants in connection with our respective loan agreements. The covenants are standard and customary in financing agreements, and we and our subsidiaries were in compliance with such covenants as of June 30, 2020.
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Liquidity Position
We manage our overall liquidity position as part of the group of companies controlled by Iberdrola, or the Iberdrola Group, and are a party to a liquidity agreement with Bank of America, N.A. along with certain members of the Iberdrola Group. The liquidity agreement aids the Iberdrola Group in efficient cash management and reduces the need for external borrowing by the pool participants. Parties to the agreement, including us, may deposit funds with or borrow from the financial institution, provided that the net balance of funds deposited or borrowed by all pool participants in the aggregate is not less than zero. The balance was $0 and $150 million as of June 30, 2020 and December 31, 2019, respectively. Any deposit amounts are reflected on our condensed consolidated balance sheets under cash and cash equivalents because our deposited surplus funds under the cash pooling agreement are highly-liquid short-term investments.
We optimize our liquidity within the United States through a series of arms-length intercompany lending arrangements with our subsidiaries and among the regulated utilities to provide for lending of surplus cash to subsidiaries with liquidity needs, subject to the limitation that the regulated utilities may not lend to unregulated affiliates. These arrangements minimize overall short-term funding costs and maximize returns on the temporary cash investments of the subsidiaries. We have the capacity to borrow up to $2.5 billion from the lenders committed to the AVANGRID Credit Facility, $500 million from the lenders committed to the 2020 Credit Facility and $500 million from an Iberdrola Group Credit Facility, each of which are described below.
The following table provides the components of our liquidity position as of June 30, 2020 and December 31, 2019, respectively:
As of June 30, As of December 31,
2020 2019
  (in millions)
Cash and cash equivalents $ 46    $ 178   
AVANGRID Credit Facility 2,500    2,500   
2020 Credit Facility 500    —   
Iberdrola Group Credit Facility 500    500   
Less: borrowings (619)   (562)  
Total $ 2,927    $ 2,616   
AVANGRID Commercial Paper Program
AVANGRID has a commercial paper program with a limit of $2 billion that is backstopped by the AVANGRID Credit Facility and the 2020 Credit Facility (described below). As of June 30, 2020 and July 30, 2020, there was $619 million and $791 million of commercial paper outstanding, respectively.
AVANGRID Credit Facility
AVANGRID and its subsidiaries, NYSEG, RG&E, CMP, UI, CNG, SCG and BGC have a revolving credit facility with a syndicate of banks, or the AVANGRID Credit Facility, that provides for maximum borrowings of up to $2.5 billion in the aggregate.
Under the terms of the AVANGRID Credit Facility, each joint borrower has a maximum borrowing entitlement, or sublimit, which can be periodically adjusted to address specific short-term capital funding needs, subject to the maximum limit contained in the agreement. On June 29, 2020, we entered into an amendment to the AVANGRID Credit Facility which reduced AVANGRID's maximum sublimit from $2.0 billion to $1.5 billion and added minimum sublimits for each joint borrower other than AVANGRID. Under the AVANGRID Credit Facility, each of the borrowers will pay an annual facility fee that is dependent on their credit rating. As of June 30, 2020, the facility fees ranged from 10.0 to 17.5 basis points. The AVANGRID Credit Facility matures on June 29, 2024. As of both June 30, 2020 and July 30, 2020, we had no borrowings under the facility.
2020 Credit Facility
On June 29, 2020, we entered into a revolving credit agreement with several lenders, or the 2020 Credit Facility, that provides maximum borrowings up to $500 million. We will pay an annual facility fee, which ranges from 15 to 30 basis points, dependent on AVANGRID’s credit rating. As of June 30, 2020, the facility fee is 20 basis points. The 2020 Credit Facility matures on June 28, 2021. We have the right to extend, and the banks are obligated to extend, the commitments and loans outstanding under the facility for one year at a cost of 75 basis points. We may also request an extension of the facility for one
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year, which the banks may grant at their discretion for a fee that will be determined at the time of the request. As of both June 30, 2020 and July 30, 2020, there were no borrowings outstanding under this credit facility.
Since our credit facilities are also a backstop to the AVANGRID commercial paper program, the total amounts available under the facilities as of June 30, 2020 and July 30, 2020, were $2,381 million and $2,209 million, respectively.
Iberdrola Group Credit Facility
AVANGRID has a credit facility with Iberdrola Financiacion, S.A.U., a company of the Iberdrola Group. The facility has a limit of $500 million and matures on June 18, 2023. AVANGRID pays a facility fee of 10.5 basis points annually. As of both June 30, 2020 and July 30, 2020, there was no outstanding amount under this credit facility.
Capital Resources
On April 9, 2020, AGR issued $750 million aggregate principal amount of unsecured notes maturing in 2025 at a fixed interest rate of 3.20%.
On May 1, 2020, NYSEG remarketed $200 million aggregate Pollution Control bonds with maturity dates ranging from 2026 to 2029 at fixed interest rates of 1.40% to 1.61%. The remarketing was a non-cash transaction to reset the interest rates.
Capital Requirements
We expect to fund our capital requirements, including, without limitation, any quarterly shareholder dividends and capital investments primarily from the cash provided by operations of our businesses and through the access to the capital markets in the future. We have a revolving credit facility, as described above, to fund short-term liquidity needs and we believe that we will continue to have access to the capital markets as long-term growth capital is needed. To date, the Company has not experienced limitations in our ability to access these sources of liquidity in connection with the economic recession triggered by the COVID-19 pandemic. While taking into consideration the current economic environment, management expects that we will continue to have sufficient liquidity and financial flexibility to meet our business requirements.
We expect to incur approximately $1.4 billion in capital expenditures through the remainder of 2020.
Cash Flows
Our cash flows depend on many factors, including general economic conditions, regulatory decisions, weather, commodity price movements and operating expense and capital spending control.
The following is a summary of the cash flows by activity for the six months ended June 30, 2020 and 2019, respectively:
Six Months Ended
June 30,
  2020 2019
  (in millions)
Net cash provided by operating activities $ 884    $ 817   
Net cash used in investing activities (1,352)   (1,452)  
Net cash provided by financing activities 335    764   
Net (decrease) increase in cash, cash equivalents and restricted cash $ (133)   $ 129   
Operating Activities
The cash from operating activities for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 increased by $67 million, primarily attributable to lower purchased power, natural gas and fuel used in the period.
Investing Activities
For the six months ended June 30, 2020, net cash used in investing activities was $1,352 million, which was comprised of $1,345 million of capital expenditures and $37 million of other investments and equity method investments, partially offset by $19 million of contributions in aid of construction and $8 million of proceeds from the sale of assets.
For the six months ended June 30, 2019, net cash used in investing activities was $1,452 million, which was comprised of $1,337 million of capital expenditures and other investments and equity method investments of $143 million, partially offset by $21 million of contributions in aid of construction and $5 million of cash distributions from equity method investments.
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Financing Activities
For the six months ended June 30, 2020, financing activities provided $335 million in cash reflecting primarily a contribution from non-controlling interests of $312 million and a net increase in non-current debt and current notes payable of $308 million, offset by distributions to non-controlling interests of $4 million, payments on finance leases of $6 million and dividends of $272 million.
For the six months ended June 30, 2019, financing activities provided $764 million in cash reflecting primarily an issuance of notes/bonds with net proceeds of $1,188 million, contributions from non-controlling interests of $131 million and a net decrease in non-current debt and current notes payable of $248 million, offset by distributions to non-controlling interests of $10 million, payments on capital leases of $25 million and dividends of $272 million.
Off-Balance Sheet Arrangements
There have been no material changes in our off-balance sheet arrangements during the six months ended June 30, 2020 as compared to those reported for the fiscal year ended December 31, 2019 in our Form 10-K.
Contractual Obligations
There have been no material changes in contractual and contingent obligations during the six months ended June 30, 2020 as compared to those reported for the fiscal year ended December 31, 2019 in our Form 10-K.
In 2019, DEEP selected Vineyard Wind to provide 804 MW of offshore wind through the development of its Park City Wind Project. Pursuant to a joint bidding agreement between Renewables and CIP, CIP holds a right to sell all or a portion of its 50% ownership interest to Renewables for up to $70 million, subject to certain conditions. CIP also holds a right to repurchase its previously held interest in Park City Wind at a later date, if they exercise their right to sell, at a pre-determined price.
Critical Accounting Policies and Estimates
The accompanying condensed consolidated financial statements provided herein have been prepared in accordance with U.S. GAAP. In preparing the accompanying condensed consolidated financial statements, our management has applied accounting policies and made certain estimates and assumptions that affect the reported amounts of assets, liabilities, stockholders’ equity, revenues and expenses and the disclosures thereof. The accounting policies and related risks described in our Form 10-K are those that depend most heavily on these judgments and estimates. As of June 30, 2020, we continue to utilize information reasonably available to us; however, the business and economic uncertainty resulting from COVID-19 has made such estimates and assumptions more difficult to assess and calculate. Impacted estimates include, but are not limited to, evaluations of certain long-lived assets and goodwill for impairment, expected credit losses and potential regulatory deferral or recovery of certain costs. While there were no material impacts from COVID-19 on financial results, actual results could differ from those estimates which could result in material impacts to our consolidated financial statements in future reporting periods. The other notable changes to the significant accounting policies described in our Form 10-K for the fiscal year ending December 31, 2019, are with respect to our adoption of the new accounting pronouncements described in the Note 3 of our condensed consolidated financial statements for the six months ended June 30, 2020.
New Accounting Standards
We review new accounting standards to determine the expected financial impact, if any, that the adoption of each such standard will have. The new accounting pronouncements that we have adopted as of January 1, 2020, and reflected in our condensed consolidated financial statements are described in Note 3 of our condensed consolidated financial statements for the six months ended June 30, 2020. There have been no other material changes to the significant accounting policies described in our Form 10-K for the fiscal year ended December 31, 2019, except for those described in Note 3 resulting from the adoption of new authoritative accounting guidance issued by FASB.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains a number of forward-looking statements. Forward-looking statements may be identified by the use of forward-looking terms such as “may,” “will,” “should,” “would,” “could,” “can,” “expect(s),” “believe(s),” “anticipate(s),” “intend(s),” “plan(s),” “estimate(s),” “project(s),” “assume(s),” “guide(s),” “target(s),” “forecast(s),” “are (is) confident that” and “seek(s)” or the negative of such terms or other variations on such terms or comparable terminology. Such forward-looking statements include, but are not limited to, statements about our plans, objectives and intentions, outlooks or expectations for earnings, revenues, expenses or other future financial or business performance, strategies or expectations, or the impact of legal or regulatory matters on business, results of operations or financial condition of the business and other statements that are not historical facts. Such statements are based upon the current reasonable beliefs, expectations, and assumptions of our management and are subject to significant risks and uncertainties that could cause actual outcomes and results to differ materially. Important factors are discussed and should be reviewed in our Form 10-K and other subsequent filings with the SEC. Specifically, forward-looking statements include, without limitation:
the future financial performance, anticipated liquidity and capital expenditures;
actions or inactions of local, state or federal regulatory agencies;
success in retaining or recruiting our officers, key employees or directors;
changes in levels or timing of capital expenditures;
adverse developments in general market, business, economic, labor, regulatory and political conditions;
fluctuations in weather patterns;
technological developments;
the impact of any cyber breaches or other incidents, grid disturbances, acts of war or terrorism, civil or social unrest, natural disasters or pandemic health events or other similar occurrences;
the impact of any change to applicable laws and regulations affecting operations, including those relating to the environment and climate change, taxes, price controls, regulatory approval and permitting;
the implementation of changes in accounting standards; and
other presently unknown unforeseen factors.
Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may vary in material respects from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Other risk factors are detailed from time to time in our reports filed with the SEC, and we encourage you to consult such disclosures.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our market risk during the six months ended June 30, 2020, as compared to those reported for the fiscal year ended December 31, 2019 in our Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control
There has been no change in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
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objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II. OTHER INFORMATION

Item 1. Legal Proceedings
Please read “Note 8—Contingencies” and “Note 9—Environmental Liabilities” to the accompanying unaudited condensed consolidated financial statements under Part I, Item 1 of this report for a discussion of legal proceedings that we believe could be material to us.

Item 1A. Risk Factors
Shareholders and prospective investors should carefully consider the risk factors disclosed in our Form 10-K for the fiscal year ended December 31, 2019. The only significant changes to our risk factors relate to the COVID-19 pandemic.
The outbreak of COVID-19 and its impact on business and economic conditions could negatively affect our business, results of operations, financial condition and the trading value of our securities.
The scale and scope of the recent COVID-19 outbreak, the resulting pandemic, and the impact on the economy and financial markets could adversely affect the Company’s business, financial condition and results of operations. As an essential business, AVANGRID continues to generate, transmit and distribute electricity and has implemented business continuity and emergency response plans to continue to provide electricity services to customers and support the Company’s operations, while taking health and safety measures such as implementing worker distancing measures and using a remote workforce where possible. However, there is no assurance that the continued spread of COVID-19 and efforts to contain the virus (including, but not limited to, voluntary and mandatory quarantines, restrictions on travel, limiting gatherings of people, and reduced operations and extended closures of many businesses and institutions) will not materially impact our business, results of operations and financial condition. In particular, the continued spread of COVID-19 and efforts to contain the virus could:
impact customer demand for electricity by our customers in New York and New England, particularly from businesses, commercial and industrial customers;
reduce the availability and productivity of our employees, including due to the availability of personal protective equipment;
cause us to experience an increase in costs as a result of our emergency measures, delayed payments from our customers and uncollectable accounts;
cause delays and disruptions in the availability of and timely delivery of materials and components used in our operations;
cause delays and disruptions in the supply chain resulting in disruptions in the commercial operation dates of certain projects and impacting qualification criteria for certain tax credits and potential delay damages in our power purchase agreements;
cause a deterioration of the credit quality of our counterparties, including power purchase agreement off-takers, contractors or retail customers, that could result in credit losses;
cause impairment of goodwill or long-lived assets and adversely impact the Company’s ability to develop, construct and operate facilities;
result in our inability to meet the requirements of the covenants in our existing credit facilities, including covenants regarding the ratio of indebtedness to total capitalization;
cause a deterioration in our financial metrics or the business environment that impacts our credit ratings;
cause a delay in the permitting process of certain development projects, affecting the timing of final investment decisions and start of construction dates;
cause an increase in cybersecurity attacks and breach attempts;
impact our liquidity position and cost of and ability to access funds from financial institutions and capital markets;
cause other risks to impact us, such as the risks described in the “Risk Factor” section of our Annual Report on Form 10-K filed on March 2, 2020, including risks of significant future contributions to our pension and post-retirement benefit plans and our ability to meet our financial obligations; and
cause other unpredictable events.
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The situation surrounding COVID-19 remains fluid and the likelihood of an impact on the Company that could be material increases the longer the virus impacts activity levels in the United States. Therefore, it is difficult to predict with certainty the potential impact of the virus on the Company’s business, operations and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.

Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
None.

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Item 6. Exhibits
The following documents are included as exhibits to this Form 10-Q:
Exhibit Number    Description
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
31.1
31.2
32
101.INS XBRL Instance Document.*
101.SCH XBRL Taxonomy Extension Schema Document.*
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.*
*Filed herewith.
†Compensatory plan or agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
    Avangrid, Inc.
     
Date: July 31, 2020 By: /s/ Dennis V. Arriola
    Dennis V. Arriola
    Director and Chief Executive Officer
Date: July 31, 2020 By: /s/ Douglas K. Stuver
    Douglas K. Stuver
    Senior Vice President - Chief Financial Officer
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into by and among Avangrid Management Company, LLC, a Delaware limited liability company (the “Company”), a wholly-owned subsidiary of Avangrid, Inc., and Dennis V. Arriola (the “Executive”) effective as of June 11, 2020 (the “Effective Date”).
1.Defined Terms. The definitions of capitalized terms used in this Agreement, unless otherwise defined herein, are provided in the last Section hereof.

2.Employment. The Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve the Company, on the terms and conditions set forth herein, with his employment commencing on July 20, 2020 (the “Start Date”) until Executive’s employment is terminated in accordance with the terms of this Agreement (the “Term”).

3.Term of Agreement. The Term will commence on the Effective Date and continue until the Date of Termination (as defined below).

4.Position and Duties.

4.1 Avangrid’s corporate governance system is inspired by and based on a commitment to ethical principles, transparency and leadership in the application of best practices in good governance and is designed to be a working structure for principled actions, effective decision-making and appropriate monitoring of both compliance and performance. Avangrid is a member of a group of companies of which Iberdrola, S.A. is the controlling member (the “Iberdrola group”). Reflecting the purpose and values of the Iberdrola group, the Iberdrola corporate governance system articulates the rules and principles governing the organization, operation, and conduct of Iberdrola group. Premised on a decentralized structure, Iberdrola, S.A. is responsible for the organization and strategic coordination of the Iberdrola group with the management of each Iberdrola group company vested in such company’s board of directors. The Iberdrola corporate governance system provides a special framework of strengthened autonomy for members of the Iberdrola group that are listed on a national stock exchange that empowers such companies to further develop their own corporate governance system. Avangrid’s corporate governance system reflects, is consistent with, and further develops the main principles and policies that constitute the Iberdrola corporate governance system, subject to certain exceptions, additions, and modifications required for publicly listed companies in the United States.

4.2 The Executive shall serve as Chief Executive Officer of Avangrid, and such other positions as may be assigned from time to time by the Company, and shall have such duties and responsibilities and power and authority as those normally associated with such position in public companies of a similar stature and will follow corporate guidelines and coordinate strategies within the AVANGRID Group. Executive shall report solely and directly to the Board and all other executives shall report to Executive. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company and its



subsidiaries and affiliates. Executive may serve on the boards of directors of profit or not-for-profit organizations with the consent of the Company, such consent not to be unreasonably withheld, and may attend to his personal affairs, provided in each case that such activities do not unreasonably interfere with the performance of his duties hereunder or cause a conflict of interest. Executive shall be based in the Company’s offices in Orange, Connecticut. The Executive recognizes that his duties will require, at the Company’s expense, travel to domestic and international locations.

5.Compensation and Related Matters.
5.1. Base Salary. The Company shall pay the Executive a base salary (the “Base Salary”) during the period of the Executive’s employment hereunder, which shall be at an initial rate of One Million One Hundred Thousand Dollars ($1,100,000.00) per annum. The Base Salary shall be paid in accordance with the Company’s standard payroll practices. The Base Salary shall be reviewed for possible increase on an annual basis, beginning in February 2021, and shall not be decreased during the Term.
5.2. Annual Bonus. During the Term, Executive shall be eligible to participate in the Company’s Executive Variable Pay plan (the “EVP”). Executive’s EVP opportunity at target for each year during the Term shall be equal to 100% of his Base Salary for such year, including on a pro-rata basis any adjustments to his Base Salary during such year, and the maximum opportunity shall be equal to 200% of the Base Salary.
5.3. Long-Term Incentive; Restricted Stock Units.
(a) Executive shall be eligible to participate in the 2020 — 2022 Avangrid Long-Term Incentive Plan and any successor thereto (the “LTIP”), in accordance with and subject to its terms and shall receive a grant of 250,000 performance share units at the maximum payout level for the 2020-2022 performance period (the “Initial PSUs”). The Initial PSUs will be granted pursuant to a separate performance share unit award agreement (the “PSU Award Agreement”), which shall govern the terms and conditions of the Initial PSUs, including the performance criteria that must be attained to earn the award (the “Performance Conditions”), provided, however, that if there is any conflict between the terms of the PSU Award Agreement and this Agreement, this Agreement shall control.
(b) During the Term, pursuant to and according to the terms of the Avangrid, Inc. Amended and Restated Omnibus Incentive Plan (“OIP”), the Executive shall be granted awards totaling 35,000 Restricted Stock Units (“RSUs”). One half of these RSUs will be granted in January 2021 and one half of these RSUs will be granted in January 2022, in each case subject to Executive’s continued employment through the date of grant. The RSUs will be granted pursuant to separate award agreements setting for the vesting and other terms and conditions of such awards. The RSUs will include the right to receive Dividend Equivalents (as defined in the OIP), which will be credited to the Executive and be deemed to be reinvested in additional RSUs as of the date of payment of any such dividend based on the Fair Market Value (as defined in the OIP). Each additional RSU which results from such deemed reinvestment of Dividend
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Equivalents shall be subject to the same vesting, distribution or payment, adjustment and other provisions which apply to the underlying RSU to which such additional RSU relates.
5.4. Benefits. Executive shall participate in all benefit and welfare plans offered to similarly situated executives, including but not limited to the Company’s 401(k) Plan and welfare plans, the Company’s medical insurance program and the Company’s deferred compensation plan, all subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. In addition, in the event that Executive becomes eligible to receive benefits under the Company’s long term disability plan (the “LTD Plan”), the Company shall supplement such benefits such that Executive receives aggregate benefits under the LTD Plan and all other disability income sources of not less than 85% of Executive’s Base Salary at the time such disability commenced. In addition, Executive shall be reimbursed for his onboarding costs, up to an aggregate of $25,000.00 including but not limited to (a) his legal fees incurred in connection with the negotiation and drafting of this Agreement; (b) his legal fees incurred in connection with estate planning services; (c) fees in connection with financial planning and tax planning; and (d) any fees or costs associated with breaking any existing financial obligations such as leases.
5.5. Relocation. Executive shall relocate to Connecticut. The Company will provide Relocation services and benefits in accordance with the terms set forth in Exhibit A attached hereto. If Executive voluntarily resigns his employment without Good Reason or is terminated for Cause, in either case within six months following the date of relocation, then the Executive will be liable to repay 100% of the relocation payments and reimbursements to the Company. If Executive voluntarily resigns his employment without Good Reason or is terminated for Cause, in either case after the sixth month anniversary of the date of relocation and before the one year anniversary of the date of relocation, Executive will be liable to repay 75% of the relocation payments and reimbursements to the Company. If Executive voluntarily resigns his employment without Good Reason or is terminated for Cause, in either case after the one year anniversary of the date of relocation and before the eighteen month anniversary of the date of relocation, Executive will be liable to repay 50% of the relocation payments and reimbursements to the Company. If Executive voluntarily resigns his employment without Good Reason or is terminated for Cause, in either case after the eighteen month anniversary of the date of relocation and before the two year anniversary of the date of relocation, Executive will be liable to repay 25% of the relocation payments and reimbursements to the Company. If Executive’s employment on is terminated without Cause or due to Executive’s death or Disability or Executive resigns for Good Reason at any time, then no repayment of relocation payments and reimbursements shall be due. In addition, if Executive is terminated without Cause or Executive resigns without Good Reason, in either case after the two year anniversary of the date of relocation, then no repayment of relocation payments and reimbursements shall be due. In addition, in light of the current COVID-19 pandemic, the Company will also coordinate the booking of, and pay for, the cost (within reason) of up to three roundtrip chartered flights from San Diego, California to the New Haven, Connecticut area between June 1, 2020 and October 31, 2020.
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5.6. One-Time Payments. In addition to the payments and benefits described above, as a special inducement to Executive commencing employment with the Company, Executive will receive the following cash bonus payments, in each case subject to Executive’s continued employment through the date of payment: (i) Executive will receive a $300,000 lump sum cash payment on the first regular payroll pay date following the date of this Agreement; (ii) Executive will receive a $1,000,000 lump sum cash payment on the first regular payroll pay date following December 31, 2020; (iii) Executive will receive a $1,000,000 lump sum cash payment on the first regular payroll pay date following December 31, 2021; and (iv) Executive will receive a $1,000,000 lump sum cash payment on the first regular payroll pay date following December 31, 2022. In the event that the Executive voluntarily resigns his employment without Good Reason before December 31, 2023, the Executive will repay to the Company the one-time payment made by the Company to the Employee in that calendar year no later than six (6) months after Executive’s termination.
5.7 Expenses. Upon presentation of adequate documentation to the Company, the Executive shall receive prompt reimbursement from the Company for all reasonable and customary business expenses incurred by the Executive in accordance with the Company’s policies in performing services hereunder.
5.8 Vacations and Holidays. The Executive shall be entitled to five (5) weeks of paid vacation and five (5) floating holidays in each calendar year, and shall also be entitled to all additional paid holidays afforded by the Company to its executives, all in accordance with applicable Company policies.
6.Compensation Related to Disability. During any period during the Term that the Executive fails to perform the Executive’s full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive’s Base Salary to the Executive, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement in which the Executive participated at the beginning of such period, until the Executive returns to work or his employment is terminated; provided, however, that such Base Salary payments shall be reduced by the sum of the amounts, if any, payable to the Executive under disability benefit plans of the Company or under the Social Security disability insurance program, to the extent such amounts were not previously applied to reduce any such Base Salary payment.

7.Compensation Related to Termination.
7.1 Termination by the Company Without Cause or by Executive for Good Reason. If the Executive’s employment shall be terminated during the Term by the Company without Cause or by Executive for Good Reason, Executive shall be entitled to receive (a) a lump sum payment payable immediately following the Executive’s execution of a release as described in Section 7.5 and applicable revocation period equal to the sum of the Executive’s Base Salary and Executive’s target EVP for the current calendar year; (b) Executive’s EVP for that year, pro-rated and paid through the Executive’s Date of Termination and based on the Company’s actual performance as measured during the ordinary annual performance for all executives participating
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in the EVP; (c) monthly reimbursement for the COBRA premium paid by Executive for Executive and his dependents for a period of twelve (12) months following the Date of Termination; (d) the immediate vesting of all RSUs described in Section 5.3(b) and (e) all compensation and benefits payable to the Executive through the Date of Termination under the terms of this Agreement or any compensation or benefit plan, program or arrangement maintained by the Company and in which Executive participated as of the Date of Termination. In addition, if the Executive’s employment shall be terminated during the Term by the Company without Cause or by Executive for Good Reason on or before December 31, 2022, (i) the Executive shall be entitled to receive a lump sum payment in an amount equal to the product of (x) fifty percent (50%) of the total number of Initial PSUs granted pursuant to Section 5.3 (i.e., 125,000) and (y) the closing price of Avangrid’s common share price on the Date of Termination and (ii) the Executive will remain eligible to vest, subject to the attainment of the Performance Conditions as measured at the end of the regular performance period and provided that the performance attainment level is at least 50%, in a number of the Initial PSUs equal to fifty percent (50%) of the total number of Initial PSUs granted pursuant to Section 5.3(a) (i.e., 125,000) multiplied by a fraction, the numerator of which is the total number of days from and after the Start Date that Executive was employed with the Company and the denominator of which is the total number of days during the period beginning on the Start Date and ending on December 31, 2022 (the “Pro Rata PSU Amount”). For the avoidance of doubt, (i) in the event that, based on the actual level of attainment of the Performance Conditions, the Initial PSUs are earned at a level that is at least 50% but less than 100%, such actual earned percentage shall be applied against the Pro Rata PSU Amount, and (ii) in the event that, based on the actual level of attainment of the Performance Conditions, the Initial PSUs are earned at a level below 50%, no portion of the Pro Rata PSU Amount shall vest. Subject to earlier payment as may be provided under the PSU Award Agreement, the number of PSUs that vest in accordance with the foregoing will be determined as soon as practicable after December 31, 2022 and, to the extent earned, such PSUs will be paid to Executive not later than such date as is necessary to cause the Initial PSUs to qualify as a “short-term deferral” pursuant to Treasury Regulation Section 1.409A-1(b)(4). With respect to any PSUs issued after the execution of this Agreement (not including, for the avoidance of doubt, the Initial PSUs) (“Subsequent PSUs”) which remain unvested upon the Date of Termination, if the Executive’s employment shall be terminated during the Term by the Company without Cause or by Executive for Good Reason on or after January 1, 2023, the Executive will remain eligible to vest, subject to the attainment of the Performance Conditions as measured at the end of the regular performance period) in the total number of Subsequent PSUs issued multiplied by a fraction, the numerator of which is the total number of days from and after the commencement of the performance period for such Subsequent PSUs that Executive was employed with the Company and the denominator of which is the total number of days during the performance period for such Subsequent PSUs. The payment of any such Subsequent PSUs shall be made in accordance with the applicable PSU award agreement governing such Subsequent PSUs.
7.2. Termination by the Company Without Cause or by Executive for Good Reason Following a Change in Control. If Executive’s employment shall be terminated during
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the Term by the Company without Cause or by Executive for Good Reason within one year following a Change in Control, Executive shall be entitled to receive all benefits set forth in Section 7.1 above, except that (i) he shall be entitled to two times his Base Salary and target EVP instead of one times his Base Salary and target EVP, and (ii) he shall be eligible to vest in the full amount of the Initial PSUs granted pursuant to Section 5.3(a), subject to attainment of the Performance Conditions, provided that (I) the Performance Conditions shall be considered earned at a level of 100% with respect to one-half of the Initial PSUs, (II) with respect to the second one-half of the Initial PSUs, such performance shall be measured as of the Change in Control date, with such adjustments to the Performance Conditions as are deemed equitable by the Board in accordance with the OIP and in a manner otherwise consistent with the treatment of outstanding performance share units in such Change in Control transaction, and (III) such PSUs shall, to the extent deemed earned in accordance with the foregoing, be paid to Executive as soon as practicable following the termination date, but in no case later than thirty (30) days following the termination date. Notwithstanding the foregoing, if any payment or benefit received or to be received by Executive (including any payment or benefit received pursuant to this Agreement or otherwise) would be (in whole or part) subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the “Code”), or any successor provision thereto, or any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then, the amounts payable under Section 7.1 shall be reduced to the extent necessary to make such payments and benefits not subject to such Excise Tax, but only if such reduction results in a higher after-tax payment to the Executive after taking into account the Excise Tax and any additional taxes the Executive would pay if such payments and benefits were not reduced. Unless the Executive and the Company otherwise agree in writing, any determination required under this Section shall be made in writing by a certified public accountant selected by the Company (the “Accountants”), whose determination shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section. The reduction of payments, if applicable, shall be effected in the following order (unless the Executive, to the extent permitted by Section 409A of the Code, elects another method of reduction by written notice to the Company prior to the Section 280G event): (i) any cash severance payments, (ii) any other cash amounts payable to the Executive, (iii) any benefits valued as parachute payments, and (iv) acceleration of vesting of equity awards.
7.3. Termination by Executive Without Good Reason, by Reason of Executive’s Retirement, or Reason of Executive’s Death or Disability. If the Executive’s employment shall be terminated during the Term by Executive without Good Reason, by reason
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of the Executive’s retirement, or by reason of the Executive’s death or Disability, Executive shall be entitled to receive (a) the Executive’s Base Salary through the Date of Termination at the rate in effect at the time the Notice of Termination is given; (b) Executive’s EVP for that year, pro-rated and paid through the Executive’s Date of Termination and based on the Company’s actual performance as measured during the ordinary annual performance for all executives participating in the EVP; and (c) all compensation and benefits payable to the Executive through the Date of Termination under the terms of this Agreement or any compensation or benefit plan, program or arrangement maintained by the Company during such period and in which Executive participated as of the Date of Termination. Notwithstanding anything to the contrary in the PSU Award Agreement, with respect to the Initial PSUs, any payments in respect of the Initial PSUs that Executive may be eligible to receive following the termination of Executive’s employment by reason of Executive’s death or Disability will be paid to executive not later than such date as is necessary to cause the Initial PSUs to qualify as a “short-term deferral” pursuant to Treasury Regulation Section 1.409A-1(b)(4).
7.4. Termination by the Company for Cause. If the Executive’s employment shall be terminated during the Term by the Company for Cause, Executive shall be entitled to receive (a) the Executive’s Base Salary through the Date of Termination at the rate in effect at the time the Notice of Termination is given; and (b) all compensation and benefits payable to the Executive through the Date of Termination under the terms of this Agreement or any compensation or benefit plan, program or arrangement maintained by the Company during such period and in which Executive participated as of the Date of Termination.
7.5. No Further Liability; Release. Other than providing the compensation and benefits provided for in accordance with this Section 7, the Company and its directors, officers, employees, subsidiaries, affiliates, stockholders, successors, assigns, agents and representatives shall have no further obligation or liability to Executive or any other person under this Agreement. The payment of any amounts pursuant to this Section 7.1 or 7.2 (other than payments required by law) is expressly conditioned upon the delivery by Executive to the Company of a release in a form to be provided by the Company of any and all claims Executive may have against the Company and its directors, officers, employees, subsidiaries, affiliates, stockholders, successors, assigns, agents and representatives arising out of or related to Executive’s employment by the Company and the termination of such employment. The Company shall provide such release to Executive not more than fifteen days after the Date of Termination.
8.Termination Procedures.
8.1. Notice of Termination. During the Term of this Agreement, any purported termination of the Executive’s employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 11 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, if the termination is purported to be by the Company for Cause or by
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Executive for Good Reason, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment.
8.2. Date of Termination. “Date of Termination,” with respect to any purported termination of the Executive’s employment during the Term of this Agreement, shall mean (i) if the Executive’s employment is terminated by his death, the date of his death, (ii) if the Executive’s employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full time performance of the Executive’s duties during such thirty (30) day period), and (iii) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination, which shall not (except in the case of a termination for Cause) be less than ninety days from the date such Notice of Termination is given.
9.Exclusive Employment; Noncompetition; Nonsolicitation; Nondisclosure of Proprietary Information; Surrender of Records; Inventions and Patents.

9.1. No Conflict; No Other Employment. During the period of Executive’s employment with the Company, Executive shall not: (i) engage in any activity which conflicts or interferes with or derogates from the performance of Executive’s duties hereunder as described in Section 4 nor shall Executive engage in any other business activity, whether or not such business activity is pursued for gain or profit, except as approved in advance in writing by the Company, such approval not to be unreasonably withheld; provided, however, that Executive shall be entitled to manage his personal investments and otherwise attend to personal affairs, including charitable, social and political activities, in a manner that does not unreasonably interfere with his responsibilities hereunder, or (ii) accept or engage in any other employment, whether as an employee or consultant or in any other capacity, and whether or not compensated therefor.

9.2. Noncompetition; Nonsolicitation.

(i)Executive acknowledges and recognizes the highly competitive nature of the Company’s business and that access to the Company’s confidential records and proprietary information renders him special and unique within the Company’s industry. In consideration of the payment by the Company to Executive of amounts that may hereafter be paid to Executive pursuant to this Agreement (including, without limitation, pursuant to Sections 5 and 7 hereof) and other obligations undertaken by the Company hereunder, Executive agrees that during (i) his employment with the Company, and (ii) the period beginning on the date of termination of employment and ending one year after the date of termination of employment (the “Covered Time”), Executive shall not, directly or indirectly, engage (as owner, investor, partner, stockholder, employer, employee, consultant, advisor, director or
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otherwise) in any Competing Business in any Restricted Area (each as defined below), provided that the provisions of this Section 9.2(a) will not be deemed breached merely because Executive owns less than 2% of the outstanding common stock of a publicly-traded company.

(ii)In further consideration of the payment by the Company to Executive of amounts that may hereafter be paid to Executive pursuant to this Agreement (including, without limitation, pursuant to Sections 5 and 7 hereof) and other obligations undertaken by the Company hereunder, Executive agrees that during his employment and the Covered Time, he shall not, directly or indirectly, (i) solicit, encourage or attempt to solicit or encourage any of the employees of the Company or any of its affiliates to terminate his, or its relationship with the Company or such affiliate; (ii) solicit, encourage or attempt to solicit or encourage any of the employees of the Company or any of its affiliates to become employees of any other person or entity; (iii) solicit or attempt to solicit any vendor or distributor of the Company or any of its affiliates in connection with a Competing Business with respect to any product or service being furnished, made, sold, rented or leased by the Company or such affiliate; or (iv) persuade or seek to persuade any vendor or distributor of the Company or any affiliate to cease doing business or to reduce the amount of business which such customer, vendor or distributor has customarily done or contemplates doing with the Company or such affiliate.

(iii)Executive understands that the provisions of this Section 9.2 may limit his ability to earn a livelihood in a business similar to the business of the Company or its affiliates but nevertheless agrees and hereby acknowledges that the consideration provided under this Agreement, including any amounts or benefits provided under Sections 5 and 7 hereof and other obligations undertaken by the Company hereunder, is sufficient to justify the restrictions contained in such provisions. In consideration thereof and in light of Executive’s education, skills and abilities, Executive agrees that he will not assert in any forum that such provisions prevent him from earning a living.
9.3 Proprietary Information. Executive acknowledges that during the course of his employment with the Company he will necessarily have access to and make use of proprietary information and confidential records of the Company and its affiliates, including without limitation trade secrets (as that term is defined in Conn. Gen. Stat. § 35-51(d)ORS 646.461) and/or competitively sensitive business or professional information. Executive
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covenants that he shall not during his employment or at any time thereafter, directly or indirectly, use for his own purpose or for the benefit of any person or entity other than the Company, nor otherwise disclose to any individual or entity, any Proprietary Information, unless such disclosure is made in the good faith performance of Executive’s duties hereunder, has been authorized in writing by the Company, or is otherwise required by law.
9.4. Confidentiality and Surrender of Records. Executive shall not during his employment or at any time thereafter (irrespective of the circumstances under which Executive’s employment by the Company terminates), except as required by law, directly or indirectly publish, make known or in any fashion disclose any confidential records to, or permit any inspection or copying of confidential records by, any individual or entity other than in the course of such individual’s or entity’s employment or retention by the Company. Upon termination of employment for any reason or request by the Company, Executive shall deliver promptly to the Company all property and records of the Company or any of its affiliates, including, without limitation, all confidential records. For purposes hereof, “confidential records” means all correspondence, reports, memoranda, files, manuals, books, lists, financial, operating or marketing records, magnetic tape, or electronic or other media or equipment of any kind which may be in Executive’s possession or under his control or accessible to him which contain any Proprietary Information. All property and records of the Company and any of its affiliates (including, without limitation, all confidential records) shall be and remain the sole property of the Company or such affiliate during Executive’s employment with the Company and thereafter.
9.5. Inventions and Patents. All inventions, innovations or improvements (including policies, procedures, products, improvements, software, ideas and discoveries, whether patent, copyright, trademark, service mark, or otherwise) conceived or made by Executive, either alone or jointly with others, in the course of his employment by the Company, belong to the Company. Executive will promptly disclose in writing such inventions, innovations or improvements to the Company and perform all actions reasonably requested by the Company to establish and confirm such ownership by the Company, including, but not limited to, cooperating with and assisting the Company in obtaining patents, copyrights, trademarks, or service marks for the Company in the United States and in foreign countries.
9.6. Enforcement. Executive acknowledges and agrees that, by virtue of his position, his services and access to and use of confidential records and Proprietary Information, any violation by him of any of the undertakings contained in this Section 9 would cause the Company and/or its affiliates immediate, substantial and irreparable injury for which it or they have no adequate remedy at law. Accordingly, Executive agrees and consents to the entry of an injunction or other equitable relief by a court of competent jurisdiction restraining any violation or threatened violation of any undertaking contained in this Section 9. Executive waives posting by the Company or its affiliates of any bond otherwise necessary to secure such injunction or other equitable relief. Rights and remedies provided for in this Section 9 are cumulative and shall be in addition to rights and remedies otherwise available to the parties hereunder or under any other agreement or applicable law.
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10.Indemnification. During the Term and for so long thereafter as liability exists with regard to the Executive’s activities during the Term on behalf of the Company or its affiliates, the Company shall indemnify the Executive (other than in connection with the Executive’s gross negligence or willful misconduct) in accordance with the Company’s customary indemnification policies and procedures which are applicable to the Company’s officers and directors. Further, during the Term and for so long thereafter as liability exists with regard to the Executive’s activities during the Term on behalf of the Company or its affiliates, the Company shall, purchase and maintain, at its own expense, directors’ and officers’ liability insurance providing adequate coverage based on market levels for a company of a similar size to the Company to the Executive on terms that are no less favorable than the coverage provided to other directors and similarly situated executives of the Company or any successor.

11.Successors; Binding Agreement.
11.1. This Agreement shall inure to the benefit of and be enforceable by the successors and assigns of the Company. The Company may assign this Agreement, without Executive’s prior consent, to any person or entity that acquires all or a substantial part of the business and/or assets of the Company or any subsidiary thereof to which Executive regularly provides services, provided in each case that such entity expressly assumes and agrees to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place.
11.2. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate.
12.Notices. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:

To the Company: Avangrid Management Company, LLC
180 Marsh Hill Road
Orange, CT 06477
Attention: Chief Human Resources Officer

To the Executive:  _______________________
           _______________________
           _______________________
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13.Miscellaneous.
13.1. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officers as may be specifically designated by the Board. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by any party, which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Connecticut. There shall be withheld from any payments provided for hereunder any amounts required to be withheld under federal, state or local law and any additional withholding amounts to which the Executive has agreed. The obligations under this Agreement of the Company or the Executive which by their nature and terms require satisfaction after the end of the Term shall survive such event and shall remain binding upon such party.
13.2. Facsimile or electronically transmitted signatures shall be treated as original signatures for all purposes.
13.3. This Agreement, together with the EVP, LTIP, LTD Plan, Employee Relocation Benefits Repayment Agreement and any other agreement referenced herein (as modified by the Agreement) contains the entire agreement and understanding between the parties hereto in respect of Executive’s employment and supersedes, cancels and annuls any prior or contemporaneous written or oral agreements, understandings, commitments and practices between them respecting Executive’s employment except as specifically referenced herein.
14.Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

15.Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

16.Settlement of Disputes; Arbitration. All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing. Any dispute or controversy arising under or in connection with this Agreement or Executive’s employment shall be settled exclusively by arbitration in New Haven County, Connecticut in accordance with the Employment Arbitration Rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. Notwithstanding the foregoing, the Company and any affiliate thereof shall have the right to seek injunctive or other equitable relief from a court of competent
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jurisdiction to enforce the provisions of Section 9 of this Agreement. For purposes of seeking enforcement of Section 9, the Company and Executive hereby consent to the jurisdiction of any state or federal court sitting in New Haven County, Connecticut. In connection with any arbitration or litigation dispute (including any appeal or enforcement proceedings related to any such dispute) arising out of or related to this Agreement, the parties shall be liable for their own costs and attorney fees, provided however that the Company shall pay the costs and fees of the arbitrator.

17.Section 409A of the Code. The Company may deduct or withhold from any compensation or benefits any applicable federal, state or local tax or employment withholdings or deductions resulting from any payments or benefits provided under this Agreement. The Company makes no representations regarding the tax implications of the compensation and benefits to be paid under this Agreement, including, without limitation, under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”) and applicable administrative guidance and regulations. It is intended that this Agreement will comply with Section 409A and all regulations and guidance issued thereunder to the extent the Agreement is subject thereto, and the Agreement shall be interpreted on a basis consistent with such intent. Notwithstanding anything in this Agreement to the contrary, in the event Executive is deemed to be a “specified employee” within the meaning of Section 409A(a)(2)(B)(i), no payments hereunder that are “deferred compensation” subject to Section 409A shall be made prior to the date that is six months after the date of Executive’s “separation from service” (as defined in Section 409A and any Treasury Regulations promulgated thereunder) or, if earlier, Executive’s death. Following any applicable six month delay, all such delayed payments will be paid in a single lump sum on the earliest permissible payment date. For purposes of this Agreement, with respect to payments of any amounts that are considered to be “deferred compensation” subject to Section 409A, references to “termination of employment” (and substantially similar phrases) shall be interpreted and applied in a manner that is consistent with the definition of “separation from service” for purposes of Section 409A. For purposes of Section 409A, Executive’s right to receive any installment payment pursuant to this Agreement will be treated as a right to receive a series of separate and distinct payments. Notwithstanding anything to the contrary in the PSU Award Agreement, the provisions of this Agreement (which shall control over any conflicting provisions in the PSU Award Agreement) are intended to cause the Initial PSUs to qualify as a “short-term deferral” pursuant to Treasury Regulation Section 1.409A-1(b)(4) such that the Initial PSUs shall not be subject to Section 409A and this Agreement and the PSU Award Agreement shall be interpreted in accordance with such intent.

18.Definitions. For purposes of this Agreement, the following terms shall have the meaning indicated below:

(a)“Affiliates” shall mean all direct and indirect parent companies and affiliates of the Company, including without limitation Iberdrola S.A. and Avangrid, Inc. and their respective affiliates.

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(b)“Avangrid” shall mean Avangrid, Inc.

(c)“AVANGRID Group” shall mean Avangrid and the Company, as well as any entity that directly, or indirectly through one or more intermediaries, controls, are controlled by, or are under common control with, Avangrid and/or the Company.

(d)“Base Salary” shall have the meaning stated in Section 5.1 hereof.

(e)“Board” shall mean the Board of Directors of Avangrid.

(f)“Cause” for termination by the Company of the Executive’s employment, for purposes of this Agreement, shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive’s duties as described in Section 4 with the Company (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness or Executive’s resignation for Good Reason) after a written demand for substantial performance is delivered to the Executive by the Company, which demand specifically identifies the manner in which the Company believes that the Executive has not substantially performed the Executive’s duties, and Executive’s failure to cure such failure within fifteen (15) days of the delivery of such written demand (provided such demand can be reasonably cured within 15 days), (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company or its subsidiaries or affiliates, monetarily or otherwise; or (iii) the Executive’s conviction, or a plea of guilty or nolo contendere to a felony. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s act, or failure to act, was in the best interest of the Company. An error in judgment or negligence by Executive shall not be considered to be “willful.” Failure to meet performance standards or objectives of the Company shall not constitute Cause for purposes hereof.

(g)“Change in Control” shall have the meaning set forth in the OIP.

(h)“Company” shall mean Avangrid Management Company, LLC and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.

(i)“Competing Business” shall mean any business (including, without limitation, utilities, power producers, power marketers or traders), co-operative, or energy provider of any kind that directly or indirectly competes with the AVANGRID Group’s businesses as defined within the approved strategic plan
14




of the Company, or with the businesses as defined within the approved strategic plan of the Company’s affiliates as of the date of Executive’s termination of employment with the Company. For the avoidance of any doubt, no affiliates or subsidiaries of Iberdrola S.A. shall be included in, or be applicable to, this definition with the exception of AVANGRID Group.

(j)“Date of Termination” shall have the meaning stated in Section 8.2 hereof.

(k)“Disability” shall be deemed the reason for the termination by the Company of the Executive’s employment if, as a result of the Executive’s incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive’s duties with the Company for a period of at least six months within any twelve month period, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive’s duties.

(l)“Executive” shall mean the individual named in the first paragraph of this Agreement.

(m)“Good Reason” for termination by the Executive of the Executive’s employment shall mean the occurrence (without the Executive’s express written consent), of any of the following acts by the Company, unless such act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (i) a material and ongoing diminution of Executive’s title, duties, responsibilities, or authorities; (ii) a material diminution of Executive’s annual base salary or EVP opportunity (iii) a requirement by the Company that Executive relocate his principal place of employment by more than fifty miles; or (iv) the Company’s failure to nominate the Executive for election or reelection to the Board or the removal of the Executive from the Board without Cause (v) any other action or inaction by the Company that constitutes a material breach of this Agreement, including (1) a failure to include the Executive in the management compensation programs then in effect on substantially the same terms and conditions as that applicable to other officers or similarly situated executives of the AVANGRID Group, or (2) a failure to continue the Executive’s participation in the material benefit plans of the AVANGRID Group (other than any pension plan) on substantially the same basis as that applicable to other officers or similarly situated executives of the AVANGRID Group. For the avoidance of doubt, the appointment of a President and assignment to such person of duties appropriate for such position, or the appointment of other executives below the level of Chief Executive Officer, shall not constitute Good Reason.
15





(n)“Notice of Termination” shall have the meaning stated in Section 8.1 hereof.

(o)“Proprietary Information” includes, but is not limited to: (a) the software products, programs, applications, and processes utilized by the Company or any of its affiliates; (b) information concerning the transactions or relations of any vendor or distributor of the Company or any of its affiliates with the Company or such affiliate or any of its or their partners, principals, directors, officers or agents; (c) any information concerning any product, technology, or procedure employed by the Company or any of its affiliates but not generally known to its or their customers, vendors or competitors, or under development by or being tested by the Company or any of its affiliates but not at the time offered generally to customers or vendors; (d) any information relating to the computer software, computer systems, pricing or marketing methods, sales margins, cost of goods, cost of material, capital structure, operating results, borrowing arrangements or business plans of the Company or any of its affiliates; (e) any information which is generally regarded as confidential or proprietary in any line of business engaged in by the Company or any of its affiliates; (f) any business plans, budgets, advertising or marketing plans; (g) any information contained in any of the written or oral policies and procedures or manuals of the Company or any of its affiliates; (h) any information belonging to customers or vendors of the Company or any of its affiliates or any other person or entity which the Company or any of its affiliates has agreed to hold in confidence; (i) any inventions, innovations or improvements covered by this Agreement; and (j) all written, graphic and other material relating to any of the foregoing. Executive acknowledges and understands that information that is not novel or copyrighted or patented may nonetheless be Proprietary Information. The term “Proprietary Information” shall not include information that is or becomes generally available to and known by the public or information that was known to Executive prior to the commencement of his employment with the Company or information that is or becomes available to Executive on a non-confidential basis from a source other than the Company, any of its affiliates, or the directors, officers, employees, partners, principals or agents of the Company or any of its affiliates (other than as a result of a breach of any obligation of confidentiality).

(p)“Restricted Area” shall mean any state in the United States in which (i) a Competing Business is headquartered and (ii) the AVANGRID Group generates more than twenty-five percent of its total revenue and total net income.

(q)“Term” shall have the meaning stated in Section 3 hereof.

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[Remainder of the page intentionally left blank.]
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement.


         AVANGRID MANAGEMENT COMPANY, LLC






           By: /s/ Peter T. Church   
           Name: Peter T. Church
           Title: Chief Human Resources Officer


          EXECUTIVE
           
           /s/ Dennis V. Arriola   
           Dennis V. Arriola

17




EXHIBIT A
Relocation Benefits
Category Description
Relocation Provider
Avangrid has partnered with Versa Relocation to manage your relocation benefits. You will be introduced to a Relocation Consultant who will be responsible for overseeing all relocation activity as outlined below.
Accompanying Family Members Family members eligible for benefits include your legal spouse/partner and legal dependents that reside in your departure home and will move with you and subsequently reside with you in the new location.
Repayment Agreement In the event employment is voluntarily terminated, or terminated for cause, Executive will reimburse Company for relocation costs as provided in the Employment Agreement.
Real Estate Agent/Broker Referral Program Registration of departure and destination real estate agents is recommended. You are encouraged to provide the name of your preferred agent selection to your Relocation Consultant.
Buyer Value Option (BVO) Home Sale Program Company will provide Executive with a BVO Home Sale benefit managed through VERSA Relocation. Company will cover up to 8.5% of qualified home sale expenses (real estate fees, BVO closing costs, seller-paid closing costs).
Loss on Sale
Company will provide tax grossed up protection of up to $200,000 if the sales price is below the sum of your purchase price plus documented capital improvements as reasonably determined and agreed between you and the Company.
Home Purchase Company will cover all reasonable and customary home purchasing expenses up to 1.5% of home purchase price (1% loan origination, non-pre-paid closing costs and fees, etc)
Mortgage Assistance VERSA Relocation will refer a relocation-specialized mortgage provider(s), if desired.
Dual Mortgage Assistance Company will provide reimbursement of the lesser of two mortgage payments for up to 60 days
Home Finding Trip Up to 3 trips of 5 days each for employee and spouse, coordinated with a qualified, relocation-certified real estate agent. Air fare (as described in the Agreement), car rental/transportation, lodging and meals included.
Shipment of Household Goods VERSA will utilize mover’s White-glove, VIP shipment program. Household goods fully insured and fully packed, shipped, and unpacked from departure primary residence to destination new home. Specialty shipment of certain goods (e.g., wine/art collections) will be provided, as needed. If storage is needed, up to 90 days is authorized. Maximum household goods shipment and insurance costs capped at $125,000, provided that the Company will work in good faith with Executive to reconsider additional reasonable costs if the Company and Executive determine that actual reasonable costs to cover goods shipment and insurance exceed $125,000.
Shipment of Automobile(s) The company will arrange to ship up to two automobiles.
Temporary Living Fully furnished temporary lodging will be covered for a maximum of 90 days. Direct reimbursement of an economy rental car for up to seven days. Meals or incidental costs incurred during the period of temporary living is not covered.
Final Move (En route Trip) Reimbursement for expenses related to the final trip to the new location for employee and all eligible accompanying family members. Reimbursable expenses may include lodging, transportation costs en-route and meals. Company travel guidelines apply.
Destination Assistance Up to 4 days of area orientation, settling in, school search and other destination services.
Relocation Allowance
You will be allotted a Relocation Allowance of $25,000 to use for the remaining incidental relocation expenses. Your Versa Consultant will assist you in managing and reimbursing for qualified relocation expenses.
Tax Assistance Financial assistance will be provided to offset the federal, state and FICA tax impact of relocation payments. Compensation will be based on Company derived income only.
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EXHIBIT 10.2
CUSIP: 05351YAJ8
$500,000,000
REVOLVING CREDIT AGREEMENT

among

AVANGRID, INC.,
as the Borrower,

The Several Lenders
from Time to Time Parties Hereto,


MIZUHO BANK, LTD.,
as Administrative Agent,
and
THE BANK OF NOVA SCOTIA and BANCO BILBAO VIZCAYA ARGERNTARIA, S.A. NEW YORK BRANCH,
as Co-Syndication Agents

Dated as of June 29, 2020
MIZUHO BANK, LTD.,
THE BANK OF NOVA SCOTIA, and
BANCO BILBAO VIZCAYA ARGERNTARIA, S.A.,
as Joint Lead Arrangers and Joint Bookrunners





TABLE OF CONTENTS
Page
SECTION 1.   METHOD OF BORROWING AND PAYMENT OF FEES
1
1.01.   Commitments; Loans
1
1.02.   Borrowings
1
1.03.   Termination and Reduction of Commitments
2
1.04.   Extensions of Commitments
2
1.05.   Additional Commitments
4
SECTION 2.   THE LOANS
5
2.01.   Notice and Provision of Loans
5
2.02.   Repayment of Loans
6
2.03.   Facility Fees, etc.
6
2.04.   Interest Rates and Payment Dates
7
2.05.   Computation of Interest
7
2.06.   Alternate Rate of Interest
8
2.07.   Continuation and Conversion of Loans
9
2.08.   Prepayments
10
2.09.   Reserve Requirements; Change in Circumstances
10
2.10.   Change in Legality
11
2.11.   New Office or Agency; Replacement of Lenders
12
2.12.   Indemnity
13
2.13.   Pro Rata Treatment
14
2.14.   Sharing of Setoffs
14
2.15.   Payments
15
2.16.   Taxes
15
SECTION 3.   [RESERVED]
18
SECTION 4.   REPRESENTATIONS AND WARRANTIES
18
4.01.   Corporate Existence and Power
18
4.02.   Due Authorization, Compliance with Law, Enforceable Obligations, etc.
19
4.03.   Financial Condition
19
4.04.   Litigation
20
4.05.   Tax Returns
20
4.06.   Investment Company Act
20
4.07.   Other Agreements
20
4.08.   Federal Reserve Regulations
20
4.09.   No Material Misstatements
20
4.10.   Employee Benefit Plans
21
4.11.   Environmental and Safety Matters
21
4.12.   Ownership of Property; Liens
21
4.13.   Use of Proceeds
21



         
4.14.   Anti-Corruption Laws and Sanctions
21
4.15.   EEA Financial Institutions
22
SECTION 5.   CONDITIONS PRECEDENT
22
5.01.   Conditions Precedent to Effectiveness of Agreement
22
5.02.   Conditions to All Extensions of Credit
23
SECTION 6.   AFFIRMATIVE COVENANTS
24
6.01.   Financial Statements; Certificates; Reports
24
6.02.   ERISA
26
6.03.   Payment of Obligations
26
6.04.   Maintenance of Existence; Compliance
26
6.05.   Inspection of Property and Operations; Books and Records
26
6.06.   Environmental Laws
26
6.07.   Further Assurances
27
6.08.   Maintenance of Ownership of Significant Subsidiaries
27
SECTION 7.   NEGATIVE COVENANTS
27
7.01.   Financial Condition Covenant
27
7.02.   Sale of Assets; Merger
27
7.03.   Limitation on Liens
27
7.04.   Limitation on Transactions with Affiliates
29
7.05.   Sales and Leasebacks
29
7.06.   Limitation on Changes in Lines of Business
29
7.07.   Use of Proceeds
29
7.08.   Fiscal Year
30
7.09.   Limitation on Restrictions on Distributions from Subsidiaries
30
SECTION 8.   EVENTS OF DEFAULT
30
SECTION 9.   DEFINITIONS
32
9.01.   Defined Terms
32
9.02.   Terms Generally
47
SECTION 10.   THE ADMINISTRATIVE AGENT
47
10.01.   Appointment and Authority of Administrative Agent
47
10.02.   Reliance by Administrative Agent; Delegation by Administrative Agent
48
10.03.   No Amendment to Administrative Agent’s Duties Without Consent
49
10.04.   Responsibilities of Administrative Agent
50
10.05.   Proofs of Claim
50
10.06.   Rights as a Lender
51
10.07.   Credit Decision
51
10.08.   Resignation of Administrative Agent
51
10.09.   No Other Duties
52
SECTION 11.   MISCELLANEOUS
52
11.01.   Notices
52
11.02.   Successors and Assigns; Participations, Assignments and Designations
53
        

         
11.03.   Expenses; Indemnity
57
11.04.   Effectiveness
58
11.05.   Survival of Agreement; Benefit to Successors and Assigns
58
11.06.   Right of Setoff
58
11.07.   Waivers; Amendment
59
11.08.   Severability
60
11.09.   Headings
60
11.10.   Governing Law; Jurisdiction
60
11.11.   Counterparts
61
11.12.   Interest Rate Limitation
61
11.13.   Entire Agreement
61
11.14.   Waiver of Jury Trial
62
11.15.   USA PATRIOT Act
62
11.16.   Defaulting Lenders
62
11.17.   Certain Acknowledgements
63
11.18.   Acknowledgement and Consent to Bail-In of EEA Financial Institutions
64


        


REVOVING CREDIT AGREEMENT, dated as of June 29, 2020, among AVANGRID, INC., a New York corporation (the “Borrower”), the Lenders (as defined herein), and MIZUHO BANK, LTD., as administrative agent (the “Administrative Agent”).
W I T N E S S E T H:
WHEREAS, the Borrower has requested, and, subject to the terms and conditions hereof, the Administrative Agent and the Lenders have agreed, to extend certain credit facilities to the Borrower on the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, such parties hereby agree as follows:
SECTION 1.   METHOD OF BORROWING AND PAYMENT OF FEES
1.01.   Commitments; Loans.
(a) Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, to make revolving loans (“Loans”) in Dollars to the Borrower at any time and from time to time from and including the date hereof to but excluding the Termination Date (as such date may be extended), or until the earlier termination of its Commitment, in an aggregate principal amount at any one time outstanding not to exceed the amount of its Commitment; provided that the Total Extensions of Credit (excluding Term Loans) shall not exceed the Total Commitments.
(b) The Loans made by the Lenders on any Borrowing Date that are ABR Loans shall be (i) in a minimum aggregate principal amount of $1,000,000, (ii) in an integral multiple of $500,000 in excess of the amount provided in clause (i) above or (iii) in an aggregate principal amount equal to the remaining balance of the Total Commitment, as the case may be. The Loans made by the Lenders on any Borrowing Date that are Eurodollar Loans shall be (A) in a minimum aggregate principal amount of $3,000,000 (or, if less, in the amount of the Total Commitments less the Total Extensions of Credit) or (B) in an integral multiple of $1,000,000 in excess of the amount provided in clause (A) above, as the case may be.
(c) Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Loans other than Term Loans. Term Loans may be prepaid at any time but may not be reborrowed.
1.02.   Borrowings.
(a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments; providedhowever, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender).


2

(b) Each Loan shall be an ABR Loan or a Eurodollar Loan, as the Borrower may request, subject to and in accordance with Section 2.01. Each Lender may at its option fulfill its Commitment with respect to any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in an aggregate of more than ten separate Eurodollar Loans of any Lender being outstanding to the Borrower hereunder at any one time. For purposes of the foregoing, Eurodollar Loans having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Loans.
1.03.   Termination and Reduction of Commitments.
(a) Upon at least three Business Days’ prior irrevocable written or facsimile notice to the Administrative Agent (which shall promptly be communicated by the Administrative Agent to the Lenders), the Borrower may at any time permanently terminate in whole, or from time to time permanently reduce in part, the Commitment of each Lender, ratably in accordance with the proportion that each Lender’s Commitment bears to the Total Commitment; provided that at no time shall the Extensions of Credit (excluding Term Loans) of any Lender exceed the Commitment of such Lender. Each such partial reduction of the Commitments of the Lenders shall be in the aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess of $5,000,000.
(b) The Borrower shall pay to the Administrative Agent for the account of the Lenders, on the date of each termination or reduction, the applicable Facility Fee on the amount of the Commitments so terminated or reduced accrued through the date of such termination or reduction.
(c) The Commitments shall be automatically terminated on (x) the Termination Date, unless sooner terminated pursuant to any other provision of this Section 1.03 or Section 8 and (y) with respect to any Loans outstanding on the Current Termination Date that are converted to Term Loans pursuant to Section 1.04(f), the Current Termination Date upon the deemed funding thereof in accordance with Section 2.01(b).
1.04.   Extensions of Commitments; Term-Out Extension Option.
(a) The Borrower may, by sending an Extension Letter in substantially the form of Exhibit E-1 to the Administrative Agent (in which case the Administrative Agent shall promptly deliver a copy to each of the Lenders), not less than 15 days and not more than 60 days prior to the Termination Date, request that the Lenders extend the Termination Date in effect on the date hereof (the “Current Termination Date”) such that it will occur 364-days after the Current Termination Date. Each Lender, acting in its sole discretion, shall advise in response to such extension request, by written notice to the Administrative Agent given not less than five days and not more than 30 days prior to the Current Termination Date (such date on which a Lender may give notice of its intention to extend the Current Termination Date being referred to



3

herein as the “Final Election Date”), whether or not such Lender agrees to such extension (each Lender that so advises the Administrative Agent that it will not extend the Current Termination Date being referred to herein as a “Non-Extending Lender”). Any Lender that does not advise the Administrative Agent by the Final Election Date shall be deemed to be a Non-Extending Lender. The election of any Lender to agree to such extension shall not obligate any other Lender to agree.
(b) (i) In response to such extension request under Section 1.04(a), if Lenders holding Commitments that aggregate 50% or more of the Total Commitments of the Lenders on or prior to the Final Election Date have not agreed to extend the Termination Date, then the Current Termination Date shall not be so extended and the outstanding principal balance of all loans and other amounts payable hereunder shall be due and payable on the Current Termination Date.
(ii) In response to such extension request under Section 1.04(a), if Lenders holding Commitments that aggregate more than 50% of the Total Commitments on or immediately prior to the Final Election Date have agreed to extend the Current Termination Date, the Administrative Agent shall notify the Borrower of such agreement in writing no later than five days after the Final Election Date, and effective on the Current Termination Date (the “Extension Date”), the Termination Date applicable to the Lenders that have agreed to such extension (such Lenders being referred to herein as “Continuing Lenders”) shall be the day that is 364 days after the Current Termination Date. In the event of such extension, the Commitments of each Non-Extending Lender shall terminate on the Current Termination Date applicable to such Non-Extending Lender, all Loans and other amounts payable hereunder to such Non-Extending Lender shall become due and payable on the Current Termination Date and the Total Commitments of the Lenders hereunder shall be reduced by the aggregate Commitments of Non-Extending Lenders so terminated on and after the Current Termination Date. Each Non-Extending Lender shall be required to maintain its original Commitments up to the Current Termination Date.
(c) In the event that the conditions in Section 1.04(b)(ii) have been satisfied, the Borrower shall have the right on or before the Extension Date, at its own expense, to require any Non-Extending Lender to transfer and assign without recourse or representation (except as to title and the absence of Liens created by it) (in accordance with and subject to the restrictions contained in Section 11.02) all its interests, rights and obligations under the Loan Documents to one or more banks, financial institutions or other entities (which may include any Lender) (each, an “Extension Lender”); provided that (w) such Extension Lender agrees that the Termination Date applicable to it shall be the day that is 364 days after the Current Termination Date, (x) such Extension Lender, if not already a Lender hereunder, shall be subject to the approval of the Administrative Agent (which consent shall not be unreasonably withheld), (y) such assignment shall become effective as of the Extension Date and (z) such Extension Lender shall pay to such Non-Extending Lender in immediately available funds on the effective date of such assignment the principal of and interest accrued to the date of payment on the Loans made by such Non-Extending Lender hereunder and all other amounts accrued for such Non-Extending Lender’s account or owed to it hereunder. Notwithstanding the foregoing, no extension of the Termination



4

Date shall become effective unless, on the Extension Date, the conditions set forth in Section 5.02 shall be satisfied (with all references in such paragraphs to the making of a Loan being deemed to be references to the extension of the Commitments on the Extension Date) and the Administrative Agent shall have received certificates to that effect with respect to the Borrower dated the Extension Date and executed by a responsible officer of the Borrower.
(d) Notwithstanding anything to the contrary in the foregoing Sections 1.04(a) through (c), the Termination Date shall not be extended unless the aggregate Commitments of the Continuing Lenders and any other Extension Lenders are greater than the Total Extensions of Credit as of the Extension Date.
(e) There shall be no more than one total (x) extension under the foregoing Sections 1.04(a) through (c) and (y) conversion and/or extension under the following Section 1.04(f).
(f) The Borrower may, by sending an Extension Letter in substantially the form of Exhibit E-2 to the Administrative Agent (in which case the Administrative Agent shall promptly deliver a copy to each of the Lenders), not less than 15 days and not more than 60 days prior to the Current Termination Date, (x) extend the Current Termination Date to the date that is 364 days after the Current Termination Date, (y) specify the amount of the Commitments so extended (which may be all or any portion of the Commitments then outstanding and shall be applied to each Lender pro rata based on each Lender’s Commitments on the Current Termination Date) and (z) specify which of the Loans shall be converted to Term Loans (which may be all or any portion of the Loans then outstanding and shall be applied to each Lender pro rata based on each Lender’s Commitments on the Current Termination Date). Each Lender hereby agrees to so extend their respective Commitments and Loans and to have their respective Loans converted to Term Loans, each at the Borrower’s election as set forth above; provided that no such Commitment or Loan shall be extended nor any Loan converted to a Term Loan unless the Borrower shall have paid on or before the Current Termination date to the Administrative Agent for the ratable benefit of the Lenders a term-out and extension fee (the “Term-Out Fee”) equal to 0.75% multiplied by (x) the aggregate principal amount of the Term Loans, and (y) to the extent the Borrower elects to extend all or any portion of the Commitments then outstanding (but excluding any Commitments that are terminated in connection with converting to Term Loans) in addition to or in lieu of the Term Loans, the Commitments (drawn or undrawn, but excluding any Commitments that are terminated in connection with converting to Term Loans) that are so extended. The Term-Out Fee shall, in each case, be applied pro rata to each Lender based on each such Lender’s Term Loans and/or Commitments, as the case may be, on the Current Termination Date. Notwithstanding the foregoing, no conversion to Term Loans nor extension of the Termination Date shall become effective unless, on the Extension Date, the conditions set forth in Section 5.02 shall be satisfied (with all references in such paragraphs to the making of a Loan being deemed to be references to the conversion to Term Loans and/or extension of the Commitments on the Extension Date) and the Administrative Agent shall have received certificates to that effect with respect to the Borrower dated the Extension Date and executed by a responsible officer of the Borrower.



5


1.05.   Additional Commitments
(a) In the event that the Borrower wishes to increase the Commitments at any time when no Event of Default has occurred and is continuing, it shall notify the Administrative Agent in writing of the amount (the “Proposed Increase Amount”) of such proposed increase (such notice, a “Commitment Increase Notice”); provided that the aggregate amount of any such increase in Commitments shall be at least $10,000,000. The Borrower may offer to the existing Lenders and, with the consent of the Administrative Agent (which consent shall not be unreasonably withheld), one or more additional banks, financial institutions or other entities the opportunity to participate in all or a portion of the Proposed Increase Amount pursuant to Section 1.05(b).
(b) Any Lender that accepts an offer to it by the Borrower to increase its Commitment pursuant to Section 1.05(a) shall, in each case, execute a Commitment Increase Supplement with the Borrower and the Administrative Agent, substantially in the form of Exhibit F, whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as so increased, and Schedule 1.01 shall be deemed to be amended to so increase the Commitment of such Lender.
(c) Any additional bank, financial institution or other entity which the Borrower selects to offer participation in the increased Commitment and which elects to become a party to this Agreement and provide a Commitment in an amount so offered and accepted by it pursuant to Section 1.05(a) shall execute an Additional Lender Supplement with the Borrower and the Administrative Agent, substantially in the form of Exhibit G, whereupon such bank, financial institution or other entity (herein called an “Additional Lender”) shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and Schedule 1.01 shall be deemed to be amended to add the name and Commitment of such Additional Lender; provided that the Commitment of any such Additional Lender shall be in an amount not less than $5,000,000.
(d) Notwithstanding anything to the contrary in this Section 1.05, (i) in no event shall any transaction effected pursuant to this Section 1.05 cause the Total Commitments to exceed $700,000,000 less the aggregate principal amount of Loans converted to Term Loans on the Current Termination Date, (ii) no Lender shall have any obligation to increase its Commitment unless it agrees to do so in its sole discretion and (iii) any increase of Commitments pursuant to this Section 1.05 shall be subject to the satisfaction of the conditions set forth in Section 5.02(a) (as modified as for extensions of credit made after the Closing Date) and Section 5.02(b) on the applicable Accordion Effective Date.
(e) Subject to the terms and conditions hereof, each Additional Lender and each Lender that executes a Commitment Increase Supplement or Additional Lender Supplement, as the case may be, pursuant to Section 1.05(b) (each, an “Accordion Lender”) shall, on the date upon which its Commitment or increased Commitment, as the case may be, becomes effective (its “Accordion Effective Date”), make Loans to the Borrower, and the Borrower shall be deemed to prepay outstanding Loans that are not Term Loans owing to the Lenders other than such



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Accordion Lender(s), in amounts such that, after giving effect to the making of such Loans by such Accordion Lender and the prepayment of such outstanding Loans owing to Lenders other than such Accordion Lender(s), the aggregate principal amount of Loans that are not Term Loans owing to each Lender shall equal such Lender’s Commitment Percentage (determined after giving effect to the new or increased Commitment of such Accordion Lender(s)) of the aggregate amount of the Loans that are not Term Loans outstanding on such Accordion Effective Date. On such Accordion Effective Date, the Borrower shall pay to the Administrative Agent, for the account of the Lenders, any amounts owing to such Lenders pursuant to Section 2.12 in respect of Loans prepaid on such Accordion Effective Date pursuant to this Section 1.05(e).
SECTION 2.
THE LOANS
2.01.   Notice and Provision of Loans.
(a) The Borrower shall give the Administrative Agent written or facsimile notice (or telephone notice promptly confirmed in writing or by facsimile) (x) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York time, three Business Days before a proposed Borrowing by the Borrower, or (y) in the case of an ABR Borrowing, not later than 11:00 a.m., New York time, on the day of a proposed Borrowing by the Borrower. Such notice shall be irrevocable and shall in each case refer to this Agreement and specify (i) whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall be a Business Day) and the amount thereof; and (iii) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, or with respect to any notice provided for under Section 2.07(a) hereof, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof.
(b) Each Lender shall make its Loans (other than Term Loans) in the amount required, as determined under Section 2.13, with respect to each Borrowing hereunder on the Borrowing Date by wire transfer of immediately available funds to the Administrative Agent in New York, New York, not later than 12:00 noon, New York time, and the Administrative Agent shall by 3:00 p.m., New York time, credit the amounts so received to the general deposit account of the Borrower with the Administrative Agent or such other general deposit account of the Borrower designated in writing to the Administrative Agent or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders. Each Lender shall be deemed to have made its Term Loans in the amount determined in accordance with Section 1.04(f) on the Current Termination Date upon the conversion thereof at such time without any further action on the part of any Lender, to the extent applicable. Unless the Administrative Agent shall have received notice from a Lender (x) in the case of a Eurodollar Loan, prior to the date of any such Borrowing, and (y) in the case of an ABR Loan, not later than 12:00 noon, New York time, on the date of any Borrowing, that



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such Lender will not make available to the Administrative Agent such Lender’s portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with this Section 2.01(b) and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date such amount is paid to the Administrative Agent, at (i) in the case of a payment to be made by the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing, and (ii) in the case of a payment to be made by such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its portion of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement and the Borrower’s obligation under this Section 2.01(b) to pay to the Administrative Agent such corresponding amount shall be deemed terminated. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.
(c) Notwithstanding any other provisions of this Agreement, the Borrower shall not be entitled to request any Borrowing if the Interest Period requested with respect thereto would end after the Termination Date.
2.02.   Repayment of Loans. The outstanding principal balance of each Loan other than Term Loans shall be payable on the Interest Payment Date with respect thereto unless such Loan is continued or converted in accordance with Section 2.07provided that in any event the outstanding principal balance of each Loan shall be payable not later than the Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 8). The outstanding principal balance of each Term Loan shall be due and payable in full in a single installment on the date that is 364-days after the Current Termination Date. Each Loan shall bear interest on the outstanding principal balance thereof from the applicable Borrowing Date as set forth in Section 2.04.
2.03.   Facility Fees, etc.
(a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee (a “Facility Fee”) for the period from and including the Closing Date until all of the Loans have been repaid and the Commitments have been terminated, computed at the Borrower’s Facility Fee Rate then in effect on the Commitment Percentage of such Lender of the total amount of the Facility (drawn or undrawn) but excluding the aggregate principal amount of the Term Loans, payable quarterly in arrears on the last day of each March, June, September and



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December, on the Termination Date, (and if applicable, thereafter on demand), commencing on the first of such dates to occur after the Closing Date. If any Commitment shall be reduced in part, the Facility Fee shall be paid in accordance with Section 1.03(b).
(b) The Borrower agrees to pay to the Administrative Agent the Fees in the amounts and on the dates previously agreed to in writing by the Borrower and the Administrative Agent.
(c) The Borrower agrees to pay to the Administrative Agent, for the benefit of the Lenders, the Term-Out Fee in the amounts and on the date set forth in Section 1.04(f).
(d) Subject to Section 2.03(b), all Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders. Once paid, none of the Fees shall be refundable under any circumstances.
2.04.   Interest Rates and Payment Dates.
(a) Each Eurodollar Loan other than Term Loans shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. Each Eurodollar Loan that is a Term Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Facility Fee Rate in effect on the Current Termination Date plus the Applicable Margin in effect on the Current Termination Date.
(b) Each ABR Loan other than Term Loans shall bear interest at a rate per annum equal to the ABR plus the Applicable Margin. Each ABR Loan that is a Term Loan shall bear interest at a rate per annum equal to the ABR plus the Facility Fee Rate in effect on the Current Termination Date plus the Applicable Margin in effect on the Current Termination Date.
(c) (i) If all or a portion of the principal amount of any Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section 2.04 plus 2%; and (ii) if all or a portion of any interest payable on any Loan or any Fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to ABR Loans plus 2%; in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full.
(d) Interest shall be payable in arrears on each Interest Payment Date; provided that interest accruing pursuant to Section 2.04(c) shall be payable from time to time on demand.
2.05.   Computation of Interest and Fees.
(a) Interest and Fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to ABR Loans the rate of interest on



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which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR or Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.09(a).
2.06.   Alternate Rate of Interest. If prior to the first day of any Interest Period the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or that such Eurodollar Rate is not available, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given, then (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the last day of the then-current Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans. If at any time the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i) the circumstances set forth in above are unlikely to be temporary or (ii) the circumstances set forth above have not arisen but either (w) the supervisor for the administrator of the Screen Rate has made a public statement that the administrator of the Screen Rate is insolvent (and there is no successor administrator that will continue publication of the Screen Rate), (x) the administrator of the Screen Rate has made a public statement identifying a specific date after which the Screen Rate will permanently or indefinitely cease to be published by it (and there is no successor administrator that will continue publication of the Screen Rate), (y) the supervisor for the administrator of the Screen Rate has made a public statement identifying a specific date after which the Screen Rate will permanently or indefinitely cease to be published or (z) the supervisor for the administrator of the Screen Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the Screen Rate may no longer be used for determining interest rates for loans, then the Administrative Agent and the Borrower shall endeavor to establish an alternate rate of interest to the Eurodollar Base Rate and/or Eurodollar Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and shall enter into an amendment to this Agreement to reflect such



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alternate rate of interest and such other related changes to this Agreement as may be applicable (but for the avoidance of doubt, such related changes shall not include a reduction of the Applicable Margin); provided that, if such alternate rate of interest as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement. Notwithstanding anything to the contrary in Section 11.07, such amendment shall become effective without any further action or consent of any other party to this Agreement so long as the Administrative Agent shall not have received, within five Business Days of the date notice of such alternate rate of interest is provided to the Lenders, a written notice from the Required Lenders stating that such Required Lenders object to such amendment. Until an alternate rate of interest shall be determined in accordance with this Section 2.06, (x) any notice provided under Section 2.07 that requests the conversion of any Loan to, or continuation of any Loan as, a Eurodollar Loan shall be ineffective and (y) if any notice provided pursuant to Section 2.01 requests a Eurodollar Loan, such Loan shall be made as an ABR Loan.
2.07.   Continuation and Conversion of Loans.
(a) The Borrower shall have the right, with respect to any Eurodollar Loan, at the end of any Interest Period, on three Business Days’ prior telephonic notice to the Administrative Agent (which shall be confirmed in writing on the next Business Day thereafter) (i) to continue such Loan into a subsequent Interest Period (provided that no Loan shall be continued into an Interest Period that ends on a date that is later than the Termination Date) or (ii) to convert such Loan into an ABR Loan.
(b) The Borrower shall have the right, with respect to any ABR Loan, at any time, on three Business Days’ prior telephonic notice to the Administrative Agent (which shall be confirmed in writing on the next Business Day thereafter), to convert such Loan into a Eurodollar Loan.
(c) Any notice required to be given by the Borrower to the Administrative Agent pursuant to this Section 2.07 shall be irrevocable. Any notice given by the Borrower to the Administrative Agent hereunder shall be promptly communicated by the Administrative Agent to the Lenders.
(d) In addition to the above notice requirements, any continuation or conversion by the Borrower pursuant to this Section 2.07 shall be subject to the following:
(i) no Event of Default shall have occurred and be continuing at the time of such continuation or conversion;
(ii) if less than all the Loans at the time outstanding shall be continued or converted, such continuation or conversion shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans of the Type being continued or converted held by the Lenders immediately prior to such continuation or conversion;
(iii) each conversion shall be effected by each Lender by applying the proceeds of the new ABR Loan or Eurodollar Loan, as the case may be, to the Loan being converted;



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(iv) upon each conversion of an ABR Loan into a Eurodollar Loan, and upon the conversion of a Eurodollar Loan into an ABR Loan, the Borrower shall pay all accrued interest on such Loan being converted at the time of conversion;
(v) if the new Loan made in respect of a conversion shall be a Eurodollar Loan, the first Interest Period with respect thereto shall commence on the date of conversion;
(vi) any Loan which may not be continued as or converted into a Eurodollar Loan shall be automatically continued as or converted to an ABR Loan; provided that each Loan shall be paid in full not later than the Termination Date;
(vii)  a Eurodollar Loan may be converted to an ABR Loan only on the last day of an Interest Period; and (viii) any conversion shall be subject to Section 1.01(b) hereof.
In the event that the Borrower shall not give notice to continue any Eurodollar Loan as a Eurodollar Loan into a subsequent Interest Period, or to convert any such Loan, such Loan (unless repaid) shall automatically become an ABR Loan at the expiration of the then current Interest Period.
2.08.   Prepayments.
(a) The Borrower shall have the right, upon notice to the Administrative Agent, at any time and from time to time to prepay any Borrowing, in whole or in part, provided that such notice must be received by the Administrative Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of Eurodollar Loans and (B) on the date of prepayment of ABR Loans; providedhowever, that each partial prepayment shall be in an amount that is (i) an integral multiple of $500,000 and not less than $1,000,000, for any ABR Loan, or (ii) an integral multiple of $1,000,000 and not less than $3,000,000, for any Eurodollar Loan.
(b) If, on the date of any termination or reduction of the Commitments pursuant to Section 1.03, the aggregate principal amount of all Loans other than Term Loans outstanding at any time exceeds the Commitments (such excess, an “Over-Advance”), then the Borrower shall pay or prepay so much of the Loans that are not Term Loans in an amount equal to the lesser of such Over-Advance and the aggregate principal amount of all Loans that are not Term Loans outstanding.
(c) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments under this Section 2.08 shall be subject to Section 2.12 but otherwise without premium or penalty. All prepayments under this Section 2.08 shall be accompanied by accrued interest on the principal amount being prepaid to the date of payment. Each prepayment shall be made to the Administrative Agent, to be distributed to the Lenders, pro rata in accordance with the proportion that each Lender’s Loans of the Type prepaid bears to the aggregate amount of all Lenders’ Loans of such Type outstanding.



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2.09.   Reserve Requirements; Change in Circumstances.
(a) Notwithstanding any other provision herein, if any Change in Law shall (i) subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Eurodollar Loan made by it, or change the basis of taxation of payments to any Lender of the principal of or interest on any Eurodollar Loan made by such Lender or any Fees or other amounts payable hereunder (other than (A) changes in respect of taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office or by any political subdivision or taxing authority therein and (B) Taxes or Other Taxes, which shall be governed by Section 2.16); (ii) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by any Lender (except any reserve requirement reflected in the Eurodollar Rate hereunder); or (iii) impose on any Lender or the interbank eurodollar market any other condition, cost or expense affecting this Agreement or Eurodollar Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any Eurodollar Loan or of maintaining its obligation to make any such Loan, or to increase the cost to such Lender, or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then, upon prompt request of such Lender, the Borrower will pay to such Lender as provided in Section 2.09(c) such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.
(b) If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy and liquidity), then from time to time, the Borrower shall pay as provided in Section 2.09(c) to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.
(c) A certificate of each Lender signed by an officer of the respective Lender setting forth in reasonable detail such amount or amounts necessary to compensate such Lender or its holding company as specified in paragraph Section 2.09(a) or 2.09(b), as the case may be, shall be delivered to the relevant Borrower and shall be conclusive absent manifest error. The Borrower shall pay each Lender the amount shown as due on any such certificate delivered by it within 10 days after its receipt of the same.
(d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section 2.09 shall not constitute a waiver of such Lender’s right to demand such compensation. The protection of this Section 2.09 shall be available to each Lender regardless of



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any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed.
2.10.   Change in Legality.
(a) Notwithstanding any other provision herein, if any Lender determines that any Change in Law shall make it unlawful for such Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by prompt written notice to the Borrower and to the Administrative Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made by such Lender hereunder, whereupon any request by the Borrower for a Eurodollar Borrowing shall, as to such Lender only, be deemed a request for an ABR Loan unless and until such declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in Section 2.10(c).
(b) In the event any Lender shall give notice pursuant to Section 2.10(a), all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.
(c) For purposes of this Section 2.10, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.
2.11.   New Office or Agency; Replacement of Lenders.
(a) If any Lender (i) requests compensation under Section 2.09, (ii) gives notice pursuant to Section 2.10(a) or (iii) requires the Borrower to pay additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then in each case such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (x) would eliminate or reduce amounts payable pursuant to Section 2.09 or 2.16 or cause such Lender to withdraw its notice pursuant to Section 2.10(a), as the case may be, in the future, and (y) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay the reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.



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(b) If any Lender requests compensation under Section 2.09, or if the Borrower is required to pay additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16 and, in each case, such Lender has declined or is unable to designate a different Lending Office in accordance with Section 2.11(a), or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse or representation (except as to title and the absence of any Liens created by it) (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.02), all of its interests, rights and obligations under this Agreement and the other Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:
(i) the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 11.02;
(ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 2.12) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
(iii) in the case of any such assignment resulting from a claim for compensation under Section 2.09 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments thereafter;
(iv) such assignment does not conflict with applicable law; and
(v) in the case of any such assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
2.12.   Indemnity.
(a) The Borrower shall indemnify each Lender against any loss or expense which such Lender may sustain or incur as a consequence of (i) any failure by the Borrower to fulfill on the date of any Borrowing hereunder the applicable conditions set forth in Section 4, (ii) any failure by the Borrower to borrow or to refinance, convert, continue or prepay any Loan hereunder after irrevocable notice of such borrowing, refinancing, conversion, continuation or prepayment has been given pursuant to Section 2.012.07 or 2.08, (iii) any payment, prepayment or conversion by the Borrower of a Eurodollar Loan required by any other provision of this Agreement or otherwise made or deemed made on a date other than the last day of the Interest Period applicable thereto, (iv) any default in payment or prepayment of the principal amount of any



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Loan or any part thereof or interest accrued thereon by the Borrower, as and when due and payable (at the due date thereof, whether by scheduled maturity, acceleration, irrevocable notice of prepayment or otherwise) or (v) the occurrence of any Event of Default with respect to the Borrower; including, in each case, any loss or reasonable expense sustained or incurred or to be sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain such Loan or any part thereof as a Eurodollar Loan. Such loss or reasonable expense shall include an amount equal to the excess, if any, as reasonably determined by such Lender, of (x) its cost of obtaining the funds for the Loan being paid, prepaid, converted or not borrowed, converted or continued (assumed to be the Eurodollar Rate applicable thereto) for the period from the date of such payment, prepayment, conversion or failure to borrow, convert or continue to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the Interest Period for such Loan which would have commenced on the date of such failure) over (y) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender in reemploying the funds so paid, prepaid, converted or not borrowed, converted or continued for such period or Interest Period, as the case may be. A certificate of any Lender setting forth in reasonable detail any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.12 shall be delivered to the relevant Borrower and shall be conclusive absent manifest error. The Borrower shall pay each Lender the amount shown as due on any certificate within 15 days after its receipt of same.
(b) The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
2.13.   Pro Rata Treatment. Each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment on account of any Facility Fee, each reduction of the Commitments and each refinancing of any Borrowing with, conversion of any Borrowing to, or continuation of any Borrowing as, a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, (x) if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans and (y) with respect to Term Loans, in accordance with the respective principal amounts of their outstanding Term Loans), except in each case (i) as otherwise expressly contemplated by this Agreement, including with respect to any difference between the Facility Fee Rate and Applicable Margin payable to Lenders on their Commitments and Loans pursuant to Section 2.03 and the Facility Fee Rate and Applicable Margin payable to Lenders on their Term Loans pursuant to Section 2.04, and (ii) as required to give effect to the provisions of Sections 2.092.102.11 and 2.12. Each Lender agrees that in computing such Lender’s portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender’s Percentage of such Borrowing, to the next higher or lower whole Dollar amount.
2.14.  Sharing of Setoffs. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or other obligations hereunder resulting in such Lender receiving payment of a proportion of the aggregate amount of its Loans and accrued interest thereon or other such obligations greater than its pro rata share thereof as provided herein, then the Lender receiving such greater



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proportion shall (a) notify the Administrative Agent of such fact and (b) purchase (for cash at face value) participations in the Loans and such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them; provided that: (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and (ii) the provisions of this Section 2.14 shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender) or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this paragraph shall apply).
The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.
2.15.   Payments.
(a) The Borrower shall make each payment (including principal of or interest on any Borrowing of the Borrower or any Fees or other amounts owing by the Borrower) hereunder not later than 12:00 p.m., New York time, on the date when due in Dollars to the Administrative Agent, for the account of the Lenders, at the Funding Office, in immediately available funds, without condition or deduction for any counterclaim, deduction, recoupment or setoff.
(b) Whenever any payment (including principal of or interest on any Borrowing of the Borrower or any Fees or other amounts owing by the Borrower) hereunder shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable.
2.16.   Taxes.
(a) Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made, in accordance with Section 2.15, free and clear of and without reduction or withholding for any and all present or future taxes, levies, imposts, duties, deductions, assessments, fees, withholdings or other charges imposed by any Governmental Authority, and all liabilities with respect thereto, including interest, additions to tax and penalties, excluding taxes imposed on the net income of the Administrative Agent or any Lender (or any transferee or assignee thereof, including a participation holder (any such entity being called a “Transferee”)) and any branch profits or franchise taxes imposed on the Administrative Agent or any Lender (or Transferee) by the United States or any jurisdiction



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under the laws of which the Administrative Agent or any such Lender (or Transferee) is organized or doing business in or any political subdivision thereof (all such nonexcluded taxes, levies, imposts, duties, deductions, assessments, fees, withholdings, charges and liabilities hereinafter referred to as “Taxes”). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender (or any Transferee) or the Administrative Agent, then (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.16) such Lender (or Transferee) or the Administrative Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law; provided that the Borrower shall not be required to pay any additional amounts to any Lender (or Transferee) pursuant to this Section 2.16(a) or to provide indemnification pursuant to Section 2.16(c) to the extent the obligation to pay such additional amounts or to provide such indemnification relates to U.S. federal withholding taxes imposed pursuant to FATCA.
(b) Without limiting the provisions of Section 2.16(a), the Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (hereinafter referred to as “Other Taxes”) that arise from any payment made by the Borrower hereunder or under any other Loan Document or from the execution, delivery, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Document.
(c) The Borrower will indemnify each Lender (or Transferee) and the Administrative Agent, within 10 Business Days after written demand therefor, for the full amount of any Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.16) paid by such Lender (or Transferee) or the Administrative Agent, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant taxing authority or other Governmental Authority. If any Lender (or Transferee) or the Administrative Agent determines, in its sole discretion, that is has received a refund in respect of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.16, it shall promptly notify the Borrower of such refund and shall, within 30 days after receipt of a request by the Borrower (or promptly upon receipt, if the Borrower has requested application for such refund pursuant hereto), pay such refund to the Borrower (but only to the extent of amounts that have been paid by the Borrower under this Section 2.16 with respect to such refund), net of all out-of-pocket expenses of such Lender (or Transferee) or the Administrative Agent, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that the Borrower, upon the request of such Lender (or Transferee) or the Administrative Agent, agrees to repay such refund (plus penalties, interest or other charges imposed by the relevant Governmental Authority) to such Lender (or Transferee) or the Administrative Agent in the event such Lender (or Transferee) or the Administrative Agent is



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required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (c), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (c) the payment of which would place the indemnified party in a less favorable net after-tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. Nothing contained in this Section 2.16(c) shall require any Lender (or Transferee) or the Administrative Agent to make available any of its tax returns (or any other information relating to taxes that it deems to be confidential) to the Borrower or any other Person.
(d) As soon as practicable, and in any event within 30 days, after the date of any payment of Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower will furnish to the Administrative Agent, at its address referred to in Section 11.01, the original or a certified copy of a receipt issued by such Governmental Authority evidencing payment thereof, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 2.16 shall survive the payment in full of the principal of and interest on all Loans made hereunder.
(f) (i) Any Lender (or Transferee) that is a “U.S. Person” as defined in Section 7701(a)(30) of the Code shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) on or about the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), two executed copies of U.S. Internal Revenue Service Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax and (ii) each Lender (or Transferee) that is not a “U.S. Person” as defined in Section 7701(a)(30) of the Code (a “Non-U.S. Lender”) shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) on or about the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent) two executed copies of either (A) U.S. Internal Revenue Service Form W-8BEN, Form W-8BEN-E or Form W-8ECI (or, if the Non-U.S. Lender is not the beneficial owner, a Form W-8IMY accompanied by Form W-8BEN, Form W 8BEN-E, Form W-8ECI, Form W-9, a certificate substantially in the form of Exhibit D-2 or D-3 and/or other certification documents from each beneficial owner, as applicable) or (B) in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest” (the “portfolio interest exemption”), a certificate substantially in the form of Exhibit D-1 and a Form W-8BEN or Form W-8BEN-E (or, if applicable, a Form W-8IMY accompanied by either a Form W-8BEN or Form W-8BEN-E and if the Non-U.S. Lender is a partnership and one or more direct or indirect partners of such Non-U.S. Lender are claiming the portfolio interest exemption, such Non-U.S. Lender may



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provide a certificate substantially in the form of Exhibit D-4), or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver.
(g) A Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement or any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.
(h) If a payment made to a Lender under any Loan Document would be subject to Federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (h), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(i) The Borrower shall not be required to pay any additional amounts to any Lender (or Transferee) in respect of United States Federal withholding tax pursuant to Section 2.16(a) or to provide indemnification pursuant to Section 2.16(c) if the obligation to pay such additional amounts or to provide such indemnification would not have arisen but for a failure by such Lender (or Transferee) to comply with the provisions of Sections 2.16(f), 2.16(g) and 2.16(h); provided, however, that the Borrower shall be required to pay those amounts or provide such



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indemnification to any Lender (or Transferee) that it was required to pay or indemnify hereunder prior to the failure of such Lender (or Transferee) to comply with the provisions of Sections 2.16(f) and 2.16(g).
(j) Each Lender shall severally indemnify the Administrative Agent, within 10 Business Days after written demand therefor, for (i) any taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such taxes and without limiting the obligations of the Borrower to do so) and (ii) any taxes attributable to such Lender’s failure to comply with the provisions of Section 11.02(b) relating to the maintenance of a Participant Register, in either case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (j).
(k) Each party’s obligations under this Section 2.16 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of the Loans in full and all other obligations under the Loan Documents.
SECTION 3.  
[RESERVED]
SECTION 4.  
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants that:
4.01.   Corporate Existence and Power. Each of the Borrower and its Significant Subsidiaries (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified to do business and is in good standing as a foreign corporation under the laws of each material jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (iii) has all requisite corporate power and authority and the legal right (A) to own its assets and carry on the business in which it is engaged and (B) in the case of the Borrower, to execute and deliver this Agreement and the other Loan Documents to which it is a party and perform its obligations under this Agreement and the other Loan Documents to which it is a party.
4.02.   Due Authorization, Compliance with Law, Enforceable Obligations, etc.




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(a) The execution and delivery of this Agreement and the other Loan Documents to which it is a party by the Borrower and the performance by the Borrower of its obligations under this Agreement and the other Loan Documents to which it is a party have been duly authorized by all necessary corporate action (including any necessary stockholder action) on the part of the Borrower, and do not and will not (i) violate (A) any provision of any law, rule, regulation (including any applicable public service or public utility law of New York, Maine, Connecticut, Massachusetts or any other state, the Federal Power Act, and Regulation U and Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, decree, determination or award presently in effect having applicability to the Borrower, (B) the Certificate of Incorporation, as amended, or By-laws of the Borrower or (C) any material indenture, agreement or other instrument to which the Borrower is a party, or by which the Borrower or any of its property is bound, (ii) be in conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or (iii) result in or require the creation or imposition of any lien of any nature upon any of the assets or properties of the Borrower or its Subsidiaries.
(b) This Agreement and the other Loan Documents to which the Borrower is a party have been duly executed and delivered by the Borrower and constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other laws or principles of equity relating to or affecting the enforcement of creditors’ rights or contractual obligations generally.
(c) The Borrower has obtained from all Governmental Authorities with jurisdiction all approvals, authorizations and consents and has made, or will make when due, all filings with such Governmental Authorities required in connection with the execution and delivery of this Agreement and the other Loan Documents to which it is a party by the Borrower and the performance by the Borrower of its obligations under this Agreement and the other Loan Documents to which it is a party (including approvals, authorizations, consents and filings (if any) required under any applicable public service or public utility law of New York, Maine, Connecticut or Massachusetts or any other state and the Federal Power Act, each as amended from time to time, and the rules, orders and regulations issued in connection therewith), and all such approvals, authorizations and consents are final and in full force and effect.
4.03.   Financial Condition. The Borrower has heretofore provided the Lenders with (i) audited consolidated financial statements of the Borrower and its Subsidiaries consisting of a consolidated balance sheet as at December 31, 2019, and the related consolidated statements of income, changes in common stock equity and cash flows audited by KPMG LLP, independent certified public accountants and (ii) unaudited consolidated financial statements for the quarterly period ended March 31, 2020, together with related consolidated statements of income, changes in common stock equity and cash flows for the respective periods ending on such dates. All such consolidated financial statements, including the related schedules and any notes thereto, fairly present the consolidated financial position of the Borrower and its Subsidiaries as of the dates thereof and the results of its operations and changes in its common stock equity and cash flows for the periods then ended, all in accordance with GAAP applied on a consistent basis. Since



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December 31, 2019, there has not occurred any event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect, except as may have been disclosed in the Borrower’s Registration Statement on Form S-4, the Borrower’s Annual Report on Form 10-K for the year ended December 31, 2019, the Borrower’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, and any Current Report on Form 8-K of the Borrower or UIL Holdings Corporation, in each case as filed with the SEC prior to the Closing Date.
4.04.   Litigation. Except as disclosed on Schedule 4.04 and in the Borrower’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 and Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC prior to the Closing Date, there are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its properties by or before any court or any Federal, state, local, foreign or other governmental agency or regulatory authority which, if determined adversely to the Borrower, would have a material adverse effect on the financial condition or business of the Borrower or would materially impair the ability of the Borrower to perform its obligations under this Agreement or the other Loan Documents to which it is a party.
4.05.   Tax Returns. The Borrower has filed or caused to be filed all Federal, state, local and foreign tax returns which, to its knowledge, are required to be filed and has paid or caused to be paid all taxes as shown on such returns or on any assessment received by it to the extent that such taxes have become due, except taxes the validity of which is being contested in good faith by appropriate proceedings and with respect to which the Borrower shall have set aside on its books such reserves as are required in accordance with generally accepted accounting principles with respect to any such tax.
4.06.   Investment Company Act. The Borrower is not an “investment company” as that term is defined in, and is not otherwise subject to regulation under, the Investment Company Act of 1940, as amended.
4.07.   Other Agreements. The Borrower is not in default with respect to any material indenture, mortgage, loan agreement or evidence of indebtedness to which it is a party or by which it or any of its properties may be bound, which default would materially adversely affect the Borrower’s financial condition.
4.08.   Federal Reserve Regulations. No part of the proceeds of any Loans will be used for “buying” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the Regulations of the Board.
4.09.   No Material Misstatements. No information, report, financial statement, exhibit, annual certificate or schedule furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or the other Loan Documents or included therein or delivered pursuant thereto contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they



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were, are or will be made, not misleading; provided that, with respect to any financial projections, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.
4.10.   Employee Benefit Plans. The Borrower is in compliance in all material respects with the applicable provisions of ERISA and the regulations and published interpretations thereunder. No Reportable Event has occurred as to which the Borrower was required to file a report with the PBGC.
4.11.   Environmental and Safety Matters. Except as disclosed on Schedule 4.11, the Borrower complies in all material respects with all, and has not violated in any material respects any, Environmental Laws, and is aware of no events, conditions or circumstances involving liability under or continued compliance with such Environmental Laws, or environmental pollution or contamination or human health or safety that could reasonably be expected to have a material adverse effect on the financial condition or business of the Borrower or would materially impair the ability of the Borrower to perform its obligations under this Agreement or the other Loan Documents to which it is a party.
4.12.   Ownership of Property; Liens. The Borrower and its Significant Subsidiaries has good title to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, except to the extent failure to have such title could not reasonably be expected to have a Material Adverse Effect, and none of such property is subject to any Lien except as permitted by Section 7.03.
4.13.   Use of Proceeds. The proceeds of the Loans shall be used for general corporate purposes of the Borrower (including, without limitation, to fund working capital needs).
4.14.  Anti-Corruption Laws and Sanctions. The Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrower, its Subsidiaries and their respective officers and directors and, to the knowledge of the Borrower, its employees and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) the Borrower, any of its Subsidiaries or any of their respective directors, officers or employees, or (b) to the knowledge of the Borrower, any agent of the Borrower or any of its Subsidiaries that will act in any capacity in connection with or benefit from the Facility established hereby, is a Sanctioned Person. No Borrowing, use of proceeds or other transaction contemplated by this Agreement will violate any Anti-Corruption Law or applicable Sanctions. None of the representations and warranties given in this Section 4.14 shall be made to any Lender incorporated in or organized under the laws of the Federal Republic of Germany to the extent that they would result in a violation of or conflict with the German Foreign Trade Regulation (Außenwirtschaftsverordnung), council regulation (EC) No 2271/1996 (EU Blocking Regulation) or any similar applicable anti-boycott law or regulation.
4.15.   EEA Financial Institutions. The Borrower is not an EEA Financial Institution.



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SECTION 5.  
CONDITIONS PRECEDENT
5.01.   Conditions Precedent to Effectiveness of Agreement. The effectiveness of this Agreement and the obligations of the Lenders to make the Loans are subject to the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by the Administrative Agent, the Borrower and each Lender listed on Schedule 1.01 and (ii) duly executed copies of the other Loan Documents.
(b) Representations and Warranties; No Default. On the Closing Date, (i) the representations and warranties set forth in Section 4 qualified as to materiality shall be true and correct and those not so qualified shall be true and correct in all material respects on and as of such time with the same effect as though such representations and warranties had been made on and as of such time, (ii) no Event of Default, nor any event which upon notice or lapse of time or both would constitute an Event of Default, shall have occurred and be continuing on and as of such time and (iii) the Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Financial Officer of the Borrower, confirming compliance with the foregoing clauses (i) and (ii).
(c) Charter Documents; Bylaws. The Administrative Agent shall have received a certificate of a secretary or assistant secretary of the Borrower certifying as to the incumbency and genuineness of the signature of each officer or authorized representative of the Borrower executing Loan Documents to which it is a party and certifying that attached thereto is a true, correct and complete copy of (i) the articles or certificate of incorporation or formation of the Borrower and all amendments thereto, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation or formation, (ii) the bylaws or other governing document of the Borrower as in effect on the Closing Date, (iii) resolutions duly adopted by the board of directors of the Borrower authorizing and approving the transactions contemplated hereunder and the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party and (iv) each certificate required to be delivered pursuant to Section 5.01(d)(i).
(d) Good Standing. The Administrative Agent shall have received copies of (i) certificates of good standing, existence or its equivalent with respect to the Borrower certified as of a recent date by the appropriate Governmental Authorities of its jurisdiction of incorporation or formation and (ii) such “bring-down” good standing certificates dated the Closing Date or the Business Day immediately preceding the Closing Date as the Administrative Agent shall reasonably require.
(e) Approvals. All governmental and third party approvals (including approvals (if any) required under any applicable public service or public utility law of New York, Maine, Connecticut or Massachusetts or any other state or commonwealth and the Federal Power Act, as amended from time to time, and the rules, orders and regulations issued in connection therewith) necessary in connection with the continuing operations of the Borrower and the transactions contemplated hereby shall have been obtained and be in full force and effect, and all applicable



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waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent, invalidate or otherwise impose adverse conditions related to this Agreement (including the rights and remedies of the Lenders hereunder).
(f) Financial Statements. On or prior to the Closing Date, the Lenders shall have received (i) audited consolidated financial statements of the Borrower for the 2019, 2018 and 2017 fiscal years and (ii) unaudited interim consolidated financial statements of the Borrower for the quarterly period ended March 31, 2020.
(g) Opinions. The Administrative Agent shall have received an opinion, or opinions, satisfactory in form and content to the Administrative Agent and the Lenders, addressed to the Administrative Agent and each of the Lenders and dated as of the Closing Date, from legal counsel to the Borrower, which legal counsel may be in-house counsel to the Borrower.
(h) Fees. The Lenders, the Arrangers and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel).
(i) PATRIOT Act. The Borrower shall have provided to the Administrative Agent and the Lenders the documentation and other information requested by the Administrative Agent and the Lenders under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the PATRIOT Act.
5.02.   Conditions to All Extensions of Credit. The obligations of the Lenders to make any extensions of credit (including the initial extension of credit) hereunder are subject to the satisfaction of the following conditions precedent on the relevant borrowing, continuation or conversion date:
(a) Representations and Warranties. On the date of each Borrowing hereunder, the representations and warranties of the Borrower set forth in Section 4 (other than, in the case of extensions of credit made after the Closing Date, the representations and warranties made in (i) the last sentence of Section 4.03, (ii) Section 4.04 and (iii) Section 4.11) qualified as to materiality shall be true and correct and those not so qualified shall be true and correct in all material respects on and as of such time with the same effect as though such representations and warranties had been made on and as of such time.
(b) No Default. On the date of each Borrowing hereunder, no Event of Default, nor any event which upon notice or lapse of time or both would constitute an Event of Default, shall have occurred and be continuing at such time or after giving effect to any such extension of credit.
(c) Notices. The Administrative Agent shall have received a notice of borrowing or notice of conversion or continuation, as applicable, from the Borrower in accordance with Section 2.01(a) or Section 2.07(a), as applicable.



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Each Borrowing hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 5.02 hereof have been satisfied.
SECTION 6.  
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof and until payment in full of the principal of and interest on the Loans and the termination of the Commitments, unless the Borrower, acting through the Administrative Agent, shall obtain the written consent of the Required Lenders, the Borrower shall:
6.01.   Financial Statements; Certificates; Reports. Furnish to the Lenders:
(a) promptly upon becoming available, but in any event within 105 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit, by KPMG LLP or other independent certified public accountants of nationally recognized standing;
(b) promptly upon becoming available, but in any event not later than 60 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by the principal financial officer of the Borrower as being fairly stated in all material respects (subject to normal year-end audit adjustments);
(c) concurrently with the delivery of any financial statements pursuant to Section 6.01(a) and (b), in each case, a Compliance Certificate of the Borrower executed by the principal financial officer of the Borrower (i) stating that to the best of such principal financial officer’s knowledge, the Borrower during such period has observed or performed in all material respects all of its covenants and other agreements, and satisfied every condition contained in this Agreement to be observed, performed or satisfied by it, and that such principal financial officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) containing information and calculations for determining compliance by the Borrower with the provisions of this Agreement referred to therein (including Section 7.01) as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be;
(d) as soon as possible, and in any event within five Business Days after a Financial Officer of the Borrower knows or has reason to know that any Reportable Event has occurred with respect to any Plan maintained in whole or in part for the employees of the Borrower or any Significant Subsidiary, a statement of such Financial Officer, setting forth details as to such



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Reportable Event and the action which is proposed to be taken with respect thereto, and as soon as possible, and in any event within five Business Days after filing or receipt thereof, a copy of the notice of such Reportable Event filed with or received from the PBGC;
(e) copies of each annual and other report with respect to any Plan requested by any Lender;
(f) promptly after receipt thereof, a copy of any notice which the Borrower or, to the knowledge of the Borrower, any Significant Subsidiary, may receive from the PBGC relating to the intention of the PBGC to terminate any Plan maintained in whole or in part for the benefit of employees of the Borrower or any Significant Subsidiary or to appoint a trustee to administer any such Plan;
(g) promptly, from time to time, such other information regarding the operations, business, affairs and financial condition of the Borrower and any Significant Subsidiary as any of the Lenders may reasonably request, including such information and documentation as may reasonably be requested by the Administrative Agent or any Lender from time to time for purposes of compliance by the Administrative Agent or such Lender with applicable laws (including without limitation the USA Patriot Act, the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, the Beneficial Ownership Regulation and other “know your customer” and anti-money laundering rules and regulations, including the PATRIOT Act), and any policy or procedure implemented by the Administrative Agent or such Lender to comply therewith; and
(h) as soon as possible, and in any event within five Business Days after a Financial Officer of the Borrower knows or has reason to know that any Event of Default, or any event which, upon notice or lapse of time or both, would constitute an Event of Default, has occurred, a statement of such Financial Officer, setting forth details as to such Event of Default or event.
6.02.   ERISA. Comply in all material respects with the applicable provisions of ERISA.
6.03.   Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where (i) the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be, or (ii) the failure to do so could not reasonably be expected to have a Material Adverse Effect.
6.04.   Maintenance of Existence; Compliance. Except as otherwise required by a Governmental Authority having jurisdiction over the Borrower or any of its Subsidiaries, (a) (i) preserve, renew and keep in full force and effect its corporate existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 7.02 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; (b) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the



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aggregate, reasonably be expected to have a Material Adverse Effect; and (c) maintain in effect and enforce policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions. None of the covenants given in Section 6.04(c) shall be made to any Lender incorporated in or organized under the laws of the Federal Republic of Germany to the extent that they would result in a violation of or conflict with the German Foreign Trade Regulation (Außenwirtschaftsverordnung), council regulation (EC) No 2271/1996 (EU Blocking Regulation) or any similar applicable anti-boycott law or regulation.
6.05.   Inspection of Property and Operations; Books and Records. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) upon the reasonable request of any Lender, permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records and to discuss the business, operations, properties and financial and other condition of the Borrower with officers and employees of the Borrower and with their independent certified public accountants.
6.06.   Environmental Laws. Comply in all material respects with, and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws and with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws, and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws.
6.07.   Further Assurances. Execute any and all further documents, agreements and instruments, and take all such further actions, that may be required under any applicable law, or which the Administrative Agent or the Required Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents, all at the expense of the Borrower.
6.08.   Maintenance of Ownership of Significant Subsidiaries. Take such action from time to time as shall be necessary to ensure that it at all times owns, directly or indirectly, all of the issued and outstanding shares of common stock of each of its Significant Subsidiaries.
SECTION 7.  
NEGATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof and until payment in full of the principal of and interest on the Loans and the termination of the Commitments, unless the Borrower, acting through the Administrative Agent, shall obtain the written consent of the Required Lenders, or except as otherwise required by a Governmental Authority having jurisdiction over the Borrower, the Borrower shall not, and shall not permit any of its Significant Subsidiaries to, directly or indirectly:



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7.01.   Financial Condition Covenant. Permit the ratio of Consolidated Indebtedness to Consolidated Total Capitalization of the Borrower to exceed 0.65 to 1.00 at any time.
7.02.   Sale of Assets; Merger. (a) Sell, lease, transfer or otherwise dispose of (whether in one transaction or a series of transactions) (i) all or materially all of its respective properties or assets, whether now owned or hereafter acquired, (ii)(A) the primary natural gas, transmission and/or energy services business, as applicable, of any Significant Subsidiary or (B) any common stock of any Significant Subsidiary (other than to the Borrower or a Significant Subsidiary, or any directors or employees thereof), or (iii) any of its properties or assets, whether now owned or hereafter acquired, if the effect of such sale, lease, transfer or disposition would (A) after giving effect to such transaction, result in the Borrower’s senior unsecured long-term debt rating issued by S&P or Moody’s to fall below BBB- or Baa3, respectively (or, if senior unsecured debt ratings are unavailable for the Borrower, the senior secured long-term debt rating issued by S&P or Moody’s to fall below BBB or Baa2, respectively) or (B) materially impair the ability of the Borrower to perform its obligations under this Agreement or under any other Loan Document or (b) consolidate with or merge with another corporation, except where the Borrower (or the Significant Subsidiary, as the case may be) is the surviving corporation and that, after giving effect to such consolidation or merger, no breach of Section 7.01, when calculated on a pro forma basis, would result therefrom, and no other Event of Default, nor any event which upon notice or lapse of time or both would constitute an Event of Default shall have occurred and be continuing.
7.03.   Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired, except for Liens created under its applicable primary first mortgage bond indenture or equivalent instrument set forth on Schedule 7.03, as in effect on the Closing Date, and except for:
(a) Liens for taxes not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower, in conformity with GAAP;
(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 90 days or that are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Significant Subsidiaries;



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(f) Liens in existence on the date hereof, securing any Indebtedness outstanding on the date hereof and extensions, renewals or replacements thereof; provided that no such Lien is spread to cover any additional property after the Closing Date (other than pursuant to any Borrower Senior Secured Indebtedness) and that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness, in an aggregate principal amount not to exceed $250,000,000 at any one time outstanding, incurred to finance the acquisition or construction of fixed or capital assets (including Capital Lease Obligations) and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Liens shall be created substantially simultaneously with or within 120 days after such acquisition or completion of such construction of such fixed or capital assets and (ii) such Liens do not at any time encumber any property other than the property financed by such indebtedness;
(h) any interest or title of a lessor under any lease entered into in the ordinary course of business and covering only the assets so leased;
(i) Liens existing upon any property acquired by the Borrower in the ordinary course of business; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition, (ii) such Lien shall not apply to any other property or assets and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(j) Liens arising in connection with sales or transfers of, or financings secured by, accounts receivable or related contracts;
(k) Liens created by or resulting from litigation or legal proceedings that are currently being contested in good faith by appropriate proceedings and do not involve amounts that in the aggregate would exceed $50,000,000;
(l) Liens incidental to the normal conduct of the business of the Borrower or any Subsidiary of the Borrower or the ownership of its property that are not incurred in connection with the incurrence of Indebtedness and that do not in the aggregate materially impair the use of such property in the operation of the business of the Borrower and its Subsidiaries taken as a whole or the value of such property for the purposes of such business; and
(m) Liens created under any Loan Document.
7.04.   Limitation on Transactions with Affiliates. Enter into any transaction, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate unless such transaction is (a) subject to the jurisdiction of, and approved by, the Federal Energy Regulatory Commission under the Federal Power Act, as amended, or any state regulatory commission or (b) upon fair and reasonable terms no less favorable to the Borrower or such Significant Subsidiary, as the



31

case may be, than it would obtain in a comparable arm’s length transaction with a Person that is not an Affiliate.
7.05.   Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Significant Subsidiary of real or personal property that has been or is to be sold or transferred by the Borrower or such Significant Subsidiary to such Person or any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Significant Subsidiary, except to the extent such arrangement would not, collectively with all similar arrangements, reasonably be expected to materially impair the ability of the Borrower to perform its obligations under this Agreement.
7.06.   Limitation on Changes in Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto.
7.07.   Use of Proceeds. Request any Borrowing or use (and the Borrower shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use) the proceeds of the Loans, directly or indirectly, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (C) in any manner that would result in the violation of any Sanctions applicable to any party hereto. None of the covenants given in this Section 7.07 shall be made to any Lender incorporated in or organized under the laws of the Federal Republic of Germany to the extent that they would result in a violation of or conflict with the German Foreign Trade Regulation (Außenwirtschaftsverordnung), council regulation (EC) No 2271/1996 (EU Blocking Regulation) or any similar applicable anti-boycott law or regulation.
7.08.   Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than December 31 or change the Borrower’s method of determining fiscal quarters.
7.09.   Limitation on Restrictions on Distributions from Subsidiaries. Create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Significant Subsidiary to pay dividends or make any other distribution on its Capital Stock to the Borrower, other than any encumbrance or restriction pursuant to an agreement or instrument in effect at the Closing Date, or imposed by any Governmental Authority.
SECTION 8.  
EVENTS OF DEFAULT
With respect to the Borrower, each of the following events shall constitute an event of default hereunder (hereinafter called an “Event of Default”):



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(a) failure by the Borrower to pay any amount of principal of any of the Loans, as and when due and payable; failure by the Borrower to pay any interest on any of the Loans, any Fee or any other amount owed under this Agreement, within five days after any such interest, Fee or other amount becomes due and payable;
(b) the Borrower shall fail to perform or observe any of its other covenants or agreements contained in this Agreement or any other Loan Document and such failure shall continue unremedied for 30 days (or in the case of failure to observe Section 7.01, for five Business Days) after the earlier of (i) a Financial Officer of the Borrower obtaining knowledge thereof and (ii) receipt by the Borrower of written notice thereof from the Administrative Agent or any Lender;
(c) any representation or warranty made by the Borrower herein or in any certificate or other instrument furnished in connection with this Agreement that is qualified as to materiality shall be incorrect or any such representation or warranty not so qualified shall be incorrect in any material respect when made or deemed made;
(d) default beyond any applicable grace period with respect to the Borrower Senior Secured Indebtedness of the Borrower, or the performance of any obligation incurred in connection with any such Indebtedness, if the effect of such default is to permit the holder thereof, or a trustee or agent on its behalf, to cause such Indebtedness to become due prior to its stated maturity or any such Indebtedness shall not be paid at maturity;
(e) default beyond any applicable grace period with respect to any Indebtedness of the Borrower and/or any Significant Subsidiary, the outstanding principal amount of which exceeds in the aggregate $50,000,000, or the performance of any obligation incurred in connection with such Indebtedness if the effect of such default is to accelerate the maturity of such indebtedness or to permit the holder thereof, or a trustee or agent on its behalf, to cause such indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable, or if any such Indebtedness shall not be paid at maturity;
(f) the entry of a decree or order by a court having jurisdiction in the premises for relief in respect of the Borrower or any Significant Subsidiary under any Debtor Relief Law, or appointing a receiver, liquidator, assignee, trustee, custodian or sequestrator (or similar official) the Borrower or any Significant Subsidiary, or of any substantial part of their respective properties, or ordering the winding-up of or liquidation of the affairs of the Borrower or any Significant Subsidiary and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days;
(g) the filing by the Borrower or any Significant Subsidiary of a petition or answer or consent seeking relief under any Debtor Relief Law, or the consent by the Borrower or any Significant Subsidiary to the institution of proceedings thereunder or to the filing of any such petition or to the appointment or taking possession by a receiver, liquidator, assignee, trustee, custodian or sequestrator (or other similar official) of the Borrower or any Significant Subsidiary or of any substantial part of their respective properties, or the failure of the Borrower or any



33

Significant Subsidiary generally to pay its debts as such debts become due, or the taking of corporate action by the Borrower or any Significant Subsidiary in furtherance of any such action;
(h) final judgment for the payment of money exceeding an aggregate of $50,000,000 shall be rendered or entered against the Borrower and/or any Significant Subsidiary and the same shall remain undischarged for a period of 60 days during which execution shall not be effectively stayed or contested in good faith;
(i) (i) a Reportable Event shall have occurred with respect to any Plan that reasonably could be expected to result in a liability of the Borrower to the PBGC or to a Plan in an aggregate amount exceeding $50,000,000 and, within 30 days after the reporting of any such Reportable Event to the Administrative Agent, the Administrative Agent shall have notified the Borrower in writing that (i) the Required Lenders have made a determination that, on the basis of such Reportable Event, there are reasonable grounds (A) for the termination of such Plan by the PBGC, (B) for the appointment by the appropriate United States District Court of a trustee to administer such Plan or (C) for the imposition of a lien in favor of such Plan and (ii) as a result thereof an Event of Default exists hereunder; or a trustee shall be appointed by a United States District Court to administer any such Plan; or the PBGC shall institute proceedings to terminate any Plan;
(j) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (except for Iberdrola, S.A.) shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 20% of the outstanding common stock of the Borrower; or
(k) any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the obligations hereunder or thereunder, ceases to be in full force and effect; or the Borrower contests in any manner the validity or enforceability of any Loan Document;
then, and in every such event and at any time thereafter during the continuance of such event, the Administrative Agent, shall, at the request of, or may, with the consent of, the Required Lenders, by written notice to the Borrower, take any or all of the following actions, at the same or different times: (A) terminate or reduce, as provided below, forthwith the Commitments (if any) of the Lenders hereunder with respect to the Borrower and (B) declare the Loans made to the Borrower and all other amounts accrued or owing by the Borrower under this Agreement to be forthwith due and payable, whereupon such Loans and such other amounts shall become forthwith due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding; provided, however, that upon the occurrence of the events in paragraph (f) or (g) of this Section 8 both of the preceding actions will automatically take place without any notice to the Borrower or any action by the Administrative Agent or any Lender.
SECTION 9.  



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DEFINITIONS
9.01.  Defined Terms. As used in this Agreement, the terms listed in this Section 9.01 shall have the respective meanings set forth in this Section 9.01.
ABR” shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus 0.5% (provided that if the Prime Rate or NYFRB Rate shall be less than zero, such rate shall be deemed to be zero) and (c) the Eurodollar Rate on such day (or, if such day is not a Business Day, the next preceding Business Day) for a deposit in Dollars with a maturity of one month plus 1.0%. Any change in the ABR due to a change in the Prime Rate, the Federal Funds Effective Rate or such Eurodollar Rate shall be effective as of the opening of business on the day of such change in the Prime Rate, the Federal Funds Effective Rate or such Eurodollar Rate, respectively.
ABR Borrowing” shall mean a Borrowing comprised of ABR Loans.
ABR Loan” shall mean a Loan bearing interest at the ABR.
Accordion Effective Date” shall have the meaning assigned to it in Section 1.05(e).
Accordion Lender” shall have the meaning assigned to it in Section 1.05(e).
Additional Lender” shall have the meaning assigned to it in Section 1.05(c).
Administrative Agent” shall have the meaning assigned to it in the recitals hereof.
Administrative Questionnaire” shall mean an administrative questionnaire in a form supplied by the Administrative Agent.
Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
Affiliate” shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the person specified. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. “Controlled” shall have a meaning correlative thereto.
Agreement” shall mean this Revolving Credit Agreement, as amended, supplemented or otherwise modified from time to time.
Anti-Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to the Borrower and their respective Subsidiaries concerning or relating to bribery or corruption and anti-money laundering rules and regulations, including the Patriot Act.



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Applicable Margin” shall mean for each Type of Loan, the rate per annum set forth under the relevant column heading below which corresponds with the most current rating of the Borrower’s senior unsecured long-term debt issued by Moody’s and S&P, respectively.
Ratings
Applicable Margin forEurodollar Loans
Applicable Margin forABR Loans
>A3/A-
1.100% 0.100%
Baa1/BBB+ 1.300% 0.300%
<Baa2/BBB
1.450% 0.450%
Changes in the Applicable Margin shall become effective on the date on which Moody’s and/or S&P changes the rating it has issued for the Borrower’s senior unsecured long-term debt. If both agencies issue a rating and the two ratings fall in different levels, the Applicable Margin shall be based upon the level indicated by the higher rating; provided that if the higher rating is two or more levels above the lower rating, the Applicable Margin shall be based upon the next level below the higher of the two. If only one of such two agencies issues a rating, such rating shall apply. If the Borrower (a) does not have a senior unsecured long-term debt rating, the Applicable Margin shall be based on the level one level below the Borrower’s senior secured long-term debt rating, and (b) does not have a senior unsecured long-term debt rating or a senior secured long-term debt rating, pricing shall be at the Borrower’s issuer rating.
Approved Fund” shall mean any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
Arrangers” shall mean Mizuho Bank, Ltd. and The Bank of Nova Scotia, in their respective capacities as joint lead arrangers and joint bookrunners.
Assignee” shall have the meaning assigned to it in Section 11.02(c).
Assignment and Acceptance” shall mean an assignment and acceptance, substantially in the form of Exhibit A.
Assignor” shall have the meaning assigned to it in Section 11.02(c).
Bail-In Action” shall mean the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
Bail-In Legislation” shall mean, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as



36

amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.
BGC” shall mean The Berkshire Gas Company, a Massachusetts gas company.
Board” shall mean the Board of Governors of the Federal Reserve System of the United States.
Borrower” shall have the meaning assigned to it in the recitals hereof.
Borrower Senior Secured Indebtedness” shall mean any Indebtedness of the Borrower secured by any Lien on property owned or acquired by it; provided that the aggregate principal amount of Indebtedness secured by such Liens shall not exceed $250,000,000 at any one time outstanding.
Borrowing” shall mean a group of Loans of a single Type made by the Lenders on a single date and as to which a single Interest Period is in effect.
Borrowing Date” shall mean, with respect to any Loan, the date on which such Loan is disbursed or, in the case of Term Loans, deemed made pursuant to Section 2.01(b).
Business Day” shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which Lenders are open for business in New York City; provided, however, that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which Lenders are not open for dealings in Dollar deposits in the London interbank market.
Capital Lease Obligations” shall mean as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.
Capital Stock” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.
Change in Law” shall mean the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or



37

issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
Closing Date” shall mean the first date all the conditions precedent in Section 5.01 are satisfied or waived in accordance with Section 11.07.
CMP” shall mean Central Maine Power Company, a Maine corporation.
CNG” shall mean Connecticut Natural Gas Corporation, a Connecticut corporation.
Code” shall mean the Internal Revenue Code of 1986, as the same may be amended from time to time.
Commitment” shall mean, as to any Lender, the obligation of such Lender, if any, to make Loans in an aggregate principal amount not to exceed the amount set forth under the heading “Commitment” opposite such Lender’s name on Schedule 1.01 or in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof.
Commitment Increase Notice” shall have the meaning assigned to it in Section 1.05(a).
Commitment Percentage” shall mean, as to any Lender at any time, the percentage that such Lender’s Commitment then constitutes of the Total Commitments or, at any time after the Commitments shall have expired or terminated, the percentage that the aggregate principal amount of such Lender’s Loans that are not Term Loans then outstanding constitutes of the aggregate principal amount of the Loans then outstanding; provided that, in the event that the Loans are paid in full prior to the reduction to zero of the Total Extensions of Credit, the Commitment Percentages shall be determined in a manner designed to ensure that the other outstanding Extensions of Credit shall be held by the Lenders on a comparable basis.
Compliance Certificate” shall mean a certificate duly executed by the principal financial officer of the Borrower substantially in the form of Exhibit B.
Consolidated Indebtedness” shall mean, with respect to the Borrower at any date, all Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP, excluding debt and interest expense arising from the application of Financial Interpretation Number 45 or 46 of the Financial Accounting Standards Board.
Consolidated Net Income” shall mean, with respect to the Borrower at any date, the consolidated net income, if any, after taxes, of the Borrower and its Subsidiaries for such period



38

determined in accordance with GAAP; provided that Consolidated Net Income shall not be reduced or increased by the amount of any non-cash extraordinary charges or credits that would otherwise be deducted from or added to revenue in determining such Consolidated Net Income.
Consolidated Net Worth” shall mean, with respect to the Borrower at any date, all amounts that would, in conformity with GAAP, be included on a consolidated balance sheet of the Borrower and its Subsidiaries under stockholders’ equity determined at such date; provided, however, that in any event (and notwithstanding a change in GAAP subsequent to the date of this Agreement) amounts attributable to the Borrower’s and its Subsidiaries’ preferred stock shall be included in Consolidated Net Worth.
Consolidated Total Capitalization” shall mean, with respect to the Borrower at any date, the sum of the Consolidated Net Worth of the Borrower and the Consolidated Indebtedness of the Borrower.
Continuing Lenders” shall have the meaning assigned to it in Section 1.04(b).
Contractual Obligation” shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
Current Termination Date” shall have the meaning assigned to it in Section 1.04(a).
Debtor Relief Laws” shall mean the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.
Default” shall mean any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
Defaulting Lender” shall mean, subject to Section 11.16(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent or any Lender any other amount required to be paid by it hereunder within two Business Days of the date when due; (b) has notified the Borrower or the Administrative Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lenders’ obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied); (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative



39

Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower); or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a (A) proceeding under any Debtor Relief Law or (B) Bail-In Action or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such equity interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 11.16(b)) upon delivery of written notice of such determination to the Borrower and each Lender.
Dollars” or “$” shall mean lawful money of the United States of America.
EEA Financial Institution” shall mean (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
EEA Member Country” shall mean any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
EEA Resolution Authority” shall mean any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
Electronic Signature” shall mean an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.
Eligible Assignee” shall mean any Person that meets the requirements to be an Assignee under Section 11.02 (subject to such consents, if any, as may be required thereunder).
Environmental Laws” shall mean any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating,



40

relating to or imposing liability or standards of conduct concerning protection of human health or the environment (including natural resources, wetlands, flora and fauna), as now or may at any time hereafter be in effect.
ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.
EU Bail-In Legislation Schedule” shall mean the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
Eurocurrency Reserve Requirements” shall mean, for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.
Eurodollar Base Rate” shall mean with respect to any Eurodollar Loan for any Interest Period, a rate per annum equal to the London interbank offered rate as administered by the ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for Dollars for a period equal in length to such Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters Screen that displays such rate (or, in the event such rate does not appear on either of such Reuters pages, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion; in each case, the “Screen Rate”) as of the Specified Time on the Quotation Day for such Interest Period; provided that if the Screen Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement; providedfurther, that if the Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”) with respect to Dollars, then the Eurodollar Base Rate shall be the Interpolated Rate at such time (provided that if the Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement).
Eurodollar Borrowing” shall mean a Borrowing comprised of Eurodollar Loans.
Eurodollar Loan” shall mean any Loan bearing interest at the Eurodollar Rate.
Eurodollar Rate” shall mean, with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements



41

Event of Default” shall mean any of the events specified in Section 8provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
Exchange Act” shall have the meaning assigned to it in Section 8(j).
Extension Date” shall have the meaning assigned to it in Section 1.04(b).
Extension Lender” shall have the meaning assigned to it in Section 1.04(c).
Extensions of Credit” shall mean as to any Lender at any time, an amount equal to the sum of the aggregate principal amount of all Loans held by such Lender then outstanding.
Facility” shall mean the Commitments and the Loans made thereunder.
Facility Fee” shall have the meaning assigned to it in Section 2.03(a).
Facility Fee Rate” shall mean, as to the Borrower, the rate per annum set forth below which corresponds with the most current rating of the Borrower’s senior unsecured long-term debt issued by Moody’s and S&P, respectively.
Ratings Facility Fee Rate
>A3/A-
0.150%
Baa1/BBB+ 0.200%
<Baa2/BBB
0.300%
Changes in the Facility Fee Rate shall become effective on the date on which Moody’s and/or S&P changes the rating it has issued for the Borrower’s senior unsecured long-term debt. If both agencies issue a rating and the two ratings fall in different levels, the Facility Fee Rate shall be based upon the level indicated by the higher rating; provided that if the higher rating is two or more levels above the lower rating, the Facility Fee Rate shall be based upon the next level below the higher of the two. If only one of such two agencies issues a rating, such rating shall apply. If the Borrower (a) does not have a senior unsecured long-term debt rating, the Facility Fee Rate shall be based on the level one level below the Borrower’s senior secured long-term debt rating, and (b) does not have a senior unsecured long-term debt rating or a senior secured long-term debt rating, pricing shall be at the Borrower’s issuer rating.
FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
Federal Funds Effective Rate” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the



42

average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it; provided that if the Federal Funds Effective Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
Fees” shall mean the Facility Fees and other fees separately agreed to in writing by the Borrower and the Administrative Agent.
Final Election Date” shall have the meaning assigned to it in Section 1.04(a).
Financial Officer” shall mean the principal financial officer, principal accounting officer, treasurer or controller of the Borrower or any vice president of the Borrower whose primary responsibility is for financial matters.
Funding Office” shall mean the office of the Administrative Agent specified in Schedule 11.01 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders.
GAAP” shall mean generally accepted accounting principles, applied on a consistent basis.
Governmental Authority” shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.
Guarantee Obligation” shall mean, as to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of



43

such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.
Hedge Agreements” shall mean all interest rate swaps, caps or collar agreements or similar arrangements dealing with interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies.
Impacted Interest Period” has the meaning assigned to it in the definition of “Eurodollar Base Rate.”
Indebtedness” shall mean of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue more than 60 days incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all liabilities of such Person as an account party under acceptances, letters of credit (other than trade letters of credit), surety bonds or similar arrangements, (g) the liquidation value of all preferred Capital Stock of such Person that is redeemable at the option of the holder thereof or that has any mandatory dividend, redemption or other required payment that could be required thereunder prior to the date that is one year after the Termination Date, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of Section 8(e) only, all obligations of such Person in respect of Hedge Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor. Indebtedness shall not include Indebtedness of the Borrower arising from the application of Financial Interpretation Number 45 of the Financial Accounting Standards Board, Financial Interpretation Number 46 of the Financial Accounting Standards Board or Issue No. 01-08 of the Emerging Issues Task Force (EITF).
Interest Payment Date” shall mean (a) as to any ABR Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and the Termination Date, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such



44

Interest Period and the last day of such Interest Period and (d) as to any Eurodollar Loan, the date of any repayment or prepayment made in respect thereof.
Interest Period” shall mean (a) as to any Eurodollar Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending one week or one, two, three or six months thereafter, as the Borrower may elect, and (b) as to any ABR Borrowing, the period commencing on the date of such Borrowing and ending on the earliest of (i) the next succeeding March 31, June 30, September 30 or December 31, (ii) the Termination Date and (iii) the date such Borrowing is repaid or prepaid in accordance with Sections 2.02 or 2.08; provided, however, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period.
Interpolated Rate” shall mean, at any time, the rate per annum (rounded to the same number of decimal places as the Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the Screen Rate (for the longest period for which that Screen Rate is available in Dollars) that is shorter than the Impacted Interest Period and (b) the Screen Rate (for the shortest period for which that Screen Rate is available for Dollars) that exceeds the Impacted Interest Period, in each case, as of the Specified Time on the Quotation Day for such Interest Period. When determining the rate for a period which is less than the shortest period for which the Screen Rate is available, the Screen Rate for purposes of clause (a) above shall be deemed to be the overnight rate for Dollars determined by the Administrative Agent from such service as the Administrative Agent may select.
Lenders” shall have the meaning as defined in the preamble hereto.
Lending Office” shall mean (a) initially, for each Lender, its branch office or offices located as of the date hereof at its address set forth in such Lender’s Administrative Questionnaire and (b) subsequently, such other branch (or affiliate) of each Lender as such Lender may designate by notice in writing to the Borrower and the Administrative Agent as the branch (or affiliate) from which ABR Loans or Eurodollar Loans will thereafter be made hereunder and for the account of which all payments by the Administrative Agent of principal of, and interest on, ABR Loans or Eurodollar Loans, as the case may be, will thereafter be made.
Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature



45

whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).
Loan Documents” shall mean this Agreement and the Notes (if any).
Loans” shall have the meaning assigned to it in Section 1.01(a) and includes Term Loans.
Material Adverse Effect” shall mean a material adverse effect on (a) the business, property, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of the Loan Documents or the rights and remedies of the Administrative Agent and the Lenders thereunder.
Maximum Rate” shall have the meaning assigned to it in Section 11.12.
Moody’s” shall mean Moody’s Investors Service, Inc. and any successor thereto.
Non-Consenting Lender” shall mean any Lender that does not approve any consent, waiver or amendment that (i) requires the approval of all affected Lenders in accordance with the terms of Section 11.07 and (ii) has been approved by the Required Lenders.
Non-Defaulting Lender” shall mean, at any time, each Lender that is not a Defaulting Lender at such time.
Non-Extending Lender” shall have the meaning assigned to it in Section 1.04(a).
Non-U.S. Lender” shall have the meaning assigned to it in Section 2.16(f).
Note” shall mean, if requested by any Lender, the promissory note of the Borrower in favor of the Lender in substantially the form of Exhibit C, together with any amendments, modifications and supplements thereto, substitutions therefor and restatements thereof.
NYFRB Rate” means for any day, the greater of (a) the federal funds effective rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a banking day, for the immediately preceding banking day); provided that if none of such rates are published for any day that is a business day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. (New York time) on such day received to the Administrative Agent from a federal funds broker of recognized standing selected by it; provided further, that each such rate shall not be less than zero.
NYSEG” shall mean New York State Electric & Gas Corporation, a New York corporation.
Other Taxes” shall have the meaning assigned to it in Section 2.16(b).
Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight eurodollar borrowings by U.S. managed banking offices of



46

depository institutions (as such composite rate shall be determined by the Federal Reserve Bank of New York as set forth on its public website from time to time) and published on the next succeeding business day by the Federal Reserve Bank of New York as an overnight bank funding rate (from and after such date as the Federal Reserve Bank of New York shall commence to publish such composite rate).
Participant” shall have the meaning assigned to it in Section 11.02(b).
Participant Register” shall have the meaning assigned to it in Section 11.02(b).
PATRIOT Act” shall have the meaning assigned to in Section 11.15.
PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.
Person” shall mean any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof.
Plan” shall mean any pension plan subject to the provisions of Title IV of ERISA or Section 412 of the Code which is maintained for employees of the Borrower or any Significant Subsidiary.
Prime Rate” shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to debtors).
Proposed Increase Amount” shall have the meaning assigned to it in Section 1.05(a).
Quotation Day” shall mean, with respect to any Eurodollar Loan for any Interest Period, two Business Days prior to the commencement of such Interest Period.
Register” shall have the meaning assigned to it in Section 11.02(d).
Regulation U” shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Related Party” shall mean, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
Reportable Event” shall mean any reportable event as defined in Section 4043(b) of ERISA or the regulations issued thereunder with respect to a Plan.
Required Lenders” shall mean at any time, the holders of more than 50% of the aggregate amount of the Commitments then in effect and the Term Loans then outstanding, or, at any time the Commitments have terminated, the holders of more than 50% of the Total



47

Extensions of Credit. The Commitment, Term Loans and the Total Extensions of Credit of any Defaulting Lender shall be disregarded in determining Required Lenders at any time.
Requirement of Law” shall mean, as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
RGE” shall mean Rochester Gas and Electric Corporation, a New York corporation.
S&P” shall mean S&P Global Ratings.
Sanctioned Country” means, at any time, a country, region or territory which is itself, or whose government is, the subject or target of any Sanctions (at the time of this Agreement, Crimea, Cuba, Iran, North Korea and Syria).
Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, by the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).
Sanctions” shall mean all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, (b) the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.
SCG” shall mean The Southern Connecticut Gas Company, a Connecticut corporation.
Screen Rate” has the meaning assigned to it in the definition of “Eurodollar Base Rate.”
Significant Subsidiary” shall mean, at any particular time, any Subsidiary of the Borrower that would be a “significant subsidiary” of the Borrower within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC, including without limitation Avangrid Renewables Holdings, Inc., Avangrid Renewables, LLC, NYSEG, RGE, CMP, UI, CNG, SCG and BGC.
Specified Time” shall mean 11:00 a.m., London time.



48

Subsidiary” shall mean, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.
Taxes” shall have the meaning assigned to it in Section 2.16(a).
Term-Out Fee” shall have the meaning assigned to it in Section 1.04(f).
Term Loan” shall mean Loans outstanding on the Current Termination Date that are converted to Term Loans pursuant to Section 1.04(f).
Termination Date” shall mean June 28, 2021, as the same may be extended pursuant to Section 1.04.
Total Commitments” shall mean, as of a given date, the aggregate Commitments of the Lenders on such date.
Total Extensions of Credit” shall mean, at any time, the aggregate amount of the Extensions of Credit of the Lenders outstanding at such time.
Transferee” shall have the meaning assigned to it in Section 2.16(a).
Type”, when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, “Rate” shall include the Eurodollar Rate and the ABR.
UI” shall mean The United Illuminating Company, a specially chartered Connecticut corporation.
UK Financial Institutions” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
Write-Down and Conversion Powers” shall mean, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b)



49

with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
9.02.   Terms Generally. The definitions in Section 9.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. All references herein to Sections, Exhibits and Schedules shall be deemed references to Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time, including the word “consolidated,” as such term is applicable to the Borrower.
9.03.   Accounting Terms. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to (i) any election under Financial Accounting Standards Board Accounting Standards Codification 825 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower or any Subsidiary at “fair value”, as defined therein and (ii) any treatment of Indebtedness under Accounting Standards Codification 470-20 or 2015-03 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.
9.04.   LIBOR Notification. The Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to the London interbank offered rate or other rates in the definition of “Eurodollar Rate” or with respect to any alternative or successor rate thereto, or replacement rate thereof (including, without limitation, any such alternative, successor or replacement rate implemented pursuant to Section 2.06), including without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, the Eurodollar Rate or have the same volume or liquidity as did the London interbank offered rate prior to its discontinuance or unavailability.
9.05.   Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred



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from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized and acquired on the first date of its existence by the holders of its Equity Interests at such time.
SECTION 10.  
THE ADMINISTRATIVE AGENT
The Lenders and the Administrative Agent agree among themselves as follows:
10.01.   Appointment and Authority of Administrative Agent. Each of the Lenders hereby irrevocably appoints Mizuho Bank, Ltd. to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except as set forth in Section 10.08, the provisions of this Section 10 are solely for the benefit of the Administrative Agent and the Lenders, and the Borrower shall not have rights as a third-party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
10.02.   Reliance by Administrative Agent; Delegation by Administrative Agent.
(a) The Administrative Agent shall, in the absence of knowledge to the contrary, be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, communication, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it in good faith to be genuine and correct and to have been signed, sent or otherwise authenticated by the proper Person(s). The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
(b) The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Section 10 shall apply to any such



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sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Facility as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or willful misconduct, or be responsible for any recitals, statements, representations or warranties herein or the contents of any document delivered in connection herewith, or be liable for failing to ascertain or to make any inquiry concerning the performance or observance by the Borrower of any of the terms, conditions, covenants or agreements contained in this Agreement or any other Loan Documents. The Administrative Agent shall not be responsible to the Lenders or the holders of any Notes for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or such Notes. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof until it shall have received from the payee of such Note notice, given as provided herein, of the transfer thereof in compliance with Section 11.02. The Administrative Agent shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders and each subsequent holder of any Note. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall have any responsibility to the Borrower on account of the failure of or delay in performance or breach by any Lender of any of its obligations hereunder or to any Lender on account of the failure of or delay in performance or breach by any other Lender or the Borrower of any of their respective obligations hereunder or under the other Loan Documents.
The Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders.
10.03.   No Amendment to Administrative Agent’s Duties Without Consent.
(a) The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:
(i) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan



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Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and (iii) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of their respective Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.
(b) The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 8 or 11.07) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent in writing by the Borrower or a Lender.
(c) The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Section 5 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
(d) The Administrative Agent shall not be bound by any waiver, amendment, supplement or modification of this Agreement that affects its duties as Administrative Agent under this Agreement unless it shall have given its prior written consent as Administrative Agent thereto.
10.04.   Responsibilities of Administrative Agent. The Administrative Agent is hereby expressly authorized by the Lenders, without hereby limiting any implied authority, (i) to receive on behalf of the Lenders all payments of principal of and interest on the Loans and all other amounts due to the Lenders hereunder, and promptly to distribute to each Lender its proper share of each payment so received in like funds, and (ii) to promptly distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrower pursuant to this Agreement as received by the Administrative Agent. In the event that (x) the Borrower fails to pay when due the principal of or interest on any Loan or any Fees or (y) the Administrative Agent receives notice from the Borrower or any Lender of the occurrence of an Event of Default or other condition or event, in each case the Administrative Agent shall promptly give written



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notice thereof to the Lenders and shall take such action with respect to such Event of Default or other condition or event as it shall be directed in writing to take by the Required Lenders; provided, however, that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may take such action or refrain from taking such action with respect to such Event of Default or other condition or event as it shall deem advisable in the best interests of the Lenders. The Administrative Agent shall promptly deliver any bill required to be delivered by the Administrative Agent to the relevant Borrower.
10.05.   Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.03 and 11.03) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.03 and 11.03.
10.06.   Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.
10.07.   Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or



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any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking any action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. Each of the Lenders agrees that the Administrative Agent shall not have any responsibility for the accuracy or adequacy of any information contained in any document, or any oral information, supplied to such Lender by the Borrower directly or through the Administrative Agent.
10.08.   Resignation of Administrative Agent.
(a) The Administrative Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000, or an Affiliate of any such bank with an office in New York, New York. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to), on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.
(b) With effect from the Resignation Effective Date (i) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (ii) except for any indemnity payments owed to the retiring Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time, if any, as the Required Lenders or the retiring Administrative Agent appoint a successor Administrative Agent as provided for in Section 10.08(a). Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Administrative Agent (other than any rights to indemnity payments owed to the retiring Administrative Agent), and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable by the Borrower to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Section 10 and Section 11.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.
10.09.   No Other Duties. Anything herein to the contrary notwithstanding, none of the Arrangers or any other agents from time to time listed on the cover page hereof shall have any



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powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent or a Lender hereunder.
SECTION 11.  
MISCELLANEOUS
11.01.   Notices.
(a) Any notice shall be conclusively deemed to have been received by a party hereto and be effective on the day on which delivered to such party at the address set forth below (or at such other address as such party shall specify to the other parties in writing):
(i) if to the Administrative Agent or the Borrower, at the address thereof set forth in Schedule 11.01; and (ii) if to any of the Lenders, at the address specified in its Administrative Questionnaire, or if a Lender is a Lender by virtue of an assignment, to it at its address (or facsimile number) set forth in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by facsimile or other telegraphic communications equipment of the sender, or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 11.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 11.01.
(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications (including email and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender pursuant to Section 2 if such Lender has notified the Administrative Agent that it is incapable of receiving notices under Section 2 by electronic communication. The Administrative Agent or the relevant Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an email address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return email or other written acknowledgement) and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its email address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice, email



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or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.
(c) Any party hereto may change its address (including email address) or facsimile number for notices and other communications hereunder by notice to the other parties hereto.
(d) The Borrower agrees that the Administrative Agent may, but shall not be obligated to, make the Communications (as defined below) available to the Lenders by posting the Communications on Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system (the “Platform”). The Platform is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower, any Lender or any other Person or entity for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s transmission of communications through the Platform. “Communications” means, collectively, any notice, demand, communication, information, document or other material that the Borrower provides to the Administrative Agent pursuant to any Loan Document or the transactions contemplated therein which is distributed to the Administrative Agent any Lender by means of electronic communications pursuant to this Section 11.01, including through the Platform.
11.02.   Successors and Assigns; Participations, Assignments and Designations.
(a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent, all future holders of the Loans and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of Section 11.02(c), (ii) by way of participation in accordance with the provisions of Section 11.02(b) or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 11.02(f) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 11.02(b) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) (i) Any Lender may, without the consent of or notice to the Borrower or the Administrative Agent, in accordance with applicable law, at any time sell participations to any Person (other than a natural person or the Borrower or any Affiliate or Subsidiary of the



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Borrower) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement to the other parties to this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible for the performance thereof, (iii) such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents and (iv) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Loan Documents. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans or its other obligations under any Loan Document) except to the extent that such disclosure is necessary to establish that such Commitment, Loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(ii) Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that requires the consent of all Lenders pursuant to Section 11.07 that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.09, 2.10, 2.12 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.02(c)provided that such Participant agrees to be subject to the provisions of Section 2.11 as if it were an Assignee under Section 11.02(c)provided further that no Participant shall be entitled to receive any greater amount pursuant to Section 2.092.102.12 or 2.16 than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.06 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.14 as though it were a Lender.
(c) (i) Any Lender (an “Assignor”) may, in accordance with applicable law, at any time and from time to time assign to any Lender, any Affiliate of any Lender or any Approved Fund



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or, with the consent (which shall not be unreasonably withheld or delayed) of the Borrower and the Administrative Agent (provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five Business Days after having received notice thereof), to any other Person (other than the Borrower, any Subsidiary or Affiliate of the Borrower, any Defaulting Lender or any other Person who, upon becoming a Lender hereunder, would constitute any of the foregoing, or any natural person) (an “Assignee”) all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance, executed by such Assignee, such Assignor and any other Person whose consent is required pursuant to this Section 11.02(c), and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that no such assignment to an Assignee (other than any Lender, any affiliate of any Lender or any Approved Fund) shall be in an aggregate principal amount of less than $5,000,000 (other than in the case of an assignment of all of a Lender’s interests under this Agreement), unless otherwise agreed by the Borrower and the Administrative Agent. For purposes of the proviso contained in the preceding sentence, the amount described therein shall be aggregated in respect of each Lender and its related Approved Funds, if any. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment and/or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of an Assignor’s rights and obligations under this Agreement, such Assignor shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.09, 2.12, 2.16 and 11.03. Notwithstanding any provision of this Section 11.02, the consent of the Borrower shall not be required for any assignment that occurs when an Event of Default shall have occurred and be continuing with respect to the Borrower.
(ii) In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable Assignee and Assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent and each other Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Loans in accordance with its Commitment Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable law without compliance with the provisions of this Section 11.02(c)(ii), then the Assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.



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(d) The Administrative Agent shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain at its address referred to in Schedule 11.01 a copy of each Assignment and Acceptance delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitment of, and the principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied by a duly executed Assignment and Acceptance, and thereupon one or more new Notes shall be issued to the designated Assignee.
(e) Upon its receipt of an Assignment and Acceptance executed by an Assignor, an Assignee and any other Person whose consent is required by Section 11.02(c), together with payment to the Administrative Agent of a registration and processing fee of $3,500, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) record the information contained therein in the Register on the effective date determined pursuant thereto.
(f) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section 11.02 concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank or any other central bank having jurisdiction over such Lender in accordance with applicable law. The parties to this Agreement further acknowledge that any such pledge or assignment shall not release such Lender from any of its obligations hereunder or substitute any pledge or assignee for such Lender as a party hereto.
(g) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in Section 11.02(f).
11.03.   Expenses; Indemnity.
(a) The Borrower agrees to pay all reasonable out-of-pocket expenses incurred (i) by the Administrative Agent in connection with the preparation of this Agreement or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions hereby contemplated shall be consummated), including the reasonable fees and disbursements of counsel to the Administrative Agent, and (ii) by the Administrative Agent or any Lender in connection with the enforcement or protection of their rights in connection with this Agreement or in connection with the Loans made or any Notes issued hereunder, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and the Lenders.



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(b) The Borrower agrees to indemnify the Administrative Agent, each Lender, the Arrangers and each Related Party of any of the foregoing Persons (each such person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by any Indemnitee or asserted against any Indemnitee by any Person (including the Borrower) other than such Indemnitee and its Related Parties arising out of, in any connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or the use or proposed use of the proceeds of therefrom, (iii) any violation of, or noncompliance with, any Environmental Law, any actual or alleged presence or release of hazardous materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any environmental liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.
(c) The provisions of this Section 11.03 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any of the other Loan Documents, or any investigation made by or on behalf of the Administrative Agent or any Lender. All amounts due under this Section 11.03 shall be payable on written demand therefor.
(d) To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under Section 11.03(a) or 11.03(b) to be paid by it to the Administrative Agent (or any sub-agent thereof) or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent) or such Related Party, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s share of the aggregate Extensions of Credit at such time) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender); provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) in connection with such capacity.



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(e) To the fullest extent permitted by applicable law, the Borrower shall not assert, and each of them hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnitee referred to in Section 11.03(b) shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.
11.04.   Effectiveness. This Agreement shall become effective on the Closing Date, and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender.
11.05.   Survival of Agreement; Benefit to Successors and Assigns. All covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by the Lenders of the Loans herein contemplated and the execution and delivery to the Lenders of any Notes evidencing such Loans and shall continue in full force and effect so long as any portion of any of such Notes is outstanding and unpaid and Commitments have not been terminated. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party and all covenants, promises and agreements by or on behalf of the Borrower which are contained in this Agreement shall bind and inure to the benefit of the successors and assigns of the Lenders; providedhowever, that no interest, rights or duties herein may be assigned by the Borrower without the prior written approval of all the Lenders.
11.06.   Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or any such Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender or its Affiliates, irrespective of whether or not such Lender or such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations may be contingent or unmatured or are owed to a branch, office or Affiliate of such Lender different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 11.16 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the obligations owing to such Defaulting Lender as to which it is exercising such right of setoff. The rights of each Lender and its



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Affiliates under this Section 11.06 are in addition to other rights and remedies (including other rights of setoff) that such Lender or its Affiliates may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.
11.07.   Waivers; Amendment.
(a) No failure or delay of the Administrative Agent or any Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by Section 11.07(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.
(b) Except for extending the Commitments in accordance with the procedures specified in Section 1.04 or replacing any Lender in accordance with the procedures specified in Section 2.11, neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders; providedhowever, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of, or any scheduled principal payment date or date for the payment of any interest on, any Loan, or waive or excuse any such payment or any part thereof, or decrease rate of interest on any Loan, without the prior written consent of each Lender directly affected thereby, (ii) change or extend the Commitment or decrease the Facility Fee of any Lender without the prior written consent of such Lender, (iii) amend or modify the provisions of Section 2.13, Section 2.14, this Section 11.07 or the definition of “Required Lenders,” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the prior written consent of each Lender, or (iv) amend the last sentences of Sections 4.14, 6.04 or 7.07 without the prior written consent of Required Lenders and each Lender incorporated or organized under the laws of the Federal Republic of Germany; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. Any waiver, amendment or modification authorized by this Section 11.07 shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the Loans.
(c) Any request by the Borrower for a modification, amendment or waiver of any provision of this Agreement or any other Loan Document shall be made in writing to the Administrative Agent and the Administrative Agent shall promptly communicate such request to the Lenders. Any such waiver, consent or approval granted by the Required Lenders (and such



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other Persons as may be required under this Section 11.07) shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in the same, similar or other circumstances.
(d) No waiver by the Administrative Agent or any Lender of any breach or default of or by the Borrower under this Agreement shall be deemed a waiver of any other previous breach or default or any thereafter occurring.
(e) In connection with any waiver, determination or direction relating to any part of Sections 4.14, 6.04(c) or 7.07 of which a Lender does not have the benefit, the Commitment and Loans of that Lender will be excluded for the purpose of determining whether the consent of the requisite Lenders has been obtained or whether the determination or direction by the requisite Lenders has been made
(f) If the Administrative Agent and the Borrower acting together identify any ambiguity, omission, mistake, typographical error or other defect in any provision of this Agreement or any other Loan Document, then the Administrative Agent and the Borrower shall be permitted to amend, modify or supplement such provision to cure such ambiguity, omission, mistake, typographical error or other defect, and such amendment shall become effective without any further action or consent of any other party to this Agreement.
11.08.   Severability. In the event any one or more provisions contained in this Agreement or any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
11.09.   Headings. The Section headings in this Agreement are for convenience only and shall not affect the construction hereof.
11.10.   Governing Law; Jurisdiction.
(a) This Agreement and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be construed in accordance with and governed by the laws of the State of New York.
(b) The Borrower irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Administrative Agent, any Lender or any Related Party of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New



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York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction.
(c) The Borrower irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in Section 11.10(b). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(d) Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 11.01. Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by applicable law
11.11.   Counterparts. This Agreement may be executed in two or more counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute but one agreement. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (e.g. “.pdf” or “.tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Agreement or any other Loan Document and shall be deemed to include Electronic Signatures, deliveries or the keeping of records in any electronic form (including deliveries by telecopy, emailed .pdf or any other electronic means that reproduces an image of an actual executed signature page), each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be.
11.12.   Interest Rate Limitation. Notwithstanding anything herein or in any other Loan Document to the contrary, if at any time the applicable interest rate, together with all Fees and charges which are treated as interest under applicable law (collectively the “Charges”), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender, shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law, the rate of interest payable under the Loan held by such Lender, together with all Charges payable to such Lender, shall be limited to the Maximum Rate.



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11.13.   Entire Agreement. This Agreement, the other Loan Documents, any separate letter agreements with respect to fees payable to the Administrative Agent and any Assignment and Acceptance (executed pursuant to Section 11.02 of this Agreement) constitute the entire contract between the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.
11.14.   Waiver of Jury Trial. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any legal proceeding directly or indirectly arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby (whether based on contract, tort or any other theory). Each party hereto (i) certifies that no representative, agent or attorney of any other Person has represented, expressly or otherwise, that such other Person would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties hereto have been induced to enter into this Agreement and the other Loan Documents by, among other things, the mutual waivers and certifications in this Section 11.14.
11.15.   USA PATRIOT Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act of 2001), as amended from time to time (the “PATRIOT Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the PATRIOT Act.
11.16.   Defaulting Lenders.
(a) Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:
(i) Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Required Lenders.
(ii) Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Section 8 or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 11.06 shall be applied at such time or times as may be determined by the Administrative Agent as follows:
(A) first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder;



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(B) second, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent;
(C) third, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement;
(D) fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement;
(E) fifth, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and
(F) sixth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that (x) if such payment is a payment of the principal amount of any Loans in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made at a time when the conditions set forth in Section 5.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of such Defaulting Lender until such time as all Loans are held by the Lenders pro rata in accordance with the Commitments. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender pursuant to this Section 11.16(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(iii) Each Defaulting Lender shall be entitled to receive a Facility Fee for any period during which that Lender is a Defaulting Lender only to extent allocable to the sum of the outstanding principal amount of the Loans funded by it.
(b) If the Borrower and the Administrative Agent agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein, that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans to be held pro rata by the Lenders in accordance with the Commitments, whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; provided further that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.



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11.17.   Certain Acknowledgements. The Borrower hereby acknowledges and agrees that (a) no fiduciary, advisory or agency relationship between the Borrower and the Credit Parties is intended to be or has been created in respect of any of the transactions contemplated by this Agreement or the other Loan Documents, irrespective of whether the Credit Parties have advised or are advising the Borrower on other matters, and the relationship between the Credit Parties, on the one hand, and the Borrower, on the other hand, in connection herewith and therewith is solely that of creditor and debtor, (b) the Credit Parties, on the one hand, and the Borrower, on the other hand, have an arm’s length business relationship that does not directly or indirectly give rise to, nor do the Borrower rely on, any fiduciary duty to the Borrower or their affiliates on the part of the Credit Parties, (c) the Borrower is capable of evaluating and understanding, and the Borrower understands and accepts, the terms, risks and conditions of the transactions contemplated by this Agreement and the other Loan Documents, (d) the Borrower has been advised that the Credit Parties are engaged in a broad range of transactions that may involve interests that differ from the Borrower’s interests and that the Credit Parties have no obligation to disclose such interests and transactions to the Borrower, (e) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent the Borrower has deemed appropriate in the negotiation, execution and delivery of this Agreement and the other Loan Documents, (f) each Credit Party has been, is, and will be acting solely as a principal and, except as otherwise expressly agreed in writing by it and the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower, any of its Affiliates or any other Person, (g) none of the Credit Parties has any obligation to the Borrower or its Affiliates with respect to the transactions contemplated by this Agreement or the other Loan Documents except those obligations expressly set forth herein or therein or in any other express writing executed and delivered by such Credit Party and the Borrower or any such Affiliate and (h) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Credit Parties or among the Borrower and the Credit Parties. For purposes of this Section 11.17, “Credit Party” means each of the Lenders, the Administrative Agent and the Arrangers.
11.18.   Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b) the effects of any Bail-In Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent entity, or a



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bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.




IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written.

AVANGRID, INC.
By: /s/ Howard Coon
Name: Howard Coon
Title:
Vice President - Treasurer
By: /s/ Scott Tremble
Name: Scott Tremble
Title: Senior Vice President – Controller
[Signature Page to Revolving Credit Agreement]


MIZUHO BANK, LTD., as Administrative Agent and as a Lender
By: /s/ Edward Sacks
Name: Edward Sacks
Title: Authorized Signatory
[Signature Page to Revolving Credit Agreement]


The Bank of Nova Scotia, as a Lender
By:
/s/ David Dewar
Name: David Dewar
Title: Director

[Signature Page to Revolving Credit Agreement]


Banco Bilbao Vizcaya Argerntaria, S.A., as a Lender
By: /s/ Brian Crowley
Name: Brian Crowley
Title: Managing Director
By:
/s/ Luis Ruigomez
Name: Luis Ruigomez
Title: Executive Director


[Signature Page to Revolving Credit Agreement]


COMMERZBANK AG, New York Branch, S.A., as a Lender
By: /s/ James Boyle
Name: James Boyle
Title: Director
By: /s/ Kareem Hartl
Name: Kareem Hartl
Title: Assistant Vice President

[Signature Page to Revolving Credit Agreement]


CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as a Lender
By: /s/ Andrew Sidford
Name: Andrew Sidford
Title: Managing Director
By: /s/ Gordon Yip
Name: Gordon Yip
Title: Director

[Signature Page to Revolving Credit Agreement]


National Westminster Bank plc, as a Lender
By: /s/ Jonathan Eady
Name: Jonathan Eady
Title: Director

[Signature Page to Revolving Credit Agreement]


Bank of America, as a Lender
By: /s/ Dee Dee Farkas
Name: Dee Dee Farkas
Title: Director

[Signature Page to Revolving Credit Agreement]


CaixaBank S.A., as a Lender
By: /s/ Felipe Plaza
Name: Felipe Plaza
Title: Structured Finance

[Signature Page to Revolving Credit Agreement]


Canadian Imperial Bank of Commerce, New York Branch, as a Lender
By: /s/ Anju Abraham
Name: Anju Abraham
Title: Authorized Signatory

[Signature Page to Revolving Credit Agreement]


TD Bank N.A., as a Lender
By: /s/ Shannon Batchman
Name: Shannon Batchman
Title: Senior Vice President

[Signature Page to Revolving Credit Agreement]

         Schedule 1.01

Lender Commitment
Mizuho Bank, Ltd. $ 70,000,000
The Bank of Nova Scotia $ 100,000,000
Banco Bilbao Vizcaya Argentaria, S. A. New York Branch $ 70,000,000
Commerzbank AG, New York Branch $ 50,000,000
Credit Agricole Corporate and Investment Bank $ 50,000,000
National Westminster Bank plc $ 50,000,000
Bank of America, N. A. $ 27,500,000
CaixaBank S.A. $ 27,500,000
Canadian Imperial Bank of Commerce, New York Branch $ 27,500,000
TD Bank, N. A. $ 27,500,000
Total Commitment $ 500,000,000




Schedule 4.04
Litigation

Please see relevant disclosure in Avangrid, Inc.’s Annual Report on Form 10-K for the year-ended December 31, 2019 and Quarterly Report on Form 10-Q for the period ended March 31, 2020.



Schedule 4.11
Environmental and Safety Matters

Please see relevant disclosure in Avangrid, Inc.’s Annual Report on Form 10-K for the year-ended December 31, 2019 and Quarterly Report on Form 10-Q for the period ended March 31, 2020.


Schedule 7.03
First Mortgage Bond Indentures
Indenture of Mortgage Dated as of May 1, 2009 from Central Maine Power Company to The Bank of New York Mellon Trust Company, N.A., as Trustee (as supplemented and amended)
Indenture dated September 1, 1918 from Rochester Gas and Electric Corporation to Bankers Trust Company (as supplemented and amended)
Indenture between The Southern Connecticut Gas Company (formerly, The Bridgeport Gas Light Company) and The Bridgeport City Trust Company, as Trustee, dated as of March 1, 1948 (as supplemented and amended)






         Schedule 11.01
Notice Addresses
Administrative Agent
Primary Contact:
Mizuho Bank, Ltd.
Harborside Financial Center
1800 Plaza Ten
Jersey City, New Jersey 07311
Attn: Flora Lio
Phone: (201) 626-9516
Email: LAU_Agent@mizuhogroup.com
Borrower
Primary Contact:
One City Center, 5th Floor
Portland, ME 04101
Attn:    Howard Coon
Phone: (207) 629-1280
Email:  howard.coon@avangrid.com
Secondary Contact:
180 Marsh Hill Road
Orange, CT 06477
Attn:    Doris Bernardi
Phone: (203) 499-2230
Email:  doris.bernardi@uinet.com
Website:
www.avangrid.com










EXHIBIT A
FORM OF
ASSIGNMENT AND ACCEPTANCE
, 20
Reference is made to the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among Avangrid, Inc., a New York corporation (the “Borrower”), the Lenders (as defined herein), Mizuho Bank, Ltd., as administrative agent (the “Administrative Agent”) and The Bank of Nova Scotia, as syndication agent (the “Syndication Agent”). Terms defined in the Credit Agreement are used herein with the same meanings.
[●] (the “Assignor”) and [●] (the “Assignee”) agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, a [●]% interest in and to all the Assignor’s rights and obligations under the Credit Agreement as of the Effective Date (as defined below) (including, without limitation, such percentage interest in the Commitment of the Assignor on the Effective Date and such percentage interest in each Loan owing to the Assignor outstanding on the Effective Date together with such percentage interest in all unpaid interest and Facility Fees accrued to the Effective Date).
2. The Assignor (i) represents that as of the date hereof, its Commitment (without giving effect to assignments thereof which have not yet become effective) is $[●] and the outstanding principal balance of its Loans (unreduced by any assignments thereof which have not yet become effective) is $[●]; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of their respective obligations under the Credit Agreement, any Note or any other instrument or document furnished pursuant hereto or thereto.
3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Person which has become a Lender and based on such documents and



information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; and (iv) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender.
4. The effective date of this Assignment and Acceptance shall be [●] (the “Effective Date”).
5. Upon acceptance and recording pursuant to paragraph (e) of Section 11.02 of the Credit Agreement, from and after the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the Notes or any other instrument or document furnished pursuant hereto or thereto and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.
6. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of State of New York.
[Remainder of Page Intentionally Left Blank]




[NAME OF ASSIGNOR], as Assignor
By:  
Name:
Title:
[Address of Assignor]
[NAME OF ASSIGNEE], as Assignee
By:  
Name:
Title:
[Address of Assignee]





[Acknowledged and consented to this      day of             ,         .]1
[NAME OF CONSENTING PARTY]
By:  
Name:
Title:



1 Insert if required pursuant to Section 11.02(c) of the Credit Agreement.


EXHIBIT B
FORM OF
COMPLIANCE CERTIFICATE
[Date]
This Compliance Certificate is delivered pursuant to Section 6.01(c) of the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among Avangrid, Inc., a New York corporation (the “Borrower”), the Lenders (as defined herein), Mizuho Bank, Ltd., as administrative agent (the “Administrative Agent”) and The Bank of Nova Scotia, as syndication agent (the “Syndication Agent”).
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
1. I am a duly elected, qualified and acting Financial Officer certifying on behalf of the Borrower.
2. I have reviewed and am familiar with the contents of this Certificate.
3. I have reviewed the terms of the Credit Agreement and the other Loan Documents and have made or caused to be made under my supervision, a review in reasonable detail of the transactions and condition of the Borrower during the accounting period covered by the financial statements attached hereto as Attachment 1 (the “Financial Statements”). Such review did not disclose the existence during or at the end of the accounting period covered by the Financial Statements, and I have no knowledge of the existence, as of the date of this Certificate, of any condition or event which constitutes a Default or Event of Default[, except as set forth below].
4. To the best of my knowledge, the Borrower during such accounting period has observed or performed in all material respects all of its covenants and other agreements, and has satisfied every condition contained in the Credit Agreement and the other Loan Documents to which it is party to be observed, performed or satisfied by it.
5. Attached hereto as Attachment 2 are the computations showing compliance with the covenant set forth in Section 7.01 of the Credit Agreement as of the last day of the fiscal [quarter] [year].
[Remainder of Page Intentionally Left Blank]

B-1
        


IN WITNESS WHEREOF, I have executed this Certificate as of the day and year first written above.
         
Name:
Title:



B-2
         

Attachment 1 to Compliance Certificate
[Attach Financial Statements]



         

Attachment 2 to Compliance Certificate
The information described herein is as of             ,         , and pertains to the period from             ,          to             ,         .
[Set forth Covenant Calculations]



         

EXHIBIT C
FORM OF NOTE
$ [Date]
FOR VALUE RECEIVED, the undersigned, Avangrid, Inc., a New York corporation (the “Borrower”), hereby promises to pay to the order of [●] (the “Lender”) on the Termination Date at the Funding Office, in lawful money of the United States and in immediately available funds, the principal amount of the lesser of (a) [●] DOLLARS ($[●]) and (b) the aggregate unpaid principal amount of all Loans of the Lender made to the Borrower outstanding under the Credit Agreement.
The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time from the date hereof at the rates, and on the dates, specified in the Credit Agreement.
The holder of this Note is authorized to record the Borrowing Date, Type and amount of each Loan of the Lender outstanding under the Credit Agreement, the date and amount of each payment or prepayment of principal hereof, and the date of each interest rate conversion or continuation pursuant to Section 2.07 of the Credit Agreement and the principal amount subject thereto, on the schedules annexed hereto and made a part hereof and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded; provided that the failure of the Lender to make any such recordation (or any error in such recordation) shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.
This Note is one of the Notes referred to in the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among, inter alia, the Borrower, the lenders from time to time party thereto and Mizuho Bank Ltd., as administrative agent, and is subject to the provisions thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. Terms used herein which are defined in the Credit Agreement shall have such defined meanings unless otherwise defined herein or unless the context otherwise requires.
Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein.
All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.
C-1
         


THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
AVANGRID, INC.

By:  
Name:
Title:

By:  
Name:
Title:



C-2
         

Schedule A to Note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
Date Amount of
ABR Loans
Amount
Converted to
ABR Loans
Amount of
Principal Repaid
Amount Converted to
Eurodollar Loans
Unpaid Principal
Balance of
ABR Loans
Notation
Made By


         

Schedule B toNote
EURODOLLAR LOANS AND REPAYMENTS OF EURODOLLAR LOANS
Date Amount of
Eurodollar Loans
Amount
Converted to
Eurodollar Loans
Interest Period and
Eurodollar Rate
with
Respect Thereto
Amount of
Principal Repaid
Amount Converted
to ABR Loans
Unpaid Principal
Balance of
Eurodollar Loans
Notation
Made By


         

EXHIBIT D-1
FORM OF TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among Avangrid, Inc., a New York corporation (the “Borrower”), the Lenders (as defined herein), Mizuho Bank, Ltd.., as administrative agent (the “Administrative Agent”) and The Bank of Nova Scotia, as syndication agent (the “Syndication Agent”). Terms defined in the Credit Agreement are used herein with the same meanings.
The undersigned is providing this certificate pursuant to Section 2.16(f) of the Credit Agreement. The undersigned hereby represents and warrants that:
1. it is the sole record and beneficial owner of the Loans or the obligations evidenced by Note(s) in respect of which it is providing this certificate;
2. it is not a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “Code”);
3. it is not a 10-percent shareholder of a Borrower within the meaning of Section 881(c)(3)(B) of the Code; and
4. it is not a controlled foreign corporation related to a Borrower within the meaning of Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

D-1-1
         



IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date set forth below.
[NAME OF PARTICIPANT]
By:  
Name:
Title:
Date:  

D-1-2
         

EXHIBIT D-2


FORM OF TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among Avangrid, Inc., a New York corporation (the “Borrower”), the Lenders (as defined herein), Mizuho Bank, Ltd.., as administrative agent (the “Administrative Agent”) and The Bank of Nova Scotia, as syndication agent (the “Syndication Agent”). Terms defined in the Credit Agreement are used herein with the same meanings.
The undersigned is providing this certificate pursuant to Section 2.16(f) of the Credit Agreement. The undersigned hereby represents and warrants that:
1. it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate;
2. it is not a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “Code”);
3. it is not a 10-percent shareholder of a Borrower within the meaning of Section 881(c)(3)(B) of the Code; and
4. it is not a controlled foreign corporation related to a Borrower within the meaning of Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

D-2-1
         



IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date set forth below.
[NAME OF PARTICIPANT]
By:  
Name:
Title:
Date:  

D-2-2
         

EXHIBIT D-3

FORM OF TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among Avangrid, Inc., a New York corporation (the “Borrower”), the Lenders (as defined herein), Mizuho Bank, Ltd.., as administrative agent (the “Administrative Agent”) and The Bank of Nova Scotia, as syndication agent (the “Syndication Agent”). Terms defined in the Credit Agreement are used herein with the same meanings.
The undersigned is providing this certificate pursuant to Section 2.16(f) of the Credit Agreement. The undersigned hereby represents and warrants that:
1. it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate;
2. its direct or indirect partners/members are the sole beneficial owners of such participation;
3. with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “Code”);
4. none of its direct or indirect partners/members is a 10-percent shareholder of a Borrower within the meaning of Section 881(c)(3)(B) of the Code; and
5. none of its direct or indirect partners/members is a controlled foreign corporation related to a Borrower within the meaning of Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform such Lender, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

D-3-1
         



IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date set forth below.
[NAME OF PARTICIPANT]
By:  
Name:
Title:
Date:  

D-3-2
         

EXHIBIT D-4
FORM OF TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among Avangrid, Inc., a New York corporation (the “Borrower”), the Lenders (as defined herein), Mizuho Bank, Ltd.., as administrative agent (the “Administrative Agent”) and The Bank of Nova Scotia, as syndication agent (the “Syndication Agent”). Terms defined in the Credit Agreement are used herein with the same meanings.
The undersigned is providing this certificate pursuant to Section 2.16(f) of the Credit Agreement. The undersigned hereby represents and warrants that:
1. it is the sole record and beneficial owner of the Loans or the obligations evidenced by Note(s) in respect of which it is providing this certificate;
2. its direct or indirect partners/members are the sole beneficial owners of such of the Loans or the obligations evidenced by Note(s);
3. with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “Code”);
4. none of its direct or indirect partners/members is a 10-percent shareholder of a Borrower within the meaning of Section 881(c)(3)(B) of the Code; and
5. none of its direct or indirect partners/members is a controlled foreign corporation related to a Borrower within the meaning of Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform the Administrative Agent and the Borrower, and (2) the undersigned shall have at all times furnished the Administrative Agent and the Borrower with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

D-4-1
         



IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date set forth below.
[NAME OF PARTICIPANT]
By:  
Name:
Title:
Date:  

D-4-2
         

EXHIBIT E-1
FORM OF EXTENSION LETTER
Mizuho Bank, Ltd., as Administrative Agent
1271 Avenue of the Americas, 3rd Floor
New York, NY 10020

Attention: Flora Lio
         
Ladies and Gentlemen:
This notice shall constitute a request pursuant to Section 1.04(a) of the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among Avangrid, Inc., a New York corporation (the “Borrower”), the Lenders (as defined herein), Mizuho Bank, Ltd., as administrative agent (the “Administrative Agent”), and The Bank of Nova Scotia, as syndication agent (the “Syndication Agent”). Terms defined in the Credit Agreement are used herein with the same meanings.
The Borrower hereby requests that the Lenders extend the Termination Date to June [●],2 2022.
[Remainder of Page Intentionally Left Blank]

2 To be the date that is 364 days after the initial Termination Date.
E-1-1
        


AVANGRID, INC.
By:  
Name:
Title:


E-1-2
         

EXHIBIT E-2
FORM OF EXTENSION LETTER
Mizuho Bank, Ltd., as Administrative Agent
1271 Avenue of the Americas, 3rd Floor
New York, NY 10020

Attention: Flora Lio
         
Ladies and Gentlemen:
This notice shall constitute a request pursuant to Section 1.04(f) of the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among Avangrid, Inc., a New York corporation (the “Borrower”), the Lenders (as defined herein), Mizuho Bank, Ltd., as administrative agent (the “Administrative Agent”), and The Bank of Nova Scotia, as syndication agent (the “Syndication Agent”). Terms defined in the Credit Agreement are used herein with the same meanings.
The Borrower hereby notifies the Lenders that the Termination Date shall be extended to June [●],3 2022, subject to payment of the Term-Out Fee and compliance with the other terms and conditions of Section 1.04(f) of the Credit Agreement. The Borrower hereby specifies that:
(i) the aggregate amount of Commitments so extended (after giving effect to the termination of Commitments in connection with the conversion of Loans to Term Loans):
$______________
(iii) [all][no][the following] Loans shall be converted to Term Loans:
$______________.
[Remainder of Page Intentionally Left Blank]

3 To be the date that is 364 days after the initial Termination Date.
E-2-1


AVANGRID, INC.
By:  
Name:
Title:

E-2-2
        

EXHIBIT F
FORM OF COMMITMENT INCREASE SUPPLEMENT
[Date]
COMMITMENT INCREASE SUPPLEMENT (this “Supplement”), dated [●], to the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among Avangrid, Inc., a New York corporation (the “Borrower”), the Lenders (as defined herein), Mizuho Bank, Ltd., as administrative agent (the “Administrative Agent”) and The Bank of Nova Scotia, as syndication agent (the “Syndication Agent”). Terms defined in the Credit Agreement are used herein with the same meanings.
W I T N E S S E T H :
WHEREAS, pursuant to the provisions of Section 1.05(b) of the Credit Agreement, the undersigned may increase the amount of its Commitment in accordance with the terms thereof by executing and delivering to the Borrower and the Administrative Agent a supplement to the Credit Agreement in substantially the form of this Supplement; and WHEREAS, the undersigned now desires to increase the amount of its Commitment under the Credit Agreement;
NOW THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees, subject to the terms and conditions of the Credit Agreement, that on the date this Supplement is accepted by the Borrower and the Administrative Agent its Commitment shall be increased by $[●], thereby making the amount of its Commitment $[●].
2. Terms defined in the Credit Agreement shall have their defined meanings when used herein.
[Remainder of Page Intentionally Left Blank]

F-1



IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.
[INSERT NAME OF LENDER], as Lender
By:  
Name:
Title:

F-2


Agreed and accepted this      day of             ,         .
AVANGRID, INC.
By:  
Name:
Title:

F-3


Acknowledged this      day of             ,         .
MIZUHO BANK, LTD.,
as Administrative Agent
By:  
Name:
Title:




F-4

         
FORM OF ADDITIONAL LENDER SUPPLEMENT
ADDITIONAL LENDER SUPPLEMENT, dated [●] (this “Supplement”), to the Revolving Credit Agreement, dated as of June 29, 2020 (the “Credit Agreement”), among Avangrid, Inc., a New York corporation (the “Borrower”), the Lenders (as defined herein), Mizuho Bank, Ltd., as administrative agent (the “Administrative Agent”) and the Bank of Nova Scotia, as syndication agent (the “Syndication Agent”). Terms defined in the Credit Agreement are used herein with the same meanings.
W I T N E S S E T H :
WHEREAS, the Credit Agreement provides in Section 1.05(c) thereof that a bank, financial institution or other entity, selected by the Borrower and with the consent of the Administrative Agent (which consents shall not be unreasonably withheld), although not originally a party thereto, may become a party to the Credit Agreement, by executing and delivering to the Borrower and the Administrative Agent a supplement to the Credit Agreement in substantially the form of this Supplement; and WHEREAS, the undersigned Additional Lender was not an original party to the Credit Agreement but now desires to become a party thereto;
NOW, THEREFORE, each of the parties hereto hereby agrees as follows:
The undersigned Additional Lender agrees to be bound by the provisions of the Credit Agreement and agrees that it shall, on the date this Supplement is accepted by the Borrower and acknowledged by the Administrative Agent, become a Lender for all purposes of the Credit Agreement to the same extent as if originally a party thereto, with a Commitment of $[●].
The undersigned Additional Lender (a) represents and warrants that it is legally authorized to enter into this Supplement; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, and has reviewed such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (c) agrees that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender.
The undersigned’s address for notices for the purposes of the Credit Agreement is as follows:
F-1

         
[                    ]
[                    ]
[                    ]
The Borrower hereby represents and warrants that no Default or Event of Default has occurred and is continuing on and as of the date hereof.
This Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.
This Supplement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same document.
[Remainder of Page Intentionally Left Blank]

F-2

         
IN WITNESS WHEREOF, each of the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.
[INSERT NAME OF ADDITIONAL LENDER],
as Additional Lender
By:  
Name:
Title:


F-3

         
Agreed and accepted this      day of             ,         .
AVANGRID, INC.
By:  
Name:
Title:

F-4

         
Acknowledged this      day of             ,        .
MIZUHO BANK, LTD.,
as Administrative Agent
By:  
Name:
Title:




F-5
EXHIBIT 10.3

AMENDMENT NO. 2
AMENDMENT NO. 2, dated as of June 29, 2020 (this “Amendment”), to the REVOLVING CREDIT AGREEMENT, dated as of June 29, 2018 (as amended, supplemented or modified from time to time, the “Credit Agreement”), among AVANGRID, INC., a New York corporation (“Avangrid”), NEW YORK STATE ELECTRIC & GAS CORPORATION, a New York corporation (“NYSEG”), ROCHESTER GAS AND ELECTRIC CORPORATION, a New York corporation (“RG&E”), CENTRAL MAINE POWER COMPANY, a Maine corporation (“CMP”), THE UNITED ILLUMINATING COMPANY, a specially chartered Connecticut corporation (“UI”), THE SOUTHERN CONNECTICUT GAS COMPANY, a Connecticut corporation (“SCG”), CONNECTICUT NATURAL GAS CORPORATION, a Connecticut corporation (“CNG”), THE BERKSHIRE GAS COMPANY, a Massachusetts gas company (“BGC”; together with Avangrid, NYSEG, RG&E, CMP, UI, SCG and CNG, the “Borrowers”; each, a “Borrower”), the several banks and other financial institutions or entities from time to time parties to this Agreement (the “Lenders”), JPMORGAN CHASE BANK, N.A., as administrative agent (the “Administrative Agent”), BANK OF AMERICA, N.A., as syndication agent (the “Syndication Agent”), MUFG BANK, LTD. and SANTANDER BANK, N.A., as co-documentation agents (the “Co-Documentation Agents”) and BANCO BILBAO VIZCAYA ARGENTARIA, S.A. NEW YORK BRANCH, as sustainability agent (the “Sustainability Agent”).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have made available revolving credit commitments to the Borrowers on the terms set forth in the Credit Agreement; and
WHEREAS, the parties hereto wish to amend the Credit Agreement, but only upon the terms and subject to the conditions set forth herein;

NOW, THEREFORE, the parties hereto hereby agree as follows:

SECTION 1. DEFINED TERMS.
        1.1 Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT.
        2.1 Section 1.06 of the Credit Agreement is hereby amended by deleting clause (iii) from such Section in its entirety and inserting the following in lieu thereof:
“(iii) the Sublimit of each Borrower shall neither exceed such Borrower’s Maximum Sublimit nor be less than such Borrower’s Minimum Sublimit.”








2
        2.2 The definition of “Maximum Sublimit” in Section 9.01 of the Credit Agreement is hereby amended by deleting the amount set forth opposite Avangrid’s name in the table in such definition and inserting “$1,500,000,000” in lieu thereof.
        2.3 Section 9.01 of the Credit Agreement is hereby amended by including the following definition in the appropriate alphabetical order:
Minimum Sublimit” shall mean, as to any Borrower (other than Avangrid), the amount set forth opposite such Borrower’s name in the table below.
Borrower Minimum Sublimit
NYSEG $ 400,000,000.00   
RGE $ 250,000,000.00   
CMP $ 100,000,000.00   
UI $ 150,000,000.00   
CNG $ 40,000,000.00   
SCG $ 40,000,000.00   
BGC $ 20,000,000.00   
SECTION 3. MISCELLANEOUS.
        3.1 Conditions to Effectiveness. This Amendment shall become effective on the date on which each of the Borrowers and the Required Lenders shall have executed and delivered to the Administrative Agent this Amendment.
        3.2 Representations and Warranties. Except, with respect to the last sentence of Section 4.03, Section 4.04, and Section 4.11, as disclosed in Avangrid’s Current Reports on Form 8-K, Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K filed with the SEC prior to the date hereof, as of the date hereof and after giving effect to the amendments contained herein, each of the Borrowers hereby confirms that all the representations and warranties set forth in Section 4 of the Credit Agreement are true and correct in all material respects; provided that each reference in such Section 4 to “this Agreement” shall be deemed to include this Amendment and the Credit Agreement, as amended by this Amendment.
        3.3 No Default. No Default or Event of Default shall have occurred and be continuing as of the date hereof after giving effect to this Amendment.
        3.4 Payment of Expenses. Each of the Borrowers agrees to pay or reimburse the Administrative Agent for all of its out-of-pocket costs and reasonable expenses incurred in connection with this Amendment, any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent.




3

        3.5 Continuing Effect; No Other Amendments. This Amendment shall not constitute an amendment or waiver of or consent to any provision of the Credit Agreement and the other Loan Documents not expressly referred to herein and shall not be construed as an amendment, waiver or consent to any action on the part of any of the Borrowers that would require an amendment, waiver or consent of the Administrative Agent or the Lenders except as expressly stated herein. Except as expressly amended hereby, the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with their terms. This Amendment shall constitute a Loan Document.
        3.6 No Novation. It is the intent of the parties hereto, and the parties hereto agree, that this Amendment shall not constitute a novation of the Credit Agreement, any other Loan Document or any of the rights, obligations or liabilities thereunder.
        3.7 Governing Law. This Amendment shall be construed in accordance with and governed by the laws of the State of New York.
        3.8 Counterparts. This Amendment may be executed in two or more counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute but one agreement. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission or in electronic (e.g. “.pdf” or “.tif”) format shall be effective as delivery of a manually executed counterpart of this Amendment. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Amendment shall be deemed to include Electronic Signatures (as defined below), deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be. “Electronic Signatures” means any electronic symbol or process attached to, or associated with, any contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.
[remainder of page intentionally left blank]





IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
AVANGRID, INC.
By: /s/Howard Coon     
Name: Howard Coon
Title: Vice President – Treasurer
By: /s/ Scott Tremble     
Name: Scott Tremble
Title: Senior Vice President – Controller
NEW YORK STATE ELECTRIC & GAS CORPORATION
By: /s/Howard Coon     
Name: Howard Coon
Title: Vice President – Treasurer
         Avangrid, Inc.
By: /s/ Scott Tremble     
Name: Scott Tremble
Title: Senior Vice President – Controller
         Avangrid, Inc.
ROCHESTER GAS AND ELECTRIC CORPORATION
By: /s/ Howard Coon     
Name: Howard Coon
Title: Vice President – Treasurer
         Avangrid, Inc.

By: /s/ Scott Tremble     
Name: Scott Tremble
Title: Senior Vice President – Controller
         Avangrid, Inc.


[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]



CENTRAL MAINE POWER COMPANY

By: /s/ Howard Coon     
Name: Howard Coon
Title: Vice President – Treasurer
         Avangrid, Inc.

By: /s/ Scott Tremble     
Name: Scott Tremble
Title: Senior Vice President – Controller
         Avangrid, Inc.


THE UNITED ILLUMINATING COMPANY

By: /s/ Howard Coon     
Name: Howard Coon
Title: Vice President – Treasurer
         Avangrid, Inc.

By: /s/ Scott Tremble     
Name: Scott Tremble
Title: Senior Vice President – Controller
         Avangrid, Inc.


THE SOUTHERN CONNECTICUT GAS COMPANY

By: /s/ Howard Coon     
Name: Howard Coon
Title: Vice President – Treasurer
         Avangrid, Inc.

By: /s/ Scott Tremble     
Name: Scott Tremble
Title: Senior Vice President – Controller
         Avangrid, Inc.
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


CONNECTICUT NATURAL GAS CORPORATION

By: /s/ Howard Coon     
Name: Howard Coon
Title: Vice President – Treasurer
         Avangrid, Inc.

By: /s/ Scott Tremble     
Name: Scott Tremble
Title: Senior Vice President – Controller
         Avangrid, Inc.


THE BERKSHIRE GAS COMPANY

By: /s/ Howard Coon     
Name: Howard Coon
Title: Vice President – Treasurer
         Avangrid, Inc.

By: /s/ Scott Tremble     
Name: Scott Tremble
Title: Senior Vice President – Controller
         Avangrid, Inc.

[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


JPMORGAN CHASE BANK, N.A., as Administrative Agent and as a Lender
By: /s/ Tasvir Hasan   
Name: Tasvir Hasan
Title: Executive Director
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]



BANCO BILBAO VIZCAYA ARGENTARIA, S.A. NEW YORK BRANCH, as a Lender
By: /s/ Brian Crowley    
Name: Brian Crowley
Title: Managing Director

By: /s/ Luis Ruigomez    
Name: Luis Ruigomez
Title: Executive Director
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


BANK OF AMERICA, N.A, as a Lender

By: /s/ Dee Dee Farkas 
Name: Dee Dee Farkas
Title: Director
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


BNP PARIBAS as a Lender
By : /s/ Denis O’Meara  
Name: Denis O’Meara
Title: Managing Director

By : /s/ Theodore Sheen  
Name: Theodore Sheen
Title: Director
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


CaixaBank S.A., as a Lender

By: /s/ Felipe Plaza / /s/ Oscar Sánchez  
Name: Felipe Plaza / Oscar Sánchez
Title: Structured Finance / Corporate Banking Unit
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]



Canadian Imperial Bank of Commerce, New York Branch, as a Lender

By: /s/ Anju Abraham   
Name: Anju Abraham
Title: Authorized Signatory
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


CITIBANK, N.A. as a Lender

By: /s/ Lei Zeng    
Name: Lei Zeng
Title: Vice President
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]



Commerzbank Aktiengesellschaft, Filiale Luxemburg, as a Lender


By: /s/ Dr. Kai-Roderich Bringewald   
Name: Dr. Kai-Roderich Bringewald
Title: Authorized Signatory

By: /s/ Silvia Gergs      
Name: Silvia Gergs  
Title: Authorized Signatory
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


Credit Agricole Corporate and Investment Bank, as a Lender

By: /s/ Rose Mary Perez   
Name: Rose Mary Perez
Title: Managing Director

By: /s/ Myra Luz Martinez   
Name: Myra Luz Martinez
Title: Vice President
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


DEUTSCHE BANK AG NEW YORK BRANCH, as a Lender
By: /s/ Ming K. Chu     
Name: Ming K. Chu  ming.k.chu@db.com
Title: Director +1-212-250-5451
By: /s/ Annie Chung     
Name: Annie Chung annie.chung@db.com
Title: Director +1-212-250-6375
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


HSBC Bank USA, NA, as a Lender


By: /s/ Marilyn Harebottle  
Name: Marilyn Harebottle
Title: Vice President #22444
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


MIZUHO BANK, LTD, as a Lender

By : /s/ Edward Sacks   
Name: Edward Sacks
Title: Authorized Signatory
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


Morgan Stanley Bank, N.A., as a Lender

By: /s/ Alysha Salinger   
Name: Alysha Salinger
Title: Authorized Signatory
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


MUFG Bank, Ltd., as a Lender

By: /s/ Jeff Fesenmaier   
Name: Jeff Fesenmaier
Title: Managing Director
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


NatWest Markets Plc, as a Lender

By: /s/ Sinead Collister   
Name: Sinead Collister
Title: Director
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


People’s United Bank, National Association, as a Lender

By: /s/ Darci Buchanan   
Name: Darci Buchanan
Title: Senior Vice President
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


Royal Bank of Canada, as a Lender


By : /s/ Frank Lambrinos  
Name: Frank Lambrinos
Title: Authorized Signatory
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


SANTANDER BANK, N.A., as a Lender
        
By: /s/ Pablo Urgoiti   
Name: Pablo Urgoiti
Title: Managing Director

By: /s/ Andres Barbosa   
Name: Andres Barbosa
Title: Managing Director
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


SUMITOMO MITSUI BANKING CORPORATION, as a Lender

By: /s/ Katie Lee   
Name: Katie Lee
Title: Director
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


Wells Fargo Bank, National Association, as a Lender

By: /s/ Patrick Engel  
Name: Patrick Engel
Title: Managing Director
[Signature Page to Avangrid Amendment No. 2 to Credit Agreement]


EXHIBIT 10.4
SECOND AMENDMENT TO TRANSMISSION SERVICE AGREEMENT AND CONSENT TO ASSIGNMENT

This SECOND AMENDMENT TO TRANSMISSION SERVICE AGREEMENT AND CONSENT TO ASSIGNMENT is executed as of the 25th day of June, 2020 (the “Second Amendment”) by and among NSTAR Electric Company d/b/a Eversource Energy, a Massachusetts corporation (“Distribution Company”), Central Maine Power Company, a Maine corporation (“Owner”), and NECEC Transmission LLC, a Delaware limited liability company (“Assignee”). Distribution Company, Owner and Assignee are referred to herein individually as a “Party” and collectively as the “Parties”.
RECITALS
        A. Owner and Distribution Company executed that certain Transmission Service Agreement dated as of June 13, 2018, as amended by that First Amendment to Transmission Service Agreement dated as of October 9, 2018 (the “Agreement”).
        B. Owner has informed Distribution Company that it intends to transfer to Assignee all of its assets and interests associated with the NECEC Transmission Line (as defined in the Agreement), including all of its rights, title, interest and obligations in, to and under the Agreement, the Additional TSAs, the HQUS TSA and the Additional HQUS TSA.
        C. Owner and Distribution Company desire to further amend the provisions of the Agreement as more fully set forth herein and to provide for Distribution Company to consent to the assignment of the Agreement to Assignee and to extend certain deadlines in the Agreement.
AGREEMENT
        NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the Parties do hereby agree as follows:
1. Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Agreement.
2. In the introductory paragraphs, the reference to “(“Owner”)” shall be changed to “(together with its successors and permitted assigns, “Owner”)”.
3. Article 1 “Definitions” shall be modified as follows:
(i)by adding the following definition of “Additional Credit Support”:
Additional Credit Support” means a guaranty of the Owner’s payment obligations under the Agreement issued by Avangrid, Inc. in a form reasonably satisfactory to the Distribution Company.
(ii)by adding the following definition of “Assignment Effective Date”:

1




Assignment Effective Date” means the date on which Central Maine Power Company assigns to NECEC Transmission LLC all of its rights, title, interest and obligations in, to and under this Agreement.
(iii)by restating the definition of “Construction Phase” as follows:
Construction Phase” means the period commencing upon the receipt of the FERC Authorization with respect to this Agreement or such other date to which the Parties shall mutually agree in writing, and ending on the day immediately preceding the Commercial Operation Date or upon the earlier termination of this Agreement pursuant to its terms (regardless of whether or not any such day is a Business Day).

and

(iv)by restating the definition of “Credit Support” as follows:
Credit Support” means a Letter of Credit issued by a Qualified Bank in a form reasonably satisfactory to the Distribution Company.
4.  In Section 3.3.1(a) “Failure to Obtain Regulatory Approval and FERC Authorizations”:
(i) clause (ii) is restated as follows:
(ii) the Regulatory Approval is denied or is not received by December 15, 2020 (such date, the “Regulatory Approval Termination Outside Date”),
and
(ii)  clause (iv) is restated as follows:
(iv) the FERC Authorization with respect to the Interconnection Agreement with ISO-NE is denied or is not received by November 1, 2020 (unless the Interconnection Agreement with ISO-NE has been executed following the pro forma Schedule 25 Elective Transmission Upgrade Interconnection Agreement of the ISO-NE Open Access Transmission Tariff) or the FERC Authorization with respect to the Transmission Operating Agreement is not received by September 1, 2022,
5. Section 8.1 “Transmission Service Payments” is modified by substituting “0.091665%” for “0.18333%”.
6. Section 14.2 “Owner Defaults” shall be modified by adding the following at the end thereof:
(j) At any time on or after five (5) Business Days after the Assignment Effective Date, the Additional Credit Support or any provision thereof shall cease to be in full force and effect (except as expressly provided therein) or Avangrid, Inc. or its successor or permitted

2




assign thereunder (i) shall be in default or breach of any of its obligations thereunder, (ii) shall have repudiated any provision thereof, or (iii) shall be subject to any Insolvency Event.
7. Section 16.1 “Owner Security” shall be restated as follows:
Section 16.1 Owner Security.
(a) In order to secure Owner’s obligations under this Agreement in the period beginning on the Effective Date and continuing through and including the date that all of Owner’s obligations under this Agreement are satisfied, Owner shall be required to post Credit Support (i) prior to the Commercial Operation Date, prior to the Assignment Effective Date in the amount of $5,793,350 and on and after the Assignment Effective Date in the amount of $11,108,350 and (ii) on and after the Commercial Operation Date, in the amount of $5,793,350 (“Owner Security”). $2,896,675 of the Owner Security shall be provided to Distribution Company within three (3) Business Days following the Execution Date; $2,896,675 of the Owner Security shall be provided to Distribution Company within fifteen (15) Business Days after receipt of the Regulatory Approval; and $5,315,000 of the Owner Security shall be provided to Distribution Company within three (3) Business Days after the Assignment Effective Date. So long as no Owner Default has occurred and is continuing, no later than the date that is fifteen (15) Business Days after the Commercial Operation Date, Distribution Company shall return to Owner the amount of the Owner Security that exceeds $5,793,350.
(b) If at any time during the Term of this Agreement, the amount of Credit Support is reduced as a result of Distribution Company’s draw upon such Credit Support, Owner shall replenish such Credit Support to the total amount required under this Section 16.1 within five (5) Business Days of that draw, provided that any replenishment obligation shall be subject to the limitations on total liability set forth in Section 14.7.
(c) The Additional Credit Support shall be provided to the Distribution Company within five (5) Business Days after the Assignment Effective Date.
(d) Any unused Credit Support or Additional Credit Support provided under this Agreement shall be returned to Owner only after any such Credit Support has been used to satisfy any outstanding obligations of Owner in existence at the time of the expiration or termination of this Agreement. Provided such obligations have been satisfied, such Credit Support or Additional Credit Support shall be returned to Owner within thirty (30) days after the expiration or earlier termination of this Agreement.
8. Assignee affirms the representations and warranties of Owner contained in Section 21.1 “Mutual Representations and Warranties” and Section 21.2 “Additional Representations and Warranties of Owner” as of the Assignment Effective Date and as of the Commercial Operation Date as though it were the Owner, with the exception that (i) Assignee is a Delaware limited liability company, and (ii) as of the Assignment Effective Date, Assignee will acquire, pursuant to certain agreements between Owner and Assignee, the real property rights necessary for construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (A) the Québec Line (other than real property rights to be held

3




by TransÉnergie) and (B) the Delivery Point (other than real property rights related to the AC Upgrades and the CCIS Capacity Upgrades) in full and final form with all options or contingencies having been exercised.
9. Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, Distribution Company consents to the assignment of the Agreement by Owner to Assignee, effective as of the Assignment Effective Date. Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that (a) an Owner Default shall not have occurred and be continuing and (b) Assignee expressly assumes as of the Assignment Effective Date all unsatisfied obligations and liabilities of Owner arising under the Agreement prior to, on or after the Assignment Effective Date, and without further action by Distribution Company, Owner shall be fully, finally and unconditionally released and forever discharged from any and all liabilities or obligations arising under the Agreement as of the Assignment Effective Date. Owner represents and warrants that, as of the date hereof and after due inquiry, it is not aware of (i) any Owner Default that has occurred and is continuing or (ii) any event or condition that has occurred and is continuing that, with the giving of notice or passage of time or both, could become an Owner Default.
10. As of the Assignment Effective Date, the address for notices, billings, requests, waivers, consents and other communications under the Agreement shall be changed to:
NECEC Transmission LLC
Attn: Thorn C. Dickinson
One City Center 5th Floor
Portland, Maine, 04101
Facsimile: (207) 629-1165
With a copy to:
NECEC Transmission LLC
Attn: Avangrid Legal Department
162 Canco Road
Portland, Maine 04103
Facsimile: (207) 629-1480
With a further copy to:
Pierce Atwood LLP
Attn: Jared des Rosiers
254 Commercial Street
Portland, Maine 04101
Facsimile: (207) 791-1350

11. The Agreement as modified by this Second Amendment shall continue in full force and effect and this Second Amendment shall constitute a part of the Agreement. All references in the

4




Agreement to itself shall be deemed to be references to the Agreement as amended hereby and the Agreement as amended hereby shall be referred to as the “Agreement.”
12. Distribution Company acknowledges receipt of a copy of the amendment to the HQUS TSA dated as of the date hereof and waives the requirement under Section 5.5.2 of the Agreement that Owner provide Distribution Company a copy of that proposed amendment to the HQUS TSA not fewer than ten (10) Business Days prior to the execution thereof.
13. The Parties hereby ratify and confirm all of the provisions of the Agreement, as amended or modified by this Second Amendment, and agree and acknowledge that the same, as so amended, remains in full force and effect.
14. This Second Amendment may be signed in one or more counterparts, which, together, shall constitute a single document. Facsimile signatures hereon or on any notice or other instrument delivered under this Second Amendment shall have the same force and effect as original signatures.

        [Remainder of Page Intentionally Left Blank]

5




IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Second Amendment on their behalf as of the date first above written.


NSTAR ELECTRIC COMPANY D/B/A EVERSOURCE ENERGY
            

/s/ James G. Daley     
Name: James G. Daley
Title: Vice President, Energy Supply


CENTRAL MAINE POWER COMPANY     

/s/ Douglas A. Herling    
Name: Douglas A. Herling
Title: President and Chief Executive Officer


/s/ Eric N. Stinneford     
Name: Eric N. Stinneford
Title: Vice President, Controller and Treasurer


NECEC TRANSMISSION LLC     

/s/ Thorn Dickinson     
Name: Thorn Dickinson
Title: CEO & President

6


EXHIBIT 10.5
SECOND AMENDMENT TO TRANSMISSION SERVICE AGREEMENT AND CONSENT TO ASSIGNMENT

This SECOND AMENDMENT TO TRANSMISSION SERVICE AGREEMENT AND CONSENT TO ASSIGNMENT is executed as of the 25th day of June, 2020 (the “Second Amendment”) by and among Massachusetts Electric Company and Nantucket Electric Company d/b/a National Grid, a Massachusetts corporation (“Distribution Company”), Central Maine Power Company, a Maine corporation (“Owner”), and NECEC Transmission LLC, a Delaware limited liability company (“Assignee”). Distribution Company, Owner and Assignee are referred to herein individually as a “Party” and collectively as the “Parties”.
RECITALS
        A. Owner and Distribution Company executed that certain Transmission Service Agreement dated as of June 13, 2018, as amended by that First Amendment to Transmission Service Agreement dated as of October 9, 2018 (the “Agreement”).
        B. Owner has informed Distribution Company that it intends to transfer to Assignee all of its assets and interests associated with the NECEC Transmission Line (as defined in the Agreement), including all of its rights, title, interest and obligations in, to and under the Agreement, the Additional TSAs, the HQUS TSA and the Additional HQUS TSA.
        C. Owner and Distribution Company desire to further amend the provisions of the Agreement as more fully set forth herein and to provide for Distribution Company to consent to the assignment of the Agreement to Assignee and to extend certain deadlines in the Agreement.
AGREEMENT
        NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the Parties do hereby agree as follows:
1. Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Agreement.
2. In the introductory paragraphs, the reference to “(“Owner”)” shall be changed to “(together with its successors and permitted assigns, “Owner”)”.
3. Article 1 “Definitions” shall be modified as follows:
(i)by adding the following definition of “Additional Credit Support”:
Additional Credit Support” means a guaranty of the Owner’s payment obligations under the Agreement issued by Avangrid, Inc. in a form reasonably satisfactory to the Distribution Company.
(ii)by adding the following definition of “Assignment Effective Date”:

1




Assignment Effective Date” means the date on which Central Maine Power Company assigns to NECEC Transmission LLC all of its rights, title, interest and obligations in, to and under this Agreement.
and
(iii) by restating the definition of “Construction Phase” as follows:
Construction Phase” means the period commencing upon the receipt of the FERC Authorization with respect to this Agreement or such other date to which the Parties shall mutually agree in writing, and ending on the day immediately preceding the Commercial Operation Date or upon the earlier termination of this Agreement pursuant to its terms (regardless of whether or not any such day is a Business Day).

4.  In Section 3.3.1(a) “Failure to Obtain Regulatory Approval and FERC Authorizations”:
(i) clause (ii) is restated as follows:
(ii) the Regulatory Approval is denied or is not received by December 15, 2020 (such date, the “Regulatory Approval Termination Outside Date”),
and
(ii)  clause (iv) is restated as follows:
(iv) the FERC Authorization with respect to the Interconnection Agreement with ISO-NE is denied or is not received by November 1, 2020 (unless the Interconnection Agreement with ISO-NE has been executed following the pro forma Schedule 25 Elective Transmission Upgrade Interconnection Agreement of the ISO-NE Open Access Transmission Tariff) or the FERC Authorization with respect to the Transmission Operating Agreement is not received by September 1, 2022,
5. Section 8.1 “Transmission Service Payments” is modified by substituting “0.091665%” for “0.18333%”.
6. Section 14.2 “Owner Defaults” shall be modified by adding the following at the end thereof:
(j) At any time on or after five (5) Business Days after the Assignment Effective Date, the Additional Credit Support or any provision thereof shall cease to be in full force and effect (except as expressly provided therein) or Avangrid, Inc. or its successor or permitted assign thereunder (i) shall be in default or breach of any of its obligations thereunder, (ii) shall have repudiated any provision thereof, or (iii) shall be subject to any Insolvency Event.
7. Section 16.1 “Owner Security” shall be restated as follows:
Section 16.1 Owner Security.

2




(a) In order to secure Owner’s obligations under this Agreement in the period beginning on the Effective Date and continuing through and including the date that all of Owner’s obligations under this Agreement are satisfied, Owner shall be required to post Credit Support (i) prior to the Commercial Operation Date, prior to the Assignment Effective Date in the amount of $4,983,480 and on and after the Assignment Effective Date in the amount of $9,555,480 and (ii) on and after the Commercial Operation Date, in the amount of $4,983,480 (“Owner Security”). $2,491,740 of the Owner Security shall be provided to Distribution Company within three (3) Business Days following the Execution Date; $2,491,740 of the Owner Security shall be provided to Distribution Company within fifteen (15) Business Days after receipt of the Regulatory Approval; and $4,572,000 of the Owner Security shall be provided to Distribution Company within three (3) Business Days after the Assignment Effective Date. So long as no Owner Default has occurred and is continuing, no later than the date that is fifteen (15) Business Days after the Commercial Operation Date, Distribution Company shall return to Owner the amount of the Owner Security that exceeds $4,983,480.
(b) If at any time during the Term of this Agreement, the amount of Credit Support is reduced as a result of Distribution Company’s draw upon such Credit Support, Owner shall replenish such Credit Support to the total amount required under this Section 16.1 within five (5) Business Days of that draw, provided that any replenishment obligation shall be subject to the limitations on total liability set forth in Section 14.7.
(c) The Additional Credit Support shall be provided to the Distribution Company within five (5) Business Days after the Assignment Effective Date.
(d) Any Cash provided by Owner as Credit Support under this Agreement shall be held in an account selected by Distribution Company in its reasonable discretion. Interest shall accrue on that Cash deposit at the daily Federal Funds Rate and shall be remitted to Owner upon written request to Distribution Company, with such request not more often than on a quarterly basis, and Distribution Company shall remit such accrued interest to the Owner within a reasonable time following receipt of such request. Owner agrees to comply with the commercially reasonable requirements of Distribution Company in connection with the receipt and retention of any Cash provided as Credit Support under this Agreement.
(e) Any unused Credit Support or Additional Credit Support provided under this Agreement shall be returned to Owner only after any such Credit Support has been used to satisfy any outstanding obligations of Owner in existence at the time of the expiration or termination of this Agreement. Provided such obligations have been satisfied, such Credit Support or Additional Credit Support shall be returned to Owner within thirty (30) days after the expiration or earlier termination of this Agreement.
8. Assignee affirms the representations and warranties of Owner contained in Section 21.1 “Mutual Representations and Warranties” and Section 21.2 “Additional Representations and Warranties of Owner” as of the Assignment Effective Date and as of the Commercial Operation Date as though it were the Owner, with the exception that (i) Assignee is a Delaware limited liability company, and (ii) as of the Assignment Effective Date, Assignee will acquire, pursuant to certain agreements between Owner and Assignee, the real property rights necessary for

3




construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (A) the Québec Line (other than real property rights to be held by TransÉnergie) and (B) the Delivery Point (other than real property rights related to the AC Upgrades and the CCIS Capacity Upgrades) in full and final form with all options or contingencies having been exercised.
9. Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, Distribution Company consents to the assignment of the Agreement by Owner to Assignee, effective as of the Assignment Effective Date. Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that (a) an Owner Default shall not have occurred and be continuing and (b) Assignee expressly assumes as of the Assignment Effective Date all unsatisfied obligations and liabilities of Owner arising under the Agreement prior to, on or after the Assignment Effective Date, and without further action by Distribution Company, Owner shall be fully, finally and unconditionally released and forever discharged from any and all liabilities or obligations arising under the Agreement as of the Assignment Effective Date. Owner represents and warrants that, as of the date hereof and after due inquiry, it is not aware of (i) any Owner Default that has occurred and is continuing or (ii) any event or condition that has occurred and is continuing that, with the giving of notice or passage of time or both, could become an Owner Default.
10. As of the Assignment Effective Date, the address for notices, billings, requests, waivers, consents and other communications under the Agreement shall be changed to:
NECEC Transmission LLC
Attn: Thorn C. Dickinson
One City Center 5th Floor
Portland, Maine, 04101
Facsimile: (207) 629-1165
With a copy to:
NECEC Transmission LLC
Attn: Avangrid Legal Department
162 Canco Road
Portland, Maine 04103
Facsimile: (207) 629-1480
With a further copy to:
Pierce Atwood LLP
Attn: Jared des Rosiers
254 Commercial Street
Portland, Maine 04101
Facsimile: (207) 791-1350


4




11. The Agreement as modified by this Second Amendment shall continue in full force and effect and this Second Amendment shall constitute a part of the Agreement. All references in the Agreement to itself shall be deemed to be references to the Agreement as amended hereby and the Agreement as amended hereby shall be referred to as the “Agreement.”
12. Distribution Company acknowledges receipt of a copy of the amendment to the HQUS TSA dated as of the date hereof and waives the requirement under Section 5.5.2 of the Agreement that Owner provide Distribution Company a copy of that proposed amendment to the HQUS TSA not fewer than ten (10) Business Days prior to the execution thereof.
13. The Parties hereby ratify and confirm all of the provisions of the Agreement, as amended or modified by this Second Amendment, and agree and acknowledge that the same, as so amended, remains in full force and effect.
14. This Second Amendment may be signed in one or more counterparts, which, together, shall constitute a single document. Facsimile signatures hereon or on any notice or other instrument delivered under this Second Amendment shall have the same force and effect as original signatures.

        [Remainder of Page Intentionally Left Blank]

5




IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Second Amendment on their behalf as of the date first above written.


MASSACHUSETTS ELECTRIC COMPANY AND NANTUCKET ELECTRIC COMPANY D/B/A NATIONAL GRID
            

/s/ Stephen McCauley     
Name: Stephen McCauley
Title: Authorized Signatory


CENTRAL MAINE POWER COMPANY     

/s/ Douglas A. Herling     
Name: Douglas A. Herling
Title: President and Chief Executive Officer


/s/ Eric N. Stinneford     
Name: Eric N. Stinneford
Title: Vice President, Controller and Treasurer


NECEC TRANSMISSION LLC     

/s/ Thorn Dickinson     
Name: Thorn Dickinson
Title: CEO & President
          



6


EXHIBIT 10.6
SECOND AMENDMENT TO TRANSMISSION SERVICE AGREEMENT AND CONSENT TO ASSIGNMENT

This SECOND AMENDMENT TO TRANSMISSION SERVICE AGREEMENT AND CONSENT TO ASSIGNMENT is executed as of the 25th day of June, 2020 (the “Second Amendment”) by and among Fitchburg Gas and Electric Light Company d/b/a Unitil, a Massachusetts corporation (“Distribution Company”), Central Maine Power Company, a Maine corporation (“Owner”), and NECEC Transmission LLC, a Delaware limited liability company (“Assignee”). Distribution Company, Owner and Assignee are referred to herein individually as a “Party” and collectively as the “Parties”.
RECITALS
        A. Owner and Distribution Company executed that certain Transmission Service Agreement dated as of June 13, 2018, as amended by that First Amendment to Transmission Service Agreement dated as of October 9, 2018 (the “Agreement”).
        B. Owner has informed Distribution Company that it intends to transfer to Assignee all of its assets and interests associated with the NECEC Transmission Line (as defined in the Agreement), including all of its rights, title, interest and obligations in, to and under the Agreement, the Additional TSAs, the HQUS TSA and the Additional HQUS TSA.
        C. Owner and Distribution Company desire to further amend the provisions of the Agreement as more fully set forth herein and to provide for Distribution Company to consent to the assignment of the Agreement to Assignee and to extend certain deadlines in the Agreement.
AGREEMENT
        NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the Parties do hereby agree as follows:
1. Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Agreement.
2. In the introductory paragraphs, the reference to “(“Owner”)” shall be changed to “(together with its successors and permitted assigns, “Owner”)”.
3. Article 1 “Definitions” shall be modified as follows:
(i)by adding the following definition of “Additional Credit Support”:
Additional Credit Support” means a guaranty of the Owner’s payment obligations under the Agreement issued by Avangrid, Inc. in a form reasonably satisfactory to the Distribution Company.
(ii)by adding the following definition of “Assignment Effective Date”:

1




Assignment Effective Date” means the date on which Central Maine Power Company assigns to NECEC Transmission LLC all of its rights, title, interest and obligations in, to and under this Agreement.
(iii) by restating the definition of “Construction Phase” as follows:
Construction Phase” means the period commencing upon the receipt of the FERC Authorization with respect to this Agreement or such other date to which the Parties shall mutually agree in writing, and ending on the day immediately preceding the Commercial Operation Date or upon the earlier termination of this Agreement pursuant to its terms (regardless of whether or not any such day is a Business Day).

and

(iv)by restating the definition of “Credit Support” as follows:
        “Credit Support” means a Letter of Credit issued by a Qualified Bank in a form reasonably satisfactory to the Distribution Company.
4.  In Section 3.3.1(a) “Failure to Obtain Regulatory Approval and FERC Authorizations”:
(i) clause (ii) is restated as follows:
(ii) the Regulatory Approval is denied or is not received by December 15, 2020 (such date, the “Regulatory Approval Termination Outside Date”),
and
(ii)  clause (iv) is restated as follows:
(iv) the FERC Authorization with respect to the Interconnection Agreement with ISO-NE is denied or is not received by November 1, 2020 (unless the Interconnection Agreement with ISO-NE has been executed following the pro forma Schedule 25 Elective Transmission Upgrade Interconnection Agreement of the ISO-NE Open Access Transmission Tariff) or the FERC Authorization with respect to the Transmission Operating Agreement is not received by September 1, 2022,
5. Section 8.1 “Transmission Service Payments” is modified by substituting “0.091665%” for “0.18333%”.
6. Section 14.2 “Owner Defaults” shall be modified by adding the following at the end thereof:
(j) At any time on or after five (5) Business Days after the Assignment Effective Date, the Additional Credit Support or any provision thereof shall cease to be in full force and effect (except as expressly provided therein) or Avangrid, Inc. or its successor or permitted

2




assign thereunder (i) shall be in default or breach of any of its obligations thereunder, (ii) shall have repudiated any provision thereof, or (iii) shall be subject to any Insolvency Event.
7. Section 16.1 “Owner Security” shall be restated as follows:
Section 16.1 Owner Security.
(a) In order to secure Owner’s obligations under this Agreement in the period beginning on the Effective Date and continuing through and including the date that all of Owner’s obligations under this Agreement are satisfied, Owner shall be required to post Credit Support (i) prior to the Commercial Operation Date, prior to the Assignment Effective Date in the amount of $123,170 and on and after the Assignment Effective Date in the amount of $236,170 and (ii) on and after the Commercial Operation Date, in the amount of $123,170 (“Owner Security”). $61,585 of the Owner Security shall be provided to Distribution Company within three (3) Business Days following the Execution Date; $61,585 of the Owner Security shall be provided to Distribution Company within fifteen (15) Business Days after receipt of the Regulatory Approval; and $113,000 of the Owner Security shall be provided to Distribution Company within three (3) Business Days after the Assignment Effective Date. So long as no Owner Default has occurred and is continuing, no later than the date that is fifteen (15) Business Days after the Commercial Operation Date, Distribution Company shall return to Owner the amount of the Owner Security that exceeds $123,170.
(b) If at any time during the Term of this Agreement, the amount of Credit Support is reduced as a result of Distribution Company’s draw upon such Credit Support, Owner shall replenish such Credit Support to the total amount required under this Section 16.1 within five (5) Business Days of that draw, provided that any replenishment obligation shall be subject to the limitations on total liability set forth in Section 14.7.
(c) The Additional Credit Support shall be provided to the Distribution Company within five (5) Business Days after the Assignment Effective Date.
(d) Any unused Credit Support or Additional Credit Support provided under this Agreement shall be returned to Owner only after any such Credit Support has been used to satisfy any outstanding obligations of Owner in existence at the time of the expiration or termination of this Agreement. Provided such obligations have been satisfied, such Credit Support or Additional Credit Support shall be returned to Owner within thirty (30) days after the expiration or earlier termination of this Agreement.
8. Assignee affirms the representations and warranties of Owner contained in Section 21.1 “Mutual Representations and Warranties” and Section 21.2 “Additional Representations and Warranties of Owner” as of the Assignment Effective Date and as of the Commercial Operation Date as though it were the Owner, with the exception that (i) Assignee is a Delaware limited liability company, and (ii) as of the Assignment Effective Date, Assignee will acquire, pursuant to certain agreements between Owner and Assignee, the real property rights necessary for construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (A) the Québec Line (other than real property rights to be held

3




by TransÉnergie) and (B) the Delivery Point (other than real property rights related to the AC Upgrades and the CCIS Capacity Upgrades) in full and final form with all options or contingencies having been exercised.
9. Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, Distribution Company consents to the assignment of the Agreement by Owner to Assignee, effective as of the Assignment Effective Date. Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that (a) an Owner Default shall not have occurred and be continuing and (b) Assignee expressly assumes as of the Assignment Effective Date all unsatisfied obligations and liabilities of Owner arising under the Agreement prior to, on or after the Assignment Effective Date, and without further action by Distribution Company, Owner shall be fully, finally and unconditionally released and forever discharged from any and all liabilities or obligations arising under the Agreement as of the Assignment Effective Date. Owner represents and warrants that, as of the date hereof and after due inquiry, it is not aware of (i) any Owner Default that has occurred and is continuing or (ii) any event or condition that has occurred and is continuing that, with the giving of notice or passage of time or both, could become an Owner Default.
10. As of the Assignment Effective Date, the address for notices, billings, requests, waivers, consents and other communications under the Agreement shall be changed to:
NECEC Transmission LLC
Attn: Thorn C. Dickinson
One City Center 5th Floor
Portland, Maine, 04101
Facsimile: (207) 629-1165

With a copy to:
NECEC Transmission LLC
Attn: Avangrid Legal Department
162 Canco Road
Portland, Maine 04103
Facsimile: (207) 629-1480

With a further copy to:
Pierce Atwood LLP
Attn: Jared des Rosiers
254 Commercial Street
Portland, Maine 04101
Facsimile: (207) 791-1350


4




11. The Agreement as modified by this Second Amendment shall continue in full force and effect and this Second Amendment shall constitute a part of the Agreement. All references in the Agreement to itself shall be deemed to be references to the Agreement as amended hereby and the Agreement as amended hereby shall be referred to as the “Agreement.”
12. Distribution Company acknowledges receipt of a copy of the amendment to the HQUS TSA dated as of the date hereof and waives the requirement under Section 5.5.2 of the Agreement that Owner provide Distribution Company a copy of that proposed amendment to the HQUS TSA not fewer than ten (10) Business Days prior to the execution thereof.
13. The Parties hereby ratify and confirm all of the provisions of the Agreement, as amended or modified by this Second Amendment, and agree and acknowledge that the same, as so amended, remains in full force and effect.
14. This Second Amendment may be signed in one or more counterparts, which, together, shall constitute a single document. Facsimile signatures hereon or on any notice or other instrument delivered under this Second Amendment shall have the same force and effect as original signatures.

[Remainder of Page Intentionally Left Blank]

5




IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Second Amendment on their behalf as of the date first above written.


FITCHBURG GAS AND ELECTRIC LIGHT COMPANY D/B/A UNITIL 
            

/s/ Robert S. Forino     
Name: Robert S. Forino
Title: Vice President


CENTRAL MAINE POWER COMPANY     

/s/ Douglas A. Herling    
Name: Douglas A. Herling
Title: President and Chief Executive Officer  
           

/s/ Eric N. Stinneford     
Name: Eric N. Stinneford
Title: Vice President, Controller and Treasurer


NECEC TRANSMISSION LLC     

/s/ Thorn Dickinson     
Name: Thorn Dickinson
Title: CEO & President

6


EXHIBIT 10.7
SECOND AMENDMENT TO TRANSMISSION SERVICE AGREEMENT AND CONSENT TO ASSIGNMENT

        This Second Amendment to the Transmission Service Agreement dated as of June 13, 2018, between Central Maine Power Company (“Owner”) and H.Q. Energy Services (U.S.) Inc. (“HQUS”), as amended, and Consent to Assignment executed the 25th day of June, 2020 (this “Second Amendment”) by and among Owner, a Maine corporation, HQUS, a Delaware corporation, and NECEC Transmission LLC, a Delaware limited liability company (“Assignee”). HQUS, Owner and Assignee are referred to herein individually as a “Party” and collectively as the “Parties.

RECITALS

        A. Owner and HQUS executed that certain Transmission Service Agreement (Eversource Energy – 579.335 MW) dated as of June 13, 2018, as amended (the “Agreement”).

        B. Owner has informed HQUS that it intends to transfer to Assignee all of its assets and interests associated with the NECEC Transmission Line (as defined in the Agreement), including all of its rights, title, interest, liabilities and obligations in, to and under the Agreement and under each of the Purchaser TSAs, the Distribution Company TSAs and the 110 MW TSA (each as defined in the Agreement).

        C. Owner and HQUS desire to further amend the provisions of the Agreement as more fully set forth herein and to provide for HQUS to consent to the assignment of the Agreement to Assignee and to extend certain deadlines in the Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the Parties do hereby agree as follows:

1.Capitalized terms not defined herein shall have the meanings assigned to them in the Agreement.
2.In the introductory paragraphs, the reference to “(“Owner”)” shall be changed to “(together with its successors and permitted assigns, “Owner”)”.
3.Article I “Definitions” of the Agreement shall be modified as follows:
(i)by adding the following definition of “Assignment Effective Date”:
Assignment Effective Date” means the date on which Central Maine Power Company assigns to NECEC Transmission LLC all of its rights, title, interest, liabilities and obligations in, to and under this Agreement.
(ii)by restating the definition of “Construction Phase” as follows:

1



Construction Phase” means the period commencing upon the receipt of the FERC Authorization with respect to this Agreement or such other date to which the Parties shall mutually agree in writing, and ending on the day immediately preceding the Commercial Operation Date or upon the earlier termination of this Agreement pursuant to its terms (regardless of whether or not any such day is a Business Day).
        and
(iii)by restating the definition of “Credit Rating Requirements” as follows:
Credit Rating Requirements” means with respect to a Party (or any guarantor of its obligations hereunder, as the case may be) or other entity, on any date of determination, the respective ratings then assigned to such Party’s (or such guarantor’s, as the case may be) or other entity’s unsecured, senior long-term debt or deposit obligations (not supported by third-party credit enhancement except that the standing guaranty of the province of Québec in favor of Purchaser Guarantor shall not be considered to constitute “third party credit enhancement” for purposes of this definition) of at least “BBB-” by S&P or “Baa3” by Moody’s.”
4.In Section 3.3.1(a) “Failure to Obtain Regulatory Approval and FERC Authorizations”:

(i)clause (ii) is restated as follows:
(ii)the Regulatory Approval is denied or is not received by December 15, 2020 (such date, the “Regulatory Approval Termination Outside Date”),
        and
(iii)clause (iv) is restated as follows:
(iv)the FERC Authorization with respect to the Interconnection Agreement with ISO-NE is denied or is not received by November 1, 2020 (unless the Interconnection Agreement with ISO-NE has been executed following the pro forma Schedule 25 Elective Transmission Upgrade Interconnection Agreement of the ISO-NE Open Access Transmission Tariff) or the FERC Authorization with respect to the Transmission Operating Agreement is not received by September 1, 2022,

5.Article XVI “Financial Assurances” of the Agreement shall be modified as follows:
(i) by restating Section 16.2 of the Agreement to read in its entirety as follows:

16.2 No later than the Assignment Effective Date, Owner shall cause Avangrid, Inc., a New York corporation, to deliver to Purchaser a guaranty by Avangrid, Inc. of Owner’s obligations under this Agreement, the Purchaser TSAs and the 110 MW TSA in form and substance reasonably satisfactory to Purchaser in an aggregate maximum amount equal to

2



the $250,000,000, which guaranty may be terminated by the guarantor in accordance with its terms in the event that Owner meets the Credit Rating Requirements.

(ii) by restating Section 16.3 of the Agreement to read in its entirety as follows:

(a) In the event Avangrid, Inc., as guarantor of the guaranty provided under Section 16.2, or any substitute guarantor thereof, fails to meet the Credit Rating Requirements while such guaranty remains in full force and effect, and Owner also fails to meet the Credit Rating Requirements, Owner shall promptly furnish to Purchaser, in an amount equal to the Proportionate Share multiplied by Two Hundred Fifty Million Dollars ($250,000,000), Additional Credit Support. In the event such guaranty is terminated or otherwise fails to remain in full force and effect and Owner fails to meet the Credit Rating Requirements, Owner shall promptly furnish to Purchaser, in an amount equal to the Proportionate Share multiplied by Two Hundred Fifty Million Dollars ($250,000,000), Additional Credit Support.
(b) In the event Purchaser Guarantor fails to meet the Credit Rating Requirements, Purchaser shall promptly furnish to Owner, in an amount equal to the Proportionate Share multiplied by the Maximum Amount provided under, and as defined in, the Hydro-Québec Guaranty, as such Maximum Amount may vary from time to time, Additional Credit Support;
For the purposes of this Section 16.3, the numerator in “Proportionate Share” shall be the PPA Contract Maximum Amount and the denominator in “Proportionate Share” shall be the capacity of the NECEC Transmission Line established by the Commissioning of the NECEC Transmission Line.
6.Assignee affirms the representations and warranties of Owner contained in Section 21.1 “Mutual Representations and Warranties” and Section 21.3 “Additional Representations and Warranties of Owner” of the Agreement as of the Assignment Effective Date and as of the Commercial Operation Date as though it were Owner, with the exception that (i) Assignee is a Delaware limited liability company, and (ii) as of the Assignment Effective Date, Assignee will acquire, pursuant to certain agreements between Owner and Assignee, the real property rights necessary for construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (A) the Québec Line (other than real property rights to be held by TransÉnergie) and (B) the Delivery Point (other than real property rights related to the AC Upgrades and the CCIS Capacity Upgrades).
7.As of the Assignment Effective Date, each of Owner and Assignee represents and warrants to HQUS that (I) Owner has assigned, transferred, conveyed and delivered to Assignee or has granted to Assignee such rights, title and interests that are necessary or reasonably required in and to the assets of Owner that as of Assignment Effective Date comprise the NECEC Transmission Line and over interests and assets owned by Owner that are necessary or reasonably required for the construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (1) the Québec Line and (2) the Delivery Point (other than interests and assets related to the AC Upgrades and the CCIS Capacity Upgrades) and (II) an Owner Default shall not have occurred and be continuing.

3



8.Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that the representations and warranties set forth in Section 7 of this Second Amendment are true and correct as of the Assignment Effective Date, HQUS consents to the assignment of the Agreement by Owner to Assignee, effective as of the Assignment Effective Date. Assignee acknowledges and agrees that, effective as of the Assignment Effective Date, Assignee shall have all of the rights, title, interest, liabilities and obligations of Owner under the Agreement, including for the avoidance of doubt, all such obligations regardless of whether they arose or relate to events occurring or circumstances existing prior to the Assignment Effective Date. Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that the representations and warranties set forth in Section 7 of this Second Amendment are true and correct as of the Assignment Effective Date and without further action by HQUS, Owner shall be fully, finally and unconditionally released and forever discharged from any and all liabilities or obligations arising under the Agreement.
9.As of the Assignment Effective Date, the address for notices, billings, requests, waivers, consents and other communications under the Agreement shall be changed to:
NECEC Transmission LLC
Attn: Thorn C. Dickinson
One City Center 5th Floor, Portland, Maine, 04101
With a copy to:
NECEC Transmission LLC
Attn: Avangrid Legal Department
162 Canco Road, Portland, Maine 04103
With a further copy to:
Pierce Atwood LLP
Attn: Jared des Rosiers
254 Commercial Street, Portland, ME 04101

10.HQUS acknowledges receipt of a copy of the amendment to the Distribution Company TSA dated as of the date hereof and consents to the increase of the Owner Security (as defined in the Distribution Company TSA) provided therein.
11.The Agreement as modified by this Second Amendment shall continue in full force and effect, and this Second Amendment shall constitute a part of the Agreement. All references in the Agreement to itself shall be deemed to be references to the Agreement as amended hereby, and the Agreement as amended hereby shall be referred to as the “Agreement.”
12.The Parties hereby ratify and confirm all of the provisions of the Agreement, as amended or modified by this Second Amendment, and agree and acknowledge that the same, as so amended, remains in full force and effect.

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13.This Second Amendment may be executed in counterparts, each of which be deemed to be an original, but all of which together shall constitute but one and the same instrument.
14.This Second Amendment shall not be subject to amendment or other modification, absent the written agreement of Owner, HQUS and Assignee.
15.This Second Amendment and each of its provisions shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts.
16.In the event that any part of this Second Amendment is held to be illegal, invalid or unenforceable to any extent, the legality, validity and enforceability of the remainder of this Second Amendment shall not be affected thereby, and shall remain in full force and effect and shall be enforced to the greatest extent permitted by Applicable Law and (y) with respect to any provision found to be illegal, invalid or unenforceable, Owner, HQUS and Assignee shall endeavor to replace such invalid, illegal or unenforceable provision with the valid, legal and enforceable provision that achieves, as nearly as practicable, the commercial intent of this Second Amendment (as it may be amended from time to time).
17.This Second Amendment shall be binding upon and inure to the benefit of each of Owner, HQUS and Assignee and their permitted successors, legal representatives and assigns under the Agreement.

[Signature page follows]



5




        IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Second Amendment on their behalf as of the date first above written.
        

H.Q. ENERGY SERVICES (U.S.) INC.


By: /s/ Martin Imbleau 
        Name: Martin Imbleau 
        Title: President 


CENTRAL MAINE POWER COMPANY


By: /s/ Douglas A. Herling 
Name: Douglas A. Herling 
Title: President and Chief Executive Officer


By: /s/ Eric N. Stinneford 
Name: Eric N. Stinneford 
Title: Vice President, Controller and Treasurer


NECEC TRANSMISSION LLC


By: /s/ Thorn Dickinson 
Name: Thorn Dickinson 
Title: CEO & President 








[Signature Page to Second Amendment to the HQUS TSA (Eversource)]


6



EXHIBIT 10.8
SECOND AMENDMENT TO TRANSMISSION SERVICE AGREEMENT AND CONSENT TO ASSIGNMENT

        This Second Amendment to the Transmission Service Agreement dated as of June 13, 2018, between Central Maine Power Company (“Owner”) and H.Q. Energy Services (U.S.) Inc. (“HQUS”), as amended, and Consent to Assignment executed the 25th day of June, 2020 (this “Second Amendment”) by and among Owner, a Maine corporation, HQUS, a Delaware corporation, and NECEC Transmission LLC, a Delaware limited liability company (“Assignee”). HQUS, Owner and Assignee are referred to herein individually as a “Party” and collectively as the “Parties.

RECITALS

        A. Owner and HQUS executed that certain Transmission Service Agreement (National Grid – 498.348 MW) dated as of June 13, 2018, as amended (the “Agreement”).

        B. Owner has informed HQUS that it intends to transfer to Assignee all of its assets and interests associated with the NECEC Transmission Line (as defined in the Agreement), including all of its rights, title, interest, liabilities and obligations in, to and under the Agreement and under each of the Purchaser TSAs, the Distribution Company TSAs and the 110 MW TSA (each as defined in the Agreement).

        C. Owner and HQUS desire to further amend the provisions of the Agreement as more fully set forth herein and to provide for HQUS to consent to the assignment of the Agreement to Assignee and to extend certain deadlines in the Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the Parties do hereby agree as follows:

1.Capitalized terms not defined herein shall have the meanings assigned to them in the Agreement.
2.In the introductory paragraphs, the reference to “(“Owner”)” shall be changed to “(together with its successors and permitted assigns, “Owner”)”.
3.Article I “Definitions” of the Agreement shall be modified as follows:
(i)by adding the following definition of “Assignment Effective Date”:
Assignment Effective Date” means the date on which Central Maine Power Company assigns to NECEC Transmission LLC all of its rights, title, interest, liabilities and obligations in, to and under this Agreement.
(ii)by restating the definition of “Construction Phase” as follows:

1



Construction Phase” means the period commencing upon the receipt of the FERC Authorization with respect to this Agreement or such other date to which the Parties shall mutually agree in writing, and ending on the day immediately preceding the Commercial Operation Date or upon the earlier termination of this Agreement pursuant to its terms (regardless of whether or not any such day is a Business Day).
        and
(iii)by restating the definition of “Credit Rating Requirements” as follows:
Credit Rating Requirements” means with respect to a Party (or any guarantor of its obligations hereunder, as the case may be) or other entity, on any date of determination, the respective ratings then assigned to such Party’s (or such guarantor’s, as the case may be) or other entity’s unsecured, senior long-term debt or deposit obligations (not supported by third-party credit enhancement except that the standing guaranty of the province of Québec in favor of Purchaser Guarantor shall not be considered to constitute “third party credit enhancement” for purposes of this definition) of at least “BBB-” by S&P or “Baa3” by Moody’s.”
4.In Section 3.3.1(a) “Failure to Obtain Regulatory Approval and FERC Authorizations”:

(i)clause (ii) is restated as follows:
(ii) the Regulatory Approval is denied or is not received by December 15, 2020 (such date, the “Regulatory Approval Termination Outside Date”),
        and
(ii)clause (iv) is restated as follows:
(iv) the FERC Authorization with respect to the Interconnection Agreement with ISO-NE is denied or is not received by November 1, 2020 (unless the Interconnection Agreement with ISO-NE has been executed following the pro forma Schedule 25 Elective Transmission Upgrade Interconnection Agreement of the ISO-NE Open Access Transmission Tariff) or the FERC Authorization with respect to the Transmission Operating Agreement is not received by September 1, 2022,
5.Article XVI “Financial Assurances” of the Agreement shall be modified as follows:
(i) by restating Section 16.2 of the Agreement to read in its entirety as follows:

16.2 No later than the Assignment Effective Date, Owner shall cause Avangrid, Inc., a New York corporation, to deliver to Purchaser a guaranty by Avangrid, Inc. of Owner’s obligations under this Agreement, the Purchaser TSAs and the 110 MW TSA in form and substance reasonably satisfactory to Purchaser in an aggregate maximum amount equal to

2



the $250,000,000, which guaranty may be terminated by the guarantor in accordance with its terms in the event that Owner meets the Credit Rating Requirements.

(ii) by restating Section 16.3 of the Agreement to read in its entirety as follows:

(a) In the event Avangrid, Inc., as guarantor of the guaranty provided under Section 16.2, or any substitute guarantor thereof, fails to meet the Credit Rating Requirements while such guaranty remains in full force and effect, and Owner also fails to meet the Credit Rating Requirements, Owner shall promptly furnish to Purchaser, in an amount equal to the Proportionate Share multiplied by Two Hundred Fifty Million Dollars ($250,000,000), Additional Credit Support. In the event such guaranty is terminated or otherwise fails to remain in full force and effect and Owner fails to meet the Credit Rating Requirements, Owner shall promptly furnish to Purchaser, in an amount equal to the Proportionate Share multiplied by Two Hundred Fifty Million Dollars ($250,000,000), Additional Credit Support.
(b) In the event Purchaser Guarantor fails to meet the Credit Rating Requirements, Purchaser shall promptly furnish to Owner, in an amount equal to the Proportionate Share multiplied by the Maximum Amount provided under, and as defined in, the Hydro-Québec Guaranty, as such Maximum Amount may vary from time to time, Additional Credit Support;
For the purposes of this Section 16.3, the numerator in “Proportionate Share” shall be the PPA Contract Maximum Amount and the denominator in “Proportionate Share” shall be the capacity of the NECEC Transmission Line established by the Commissioning of the NECEC Transmission Line.
6.Assignee affirms the representations and warranties of Owner contained in Section 21.1 “Mutual Representations and Warranties” and Section 21.3 “Additional Representations and Warranties of Owner” of the Agreement as of the Assignment Effective Date and as of the Commercial Operation Date as though it were Owner, with the exception that (i) Assignee is a Delaware limited liability company, and (ii) as of the Assignment Effective Date, Assignee will acquire, pursuant to certain agreements between Owner and Assignee, the real property rights necessary for construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (A) the Québec Line (other than real property rights to be held by TransÉnergie) and (B) the Delivery Point (other than real property rights related to the AC Upgrades and the CCIS Capacity Upgrades).
7.As of the Assignment Effective Date, each of Owner and Assignee represents and warrants to HQUS that (I) Owner has assigned, transferred, conveyed and delivered to Assignee or has granted to Assignee such rights, title and interests that are necessary or reasonably required in and to the assets of Owner that as of Assignment Effective Date comprise the NECEC Transmission Line and over interests and assets owned by Owner that are necessary or reasonably required for the construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (1) the Québec Line and (2) the Delivery Point (other than interests and assets related to the AC Upgrades and the CCIS Capacity Upgrades) and (II) an Owner Default shall not have occurred and be continuing.

3



8.Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that the representations and warranties set forth in Section 7 of this Second Amendment are true and correct as of the Assignment Effective Date, HQUS consents to the assignment of the Agreement by Owner to Assignee, effective as of the Assignment Effective Date. Assignee acknowledges and agrees that, effective as of the Assignment Effective Date, Assignee shall have all of the rights, title, interest, liabilities and obligations of Owner under the Agreement, including for the avoidance of doubt, all such obligations regardless of whether they arose or relate to events occurring or circumstances existing prior to the Assignment Effective Date. Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that the representations and warranties set forth in Section 7 of this Second Amendment are true and correct as of the Assignment Effective Date and without further action by HQUS, Owner shall be fully, finally and unconditionally released and forever discharged from any and all liabilities or obligations arising under the Agreement.
9.As of the Assignment Effective Date, the address for notices, billings, requests, waivers, consents and other communications under the Agreement shall be changed to:
NECEC Transmission LLC
Attn: Thorn C. Dickinson
One City Center 5th Floor, Portland, Maine, 04101
With a copy to:
NECEC Transmission LLC
Attn: Avangrid Legal Department
162 Canco Road, Portland, Maine 04103
With a further copy to:
Pierce Atwood LLP
Attn: Jared des Rosiers
254 Commercial Street, Portland, ME 04101

10.HQUS acknowledges receipt of a copy of the amendment to the Distribution Company TSA dated as of the date hereof and consents to the increase of the Owner Security (as defined in the Distribution Company TSA) provided therein.
11.The Agreement as modified by this Second Amendment shall continue in full force and effect, and this Second Amendment shall constitute a part of the Agreement. All references in the Agreement to itself shall be deemed to be references to the Agreement as amended hereby, and the Agreement as amended hereby shall be referred to as the “Agreement.”
12.The Parties hereby ratify and confirm all of the provisions of the Agreement, as amended or modified by this Second Amendment, and agree and acknowledge that the same, as so amended, remains in full force and effect.

4



13.This Second Amendment may be executed in counterparts, each of which be deemed to be an original, but all of which together shall constitute but one and the same instrument.
14.This Second Amendment shall not be subject to amendment or other modification, absent the written agreement of Owner, HQUS and Assignee.
15.This Second Amendment and each of its provisions shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts.
16.In the event that any part of this Second Amendment is held to be illegal, invalid or unenforceable to any extent, the legality, validity and enforceability of the remainder of this Second Amendment shall not be affected thereby, and shall remain in full force and effect and shall be enforced to the greatest extent permitted by Applicable Law and (y) with respect to any provision found to be illegal, invalid or unenforceable, Owner, HQUS and Assignee shall endeavor to replace such invalid, illegal or unenforceable provision with the valid, legal and enforceable provision that achieves, as nearly as practicable, the commercial intent of this Second Amendment (as it may be amended from time to time).
17.This Second Amendment shall be binding upon and inure to the benefit of each of Owner, HQUS and Assignee and their permitted successors, legal representatives and assigns under the Agreement.

[Signature page follows]



5




        IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Second Amendment on their behalf as of the date first above written.
        

H.Q. ENERGY SERVICES (U.S.) INC.


By: /s/ Martin Imbleau 
        Name: Martin Imbleau 
        Title: President 


CENTRAL MAINE POWER COMPANY


By: /s/ Douglas A. Herling 
Name: Douglas A. Herling 
Title: President and Chief Executive Officer


By: /s/ Eric N. Stinneford 
Name: Eric N. Stinneford 
Title: Vice President, Controller and Treasurer


NECEC TRANSMISSION LLC


By: /s/ Thorn Dickinson 
Name: Thorn Dickinson 
Title: CEO & President 








[Signature Page to Second Amendment to the HQUS TSA (National Grid)]


6



EXHIBIT 10.9
SECOND AMENDMENT TO TRANSMISSION SERVICE AGREEMENT AND CONSENT TO ASSIGNMENT

        This Second Amendment to the Transmission Service Agreement dated as of June 13, 2018, between Central Maine Power Company (“Owner”) and H.Q. Energy Services (U.S.) Inc. (“HQUS”), as amended, and Consent to Assignment executed the 25th day of June, 2020 (this “Second Amendment”) by and among Owner, a Maine corporation, HQUS, a Delaware corporation, and NECEC Transmission LLC, a Delaware limited liability company (“Assignee”). HQUS, Owner and Assignee are referred to herein individually as a “Party” and collectively as the “Parties.

RECITALS

        A. Owner and HQUS executed that certain Transmission Service Agreement (Unitil – 12.317 MW) dated as of June 13, 2018, as amended (the “Agreement”).

        B. Owner has informed HQUS that it intends to transfer to Assignee all of its assets and interests associated with the NECEC Transmission Line (as defined in the Agreement), including all of its rights, title, interest, liabilities and obligations in, to and under the Agreement and under each of the Purchaser TSAs, the Distribution Company TSAs and the 110 MW TSA (each as defined in the Agreement).

        C. Owner and HQUS desire to further amend the provisions of the Agreement as more fully set forth herein and to provide for HQUS to consent to the assignment of the Agreement to Assignee and to extend certain deadlines in the Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the Parties do hereby agree as follows:

1.Capitalized terms not defined herein shall have the meanings assigned to them in the Agreement.
2.In the introductory paragraphs, the reference to “(“Owner”)” shall be changed to “(together with its successors and permitted assigns, “Owner”)”.
3.Article I “Definitions” of the Agreement shall be modified as follows:
(i)by adding the following definition of “Assignment Effective Date”:
Assignment Effective Date” means the date on which Central Maine Power Company assigns to NECEC Transmission LLC all of its rights, title, interest, liabilities and obligations in, to and under this Agreement.
(ii)by restating the definition of “Construction Phase” as follows:

1



Construction Phase” means the period commencing upon the receipt of the FERC Authorization with respect to this Agreement or such other date to which the Parties shall mutually agree in writing, and ending on the day immediately preceding the Commercial Operation Date or upon the earlier termination of this Agreement pursuant to its terms (regardless of whether or not any such day is a Business Day).
        and
(iii)by restating the definition of “Credit Rating Requirements” as follows:
Credit Rating Requirements” means with respect to a Party (or any guarantor of its obligations hereunder, as the case may be) or other entity, on any date of determination, the respective ratings then assigned to such Party’s (or such guarantor’s, as the case may be) or other entity’s unsecured, senior long-term debt or deposit obligations (not supported by third-party credit enhancement except that the standing guaranty of the province of Québec in favor of Purchaser Guarantor shall not be considered to constitute “third party credit enhancement” for purposes of this definition) of at least “BBB-” by S&P or “Baa3” by Moody’s.”
4.In Section 3.3.1(a) “Failure to Obtain Regulatory Approval and FERC Authorizations”:

(i)clause (ii) is restated as follows:
(ii)the Regulatory Approval is denied or is not received by December 15, 2020 (such date, the “Regulatory Approval Termination Outside Date”),
        and
(iii)clause (iv) is restated as follows:
(iv)the FERC Authorization with respect to the Interconnection Agreement with ISO-NE is denied or is not received by November 1, 2020 (unless the Interconnection Agreement with ISO-NE has been executed following the pro forma Schedule 25 Elective Transmission Upgrade Interconnection Agreement of the ISO-NE Open Access Transmission Tariff) or the FERC Authorization with respect to the Transmission Operating Agreement is not received by September 1, 2022,

5.Article XVI “Financial Assurances” of the Agreement shall be modified as follows:
(i) by restating Section 16.2 of the Agreement to read in its entirety as follows:

16.2 No later than the Assignment Effective Date, Owner shall cause Avangrid, Inc., a New York corporation, to deliver to Purchaser a guaranty by Avangrid, Inc. of Owner’s obligations under this Agreement, the Purchaser TSAs and the 110 MW TSA in form and substance reasonably satisfactory to Purchaser in an aggregate maximum amount equal to

2



the $250,000,000, which guaranty may be terminated by the guarantor in accordance with its terms in the event that Owner meets the Credit Rating Requirements.

(ii) by restating Section 16.3 of the Agreement to read in its entirety as follows:

(a) In the event Avangrid, Inc., as guarantor of the guaranty provided under Section 16.2, or any substitute guarantor thereof, fails to meet the Credit Rating Requirements while such guaranty remains in full force and effect, and Owner also fails to meet the Credit Rating Requirements, Owner shall promptly furnish to Purchaser, in an amount equal to the Proportionate Share multiplied by Two Hundred Fifty Million Dollars ($250,000,000), Additional Credit Support. In the event such guaranty is terminated or otherwise fails to remain in full force and effect and Owner fails to meet the Credit Rating Requirements, Owner shall promptly furnish to Purchaser, in an amount equal to the Proportionate Share multiplied by Two Hundred Fifty Million Dollars ($250,000,000), Additional Credit Support.
(b) In the event Purchaser Guarantor fails to meet the Credit Rating Requirements, Purchaser shall promptly furnish to Owner, in an amount equal to the Proportionate Share multiplied by the Maximum Amount provided under, and as defined in, the Hydro-Québec Guaranty, as such Maximum Amount may vary from time to time, Additional Credit Support;
For the purposes of this Section 16.3, the numerator in “Proportionate Share” shall be the PPA Contract Maximum Amount and the denominator in “Proportionate Share” shall be the capacity of the NECEC Transmission Line established by the Commissioning of the NECEC Transmission Line.
6.Assignee affirms the representations and warranties of Owner contained in Section 21.1 “Mutual Representations and Warranties” and Section 21.3 “Additional Representations and Warranties of Owner” of the Agreement as of the Assignment Effective Date and as of the Commercial Operation Date as though it were Owner, with the exception that (i) Assignee is a Delaware limited liability company, and (ii) as of the Assignment Effective Date, Assignee will acquire, pursuant to certain agreements between Owner and Assignee, the real property rights necessary for construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (A) the Québec Line (other than real property rights to be held by TransÉnergie) and (B) the Delivery Point (other than real property rights related to the AC Upgrades and the CCIS Capacity Upgrades).
7.As of the Assignment Effective Date, each of Owner and Assignee represents and warrants to HQUS that (I) Owner has assigned, transferred, conveyed and delivered to Assignee or has granted to Assignee such rights, title and interests that are necessary or reasonably required in and to the assets of Owner that as of Assignment Effective Date comprise the NECEC Transmission Line and over interests and assets owned by Owner that are necessary or reasonably required for the construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (1) the Québec Line and (2) the Delivery Point (other than interests and assets related to the AC Upgrades and the CCIS Capacity Upgrades) and (II) an Owner Default shall not have occurred and be continuing.

3



8.Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that the representations and warranties set forth in Section 7 of this Second Amendment are true and correct as of the Assignment Effective Date, HQUS consents to the assignment of the Agreement by Owner to Assignee, effective as of the Assignment Effective Date. Assignee acknowledges and agrees that, effective as of the Assignment Effective Date, Assignee shall have all of the rights, title, interest, liabilities and obligations of Owner under the Agreement, including for the avoidance of doubt, all such obligations regardless of whether they arose or relate to events occurring or circumstances existing prior to the Assignment Effective Date. Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that the representations and warranties set forth in Section 7 of this Second Amendment are true and correct as of the Assignment Effective Date and without further action by HQUS, Owner shall be fully, finally and unconditionally released and forever discharged from any and all liabilities or obligations arising under the Agreement.
9.As of the Assignment Effective Date, the address for notices, billings, requests, waivers, consents and other communications under the Agreement shall be changed to:
NECEC Transmission LLC
Attn: Thorn C. Dickinson
One City Center 5th Floor, Portland, Maine, 04101
With a copy to:
NECEC Transmission LLC
Attn: Avangrid Legal Department
162 Canco Road, Portland, Maine 04103
With a further copy to:
Pierce Atwood LLP
Attn: Jared des Rosiers
254 Commercial Street, Portland, ME 04101

10.HQUS acknowledges receipt of a copy of the amendment to the Distribution Company TSA dated as of the date hereof and consents to the increase of the Owner Security (as defined in the Distribution Company TSA) provided therein.
11.The Agreement as modified by this Second Amendment shall continue in full force and effect, and this Second Amendment shall constitute a part of the Agreement. All references in the Agreement to itself shall be deemed to be references to the Agreement as amended hereby, and the Agreement as amended hereby shall be referred to as the “Agreement.”
12.The Parties hereby ratify and confirm all of the provisions of the Agreement, as amended or modified by this Second Amendment, and agree and acknowledge that the same, as so amended, remains in full force and effect.

4



13.This Second Amendment may be executed in counterparts, each of which be deemed to be an original, but all of which together shall constitute but one and the same instrument.
14.This Second Amendment shall not be subject to amendment or other modification, absent the written agreement of Owner, HQUS and Assignee.
15.This Second Amendment and each of its provisions shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts.
16.In the event that any part of this Second Amendment is held to be illegal, invalid or unenforceable to any extent, the legality, validity and enforceability of the remainder of this Second Amendment shall not be affected thereby, and shall remain in full force and effect and shall be enforced to the greatest extent permitted by Applicable Law and (y) with respect to any provision found to be illegal, invalid or unenforceable, Owner, HQUS and Assignee shall endeavor to replace such invalid, illegal or unenforceable provision with the valid, legal and enforceable provision that achieves, as nearly as practicable, the commercial intent of this Second Amendment (as it may be amended from time to time).
17.This Second Amendment shall be binding upon and inure to the benefit of each of Owner, HQUS and Assignee and their permitted successors, legal representatives and assigns under the Agreement.

[Signature page follows]



5




        IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Second Amendment on their behalf as of the date first above written.
        

H.Q. ENERGY SERVICES (U.S.) INC.


By: /s/ Martin Imbleau 
        Name: Martin Imbleau 
        Title: President  


CENTRAL MAINE POWER COMPANY


By: /s/ Douglas A. Herling 
Name: Douglas A. Herling 
Title: President and Chief Executive Officer


By: /s/ Eric N. Stinneford 
Name: Eric N. Stinneford 
Title: Vice President, Controller and Treasurer


NECEC TRANSMISSION LLC


By: /s/ Thorn Dickinson 
Name: Thorn Dickinson 
Title: CEO & President 








[Signature Page to Second Amendment to the HQUS TSA (Unitil)]


6



EXHIBIT 10.10
SECOND AMENDMENT TO TRANSMISSION SERVICE AGREEMENTS AND CONSENT TO ASSIGNMENT

        This Second Amendment to the Additional Transmission Service Agreement dated as of June 13, 2018, between Central Maine Power Company (“Owner”) and H.Q. Energy Services (U.S.) Inc. (“HQUS”), as amended, and Consent to Assignment executed the 25th day of June, 2020 (this “Second Amendment”) by and among Owner, a Maine corporation, HQUS, a Delaware corporation, and NECEC Transmission LLC, a Delaware limited liability company (“Assignee”). HQUS, Owner and Assignee are referred to herein individually as a “Party” and collectively as the “Parties.

RECITALS

        A. Owner and HQUS executed that certain Additional Transmission Service Agreement dated as of June 13, 2018, as amended (the “Agreement”).

        B. Owner has informed HQUS that it intends to transfer to Assignee all of its assets and interests associated with the NECEC Transmission Line (as defined in the Agreement), including all of its rights, title, interest, liabilities and obligations in, to and under the Agreement and under each of the Purchaser TSAs and the RFP Sponsor TSAs (each as defined in the Agreement).

        C. Owner and HQUS desire to further amend the provisions of the Agreement as more fully set forth herein and to provide for HQUS to consent to the assignment of the Agreement to Assignee and to extend certain deadlines in the Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the Parties do hereby agree as follows:

1.Capitalized terms not defined herein shall have the meanings assigned to them in the Agreement.
2.In the introductory paragraphs, the reference to “(“Owner”)” shall be changed to “(together with its successors and permitted assigns, “Owner”)”.
3.Article I “Definitions” of the Agreement shall be modified as follows:
(i)by adding the following definition of “Assignment Effective Date”:
Assignment Effective Date” means the date on which Central Maine Power Company assigns to NECEC Transmission LLC all of its rights, title, interest, liabilities and obligations in, to and under this Agreement.
(ii)by restating the definition of “Construction Phase” as follows:
1



Construction Phase” means the period commencing upon the receipt of the FERC Authorization with respect to this Agreement or such other date to which the Parties shall mutually agree in writing, and ending on the day immediately preceding the Commercial Operation Date or upon the earlier termination of this Agreement pursuant to its terms (regardless of whether or not any such day is a Business Day).
        and
(iii)by restating the definition of “Credit Rating Requirements” as follows:
Credit Rating Requirements” means with respect to a Party (or any guarantor of its obligations hereunder, as the case may be) or other entity, on any date of determination, the respective ratings then assigned to such Party’s (or such guarantor’s, as the case may be) or other entity’s unsecured, senior long-term debt or deposit obligations (not supported by third-party credit enhancement except that the standing guaranty of the province of Québec in favor of Purchaser Guarantor shall not be considered to constitute “third party credit enhancement” for purposes of this definition) of at least “BBB-” by S&P or “Baa3” by Moody’s.”
4.In Section 3.3.1(a) “Failure to Obtain Regulatory Approval and FERC Authorizations”:

(i)clause (ii) is restated as follows:
(ii)the Regulatory Approval is denied or is not received by December 15, 2020 (such date, the “Regulatory Approval Termination Outside Date”),
        and
(iii)clause (iv) is restated as follows:
(iv)the FERC Authorization with respect to the Interconnection Agreement with ISO-NE is denied or is not received by November 1, 2020 (unless the Interconnection Agreement with ISO-NE has been executed following the pro forma Schedule 25 Elective Transmission Upgrade Interconnection Agreement of the ISO-NE Open Access Transmission Tariff) or the FERC Authorization with respect to the Transmission Operating Agreement is not received by September 1, 2022,

5.Article XVI “Financial Assurances” of the Agreement shall be modified as follows:
(i) by restating Section 16.2 of the Agreement to read in its entirety as follows:

16.2 No later than the Assignment Effective Date, Owner shall cause Avangrid, Inc., a New York corporation, to deliver to Purchaser a guaranty by Avangrid, Inc. of Owner’s obligations under this Agreement and the Purchaser TSAs in form and substance reasonably satisfactory to Purchaser in an aggregate maximum amount equal to the
2



$250,000,000, which guaranty may be terminated by the guarantor in accordance with its terms in the event that Owner meets the Credit Rating Requirements.

(ii) by restating Section 16.3 of the Agreement to read in its entirety as follows:

(a) In the event Avangrid, Inc., as guarantor of the guaranty provided under Section 16.2, or any substitute guarantor thereof, fails to meet the Credit Rating Requirements while such guaranty remains in full force and effect, and Owner also fails to meet the Credit Rating Requirements, Owner shall promptly furnish to Purchaser, in an amount equal to the Proportionate Share multiplied by Two Hundred Fifty Million Dollars ($250,000,000), Additional Credit Support. In the event such guaranty is terminated or otherwise fails to remain in full force and effect and Owner fails to meet the Credit Rating Requirements, Owner shall promptly furnish to Purchaser, in an amount equal to the Proportionate Share multiplied by Two Hundred Fifty Million Dollars ($250,000,000), Additional Credit Support.
(b) In the event Purchaser Guarantor fails to meet the Credit Rating Requirements, Purchaser shall promptly furnish to Owner, in an amount equal to the Proportionate Share multiplied by the Maximum Amount provided under, and as defined in, the Hydro-Québec Guaranty, as such Maximum Amount may vary from time to time, Additional Credit Support.
For the purposes of this Section 16.3, the numerator in “Proportionate Share” shall be the Contract Capacity and the denominator in “Proportionate Share” shall be the capacity of the NECEC Transmission Line established by the Commissioning of the NECEC Transmission Line.
6.Assignee affirms the representations and warranties of Owner contained in Section 21.1 “Mutual Representations and Warranties” and Section 21.3 “Additional Representations and Warranties of Owner” of the Agreement as of the Assignment Effective Date and as of the Commercial Operation Date as though it were Owner, with the exception that (i) Assignee is a Delaware limited liability company, and (ii) as of the Assignment Effective Date, Assignee will acquire, pursuant to certain agreements between Owner and Assignee, the real property rights necessary for construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (A) the Québec Line (other than real property rights to be held by TransÉnergie) and (B) the Delivery Point (other than real property rights related to the AC Upgrades and the CCIS Capacity Upgrades).
7.As of the Assignment Effective Date, each of Owner and Assignee represents and warrants to HQUS that (I) Owner has assigned, transferred, conveyed and delivered to Assignee or has granted to Assignee such rights, title and interests that are necessary or reasonably required in and to the assets of Owner that as of Assignment Effective Date comprise the NECEC Transmission Line and over interests and assets owned by Owner that are necessary or reasonably required for the construction and operation of the NECEC Transmission Line, and the interconnection of the NECEC Transmission Line with (1) the Québec Line and (2) the Delivery Point (other than interests and assets related to the AC Upgrades and the CCIS Capacity Upgrades) and (II) an Owner Default shall not have occurred and be continuing.
3



8.Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that the representations and warranties set forth in Section 7 of this Second Amendment are true and correct as of the Assignment Effective Date, HQUS consents to the assignment of the Agreement by Owner to Assignee, effective as of the Assignment Effective Date. Assignee acknowledges and agrees that, effective as of the Assignment Effective Date, Assignee shall have all of the rights, title, interest, liabilities and obligations of Owner under the Agreement, including for the avoidance of doubt, all such obligations regardless of whether they arose or relate to events occurring or circumstances existing prior to the Assignment Effective Date. Upon satisfaction of the conditions in Section 22.1(c) of the Agreement by Owner and Assignee, provided that the representations and warranties set forth in Section 7 of this Second Amendment are true and correct as of the Assignment Effective Date and without further action by HQUS, Owner shall be fully, finally and unconditionally released and forever discharged from any and all liabilities or obligations arising under the Agreement.
9.As of the Assignment Effective Date, the address for notices, billings, requests, waivers, consents and other communications under the Agreement shall be changed to:
NECEC Transmission LLC
Attn: Thorn C. Dickinson
One City Center 5th Floor, Portland, Maine, 04101
With a copy to:
NECEC Transmission LLC
Attn: Avangrid Legal Department
162 Canco Road, Portland, Maine 04103
With a further copy to:
Pierce Atwood LLP
Attn: Jared des Rosiers
254 Commercial Street, Portland, ME 04101

10.HQUS acknowledges receipt of a copy of the amendment to the RFP Sponsor TSAs dated as of the date hereof and consents to the increase of the Owner Security (as defined in the RFP Sponsor TSAs) provided therein.
11.The Agreement as modified by this Second Amendment shall continue in full force and effect, and this Second Amendment shall constitute a part of the Agreement. All references in the Agreement to itself shall be deemed to be references to the Agreement as amended hereby, and the Agreement as amended hereby shall be referred to as the “Agreement.”
12.The Parties hereby ratify and confirm all of the provisions of the Agreement, as amended or modified by this Second Amendment, and agree and acknowledge that the same, as so amended, remains in full force and effect.
4



13.This Second Amendment may be executed in counterparts, each of which be deemed to be an original, but all of which together shall constitute but one and the same instrument.
14.This Second Amendment shall not be subject to amendment or other modification, absent the written agreement of Owner, HQUS and Assignee.
15.This Second Amendment and each of its provisions shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts.
16.In the event that any part of this Second Amendment is held to be illegal, invalid or unenforceable to any extent, the legality, validity and enforceability of the remainder of this Second Amendment shall not be affected thereby, and shall remain in full force and effect and shall be enforced to the greatest extent permitted by Applicable Law and (y) with respect to any provision found to be illegal, invalid or unenforceable, Owner, HQUS and Assignee shall endeavor to replace such invalid, illegal or unenforceable provision with the valid, legal and enforceable provision that achieves, as nearly as practicable, the commercial intent of this Second Amendment (as it may be amended from time to time).
17.This Second Amendment shall be binding upon and inure to the benefit of each of Owner, HQUS and Assignee and their permitted successors, legal representatives and assigns under the Agreement.

[Signature page follows]


5




        IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Second Amendment on their behalf as of the date first above written.
        

H.Q. ENERGY SERVICES (U.S.) INC.


By: /s/ Martin Imbleau 
        Name: Martin Imbleau 
        Title: President 


CENTRAL MAINE POWER COMPANY


By: /s/ Douglas A. Herling 
Name: Douglas A. Herling 
Title: President and Chief Executive Officer


By: /s/ Eric N. Stinneford 
Name: Eric N. Stinneford 
Title: Vice President, Controller and Treasurer


NECEC TRANSMISSION LLC


By: /s/ Thorn Dickinson 
Name: Thorn Dickinson 
Title: CEO & President 






[Signature Page to Second Amendment to the Additional TSA]

6


EXHIBIT 31.1
CERTIFICATION
I, Dennis V. Arriola, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Avangrid, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: July 31, 2020   /s/ Dennis V. Arriola
    Dennis V. Arriola
    Director and Chief Executive Officer


EXHIBIT 31.2
CERTIFICATION
I, Douglas K. Stuver, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Avangrid, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: July 31, 2020   /s/ Douglas K. Stuver
    Douglas K. Stuver
    Senior Vice President - Chief Financial Officer


EXHIBIT 32
 
 
 
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, the undersigned, Dennis V. Arriola and Douglas K. Stuver, the Chief Executive Officer and Chief Financial Officer, respectively, of Avangrid, Inc. (the “issuer”), do each hereby certify that the issuer’s quarterly report on Form 10-Q for the quarter ended June 30, 2020, to which this certification is attached as an exhibit (the “report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the issuer.
 
/s/ Dennis V. Arriola
Dennis V. Arriola
Director and Chief Executive Officer
Avangrid, Inc.
July 31, 2020
 
/s/ Douglas K. Stuver
Douglas K. Stuver
Senior Vice President - Chief Financial Officer
Avangrid, Inc.
July 31, 2020