Shares of Avangrid Inc (AGR) — a holding in our Aggressive Portfolio — have underperformed the Dow Jones Utility Average so far in 2022, observes Roger Conrad, editor of Conrad's Utility Investor, — and a participant in The MoneyShow Orlando, October 30 to November 1. Register here.

This is no surprise, with the US arm of 81.65 percent owner Iberdrola SA (Spain: IBE) (IBDRY) facing regulatory and operating uncertainty on three fronts. And Wall Street is obviously skeptical, with six “underweight/underperform/sell” recommendations by Bloomberg Intelligence-tracked analysts last month.

Why bet now against the crowd? First, there’s an utter lack of expectations that won’t be hard to beat. Second, Avangrid insiders are bullish as considerable net buyers of shares the past two years. And most important, the company is on track for a favorable resolution of at least two of these issues, possibly as soon as the next six months.

First up is the likely close of the proposed PNM Resources (PNM) in early 2023. Last December, the New Mexico Public Regulation Commission said no, citing concerns over previously resolved operating issues at other Avangrid utility units.

On January 1, however, they’ll be fully replaced by state Governor Grisham under the state’s Energy Transition Act. As the governor continues to support the deal, it’s a fair bet her PRC will reverse their predecessors’ rejection.

So even if Avangrid and PNM fail in their appeal to the courts, they should still be closing their deal in Q1. And the resulting larger portion of regulated revenue should enable the company to raise dividends for the first time since October 2018.

Avangrid’s current guidance for its 800-megawatt capacity Vineyard offshore wind project is initial startup in second half 2023 and full operations in 2024. With a 100 percent contracted supply chain, the project appears to be on time and budget, as are the company’s Park City Wind and Commonwealth Wind projects that will also serve Massachusetts.

Even before these projects start generating cash, shares could get a big lift if the company can start work on the New England Clean Energy Connect power line. The company won a key court case in Maine in late August that should allow regulators to move ahead with final reviews of the project. Buy Avangrid at $52 or less.

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