Clearway Energy, Inc. Q1 FY2024 earnings call

• First quarter delivered solid results due to strong renewable resource at Alta generating $52 million of CAFD, allowing reaffirmation of 2024 guidance of $395 million.
• Increased dividend by 1.7% for the quarter, bringing quarterly dividend to $0.4102 per share.
• Latest investments like Cedar Creek and Texas Solar Nova 2 achieved commercial operations. Committed $65 million of new corporate capital deployments with expected 10% five-year annual average CAFD yields.
• Pro forma CAFD outlook increased to $420 million from $415 million. On track to achieve $2.15 of CAFD per share by 2026 with no external capital and 5%-8% EPS growth through 2026.
• Completed joint development agreement with Clearway Group to optimize Utah Solar assets with potential $85 million investment in 2026 at 10% CAFD yield.
• Executed RA contracts for Marsh Landing and Walnut Creek with strong pricing, enhancing organic CAFD per share growth in 2027 and beyond.
• Sponsor’s 30-gigawatt renewable pipeline continues to develop with approximately eight gigawatts of late-stage projects targeting CODS over next five years.

In the first quarter, Clearway Energy, Inc. achieved solid results. Adjusted EBITDA was $211 million and CAFD was $52 million. The strong renewable resource at Alta generated $52 million of CAFD. Cedar Creek and Texas Solar Nova 2 now contribute to CAFD. Clearway committed to approximately $65 million of new corporate capital deployments since the last earnings call, with these investments expected to generate five-year annual average CAFD yields of approximately 10%. The pro forma CAFD outlook was increased to $420 million from $415 million. By 2026, Clearway is on track to achieve $2.15 of CAFD per share, and reaffirms the ability to achieve the upper range of 5% to 8% EPS growth through 2026. Revenue contribution % wasn't explicitly stated in absolute terms for each segment but the focus was on the performance and growth of different assets like wind, solar, and gas fleet in terms of CAFD generation.

• Reaffirmed 2024 CAFD guidance of $395 million.
• Increased pro forma CAFD outlook to $420 million from $415 million.
• On track to achieve $2.15 of CAFD per share by 2026 with no external capital.
• Reaffirmed ability to achieve 5% to 8% EPS growth through 2026.
• 2027 and beyond have growth opportunities like RA contract signings and battery asset development, with visibility improving for CAFD per share growth.

• Energy market fluctuations could impact the performance and revenue of assets.
• Policy changes might affect the execution and profitability of projects.
• Supply chain disruptions could pose challenges to the development and operation of new projects.

Q: You talk about the new contract terms at Walnut Creek and Marsh Landing providing higher CAFD than run rate expectations. Just wondering if you could give us a sense how much higher, maybe in percentage terms, they were, and with continued contracting at these levels change, how aggressively you pursued dropdowns over this timeframe or third-party M&A, given the organic growth.

A: It's not advantageous for the company to go into detail on the exact percentage higher of the new contract terms due to ongoing annual procurement cycle and confidentiality obligations. Regarding dropdowns and third-party M&A, they want to be deliberate about pacing new commitments based on the accretiveness of available capital sources and have sufficient building blocks in development for growth provided they are accretive.

Q: Hoping you could give us an update wearing one of your hats on the development side. We've heard from some of the equipment providers into the solar space so far this quarter around some project delays, and obviously there's just very robust demand for power, given one of my peers earlier comments around data center and other load growth. But just talk about what you are seeing in terms of bottlenecks, gating factors, and how you're viewing kind of the timetables and trajectory for the key projects you have under development.

A: Clearway invested heavily in high voltage equipment supply and established domestic content supply chains for wind, solar, and battery projects ahead of peers. This helps underpin execution timetables. They feel good about fulfillment of existing and pending projects' timetables as they have thoughtful supply chain solutions and contractual relationships, and don't face risks from recent solar trade cases affecting project fulfillment for current projects and late-stage projects in the pipeline.

Q: Thinking about the battery opportunities, certainly with the new framework for development, joint development of effectively I guess retrofitting battery to existing renewables, just wondering if you could talk a little bit more about what that opportunity means in a greater context among the whole portfolio. And then what was the kind of maybe financial thoughts behind moving forward with that. Are battery prices low enough and returns high enough that this makes a lot of sense today, maybe even preferable to other types of renewable development. I just want to kind of think about like where the batteries show up in the hierarchy of investment opportunities.

A: Clearway sees battery opportunities as favorable due to regulators and load-serving entities' need for incremental capacity to enhance grid reliability, preferring batteries. They have projects in the western US where load-serving entities need to firm renewable resources with batteries. The cost structure and execution experience of batteries are improving, making them attractive investment opportunities with favorable tenors and returns, and they are part of the growth portfolio as a valuable addition to the overall asset mix.