Pedro Azagra (Avangrid): "The energy transition in the United States is unstoppable"

Pedro Azagra is the first executive of Avangrid since last May.

Although he is new to the position, he knows the company very well.

Not only has he been a director for many years, but he helped shape it with a series of acquisitions when he was responsible for corporate development at Iberdrola, which controls 81.5% of the company.

In the first interview that he grants in his new position, he highlights how Avangrid is committed to the energy transition towards renewable energies in the United States, which he considers “unstoppable”.

“We are very proud to be part of the energy transition in the United States and we believe there is no turning back.

Of course, there are people who make a lot of money on gas and who try to delay the transition, but it does not matter.

We are going to continue and we believe that there is no turning back and the road is unstoppable.

We need the support of politicians in granting permits and in ensuring a stable and predictable framework.

But the story is simple.

It will continue and the world needs it”, explains Azagra.

Azagra granted the interview at the New York Stock Exchange building, where last week the Orange (Connecticut)-based company presented the company's future plans to analysts and investors, which include investments of 14.6 billion until 2025.

The manager underlines that the wind is blowing in favor with the Infrastructure Law and the Inflation Reduction Law.

“The law to reduce inflation is going to generate a wave of investment in renewables without a doubt.

When you have financing of 350,000 or 360,000 million and they allow you to sell tax credits on the market, that will boost investments, which were already very strong.

We have a 10-year framework that gives us a lot of peace of mind, but progress has not stopped.

Even in the presidency of Donald Trump, he did not stop building renewables in the United States.

We are going in the right direction.

Would we want to go faster?

Yes. Do we have our opponents, like the gas companies?

Yes, we have always had opponents, but we are still on the road”.

In Maine, for example, where Avangrid is promoting a line to transport hydroelectric power from Canada to Massachusetts, it has been another power company that has opposed the project because it has gas generation in that area.

"It's a competitive reaction protecting your situation," he says.

Azagra explains that there are banks that are stopping financing companies that have coal plants and do not have a credible closure plan.

The entities' own shareholders demand ESG (environmental, social and corporate) values ​​from them.

“In the United States the change that has occurred in renewables is brutal.

Coal is practically becoming history, a new plant is not being built and closures are accelerating.

That was unthinkable 6, 7, or 8 years ago, unthinkable”, says Azagra.

Avangrid electrical transmission networks, in an image provided by the company.

What is the impact for Avangrid of the regulatory changes?

"Is positive.

There are a series of measures that we think have a positive impact on cash of at least 50 million a year.

Then there is the impact on results, which is computed here once and which we have not yet 100% quantified, but we think it will be positive.

The tax authority takes time to analyze all the aspects and it will also be necessary to see project by project, but what has already been approved is positive” he explains.

The bulk of Avangrid's investment for the coming years will focus on transmission and distribution networks, rather than on generation with renewables, but both contribute to the green transition.

“Investment in networks goes hand in hand with the deployment of renewables.

The new generation and transport and distribution have to go together.

On the one hand, some networks are already 60, 80 or 100 years old, and the network needs to be updated;

on the other hand, consumption is rising and it is doing so in places where no more generation is available.

The planned investments in networks in our companies in the United States are brutal, in practically 10 years we doubled the regulatory value of the assets, it is almost like setting up a new network the size of the one we already had”.

Partner Search

In the presentation to analysts, Azagra pointed out the possibility of selling assets amounting to some 2,000 million dollars.

“It's the same thing we've done in the group.

I have been in the group for 20 years with purchases and sales, we want to do so many things that we do not always have the financial capacity for everything that we have on the table.

In the end, the fact that we look for partners to participate in 50% of some projects is what we have done all our lives”.

Recently, Iberdrola has announced an agreement with Energy Infrastructure Partners (EIP) for the sale of 49% of the Wikinger offshore wind farm, in German waters of the Baltic Sea, for 700 million euros.

In the United States, it has a 50% stake with Copenhagen Infrastructure Partners (CIP) in the 800-megawatt (MW) Vineyard Wind 1 offshore wind farm.

The chief executive of Iberdrola's US subsidiary points out where these divestments can go: “We already have a partner in the Vineyard, so in the other offshore wind projects we can also incorporate a partner.

In solar energy, attractive prices are being paid right now, so we can bring in partners and with what we recover, we invest again and maintain credit ratios”.

Avangrid owns 100% of Commonwealth Wind (1,200 MW in Massachusetts), Park City Wind (804 MW in Connecticut), and Kitty Hawk Wind (2,500 MW off the coast of North Carolina).

Avangrid's Gala Solar photovoltaic power plant, outside Prineville, Oregon, in an image provided by the company.

“We have a plan that right now contemplates a capital increase, but with 2,000 million in divestments, the capital increase may not be necessary.

We are not saying yet that it is not necessary, but our history shows that we ended up doing the divestments, ”he adds.

Two of Avangrid's large projects are now paralyzed and pending in court.

In Maine, the company recently won a major legal victory, with the state Supreme Court overturning a referendum opposing the project if the company can show that it has already started.

“The Supreme Court has been very firm and we can show that we have invested 500 million.

One does not invest to have a legal case, we have invested because we had a very prepared plan on how to build the line and we were executing it”.

In any case, the project is also awaiting another decision from the state Supreme Court on a lease of the land through which the line passes.

The other major operation pending before the courts is the purchase of PNM Resources, the New Mexico company that concentrates 6,500 million of the investments planned by Avangrid until 2025, counting the acquisition of the company and the investments it makes.

The purchase was up to regulators in Texas and New Mexico.

Those from Texas gave the green light to the operation, but those from New Mexico rejected it for not considering it the best alternative for the interests of consumers in a decision in which they used as an argument the investigations into Iberdrola and its directors for the Villarejo case.

Azagra underlines that of 24 parties, only one was opposed to the transaction.

“In any other state it would have been approved.

We do not agree with the arguments that were given.

These are reasons that have nothing to do with a merger case.

We think that the law in New Mexico is not being complied with, so we have resorted to the Supreme Court, we are waiting for the hearing, which we hope will be soon, and then to wait for a decision from the court.

In parallel, the commission changes on January 1 and we have to see what the alternatives are."

Avangrid is not considering restarting the procedure, but it is possible to renegotiate or try to reach an agreement, he explains, depending a lot on what the court says.

Avangrid wind farm in Ohio, in an image provided by the company.Michael McPheeters

Avangrid has a market value of around 17,500 million.

Its main shareholder is Iberdrola, with 81.5% of the capital.

"We are proud to be part of the Iberdrola group, not to go it alone, even though we are a listed company and we also have minorities in mind, but we are proud of the group where we are and to benefit from everything that Iberdrola gives us," he says. Azagra.

Azagra sees the coming years with optimism.

“We have a powerful team, very committed, with the desire to eat the future.

We are mainly a network company: we have to have zero failures in regulatory issues, zero failures in operations.

On the subject of

the projects have to be profitable.

Vineyard is going phenomenally and in the following projects the numbers have to turn out well.

Now there are supply problems, with increases in the price of steel and raw materials, so let's delay a little, we are going to renegotiate and make the projects profitable.

We want to help the energy transition, but we have to do it without losing money.

We have to continue to be the first to do certain things and then we have so many things to do that what we have to do is deliver, quarter by quarter, and year by year, and we have to do that for the next seven years, until 2030. And in the meantime look for opportunities”, he concludes.

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