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Avangrid considers more US clean energy project bids outside Northeast

Avangrid Inc.'s decisions to exit the gas storage business and explore beyond the northeastern U.S. for opportunities in renewables are part of its focus on a "smarter and cleaner energy future," CEO James Torgerson told analysts Feb. 20.

The company is considering going outside the Northeast region to bid on requests for proposals and invest in new opportunities, CFO Robert Kump said during the company's fourth-quarter 2017 earnings call. Avangrid would focus on transmission projects, such as its subsidiary Central Maine Power Co.'s New England Clean Energy Connect transmission project submitted to a Massachusetts request, and would look for opportunities in which Avangrid Renewables LLC could participate.

"If you look at estimates, the amount of transmission that will need to be built over the next 10 years, they run as high as $150 billion, or $15 billion to $20 billion a year," Kump said. Avangrid and its Spain-headquartered parent, Iberdrola SA, have experience to leverage and are developing a team to look into potential markets.

A possible U.S. expansion combined with its gas storage business exit are part of the company's efforts to be a leader in renewables and an energy industry that is embracing sustainability. Avangrid Renewables added 590 MW of installed capacity for solar and wind in 2017, bringing its cumulative capacity to 6,495 MW. Torgerson said the company projects installed capacity of renewables will increase by 2,700 MW through 2022. 1,400 MW already are secured through power purchase agreements.

"We have renewables, we have networks. Those are the two businesses that we're going to be in for the future," Torgerson said. "And we want to maintain our financial strength while delivering sustainable value. So we're going to grow with sustainable value creation in those two businesses."

Avangrid is expected to benefit from investments in its renewables business, especially in wind generation, CFRA Equity Research analyst Christopher Muir wrote in a Feb. 17 note, saying, "New power purchase agreements for the sale of output from renewable plants should lead to more stable earnings from the segment."

Offshore wind on horizon

Another area in which Avangrid hopes to have Iberdrola help it grow is the budding U.S. offshore wind market. Avangrid Renewables and Copenhagen Infrastructure Partners K/S submitted a bid for their Vineyard Offshore Wind Project for Massachusetts' offshore wind project solicitation in December 2017, but Avangrid Renewables CEO Laura Beane said the company wants to go beyond the Bay State.

"I think offshore is our next frontier," she said, noting that much of the Northeast region, including Connecticut, New Jersey and New York, now have specific offshore wind targets. "We're watching a healthy competition starting to develop between the northeastern states and now who's going to be the first in line for offshore wind."

The Vineyard Offshore Wind Project could come online as early as 2021, making it one of the first U.S. offshore wind projects to follow Deepwater Wind's Block Island Offshore Wind farm in Rhode Island. Beane said that could set the stage for how the rest of the domestic industry shakes out. In the European market, the costs of the projects, ports and infrastructure for offshore wind dropped quicker in regions that first built those projects. The same could happen in the U.S.

"Whoever gets started first is likely going to be the foundation or one of the primary foundations for the U.S. offshore industry," Beane said.