Ladies and gentlemen, thank you for standing by and welcome to the Clearway Energy, Inc. Second Quarter 2020 Earnings Conference Call. At this time all participant lines are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. Operator Instructions. I would now like to hand the conference over to your speaker today, Chris Sotos. Thank you. Please go ahead, sir.

Good morning. Let me first thank you for taking the time to join today's call. Joining me this morning is Chad Plotkin, our Chief Financial Officer; Akil Marsh, our Investor Relations Manager; and Craig Cornelius, President and CEO of the 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 4, for the second quarter of 2020, Clearway achieved CAFD of $86 million, for a total of $94 million in the first half of 2020. These results are within our expected sensitivity ranges. To date, the effects of COVID remain immaterial, with our teams maintaining safe and reliable operations through this difficult time. As previously announced, we closed on the sale of our residential solar portfolio for $75 million and merely recycled that capital to close the first project in the April Drop-Down for the remaining interest that CWEN did not already own and repowering a 1.0 for $70 million. After a year and a half, I am happy to note that PG&E has emerged from bankruptcy, and consistent with our commitments we are recalibrating the dividend in line with our long-term financial objectives. So today, we are announcing a 49% increase to the company's dividend to $1.25 per share annualized, which is in line with our payout ratio objectives relative to 2020 CAFD guidance. As of the end of June, there was $168 million in predictable cash at the PG&E-related projects. And as we've indicated previously, we will allocate this to committed growth investments. Through this capital deployment, and with the binding agreements in place we already have, Clearway Energy Inc. anticipates being able to increase the dividend at the upper end of our 5% to 8% long-term growth rate for 2021. In addition, during the quarter, we raised $278 million in corporate capital, with $250 million issued as a tack-on to the 2028 green bond and $28 million under the ATM program. The Clearway Energy Board has also authorized a new $150 million ATM program to fund growth within our balance sheet objectives. With the constraints from PG&E now behind us, during the quarter, we were also able to advance new growth. First, we agreed to acquire an interest in the 419-megawatt Mesquite Star wind project, with CWEN obtaining 50% of the cash flows through the middle of 2031 while the project is predominantly contracted; and then retaining 22.5% of the cash flows thereafter while it's predominantly merchant. As you will recall, as a result of the PG&E bankruptcy, we initially had to forego any investment in Mesquite Star. We have been fortunate through this period to continue working with our colleagues at Clearway Group to find a solution to allow CWEN to retain an interest in the project. Our ability to structure an innovative approach for this project that minimized our capital exposure in the merchant period is a testament to the strength in our sponsor relationship, and provides growth outside of the ROFO pipeline. In addition, Clearway reached agreement with all parties regarding black start services at Marsh Landing with anticipated COD in 2021. During the five-year pendency of the contract, CWEN will receive a return of, and on, its capital, resulting in an exceptionally strong CAF deal. While the duration of the contract is not long, this important investment continues to highlight the importance of our gas assets in the California electricity market. We continue to work with CEG on the closing of additional investments announced last quarter with both Rattlesnake Wind and Pinnacle Repowering remaining on track. Finally, we are acutely focused on driving growth for 2021 and beyond, especially in partnership with Clearway Group. We have received a Drop-Down offer from Clearway Group for 100% of the ownership interest in Langford following its repowering, and the remaining interest in Hawaii Solar Phase I. The Hawaii assets are already well known to you, given CWEN's previous investments into those projects in 2019, while Langford Repowering provides another opportunity for CWEN to diversify its portfolio or participate in an asset with a hedge structure similar to Elbow Creek and ERCOT. In addition, we are engaged in structuring a co-investment in a 1.2 gigawatt portfolio of renewable assets under development by Clearway Group, with expected commercial operation dates from 2021 to 2022. While we are in the early stages of this process, the sizeable portfolio will provide additional growth on a longer-term basis with an estimated 15-year weighted average life for Clearway Energy Inc.'s CAFD per share, which will support sustained dividend growth in the future.

Thank you, Chris. Turning to Slide 9, today Clearway is reporting second quarter adjusted EBITDA of $316 million in cash available for distribution, or CAFD, of $86 million. These results bring first half 2020 adjusted EBITDA to $541 million and CAFD to $94 million. While COVID-19 remains a key focus across the enterprise, we are pleased to say that our projects have continued to operate safely and reliably. As indicated on the first quarter earnings call, we anticipated minimal financial impacts from the pandemic. Consistent with this view, during the second quarter, the primary observed business issue from the pandemic was at the Thermal segment, where a reduction in volumetric sales was materially offset by lower operating costs. Though results were significantly approved year-over-year, renewable energy conditions during the second quarter were below median expectations. This was primarily due to a challenging wind environment at Alta in May and June, as well as higher-than-normal rainfall at locations during April, which impacted the solar portfolio. Partially offsetting these conditions was the timing of debt service payments, including the impact from the May issuance of the additional $250 million of 2028 notes, which the company benefited from due to a deferral of interest payments. Excluding these items, CAFD results in the quarter would have been at the lower end of our sensitivity range, as noted in the Appendix section of the presentation. Overall, and with results within our sensitivity range, we continue to maintain 2020 CAFD guidance of $310 million, which is now unencumbered by the PG&E project due to its emergence from bankruptcy. In the second quarter, Clearway also continued its success in raising permanent corporate capital at levels supporting long-term accretion for the company. As mentioned, in May we issued an additional $250 million of the existing 2028 green bonds. This financing occurred at attractive levels, as evidenced by an issuance price of 102 or a yield of approximately 4.35%. The proceeds of this financing were used to repay all cash borrowings under the corporate revolver, which remains undrawn today. We also used the proceeds to retire the remaining $45 million of outstanding 2020 convertible notes that were due in June. During the quarter, Clearway also completed use of the existing $150 million ATM program by issuing $28 million of equity to support growth initiatives in line with our long-term balance sheet objectives. Like the tack-on bond issuance, this equity was raised at attractive levels with an implied CAFD yield of just over 7%. This issuance also further demonstrated the efficacy of the ATM program to fund a significant portion of Clearway's long-term equity needs at efficient prices. As such, the Board has authorized the company to move forward on a new $150 million ATM program. Following these financings, and with the PG&E bankruptcy now resolved, Clearway's liquidity position is exceptionally strong and the company is well positioned to execute on growth within its balance sheet objectives. In addition to the fully-undrawn revolver, Clearway has approximately $168 million of restricted cash that has been tied up at the PG&E projects. We have already received $83 million of this amount and will receive the balance by October, or through the normal distribution windows. The company is also at its target ratings level and viewed stable by both S&P and Moody's. All these factors afford Clearway significant flexibility to execute on its long-term plans. And with that, I'll turn the call back to Chris for closing remarks and Q&A.

Thank you, Chad. Moving to Page 11, I will conclude with a few key points. First, we are meeting our 2020 financial commitments, with cash available for distribution and leverage aligned with our objectives, leading to stable ratings from both agencies. Second, now that PG&E is behind us, we are adjusting our dividend consistent with our long-term financial strategies, raising the third quarter dividend to $1.25 on an annualized basis, with expected growth for 2021 at the upper end of our 5% to 8% long-term targeted growth rate. Third, we aim to increase our long-term cash available for distribution per share to promote sustainable dividend growth. Our recent acquisitions, the new investment in Mesquite Star on favorable terms, collaboration with CEG on repowering the Langford assets, and our ongoing work in Hawaii, along with efforts with Clearway Group to boost our cash per share through potential co-investments in 1.2 gigawatts of opportunities in 2021 and 2022 with completion dates in 2021 and 2022, all support this goal. Lastly, I want to express my gratitude to our shareholders, bondholders, banks, and employees for their support during the PG&E situation, which has presented numerous challenges for the organization. I am incredibly proud of the team's response to the crisis and their resilience, which is inherent in the CWEN platform. I am excited to focus on future growth, free from the limitations of the past year and a half. Thank you. Operator, please open the line for questions.

Thank you. Operator Instructions. And our first question is going to come from Julien Dumoulin-Smith from Bank of America. Your line is now open.

Hey, good morning to you. Congratulations on the dividend hike and making it through everything. So hope you guys are well and safe. A few different questions coming up this morning. First, conceptual one, just with respect to the gas assets versus renewables, I'm going to raise the analog of Dominion and some of the other utilities. And I know it's not necessarily a direct parallel, but do you see any merits to eventually seeing a more Thermal versus renewable portfolio split, whatever that means strategically? And then separately and related, you talk about diversification a little bit from California here as emphasized by your latest acquisition. Do you see the future portfolio expansion, a la CEG or otherwise, to be outside of California to help de-emphasize that previous issue in terms of counter-party?

Sure. Thanks, Julien and I hope you and your family are safe as well. In terms of your first question, I don't think that we necessarily take the view of Dominion that we want to take gas out from the portfolio entirely. I think as we talked over the years, the gas lead provides a very good hedge against some P50 volatility that obviously, we see from time to time in wind and solar. I do see, in terms of investment, much more investment going forward into renewables than gas. Obviously, Carlsbad was a large investment, but if your question is do we see a lot in the near term, not necessarily. So I'd say that natural gas would be diluted within the portfolio in terms of a CAFD contributor as we continue to grow, average. So I think that's kind of how we view gas overall. To your second question in terms of California, it's not as though that we won't look at assets in California anymore. But I think, given what did occur for the past year and a half, we often tend to look to see if we can diversify. So if we have a limited amount of capital and two assets that have the same IRRs or CAFD yield at the same risk level, we'll definitely prefer something outside of California versus inside California for that reason.

Excellent. I would like to ask a quick follow-up about the timing of dividend growth and CAFD growth. Regarding the 1.2 gigawatt portfolio for projects that are set to come online in 2021 and 2022, should we expect that these investments will mainly occur towards the end of 2021 and into 2022? Would that mean they primarily support growth in 2022? I understand you've highlighted a positive outlook for dividend growth for 2021, but it seems some of the growth projects are actually projected for 2022, aligning with their expected commercial operation dates for investment.

The simple answer is yes to answer your question. I think looking at the $1.70 that we have for 2021, that's what gives us confidence to be able to increase the dividend at the high end of our rate between 5% and 8% in 2021. But to your question around the 1.2 gigawatts that we're working with Clearway Group, those would be much more for after 2021 CAFD guidance because obviously, the projects need to come online.

Okay, excellent. So really if you were to think out loud, when you think about what you already have visibility on here for 2022, given just how large a portfolio 1.2 gigs would be, I don't want to push you too much, but what kind of clarity or line of sight in terms of CAFD opportunity does that provide you, in your view?

Yes, we didn't really disclose that, and as we said, we're in early days with working with Craig and the CEG team to kind of work through it. So obviously, when we have a binding agreement, we'll announce that. But until then, I don't want to speculate.

Fair enough. Thank you, guys very much. All the best. Again, congrats.

And thank you. And our next question comes from Colin Rusch from Oppenheimer & Company. Your line is now open.

Thanks so much guys. Can you give us a sense of what you're seeing at the project level debt markets right now in terms of cost of capital and terms, does the market feel liquid to you, how much money could you raise on some of these assets it seems like there might be some opportunities to be pretty proactive in terms of this leveraging of some of the new assets, to be specific?

Sure. So I'll hand it to Chad if there's anything to add. But I mean I think we see the project financing markets as actually pretty strong. I think once again, there are dollars available for good projects. I'd say that in terms of leverage, obviously, the DSCRs that most of the banks are looking at are similar to what they'd look at normally as market. But obviously, with the interest rate environment the way it is, the principal tends to be a little bit higher. I don't know, Chad, anything to add from a project financing perspective?

Yeah Colin, obviously, as it relates to new projects, I think the point that Chris raised was accurate. I think if your question is do we see other opportunities in our portfolio to perhaps refinance or do anything that could drive additional capital back to the corporate enterprise, as you've found over the years, we're always, as I say, mining the portfolio for opportunities. And we'll continue to look at that. But I think overall, to your point, we're seeing cost of capital very attractive in the markets, not just at the project level, but also at the corporate level.

Okay. That's helpful. And then I know there's been a lot of discussion around energy storage, but we are also seeing any number of different technologies implemented across different portfolios. Is that something that you guys see as an opportunity in terms of selling into the ancillary services market with some incremental CAPEX on the existing portfolio in some sort of meaningful way?

Sure, I'll kind of start off and then hand it to Craig to see if he has any additional color. But I think from our view, we constantly work with our colleagues at Clearway Energy Group to say what assets do we have that may make sense to put storage on. Obviously, we have a pretty good and wide footprint. So I think maybe, Colin, to answer your question, we look at those opportunities all the time to see what might make sense. But Craig, I'll turn it over for you for maybe how you're looking at it on the group side.

Yes, sure. Hi, Colin. When we look at deployment of storage technology or other technologies like you've described, in most cases we're focused on resource adequacy, tolling-type revenue contract structures, to be able to underpin an investment because it's been our observation that ancillaries can be a market that can compress relatively rapidly. And we want to focus on using capital both at Clearway Group and Clearway Energy Inc. around investment opportunities that we expect will produce a reliable stream of cash flows over time, consistent with our investment objectives. So where we've been looking for retrofit opportunities for storage, and we see a number of them around the fleet, we focus where the contracted revenue picture could actually be a pretty attractive one, and where ancillaries might be or energy arbitrage could be a returns-enhancer, but not something we're relying upon to underpin the investment thesis. And we see chances to be able to do just that.

Alright, and can you give us a sense of how big that opportunity is with the portfolio right now?

It's a function of matching project facts and circumstances with load-serving entity appetite. As your question indicates, right now we are assessing an opportunity set that certainly is measured in many hundreds of megawatts. And as those opportunities ripen and we reach a point where there's a commercial transaction that would merit disclosure, then I think you'll certainly hear more. But by virtue of the positioning of our incumbent fleet, certainly, you could think of us as a company that is as well positioned as any to be able to make use of the opportunity for storage retrofit.

Okay. That's helpful, guys. Thanks so much.

And thank you. And our next question is going to come from Stephen Byrd from Morgan Stanley. Your line is now open.

Hey, good morning. I hope you all and your families are doing well.

Thank you, yours as well Stephen.

I wanted to step back and just talk about potential election impacts, and I'm thinking about the possibility of a blue sweep. And the three things that I guess we often get asked about would be tax credit extension, higher corporate tax rates, and then carbon regulation. Just as a high level, as you think about your business, both your current assets as well as your growth opportunity, how do you think about those kind of impacts to your business?

Certainly. Regarding tax policy, my response is straightforward. In terms of corporate tax rates, we aren't particularly worried because of our net operating loss. The variation in corporate tax rates is less relevant for us as we are largely a minimal federal taxpayer over the next decade due to our NOL. Thus, any changes in the corporate tax rate mainly impact the value of the NOL. If corporate tax rates rise, the effect is dependent on the complexities of federal tax policy, and the rate itself doesn't necessarily create any significant outcomes. On tax credits, I believe a blue sweep would be advantageous since it would encourage more renewable development and related tax incentives, which would help sustain our NOL period. Regarding carbon regulation, it's harder to predict as it tends to be more complicated than corporate tax policy. However, considering the current positioning of our fleet and the increasing share of renewable assets compared to natural gas, we believe these factors will ultimately benefit us. Additionally, our gas initiatives differ from the Dominion example; our gas infrastructure primarily supports and facilitates renewable energy in California, apart from the Gen-Con asset. Thus, our gas assets are strategically aligned with California's renewable goals, making them distinct depending on future carbon regulations.

That's really helpful. And then just separately, thinking about a very popular topic these days is green hydrogen. One of the key enablers of green hydrogen, in our view, is just very cheap renewable power and you've got some quite excellent sites. Do you see that as a long-term potential in terms of potentially siting electrolyzers at any of your sites and providing very cheap power for creation of green hydrogen, or is that really sort of early days in terms of thinking about that?

I'll start and then it over to Craig. I think the one part, when people think of those different opportunities, is for good or ill, our PPA duration is pretty long. So that cheap power, which I agree with, a lot of it's already contracted for, so just kind of a negative to that question in terms of the portfolio. But Craig, in terms of hydrogen, anything you might do with that?

Yes, sure. Like others, we do see this as a potential higher-value end product for renewable power plants in the long run. For some time, we've been evaluating the opportunity for renewable-driven electrolysis to produce hydrogen for industrial applications in Texas and for automotive applications in California. We see the long run total addressable market as higher in the former category, but see opportunity in both. It's our assessment that our sizeable existing operational footprint, which you'd touched on in both states, will provide a competitively advantaged foundation as different required conditions in the supply chain and the market come together over time. And I think it's our point of view that the progression of electrolyzers and the demand for hydrogen at a higher price point than it's currently sold at, will hopefully converge with the contract's evolution, in particular for assets in Texas in a way that's favorable. So we spend time on this, we see an opportunity, we think others are right to see it. And in the long run, we think it could be favorable to the terminal value in the existing operating fleet.

That makes sense. So it sounds like as you think about some of your contract expirations, that actually, it could work out in the sense that this sort of complements the opportunity with contract expirations, in some cases, at least. Am I understanding that correctly?

Yes, sort of your ideal project configuration probably looks like an operating wind project that has rolled off of its initial contract period that has a well-understood resource and a very low operating cost, and a new construction solar project with the two of them relatively close to either existing gas distribution infrastructure or hydrogen end use. And you could think of our fleet, especially in a place like Texas, as being pretty well positioned for that kind of situation in the latter half of this decade.

Yes, that's really helpful. Thank you so much.

And thank you. Operator Instructions. And our next question comes from David Fishman from Goldman Sachs. Your line is now open.

Good morning, congrats on a return to normal here.

It's been a long time, appreciate that.

So I have a question kind of on the shape of the CAFD run rates as it relates to kind of pro forma guidance and thinking about dividends from that. So it's my understanding that the pro forma is about $1.70 of CAFD per share, but it seems like the 2021 DPS guidance of $1.34 to $1.36 is about 80%, but not quite on the low end. Is that simply just due to kind of the timing of the escalation of some of these run rates that are in the pro forma? So maybe the first year or two, it's a little bit lighter, and then it escalates a little bit higher over the next couple of years? Just trying to think about the shape of the cash flow.

It's also that not all the assets are necessarily fully online by January 1, 2021, so that's part of it as well.

Got it. Okay. That makes sense. And then the pro forma number itself, so that doesn't include the announced Mesquite Star potential acquisition as well as the black start announcement. So those would be potentially incremental to that run rate, obviously, not necessarily for January 1, 2021, but in general, that would be incremental to the $340 million of pro forma?

Correct.

And we should assume that the dividend growth could be raised proportionately to whatever you might revise the pro forma guidance rate to in the future, or is it more looking at the target within the 5% to 8% band?

Yep, once again, we try to stay within our long-term objectives. So I think to your point, if we kind of, so to speak, got a lead and kind of were able to have higher CAFD yields investments, that would then increase the duration which we felt comfortable increasing the dividend at that 5% to 8% rate.

Okay. Got it. And just the last question. On the black start at Marsh Landing, so for the completion in 2021, as you go through that process, does that accelerate any of the potential conversations with kind of re-contracting for the broader asset with the counter-party? And if it does, or if it doesn't, when do you kind of expect for the 3 assets with the contracts coming due in 2023, kind of the dialog there about re-contracting to pick up?

I think it probably changes that dynamic marginally. Obviously, those entities are focused on the black start, naturally, the PPA or re-contracting. I think just being consistent, I've always said kind of 2 years is a little bit early with a little bit of false precision. So I think those conversations will really get going in 2021.

Okay. That makes sense. And those are my questions. Thank you and congrats on obviously a great quarter and the return to normal.

And thank you. And I'm showing no further questions. I would now like to turn the call back over to management for further remarks.

Thank you. Once again, thank you everyone for joining our call. Appreciate everyone's support over the past year and a half and really look forward to growth in the future. So thank you all for your time. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.