QIA has joined what promises to be a gold rush in US renewables generation, buying a minority stake in US sustainable energy company Avangrid for US$740 million.
The Qatari sovereign wealth fund acquired a 3.7% stake via a wholly-owned subsidiary Hyde Member in a private placement. Majority owner Spanish utility group Iberdrola also stumped up US$3.26 billion of common stock to maintain its shareholding at 81.5%.
Avangrid is using the fresh capital to pay for its planned merger with US utilities holding PNM Resources as well as paying off a US$3 billion loan to Iberdrola and funding its investment plan.
In 2021, Avangrid has targeted US$1 billion investment in renewables and is planning to deliver 690MW of wind and solar projects. It is also building the US$950 million US-Canada New England Clean Energy Connect transmission line project, running 233km from Quebec to Maine, due to begin operations in 2022.
The Avangrid deal brings total QIA private markets investment in the US to over US$16 billion from 2015, 66% of which is real estate, 21% is infrastructure and the rest in private equity investments. Global SWF anticipates QIA will follow other funds in increasing its exposure to the US’s fast-growing infrastructure market, with renewables an increasingly important element. QIA has lagged far behind its peers in investment in renewables, with Arab Gulf funds deploying significant capital in the sector.
The US is set to be a global renewables front-runner over the coming decade. The Biden administration’s US$2 trillion accelerated investment program to rebuild the economy, including an intense focus on renewables infrastructure, should set the US on course to meet the ambitious climate progress demanded by its re-commitment to the Paris Climate Accord. However, this could be at the expense of energy sector investments, such as mid-stream oil infrastructure, which still play a significant role in the portfolios of some SOIs.
Since taking office, President Biden has rejoined the Paris Agreement on climate change and hosted a Leaders Summit on Climate in which the US committed to reduce net greenhouse gas (GHG) pollution by 50-52% from 2005 levels by 2030. The power sector, which represents 25% of US emissions in 2019, will be a focus of attention. Biden is aiming for a carbon-free power sector by 2035, leading to a boost in government efforts towards accelerating energy transition.
Offshore wind produced by companies like Avangrid will play a major role in the renewables effort. In March, the White House released a joint statement from the Departments of the Interior, Energy, Commerce and Transportation Departments outlined a set of actions aimed at rapidly advancing the development of the US offshore wind industry, with the goal of 30GW of offshore wind in the US by 2030.