RWE's US renewables expansion bucks capex reduction spend among peers

As some global power and renewables majors rein in spending on electricity generation, RWE AG is pouring resources into its extensive US development pipeline.

"The strategies of a number of companies within this segment have become increasingly cautious," Chris DeLucia, head of global power and renewables at S&P Global Commodity Insights, wrote in an April 1 report. "This trend includes reducing absolute capex being deployed for renewables development (such as for [Ørsted A/S]), while [Enel SpA] and [Iberdrola SA] are reallocating capital away from renewables toward grid infrastructure in order to benefit from the reduced risk and greater stability of these investments."

"These three companies have all scaled back targets for wind and solar capacity increases, amid a rising focus on value creation instead of growth," while RWE increased its target renewables capacity from 50 GW to 65 GW by 2030, the report continued.

In the US alone, the Germany-headquartered company has 36 GW of planned onshore wind, solar and battery storage projects, in addition to the 1,314-MW Community Offshore Wind Project in New York it co-owns with National Grid PLC. That list of planned power plants includes facilities acquired through RWE's $6.8 billion purchase of Consolidated Edison Inc.'s renewables business, which closed in March 2023.

To speed up US development, RWE subsidiary RWE Clean Energy LLC is partnering with Dallas-based developer WhiteRock Renewables LLP, which will originate and develop 4 GW to 5 GW. RWE will have the option to acquire such projects as they reach maturity and are ready for a final investment decision.

The company has also issued $2 billion of green bonds as its first green US dollar bond placement, with the order book oversubscribed 3.8 times at $7.6 billion.

Despite cancellation, NY offshore wind seen still on track

Even though New York state officials April 19 canceled the provisional contract awarded in 2023 to Community Offshore Wind, citing GE Vernova Inc.'s decision to halt production of a larger-sized wind turbine that would have been used, the project remains on track.

"The company has communicated that the cancellation of the offtake contract does not have an impact on the [profit and loss statement] and balance sheet and does not change the development timeline of the project," analysts at Barclays told clients April 22.

"It is also very likely that RWE will secure an offtake agreement for its 2.3 GW share of the [New York] Bight seabed lease at a later point," Barclays added, given that New York and New Jersey plan additional solicitations in 2024 and 2025. RWE and National Grid jointly won the largest acreage awarded in February 2022 for seabed leases off of New York and New Jersey, in an area known as the New York Bight.

After Community Offshore Wind, RWE's biggest projects planned for the US are the 403.2-MW Cattleman Wind Farm and the 301.3-MW Peregrine Solar Project, both in Texas.

During the 12 months ended Feb. 1, RWE contracted a substantial amount of capacity bound for datacenters, selling a combined 400 MW from the Montgomery Ranch Wind Project and Stoneridge Solar Project, both in Texas, to Amazon.com Inc. The Peregrine solar facility's output is also under contract, according to S&P Global Market Intelligence data.

Iberdrola also investing more in US

RWE is not the only global renewables developer looking to invest more in the US. Spain-headquartered Iberdrola is also investing significantly in the US and in March unveiled a $2.49 billion offer to acquire all shares it does not already own, the remaining 18.4% stake, in US subsidiary Avangrid Inc. as part of an effort to scale up grid networks. The proposed deal comes after Avangrid's $8.3 billion acquisition of New Mexico-headquartered utility PNM Resources Inc. fell through in January, ending more than three years of negotiations.

Analysts at Siebert Williams called the proposal a "surprise" in a March 11 note to clients, saying that the offer was also "well below the current market price."

"Why Iberdrola would not want to leave [Avangrid] be after the company has deftly managed through its various significant regulatory filings that have provided a base of higher earnings and investment for future growth, while the company's fundamentals appear attractive and management has been managing its regulatory, legal, and market challenges adeptly is mystifying to us," Siebert Williams analysts wrote.

The Avangrid takeover is included in Iberdrola's €41 billion investment plan to accelerate electrification and achieve net-zero emissions in its power generation fleet as early as 2030. A little more than half of the planned investments, or €21.5 billion, will go to expanding and strengthening transmission networks in Brazil, Spain, the UK and the US.

Similar to RWE, Iberdrola contracted just over 330 MWW of capacity with US datacenter customers during the 12 months ended Feb. 1.