Clearway Energy, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless noted. Clearway owns approximately 8,700 net MW of generation and storage capacity, including about 6,200 MW of wind, solar and battery storage and 2,500 MW of natural gas generation. Most revenue is supported by long-term contracts; weighted-average remaining offtake duration was approximately 10 years based on CAFD.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Operating revenue | $263 million | $288 million |
| Operating income (loss) | $(29) million | $42 million |
| Net loss | $(46) million | $(40) million |
| Net loss attributable to Clearway Energy, Inc. | $(2) million | $0 million |
| Operating cash flow | $81 million | $75 million |
| Capital expenditures | $98 million | $88 million |
| Dividends per Class A and Class C share | $0.4033 | $0.3745 |
Operating margin, calculated as operating income divided by revenue, was approximately negative 11% versus positive 15% a year earlier. The company reported an income tax benefit of $13 million on a pretax loss of $59 million. Adjusted EBITDA and CAFD values are not provided in the filing text supplied.
Balance sheet and liquidity
- At March 31, 2024, cash and cash equivalents were $478 million and restricted cash was $485 million. Total liquidity was approximately $1.435 billion, including $472 million of revolver availability; the revolver had no borrowings and $228 million of letters of credit outstanding.
- Total debt, including current maturities, was approximately $8.201 billion, versus $8.099 billion at year-end 2023. This included $565 million current and $7.579 billion long-term debt on the balance sheet. The company reported compliance with required debt covenants.
- Total assets were $14.862 billion and total liabilities were $9.815 billion. Restricted cash is subject to use restrictions, including operating, debt-service and reserve requirements.
- Cash, cash equivalents and restricted cash decreased by $88 million during the quarter to $963 million. Investing cash use was $203 million, mainly acquisitions and capital spending; financing cash provided $34 million.
Changes, drivers and significant events
- Revenue declined $25 million year over year. Lower conventional capacity revenue and unfavorable mark-to-market movements on economic hedges were partly offset by higher conventional energy revenue, renewable acquisitions and stronger wind production. Mark-to-market hedge results shifted from a $19 million gain to a $22 million loss.
- Operating costs rose $46 million, including a $26 million increase in depreciation, amortization and accretion, and $14 million of fuel costs associated with facilities moving from expiring PPAs to merchant operations. Conventional generation revenue was $95 million in both periods; renewables revenue declined from $193 million to $168 million.
- Interest expense fell $42 million, primarily because of a $44 million favorable change in interest-rate-swap fair value, partly offset by higher interest expense from acquired renewable assets. Equity-method results improved by $15 million, from a $3 million loss to $12 million in earnings.
- Q1 included the acquisition of the 200 MW Texas Solar Nova 2 facility for $112 million; $17 million was funded by Clearway and the balance by a cash-equity investor. Its 18-year PPA began in March 2024. After quarter-end, Clearway acquired the 160 MW Cedar Creek wind facility for $117 million, with a $108 million tax-equity contribution.
- Victory Pass and Arica reached substantial completion on May 1. Clearway paid an additional $165 million purchase price; investor and CEG contributions, together with escrow funds, were used to repay bridge loans, fund reserves and pay fees. Further asset purchases from CEG were announced, including Dan’s Mountain and Rosamond South I, subject to conditions and expected in 2025.
Outlook, risks and contingencies
- Management said current liquidity, operating cash flow and revolver availability should be adequate for financial commitments, debt service, capital needs and dividends. It estimated 2024 maintenance capital expenditures of $40 million; estimates may change. No formal earnings or CAFD guidance is stated in the supplied filing text.
- Management expected comparable cash dividends to continue in the foreseeable future, subject to available capital, market conditions, laws and contractual restrictions. On May 9, 2024, it declared a $0.4102 quarterly dividend per Class A and Class C share.
- Key exposures include weather and generation variability, commodity and interest-rate movements, outages, regulation, financing access and substantial indebtedness, counterparty performance, and operating restrictions in debt agreements. PG&E is a significant offtaker and is rated below investment grade.
- Derivative liabilities were $361 million, primarily long-term power contracts valued with significant unobservable inputs; management noted market-price changes could materially affect valuations. A $0.50/MWh change in power prices across the term of long-term power contracts was estimated to change related derivative net value by about $6 million.
- The company reported no material legal proceedings and no material change in risk factors from its 2023 Form 10-K. IRS audits of three subsidiary partnership returns were ongoing; management said it believes the proposed adjustment in one audit is without merit and expects resolution of the audits not to be material.
- BlackRock agreed to acquire GIP’s investment manager; closing was expected in Q3 2024, subject to approvals and customary conditions. Separately, the SEC climate-disclosure rules were stayed pending judicial review.
Important facts for investors to verify
- How much of reported results and future cash generation depends on hedge fair-value movements, HLBV accounting and tax-equity allocations.
- Availability and terms of restricted cash, facility-level debt, bridge financing and the funding plan for growth acquisitions and construction.
- Merchant exposure as conventional PPAs expire, including capacity contracting at Walnut Creek and Marsh Landing and exposure to power and fuel prices.
- Actual operating performance, maintenance spending and the sustainability of dividends relative to CAFD; the supplied text does not provide Q1 CAFD or Adjusted EBITDA values.
- Completion and financial effects of announced acquisitions, the GIP/BlackRock transaction, and the outcome of tax audits and regulatory proceedings.