Good day. And thank you for standing by. Welcome to Clearway Energy, Inc.'s Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker 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 call over to your speaker today, Chris Sotos, President and CEO of Clearway Energy, Inc. Please go ahead.

Good morning. Let me first thank you for taking the time to join Clearway Energy, Inc.'s fourth quarter call. Joining me this morning are Akil Marsh, Director of Investor Relations; Sarah Rubenstein, CFO; and Craig Cornelius, President and CEO of Clearway Energy, our sponsor. Craig will be available for the Q&A portion of our presentation. Before we begin, I'd like to quickly take note that today's discussion will contain forward-looking statements, which are based on the assumptions that we believe to be reasonable as of this date. Actual results may differ materially. Please review the safe harbor in today's presentation as well as the risk factors in our SEC filings. In addition, we 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. Despite a difficult year from a renewable resource perspective, CWEN's 2023 CAFD came within its revised guidance range of $330 million to $360 million at $342 million, with the fourth quarter CAFD of $53 million. Commercial operations were also achieved on Daggett 2 and Texas Solar Nova 1 in the fourth quarter, which will help drive CAFD in 2024 and beyond. CWEN also committed to approximately $215 million of new corporate capital deployments in 2023, and an average five-year annual CAFD yield of approximately 10%, further diversifying CWEN's fleet. Looking to 2024, we are announcing a dividend increase of 1.7% for the quarter to bring our quarterly dividend to $0.4033 per share, or $1.6132 on an annualized basis, with a targeted group growth of 7% for the full year of 2024. Clearway is also reaffirming its CAFD guidance of $395 million for 2024, with CAFD results in line with expectations to date. Clearway continues to execute its long-term growth targets of $2.15 of CAFD per share, and is reaffirming our ability to achieve the upper range of 5% to 8% growth through 2026 without needing to raise external capital. As we transition to focus on growth beyond 2026, we continue to manage our RA contracting positions in the 2026 to 2030 time frame, pursuing both value and certainty to drive value for shareholders. In addition, our sponsor's 29 gigawatt renewable pipeline continues to develop with approximately 7 gigawatts of late-stage projects targeting CODs over the next four years. Clearway continues to execute toward its 2026 $2.15 CAFD per share target during 2024, while also focusing on providing further growth visibility beyond this CAFD goal in the years to come.

Thanks, Chris. On slide 9, we provide an overview of our financial results, which includes full year adjusted EBITDA of $1.058 billion and CAFD of $342 million, which was within the previously provided revised guidance range of $330 million to $360 million. Fourth quarter adjusted EBITDA was $201 million and CAFD was $53 million. Those results are consistent with revised internal expectations updated in August of 2023 to reflect renewable resource impacts. Our fourth quarter results reflected strong conventional availability and the benefit of timing of maintenance, capital expenditures, and other items, offset in part by lower wind resource, a trend observed throughout the industry in the fourth quarter. Despite the challenges impacting 2023 full year CAFD, the company remains well positioned for growth with a strong balance sheet, pro forma credit metrics in line with target ratings and 99% of its consolidated long-term debt with a fixed interest cost. In addition, the company's earliest corporate debt maturity is 2028, and there continue to be no external capital needs to fund the line of sight growth to meet our dividends per share growth objectives through 2026. The remaining thermal sale proceeds are available to fund committed 2023 investments and offered projects that are expected to facilitate achievement of the line of sight CAFD per share of $2.15. We are reiterating our 2024 CAFD guidance at $395 million. Among other factors, our 2024 CAFD guidance continues to factor in current P50 median production estimates, previously disclosed expectations for maintenance capital expenditures in 2024, and timing of committed growth investments based on estimated project CODs, but excludes CAFD from committed growth investments beyond 2024. Our pro forma CAFD outlook remains at $415 million, which along with anticipated growth investments using the remaining thermal sale proceeds supports our potential line of sight CAFD and dividend per share growth targets. Now I will turn it back to Chris for closing remarks.

Thank you, Sarah. Turning to slide 11, our goals for 2024 are simple. First, to focus on delivery of our 2024 CAFD guidance, while achieving our 7% DPS growth in 2024. In order to do this, we will target to improve availability from the CapEx investment we are making at several of our sites. Second, we continue to execute toward our $2.15 of CAFD per share target once all the excess thermal proceeds are deployed and fully operational while adhering to our underwriting standards. Third, we want to begin the move to conversation around growth beyond 2026 for a combination of additional RA contracting, providing visibility on further drop downs in the 2026 to 2027 period as we progress through 2024, additional improvements in the existing fleet to repowerings and finally, an eye to continuing to pursue M&A at our disciplined capital targets. Operator, please open the line for questions.

Our first question comes from the line of Michael Lonegan with Evercore ISI.

Yes, hi. Good morning. Thanks for taking my question. So you highlighted the shift in the timing of maintenance CapEx. It looks like you spent less on maintenance in the third quarter than in the fourth quarter. You came in at $22 million for the year versus guidance for $35 million, yet you reiterated your maintenance CapEx forecast for 2024. Just wondering if you could share more detail about this?

Sure, probably not going to get into a lot of detail, just as a lot of those numbers are immaterial to overall guidance. I'll turn it over to Sarah in terms of any further clarity. But for us, obviously, 2023 was a disappointing year from generation overall, so maintenance CapEx was not needed as much due to lower generation. So I think from our perspective, while we kind of gave guidance for 2024 maintenance CapEx to your point, we really looked comprehensively at what happened in 2023, some of the availability shortfalls we suffered and where we can kind of spend those dollars to improve availability in ‘24 to move on. So I think those are really kind of a lot of the points around maintenance CapEx is not a question of what we thought it was unfortunately due to the generation kind of being lower than we had targeted, maintenance CapEx is also thereby lower and really kind of putting those two together. But Sarah, any other details?

No, I think you covered it. I mean, maybe just to highlight the $395 million of CAFD that we're guiding to in 2024 includes any amount that we would potentially have decided not to do in 2023 and to do in 2024. So there's nothing that we have to worry about revising 2024, and to Chris' point, I think overall the coming in lower than budget for maintenance CapEx for 2023 really just reflects our results for 2023.

Great. Thank you. And then secondly for me, you reiterated that you still don't need external capital through 2026. You've been talking about how you're targeting 4x to 4.5x corporate debt to corporate EBITDA. Just wondering once you deploy all the thermal proceeds, presumably you'll organically deleverage the balance sheet a little bit. Just wondering if you could share where you expect to be within that leverage range now. And if you're at the low end, would you consider deploying excess capital to target the midpoint, for instance?

Sure. I think a couple of questions in there, so hopefully I'll unpack it. The first point is it's not as though we're actually going to rest on our laurels for $215 million by 2026. That's just where the number falls out, given the external capital from thermal. So we actually hope to do better, but right now it's what we can show a line of sight on just for a point of clarity. And I think as we think about the overall debt, there's about $2.125 billion of bonds. And once we deploy all the thermal proceeds on a run rate basis, that's about $435 million of CAFD. You add that corporate interest of about $90 million to $95 million. You get about four times, call it that to corporate debt to corporate EBITDA. So I think to your question there should be excess leverage capacity to be fair. I don't want to pin everything on one credit set. That's the easiest one we use to translate. Yes, if we're in an 8% interest rate environment, obviously other things move around. So I think to your question, we do think we'd be, once all the thermal capital is deployed, on the low end of our target, 4 to 4.5 but also be a little bit figured question. There's, yes, ratings use a number of other metrics. It's just the simplest one to kind of walk through. So hopefully I answered your question.

Our next question comes from the line of Mark Jarvi with CIBC.

Yes, good morning, everyone. Maybe just coming back to the comments around M&A, third-party M&A, and you didn't transact in 2023, like some might be more active in ‘24. How would you sort of frame the environment right now? It seemed like it was a bit of a buyer's market last year, anecdotally we're hearing it from some other peers that things are starting to pick up in terms of activity levels, a bit more competition. How would you frame it right now, Chris?

Oh, sure. I think from our view, 2023, because of the volatility, I mean, we're well aware of kind of where the markets moved and also our stock in the fourth quarter. It was just very difficult for us to feel comfortable underwriting during that year, given that volatility and knowing we'd get accretion and being disciplined. So for us, and also, I think a lot of sellers were kind of waiting to see where those markets calmed down to be able to move forward with sales. And I think while obviously kind of the past month, we've probably had about 40 basis points of volatility in the bond market, which is obviously much less than we were all experiencing in the fourth quarter of last year. So from my perspective, I think the overall target for M&A is hopefully more robust in ‘24 than it was in ‘23. Importantly, our ability to execute is just that we had very volatile markets that made execution and underwriting very difficult in ‘23.

And then how would you think about funding any M&A on top of your existing commitments?

Yes, depending on what size it is, we obviously have an unfunded revolver which we kind of use to warehouse first. And I think to the previous question, we always kind of use excess cash—whatever we borrow, if you look at our excess cash—to basically pay back first, then any excess debt capacity, which was the previous question, and then equity last. So for us, depending on where capital markets are at the time and the acquisition, we obviously have significant revolver capacity, so we're not forced to go to the markets at a certain size.

Understood. And then as you look through the next three to five years, at some point, you guys will provide some more clarity on where you think the organic growth or sort of the drop-down growth will come from. But besides that, is there anything else on the CAFD profile related to tax equity partnerships? Are there any notable flips coming up, potential buyouts, anything that sort of changes the CAFD profile of the existing assets in the next three to five years?

Those come up fairly regularly, but I wouldn’t say they are material drivers of a paradigm-changing number. In our disclosure, you see us kind of do one of those a year. In general, they tend to be pretty small. So to your question, those flips do come up, but they tend to not be material drivers of CAFD in the long term.

Okay, and the last question for me is just, now you saw PPA prices rise over the last couple of years, return objectives moved higher, including your own CAFD targets. Assuming that rates plateau or go lower here, could you update us in terms of where you think returns are going to trend over the next 12 months?

Craig, if you don't mind, speak for CWEG.

Sure. I think as the weighted average cost of capital for sponsors and project owners across the industry rose over fiscal year 2023, the broad environment of industry participants factored that increased weighted average cost of capital into the prices they offered customers on new contracts. Those prices also took into account the equipment pricing environment that after the pandemic and other changes in trade policy became more elevated. In today's market, we see PPA prices remaining above where they were for comparable resources before the start of 2023. And we and other competitors, I think, are finding that customers still see value in those elevated PPA prices, particularly for customers who, either as load serving entities or as end-use customers, see growing load and value the low emissions profile of the products that we're selling. So we don't foresee meaningful declines in PPA prices from where they are today. And equally, because it's a competitive environment, we don't expect dramatic increases in returns that are produced for projects. But we are now able to support higher internal rates of return and higher cap deals on the new projects that we're creating, which take into account the elevated cost of capital for the industry generally.

Got it. So any decline in PPA prices would really be more reflective of CapEx trends and financing costs and not so much a sacrifice in IRR objectives?

No, I don't think so. I mean, I think what we've thought to be disciplined—we need to deliver accretive growth for Clearway Energy Inc. And I think, in general, the industry's largest project sponsors have entered an era where we are all being cautious in the way projects are configured and created. And I think, the largest customers having gone through all the disruption of the last three or four years increasingly value engaging with project sponsors who can deliver projects with certainty.

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

Yes, thanks for taking our questions here. So was wondering if you could maybe just update us on the progress you're making on contracting the open conventional capacity in 2027? Could we see in the near term here some smaller amounts of that capacity contracted or is it more likely that something happens in the summer of this year? And then beyond that, was wondering if you could maybe just talk about the other levers that you're focused on for extending DPS growth into 2027. I know acquisitions are a part of it, but anything else meaningful that we should be considering?

So for the first part of your question, like, don't get me wrong, the major procurement initiative. You bid as part of the RFP processes on the utilities and the grid and the like, really in kind of late first quarter early second quarter, and you find out about those awards in the call it third quarter when they're binding late third quarter, maybe early fourth. So I think your point in terms of a real paradigm change, in terms of much more significant capacity, that's when you'd see it. That being said, we're constantly in communications with a variety of counterparties on the smaller side to try to move those numbers up at prices that we think are good as well. So to your question, if you were to say, hey, Chris, when would we see a multiple 100 megawatt move? That's probably much more as part of that large procurement process. That being said, could you see smaller moves in the interim? Yes. And then your second question about extending the other resources that go through ‘27, not to minimize it, really is those three sources. RA is the big part of it given pricing that we're seeing, we hope it holds. And like the question I just answered, we'll look to see what happens in the RFP processes kind of in the spring and summer. M&A is obviously critical as well as the repowerings and further drop-downs with the 2026 and 27 COD. And once again, we hope to provide more color on those as we progress through the year and we feel better about what capital those projects are going to take, so on and so forth. It's a little bit early now to do that.

Got it, okay, I appreciate it. And then I did want to ask about the non-recourse principal amortization schedule. It looks like the amount expected in 2024 moved up significantly, $1.7 billion. I think last quarter of the expectation was $432 million. So, could you just maybe walk us through the change there and help us understand that?

Sarah, let me get the schedule for a second.

The projects under construction.

You got it. Go ahead, Sarah, why don’t you just answer.

Yes, we had several projects that we acquired. I think you can see Victory Pass and Arica are the biggest piece of it, the 757, and then also the Rosie Class B. Those two amounts are for projects under construction. Once the construction is complete, that will get replaced by tax equity, cash equity, more permanent financing. So those maturities will go away as a result of other proceeds from other financing arrangements.

Got it, okay, that makes sense.

So what we're thinking about, the amortization on the existing project debt is about the same as it had been before. That's really just as the two projects move from construction debt to permanent financing.

Yes, that's right.

Our next question comes from the line of Noah Kaye with Oppenheimer & Company.

Okay, great, yes, they cut out for a second, but I just want to make sure I was in hold on. Thank you for taking the questions, folks. I think it goes a little bit to one of the earlier questions, but is it too soon to talk about capital yield expectations for some of these 2026, 2027 potential projects? Any way to dimension that? And in particular, I know one of your peers has talked about kind of the return expectations for repowering. So not sure if you can parse that out for us a bit.

Yes, to your question, no, we think it's too early. I think once again, if your question is, will it be eight? Probably not. But I think if you look at where CAF deals move, I think also, you've noticed that hopefully our sponsors have been supportive of moving CAF deals higher from where we first thought they would be given the move in tertiaries that happened. So if you look, I think it was probably August of 2022. We basically indicated CAF deals on some of these drops would be about eight and a half. And then we kind of moved them up in, I believe it was the fourth quarter of 2022, moved them up further in ‘23. So there's a ceiling on that. It's not as though they can move them to infinity. So I think for us, not to minimize your question, it really is seeing where the capital markets are at that time and where do we feel comfortable underwriting. So it is too early to tell. And I think the projects are a little bit too early stage currently for everybody to feel good about the capital required and also what that cost of capital might be.

Yes. It's good to see that, just from a sponsor development standpoint, I mean, the kind of quantity of projects for ‘24 and ‘25 looks fairly consistent quarter-to-quarter. I did notice what appears to be some shift of target CODs of ‘26 into ‘27. Anything we can understand or read into that? Does it speak to IRA clarifications or kind of more perceptive in their connection bottlenecks, anything like that? Maybe a Craig question.

Yes, Craig, if you don't mind.

Yes, perceptive question, Noah. What that shift over ‘26 to ‘27 reflects principally is a plan for certain projects to be able to make use of domestic content solutions and conservatism in the way that we're planning those project schedules based on when and how the guidance that's required for being able to finance those solutions would materialize. But also just forecasting of project schedules in a way that we anticipate would be durable and also enabling of capitalization of the project by CWEN under foreseeable financial market conditions. So right now, with respect to interconnection, we feel pretty solid about the family of projects that we are advancing that underpin the core of that 2026-2027 volume for CWEN growth enablement. We have in excess of 15 gigawatts worth of late-stage interconnection acute positions and many gigawatts worth of high voltage equipment that we've secured to be able to support the growth there in the mid-decade. So I think we're not in a position where we're particularly concerned about some of the grid bottlenecks that have broadly impacted the industry to be able to support growth goals for CWEN and instead right now as we're prosecuting projects for that mid-decade are just focused on how to set projects up to maximize value to construct a portfolio that will be diversified and beneficial for CWEN while setting projects up for construction and funding schedules that provide us with useful flexibility for how and when the projects would be funded by CWEN.

Very helpful, Craig. May I just ask a quick follow up? As someone who knows DC as well as anybody in the world, I just want to clarify whether or not you know the development entity is still kind of waiting on finalization of domestic content guidance to make some of those FIDs, and if so, when you’re thinking that guidance may actually be published?

I mean, I think that we, it's a balancing act as I think you're alluding to. There are projects that we have planned for the 2026 vintage where we would ideally like to enable the use of additional domestic content solutions that we think would be responsive to U.S. policy goals and value enhancing, but there are certain timetables that support customer needs that eventually just have to be fulfilled. So, what we do is we advise the staff of the various agencies on the implications of the amount of time it takes to issue guidance for project timetables that aren't universally flexible in the industry, and I think it's understood by a lot of the folks who have to work through the policy process on domestic guidance that we're moving through time windows where it would be beneficial for that clarification of domestic content guidance to be issued in the course of the next two months if we want to be able to catch the 2026 vintage for a substantial fraction of the industry activity. But for what we currently have planned for 2026, we have locked in supply chain solutions that will allow those projects to be completed in that timetable and are no longer relying on the assurance of that guidance to be able to do so.

Thank you. I'm currently showing no further questions at this time. I'd like to hand the call back over to Chris Sotos for closing remarks.

Thank you. Once again, I think, 2023 was a difficult year from a resource perspective, but we hope to kind of bring things back on track in '24 and see a lot of progress over the course of the year that we hope to be able to illustrate to you in terms of driving CAFD forward on a future basis beyond '26. I appreciate everyone's patience during '23 and moving on to '24. Thank you, everyone.

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