| Segment Information |
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, income from release of collateral, impact of the Tax Act and adjustments for the non-core Gas storage 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 and six months ended June 30, 2019, consisted of: | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2019 | | Networks | | Renewables | | Other (a) | | AVANGRID Consolidated | (Millions) | | |
| | |
| | |
| | |
| Revenue - external | | $ | 1,092 |
| | $ | 307 |
| | $ | 1 |
| | $ | 1,400 |
| Revenue - intersegment | | 1 |
| | — |
| | (1 | ) | | — |
| Depreciation and amortization | | 135 |
| | 87 |
| | — |
| | 222 |
| Operating income | | 155 |
| | 49 |
| | 3 |
| | 207 |
| Earnings (losses) from equity method investments | | 2 |
| | (1 | ) | | — |
| | 1 |
| Interest expense, net of capitalization | | 66 |
| | 2 |
| | 7 |
| | 76 |
| Income tax expense (benefit) | | 25 |
| | (18 | ) | | 22 |
| | 29 |
| Adjusted net income | | $ | 66 |
| | $ | 64 |
| | $ | (29 | ) | | $ | 101 |
|
Included in revenue-external for the three months ended June 30, 2019, are: $836 million from regulated electric operations, $254 million from regulated gas operations and $2 million from other operations of Networks; $307 million primarily from renewable energy generation of Renewables. | | | | | | | | | | | | | | | | | | Six Months Ended June 30, 2019 | | Networks | | Renewables | | Other (a) | | AVANGRID Consolidated | (Millions) | | |
| | |
| | |
| | |
| Revenue - external | | $ | 2,692 |
| | $ | 549 |
| | $ | 1 |
| | $ | 3,242 |
| Revenue - intersegment | | 5 |
| | — |
| | (5 | ) | | — |
| Depreciation and amortization | | 269 |
| | 175 |
| | — |
| | 444 |
| Operating income | | 486 |
| | 62 |
| | — |
| | 548 |
| Earnings (losses) from equity method investments | | 5 |
| | (3 | ) | | — |
| | 2 |
| Interest expense, net of capitalization | | 135 |
| | 7 |
| | 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 June 30, 2019 | | | | | | | | | Property, plant and equipment | | 15,104 |
| | 9,261 |
| | 8 |
| | 24,373 |
| Equity method investments | | 144 |
| | 361 |
| | — |
| | 505 |
| Total assets | | $ | 22,491 |
| | $ | 11,905 |
| | $ | (1,255 | ) | | $ | 33,141 |
|
_________________________ (a) Includes Corporate, Gas and intersegment eliminations. Included in revenue-external for the six months ended June 30, 2019, are: $1,800 million from regulated electric operations, $890 million from regulated gas operations and $2 million from other operations of Networks; $549 million primarily from renewable energy generation of Renewables. Segment information for the three and six months ended June 30, 2018, consisted of: | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2018 | | Networks | | Renewables | | Other (a) | | AVANGRID Consolidated | (Millions) | | |
| | |
| | |
| | |
| Revenue - external | | $ | 1,103 |
| | $ | 296 |
| | $ | 3 |
| | $ | 1,402 |
| Revenue - intersegment | | 2 |
| | 1 |
| | (3 | ) | | — |
| Loss from assets held for sale | | — |
| | — |
| | 10 |
| | 10 |
| Depreciation and amortization | | 128 |
| | 87 |
| | — |
| | 215 |
| Operating income (loss) | | 183 |
| | 55 |
| | (16 | ) | | 222 |
| Earnings (losses) from equity method investments | | 4 |
| | 1 |
| | — |
| | 5 |
| Interest expense, net of capitalization | | 65 |
| | 7 |
| | (2 | ) | | 70 |
| Income tax expense (benefit) | | 23 |
| | (24 | ) | | 28 |
| | 27 |
| Adjusted net income | | $ | 79 |
| | $ | 68 |
| | $ | (18 | ) | | $ | 128 |
|
Included in revenue-external for the three months ended June 30, 2018, are: $864 million from regulated electric operations, $242 million from regulated gas operations and $(3) million from other operations of Networks; $296 million primarily from renewable energy generation of Renewables. | | | | | | | | | | | | | | | | | | Six Months Ended June 30, 2018 | | Networks | | Renewables | | Other (a) | | AVANGRID Consolidated | (Millions) | | |
| | |
| | |
| | |
| Revenue - external | | $ | 2,652 |
| | $ | 579 |
| | $ | 36 |
| | $ | 3,267 |
| Revenue - intersegment | | 5 |
| | 2 |
| | (7 | ) | | — |
| Loss from assets held for sale | | — |
| | — |
| | 15 |
| | 15 |
| Depreciation and amortization | | 246 |
| | 172 |
| | — |
| | 418 |
| Operating income (loss) | | 527 |
| | 99 |
| | (1 | ) | | 625 |
| Earnings (losses) from equity method investments | | 6 |
| | 1 |
| | — |
| | 7 |
| Interest expense, net of capitalization | | 125 |
| | 15 |
| | 4 |
| | 144 |
| Income tax expense (benefit) | | 87 |
| | (32 | ) | | 44 |
| | 99 |
| Adjusted net income | | 280 |
| | 115 |
| | (23 | ) | | 371 |
| Capital expenditures | | 522 |
| | 229 |
| | — |
| | 751 |
| 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 |
|
_________________________ (a) Includes Corporate, Gas and intersegment eliminations. Included in revenue-external for the six months ended June 30, 2018, are: $1,819 million from regulated electric operations, $842 million from regulated gas operations and $(9) million from other operations of Networks; $579 million primarily from renewable energy generation of Renewables. Reconciliation of Adjusted Net Income to Net Income attributable to AVANGRID for the three and six months ended June 30, 2019 and 2018, respectively, is as follows: | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | 2019 | | 2018 | | 2019 | | 2018 | (Millions) | | | | | | |
| | |
| Adjusted Net Income Attributable to Avangrid, Inc. | | $ | 101 |
| | $ | 128 |
| | $ | 319 |
| | $ | 371 |
| Adjustments: | | | | | | | | | Loss from assets held for sale (1) | | — |
| | (10 | ) | | — |
| | (15 | ) | Mark-to-market adjustments - Renewables (2) | | 20 |
| | (3 | ) | | 23 |
| | 1 |
| Restructuring charges (3) | | (2 | ) | | — |
| | (2 | ) | | (1 | ) | Accelerated depreciation from repowering (4) | | (5 | ) | | — |
| | (10 | ) | | — |
| Income from release of collateral - Renewables (5) | | — |
| | 7 |
| | — |
| | 7 |
| Impact of the Tax Act (6) | | — |
| | (7 | ) | | — |
| | (7 | ) | Income tax impact of adjustments | | (3 | ) | | (7 | ) | | (3 | ) | | (17 | ) | Gas Storage, net of tax (7) | | — |
| | (2 | ) | | — |
| | 11 |
| Net Income Attributable to Avangrid, Inc. | | $ | 110 |
| | $ | 107 |
| | $ | 327 |
| | $ | 351 |
|
| | (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 and 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) | Relates to cash collateral released in excess of outstanding receivables from a bankruptcy proceeding with a Renewables customer regarding two power purchase agreements. |
| | (6) | Represents the impact from measurement of deferred income tax balances as a result of the Tax Act enacted by the U.S. federal government on December 22, 2017. |
(7) Removal of the impact from Gas activity in the reconciliation to the AVANGRID Net Income.
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