Avangrid execs update investors on controversial Maine transmission project referendum

Avangrid is using a political action committee in Maine to educate voters on the benefits of a 1,200-MW transmission line that would deliver Canadian hydropower into New England, as fossil fuel interests continue fighting the project with "misinformation," executives said Wednesday.

Avangrid established a political action committee called Clean Energy Matters to "correct misinformation" that fossil fuel interests are having an impact in Maine regarding the New England Clean Energy Connect transmission line, Doug Stuver, chief financial officer, said during the utility's fourth quarter and full-year 2019 earnings conference call.

There is currently a referendum process underway to add a ballot measure that would require the Maine Public Utilities Commission to reverse its prior approval of the project.

Through the referendum, project opponents are seeking to collect the roughly 63,000 signatures required to add the item to the election ballot in November. The signatures are being counted and verified by the Maine Secretary of State's office.

That process should be completed by March 4, after which Avangrid's PAC will have 10 days to review the signatures as well, Stuver said.

The power will be supplied through the $1.1 billion New England Clean Energy Connect transmission project which is a 145-mile, 320-kV high-voltage direct current transmission line that would run from the Québec-Maine border to Lewiston, Maine. The power would feed into the ISO New England grid.

The Massachusetts Department of Public Utilities approved long-term contracts between the state's utilities and Hydro-Québec for 9.45 TWh of hydropower last June.

Local utility Central Maine Power is developing the line with Avangrid, whose main shareholder is Spain-based Iberdrola.

Executives on the earnings call said they expect to have the permits required to begin construction, which is currently scheduled to start in Q3 2020 with completion by year-end 2022.

However, "there are a lot of moving parts" ... and "this could go in a number of directions," Stuver said, including potential court challenges "depending on the nature of the referendum."

Fossil fuel-fired power generators continue to "spend significant money to kill the project" because 1,200 MW of clean energy would mean they would make less money, Stuver said.

However, project opponents accused the developers of using misinformation. "Central Maine Power and Hydro Hydro-Québec are using misinformation to promote their project," Nick Bennett, staff scientist with Natural Resources Council of Maine, said in a phone call.

"They claim this project will have benefits in terms of reducing greenhouse gas emissions, which it will not. The project would be the most destructive project to the Western Mountains in Maine's history," Bennett said.

"The only 'fossil fuel interest' spreading misleading information in Maine is CMP/Avangrid/Iberdrola," Sandi Howard, director of Say NO to NECEC and principal officer of the NO CMP Corridor PAC, the group collecting the signatures, said in an email.

"CMP/Avangrid/Iberdrola have found it necessary to team up with Hydro-Quebec to spend millions of dollars in a Hail Mary attempt save its corridor," Howard said. NO CMP Corridor is funded "mostly by small private donors," she said.

The full funding sources of the PACs involved in the ballot initiative is unclear.

The outcome of the referendum should be known by mid-March, Stuver told investors. If it makes the ballot, a majority vote to support or oppose the project would be recorded on Election Day.

RENEWABLE ENERGY MARKETS

Avangrid reached commercial operational dates for 831 MW of wind projects in 2019 and is constructing 700 MW of wind power capacity in 2020, in addition to adding 366 MW of incremental capacity through repowering projects, also in 2020.

The company increased its pipeline of renewable energy projects by 19% from 2018 to 2019 and currently has about 18 GW of pending renewable energy project capacity, according to its earnings presentation.

Forward power price curves show an uptick 10 years out, "but I don't know how much that is reflected in existing power purchase agreements," CEO James Torgerson said.

As PPAs expire we will see lower contract prices in new deals because the higher priced PPAs struck in past years will be rolling off, he said. Merchant power prices were about $29/MWh for energy in 2018, but the bigger year-over-year changes were in renewable energy credits and hedging, which decreased from $11.90/MWh to $6.50/MWh, Torgerson said.

Additionally, natural gas prices being "low" at about $1.80/MMBtu will have power price impacts in certain markets, he said.

The company reported consolidated US GAAP net income of $223 million, or 72 cents/share, for Q4 19, compared to $119 million, or 38 cents/share, for the same period in 2018. For full-year 2019, consolidated net income was $700 million, or $2.26/share, compared to $595 million, or $1.92/share, for the full year 2018.

The results missed analyst expectations, which caused Torgerson to conclude "We are disappointed with our financial results for what was ultimately a challenging year."