Good day and thank you for standing by. Welcome to the Clearway Energy, Inc. Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. 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.

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

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

Thank you, Sarah. Turning to page 11. Due to the challenging first half of the year and potential volatility in the back half of the year, we'll be unable to achieve our original CAFD guidance of $410 million. While we do not control the weather, all of us within the Clearway enterprise take this very seriously and our continuing focus on improving results and forecasting in both the short and long term. Despite these challenges, we remain on track to support the upper range of our 5% to 8% long-term dividend objective. As discussed in previous years, the rationale for our long-term payout ratio of 80% to 85% is precisely to manage through years like 2023, so that Clearway can continue to grow its dividend based on long-term cash flows without undue financial stress despite periods of short-term negative weather volatility. In addition, Clearway continues to work through commitments for the remaining drop-down offers from October 2022 with our investments in Cedar Creek Wind and Rosamond Central Battery Storage and our first offer on the next batch of drop-downs with Dans Mountain. We expect to have commitments completed for all drop-downs that underpin our $2.15 CAFD per share line of sight by the first half of 2024. Beyond the $2.15 of CAFD per share, we continue to add projects such as the Cedro Hill Repowering that was discussed last quarter, the extension of resource adequacy contracts on our California fleet, and continued improvement in our operational performance. In conclusion, 2023 thus far has been a difficult year for Clearway, given the weakness in renewable resources and volatility in the capital markets. While these headwinds impact us currently, Clearway Energy has always been about the long game, about compounding our dividend over time that leads to stock price appreciation. The foundations of this long-term growth are still intact: strong sponsorship in a key growth sector of America's infrastructure, significant development capital spent to provide growth opportunities for Clearway Energy, Inc., and a disciplined capital and investment approach. As Clearway celebrates its 10th year of existence, our ability to withstand and grow through these challenges has been demonstrated in the long term. Operator, open the lines for questions, please.

Thank you. Our first question comes from Julien Dumoulin-Smith with Bank of America. You may proceed.

Hey, good morning, team. Thanks so much for the time. I appreciate it. Chris, you're talking a lot about the challenges in the past tense here through the first half of the year. Can you talk a little bit more about sort of today mark-to-market, if you will, through part of the third quarter? How are trends continuing across the portfolio in terms of renewable generation?

Sure. I think as I mentioned in my comments, July was on track for plan. So we didn't see a significant deviation on a CAFD basis for the portfolio as a whole. So I think August it's early days. You want to get a full month in there, but July was on track. So we're hoping that the weakness we saw in the first half of the year has abated.

Got it. I see stabilized here. Yes. And then more to the point, in terms of the capital market backdrop, you alluded to the challenges. At the same time, clearly, transaction multiples in the market have come in. How do you see that as transforming and impacting the plan that you described or reaffirming here today in terms of acquisitions and acquisition multiples? I mean obviously there's puts and takes in terms of your financing plan. But can you speak to a little bit what the transfer multiples or acquisition multiples you were contemplating in the past versus today?

I don't think they've shifted much given, I think, kind of what you're saying, Julien, may phrase differently is a lot of the volatility in the 10-year Treasury has really shown up the past two weeks depending on how you look at it. And so from my perspective, a lot of the multiples we were looking at in terms of the acquisition, which are very similar to what we have for drop-downs, really haven't changed that much. I think for us, I don't know if what we're seeing in terms of about a 410, I think, 10-year Treasury environment currently versus, call it, a 37, 38, maybe 3, 4 weeks ago as that's transferred through real seller price expectations to date. So a long-winded way of saying, I don't think it's impacted us that much in the current period, but we'll have to see how sticky this Treasury environment is and if it translates to M&A multiples.

Right. But your point is that despite seeing some transactions in the quarter here at perhaps lower headline multiples, you wouldn't necessarily read into those as being indicative of the wider trends, right? They're more discrete to specific portfolios and the issues that might otherwise be embedded in them. If I hear you right?

Correct. I don't think you can extrapolate based upon the past three weeks of Treasury volatility there's capitulation in the M&A market in terms of new levels.

Right or more specifically, transactions action through the balance of the second quarter here, if I hear you right, but and then just lastly here, if you don't mind, super quick, on just the backdrop in California, data points continue to accrue across the forward curve at very robust prices, if not higher, quarter-over-quarter. Again, I would love to come back to how you're thinking about your commercial strategy here and then ultimately extending out your outlook too.

Sure. There are several questions here, Julien, so I’ll do my best to clarify. As you mentioned, some of the forward prices in California remain very strong. However, when we talk about peaking assets, the runtime and the peak prices reached are crucial factors in assessing profitability. Currently, California has a relatively cool environment, which is expected to heat up towards the end of next week. Therefore, the run time data and our current position will be more relevant next week than it is now. For us, while the commentary I provided suggests that July went according to plan, there were difficult days mixed in with stronger performance on others, reflecting the nature of peaking assets. For the rest of the year, we feel optimistic about our situation, but once again, it is largely dependent on weather conditions, as well as the duration and intensity of those conditions. Regarding longer-term RA pricing, as noted throughout the year, we participated in the RFP process conducted by the utilities in the second quarter and expect to receive results and share them on the November call.

Understood. Assets running okay in California here?

Yes.

Thank you. One moment for questions. Our next question comes from Mark Jarvi with CIBC. You may proceed.

Thanks. Good morning, everyone. So just coming back to the last commentary on the California assets. Just when you think about your guidance, is there any changes at all within the guidance you're now around expectations for energy margins in the back half of 2023?

Not in terms of the baseline number. However, it does help inform the range of kind of some of the cooler weather that I talked about were to appear. So to answer your question, it doesn't really change our pinpoint estimate, but in terms of helping inform the range? Yes, it does.

And then when you think of the range specifically those assets. What do you think like obviously there's the renewable assets, this brings some more variability in particular wind, but what's the sort of, I guess, the range that you think is conventional in terms of swings in terms of CAFD expectations for the balance of the year? Is it narrower than the broad range you've given or is about the same in terms of that sort of $30 million range?

I would say it would be within the range given. It's not as though that the wind would or renewable assets would kind of offset a deviation in the gas fleet, if that's where you're going. So it's not as though the deviation is wider than that. The deviation on the conventional would tend to be within that range.

Got it. And then just in terms of the offer here on Dans Mountain 9% CAFD what performs at a bit lower than where I think the 9.5% range stocks trading at 8.5%. So how do you think about that transaction relative to your own currency in terms of your share price, what would be buying back stock at? And if there's anything around the funding plan you could optimize to bring up that CAFD yield over time with Dan Mountain.

Sure. There are a few questions to address. For Dans, we estimate about 9.2%. The important point is that when we first discussed drop-downs 24 and 25, we mentioned that on a weighted average basis they would be around 9.5% for the entire fleet. Some will be below that, while others, like Rosamond BESS, are at 11%. Therefore, when we say 9.5%, it does not imply that every asset will meet or exceed that percentage; it refers to the overall portfolio. Some assets will be lower, and some will be higher, which is consistent with our overall view. Regarding the asset itself, it is quite appealing with a 12-year contracted basis, which is strong for today’s market. This outlook is subject to due diligence and approval from the GCN, but this number does not shock me as a reason to view it negatively. As for stock buybacks, we are considering that option. I believe that as long as we can keep finding accretive acquisitions or drop-downs from our sponsor, those are likely a better investment. They help diversify the portfolio and extend our PPA tenor. If we were to halt drop-downs and focus solely on stock buybacks, over time, that would shorten our PPA duration. Given the acquisitions we discussed, such as Cedar Creek and Rosamond, along with the potential for Dans Mountain, we expect to maintain that PPA duration in an accretive manner through drop-downs rather than through dilution.

Okay. That makes sense, Chris. And then just coming to the dividend increase is, obviously, you've talked about noting equity to get the $2.15 and drive 8% dividend growth. But given the stocks in the trading now and market conditions, if you're not being rewarded for the increase, do you start to moderate down at the lower end? Or do you just take the long-term view and stick with the plan you're at 8% for the foreseeable future?

Sure. I want to mention a few things regarding your question. First, we need to see where the Treasury market stabilizes. The recent four-handle phenomenon has impacted stock performance. So, the first part is understanding the stabilization of Treasuries. Secondly, the difference between growing at six versus eight does not greatly affect the cash on the balance sheet. For instance, with $410 million of CAFD, every 1% change corresponds to $4 million. Therefore, a 2% growth difference amounts to about $8 million, which isn't a substantial change in available cash for asset investments. Regarding how we might adjust our approach in the future, it will depend on market valuation. If the market stops valuing dividends—which I don't believe is the case now—we'll reevaluate the situation. For now, we're confident in our long-term growth rate, which is generally viewed as 8%, but more accurately falls between 6.5% to 8% at the high end. Lastly, I still see value in the dividend for our equity holders, and I believe we need some time for the market to stabilize before we reassess.

Okay. All right. I'll leave it there. Thanks for the time today.

Thank you. One moment for questions. Our next question comes from Angie Storozynski with Seaport Research Partners. You may proceed.

Good morning. So one question on the gas plant. So could you comment on the dispatch of the assets and how it differs versus what we saw for the output from these assets under the tolls?

I can't really say there's a difference that can really be identified, Angie. Obviously, the tolling entities probably ran them differently based upon what they're seeing in their portfolios versus us just taking market signals. So I will say and it's also a little bit difficult because obviously, we've only got really two months of full data, maybe three and also not around the full fleet. So I don't know if there's a really good basis for that comparison, Angie, to be fair to your question.

Okay. I understand. Changing topics to the CAFD per share expectation, I'm looking at your holdco debt maturities and the current trading of these bonds. While I know some of them are maturing in 2020 and beyond, is there a plan to manage the additional interest expense from that refinancing in your CAFD per share projection?

Sure. I think to your question, if I mentioned correctly though, the corporate bonds in 2028, 2031, and 2032. And I think while, again, that gives us some time to continue to grow the portfolio. It's in the end, Angie, if those things are yielding nine, they make sense to buy those back at that period of time, because you obviously have a pretty strong cap deal at that point. So I think for me, a) we've got a bit of time between now and then, 2) one way to manage those to continue to grow the portfolio. Third is, obviously, the other two are very long dated with 2031 and 2032. So hopefully that answers your question.

Thank you. Our next question comes from Noah Kaye with Oppenheimer. You may proceed.

Thank you for taking my question. I just want to clarify the numbers following the previous inquiries. The midpoint of your updated guidance includes the first and second quarter 2023 figures presented in the deck. Additionally, there is a potential decrease of about $5 million in CAFD at the midpoint for the second half of the year. Is that an accurate way to consider the prospect of lower energy?

The way I would put it, Noah, is given the first half results, we kind of skewed the range a bit to the downside just taking into account the first half of the year. Once again, I think some of the other questions. Fortunately, we haven't seen the weather patterns that persisted in the first half of the year in July. So we're hoping the trend in July continues, but yes a long way to go.

So just a little bit of conservatism regarding the first half. You increased your pro forma CAFD outlook due to those portfolio additions, but you’re maintaining your view on the existing portfolios’ pro forma long-term EBITDA CAFD. What supports that decision at this point? You mentioned that this quarter has seen historically low wind production, which suggests some mean reversion might occur. However, as a company focused on addressing climate change, you must consider these weather patterns and any potential concerns. Please share your assessment of the portfolio and how rigorously you are evaluating those long-term assumptions.

Sure. The first part involves updating any long-term assumptions in November. I want to clarify that we do expect some adjustments, but we don’t make those every quarter. Instead, we take a comprehensive look in November, considering any revisions to the P50s, cost increases, merchant curves, and the extension of RA contracts. So, the long-term outlook is revisited in November, addressing everything in detail. Regarding long-term data, if you examine our historical production indices, aside from this year, they fluctuate around 100. You might see numbers like 103 and 97, indicating that there’s natural variation in different years. Our focus is on gathering more long-term data and refining it. I don’t believe our models are fundamentally wrong once we have adequate data, which is what we aim to illustrate with Alta. This year has its challenges, and while we don't prioritize maximizing leverage or payout ratios, I recognize that easier routes to dividend growth exist, such as raising the payout ratio to 90%. We are aware that challenging years will occur, but we strive to manage our operations effectively. Despite the difficulties this year, it’s noteworthy that we managed to amortize all project debt, pay off corporate interest, and still generate approximately $345 million in cash at the midpoint, even with a challenging P9 or P85 year in several parts of the fleet. While I wish the figures were higher, I believe this demonstrates the resilience of our system in navigating these fluctuations that we expect to encounter over the next decade.

Appreciate that. And one last question, if I could. Just with Rosamond, you have the 15-year RA agreement in place with the high-quality IOU. What kind of attributes do you need to see to invest in additional stand-alone storage projects? I assume you need some elements of long-term revenue visibility hopefully, in a desirable market. But just walk us through how you think about the investability of stand-alone storage.

Sure. If you're talking about investing in stand-alone storage purely on a merchant basis where capacity and energy are flexible, that might be challenging for us unless it's aligned with other parts of our strategy where we're looking to address positions or scarcity pricing. From our perspective, if you were to ask about the probability of CWEN investing in fully merchant storage that isn't integrated with our existing portfolio, that's unlikely to happen. Additionally, since storage is still somewhat early stage as an asset class, a significant majority of the financial benefits come from the capacity side. We’re cautious about making large bets on merchant energy, not that we completely overlook it, but we aim to minimize dependence on that through contracts on the capacity side. While some merchant dispatch is necessary, we're not willing to place a significant economic bet on that side either.

Yeah. That's very helpful. Thank you.

Thank you. I'd now like to turn the call back over to Chris Sotos for any closing remarks.

Thank you. Once again, I appreciate everyone's patience during this difficult year. I think we're working it through. And like I said, July looks to have reversed some of the trends we saw in the first half. We hope it continues. But thank you all for your support. Take care.

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