With more pipeline than purse, Avangrid seeks partnerships, delays 2 projects | AGR Message Board Posts


Avangrid, Inc.

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Msg  25 of 26  at  9/28/2022 6:07:57 PM  by

jerrykrause


With more pipeline than purse, Avangrid seeks partnerships, delays 2 projects

from SNL Energy Finance Daily
 

With more pipeline than purse, Avangrid seeks partnerships, delays 2 projects

 
 
Byline: Allison Good
 

Avangrid Inc. will seek partnerships of up to 50% across its offshore wind portfolio, reduce its share of certain onshore renewables projects under development to 40%, and sell part of the Kitty Hawk Offshore Wind Farm project's lease for approximately $100 million before taxes as part of a strategic review to optimize the utility company's balance sheet.

"We don't have enough resources to do everything we have on the table," Avangrid CEO Pedro Azagra Blázquez told analysts and investors during a Sept. 22 conference. The executive added that the Iberdrola SA subsidiary is not "exiting any business" as evidenced by its existing European offshore wind partnerships.

"This is about sharing the amount of investments we have," Blázquez explained.

Citing pressures from inflation and soaring commodity prices, the CEO also announced that commercial operations for the company's Park City project and Commonwealth Offshore Wind Project under development in the northeastern U.S. will be delayed by a year, to 2027 and 2028, respectively, "to benefit from advanced turbine technology" under an extension provided for in the contracts.

Avangrid recently restructured its joint venture with Danish infrastructure investor Copenhagen Infrastructure Partners K/S to take full ownership of the 804-MW Park City and 1,232-MW Commonwealth projects, which will now be built as a single 2-GW project, according to the company.

"We feel comfortable" putting the two projects together to maximize ongoing wind turbine negotiations, Blázquez said, and executives noted that Commonwealth and Park City may also be able to take advantage of new tax credits for domestic content passed in the Inflation Reduction Act and ask Massachusetts and Connecticut utilities regulators for a "modest [power purchase agreement] adjustment."

"Every offshore wind developer will try to do that in the U.S. because at the time of bidding, conditions were extremely different compared to now," said Sy Otan, senior vice president for offshore project management at subsidiary Avangrid Renewables Holdings Inc., referring to power purchase agreement renegotiations.

The 800-MW Vineyard Offshore Wind Project, under construction and on schedule for a 2024 commercial in-service date, is not subject to similar pressures, Avangrid executives said.

When it comes to the onshore business, Blázquez sees enhanced valuations for Avangrid's 8-GW portfolio of wind generation and the 800 MW of solar capacity expected to come online in 2023.

Avangrid plans to divest an additional $2 billion of assets through 2025 as an "over and above opportunity" that could completely offset its $1.9 billion equity needs, according to CFO Patricia Cosgel.

ESG, financial metrics

Avangrid announced new decarbonization goals targeting Scope 1 and 2 carbon neutrality by 2030, with a Scope 3 strategy in development, compared to a previous target of 2035.

The company reaffirmed its 2022 guidance for adjusted EPS of $2.20 to $2.38 for 2022 and reiterated its plans to invest $14.6 billion through 2025.

Avangrid anticipates an average of 6% to 7% EPS growth per year through 2025, but executives acknowledged that it could settle at 6% in the unlikely event that a pending merger with PNM Resources Inc., still requiring approval from the New Mexico Public Regulation Commission, falls apart. The commission initially rejected the proposed $4.32 billion combination in December 2021, which PNM is appealing.

With the 145-mile, $1 billion New England Clean Energy Connect transmission project back on track after the Maine Supreme Court ruled in August that a referendum banning construction was unconstitutional, Cosgel noted that Avangrid expects the line to bring in about $25 million of net income for 2025 once it begins commercial service.

 


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