Clearway Energy, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This filing reports full-year results, not standalone fourth-quarter results. Clearway owns contracted renewable and natural-gas generation assets; it reported 8,078 net MW of capacity at year-end. The Thermal Business was sold on May 1, 2022.
Financial performance and position
| Metric | 2022 | 2021 |
|---|---|---|
| Operating revenue | $1.190 billion | $1.286 billion |
| Operating income | $1.470 billion | $267 million |
| Net income (loss) | $1.060 billion | $(75) million |
| Net income attributable to Clearway Energy, Inc. | $582 million | $51 million |
| Net cash from operating activities | $787 million | $701 million |
| Net cash from investing activities | $1.065 billion | $(865) million |
| Net cash from financing activities | $(1.510) billion | $367 million |
| Total consolidated debt | $6.870 billion | $7.778 billion |
| Cash, cash equivalents and restricted cash | $996 million | $654 million |
| Total liquidity, including revolver availability | $1.366 billion | $821 million |
- Revenue declined $96 million. Renewable acquisitions and higher realized wind prices were offset by the Thermal Business sale, conventional-plant outages, and increased unrealized losses on economic hedges.
- Net income included a $1.292 billion gain on the Thermal Business sale. The resulting reported earnings and margins are therefore not representative of recurring operations; the filing does not provide a single normalized margin measure.
- Operating cash flow rose $86 million. Investing cash flow included $1.457 billion of sale proceeds. Financing cash outflow reflected debt repayments and lower net contributions from noncontrolling interests, among other items.
- Debt included $2.125 billion of senior notes and $4.745 billion of non-recourse project-level debt. Approximately $4.745 billion of consolidated debt was incurred by non-guarantor subsidiaries. Debt carrying value was $6.874 billion; estimated fair value was $6.288 billion.
- Liquidity includes $339 million of restricted cash, which is not freely available for general corporate use. The company had no revolver borrowings and $125 million of letters of credit outstanding at year-end.
- CAFD is a key non-GAAP distribution measure, but the provided filing text does not give a clear 2022 CAFD result.
Material changes and significant items
- The Thermal Business sale generated approximately $1.46 billion in net proceeds and a $1.292 billion gain. Proceeds were used in part to repay $335 million of bridge-loan borrowings, $305 million of revolver borrowings, and other debt.
- Clearway acquired the 413 MW Capistrano Wind Portfolio for approximately $239 million and completed dropdown acquisitions of the Mililani I and Waiawa solar projects. Several acquisitions involved CEG, the controlling shareholder’s affiliate.
- Renewable generation increased: solar MWh generated/sold rose to 4.991 million from 3.585 million, and wind to 9.343 million from 7.728 million. Conventional equivalent availability declined to 92.2% from 94.7%, with forced outages at El Segundo and Walnut Creek cited as a factor.
- Dividend per Class A and Class C share was $1.43 for 2022, versus $1.33 in 2021. A quarterly dividend of $0.3745 per share was declared for payment in March 2023.
- GIP and TotalEnergies became equal owners of CEG in September 2022. CEG retained control of Clearway, with 54.91% of combined voting power and 42.12% of Clearway Energy LLC’s economic interests at year-end.
Outlook, risks and contingencies
- Management said liquidity, operating cash flow and revolver availability should be adequate for financial commitments, debt service, capital spending and dividends. It expected to refinance the revolving credit facility before its April 2023 expiration; the filing does not provide a specific forecast of revenue, earnings or CAFD.
- Management estimated 2023 maintenance capital expenditures of $35 million. It stated that comparable cash dividends were expected to continue in the foreseeable future, subject to available capital, market conditions, laws and contractual restrictions.
- Growth plans include contracted renewable and storage projects. Daggett Solar 3 was acquired in February 2023; the company also expected to close on its interest in the Victory Pass and Arica projects in the second half of 2023, subject to project milestones.
- Significant risks include reliance on long-term offtake counterparties and concentrated customers (SCE and PG&E represented approximately 33% and 25% of 2022 consolidated revenue, respectively), weather and generation variability, outages, transmission constraints, project-level debt and distribution covenants, refinancing and interest-rate exposure, and dependence on CEG for services and acquisition opportunities.
- Commodity contracts had a $353 million Level 3 derivative liability at year-end, based on significant unobservable valuation inputs. Fair values and earnings may change with power prices and other assumptions.
- The City of Georgetown’s litigation concerning the Buckthorn solar project and PPA remained in discovery, with trial expected in June 2023. Clearway disputes the claims; it said it could not predict the outcome or reasonably estimate potential costs and liabilities.
- Tax considerations include an expected cumulative earnings-and-profits surplus after the Thermal sale, meaning some 2023 and later distributions may be taxable dividends. The company expected no material federal income tax payments until 2027 but anticipated material state income taxes in certain jurisdictions beginning in 2023.
- The company reported effective disclosure controls and internal control over financial reporting; Ernst & Young gave unqualified opinions on the 2022 financial statements and internal controls.
Investor verification priorities
- Separate recurring cash generation and CAFD from the Thermal sale gain; confirm the reported CAFD and dividend coverage in the full filing or company materials.
- Track refinancing of the revolving credit facility and the treatment of the $97 million of 2023 project debt described as being funded through long-term equity contributions or converted to long-term debt.
- Assess customer concentration and upcoming contract expirations, including conventional capacity agreements and the ability to renew or replace them on economic terms.
- Monitor forced-outage recovery, renewable production, hedge valuation and Level 3 power-price assumptions, as well as the $353 million commodity-contract liability.
- Review the Buckthorn litigation, project-level covenant and distribution restrictions, and the tax treatment of future dividends.