Clearway Energy, Inc.

Hello, and welcome to the Clearway Energy, Inc. second quarter 2024 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 11 on your telephone. You will then hear an automated message advising that your hand has been raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Director of Investor Relations, Akhil Marsh.

Good morning. Thank you for taking time to join Clearway Energy, Inc.' 's second quarter call. With me this morning are Craig Cornelius, the company's president and CEO, and Sarah Rubenstein, the company's CFO. 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. With that, I'll hand it over to Craig.

Thanks, Akhil. Turning to page four. We're pleased to report to you today the solid second quarter results that we delivered for Clearway Energy, Inc. during this year's second quarter and to also provide further definition to the building blocks we intend to use as we prudently grow the company in future years. Our financial results for the quarter demonstrate a strong year-over-year improvement in operational performance due to high equipment availability in our conventional segment and a return to more normalized generation in our renewable segment. The strong start to the first half of this year reflects the focused execution and financial discipline of our organization and has allowed us to reaffirm our 2024 guidance of $395 million. Meanwhile, our actions establishing future building blocks for the future growth of Clearway Energy, Inc. reflect the harvesting of development investments that have been sowed over many years with the intention of providing future investment opportunities that will be complementary to our existing fleet and delivered in a way that allows our growth to be planned with deliberate financial prudence over time. On the back of these successful results and consistent with the previously established target for dividend growth of 7% for 2024, Clearway increased its dividend by 1.7% for the quarter. bringing our quarterly dividend to $41.71 per share or $1.66.84 per share on an annualized basis. With the upsized growth investment commitment to the Luna Valley and Daggett One projects, we have now committed to deploying all of the access proceeds raised from the sale of our district thermal business at Accretive Economics, and establish the path to achieving our previously communicated financial objectives through 2026. Incorporating this commitment, we are increasing our pro forma CAFTI outlook to approximately $435 million, or $2.15 of CAFTI per share. These financial expectations also enable us to reaffirm our ability to achieve the upper range of our 5% to 8% DPS growth target through 2026 without a need to raise external capital to meet those goals. We have also executed on a series of actions that enhance visibility into prospects for growth above $2.15 of CAFTI per share in 2027 and beyond. Clearway Group's development company delivered on the milestones required to translate the Honeycomb Battery Hybridization Program into potential investment commitments for Clearway Energy Inc. by year end. signing 20-year tolling agreements with an investment-grade utility for the entire 320-megawatt Phase I previously identified, while executing all the equipment and construction agreements required to complete the projects in 2026. Clearway Group also enhanced the Pine Forest Solar Plus Storage Complex. and provided an offer to Clearway Energy Inc. to invest $155 million at a 10.5% CAFTI yield with an investment structure that both provides desirable market participation and extended tax runway benefits. Both investments are subject to approval by CWIN's independent directors and are expected to be funded with existing sources of liquidity, such as retained CAFTI generated over the next few years, and excess debt capacity, which Sarah will discuss in more detail in the financial summary section. Meanwhile, we continue to make progress on securing a balanced and profitable approach to managing our delivery of resources into California's resource adequacy or RA market. With today's announcement of another RA contract at Marsh Landing at strong pricing, we have contracted 63% of our available capacity for 2027 while enhancing visibility into organic CAFTI for share growth in 2027 and beyond. With this visibility now in place, we intend to be deliberate as we work with the state's load serving entities to meet their needs, while also ensuring that we receive appropriate value for the capacity we have available to deliver RA in 2027 and beyond. Modern, clean, and efficient gas plants like ours that can deliver capacity 24 hours per day have been rightly recognized in the state's newly revised regulatory structure, and we expect them to play this role through the balance of this decade and into the next one. Finally, Clearway Group's development company continues to advance progress in its pipeline with the approximately 8 gigawatts of late-stage projects targeting CODs over the next five years that are being designed in a manner that is compatible with CWIN's capital allocation framework and pacing of growth needs. In a reflection of our enterprise's scale and forward thinking, Clearway Group has already made investments in 7.8 gigawatts of equipment that secures qualification for tax credits for projects across multiple COD vintages and technologies through 2028, making use of longstanding Safe Harbor guidance. And as a reflection of the differentiated positioning of its projects and track record and execution, Clearway Group completed the quarter with its largest-ever totals in power marketing at mid-year, with 3.5 gigawatts contracted and awarded year-to-date. In summary, Clearway is executing well across each of the dimensions of its business, and we are pleased to say that we are well-positioned to fulfill the objectives we had set for this year and beyond. Turning to slide five. With a commitment to Luna Valley and Daggett One, along with the offer for an investment into an enhanced pine forest project complex and financing structure, we continue to complete actions on our checklist towards providing further visibility into growth beyond the previously established target of $2.15 of CAPTI per share. To go into more details, I'll first highlight the investment we've committed to make into the Luna Valley Solar and Daggett One storage project. enabled by strong sponsor support and alignment, the commitment will provide Clearway Energy Inc. ownership of 100% of the cash equity interest in the project versus prior expectations of 50%, resulting in an approximately $143 million corporate capital commitment at a 10% cap to yield. Highly compatible with C1's investment mandate, The project's generation and capacity is underpinned by diversified node-settled contracts with investment-grade load-serving entities with terms of over 16 years. We expect to fund those commitments by the second half of 2025. Following completion of the investment commitment in Luna Valley Solar and Daggett One Storage, Clearway Energy Inc. received an offer to invest in the Pine Forest Solar Plus Storage Complex. Located near the Dallas metro area in Texas, the project's 300 megawatts of solar generation has been fully contracted for an average of approximately 20 years at strong pricing and settlement terms. The majority contracted with a leading information technology company. Meanwhile, its 200 megawatts of battery capacity has been configured to complement the project's contracted solar revenues and provide a resource to balance our overall renewable market position in ERCOT. Finally, the project's financial structure has been designed to allocate substantially all of the depreciation benefits to Clearway Energy Inc. to extend its federal tax runway. Improvements in the overall revenue and cost profile of the project, along with the structure enabling CWIN to invest as the project's tax equity investor, have enhanced the overall investment opportunity for CWIN since the time of its initial disclosure increasing the total potential CAFTE contributed by the project and raising the total potential corporate capital investment to $155 million at an approximate 10.5% CAFTE yield. Subject to the evaluation and approval of our GCN committee, we would aim to make an investment commitment in the second half of 2024 and to fund the investment by the end of 2025. Turning to slide six. Having now allocated the remaining excess thermal proceeds to fund the committed Luna Valley and Vagabond investments, we have completed the establishment of a path to $435 million in run rate CAFTI and $2.15 in CAFTI per share for our shareholders. With that path now set, we turn now to look ahead to our building blocks for growth beyond $2.15 in CAFTI per share. and the framework we will employ to assure that investments we make are accretive to shareholders based on the plans we make to fund them. The next building blocks created by Clearway Group and identified for potential investment commitment by year end collectively represent approximately $240 million of corporate capital that can be funded with existing liquidity to grow CAFTI per share above $2.15. Together, these potential investments have been valued at CAFTI yields that would make investments accretive at our present cost of capital and have also been staged for potential funding dates well into the future that provide us the latitude to make use of a spectrum of potential funding sources. Increased revenues from our gas fleet, most notably from new resource adequacy contracts priced at levels above our 2024 to 2026 contract pricing, will provide another driver of growth in CAFTI per share. Assuming that the average pricing on recent contract extensions announced in the last year were applied to our remaining uncontracted capacity, this alone could enable CWIN CAPTI for share growth at the low end of 5% to 8% in 2027. With the newly announced marshlanding contract, CWIN has contracted 63% of its RA capacity for 2027. and is contracting the balance of the open position for value with numerous indicators of market strength. Lastly, our business development teams continue to diligently evaluate the landscape for potential third-party M&A opportunities with a particular eye for asset investments that would provide complementary additions to our fleet with the ability for us to apply proprietary value additions. We remain focused on this potential avenue for growth and are optimistic that the present market environment may allow us to consummate targeted acquisitions that meet our requirements for accretion and portfolio enhancement while making use of some of our organizational capabilities. Turning to slide seven. In addition to the progress we've made in the aforementioned areas of growth by investment, we have also continued to make progress on adding to the contracted position of our California gas fleet in 2027 and beyond. As mentioned earlier, we are today announcing another RA contract at Marsh Landing for approximately 195 megawatts. Awarded through the central procurement process that fulfills load serving entity needs in Northern California, This contract brings Marsh Landing's RA capacity up to being fully contracted through 2027. And in combination with the approximately 190 megawatts of contracts announced last quarter, this brings the gas fleet's overall contracted position to 63% for 2027. As we mentioned last quarter, tight capacity conditions in the western U.S., coupled with thoughtful system planning from regulators, have put a particular focus on the need for load-serving entities to procure clean, dispatchable capacity from plants like ours. Furthermore, regulatory reforms, in particular the 24-hour slice-of-day construct in California, have solidified the value of our gas assets for load-serving entities to achieve compliance with that reform. Having established the contracted position we have now into 2027, we will be disciplined about pacing our remaining contracting of RA capacity for 2027 to 2030, being focused on aligning with the state's load-serving entities around the full value that the plant's RA capacity is likely to convey in this new regulatory construct. You can anticipate that we will keep you apprised of our progress in that contracting effort in future quarters, as we also assure that the goals we set for CAFTI for share contributions from the facilities are goals we can meet. Turning to slide eight. Looking further ahead into our avenues for growth beyond the investment opportunities already announced, we are pleased to report that Clearway Group continues to advance a pipeline of projects that will offer further opportunities for CWIN growth investments across a diverse range of geographies and at a pace that is appropriate for the goals we set for CWIN. Within the 30-gigawatt overall pipeline that Clearway Group is advancing, approximately 8 gigawatts of late-stage projects are targeting CODs over the next five years. Furthermore, more than 60% of the gross development pipeline is comprised of projects that are in or will deliver to states that will exhibit particularly resilient demand for new renewable and battery projects across a spectrum of potential federal policy scenarios. a geographic composition that both reflects regions of historical strength for Clearway and an intentional strategy to mitigate policy risk. We are pleased to say that the size, advancement, and composition of this overall pipeline provides abundant options to match the needs for growth at Clearway Energy, Inc. as we move further into the decade. As we have advanced the commercialization of some of these projects towards construction and financing readiness, we are pleased to note that the last six months have been a notably successful period for us in power marketing. In the year to date, Clearway Group's origination of new power contracts has totaled 3.5 gigawatts in awarded and contracted capacity, with an additional 1.8 gigawatts of shortlisted opportunities also in progress. The success Clearway is achieving in power marketing is a direct reflection of the locational value of the assets it is developing, along with the increasing value offtakers assigned to partnering with the Clearway Enterprise given our track record for project delivery. Over the next 12 to 18 months, as we continue to advance late-stage projects within the 2026 and 2027 vintages, you can expect for us to provide more details on the next round of future offers that will underpin CWIN's long-term growth. These offers will make use of the abundant pipeline of projects that we've described here while being paced and priced to be both accretive and manageable for CWIN in the context of the prudent and value-oriented capital allocation framework we established. And now I'll turn it over to Sarah for the financial update. Sarah?