• Committed to approximately $348 million of new long-term corporate capital investments in 2022
• Raised over $1.3 billion of corporate level capital in 2022 from the sale of Clearway's Thermal Business
• Signed contract for El Segundo in 2022 ensuring that 100% of the Resource Adequacy for Marsh Landing, Walnut Creek, and El Segundo is contracted through approximately 2026
• Signed agreement with Clearway Group in 4Q22 to commit to invest in 463 MW of solar plus storage projects
• Reaffirming 2023 financial guidance and raising pro forma CAFD outlook
• Increased the quarterly dividend by 2% to $0.3745 per share in the first quarter of 2023, or $1.498 per share annualized
• Continue to target annual dividend per share growth in the upper range of 5% to 8% through 2026
Clearway Energy, Inc. reported full year 2022 financial results, including Net Income of $1,060 million, Adjusted EBITDA of $1,160 million, Cash from Operating Activities of $787 million, and Cash Available for Distribution (CAFD) of $326 million.
"While 2022 financial results were impacted by weaker wind performance in the fourth quarter and the previously disclosed forced outages in the Conventional segment, the long-term outlook for Clearway remains positive. The closing of the Thermal sale in 2022 has provided unprecedented financial flexibility to execute upon our long-term growth objectives given the $750 million of excess proceeds. In 2022, the Company committed to approximately $348 million of new long-term corporate capital investments that will be funded with the Thermal sale proceeds and we expect to commit to additional accretive drop-downs from our sponsor in 2023 utilizing the remaining Thermal proceeds,” said Christopher Sotos, Clearway Energy, Inc.’s President and Chief Executive Officer. “Given the continued line of sight to the future deployment of all of the excess proceeds from the Thermal sale, Clearway remains on track to deliver at the upper range of its dividend growth target through 2026.”
Overview of Financial and Operating Results
For the fourth quarter of 2022, the Company reported Net Loss of $54 million, Adjusted EBITDA of $212 million, Cash from Operating Activities of $180 million, and CAFD of $(2) million. Net Loss decreased versus 2021 primarily due to non-cash changes in income tax expenses. Cash from Operating Activities increased versus 2021 primarily due to the contribution of growth investments. Adjusted EBITDA and CAFD results in the fourth quarter of 2022 were lower than 2021 due to the disposition of the Thermal Business, lower availability at the Conventional segment, and lower renewable resources, partially offset by the contribution from growth investments.
For the full year 2022, the Company reported Net Income of $1,060 million, Adjusted EBITDA of $1,160 million, Cash from Operating Activities of $787 million, and CAFD of $326 million. Net Income increased versus 2021 primarily due to the one-time gain from the sale of the Thermal Business. Adjusted EBITDA results were higher than 2021 primarily due to the contribution of growth investments and the impact on results in 2021 from the severe winter weather event in Texas in February of 2021. This was partially offset by the disposition of the Thermal Business and forced outages at the Conventional segment. CAFD results were lower than 2021 due to the disposition of the Thermal Business and forced outages at the Conventional segment.
Operational Performance
In the fourth quarter of 2022, availability at the Conventional segment was lower than the fourth quarter of 2021 primarily due to lower availability at the El Segundo Energy Center and Walnut Creek facilities. Generation in the Renewables segment during the fourth quarter of 2022 was 21% higher than the fourth quarter of 2021 primarily due to the contribution of growth investments.
Liquidity and Capital Resources
Total liquidity as of December 31, 2022 was $1,366 million, which was $545 million higher than the same period ended December 31, 2021, primarily due to the proceeds received from the sale of the Thermal Business. This was partially offset by the execution of growth investments, the repayment of $305 million in outstanding borrowings under the Company's revolving credit facility, the repayment of $335 million under the Bridge Loan Agreement, and the repayment of approximately $130 million of outstanding project-level debt for the El Segundo Energy Center.
As of December 31, 2022, the Company's liquidity included $339 million of restricted cash. 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, 2022, these restricted funds were comprised of $109 million designated to fund operating expenses, approximately $55 million designated for current debt service payments, and $105 million of reserves for debt service, performance obligations and other items including capital expenditures. The remaining $70 million is held in distribution reserve accounts.
Potential future sources of liquidity include excess operating cash flow, availability under the revolving credit facility, which the Company expects to refinance prior to its maturity in April 2023, asset dispositions, and, subject to market conditions, new corporate debt and equity financings.
Growth Investments
Daggett 3 Solar Project
On February 17, 2023, the Company, through a partnership with a third-party investor, acquired the indirect owner of the Daggett 3 solar project, from a subsidiary of Clearway Group for cash consideration of $21 million. Daggett 3 has PPAs with investment-grade counterparties that have a 15-year weighted average contract duration that commence when the project reaches commercial operations, which is expected to occur in the first half of 2023.
Victory Pass and Arica Solar Plus Energy Storage Projects
On December 23, 2022, the Company, through an indirect subsidiary, entered into an agreement with Clearway Group to acquire interests in a partnership that holds the interests in the Victory Pass and Arica solar plus energy storage projects, which are both located in Riverside, California, upon the projects reaching certain milestones for a total purchase price of approximately $228 million in cash, subject to customary working capital adjustments. Victory Pass is a 200 MW solar facility and Arica is a 263 MW solar facility, each with an energy storage system. Upon achieving commercial operations the projects will sell the majority of their power, RECs and capacity under agreements with creditworthy counterparties with a weighted average contract duration of approximately 14 years. Upon the closing of the transaction, which is expected in the second half of 2023, the Company will own 40% of the partnership holding interests in Victory Pass and Arica. The Company expects the projects to contribute asset CAFD on a five-year average annual basis of approximately $20 million beginning January 1, 2024.
Financing Update
El Segundo Project-Level Debt Repayment
On December 15, 2022, the Company repaid the outstanding project-level debt for the El Segundo Energy Center in the amount of approximately $130 million, utilizing cash on hand. The project-level debt had an original maturity of August 2023. On December 29, 2022, as a result of the project-level debt repayment, $35 million of previously restricted cash was distributed to the Company.
Quarterly Dividend
On February 15, 2023, Clearway Energy, Inc.’s Board of Directors declared a quarterly dividend on Class A and Class C common stock of $0.3745 per share payable on March 15, 2023, to stockholders of record as of March 1, 2023.
The Company anticipates that, largely due to the Thermal Disposition in 2022, it will be in a cumulative earnings and profits surplus position as of the end of 2022. As a result, all of the dividends that were paid to holders of the Company’s Class A and Class C Common stock in 2022 will be treated as taxable for U.S. federal income tax purposes. Additionally, the Company anticipates that a portion of the dividends expected to be paid in 2023 and beyond may be also treated as taxable for U.S. federal income tax purposes. The portion of dividends in future years that will be treated as taxable will depend upon a number of factors, including but not limited to, the Company’s overall performance and the gross amount of any dividends made to stockholders in 2023 and beyond.
Seasonality
Clearway Energy, Inc.’s quarterly operating results are impacted by seasonal factors, as well as weather variability which can impact renewable energy resource. Most 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 and energy 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;
• Timing of maintenance capital expenditures and the impact of both unforced and forced outages; and
• Timing of distributions from unconsolidated affiliates
The Company takes into consideration the timing of these factors to ensure sufficient funds are available for distributions and operating activities on a quarterly basis.
Financial Guidance and Pro Forma CAFD Outlook
The Company is reaffirming its 2023 full year CAFD guidance of $410 million. The Company's 2023 financial guidance factors in the contribution of committed growth investments based on current expected closing timelines and estimates for merchant energy gross margin at the conventional fleet upon the expiry of their current toll contracts. 2023 CAFD guidance does not factor in the timing of when CAFD is realized from new growth investments pursuant to 5-year averages beyond 2023.
The Company is updating its pro forma CAFD outlook expectations from approximately $390 million to approximately $410 million due to the growth investment commitments for the Victory Pass and Arica solar plus energy storage projects.
Financial guidance and the pro forma CAFD outlook continue to be based on median renewable energy production estimates for the full year.
