PNM solar array in Santa Fe County, courtesy of PNM
By Collin Krabbe, Albuquerque Business First | October 21, 2020
A New Mexico Public Bank could reduce the need for our energy companies to create deals and mergers with out-of-state companies as New Mexico transitions to renewable energy
A proposed merger between Albuquerque-based electric utility PNM Resources, one of New Mexico’s largest companies, and Conneticut-based Avangrid Inc. sent shockwaves through the energy community. The deal — worth $4.3 billion — is expected to lead to “substantial” job increases for PNM and a quicker adoption of renewables, officials said following the announcement on Wednesday.
But some burning questions remain, mainly about how and why the deal came together. PNM Resources Chair, President and CEO Pat Vincent-Collawn shed some light on the topic. During an investor call Wednesday she said the transition away from coal “has created challenges” for the company.
Those challenges refer to significant investments that have to be made into things like transmission lines and grid improvements as part of the switch, PNM Resources spokesman Ray Sandoval said.
Without a large enough financial footprint, PNM would have to use investor capital and debt financing to make those improvements. And due to its size, which Sandoval said is small in the realm of commercial utilities, the company would have received higher interest rates on its debt financing. That increased expense would have been passed on to customers, resulting in higher energy bills, Sandoval said.
But under the merger deal, set to close in late 2021, PNM’s switch to renewables would be backed by Avangrid, which is a larger company that has more money.
“PNM being this… small company, was really at a disadvantage,” when it came to transitioning to carbon-free energy production, Sandoval said. “We see the potential [of the merger] for really helping us solve all of these obstacles.”
Based out of Orange, Connecticut, Avangrid is an energy company with about $35 billion in assets. It employs about 6,600, according to its most recent quarterly report. That makes it much larger than PNM Resources, which employs about 1,800 people throughout New Mexico and Texas.
For Avangrid, the merger positions the company as a clean energy leader in the U.S., with a strong market position in energy distribution and transmission, as well as renewables, said Athena Hernandez, the company’s manager of corporate media relations and sustainability.
When the transaction clears the necessary regulatory approvals — which could take a year — the combined company will be comprised of 10 regulated utilities in six states, and renewables operations in 24 states, Hernandez said in an email.
Avangrid is majority owned by Spain-based energy conglomerate Iberdrola. It has two primary lines of business through its Avangrid Networks and Avangrid Renewables.
Avangrid Networks owns eight electric and natural gas utilities, serving about 3.3 million in New England and New York, according to its quarterly report. Avangrid Renewables, on the other hand, could be instrumental in helping PNM and the state achieve their clean energy goals.
Under the Energy Transition Act, passed last year, New Mexico utilities must achieve 50% renewable energy by 2030 and completely carbon free energy generation by 2045. PNM has an even more ambitious goal, hoping to go carbon free by 2040.
Avangrid Renewables, headquartered in Portland, owns and operates a portfolio of renewable energy facilities mostly using wind power. The subsidiary recorded $272 million in operating revenue during the second quarter of this year, according to Avangrid’s quarterly report.
PNM hopes to leverage the renewable energy tools used by the Avangrid Renewables, Sandoval said.
The combined company will have $40 billion in assets spread across 24 states once the deal is completed, making it a top 20 U.S. utility when measured by equity market cap, according to PNM. The deal will also lead to “substantial” job creation, Sandoval said.
Gov. Michelle Lujan Grisham’s office is optimistic about the deal, saying in a statement that “Avangrid will bring more resources to the table to assist the state in reaching the essential benchmarks set by the landmark Energy Transition Act.”
An Avangrid Renewables representative was unable to be reached for comment.
