Good day, and thank you for standing by. Welcome to the Clearway Energy, Inc. First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Chris Sotos, President, and CEO. Please go ahead.

Good morning. Let me first thank you for taking the time to join Clearway Energy Inc.'s first quarter call. Joining me this morning is Akil 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 would 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 3. The company had a soft quarter driven primarily by weak renewable resources due to heavy rainfall in California and the West Coast. CAFD was negative $4 million for the first quarter. Clearway is announcing an increase in its dividend of 2%, to $2.3818 per share in the second quarter 2023, or $1.5272 on an annualized basis, keeping us on target to achieve the upper range of our dividend growth objectives for 2023. We are also reaffirming our 2023 CAFD guidance of $410 million. Clearway continues its focus on growth at all levels of the enterprise. Our sponsor’s pipeline has grown to 29.3 GW, including 6.9 GW of late-stage projects expected to reach COD in the next four years. We're excited to announce our commitment to the Cedro Hill repowering project. We'll go over the project in more detail in a couple of slides, but this repowering will deploy approximately $63 million in capital while extending the PPA duration to 2045, significantly de-risking the value of the asset. Focusing on the five-year CAFD yield starting in the 2027 period of over 9%. Cedro will create a yield beyond the assumptions embedded in the $2.15 of CAFD per share when fully repowered. Clearway Energy Inc continues to work on commitments from the October 2022 dropdown offers and expects to have them completed by the end of the second quarter. In addition, Clearway Group now has visibility into nearly 600 MW of additional projects that will also continue growth in the future beyond the $2.15 of CAFD per share. While it's too early to update, anticipate capital deployment and CAFD creation for these new asset editions; Clearway considers the projects far enough along to start adding them to our growth profile. Given the capital market volatility in recent months, I wanted to take a moment to remind our investors that we have enough capital to fund our line of sight dropdowns that underpin our $2.15 CAFD per share long-term target. In addition, at our 2023 guidance, we generate approximately $100 million of excess cash that can be deployed toward investments in the business; additionally, we recently increased our revolver size from $495 million to $700 million, creating internal liquidity for dropdowns, third-party acquisitions, or LC issuances to support the business, particularly as we seek to add RA capacity contracts associated with our California natural gas assets. This significant internal liquidity is further strengthened by the fact that our long-term corporate leverage will be at the low end of our targeted range with some capacity for additional corporate debt before there is a need to issue any additional equity. In summary, Clearway feels we are well-positioned to manage this period of capital market volatility and continue our growth trajectory without needing to access the capital markets. In summary, Clearway continues to execute its growth plan with a very strong internal liquidity profile, so we are well positioned to grow beyond the $2.15 of CAFD per share combined with the DPS growth rate at the upper range through 2026. Turning to Slide 4, here are more details on the financial results of the first quarter. Clearway is reporting adjusted EBITDA of $218 million and cash available for distribution or CAFD of negative $4 million. In the quarter, results were below expectations primarily due to weaker results in the renewable segment. Our California solar assets were impacted by above-average rainfall, which led to lower solar radiance and thus production coming in below expectations. Additionally, our wind portfolio experienced lower than expected production for the quarter, which impacted CAFD generation. A less significant driver to the quarterly results was from the conventional fleets, extended spring outages, and preventive maintenance ahead of the summer merchant energy period. We continue to believe the conventional fleet is well positioned to provide critical grid reliability services, as well as generate additional revenue from dispatching to the merchant power market in the second half of 2023. As discussed earlier, our liquidity and balance sheet are well positioned to execute on growth with no equity or debt issuance need to achieve our 2026 DPS growth objectives, significant undrawn revolver capacity, and strong credit metrics. While the first quarter results came in below our expected seasonality for the quarter, we want to remind investors that achievement of full-year results is highly weighted on both the second and third quarters, where the revenue contribution from renewable resources and the conventional fleet is typically highest. Given the seasonality of the portfolio, the conventional fleet starting merchant dispatch in the second half of the year and only one-fourth of the year complete, we are reaffirming our 2023 guidance of $410 million. Turning to Page 5, I want to highlight our Cedro Hill Repowering project. Overall, this repowering is a great success for extending the asset's useful life, improving its risk profile, and driving our CAFD growth profile. As part of the repowering, Cedro Hill will be upgraded with new GE technology, increasing its net corporate capacity by 10 MW and projected annual production by approximately 14%. We are pleased to have the opportunity to work with our customer to amend and extend the existing PPA by 15 years, providing the asset with 22 years of remaining price certainty. Given the locational value of this resource, this outcome will be a win for both our customer and for Clearway. We'll deploy turbine repowering technology that has been proven to be very technically efficient elsewhere in our fleet. Importantly, the Cedro repowering is projected to have a healthy average CAFD yield of approximately 9% beginning in 2027, which will create a yield beyond the assumptions embedded in the $2.15 of CAFD per share. Cedro Hill will reach its repowering commercial operation date in the second half of 2024 and is anticipated to be funded by excess cash generation. This repowering continues our strong track record of CWEN upgrading our wind fleet, having successfully repowered over 650 MW of assets to date. Page 6 provides an update on the progress of the previously discussed dropdowns from our sponsor. The left side of the page represents our pro forma CAFD outlook inclusive of Victory Pass/Arica. We are currently not including Cedro Hill repowering as the move in CAFD is relatively small. We'll modify our pro forma CAFD outlook and line of sight CAFD more comprehensively later in the year when we have more assets committed. The remaining dropdown that we are currently working on with Clearway Group represents an anticipated additional $180 million of capital deployment, which are expected to turn into binding commitments by the end of the second quarter. This would then be followed by the next dropdown offer of approximately $220 million. Importantly, these assets have a strong CAFD yield on a portfolio basis, so that Clearway can continue to generate accretive total returns for our shareholders. Our $440 million of potential line of sight CAFD does not include any contribution from roughly 600 MW of newly identified dropdown assets. When the capital deployment and CAFD generation of these assets are more well-defined, we'll update our $2.50 CAFD per share number to account for this additional growth. Page 7 provides some details around additional advancement, Clearway’s long-term growth, and while these projects are not far enough along to provide updates to capital deployment and CAFD, development has progressed far enough that Clearway Group feels confident enough to add them to the list of assets that will eventually be offered. These assets will present nearly 600 MW of additional opportunities that will have funding dates in the first half of 2025 and support growth in CAFD per share beyond the $2.15 target we have discussed previously. The projects highlighted are not the full extent of growth that is being developed at Clearway Group but are anchor tenants in a 1 GW portfolio of diversified assets that will provide additional growth. As we work through all the opportunities of the IRA, we will continue to analyze ways to optimize our fleet through repowering and opportunities to add storage to existing facilities. As I have discussed on previous calls, a key component of achieving value for this optimization option is customer interest. We are now seeing evidence of this in multiple markets across our fleet. The two provide some sense of scale of these opportunities with approximately 2.3 GW between 2025 and 2028. As always, we will be cognizant of exercising these options in a way that manages capital formation and value optimization for Clearway shareholders. Turning to Page 8. Our goals for 2023 have not changed to deliver on our CAFD guidance, grow our dividend at the upper range of our objectives, and continue to execute on our growth plan. Clearway continues to work through commitments for the remaining dropdown offers from October 2022 by the end of the second quarter of 2023, and receive the next offer on further commitments to continue our growth path as well. Clearway is focused on demonstrating the visibility to CAFD per share growth through 2027 and beyond in its $2.15 of CAFD per share long-term objective. We are working to achieve this by investing in additional growth projects beyond the dropdowns already discussed with repowering such as Cedro Hill, as well as third-party M&A, and also continuing to work at originating and/or extending the RA contract on our California natural gas assets. In summary, Clearway Energy Inc continues its focus on prudent growth and has confidence and stability to meet its long-term growth objectives, due in part to strong sponsor support to ensure Clearway's success.

Please open the lines for questions.

Thanks so much. Good morning. Maybe just to start with a health check on the operating environment. Can you comment on what you are seeing in terms of the flow of panels and batteries? Are we starting to see some easing of bottlenecks here? And just how that plays into expectations for some of the timing of these dropdowns? Thanks.

Sure. That phenomenon has been kind of taken into account with the timings of the dropdowns we have in our appendix. But Craig, you are obviously closer to that. I'll let you speak to that.

Yes, thanks for the question, Noah. We're really pleased with our execution and environment, which I think is important to note has been challenging for some. So, in our case for the projects that underpin current committed growth expectations for Clearway Energy Inc., we are ahead of schedule on module deliveries, that's true for both Daggett and for Victory Pass/Erica. And that reflects the success we have had with those projects over really the time since we have been in execution and some of the cluttered policy issues that you are referencing have impacted module deliveries for others. So, we are really quite pleased with the decisions we have made, the support we have gotten from our suppliers, and how the procurement strategy we have had to underpin growth for CWEN is playing out.

Okay, great. And then it's great, and then expect to see some of the repowering opportunities start to materialize. I think Chris, you had mentioned over a couple of GW of potential opportunities interest across the fleet. When you kind of bucket that into opportunities, where it seems like the CAFD yields might pencil out similarly to this one. I mean, is that broadly true for all the opportunities you identified? Have you sharpened your pencils on that yet? Is there a subset that you have high conviction in? What can you share with us?

I believe it's too early to determine and quantify the expected CAFD yield. While I don't expect it to be around 4%, I'm hesitant to make a definite assessment at this stage. Regarding the 600 MW and similar projects, these are still in the early stages. We've progressed with one that is in what we consider a late stage. Therefore, I don't want to suggest that all of these will fall within the same range. As I’ve mentioned in previous calls, there are three types of repowering situations. The first is like Cedro Hill, where the asset is performing well, and while there will be some improvement in CAFD generation, it may not be significant because the asset is currently functioning effectively. The second type involves a well-performing asset that may face substantial maintenance costs or future volatility and operational needs, which might limit the uplift potential due to its stage. The third type, which is the easiest to show value with, includes poorly performing assets. Fortunately, we don't have many in that category. Thus, regarding CAFD uplift, I prefer not to make premature statements since it heavily relies on the specific circumstances of each asset we are managing.

Yes. Maybe just seeking one more. I think double-clicking on the point that you don't need equity incrementally to fund the growth through ‘26. Can you just walk us through a little bit more in your thoughts around additional leverage capacity at the project level, and then just what's a comfort level for you in terms of an upper bound for consolidated leverage?

Sure, there are a few different questions here. Regarding non-recourse debt, we have certain areas where it's applicable. For instance, we didn’t use non-recourse financing for the other half of our Utah purchase; we essentially received thermal proceeds. There are aspects like this within our financial structure. However, I believe the larger option we might consider, depending on the specific asset, is corporate debt. To provide some context, our total corporate debt is around $2.125 billion based on the bonds we hold, and with our $410 million guidance for Cash Available for Distribution, our corporate interest ranges from $90 million to $95 million. This puts our ratio at roughly low 4 times, with the upper limit being around 4.5 times, according to rating agencies. They tend to focus on one metric, such as Funds From Operations to debt, and the interest rate environment is also a factor. This is a rough calculation to give you an idea.

Great. Helpful, thanks.

Our next question comes from Angie Storozynski with Seaport.

Good morning. First, just one more question about project level debt and its availability and cost. So, I mean, you show the allocation of thermal proceeds for financing growth, but I'm assuming that there is obviously an assumption of project-level debt that is being added to these assets. So, could you comment on any increase in the cost of that debt and how that impacts your expected cash flow generation from these assets?

Sure. It doesn't significantly affect the expected cash flow generation because obviously the corporate capital we're putting in is after those costs, and that's pretty well defined. I think to your point; the credit spreads aren't really showing that much volatility. I think it's really more a SOFR swap to fix type of phenomenon that may increase the cost there, but I don't think we've seen a significant increase in the credit spread on non-recourse debt.

And Chris, if I could add to that, Angie. What we do as a business practice, Angie, is at the same time that we execute major revenue contracts for projects that will become part of the growth profile for CWEN, we also put in place long-term interest rate hedges of some kind and secure major equipment for the project. And we do that so that we can largely fix the stream of expected cash flows for a project when it is commercialized. That might not have been industry practice some years ago, but given what we've all observed around a more complex supply chain environment and also a more complex interest rate environment, we find it useful to try to fix all those factors simultaneously. So, we do that and that allows us to be confident in the contribution of CAFD per share from any given asset even before a commitment is made by the yield component, but certainly as of the date that the commitment is made.

Okay. And then probably, even more importantly, so, we are increasingly scrutinizing the quality of CAFD of different yield costs and how it's financed. Have a pretty substantial debt amortization on an annual basis, especially associated with the California assets? I mean, as you think about the future, is there a certain mix between non-amortizing debt and project-level debt that you're comfortable with? And also, is there any deferred financing? Like anything I clearly don't see about anything that could catch up with you in the next couple of years? Some sort of a deferred benefit of low short-term rates that we had over the last couple of years.

There are a few questions to address. Regarding corporate bonds, our earliest maturity is in 2028, with subsequent maturities in 2031 and 2032. As for our non-recourse project financing, we do not anticipate any significant refinancing needs until the third quarter of 2024, which will involve principal amounts of approximately $100 million to $150 million. I want to emphasize that credit spreads are relatively stable, and we will monitor any changes in swap rates. To summarize, there are no obligations in 2023, and the only refinancing we expect in 2024 pertains to that non-recourse financing, with all corporate debt secured until 2028. Additionally, approximately 99% of our non-recourse debt is fixed, so aside from potential repricing in the third quarter of 2024, we don't foresee any major issues.

When you mention that you are meeting your credit targets, could you clarify if it is four times the hold call debt to the parent level CAFD, or what specific metric I should be aware of?

Yes, it’s basically between 4 and 4.5, which reflects the CAFD. As I mentioned last quarter, our approach involves taking the total corporate debt of $2.125 billion in bonds and dividing that by corporate-level CAFD plus corporate-level interest. For our guidance of $410 million, we add approximately $90 million to $95 million in overall corporate interest. This results in a total of around $500 million to $510 million, leading us to the lower end of the four range. Therefore, we expect to be at the lower end of that range. This remains the key metric we aim to achieve.

Thank you very much.

Our next question comes from Mark Jarvi with CIBC.

Thanks, Good morning. Just in terms of the commitment, do you expect to finalize this quarter? Is that occasionally all done together? And I guess is there any one of those projects that are a bit trickier to get across the finish line and figure out that might be pushed out into subsequent quarters?

I believe the timeline we have is appropriate for those assets. Regarding whether all of them will be signed at the same time, that's unlikely. We review the assets as they come in, with varying speeds of diligence. For example, from the first dropdown, we prioritized Victory Pass/Erica because it was the most advanced. So, to answer your question, don't anticipate that they will all be completed simultaneously. There will likely be several announcements related to the different assets. The timing we have mentioned in our appendix reflects our current thoughts.

Okay. Excellent. And just coming back to the 2.3 GW of storage and power projects. What would you frame as a good success rate if you thought about that? Like, do you see it as potentially achieving 50% of that in terms of getting contracted over the last couple of years or is it just too hard to give any numbers at this point, given all the negotiations that have to come through?

Craig, would you like to take that one?

Sure. Yes, I think giving you a particular probability right now is probably premature. What we can say is this; for all of the volume you see represented there, we have active engagement with, and in most cases with the existing customer for those facilities. And that is a very meaningful change over the picture just one year ago. I think it reflects a recognition from load-serving entities across the country that the clean energy assets that were deployed first in our grid tend to be located in places where their resource and their place in the transmission position is especially useful. And between that locational value of our existing fleet and the substantial flexibility and economic benefit that the structure of incentives in the Inflation Reduction Act provide, there is a real strong catalyst for engagement with load-serving entities and other customers to contract for resources at these locations for a long-term at economics that are attractive to us. And also, to try to expand or supplement them where either the renewable resource can be increased in size or where we can augment it with batteries. What we see now is the ability to extend contracts for materially longer periods than repowerings generally supported before. You see that in the extended duration of the agreement we reached for Cedro Hill. Importantly, the incentive structure for storage allows us to deploy storage at those locations without some of the structuring complexities that one had to go through before the IRA's passage. So, I feel pretty constructive that, over time, we are going to be able to repower, expand or hybridize a pretty substantial fraction of our fleet, and it's really just a question of when we get to do that. And what you see on that page just represents the ones where we're in active conversations today.

Understood. And then just in terms of the conversations around co-located storage and the comments before I've been, and that you have to get someone to be willing to pay for that upside and get that a little counterparty. Is there any other opportunities you're seeing or structure you could see around trying to get storage built with existing utility partners for the wind or solar asset that they don't want to partner on the storage side?

Yes. I mean, I think, we're kind of at the dawn of a real renaissance for how these assets can be structured commercially. How they can be financed, and also how power markets will be regulated and will make market designs that generate revenues or procurement obligations on behalf of utilities, where storage is a useful resource. I think we can look at California as being instructive, where eventually storage was viewed as a pretty essential resource. There was a combination of IRPs that were generated that expected storage as a central resource, procurement direction from utilities, or mandated by their regulatory commission. That structure is producing assets that are very compatible with the yield co's investment mandate with long-term revenue profiles. We are starting to see that move east where some of the resources you see referenced there are outside California. Actually, the majority of the hybridization opportunity set we're engaged on is now outside California. If you look under the surface of IRPs from utilities, they're starting to identify storage as a resource they really need to procure in the system, as renewables grow. What we're finding is those utilities are prepared to think about contracting for those resources over a long-term basis. That's compatible with Yield Co. The last thing I'd add is that I think as you move eastward, we do expect that over the next 2 years, 3 years, 4 years, ISOs and RTOs will start to recognize the need for storage in their system. As they do, that will likely lead to changes in how those markets are designed that may ultimately make attributes of batteries that today you would expect we have to monetize on a merchant basis, attributes that we can monetize on a contracted basis.

That's really helpful. And Chris, just last question for you, bit of catch up here if you want to hit your guidance. Was there buffering regional guidance that gives you some hope that you'll be there through the balance of the year or some of the levers you can pull to make up catch up here on the lost opportunities in the quarter?

I think it's more just the waiting. For those of you who follow us for a long period of time, the first quarter is always the weakest. It's low from a renewable resource perspective. And so, for us, it's just obviously the second quarter and third quarter are critical to getting that, especially with the merchant. So, it's not as though we necessarily need to have a herculean effort to catch up. I just think that we'll know a lot more when we sit in our second and third quarters as we get through those, as the main CAFD generation period.

Our next question comes from Julien Dumoulin-Smith with Bank of America.

Hey, good morning. So, I wanted to follow up on the 600 MW of additional potential drops. Just talk about the 215 and DPS. Listen, you all have a pretty good line of sight on, that number already prior to this incremental 600 MW, the 600 MW is being contemplated I think in the 2025 timeframe, as best I understood your commentary. How do you think about this adding latitude to the 215, if not upside? Or do you think that the drop timing here, et cetera, just extends that growth rate and gives you the latitude to continue combating it here? I just want to make sure how we should think about that, especially in conjunction with the additional cash flow coming from the Cedro Hill repowering as well.

Sure. Hopefully, I understood your question correctly. I would say it's much more an extension of the $2.15. I think kind of the point that would kind of come online in 2025, the first year would be the first year of operation 2026. So, maybe not kind of run rate CAFD number. So, I view it much more toward adding to the 2027 and beyond timeframe than really a big impact necessarily in ‘25 and ‘26, depending. But Julian, to be fair, there's a reason I said it's a little bit too early to tell. We have everything tied down. We'll go through it, but just to give you a directional, I think about it that way.

How do you see this aligning with the idea of not needing external equity to finance it? You can consider some CAFD assumptions regarding what the 600 MW capacity could generate. How do you perceive this potentially creating some equity requirements? Clearly, we will revisit this topic at some point.

Yep. I mean, it depends on size. I think to the point in 2023, once again at our guidance, et cetera, we generate about $100 million of excess cash. And I think for us, Julian, it's really about flexibility. As I talked a little bit on the call and over the past quarters, we did upsize our revolvers; we have a lot of flexibility to determine if and when we need to issue equity. But yeah, once again, there's a reason I didn't bring up the actual capital is because it's a little bit too early, so I don't want to speculate. But the point I would like to make is we have a lot of capital flexibility with internal cash flow generation, high cash balances from the thermal sale, and an undrawn revolver except for LC postings.

And then just remind us, especially since regarding that ‘27 - ‘28 timeframe here. I mean your California portfolio, I mean, RA prices continue to move sharply higher here in recent months. I mean, when does that reopen up again here in his open exposure? I just want to think about the pan ratio latitude and the continued organic improvement in the portfolio as well as we talk about ‘27 and ‘28 here with a new drive.

All three assets are scheduled to open in 2027 based on capacity. There are various bidding rules that influence what we can bid on. While we're not going to disclose our bidding strategy publicly, we may choose to bid on some assets while opting out of others. To clarify, the RA capacity for all three will be available in 2027.

And you would agree this would be an assessment that there is further latitude relative to where your head today, I imagine, wherever you head say a few months ago. It's just not where the current forward marks are.

I would say that forward marks are generally higher than our hedged positions. However, I want to be cautious about making sweeping statements. If we consider a three-year timeline from 2027 to 2030, for example, the RA price for 2024 might seem inflated when viewed from a longer perspective. But to answer your question, Julian, overall RA prices are indeed higher than what we had previously hedged.

Excellent. Thank you very much. I appreciate it. Good luck, guys.

That concludes today's question-and-answer session. I'd like to turn the call back to Chris Sotos for closing remarks.

Thank you, everyone, for attending today. As I understand, it's a very busy day in terms of reports coming out. So, appreciate everyone's time and look forward to talking to you in August. Thank you.

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