Clearway Energy(CWEN) - 2022 Q3 - Quarterly Report

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This section provides a standard cautionary statement regarding forward-looking information, identifying common forward-looking terms and listing various known and unknown risks that could cause the Company's actual results to differ materially from those projected - Forward-looking statements are identified by words such as 'believes,' 'projects,' 'anticipates,' 'plans,' 'expects,' 'intends,' and 'estimates'[7] - Key risks include the Company's ability to maintain and grow its quarterly dividend, potential risks related to COVID-19, relationships with GIP, TotalEnergies and CEG, successful identification and consummation of acquisitions/dispositions, ability to raise additional capital, changes in law, hazards customary to the power production industry, operational efficiency, counterparty obligations, government regulation, operating/financial restrictions, cybersecurity, and access to capital markets[7] GLOSSARY OF TERMS This section provides definitions for key terms and abbreviations used throughout the report, covering financial metrics (e.g., Adjusted EBITDA, CAFD), company entities (e.g., CEG, GIP, KKR, TotalEnergies), debt instruments (e.g., Senior Notes), and project types (e.g., Distributed Solar, Utility Scale Solar, Thermal Business) PART I — FINANCIAL INFORMATION This part presents Clearway Energy, Inc.'s unaudited consolidated financial statements, including income, comprehensive income, balance sheets, cash flows, and stockholders' equity, along with detailed notes. It also includes management's discussion and analysis of financial condition and results of operations, market risk disclosures, and controls and procedures ITEM 1 — FINANCIAL STATEMENTS AND NOTES This item presents the unaudited consolidated financial statements for Clearway Energy, Inc. for the three and nine months ended September 30, 2022 and 2021, and the balance sheets as of September 30, 2022 and December 31, 2021. It includes detailed notes on the nature of business, accounting policies, acquisitions, dispositions, investments, fair value measurements, derivatives, long-term debt, earnings per share, segment reporting, income taxes, related party transactions, and legal contingencies CONSOLIDATED STATEMENTS OF INCOME Presents the company's consolidated statements of income for the three and nine months ended September 30, 2022 and 2021 Three Months Ended September 30 (in millions, except per share amounts): | Metric | 2022 | 2021 | Change (YoY) | | :----------------------------------- | :--- | :--- | :----------- | | Total operating revenues | $340 | $351 | $(11) | | Total operating costs and expenses | $235 | $262 | $(27) | | Operating Income | $105 | $89 | $16 | | Net Income (Loss) | $62 | $25 | $37 | | Net Income Attributable to Clearway Energy, Inc. | $32 | $21 | $11 | | Earnings per Weighted Average Class A and Class C Common Share | $0.28 | $0.18 | $0.10 | | Dividends Per Class A Common Share | $0.3604 | $0.3345 | $0.0259 | | Dividends Per Class C Common Share | $0.3604 | $0.3345 | $0.0259 | Nine Months Ended September 30 (in millions, except per share amounts): | Metric | 2022 | 2021 | Change (YoY) | | :----------------------------------- | :--- | :--- | :----------- | | Total operating revenues | $922 | $968 | $(46) | | Total operating costs and expenses | $755 | $760 | $(5) | | Gain on sale of business | $1,291 | — | $1,291 | | Operating Income | $1,458 | $208 | $1,250 | | Net Income (Loss) | $1,114 | $(19) | $1,133 | | Net Income Attributable to Clearway Energy, Inc. | $570 | $59 | $511 | | Earnings per Weighted Average Class A and Class C Common Share | $4.89 | $0.51 | $4.38 | | Dividends Per Class A Common Share | $1.0608 | $0.9875 | $0.0733 | | Dividends Per Class C Common Share | $1.0608 | $0.9875 | $0.0733 | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Presents the company's consolidated statements of comprehensive income for the three and nine months ended September 30, 2022 and 2021 Three Months Ended September 30 (in millions): | Metric | 2022 | 2021 | Change (YoY) | | :----------------------------------- | :--- | :--- | :----------- | | Net Income (Loss) | $62 | $25 | $37 | | Other Comprehensive Income | $11 | $3 | $8 | | Comprehensive Income (Loss) | $73 | $28 | $45 | | Comprehensive Income Attributable to Clearway Energy, Inc. | $36 | $22 | $14 | Nine Months Ended September 30 (in millions): | Metric | 2022 | 2021 | Change (YoY) | | :----------------------------------- | :--- | :--- | :----------- | | Net Income (Loss) | $1,114 | $(19) | $1,133 | | Other Comprehensive Income | $31 | $14 | $17 | | Comprehensive Income (Loss) | $1,145 | $(5) | $1,150 | | Comprehensive Income Attributable to Clearway Energy, Inc. | $582 | $65 | $517 | CONSOLIDATED BALANCE SHEETS Presents the company's consolidated balance sheets as of September 30, 2022, and December 31, 2021 Consolidated Balance Sheet Highlights (in millions): | Metric | Sep 30, 2022 | Dec 31, 2021 | Change | | :----------------------------------- | :----------- | :----------- | :----- | | Total Assets | $12,596 | $12,813 | $(217) | | Total Liabilities | $8,480 | $9,513 | $(1,033) | | Total Stockholders' Equity | $4,109 | $3,300 | $809 | | Cash and cash equivalents | $793 | $179 | $614 | | Restricted cash | $363 | $475 | $(112) | | Current assets held-for-sale | — | $631 | $(631) | | Current portion of long-term debt | $493 | $772 | $(279) | | Current liabilities held-for-sale | — | $494 | $(494) | | Long-term debt | $6,519 | $6,939 | $(420) | CONSOLIDATED STATEMENTS OF CASH FLOWS Presents the company's consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021 Nine Months Ended September 30 (in millions): | Metric | 2022 | 2021 | Change (YoY) | | :----------------------------------- | :--- | :--- | :----------- | | Net Cash Provided by Operating Activities | $607 | $529 | $78 | | Net Cash Provided by (Used in) Investing Activities | $1,100 | $(430) | $1,530 | | Net Cash Used in Financing Activities | $(1,205) | $(9) | $(1,196) | | Net Increase in Cash, Cash Equivalents and Restricted Cash | $502 | $90 | $412 | | Cash, Cash Equivalents and Restricted Cash at end of period | $1,156 | $555 | $601 | CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Presents the company's consolidated statements of stockholders' equity for the nine months ended September 30, 2022 and 2021 - Total Stockholders' Equity increased from $3,300 million at December 31, 2021, to $4,109 million at September 30, 2022[26] - Net income attributable to Clearway Energy, Inc. was $570 million for the nine months ended September 30, 2022, contributing to the increase in retained earnings[26] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS This section provides detailed disclosures and explanations for the financial statements, covering the company's business nature, significant accounting policies, recent acquisitions and dispositions, equity method investments, fair value measurements, derivative instruments, long-term debt, earnings per share calculations, segment performance, income taxes, related party transactions, and legal contingencies Note 1 — Nature of Business Describes Clearway Energy, Inc.'s business as an energy infrastructure investor, its sponsorship, asset portfolio, and key transactions - Clearway Energy, Inc. is a publicly-traded energy infrastructure investor in modern, sustainable, and long-term contracted assets across North America[32] - The Company is sponsored by GIP and TotalEnergies through Clearway Energy Group LLC (CEG), which became equally owned by GIP and TotalEnergies as of September 12, 2022[32][39] - The Company is one of the largest renewable energy owners in the U.S. with over 5,500 net MW of installed wind and solar generation projects, and also includes approximately 2,500 net MW of natural gas-fired generation facilities, totaling over 8,000 net MW of assets[33] - On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR[34] - As of September 30, 2022, the Company owned 57.86% of the economic interests of Clearway Energy LLC, with CEG owning 42.14%[36] Note 2 — Summary of Significant Accounting Policies Outlines the company's significant accounting policies, including cash, dividends, revenue recognition, and segment reporting Cash, Cash Equivalents and Restricted Cash (in millions): | Metric | Sep 30, 2022 | Dec 31, 2021 | | :----------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $793 | $179 | | Restricted cash | $363 | $475 | | Total Cash, cash equivalents and restricted cash | $1,156 | $654 | - Restricted cash includes $144 million for operating expenses, $66 million for current debt service, $124 million for reserves (debt service, performance obligations, capital expenditures), and $29 million in distribution reserve accounts as of September 30, 2022[44] Dividends Per Share (Class A & C): | Quarter | 2022 (per share) | | :----------------------------------- | :--------------- | | Third Quarter | $0.3604 | | Second Quarter | $0.3536 | | First Quarter | $0.3468 | Note: On November 2, 2022, the Company declared quarterly dividends of $0.3672 per share payable on December 15, 2022. - The majority of the Company's revenues are obtained through Power Purchase Agreements (PPAs) or similar contractual agreements, often accounted for as operating leases[54] Total Operating Revenues by Segment (in millions): | Period | Conventional Generation | Renewables | Thermal | Total | | :----------------------------------- | :---------------------- | :--------- | :------ | :---- | | Three months ended Sep 30, 2022 | $102 | $238 | — | $340 | | Three months ended Sep 30, 2021 | $118 | $179 | $54 | $351 | | Nine months ended Sep 30, 2022 | $313 | $532 | $77 | $922 | | Nine months ended Sep 30, 2021 | $329 | $487 | $152 | $968 | Note 3 — Acquisitions and Dispositions Details the company's recent acquisitions and dispositions, including solar and wind projects and the sale of the Thermal Business - On October 3, 2022, the Company acquired the Waiawa solar project (36 MW with matching storage) for $20 million cash[73] - On August 22, 2022, the Company acquired the Capistrano Wind Portfolio (five wind projects, 413 MW) for approximately $239 million net consideration[74] - On March 25, 2022, the Company acquired the Mililani I solar project (39 MW with matching storage) for $22 million cash[77] - On August 1, 2022, the Company sold 100% of its Class A interests in the Kawailoa Partnership for $9 million cash[79] - On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR for net proceeds of approximately $1.46 billion, resulting in a gain on sale of business of approximately $1.29 billion[81] Note 4 — Investments Accounted for by the Equity Method and Variable Interest Entities Discusses the company's accounting for equity method investments and variable interest entities, including exposure to loss - The Company consolidates certain entities identified as Variable Interest Entities (VIEs), primarily related to tax equity arrangements for wind and solar facilities[82] - The Company's maximum exposure to loss in unconsolidated entities (equity method investments) is limited to its equity investment balance, which was $377 million as of September 30, 2022[89] Note 5 — Fair Value of Financial Instruments Provides fair value disclosures for financial instruments, including long-term debt and derivatives, and their valuation hierarchy Long-term Debt Carrying Amount and Fair Value (in millions): | Metric | Sep 30, 2022 | Dec 31, 2021 | | :----------------------------------- | :----------- | :----------- | | Carrying Amount | $7,077 | $7,782 | | Fair Value | $6,297 | $7,997 | Fair Value Hierarchy for Long-term Debt (in millions): | Level | Sep 30, 2022 | Dec 31, 2021 | | :----------------------------------- | :----------- | :----------- | | Level 2 | $1,752 | $2,159 | | Level 3 | $4,545 | $5,838 | Derivative Assets and Liabilities Fair Value (in millions): | Metric | Sep 30, 2022 | Dec 31, 2021 | | :----------------------------------- | :----------- | :----------- | | Derivative assets | $94 | $6 | | Derivative liabilities | $370 | $179 | - Significant unobservable inputs for Level 3 commodity contracts include forward market prices (per MWh) ranging from $23.33 to $129.06, with a weighted average of $41.69 as of September 30, 2022[101] - A significant portion of commodity contracts are with utilities with strong credit quality, but PG&E, a significant counterparty, has a credit rating below investment-grade[103] Note 6 — Derivative Instruments and Hedging Activities Describes the company's use of derivative instruments for hedging interest rate and commodity price risks, and their financial impact - The Company uses interest rate swap agreements to hedge the variability of expected future cash interest payments, with instruments extending through 2031[106] - Energy-related derivative instruments extend through 2033 but are not designated as cash flow or fair value hedges[107] Total Derivatives Fair Value (in millions): | Metric | Sep 30, 2022 | Dec 31, 2021 | | :----------------------------------- | :----------- | :----------- | | Total Derivative Assets | $94 | $6 | | Total Derivative Liabilities | $370 | $242 | Impact of Derivative Instruments on Consolidated Statements of Income (in millions): | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest Rate Contracts (Interest expense) | $33 | $6 | $110 | $42 | | Commodity Contracts (Mark-to-market for economic hedging activities) | $(17) | $(36) | $(191) | $(86) | Note 7 — Long-term Debt Details the company's long-term debt, including changes in balances, repayments, and new debt acquired Total Debt (in millions): | Metric | Sep 30, 2022 | Dec 31, 2021 | Change | | :----------------------------------- | :----------- | :----------- | :----- | | Total debt | $7,073 | $7,778 | $(705) | | Less current maturities | $(493) | $(772) | $279 | | Total long-term debt | $6,519 | $6,939 | $(420) | - The Company had no outstanding borrowings under the revolving credit facility as of September 30, 2022, having repaid $325 million during the nine months ended September 30, 2022, primarily using proceeds from the Thermal Disposition[123] - The $335 million outstanding borrowings under the Bridge Loan Agreement were repaid on May 3, 2022, utilizing proceeds from the Thermal Disposition[124] - As part of the Capistrano Wind Portfolio acquisition, the Company acquired $164 million in non-recourse project-level debt[125] - The Company recorded a loss on debt extinguishment of $2 million during the nine months ended September 30, 2022, related to the write-off of deferred finance costs for Viento Funding II, LLC[127] Note 8 — Earnings Per Share Presents the calculation of earnings per share attributable to Clearway Energy, Inc. for the reported periods Earnings Per Share Attributable to Clearway Energy, Inc. (in millions, except per share amounts): | Period | Net Income | Weighted Average Common Shares Outstanding | Earnings Per Share | | :----------------------------------- | :--------- | :----------------------------------------- | :----------------- | | Three Months Ended Sep 30, 2022 | $32 | 117 | $0.28 | | Three Months Ended Sep 30, 2021 | $21 | 117 | $0.18 | | Nine Months Ended Sep 30, 2022 | $570 | 117 | $4.89 | | Nine Months Ended Sep 30, 2021 | $59 | 117 | $0.51 | Note 9 — Segment Reporting Provides financial information by operating segment, including revenues and operating income, reflecting the impact of the Thermal Business sale Operating Revenues by Segment (in millions): | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Conventional Generation | $102 | $118 | $313 | $329 | | Renewables | $238 | $179 | $532 | $487 | | Thermal | — | $54 | $77 | $152 | | Total Operating Revenues | $340 | $351 | $922 | $968 | Operating Income (Loss) by Segment (in millions): | Segment | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Conventional Generation | $146 | $160 | | Renewables | $32 | $54 | | Thermal | $23 | $26 | | Corporate | $1,257 | $(32) | | Total Operating Income | $1,458 | $208 | Note: The Corporate segment's operating income in 2022 includes the $1.291 billion gain on the sale of the Thermal Business. Note 10 — Income Taxes Discusses the company's income tax expense, effective tax rate, and the impact of the Thermal Business sale and tax legislation Effective Income Tax Rate: | Period | Income (Loss) Before Income Taxes (Millions) | Income Tax Expense (Benefit) (Millions) | Effective Income Tax Rate | | :----------------------------------- | :------------------------------------------- | :-------------------------------------- | :------------------------ | | Three Months Ended Sep 30, 2022 | $75 | $13 | 17.3% | | Three Months Ended Sep 30, 2021 | $26 | $1 | 3.8% | | Nine Months Ended Sep 30, 2022 | $1,351 | $237 | 17.5% | | Nine Months Ended Sep 30, 2021 | $(31) | $(12) | 38.7% | - The primary driver for the difference in the effective tax rate from the statutory rate of 21% is the allocation of taxable earnings and losses, including the gain on the sale of the Thermal Business[141] - The sale of the Thermal Business was treated as a discrete event, and associated income taxes were recorded during the nine months ended September 30, 2022[143] Note 11 — Related Party Transactions Details transactions with related parties, including O&M services and administrative services - Expenses for O&M services from Clearway Renewable Operation & Maintenance LLC (RENOM) were $19 million for Q3 2022 (vs. $13 million in Q3 2021) and $49 million for YTD 2022 (vs. $40 million in YTD 2021)[145] - Expenses for administrative services from CEG subsidiaries were $3 million for Q3 2022 (vs. $3 million in Q3 2021) and $11 million for YTD 2022 (vs. $10 million in YTD 2021)[146] - Net expenses under CEG Master Services Agreements were $1 million for Q3 2022 (vs. $1 million in Q3 2021) and $4 million for YTD 2022 (vs. $3 million in YTD 2021)[148] Note 12 — Contingencies Discusses legal contingencies, specifically the Buckthorn Solar Litigation, and the company's policy for recording estimated losses - The Company is involved in the Buckthorn Solar Litigation, where the City of Georgetown, Texas, alleges fraud and breach of contract related to the Buckthorn Westex solar project and PPA[152] - Buckthorn Westex denies the allegations, claims Georgetown breached its contracts, and is vigorously defending its rights, with the case expected to proceed to trial in June 2023[152] - The Company records reserves for estimated losses from contingencies when a loss is probable and the amount can be reasonably estimated[150] ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This item provides management's perspective on the company's financial performance, condition, and future outlook. It includes an executive summary, detailed analysis of operating results for both three and nine-month periods, liquidity and capital resources, cash flow discussion, tax implications, fair value of derivatives, and critical accounting policies Executive Summary Provides an overview of Clearway Energy, Inc.'s business, asset portfolio, recent strategic transactions, and key operational considerations - Clearway Energy, Inc. is a publicly-traded energy infrastructure investor in sustainable and long-term contracted assets across North America, with over 8,000 net MW of assets, including 5,500 net MW of wind and solar and 2,500 net MW of natural gas-fired generation[159][160] - The weighted average remaining contract duration of offtake agreements was approximately 11 years as of September 30, 2022[160] - On May 1, 2022, the Company completed the sale of its Thermal Business to KKR for $1.46 billion net proceeds, resulting in a $1.29 billion gain[166] - Recent acquisitions include the Capistrano Wind Portfolio (413 MW for $239 million), Waiawa solar project (36 MW for $20 million), and Mililani I solar project (39 MW for $22 million)[167][168][169] - The Company repaid $305 million on its revolving credit facility and a $335 million bridge loan using proceeds from the Thermal Disposition[174] - The U.S. Fish and Wildlife Service (FWS) proposed reclassifying the northern long-eared bat as endangered, which could impact renewable energy facility siting and operations[177] - The Company has not experienced any material financial or operational impacts related to COVID-19, with all facilities remaining operational[182] Consolidated Results of Operations Presents selected consolidated financial information and business metrics for the three and nine months ended September 30, 2022 and 2021 Selected Financial Information (in millions): | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Operating Revenues | $340 | $351 | $922 | $968 | | Total Operating Costs and Expenses | $235 | $262 | $755 | $760 | | Gain on sale of business | — | — | $1,291 | — | | Operating Income | $105 | $89 | $1,458 | $208 | | Net Income Attributable to Clearway Energy, Inc. | $32 | $21 | $570 | $59 | Business Metrics: | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Renewables MWh generated/sold | 11,102 | 8,640 | | Thermal MWt sold | 835 | 1,577 | | Conventional MWh generated | 912 | 897 | | Conventional equivalent availability factor | 92.5% | 93.4% | Management's Discussion of the Results of Operations for the Three Months Ended September 30, 2022 and 2021 Analyzes the company's operating results for the three months ended September 30, 2022 and 2021, highlighting key revenue and expense drivers - Operating revenues decreased by $11 million YoY, primarily due to a $55 million decrease from the Thermal Segment sale, partially offset by a $37 million increase from Renewables acquisitions and repowering[186] - Cost of fuels decreased by $20 million YoY due to the sale of the Thermal Business[187] - Operations and maintenance expense increased by $2 million YoY, driven by Renewables acquisitions and higher material costs, partially offset by the Thermal Business sale[188] - Interest expense decreased by $35 million YoY, primarily due to a $27 million change in the fair value of interest rate swaps and reduced principal balances[191] - Income tax expense increased by $12 million YoY to $13 million, driven by increased taxable earnings[192] Management's Discussion of the Results of Operations for the Nine Months Ended September 30, 2022 and 2021 Analyzes the company's operating results for the nine months ended September 30, 2022 and 2021, focusing on significant changes and their causes - Operating revenues decreased by $46 million YoY, primarily due to a $78 million decrease from the Thermal Segment sale and a $68 million increase in unrealized losses from economic hedging, partially offset by a $104 million increase from Renewables acquisitions and repowering[195] - A gain on sale of business of $1.29 billion was recorded from the Thermal Business sale on May 1, 2022[199] - Loss on debt extinguishment was $2 million in 2022 (write-off of finance costs for Viento Funding II, LLC) compared to $42 million in 2021 (redemption of 2025 Senior Notes)[202][203] - Interest expense decreased by $89 million YoY, driven by a $68 million change in the fair value of interest rate swaps and decreased principal balances[204] - Income tax expense increased by $249 million YoY to $237 million, primarily due to increased taxable earnings, including the gain from the Thermal Business sale[205] - Income attributable to noncontrolling interests increased by $622 million YoY to $544 million, primarily driven by CEG's economic interest in Clearway Energy LLC, including the gain on sale of the Thermal Business[206][207] Liquidity and Capital Resources Discusses the company's liquidity position, capital resources, credit ratings, capital expenditures, and debt obligations Current Liquidity Position (in millions) as of September 30, 2022: | Metric | Amount | | :----------------------------------- | :----- | | Cash and cash equivalents | $793 | | Restricted cash | $363 | | Revolving credit facility availability | $383 | | Total liquidity | $1,539 | - The $1.46 billion net proceeds from the Thermal Disposition were utilized to repay certain borrowings and invested in short-term investments[215] Credit Ratings as of September 30, 2022: | 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 | - Capital expenditures for the nine months ended September 30, 2022, totaled $95 million, including $75 million in growth expenditures for Renewables and $16 million in maintenance expenditures[220] - The Company's pro-rata share of non-recourse debt held by unconsolidated affiliates was approximately $333 million as of September 30, 2022[232] Cash Flow Discussion Provides an analysis of the company's cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 Cash Flow Summary (in millions): | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net Cash Provided by Operating Activities | $607 | $529 | $78 | | Net Cash Provided by (Used in) Investing Activities | $1,100 | $(430) | $1,530 | | Net Cash Used in Financing Activities | $(1,205) | $(9) | $(1,196) | - The $1,530 million increase in net cash provided by investing activities was primarily driven by $1,457 million in proceeds from the sale of the Thermal Business[239] - The $1,196 million increase in net cash used in financing activities was mainly due to decreased proceeds from long-term debt issuance and revolving credit facility, and decreased contributions from noncontrolling interest members[240] NOLs, Deferred Tax Assets and Uncertain Tax Position Implications, under ASC 740 Addresses the company's net operating losses (NOLs), deferred tax assets, and the implications of the Inflation Reduction Act of 2022 - As of December 31, 2021, the Company had a cumulative federal NOL carryforward balance of $1.3 billion, with an estimated $837 million utilized due to the taxable gain from the Thermal Business sale[241] - The Company estimates it will not pay material federal income tax through 2027 due to NOL utilization and benefits from renewable assets, but expects to pay approximately $32 million in state income taxes for 2022 and early 2023[241][243] - The Company does not anticipate the 15% corporate minimum tax from the Inflation Reduction Act of 2022 (IRA) applying to it or having a material impact on its consolidated financial statements[246] Fair Value of Derivative Instruments Presents the fair value of the company's derivative instruments and their classification within the fair value hierarchy Fair Value of Contracts (in millions): | Metric | Sep 30, 2022 | Dec 31, 2021 | | :----------------------------------- | :----------- | :----------- | | Fair value of contracts | $(276) | $(236) | Fair Value Hierarchy for Derivatives (in millions) as of September 30, 2022: | Level | 1 Year or Less | 1 to 3 Years | 3 to 5 Years | Greater 5 Years | Total Fair Value | | :----------------------------------- | :------------- | :----------- | :----------- | :-------------- | :--------------- | | Level 2 | $23 | $44 | $15 | $12 | $94 | | Level 3 | $(79) | $(98) | $(72) | $(121) | $(370) | | Total | $(56) | $(54) | $(57) | $(109) | $(276) | Critical Accounting Policies and Estimates Identifies the company's critical accounting policies and estimates that require significant management judgment - The Company's critical accounting policies, requiring significant judgment and estimates, include income taxes and valuation allowance for deferred tax assets, accounting utilizing Hypothetical Liquidation at Book Value (HLBV), and acquisition accounting[256] Recent Accounting Developments Provides an overview of recent accounting pronouncements and their potential impact on the company's financial statements ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This item discusses the company's exposure to various market risks, including interest rate risk, liquidity risk, commodity price risk, and counterparty credit risk, and outlines how these risks are managed - A 1% change (100 basis points) in interest rates would result in an approximately $1 million change in market interest expense on a rolling twelve-month basis[263] - A 1% decrease in market interest rates would have increased the fair value of the Company's long-term debt by approximately $361 million as of September 30, 2022[264] - A $0.50 per MWh increase or decrease in power prices across derivative contracts would cause an approximately $7 million change to the net value of power derivatives[267] - The Company manages counterparty credit risk through credit policies, including an established credit approval process and the use of credit mitigation measures[268] ITEM 4 — CONTROLS AND PROCEDURES This item states that the company's disclosure controls and procedures were effective as of September 30, 2022, and reports no material changes in internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were effective as of September 30, 2022[270] - There were no material changes in the Company's internal control over financial reporting during the quarter ended September 30, 2022[271] PART II — OTHER INFORMATION This part provides additional information including legal proceedings, risk factors, unregistered sales of equity securities, defaults upon senior securities, mine safety disclosures, other information (board changes), and a list of exhibits ITEM 1 — LEGAL PROCEEDINGS Refers to Note 12, Contingencies, for a discussion of material legal proceedings involving the company ITEM 1A — RISK FACTORS States that there have been no material changes in the company's risk factors since its 2021 Form 10-K - There have been no material changes in the Company's risk factors since those reported in its 2021 Form 10-K[275] ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Reports no unregistered sales of equity securities or use of proceeds during the period - None[276] ITEM 3 — DEFAULTS UPON SENIOR SECURITIES Reports no defaults upon senior securities during the period - None[277] ITEM 4 — MINE SAFETY DISCLOSURES States that mine safety disclosures are not applicable to the company - Not applicable[278] ITEM 5 — OTHER INFORMATION Discloses changes to the Board of Directors, including the retirement of Ferrell P. McClean and the election of Guillaume Hédiard, Vincent Stoquart, and Emmanuel Barrois as new directors, effective October 27, 2022 - Ferrell P. McClean retired from the Board of Directors effective October 27, 2022[279] - Guillaume Hédiard, Vincent Stoquart, and Emmanuel Barrois were elected as new members of the Board, effective October 27, 2022[280] ITEM 6 — EXHIBITS Lists the exhibits filed with the Form 10-Q, including amendments to credit agreements, certifications, and XBRL documents - Includes the Seventh Amendment to Amended and Restated Credit Agreement (Exhibit 10.1)[284] - Includes Rule 13a-14(a)/15d-14(a) certifications (Exhibits 31.1, 31.2) and Section 1350 Certification (Exhibit 32)[285] - Includes Inline XBRL Instance Document and related taxonomy extension files[285] SIGNATURES Contains the official signatures of the Company's principal executive and financial officers, certifying the report - The report is signed by Christopher S. Sotos, President and Chief Executive Officer, and Sarah Rubenstein, Senior Vice President and Chief Accounting Officer[288] - The report was dated November 2, 2022[289]