Avangrid (NYSE:AGR) announced Wednesday that its net income increased 16% in 2022 over 2021 but projected flat financials in 2023.
In a conference call with industry analysts, CEO Pedro Azagra said the company’s priorities this year are closing its merger with PNM Resources (NYSE:PNM), negotiating settlements in its utility rate cases and ensuring the economic viability of its New England Clean Energy Connect (NECEC) transmission project.
He said Avangrid remains committed to the Commonwealth Wind project off the Massachusetts coast and is still working on it, even after moving to terminate the power purchase agreements it agreed to.
Avangrid plans to submit an economically viable bid on that project in the state’s next offshore wind solicitation, Azagra added, and is working through the legal and economic challenges that face some of its other projects.
NECEC, first proposed in 2017, would bring Quebec hydropower to New England. After multiple challenges, the project won key court victories in 2022. (See NECEC Scores Another Victory in Maine’s Highest Court.)
But legal issues remain unresolved, Azagra said.
“Also, we have to review the economics just to be sure we get recovery of the costs we have incurred,” he said.
“With the delay caused by the unprecedented action by our opponents, we continue to look at restarting construction as soon as possible,” said Catherine Stempien, CEO of Avangrid Networks. “And with that restart of construction, we’re negotiating with all of our vendors to make sure we can optimize the construction schedule as well as the pricing. We’re doing that in the background as we’re proceeding with the legal matters.”
An analyst asked whether the financial review centers on the cost of construction of the line or on the revenue that will be derived from it.
“We are working on both sides,” Azagra said.
Turning to utility revenues, Avangrid reported that it had settled its rate case for Berkshire Gas in Massachusetts in 2022; expects its settlement negotiations for New York State Electric and Gas and Rochester Gas and Electric in New York to yield new rates in May; expects new rates for Central Maine Power in Maine by July; and expects rates for United Illuminating in Connecticut to be settled by September.
Avangrid also said its proposed acquisition of the largest energy utility in New Mexico is still in play, despite being shot down by that state’s Public Regulation Commission in December. (See NM Regulators Reject Avangrid-PNM Merger.)
Since that vote, Avangrid and PNM have extended their merger agreement and the elected commissioners have been replaced by appointees. Azagra expects that to make a difference.
“The new commissioners are each highly experienced individuals with deep knowledge of the challenges and opportunities the energy transition will bring, as well as the central role of utilities in enabling that transition,” he said.
During the call, Azagra spoke repeatedly about the economic pressures of the past year. He said Avangrid renegotiated PPAs for 780 MW of onshore wind in 2022 and, when it could not renegotiate the PPAs for the 1,232-MW Commonwealth offshore project, moved to dismiss them. (See Avangrid Seeks to Terminate Commonwealth Wind PPAs.)
“Let me be clear: While we are terminating our PPAs for Commonwealth Wind, we remain fully committed to our offshore business. We are on track to bring the first large-scale project to successful completion,” he said, referring to the 806-MW Vineyard Wind I, now under construction and expected to start generating electricity later this year. “This is not a question of commitment or capabilities, but rather of a unique economic situation.
“Unfortunately, the impact of historic inflation, sharp interest rate increases, supply chain bottlenecks and existence of a price cap prevent us from moving Commonwealth Wind forward under viable economic conditions,” Azagra said. So Avangrid will submit a new bid to the state of Massachusetts in May, he added.
Asked by an analyst if Avangrid had confidence in the viability of such a bid amid continued economic pressures, Azagra said he did.
“Because of the work we have already done in the last more than three years, we’re probably as best positioned as we can to have [certainty] to make a new bid for this project because we continue working in the project, and we are committed to delivering this project.”
He noted that offshore projects in other states have included price indexing and said that given the multiyear time frame, an ability to make price adjustments needs to be considered for Commonwealth.
Unaudited financials show Avangrid ended 2022 with $901 million in adjusted net income on $7.92 billion in operating revenue, up from $780 million and $6.97 billion in 2021. That works out to $2.33/share in 2022 and $2.18 in 2021.
For 2023, it is projecting $850 million to $915 million in adjusted net income, or $2.20 to $2.35/share.
Additional discussion by the company about its projects and its finances is contained within its 10-K annual report, also published Wednesday.
Avangrid stock closed at $41.01/share in heavier-than-average trading, a 1.6% increase from Tuesday’s close.
