Clearway Energy, Inc. Reports Full Year 2018 Financial Results

  • Full year financial performance in-line with expectations
  • Completed new sponsorship with Global Infrastructure Partners (GIP)
    as the Company’s controlling shareholder
  • Invested $94 million1 in new accretive
    growth investments in 2018
  • Raised $754 million in new corporate level capital for growth
    investments and balance sheet management
  • Announced modified capital allocation approach on February 14, 2019
    due to Pacific Gas & Electric’s (PG&E) bankruptcy filing

PRINCETON, N.J.–(BUSINESS WIRE)–Clearway Energy, Inc. (NYSE: CWEN, CWEN.A) today reported full year 2018
financial results including Net Income of $54 million, Adjusted EBITDA
of $983 million, Cash from Operating Activities of $498 million, and
Cash Available for Distribution (CAFD) of $291 million.

“In 2018, Clearway Energy began a new era under sponsorship by GIP,
raised $754 million in new capital for growth and balance sheet
management, closed on $94 million of accretive transactions, and met
financial expectations despite weak renewable energy conditions in the
fourth quarter.” said Christopher Sotos, Clearway Energy, Inc.’s
President and Chief Executive Officer. “As we move forward into 2019, we
are confident that our recently announced modified capital allocation
approach will allow us to prudently navigate the impacts on the Company
caused by the Pacific Gas and Electric bankruptcy. Additionally, and
under GIP’s stewardship, Clearway Group’s continued investment in its
development pipeline will over time lead to additional projects placed
into the Company’s Right of First Offer pipeline. The addition of Hawaii
Solar Phase II to the ROFO pipeline, as well as the backstop of the
Carlsbad purchase, were the most recent examples of our strong
partnership with Clearway Group and GIP.”

Overview of Financial and Operating Results

Segment Results

   

Table 1: Net (Loss)/Income

 
($ millions) Three Months Ended Twelve Months Ended
Segment 12/31/18   12/31/17 12/31/18   12/31/17
Conventional 28 33 135 120
Renewables (45 ) (49 ) 86 8
Thermal 5 3 29 25
Corporate (79 ) (84 ) (196 ) (177 )
Net (Loss)/Income (91 ) (97 ) 54   (24 )
 

Table 2: Adjusted EBITDA

 

($ millions)

Three Months Ended Twelve Months Ended
Segment 12/31/18 12/31/17 12/31/18 12/31/17
Conventional 77 84 302 305
Renewables 110 113 634 589
Thermal 14 12 64 58
Corporate (1 ) (4 ) (17 ) (17 )
Adjusted EBITDA 200   205   983   935  
 

Table 3: Cash from Operating Activities and Cash Available for
Distribution (CAFD)

 

 

Three Months Ended Twelve Months Ended
($ millions) 12/31/18 12/31/17 12/31/18 12/31/17
Cash from Operating Activities 102 144 498 517
Cash Available for Distribution (CAFD) 41   60   291   269  
 

For the fourth quarter of 2018, the Company reported a Net Loss of $91
million, Adjusted EBITDA of $200 million, Cash from Operating Activities
of $102 million, and CAFD of $41 million. Adjusted EBITDA results were
lower than 2017 primarily due to outages at the Conventional segment and
weaker renewable energy conditions versus fourth quarter 2017. This was
partially offset by the contribution from growth investments made during
2018 and lower corporate costs. In the fourth quarter, CAFD results were
lower than 2017 primarily due to lower Adjusted EBITDA, additional
maintenance capex in 2018, the timing of insurance proceeds, and the
roll off of network upgrade reimbursements.

For the full year of 2018, the Company reported Net Income of $54
million, Adjusted EBITDA of $983 million, Cash from Operating Activities
of $498 million, and CAFD of $291 million. Adjusted EBITDA results were
higher than 2017 primarily due to growth investments made in 2018 and
higher wind production for the full year relative to 2017. For the full
year, CAFD results were higher than 2017 primarily due to the growth in
Adjusted EBITDA, lower principal amortization at Thermal due to the
refinancing of the Series C notes, and the full year impact of growth
from the November 2017 Drop Down Assets2.

Operational Performance

   

Table 4: Selected Operating Results

 
(MWh and MWht in thousands) Three Months Ended Twelve Months Ended
  12/31/18   12/31/17 12/31/18   12/31/17
Equivalent Availability Factor (Conventional) 97.6 % 98.3 % 94.3 % 93.9 %
Renewables Generation Sold (MWh) 1,472 1,490 7,197 6,844
Thermal Generation Sold (MWh/MWht) 479 484 2,090 1,961
 

In the fourth quarter of 2018, availability at the Conventional segment
was lower than the fourth quarter of 2017 due to a forced outage event
at Walnut Creek’s Unit 2. The amendment to the comprehensive service
agreement executed in 2017 with the original equipment manufacturer
provided for a portion of cost recovery on this outage.

Additionally, generation in the renewables segment was significantly
below median expectations and 1% lower than the fourth quarter of 2017
primarily due to weak wind conditions. This was partially offset by the
addition of Buckthorn Solar which closed in April 2018.

Liquidity and Capital Resources

Table 5: Liquidity

     
($ millions) 12/31/18 9/30/18 12/31/17
Cash and Cash Equivalents:
Clearway Energy, Inc. and Clearway Energy LLC, excluding subsidiaries $ 298 $ 112 $ 24
Subsidiaries 109 120 124
Restricted Cash:
Operating accounts 84 65 25

Reserves, including debt service, distributions, performance
obligations
and other reserves

92   92   143
Total Cash $ 583 $ 389 $ 316
Revolving credit facility availability $ 454   $ 425   $ 366
Total Liquidity $ 1,037   $ 814   $ 682
 

Total liquidity as of December 31, 2018, was $1,037 million, $355
million higher relative to December 31, 2017. This increase was
primarily driven by higher total cash balances of $267 million primarily
from the issuance of the 2025 Senior Notes partially offset by the
tendered 2019 and 2020 convertible notes from the Fundamental Change
Tender Offer. Borrowing capacity under the revolving credit facility
also increased by $88 million due the repayment of outstanding balances
and lower letter of credit postings.

The Company’s liquidity includes $176 million of restricted cash
balances as of December 31, 2018. Restricted cash consists primarily of
funds to satisfy the requirements of certain debt arrangements and funds
held within the Company’s projects that are restricted in their use. As
of December 31, 2018, these restricted funds were comprised of $84
million designated to fund operating expenses, approximately $26 million
designated for current debt service payments, and $32 million of
reserves for debt service, performance obligations and other items
including capital expenditures. The remaining $34 million is held in
distribution accounts, of which $31 million related to subsidiaries
affected by the PG&E bankruptcy.

In the first quarter of 2019 the Company used approximately $239 million
of cash to repay the remaining $220 million of 2019 Convertible notes at
maturity and for $19 million buy out of the Wind TE HoldCo tax equity
partnership as described below.

Potential future sources of liquidity include excess operating cash
flow, the existing $150 million ATM program, of which $36 million
remained available as of February 28, 2019, availability under the
revolving credit facility, and, subject to market conditions, new
corporate financings.

PG&E Bankruptcy Update

On January 29, 2019, Pacific Gas and Electric Company filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. The Company
either owns or invests in 1,200 net MW of electric generation projects
with long-term supply or capacity contracts with PG&E. As of December
31, 2018, the Company’s balance sheet included approximately $1.4
billion of non-recourse debt associated with these projects.
Additionally, these projects represent approximately $90 million3
of potential exposure to 2019 project level CAFD. The PG&E bankruptcy
filing has triggered defaults under the power purchase agreements with
PG&E and related project level financing agreements. While the Company
is actively working with project level lenders on forbearance
agreements, unless such lenders for the related project level debt
otherwise agree, distributions to the Company from these projects may
not be made during the pendency of the bankruptcy, although the Company
currently expects these projects to otherwise operate in the normal
course of business. These restrictions, therefore, could result in the
Company accumulating less unrestricted cash and thus decrease the
Company’s corporate liquidity and cash available for shareholder
dividends and growth investments.

As of February 27, 2019, PG&E has neither assumed, rejected, or sought
to renegotiate contracts.

Growth Investments

Carlsbad Energy Center: Exercised the Backstop with GIP

The Company exercised the equity backstop with GIP for the acquisition
of the Carlsbad Energy Center. On February 27, 2019, after considering
final purchase price adjustments, GIP acquired Carlsbad from NRG for
$387 million, excluding working capital. Pursuant to the terms
previously agreed by and between the Company and GIP, the Company
maintains the option for a period of eighteen (18) months to acquire
Carlsbad from GIP at the same terms and conditions previously negotiated
with NRG. Should the Company not acquire Carlsbad during such eighteen
months, Carlsbad will become a Clearway Group ROFO Asset.

Interest in Agua Caliente: Forgoing the Drop Down Offer from NRG
Energy, Inc.

On November 1, 2018, NRG offered the Company the opportunity to acquire
Agua Caliente Borrower 1 LLC, which owns a 35% interest in Agua
Caliente, a 290 MW utility-scale solar project located in Dateland,
Arizona with PG&E as the project’s customer. The Company has elected to
forgo the acquisition. The Company continues to own a 16% interest in
the project through Agua Caliente Borrower 2 LLC.

Update to the ROFO Pipeline with Clearway Group

On February 14, 2019, the Company entered into a First Amendment to the
Right of First Offer Agreement with Clearway Group to add Hawaii Solar
Phase II, the first addition to the ROFO pipeline since the closing of
the GIP Transaction. Hawaii Solar Phase II consists of two solar and
storage projects located in Oahu, Hawaii with a combined capacity of
75MW. The Mililani I Solar project, located in the Mililani Agricultural
Park, is sized at 39 MW and will include battery storage capability. The
Waiawa Solar Power project, located in the Waiawa region, is sized at 36
MW and will also include battery storage capability. Subject to approval
by the Hawaii Public Utilities Commission (PUC) both projects will sell
power to Hawaii Electric under 20-year PPAs. The expected commercial
operation date for these projects is currently estimated in 2021.

Repowering Partnership with Clearway Group

On September 11, 2018, the Company entered into a repowering partnership
with Clearway Group for 283 MW of wind assets (Wildorado and Elbow
Creek). To facilitate this new partnership, the Company agreed to buy
out the existing Wind TE Holdco tax equity partner for $19 million,
subject to purchase price adjustments. In January 2019, the Company
completed the transaction with the tax equity partner for $19 million.
The Company expects to provide further updates with respect to the
Repowering Partnership during 2019.

Corporate Liability Management Update

In October 2018 the Company issued $600 million of 2025 Senior Notes. A
portion of these proceeds was used to fund the repurchase of $352
million of the 2019 and 2020 Convertible Notes tendered as part of the
Fundamental Change Tender Offer.

In the first quarter of 2019 the Company repaid the remaining $220
million of 2019 Convertible Notes at maturity with cash on hand. Other
than the remaining $45 million of 2020 Convertible Notes due in June
2020, the Company has no outstanding corporate maturities due until 2024.

Quarterly Dividend

On February 12, 2019, Clearway Energy, Inc.’s Board of Directors
declared a quarterly dividend on Class A and Class C common stock of
$0.20 per share payable on March 15, 2019, to stockholders of record as
of March 1, 2019. The Company will continue to assess the level of the
dividend pending developments in the PG&E Bankruptcy, including the
Company’s ability to receive unrestricted project distributions.

Seasonality

Clearway Energy, Inc.’s quarterly operating results are impacted by
seasonal factors, as well as variability in renewable energy resources.
The majority of the Company’s revenues are generated from the months of
May through September, as contracted pricing and renewable resources are
at their highest levels in the Company’s portfolio. Factors driving the
fluctuation in Net Income, Adjusted EBITDA, Cash from Operating
Activities, and CAFD include the following:

  • Higher summer capacity prices from conventional assets;
  • Higher solar insolation during the summer months;
  • Higher wind resources during the spring and summer months;
  • Debt service payments which are made either quarterly or
    semi-annually; and
  • Timing of maintenance capital expenditures and the impact of both
    unforced and forced outages.

The Company takes into consideration the timing of these factors to
ensure sufficient funds are available for distribution and operating
activities on a quarterly basis.

2019 Financial Guidance

As previously updated on February 14, 2019, the Company’s 2019 CAFD
guidance is $270 million. This financial guidance reflects no additional
corporate level financing and assumes that all CAFD related to the
projects impacted by the PG&E Bankruptcy is realized in 2019. Financial
guidance for 2019 continues to be based on median renewable energy
production estimates.

Earnings Conference Call

On February 28, 2019, Clearway Energy, Inc. will host a conference call
at 8:00 a.m. Eastern to discuss these results. Investors, the news media
and others may access the live webcast of the conference call and
accompanying presentation materials by logging on to Clearway Energy,
Inc.’s website at http://www.clearwayenergy.com
and clicking on “Presentations & Webcasts” under “Investor Relations.”

About Clearway Energy, Inc.

Clearway Energy, Inc. is a leading publicly-traded energy infrastructure
investor focused on modern, sustainable and long-term contracted assets
across North America. Clearway Energy’s environmentally-sound asset
portfolio includes over 7,000 megawatts of wind, solar and natural
gas-fired power generation facilities, as well as district energy
systems. Through this diversified and contracted portfolio, Clearway
Energy endeavors to provide its investors with stable and growing
dividend income. Clearway Energy’s Class C and Class A common stock are
traded on the New York Stock Exchange under the symbols CWEN and CWEN.A,
respectively. Clearway Energy, Inc. is sponsored by its controlling
investor Global Infrastructure Partners (GIP), an independent
infrastructure fund manager that invests in infrastructure and
businesses in both OECD and select emerging market countries, through
GIP’s portfolio company, Clearway Energy Group.

Safe Harbor Disclosure

This news release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements are
subject to certain risks, uncertainties and assumptions, and typically
can be identified by the use of words such as “expect,” “estimate,”
“anticipate,” “forecast,” “plan,” “outlook,” “believe” and similar
terms. Such forward-looking statements include, but are not limited to,
statements regarding impacts resulting from the PG&E bankruptcy, the
benefits of the relationship with Global Infrastructure Partners III
(GIP) and GIP’s expertise, the Company’s future relationship and
arrangements with GIP and Clearway Energy Group, as well as our Net
Income, Adjusted EBITDA, Cash from Operating Activities, Cash Available
for Distribution, the Company’s future revenues, income, indebtedness,
capital structure, strategy, plans, expectations, objectives, projected
financial performance and/or business results and other future events,
and views of economic and market conditions.

Although Clearway Energy, Inc. believes that the expectations are
reasonable, it can give no assurance that these expectations will prove
to be correct, and actual results may vary materially. Factors that
could cause actual results to differ materially from those contemplated
above include, among others, effects relating to the PG&E bankruptcy,
general economic conditions, hazards customary in the power industry,
weather conditions, including wind and solar performance, competition in
wholesale power markets, the volatility of energy and fuel prices,
failure of customers to perform under contracts, changes in the
wholesale power markets, changes in government regulations, the
condition of capital markets generally, our ability to access capital
markets, cyber terrorism and inadequate cybersecurity, the ability to
engage in successful acquisitions activity, unanticipated outages at our
generation facilities, adverse results in current and future litigation,
failure to identify, execute or successfully implement acquisitions
(including receipt of third party consents and regulatory approvals),
our ability to enter into new contracts as existing contracts expire,
risk relating to the Company’s relationships with GIP and Clearway
Energy Group, our ability to acquire assets from GIP, Clearway Energy
Group or third parties, our ability to close drop down transactions, and
our ability to maintain and grow our quarterly dividends. Furthermore,
any dividends are subject to available capital, market conditions, and
compliance with associated laws and regulations.

Clearway Energy, Inc. undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The Adjusted EBITDA and Cash Available for
Distribution are estimates as of today’s date, February 28, 2019, and
are based on assumptions believed to be reasonable as of this date.
Clearway Energy expressly disclaims any current intention to update such
guidance. The foregoing review of factors that could cause Clearway
Energy’s actual results to differ materially from those contemplated in
the forward-looking statements included in this news release should be
considered in connection with information regarding risks and
uncertainties that may affect Clearway Energy’s future results included
in Clearway Energy’s filings with the Securities and Exchange Commission
at www.sec.gov.
In addition, Clearway Energy makes available free of charge at www.clearwayenergy.com,
copies of materials it files with, or furnishes to, the SEC.

 
CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Year ended December 31,
(In millions, except per share amounts) 2018   2017   2016
Operating Revenues
Total operating revenues $ 1,053   $ 1,009   $ 1,035  
Operating Costs and Expenses
Cost of operations 332 326 308
Depreciation and amortization 331 334 303
Impairment losses 44 185
General and administrative 20 19 16
Acquisition-related transaction and integration costs 20 3 1
Development costs 3      
Total operating costs and expenses 706   726   813  
Operating Income 347   283   222  
Other Income (Expense)
Equity in earnings of unconsolidated affiliates 74 71 60
Other income, net 8 4 3
Loss on debt extinguishment (7 ) (3 )
Interest expense (306 ) (307 ) (284 )
Total other expense, net (231 ) (235 ) (221 )
Income Before Income Taxes 116 48 1
Income tax expense (benefit) 62   72   (1 )
Net Income (Loss) 54 (24 ) 2
Less: Pre-acquisition net income (loss) of Drop Down Assets 4   7   (4 )

Net Income (Loss) Excluding Pre-acquisition Net Income (Loss)
of Drop

Down Assets

50   (31 ) 6  
Less: Net income (loss) attributable to noncontrolling interests 2   (15 ) (51 )
Net Income (Loss) Attributable to Clearway Energy, Inc. $ 48   $ (16 ) $ 57  

Earnings Per Share Attributable to Clearway Energy, Inc. Class
A and Class

C Common Stockholders

Weighted average number of Class A common shares outstanding – basic
and diluted
35 35 35
Weighted average number of Class C common shares outstanding – basic
and diluted
69 64 63

Earnings (Loss) per Weighted Average Class A and Class C Common
Share

– Basic and Diluted

$ 0.46   $ (0.16 ) $ 0.58  
Dividends Per Class A Common Share 1.258   1.098   $ 0.945  
Dividends Per Class C Common Share $ 1.258   $ 1.098   $ 0.945  
 
 
CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
Year ended December 31,

(In millions)

2018   2017   2016
Net Income (Loss) $ 54 $ (24 ) $ 2
Other Comprehensive Income (Loss), net of tax
Unrealized gain on derivatives, net of income tax expense of $2, $7,
and $0
22   10   13  
Other comprehensive income 22   10   13  
Comprehensive Income (Loss) 76 (14 ) 15
Less: Pre-acquisition net income (loss) of Drop Down Assets 4 7 (4 )
Less: Comprehensive income (loss) attributable to noncontrolling
interests
14   (5 ) (37 )
Comprehensive Income (Loss) Attributable to Clearway Energy, Inc. $ 58   $ (16 ) $ 56  
 
 
CLEARWAY ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
   

(In millions, except shares)

December 31, 2018 December 31, 2017
ASSETS
Current Assets
Cash and cash equivalents $ 407 $ 148
Restricted cash 176 168
Accounts receivable — trade 104 95
Inventory 40 39
Notes receivable — current 13
Prepayments and other current assets 29   19  
Total current assets 756 482
Property, plant and equipment, net 5,245 5,410
Other Assets
Equity investments in affiliates 1,172 1,178
Intangible assets, net 1,156 1,228
Derivative instruments 8 1
Deferred income taxes 57 128
Other non-current assets 106   62  
Total other assets 2,499   2,597  
Total Assets $ 8,500   $ 8,489  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt $ 535 $ 339
Accounts payable — trade 45 46
Accounts payable — affiliate 19 49
Derivative instruments 4 18
Accrued interest expense 44 38
Accrued expenses and other current liabilities 57   50  
Total current liabilities 704   540  
Other Liabilities
Long-term debt 5,447 5,659
Derivative instruments 17 31
Other non-current liabilities 108   100  
Total non-current liabilities 5,572   5,790  
Total Liabilities 6,276   6,330  
Commitments and Contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized; none
issued

Class A, Class B, Class C and Class D common stock, $0.01 par
value; 3,000,000,000
shares authorized (Class A 500,000,000,
Class B 500,000,000, Class C 1,000,000,000,
Class D
1,000,000,000); 193,251,396 shares issued and outstanding (Class A
34,586,250,
Class B 42,738,750, Class C 73,187,646, Class D
42,738,750) at December 31, 2018 and
184,780,837 shares
issued and outstanding (Class A 34,586,250, Class B 42,738,750,
Class
C 64,717,087, Class D 42,738,750) at December 31, 2017

1 1
Additional paid-in capital 1,897 1,843
Accumulated deficit (58 ) (69 )
Accumulated other comprehensive loss (18 ) (28 )
Noncontrolling interest 402   412  
Total Stockholders’ Equity 2,224   2,159  
Total Liabilities and Stockholders’ Equity $ 8,500   $ 8,489  
 
 
CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Year ended December 31,
2018   2017   2016
Cash Flows from Operating Activities (In millions)
Net income (loss) $ 54 $ (24 ) $ 2
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in earnings of unconsolidated affiliates (74 ) (71 ) (60 )
Distributions from unconsolidated affiliates 70 72 58
Depreciation and amortization 331 334 303
Amortization of financing costs and debt discounts 24 25 20
Amortization of intangibles and out-of-market contracts 70 70 76
Loss on debt extinguishment 7 3
Change in deferred income taxes 62 72 (1 )
Impairment losses 44 185
Changes in derivative instruments (16 ) (15 ) (15 )
(Gain) loss on disposal of asset components 16 6
Cash provided by (used in) changes in other working capital:
Changes in prepaid and accrued capacity payments (4 ) (8 )
Changes in other working capital (30 ) (5 ) 11  
Net Cash Provided by Operating Activities 498   517   577  
Cash Flows from Investing Activities
Acquisition of business (11 )
Acquisition of Drop Down Assets, net of cash acquired (126 ) (250 ) (77 )
Capital expenditures (83 ) (190 ) (20 )
Cash receipts from notes receivable 13 17 17
Return of investment from unconsolidated affiliates 45 47 28
Investments in unconsolidated affiliates (34 ) (73 ) (83 )
Other 11   7   4  
Net Cash Used in Investing Activities (185 ) (442 ) (131 )
Cash Flows from Financing Activities
Net contributions from noncontrolling interests 91 13 5
Net distributions and return of capital to NRG prior to the
acquisition of Drop Down Assets
(23 ) (184 )
Proceeds from the issuance of common stock 153 34
Payments of dividends and distributions (238 ) (202 ) (173 )
Proceeds from the revolving credit facility 35 55 60
Payments for the revolving credit facility (90 ) (366 )
Proceeds from issuance of long-term debt 827 210 740
Payments of debt issuance costs (14 ) (12 ) (15 )
Payments for long-term debt (810 ) (332 ) (269 )
Net Cash Used in Financing Activities (46 ) (257 ) (202 )
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted
Cash
267 (182 ) 244
Cash, Cash Equivalents and Restricted Cash at Beginning of Period 316   498   254  
Cash, Cash Equivalents and Restricted Cash at End of Period $ 583   $ 316   $ 498  
 
Supplemental Disclosures
Interest paid, net of amount capitalized $ (292 ) $ (297 ) $ (271 )
Non-cash investing and financing activities:
(Reductions) Additions to fixed assets for accrued capital
expenditures
(15 ) 22 3
Non-cash adjustment for change in tax basis of assets (7 ) (20 ) 44
Non-cash contributions from CEG, NRG, net of distributions $ 38 $ (2 ) $ 90
 

Contacts

Investors:
Akil Marsh
[email protected]
609-608-1500

Media:
Ray Long
[email protected]

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