Clearway Energy(CWEN) - 2023 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements and Notes For Q1 2023, Clearway Energy reported increased operating revenues and improved operating income, with total assets of $12.7 billion and long-term debt of $6.8 billion, driven by strategic acquisitions and refinancing Consolidated Statements of Operations Q1 2023 saw operating revenues rise to $288 million, reversing a prior-year operating loss to a $42 million income, with net loss attributable to the company at zero Consolidated Statements of Operations (Millions USD) | Financial Metric | Three months ended March 31, 2023 (Millions USD) | Three months ended March 31, 2022 (Millions USD) | | :--- | :--- | :--- | | Total operating revenues | $288 | $214 | | Operating Income (Loss) | $42 | $(53) | | Net Loss | $(40) | $(97) | | Net Loss Attributable to Clearway Energy, Inc. | $0 | $(32) | | Loss per Share (Basic and Diluted) | $0.00 | $(0.28) | | Dividends Per Class A/C Share | $0.3745 | $0.3468 | Consolidated Balance Sheets As of March 31, 2023, total assets reached $12.75 billion and total liabilities $8.59 billion, with long-term debt increasing to $6.77 billion Consolidated Balance Sheets (Millions USD) | Balance Sheet Item | March 31, 2023 (Unaudited, Millions USD) | December 31, 2022 (Millions USD) | | :--- | :--- | :--- | | Total Assets | $12,749 | $12,312 | | Cash and cash equivalents | $576 | $657 | | Property, plant and equipment, net | $7,863 | $7,421 | | Total Liabilities | $8,587 | $8,279 | | Current portion of long-term debt | $366 | $322 | | Long-term debt | $6,769 | $6,491 | | Total Stockholders' Equity | $4,153 | $4,026 | Consolidated Statements of Cash Flows Q1 2023 operating cash flow decreased to $75 million, while financing activities provided $28 million, a significant shift from the prior year's cash usage Consolidated Statements of Cash Flows (Millions USD) | Cash Flow Activity | Three months ended March 31, 2023 (Millions USD) | Three months ended March 31, 2022 (Millions USD) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $75 | $93 | | Net Cash Used in Investing Activities | $(86) | $(92) | | Net Cash Provided by (Used in) Financing Activities | $28 | $(184) | | Net Increase (Decrease) in Cash | $17 | $(188) | Note 3 — Acquisitions and Dispositions The company acquired the 300 MW Daggett 3 solar project for $21 million, accounted for as an asset acquisition under common control - The company acquired the Daggett 3 solar project, a 300 MW solar and storage facility under construction, for $21 million in cash consideration from its sponsor, CEG[56] - The acquisition was accounted for as a transfer of assets under common control, with the net assets acquired recorded at a historical cost of $15 million[56] Note 7 — Long-term Debt Total debt increased to $7.19 billion, with the company refinancing its revolving credit facility to $700 million and extending its maturity to 2028 Long-term Debt (Millions USD) | Debt Component | March 31, 2023 (Millions USD) | December 31, 2022 (Millions USD) | | :--- | :--- | :--- | | Senior Notes | $2,125 | $2,125 | | Revolving Credit Facility | $0 | $0 | | Non-recourse project-level debt | $5,069 | $4,745 | | Total debt | $7,194 | $6,870 | - On March 15, 2023, the company refinanced its credit agreement, increasing revolving commitments to $700 million, extending maturity to March 2028, and transitioning from LIBOR to SOFR[87] - As part of the Daggett 3 acquisition, the company assumed a financing agreement including a $181 million construction loan, a $229 million tax equity bridge loan, and a $75 million sponsor equity bridge loan (repaid at acquisition)[90] Note 9 — Segment Reporting Q1 2023 segment performance shows Renewables with $193 million revenue and Conventional Generation with $95 million revenue, reflecting a shift from prior year Segment Reporting (Q1 2023, Millions USD) | Segment (Q1 2023) | Operating Revenues (Millions USD) | Net Income (Loss) (Millions USD) | Total Assets (Millions USD) | | :--- | :--- | :--- | :--- | | Conventional Generation | $95 | $24 | $2,203 | | Renewables | $193 | $(48) | $10,055 | | Corporate | $0 | $(16) | $491 | | Total | $288 | $(40) | $12,749 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes revenue growth to mark-to-market gains and lower fuel costs, with strong liquidity and continued investment in renewable assets like Daggett 3 Executive Summary Clearway Energy, a major U.S. renewable energy owner, expanded its portfolio with the Daggett 3 solar project and plans to repower the Cedro Hill wind project - 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[109] - On February 17, 2023, the company acquired the Daggett 3 solar project (300 MW solar with matching storage) for $21 million[119] - On May 3, 2023, the company agreed to repower the Cedro Hill wind project, expecting to invest approximately $63 million to extend its PPA for an additional 15 years to 2045[119] Consolidated Results of Operations Q1 2023 operating revenues increased by $74 million, driven by favorable mark-to-market changes and reduced operating costs post-Thermal Business sale Consolidated Results of Operations (Millions USD) | Line Item | Q1 2023 (Millions USD) | Q1 2022 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Total operating revenues | $288 | $214 | $74 | | Mark-to-market for economic hedges | $19 | ($126) | $145 | | Total operating costs and expenses | $246 | $267 | ($21) | | Operating Income (Loss) | $42 | ($53) | $95 | | Interest expense | $99 | $47 | $52 | | Net Loss | ($40) | ($97) | $57 | - The increase in operating revenue was primarily driven by a $145 million positive change in mark-to-market for economic hedges in the ERCOT and PJM markets, offset by a $59 million revenue decrease from the sale of the Thermal Business[121] - Operations and maintenance expense increased by $7 million, driven by the acquisition of the Capistrano Wind Portfolio and maintenance activities at wind and conventional facilities[123] Liquidity and Capital Resources Total liquidity increased to $1.57 billion, supported by a refinanced revolving credit facility and $88 million in capital expenditures for growth projects Liquidity and Capital Resources (Millions USD) | Liquidity Component | March 31, 2023 (Millions USD) | December 31, 2022 (Millions USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $576 | $657 | | Restricted cash | $437 | $339 | | Revolving credit facility availability | $561 | $370 | | Total liquidity | $1,574 | $1,366 | - The company refinanced its revolving credit facility on March 15, 2023, increasing its size to $700 million and extending the maturity to March 2028[133] - Capital expenditures for Q1 2023 totaled $88 million, including $81 million for growth, primarily for the Daggett 3 ($74 million) and Waiawa ($7 million) solar projects[141] Quantitative and Qualitative Disclosures About Market Risk The company manages commodity price and interest rate risks, with a $0.50/MWh power price change impacting derivatives by $7 million and a 1% interest rate change affecting expense by $1 million - A hypothetical $0.50 per MWh increase or decrease in power prices would change the net value of power derivatives by approximately $7 million as of March 31, 2023[174] - 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[178] - The fair value of the company's debt was $6.76 billion, while its carrying value was $7.20 billion as of March 31, 2023[179] Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures, with no material changes to internal control over financial reporting in Q1 2023 - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[182] - No changes occurred in the company's internal control over financial reporting during the quarter ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, these controls[183] PART II — OTHER INFORMATION Legal Proceedings The company is in litigation with the City of Georgetown over the Buckthorn Westex solar project PPA, with a trial expected in October 2023 - The company's subsidiary, Buckthorn Westex, is in a legal dispute with the City of Georgetown, Texas, over the PPA for the Buckthorn solar project[104] - Georgetown alleges fraud and breach of contract, seeking to terminate the PPA. Buckthorn Westex denies the claims and has counterclaimed for non-payment[104] - A court denied Georgetown's motion for summary judgment and granted Buckthorn Westex's motion regarding the fraud claim. The case is expected to go to trial in October 2023[104] Risk Factors No material changes to the company's risk factors have occurred since those reported in its 2022 Annual Report on Form 10-K - No material changes in the Company's risk factors have occurred since those reported in its 2022 Form 10-K[187]