Q2 2022 Clearway Energy Inc Earnings Call

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Good morning. Well, first thank you for taking the time to join today's call.

Joining me this morning is Akil Marsh, Director of Special Relations, and Craig Kourianoulias, President and CEO of Clearway Energy Group. Her to be available for the Q&A portion of her presentation.

Before we begin, I'd like to quickly note that today's discussion contained over-looking statements which are based on assumptions we believe to be reasonable as of this date. Actual results make different material.

These are due to Safe Harbor in today's presentation, as well as the risk factors on our SEC filings. In addition, we will refer to both GAAP and non-duper financial metrics.

For information regarding our non- GAAP financial measures and reconciliations to the most fully directly-comparable GAAP measures , please refer to the day's presentation.

I would be remiss not recognizing that this is the first call where our CFO , Chad Flock, is not participating.

I want to thank Chad for all his contributions over the years and for ensuring an orderly transition of his responsibilities prior to his departure. We recently launched a search for his replacement and will take a deliberate and careful approach to ensure our executive leadership team has the appropriate skills and experience to continue the lead fairly full.

Train at page 30.

The first half of 2022 performed within our sense to be the ringters.

with clearly diversified portfolio producing $176 million of caffeine in the second quarter of 2022 and $174 million through the first half.

Railway increases dividend by 2% to $0.3604 per share or $1.442 on annual basis.

keeping us on target to achieve the upper range of the zawsze possible pilgrimage doors. but give them close objectives for the year.

For reconcerned, this solidifies the proformer Kathy Outlook by a strong execution.

We have now contracted the remaining 20% of capacity at the marsh landing project that had previously been open after the current polling agreement ends. This project is now fully contracted on a wage average basis to approximately the end of 2026.

We are also currently in the procurement processes regarding the open position at El Segundo and would expect to provide update on this reminders or Google assistance barretics or ?? I feel very emotional.

In addition, there was your close in the mirror turn on the campus on our position. Thank you.

which faced in our current expectations for new project level financing to result in long-term corporate capital approximately 110 $130 million dollars. a

Allowing us to increase our pro forma cafti hour with approximately $400 million up to $385 million and the resultant cafti for share with $$98 from $$90.

The prior committed growth investments were made on track with their CODs in 2022 and 2023.

Longer term are clear way energy group colleagues continue to work on the development projects that underpin our minimum 300 million capital commitment over the next 12 months.

as well as growing their development pipelines now 24.7 gigawatts for 6.7 gigawatts of latest-based projects.

The first financial milestones underpinning our 300 million capital commitment roll are targeted for completion in late Q3 and early Q4 2022 as solar and storage projects plan for completion next year each financial close and start construction.

In total, the capital commitment opportunity for us across the project's energy group is planning to place in service through 2024 exceeds the $300 million goal we set at the beginning of the year. As the commercial profile and capital structure of those projects, which finals a resolution during the coming months, including potential changes to their tax credit qualifications arising out of the Inflation Reduction Act presently being considered in Congress.

you will provide an update on the cable commitments which expect to make their project investment opportunities off of quite clearly energy through over the near term. The cable commitments are available to the cable commitments which expect to make their project investment opportunities in the near term. The cable commitments are available to the cable commitments in the near term. The cable commitments are available to the cable commitments

In addition, the sale of 50% of Clearway Energy Group to total energy is still on track with closing in the second half of 2022, with the outcome of Clearway Energy Aimed having an even stronger sponsor with leading capabilities as well as the possible global generation goals.

subject to the provisions of applicable agreements and regulations, the companies have commenced planning for collaboration in several dimensions across the Clearway enterprise we expect will make us an even more productive participant in our country's clean energy markets as they grow and diversify in asset class.

In line with this continued progress around executing on our growth plan, we have allocated approximately $420 million of the 750 million of excess sale proceeds to thermal, supporting $2.10 of cash per share with full allocation of the remaining $330 million of thermal proceeds, providing visibility to over $2.50 of cash per share.

Given the solid outlook, I continue to have great confidence in our fully-regrated dividend at the upper range of our 5-8% PPS growth target through 20-26.

In summary, we're working to reduce this portfolio through the expansion of new contracts on its natural gas portfolio as well as investing in new assets to create growth in line with its long term projections.

Turn to slide four to provide a bit more color on the quarter and we'll withstand it overall from a financial perspective.slow upbeat music

For the first half of the year, our total portfolio performance was very close to the end point of our sensitivity ranges with adjusted EBITDA of 626 million and a cast fee of 174 billion. The cast fee of 174 billion.

Contributing to this is today's reporting of second quarter adjusted P-Pita up 366 billion at 176 million in cash.

During the quarter, the company's renewable segment delivered strong results led by above average production at all the winter portfolio and clearing utility and fairways to the scale. lakeside

The performance of renewables was somewhat offset by weaker than expected results in the conventional segment, primarily due to the El Segundo facility, as we managed through an extended spring outage as well as a forced outage in June that ended in early July related to damage to floating equipment. This event was managed expeditiously, and the facility is currently running at normal compressions.

Overall, with the company's results, the first half of the year and final of our sensory ranges, we continue to maintain 2022 capty dives on the health of three-hindered 65 million.

As a reminder, 2022 CAFTA guidance does include contribution from the thermal segment through April given the timing of when the transaction closed and continues to assume we achieve a full year piece of renewable performance.

The guidance does not, however, factor in the full contribution from existing community growth investments and the Capistrano acquisition, which informs the updated pro forma CAFIA outlook of $400 million, which I'll speak to on the next slide.

For a balance sheet perspective, the company continues to have a personal flexibility to execute on its codes while not heading to form the corporate capital.

We have the 750 million from the thermal sale of which we have which approximately 330 million remains to be allocated

Our law was completely undrawn, while we were enslaved from increased street volatility with 99% of our test-fix.

Simply put, we are in a phenomenal position to move our company forward in a challenging, macroeconomic backdrop. We are in a challenging, macroeconomic backdrop.

Let's turn to next slide to speak about our latest that transaction, Capastrano, and the value of a precion that comes from the stapler, the full protected deal, our Station of garlic valve.

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After assumed project level debt capital formation, Capa Shauna should require approximately $110 to $130 million of long-term corporate capital, producing $12 to $14 million of five-year levered average caffi for a significant 10.8% caffi yield.

We expect this transition to close in the second half of 2022.

The project sells its energy under plus-bar agreements with a weight average tenor of ten years and provides fuel and further diversification into Texas, Nebraska, and Wyoming.

As part of the acquisition, the RANergy Group will fund 10 million to work the purchase price exchange for an exclusive right to develop any replying projects from this portfolio. The RANergy Group will fund 10 million to work the purchase price exchange for an exclusive the RANergy Group will fund 10 million to work the purchase price exchange for an exclusive

In the event that a project were empowered, C1 would remain the long-term owner of the announcement.

Overall, this acquisition provides an excellent stepping stone and our continued executioner on a creative growth, utilizing the cash in the thermal cell.

A 6 provides an update as we continue to reinvest thermal sale proceeds January 2015- that is greater.?????? really important! The prayeress is held for under shape. In special broad, the malaria caused her infecting the skin. During what caused the sex toinating everyone, the leightpoins respiratory beta moi you

With the addition of Capitano to our pro forma Caspi Outlook, we now see dollar 98 of Caspi per share. As discussed last worker, the investment in the next drop down portfolio should generate approximately $26 million of average passable caffeine. They're about providing thoroughly energy investors for $2.10 for Caspi per share, with 330 million of proceeds for mainly the allocated.

As Clearway continues to reinvest those proceeds and assume CAFDE yielded at 8.5%, we should be able to achieve CAFDE per share of $2.15 or greater, reaffirming our ability to deliver the upper end of the range of 5-8% DPS growth through 2026.

In addition, I would like to remind our investors that these numbers barely account for the deployment of the $750 million of thermal proceeds and assume no additional capital deployment between now and 2026, which is not our intent.

Turning to page seven.

Clearways goals continue to focus on execution.

closing the sale of thermal and achievement of our 2022 guidance with an increase in our dividend per share at the upper range of growth.

It's signed up finding agreement to acquire the Capuchon of Lafolio, which in addition to its captive generation as strong yield, also provides for reparing opportunities at sites that are well-known and create their way energy group given their historical role with the essence.

Federal are continuing to pursue acquisitions of appropriate assets and appropriate returns. You will be patient as here to our unwriting standards.

We continue to work with Clearway Energy Group around the latest potential drop-down assets, as well as the prospects for the enactment of the energy security and climate petitions of the inflation reduction act.

We will provide additional details and a few course on how the terms of these assets could give capital an opportunity to be impacted.

And finally, we are always focused on enhancing the value of our California natural gas portfolio by signing the remaining 20 percent open capacity position at marsh landing through 2026 and also weighing the outcome of also windows participation and procurement processes.

And some way, certainly energy in, is an excellent position to grow its portfolio on an creative matter and strong, risk-adjusted returns. Operator, please open a line for questions.

Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your touchtone telephone. We'll pass for a moment while we compile our key snapper.

Our first question comes from Julian Dummins with Bank of America. Your line is open.

Hi guys, this is Ania, a stepping in for Julian today. So actually, the first question I was just kind of curious, how are you thinking of strategic options for the California natural gas portfolio? In light of just the changes made recently, for instance, the GIP, total agreement, and just the potential strategic optionality there. I guess how are you thinking about them long term? And...

At what valuation would you consider potentially selling those assets, monetizing them?

Sure. A couple different questions there, Anya. Hopefully, I unpack it. So I think the one question, really, Total's involvement doesn't change our view of the underlying value of the assets, our desire to hold them in the light. I think we view the diversification that we have in those assets as valuable. And I think as we've talked over the past several years, the value of those assets is tending to increase versus decrease.

Overall, in terms of valuation and where we'd want to sell those, I wouldn't give out to evaluation numbers, but you know, in terms of where somebody wanted to buy any or all those assets, we're open to that just as we are with any asset of clear energy. But if we think we can sell it for a value above, we'd hope it'd be interesting monetizing, but it doesn't really go really beyond that.

Okay, great, thanks. And then, curious to on just the IRA, if I could ask a question about that. How are you guys thinking of your strategy if that does pass? And then what are your thoughts on expanding further into a storage versus your overall portfolio? Where are you seeing our opportunities today? And I guess where are returns today as well? And I guess where are returns today as well?

Sure, I think I'll answer the points of the first part in that hand over to Craig for the second part. But in terms of strategy, I think as we've kind of talked out a little bit, my prepared remarks, obviously the devils are in the details of exactly how it unfolds. I think long-term, obviously it's a pretty big positive for renewables. And for our perspective, it also is a more flexibility in our approach looking at TTCs and different applications around tax. But Craig, I don't know if you want to answer the other two parts of the question. Yeah, sure.

Well, for the energy system and the customers that depend on it here.

We really just couldn't be more pleased to see the form of the legislation that senators mansion and shimmer have ultimately crafted. It's a, it's a truly elegant piece of legislation that. Both should enable transition in terms of carbon reduction, but also enhancement of our systems, reliability and resiliency. So we really could not be more pleased by the final form of it as far as.

Clearway specifically goes there's a number of provisions we're excited to put to work in our context.

Extension of the wind PTC is going to enable a better value proposition for our customers and

Should enable a greater velocity of our build program as we look into the mid decade.

That will be true across a significant portion of our country, but we're particularly happy about what it will mean for the development program we've had underway in PGM and West Virginia, in particular, where wind resources are in especially high demand, but really all over the country.

The qualification of solar projects for the PTC is going to enable us to evolve the capital structure we use for those projects and will mean

that a greater fraction of the permanent capitalization of those projects can come from the project sponsor, which both makes for a better model for long-term management for all of the project stakeholders, and also in the context of C-Wend is gonna mean that the quantity of capital deployed for any given project can be meaningfully higher than it would be for a project of letting the ITC as a tax credit.

The standalone storage ITC is going to be transformative for the way we can make clean, renewable assets as well as superimp distracting.

And enhance reliability in the system overall.

And we've increased our pipeline for standalone impaired storage assets to approximately eight gigawatts over the course of the last few years through hard work and in anticipation of battery storage becoming. All of Power It? was a video series where an additional battery storage has been started. All is well available is our emergency Unfortunately, Minimal? cases carry out the start of our DNA testing, prep food, and plan Streetigation Division. issues, inspection and you

An increasingly economically viable resource in a large part of the country, and that's certainly going to be accelerated in many cases through the availability of the standalone storage.

In our case, we've approached the sighting of that pipeline with the intent that the location and revenue model for the resources that we're advancing would be complimentary to the operating portfolio with them to UN. So we're optimistic about what that pipeline will yield. And also as we look out to the end of the decade, I'd expect that...

we'll see an opportunity for deployment of paired storage across a substantial share of our operating fleet.

Just a couple of other points. The incentives created for domestic manufacturing and domestic content deployment are also incredibly useful for the creation of a more resilient economy.

We've announced the formation of a U.S. Solar Buyers Consortium that we spearheaded and also in our sole capacity are pursuing procurement of wind and solar and battery components.

And we've been driving plans to evolve the provenance of the component supply chains we employ in the spectrum of incentives. Contained in the legislation are a pretty critical enabler of those ambitions as some suppliers have said that's pretty essential for them to site factories here. And then lastly. In terms of green, hydrogen and offshore wind, the incentives that are in the legislation really would be enablers of the long term growth initiatives. We've been undertaking in those areas.

We've had work underway in those for the last few years for some time. And we focus that on regions where we have proprietary strength out in the Western US and in Texas. Knox ?? Vorley on kneespper. Until now they relational systems where we could drill through our doors but there were notpus??k trep." meow Yet another Taipei Ding Rogers staticthough while still minimal disrupts potential confirmation coincide with the laboratory a care center and frequently by våra database software misunderstood a system calling for our system given the risk of Light Biden sharing about Evely Received Assassin S- Rlerini you

And we're looking forward to accelerating our work in those areas, both through the economic support of these incentives and also in collaboration with our new partners at Total. So while we'll take some time for those efforts to yield operating assets that would be investible for C1, I'm pretty optimistic that through this legislation, assets in those classes will ultimately also be attractive and substantial and compatible with the investment mandate we have in C1. So in total, while we've been advancing our business in a way that we weren't dependent on the enactment,

next question.

Next question comes from Keith's family with bullfries search. The first line is open. The first line is open.

Hi, good morning. First, a bit of a follow-up to the last one, but I think you mentioned the drop-downs from CEG could be more than that plan, $300 million now for that bucket of assets you show in the slide.

Could it be, I guess, due to the bill, could it be material in more than 300 million because of the solar PTC and other dynamics, and then, relatedly, just...

Chris, any comments on overall level of visibility and confidence on fully redeploying the thermal cache over the next six to 12 months or so? So, over the next six to 12 months or so. Chris, any comments on overall level of visibility and confidence on fully redeploying the thermal cache

Sure. I think not to minimize the question, the answer to the first question is yes. I think obviously as we talked about on the prepared remarks, we want to see exactly how this all comes to pass. I want to make sure everything is tied out before kind of talking about exactly what the number might be, but does it potentially be materially different? Yes. To your second question around confidence, I think again we're being disciplined. I think obviously some of that cash will be used depending on exactly the final determination of how much the 300 million moves, but yeah, we are working hard to make sure we deploy it appropriately.

So I think our ability to play this is pretty high, but we'll know when we're done.

Great. And then just in Texas, any comments you can give on how the assets performed with the heat wave last month and some of the power price spikes?

Sure, in July , once again, books are not closed. So this is kind of an indicative, you know, the portfolio seems to have held up well. So we saw some price spikes, but you know, in general, the portfolio performed well from what we could tell.

Great, thank you.

in one moment for our next question.

The next question comes from Colton Bean with PPH call. Your line is open.

Good morning.

I'm a conventional portfolio. Yeah, you now have two of the three natural gas facilities recontracted any updates as to how you're approaching dispatch on the new R.A. agreements. Would that still be at the counterparty's discretion? Or do you all have interest in maintaining flexibility there? It depends to a capitalized round market volatility.

Sure, we sold the capacity portion forward at the energy margins, so you're question that would kind of be for our book currently on an open basis. However, if a counterparty were interested in buying the energy piece, we'd be open to that as well, but that's your question. Currently, the energy margin is open on those ends.

Okay, great. And then just on El Segundo, I know more folks have been likely still to come, but with that being a CCGT, and I don't think it was too many years ago that it was running something close to base load, any differences in how you're approaching or re-contracting there.

Not really. I think for ourselves, obviously the energy margin should be higher on a CCGT than on a Peaker. But for us, really not a difference in terms of how we view it. We think it's well positioned within the market.

I appreciate that.

And one moment for our next question.

Our next question comes from Michael Lapides with Goldman Sachs. Your line is open.

Hey guys, thank you for taking my question. I will.

It's kind of high level one here. Can you talk about?

With more large cap utility holding companies, more international players, more infrastructure funds, developing utility scale wind and solar. Can you just talk about the landscape? And I don't know whether if this is a Steve or a Chris question, but what's it doing to return?

What's it doing a project tenors, meaning the length of contracts?

What's is doing to the overall dynamic, given there's just a lot more capital flowing into the space right now?

Chris, sure, thank Michael. I'll kind of have to have it and then pass over to Craig for his view. But I think for, we're not seeing a dramatic difference than frankly what we saw last year, Michael, as you're well familiar, a lot of capital has moved into the industry over the past several years. And so for us, I think what we're seeing in terms of returns and what's available out there, it's a pretty rich M&A market. I think that's why, you know, you've got, could you only heard me emphasize we're gonna be disciplined in how we allocate the capital? So that's what we intend to do.

But I think in terms of market opportunities, there's quite a few out there of attractive assets. We'll see how those end up. But I think that also, with the increase in the treasuries, treasuries obviously come back a little bit to about 2.6, depending on where it is this morning, on the 10-year. So some of that has yet to pass through. But I think overall, IRRs are no real different in terms of downward pressure this year versus last given that inflow. Because I think that inflow has been happening for quite a while. But Craig, from your view, any difference?

Yeah, sure. All well put, Chris. Yeah. In terms of new asset creation and development,

You know, honestly, the period of the last 12 months, I think has been an important and useful 1 in allowing both suppliers of. Of energy providers of components and customers for energy all to. I get grounded around the importance of project viability and sponsor strength.

And as we're engaging with customers today, what we're seeing is that those customers value in, I think, very important ways and more than they might have, say, two years past. The locational viability of individual projects based on where they're located in the transmission system, the timeline that those transmission interconnections will allow resources to come online.

The quality of the fighting of the project in terms of the effective load carrying capacity that it can support or congestion risk that it might face the quality of the project sponsor itself and both its financial resources and its operational acumen in terms of the ability to get a project built and brought online. And to navigate the supply chain challenges that exist and will persist for some time.

And we find that all those things actually are played to strengths that companies like ourselves have.

So, um...

So I'm actually quite optimistic about what the next years are going to have in store for businesses like ours, because the demand from end use customers that want a deflationary lower cost resource that's renewable or storage backed. It's extraordinarily high and there's still a scarcity of projects and sponsors that can credibly deliver.

that value proposition and the timeframe other customers want, and that also have a proven ability to navigate the types of disruptions that we've had and that I think we would expect a need to continue to navigate. So I'm quite optimistic that we're gonna be able to continue to create projects that exhibit in total a good contracting and revenue portfolio for CWAN and that...

That are going to produce adequate returns, both for the investments that makes and for what we do in the creation of the projects. And I think that will that will really persistent to the mid decade, even with the availability of these incentives and all the capital flowing into the space.

Got it. Thanks, guys. And just real quick on contract centers. Are you seeing customers mean buyers?

seek shorter term deals than what you saw maybe two, three, four years ago? You know, it's interesting that actually the trend of late

has almost shifted in the opposite direction. The inflationary trends that have been observed over the course of the last. The inflationary trends that have been observed over the course of the last.

Six months in particular, I think, have shifted the calculus for a lot of buyers that locking in a resource that has a predictable cost to it is actually a useful part of procurement for an overall energy mix. So that's the first thing that I'd see. Thank you.

You know, when we look at the models that work for us, you've probably noticed that there's a substantial expansion we've undertaken in development of resources out in the WAC. We've undertaken in development of resources out in the WAC.

And a lot of the natural buyers for those resources are load serving entities who like 20, 25 year contracts as they plan their system for the long run. And we've done that with intention because of the way we think those could fit in the C-Wend portfolio. And then we're also matching those with some commercial contracting designs that put a floor around price but will allow us to participate in upside when price volatility exists.

So we're trying to construct an overall portfolio that may involve both very long tenors and open positions with downside revenue protection. That in total will be a nice complimentary match to the existing portfolio that we have within CUN. And to your first question, I think many customers see these resources as an attractive thing to walk in. And tenors have not been walking and further, in fact, in many cases, customers have been looking to contract them for longer links.

Got it. Thank you, Craig. Much appreciated us. Yep.

And one moment for our next question.

Our next question comes from Mark Jarvey with CIBC. Your line is open.

Thanks, good morning everyone. I wanted to come back to the IRA and talk about the impact on existing assets, particularly the wins. Can you comment on whether, like, maybe looking at the legislation as written now?

impact around adding storage to those sites and repowering, if you've got a feel for storage to be more impactful versus repowering, and how many of the sites maybe could even do both in a current portfolio.

Thank you.

The other problem they'll handle with the back half is usual. I think from our view, it's important to keep in mind that a lot of our assets have the benefit of being relatively new. So as I talked about on other calls, our reparing opportunity is not as though we've got a gigawatt of repowering that can happen. A lot of it kind of happens over time as you move through it because a lot of our assets are relatively new with longer, longer-tenered contracts that we need to be renegotiated. So I think overall the opportunity from a side perspective.

is impactful in terms of the different rules around PTC and tax treatment. However, I wouldn't want you to read too much into that, given like I said, the age of our fleet is relatively young and also the PTA-10 is relatively long, so it's not as though there's a big opportunity in the next.

24 months to do a gigawatt of repowering or something like that. I cried from your view.

Chris makes a very important point which is that with the long runway that the legislation creates we can really pick the optimal point in time to repower our existing wind projects which –

In a lot of cases will be...

You know, as those PPAs from the original construction of the project expire. The project expire.

And the way that we've advanced our repowering development program has anticipated the succession of those, those milestones has taken into account the status of the equipment at those sites. And, and it's a systematic program with the benefit of this legislation, which will be staged out over time. So that when we replace the equipment at the project and benefit from the new tax incentives.

The new revenue contract that's put in place is something that fairly values the asset, which the shorter timeframes we had to repower projects didn't really allow for in the past all the time in terms of storage pairing. You know, that's a pretty meaningful opportunity, both in terms of wind and solar assets. We've got. Okay.

thousands of megawatt hours worth of paired storage or retrofit programs underway for development across us. Both wind and solar resources in the west and

that the Midwest corridor of the country. And we expect that, especially with the way the transmission systems evolving, that a number of the load serving entities that we support through those existing plans, we'll find it useful to evaluate commercial solutions with us that would allow us to deploy that storage hybridization even while the existing contracts are in place.

I think more, as Chris says, this will take some time for us to figure out what's really optimal, keeping in mind what the current commercial picture is for those projects. But there's good reason to expect that there would be a substantial enhancement to value in the portfolio as we move through the decade. There's good reason to expect that there would be a substantial enhancement to value in the portfolio as we move through the decade. That's helpful. And just on the storage, would you need to be 100 percent contracted just as you start to understand that market better and see asset performance?

Your comfort level on the ambient open level, on the ambient open on the storage side. On the ambient open on the storage side.

Yeah, I think it's a more complex answer, especially depending on what assets it's paired with. Don't get me wrong, I think our preference would be in general to have it 100% contracted, but I think it's important to say where the storage is, what type of assets paired with, how it works within the overall portfolio, which may lead to different answers than 100%. So not to cheat your question, it's a little bit really how the storage is used. If it's a one-off, you want a much higher level of contract in nature. If it's part of the overall portfolio, lower levels of contract, it could make sense, given how it interfaces with the other assets.

Got it. And Chris, question for you, when you look at the pipeline, core energy group keeps expanding, lots of opportunity. So it's not a lack of assets that will constrain your growth. So as you think about that now, what else comes in the picture when you're thinking about which assets you wanna negotiate? Is there anything on the diverse location asset next that is changing, just giving you sort of a, sort of a abundance of assets to look at? I think what else is going on in the decision making in terms of when you sit down to discuss what specific assets?

From our view, we've never really had precise diversification goals of we want to be 60-40 or 50-50, let's say on the renewable side. So for us, it's more about making sure that we have the right asset in the right place at the right value. So don't get wrong, as you can see with some of our acquisitions over the past two years, we've tended to diversify outside of California. So on the margin, if there's a dollar, we probably are a little bit more outside of California than within, and that's where you've seen a lot of our third-party M&A take place.

or maybe people are too bullish on it, but did that come in the decision making as well in terms of longer term tail value?

For the longer term channel value, as you know, as you're also familiar, most of the, you know, initial tenors are contract, are very prominently contracted. So that really helps inform maybe a little bit our tail view of, okay, where do we want to be after the contract on lines and what markets so we'll be more interested in? But it really doesn't affect the law of our decision-making over the contract period, obviously.

Got it. Okay. Thanks everyone.

One moment for our next question.

Our next question comes from Justin Clare with Roth. Your line is open. Your line is open.

Thanks for taking our questions.

So I guess first up here, I just wanted to follow up on the Inflation Reduction Act. You know, it seems like project economics could meaningfully improve here and you could also see more opportunities with growth in the market. But just wanted to see how you're thinking about the potential economics of dropdowns. You know, I know this will be market dependent, but do you see potential opportunity for higher CAFTA yields here? And then I know you touched on this a little already, but could you give us a sense for how the change in the...

a direct buy-in to how it all affects returns.

So your second question, in terms of tax equity, especially on the solar PTC, it allows to, I think the point, Craig made earlier in the discussion, you can kind of get a lot more cash and cash fee out of that versus having an ITC profile where we obviously aren't a current taxpayer. Some of those benefits aren't as helpful for us. So for us, I think it changes some of the demographics of returns that we're able to achieve. I think we, we have to see what all works out to see if it actually changes, and how to deal with IRRs and like.

Okay, great, thanks. And then just on the supply chain here, we're wondering if you could just give us a sense for how disruptive the UFLPA enforcement might be to the solar module availability. I think you have modules for the Hawaiian projects, but could you give us the status for maybe Daggett solar? And then for the commitments that you might be making here in the near term, are you considering whether projects have...

panels available uh... you know that factoring into your decision making here

Sure, I'll answer first and then hand over to Craig. It's more to your last question. For us, we tend to take over projects at commercial operation date, so it's not as though that we're really taking a lot of construction risk in terms of panels arriving. So just for what it's worth, when we kind of commit, we're really usually funding at or near COD depending on tax rules. So just in terms of context, but Craig, for the other parts of the question?

Yeah, sure. I'm very proud of the work that our team does in general when it comes to technology forecasting and procurement and especially in the solar domain. I think we've generally been a few steps ahead of everybody else in thinking about what our supply chain needs to look like as an early adopter, a bifacial, as a major driver. As a major driver.

pro-cermit of panels that make use of US-made polysilic in establishment of Xinjiang-free provisions in our pro-cermit. And I think that foresight is really serving us well today as an enterprise. So through the application of that kind of foresight and the responsibility we put to work, we are optimistic that in the same way that we were resilient around.

to the estimated CODs presented in today's earnings material for a future near-term drop-down opportunities. A

While it's conceivable that temporary confirmatory holds at the border are possible for industry participants generally as CBP establishes its enforcement program, we think it's going to be a manageable risk for our enterprise without materially delaying any of our project's estimated CODs because of the supply chain configuration that we've procured really for all the projects, DAGET, which makes use of the same supply chain that supported

Hawaii, the Victory Pass and Erica project, the Texas Solar Nova project, and then successor solar and storage projects that make use of similar supply arrangements. So in the short run, we think we have established a procurement program that anticipated U.S. policy objectives and therefore should prove resilient. And then as we look into the future, I think again, we're trying to sort of...

spearhead the way of planning for an increasingly localized supply chain for solar modules or a supply chain that makes use of manufacturing locations consistent with U.S. policy objectives. And certainly the incentives and the legislation if passed are going to make that an even more feasible goal for us as we go into the mid-decade. So I think in total we've been thoughtful and we should be all right because of where we're procuring these panels from.

While it's possible that we may see disruptions just because ports are complicated entities and the way that the whole of the CBP implementation regime will function is is certainly something that will involve disruptions but in the long run we think we should be okay based on what we bought and who we bought it from.

Okay, great. I appreciate it. Thanks guys.

One moment for our next question.

Our next question comes from Noel Kay with Oppenheimer. Your line is open.

Good morning, thanks for taking the questions. Maybe to start with, one backup and FK high level one around the total collaboration here. I know you're obviously in the planning stage and haven't closed yet, but based off of those discussions, just can you sketch out some of the areas where you see the opportunities for collaboration? And maybe we can walk through the development side, the re-contracting side.

and then you potentially, you know, the financing in MAA side. Sure, I'll kind of walk through some of the parts of the handoff to Craig, under development side. So I think financing in MAA, it's not as though, you know, we obviously currently need, and we have a pretty strong capital market presence going forward.

Respect. out.

Is purchasful.

Backets.

Have a good day.

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Yeah, sure. Yeah, so we've, as I think your question suggests, we're in the early stages of discussions with total around collaboration. And of course, there's during the time period between signing and closing certain regulatory constraints that we need to be respectful of during that time period, by, by, by.

We see in particular potential for unlocking new capabilities or opportunities in the ability to collaborate around energy management.

and the interface with power markets, where as total growth is US presence in electric power markets, it's a ability to act as a trading counter party to help us establish revenue contract positions for projects that are consistent with the yield co or manage around those positions for value and risk reduction. You know, it could be a really important tool for us to have in the toolbox and some power markets.

So that's one area we look forward to collaborating with them on. In terms of development activities, it will certainly look to collaborate with them as we do with GIP on global procurement strategies.

that help us drive value, both for our projects and for the work that they do in the US and elsewhere. So there's opportunity for us to collaborate around procurement and cost and long run service in that regard. In some of the newer asset class categories that we touched on before, I think there's especially some interesting opportunity for collaboration. When we think about

the capabilities that a company like TOTAL brings to bear in the green hydrogen market globally, they are truly complimentary to what we know how to do. We're, I think, one of the leading enterprises when it comes to citing renewable assets and building them and operating them,

We have started to do the work of thinking about where they could be built for purposes of green hydrogen production. Moving molecules and marketing them in a value-added way is something that Total is a world-class leader in. We look forward to collaborating with them in terms of matching those capabilities up with our own. Then certainly, as you look across offshore wind, Total is an emerging global leader in that asset class.

And as we've thought about what's possible in the context of the Western US, where we're a leader, certainly clear way has been advancing a vision for what we could do in that aspect class. And I think together with Total, we would be a formidable force as you look out in the longer run to the Western US and what it can do in offshore wind. So these are early days and we have to be respectful of regulatory constructions.

anywhere in the portfolio in terms of

I'm certainly around the tariff and getting the clarification. Obviously, you had to remobilize crews. Some of the peers have pointed to specific kind of time delay period. So curious to know what you experienced and to what extent or any time frames you can put around any push outs and CODs.

Yeah, the COD forecasts that are contained in the earnings materials reflect our current outlook for completion of projects. And what you'd observe is in general they have not moved that much from what you would have seen say six months ago. And part of that reflects...

the supply chain that we were employing on projects like Hawaiian Daggett, which exhibited different facts than those that were a particular focus of the AD-CVD investigation.

Some of that also reflects the work that we've done with our panel suppliers to assure that they are allocating the capacity that they have that were at the top of their priority list.

And in candor, some of it reflects actions that we took at the sponsor company incurring material incremental costs in order to perfect that supply chain position so that projects would stay on track. And so, I think our goal has been to advance those projects so that our customers can get the resources that they'd planned on as close as possible to the timeframes they originally envisioned.

before some of either the supply chain disruptions or these trade policy driven disruptions and to also get these projects online for CWIN to be able to deploy its capital into them. And that has not been a costless proposition for the parent entity but we take those objectives seriously and so we've incurred those costs to keep these projects moving forward and have been glad to be working with our customers who have.

who have worked up with us and are working with us to make the accommodations that those project circumstances require. So it's not been without impacts in terms of our cost or modest impacts on schedule, but I think overall our program has been less disrupted than others because of our readiness to incur those costs and also what we were planning on in terms of the supply chain in the that it must experience with our vision that security and good specificled reference which First place.

Great, thank you.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Chris for any closing remarks.

Just wanted to say thank you for everyone for attending and I look forward to talking to you all in November . Thank you for having me sort of wake up after though.

Ladies and gentlemen, this has concluded today's presentation. You may now disconnect and have a wonderful day.

That's conclude today's presentation. You may now disconnect and have a wonderful day.

The conference will begin shortly. The raise your hand during Q&A.

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