Q3 2023 Clearway Energy Inc Earnings Call
Yeah.
Thank you for standing by and welcome to Clearway Energy, Inc. Third quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone to remove yourself from the question queue. You May Press Star one one again.
I would now like to hand, the call over to President and CEO of Clearway Energy, Inc. Chris Sotos. Please go ahead.
Good morning, Ladies first thank you for taking the time to Clearway Energy, Inc. Third quarter call joining.
Joining me. This morning are actual marsh director of Investor Relations, Sir Rubenstein, CFO, and Craig Cornelius President and CEO of Clearway energy our sponsor.
It would 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 assumptions that are reasonable.
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'll refer to both GAAP and non-GAAP financial measures and.
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.
Given recent market volatility we wanted to change our customary investor call format to take a step back to reinforce the strength of our platform.
Apart from competitors and the opportunities ahead of us.
As such first and foremost critical to the Yieldco model is the difference of the Yieldco its cost of capital.
To that of a development there.
This difference is oscillate over time and despite the current market volatility our sponsors historic return targets and recently disclosed development IRR targets by other market participants demonstrate that <unk> cost of capital remains well below the target returns of up sure developed.
Preserving this relationship and benefits for both parties in addition.
Hold approximately $1 $8 billion of <unk> shares ensuring alignment of sponsor interest for long term, let's see one.
The second ingredient for successful Yieldco, the strong supply of assets with long term contracts.
While the current volatile capital markets create some dislocation in the near term.
Mental strength of renewable assets in terms of transitioning the U S away from fossil fuels to clean or cost energy has not changed.
The demand to transition our cleared away from fossil fuels is not diminished the climate change a continual challenge for the globe burdened by companies governments goals of reducing their carbon footprint while.
The benefits of the IRR also still intact.
Importantly, competitively priced well generation when compared to the current <unk> cost of energy all drive a compelling long term growth starting Q1.
As part of these ingredients, we are clearly at work to optimize these larger macro elements in combination with a very straightforward corporate financing model that is underpinned complex to portable our contingent equity financings and <unk> capital structure and.
And no need for external capital to meet our Dts objectives through 2026.
Pulling many of these elements together.
And working with the sponsors as negotiated increased catheter yields of 10%.
Dropdown assets approximately $230 million of corporate capital deployment, we will discuss later.
Accordingly, we reaffirm our continued fight on site or $2.15 of <unk> per share.
Our need for external corporate capital and our consistent message over the past several years of visibility.
The high range of our 5% to 8% long term target.
And looking beyond 2026. In addition to the strong long term global demand. We described earlier <unk> also benefits patent strategic natural gas assets in California that are critical to assistant upstate and transitioning away from fossil fuels.
As evidence of this value.
Recently been awarded an additional approximate year and a half are contracted or a value a strong pricing on a portion of our fleet.
This pricing provides a strong foundation pursuant to continue its growth trajectory in 2027 and beyond in line with long term targets.
In summary, despite challenging market conditions, the key elements that underpin our strong yieldco still exists.
<unk> cost of capital differences between the Oklahoma sponsor straw.
Strong development spend the demand for renewable assets long term contracts combined with a straightforward capital structure that translates into transparent growth.
Turning to slide five.
Critical to the success of the Yieldco model is a strong sponsorship relationship.
One key element of this as a cost of capital difference between the hotel and development.
Given the return requirements with GIC and total energies as well as other recent examples are publicly disclosed development returns that relationship continues to hold between clear rate frequency one even in the increased cost of capital environment, They're operating in.
Certainly group, which owns 85 million total shares in Q1, representing approximately $1 $8 billion of value.
Also receives approximately $130 million of dividends per year. It helps fund development activities to ensure a strong supply of dropdown assets in the future.
Importantly, clearway group and our sponsors have any idea or are other special arrangements to derive value from the relationship with <unk> as.
As the increase in human stock price.
<unk> paid and margin development assets at Alliance Valley observation for all entities.
As evidenced since relationship through a group has agreed to move the targeted yields on over $230 million you want investments for approximately 9% to nine 5% cap deal to 10%.
Adding additional accretion on our redeployed thermal capital and reaffirming our line of sight growth through 2026.
Clearway group continues to invest heavily in development in line with line of sight dropdown or through 2026, as well as flexibility for timing of Dropdowns thereafter.
Slide six provides an overview of <unk> 2009, gigawatts at all and pipeline, which has grown substantially in previous years. This pipeline, which is an important source of growth pursuing continues to receive strong sponsor capital deployment two advanced development projects that are well diversified among technology types and compatible with <unk>.
<unk> growth and diversification objectives.
Significant sponsor support has been demonstrated in a lot of the platform to grow by over two gigawatts in the last 12 months engineered doubled the last two years.
The continued importance of scale in this industry. It is critical to managing through volatile periods.
To leverage a large development operational platform to weather the storms.
To this point clearly group has been able to procure cost effective supply agreements should enable domestic content qualification and or reduce interconnection timeline risk for 2025 to 227 pipeline.
In conclusion.
Early group development platform as the benefit of leading scale in its class, it's being sponsors to ensure supply of dropdown assets for <unk> in the future.
Turning to page seven.
During this period of market dislocation there've been a number of questions around long term challenges development of renewable assets with contracts.
While the rapid increase in interest rates since may has created some headwinds in the near term and as all stakeholders have had but just a capital cost conditions.
We've not see this as a long term impediment to the growth of renewables with U S.
As a backdrop.
Mobile industry benefits from a variety of support at the federal and state policies as well as corporate ESG goals to drive long term demand for renewable assets that are not as sensitive to the price increases.
In addition, renewable ppas are still competitively priced versus non renewable power options.
As though an increased cost of capital only impacts renewable assets and impacts all electricity generating assets.
Importantly, regardless of ESG or Rps standards renewable assets produce electricity at prices are competitive with other forms of generation. So are an attractive source of energy and economic terms as well.
That being said.
All of us within the clear way enterprise are cognizant of the increased capital costs that impacts all stakeholders.
Readjustment in Edp pricing.
Long term asset and I was like zero tax equity nonrecourse debt providers, OEM suppliers developers and PPA off takers.
We cannot forecast precisely how long it may take PPA prices to increase.
Can say scale becomes ever more important during this period as it is critical to be able to develop quality cost effective projects and we have seen when take significant comfort having clearway energy group is one of the largest developers in the U S backed by GIC and total energies towards the largest companies in their respective industries to match. This.
Period.
Simply stated all of us within Mcsorley enterprise recognize that we are in a period that require adjustments by all stakeholders.
In a more competitively advantaged position than most to manage through.
Turning to slide eight.
Additional ingredient for success long term is a straightforward capital allocation and financing strategy as we have discussed through the years, we have a simple capital structure with no complex financings require a tier one common equity conversion our contingent issuance.
For external capital either to meet our Dps growth through 2026.
We are also insulated from current interest rate volatile.
99% of our consolidated debt fixed realizations of interest rate swaps and no corporate maturities through 2028.
So you want to also naturally amortize over $350 million of non recourse debt per year as our debt amortization schedule is designed to limit risk around PPA renewal and different energy market environments. As was recently demonstrated our three natural gas assets that became merchant in 2023.
All of this leads to an overall conservative capital structure that correlates to a double <unk> rating has been maintained since 2016 for a variety of challenges and market headwinds.
<unk> disciplined financial management is provide a strong foundation for sustainable growth through a variety of market conditions.
To provide further disclosure around our sponsor support on our latest dropdown offers please turn to page nine.
We are excited to announce that we have a commitment to purchase Texas solar Nova for approximately $40 million of capital and a 10% cap.
This project consists of over 450 megawatts of solar located in <unk> County, Texas and are underpinned by a power contracts that are 18 years in duration with credit worthy counterparties.
Addition, discussions.
Discussions with Clearway Energy group.
We're able to come to agreement to modify Dan's mountains cap to yield approximately 10% or approximately 9% benefit from a new dropdown twenty-five offer of three solar assets in our approximate GAAP yield of 10% compared to the 95% of targeted previously.
These high quality assets are significantly weighted towards solar storage generation was fully contracted nodes subtle unit contingent contracts to reduce volatility from the C. One fleet.
These dropdowns complete the allocation of the excess proceeds from the thermal sale closed in May of 2022, and most recently an increased cap yields demonstrating long term alignment of interest between COF as sponsors to continue to drive value for shareholders.
Turning to page 10. This is a graph that should be familiar to you.
Lock of our growth visibility through 2026, starting on the left side of the page is our prior $420 million.
Look at you enroll achieved when the majority of the dropdown 24 assets are operational on a full year basis.
The second column is a reduction in cap you have $10 million or update to reflect a variety of factors revisions to our P. 50, given weak wind resources in 2023 increased insurance cost inflation as well as other factors.
The third column represents a $5 million <unk> increased our investments in CSN as well as the incremental contribution of Cedar Hill Repowering prior to 2026 summing up to our updated pro forma Kathy outlook upward $15 billion.
This when added approximately $20 million of Kathy dropdown twenty-five discussed previously.
And that our updated line of sight, Kathy approximately $435 million.
Importantly, we are maintaining the $2.15 Kathy per sure guidance through 2026, and we have discussed previously.
We believe the ability to maintain our long term capital your line of sight and our growth trajectory speaks to the strengths of the <unk> platform.
Turning to slide 11.
Slide 11 provides a summary of sealants contracted and open positions in the resource adequacy market through the next four years.
We currently have the benefit of approximately 100% of our capacity contracted through 2025, 87% contracted through 2026, and now with 42% contracted in 2027.
As discussed throughout the year <unk> participated in several RFP auctions in bilateral discussions as a result was able to secure two contracts for approximately additional year and a half a strong pricing compared to previous contracts.
We do not disclose the pricing on these contracts due to confidentiality provisions, we can say that the pricing achieved on these contracts extrapolate current unconstructive megawatts in 2027 and beyond.
That would drive growth in 2027 with the low end of our five to eight long term <unk> per share growth target without requiring any other dropdowns are external count.
This is an important source of potential path to growth in the future and while we do the extension of our <unk> contracts strong pricing is an excellent signal of the future.
It's too early to declare victory and incorporate this higher pricing to our 2027 and beyond.
Now I'll turn it over to Sir Sir.
Hey, Greg.
Hi.
Provide an overview of our financial update.
Kathy.
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Third quarter 2023.
Based on results to date and solid forecasted activity is.
Great.
Reiterating our 3334.
Full year Kathy guidance Street.
300.
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He continues to maintain his lawyer Patsy guidance breathe.
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The full year Kathy guidance.
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Both seasonality forecast.
23.
Despite the challenges impacting twenty-three Kasey the company remains well positioned the throat.
Strong balance sheet.
And go for my credit, Patrick and mine's, a target right eight.
99% that <unk> that has extra sauce.
263426 right spot.
Due to the proceeds from the sale of thermal author continues to be no external happening fees.
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Moving to 515.
<unk> 2024, Kathy guidance at 395.
As we walk our 2024 Cassie guidance to our updated.
Hi, Kathy outlets.
Note that we have to curb the timing of the cap is rhonda debt refinancing until after 2024.
Giving our sizeable cash balance <unk> physician behalf flexibility.
On the timing of the three financing.
And the <unk> principal and interest payments or not a 2024 Cassie guidance.
Wherever they are reflected in the updated.
Cassie Alpha.
In addition to the 395 billion of Cassie anticipated for 2024 reflects one time payments cause isolated outage time.
Required basis upgrade that specific legacy waste sites.
Upgrades are required to return <unk> facilities normal availability levels and are expected to have a one time impact 2024 Kathy of $53.
Indigestion or pro forma Kathy outlook of 415.
Reflect all year, Kathy <unk>, including Peter Freak victory path, Arizona, Rosey path of Texas <unk>. The full year contribution of these broke investment is expected to be approximately.
<unk> incremental Cassie as compared to the portion of Kathy realized by these <unk> 2024.
Based on the anticipated timing of exam or project D O D.
<unk> 824.
Also reflected in the 395 to 824, a full year Cassie items.
Along with the updated so corporate Kathy outlets are updated T.
Production asked us as well as 30 cost increases primarily driven by installation fees.
These amounts are individually and material and therefore, we have not quantified detail.
In addition to Entergy emergency for the convention facilities are you <unk>.
Really in mind longterm assumption previously provided.
Material cheese has been noted.
And the full year Kathy guidance for 2024 or in the updated so for my Kathy outlets. It continues to activate longterm Virgin Entergy margin is a dollar to dollar 54 G. W. Pumphrey visited.
Kennedy at $20 billion of Cassie for one dollar per kilowatt month increase or D.
Based on these estimates be arrive at our 20th 24, four year Cassie guidance of 395.
And are updated pro forma Kathy outlook of 416.
Which along with anticipated Bruce <unk> sale proceeds support our longterm Cassie activity per share growth target now.
Now I will turn it back to Christopher closing remarks.
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Adam tried it could be able to provide you a more precise Kathy fershur clothes I'll look for 2027 will be I'll know this fall.
Variables refrains far more clarity on while.
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For questions.
You as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the Jew You May Press Star one one again.
Please stand by while we compile virtue and a roster.
Our first question comes from the line of Julian <unk> Smith Bank of America.
Good morning, and thank you guys very much appreciate your time.
Yes.
Okay excellent. Good morning. Thank you look guys nicely done in California here. It wanted to just get a little bit of a sensor just what are you looking forward to provide an update here I'm gonna just <unk>.
Just to pick up where you just left left off Hiraman, what specific parameters visit California's specifically or is it other dropped out and then I have a few specific follow ups. If you can.
And then you can give us a little bit clearer sense of what you're seeing California as well.
Sure I think in California, and once again, Unfortunately, we can't disclose the price of your account sensuality, but yoga. The contract you signed previously to kind of be able to give guidance through 26, yeah, we're seeing prices stronger than that waited those contract back in the past and so for US we feel very good about the ability to extend those <unk>.
<unk> by about a year and a half on those two assets into 2027, but as you can see from our charged in the white, we're only about 42% of that capacity edge as in 2027, which makes it difficult to say here's exactly how Cassie works and here's what we're going to target. So I think what we tried to talk about on the call was that <unk> the other variable.
<unk>. If you were to move that 2027 contract or were able to secure and said we were able to contract.
Corresponding 58 per cent open physician at those rates because she being able to hit the low end of the longterm Kathy God's through twenty-seven with.
With regard to Dropdowns, Julia, which I think was kind of your second question.
Obviously, that's three years in the future right a market that is very good.
Oh that was a very volatile currently so for US we kind of looked at the strong sponsor support we've received on our most recent dropdown discussions and then we'll kind of see where the market goes over time to move those casio for what makes sense in the future, but I think right now we're kind of very confident and happy with our ability to reaffirm twenty-fifth Jane continue or.
Guidance in terms of being able to hit the upper end of the range through 26th and we're starting to see some good green shoots for twenty-seven it'd be I'll, just not as tight as we would've liked definitely talk to this time last year.
Got it alright fair enough excellent now with that said, let me just take a little bit here.
Instead of using a greater than now you just get till the 22 on the 215 can you explain a little bit of of what you're seeing it sounds like a slight reduction in confidence and that seems despite the higher yield on the dropped out of 10 per cent. So in theory I would've thought that estimate revisions living higher and then may be related to that.
Can you tell me if it is <unk> or not it looks like updated pro forma Cassie here goes to 205 from 208 sit down three pennies there. So I don't I again, I don't mean to nitpick too much here, but I'm curious on the signaling and what's driving a little bit of a reduction if you will despite the the higher dropped out and yield environment.
Oh no no concerned Julian there's a reason we tried to map it out all for yourself. The question. Yeah. Welcome to question I think to you yeah, but it's not as though we have less confidence in the 215. It's just before like we are giving you a point estimate three years out so it might be a cent higher low in terms of rounding and the like the real driver behind the reduction from.
What you saw before from kind of a 442, a 435 is really around $10 million that we took as a result of the P. 50 results we saw in 2023.
Insurance is a little bit higher than other costs, just the main source of that deviation that you're mentioning for what maybe you saw previously disclosed obviously kind of we're not happy with that but as we talked about during this year, we incorporate actual performance into our estimates we try not to just be theoretical we actually take into account what's going on 2023, stating the obvious has not been a good year.
Wind resource for solar resource perspective, so we've taken into account going forward to make sure we can kind of tightened down our Max.
Okay sure enough it doesn't sound like there's anything too specific there from what I can tell and then maybe just <unk> it seems like.
And the drop down here the the wind dropped down do you mind talking about it it seems like there's there's a higher yield, but a higher valuation or sorry.
I think I said that right.
There's more capital just because of how it's structured at the end for US we're looking to really target. The overall deployment Yo for for US Julian a lotta people kinda count megawatts were much more concerned about how much capital R. Redeploying at good quality projects with good accretive Castillo so for us to your point the way. It was finally structured result.
And a little bit higher capital deployment, because it's also at a higher cap of the yield I'll I'll I'll <unk> I'll take it.
Okay, Alright fair enough excellent guys well I appreciate your patience. This morning, and good luck and hopefully next year or next quarter, we'll get an update it lastly may openings there.
Well I think once again Juliet Oh, those are a contracts they take time to basically right will participate or we're always engaged in bilateral discussions the rfps as you know kind of happen in June or a little bit before during the year, we get our awards in November So I don't think they'll definitely be that many major updates between now and let's say the February.
For a call I think for us as we continue to see if this market environment settles down and we can have more clarity around what Dropdowns me look like an addition to more are eight megawatts being Ah Ah contracted that would kind of give more clarity around 2027.
Excellent Okay. Thank you guys.
Yep.
Thank you.
Our next question comes from the line of Angie Stirs Inkscape of Seaport. Please go ahead Angie.
Thank you I just wanted to say you know.
<unk> this is having to do it basically.
Tastes yourself with <unk>.
Gross you just live within your means and.
I'm hopeful that this stuff.
Reflects this this reality versus what we're seeing <unk>.
So now [laughter].
The growth is concerned so to speak.
You have a sponsor that is supportive and willing to adjust the epitaph to yield for the the the current interest rate environment, but how about you know maybe organic growth any sort of retiring sore expansions of existing site something that you could do on your own.
Sure we look at that all the time and you know I think we've talked about is you know see drew hill is a repelling. So we have some of that don't already I think for us and a little bit further discussion about the volatile capital market environment that you reference, we kind of really need to see where we need to source new capital as part of my prepared comments, we kind of worked through.
All of the excess capital that received as part of our thermal disposition and so for us and looking at Repowerings and kind of Craig's James I'm looking at what P. P H and your renegotiate, but our turban places like there is some of that organic broke but as I've come back previously it's not like we have two gigawatts that can be a repower. It in the next two years or more.
Main source of organic growth is really isn't that already pricing I think for also given the hedges that we did before in order to contract through twice the middle of 2020 cents, that's probably where you have your main organic taffety generator is depending on where those already prices go in 2027 and beyond.
Okay, and then changing topics that'd be seen in 23.
It has been a challenging year for actually a number of assets that you know that that the results for the several assets, where where we kind of expect it now.
How much of that weakness or a lessons learned how can you incorporate it in your 24 guidance crafty.
I think <unk>.
Hopefully I'll watch you know from our perspective, we're much more in line and our 2024 guidance with that you know the upper end of that dollar to dollar 50, we talked about long term energy gross margin obviously, given when we gave guidance in November of 20, 242023, yeah, as you're well familiar the markets were much stronger for what we're <unk>.
<unk> that you know didn't show up and several of the months that we were looking for so for US you are materially you're kind of on the upper end of the range of that lower dollar $1.50.
Upper of the dollar dollars 50 that we have for a longterm aegium gotten so to a point where being more conservative for full year 24, I mean, we're for partially or 23.
Awesome. Thank you.
Thank you.
Our next question.
Comes from the line of Mark Jarvie up C. I B C.
Yeah, good morning ones, So I Wanna come in as you'd think yeah. If you think about expanding.
Expanding the time horizon for grow with you that the federal proceeds fully deployed now off the balance sheet funding clarity is really important in today's market. So how how do you think about as you extend that runway and you think about future drops.
Indicating the funding plan in terms of how much clarity can give and can I get help proscriptive you can be in terms of how you might funding, but I think rose.
Sure I think we've always been pretty proscriptive in how we viewed it yeah. We have a undrawn revolver currently with significant liquidity underneath it. So we had to fund something we could on a temporary basis, but I think yeah, how we'd funded as in line with our longterm view at about four to four and a half times would be appropriate that number of the corporate capital the remaining being.
Equity, obviously using any excess cash we have in the system first so I don't really think we'd look to deviate from that long term funding model that has been successful in a wide variety we may need a warehouse some facilities, depending on where the volatility is for a period of time I think for us. It it wouldn't deviate from a long term funding model that has worked over a number of years.
So I guess, you'll be okay. With you know if you saw a favorite color in mind, our funding gap for equity to hit your targets and say it sort of a T V. D. In terms of the sources you'd be findings are lane that out there and I guess he saw the need for general equity would you be open at things like an a T M or something like that as of March four.
Yeah, I mean, we used to atm's before which we think are very effective equity funding mechanic. We've done smaller you know kind of issuances as well. So I think we do things very consistently with how we have in the past I wouldn't have to spend any deviations I just think that maybe kind of sort of your question is going given how volatile things are currently we may seek to kind of use our river.
The over more depending on size to hold facilities until kind of about that settled down and take a much more measured approach to getting that long term capital deployment given current volatility.
Okay that makes sense in Texas and they just don't unconventional units as you continue to operate them did you see these are a process in the contracting process, we player sort of any update or thoughts in terms of waste of optimize them from a commercial strategy.
And just curious in terms of the mental capacity security into 2027.
Could you have gotten more or was it just a trade off with price just kind of understanding the depths of the marketing opportunities receiving right now in terms of contracting.
Got it yeah. It it is very focused on price you kind of an apology as you already know all this but you're kind of bidding on an auction basis and kind of see what you get awarded.
We typically give kind of Yale one and wanted to have your business severe bids a combination of different price points to kind of see what the customer wants the customer at the N chooses what price they're looking for in China. So to your point and it's not as though we could really optimize that conversation because it is a well attended auction, but we provide.
Right a number of price points as part of our submission and at the end of the day that the customer picks the price point that does he have made more sense.
If you could do sort of a retrospective look at how you've been most recently did you think there was an opportunity to declare more capacity to thank for it in the next processes.
I don't think there's the ability to clear more just because what they're not to shoot your question. What what cleared was what's accepted you kind of don't really I know exactly what the band there is on the other side so not to treat your question at all but it'll take for me to say directly what the number is.
And your last question for me and Vanessa Craig.
Your <unk> tax actually transfer abilities, Plano, how that sort of impact for anything actually returns could be for project and ultimately I guess, where I need to come back to Christian from the dropdown cocky yields potential under so I'm gonna transfer ability to scheme on funding.
I'll I'll I'll kind of answered the last part and then Craig what let you answered kind of the first part of the question. So in terms of where it means for a caf deal I think that's really in all all in Castillo that we'd get I think Mark of your question is if we're doing things that at 10 per cent Castillo now would that lead to a 14 per cent caffeine I don't think that's the right interpretation I think basically all of the.
Components needed to be required because it passes through cause we talked a little bit on the call. The P. P. A prices affected by the transfer ability of P. T. She's ready to kind of all acts as to work together in a train so it's not as though the TTC transfer authority will lead to an economic rent or a significantly above market after yield simply due to that but Craig I'll I'll let.
You answered the first part of the question.
Sure.
Well first the market is really still taking shape and becoming organized as you.
Well no both the banks that traditionally provided fully integrated tax equity solutions that with both monetize tax credits and depreciation are playing roles.
To provide sponsors like us solutions to monetize depreciation.
Also looking to serve as clearinghouses for the disposition and monetization of tax credits that projects produced there.
There are certainly an important part of organizing this market there are numerous other.
Other channels that are looking to establish themselves as more direct conduit to buyers of tax credits.
And the market structures for how everything from indemnities to timing a payment to take place or.
Still forming and stabilizing and.
In that environment.
Sponsor that has a strong balance sheet, which we do we want to make sure that we make smart choices about how and when we fix the structures that will employ.
Other sponsors may not be in a position to wait.
But in the six months since guidance was first issued.
How that transfer ability market would take shape, we've seen the structures and the depth of the market really improve.
In favor of projects and we expect that will continue.
So when I look out to the future. My hope is that this market will really do many of the things that were hoped for when transfer ability was incorporated into the text of the statute by deepening.
The range of options that projects have to monetize tax credits and.
And what we eventually I as an enterprise will want to do is to try to come up with structures that we find most efficient for disposition hang the depreciation benefits that the projects way create produce.
Okay. Thanks for times day, and thanks for calling from other additional materials here in the presentation Firstly.
Thank you.
Thank you.
Our next question.
Comes from the line of no a K a oppenheimer and company.
Alright, good morning, Thanks for taking the questions and appreciate all the incremental Ah details and disclosures and frankly, the reframing of the platform here the point is well taken.
Called out the Capistrano refinancing timing I just wanted to ask about the <unk>.
Project level that in the portfolio. It does appear like there's a fair amount of that.
Ah coming due over the next few years for some of these projects at the project level. How are you thinking about any potential additional refinancings are all these basically going to be paid off a term.
Sure it depends on the market to be fair to your question, but I do think that we should be in good shape for refinancing perspective. So the next two large project refinancings Elisa <unk> solar in 2024, I believe buckthorn and 25 or 26. So I think <unk> is backed by you know so it was probably about 20 or a P. P E I still underneath it so we have quite a bit of <unk>.
For there to be able to refinance the nims solar assets. Once again, that's kind of you know September of 2024, so from our view that should be able to be refinanced. So we don't yeah not to minimize the question. We we don't have a lot of concern about near term non recourse assets need to be refinanced.
But that doesn't impact the pro forma cafferty outlook.
If the interest rates are drastically different it may move it around but keep in mind, Minnesota is about $148 million, if I recall correctly. So yeah, 100, or 200 basis points move overall is three.
$3 million not to minimize three of us not a major driver.
Yeah, I mean, just the the key point here right is that your refi risk both the corporate level and at the project level is is very minimal for the next several years.
I'm not saying, it's zero, but yeah. There it's not 10, it's maybe three depending on where you go.
Okay, Great I appreciate adjusting the P 50 expectations.
[noise] does that generally apply to how you look at you know future dropdowns or acquisitions as well I mean, I'm I'm sure. There was some degree of of regional resource Ah specificity here with the adjustments, but just talk to us a little bit about how.
How you model and expectations for P 50, going forward and whether that's changed at all.
Sure step one just for background, we always ask for an additional return on a wind assets versus solar to take into account that volatility. So one nowhere to your question is we view windows are riskier assets in general because they have to be 50 volatility and we typically look for a higher are are Kathy older. Both when we negotiate that's just for way a backdrop.
The other part is really haven't seen anything that we need to change how we model. Our P. 50, those are based upon longterm rates, but I think as we've talked about in previous calls once you kind of getting through five years, we tried to take a much more what's actual approach an asset then kind of what a statistical model may say, we're trying to be much more empirical.
And kind of use the most relevant near term data set as we adjustment blender too so for us to your appointment while you're looking at future Dropdowns. We're looking at all the acquisitions, we try to always take into account those deviations between what might be a 30 year, let's say the school model and what we're seeing in the past five years tried to add on a premium for windows certain regions that are shown more volatility.
But once we got we're trying to get that as tight as we can we take recent events into account. That's one reason you see the revision, but it really is trying to be comprehensive between yeah, not overestimating, what's happened in the past two years either to make decisions either.
Alright, thanks very much.
Thank you.
Thank you.
Our next question.
It comes from the line just in Clare of Roth M K M.
Thanks for taking my questions here first off I just wanted to ask you about the 2024 guide it looks like about a 15 million dollar impact to the guide as a result of a change in the expectation from growth investments was wondering if you could just provide a little bit more detail.
Mail on the project timing and <unk>, what led to that that reduction for 2020 for.
Sure I'll, let Sarah address it but I think you know for US we took a look at our 20 twenty-three results and obviously you are not happy with them and and part of that as we talked about during the year is due to 150 available 50 generation some of his availability. So for US we kind of take a comprehensive look at our overall portfolio and yeah, I'll I'll, let Sarah kind of reflect anything she wants to do but that that's really the basis stomach.
Yeah, Yes, and just to clarify were you asking about the 50 million of timing for granted Datsun.
Yeah, exactly just just what that led to that because it looks like it's impacting 2024, and then it's gonna be a contributor in probably 2025. So I just wanted to understand a bit more there.
Yeah, it's not.
I didn't change in 2020th or it's just a bridge between 2024 and our <unk>.
<unk> well, let's let's just finish to reflect sort of you know that.
Full amount of caffeine one the you know the dropdowns or startup up and running and at their phone you know like half the amount. So it's really just a bridge item because will only be picking up a smaller portion of it.
The 20th 20th for guidance because of the timing of the dropdown or that project D. V. D. Ah. So we'll have sort of like a fraction of that Cassie amount just in 2024, but by the time, we get to the pro forma outlet you know, we'll have the full amount and that differences that's S. T.
Got it okay. Okay. Thanks for that clarification and then it just was wondering for for the projects that you have committed investments for and then for those that are identified as potential dropdown opportunities. In 2024 2025 here can you talk about.
There you are in the process of securing the permits and the interconnection for these projects wondering if they're still risks there that those factors could cause delays.
And just where you are in that process.
Craig if you wouldn't mind addressing that.
Yeah sure all of the project that are listed on the set of committed our potential future dropdown opportunities.
Have existing sign <unk> large generator interconnection agreements and have obtained all of the major premise that Williams fluids their construction feasibility or schedule.
So so.
So I think that you could consider it the dates that are reflected here.
Hi confidence.
Also a secure all of the revenue contracts that wouldn't be necessary from it for financial closing.
We prepared all the equipment for the project and we are mature in the course of advancing financial structuring of the projects as well.
Some of those projects now reflect dates that are later than the dates we would have hoped for one year ago in those reflect observed experience from interconnecting utilities around the country and their ability to execute scope of large generated around our connection agreements and also timetable that have been observed as being.
Elongate it for the delivery of high voltage equipment and we've taken further actions to Derisk timelines for these projects in particular, but also other projects in our pipeline to address what's being observed in terms of interconnection timeline as well. So we think these are pretty derisks in terms of the execution timetable and that's reflected on.
Page.
Okay got it thank you very much.
Thank you.
Our next question.
<unk>.
It comes from the line of William Griffin.
B S.
Craig Good morning, everybody. Thanks, very much for the time I guess, just my first one here just what the excess thermal proceeds now fully allocated could you speak to how you foresee the future pacing of investment announcements and maybe you should we expect a quieter.
Next.
Few quarters with respect to announcements.
Yeah, I think I think that question if it's yellow should we expect some large dropdown announcement in the next six months I.
Doubt it you know I think it's heavily conditioned upon how the capital markets settled down or not but I think to your question. Because we are in essence C. G is incredibly busy by getting the Gigawatts, we've talked about basically online and 24 and 25, obviously, they're still developing while doing that but I think you know at the end of the day if your question.
Should we expect a large dropdown announcement here in the near term it might be a little quiet for awhile for the reasons, we talked about.
Mmm makes sense and so in that light I mean do you do you continue to view the conventional assets this quarter the nuclear waste strategy and maybe how you how are you thinking about potential opportunities to recycle those assets as you continue to contract the the open capacity.
Sure I I think for US obviously, we're willing to sell assets that what we think is a strong price. So if somebody offered us a good price for those assets, we'd look at that however, it's always been part of our core strategy because it does provide diversification versus kind of simply wind and solar resource availability. So for US we think it's a.
Very beneficial and we're obviously pretty bullish on what things will look like for let's call. It through the <unk> through the end of the decade and those assets. So we give them a score that being said if someone offered us a price that we thought made sense. We've shown we've been willing to transact on that in the past and for US we're pretty bullish through at least 2030.
Great and just one last one for me could you elaborate a little bit on the the one time maintenance items in the wind portfolio and is that in any way related to the semen Sir binds in the fleet.
Not specifically like that's a variety of assets incorrectly answered. The last question that somebody has basically that as a result of kind of us looking at our fleet and recognizing some of the weaknesses that affected our 2023 results and saying, okay. How can we try to assure that up with what's a one time maintenance push here some portion of that's the Siemens.
Assets, but some of them aren't so it's really just looking at the overall fleet and some of the challenges we face in 23.
I guess <unk> are you are you getting any sort of warranty reimbursements or any cost reimbursement of any kind for for these efforts.
That's some of it like over all these things are in negotiation, but that's the amount that we think will have to kind of net net boy out during the year.
Fair enough.
Alright, I stopped thanks very much.
Thank you.
Thank you I would now like to turn the conference back to Chris Sotos for closing remarks.
Just wanted to thank everybody for attempts on the call I know this was a little bit longer than our typical calls, but really given kind of the policy that we've seen one to provide you as analysts are investors was kind of a much more comprehensive beautiful received we are and where we think we're going and I think well obviously, there's a number of challenges in the capital markets.
Able to reiterate where we are for twenty-four our growth rate to 26 and that we're seeing kind of positive things, even this volatile environment and twenty-seven beyond but or to come as we walk through 24 I appreciate everyone's support.
This concludes today's conference call. Thank you for participating you may now disconnect.
Mmm.
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