Clearway Energy, Inc.

Good day and thank you for standing by. Welcome to the Clearway Energy Incorporated 2021 earnings call. At this time, all participants are in a holy mood. After the presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Chris Sotos, President and CEO, Clearway Energy Incorporated. Please go ahead.

Thank you. Good morning, everyone. Let me first thank you for taking the time to join today's call. Apologies for being a little bit late. There were some technical difficulties. Joining me this morning is Akil Marsh, Investor Relations, 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 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, Clearway is reporting second quarter CAFTI of $155 million and $140 million through the first half of 2021. Due to the strong performance of our diversified portfolio, we maintain our full-year CAFTI guidance of $325 million, including the impact from the Texas winter weather event. Clearway has announced an increase in its dividend by approximately 1.7%. to 33.45 cents per share for the third quarter of 2021. This is on track for DPS growth at the upper end of our 5% to 8% long-term target for 2021, targeting an annualized rate of $1.36 dividend per share going into 2022. As we have discussed in our previous calls, growth in CAFTI per share is visible for the next few years. So our focus and partnership with Clearway Energy Group has been on the extension of this trajectory over the long term, and we are pleased with our progress. Our newest partnership with Clearway Energy Group is becoming more concrete and would comprise approximately 1.1 gigawatts of co-investment and diversified portfolio of renewable assets. Today, we are also announcing potential new drop-down opportunities comprising 452 megawatts of solar projects in Texas and a 133 megawatt portfolio of distributed solar projects. These investments would require funding between the second half of 2022 and 2024, providing Clearway additional visibility into its growth plan. And looking at growth beyond these discrete opportunities, we are very pleased by the progress we are making on renewable development in our integrated Clearway enterprise, as the investments Clearway Group has been making in capabilities and projects have accelerated each year and are meeting growing demand from customers and expanding support from policymakers. In this regard, our integrated clean power enterprise is among the industry leaders as renewable growth expands in the U.S., With over 75% of new electricity generating capacity last year having come from renewable resources, we expect to see substantial growth in this asset class and for progress in the Clearway development pipeline to sustain dividend for sure growth for years to come. Putting numbers to that progress, Clearway Group increased its development pipeline to over 16 gigawatts during the first half of 2021 through a full spectrum of development activities that involve securing control of late-stage projects planned for completion in the next three years, expansion of greenfield development assets to greater nameplate capacity, substantial additions to its pipeline of paired and standalone storage assets, and initiation of additional early-stage development projects that will sustain growth in the longer term. Further, the pipeline Clearway Group's developing is being tailored to further reinforce the type of resource diversification that enables us to provide in-line financial results during the first half of this year. It reflects a balance across wind development regions, including sites that exhibit favorable correlation to our existing fleet, a substantial volume of solar and storage projects that exhibit load generation variability, and potential for market and contracting positions complementary to our existing ones. Having doubled its annual development throughput to over 1 gigawatt last year, Clearway Group aims to double its development throughput to over 2 gigawatts per year by the 2024 Project Vintage and a 6.9 gigawatt pipeline of late-stage projects provides a strong foundation for meeting that objective. This pipeline supports a range of upcoming drop-down opportunities, including what I'll discuss on the next slide, but as importantly, an even further set of drop-down opportunities for investment by the company as the pipeline of projects planned through 2025 mature toward financing commitments. Next, we continue to make progress around the 2023 position regarding our California gas assets. We are in active discussions around our open position and expect further progress towards contracting the assets during the third quarter. In addition, I want to address a topic that we have received a number of incoming questions about, namely the potential sale of the thermal platform. District energy is a highly attractive infrastructure asset class, and our thermal platform represents one of the three large district energy platforms in the U.S. Due to significant interest from prospective buyers, we have decided to explore a potential sale of the thermal platform. Let me be clear, we do not need to sell thermal for capital formation purposes, and the asset class is a strong and well-performing one for Clearway. Therefore, any decision on the sale of the thermal platform is going to be very disciplined on price. And to the extent we move forward, we believe proceeds from such a potential transaction will exceed our current capital commitments and near-term visible growth opportunities. Finally, and as I indicated on our last call, Clearway sees its pro forma CAFTI per share outlook at $1.85 per share, which supports our DPS growth objectives through 2023. This pro forma CAFTI outlook does not factor in any uncommitted growth or results of capital deployment for massive sales. Turning to page five, we review our current pro forma CAFTI outlook as well as our prospective opportunities from the Clearway development efforts. As can be seen on the slide, compared to the CAFTI guidance of $325 million we entered 2021 with, we now see our pro forma CAFTI outlook at $395 million when all of our current capital commitments are funded in line with our balance sheet objectives and are fully operational. Focusing not on the absolute CAFTI number, but more importantly, CAFTI per share, which takes into account capital formation, we are maintaining our $1.85 outlook versus $1.61 coming into this year. This represents an increase of approximately 15% on a per share basis versus where it clearly entered 2021, driving further dividend growth. In providing more detail on growth that is not included in these numbers, I would turn to the right side of the page. The first component of the overall investment opportunity encompasses 133 megawatts of distributed solar assets that have either recently come online or have near-term CODs. These assets comprise more than 50 projects and 133 gross megawatts, carry revenue contracts of 20 years on average, and as with our other distributed solar assets, provide high CAFTI relative to their generating capacity. The second component is approximately 450 megawatts of ERCOT solar projects, currently with 254 megawatts of these under node-settled PPAs with a duration of 18 years and a complementary location in our Texas portfolio. Last are the 1.1 gigawatts of diversified partnership assets that are taking shape, including two solar plus storage projects for 463 megawatts in western states, along with a basket of other wind and solar projects with diversified off-takers. Before turning over to Chad, And I want to reiterate that while we have significantly improved the portfolio in the past 12 months to continue our growth trajectory, the Clearway enterprise continues to relentlessly focus on continuing our creative growth through drop-downs in new projects, third-party acquisitions, and capital recycling. With that, I'll hand the presentation over to Chad. Chad?

Thank you, Chris. And turning to slide seven. Today, we are pleased to report that Clearway benefited from its mix of generation and regionally diversified renewable portfolio. The second quarter adjusted EBITDA of $365 million and cash available for distribution, or CAFD, of $155 million were in line with seasonal expectations. With these results, the company is also reporting first half 2021 adjusted EBITDA of $563 million and CAFD of $140 million. During the quarter, and as noted in the appendix section of today's presentation, Clearway's renewable portfolio was able to withstand weakness in generation conditions at the non-California-based wind assets, where production was below median expectations. This was most prevalent in California, where the company's ALTA wind project generated strong results in April and May, helping to support first-half 2021 production at ALTA that was 12% above our median production forecast. Further, and in the second quarter, the company's utility-scale solar portfolio performed well with production modestly above expectations, providing further mitigation to the lower than average wind generation outside of California. In addition, and primarily due to favorable weather conditions as well as the initial phases of demand recovery from the COVID-19 pandemic, the company's thermal segment had a solid quarter as thermal equivalent megawatt hours sold were up 16% versus the second quarter of last year. Overall, and with the company results through the first half of the year in line with our sensitivity ranges, we continue to maintain 2021 CAFD guidance of $325 million. As a reminder, this guidance does continue to assume P50 median renewable expectations for the full year and is also affected by the approximate $25 million impact to CAFD in the first quarter due to the financial exposure from the February winter weather event in Texas. As Chris discussed, Clearway continues to both execute on and position the company for new opportunities to drive CAFD and dividend per share growth. With existing capital commitments on track to close within timeframes supporting our pro forma CAFD outlook, we are also focused on effectuating the financing of these transactions efficiently while maintaining our balance sheet objectives. With this in mind, we continue to focus on strategic flexibility in our approach to corporate capital formation. This flexibility is available to us with $420 million of capacity currently under our revolver to temporarily finance transactions and $126 million unutilized in the existing ATM program, providing an efficient means of placing equity as required. While these means are effective vehicles to support our efforts, we are also mindful that success in asset dispositions can also provide even more flexibility, as net proceeds on any transaction can lead to accretive recycling of capital. And this would be the case for thermal, where potential net proceeds in a potential transaction would be expected to exceed both our existing capital commitments and new opportunities that may arise. With that, I'll turn the call back to Chris for closing remarks.