Clearway Energy(CWEN) - 2024 Q3 - Quarterly Report

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This section provides a cautionary statement regarding forward-looking information and outlines key risk factors that could impact future results Forward-Looking Information and Risk Factors This section outlines the forward-looking statements within the report and identifies various known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those projected - The report contains forward-looking statements identified by words like 'believes,' 'projects,' 'anticipates,' 'plans,' 'expects,' 'intends,' 'estimates'[6] - Key risks include the Company's ability to maintain and grow its quarterly dividend, potential risks related to relationships with CEG, ability to consummate acquisitions and dispositions, access to capital markets, changes in law, hazards customary to the power production industry (e.g., weather, outages, fuel price volatility), operational efficiency, counterparty willingness to fulfill obligations, government regulation, and cybersecurity[6] GLOSSARY OF TERMS This section defines key financial and operational terms used throughout the report to ensure clarity and consistent understanding Definitions of Key Terms This section provides definitions for various terms and abbreviations used throughout the report, including specific senior notes, non-GAAP financial measures like Adjusted EBITDA and CAFD, and company-specific entities and assets - Adjusted EBITDA is a non-GAAP measure representing earnings before interest, tax, depreciation, and amortization, adjusted for mark-to-market gains/losses, asset write-offs, impairments, and other non-indicative factors of future operating performance[9] - CAFD (Cash Available for Distribution) is a non-GAAP measure defined as Adjusted EBITDA plus cash distributions/return of investment from unconsolidated affiliates, cash receipts from notes receivable, cash distributions from noncontrolling interests, and adjustments for sales-type lease cash payments and lease expenses, less cash distributions to noncontrolling interests, maintenance capital expenditures, pro-rata Adjusted EBITDA from unconsolidated affiliates, cash interest paid, income taxes paid, principal amortization of indebtedness, changes in prepaid and accrued capacity payments, and adjusted for development expenses[9] - The Senior Notes collectively refer to the $850 million 4.75% notes due 2028, $925 million 3.75% notes due 2031, and $350 million 3.75% notes due 2032, all issued by Clearway Energy Operating LLC[9][11] PART I — FINANCIAL INFORMATION This part presents the company's unaudited consolidated financial statements and detailed notes for the reporting period ITEM 1 — FINANCIAL STATEMENTS AND NOTES This section presents the unaudited consolidated financial statements, including statements of income, comprehensive income, balance sheets, cash flows, and stockholders' equity, along with detailed notes Consolidated Statements of Income This statement presents the company's revenues, expenses, and net income (loss) for the specified periods Consolidated Statements of Income (Millions) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:--------------------------------------------------|:-------------------------------------------|:-------------------------------------------|:------------------------------------------|:------------------------------------------| | Total operating revenues | $486 | $371 | $1,115 | $1,065 | | Total operating costs and expenses | $308 | $277 | $882 | $780 | | Operating Income | $178 | $94 | $233 | $285 | | Net Income (Loss) | $27 | $15 | $(15) | $59 | | Net Income Attributable to Clearway Energy, Inc. | $36 | $4 | $85 | $42 | | Earnings Per Weighted Average Class A and C Share | $0.31 | $0.03 | $0.72 | $0.36 | | Dividends Per Class A Common Share | $0.4171 | $0.3891 | $1.2306 | $1.1454 | Consolidated Statements of Comprehensive Income This statement details the company's net income (loss) and other comprehensive income (loss) components for the specified periods Consolidated Statements of Comprehensive Income (Millions) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:--------------------------------------------------|:-------------------------------------------|:-------------------------------------------|:------------------------------------------|:------------------------------------------| | Net Income (Loss) | $27 | $15 | $(15) | $59 | | Other Comprehensive (Loss) Income | $(13) | $8 | $(13) | $8 | | Comprehensive Income (Loss) | $14 | $23 | $(28) | $67 | | Comprehensive Income Attributable to Clearway Energy, Inc. | $32 | $6 | $79 | $44 | Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time Consolidated Balance Sheets (Millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | |:---------------------------|:------------------------|:------------------------| | Total Assets | $14,249 | $14,701 | | Total Liabilities | $8,616 | $9,706 | | Total Stockholders' Equity | $5,624 | $4,994 | Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for the specified periods Consolidated Statements of Cash Flows (Millions) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:--------------------------------------------------|:------------------------------------------|:------------------------------------------| | Net Cash Provided by Operating Activities | $578 | $496 | | Net Cash Used in Investing Activities | $(674) | $(271) | | Net Cash Used in Financing Activities | $(281) | $(65) | | Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash | $(377) | $160 | | Cash, Cash Equivalents and Restricted Cash at End of Period | $674 | $1,156 | Consolidated Statements of Stockholders' Equity This statement details changes in the company's equity accounts, including common stock, retained earnings, and noncontrolling interests Consolidated Statements of Stockholders' Equity (Millions) | Metric | Dec 31, 2023 | Sep 30, 2024 | |:-------------------------------------|:------------------------|:------------------------| | Common Stock | $1 | $1 | | Additional Paid-In Capital | $1,732 | $1,831 | | Retained Earnings | $361 | $301 | | Accumulated Other Comprehensive Income | $7 | $1 | | Noncontrolling Interest | $2,893 | $3,490 | | Total Stockholders' Equity | $4,994 | $5,624 | - For the nine months ended September 30, 2024, the company reported a net loss of $2 million attributable to Clearway Energy, Inc. (after noncontrolling interests) and common stock dividends and distributions to CEG unit holders totaling $81 million[21] - For the nine months ended September 30, 2023, the company reported a net income of $38 million attributable to Clearway Energy, Inc. (after noncontrolling interests) and common stock dividends and distributions to CEG unit holders totaling $76 million[23] Notes to Consolidated Financial Statements These notes provide essential details and explanations supporting the consolidated financial statements, covering accounting policies and specific transactions Note 1 — Nature of Business Clearway Energy, Inc. is a publicly-traded energy infrastructure investor focused on clean energy, owning a diversified portfolio of modern, sustainable, and long-term contracted assets across North America - Clearway Energy, Inc. is a publicly-traded energy infrastructure investor focused on clean energy and owner of modern, sustainable and long-term contracted assets across North America[25] - The Company is one of the largest renewable energy owners in the U.S. with approximately 6,500 net MW of installed wind, solar and battery energy storage system (BESS) facilities, and approximately 2,500 net MW of natural gas-fired generation facilities[26] - As of September 30, 2024, the Company owned 58.10% of the economic interests of Clearway Energy LLC, with CEG owning 41.90%[28] Note 2 — Summary of Significant Accounting Policies This note outlines the company's significant accounting policies, including the use of estimates, classification of cash and restricted cash, and supplemental cash flow information Cash, Cash Equivalents and Restricted Cash (Millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | |:--------------------------------------------------|:------------------------|:------------------------| | Cash and cash equivalents | $292 | $535 | | Restricted cash | $382 | $516 | | Cash, cash equivalents and restricted cash (total) | $674 | $1,051 | - As of September 30, 2024, restricted cash included $183 million for operating expenses, $71 million for current debt service, $89 million for other reserves, and $39 million in distribution reserve accounts[35] Dividends Per Share | Metric | Q3 2024 (per share) | Q2 2024 (per share) | Q1 2024 (per share) | |:--------------------------------------|:--------------------|:--------------------|:--------------------| | Dividends per Class A share | $0.4171 | $0.4102 | $0.4033 | | Dividends per Class C share | $0.4171 | $0.4102 | $0.4033 | - On October 29, 2024, the Company declared quarterly dividends of $0.4240 per share for Class A and Class C common stock, payable on December 16, 2024[39] Revenue by Type and Segment (Q3 2024, Millions) | Revenue Type | Conventional Generation | Renewables | Total | |:---------------------------------|:------------------------|:-----------|:------| | Energy revenue | $35 | $315 | $350 | | Capacity revenue | $65 | $22 | $87 | | Other revenues | $3 | $20 | $23 | | Contract amortization | $(5) | $(41) | $(46) | | Mark-to-market for economic hedges | $4 | $68 | $72 | | Total operating revenues | $102 | $384 | $486| Revenue by Type and Segment (9M 2024, Millions) | Revenue Type | Conventional Generation | Renewables | Total | |:---------------------------------|:------------------------|:-----------|:------| | Energy revenue | $67 | $870 | $937 | | Capacity revenue | $195 | $44 | $239 | | Other revenues | $6 | $63 | $69 | | Contract amortization | $(14) | $(124) | $(138)| | Mark-to-market for economic hedges | $12 | $(4) | $8 | | Total operating revenue | $266 | $849 | $1,115| Note 3 — Acquisitions This note details two significant asset acquisitions from Clearway Renew in the first half of 2024, funded with existing liquidity and consolidated prospectively - On April 16, 2024, the Company acquired Cedar Creek, a 160 MW wind facility in Idaho, from Clearway Renew for $117 million cash[50] - On March 15, 2024, the Company acquired Texas Solar Nova 2, a 200 MW solar facility in Texas, from Clearway Renew for $112 million cash ($17 million from the Company, $95 million from a cash equity investor)[53] Note 4 — Investments Accounted for by the Equity Method and Variable Interest Entities This note describes the company's equity investments in unconsolidated affiliates and its controlling financial interest in various Variable Interest Entities (VIEs) Equity Investments in Unconsolidated Affiliates (Sep 30, 2024, Millions) | Name | Economic Interest | Investment Balance | |:------------------|:------------------|:--------------------------------------------| | Avenal | 50% | $8 | | Desert Sunlight | 25% | $227 | | Elkhorn Ridge | 66.7% | $9 | | GenConn | 50% | $75 | | San Juan Mesa | 75% | $3 | | Total | | $322 | - The Company consolidates entities identified as VIEs where it has a controlling financial interest, primarily related to tax equity arrangements for wind, solar, and BESS facilities[58] - On June 13, 2024, Clearway Renew redeemed Rosie Class B LLC's entire $28 million equity investment in Rosie Central BESS upon substantial completion of the facility[57] Note 5 — Fair Value of Financial Instruments This note details the fair value hierarchy for financial instruments and provides the carrying amount and estimated fair value of the company's long-term debt Long-term Debt Fair Value (Millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | |:------------------------------------------|:------------------------|:------------------------| | Long-term debt, including current portion | Carrying Amount: $7,201 | Carrying Amount: $8,102 | | | Fair Value: $6,897 | Fair Value: $7,611 | Derivative Instruments Fair Value (Sep 30, 2024, Millions) | Derivative Type | Level 2 | Level 3 | Total | |:-----------------------------------------|:--------|:--------|:------| | Derivative assets: | | | | | Energy-related commodity contracts | $0 | $7 | $7 | | Interest rate contracts | $97 | $0 | $97 | | Other financial instruments | $0 | $10 | $10 | | Total assets | $97 | $17 | $114| | Derivative liabilities: | | | | | Energy-related commodity contracts | $1 | $326 | $327 | | Interest rate contracts | $3 | $0 | $3 | | Total liabilities | $4 | $326| $330| - Significant unobservable inputs for Level 3 positions include illiquid power tenors and location pricing, derived by extrapolating pricing as a basis to liquid locations or from historic/forward market prices[77] Note 6 — Derivative Instruments and Hedging Activities This note describes the company's use of interest rate swap agreements and energy-related commodity contracts to mitigate financial risks - As of September 30, 2024, the Company had interest rate derivative instruments on non-recourse debt extending through 2040, with a portion designated as cash flow hedges[83] - Energy-related derivative instruments extended through 2033 but were not designated as cash flow or fair value hedges as of September 30, 2024[84] Derivative Instruments Summary (Sep 30, 2024, Millions) | Derivative Type | Derivative Assets | Derivative Liabilities | |:-----------------------------------------|:------------------|:-----------------------| | Derivatives Designated as Cash Flow Hedges | $19 | $2 | | Derivatives Not Designated as Cash Flow Hedges | $104 | $328 | | Total Derivatives | $123 | $330 | Impact of Derivative Instruments on Income (Millions) | Impact on Income | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2024 | |:----------------------------|:--------------------------------|:-------------------------------| | Derivative interest expense | $(57) | $(33) | | Mark-to-market for economic hedges | $72 | $11 | Note 7 — Long-term Debt This note details the company's long-term debt, including Senior Notes and various non-recourse facility-level debt, confirming compliance with all covenants Long-term Debt (Millions) | Debt Type | Sep 30, 2024 | Dec 31, 2023 | |:----------------------------------------|:------------------------|:------------------------| | 2028 Senior Notes | $850 | $850 | | 2031 Senior Notes | $925 | $925 | | 2032 Senior Notes | $350 | $350 | | Subtotal non-recourse facility-level debt | $5,074 | $5,974 | | Total debt | $7,199 | $8,099 | | Less current maturities | $(412) | $(558) | | Less net debt issuance costs | $(57) | $(65) | | Add premiums | $2 | $3 | | Total long-term debt | $6,732 | $7,479 | - On October 23, 2024, Capistrano Portfolio Holdco LLC issued a $121 million term loan, using proceeds to pay off $63 million of existing debt related to Broken Bow and Crofton Bluffs[95] - On July 25, 2024, Natural Gas Holdco entered into a $200 million letter of credit facility to support collateral needs of merchant conventional facilities[96] - On June 13, 2024, the Company paid $279 million as additional purchase price for the Rosamond Central BESS facility, converting outstanding construction loans to a $115 million term loan[97][98] - On May 1, 2024, the Company paid $165 million as additional purchase price for the Victory Pass and Arica solar and BESS facilities upon substantial completion[100] - On April 16, 2024, as part of the Cedar Creek acquisition, the Company assumed its financing agreement, with a construction loan converting to a $110 million term loan[101] - On March 15, 2024, Texas Solar Nova 1's financing agreement was amended to merge the Texas Solar Nova 1 and Texas Solar Nova 2 term loans under TSN1 Class B Member LLC[103] Note 8 — Earnings Per Share This note provides the calculation of basic and diluted earnings per share for Class A and Class C common stockholders for the three and nine months ended September 30, 2024 and 2023 Earnings Per Weighted Average Common Share | Metric | Q3 2024 Class A EPS | Q3 2024 Class C EPS | 9M 2024 Class A EPS | 9M 2024 Class C EPS | |:--------------------------------------------------|:--------------------|:--------------------|:--------------------|:--------------------| | Earnings per weighted average common share – basic and diluted | $0.31 | $0.31 | $0.72 | $0.72 | Note 9 — Segment Reporting This note presents financial information segmented by Conventional Generation, Renewables, and Corporate, reflecting how management evaluates performance based on net income (loss) Segment Performance (Q3 2024, Millions) | Segment | Operating Revenues | Net Income (Loss) | |:----------------------------|:-------------------|:------------------| | Conventional Generation | $102 | $25 | | Renewables | $384 | $66 | | Corporate | $0 | $(64) | | Total | $486 | $27 | Segment Performance (9M 2024, Millions) | Segment | Operating Revenues | Net Income (Loss) | |:----------------------------|:-------------------|:------------------| | Conventional Generation | $266 | $50 | | Renewables | $849 | $60 | | Corporate | $0 | $(125) | | Total | $1,115 | $(15) | Note 10 — Income Taxes This note explains the company's effective tax rate, which differs from the statutory rate primarily due to the allocation of taxable earnings and losses based on the HLBV method Income Tax Metrics (Millions, except rate) | Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 | |:---------------------------|:--------|:--------|:--------|:--------| | Income before income taxes | $60M | $72M | $15M | $126M | | Income tax expense | $33M | $57M | $30M | $67M | | Effective income tax rate | 55.0% | 79.2% | 200.0% | 53.2% | - The effective tax rate differs from the statutory rate of 21% primarily due to the allocation of taxable earnings and losses based on the HLBV method for certain partnerships[116] - For the nine months ended September 30, 2024, income tax expense was calculated based on year-to-date results, a change from prior periods' forecasted effective tax rate under ASC 740-270[117] Note 11 — Related Party Transactions This note details material related party transactions with Clearway Energy Group LLC (CEG) and its subsidiaries, including O&M and administrative services Related Party Expenses (Millions) | Service Type | Q3 2024 Expenses | 9M 2024 Expenses | |:------------------------|:-----------------|:-----------------| | O&M Services (RENOM) | $22 | $59 | | Administrative Services (CEG subsidiaries) | $5 | $17 | | CEG Master Services Agreement (net expenses) | $1 | $4 | - The CEG Master Services Agreement was amended on April 30, 2024, to transfer all Company employees and operations to CEG as of January 1, 2025[122] ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's comprehensive discussion and analysis of the company's financial condition and results of operations for the three and nine months ended September 30, 2024, compared to 2023 Executive Summary The Executive Summary introduces Clearway Energy, Inc. as a leading energy infrastructure investor with a focus on clean energy, owning a diverse portfolio of approximately 9,000 net MW of assets - Clearway Energy, Inc. is a publicly-traded energy infrastructure investor with approximately 6,500 net MW of wind, solar, and BESS facilities and 2,500 net MW of natural gas-fired generation facilities[129] - The majority of the Company's revenues are derived from long-term contractual arrangements with a weighted average remaining contract duration of approximately 10 years as of September 30, 2024[129] - Recent Drop Down Transactions include agreements to acquire Pine Forest (300 MW solar + 200 MW BESS) for $136 million, Luna Valley (200 MW solar) and Daggett 1 (114 MW BESS) for $143 million, Rosamond South I (140 MW solar + 117 MW BESS) for $21 million, and Dan's Mountain (55 MW wind) for $44 million, all expected to close between Q4 2024 and H2 2025[136][137][138][139] - The Company acquired Cedar Creek (160 MW wind) for $117 million on April 16, 2024, and Texas Solar Nova 2 (200 MW solar) for $112 million on March 15, 2024[140][141] - New RA agreements include contracting approximately 97 MW of Walnut Creek's RA for 2027 and approximately 285 MW of Marsh Landing's RA for 2026-2030[142][143] Consolidated Results of Operations This section provides a high-level overview of the company's consolidated financial performance, including operating revenues, costs, and net income, for the three and nine months ended September 30, 2024 and 2023 Consolidated Results of Operations (Millions) | Metric | Q3 2024 | Q3 2023 | Change | 9M 2024 | 9M 2023 | Change | |:--------------------------------------------------|:-------------------|:-------------------|:------------------|:-------------------|:-------------------|:------------------| | Total operating revenues | $486 | $371 | $115 | $1,115 | $1,065 | $50 | | Total operating costs and expenses | $308 | $277 | $31 | $882 | $780 | $102 | | Operating Income | $178 | $94 | $84 | $233 | $285 | $(52) | | Net Income (Loss) | $27 | $15 | $12 | $(15) | $59 | $(74) | | Net Income Attributable to Clearway Energy, Inc. | $36 | $4 | $32 | $85 | $42 | $43 | Business Metrics (Thousands MWh) | Business Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 | |:----------------------------|:--------|:--------|:--------|:--------| | Solar MWh generated/sold | 2,943 | 1,822 | 6,999 | 4,232 | | Wind MWh generated/sold | 2,012 | 2,085 | 7,478 | 7,262 | | Renewables MWh generated/sold | 4,955 | 3,907 | 14,477 | 11,494 | | Conventional MWh generated | 445 | 551 | 695 | 778 | Capacity Factor (%) | Capacity Factor | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 | |:--------------------|:--------|:--------|:--------|:--------| | Solar | 38.9% | 34.2% | 32.5% | 31.7% | | Wind | 22.4% | 24.0% | 29.4% | 28.9% | | Conventional | 87.5% | 97.9% | 90.3% | 87.5% | Management's Discussion of the Results of Operations for the Three Months Ended September 30, 2024 and 2023 This section provides a detailed analysis of the company's financial performance for the third quarter of 2024 compared to the same period in 2023 - Operating revenues increased by $115 million in Q3 2024 compared to Q3 2023, primarily due to a $51 million increase from solar and BESS acquisitions and a $90 million increase from mark-to-market economic hedging activities[159] - Conventional Segment operating revenues decreased by $22 million due to lower prices from merchant operations at Walnut Creek and Marsh Landing, and by $9 million due to lower capacity revenue from PPA expiration at El Segundo[159] - Cost of fuels decreased by $13 million in Q3 2024, driven by lower fuel prices at Walnut Creek and Marsh Landing facilities[160] - Interest expense increased by $91 million in Q3 2024, primarily due to a $90 million change in the fair value of interest rate swaps and a $2 million increase in principal balances for the Renewables segment due to solar and BESS acquisitions[161] - Income tax expense decreased by $24 million in Q3 2024, primarily due to the allocation of taxable earnings and losses, including the effect of applying the HLBV method for certain partnerships[162] - Net loss attributable to noncontrolling and redeemable noncontrolling interests was $9 million in Q3 2024, compared to an income of $11 million in Q3 2023[164][165] Management's Discussion of the Results of Operations for the Nine Months Ended September 30, 2024 and 2023 This section analyzes the company's financial performance for the nine months ended September 30, 2024, compared to the same period in 2023 - Operating revenues increased by $50 million for the nine months ended September 30, 2024, compared to the same period in 2023[167] - Renewables Segment revenue increased by $105 million due to solar and BESS acquisitions, $39 million from higher wind production at Alta facilities, and $9 million from the Cedar Creek wind facility acquisition[167][168] - Conventional Segment revenue decreased by $75 million due to lower capacity revenue from PPA expirations and RA commencement at Walnut Creek, Marsh Landing, and El Segundo, and by $21 million from sales-type lease revenue recognition of Marsh Landing Black Start addition[167] - Operations and maintenance expense increased by $19 million, and depreciation, amortization and accretion increased by $82 million, both primarily due to solar and BESS acquisitions[170][171] - Interest expense increased by $82 million, primarily due to a $67 million change in the fair value of interest rate swaps and an $18 million increase in principal balances for the Renewables segment due to solar and BESS acquisitions[174] - Income tax expense decreased by $37 million, primarily due to the allocation of taxable earnings and losses using the HLBV method and a change in the calculation method to year-to-date results[175] - Net loss attributable to noncontrolling interests and redeemable noncontrolling interests was $100 million for the nine months ended September 30, 2024, compared to an income of $17 million in the prior year[176][177] Liquidity and Capital Resources This section details the company's liquidity position, including cash balances and revolving credit facility availability, and its principal liquidity requirements Liquidity Position (Millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | |:--------------------------------------------------|:------------------------|:------------------------| | Cash and cash equivalents (Clearway Energy, Inc. and Clearway Energy LLC) | $90 | $410 | | Cash and cash equivalents (Subsidiaries) | $202 | $125 | | Restricted cash | $382 | $516 | | Revolving credit facility availability | $592 | $454 | | Total liquidity | $1,266 | $1,505 | - As of September 30, 2024, restricted cash included $183 million for operating expenses, $71 million for current debt service, $89 million for reserves, and $39 million in distribution reserve accounts[180] Credit Ratings | Entity/Notes | S&P | Moody's | |:------------------------------|:----|:--------| | Clearway Energy, Inc. | BB | Ba2 | | 4.750% Senior Notes, due 2028 | BB | Ba2 | | 3.750% Senior Notes, due 2031 | BB | Ba2 | | 3.750% Senior Notes, due 2032 | BB | Ba2 | - For the nine months ended September 30, 2024, capital expenditures totaled $237 million, including $229 million for growth (primarily solar and BESS facilities) and $8 million for maintenance[191] Cash Flow Activity (9M, Millions) | Cash Flow Activity | 2024 | 2023 | Change | |:----------------------------------|:--------|:--------|:--------| | Net cash provided by operating activities | $578 | $496 | $82 | | Net cash used in investing activities | $(674) | $(271) | $(403) | | Net cash used in financing activities | $(281) | $(65) | $(216) | NOLs, Deferred Tax Assets and Uncertain Tax Position Implications, under ASC 740 This section outlines the company's federal and state Net Operating Loss (NOL) carryforwards, Production Tax Credit (PTC) and Investment Tax Credit (ITC) balances, and interest disallowance carryforward - As of December 31, 2023, the Company had a cumulative federal NOL carryforward balance of $353 million (no expiration) and a state NOL carryforward balance of $102 million (expiring between 2024 and 2040)[208] - As of December 31, 2023, PTC and ITC carryforward balances totaled $21 million (expiring between 2035 and 2043), and an interest disallowance carryforward of $75 million (indefinite carryforward)[208][209] - The Company does not anticipate the corporate minimum tax from the Inflation Reduction Act (IRA) will apply to it, nor that the IRA will have a material impact on its consolidated financial statements[211] - Three of the Company's subsidiaries are currently under IRS audit, with proposed adjustments for one subsidiary believed to be without merit and not expected to impact the Company's tax liability[212] Fair Value of Derivative Instruments This section discusses the company's use of energy-related commodity contracts and interest rate swap agreements to mitigate variability in earnings and interest rate risk - The Company uses energy-related commodity contracts to mitigate variability in earnings due to fluctuations in spot market prices and interest rate swap agreements to mitigate interest rate risk associated with variable rate debt[214] Fair Value of Contracts (Millions) | Metric | Sep 30, 2024 | |:--------------------------------------------------|:------------------------| | Fair value of contracts as of December 31, 2023 | $(209) | | Contracts realized or otherwise settled during the period | $(9) | | Changes in fair value | $(8) | | Fair value of contracts as of September 30, 2024 | $(226) | Fair Value Hierarchy (Losses) Gains (Sep 30, 2024, Millions) | Metric | 1 Year or Less | Greater Than 1 Year to 3 Years | Greater Than 3 Years to 5 Years | Greater Than 5 Years | Total Fair Value | |:-------------------------------------------------------------|:---------------|:-------------------------------|:--------------------------------|:---------------------|:-----------------| | Level 2 | $26 | $12 | $51 | $4 | $93 | | Level 3 | $(43) | $(104) | $(89) | $(83) | $(319) | | Total | $(17) | $(92) | $(38) | $(79) | $(226) | Critical Accounting Policies and Estimates This section identifies the company's most critical accounting policies, which are crucial for portraying its financial position and results of operations and involve significant management judgment - The Company's critical accounting policies include income taxes and valuation allowance for deferred tax assets, accounting utilizing HLBV, acquisition accounting, and determining the fair value of financial instruments[221] ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details the company's exposure to various market risks, including commodity price risk, interest rate risk, liquidity risk, and counterparty credit risk - The Company is exposed to commodity price risk (electricity, natural gas, emissions credits), interest rate risk (variable rate debt), liquidity risk, and counterparty credit risk[224] - A $0.50 per MWh increase or decrease in power prices across long-term power commodity contracts would cause an approximate $6 million change to the net value of related derivatives[226] - A 1% (100 basis points) change in interest rates would result in an approximately $1 million change in market interest expense on a rolling twelve-month basis[230] - A 1% (100 basis points) decrease in market interest rates would have increased the fair value of the Company's long-term debt by approximately $328 million as of September 30, 2024[231] - Counterparty credit risk is managed through credit policies, including credit approval, monitoring, mitigation measures (margin, collateral), and netting agreements[233] A significant portion of energy-related commodity contracts are with utilities, including PG&E, which has a below investment-grade credit rating[81] ITEM 4 — CONTROLS AND PROCEDURES This section confirms that the company's disclosure controls and procedures were effective as of September 30, 2024, with no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were effective as of September 30, 2024[235] - There were no material changes in the Company's internal control over financial reporting during the quarter ended September 30, 2024[236] PART II — OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, and other material events ITEM 1 — LEGAL PROCEEDINGS This section states that there are no legal proceedings to report for the period - No legal proceedings to report[238] ITEM 1A — RISK FACTORS This section refers readers to the company's 2023 Form 10-K for a comprehensive discussion of risk factors and confirms that no material changes have occurred since that filing - No material changes in the Company's risk factors since those reported in its 2023 Form 10-K[239] ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section states that there are no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[239] ITEM 3 — DEFAULTS UPON SENIOR SECURITIES This section states that there are no defaults upon senior securities to report for the period - No defaults upon senior securities to report[239] ITEM 4 — MINE SAFETY DISCLOSURES This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[239] ITEM 5 — OTHER INFORMATION This section discloses the entry into a Second Amended and Restated Exchange Agreement related to the acquisition of Pine Forest TE HoldCo LLC, and reports a change in the Board of Directors - On October 28, 2024, the Company entered into a Second Amended and Restated Exchange Agreement, which amends the exchange mechanism for CEG Unitholders to receive Class A or Class C common stock, including an equitable cash settlement for assets not held by Clearway Energy LLC[240][241] - Olivier Jouny was elected to the Board of Directors, effective October 24, 2024, replacing Vincent Stoquart[244] - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended September 30, 2024[248] ITEM 6 — EXHIBITS This section lists all exhibits filed with the Form 10-Q, including various agreements, certifications, and Inline XBRL documents - Exhibit 10.2 is the Second Amended and Restated Exchange Agreement, dated October 28, 2024[250] - Includes Rule 13a-14(a)/15d-14(a) certifications by Craig Cornelius and Sarah Rubenstein, and Section 1350 Certification[250] SIGNATURES This section contains the official certifications and signatures of the company's executive and financial officers Signatures This section contains the required signatures of the company's principal executive officer and principal financial and accounting officer, certifying the accuracy and completeness of the report - The report is signed by Craig Cornelius, President and Chief Executive Officer (Principal Executive Officer), and Sarah Rubenstein, Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)[252]