CWEN - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Clearway Energy Incorporated Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Chris Sotos, President and CEO.

Chris Sotos

Thank you. Good morning.

Let me first thank everyone for taking the time to join today's call.

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

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

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

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

fourth XXXX to Clearway of achieve I'm their Page Turning situation normal course, quarter, that CAFD to the contracts was the happy anticipated with report its in see in $XXX to able evolving generated. guidance to summer CAFD weak positively, million XXXX. of the resolution renewable with revised despite PG&E X, the Clearway continues energy in and conditions performing

these Despite renewed know, to you of made to difficult the commit and more challenges, the well to support corporate and situation growth corporate our Clearway and as forward of $XXX projects, balance the PG&E company, bankruptcy our raise As it grow we deploy was forward. resolution has move look the these investments all to able ability capital to to or capital as in sheet. million in XXXX $XXX million

bankruptcy. versus as XXXX $.XX Clearway the opportunity X% the to increase Clearway $X.XX on dividend the this transaction from in quarter for per sources, more the non-PG&E strong improvement relative by PG&E once bankruptcy, XXXX growth, across to quarter from of Due normalized dividend anticipate CAFD fourth level views share the XXXX. to be executed to quarter we first the PG&E the PG&E the of increase share. situation, previous of increased appropriate, emerges the support following per executed conclusion continued To future the platform. to we adjusted the took dividend will a dividend And in growth

a of As per efforts, a pro $X.XX. share based forma, capita grew outlook XXXX to result Clearway's these on

we fourth of the conventional acquisition closed quarter. on in the segment, Carlsbad the In

pleased also XXXX. company start which project FERC are to procurement announce We filed a was with in the Marsh has awarded that at under black originally Landing,

continue project, the deliver discussions which, California. to successful, We Landing to around in State provide needs additional operational reliability will if Marsh the of attributes advance key

and Phase contracts achieving business long-term successful The XXXX, months. The year, across attractive also under renewables Solar I growth, within the in and reaching with with a completed invested commercial segment thermal Wildorado and X.X Hawaii both operation Elbow the projects also three with Creek million last returns. completion showed strong Repowering partnership $XX very commercial very

increasing Clearway guidance Carlsbad addition, the $XXX XXXX acquisition from and is primarily In million capital to to dollars due its $XXX formation. related million,

will $XXX are new We excludes highlight our the down I next. outlook evaluation, under outlook forma pro forma currently CAFD investments, pro reiterating drop including million. of any growth XXXX This which through also

the new negotiation partnership which company's directors. Repowering portfolio X.X, down Supporting in beyond now the and in by wind This the is of a has independent the drop at owned portfolio is outlook Pinnacle Group company's transaction the company, partially growth a West interest and acquiring our farm farm, This offered Clearway XXXX, residual new to Virginia. XX-megawatt opportunity. wind approval XXX-megawatt the Rattlesnake subject includes company

the this will previous we our with update year. first of to you economics, to on As practice, the subject is overall expect which reaching within definitive we consistent agreement, complete half

continued want share. I Turning to Page discuss and per X, growth our to CAFD

a remains into Carlsbad, outlook forma prior conclusion. per items strong, to chart, seen fourth share, growth quarter situation reaching support future XXXX. downs now or the and pro be the dividend any are After drop the trajectory acquisition account XXXX the share, in up of financings, taking of to X% $X.XX can forecasting company's the from PG&E As increase we growth the in or platform, an in over other of CAFD $X.XX upon per

addition In the in right, represent emphasize on of with California, CAFD assets with XXXX. the end chart anticipated to Group the we new would, growth, down negotiation outside Clearway diversification of offer further to a operation be the by want drop that under providing all in to

a new trapped with the pro excess of projects, by at to PG&E Additionally, to CAFD XXXX. portion we of forma CAFD serving see pathway per the currently share of outlook equity the transactions, the in cash excess a of end us fund $X.XX

Chad. over turning it to Now,

Chad Plotkin

Chris. you, Thank

to reported adjusted quarter EBITDA to available X. of distribution, is Today, and Energy reporting Turning million CAFD to of full-year fourth These EBITDA million. $XXX $XX for CAFD. adjusted million Slide Clearway million, results or cash bring $XXX and $XXX

of the refinancing impact the XXXX long-term through closing from contribution these reported Carlsbad issuance expected the notes, to these the excludes the December XXXX noted as acquisition As transactions, the CAFD not month due is the the the of of on the new of deals. CAFD during notes slide, and reflective

For, timing debt the Carlsbad this year. during to the of project-level service relates

accelerated a the For notes in of it corporate the of the and refinancing, XXXX to portion relates paid accrued redemption relative the December. to interest,

performance CAFD line in very from year production Despite of this company renewable the half unconsolidated in in segment. company's While the the the offsetting the progressing still made $XXX the year the quarter their with third great observed did guidance, across in difficult the the quarter. the the updated challenging renewable was cemented company business environment, were that just in million strides goals dollar first fourth fourth quarter, long-term results in reemerged full-year results otherwise an financial realize Though during of the weakness benefit distributions its strong in reported higher year. subsidiaries, energy the

commit to was directly or in accretive of to mentioned, the $XXX PG&E able growth As even bankruptcy, with Chris resulting million the from limitations invest investments. Clearway new

of management corporate to raised and company XXXX. of liability the used was and and $XXX both million growth, due the interest a providing our fund to objectives, four-year this debt $XXX on offering, the as coupon December, equity million notes, in new refinance support from issuance and X.XXX% extension million million $XXX capital through in cost through execute in a XXXX savings moved outstanding growth X.XX%. equivalent and $XXX debt maturity to the to This To

received potential mitigate long-term constraints temporary bankruptcy it or take to did While rating was the committed emerge the our under the the the over feel its given year, in metrics, projects credit may company to credit not investments plans. agreement from we has impacted company prudent that PG&E remains by past that the distributions corporate growth any action advancing to targeted

allowing As of such, ratio the and to permitted two we XXXX. the borrower leverage credit company in revolving lenders reached to agreement facility, increase up last X.Xx quarters from the with the the X.Xx

company the This during trapped continue be resolution, the and flexibility temporary projects associated to released growth modification to reach while more the to XXXX, cash final for waiting provides making cushion the whereby can from investments PG&E process company.

the slide, during in As the CAFD noted million by on projects $XX bankruptcy did generate XXXX. PG&E the impacted

available be XXXX, distributions estimate that approximately for with now currently is to projects across over of of or months, distributed PG&E excess we cash Importantly, end Clearway's as $XXX the restricted investments. and million related of XX been having unconsolidated

on additional in becomes project for be of PG&E the that half bankruptcy the the providing current view Based our is XXXX, will timeline, terms of expectation is company cash the this subject growth cash The timing available this available second various to the financings. when process of our bankruptcy of made in capital. to

for Additionally, flexibility long-term once more PG&E with the as more projects allowing company's our the and distribute, normalize, inclusive capital allocation, the objectives. pro corporate free ratio, forma of metrics the in are will credit projects, is line to related credit

rating using when current to targets. is figure company's forma relative consistent X.Xx a pro the with the company's Specifically, approximately borrowings, or corporate leverage outlook ratio CAFD our

this Turning X CAFD guidance. update to to Slide to discuss year's

completion third two quarter The the guidance base Repowering when XXXX execute of million. associated related budgetary and call forma to formation XXXX in company Carlsbad, transactions, outlook CAFD in portfolio. During these fund could X.X, of capital to the expected CAFD and a drivers between $XXX year-over-year November, of delta we the timing the million the initiated the on of pro figures, provided $XXX earnings

include energy production the $XX new and Repowering the million partnership PXX increase is refer underlying funded CAFD to issued, million full-year Clearway's to the CAFD bonds to Please under continues the section projects, $XXX we estimate. from the This closed, XXXX temporarily expectations. revolver, guidance sensitivities for corporate of based renewable Carlsbad PG&E appendix to are to XXXX the corporate announce the to an the guidance now this fully on and presentation With to million. median $XXX pleased in company's attributed

we does to may providing also continuance any bankruptcy XXXX pathway additional the changed, Clearway portfolio of Since the will expected of around to increase increase enter drivers in base to upon opportunity the which through million the on This factor which as the a downs, company's drop million and the process. have in the $XX an $XXX not after amount in subsequent execute, business to course conclusion PG&E budgetary forecast XXXX, CAFD such for forma additional leading outlook. growth growth not pro CAFD, a continue to further of outlook dividend of

turn to Chris. I'll that, call the With back

Chris Sotos

the a to achievement new of updated XX, Turning and want as guidance and to during in the Clearway's our XXXX renewable difficult situation. conditions Page PG&E begin CAFD year we the navigating closeout decade, highlight I

able we've growth to our has most While period constrained Clearway, CAFD PG&E this been and share. manage continuing investments, credit per the invest increasing to situation ratings, importantly, in maintaining while

first to a a ourselves year integration all forward. requirements from have as the and clear full Clearway's on importantly company, transaction, of as see finalized and GIP Just transition we for footing resulting move independence public

during discussed, share with for per opportunities renewable, going CAFD across As platform, conventional, forward. thermal of all we contributing wide a growth the range growth to XXXX, and executed

execution in XXXX, deliver as And long-term its XXXX guidance, of terms sheet financial of commitments well on seeks continued CAFD consistent looking balance objectives. to our as with Clearway growth, to

for the key binding the projects, and with XXXX sponsor continue to a thermal of of our recently COD drop for offered development our sign growth beyond, XXXX to and down we're efforts. working As component agreements

outcome wanted to normalized than patience the better at level time investors year. upon the positive of looks PG&E they significantly a bankruptcy, forward more it thank this past dividend around to during visibility last year. our did for demonstrated I Clearway Finally, have the and resolution the

a increase Our the dividend Thank toward step recently normalization. announced first is you.

Operator

first Bank from line of next America. our of with line our Julien with the And the Colin from And Rusch question comes Instructions] Oppenheimer. Dumoulin-Smith comes [Operator question of

Colin Rusch

that you're systems, and other looking of how or those if storage, a In if about curious storage amount standalone should tied at, there's we are pipeline with that. I'm projects, the of and are projects fair those think

Craig Cornelius

pipeline the in Yes, of solar-coupled all are projects that Colin. you referenced Hi, storage storage the projects. see

sought to with what to prepared and and to we've a we where to design, attention So, have there for tax and operation Those deployment, got strengths proposition consistent focused qualification both have our see think long particular entities today, the the assets serving that we've and for are of term. strengths apply we incentives, focus our through eligible been. where western load value a demonstrable markets projects on been over commit pay for

over that pipeline think and in profile So And, for grow storage, that cost as serving of California forward new look a for pay being forward of is storage time. Hawaii. entities allows to you we resource of be building and that that we Arizona load cost-viable for the as concentrated deflation to as as the something could for operation, go both terms in to

Colin Rusch

some Okay, in those the think environment competitive is with projects terms how those select after projects? amount developers, certainly things. on of the of certain just can of terms helpful. in the you a of market talk as acquisition And what could go projects, for of about amount around dynamics you about returns then, seen available going you of those And through distress incredibly that's we've

CraigCornelius

me Chris, take Sure. you would like that? to

Chris Sotos

please. Yes,

CraigCornelius

Okay.

advanced turbine the also, mix than that in and you put secured geographic some wind And few just was substantial meaningful looking pipeline final in you can that is where overall to for around quarter picture One different of certainty increase which an of pipeline enterprises support own, development growth into in you a strengths. a developers commercialization if finding somewhat over have finish is And noted eligible choices we've XX% this a of changes stages projects can them. for like eligible wind found project that lastly, together, that be assets. collateral control of that on COD now intermediate that One areas. quarter. and enterprises will construction, customers more some PTC of stage we increasing the outside have of and California might see XXXX And suppliers increased based over completed, market make in XX% needing where that pipeline, what smaller the projects, disclosures competitive the quarter expansion things like And post assets can bring that our our in the of [indiscernible].

Colin Rusch

Okay, I'll offline. rest the much. perfect. take so Thanks

Operator

from Thank Morgan you. of a And line Stanley. our question next comes Berg with Steven

Your open. line now is

Steven Berg

relatively morning. to good Wanted just the in that require quarter, and a or any on unusual quarter the fourth saw Anything in information Hi, of production what through the first would-- just XXXX. the would visions touch terms your also quarter you walk for of fourth expectations index. sort was index for base it that

but commentary quite a vary around that? does course, Of bit, this any

Chris Sotos

ahead? you go why Chad, don't

Chad Plotkin

see I West. you'll the surprisingly especially out quarter fourth think the was look we I way at think this. the mean, I low, Steve,

think, already have. as quarter you the historical data take on of statistical our various our was the we reminder, technology same on we we that whatever the and modification that rerun various into the historical production annual was prosecute and looked And, sets, third that at recall, our all on was models as through numbers. think an basis over when I through curves needed and asked, call, factored I a question information

even numbers, talking in we're One, standard two the within deviation and portfolio an think, look months, around I'd the look production as tight extended of what period offer I as time, we portfolio well XX at months seeing our over I is you PXXs. at XX a the things.

what The on it's for levels at right point, to of through top our expected other worth, the date, almost February overall year production yesterday, least of for we're portfolio.

think than a more don't XXXX in I acute was fourth anything quarter challenging the year. So, there's very other

Steven Berg

question versus and fairly market. That's just yield guess ability if optimizing question private in stepping raise terms of an is possibly value highest that in in investor I And both than private would could then be relates for days clearway common the the a potentially assets to the back, value helpful market stock, assets. though the renewable Chad, the a way buyer of be also there's portfolio who bidder these reflected of pay competitive it presents potentially public or opportunity a to more happens to pressure

in degree look that level, of of high certainly increased a to overall, at how kind Just as renewables you just appetite, there's broadly think at you interest investor the philosophically about topic?

Chris Sotos

that looking versus Yes, view I have think, have you different Steven, to very my asset an how view works. at company is our a

parts So of really would a I exposes if do and once to the also, well. where walking most to PPAs all the us deleveraging we the needed think, of see. tend you you the company debate to value which keep PPAs. the you the is have are the sure require PPA assets right you're risk, duration from where for longest talking to analysis going could that, as that as again, sum I'm mind longer all in assets, the someone's we about in sold whole, those off the But more

as is, as lot you point basis are through year second are makers well. our familiar, have which of well The assets them five pretty renewables, in low a

has want you you taxable as that So did in and then long PPA also, and a pretty basically a would the and big asset tax let's and you create an just walk you PPA to the to tend if would [ph] CDSR say overall, walk low game, you also basis, a day NLL. sell that

this the I'm trading the teams performance, as May really year I the really to and full point gratified CAFTA and I've for up are since work company, first is, bring since probably or say in stock XXXX. yield an of The very we given strong third independent all would best at chair, been

is pose lot that I high our it since looking point point don't market-based, than at so at deltas at of a the that heck a And what different you're look XXXX. a think bidder more this of you really has any if at paying,

Steven Berg

detail deadline? just last projects PG&E counterparty, would by a talk more the did when assuming released, Could sort the and just be we one, emergent flex any by are mechanically of is one And exact set. exit little points of of about flows that's PG&E deadline been PG&E there, you of on timing uncertainty the if points. the the quick see them release for good where maybe points, cash cash that All there a just fully sort let again chapter do

Chad Plotkin

Yes, Stephen, Chad. it's

that it one it at your follow submit the you way book many would in I would is, not look terms in end projects to end. would can existing the it, release have would simple time. you I a to you the see to of as and think third the as the out projects come given is way financings early certificates July. really just the think, get cast a of And starting you weeds, quarter, describe I that normal release fact is as usually withdraw in and these Book

end hope everything going than happens, that. commit of might is with are any July probable been, in But something work than move lenders not cash book obviously we know to to capability that, maybe see earlier they June, starting imagine to we can a we end you I and by the am that have certainly there's is, do to, that continuously other other The scenario. we emerge if of as the that with our going

Steven Berg

much. great. That's so Thanks

Operator

line our David from with Sachs. comes the question Thank next Fishman you. Goldman And of

line open. now is Your

David Fishman

of little that piggybacking of off Kind a Morning. bit. question

you cash of as, that dividend it use trying of at cash, in have a does would you for that's to might your cash the in access of and when were the the normalizing more kind frees accordance accrued you your it up, kind July, around of think [ph], should receive be to time but as right think you of it-- if dividend percentage not that, the as some rise ratio released special just So you to with and cash that? pay

Chris Sotos

Yes, as I generalization a statement. your agree with

the think as the a run rolled gets over saw it of will in the as period. take previous as really on Chad's dividend you yes, it, that how released, previously. we toward soon lot definitely more depends normalization cash it's pointed of I to that question, rate levels But steps out

David Fishman

what would Star of via Energy sell some perspective, Mesquite GIP to structurally, then down. make a does last not quarter we're of if what are the was some seeing you does in the them effectively to to And Okay. for? of you Could maybe they think also, them accept given about attractive Mesquite And added you then these opportunity Clearway acquire all you of being which I assets? obviously, Just I just do you Clearway bit. wondering, just hold and assets topics that little to of were ROFO what look then changing this looking assets a to the some market mentioned from Star offered Rattlesnake to Group's acquire all that Energy the differences or more the level Clearway, turn maybe didn't and high down, they being kind those drop versus you, some happens And whatnot. assets a talk or third quarter, new previously. and on or

Chris Sotos

Sure.

there. Okay, a couple questions

of cover hopefully them. I all if know me Let

want to make attractive. a make sure that Carlsbad I attractive. there's Mesquite was that not more was It we it's to wasn't Star understand clarification. I First, want sure

that a October, the was time just think we come season, and I to kind of to was period a had recovering. off in of fire of negative stock back go that our just So, again, kind of year,

anything kind decision say, given less So, we high provide Carlsbad, I want [ph] thought made Star well, to clarity, bad the for asset. was terms Merely, Mesquite CAFD and around to we the where think accretive Carlsbad. tough to it deed and that, that or had while a choice, choice of Carlsbad we a away then volatility diversification Mesquite we to suboptimal the and just decision in like a But was yield, the had do for purchase CAFD we PXX, from more a we longer issue because, made do to asset. equity make or asset PPA the renewables or Star wasn't of

targeting what's lot of some difference kind the is To lot now, XXXX, in -- were are to of these assets that when of hit CODs a the cash those as fundings of the period available is when with question their for about also of Group we the released. really much Clearway June have talked are your asked earlier what comports XXXX, think that second within work of half I with pipeline, funding ROFO say pipeline a of question, more after back that the added these about assets would is projects be our the you which

So, I think I hopefully answered your question.

David Fishman

Okay.

yes, GIP offered with the the level, the now a looks up later So cash high just or in party? hey, be and is couldn't I'd theoretically, beginning that timing third Carlsbad Mesquite to regarding last is it just at say more CEG Star -- a was year, to Star, of it's was it a the sell that to Mesquite attractive there for themselves thing the was hold and offered two. the release, of guess it mean, the I or I was made, be of decision just, date or effectively

Chris Sotos

want to do. not going would I what GIP to mean speculate I'm

always they're downs on this up But think the negotiation. we yes, we're described that focused I for drop call.

Operator

question of comes of Julien Dumoulin-Smith with from line Bank last America. our And

Julien Dumoulin-Smith

again strategy, other corporate also So, if that as But yourselves? to And your this just quickly be mean another yields how What that observations especially bit. level, the to right, sort to the What from you're just can this you decision been dividend, you tight. does So, that rehash sector terms pursuing right? awarded external sponsor high-level and seeing of is I assets, assets? gain have never access where raising attractiveness little and for observed, on means for does drive versus as I want elsewhere, PG&E given of ability what want the your once I and that right, for peers, mean as revisit your both to of interject the assets the related in it? your the does

Chris Sotos

a So, questions there. couple Julien, obviously, as always,

know. cover what looking Hopefully, you're Let for. I'll me

our is I your to especially I've perspective, in given the I at the do terms said look That'll whole, is XX% we think I questions to ability as really, you tough with in assets. opportunities, your nines. from as up. consistent ability X.X at trade, industry of a our open third-party on what of think a one bid other be opportunities really of -- of it M&A and the that's where was since think where deal, universe CAF But kind XXXX,

of other in XXXX. of May side ability, of think, terms of the since I M&A in position on kind size, we're best the ways, so in June once And for again, we're once many

yield we're I at CG. downs, looking and CEG, I again, the able good very from to think, that think conducive drop assets to being drop assets trading once of terms at, very with In is

the acquisitions was third-party questions that around One of market. earlier in

I is ways, quote most or we aggressive unquote In might think top out question. what it's that ways, a be many what in pay I delta or can accretive between more, been. many to ever the tightest bidder and trade that answered

release impact cash I significant that that don't overall a on think acquisitions, really acquisitions. dynamic view that might think about as from positive. and has how I PG&E question second I To affect So, a your

negotiating. we're down in dividend of before June, talked second to PG&E kind question? that As the once That's partially, part is would a drop consistently But at basically, dividend. lot that least I think situation we half your we've a not just cash would of and it the the assets -- said obviously since once of to we special normalize emerged take out this levels year. assuming fund as to We over answer pay of have again, they where target began the the we of about again, use we kind

Julien Dumoulin-Smith

me biased Yes, it's right? about against slightly does on into being and been, where more that therefore, do differently, situation? was that normalizing putting right? but the let level ROFO dividend rather You just your the this hit the money that acquisitions it tightest talked margin, mean the spread ever back to the So prior than necessarily to

Chris Sotos

answer's a That no.

question is or like that to answer your If payout a the to something moving we acquisitions, to no. that think ratio is fund would XX%

been counterintuitive equities as I When In trading maintain cash right? think In to need is as probably today. the frankly, converse a your one to cash least trading that's cap equity's well, the XX% at deal, since ways, well our it's because XXXX. May our way is of equity's true acquire. best it, could because the many trading needed you argue sense, is the

Julien Dumoulin-Smith

the capital benefits, about -- you in assets of solar potentially do more helping commentary And industry earlier and both relationship buy the at backdrop working to already, to Got involved kind you well. effort some we get et given the have some especially has developed where stand community alluded I trade, the Excellent. the question having a what you then it. again, reverse And in developers and this strategic related know you earlier how if on advantages of think about the tighter the together. of point in as there. benefits, given rest returns developed buying I are to the likely already this and too, Irrespective that ability you counterparty developers as -- already, likely What I if opportunity assets can. to think about have -- where of When gotten the all of integrating backwards you market upstream, about tighter you cetera? alluded

this elaborate maybe So, on too. as that of answer part

Chris Sotos

those I are of kind group at Yes, lot the think of a level.

the obviously a contracts the that trading stability risk. reason -- a long-term we're of investors looked for I with used where risk again, one long-dated CEG producing yield time goes are, have NOL. Julien, in of sense of our to the for And is sense. answer question, and at consistent the whole make my always CX, we then or a integrate, into doesn't flows. holders remember development Reverse been kind vehicle, long-dated an combine trade those do way, integrate, no. it is is is think they I From phrase two your cents, you certain income that like I makes whatever I've we see backwards cash of reason kind integrating with once it to you into If We what as CEG CX, think a a reverse think perspective, separate this can't profile of of that

Operator

And CEO, would the today's like this turn for Chris concludes remarks. further call to session. and I Sotos, President question-and-answer back to now

Chris Sotos

everyone, forward quarter. and to next you, you Thanks. attending, for Thank talking look it. Appreciate

Operator

Ladies gentlemen, participating. for Thank today's concludes conference and call. you this

may disconnect. now You

Clearway Energy (CWEN) 27 Feb 202019 Q4 Earnings call transcript