Clearway Energy, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless noted. Clearway owns more than 8,000 net MW of generation assets, including over 5,500 net MW of wind and solar. Most revenue comes from long-term contracted assets; the weighted-average remaining contract duration was approximately 10 years based on CAFD.
Key financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Operating revenue | $288 million | $214 million |
| Operating income (loss) | $42 million | $(53) million |
| Net loss | $(40) million | $(97) million |
| Net loss attributable to Clearway Energy, Inc. | $0 million | $(32) million |
| Cash from operating activities | $75 million | $93 million |
| Capital expenditures | $88 million | $47 million |
| Dividends per Class A and Class C share | $0.3745 | $0.3468 |
Revenue rose $74 million, primarily because economic-hedge mark-to-market results improved by $145 million year over year. Excluding that line, energy and capacity revenue declined $56 million, and other revenue declined $10 million. Operating costs fell $21 million, including the effects of the Thermal Business sale in May 2022. Interest expense increased $52 million, mainly due to a $62 million unfavorable change in interest-rate-swap fair value. The company reported a $12 million income-tax benefit on a $52 million pretax loss. Q1 2023 net loss was attributable to noncontrolling and redeemable noncontrolling interests; no net loss was attributed to the registrant’s common stockholders.
At March 31, 2023, cash and cash equivalents were $576 million, restricted cash was $437 million, and total liquidity was approximately $1.574 billion, including $561 million of revolver availability. Restricted funds are not freely available for general use. Total debt was $7.194 billion; balance-sheet current and long-term debt totaled $7.135 billion after debt issuance costs and other adjustments. Debt fair value was $6.760 billion. The company had no revolver borrowings and $139 million of letters of credit outstanding, and reported compliance with required debt covenants. Total assets were $12.749 billion and total liabilities were $8.587 billion.
Material changes and notable items
- Operating revenue increased from $214 million to $288 million, while operating income improved from a loss to income. The comparison reflects a large swing in economic-hedge mark-to-market results; Q1 2023 recorded a $19 million gain versus a $126 million loss in Q1 2022.
- Q1 2023 wind generation/sales increased to 2.744 million MWh from 2.259 million MWh, while solar declined to 0.866 million MWh from 1.060 million MWh. The company cited lower solar generation and weather/seasonality as factors. Conventional equivalent availability fell to 74.4% from 95.3%, with maintenance and unplanned outages affecting facilities.
- The Thermal Business was sold in May 2022, so it contributed revenue and costs in the prior-year quarter but not in Q1 2023.
- In February 2023, Clearway acquired an interest in the 300 MW Daggett 3 solar project with matching storage capacity, which was under construction. Most assets were expected to reach commercial operation in Q2 2023; the project has PPAs with investment-grade counterparties and a 15-year weighted-average contract duration.
- In March 2023, the revolving credit facility was refinanced: commitments increased to $700 million, maturity extended to March 15, 2028, and the reference rate changed from LIBOR to SOFR. The reported availability was $561 million after letters of credit.
- Operating cash flow declined by $18 million year over year to $75 million. Financing cash flow was $28 million provided, compared with $184 million used in Q1 2022, primarily reflecting higher net contributions from noncontrolling interests.
Outlook, risks and contingencies
- Management said current liquidity, operating cash flows and revolver availability are expected to cover financial commitments, debt service, growth and maintenance spending, and dividends. This is management’s assessment, not a guarantee.
- The company estimated 2023 maintenance capital expenditures of $35 million. Q1 capital expenditures included $81 million of renewables growth spending, principally $74 million for Daggett 3 and $7 million for Waiawa; the filing says growth spending was funded through construction-related financing.
- The board declared a post-quarter dividend of $0.3818 per Class A and Class C share, payable June 15, 2023. The filing says future dividends depend on available capital, market conditions, legal requirements and contractual obligations.
- On May 3, 2023, the company agreed to invest approximately $63 million in net corporate capital to repower the Cedro Hill wind project, subject to closing adjustments. The project’s amended PPA would extend through 2045 if repowering reaches commercial operation, expected in the second half of 2024.
- Key risks include weather and generation variability, facility outages, commodity and interest-rate movements, counterparty performance, access to capital, substantial indebtedness, regulation, cybersecurity and reliance on related parties. The company disclosed that PG&E, a significant PPA counterparty, is below investment grade.
- The Georgetown/Buckthorn Solar litigation is expected to proceed to trial in October 2023. The court granted the company subsidiary’s motion on the fraud-by-nondisclosure claim but denied it on the breach-of-contract claim. Management says it has a valid defense; the company cannot predict the outcome or reasonably estimate potential costs or liabilities.
- The filing reported no material change in risk factors from the 2022 Form 10-K. No full-year earnings or CAFD guidance is stated in the supplied filing text.
Important facts for investors to verify
- How much of the revenue and operating-income improvement reflects recurring operations versus volatile hedge valuation changes.
- Whether Daggett 3 and Waiawa reach expected completion milestones, and how project-level financing and noncontrolling interests affect distributable cash.
- Actual cash available for dividends after accounting for restricted cash, debt service, maintenance spending and project obligations.
- Debt maturities, interest-rate exposure, covenant headroom and the effect of future refinancing or capital needs.
- Developments in the Georgetown litigation and the potential financial impact, which the filing does not clearly quantify.