(Bloomberg) -- Avangrid Inc. agreed to pay $16 million to exit contracts for a New England offshore wind farm that has become “unfinanceable” after inflation and supply-chain issues drove up costs, its second cancellation in three months.
The US entity of Spanish electricity group Iberdrola SA expects to submit bids to win new power-purchase agreements for its Park City project in state auctions set for January, according to Ken Kimmell, vice president for offshore wind development for Avangrid’s renewables unit. The payment will go to Eversource Inc. and First Energy Corp’s United Illuminating, according to a company statement.
The move follows the company’s July decision to pay $48 million to exit similar power-purchase agreements for its Commonwealth offshore wind farm. Both projects, south of Massachusetts, are facing the same hurdles that are impacting the entire US offshore wind industry, Kimmell said Tuesday at the American Clean Power Association Offshore Windpower Conference in Boston. Inflation is driving up costs and higher interest rates are boosting financing costs. Those have all been compounded by the global pandemic and the war in Ukraine.
“That contract was bid in 2019 and signed in 2020,” Kimmell said. “That was before everything about the offshore wind market changed from an economic perspective.”
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