Clearway Energy, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Clearway owns more than 7,500 net MW of generation assets, including over 5,000 net MW of wind and solar. Most generation output or capacity is sold under long-term contracts; weighted-average remaining contract duration was approximately 12 years based on CAFD.
Financial and operating results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Operating revenue | $214 million | $237 million |
| Operating loss | $(53) million | $(14) million |
| Net loss | $(97) million | $(76) million |
| Net income (loss) attributable to Clearway, Inc. | $(32) million | $3 million |
| Basic and diluted loss per Class A and C share | $(0.28) | $0.03 |
| Net cash provided by operating activities | $93 million | $47 million |
| Cash, cash equivalents and restricted cash | $466 million | $654 million at Dec. 31, 2021 |
| Total debt, including current portion | $7.822 billion | $7.778 billion at Dec. 31, 2021 |
Investing activities used $92 million of cash, while financing activities used $184 million. Total liquidity was $574 million at quarter-end, including $326 million of restricted cash and $108 million of revolving-credit availability. The filing defines CAFD as a non-GAAP measure but does not provide a clear Q1 CAFD value in the supplied text. No profit margin guidance is provided.
Changes versus Q1 2021
- Revenue fell $23 million, despite higher energy and capacity revenues. The main offset was a $102 million greater mark-to-market loss on economic hedges, primarily reflecting higher forward power prices and the Langford contract’s loss of the normal-purchases-and-normal-sales exception.
- Renewables generation sold increased to 3.319 million MWh from 2.530 million MWh, reflecting acquisitions and the absence of the prior-year Texas extreme-weather settlement loss. Conventional equivalent availability improved to 95.3% from 83.2%.
- Operating costs rose $16 million, mainly from operations and maintenance and other operating costs associated with acquisitions. Depreciation and amortization declined $4 million.
- The 2021 period included a $42 million debt-extinguishment loss, versus $2 million in Q1 2022. Despite that improvement, net loss widened by $21 million, and Clearway, Inc.’s attributable result shifted from $3 million income to a $32 million loss.
- Operating cash flow increased $46 million. Investing cash outflow was $222 million lower, largely because Q1 2021 included the Agua Caliente acquisition. Financing cash flow decreased by $417 million year over year, reflecting lower noncontrolling-interest contributions, debt issuance proceeds and the 2022 distribution of escrowed funds to CEG.
Outlook, notable events and risks
- On May 1, 2022, after quarter-end, Clearway completed the sale of its Thermal Business to KKR for approximately $1.46 billion of net proceeds, subject to post-closing adjustments and excluding approximately $20 million of transaction expenses. Management estimated a gain of approximately $1.31 billion. On May 3, it used sale proceeds to repay $305 million drawn on the revolving facility and the $335 million bridge loan.
- On May 4, the company declared a quarterly dividend of $0.3536 per Class A and Class C share, payable June 15. It said comparable cash dividends were expected to continue in the foreseeable future, subject to available capital, market conditions and contractual and legal requirements.
- Management stated that liquidity, operating cash flows and revolving-credit availability were expected to be adequate for commitments, debt service, capital expenditures, growth and dividends. Estimated 2022 maintenance capital expenditures were $30 million; estimates may change.
- Mililani I, a 39 MW solar project with 156 MWh of storage under construction, was acquired in March and is expected to reach commercial operation in the second half of 2022. It has a 20-year PPA with an investment-grade utility. A $60 million tax-equity bridge loan is expected to be repaid from tax-equity proceeds upon commercial operation.
- Clearway reported compliance with required debt covenants at March 31. It had $82 million of letters of credit outstanding under the revolving facility. Credit ratings were BB from S&P and Ba2 from Moody’s.
- Key exposures include power and natural-gas prices, variable interest rates, counterparty performance, weather and generation variability, regulation, environmental requirements, access to financing and substantial indebtedness. Commodity derivative liabilities were $323 million on the balance sheet; the filing notes significant unobservable inputs and possible material variation in future market prices.
- The City of Georgetown, Texas, is pursuing claims related to the Buckthorn Solar PPA, including possible cancellation and damages; Buckthorn disputes the claims and is defending its rights. Discovery was scheduled through June 24, 2022, with a bench trial expected in September or October.
- The proposed endangered listing of the northern long-eared bat could affect renewable facility siting and operations. Clearway reported no material financial or operational impact from COVID-19 as of the filing date. The company said there had been no material change to the risk factors in its 2021 Form 10-K.
Important facts for investors to verify
- Final Thermal sale proceeds, transaction expenses, post-closing adjustments and realized gain; also confirm how the remaining proceeds are deployed.
- Underlying operating performance and CAFD apart from volatile mark-to-market accounting; the supplied filing text does not state a clear Q1 CAFD figure.
- Dividend coverage and the impact of the Thermal Business sale on future cash flows, liquidity and portfolio composition.
- Mililani I construction and commercial-operation timing, tax-equity funding and repayment of its bridge loan.
- Developments in the Buckthorn litigation, environmental regulation and the company’s commodity-derivative exposures.