Clearway Energy, Inc.

Thank you for standing by and welcome to Clearway Energy Inc's third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the question queue, you may press star 1-1 again. I would now like to hand the call over to President and CEO of Clearway Energy Inc., Chris Sotos. Please go ahead. Good morning.

We first thank you for taking the time to join Clearway Energy Inc.' 's third quarter call. Joining me this morning are Akhil Marsh, Director of Investor Relations, Sarah Rutenstein, CFO, and Craig Cornelius, President and CEO of Clearway Energy, our sponsor. Craig will be available for the Q&A portion of our presentation. Before we begin, I'd like to quickly take note that today's discussion will contain forward-looking statements, which are based on the 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'll refer to both GAAP and non-GAAP financial measures. 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. Given recent market volatility, we wanted to change our customer investor call format, take a step back, to reinforce the strength of our platform, what sets us apart from competitors, and the opportunities ahead of us. As such, first and foremost, critical to the Yieldco model is the difference of the Yieldco's cost of capital compared to that of a development company. This difference has oscillated over time, and despite the current market volatility, our sponsor's historic return targets and recently disclosed development IRR targets by other market participants demonstrate that C1's cost of capital remains well below the target returns of a pure developer, preserving this relationship and benefits for both parties. In addition, the sponsors hold approximately $1.8 billion of C1 shares, ensuring alignment of sponsor interests, the long-term interest of C1. The second ingredient for a successful yield show, the strong supply of assets with long-term contracts. While the current volatile capital markets have created some dislocation in the near term, the fundamental strength of renewable assets in terms of transitioning the U.S. away from fossil fuels to green, lower-cost energy has not changed. The demand to transition our grid away from fossil fuels has not diminished. To climate change, a continual challenge for the globe, feared by companies' government's goals of reducing their carbon footprint, while the benefits of the IRA are also still intact. Most importantly, competitively priced with local generation when compared to the current grid cost of energy, all drive a compelling long-term growth story for C1. As part of these ingredients, we at Clearway work to optimize these larger macro elements in combination with a very straightforward corporate financing model that has underpinned no complex convertible or contingent equity financings in C1's capital structure and no need for external capital to meet our DPS objectives through 2026. Pulling many of these elements together, at CUN and working with the sponsors has negotiated an increased CAFTI yield to 10% on drop-down assets for approximately $230 million of corporate capital deployment that we will discuss later. Importantly, we reaffirm our continued light on site for $2.15 of CAFTI per share with no need for external corporate capital and our consistent message over the past several years of visibility to achieve the high range of our 5% to 8% long-term target. And looking beyond 2026, In addition to the strong long-term global development demand we described earlier, CWIN also benefits from having strategic natural gas assets in California that are critical to assisting that state in transitioning away from fossil fuels. As evidence of this value, we have recently been awarded an additional approximate year and a half of contracted RA value at strong pricing on a portion of our fleet. This pricing provides a strong foundation for CWIN to continue its growth trajectory in 2027 and beyond in line with its long-term targets. In summary, despite challenging market conditions, the key elements that underpin a strong yield code still exist. Significant cost of capital differences between the yield code and the sponsor, strong development spend and demand for renewable assets, long-term contracts, combined with a straightforward capital structure that translates into transparent growth. Turning to slide five. Critical to the success of the yield code model is a strong sponsorship relationship. One key element of this is a cost of capital difference between the Yield Co. and Development Company. Given the return requirements of GIP and Total Energies, as well as other recent examples of publicly disclosed development returns, that relationship continues to hold between Clearway Group and CWIN, even in the increased cost of capital environment they're operating in. Clearway Group, which owns 85 million total shares of CWIN, representing approximately $1.8 billion of value, also receives approximately $130 million of dividends per year, It helps fund the entity's development activities to ensure a strong supply of drop-down assets in the future. Importantly, Clearway Group and our sponsors do not have any IDR or other special arrangements to derive value from their relationship with C1. It is the increase in C1 stock price, dividends paid, and margin on development assets that aligns value optimization for all entities. As evidence of this relationship, Clearway Group has agreed to move the targeted deals on over $230 million of C1 investments from approximately 9% to 9.5% cap yield to 10%, providing additional accretion on our redeployed thermal capital and reaffirming our line-of-sight growth through 2026. Clearway Group continues to invest heavily in development in line with line-of-sight drop-down growth through 2026, as well as flexibility for timing of drop-downs thereafter. Slide 6 provides an overview of CEG's 29 gigawatt development pipelines. which has grown substantially in previous years. This pipeline, which is an important source of growth for C1, continues to receive strong sponsor capital deployment to advance development projects that are well diversified among technology types and compatible with C1's growth and diversification objectives. The significant sponsor support has been demonstrated in allowing the platform to grow by over two gigawatts in the last 12 months and to nearly double in the last two years. The continued importance of scale in this industry It's critical to managing through volatile periods by being able to leverage a large development and operational platform to weather these storms. To this point, Clearway Group has been able to procure cost-effective supply agreements that should enable domestic content qualification and or reduce interconnection timeline risk for the 2025 to 2027 pipeline. In conclusion, the Clearway Group development platform has the benefit of leading scale in its class, leading sponsors, to ensure a supply of drop-down assets for C1 in the future. Turning to page 7. During this period of market dislocation, there have been a number of questions around long-term challenges in development of renewable assets for contracts. While the rapid increase in interest rates since May has created some headwinds in the near term, and as all stakeholders have had to adjust to the capital cost conditions, we do not see this as a long-term impediment to the growth of renewables in the U.S. As a backdrop, Renewable industry benefits from a variety of supportive federal and state policies, as well as corporate ESG goals that drive long-term demand for renewable assets that are not as sensitive to price increases. In addition, renewable PPAs are still competitively priced versus non-renewable power options. It is not as though an increased cost of capital only impacts renewable assets. It impacts all electricity generating assets. Importantly, regardless of ESG or RPS standards, Renewable assets produce electricity at prices that are competitive with other forms of generation, so are an attractive source of energy in economic terms as well. That being said, all of us within the Clearway enterprise are cognizant of the increased capital costs that impacts all stakeholders during this period of readjustment in PEP pricing. Long-term asset owners like CWIN, tax equity, non-recourse debt providers, OEM suppliers, developers, and PPA offtakers alike. We cannot forecast precisely how long it may take BPA prices to increase. We can say the scale becomes ever more important during this period, as it is critical to be able to develop quality, cost-effective projects, and we at CUN take significant comfort in having Clearway Energy Group as one of the largest developers in the U.S., backed by GIP and Total Energies, two of the largest companies in their respective industries, to manage this period. Simply stated, All of us within the Clearway Enterprise recognize that we are in a period that require adjustments by all stakeholders, but we are in a more competitively advantaged position than most to manage through. Turning to slide eight, an additional ingredient for success in the long term is a straightforward capital allocation and financing strategy. As we've discussed through the years, we have a simple capital structure. With no complex financing to require a C1 common equity conversion or contingent issuance, no need for external capital either to meet our DPS growth through 2026. We are also insulated from current interest rate volatility, with 99% of our consolidated debt fixed through utilization of interest rate swaps and no corporate maturities through 2028. CUN also nationally amortizes over $350 million of non-request debt per year, as our debt amortization schedule is designed to limit risk around PPA renewal in different energy market environments. as was recently demonstrated with our three natural gas assets that became merchant in 2023. All of this leads to an overall conservative capital structure that correlates to a BBBA2 rating that has been maintained since 2016 through a variety of challenges and market headwinds. C1's disciplined financial management has provided a strong foundation for sustainable growth through a variety of market conditions. To provide further disclosure around our sponsor's support on our latest drop-down offers, please turn to page 9. We are excited to announce that we have a commitment to purchase Texas Solar Nova for approximately $40 million of capital and a 10% CAFTE. These projects consist of over 450 megawatts of solar located in Kent County, Texas, and are underpinned by power contracts that are 18 years in duration with creditworthy counterparties. In addition, discussions with Clearway Energy Group have been able to come to agreement to modify Dan's Mountains CAFTE yield to approximately 10% for approximately 9% benefit from a new drop down 25 offer of three solar assets and our approximate CAF yield of 10% compared to the 9.5% that was targeted previously. These high-quality assets are significantly weighted towards solar and storage generation with fully contracted node-settle unit contingent contracts to reduce volatility from the C1 fleet. These dropdowns complete the allocation of the excess proceeds from the thermal sale close in May of 2022, and most recently, an increased CAF yields. demonstrating a long-term alignment of interest between CUN and its sponsors to continue to drive value for shareholders. Turning to page 10, this is a graph that should be familiar to you. It's a walk of our growth visibility through 2026. Starting on the left side of the page is our prior $420 million CAFTI outlook that CUN will achieve when the majority of the drop-down 24 assets are operational on a full-year basis. The second column is a reduction in CAFTI of $10 million for updating to reflect a variety of factors. provisions to our P50 given wind resources in 2023, increased insurance costs, inflation, as well as other factors. The third column represents a $5 million CAFTE increase for investments in TSN, as well as the incremental contribution of the Cedar Hill repowering prior to 2026, summing up to our updated pro forma CAFTE outlook of $415 million. This, when added to the approximate $20 million of CAFTE dropped on 25 discussed previously, ends at our updated line of site CAFTI of approximately $435 million. Importantly, we are maintaining the $2.15 CAFTI per share guidance through 2026 that we've discussed previously. We believe the ability to maintain our long-term CAFTI line of site and our growth trajectory speaks to the strengths of the C1-4 platform. Turning to slide 11. Slide 11 provides a summary of C1's contracted and open positions in the resource adequacy market through the next four years. We currently have the benefit of approximately 100% of our capacity contracted through 2025, 87% contracted through 2026, and now with 42% contracted in 2027. As discussed throughout the year, SUMAN participated in several RFP auctions and bilateral discussions, and as a result was able to secure two contracts for approximately an additional year and a half at strong pricing compared to previous contracts. While we cannot disclose the pricing of these contracts due to confidentiality provisions, We can say that the pricing achievement of these contracts would be extrapolated to current uncontracted megawatts in 2027 and beyond. That would drive growth in 2027 for the low end of our 5 to 8 long-term CAFTI per share growth target without requiring any other drop-downs for external capital. This is an important source of potential CAFTI growth in the future, and while we view the extension of our RA contracts as strong pricing as an excellent signal of this growth in the future, we feel it is too early to declare victories. and incorporate this higher pricing into our 2027 and beyond deal. Now I'll turn it over to Sarah.

Sarah? Thanks, Chris. On slide 13, we provide an overview of our financial update, which included a cap fee of $156 million for the third quarter of 2023. Based on results incurred to date, as well as forecasted activity through the balance of 2023, we are reiterating our 2023 full-year CAFI guidance reach of $330 to $360 million. We are also introducing guidance for 2024 of $395 million of full-year CAFI, reflecting certain one-time maintenance costs, along with timing of gross investment to run rate CAFI contributions are achieved after 2024. We will provide further detail in a moment. Our dividend per share growth outlook for 2024 remains aligned with our long-term growth objectives. For the fourth quarter, we are announcing a dividend increase of 2%, 39.64 cents per share. It decreased to $1.58.56 dividends per share on an annualized basis. For 2023, this reflects full-year dividend growth as compared to 2022 of 8%, which is the distance of our long-term growth market. In addition, we are announcing a dividend per share growth target for 2024 of 7% in compliance with our growth target in the upper part of the 5% to 8% range for 2026. Turning to slide 14, we highlight CAFI of $156 million and adjusted EBITDA of $323 million for the third quarter of 2023. Compared to our expectations, conventional energy close margin was approximately 11 billion lower due to milder temperate temperatures in California. Despite lower energy margins, the conventional facilities had strong availability and provided resource adequacy as expected. Solar generation was also in line with internal expectations for the third quarter, while wind generation for the overall C1 wind speed slower than anticipated in August and September. In the third quarter, CAFTI was also to a lesser degree affected by increased season expenses. Year-to-date CAFTI of $289 million in the third quarter of 2023 continues to reflect the previously reported historically low wind production and lower than expected merchant energy margins with expansion facilities through the second quarter of 2023. The company continues to maintain its full year CAFI guidance range, 330 to 360 million. However, we anticipate that 2023 full year results will fall within the lower end of the guidance range. The full year CAFI guidance range reflects potential wind and solar variability for the second half of 2023 and sensitivity for conventional growth margins, the majority of which was reflected in the third quarter results. since the fourth quarter represents a smaller portion of projected results as noted in our seasonality forecast by 23. Despite the challenges impacting 2023 Cassie, the company remains well positioned for growth with a strong balance sheet and pro forma credit metrics in line with target ratings. 99% of its consolidated long-term debt has a fixed interest cost, either through fixed-rate debt or through fixed-rate loss. Due to the proceeds from the sales thermal, there continues to be no external capital need to fund the line-of-sight growth fee, our dividend per share growth objective for 2026. Moving to slide 15, we are establishing our 2024 CAFSE guidance at $395 million. As we walk our 2024 CAFSI guidance to our updated pro forma CAFSI outlook, we know that we have deferred the timing of the Capistrano debt refinancing until after 2024. Given our sizable cash balance and liquidity position, we have flexibility to be prudent on the timing of this refinancing. And the incremental principal and interest payments are not in our 2024 CAFSI guidance. However, they are reflected in the updated pro forma CASI outlook. In addition, the $395 billion of CASI anticipated for 2024 reflects one-time maintenance costs and related outage time for required maintenance upgrades at specific Legacy Wind sites. These maintenance upgrades are required to return certain facilities to normal availability levels. and are expected to have a one-time impact to 2024 CAFI of $15 million. In addition, our pro forma CAFI outlook of $415 million reflects full-year CAFI for all submitted growth assessments, including Cedar Creek Victory Path, Erica, Rosie, Beth, and Texas Solar Nova. The full-year contribution of these growth investments is expected to be approximately 15 million of incremental CAFI as compared to the portion of CAFI realized by these investments in 2024. This is based on the anticipated timing of investment or project COD, the majority of which are anticipated in mid to late 2024. Also reflected is the 395 million of 2024 full-year CAFI guidance, along with the updated pro forma CAFI outlook, are updated P50 renewable production estimates as well as certain cost increases primarily driven by inflation. These amounts are individually immaterial and therefore we have not quantified them in detail. In addition, virgin energy margins for the conventional facilities are assumed to be materially in line with long-term assumptions previously provided and no material change has been noted either in the full-year CAFTI guidance for 2024 or in the updated pro forma CAFTI outlook. We continue to estimate long-term merchant energy margin in the $1 to $1.50 per KW month range, noted sensitivity at $20 billion of CAFTI per $1 per kilowatt month increase or decrease. Based on these estimates, we arrive at our 2024 full-year CAFTI guidance of 395 million and our updated pro forma CAFTI outlook of $415 million, which along with anticipated growth investments using the remaining thermal sale proceeds, support our long-term CAFTI and dividends for shared growth targets. Now I will turn it back to Chris for closing remarks.

Thank you, Sarah. Turning to page 17. Well, this year has been challenging from a CAFTI generation perspective for maintaining our revised CAFTI range, guidance range for 2023. More importantly, during this difficult period, the strength of our platform allows us to reaffirm and continue with our consistently held near and long-term objectives. We achieved DPS growth of 8% in 2023. We are reaffirming our DPS growth objectives at the upper end of our long-term growth target through 2026. We continue to receive support from our sponsors and enhance CAFTI yields over the next time to play at drop-downs. And the additional contract length in our natural gas fleet is strong prices. for getting traction around visibility beyond 2026 to achieve growth in line with our long-term CAPTI targets. While I had intended to be able to provide you with a more precise CAPTI per share growth outlook for 2027 and beyond on this call, there are certain variables we frankly want more clarity on. While the resource adequacy contracting pricing environment is very constructive, we'd like to see how contracting plays out for people in positions in 2027 and beyond. Additionally, as stated before, We and our sponsor have flexibility in timing of drop-downs for growth beyond 2026. Be prudent on timing and structuring drop-downs to effectuate growth beyond 2026 and compete for the capital market environment to stay in place. Operator, open the lines for questions, please.

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Julian Dumoulin-Smith of Bank of America.

Hey, good morning, team. Thank you guys very much. Appreciate the time. Can you guys hear me? Yes.

Morning.

Hey, excellent. Good morning. Thank you. Look, guys, nicely done on California here. Wanted to just get a little bit of a sense here. Just what are you looking for to provide an update here? I mean, just to pick up where you just left off here. I mean, what specific parameters? Is it California specifically or is it other drop-downs? And then I have a few specific follow-ups if you can. And maybe you can give us a little bit clearer sense of what you're seeing in California as well.

Sure. I think in California, and once again, unfortunately, we can't disclose the price to the confidentiality. But the contract that we had signed previously to kind of be able to give guidance through 26, we're seeing prices stronger than that when we did those contracts back in the past. And so for us, we feel very good about the ability to extend those contracts by about a year and a half on those two assets into 2027. But as you can see from our charts and the like, we're only about 42% of that capacity hedged in 2027, which makes it difficult to say, here's exactly how CAFD works and here's what we're going to target. So I think what we tried to talk about on the call was that if you keep kind of the other variables held constant, if you were to move that 2027 contract that we were able to secure and said we were able to contract the corresponding 58% open position at those rates, we could see being able to hit the low end of the long-term CAFTI guidance through 27. With regard to drop-downs, Julian, which I think was kind of your second question, there, obviously, that's three years in the future. We're at a market that is very volatile currently. So for us, we've kind of looked at the strong sponsor support we've received in our most recent drop-down discussions, and then we'll kind of see where the market goes over time to move those cap deals to what makes sense in the future. But I think right now we're kind of very confident and happy with our ability to reaffirm 2015, continue our guidance in terms of being able to hit the upper end of the range through 2026, and we're starting to see some good green shoots for 27 and beyond, just not as tight as we would have liked it when we talked this time last year.

Got it. All right. Fair enough. Excellent. Now, with that said, let me just nitpick a little bit here. Instead of using a greater than, now you're using a tilde on the 215. Can you explain a little bit of what you're seeing? It sounds like a slight reduction in confidence, and that seems, despite the higher yields, on the drop-down at 10%. So in theory, I would have thought that estimate revisions would have been higher. And then maybe related to that, you tell me if it is or not, it looks like updated pro forma CAPTI here goes to 205 from 208, so down three pennies there. So again, I don't mean to nitpick too much here, but I'm curious on the signaling and what's driving a little bit of a reduction, if you will, despite the higher drop-down yield environment.

No, no concern, Julian. There's a reason we try to map it out all for you. So the question, yeah, welcome to the question. I think it's not as though we have less confidence in the 215. It's just before, like we are giving you a point estimate three years out. So we might be a cent higher low in terms of rounding and the like. The real driver behind the reduction from what you saw before from kind of a 440 to a 435 is really around the $10 million that we took as a result of You know, the P50 results we saw in 2023, you know, insurance is a little bit higher in other costs. So that's the main source of that deviation that you're mentioning from what maybe you saw previously disclosed. Obviously, kind of we're not happy with that, but as we talked about during this year, we incorporate actual performance into our estimates. We try not to just be theoretical. We actually take into account what's going on. 2023, stating the obvious, has not been a good year from wind resource or solar resource perspective. So we've taken into account going forward to make sure we can kind of tighten down our map.

Okay, fair enough. It doesn't sound like there's anything too specific there from what I can tell. And then maybe just, it seems like, and then the drop down here, the wind drop down, do you mind talking about it? It seems like there's a higher yield, but a higher valuation, or sorry, I think I said that right.

Yeah, there's more capital just because of how it's structured at the end. For us, we're looking to really target the overall deployment, you know, for For us, Julian, a lot of people kind of count megawatts. We're much more concerned about how much capital are we deploying at good quality projects with good or creative CAFTA yields. So for us, to your point, the way it was finally structured resulted in a little bit higher capital deployment, but because it's also at a higher CAFTA yield, I'll take it.

Okay. All right. Fair enough. Excellent, guys. Well, I appreciate your patience this morning, and good luck, and hopefully next year or next quarter. We'll get an update at last. You nailed things there.

Well, I think once again, Julian, those RA contracts, they take time to basically participate. We're always engaged in bilateral discussions. The RFPs, as you know, kind of happen in June or a little bit before during the year. We get our awards in November. So I don't think there will necessarily be that many major updates between now and, let's say, the February call. I think for us, as we continue to see if this market environment settles down and we can have more clarity around what drop-downs may look like, in addition to more RA megawatts being contracted, that will kind of give more clarity around 2027.

Excellent. Okay. Thank you, guys. Cheers. Thank you.

Thank you. Our next question. comes from the line of Angie Storzinski of Seaport. Please go ahead, Angie.

Thank you. I just wanted to say, you know, well played. This is how we do it, basically. You pace yourself with the dividend growth. You just lived within your means, and I'm hopeful that the stock will reflect this reality versus what we're seeing at other yield costs. So now... As far as the growth is concerned, obviously you have a sponsor that is supportive and willing to adjust the CAFTI yield for the current interest rate environment. But how about maybe organic growth, any sort of repowerings or expansions of existing sites, something that you could do on your own?

Sure. We look at that all the time, Angie, and I think what we've talked about is, you know, Cedro Hill is a repowering, so we have some of that built already. I think for us, and a little bit further discussion about the volatile capital market environment that you referenced, we kind of really need to see where we need to source new capital. As part of my prepared comments, we've kind of worked through all of the excess capital that we received as part of our thermal disposition. And so for us, in looking at repowerings and kind of Craig's team and looking at What PPA can you renegotiate? What are turbine prices and the like? There is some of that organic growth, but as I've commented previously, it's not like we have two gigawatts that can be repowered in the next two years. Our main source of organic growth is really in that RA pricing. I think for us, given the hedges that we did before in order to contract through the middle of 2026, that's probably where you have your main organic calf degenerator is depending on where those RA prices go in 2027 and beyond.

Okay, and then changing topics, obviously the 23 has been a challenging year for actually a number of assets, but the results for the thermal assets were weaker than expected. Now, how much of that weakness or lessons learned have you incorporated in your 24 guidance, Kasti?

I think, you know, we intend hopefully a lot, you know, from our perspective, we're much more in line in our 2024 guidance with that, you know, the upper end of that dollar to dollar 50 we talked about, long-term energy growth margin. Obviously, given when we gave guidance in November of 22 for 2023, yeah, as you're well familiar, the markets were much stronger for what were expected sparks that, you know, didn't show up in several of the months that we were looking for. So for us, you know, we're materially kind of on the upper end of the range of that lower $1.50, I think the upper of the $1.50 that we have for long-term EGM guidance. So to your point, we're being more conservative for full year 24 than we were for partial year 23. Awesome.

Thank you. Thank you. Our next question comes from the line of Mark Jarvie of CIBC.

Yeah, good morning, everyone. So coming as you think, yeah, if you think about, you know, expanding the time horizon for growth, you've got the thermal proceeds fully deployed now. Obviously, balance sheet funding clarity is really important in today's market. So how do you think about as you extend that runway and you think about future drops, communicating the funding plan in terms of how much clarity you can give and I guess how prescriptive you can be in terms of how you match funding with asset growth?

Sure. I think we've always been pretty prescriptive in how we viewed it. We have an undrawn revolver currently with significant liquidity underneath it, so we had to fund something we could on a temporary basis. I think how we'd fund it is in line with our long-term view. At about four to four and a half times would be a corporate debt number of the corporate capital, the remaining being equity, obviously using any excess cash we have in the system first. So I don't really think we'd look to deviate from that long-term funding model that has been successful in a wide variety of we may need to warehouse some facilities depending on where the volatility is for a period of time. I think for us, it wouldn't deviate from our long-term funding model that has worked over a number of years.

So I guess you'd be okay with, you know, if you saw a couple hundred million dollar funding gap for equity to hit your targets and say it's sort of a bit TBD in terms of the sources, you'd be fine with sort of laying that out there. And I guess if you saw the need for external equity, would you be open to things like an ATM or something like that as you march forward?

Yeah, I mean, we used ATMs before, which we think are a very effective equity funding mechanic. We've done smaller kind of issuances as well. So I think we do things very consistently with how we have in the past. I wouldn't anticipate any deviations. I just think that maybe kind of to where your question is going, given how volatile things are currently, we may seek to kind of use our revolver more depending on size to hold facilities until kind of markets settle down and take a much more measured approach to getting that long-term capital deployment given current volatility.

Okay, that makes sense. Thanks, Chris. And then just on the conventional units, as you continue to operate them, as you see these RA processes, the contracting processes play out, sort of any updated thoughts in terms of ways to optimize them from a commercial strategy? And just curious in terms of the amount of capacity secured into 2027, could you have gotten more of a trade-off with price? Just kind of understanding the depth of the market and opportunities you're seeing right now in terms of contracting.

Got it. Yeah, it is very focused on price. You kind of, yeah, and apologies if you already know all this, but you kind of bid in on an auction basis and kind of see what you get awarded. We typically give kind of, you know, one and one and a half year bids and three year bids, a combination of different price points to kind of see what the customer wants. The customer at the end chooses what price they're looking for in tenor. So to your point, it's not as though we could really optimize that conversation because it is a well-attended auction. But we provide a number of price points as part of our submission. And at the end of the day, the customer picks the price point that they thought made the most sense.

If you could do sort of a retrospective look at how you bid most recently, do you think there was an opportunity to clear more capacity as you think forward in the next processes?

I don't think there's the ability to clear more just because what – not to cheat your question, what cleared was what's accepted. You kind of don't really know exactly what demand there is on the other side. So not to cheat your question, that's a little bit opaque for me to say directly what the number is. Okay.

And just a last question for me, and maybe for Craig. Your views in terms of how tax equity transferability is playing out, how that sort of impacts where you think actually returns could be for projects, and ultimately I guess where, and maybe it comes back to Chris, in terms of drop-down CACTI yields potential under sort of a transferability scheme on funding.

I'll kind of answer the last part, and then Craig will let you answer kind of the first part of the question. So in terms of what it means for a CAF deal, I think that's really in our all in CAF deal that we'd get. I think, Mark, if your question is, if we're doing things at a 10% CAF deal now, would that lead to a 14% CAF deal? I don't think that's the right interpretation. I think basically all of the components will be needed to be required because it passes through, as we talked a little bit on the call, the PPA prices affected by the transferability of PTCs, right? It kind of all has to work together in a chain. So it's not as though that PTC transferability will lead to an economic rent or a significantly above market cap to yield simply due to that. But Craig, I'll let you answer the first part of the question.

Yeah, sure. Well, first, the market is really still taking shape and becoming organized. As you may very well know, both the banks that traditionally provided fully integrated tax equity solutions that would both monetize tax credits and depreciation are playing roles to provide sponsors like us solutions to monetize depreciation while also looking to serve as clearinghouses for the disposition and monetization of tax credits that projects produce. They're certainly an important part of organizing this market. There are numerous other channels that are looking to establish themselves as more direct conduits to buyers of tax credits. And the market structures for how everything from indemnities to timing of payments take place are still forming and stabilizing. And in that environment, as a sponsor that has a strong balance sheet, which we do regularly, We want to make sure that we make smart choices about how and when we fix the structures that we'll employ. Other sponsors may not be in a position to wait. But in the six months since guidance was first issued about how that transferability market would take shape, we've seen the structures and the depth of the market really improve in favor of projects, and we expect that will continue. So when I look out to the future, my hope is that this market will really do many of the things that were hoped for when transferability was incorporated into the text of the statute by deepening the range of options that projects have to monetize tax credits. And what we eventually, as an enterprise, will want to do is to try to come up with structures that we find

Okay, thanks for the time today, and thanks for pulling some other additional materials here in the presentation for us today. Thank you.

Thank you. Thank you. Our next question comes from the line of Noah Kay of Oppenheimer and Company.

All right, good morning. Thanks for taking the questions, and appreciate all the incremental details and disclosures and, frankly, the reframing of the platform here. Points well taken. You called out the Capistrano refinancing timing. I just wanted to ask about the project-level debt in the portfolio. It does appear like there's a fair amount of debt coming due over the next few years for some of these projects at the project level. How are you thinking about any potential additional refinancings, or are all these basically going to be paid off at term?

Sure. It depends on the market, to be fair to your question, but I do think that we should be in good shape from a refinancing perspective. So the next two large project refinancings are what's referred to as NIMS Solar in 2024, I believe Buckthorne in 2025 or 2026. So I think Buckthorne is backed by – still has probably about a 20-year PPA still underneath it, so we have quite a bit of length there to be able to refinance. The NIMS Solar assets, once again, that's kind of September of 2024 – So from our view, that should be able to be refinanced. So we don't, you know, not to minimize the question, we don't have a lot of concern about near-term non-recourse assets needing to be refinanced.

That doesn't impact the pro forma cap, the outlook.

If the interest rates are drastically different, it may move it around. But keep in mind, NIMS solar is about $148 million, if I recall correctly. So, you know, 100 to 200 basis points move overall is, you know,

three million dollars not to minimize three but it's not a major driver yeah and just the key point here right is that your refi risk uh both the corporate level at the project level is is very minimal for the next several years correct i'm not saying it's zero but yeah there it's not 10 it's maybe three depending on where you go okay great um appreciate adjusting the p50 expectations uh Does that generally apply to how you look at future drop-downs or acquisitions as well? I'm sure there's some degree of regional resource specificity here with the adjustments, but just talk to us a little bit about how you model in expectations for P50 going forward and whether that's changed at all.

Sure. We have background. We always ask for an additional return on wind assets versus solar to take into account that volatility. So part one, no to your question, is we view wind as a riskier asset in general because of that P50 volatility. And we typically look for a higher RRR or cap yield or both when we negotiate those, just for way of backdrop. The other part is we haven't seen anything that we need to change how we model our P50. Those are based upon long-term rates. But I think as we've talked about in previous calls, Once you're kind of getting through five years, we try to take a much more what's actual approach on asset than kind of what a fiscal model may say. We're trying to be much more empirical and kind of use the most relevant near-term data set as we adjust and blend the two. So for us, to your point, while you're looking at future drop-downs or looking at other acquisitions, we try to take into account those deviations between what might be a 30-year, let's say, fiscal model and what we're seeing in the past five years and try to add on a premium for wind in certain regions that are showing more volatility. But once again, we're trying to get that as tight as we can. We take recent events into account. That's one reason you see the revision. But it really is trying to be comprehensive between, yeah, not overestimating what's happened in the past two years either to make decisions either.

Yeah. All right. Thanks very much.

Thank you. Thank you. Our next question. comes from the line of Justin Clare of Roth MKM.

Yeah, thanks for taking our questions here. So first off, I just want to ask about the 2024 guide. It looks like about a $15 million impact to the guide as a result of change in the expectation from growth investments. I was wondering if you just provide a little bit more detail on the project timing and what led to that reduction for 2024. Sure.

I'll let Sarah address it, but I think, you know, for us, we took a look at our 2023 results, and obviously we're not happy with them. And part of that, as we talked about during the year, is due to P50 generation. Some of it's due to availability. So for us, we kind of took a comprehensive look at our overall portfolio, and I'll let Sarah kind of reflect anything she wants to, but that's really the basis of it.

Yeah, and Justin, just to clarify, were you asking about the $15 million of timing for growth investments?

Yeah, exactly. Just what led to that. Because it looks like it's impacting 2024, and then it's going to be a contributor in probably 2025. So just wanted to understand a bit more there.

Yeah, it's not a change in 2024. It's just a bridge between 2024 and our project. pro forma outlook, which is supposed to reflect sort of, you know, the full amount of CAFTI once the, you know, the drop downs are sort of up and running and at their full, you know, CAFTI amount. So, it's really just a bridge item because we'll only be picking up a smaller portion of those in the 2024 guidance because of the timing of the drop down or the project COD. So we'll have sort of like a fraction of that CAFTE amount just in 2024. But by the time we get to the pro forma outlook, you know, we'll have the full amount. And that difference is the 15.

Got it. Okay. Okay. Thanks for that clarification. And then just was wondering for the projects that you have committed investments for, and then for those that are identified as potential drop-down opportunities in 2024, 2025 here, Can you talk about where you are in the process of securing the permits and the interconnection for these projects? Wondering if there's still risk there that those factors could cause delays and just where you are in that process. Craig, if you wouldn't mind addressing that.

Yeah, sure. All of the projects that are listed on the set of committed or potential future drop-down opportunities have existing signed large generator interconnection agreements and have obtained all of the major permits that would influence their construction feasibility or schedule. So I think that you could consider the dates that are reflected here, high confidence dates. They've also secured all of the revenue contracts that would be necessary for financial closing. We've procured all of the equipment for the project. and we are mature in the course of advancing financial structuring of the projects as well. Some of those projects now reflect dates that are later than the dates we would have hoped for one year ago, and those reflect observed experience from interconnecting utilities around the country and their ability to execute scope of large generator interconnection agreements, and also timetables that have been observed as being elongated for the delivery of to de-risk timelines for these projects in particular, but also other projects in our pipeline to address what's being observed in terms of interconnection timelines as well. So, we think these are pretty de-risked in terms of the execution timetable that's reflected on the page.

Okay. Got it. Thanks very much.

Thank you. Our next question. comes from the line of William Gripen of UBS. William Gripen of UBS.

Greg, good morning, everybody. Thanks very much for the time. I guess just my first one here, just with the excess thermal proceeds now fully allocated, could you speak to how you foresee sort of the future pacing of investment announcements, and maybe should we expect a quieter next few quarters with respect to announcements

Yeah, I think that question, should we expect some large drop-down announcement in the next six months? I doubt it. I think it's heavily conditioned upon how the capital markets settle down or not. But I think to your question, because we are talking, in essence, CEG is incredibly busy by getting the gigawatts we talked about basically online in 24 and 25. Obviously, they're still developing while doing that. But I think at the end of the day, if your question is, should we expect a large drop-down announcement here in the near term? It might be a little quiet for a while for the reasons we talked about.

Makes sense. And so in that light, I mean, do you continue to view the conventional assets as core to the Clearway strategy? And maybe how are you thinking about potential opportunities to recycle those assets as you continue to contract the open capacity?

Sure. I think for us, obviously, we're willing to sell assets at what we think is a strong price. So if somebody offered us a good price for those assets, we'd look at that. However, it's always been part of our core strategy because it does provide diversification versus kind of simply wind and solar resource availability. So for us, we think it's a very beneficial and we're obviously pretty bullish on what things will look like for let's call it through the end of the decade in those assets. So We give them as core. That being said, if someone offered us a price that we thought made sense, we've shown we've been willing to transact on that in the past. And for us, we're pretty bullish through at least 2030.

Great. And just one last one for me. Could you elaborate a little bit on the one-time maintenance items in the wind portfolio? And is that in any way related to the Siemens turbines in the fleet?

Not specifically, like that's a variety of assets, as I incorrectly answered the last question that somebody asked. Basically, that's a result of kind of us looking at our fleet and recognizing some of the weaknesses that affected our 2023 results and saying, okay, how can we try to shore that up with what's a one-time maintenance push here? Some portion of that's the Siemens assets, but some of them aren't. So it's really just looking at the overall fleet and some of the challenges we faced in 2023.

I guess, are you getting any sort of warranty reimbursements or any cost reimbursement of any kind for these efforts?

That's some of it. Like, overall, these things are in negotiation, but that's the amount that we think we'll have to kind of net-net lay out during the year.

Fair enough. All right. Nice job. Thanks very much.

Thank you. Thank you. I would now like to turn the conference back to Chris Sotos for closing remarks.

I just wanted to thank everybody for attending the call. I know this was a little bit longer than our typical calls, but really given kind of the volatility that we've seen, wanted to provide you as analysts or investors with kind of a much more comprehensive view of where we see we are and where we think we're going. And I think while obviously there's a number of challenges in the capital markets, we're able to reiterate where we are for 24, our growth rate to 26, and that we're seeing kind of positive things even in this volatile environment and 27 and beyond. But More to come as we walk through 24. Appreciate everyone's support.

This concludes today's conference call. Thank you for participating. You may now disconnect.