Sustainable energy firm Avangrid to invest $14.6 billion to 2025

Thursday was a big day for Avangrid on Wall Street, where the publicly listed US subsidiary of Spanish energy giant Iberdrola presented its plans to analysts and investors. The sustainable energy company detailed an ambitious growth plan for renewables at a time when the United States is betting on the sector. Company officials said Avangrid has plans to invest some $14.6 billion to 2025.

Those investment plans include the purchase of PNM Resources, a company based in Albuquerque that provides electricity to around 800,000 customers in New Mexico and Texas. The acquisition is currently blocked by the regulator, and without it, Avangrid’s investment to 2025 would amount to about $8.1 billion. If the operation goes through, Avangrid is contemplating a capital increase of US$1.9 billion. The figure also includes a power transmission line from Canada to the US, the New England Clean Energy Connect (NECEC), which has faced hurdles although the group has recently won a legal victory in connection with the project.

Avangrid CEO Pedro Azagra presented the company to the market as a story of “growth and evolution.” “We are very proud to be part of the US energy transition and we believe there is no turning back on this path,” he told an audience of investors and analysts on Investor Day at the New York Stock Exchange.

The company reaffirmed its forecast of $2.20 to $2.38 earnings per share for this year and expects that figure to grow 6-7% a year on average through 2025, if the acquisition of PNM Resources goes ahead as planned.

“Avangrid is driven by our commitment to execution, growth and value creation,” said Azagra in an earlier statement. “Our business mix of regulated and renewables contracted businesses is one of our primary differentiators, as it positions us to fully capitalize on all the benefits the energy transition will bring.”

“Through our Networks business, we are working to modernize the grid and further integrate clean energy into the system,” added Azagra. “We are also one of the top renewable energy companies by installed capacity and are leading the way in the development of offshore wind, which is a critical step in the energy transition,” he said. “These investments in both the regulated and contracted renewables will generate predictable earnings and cash flow through and beyond our 2022 to 2025 long-term outlook.”

The bulk of investments will focus on the Networks area with $12.8 billion, of which $6.5 billion will be tied to the PNM operation. The remaining $1.8 billion will be investments in renewables, mainly in offshore wind ($1.2 billion), according to the presentation to analysts. The company expects sales of around US$2 billion from asset rotation.

The company recently decided to merge its onshore and offshore wind business, which were previously managed separately. The consolidated business will now be led by José Antonio Miranda, who will serve as President and CEO of Avangrid Renewables.

The company will give details about these investment plans and its future forecasts throughout Thursday, in presentations to analysts made by its directors.

The company has pledged a dividend target of about $2 billion over the next three years, of which approximately 80% corresponds to Iberdrola as the main shareholder. The dividend target is $1.78 per share, with a policy of distributing between 65% and 75%.

Headquartered in Orange (Connecticut), Avangrid has approximately $40 billion in assets and operations in 24 US states, where it employs over 7,000 people. It has two main lines of business: Avangrid Networks and Avangrid Renewables. Avangrid Networks owns and operates eight electric and natural gas utilities, serving over 3.3 million customers in New York and New England. Avangrid Renewables owns and operates a portfolio of renewable energy generation facilities across the United States.

Iberdrola is one of the world’s biggest energy companies and a leader in renewables. Avangrid’s presentation on Thursday was a preview of Iberdrola’s own strategic plan to 2025, which the group chaired by Ignacio Sánchez Galán plans to present on November 9. The presentation was originally scheduled for March, but postponed because of the war in Ukraine.