CWEN - Earnings call transcript Q1 2020

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Chris Sotos

Good morning.

Let me first thank you for taking the time to join Clearway Energy’s First Quarter Earnings Call.

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

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

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

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

Turning to Page X.

process, $X to through and first guidance. full quarter of The we we’re perform with works line and PG&E achieved XXXX, the in to bankruptcy our continue as forward year their PG&E For CAFD contracts their of million, looking internal expectations emergence.

of As the quarter PG&E await holding we are per our $X.XX dividend resolution last the with process, flat we share. quarterly at

hard I our during this work thank want first a take difficult all time. COVID-XX, employees moment Clearway of the to their and Regarding within focus to for team

effects no effect of date, that say entire minimal, with keeping been pleased felt our Clearway been have or to am I COVID-XX have material across employees country, to and While operations the revenues. to COVID on effects the safe

may tolling they our not assets Given the portfolio, around renewable reimbursable that our our economic to across portfolio, characteristics Ignoring pandemic results in slowdown. matters and future. materially in curtailment, no affect see always are impact are of due for to reason pursuant agreements of backed the conventional to unaffected by that our Exposure also currently an Clearway financial we generally operational PPAs. the the results by portfolio economic terms is date can financial observations to the

relatively economic curtailment full X% curtailment, projects experienced to to We year immaterial unreimbursable COVID-XX, of economic any related approximately date amount. not have CAFD, a to represent subject

full the sales the chilled for for around the persisted profile This full platform, with X% represent remains Thermal month also CAFD the some of entire not water volumetric our material steam impacts in year. strong that course every enterprise, only as of is amount In would year April. viewed customer and experienced that the

I track the PG&E’s XXXX. emergence from be would million As on from end as sees of quarter, would discussed the first had they bankruptcy the of of $XXX June anticipate emerges the bankruptcy. PG&E in cash, released for Clearway Clearway second half earlier, year At of

CX we Group all transaction add in approximately invest be PG&E given million from million is X.X% our capital current of a approximately available During on should that to million next asset-level assets capacity. should commitment, well $XXX operational, well fund the as drop-down yield. after binding projects five-year the with signed are that PG&E’s soon agreements asset revolver in our annual CAFD, restricted garnering to quarter, cash CAFD capital, average when all their as Clearway emergence level fully $XX positioned of $XXX bankruptcy

pro is its forma in result deployment, and to of share, CAFD future $X.XX increase capital investments a Clearway increasing of As outlook our per February. outlook X.X% approximately a these from

Page X. I latest the drop transaction. economics to of Turning discuss down want to the

five-year top million As and basis. approximately CAFD on transactions capital of the million require produce average of these the page, illustrated of $XXX an will at $XX asset-level corporate

in to Clearway Clearway million, $XX additional addition as In Group also the of portfolio million XXXX $XXX an financing. pay this will part to

project. currently assets, XXX-megawatt Clearway at of day shareholders, from a long-term has fully portfolio and to projects Energy, outside PXX California. with accretion obtain Pinnacle portfolio now of under portion through weighted the its diversification PPA IRR support, long This agreed operational. strong with XX still compensation order currently mix which results. strong and Rattlesnake projects includes while Clearway Wildorado repowering construction preserving of average in CX the This all a contract a The its a is and for strong of residual Group’s a purchase Creek of XX-year Clearway Group, life sponsor wind interest the a Elbow project XX-megawatt are increase XX-year years of to in for

the The portfolio experienced COVID-XX XXXX. and but is site on caution under pandemic The be an achieve construction Project project Pinnacle associated considerations. this track in Rattlesnake XXXX active due feasible capital without Wind to The to required delayed impact the will construction CAFD operation are at is ready abundance this to of construction that of Repowering and commercial provided in the of time the date. schedule for may project out and labor assumption any

maintained. event the CAFD pro Pinnacle full completed and be is forma five-year XXXX, in In would the materially CX yield CAFD

variances update provide to As an material in estimates past, done occur. any investors these if the of we’ve we

Page growth of was $XXX X outlook million guidance CAFD CAFD now CAFD. per accounting share, of with or these Clearway share in growth million, share. $X.XX provides of per Starting and XXXX After $X.XX $XXX factoring when drop-down to financing, investments previously for sees million of an forma illustrative pro assuming update per growth outlook $XXX our at to the our our investments. CAFD

capital discuss Group for is the and as per together Clearway, fungible, our While significant balance for the investments growth shown credit strength to $XXX share to This growth. of be by corporate testament line funded entirely set ability overall cash requirement putting want these great calculation, funded a great well we future have the by thank of The this target stage the with is for in million dividend we a debt, Clearway the will purposes ratios. trapped could shortly, with the of platform to for Chad equity is colleagues a outcome transaction. and CAFD in for our PG&E-related

Chad. to pass the I’ll With that, over Chad? discussion

Chad Plotkin

Thank you, Chris.

X. Slide to Turning

million the the available expectations CAFD, million $X adjusted reported portfolio quarter, of $XXX as within and company’s Energy’s were for of EBITDA cash During ranges. within or operated distribution, first sensitivity diversified Clearway

operating the our projects As Chris both partners reliably. and and continuing pandemic safely our mentioned, employees well exceptionally with to COVID-XX navigated operate have

quarter, financial Clearway any results material impact due its During not experience COVID-XX. to the to did consolidated

as normal create of deviation to presentation. provided the company’s today’s the impacts in from of pandemic appendix outside section ranges We not a the do also sensitivity year anticipate future full

quarter the are during for year first distribution. year, to not the $XXX to impacts reiterating of were we full with line expected are expectations, in available Given material financial million from cash today, in impacts results and lead guidance COVID-XX also

As renewable production. financial the result under of unconsolidated including of that a not assumes reminder, from median CAFD technical also to have agreements. project credit the impacted the able guidance PXX energy cash PG&E the event includes contribution default distribute guidance the bankruptcy, a year achievement full of projects as by the affiliates been

to capital the including our formation company’s growth the Despite on capital objectives, for the markets during volatility quarter, in continued also investments. we focus have the requirements

prospective we are to drop-downs. to sufficient investments, the say company’s our growth the for of available resources latest that pleased including meet our million view the liquidity, our needed Given committed are current $XXX

the we liquidity quarter, First, by enhanced the ATM utilizing program. company during overall

approximate price noted weighted share. an on slide, company to over at $XX.XX or This growth CAFD As investments. the relative current the represents average recent of at level an guidance million per yield raised a X.X% $XX accretive

to at investments Next, to the year, able excess PG&E the impacted the been project last these has subject projects dividend by because been have Clearway projects. bankruptcy the not and since cash beginning access restrictions of

approximately of first quarter, amount $XXX As the we be of end million. to this the estimate

$XXX $XX down Assuming commitment this of still excess latest of remaining is million the drop allocated million, cash is required. capital to

$XXX While noted credit the quarter, of capacity Clearway available also as in has, end on requirements. capital the the as slide, company under this will temporary to providing operations, the generate excess the normal financing meet facility, first million of cash revolving remaining

growth do at ratings capital can and so times while our to forma With X.X accessing corporate our a with most and importantly, investments target the we resources, Clearway pro we company’s Based be plans, ratio the range. will to available committed these estimate markets, corporate can leverage balance funding sheet. be continue the patient managing within that on X.X

I for remarks. back will that, turn With to call the closing Chris

Chris Sotos

Thanks, Chad.

Turning to XX. Page

challenge is that reliable one forward our of As facing, keep are Clearway and healthy, is into safe and we and COVID-XX while goal we number maintaining XXXX, employees operations. all move the new to safe a

of we our reiterated in terms have CAFD line our with first commitments, quarter our financial with numbers XXXX In expectations. guidance

assets targeting the goals, Clearway Energy allow with Clearway growth per near-term also division terms. While growth Clearway to the systems. CAFD in Thermal with attractive our develop Energy its of also with Group our additional as activity, constantly Clearway at to continue recent are long-term M&A pipeline portfolio ROFO we in from is on organic growth working agreement will purchase working expand future. a focusing third-party to well goals as This, to the share dividend combined with into Group

our forward look of summer normalization bankruptcy to resolution PG&E XXXX. of we Thank of dividend growth you. expected the the in Finally, upon

the please questions. Operator, lines open for

Operator

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

Julien Dumoulin-Smith

execute respect with across on some your been in year and that just be the amongst and level I’d respect any concern to I’ll And on some solar, I on with to reactions space keep There’s quick cetera. the be high operationally. supply curious it to impacts to curious then wind, degree rate? financing spreads, related, would thoughts current shall renewal in and late, cetera. the might be et financing given of chain here. there at given less in you of others all all-in of any costs of we it’s in are status although terms et focus unique say, around a for risk-free activity the you markets financing clear, been terms the wider looking practical lower There’s investor what ramifications there and your

Chris Sotos

Julien. Thanks,

in terms you markets, of kind of kind supply I’ll So that of the first asked. and I’ll financing Craig question the let question chain second answer then address

financing I markets, actually, pretty think them view terms constructively. in of we

COVID-XX seen the our lot down of you’re terms of today. We’ve I first very bonds trading of pretty north are when kind markets par them happened, a aware, And well yield. as in were significantly of think volatile. obviously, capital come

see debt things we pretty a from perspective, think I actually constructive. So as

the during bit a of day. on On situation that volatility obviously, there depending the equity side, there’s

overall, But pretty level. they’re equity still constructive

on as being of of a as seem of the perspective, both cash we in a talked view about from position. our financing, source fund we we really, and about. primary debt markets talked be to liquidity good the terms That to in just the So call, PG&E help trapped acquisitions lot said, capital equity basically

mind, So the the conducive, are sure while are help you question. fund just chain majority don’t we looking those markets really cash supply the capital that to to Craig, investments. to if of make

Craig Cornelius

that of our adequately are in where an and to Julien. asking, outperform planning say, been with can protected, environment key partly projects we pleased relative both of been we’d proactively what chain remain components mean, key ways have to one we’ve in assure for our we’re stay have enterprise for to their through relative to the some with depth cautiously tax far crews, we’ve finding is scale require What credit worked them a this to, I peers. that one so construction our activities of Thanks construction quest. that suppliers, that but Sure. experience projects That’s a up that of is able on and track. the our an are adaptive all of priority also fact gone our found for our planned I we major fact sensibly because and like and our is think Yes. have the planned that activities set were relation supply function

projects we’ve with expected. largely been really So what able we’d to track this on relative to through come remaining

With formation that we’re new respect to projects capital for developing.

they to the a also project substantial of whom major whom part rely for and they future. continued lenders about. look in can think business asking to is investors What seen and on think that’s of major equity preference volumes I the what amongst to tax developers for complete we’ve I can projects you’re

are So is an and that quality risk developed a the on focus there’s matter in markets reliability these being durable a we’re in transactions, mitigation those while of is finding things – rewarding sponsor us. the level what and that that increased projects basic are quite lot surely, of and

Julien Dumoulin-Smith

Clearway-specific what briefly one you more here very are very PG&E ultimate obviously, might Excellent. With to be don’t mind. close very thinking growth, if baseline, How about bankruptcy. normalizing, you and we I longer question, if clear to follow-up about about can are just clear but to resolution Imminently, argue. getting to respect And I that dividend, on the in the a You in very near-term of dividend about means want cetera? sort of it? trajectory term et talk the and be

Chris Sotos

Sure.

been years I time. imminent a Julien. From but – enough, our think long X.X has enough, not fair

X% in So from XX% target our goals XX%, basically per our terms that share at we growth remains to our with dividend talked in X% our of view, about September The same long-term ratio of a payout XXXX. of on basis.

that changed So really all. hasn’t at

dividend there the second and the in hits normalized future exactly having we from anticipate release bankruptcy we be then As XXXX. may the grow for when thereafter, previously, cash metrics, dividend stated PG&E depending that how the timing a emerges of to half of to on but those slope the

our think the back of we’ve basically happen XXXX. a when the in think what about is course the resumption explained of I haven’t changed exactly this PG&E in X.X resolved. I from So we back as at over half normalized of cash given sometime all of goals years, will dividend talked the XXXX, September And

Julien Dumoulin-Smith

that rate saying. to on not by be to Got to presumably. of to guidance, XQ, you on little able if should basis course it. mouth words se, nail and seems of your but ratio sort late Again, a a put least payout further what in Say, for run be resolution, at as by XXXX quarter, your you’re conceivably bit a on presumably, that follow through bankruptcy But per you’re get that PG&E this. therefore, you

Chris Sotos

question to your differently. Yes. a little bit Maybe answer

saying happen no, you’re XXXX, happen it XXXX. would that in If answer’s that in would

Julien Dumoulin-Smith

Yes.

Thank enough. fair Okay, you.

Operator

Thank you.

is Rusch your question Oppenheimer. Go next from ahead question Colin of Our please.

Colin Rusch

Thanks guys. so much

Just for maybe another Craig. question

As smaller little that developers projects? bit you portfolio situation? challenges. and are the about of financial running some building of broken for the Can see those that And dynamics out at yourselves talk for set positioned how guys seeing the you development and/or Clearway opportunity opportunities in you competitive a the projects, for some into acquiring look

Craig Cornelius

Sure.

vintage in us when a that we we’d organized manage incremental has our pipeline you completion our So the XXXX growing that from sort to disruption first, to room active as I imagine, create And project think to of tier activity principal opportunity for available. for company emerge. expect could COD controlled the wherewithal. and be of of set developer some with do We’ve to would expect have dialogue that benefit to who

for that are like allows bring the safe harbor to I multi-gigawatt ourselves and think vintages the to of a equipment factors inure ability we’ve the company benefit and harbor bear, that program principal safe got to projects to solar both, projects, multiple that. us safe a do for harbor wind

arrange those opportunities to to more has a Reaching year, that, on this is but over of situations likely now, we’ll but need more folks in revenue year. had extent build to year, move to the becoming for forward a And next the the the revenue in developer during organized build experience we’re we they on now, we capitalized next expect of projects, and our kind for financing to intend challenging boxes order present the occur they I as of yet takes processes projects more similar to ability during right The thinly projects developers ability contracts a that And is while, contracting developers. project complete for short decade, that based that transacting that to including which haven’t to think to seeing choice latter this half the XX that that opportunities check last look disruption months. make, conclusion themselves. hoped to little

Colin Rusch

super to terms generation potential answer thinking meet way? of usage are use or on patterns. the down then opportunities some in distributed and understanding of would either portfolios And those what needs, And helpful. great? projects you line That’s or new in of acquiring some new like more guys might projects in more the the how look some patterns around far might bidding localized the a emerge changes actually sets terms additional of an How of detailed in of be Okay.

Craig Cornelius

want me you take that first? Chris, to do

Chris Sotos

Yes.

Craig Cornelius

I of guess, couple a Well, Okay. observations.

I fleet of suppose, – operating there’s distributed families three two assets. or So sort our generation within today, of

owned portfolio Inc., together. of Energy, originally assets NRG put is by Clearway the first remaining which solar The residential

industrial generation or net of, residential decentralized Second on-site are virtual and customers sort sell projects, solar distributed metered which which then service projects, customers. community commercial more substantially, behind-the-meter and customers CMI And call or are power plants, that utility-scale customers. third, to municipalities it, which

of they have case the the been load to In substantially for for than historically those XXX% total of less customers. account all sized really three,

aren’t we to situation I and what look the the in able can of power we make. haven’t they And case think ahead, sell projects So produce seen where as being materiality any really all we’re commercial asset for including of the remain purchasing those some lot a industrial of customers is as commitments finding growth renewables, for sustainability ever. been that driving classes. and to strong as that of have Their

as large-scale the we’re is And ever. proposition good able as projects solar to projects the we’re to value from today, which community them are make that developing principally projects or

bullish So our the segment, you’re is active worth to commercial really I wholesale have concluded industrial they the to deliver in procure are of best that we we’ve about through very I disclosures and virtual offerings. short-listed and positioned projects, And large contracts what noted think net that for or of play on ourselves combination awards asking them and metered – strengths. continuing finding to find to projects gigawatts we’re which customers we think, our where

Colin Rusch

much. super helpful as, actually thanks so That’s

Operator

Fishman of Our Goldman next from question David Sachs. is

Your line open. is

David Fishman

right, All good morning.

impact on Pinnacle Just delay the quick on Wind Repowering. a the clarification small potential the or Pinnacle delay small and on

so from economics our remain intact, the be the deferred a there’s when delay like contract, Just if think, that? the we is or that, you we in the Or delay, something intended payment quarter think even if a are shift of should standpoint, we will just this same? or all might something timing structure a how about the like one see actually to

Chris Sotos

I in like a economics, same. think anticipate that. really was something think point, significant to be difference I point material, I if shift or think X/XXth I mean, not we in But be obviously largely But something there like all. the at update might it CAFD they don’t a would everyone. we’d the of

David Fishman

of? financing the PCG showing it’s million the we just X% quarter Okay. that being now, Is illustration, remainder for if kind had right would so of step of quarter, thinking pro then the the forma first with And know, you debt. then you’re and cash on $XXX next show roughly you XXXX financed because on interest cash cash a less expense? of a higher Or mix more amount

Chris Sotos

to I generalization, discoursed it financings. it as yes. question, correct. depends from quarter Overall, various fungible the exactly mean, gets to fair a But be you’re project money is what your

David Fishman

operating cash, you should is is balances, then a that the level And of cash your think have you normal can cash get as just growth you of we restricted your do end, So Okay. that think as resolved, level of kind your PCG, investments? to about have about? excess a there current to what cash normal bankruptcy think so you be capital what want for we might other be deployed to about on maybe

Chris Sotos

don’t why Chad, you that? address

Chad Plotkin

Obviously, in our move. – sure. will we balances a there’s seasonality cash where Yes, business,

a to impute David, payout CAFD, in to relative on would ratio to we if as and year. simple assume it we think about just I best maybe, the a basis any that way ratio and effectively, what available your to about payout as a impute delta think normalized think wanted cash is given you be would

had $XXX at be of you going of have this your CAFD, looked say, in year if guidance you should million to So expectations, hit you that year okay, of given ratio. assuming any payout we’re XX% you available if XX% an all would

that’s the of given think I on to year. cleanest available cash way So think any

David Fishman

Okay.

your for flow to the it just payout be So going ratio, minus incremental it’s that’s allocation? think more cash X about

Chad Plotkin

that way to is about think it. I think the best

David Fishman

Any quick anything there? on more the On start at update Or out two ones. When black just then timing? the occur? potential Marsh might And Landing? that Okay.

Chris Sotos

Chad?

Chad Plotkin

Sure.

given to So at the sort that. wouldn’t that, I like leave earnestly a stakeholders. of we’ll all leave goal And for impact our that material capital I suggest number is is Obviously, there, the works at that, working through think But that I move forward size FERC, we’re be process, we’re filing to be still it on able working of overall to given there. the think to results. through going a David. have project I’ll we it that that

have. but it a asset underlying is lot that a the does So – that project we high-quality enhance certainly to

make eager So it sure the move we’re works judiciously but certainly we’re stakeholders. forward, to it all for to working

David Fishman

then the Langford like Okay. looks And to deck, Wind It for last pulled the forward XXXX. one me. COD in slide was

have for binding projects do think is agreement? excess Just might us cash, you assuming fair during appetite that it you incremental the XXXX have an for beyond to

Chris Sotos

yes, be is this always stop. to where to Just clear, intend we we say that,

for have we projects. appetite So always

your So or we’re that at thermal looking as and I always question, like third-party growth think organic projects well. M&A

question. this is yes, So the your to simple answer

David Fishman

Great, thanks. Okay.

Operator

[Operator of Durgesh from Instructions] ISI. Our Evercore question is next Chopra

Your line open. is

Durgesh Chopra

Good for quickly taking question. I morning one just my me. guys. actually for – Thanks

about Texas. in have utility Some in renewable talked of slowdown activity, your peers energy specifically

from So – your seeing your I do that of hearing customers, wanted color just about going how about to plan any if of if any we think or your forward? sort plans? development see think you’re you’re And should you any kind and development slowdown

Chris Sotos

Sure. take Craig, why you please? that, don’t

Craig Cornelius

Texas is Sure. We think actually what’s in healthy. happening

part, projects of have being reflected advanced, our of NRG, disclosures, a construction-stage virtue for by including that us. place and as for So we history in is substantial are strength intermediate of gigawatts in is within enterprise, which project Texas, X.X an which our in the volume our

which in have we next have construction meaningful the wind solar scale state high-quality on So with amongst over advancement largest the contracted we for projects that two customers. And been are the for years. track the advancing of and remain course that of both

the for to time And chain for and see to of deliver because projects there. same our have them customers longer glad that out capitalized challenging to that in it’s proposition smaller is organize to some push less there of value to the or at demand supply projects – well a tail out needed for been the time, comparable those developers

the the market. ultimately, in a solar think think, Texas some be I for there the health volumes supply reduction to that and expectations So for I wind indicate changes side we overall is new good which over to on is are see project years, which of appear starting that total the favorable thing, construction what happen, couple next should of

service economic be new to in mean looking proposition think that to provide hopeful further attractive we’re are I that we’re through really a able to the customers projects still developing. for And we’re position some that And build a are in of there few projects industry renewables that new ongoing within able find the will next to during we’re the cost efficiency other as levels we Texas changes years. of that the

Durgesh Chopra

I you guys, thank had so all That’s much. it. Got

Operator

question We no the have longer you. to a on I call like Chris queue. Thank would turn to Sotos. back

Chris Sotos

to thank you. wanted So everyone I safe taking time, everyone out for there. the remains thank and

quarter. So I talking look to forward Take care. next

Operator

call. This attending. concludes today’s Thank all you for conference

You disconnect. now may

Clearway Energy (CWEN) 7 May 202020 Q1 Earnings call transcript