Clearway Energy, Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing is an annual report, not a standalone fourth-quarter filing; quarterly figures are included below where relevant. Financial amounts are in U.S. dollars.
Business context
Clearway owns and operates contracted renewable and conventional generation and thermal infrastructure assets in North America. Its generation portfolio exceeded 5,875 MW, with approximately 13 years of weighted-average remaining contract duration based on CAFD. The company aims to provide stable and growing dividends. GIP, through CEG, controlled approximately 55% of voting power at year-end.
Key financial and operating metrics
| Metric | 2019 | 2018 |
|---|---|---|
| Operating revenue | $1.032 billion | $1.053 billion |
| Operating income | $224 million | $347 million |
| Operating margin | 21.7% | 33.0% |
| Net income (loss) | $(96) million | $54 million |
| Net income (loss) attributable to Clearway Energy, Inc. | $(11) million | $48 million |
| Basic and diluted EPS | $(0.10) | $0.46 |
| Cash from operating activities | $477 million | $498 million |
| Cash, cash equivalents and restricted cash | $417 million | $583 million |
| Total debt | $6.858 billion | $6.044 billion |
| Total liquidity, including revolver availability | $842 million | $1.037 billion |
The company reported a $96 million net loss despite $224 million of operating income. Net interest expense rose $98 million to $404 million, including a $65 million loss on non-hedge interest-rate derivatives. Operating cash flow declined $21 million. The balance sheet reported $1.824 billion of current debt, including $1.2 billion reclassified as short-term following defaults triggered by PG&E’s bankruptcy. Company-reported liquidity included $262 million of restricted cash and $425 million of revolver availability.
Annual dividends were $0.80 per Class A and Class C share, paid at $0.20 per quarter. The company declared a $0.21-per-share quarterly dividend in February 2020. CAFD is a non-GAAP measure; the filing text supplied here does not provide a clear annual CAFD value.
Fourth quarter: Revenue was $235 million, operating income $6 million, net loss $48 million, and loss attributable to Clearway $6 million. Reported basic and diluted loss per share was $0.06.
Changes versus 2018
- Revenue decreased 2.0%, while operating income fell 35%, reflecting lower renewable gross margin and higher depreciation, impairment, and operating costs.
- Renewables generation sold declined to 6.584 million MWh from 7.197 million MWh, primarily due to weaker wind and solar resources and the CVSR fire-related outage. Thermal volumes sold increased.
- Depreciation and amortization rose $65 million, including $54 million of accelerated depreciation related to the Wildorado and Elbow Creek repowering. The company recorded $33 million of impairments, versus none in 2018.
- Cash from operations decreased by $21 million, partly due to lower distributions from unconsolidated affiliates affected by PG&E’s bankruptcy. Investing outflows increased with acquisitions and repowering expenditures.
- Total debt increased $814 million, alongside the Carlsbad acquisition and other project financing activity. Cash and restricted cash declined $166 million.
Outlook, significant events and risks
- PG&E bankruptcy: PG&E accounted for approximately 22% of 2019 consolidated revenue; SCE accounted for approximately 40%. The bankruptcy triggered defaults under affected PPAs and project financing agreements. Clearway classified $1.2 billion of related debt as short-term, and project distributions are restricted. As of March 2, 2020, the PPAs were operating normally and forbearance agreements covered some affected financing arrangements. PG&E’s proposed plan would assume the company’s PPAs, but required approvals remained outstanding.
- Financing and liquidity: Clearway issued $600 million of 4.75% notes due 2028 and repurchased most of its 2024 notes; the remaining $88 million was redeemed in January 2020. It also issued $100 million of Class C shares. The company stated that liquidity and operating cash flows were expected to meet commitments, debt service, capital spending and dividends, while noting financing availability is not assured.
- Dividend and spending outlook: Management expected comparable dividends to continue based on then-current circumstances, subject to available capital, market conditions and contractual restrictions. Estimated 2020 maintenance capital expenditures were $32 million. No quantified earnings or CAFD guidance is provided in the supplied filing text.
- Other notable items: Carlsbad was acquired for $184 million cash plus assumed project financing. Clearway recorded a $19 million impairment associated with planned sale of Dover/Smyrna assets and $14 million of wind-asset impairments. A June fire at CVSR caused approximately $8 million of lost revenue; the facility returned to full operation in July.
- Principal risks: Concentrated customer exposure and PG&E-related defaults; high leverage and refinancing needs; variable-rate debt and LIBOR transition; resource variability, outages and transmission constraints; changing renewable incentives and environmental regulation; and dependence on GIP/CEG, including related-party services and GIP’s voting control.
KPMG issued an unqualified opinion on the financial statements and internal controls. Management reported effective internal control over financial reporting as of December 31, 2019.
Investor facts to verify
- Progress and final approvals for PG&E’s reorganization plan, PPA assumption, and forbearance or cure arrangements for affected project debt.
- Whether restricted project cash and distributions become accessible, and the implications of the $1.2 billion short-term debt classification.
- CAFD generation and reconciliation to GAAP cash flows, including the effect of PG&E-related distribution restrictions.
- Dividend coverage, liquidity availability, covenant headroom, and the company’s refinancing requirements.
- Operating performance and expected returns from Carlsbad, the repowering projects, and other acquisitions, together with any further asset impairments.