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Avangrid's $600M Notes to Fund Transmission & Green Project

Zacks Equity Research

Avangrid, Inc. AGR announced that it has priced an offering of $600 million. The notes carrying an interest rate of 3.150% per year are set to mature on Dec 1, 2024. The offering, subject to the satisfaction of customary closing conditions is expected to close on Nov 21, 2017.

Usage of Proceeds

The company intends to utilize the net proceeds of the offering to reimburse the construction expenditures in relation to a 208 megawatt (MW) wind farm in North Carolina that came online between December 2016 and February 2017. Additionally, it will fund the purchase of the 56 MW solar farm in Oregon that came into service on October 2017.

Further, it aims at using the remaining proceeds if any, toward financing additional offshore and onshore renewable energy projects. The company will also fund a transmission and distribution networks project that connects renewable energy sources with an objective to reduce greenhouse gas emissions.

Debt & Cash Flow Fund Projects

Avangrid follows the strategy of carrying out planned growth expenditure with the help of its cash from operations and issuing new debt. Toward this, for the nine months ended Sep 30, 2017, net cash provided by operating activities was pegged at $1.3 billion. For the same period, the company had approximately $4,767 million in the form of non-current debt. Notably, it exited 2016 with total non-current debt of approximately $4,510 million. The issue of notes will bring its non-current debt to a total of $5,367 million year to date for funding growth projects.

Notably, the company has plans of spending approximately $2.2 billion in renewable and network investments for 2017. It intends to expend an estimated $0.9 billion toward renewable investment and $1.3 billion toward networks investment for 2017.

We expect the company to continue to fund ongoing capital expenditure programs without Issuing equity shares.

Price Movement

Shares of Avangridoutperformed the industry in the last 12 months. The company’s shares have advanced 43.0% compared with the industry’s gain of 18.8%.

Such outperformance can be attributed to the company’s consistent performance over the last 12 months. The company has surpassed earnings estimates in last four quarters with an average positive surprise of 11.53%.

Zacks Rank & Stocks to Consider

Avangrid currently carries a Zacks Rank #3 (Buy). Better-ranked stocks in the same industry include Atlantic Power Corporation AT, PNM Resources, Inc. (Holding Co.) PNM and UNITIL Corporation UTL.  All of them carry a Zacks Rank #2 (Buy). You cansee the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Atlantic Power posted third-quarter 2017 earnings from continuing operations of 3 cents per share, beating the Zacks Consensus Estimate of 2 cents per share by 50%. It 2017 estimates have narrowed to a loss of 22 cents per share from a loss of 27 cents per share in the last 30 days.

PNM Resources reported third-quarter 2017 earnings from continuing operations of 93 cents per share, beating the Zacks Consensus Estimate of 85 cents per share by 9.4%. It 2017 estimates increased to $1.86 per share from $1.85 per share in the last 30 days.

UNITIL posted third-quarter 2017 earnings from continuing operations of 16 cents per share, beating the Zacks Consensus Estimate of 11 cents per share by 45.5%. It 2017 estimates increased to $2.03 per share from $1.98 per share in the last 30 days.

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