Clearway Energy(CWEN) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Clearway Energy reported a cash available for distribution (CAFD) of $176 million in Q2 2022, with a total of $174 million for the first half of the year, maintaining a dividend increase of 2% to $2.3604 per share, which is on track to achieve the upper range of its dividend growth objectives for the year [4][10] - Adjusted EBITDA for the first half of the year was $626 million, with Q2 adjusted EBITDA at $366 million [10][11] - The company maintains its 2022 CAFD guidance of $365 million, which includes contributions from the Thermal segment through April [12] Business Line Data and Key Metrics Changes - The Renewable segment delivered strong results, driven by above-average production in the wind portfolio, while the Conventional segment faced challenges due to outages at the El Segundo facility [11] - The company has contracted the remaining 20% of capacity at the Marsh Landing project, which is now fully contracted until approximately the end of 2026 [4][19] Market Data and Key Metrics Changes - The company is currently in the procurement process for the open position at El Segundo and expects to provide updates in the third quarter earnings call [4] - The capital commitments opportunity across Clearway Energy Group is expected to exceed the initial $300 million target set at the beginning of the year [7] Company Strategy and Development Direction - Clearway Energy is focused on executing its growth plan, including the acquisition of the Capistrano portfolio, which is expected to close in the second half of 2022 and will enhance the company's CAFD outlook [5][17] - The company is pursuing acquisitions of appropriate assets while adhering to its underwriting standards, with a focus on enhancing the value of its California natural gas portfolio [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the potential positive impact of the Inflation Reduction Act on renewable energy projects, particularly in terms of tax credits and project financing [22][24] - The company is confident in its ability to grow dividends at the upper range of its 5% to 8% EPS growth target through 2026, supported by a solid CAFD outlook [9][16] Other Important Information - The company has launched a search for a new CFO following the departure of Chad Plotkin, emphasizing the importance of maintaining strong executive leadership [3] - Clearway Energy has allocated approximately $420 million of the $750 million in excess sale proceeds for Thermal, supporting a CAFD per share of $2.10 [9] Q&A Session Summary Question: Strategic options for the California natural gas portfolio - Management indicated that Total's involvement does not change their view on the underlying value of the assets and they are open to monetizing if a suitable offer arises [20][21] Question: Strategy regarding the Inflation Reduction Act - Management noted that the act is a significant positive for renewables, providing more flexibility in tax applications and enhancing project economics [22][23] Question: Visibility on redeploying Thermal cash - Management expressed confidence in redeploying the Thermal cash appropriately, with potential for the $300 million target to be exceeded due to favorable market conditions [30][31] Question: Performance of Texas assets during heat waves - The portfolio performed well during the heat wave, with price spikes observed but overall stability maintained [32] Question: Updates on the conventional portfolio and dispatch approach - Management confirmed that the energy margin is currently open on the assets, with flexibility to capitalize on market volatility [34][35] Question: Landscape of large-cap utility holding companies and returns - Management noted that while there is significant capital flowing into the space, they have not seen a dramatic change in returns compared to previous years [37][38] Question: Impact of the Inflation Reduction Act on existing wind assets - Management highlighted that many assets are relatively new, limiting immediate repowering opportunities, but the act will enhance long-term value [46][47] Question: Supply chain disruptions and solar module availability - Management expressed confidence in their supply chain resilience and compliance with UFLPA, minimizing potential disruptions to project timelines [59][60] Question: Collaboration opportunities with Total - Management outlined potential collaboration areas with Total, including energy management, procurement strategies, and green hydrogen initiatives [66][68]