Good day, and thank you for standing by. Welcome to the Clearway Energy, Inc. Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Sotos, President and CEO of Clearway Energy, Inc. Please go ahead.

Thank you and good morning. Let me first thank you for taking the time to join Clearway Energy Inc.'s fourth quarter call. Joining me this morning is Akil Marsh, Director of Investor Relations; and Craig Cornelius, President and CEO of Clearway Energy Group, our sponsor. Craig will be available for the Q&A portion of our presentation. Before we begin, I like to quickly note that today's discussion will contain forward-looking statements, which are based on assumptions that we believe to be reasonable as of this date. Actual results may differ materially. Please review the safe harbor in today's presentation, as well as the risk factors in our SEC filings. In addition, we will refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures, please refer to today's presentation. Turning to Page 3. The company generated full-year CAFD of $326 million, short of its full-year guidance of $350 million, predominantly due to weak fourth quarter [wind resource] [ph] and December's winter storms. Our CAFD generation in 2022 was below expectations. Clearway executed well to increase its long-term pro forma CAFD through the closing of the thermal transaction, and a commitment of nearly 350 million in new investments. In addition, with the contracting of El Segundo's capacity through 2026, we have reduced the volatility in the natural gas fleet and Clearway is currently ahead of schedule in terms of repairs of the facility. Last week, Clearway announced it increased the dividend by 2% to $0.3745 per share or $1.498 on annualized basis, keeping us on target to achieve the upper range of our dividend growth objectives for 2023. We are also reaffirming our 2023 CAFD guidance of 410. [Clearway sponsor] [ph] continues its strong growth in this development…

Thank you. [Operator Instructions] Our first question comes from the line of Noah Kaye with Oppenheimer & Co. Your line is now open.

Hey, good morning. Thanks for taking the questions. First, Victory Pass and Arica, can you just give us how much merchant contribution from the storage projects contributes to the CAFD expectations? And can you also detail the length of tolling or other resource [adequacy] [ph] contracts on those projects?

Sure. The contracts basically last for 15 years. Some of them start a year after COD. So, that's what we say like the weighted average is around 14. In terms of how much is contracted? About 95%, 94% is contracted in terms of overall capacity. In terms of cash, that's a little bit tough because cash is fungible. But for us, the vast majority of the asset is contracted, kind of over that timeframe.

That is very good to hear. Thank you. And then maybe can we talk a little bit about some of the factors that are driving the changes in expected COD timing at CEG for 2024, 2025? There are a few factors mentioned in the deck, but would love to get your view of the development environment and some of those timing considerations?

Sure. I'll kind of start and then Craig, pitch in, obviously as he's working through all of that. I think from our view, the one part we’ve recently closed Daggett 3, which basically had been out for a while. That was one of the projects that was delayed. So, I think we're definitely seeing progress in, kind of closing out some of those delays that we saw before when there was several changes in, kind of governmental policy around that. But Craig, on the development pipeline?

Yes, sure. Thanks for the question, Noah. First for the assets that we have in construction stage, we're quite happy with the performance that our organization and our suppliers are driving today. As we noted in the materials, all those assets that are committed or have been offered to see when are – on track today for construction completion this year, equipment is flowing freely, construction activity at all those assets is actually outperforming baseline expectations. So, we're quite happy with how we're doing there in assets stage for construction and completion in 2023 and early 2024. As we look out to 2024, we again feel good about the supply chain core late stage assets that underpin the dropdown offers we pointed to making in the first half of 2023 that will support fundings for [CWEN] [ph] as we exit 2024. We have the wind turbine supplies, batteries supplies, panel supplies that are required for those and with suppliers who have demonstrated the ability to perform for us in today's environment. As we look out to the later stages of 2024, 2025, 2026, what we're balancing and as I think you're alluding to is how best to align demand from load serving entities who have an interest in procuring resources under contractual structures that are especially desirable for the YieldCo investment mandate that we want to support. The availability of equipment, ideally equipment that could qualify projects for domestic content tax credit supplements, clarification on treasury guidance that may underpin financing structures and tax credit elections. And then ultimately, what's optimal in terms of construction seasonality and schedule. And so, those are the things that we balance. We also want to try to sort projects into vintages so that in any given year the project inventory that we have doesn't accelerate beyond the ability of us to prudently capitalize those assets into our YieldCo, which is the repository for the assets that we want to create predominantly. So, those are the things that we balance. We're happy with what we have in terms of our outlook for being able to support 2.5 gigawatts or more worth of annualized construction volume out into the mid-decade that would support growth beyond the 2.15 per share. And it's conceivable that based on how the next few months' worth of treasury guidance sorts out that we may be able to bring a bit more volume back into 2024 versus what you see represented in the pipeline slide.

That's a great summary, Craig. Thanks. And I'm sure others will have follow-up questions, but for now I'll jump back in queue.

Thank you.

Thank you. Our next question comes from the line of Julien Dumoulin-Smith with Bank of America. Your line is now open.

Hey, guys. It's Julien here. Thanks for the time and the opportunity. Super quick, just can we talk a little bit about the outage expectations just where we are on running gas assets? And then also altogether, any thoughts about spark spread outlook, etcetera? Just given with the events of late with gas procurement, I assume to a large extent, you're mitigated from some of the volatility you've seen out west, but I just want to clarify that, given the nature of the offtake that you've put in place here? And then subsequently, if I can, I'll just throw in the other question. Just rolling forward to 2027, how do you think about doing that and ultimately pivoting to that more formally to the higher-end?

Got it. So, three questions or hopefully I break them apart correctly. I think I'll kind of maybe address your second question first in terms of spark spread. I think the volatility that we're seeing in natural gas is obviously a little bit different at California Citygate’s where obviously that's the most important area where gas is delivered and there we're still seeing good pricing on gas, kind of in [the 5s] [ph]. So, I think once again, as you're aware, Julien, the different assets roll-off of their tolls at different times during the year. We're very heavily weighted toward that merchant curve in kind of the July through end of the year timeframe. So, that's really one of the most critical. But I think for us, the fundamental characteristics that we saw that underpinned our estimates were, a, good natural gas price, which has been maintained at the Citygate; b, our assets are still needed for the [duct curve] [ph], which we definitely don't see going away here in the near-term in terms of their ability to fast start and load pockets and see overall, sort of very robust, kind of overall load growth in terms of California as well with electrification of vehicles and the like. So, we think the fundamental underpinnings that have our estimates in 2023 and also longer-term in the $1 to $1.50 of energy margin long-term, we still feel we’re pretty good. To your first question on outages, I think as we talked a little bit about in my prepared remarks, I want to make sure that what happened with El Segundo in the third quarter does not happen again, but we had 5 years without kind of a significant incident. So, whenever we have the chance, we're replacing the two bundles, which were the issue that created the outage, the unplanned outage as quick as we can. So, we're ahead of schedule and expect the vast majority of them to be completed by, kind of end of the second quarter. And hopefully, once again, can't promise anything, but we should have the machine in good shape by then, but we continue to replace them as quickly as possible and took the opportunity in December when the toll prices are a little bit lower than obviously summertime to do that. To your third question around looking at 2027, I think there, as discussed on previous calls over the years we’ll participate in the capacity auctions and tell us [indiscernible] procurement in summer. We'll see where that ends up. We may win. We may get awarded. We may not. We'll where that goes. But I think that combined with further dropdowns and maybe some repowering’s is what could give us growth in 2027. But Julien, to have that math tied out, I kind of won't show that until I'm very confident where the math sits. But I think we're well-positioned here in February to be able to show that by November.

Got it. And then related to that, when you think about your upper range to use your words, [5% to 8%] [ph] when do you start to get a little bit more crystallized about just changing the rather range to a narrower range or specific number, etcetera through a certain period or what have you. Again, given what you have in hand already in terms of acquisitions and then maybe related to that you've got a lot in hand already that you've lined up. What about further opportunities maybe away from Clearway Group overall?

Sure. So, as usual, Julien, a couple of questions there [to unpack] [ph]. I think, part one is kind of looking what we prefer to do is, kind of grow into 2027. So, to your point, we've talked about the upper range through kind of 2026 and our goal is to be able to show some demonstrable growth in 2027. Right? We want to start at 5, and kind of be able to grow it from there. As we talked about over the years, I typically, and I think investors as well value more in expansion in duration of the dividend visibility versus an absolute number. So, if you told me, hey, would I rather be able to show you 5% growth in 2027 and 3% growth in 2028 versus 8% in 2027 to be simplistic. I think that's a better profile for us overall as I can continue to show growth in that visibility for longer and longer tenors. To your second question around, kind of other opportunities, we're engaged in the M&A market. We look at a variety of assets. We're pretty active. I do think that as I've talked about on previous calls, a lot of these auctions [right around] [ph], we have a different view on pricing of those assets. And so, we've had a lot of successes on the bilateral side. The tough part is that the bilateral takes a lot of [indiscernible] for lack of a better term of really reaching out to a variety of counterparties, trying to shake assets loose and requires quite a bit of additional work. So, we're pursuing those auctions, but we tend to be a little bit short in terms of where we view appropriate pricing. And bilateral is something we're going to push here in 2023 to see if we can continue on our success of M&A as we've demonstrated with Capistrano, Mountain Storm, and the other half of Utah.

Got it. Awesome. All right. Well, good luck, guys. Thank you so much. Appreciate it.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Angie Storozynski with Seaport Research Partners. Your line is now open.

Good morning. So, maybe I missed that. Good morning. I was just wondering you mentioned some operational issues and performance of assets during December. Any of these issues related to your wind farms in Texas?

Yes. We said there was a modest issue in terms of overall CAFD. The vast majority you can kind of see and I believe it's Page 12 of the deck that has, kind of wind resource. Just we ended up with an exceptionally poor wind resource during the quarter. So, it's gives an operational issue, [and now] [ph] it's more just unfortunate wind resource, especially in October and December.

Okay. And then secondly, so I appreciate the regional differences, the natural gas prices and the strength at PG&E Citygate, but are you – I mean, did you hedge any of the exposure, especially on the CCGT side? And I [indiscernible], it's kind of hard to hedge spark spreads for the peaking assets, but are you basically fully merchant and so your profitability, sort of swings with those changes in [spot spreads] [ph]?

To your question, simple answer is, we are open on merchant energy once the toll rolls off. To your point, we've tended not to hedge them because they're [peakers] [ph] and also going to know it. Just as you probably already know, but has the capability to run [as peakers] [ph], so does that quite a bit as well. To your question, we didn't hedge out the energy. I think the capacity is fully hedged however in 2023 through 2026, fourth quarter 2026. So, we're open on energy, but we still feel very good about our estimate given it was for a partial year.

Okay. And then lastly, you mentioned, you're looking at various M&A opportunities, your peer announced a strategic review, I don't even know if you can comment, but I mean would you for example consider owning assets outside of the United States or outside of the Americas?

Yes. Outside of the United States or outside of the Americas, that's simply no. If someone said, hey, there was a portfolio that was 95% in the U.S. and 5% in Canada or something like that, maybe you look at that, I wouldn't want to say, it's a binary outcome. But if your question is, do we have any goals to substantively change our portfolio mix to outside of the United States, then answer is, no.

Okay. Thank you.

Thank you. Our next question comes from the line of William Grippin with UBS. Your line is now open.

Great. Thanks very much. Just one quick one for me. I guess now that you've got line of sight to allocating the 750 million in excess thermal sale proceeds, maybe just – could you speak to how you're thinking about, sort of funding mix for any other acquisitions, kind of post that 750 million?

Sure. The first part always comes from retained cash. So, once again, our payout ratios call it 80% to 85% in terms of our guidance. So, on $410 million of guidance, you have about $80 million of cash rounding. That's obviously the first utilization. Then second, we probably are under levered within the [4 to 4.5] [ph] currently, it would be a little bit, but we would use any leverage capacity that we have second. And then lastly, would be equity. I think again, we have some pockets of assets that don't have non-recourse debt on them. If 2007, 2008 were to show up and the equity markets were to kind of fall out of bed, we would probably use some of those non-recourse finance capabilities we have on some of the levered assets, but really in a normal course of business, the first move is excess cash. Second is leverage within about a 4x to 4.5x, kind of debt to corporate EBITDA count. And then lastly, equity issuance.

Got it. Thanks very much.

Thank you. And I'm currently showing no further questions at this time. I'd like to hand the call back over to Chris Sotos for closing remarks.

Thank you. Once again, thanks everyone for joining the call. I know it's a busy day for everyone. So, really appreciate the support and look forward to continue discussing our growth in 2023. Thank you for your time.

This concludes today's conference call. Thank you for participating. You may now disconnect.