Clearway Energy Inc

Previous wording

As you read this discussion and analysis, refer to the Company’s consolidated financial statements to this Form 10-Q, which present the results of operations for the three and six months ended June 30, 2024 and 2023. Also refer to the Company’s 2023 Form 10-K, which includes detailed discussions of various items impacting the Company’s business, results of operations and financial condition.

Current wording

As you read this discussion and analysis, refer to the Company’s consolidated financial statements to this Form 10-Q, which present the results of operations for the three and nine months ended September 30, 2024 and 2023. Also refer to the Company’s 2023 Form 10-K, which includes detailed discussions of various items impacting the Company’s business, results of operations and financial condition.

Previous wording

Clearway Energy, Inc., together with its consolidated subsidiaries, or the Company, is a publicly-traded energy infrastructure investor with a focus on investments in clean energy and owner of modern, sustainable and long-term contracted assets across North America. The Company is sponsored by GIP and TotalEnergies through the portfolio company, Clearway Energy Group LLC, or CEG, which is equally owned by GIP and TotalEnergies. GIP is an independent infrastructure fund manager that makes equity and debt investments in infrastructure assets and businesses. TotalEnergies is a global multi-energy company. CEG is a leading developer of renewable energy infrastructure in the U.S. On January 12, 2024, BlackRock entered into a definitive agreement to acquire 100% of the business and assets of GIM, which is the investment manager of the GIP funds that own an interest in CEG. BlackRock has indicated that the transaction is expected to close in the third quarter of 2024, subject to regulatory approvals and other customary closing conditions. BlackRock is a publicly-traded global investment management firm.

Current wording

Clearway Energy, Inc., together with its consolidated subsidiaries, or the Company, is a publicly-traded energy infrastructure investor with a focus on investments in clean energy and owner of modern, sustainable and long-term contracted assets across North America. The Company is sponsored by GIP and TotalEnergies through the portfolio company, Clearway Energy Group LLC, or CEG, which is equally owned by GIP and TotalEnergies. GIP is an independent infrastructure fund manager that makes equity and debt investments in infrastructure assets and businesses. TotalEnergies is a global multi-energy company. CEG is a leading developer of renewable energy infrastructure in the U.S. On October 1, 2024, BlackRock acquired 100% of the business and assets of GIM, which is the investment manager of the GIP funds that own an interest in CEG. BlackRock is a publicly-traded global investment management firm.

Previous wording

•On June 27, 2024, the Company, through an indirect subsidiary, entered into an agreement with Clearway Renew to acquire the Class A membership interests in Luna Valley, a 200 MW solar facility currently under construction in Fresno County, California, and Daggett 1, a 114 MW BESS facility currently under construction in San Bernardino, California, for $143 million in cash consideration, subject to closing adjustments. The consummation of the transaction is subject to customary closing conditions and certain third-party approvals and is expected in the second half of 2025.

Current wording

•On June 27, 2024, the Company, through an indirect subsidiary, entered into an agreement with Clearway Renew to acquire the Class A membership interests in Luna Valley, a 200 MW solar facility currently under construction in Fresno County, California, and Daggett 1, a 114 MW BESS facility currently under construction in San Bernardino, California, for $143 million in cash consideration, subject to closing adjustments. The consummation of the transaction is subject to customary closing conditions and certain third-party approvals and is expected in the first half of 2025.

Previous wording

•On May 3, 2024, the Company, through an indirect subsidiary, entered into an agreement with Clearway Renew to acquire the Class A membership interests in Dan’s Mountain, a 55 MW wind facility currently under construction in Allegany County, Maryland, for $44 million in cash consideration, subject to closing adjustments. The consummation of the transaction is subject to customary closing conditions and certain third-party approvals and is expected in the first half of 2025.

Current wording

•On May 3, 2024, the Company, through an indirect subsidiary, entered into an agreement with Clearway Renew to acquire the Class A membership interests in Dan’s Mountain, a 55 MW wind facility currently under construction in Allegany County, Maryland, for $44 million in cash consideration, subject to closing adjustments. The consummation of the transaction is subject to customary closing conditions and certain third-party approvals and is expected in the fourth quarter of 2024.

Previous wording

•On July 25, 2024, the Company, through its indirect subsidiary, Natural Gas Holdco, entered into a financing agreement that provides for a $200 million letter of credit facility, which will be utilized to support the collateral needs of the Company’s merchant conventional facilities and will free up capacity on the Company’s corporate revolving credit facility. See Note 7, Long-term Debt, for further discussion of the letter of credit facility.

Current wording

•On July 25, 2024, the Company, through its indirect subsidiary, Natural Gas Holdco, entered into a financing agreement that provides for a $200 million letter of credit facility, which is being utilized to support the collateral needs of the Company’s merchant conventional facilities and freed up capacity on the Company’s corporate revolving credit facility. See Note 7, Long-term Debt, for further discussion of the letter of credit facility.

Previous wording

•On June 11, 2024, NIMH Solar LLC refinanced its amended and restated credit agreement, which was scheduled to mature in September 2024, resulting in the issuance of a $137 million term loan facility, as well as $17 million in letters of credit in support of debt service and facility obligations. The Company utilized the proceeds from the term loan and existing sources of liquidity to pay off the existing debt. See Note 7, Long-term Debt, for further discussion of the refinanced credit agreement.

Current wording

•On June 11, 2024, the Company, through its indirect subsidiary, NIMH Solar LLC, refinanced its amended and restated credit agreement, which was scheduled to mature in September 2024, resulting in the issuance of a $137 million term loan facility, as well as $17 million in letters of credit in support of debt service and facility obligations. The Company utilized the proceeds from the term loan and existing sources of liquidity to pay off the existing debt. See Note 7, Long-term Debt, for further discussion of the refinanced credit agreement.

Previous wording

Operating revenues decreased by $40 million during the three months ended June 30, 2024, compared to the same period in 2023, due to a combination of the drivers summarized in the table below:

Current wording

Operating revenues increased by $115 million during the three months ended September 30, 2024, compared to the same period in 2023, due to a combination of the drivers summarized in the table below:

Previous wording

Interest expense increased by $33 million during the three months ended June 30, 2024, compared to the same period in 2023, primarily due to the following:

Current wording

Interest expense increased by $91 million during the three months ended September 30, 2024, compared to the same period in 2023, primarily due to the following:

Previous wording

For the three months ended June 30, 2024, the Company recorded an income tax expense of $10 million on pretax income of $14 million. For the same period in 2023, the Company recorded an income tax expense of $22 million on pretax income of $106 million. The $12 million decrease in income tax expense during the three months ended June 30, 2024, compared to the same period in 2023, was primarily due to the allocation of taxable earnings and losses, which includes the effect of applying the HLBV method of accounting for book purposes for certain partnerships.

Current wording

For the three months ended September 30, 2024, the Company recorded an income tax expense of $33 million on pretax income of $60 million. For the same period in 2023, the Company recorded an income tax expense of $57 million on pretax income of $72 million. The $24 million decrease in income tax expense during the three months ended September 30, 2024, compared to the same period in 2023, was primarily due to the allocation of taxable earnings and losses, which includes the effect of applying the HLBV method of accounting for book purposes for certain partnerships.

Previous wording

For the three months ended June 30, 2024, the Company had a net loss of $47 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

Current wording

For the three months ended September 30, 2024, the Company had a net loss of $9 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

Previous wording

For the three months ended June 30, 2023, the Company had a net income of $46 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

Current wording

For the three months ended September 30, 2023, the Company had a net income of $11 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

Previous wording

Management’s Discussion of the Results of Operations for the Six Months Ended June 30, 2024 and 2023

Current wording

Management’s Discussion of the Results of Operations for the Nine Months Ended September 30, 2024 and 2023

Previous wording

Operating revenues decreased by $65 million during the six months ended June 30, 2024, compared to the same period in 2023, due to a combination of the drivers summarized in the table below:

Current wording

Operating revenues increased by $50 million during the nine months ended September 30, 2024, compared to the same period in 2023, due to a combination of the drivers summarized in the table below:

Previous wording

Cost of fuels decreased by $14 million during the three months ended June 30, 2024, compared to the same period in 2023, primarily due to the associated costs of the sales-type lease recognition of the Marsh Landing Black Start addition during the second quarter of 2023.

Current wording

Cost of fuels decreased by $13 million during the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to the associated costs of the sales-type lease recognition of the Marsh Landing Black Start addition during the second quarter of 2023.

Previous wording

Operations and maintenance expense increased by $10 million during the three months ended June 30, 2024, compared to the same period in 2023, primarily due to solar and BESS acquisitions.

Current wording

Operations and maintenance expense increased by $19 million during the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to solar and BESS acquisitions.

Previous wording

Depreciation, amortization and accretion increased $51 million during the six months ended June 30, 2024, compared to the same period in 2023, primarily due to the acquisitions of the Daggett 2, Daggett 3, Victory Pass and Arica solar and BESS facilities, as well as Texas Solar Nova 1 and Texas Solar Nova 2.

Current wording

Depreciation, amortization and accretion increased $82 million during the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to the acquisitions of the Daggett 2, Daggett 3, Victory Pass and Arica solar and BESS facilities, Texas Solar Nova 1 and Texas Solar Nova 2.

Previous wording

Equity in earnings of unconsolidated affiliates increased by $20 million during six months ended June 30, 2024, compared to the same period in 2023, due to changes in the fair value of interest rate swaps, lower depreciation expense and higher wind production.

Current wording

Equity in earnings of unconsolidated affiliates increased by $22 million during nine months ended September 30, 2024, compared to the same period in 2023, due to changes in the fair value of interest rate swaps, lower depreciation expense and higher wind production.

Previous wording

For the six months ended June 30, 2024, the Company recorded an income tax benefit of $3 million on pretax loss of $45 million. For the same period in 2023, the Company recorded an income tax expense of $10 million on a pretax income of $54 million. The $13 million decrease in income tax expense during the six months ended June 30, 2024, compared to the same period in 2023, was primarily due to the allocation of taxable earnings and losses, which includes the effect of applying the HLBV method of accounting for book purposes for certain partnerships.

Current wording

For the nine months ended September 30, 2024, the Company recorded an income tax expense of $30 million on pretax income of $15 million. For the same period in 2023, the Company recorded an income tax expense of $67 million on a pretax income of $126 million. The $37 million decrease in income tax expense during the nine months ended September 30, 2024, compared to the same period in 2023, was primarily due to the allocation of taxable earnings and losses, which includes the effect of applying the HLBV method of accounting for book purposes for certain partnerships. Additionally, the income tax expense for the nine months ended September 30, 2024 was calculated based on year-to-date results as this represents the best estimate of the income tax rate. This differs from prior periods where income tax expense was calculated based on a forecasted effective tax rate under ASC 740-270.

Previous wording

For the six months ended June 30, 2024, the Company had a net loss of $91 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

Current wording

For the nine months ended September 30, 2024, the Company had a net loss of $100 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

Previous wording

For the six months ended June 30, 2023, the Company had a net income of $6 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

Current wording

For the nine months ended September 30, 2023, the Company had a net income of $17 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

Previous wording

As of June 30, 2024 and December 31, 2023, the Company’s liquidity was approximately $1.07 billion and $1.51 billion, respectively, comprised of cash, restricted cash and availability under the Company’s revolving credit facility.

Current wording

As of September 30, 2024 and December 31, 2023, the Company’s liquidity was approximately $1.27 billion and $1.51 billion, respectively, comprised of cash, restricted cash and availability under the Company’s revolving credit facility.

Previous wording

The Company’s liquidity includes $344 million and $516 million of restricted cash balances as of June 30, 2024 and December 31, 2023, respectively. Restricted cash consists primarily of funds to satisfy the requirements of certain debt arrangements and funds held within the Company’s facilities that are restricted in their use. As of June 30, 2024, these restricted funds were comprised of $169 million designated to fund operating expenses, approximately $42 million designated for current debt service payments and $89 million restricted for reserves including debt service, performance obligations and other reserves, as well as capital expenditures. The remaining $44 million is held in distribution reserve accounts.

Current wording

The Company’s liquidity includes $382 million and $516 million of restricted cash balances as of September 30, 2024 and December 31, 2023, respectively. Restricted cash consists primarily of funds to satisfy the requirements of certain debt arrangements and funds held within the Company’s facilities that are restricted in their use. As of September 30, 2024, these restricted funds were comprised of $183 million designated to fund operating expenses, approximately $71 million designated for current debt service payments and $89 million restricted for reserves including debt service, performance obligations and other reserves, as well as capital expenditures. The remaining $39 million is held in distribution reserve accounts.

Previous wording

As of June 30, 2024, the Company had no outstanding borrowings under the revolving credit facility and $205 million in letters of credit outstanding. The facility will continue to be used for general corporate purposes including financing of future acquisitions and posting letters of credit.

Current wording

As of September 30, 2024, the Company had no outstanding borrowings under the revolving credit facility and $108 million in letters of credit outstanding. The facility will continue to be used for general corporate purposes including financing of future acquisitions and posting letters of credit.

Previous wording

On July 25, 2024, the Company, through its indirect subsidiary, Natural Gas Holdco, entered into a financing agreement that provides for a $200 million letter of credit facility, which will be utilized to support the collateral needs of the Company’s merchant conventional facilities and will free up capacity on the Company’s corporate revolving credit facility. The letter of credit facility has an initial term of three years and the option for two additional one-year extensions.

Current wording

On July 25, 2024, the Company, through its indirect subsidiary, Natural Gas Holdco, entered into a financing agreement that provides for a $200 million letter of credit facility, which is being utilized to support the collateral needs of the Company’s merchant conventional facilities and freed up capacity on the Company’s corporate revolving credit facility. The letter of credit facility has an initial term of three years and the option for two additional one-year extensions. As of September 30, 2024, $107 million was outstanding under the letter of credit facility.

Previous wording

For the six months ended June 30, 2024, the Company used approximately $202 million to fund capital expenditures, including growth expenditures of $198 million, primarily in the Renewables segment, funded through construction-related financing. Growth capital expenditures included $103 million incurred in connection with the Victory Pass and Arica solar and BESS facilities, $37 million incurred in connection with the Rosamond Central BESS facility, $18 million incurred in connection with the Texas Solar Nova 1 and Texas Solar Nova 2 facilities, $14 million incurred in connection with the Daggett 2 solar and BESS facility, $11 million incurred in connection with the repowering of the Cedro Hill wind facility, $8 million incurred in connection with the Daggett 3 solar and BESS facility and $7 million incurred by other facilities. In addition, the Company incurred $4 million in maintenance capital expenditures.

Current wording

For the nine months ended September 30, 2024, the Company used approximately $237 million to fund capital expenditures, including growth expenditures of $229 million, primarily in the Renewables segment, funded through construction-related financing. Growth capital expenditures included $106 million incurred in connection with the Victory Pass and Arica solar and BESS facilities, $41 million incurred in connection with the Rosamond Central BESS facility, $28 million incurred in connection with the repowering of the Cedro Hill wind facility, $18 million incurred in connection with the Texas Solar Nova 1 and Texas Solar Nova 2 facilities, $14 million incurred in connection with the Daggett 2 solar and BESS facility, $9 million incurred in connection with the Daggett 3 solar and BESS facility, $8 million incurred in connection with the Cedar Creek wind facility and $5 million incurred by other facilities. In addition, the Company incurred $8 million in maintenance capital expenditures.

Previous wording

Variable interest in equity investments — As of June 30, 2024, the Company has several investments with an ownership interest percentage of 50% or less. GenConn is a VIE for which the Company is not the primary beneficiary. The Company’s pro-rata share of non-recourse debt held by unconsolidated affiliates was approximately $295 million as of June 30, 2024. This indebtedness may restrict the ability of these subsidiaries to issue dividends or distributions to the Company.

Current wording

Variable interest in equity investments — As of September 30, 2024, the Company has several investments with an ownership interest percentage of 50% or less. GenConn is a VIE for which the Company is not the primary beneficiary. The Company’s pro-rata share of non-recourse debt held by unconsolidated affiliates was approximately $290 million as of September 30, 2024. This indebtedness may restrict the ability of these subsidiaries to issue dividends or distributions to the Company.

Previous wording

The following table lists the dividends paid on the Company’s Class A common stock and Class C common stock during the six months ended June 30, 2024:

Current wording

The following table lists the dividends paid on the Company’s Class A common stock and Class C common stock during the nine months ended September 30, 2024:

Previous wording

On August 1, 2024, the Company declared quarterly dividends on its Class A and Class C common stock of $0.4171 per share payable on September 16, 2024 to stockholders of record as of September 3, 2024.

Current wording

On October 29, 2024, the Company declared quarterly dividends on its Class A and Class C common stock of $0.4240 per share payable on December 16, 2024 to stockholders of record as of December 2, 2024.

Previous wording

The Company, after the utilization of various federal and state NOL carryforwards, paid $1 million in federal and state income taxes during the six months ended June 30, 2024 and does not expect to pay additional material federal or state income taxes for the remainder of the current year. The Company does not anticipate being subject to the corporate minimum tax on financial statement income as enacted by the recently passed the IRA, which is discussed in further detail below.

Current wording

The Company, after the utilization of various federal and state NOL carryforwards, paid $1 million in federal and state income taxes during the nine months ended September 30, 2024 and does not expect to pay additional material federal or state income taxes for the remainder of the current year. The Company does not anticipate being subject to the corporate minimum tax on financial statement income as enacted by the recently passed the IRA, which is discussed in further detail below.