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 adjustments to reflect the effect of mark-to-market 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, loss from held for sale measurement, accelerated depreciation derived from repowering of wind farms and adjustments for the non-core Gas business.

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 the condensed consolidated financial statements.

Segment information as of and for the three months ended March 31, 2019, consisted of:



Three Months Ended March 31, 2019	Networks		Renewables			Other (a)			AVANGRID Consolidated
(Millions)
Revenue - external	$	1,600	$	242		$	—		$	1,842
Revenue - intersegment	4		—			(4		)	—
Loss from assets held for sale	—		—			—			—
Depreciation and amortization	134		88			—			222
Operating income (loss)	331		13			(3		)	341
Earnings (losses) from equity method investments	3		(2		)	—			1
Interest expense, net of capitalization	68		4			6			78
Income tax expense (benefit)	64		1			(24		)	41
Adjusted net income	201		5			13			219
Capital expenditures	324		101			—			425
As of March 31, 2019
Property, plant and equipment	14,819		8,728			8			23,555
Equity method investments	140		341			—			481
Total assets	$	22,408	$	11,046		$	(846	)	$	32,608

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(a) Includes Corporate, Gas and intersegment eliminations.

Included in revenue-external for the three months ended March 31, 2019, are: $964 million from regulated electric operations, $636 million from regulated gas operations and $0 from other operations of Networks; $242 million primarily from renewable energy generation of Renewables.

Segment information for the three months ended March 31, 2018, consisted of:



Three Months Ended March 31, 2018	Networks		Renewables			Other (a)			AVANGRID Consolidated
(Millions)
Revenue - external	$	1,549	$	283		$	33		$	1,865
Revenue - intersegment	3		1			(4		)	—
Loss from assets held for sale	—		—			5			5
Depreciation and amortization	118		85			—			203
Operating income (loss)	344		44			15			403
Earnings (losses) from equity method investments	2		—			—			2
Interest expense, net of capitalization	60		8			6			74
Income tax expense (benefit)	64		(8		)	16			72
Adjusted net income	201		47			(5		)	243
Capital expenditures	282		116			1			399
As of December 31, 2018
Property, plant and equipment	14,754		8,697			8			23,459
Equity method investments	142		224			—			366
Total assets	$	22,239	$	10,703		$	(775	)	$	32,167

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(a) Includes Corporate, Gas and intersegment eliminations.

Included in revenue-external for the three months ended March 31, 2018, are: $955 million from regulated electric operations, $600 million from regulated gas operations and $(6) million from other operations of Networks; $283 million primarily from renewable energy generation of Renewables.

Reconciliation of Adjusted Net Income to Net Income attributable to AVANGRID for the three months ended March 31, 2019 and 2018, respectively, is as follows:



	Three Months Ended March 31,
	2019			2018
(Millions)
Adjusted Net Income Attributable to Avangrid, Inc.	$	219		$	243
Adjustments:
Loss from assets held for sale (1)	—			(5		)
Mark-to-market adjustments - Renewables (2)	3			4
Restructuring charges (3)	—			(1		)
Accelerated depreciation from repowering (4)	(5		)	—
Income tax impact of adjustments	—			(10		)
Gas Storage, net of tax (5)	—			13
Net Income Attributable to Avangrid, Inc.	$	217		$	244


(1)	Represents loss from measurement of assets and liabilities held for sale in connection with the committed plan to sell the gas trading and storage businesses.


(2)	Mark-to-market adjustments relate to 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 and gas.


(3)	Restructuring and severance related charges relate to costs resulted from restructuring actions involving initial targeted voluntary workforce reductions and related costs in our plan to vacate a lease, predominantly within the Networks segment.


(4)	Represents the amount of accelerated depreciation derived from repowering of wind farms in Renewables.


(5)	Removal of the impact from Gas activity in the reconciliation to the AVANGRID Net Income.