Clearway Energy, Inc.

Gentlemen, thank you for standing by and welcome to the ClearWay Energy third quarter 2020 earnings call. All lights have been placed on mute to prevent any background noise. After the presentation, there will be a question and answer session. Any instructions on how to do so will be given at the appropriate time. Thank you. Mr. Chris Soros, President and CEO of ClearWay Energy, sir, you may begin.

Good morning. Let me first thank you for taking the time to join today's call. Joining me this morning, is Chad Plotkin, our Chief Financial Officer, Akhil Marsh, our Investor Relations Manager, and 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. Actual results may differ materially. Please review the safe harbor in today's presentation, as well as the risk factors in our SEC filings. In addition, we will refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and reconciliations with the most directly comparable GAAP measures, please refer to today's presentation. Turning to page four. For the third quarter of 2020, Clearway achieved CAFTI of $171 million for a total of $265 million year-to-date. These results are within our expected sensitivity ranges. To date, the effects of COVID remain minor, with our teams maintaining safe and reliable operations through this difficult time. Clearway is announcing an increase in our quarterly dividend by 1.8% to 0.318 cents per share in the fourth quarter of 2020, and continues to see dividend per share growth at the upper end of our 5% to 8% long-term growth rate through 2021. As I will go into more detail later in this presentation, C1 has committed to invest approximately $450 million in new growth during 2020. This is comprised of today's announcement, encompassing total growth investments of approximately $108 million, while generating $13.8 million of average asset CAFTI over a five-year period, and our previous growth investments, totaling $339 million, while generating approximately $36 million of average asset CAFTI over a five-year period. In tandem with these accretive acquisitions, Clearway has also raised capital efficiently. We raised $24 million in equity during the quarter via the ATM program for a total of $63 million year-to-date. We clearly also refinanced and upsized several non-recourse debt facilities, releasing $96 million of new capital available for capital allocation at the corporate level. In addition, all cash trapped due to the PG&E situation has been released. As a result, we have sufficient capital to fund all of the currently committed investments. With this activity, we are updating our pro forma CAFTI per share view to $1.71 per share. which supports our target DPS growth and 80-85% payout ratio through 2021 at the high end of the growth range, as well as already positioning the company for growth beyond 21. This trajectory factors in the financings and contributions of the committed growth we just discussed, and does not include any additional growth opportunities. As we release the new growth, we continue to advance the opportunity set with Clearly Group. including the formal drop-down offer, the investment opportunity, and partnerships comprising 1.6 gigawatts of projects, comprised of 1.2 gigawatts of new projects, and increased interest in Mesquite Star, with an expected capital commitment in the range of $230 to $240 million, subject to negotiation by C1's independent directors. In addition, and also working with CEG... we're in the early stages of structuring an additional portfolio opportunity of 1.1 gigawatts with 2021 to 2023 commercial operation dates that we anticipate being offered to make a commitment on in the first half of 2021. All in all, 2020 has been a very successful growth year for C1 with sufficient pro forma CAFTI growth to achieve the high end of our long-term dividend growth targets in 2021. Turning to page five, I wanted to highlight our execution this year in new investments. In 2020, and as already disclosed, we have closed or committed to invest nearly $340 million of investments, representing around $36 million of annual CAFTI contribution on a five-year basis. This leads to a CAFTI yield of roughly 9.8%, with a weighted average life of 13 years contracted, excluding the Black Start project at Marsh Landing. And looking at the right side of the page, Today we are announcing an additional $108 million in investments, with $44 million invested to acquire CEG's residual interest in our distributed generation partnerships, as well as an SREC contract associated with these assets. This investment is expected to produce $5.3 million of CAFTI for a CAFTI yield of 12.2%. We've also committed to acquire the 160 megawatt Langford Wind Farm upon commercial completion of its repowering, expected by the end of this year, for $64 million. This asset, which is unlevered, has been designed around a commercial profile optimized to balance risk and return in the ERCOT market and is thus less contracted than is typical for our projects at approximately 35% hedged over 12 years. A revenue contract position that is supplemented by a contracted stream of reliable PTC pay-go cash flows. With those factors taken into account, we believe the expected 8.5 million in CAF degeneration and unlevered 13.2% CAF yield make for an attractive investment profile that takes into account the project's higher merchant position. As you can see in the investments listed on this page, I'd ask you to note our continuing emphasis on accretion. While the CAF yields these drop-downs create from our sponsor are helpful, they're matched with the profile of investments which takes into account the upfront cash flow weighted in the case of the distributed generation partnerships investment, and the merchant cash flows of Langford. So as we move to the future drop-down structure discussed on the next page, I would suggest yields on this structure will be more aligned with what we have executed in the past for similar type of assets while still providing for meaningful accretion on a highly diversified portfolio. Turning to page six, I want to provide a high-level overview of our CAFI outlook that Chad will have more detail on his part of the presentation. We're announcing 2021 guidance of $325 million resulting in $1.61 CAFTI per share and an update to our current pro forma CAFTI outlook to $345 million, leading to CAFTI per share of $1.71. These numbers do not include the drop-down opportunity for the new partnership investments as listed on the right side of the page. This drop-down opportunity is well diversified, comprising six new assets as well as increased ownership in Mesquite Star, with a greater than 14-year CAFTI weighted average contract life. It also further diversifies Clearway Energy into storage, with 395 megawatts, 1,580 megawatt hours of co-located storage in Hawaii and California. As we indicated on our last call, all it goes to provide more transparency to our shareholders regarding the capital needs of the business, and such we anticipate, subject to the approval of NAPAN directors, an investment required for this portfolio of between $230 and $240 million. As mentioned on the last slide, Given the structure and asset mix overall, we would anticipate the yields in this investment to be commensurate to the risk-adjusted profile of this substantial and diversified portfolio. While we are still working through the structure and other terms and conditions of the transaction with our CEG colleagues, I want to emphasize that while our ownership percentage will be approximately 50% for most of the assets, this is not a financing structure intended to provide capital to C1. In working with CEG and our anticipated partner, we are focused on optimizing ownership in these assets that allows for appropriate returns for CWIN, as well as an accretive yield on a diversified, contracted basis, while also allowing CEG to develop more assets at their target investment returns. When concluded, these assets will contribute beyond the $71 CAFTI per show pro forma outlook. This partnership platform we intend to continue to utilize in the future. and as such, will be followed by an additional 1.1 gigawatt portfolio offer in the first half of 2021. At Clearway Energy, we are excited about this new structure, allowing us to continue our growth trajectory at attractive, accretive, and further de-risk CAFTI yields. With that, I will turn the discussion over to Chad. Chad?

Thank you, Chris. And turning to slide eight. For the third quarter, Clearway is reporting adjusted EBITDA of $312 million. and cash available for distribution, or CAPTI, of $171 million. Clearway has now realized $853 million of adjusted EBITDA and $265 million of CAPTI year-to-date. During the quarter, the company benefited from strong availability at the conventional segment, as our California-based gas plants performed exceptionally well during the key summer months. This was especially evident during the extreme heat wave across the West Coast, where our California plants demonstrated their value as critical reliability resources in the state. While the conventional performance in the quarter was a welcome respite to the challenging West Coast weather conditions, the company's renewable portfolio did not benefit from the environmental and weather-related events. As noted in the appendix section of the presentation, the solar projects were especially challenged as the fires on the West Coast resulted in soiling and weak irradiance, leading to production below 95% of expectations between August and September. Additionally, wind production during the quarter across the portfolio was at 92% of expectations, as strong results in August were offset by a weaker July and September. As a company, we continue to closely monitor the business impacts related to the COVID-19 pandemic. Consistent with what we indicated last quarter, the company's projects have maintained safe and reliable operations, but we have observed a reduction in volumetric sales at the thermal segment, which continued into the third quarter. Though this impact is not material from a consolidated company perspective, we do currently anticipate the volumetric degradation to continue into next year, which I will discuss momentarily when walking through forward financial expectations. Lastly, in providing an offset to these items, CAPD results in the quarter were favorably impacted by the timing of project-level debt service due to the recent refinancings. Overall, while CAPD performance year-to-date is moderately below expectations, Since results are within the company's sensitivity ranges, we are maintaining CAPT guidance of $310 million. Now moving to capital formation. Inclusive of the DG Partnership Whole Co. refinancing completed this week, the company raised $96 million in new corporate capital through the upsizing of several non-recourse financings at an effective weighted average interest cost of 3.3%. Additionally, we continue to prudently utilize the ATM programing having raised an additional $24 million during the quarter. This brings total equity capital raised under the program year-to-date to $63 million. With the release of the $168 million in TRAPP PG&E project-related distributions and the $75 million previously raised through the residential solar portfolio sale in May that was used to acquire the remaining interest in repowering 1.0, the company is also well-positioned from a cash perspective. With these combined resources and the fact that the company's corporate revolver is completely undrawn, Clearway is essentially fully capitalized to accretively fund all committed growth it has made year-to-date while also preserving significant flexibility for new growth. As such, there is no requirement for any incremental new permanent capital except for new growth, including the most recent drop-down offer of the partnership investment opportunity. Turning to slide nine to discuss the company's updated pro forma CAFD outlook and 2021 expectations. In order to aid in understanding the various moves in our CAFD expectations, we provide a bridge commencing with our prior pro forma CAFD outlook of $340 million. First, due to the refinancing and upsizing of the non-recourse project debt facilities that provided $96 million in additional capital, CAFD is reduced by approximately $9 million due to additional principal and interest from these transactions. Next, we add in the $22 million of new asset-level CAFD from recent growth investments that were otherwise excluded from the prior pro forma outlook. This contribution is based on the expected five-year average CAFD profiles for these projects and include Mesquite Star in today's announcement of Langford Wind and the remaining interest in the DG partnerships. Next, While the company has had success in the identification of additional operational improvements, we are now factoring in around a $6 million budgetary impact that will reduce annual CAPTI expectations. This relates to increased cost associated with our overall insurance program and adjustments relative to support services under the MSA with Clearway Group and other back office requirements. Additionally, and consistent with the approach we have communicated to you around budgeting for renewable energy production, We have factored into our statistical modeling additional historical data, which had a modest effect on expected P50 median production estimates across the portfolio. With these changes, we are raising our pro forma CAFTI outlook to an approximate $345 million, or an amount that continues to be supportive of our ability to deliver on dividend growth within our payout ratio targets. Moving to 2021 expectations. Because our conveyance of our pro forma CAPD outlook is based on the five-year average asset CAPD profile for new investments, current year results will be affected by the timing of when a project reaches COD and the shape of the project's cash flow profile. In this regard, we anticipate a $17 million timing delta in 2021 related to the company's growth investments. Lastly, while we believe these are all temporary variances, We do foresee further impacts in 2021 of approximately $5 million due to COVID-19 related matters. This includes lower volumes at the thermal segment and the impact from California state taxes resulting from Assembly Bill 85 that was enacted at the end of June, which suspended the company's ability to utilize state net operating losses for the next three years. With these adjustments, Clearway is initiating 2021 CAPT guidance of $325 million and As noted, CAPTI guidance and the company's pro forma outlook are based on P50 renewable production expectations for the full year. Importantly, this also only factors in the committed and funded growth year to date, providing for additional upside to expectations upon the execution of new transactions, such as the 1.6 gigawatt partnership investment. And with that, I'll turn the call back to Chris for closing remarks.