Avangrid agrees to pay $48M to terminate Mass. offshore wind supply contracts

Avangrid Inc. has agreed to pay the Massachusetts distribution utilities of Eversource Energy, National Grid PLC and Unitil Corp. a combined $48 million to terminate power purchase agreements for the output of the 1,232-MW Commonwealth Offshore Wind Project.

The utilities asked the Massachusetts Department of Public Utilities (DPU) on July 13 to approve the deal for canceling the contracts, which Avangrid previously disputed due to higher financing and equipment costs. State regulators in November 2022 denied the offshore wind developer's request to renegotiate the supply contracts.

Avangrid plans to rebid Commonwealth Offshore Wind in Massachusetts' upcoming offshore wind solicitation, its fourth, in 2024.

KeyBanc analysts told clients June 29 following a meeting with Avangrid management that the solicitation "will likely include some inflation indexation and probably a higher collateral deposit to discourage bidders from withdrawing" and will not permit applications for projects depending on the outcome of other solicitations.

In October 2022, the DPU also declined a request from the developers of the 1,600-MW SouthCoast Wind Energy Project — Shell PLC and Ocean Winds, a venture of Energias de Portugal SA and Engie SA — to renegotiate supply contracts with the same distribution utilities.

In September 2022, Avangrid said during an investor presentation that it intended to seek a similarly "modest PPA adjustment" for utilities in Connecticut to buy power from its planned 804-MW Park City Wind project.

As of June 12, about "one-third of the total offshore wind capacity contracted on [US] state-sanctioned procurements to date is now in dispute," according to ClearView Energy Partners.

The Park City and Commonwealth Offshore Wind projects are expected to come online in 2027 and 2028, respectively.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.