Clearway Energy, Inc.

Good day, and thank you for standing by. Welcome to the Clearway Energy, Inc. First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Requiring further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Christopher Sotos, President and Chief Executive Officer. Please go ahead.

Good morning. Let me first thank you for taking time to join today's call. Joining me this morning is Chad Plotkin, our Chief Financial Officer, 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 to the most directly comparable GAAP measures, please refer to today's presentation. Turning to page four, financially, Clery is reporting first quarter CAFTI of negative 15 million, including the negative impacts from the February weather event in Texas and the acceleration of accrued interest due to the refinancing of the 2025 senior notes. These negative effects were significantly offset by the strong performance at our West Coast renewable projects, demonstrating the benefits of a scalable and diversified portfolio. As a result, we are maintaining our guidance at 325 million that we provided on our call in February. As indicated previously, during the quarter we were able to refinance our $600 million 2025 senior notes with a $925 million new green bond due in 2031 at a very attractive 3.75% interest rate. This issuance was used to refinance the 2025 bonds, repay our revolver borrowings with permanent capital, and general corporate purposes, all while saving Clearway approximately $10 million in interest costs. Clearway has announced an increase in its dividend by 1.5% to 32.9 cents per share for the second quarter of 2021. This is on track for our DPS growth at the upper end of our 5% to 8% long-term target for 2021. As one of our key strategic goals this year, I'm happy to announce more than two years prior to the expiration of the current tolling contracts in the middle of 2023, a new seven and a half year resource adequacy contract with an established load serving entity for 100 megawatts at marsh landing. Not only is this an important first step in mitigating future merchant exposure, but the pricing we were able to achieve, while subject to confidentiality, is sufficient to maintain the current CAFTI profile of marsh landing if we were able to secure similar economics on the remaining capacity of the plant. It is important to recall that our gas plants will be materially debt free at the expiration of the existing contracts. While we still have a long way to go, I want to reiterate this is a strong step more than two years ahead of the expiry of these contracts at a constructive tenor in pricing and reinforces the strong position that our gas assets occupy. Our assets are some of the newest and most efficient in California. They are strategically located inside of major load pockets. Most importantly, they all have quick start and fast ramping capabilities, allowing California to adjust reliability needs related to its renewable energy goals. These attributes make Clearway's gas assets a critical part of California's overall supply stack, as was demonstrated last summer. During the quarter, we continued to execute and advance renewable growth at Clearway. We closed the acquisition of the 264-megawatt Mount Storm project, which is situated near our Pinnacle and Black Rock assets, allowing Clearway to effectively provide O&M services to these three sites. In a competitive market, efficiency is a key advantage. and our ability to build out platforms in certain geographic locations while achieving operational efficiencies is critical to our success. We continue to work with our sponsor, Clearway Group, on co-investing in a new partnership, currently expected to be between 1.1 and 1.7 gigawatts, which will further diversify Clearway Energy and provide additional CAFD certainty with a weight average contract tenor of approximately 14 years. In addition, Clearway Group is continuing to grow its development efforts, and we expect its current 10 gigawatt pipeline to grow meaningfully in the second half of 2021. Finally, as we'll discuss in more detail on the next slide, Clearway is increasing its pro forma CAFTI per share outlook to $1.85 per share, which now supports our DPS growth objectives through 2023. Turning to page five to provide more color to our pro forma CAFTI and dividend per share outlook. Given the investments in growth that we have made, as well as the recently completed refinancing discussed, we are now increasing our pro forma CAFTI outlook to $1.85 a share. If we assume that the CAFTI profile of our assets remains constant, we can increase our dividend within our long-term 5% to 8% growth rate through the end of 2023. Or we recognize that merchant exposure in California, resulting from the natural gas assets reaching contract maturity in 2023 as uncertainty, The current CAFTI per share trajectory provides for flexibility to mitigate this uncertainty. Specifically, the company is cushioned against a reduction in CAFTI per share of approximately 10 cents while maintaining the ability to achieve our long-term DPS growth targets through this period of time. For example, at $1.75 of CAFTI per share and 85% payout ratio, Clearway Energy could pay a dividend per share of $1.49, which would fall in line with the low end of our long-term dividend growth objectives of 5% to 8%. In addition, please note that the $1.85 pro forma CAFTI outlook does not include any further investments by Clearway in additional drop-downs or third-party M&A. So, in summary, the company continues to execute, adding to visibility around future growth in CAFTI and dividend per share, as well as to increase the certainty around that growth trajectory. With that, I'll hand the presentation over to Chad. Chad?

Thank you, Chris. I'm turning to slide 7. Today, Clearway is reporting first quarter adjusted EBITDA of $198 million and cash available for distribution, or CAPTI, of negative $15 million. Though these results came in below our expectations, we view overall financial performance favorably as excellent production at our renewable portfolio on the West Coast and higher distributions from unconsolidated investments provided a substantial offset to the financial impact from the February winter event in Texas. On the positive front, the prevailing winter weather in the quarter that impacted wind production in Texas and the Midwest had the effect of creating favorable renewable energy conditions in California, where production at the Alta Wind Project was up over 30% relative to expectations. Similarly, these same conditions led to above-expectation performance for the West Coast-based utility-scale solar projects. On the negative side, and as previously disclosed, The company had estimated the full-year cash impact from the February winter event in Texas to be in the $20 to $30 million range. Today, we are narrowing that range to $25 to $30 million, as in the first quarter, we realized an approximate $25 million impact to CAPD, which, due to amounts attributed to third-party equity investors, resulted in an approximate $50 million impact to adjusted EBITDA, given the effect on fully consolidated revenue. While there continues to be ongoing discussions in Texas on the long-term implications of the February event, we do believe the material impact to the company has passed. That said, and based on our best available information, we continue to plan for some potential additional cash exposure, which is what informs the narrowed range currently noted on the slide. Further impacting quarterly results was a timing dynamic relating to the successful issuance of the green bonds due 2031 and the repayment of the outstanding 2025 senior notes. Specifically, the timing of when cash interest payments are made changed as roughly $14 million in accrued cash interest expense that would normally have been paid in the second quarter was accelerated into the first quarter. Because of this change in the timing of corporate interest payments and to improve visibility into quarterly expectations, we pro forma adjusted the normal seasonality disclosure in the appendix section of our earnings material to account for this modification. Please refer to slide 14 of this presentation for this update. In referring to this updated disclosure, I would remind you that the first quarter is generally a seasonally low part of the year, as most of the company's CAFTI is generated in the second and third quarter. That said, and to put some perspective on quarterly performance, if we excluded the approximate $25 million reduction to first quarter CAFTI from the February Texas winter event, realized CAFD in the quarter would have been favorable to the modified pro forma first quarter expectations. As noted in the last quarterly call, we indicated that the effect of the February event in Texas was essentially offset by the expected four-year contribution from the closing of the 35% interest in Agua Caliente. So we did not raise CAFD guidance at that time to account for the growth investments. Today, we are again maintaining full-year CAFTE guidance of $325 million, which continues to be based on the achievement of P50 median renewable energy production for the full year. But we do note that given the pro forma adjustment to our seasonality expectations, and since we view the financial effect of the Texas event as outside of the scope of our normal sensitivity range, the company is currently trending favorably to our consolidated P50 financial outlook for the full year. With that, I'll turn the call back to Chris for his closing remarks.