Q1 2025 Clearway Energy Inc Earnings Call
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Speaker Change: Good day and thank you for standing by welcome to Clearway Energy, Inc. First quarter 2025 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question answer session to ask a question during the session you will need.
Speaker Change: Press Star one one on your telephone.
Speaker Change: Well done here, an automated message advisory your hand is raised to withdraw your question. Please press star one one again, please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand, the conference over to your speaker today, our keel director of Investor Relations. Please go ahead.
Speaker Change: Thank you for taking the time to join Clearway Energy, Inc. First quarter call with me today are Craig corneal is the company's president and CEO and Sarah Rubinstein, the company's CFO before we begin I would like to quickly note that today's discussion will contain forward looking statements, which are based on assumptions that.
Speaker Change: We believe to be reasonable as of this date.
Speaker Change: Actual results may differ materially.
Speaker Change: Please review the Safe Harbor in today's presentation as well as our risk factors in our SEC filings and.
Speaker Change: In addition, we will refer to both GAAP and non-GAAP financial measures for information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures. Please refer to today's presentation.
Speaker Change: In particular, please note that we may refer to both offered and committed transactions in todays oral presentation and also may discuss such transactions. During the question and answer portion of today's conference. Please.
Speaker Change: Please refer to the safe Harbor in today's presentation for a description of the categories of potential transactions and related risks contingencies and uncertainties with that I'll hand, it over to Craig.
Craig Corneal: Thanks, Mikael turning to slide four.
Craig Corneal: Clearway delivered solid first quarter results across all segments, putting us in good standing to meet our 2025 financial objectives. We.
Craig Corneal: We have reaffirmed our 2025 guidance range and if we can see typical annual resource for the remainder of the year and continue to deliver strengthened fleet performance. We have line of sight to achieving the top half of that range or even better through contributions from newly committed investments.
Craig Corneal: We also continued to execute on initiatives that will enable future long term growth in our business and are pleased to note that we made accretive progress in each of the growth pathways, we have established for <unk>.
In fleet enhancements sponsor enabled dropdown investments and asset Center third party M&A.
Craig Corneal: First in our fleet, we continued to drive previously identified repowering opportunities forward and added still more identified opportunities this quarter.
Craig Corneal: For the previously announced non storm Repowering, we signed the projects revenue contract with Microsoft and the project is advancing towards the start of construction in 2025.
Craig Corneal: The Repowering remains on track to achieve commercial operation in phases in 2026 and 2027.
Craig Corneal: We are pleased to also announced that a potential repowering a goat mountain in 2027 is now advancing within awarded PPA that can enable an accretive investment proposition and meaningful expansion of the facility side.
Craig Corneal: Lastly, we continue to advance development of our Repowering at San Juan Mesa and signed a PPA extension for the project to serve as a bridge to a future repower targeted for 2027.
Craig Corneal: Another growth pathway sponsor enabled dropdown growth also remains resilient and saw further advancement during the past quarter.
Craig Corneal: All of <unk> committed growth remains on track for completion schedule is aligned with previous public disclosures.
Craig Corneal: Clearway group continues to develop an abundant pipeline of over nine gigawatts of C. When compatible late stage projects that has now been further reinforced with additional safe Harbor investment.
Craig Corneal: Clearway group is now on pace to complete safe Harbor investments for approximately 13 gigawatts of projects that could achieve through 2029, which maximizes optionality relative to what the enterprise plan to build over that timeframe.
Craig Corneal: This advancement includes battery projects within the late stage pipeline due to thoughtful planning and collaboration with our PPA customers and equipment suppliers on tariff risk sharing.
Craig Corneal: We are now officially naming the spindle project, a 199 megawatt battery storage project, which signed a long term contract with an investment grade utility in mid April.
Craig Corneal: Asset centered M&A also continued to be a complementary avenue for us to pursue to meet our cap <unk> per share growth objective.
Craig Corneal: We are pleased to announce that we closed the <unk> acquisition in recent days. We are also pleased to announce that we have signed a binding agreement to acquire an operational solar project in California that is nearby a large cluster of other clear assets in the area and a further demonstration of our ability to thoughtfully apply.
Craig Corneal: Operating synergies to add complementary high quality assets to our fleet.
Craig Corneal: Further reinforcing confidence in our outlook, we've mitigated interest rate risks for the refinancing of our corporate bonds scheduled to mature in 2028 with opportunistic hedging of base rates that Sarah will discuss in her section of the prepared remarks.
Craig Corneal: Through all of these actions and more we are positioning the platform to potentially achieve the high end or better of our 2027 cap do you per share growth target.
Craig Corneal: We are proud of how we've continued to execute since last quarter's earnings call on a redundant growth pathways, providing further visibility into how we will accretively grow Clearway energy, Inc. While evolving the company to be increasingly self funding over time.
Craig Corneal: Turning to slide five.
Craig Corneal: Progress continues on attractive repowering that we expect to extend and enhance the value of our existing owned wind fleet.
Craig Corneal: <unk>. The three named Repowering is on this slide are providing solid building blocks for our <unk> per share growth outlook beyond 2027.
Craig Corneal: The previously announced non storm Repowering continues to advance with win win PPA terms accommodative of the current policy environment.
Craig Corneal: The project is also completed key permitting milestones in place the turbine order with Vestas.
Craig Corneal: Goat mountain targeting a repowering in 2027% to expand the facilities capacity to 301 megawatts.
Craig Corneal: The projects expanded capacity will be enabled by major permits that are already secured.
Craig Corneal: And then the awarded PPA that is in the process of final negotiations on terms, which allow for it to be advanced accretively in today's supply chain environment.
Craig Corneal: Finally, San Juan Mesa is another repower and we're targeting for completion in 2027.
Craig Corneal: Advancing our PPA extension with the current off taker, which will serve as a bridge to a future repower at Clearway group is advancing development activities that could set the project up for construction in 2027.
Craig Corneal: In the coming quarters, we are hopeful that we can disclose additional details and official commitments to these next two targeted repowering is subject to customary applicable caveat, including the requirement for review by the <unk> governance conflicts and nominating committee.
Craig Corneal: As a reminder, repowering and our fleet enhancement program, our underwritten to extend the assets useful life improve its risk profile and drive caf fee growth incremental to our baseline forecast for EBITDA and Kathy contribution from these projects prior to Repower.
Craig Corneal: In aggregate, we have re powered or committed to Repower 712 megawatts of our wind portfolio and look to increase that amount in the coming years.
Craig Corneal: Based on rigorous analysis with a core focus on maximizing shareholder value will continue to enhance our wind fleet through either future capital light contract extensions or contracting to underpin our potential repowering.
Craig Corneal: Turning to slide six.
Craig Corneal: Our sponsor enabled dropdown growth pathway is moving along nicely and further firming our confidence in our growth outlook in 2027 and beyond.
Craig Corneal: All of Clearway group's projects with 2025 <unk> are committed to see win and on track with substantially all equipment for the projects delivered long ago, and greener grid synchronization active as of today.
Craig Corneal: Commissioning work has begun ahead of commercial operations and <unk> has made initial funding based on milestones laid out in the investment commitment agreements with Clearway group.
Craig Corneal: Opportunities for <unk> investment in 2026, and 2027 project Vintages also continued to advance.
Craig Corneal: Including approximately one gigawatts of committed and identified potential dropdowns within those vintages.
Craig Corneal: This includes the now named spindle storage project, which executed a 20 year PPA with the Colorado investment grade utility after the announcements of escalated tariff in April reflecting both the ability of the PPA to accommodate expense recovery of elevated tariffs and other actions, we have been able to take to mitigate.
Craig Corneal: That potential elevated cost to ratepayers.
Craig Corneal: Also are continuing to advance development of the Rosemont, South two project, which provides vital and valuable mid term reliability for California, and for which we are collaboratively concluding a PPA negotiation with a valued historical customer.
Finally, we are continuing forward on construction of the committed honeycomb projects enabled by timely delivery of required equipment and nimble collaboration with our valued battery supplier an EPC contractor.
Craig Corneal: In sum thanks to our organizations trademark excellence in policy aware project development, we've been able to implement a combination of mitigation factors to ensure projects stay on track to provide cost effective and reliable power to customers.
Craig Corneal: Off takers are acknowledging the value of ready to build projects and the importance of strong franchises backing them.
Craig Corneal: Contracting arrangements, we have reached an awarded and signed agreement even after the recent announcements of elevated tariff.
Craig Corneal: We continue to find ways to assure adequate project investment returns, while also delivering a solid value proposition for our customers.
Craig Corneal: Furthermore, our equipment procurement as either thoughtfully been sourced from domestic sources <unk> benefited from relationships with key suppliers understanding the current macro and policy backdrop, when setting procurement term.
Craig Corneal: Through collaborative application of these mechanisms and excellence and project implementation and financing we have been able to sustain forward progress on sponsor enabled growth and are enormously proud of what that says about the resiliency of our very capable enterprise.
Craig Corneal: With this backdrop not only does our outlook for growth in 2027 continue to firm up but the outlook beyond that remains robust.
Craig Corneal: <unk> group's late stage pipeline through the 2029 vintages has over $750 million of potential corporate capital investments beyond already offered and committed project.
Craig Corneal: These vintages through 2029 are now on track to secure qualification for tax credits for approximately 13 gigawatts of projects.
Craig Corneal: Our strategy with which is intentionally over collateralized needed tax credit qualification for project sites across Clearway group's pipeline relative to the enterprise's project build out plans over that timeframe.
Craig Corneal: Turning to slide seven.
Craig Corneal: Since our last call. We have once again also made steps forward on value accretive M&A.
Craig Corneal: We signed a binding agreement to acquire an operational solar project in California that has an existing long term PPA that currently extends into late 2038.
Craig Corneal: The asset is also complementary to our fleet given its proximity to existing <unk> assets and also presents optionality for our future potential battery hybridization.
Craig Corneal: The transaction, which is expected to close in 2025 is expected to generate an approximately 10% to 11% five year average annual cap the yield and a 13% 10 year average annual cap the given the cap the profile of the project.
Craig Corneal: Turning to slide eight.
Craig Corneal: We're in a strong position to achieve the top end or better of the 2027 cap your per share target range that we set given the incremental updates on growth pathway shared today combined with fast update.
Craig Corneal: We had previously provided visibility into how we could reach the midpoint or better of the $2 40 to $2 60, Kathy per share target. We set for 2027 through previously committed growth investments contracted and observe pricing levels for revenues and our flexible generation segment and our assumed plan.
Craig Corneal: <unk> for the refinancing of our 2028 maturity bonds, which had been firmed up by way of recent hedging activity.
Craig Corneal: We now see path to the top end of our 2027 cap per share range or better given today's third party M&A ingredient for an operational solar project, along with continued solid execution across our redundant growth pathways.
Craig Corneal: The deployment of additional capital as one Guy clearway.
Craig Corneal: Clearway group's pipeline has additional potential dropdowns in stores that have not yet been offered such as <unk> and the targeted repowering that could allow for the deployment of capital at sufficient levels to meet the top end of our 2027% range or better.
Craig Corneal: We also continue to remain active in evaluating further third party M&A opportunities through which we could also deploy capital and finally, we continue to pursue additional fleet optimization improvements such as accretive revenue contracting and our flexible generation segments.
Craig Corneal: So all in all we continue to believe we are in a position of strength when it comes to executing towards meeting our 2027 financial objectives with that I'll turn it over to Sarah for the financial summary section.
Sarah Rubinstein: Thanks, Craig.
Sarah Rubinstein: Slide 10, we provide an overview of our financial results.
Sarah Rubinstein: We are pleased to report first quarter, adjusted EBITDA of $252 million and Kathy at 77 million, our first quarter results reflect strong wind resource in California.
Sarah Rubinstein: <unk> from 2020 for growth investment.
Sarah Rubinstein: In addition, our first quarter Cathy is higher than seasonally expected due in part to timing of debt service and distributions to noncontrolling partner it shifted into the second quarter.
Sarah Rubinstein: It has to be faster for our renewable and storage segment improved by four 7% to 25, 7% for solar.
Sarah Rubinstein: And by two 9% to 33, 9% for win 10.
Sarah Rubinstein: In addition, our flexible generation availability improved by 3% to 89, 3%, continuing our trend providing strong availability and grid reliability in California.
Sarah Rubinstein: We continue to reiterate our 2025 cap the guidance range of $400 million to $440 million with a target to achieve the higher end of the range. We had secured several of our previously described building blocks to achieve this target.
Sarah Rubinstein: Recently, completing the acquisition of two on the wind farm in Washington.
Sarah Rubinstein: As well as completing the timely dropdown an initial funding of resin than a 257 megawatt solar plus storage facility in California. During the first quarter of 2025 and this project is on track to achieve the air Bnb.
Sarah Rubinstein: And be fully funded later this year.
Sarah Rubinstein: In addition, initial funding of Laguna Valley Solar and I get one storage remains on track and is also on track to achieve Vod and be fully funded later this year.
Sarah Rubinstein: Continued to maintain disciplined focus on the availability of our entire fleet as well as the management of energy margins for our flexible generation fleet.
Sarah Rubinstein: Our guidance range reflects P 50, renewable production expectations at the midpoint with the upper and lower ends of the range, reflecting variability in potential outcomes for resource and availability.
Sarah Rubinstein: Moving to slide 11, we remain well positioned to fund our planned growth in a prudent manner, we expect to generate 250 million or more of retained Kathy from 2025 to 2027 that we expect will be utilized to fund a portion of our committed.
Sarah Rubinstein: In that sense.
Sarah Rubinstein: In addition, applying a corporate debt to EBITDA ratio consistent with our target of four to four five times to our projected forward looking that Jay yields estimated excess debt capacity of approximately $400 million are greater.
Sarah Rubinstein: We expect to utilize a portion of this debt capacity along with retained cash.
Sarah Rubinstein: To fund our committed growth investments, which will allow us to achieve our targeted CAD per share goals in 2020 and beyond.
Sarah Rubinstein: Our strategy continues to assume that we will opportunistically and predictably issue modest amounts of equity in order to fund accretive growth to facilitate the achievement of the top end or better of our growth target.
Sarah Rubinstein: We expect to do these small targeted equity issuances through the use of an ATM facility.
Sarah Rubinstein: This will allow us to issue equity over time.
Sarah Rubinstein: Declines in representing only a small percentage of our public float.
Sarah Rubinstein: Similar to what you see in the listed utility fee.
Sarah Rubinstein: As part of routine upkeep for our ATM program, we plan to make filings later this year to ensure the program is ready for accretive and opportunistic equity issuances subject to market condition.
Sarah Rubinstein: We expect to regularly utilized our revolving credit facility, which is largely undrawn as the source of temporary liquidity, while we complete longer term financing for our growth investments.
Sarah Rubinstein: As we look to put in place longer term corporate financing for growth investment and plan for the refinancing of our corporate bonds.
Sarah Rubinstein: The earliest maturity in 2028.
Sarah Rubinstein: We're looking to mitigate the risk of interest rate volatility by hedging certain notional amounts with forward starting interest rate swaps that will fix the phase III for the intended refinanced bonds.
Sarah Rubinstein: We recently executed forward starting hedges for the majority of the principal amount of our $850 million corporate bonds at the earliest maturity and we will look to hedge incremental notional amounts in the March.
Sarah Rubinstein: Our support of.
Sarah Rubinstein: This hedging strategy will help us to manage potential interest rate volatility and further support our ability to meet our growth target.
Sarah Rubinstein: We're pleased to approach our growth strategy and related funding plan from a position of strength and balance sheet and liquidity and with a focus on risk management and financial discipline.
Craig Corneal: Now I will turn it back to Craig for closing remarks.
Craig Corneal: Thanks Sarah.
Speaker Change: Turning to slide 13.
Craig Corneal: To recap.
Craig Corneal: <unk> delivered strong first quarter results with currently forecasted timing of committed growth investment contributions firming up our path to meet or exceed the 2025 cap. The guidance range is also unclear view.
Craig Corneal: Committed dropdowns continue on track and are expected to deliver accretive growth to see wet.
Craig Corneal: Additionally, we've signed another binding third party M&A agreement for an operational solar project at attractive economics.
Craig Corneal: <unk>, we are solidifying multiple pathways towards the top end of the 2027 cap the per share range and are on track to meet Dps growth objective.
Craig Corneal: When thinking about our outlook beyond 2027 are very capable organization is working tirelessly for further long term value creation.
Craig Corneal: We continue to aim to accumulate further growth pathways from dropdown offers from Clearway group's development pipeline further repowering and hybridization opportunity and selective third party M&A.
Craig Corneal: Our capital allocation framework, we will see us continue to allocate capital to the highest return investments available to target a long term payout ratio trending towards 70% and pursuit of increasingly self funded growth.
Craig Corneal: And to make use of financial flexibility, we create and maintain through.
Craig Corneal: <unk>.
Craig Corneal: In that framework, we will pursue growth towards extending our goal of 5% to 8% long term cap per share growth.
Craig Corneal: And view that goal as something we can sustainably meet.
Craig Corneal: Finally, we will continue to be data dependent and attentive listeners to the investment community about what we can do to it.
Craig Corneal: To enhance our investment proposition as we look to present one of the most compelling investments available within the listed infrastructure universe.
Speaker Change: Operator, you may open the lines for questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone.
Speaker Change: For your name to be announced towards the draw. Your question. Please press star one one again, please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Julien Dumoulin Smith from Jefferies.
Speaker Change: Hey, good evening. This is Hanna Velasquez on for Julien Congrats on the quarter I had two questions. So first on battery storage. How are you thinking about that as part of your pipeline going forward and I know you are advancing with some of the projects through 2026, but how are you thinking about there.
Speaker Change: <unk> and I also know separately the sponsor can absorb to some extent some of the tariff impact, but it also sounds like you might be sharing.
Speaker Change: Some of the cost of the higher cost does that mean beyond 2026. If you do pursue further storage projects you might continue to caution here or you might look for a non Chinese supplier or you might altogether, just slow down on post 2026 storage projects.
Speaker Change: Yes.
Speaker Change: Thanks for the questions I appreciate the recognition of the strong quarter.
Speaker Change: So.
Speaker Change: The second of those questions first.
Speaker Change: We really like this technology and what it delivers for the system.
Speaker Change: Now being in a position, where we can see a sizeable fleet of.
Speaker Change: Batteries.
Speaker Change: Our operating portfolio.
Speaker Change: Our tremendously reliable generators of revenue for us given the way that we structure revenue contracts on them and I think we've been very savvy about the approach we've taken to design engineering and commissioning of those resources.
Speaker Change: If you look on any given day at our operational dashboards.
Speaker Change: Every one of these resources as green and exceeding our underwritten expectations for their performance and in the <unk>, where they're contributing now.
Speaker Change: Both from our fleet and from others, they've had a really appreciable beneficial impact on reliability.
Speaker Change: As well as for repair costs and systems like Texas in ERCOT and queso over the last few summers.
Speaker Change: So we think batteries have any central bright future here not just in 2026, and our business, but all over the U S and.
Speaker Change: We're proud of what we did for the projects that we've got an execution now.
Speaker Change: Through the combination of delivery schedules and work with our suppliers.
Speaker Change: And work with our customers to keep those on track.
Speaker Change: As we look out into the future we have a lot of good reasons to expect that those projects can continue to deliver the attributes that I just described.
Speaker Change: In a way that is compelling and value proposition.
Speaker Change: As you are alluding to there are.
Speaker Change: Numerous supply chains around the world that can support deployment into the United States.
Speaker Change: Which and to do so over time with China content that diminishes.
Speaker Change: I think we understand and support the decision structure that the U S. Government is looking to implement to encourage U S markets to purchase increasingly from sources that extend beyond China for this and other <unk>.
Speaker Change: Parts of our economy, and we feel comfortable that with the leading quality battery suppliers, we engage with that debt.
Speaker Change: There'll be able to support what we're implementing in 2026 and also what we would be implementing in 2027 and beyond.
Speaker Change: Even in today's tariff environment with the timeframe thats required to adjust our supply chain. So.
Speaker Change: We don't intend to slow that work down, but we plan to continue to execute it in a way that exhibits all of the same characteristics of prudence and craftsmanship that you see reflected in our results today. So that's sort of the first answer to your question around batteries in our pipeline.
Speaker Change: <unk>.
Speaker Change: I'm, sorry could you remind me back to the first of your two questions.
Speaker Change: No I mean that was exactly it was just mainly on how you were thinking about storage so that was super clear.
Speaker Change: Question will be shortened and hopefully easy to answer but just in terms of 2025 guidance you all reiterated it and I know it was introduced maybe a couple of quarters ago and that was before you had closed on to illuminate and now you have this new third party M&A that you announced today. So could we see any I know you are.
Speaker Change: Getting at that Youll be at the top end potentially of guidance, but could we see beyond that or are you thinking about potentially revising guidance down the line just because these two assets are missing for these two acquisitions.
Speaker Change: Yes, we understand the question Ali I'll give you a sort of a first statement of principles and then Sarah.
Sarah Rubinstein: Can fill in after after me.
Speaker Change: So I think.
Speaker Change: We understand the question.
Speaker Change: It is our intention to continue to assure that the.
Speaker Change: The expectations, we set with our investors are representative of what our own are.
Speaker Change: And at the same time, we're also mindful that.
Speaker Change: We've just completed the first quarter of a year and a business that earns much of what it does in the second and third quarters, and we feel proud of the reliable execution and exceedance of guidance targets that we've set both in the short and the long run as an enterprise.
Speaker Change: And that pride is something we want to sustain with continued execution. So.
Speaker Change: So I think.
Speaker Change: As we.
Speaker Change: Increase our confidence around the final year outlook as a result of execution in successive quarters and timeline for closing I think that that will inform when we think we're confident enough to change the range that we've already set.
Speaker Change: Ill turn it over to you to fill in some of the details there.
Speaker Change: Sure I think you covered you covered it pretty well Craig.
Speaker Change: I think that we.
Speaker Change: We feel like we need to get through a little more of the year and actually.
Speaker Change: So we did.
Speaker Change: Just close on one.
Speaker Change: And.
Speaker Change:
Speaker Change: Which we.
Speaker Change: We reflect in our range and then incremental acquisitions, we would typically.
Speaker Change: Wait until those acquisitions have closed.
Speaker Change: Think that.
Speaker Change: We will track the closing of this additional acquisition as well as the.
Speaker Change: Other factors that we'll see and.
Speaker Change: Al.
Speaker Change: Maintain our operating fleet through the next few months and then when we get to a point, where we feel confidant.
Speaker Change: We would update the range if it were appropriate.
Speaker Change: Thank you.
Dan: Thanks, Dan I appreciate the support I appreciate the questions.
Speaker Change: Thank you. Our next question comes from the line of Justin Clare from Roth Capital Partners.
Justin Clare: Hey, thanks for taking the questions.
Justin Clare: So I did want to follow up on the battery supply here just wondering for Clearway Energy group I was wondering if you could just speak to the potential to source batteries outside of China, whether that might be from southeast Asia other countries or domestically in the U S. And then if you could just speak to.
Justin Clare: The <unk>.
Justin Clare: Level of the tariffs that can be absorbed here. So there is obviously very high levels in China.
Justin Clare: For those imports so wondering if youre planning to absorb a more modest level of tariffs and that can be shared.
Justin Clare: Just wanted to understand a little bit more about.
Justin Clare: How this is being managed.
Justin Clare: Yeah.
Justin Clare: So first just sort of level of order of magnitude.
Justin Clare: Answers with respect to the totality of resource types that we deploy.
Justin Clare: There is certainly an increase in capital expense for projects that.
Justin Clare: Are implemented.
Justin Clare: Cross wind solar and batteries.
Justin Clare: At the levels that have been announced and that are applicable to entries into the United States today.
Justin Clare: For wind resources and for solar resources.
Justin Clare: They are pretty manageable in relation to current clearing prices for projects that can be constructed.
Justin Clare: In the near term and.
That are responsive to the needs of either load serving entities or commercial and industrial customers.
Justin Clare: For battery project.
Justin Clare: With more China, driven supply chain today.
Justin Clare: Instead of a capital expense increase of five or 6%. The currently enacted tariffs could have an impact on capex of about 30%.
Justin Clare: Yes.
Justin Clare: Okay.
Justin Clare: Got it.
Justin Clare: Okay.
Justin Clare: <unk> incorporated into customary financing structures.
Justin Clare: The increase in toll rates that our project needs in order to produce a similar return is measured in single dollars per kilowatt month for resource, which.
Justin Clare: It's pretty important and necessary and a lot of places.
Justin Clare: The Western U S right now.
Justin Clare: And that's why it's been possible for us to continue to present.
Justin Clare: Revenues contract structures, our pricing to customers for battery projects that need to be delivered in the near term.
Justin Clare: And for those customers start to see a value proposition and procuring from those resources are agreeing to terms that would that would price potentially elevated tariff costs into the toll contracts that.
Justin Clare: That they will purchase power from.
Justin Clare: And then.
Justin Clare: We really considered the relationships, we have both with our constructors and our equipment suppliers important and collaborative.
Justin Clare: And for that reason.
Justin Clare: I would not get into tremendous detail about how together we manage challenges like these.
Justin Clare: The levers that we are able to pull together our schedules for deliveries.
Justin Clare: Approaches to commissioning and construction.
Justin Clare: The absolute sharing of cost of tariffs themselves and.
Justin Clare: And also the way that.
Justin Clare: That increased prices on revenue contracts or financing structures can partly offset that for us both.
Justin Clare: By being able to.
Justin Clare: Other bring equipment into the country already before the tariffs were imposed or.
Justin Clare: Make use of the combination of those levers we've been able to keep all of the projects planned for 2026 on track.
Justin Clare: To be able to deliver returns in an investment proposition to Clearway Energy Inc.
Justin Clare: With what's been announced already or what would be customarily targeted as we look out to the longer term.
Justin Clare: Hi.
Justin Clare: I think we have been a leader in driving.
Justin Clare: Increasing domestication of supply chains.
Justin Clare: As a company we've been buying panels made with U S produced polysilicon for years and years and years long before.
Justin Clare: It was something that policy demanded.
Justin Clare: We have pushed for domestication of wind turbine supply chains, we've done the same with batteries.
Justin Clare: A lot of the battery procurements, we've executed.
We're supportive of some of the first large scale Manny.
Justin Clare: Manufacturing and configurations for domestically produced with <unk> cells.
Justin Clare: For stationary storage and.
Justin Clare: As we work with our multiple battery suppliers to target what's necessary to support projects that would be completed in 2027.
Justin Clare: There are multiple pathways that could be employed in order to reduce the cost of tariffs.
Justin Clare: To the projects, we build and the price that we need customers to pay in order to make them economic.
Justin Clare: I think it's certainly our hope that U S policy.
Justin Clare: We will ultimately.
Justin Clare: Be configured in a way that gives supply chain time to respond and create the increasingly domestic or non China supply chain, that's consistent with national goals, but.
Justin Clare: As far as Clearway Energy, Inc. And Clearway group are concerned we have been able to manage and organize our business in a way that we can keep things on track and still deliver a resource that people want to pay for it.
Speaker Change: Okay got it really appreciate the answer.
Speaker Change: Ill pass it on thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Michael loan again from Evercore ISI.
Michael loan: Hi, Thanks for taking my questions.
Michael loan: So you are advancing repowering opportunities and other commitments pending a goat mountain in San Juan Mesa, you also highlighted a lot of other re powering opportunities through 2030, just wondering if you could talk about the cap. The yield you expect on these I know some recent repowering.
Michael loan: <unk> Hill was at 10% non storm 11 to 13, how did these levels compare to what you expect going forward.
Michael loan: I think the guidance.
Michael loan: We've given.
Michael loan: Our investors and the analyst community when thinking about <unk>.
Michael loan: Capital allocation on a going forward basis is that.
Michael loan: We look to deploy capital at.
Michael loan: Cap yields of at least 10%.
Michael loan: And with.
Michael loan: Our risk return proposition that creates value.
Michael loan: In relation to our weighted average cost of capital.
Michael loan: And which extends the runway of contracted newness in our revenues and cash flows and those same expectations are what we apply when evaluating additional investment opportunities for repowering investments in our fleet.
Michael loan: When we value that investment.
Michael loan: We assess the baseline amount of cap.
Michael loan: We expect our non Repowering project to produce.
Michael loan: The additional amount of Caf <unk> and cash flow, we expect the Repowering project to produce.
Michael loan: We assess the cap the yield and the investment returns on the capital deployed against.
Michael loan: Those increases to <unk> and cash flow and EBITDA as compared to what we would expect the project to be generating where it not to be repower and we're.
Michael loan: We're pleased both with the commercial profile of projects like Mount Storm.
Michael loan: Which now exhibits a 20 year PPA after completion.
Michael loan: And C drove hill, which gives a nice long life to that project with an existing customer who we value. We just completed the ribbon cutting for that project today.
Michael loan: And outcomes like that or what we're targeting for the next projects ahead, and what we see and our.
Michael loan: Proud of today is that the market values these existing wind resources.
Michael loan: And.
Michael loan: Our ability to expand them or extend their life and <unk>.
Michael loan: Just as I think we've indicated six months ago that this would be a policy resilient growth pathway for the company. We were pleased to see that proving out.
Michael loan: Great. Thanks, and then obviously you signed the third party M&A agreement for the Solar project on April 25.
Michael loan: Five days ago.
Michael loan: The current economic uncertainty I'm just wondering what are you broadly seeing in the M&A market would you say this was the.
Michael loan: Unique opportunity to act on or what are you seeing in terms of activity and attractiveness of options.
Michael loan: What we see right now is that.
Michael loan: We're operating in a market with more balanced between buyers and sellers of operating assets than we've seen in some time.
Michael loan: Sellers still have options.
Michael loan: And <unk>.
Michael loan: Buyers continue to need to be rigorous and selective.
Michael loan: For each of the two acquisitions that we've announced in the last six months.
Michael loan: You will have seen that there is some unique synergistic benefit that clear way has been able to bring to bear on the project in the case of the most recent asset because of its proximity to other solar projects we operate already.
Michael loan: In the case of the <unk> wind acquisition announcement because of a pre existing relationship with the off taker in and our ability to potentially repower that project in the future with a track record of successfully doing that.
Michael loan: And as we go forward and we look at other potential asset acquisitions.
Michael loan: It's our intention that we would continue.
Michael loan: To evaluate and execute on any applying the same principles that you see reflected in these deals, namely that they can be executed within our capital allocation framework that they exhibit return proposition at or better than the capital allocation expectations, we set with our public investors.
Michael loan: And that there is something unique that clear way can bring to bear in order to enhance value and assure a good return for Clearway Energy Inc.
Michael loan: So.
Michael loan: There is certainly a market window right now where.
Michael loan: We see opportunity to apply.
Michael loan: Those advantages.
Michael loan: With acquisitions that are secure and additive to our fleet.
Michael loan: And to the extent that those can be acted on in a fashion that is supportive of our growth goals and consistent with our capital allocation framework, we will do that but we're glad to be able to do that from a position of strength where.
Michael loan: What we're focused on now is hitting the top end or better of our out year goals.
Michael loan: And being able to manage the sequencing of <unk>.
Michael loan: Sponsor enabled development assets and acquisitions too.
Michael loan: <unk>, a nice deliberate pathway for capital allocation for Clearway Energy Inc.
Michael loan: Great. Thanks for taking my questions.
Michael loan: Yes.
Michael loan: Thank you one moment for our next question.
Our next question comes from the line of Mark Jarvi from CIBC.
Michael loan: Thanks, Good evening everyone.
Mark Jarvi: Craig maybe you can talk a little bit more about the willingness to assume I guess and share the risks in terms of Ppas and the pass through would you say that's widespread across counterparties, you're engaging with it is selective and then I guess when you think about it is that something you think will be pervasive across the industry or do you think companies like yourselves, where you can find other tweaks.
Mark Jarvi: And solutions to maybe mitigate some of those costs make it easier for you to get your counterparty across the line to share some of those risks.
Mark Jarvi: Yes, thanks for the question Mark.
Mark Jarvi: It's much more common in today's marketplace than it was six months ago and it was more common six months ago than at any time in the history of developing renewable power projects.
Mark Jarvi: I think.
Mark Jarvi: Really for the last five years.
Mark Jarvi: The industry has been presented with a succession of.
Mark Jarvi: Changes in the policy environment that are applicable to <unk>.
Mark Jarvi: Constructing and capitalizing.
Mark Jarvi: Long term contracted projects.
Mark Jarvi: And.
Mark Jarvi: Over time.
Mark Jarvi: The combination of developers and customers.
Mark Jarvi: Have become increasingly accepting of the fact that.
Mark Jarvi: We need to work together with each other to adapt to changes in policy in order to enable resources that have to be constructed to meet demand to be built.
Mark Jarvi: <unk>.
Mark Jarvi: I think.
Mark Jarvi: We are now at a point, where we have.
Mark Jarvi: Being able to reach agreements for how policy benefits or risk shared with regulated load serving entities in markets across the country.
Mark Jarvi: With commercial and industrial customers in markets across the country.
Mark Jarvi: And also.
Mark Jarvi: Sellers of equipment and project developers has started to develop manageable ways of.
Mark Jarvi: Establishing floors and ceilings on the cost of constructing projects. So that we can either do what we need to do together.
I think customers are much more prepared to enter into those types of adaptable.
Mark Jarvi: Revenue contract structures with sponsors like ourselves.
Mark Jarvi: And with projects that are more mature where they feel that.
Mark Jarvi: What they're paying for is certainty that our resource will come online with an understanding that the exact cost of that resource might vary.
Mark Jarvi: On.
Mark Jarvi: For project debt.
Mark Jarvi: Less certain to be built with sponsors with a less effective track record than our own.
Mark Jarvi: Customers may be less prepared to enter into agreements of that nature, but I think as a whole.
Mark Jarvi: End use customers and load serving entities recognizes that our country needs a tremendous campaign for the addition of both energy and capacity resources.
Mark Jarvi: And we need to find a way to work with each other to build them even as the policies that are applicable to them changed from time to time.
Speaker Change: That's good to hear so last question for me is just clarifying the comments on the equity needs was that were you, saying that you would need external equity. If you wanted to at least at the top end or exceed the 2027 targets.
Speaker Change: And I guess another question would be given all the progress youre, making.
Speaker Change: Predict with Repowering and other visibility beyond 2027, why don't you guys think you'd be in a position to extend the horizon in terms of the growth projections.
Speaker Change: Sure I'm going to start with.
Speaker Change: To that question or both of them and then.
Sarah Rubinstein: To turn to you Sarah.
Speaker Change: To follow on.
Sarah Rubinstein: No.
Speaker Change: First I think one of the things that we feel we have done right over the last year is to listen carefully to the community of investors who support our company.
Speaker Change: To establish growth plans and capital allocation frameworks that are responsive to what they think should be representative of a company like ours and.
Speaker Change: One of the things that I think has been consistently communicated to us.
Speaker Change: By our investors is that they would like to see the company over time move in a direction, where its growth can be funded through its own cash flow and through.
Speaker Change: A.
Speaker Change: <unk> balance sheet prudently managed balance sheet and debt capacity.
Speaker Change: And that to the extent that we are making use of equity as a funding source for our growth that is predictable and modest.
Speaker Change: And you can sum all that up by saying if we can grow in a compelling way while living within our means that's what's optimal so it's our intention to do just that.
Speaker Change: With respect to.
Speaker Change: The the start.
Speaker Change: Equity issuances through the use of an ATM and how that fund our growth plan I think what we've indicated is that.
Speaker Change: To hit the top end of the $2 40 to $2 60.
Speaker Change: Range that we've articulated then if also aiming to hit the targets we have for credit ratings and so on that we.
Speaker Change: Would plan to make use of a modest amount of ATM issuance also just because we think it is healthy for a company like ours to be able to do that.
Speaker Change: But it's not something that's an absolute necessity and we took the step as you saw on our disclosures to sort of quantify a range of issuance that we have in mind over three years.
Speaker Change: Which if quantified relative todays share price represents something like 1% of the flow of our C shares.
Speaker Change: So that's sort of the answer to the question with respect to equity issuance in.
Speaker Change: In terms of range and when we would articulate a new vintage beyond 2027 or revisit the commitments we've made for 2027.
Speaker Change: When we have historically done that as a company has been in the third quarter of the year. When we set guidance for for the next period of time.
Speaker Change: I think.
Speaker Change: That is the natural cadence when we would when we would update that long term expectation.
Speaker Change: Unless we reach some point between now and then where.
Speaker Change: The accumulation of committed investments that we have committed to.
Speaker Change: And other improvements in the fleet.
Speaker Change: Reach a point, where our expectations are materially in excess of the range. We've articulated already so but why don't you.
Speaker Change: Help fill in the details from our care about how and when we do that second part.
Craig Corneal: Yeah, I mean, I think you'd be generally cover today Craig. Thank you.
Speaker Change: We typically go through a robust budget process and long term plan.
Craig Corneal: And that wraps up.
Craig Corneal: In time for us to initiate guidance for the subsequent year.
Craig Corneal: And potentially update long term targets.
Craig Corneal: When we do our third quarter earnings call.
Craig Corneal: I think we would anticipate that that pattern would continue.
Craig Corneal: Unless to Craig's point.
Speaker Change: Have something that occurs prior to that that would warrant that.
Speaker Change: In fact, given how our process works here I would expect us to continue to update our.
Speaker Change: Guidance initiation for the subsequent year and long term targets.
Speaker Change: On our third quarter call and then in terms of what we would do to extend our longer term targets I think.
Speaker Change: Also will be based upon the things that we're able to.
Speaker Change: Included within that long term planning process. So.
Speaker Change: <unk>.
Speaker Change: Maybe not we're not giving specific.
Speaker Change: Update, but I think that you could expect.
Speaker Change: To do that later this year around the same time as we typically do.
Speaker Change: Okay, well it seems like everything is heading the right direction. Thanks for the time Tonight.
Yes, Thanks, Mark we think it is.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Steve Fleishman from Wolfe Research.
Steve Fleishman: Yeah, Hi, thanks for the update.
Speaker Change: Just could you.
Speaker Change: New mines in terms of.
Speaker Change: Tax credit monetization.
Speaker Change: New projects new projects.
Speaker Change: How you are monetizing tax credits.
Speaker Change: If you are using.
David: Thanks, David.
Speaker Change: Yes.
Speaker Change: The capital structures that are put together for.
Speaker Change: Financing of our project.
Speaker Change: Generally makes use of traditional tax equity partnerships and which.
Speaker Change: Some portion of the depreciation.
Speaker Change: Most or all of the tax credit value is allocated for some financial institution are stable.
Speaker Change: Make use of those.
Speaker Change: In some cases those structures.
Speaker Change: <unk> financial institution, the ability itself too.
Speaker Change: Transfer those tax credits.
Speaker Change: Senior separate party and.
Speaker Change: And to the extent that it does so in some cases.
Speaker Change: That can produce an additional financial benefit for Clearway group as a development company.
Speaker Change: But in all instances except for.
Speaker Change: Very limited ones, where we have remaining leakage of excess production tax credits.
Speaker Change: From projects that are at the very end of a PTC partnership where now on occasion at the end of a project, we're able to sell one or $2 million worth of production tax credits.
Speaker Change: For the benefit of Clearway Energy, Inc.
Speaker Change: <unk>.
Speaker Change: The monetization of tax credits is through traditional partnerships and the risk of.
Speaker Change: Were tax credits are monetized.
Speaker Change: Is relevant to the development margin that Clearway group rooms on the project I think that gets at what you have in months.
Speaker Change: Yeah, Okay, I'm going to leave it there for now thank you.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Noah Kaye from Oppenheimer.
Speaker Change: Okay.
Speaker Change: Hey, good afternoon, and thanks for taking the questions.
Speaker Change: It's notable perhaps that.
Speaker Change: The late stage pipeline.
Speaker Change: Grew over a gigawatt sequentially.
Speaker Change: Amidst all this headline uncertainty for the space.
Speaker Change: So I want to commend you there didn't notice that some of the <unk>.
Speaker Change: Within that to appear to shift from 'twenty six 'twenty seven two later on.
Speaker Change: And in the period.
Speaker Change: Can you just comment on factors around that.
Implications if any for <unk>.
Speaker Change: Yes.
Thanks for noticing thanks for the question, yes, so as I think you've seen over time no one of the things that we do is move projects from.
Speaker Change: <unk> development inventory from Clearway group.
Speaker Change: Around in deployment schedules in order to be.
Speaker Change: Responsive to the capital allocation framework.
Speaker Change: Growth needs of Clearway Energy, Inc, and what you see reflected in our pipeline reflects that kind of thinking.
Speaker Change: With the benefit of.
Speaker Change: Some of the operating asset acquisitions, we've just completed.
Speaker Change: We are in a position where what would be necessary to build to fully utilize all of the capital that's available for Clearway Energy Inc to invest.
Speaker Change: And to hit the top end or better of the growth goals. We have articulated is more than sufficient and so the mode that we're in now is optimizing the succession of project development and construction schedules to filling neatly into the growth plan that we've set out for <unk>.
Speaker Change: And there is.
Speaker Change: Say six or 800 megawatts worth of project that.
Speaker Change: We had pointed to 2027 that could either be completed in 2028 or in some cases late 2027.
Speaker Change: Where we ultimately build them will be a function of business decisions. We make in the next 12 months that look first to the capital that <unk> has available to allocate and.
Speaker Change: The growth goals that we've got for the business. So we feel as though we've been able to manage our pipeline.
Speaker Change: Pretty effectively in the current environment and it.
Speaker Change: Policy exposures are manageable.
Speaker Change: Right now in <unk>.
Speaker Change: As I think you've probably noted the magnitude of the safe Harbor pipeline, we've created gives us tremendous optionality.
Speaker Change: At a very acceptable cost to clearway group to pick whichever project are.
Speaker Change: Most likely to present, the best risk. Adjusted addition to the <unk> portfolio and plan to construct those projects and the timelines we need to.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Angie <unk> from Seaport.
Speaker Change: Thank you.
Speaker Change: Question to ask.
Speaker Change: And answered.
Speaker Change: Maybe two questions.
Speaker Change: Any thoughts on <unk>.
Speaker Change: Energy margins for your gas plants in California, and then secondly.
Speaker Change: I mean.
Speaker Change: Should be an interesting months so the future of DRA and then also there is some.
Speaker Change: Some rumblings coming from the wind tower industry about permitting a project and I'm wondering if you see any risks to.
Speaker Change: Repowering of wind projects those that already have the federal permits and those that are awaiting those permits.
Speaker Change: Do you think that theres any risk that those permits could be revoked or that.
There is any issue with that.
Speaker Change: Reload.
Speaker Change: PV snowcapped, sorry, when species for these projects depending on what happens with the IRI.
Speaker Change: Thank you.
Speaker Change: So on energy margins and our outlook for the California fleet.
Speaker Change: Something you would have noticed in our financial results last year was that we.
Speaker Change: Part of the reason for why we outperformed that year was our success in managing that energy position inclusive of.
Speaker Change: Heat rate call options that helped us establish.
Speaker Change: Establish a revenue floor for that fleet.
Speaker Change: In a year, where dispatch was not as frequent and queso.
Speaker Change: We've been pleased to see as we go forward.
Speaker Change: As far out as three years from now are pretty supportive market for.
Speaker Change: The energy.
Speaker Change: Value of those assets and in fact, the further out in time you go the more we've seen.
Speaker Change: Appreciation than you expected.
Energy gross margin creation potential of the assets right now.
Speaker Change: We feel good about.
Speaker Change: The position of those assets in relation to.
Speaker Change: The amount of cap do we'd expect them to produce each year as part of our guidance and our five year plan both.
Speaker Change: What we would expect the market to bear and where we've been able to.
Speaker Change: Hedge modest amounts of of that capacity in a way that we think is risk aware.
Speaker Change: So as I think you know tens of millions of dollars of Kathy.
Speaker Change: Measured in sort of low one $1 50.
Speaker Change: Levels that we count on for energy gross margin in that fleet and we feel constructive about the fleet fleets ability to continue to deliver that as we look into the out years based on actual market activity.
Speaker Change: And then on your question about the wind resources.
Speaker Change: The projects that we have incorporated into.
Speaker Change: Our near term plans.
Speaker Change: <unk>.
Where we have signed ppas or are on the cusp of doing so have all the federal permits that are required.
Speaker Change:
Speaker Change: We continue to make progress where necessary on.
Speaker Change: The later stage projects in our land based wind fleet.
Speaker Change: And I think we see a number of.
<unk>.
Speaker Change: Examples that.
Speaker Change: Land based wind projects that are being developed in a way that is.
Speaker Change: Appropriately thoughtful about the interests of.
Speaker Change: The various federal agencies that play roles in permitting them and local communities.
Speaker Change: Can still be permitted need to be constructed and deliver an energy value proposition that is increasingly necessary in our system, which has so much solar on the margin and won't see much gas felt for a while so we feel pretty good about that.
Speaker Change: And then on the IRI.
Speaker Change: Yes, I mean, I think if what youre referencing is that we'll start to see markups from committees of parts of the IRI and we agree.
Speaker Change: That will happen and we also feel pretty good about the.
Speaker Change: The constellation of.
Speaker Change: Important interests that are represented by members of Congress and the majority both on the Senate and house side and how clear eyed. They are about the important role that renewable energy and batteries have to play in the states that they represent and then and in an energy system that short both energy and capacity. So we feel good about the.
Speaker Change: The way, we planned our business for resiliency around change to the IRI, we expect some changes to it to occur.
Speaker Change: And.
Speaker Change: We are there.
Speaker Change: About the plans we have for Clearway Energy, Inc. In the short run.
Speaker Change: Looking equally resilient a year from now as they do today.
Speaker Change: Thank you.
Speaker Change: Thank you at this time I would now like to turn the conference back over to Craig Cornelius for closing remarks.
Speaker Change: Thank you everyone for joining us today and for your ongoing support of Clearway, we look forward to continuing to deliver with excellence in the quarters ahead as we strive to set the gold standard for all of the above energy companies here in America, operator, you can close the call.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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