Clearway Energy, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the ClearWire Energy Fourth Quarter 2021 Earnings Conference 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 this session, you will need to press the star, then the one key on your touch-tone telephone. If you recall our resistance, please press star, then zero. I would now like to hand the conference over to your speaker host, Mr. Chris Sotos, President and CEO of ClearWire Energy. Please go ahead, sir.

Thank you. Good morning, and we first thank you for taking the time to join today's call. Joining me this morning are Akhil Marsh, Senior Manager of 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 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. 2021 was a historic year for Clearway Energy. From an operational performance and CAF degeneration standpoint, we exceeded our objectives for the year. We also deployed approximately $820 million into accretive growth projects, while our sponsor made significant strides in expanding its development portfolio, which will help drive our future growth. We materially reduced the risk in our natural gas portfolio with new contracts. Finally, Clearway Energy announced the sale of our thermal business at a very attractive multiple. As a result of all these efforts, Clearway enters 2022 with unprecedented flexibility. This flexibility provides Clearway with the longest visible runway for dividend per share growth in its history, with $750 million of net proceeds remaining for capital deployment after the thermal sale. In summary, we are very well positioned for 2022 and beyond. For 2021, our CAFTI generation performed well, with full-year CAFTI of $336 million ahead of our guidance. Clearway also announced an increase in its quarterly dividend by 2%, or 1.3872 per share, on an annualized basis. the sale of our thermal business is on track with anticipated closing in the second quarter. We're also increasing the amount of remaining capital as a result of the sale from 680 million to now 750 million. This is primarily due to a recent change in California law where prior suspension and a company's ability to utilize state NOLs in 2022 was reversed. For 2022, taking into account the sale of thermal and our current committed growth commitments, we're on track for 385 million of pro forma CAFTI translating into $1.90 per share, with $520 million out of the $600 million in capital commitments already funded. Moving forward, CLM is working to deploy the $750 million of remaining capital to drive CAFTI and dividend per share. In working with our Clearway Energy Group colleagues, we have line of sight to a minimum of $250 million, or roughly a third, of this capital being allocated to the next dropdown, with Clearway Energy Group's development pipeline growing to 19 gigawatts. This $250 million of capital deployment would be viewed as a floor that would potentially be increased, depending on what climate and clean energy tax provisions working their way through Congress are ultimately passed. With the full deployment of the $750 million of remaining capital, Cleroy would be able to drive CAFD per share to over $2.15 on a long-term basis. Cleroy is also announcing a goal in 2050 of net zero GHG emissions. The ownership of our long-term contracted clean energy assets is at the heart of what Clearway does every day and represents the significant majority of our CAFTE and EBITDA generation going forward, as well as a platform for future accretive renewable growth through drop-downs from our sponsor or through opportunistic third-party M&A. However, we thought it was important to formally state our Board-approved long-term goal around climate change and our emissions, given our natural gas holdings. As a leader in the clean energy transition, Clearway is well positioned for 2022 and beyond to achieve the upper range of its long-term 5% to 8% DPS growth target through 2026. Turning to page 5, this provides a roadmap for anticipated CAFTI growth utilizing the now $750 million of remaining capital resulting from the thermal sale. Starting on the left side of the page, the $385 million, or $1.90 CAFTI per share, takes into account the disposition of thermal as well as the committed growth investments. The next column indicates the anticipated CAFD on our next drop-down from our sponsor, with an anticipated minimum capital requirement of $250 million and an average 8% to 9% CAFD yield. Due to this drop-down, we now have line of sight to deployment of a third of the remaining proceeds from the sale of thermal. As discussed on previous calls, Clearway has always focused on efficiency of capital deployment with an emphasis on accretive growth. We are continuing to work to commit the remaining $500 million of thermal sale proceeds to accretive growth investments driving CAFTI on a long-term basis to approximately $440 million and CAFTI per share to $215 million or greater, depending on CAFTI yield. In this process, we remain focused on meeting our underwriting criteria. If we cannot meet this criteria, we retain the option to evaluate other means of capital allocation, including returns to shareholders. Page 6 provides an illustration of our environmental footprint. Clearway Energy has one of the lowest GHG intensities in the U.S. power sector driven by 5.2 gigawatts of net owned renewable generation. As a result, approximately 91% of our electricity megawatt hours in 2021 were from renewable generation. This number should increase in the future as the size of our renewable fleet grows through investment in our sponsor's 19 gigawatt renewable development pipeline, as well as third-party acquisitions. This renewable footprint also provides the vast majority of Clearway's economic value with 75% of our pro forma CAFTI and 82% of our pro forma adjusted EBITDA coming from renewables after accounting for the thermal sale. As we've discussed over the years, Clearway views its gas fleet as essential for the transition to renewable energy of California's electricity generation. Our natural gas assets are predominantly peaking assets that help ensure the grid's reliability during periods of high demand and for electric grids with high penetrations of renewables. Our California gas assets' characteristics of being fast start Efficient and unload pockets are critical for providing electricity during periods in which renewable generation may be waning. As I mentioned earlier, the Board has approved a net zero GSG emission target by 2050, aligned with the Paris Climate Agreement. Taken together, Clearway is a leader in clean energy and a premier investment opportunity in the energy transition space. With that, I'll turn it over to Chad.

Chad? Thank you, Chris. And turning to slide eight. Clearway had an excellent 2021 both operationally and strategically. The company finished the year strong with fourth quarter cash available for distribution or CAPTI of $35 million and adjusted EBITDA of $250 million. This brought full year 2021 results to $336 million in CAPTI or above our guidance of $325 million and adjusted EBITDA to $1.15 billion overall. As a reminder, full-year CAFD results were impacted by approximately $25 million from Ice Storm URI almost one year ago. Excluding that impact, CAFD would have been approximately $360 million for 2021. During the fourth quarter, the company's portfolio was balanced. In the non-renewable part of our business, both the conventional and thermal segments performed materially in line with expectations, leading to a strong year overall. For renewables, production across the wind portfolio during the fourth quarter was modestly above expectations, providing an offset to lower solar volumes. As a reminder from the third quarter call, strategic efforts did impact fourth quarter results relative to original expectations due to a change in the timing of project-level interest payments such that payments were made in the third quarter versus the fourth quarter. On the strategic financing front, the company continued to manage the corporate balance sheet in 2021 through effective liability management, capital formation in line with our leverage targets, and by implementing temporary solutions to execute on growth in advance of receiving the net proceeds from the thermal transaction. During the year, we raised $1.3 billion in new corporate-level green bonds, which in part the company utilized to refinance the $950 million in the then-outstanding 2025 and 2026 senior notes. Through these efforts, and on a weighted average basis for the new financings, we reduced interest costs from approximately 5.5% to 3.75% in the aggregate, extended the maturities to 2031, and raised additional cost-effective debt capital for growth. Importantly, Clearway has further mitigated its interest rate exposure, as the company's earliest corporate maturity is now in 2028, and when also including the project-level non-recourse debt, approximately 99% of the company's consolidated long-term debt interest costs are fixed. As mentioned on the last earnings call, due to the timing of when we expected to receive the net proceeds from the thermal sale relative to when we needed to finance committed growth investments, we required a temporary solution to bridge the company's capital needs. To accommodate this requirement, in November, we agreed with the company's bank group on an amendment to the revolving credit facility providing for the ability to temporarily operate at higher leverage ratios and to enter into a bridge loan to facilitate the closing of the $335 million acquisition of the remaining interest in Utah Solar. Through these efforts, the company achieved significant financial operating flexibility to advance its strategic growth objectives. This included the ability to fund $520 million of growth commitments since November, which was instrumental to meet both 2022 CAPD guidance and its pro forma CAPD outlook. We do, however, want to emphasize that these efforts should not be interpreted as a long-term change in our leverage targets. Upon the closing of the thermal transaction, the company will repay both the bridge loan and outstanding balances under the credit facility and see its leverage ratios move back to a more normalized level. For 2022, we continue to maintain full-year CAPD guidance of $395 million. However, and as noted on the company's last earnings call, due to the uncertainty of when the thermal transaction may close, guidance does continue to factor in the estimated full-year contribution of $40 million in CAPD from the thermal business. As is our normal practice for strategic transactions, we will provide an update to full-year 2022 expectations after the closing of the thermal transaction. Lastly, we want to also remind you that 2022 CAPD guidance also does not fully capture all CAPD expected relative to five-year averages from committed growth investments, which informs the company's $385 million in pro forma CAPD outlook, a figure that already excludes any contribution from thermal. And with that, I'll turn the call back to Chris for closing remarks.