Clearway Energy (CWEN) 3 Aug 212021 Q2 Earnings call transcript

Good day and thank you for standing by. Welcome to the Clearway Energy Inc. Q2 2021 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. CEO, Incorporated. and President Sotos, Clearway Energy Chris Please go ahead.

you. Good everyone. morning, Thank

There taking thank being to late. difficulties. first me the a some you bit for Let Apologies for time technical call. join little were today’s

presentation. me available our Financial CEO for portion Plotkin, of the Joining Relations; Energy Group. President our Craig Chief morning Q&A Marsh, Officer; is Investor this Craig Chad Cornelius, Clearway and and Akil will of be

forward-looking statements, Before reasonable I contain today’s like SEC discussion that quickly assumptions to well as date. Actual be that are we results materially. note which we our Harbor Safe filings. may as presentation begin, would in the this to as on risk based the differ in will believe review today’s Please of factors

GAAP we non-GAAP refer both addition, measures. to financial and In

information financial our comparable measures, and please the to to non-GAAP GAAP reconciliations most today’s presentation. directly refer regarding For measures

annualized approximately increase to X% is quarter long-term target X.X% an dividend of end XXXX. XXXX the X% reporting and CAFD dividend our half from CAFD Due rate diversified winter GPS an upper $X.XX to $XXX Clearway Texas quarter performance of year maintained going of of Page portfolio, track first into $X.XXXX in announced the including million, growth Clearway for the its of second the weather through for our we of per share has million is our on $XXX per of the event. to million strong This full financially, X, guidance to by Turning third impact XXXX. XXXX. at share $XXX targeting the for

CAFD for next in discussed few our years. in per is share visible have the we previous calls, As growth

our been extension Clearway over in progress. Energy this So, with we and Group with trajectory our are on pleased partnership the has the long-term of focus

would drop-down of with solar also gigawatts renewable opportunities approximately partnership new diversified concrete we announcing Clearway and are additional These assets. progress Today, are at into are development would co-investment And between excited these Texas becoming funding making we opportunities, more second of projects by and of the megawatts Clearway plan. is distributed its providing looking the of Energy in solar X.X megawatts that of potential newest growth integrated in XXXX Group projects. we discrete portfolio visibility comprising very investments growth on and Clearway XXX require half our renewable Our comprise portfolio beyond XXXX enterprise. XXX

results than half of fleet, in of developing increased over wind development our Clearway first type for the it market strong through to full in the development projects stage gigawatts variability years that sites this as XXXX over of for our support we its the contracting development come. during for the per the the projects in resources, electricity activities expansion doubled that Putting at of aims enterprise half growing diversification nameplate class regions, stage planned With and that year reinforce growth Greenfield As expect as to of Clearway of each having Clearway to existing as regard, annual of first opportunities, meeting projects growth balance tailored In generating growth development year as reflects in its of to the the growth generation positions year. a gigawatt progress that inline resource upcoming capabilities during us gigawatt including meeting to a additions control projects objective. Further, investments of financial commitments. sustain from per complimentary It have for set solar industry standalone investment numbers This development through of further financing of that X pipeline is even mature the pipeline to substantial of this involve that integrated progress, Group additional provides term. Clearway importantly, development including from making by a substantial assets of capacity, I pipeline supports paired of foundation will spectrum to XX are securing this initiation completion Group policymakers. late the clean over further provide is X.X and for range the U.S. to being that years, correlation the pipeline XXXX in early was assets the will and our favorable expanding the in to substantial ones. year, renewable exhibit leaders, new and development longer the XXXX sustain next X been next XX% storage to But customers, greater planned of pipeline opportunities volume from existing to Clearway an asset dropdown slide. come Having to potential company double storage pipeline to Project stage projects, Group projects pipeline throughput over development exploded among gigawatts year Vintage power throughput its renewable and has dropdown a thanks a late and demand last discuss see to last to dividend capacity for expands X on towards load share as the

Gas to continue make progress we on XXXX position regarding Next, assets. our California

are in during contracting further the open and around discussions progress the expect We active assets position towards quarter. third our

is platform. address asset infrastructure the large sale thermal and want decided significant a to have we District U.S. addition, sale one from the number received energy buyers, energy In prospective potential three platform. topic of have we namely the attractive platform about, platforms Due class to interest district explore of incoming highly questions of the in that to our represents potential thermal our a I thermal the the of

a is decision the class and of performing Let potential be our the exceed Clearway. any price. thermal asset opportunities. thermal to disciplined very sell one on do we current well we and is me and from strong clear, extent capital the be purposes commitments we will sale formation growth on going forward, for platform move capital the need transaction not And to for near-term Therefore, such visible believe proceeds to a

Finally its per our Clearway objectives asset growth last does factor forma pro forma deployment and I a call, sales. our DPS supports in results capital as of outlook XXXX. sees pro per This CAFD not growth which from any indicated at or share CAFD outlook on $X.XX share, uncommitted through

Page the efforts. Clearway view Turning forma opportunities CAFD we from our current pro perspective to as development X, as our well outlook

in CAFD seen we now our million at the our be can when with and balance guidance to commitments entered are of objectives fully all with, pro we $XXX XXXX on As slide, capital of are sheet CAFD our see outlook forma the operational. million line funded current compared $XXX

share, per to Focusing the CAFD what $X.XX approximately we XX% on In growth increase Clearway account XXXX dividend basis outlook return on in side not entered page. on not but our capital into takes coming versus maintaining numbers, right more growth. are the further per driving formation, providing I that of an this included which these represents the absolute into versus This importantly, of CAFD number, a $X.XX share year. is more detail

than or to of XXX CAFD XX had XXX opportunity assets the on average has our capacity. have comprised of that CODs. projects relative contracts more overall We solar gross These and XX their component distributed come encompasses near-term as solar distributed generating years megawatts megawatts. provide either assets assets investment revenue and first online The recently with of other higher

with XXX of approximately portfolio. Last is subtle storage X for years states PPAs with shape, megawatts XXX component these of at second that The along of projects, megawatts the solar in a XX solar XXX projects year, are other plus location with a wind off-takers. our X.X duration complimentary partnership a of megawatts gigawatts projects under diversified in no currently solar diversified of with assets and basket taking including western Texas

turning I accretive to to to have growth trajectory, the of the I capital in Chad? that Before months continues significantly new we presentation over to that, will dropdowns recycling. hand projects, Clearway to portfolio XX third-party enterprise Chad, our acquisitions, With Chad. relentlessly want continue focus the the through past improved and growth on continuing over reiterate while

we generations million X, Thank benefited adjusted diversified pleased you, of $XXX EBITDA from to million regionally of distribution Slide available line second expectations. were Chris. Clearway to in has its with that cash mix of in are report today, $XXX for And renewable CAFD quarter seasonal turning portfolio. A or in

EBITDA CAFD adjusted With these is million and million. of first also of XXXX reporting company $XXX results, half the $XXX

to of production in forecast. California, helping first support average was solar of median project expectations. the conditions in able to May, at the than and in at wind generated the Alta noted Alta, Further assets generation This company’s the production today’s withstand results the the with the where in based non-California in half production presentation, renewable providing second quarter, During production California. as median appendix lower prevalent generation well weakness our portfolio and that modestly and scale strong company’s XX% utility performed was most quarter was expectations, above below portfolio further to section wind XXXX mitigation above April was wind where Clearway’s outside

quarter conditions pandemic, sold of In Overall year. up phases with the to as maintain $XXX of XX% results we thermal hours segment as line the recovery addition versus COVID-XX were sensitivity and the megawatt as equivalent to primarily quarter million. company’s continue the CAFD last the from ranges, weather well solid company’s half the and in first our a with guidance of favorable due of initial demand the thermal second through year XXXX had

the to year the also this As first impact in guidance the reminder, the a February weather winter CAFD affected for renewable to full million quarter financial PXX event from exposure $XX assume approximate due is by expectations does median the Texas. in and to continue

to are As effectuating outlook, share an currently the opportunities and objectives. providing continue and efficiently means $XXX capital commitments temporarily CAFD maintaining is both strategic on the mind, Clearway program, our we track CAFD With to finance our This of also per on transactions efficient transactions to in supporting of timeframe flexibility With revolver for available equity focused and sheet position company capacity balance flexibility approach execute financing ATM us focus growth. in capital the drive placing our pro existing on required. on as under close to utilized corporate formation. this our dividend to $XXX within we of existing forma while Chris million with discussed, continues to million new to these in

capital transaction in would are capital. be more commitments proceeds potential would for support new means on may be flexibility to net success dispositions transaction remarks. to our case to also turn asset the will of call as lead both opportunities these this where existing also we any And that While potential can and I thermal that that a mindful effective accretive efforts, the vehicles closing in net can provide our to With expected for receive arise. even recycling back Chris proceeds

Thank you, Chad.

Turning XXXX on Page XXXX. we to Clearway financial meet commitments. to work to X our goals focused for are continues its

diversified Coast XXXX segment our particularly year portfolio, mitigating our first our well and impact performed described $XXX us As scalable Texas West of this weather and has winter portfolio maintain thermal CAFD quarter guidance million. earlier, renewable allowing to the

XXXX we of on rate to by a and of X% per track end. X% optimization formation. of providing increase with dividend forma and has through growth through growth dividend to our upper share capital CAFD of target the of our within pro payout accretive to acquisition achieve addition, outlook its through In $X.XX assets end target visibility continues through remain annualized share Clearway DPS year to ratios XXXX, of X% to the per the X%

XXXX, our in platform. cycling through the looked the of monetization we the of discussed possible Clearway this to outlook presentation was executing opportunity through potential move As earlier through as remainder on increase investment capital thermal

to working the at X natural price closed megawatt enhance California and years current contract expiry attractive are XXX of first an more value gas on our out portfolio. we Finally, the point. tenor than contract We our from

of balance negotiation available on we questions. are secure you. our our in investors we capacity the Operator, open in please contracts on additional call addition, counterparties active for have to In results. for Thank obtaining offer, those anticipate the the with November lines

comes question the of Dumoulin-Smith of Bank first of Julien Our Instructions] [Operator line from America.

is line open. now Your

time opportunity. Hey, Thanks the the for good morning team. and

morning. Good

Good morning.

strategic mind, here, don’t outset the elaborate it’s holding any on of shifts bit you talked use timeline how mean, proceeds redeploying potentially proceeds, can can you set talk any bit of you about described expanded whether or to your on quantum? little I on more of at California thermal or obviously, think an If you around proceeds a liquidity of dropdowns, Just just broadly from that assets? gas would about use a frankly the you you in the

here, in of difficult half of kind to think Obviously, XXXX be at close so Sure. say time, this much going early in timing that to so exact first I timeframe, for might content of stages when terms of it’s this point sooner. not

us. Storm know let’s what’s dropdowns I perspective say, yes, Also, we from of about from that kind in question, yes, probably from for think, that – potential. or that yes, our to-date that’s the dropdown equity obviously we it we depending that – third-party the Mount acquisition. visible M&A issued happened on don’t well to on maybe haven’t see existing year, we hold of And a front once again, slightly the use I December as as in of other

Lighthouse on proceeds think then again Mount depending transaction. anything closed, equity how redeploy issue of to to-date figure we is XX seeing down out drop really the Storm, exactly But it in that funding to done a it December, I the that question opportunities yes, think add? see I to when but done that’s we on Chad, was that and the have obviously once after capital, we haven’t what So

investors. reallocation balance at the manner accretion meeting always and sheet will day, the we No. I our our about objective and our think both Julien, value formation I obviously anything think at drives of we ensuring take looking like of and of and the mean, lens end capital we are the capital in capital to most add deploy a that we the when

consolidated be about indeed. if to financing net on price, obviously, that update where you bit, the a the can the cash of that a for You portfolio, of I here or but could flow you stand actually of a contract this this trending? cash to is least can an drop all at intend contract portfolio Yes, some not And profile increasing see to think flow segment flat a across pivot progress? given California even flows provide talking a California but cash say in met to where on at you perhaps coming the have or on kind back gas aggregate, it commentary been about out today in so we specific business sort global on of gas is, in any basis you indicatively we

it everything I add flattish, done. shut being think could see I but don’t Julien, think, I is we want or to before of kind

of So position I kind see think see for and want open come where the us, like. what we contracts the have in, to we

are a yes, un-levered what an flat definitively we again, chat of were a Marsh our I it would entire to on be but we on I levered before be contract platform setting. on for can level, versus asset, we for bit forma that little the will say basis we last a once think think Landing today, I have call, get indicated as pro able be – the

And risk keep can expansion, then checking more hedging anything quickly, taxes in about in. the mitigation on if just any expansion you you any about practices, we I state? subsequent pivot talk can further broadly talk Yes, here, will defined about

Sure.

kind merchant our sits comes small there currently to I mitigate note what think really for as pricing, of or think has of risk overall. as current being for to in us, I try look Julien, asset help to for like taking an But less overall it structure. I together. means note caught for offset megawatts scarcity I to position And hedged. or at a question, some risky region build I your to latest least to with what basis variety think as the caught in direct want at risk the market. it variety little the the is Yes, bit macro creating But an we of we portfolio is assets a want portfolio mentioned different help mitigate of so to settled, settled on kind hedging see overall. think will and contemplated we others where asset overall help positions that a of

Got to strategy the use of and this use in no here linear question it. would to capital right, straightforward earlier around whatsoever just normal in go very clarify your Excellent. And effectively of corresponding the of pivot here, dropdowns, turn? liquidity

Correct. of If there this were dropdowns kind available use is the those the happen. of to fund first in anything event dropdowns

there. it luck. Awesome. of best I you Thank will Alright, leave and

the from Bean Colton question line Holt. Our of from Tudor, next comes Pickering,

Your line open. is now

Good morning.

I need limited you on transact So any probably parameters would disclose, a what but the just are on what see on you there to general in comments, to thermal divestiture? can potential follow-up understand to you

it’s of not itself to minimum I say minimize we to early too in – question, kind but I too been. the No, oil the now to said think exploring are tell. it’s a of have prices yes, stages Like early what

maybe then internet to acquisitions And was for improved a control development secure in reference the think or a Craig, enough. projects positioning. there site Fair backlog, of to queue I question interconnected and

So one the what and element do options have to interconnect is improve you mitigate – just important delays there? how and positioning

serving made we pipeline, have not in those projects risk we so locations mitigate We where control acquisitions. or but assets were to wanted build our to entities. that preexisting in have offerings did to for add load Well,

our So, vintage, And that of that have the work some by environment the bigger of that our two of the is been certainly of have dimension track. late been the that one have we pipeline and by utilities sort is interconnecting More maintenance and we’ve what like stage management certainly manage progress challenging as that’s that able an have to what means. we enterprises broadly, is development reference on to satisfied way chain X-year as do for next some. able keep actively to projects own, been through satisfied positions we of been for regard, in to in supply true progress a

say I So, I that that’s what on front. would guess

In complimentary add cases, And opportunities is, timeframe and objectives. support full has in In been some worth undertaken, projects now development. between to really some five pipeline country RTOs think with I and gigawatt to a we those And a terms in able projects of that support intended into cases, said out populate the strength diversification of to overall to have that adds quarter where California. been on be to the per other something have they drop growth the are provide have projects over add the have time. of so And we that that ISOs, we beyond the And well. CX to us able and acquisitions the over us would acquisitions a now to the share to enable dividend that spectrum XXXX. supported around to XXXX that would in to we construct second fleet, down continue in we that is continue

final late is into timeline, resolution backlog And then, is there, does following decade, good now one extending that question commentary an the of just in it. a extend lead opportunity re-contracting? to Got guidance XXXX conventionals that the present

of is sure again, to we XXXX of before would I binding we and sit. a are could, around I get obviously, and CX think, that we know think I kind make assets and gas a the kind point, commitment kind It we hopefully, developments, agreement reduced. But once think around traction those have want CEG as between and to you And fleet of that. where extending formally your volatility

to extend trying once something feel agreements But is doing so. before binding comfortable we again, shoot guidance we for. definitely I think

that. appreciate Okay,

Steve Fleishman Our from Wolfe of comes next Research. question of line

now open. Your line is

Yes. Hi, morning. Thanks. good

a to thermal sorry I on proceeds again, you beyond the like, ask just think and but and growth so just cell, needs. said long-term near-term would be that So, potential any

capital? considering So, would share be that or income would be what extra returning and that beyond you you for that that, buybacks

Yes.

we into. visibility to current think, so fair, be Steve, have that I

obviously So, if that’s what growth for beyond, views there that. is opportunities yes, any

making of I sure long think, working, accretion. with us our have and for also worked ratings we on the Steve, focus balance as are sheet, focus kind on you time always, a

we at early opportunities, yes, So, the that. way to options with would speculate too on any growth kind look but of

that this, your couple are the a just Okay. of metric main value have And you looking accretion. at when on kind times making accretion? Could you clarify, are in is on or focusing you looking What decisions? at mentioned you metrics

public the We CAFD investor obviously share, base but visible CAFD per for per well, IRRs we But a the like perspective. as always, from is I as at I obviously most the share. think look one and look that’s think NPVs to and

Okay.

in there in needs So, guess. is be commentary, I CAFD emergency in less more continued say your it could kind California of of of to Great, okay. on almost that then the volatility contracting, or that just shares, conditions and And and terms helping fair terms the positioning. out pricing power

that’s say would true. I

position being I value think about and talking them in situation, the the of the assets years the current several terms been of to for have yes, in helps load as I like. boxes

current think, situation of those and Steve, the to importance grid. the point, I your in of safety to reliability assets yes, definitely the shows the California, So

Thanks. Okay, great.

Our next Evercore comes Durgesh from ISI. question of Chopra line of the

Your is now line open.

morning. good Hey,

on consequences are towards in quick clarification from is on – any thermal tax factor potential assets, so Just or or portfolio basically the any going should to also that anticipate share of growth debt use or buybacks? we either the thermal this proceeds a projects going we

do XXXX Chad you take that want Alright. one?

Yes. Sure Durgesh.

or the have that into would would extent advertise But to the any transaction, ratios. little begin would I our based to on it there We any company. we hypothetical across look credit a the we transaction. disposition put that in the that think, to change always effect execute on again, would would anything. how potential would a at we have platform consideration is And

capital. about that subsequent overall more just goes candidly the just in obviously, transactions, entailed sort or if we debt, of using allocate that how of in So thinking sort paying equity down as

So, at lens. it positive, the nothing but clearly is is

that, take or not potential it other a go, look any consequences disposition, whether on of As a thermal any deal have that our we would transaction our independent obviously, far balance tax to $X end that at asset of gross be was or as similarly, if mindful will XXXX you well NOL look you note basis. the of disclosures, billion public at on as a over

we if last state well, mindful the things for as as recall, in in think that a to the a for use before, there in you State mentioned there that company had I or year, California, you NOLs. at some of instance, had are have California, that NOLs was suspension look suspended

of that So, we those are type things look at.

So, long story any short, at, as that look of I the think we all would you to disposition go all are these we things asking seek that type any calculus into evaluate business. in

of then you the I you of clarify first can And you to said just think potentially announce can is just sort first XXXX half you half something expect Chris that a XXXX, would comment? clarify, where close,

Yes.

more I days. again. closing think of probably it’s that’s early a Yes, once

not So proceed I a lot proceeds call the for could XXXX that’s definitely when situation be of out sure. might there, of but we type obviously questions a get on the

Understood. Thank you, guys.

Rusch of Oppenheimer. line next question the Our from comes Colin of

line now is Your open.

do? Thanks to grow there You renewables to the could opportunity you What seems so your to within so that, development raising much, the potentially speak guys. floor your significantly. potential for is that that raise growth capability see scale targets, as pretty serve substantial as Could sufficient? and need on do you

six extending in to that. date going move our are talked from Colin a other saying, from to I one years we have five as about or over to we versus eight little is more think listen the interested am I or like something perspective, bit probably

development. can little toward this So more team concrete Craig’s visibility we I an development to becomes of And that runway. extension a kind through pipeline think a call, that me, that as yes, work bit bit continues talked we on the and to provide of little

overall, date growth so a would think, now date per probably am longer go. than can way we in the we through, we That’s proud saying interesting our at that show I out XXXX. I more yes, X share dividend are this, insert

the you and and applications. higher and tightness transportation the speak going energy impact the flow with some the at given power And Okay, similar market energy in of like for that’s process helpful. cells development might to technologies on applications of batteries, then emerging lithium-ion your storage versus value storage activities? some evaluation what’s that how Can work for

want you to do Craig, comment?

Yes, sure.

we battery and type to to predict a at their resource that makes you if the of deployment through for able the ability contract, nature think, because technologies of be at terms constructability looking what’s scale projects, that are and finance our of technology built, lithium-ion will ability up vintages, to are we be are I XXXX, and the advancing, looking operations the technology its essential ability in perform. of importance when of the adequacy

could that performance look market potentially hour taking a you in hour out for is lithium-ion be perspectives. to cost shape vintage, six the and XXXX certainly from and there to a technology something beyond As preferable in California, that’s eight duration, where alternatives to

evolve to lithium-ion embedded it supply volume have and into can pretty terms but offering entities. of right and see cost technology I these saw that technologies automotive hour can product own we module we that deliver, continue serving will price of will that competitive offerings, presenting our way over decades demand pay the eight price up for experience chain tend push that six applications costs to automotive that that do of to be of solar think comparatively. we certainly Colin offering load the from both ownership are a and baked the couple You points hour and for lithium-ion also an last in the total

to companies things technology I operations us that I their do to some technology confidence them. manufacturability evaluating some think And like and the and pilot that providers that about. same support you of are others is and what some I offerings scale, of modest certainly take are construction. to think We asking able those can will and financing need so in be see in to then their we into at and scale sufficient have and their demonstrating promise deployment

the entities built expect whether will gigawatts see offerings of scale other So, to need that and that we to us continue can decade. out see technologies lithium-ion mid be load at storage, to the able the But, to are main evaluate development serving for states doing some part of be great would you companies and some this like have of financed are to resource it be complimentary I deployment on that there. be call and be these worth for going to still can

That’s much, super Thanks guys. helpful. so

[Operator Instructions] questions at There this continue. presenters please further no are time,

And talking care. difficulties. for look to it. once you, your apologies technical Thank forward next Take quarter. Appreciate everyone time and again, for

for Thank conference participating. concludes you call. This today’s

You may disconnect. now