Clearway Energy, Inc.

Good day and thank you for standing by. Welcome to the Clearway Energy Inc. Second Quarter 2023 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 the session, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Sotos, President and CEO.

Good morning. Let me first thank you for taking the time to join Clearway Energy, Inc.' 's second quarter call. Joining me this morning are Akhil Marsh, Director of Investor Relations, Sarah Rubenstein, CFO, and Craig Cornelius, President and CEO of Clearway Energy Group, our sponsor. 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, Cleary had a soft first half of the year. as weather and renewable resource conditions deviate substantially from historical averages across most geographies. For the second quarter, Clearway generated $137 million of CAFTI with the lowest quarterly wind production in the company's history. As we look ahead to the balance of the year, we are updating and reducing our full year guidance to a range of $330 to $360 million, which accounts for our first half results and reflects a range of potential outcomes in renewable resources and weather impacts on load. While results have stabilized in July and are materially on plan for the month, we are cautious given the weak renewable resource and relatively mild weather in California through June. Nonetheless, enabled by our prudent financial management, Clearway is announcing an increase in its dividend of 2% to 0.3891 per share in the third quarter of 2023 or 1.5564 on an annualized basis, keeping on target to achieve the upper range of our dividend growth objectives for 2023. Despite our challenges, Clearway continues its focus on growth in long-term CAFTI and our asset base. In terms of drop-downs from Clearway Energy Group, we recently committed to acquire Cedar Creek Wind for $107 million at a greater than a 9% CAFTI yield, as well as Rosemont Central Storage for $32 million at an approximate 11% CAFTI yield. As such, we are raising our pro-format CAFTI outlook from $410 to $420 million. In terms of our continued growth trajectory, Our sponsor's pipeline has grown over 30 gigawatts, including 6.9 gigawatts of late-stage projects expected to reach COD in the next four years. We continue to work toward binding commitments on the remainder of drop-down 24 with Texas Solar Nova, which will have an estimated capital commitment of $40 million. Working with Clery Group on drop-down 25, that begins our deployment of $220 million of capital commitments, we have received our first offer on these assets in the form of Dan's Mountain, a wind farm with a target completion at year-end 2024, and a greater than 9% CAFTI yield. Offers of subsequent drop-down 25 assets are anticipated from our sponsor over the balance of the year, with the contribution of those assets targeted to provide a CAFTI contribution consistent with our goals. Here at Clearway, we are keenly aware of the capital market volatility of recent months. I want to reiterate a key point around capital, which is we have enough cash to fund our line-of-sight drop-downs that underpin our 215 per share long-term target. Clearway also benefits from an undrawn revolver, excess cash flow generation, and unused leverage capacity to fund additional growth through this volatile period. In summary, Clearway continues to execute its growth plan with a very strong internal liquidity profile, so it's well positioned to grow beyond the 215 CAFTE per share, combined with a DPS growth rate in the upper range through 2026. Turning to slide five to provide an overview of our recent capital commitments. On the left side of the page, review Cedar Creek Wind, a 160-megawatt Idaho project underpinned by a 25-year bus bar PPA for an investment-grade utility. This project should produce 10 million of CAFTI annually for an approximate 9.3% CAFTI yield while it achieves commercial operations targeted for the first half of 2024. On the right side of the page, our Rosamond Central battery storage project is co-located with a Rosamond Central solar facility. This project is expected to require $32 million of capital with an approximate 11% CAFTI yield will achieve commercial operation in the first half of 2024. This represents our continued diversification into a new asset class beyond wind and solar, with C1 owning or committing to invest in over 550 gross measure lots of storage today. In summary, we continue to advance our growth objectives with these two high-quality capital commitments. Slide 6 provides an update about our path to invest the thermal excess proceeds and achieve our growth targets. With our announced investments in Rosamond and Cedar Creek, Our pro forma CAFTI outlook now increases to $420 million, with our remaining capital targeted for investment in Texas Solar Nova and the anticipated $220 million of commitments in drop-down 25 offered from Clearway Group, of which the recently offered Bands Mountain represents approximately 35% of this future commitment. Despite our current challenges due to poor renewable resources in the first half of the year and ongoing capital market volatility, clearly remains on track regarding continued executions versus $2.15 CAFTI per share goal and beyond. Now I'll turn it over to Sarah. Sarah?

Thanks, Chris. On page 8, we provide an overview of Q2 results, including adjusted EBITDA for the second quarter of 2023 of $316 million and cash available for distribution of $137 million. These results reflect the previously disclosed historically low wind production that resulted in an approximately $30 million reduction to second quarter revenue, including a decrease as compared to expectations of approximately $16 million for the ALTA projects. Results at the conventional segment were also below internal expectations. The Marsh Landing and Walnut Creek facilities, whose initial tolling agreements ended in May and June respectively, generated lower than expected merchant energy margin in the quarter because of milder than normal temperatures. Despite the first half challenges impacting CAFTI, the company remains well positioned for growth with its long-term CAFTI per share outlook intact, a strong balance sheet, large revolver capacity, and pro forma credit metrics in line with target ratings. there continues to be no external equity needs for line-of-sight growth to meet the $2.15 of CAFTI per share and resultant dividend per share objectives. Moving to page 9, we provide a walk from our previous 2023 full-year CAFTI guidance of $410 million to our revised guidance range. Starting from the left, the first quarter of 2023 reflected lower solar irradiance due to above average rainfall in California, which resulted in lower than normal solar revenues. First quarter 2023 results also reflected extended outages at the conventional facilities that reduced capacity revenue and increased maintenance costs compared to expectations. As previously noted, second quarter reflected historical low wind production, yielding a decrease in revenue compared to expectations of approximately $30 million, with a material shortfall at the ALTA facilities along with generation underperformance across all wind facilities in the portfolio. In addition, the conventional facilities generated lower than expected merchant energy margin due to milder than normal temperatures. The impact of the first half of 2023 results led to a revision to full year 2023 CAFTE guidance down to a range of $330 to $360 million. We have observed more normal wind production trends for the month of July, and while we have not altered our long-term view of P50 median production estimates, the revised guidance range reflects the possibility that renewable resource may trend lower than normal for the balance of 2023, given the more volatile renewable resource experience in 2023 thus far. The guidance range also reflects a sensitivity for merchant energy margin at the conventional facilities for the remaining summer months. While temperatures increase during the month of July, the company cannot predict how weather, as well as other factors, such as gas prices and the availability of other generation sources, may impact energy margin at the conventional facilities. Finally, the revised guidance range reflects the expected timing of committed growth investments, including estimated project CODs. And with that, I'll turn it back to Chris for closing remarks.