UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the quarterly period ended March 31, 2022
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
Commission File Number: 001-36002
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(609 ) 608-1525
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of April 29, 2022, there were 34,599,645 shares of Class A common stock outstanding, par value $0.01 per share, 42,738,750 shares of Class B common stock outstanding, par value $0.01 per share, 81,944,239 shares of Class C common stock outstanding, par value $0.01 per share, and 42,738,750 shares of Class D common stock outstanding, par value $0.01 per share.
TABLE OF CONTENTS
Index
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION | |||||
GLOSSARY OF TERMS | |||||
PART I — FINANCIAL INFORMATION | |||||
ITEM 1 — FINANCIAL STATEMENTS AND NOTES | |||||
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |||||
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |||||
ITEM 4 — CONTROLS AND PROCEDURES | |||||
PART II — OTHER INFORMATION | |||||
ITEM 1 — LEGAL PROCEEDINGS | |||||
ITEM 1A — RISK FACTORS | |||||
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | |||||
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES | |||||
ITEM 4 — MINE SAFETY DISCLOSURES | |||||
ITEM 5 — OTHER INFORMATION | |||||
ITEM 6 — EXHIBITS | |||||
SIGNATURES | |||||
2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q of Clearway Energy, Inc., together with its consolidated subsidiaries, or the Company, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The words "believes," "projects," "anticipates," "plans," "expects," "intends," "estimates" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, risks and uncertainties include the factors described under Item 1A — Risk Factors in Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2021, as well as the following:
•The Company's ability to maintain and grow its quarterly dividend;
•Potential risks related to COVID-19 (including any variant of the virus) or any other pandemic;
•Potential risks related to the Company's relationships with GIP and CEG;
•The Company's ability to successfully identify, evaluate and consummate acquisitions from, and dispositions to, third parties;
•The Company's ability to acquire assets from GIP or CEG;
•The Company's ability to raise additional capital due to its indebtedness, corporate structure, market conditions or otherwise;
•Changes in law, including judicial decisions;
•Hazards customary to the power production industry and power generation operations such as fuel and electricity price volatility, unusual weather conditions (including wind and solar conditions), catastrophic weather-related or other damage to facilities, unscheduled generation outages, maintenance or repairs, unanticipated changes to fuel supply costs or availability due to higher demand, shortages, transportation problems or other developments, environmental incidents, or electric transmission or gas pipeline system constraints and the possibility that the Company may not have adequate insurance to cover losses as a result of such hazards;
•The Company's ability to operate its businesses efficiently, manage maintenance capital expenditures and costs effectively, and generate earnings and cash flows from its asset-based businesses in relation to its debt and other obligations;
•The willingness and ability of counterparties to the Company's offtake agreements to fulfill their obligations under such agreements;
•The Company's ability to enter into contracts to sell power and procure fuel on acceptable terms and prices as current offtake agreements expire;
•Government regulation, including compliance with regulatory requirements and changes in market rules, rates, tariffs and environmental laws;
•Operating and financial restrictions placed on the Company that are contained in the project-level debt facilities and other agreements of certain subsidiaries and project-level subsidiaries generally, in the Clearway Energy Operating LLC amended and restated revolving credit facility and in the indentures governing the Senior Notes;
•Cyber terrorism and inadequate cybersecurity, or the occurrence of a catastrophic loss and the possibility that the Company may not have adequate insurance to cover losses resulting from such hazards or the inability of the Company's insurers to provide coverage; and
•The Company's ability to borrow additional funds and access capital markets, as well as the Company's substantial indebtedness and the possibility that the Company may incur additional indebtedness going forward.
Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause the Company's actual results to differ materially from those contemplated in any forward-looking statements included in this Quarterly Report on Form 10-Q should not be construed as exhaustive.
3
GLOSSARY OF TERMS
When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:
| 2025 Senior Notes | $600 million aggregate principal amount of 5.750% unsecured senior notes due 2025, issued by Clearway Energy Operating LLC, which were repurchased and redeemed in March 2021 | ||||
| 2028 Senior Notes | $850 million aggregate principal amount of 4.750% unsecured senior notes due 2028, issued by Clearway Energy Operating LLC | ||||
| 2031 Senior Notes | $925 million aggregate principal amount of 3.750% unsecured senior notes due 2031, issued by Clearway Energy Operating LLC | ||||
| 2032 Senior Notes | $350 million aggregate principal amount of 3.750% unsecured senior notes due 2032, issued by Clearway Energy Operating LLC | ||||
| Adjusted EBITDA | A non-GAAP measure, represents earnings before interest (including loss on debt extinguishment), tax, depreciation and amortization adjusted for mark-to-market gains or losses, asset write offs and impairments; and factors which the Company does not consider indicative of future operating performance | ||||
| ASC | The FASB Accounting Standards Codification, which the FASB established as the source of authoritative GAAP | ||||
| ASU | Accounting Standards Updates - updates to the ASC | ||||
| ATM Programs | At-The-Market Equity Offering Programs | ||||
| Bridge Loan Agreement | Senior secured bridge credit agreement entered into by Clearway Energy Operating LLC that provided a term loan facility in an aggregate principal amount of $335 million and was repaid on May 3, 2022 | ||||
| CAFD | A non-GAAP measure, Cash Available for Distribution is defined as of March 31, 2022 as Adjusted EBITDA plus cash distributions/return of investment from unconsolidated affiliates, cash receipts from notes receivable, cash distributions from noncontrolling interests, adjustments to reflect sales-type lease cash payments and payments for lease expenses, less cash distributions to noncontrolling interests, maintenance capital expenditures, pro-rata Adjusted EBITDA from unconsolidated affiliates, cash interest paid, income taxes paid, principal amortization of indebtedness, changes in prepaid and accrued capacity payments, and adjusted for development expenses | ||||
| CEG | Clearway Energy Group LLC (formerly Zephyr Renewables LLC) | ||||
| CEG Master Services Agreement | Master Services Agreements entered into as of August 31, 2018 between the Company, Clearway Energy LLC and Clearway Energy Operating LLC, and CEG | ||||
| Clearway Energy LLC | The holding company through which the projects are owned by Clearway Energy Group LLC, the holder of Class B and Class D units, and Clearway Energy, Inc., the holder of the Class A and Class C units | ||||
| Clearway Energy Group LLC | The holder of all of the Company's Class B and Class D common shares and Clearway Energy LLC’s Class B and Class D units and from time to time, possibly shares of the Company’s Class A and/or Class C common stock | ||||
| Clearway Energy Operating LLC | The holder of the project assets that are owned by Clearway Energy LLC | ||||
| Company | Clearway Energy, Inc. together with its consolidated subsidiaries | ||||
| CVSR | California Valley Solar Ranch | ||||
| CVSR Holdco | CVSR Holdco LLC, the indirect owner of CVSR | ||||
| Distributed Solar | Solar power projects, typically less than 20 MW in size (on an alternating current, or AC, basis), that primarily sell power produced to customers for usage on site, or are interconnected to sell power into the local distribution grid | ||||
| Drop Down Assets | Assets under common control acquired by the Company from CEG | ||||
| Exchange Act | The Securities Exchange Act of 1934, as amended | ||||
| FASB | Financial Accounting Standards Board | ||||
| GAAP | Accounting principles generally accepted in the U.S. | ||||
| GenConn | GenConn Energy LLC | ||||
| GIP | Global Infrastructure Partners | ||||
| HLBV | Hypothetical Liquidation at Book Value | ||||
| KKR | KKR Thor Bidco, LLC, an affiliate of Kohlberg Kravis Roberts & Co. L.P. | ||||
4
| LIBOR | London Inter-Bank Offered Rate | ||||
| Mesquite Star | Mesquite Star Special LLC | ||||
| MMBtu | Million British Thermal Units | ||||
| Mt. Storm | NedPower Mount Storm LLC | ||||
| MW | Megawatt | ||||
| MWh | Saleable megawatt hours, net of internal/parasitic load megawatt-hours | ||||
| MWt | Megawatts Thermal Equivalent | ||||
| Net Exposure | Counterparty credit exposure to Clearway Energy, Inc. net of collateral | ||||
| NOLs | Net Operating Losses | ||||
| NPNS | Normal Purchases and Normal Sales | ||||
| OCL | Other comprehensive loss | ||||
| O&M | Operations and Maintenance | ||||
| PG&E | Pacific Gas and Electric Company | ||||
| PPA | Power Purchase Agreement | ||||
| RENOM | Clearway Renewable Operation & Maintenance LLC | ||||
| SCE | Southern California Edison | ||||
| SEC | U.S. Securities and Exchange Commission | ||||
| Senior Notes | Collectively, the 2028 Senior Notes, the 2031 Senior Notes and the 2032 Senior Notes | ||||
| SOFR | Secured Overnight Financing Rate | ||||
| SPP | Solar Power Partners | ||||
| SREC | Solar Renewable Energy Credit | ||||
| Tax Act | Tax Cuts and Jobs Act of 2017 | ||||
| Thermal Business | The Company's thermal business, which consists of thermal infrastructure assets that provide steam, hot water and/or chilled water, and in some instances electricity, to commercial businesses, universities, hospitals and governmental units | ||||
| Thermal Disposition | On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR | ||||
| U.S. | United States of America | ||||
| Utah Solar Portfolio | Seven utility-scale solar farms located in Utah, representing 530 MW of capacity | ||||
| Utility Scale Solar | Solar power projects, typically 20 MW or greater in size (on an alternating current, or AC, basis), that are interconnected into the transmission or distribution grid to sell power at a wholesale level | ||||
| VaR | Value at Risk | ||||
| VIE | Variable Interest Entity | ||||
5
PART I - FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS
CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended March 31, | |||||||||||
| (In millions, except per share amounts) | 2022 | 2021 | |||||||||
| Operating Revenues | |||||||||||
| Total operating revenues | $ | $ | |||||||||
| Operating Costs and Expenses | |||||||||||
| Cost of operations, exclusive of depreciation, amortization and accretion shown separately below | |||||||||||
| Depreciation, amortization and accretion | |||||||||||
| General and administrative | |||||||||||
| Transaction and integration costs | |||||||||||
| Development costs | |||||||||||
| Total operating costs and expenses | |||||||||||
| Operating Loss | ( | ( | |||||||||
| Other Income (Expense) | |||||||||||
| Equity in earnings of unconsolidated affiliates | |||||||||||
| Other income, net | |||||||||||
| Loss on debt extinguishment | ( | ( | |||||||||
| Interest expense | ( | ( | |||||||||
| Total other expense, net | ( | ( | |||||||||
| Loss Before Income Taxes | ( | ( | |||||||||
| Income tax benefit | ( | ( | |||||||||
| Net Loss | ( | ( | |||||||||
| Less: Loss attributable to noncontrolling interests and redeemable interests | ( | ( | |||||||||
Net (Loss) Income Attributable to Clearway Energy, Inc. | $ | ( | $ | ||||||||
(Losses) 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 | |||||||||||
Weighted average number of Class C common shares outstanding - basic and diluted | |||||||||||
(Losses) Earnings per Weighted Average Class A and Class C Common Share - Basic and Diluted | $ | ( | $ | ||||||||
| Dividends Per Class A Common Share | $ | $ | |||||||||
| Dividends Per Class C Common Share | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
6
CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
| Three months ended March 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Net Loss | $ | ( | $ | ( | |||||||
| Other Comprehensive Income | |||||||||||
Unrealized gain on derivatives, net of income tax expense of, $ | |||||||||||
| Other comprehensive income | |||||||||||
| Comprehensive Loss | ( | ( | |||||||||
| Less: Comprehensive loss attributable to noncontrolling interests and redeemable interests | ( | ( | |||||||||
| Comprehensive (Loss) Income Attributable to Clearway Energy, Inc. | $ | ( | $ | ||||||||
See accompanying notes to consolidated financial statements.
7
CLEARWAY ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
| (In millions, except shares) | March 31, 2022 | December 31, 2021 | |||||||||
| ASSETS | (Unaudited) | ||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Accounts receivable — trade | |||||||||||
| Inventory | |||||||||||
| Derivative instruments | |||||||||||
| Current assets held-for-sale | |||||||||||
| Prepayments and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Other Assets | |||||||||||
| Equity investments in affiliates | |||||||||||
| Intangible assets for power purchase agreements, net | |||||||||||
| Other intangible assets, net | |||||||||||
| Derivative instruments | |||||||||||
| Deferred income taxes | |||||||||||
| Right-of-use assets, net | |||||||||||
| Other non-current assets | |||||||||||
| Total other assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Current portion of long-term debt | $ | $ | |||||||||
| Accounts payable — trade | |||||||||||
| Accounts payable — affiliates | |||||||||||
| Derivative instruments | |||||||||||
| Accrued interest expense | |||||||||||
| Current liabilities held-for-sale | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Other Liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred income taxes | |||||||||||
| Derivative instruments | |||||||||||
| Long-term lease liabilities | |||||||||||
| Other non-current liabilities | |||||||||||
| Total other liabilities | |||||||||||
| Total Liabilities | |||||||||||
| Commitments and Contingencies | |||||||||||
| Stockholders’ Equity | |||||||||||
Preferred stock, $ | |||||||||||
Class A, Class B, Class C and Class D common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ||||||||||
| Noncontrolling interest | |||||||||||
| Total Stockholders’ Equity | |||||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
8
CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three months ended March 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net Loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Equity in earnings of unconsolidated affiliates | ( | ( | |||||||||
| Distributions from unconsolidated affiliates | |||||||||||
| Depreciation, amortization and accretion | |||||||||||
| Amortization of financing costs and debt discounts | |||||||||||
| Amortization of intangibles | |||||||||||
| Loss on debt extinguishment | |||||||||||
| Reduction in carrying amount of right-of-use assets | |||||||||||
| Changes in deferred income taxes | ( | ( | |||||||||
| Changes in derivative instruments | ( | ||||||||||
| Cash used in changes in other working capital | |||||||||||
| Changes in prepaid and accrued liabilities for tolling agreements | ( | ( | |||||||||
| Changes in other working capital | ( | ( | |||||||||
| Net Cash Provided by Operating Activities | |||||||||||
| Cash Flows from Investing Activities | |||||||||||
Acquisitions, net of cash acquired | ( | ||||||||||
| Acquisition of Drop Down Assets | ( | ( | |||||||||
| Capital expenditures | ( | ( | |||||||||
| Asset purchase from affiliate | ( | ||||||||||
| Return of investment from unconsolidated affiliates | |||||||||||
| Other | |||||||||||
| Net Cash Used in Investing Activities | ( | ( | |||||||||
| Cash Flows from Financing Activities | |||||||||||
| Contributions from noncontrolling interests, net of distributions | |||||||||||
| Payments of dividends and distributions | ( | ( | |||||||||
| Distributions to CEG of escrowed amounts | ( | ||||||||||
| Proceeds from the revolving credit facility | |||||||||||
| Payments for the revolving credit facility | ( | ( | |||||||||
| Proceeds from the issuance of long-term debt | |||||||||||
| Payments of debt issuance costs | ( | ( | |||||||||
| Payments for long-term debt | ( | ( | |||||||||
| Other | ( | ||||||||||
| Net Cash (Used in) Provided by Financing Activities | ( | ||||||||||
| Reclassification of Cash to Assets Held-for-Sale | ( | ||||||||||
| Net Decrease in Cash, Cash Equivalents and Restricted Cash | ( | ( | |||||||||
| Cash, Cash Equivalents and Restricted Cash at beginning of period | |||||||||||
| Cash, Cash Equivalents and Restricted Cash at end of period | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
9
CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Three Months Ended March 31, 2022
(Unaudited)
| (In millions) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Noncontrolling Interest | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Unrealized gain on derivatives, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Distributions to CEG, net of contributions, cash | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests, net of distributions, cash | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Mesquite Sky Drop Down | — | — | ( | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Black Rock Drop Down | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Mililani I Drop Down | — | — | ( | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Non-cash adjustments for change in tax basis | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| Common stock dividends and distributions to CEG unit holders | — | — | ( | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balances at March 31, 2022 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||
CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Three Months Ended March 31, 2021
(Unaudited)
| (In millions) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Noncontrolling Interest | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
| Unrealized gain on derivatives, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Contributions from CEG, non-cash | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Contributions from CEG, cash | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests, net of distributions, cash | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Agua Caliente acquisition | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Rattlesnake Drop Down | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Non-cash adjustments for change in tax basis | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Common stock dividends and distributions to CEG unit holders | — | — | ( | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balances at March 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||
10
CLEARWAY ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Nature of Business
Clearway Energy, Inc., together with its consolidated subsidiaries, or the Company, is a publicly-traded energy infrastructure investor in and owner of modern, sustainable and long-term contracted assets across North America. The Company is indirectly owned by Global Infrastructure Partners, or GIP. GIP is an independent infrastructure fund manager that makes equity and debt investments in infrastructure assets and businesses. The Company is sponsored by GIP through GIP’s portfolio company, Clearway Energy Group LLC, or CEG.
The Company is one of the largest renewable energy owners in the U.S. with over 5,000 net MW of installed wind and solar generation projects. The Company's over 7,500 net MW of assets also includes approximately 2,500 net MW of environmentally-sound, highly efficient natural gas-fired generation facilities. Through this environmentally-sound, diversified and primarily contracted portfolio, the Company endeavors to provide its investors with stable and growing dividend income. Substantially all of the Company’s generation assets are under long-term contractual arrangements for the output or capacity from these assets.
On May 1, 2022, the Company completed the sale of 100 % of its interests in the Thermal Business to KKR. For further details of the Thermal Disposition, refer to Note 3, Acquisitions and Dispositions.
The Company consolidates the results of Clearway Energy LLC through its controlling interest, with CEG’s interest shown as non-controlling interest in the consolidated financial statements. The holders of the Company’s outstanding shares of Class A and Class C common stock are entitled to dividends as declared. CEG receives its distributions from Clearway Energy LLC through its ownership of Clearway Energy LLC Class B and Class D units. From time to time, CEG may also hold shares of the Company’s Class A and/or Class C common stock.
The Company owned 57.68 % of the economic interests of Clearway Energy LLC, with CEG owning 42.32 % of the economic interests of Clearway Energy LLC as of March 31, 2022.
11
The following table represents the structure of the Company as of March 31, 2022:
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the SEC’s regulations for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the consolidated financial statements included in the Company’s 2021 Form 10-K. Interim results are not necessarily indicative of results for a full year.
In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all material adjustments consisting of normal and recurring accruals necessary to present fairly the Company’s consolidated financial position as of March 31, 2022, and results of operations, comprehensive (loss) income and cash flows for the three months ended March 31, 2022 and 2021.
Note 2 — Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions. These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amounts of net earnings during the reporting periods. Actual results could be different from these estimates.
12
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include highly liquid investments with an original maturity of three months or less at the time of purchase. Cash and cash equivalents held at project subsidiaries was $95 million and $146 million as of March 31, 2022 and December 31, 2021, respectively.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows:
| March 31, 2022 | December 31, 2021 | ||||||||||
| (In millions) | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | $ | |||||||||
Restricted cash consists primarily of funds held to satisfy the requirements of certain debt agreements and funds held within the Company’s projects that are restricted in their use. As of March 31, 2022, these restricted funds were comprised of $135 million designated to fund operating expenses, $38 million designated for current debt service payments and $135 million restricted for reserves including debt service, performance obligations and other reserves as well as capital expenditures. The remaining $18 million is held in distributions reserve accounts.
In 2020, the members of the partnerships holding the Oahu Solar and Kawailoa Solar projects submitted applications to the state of Hawaii for refundable tax credits based on the cost of construction of the projects. In 2021, the members of the partnerships contributed their respective portions of the tax credits in the amount of $49 million to the Oahu Solar and Kawailoa project companies, which was recorded to restricted cash on the Company’s consolidated balance sheet with an offsetting adjustment to noncontrolling interests. In accordance with the projects’ related agreements, the cash is held in a restricted account and utilized to offset invoiced amounts under the projects’ PPAs. As of March 31, 2022, $23 million of the $49 million has been utilized to offset invoiced amounts under the projects’ PPAs.
Accumulated Depreciation and Accumulated Amortization
The following table presents the accumulated depreciation included in property, plant and equipment, net, and accumulated amortization included in intangible assets, net, respectively, as of March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | ||||||||||
| (In millions) | |||||||||||
| Property, Plant and Equipment Accumulated Depreciation | $ | $ | |||||||||
| Intangible Assets Accumulated Amortization | |||||||||||
Dividends to Class A and Class C common stockholders
The following table lists the dividends paid on the Company's Class A and Class C common stock during the three months ended March 31, 2022:
First Quarter 2022 | ||||||||
| Dividends per Class A share | $ | |||||||
| Dividends per Class C share | ||||||||
Dividends on the Class A and Class C common stock are subject to available capital, market conditions, and compliance with associated laws, regulations and other contractual obligations. The Company expects that, based on current circumstances, comparable cash dividends will continue to be paid in the foreseeable future.
On May 4, 2022, the Company declared quarterly dividends on its Class A and Class C common stock of $0.3536
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Noncontrolling Interests
Clearway Energy LLC Distributions to CEG
The following table lists distributions paid to CEG during the three months ended March 31, 2022 on Clearway Energy LLC’s Class B and D units:
| First Quarter 2022 | ||||||||
| Distributions per Class B Unit | $ | |||||||
| Distributions per Class D Unit | ||||||||
On May 4, 2022, Clearway Energy LLC declared a distribution on its Class B and Class D units of $0.3536
Revenue Recognition
Revenue from Contracts with Customers
The Company applies the guidance in ASC 606, Revenue from Contracts with Customers, or Topic 606, when recognizing revenue associated with its contracts with customers. The Company's policies with respect to its various revenue streams are detailed below. In general, the Company applies the invoicing practical expedient to recognize revenue for the revenue streams detailed below, except in circumstances where the invoiced amount does not represent the value transferred to the customer.
Thermal Revenues
Steam and chilled water revenue is recognized as the Company transfers the product to the customer, based on customer usage as determined by meter readings taken at month-end. Some locations read customer meters throughout the month and recognize estimated revenue for the period between meter read date and month-end. For thermal contracts, the Company’s performance obligation to deliver steam and chilled water is satisfied over time and revenue is recognized based on the invoiced amount. The Thermal Business subsidiaries collect, and remit state and local taxes associated with sales to their customers, as required by governmental authorities. These taxes are presented on a net basis in the consolidated statements of operations.
As contracts for steam and chilled water are long-term contracts, the Company has performance obligations under these contracts that have not yet been satisfied. These performance obligations have transaction prices that are both fixed and variable, and that vary based on the contract duration, customer type, inception date and other contract-specific factors. For the fixed price contracts, the Company cannot accurately estimate the amount of its unsatisfied performance obligations as it will vary based on customer usage, which will depend on factors such as weather and customer activity.
On May 1, 2022, the Company completed the sale of 100 % of its interests in the Thermal Business to KKR. For further details of the Thermal Disposition, refer to Note 3, Acquisitions and Dispositions.
Power Purchase Agreements, or PPAs
The majority of the Company’s revenues are obtained through PPAs or similar contractual agreements. Energy, capacity and where applicable, renewable attributes, from the majority of the Company’s renewable energy assets and certain conventional energy plants is sold through long-term PPAs and tolling agreements to a single counterparty, which is often a utility or commercial customer. The majority of these PPAs are accounted for as operating leases as the Company retained its historical lease assessments and classification upon adoption of ASC 842, Leases. ASC 842 requires the minimum lease payments received to be amortized over the term of the lease and contingent rentals are recorded when the achievement of the contingency becomes probable. Judgment is required by management in determining the economic life of each generating facility, in evaluating whether certain lease provisions constitute minimum payments or represent contingent rent and other factors in determining whether a contract contains a lease and whether the lease is an operating lease or capital lease. Certain of these leases have no minimum lease payments and all of the rental income under these leases is recorded as contingent rent on an actual basis when the electricity is delivered.
Renewable Energy Credits, or RECs
Renewable energy credits, or RECs, are usually sold through long-term PPAs or through REC contracts with counterparties. Revenue from the sale of self-generated RECs is recognized when the related energy is generated and simultaneously delivered even in cases where there is a certification lag as it has been deemed to be perfunctory.
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Disaggregated Revenues
The following tables represent the Company’s disaggregation of revenue from contracts with customers along with the reportable segment for each category for the three months ended March 31, 2022 and 2021, respectively:
| Three months ended March 31, 2022 | |||||||||||||||||||||||
| (In millions) | Conventional Generation | Renewables | Thermal | Total | |||||||||||||||||||
Energy revenue (a) | $ | $ | $ | $ | |||||||||||||||||||
Capacity revenue (a) | |||||||||||||||||||||||
| Contract amortization | ( | ( | ( | ||||||||||||||||||||
| Other revenue | |||||||||||||||||||||||
| Mark-to-market for economic hedges | ( | ( | |||||||||||||||||||||
| Total operating revenues | |||||||||||||||||||||||
| Less: Mark-to-market for economic hedges | |||||||||||||||||||||||
| Less: Lease revenue | ( | ( | ( | ( | |||||||||||||||||||
| Less: Contract amortization | |||||||||||||||||||||||
Total revenue from contracts with customers | $ | $ | $ | $ | |||||||||||||||||||
(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 842:
| (In millions) | Conventional Generation | Renewables | Thermal | Total | |||||||||||||||||||
| Energy revenue | $ | $ | $ | $ | |||||||||||||||||||
| Capacity revenue | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
| Three months ended March 31, 2021 | |||||||||||||||||||||||
| (In millions) | Conventional Generation | Renewables | Thermal | Total | |||||||||||||||||||
Energy revenue (a) | $ | $ | $ | $ | |||||||||||||||||||
Capacity revenue (a) | |||||||||||||||||||||||
| Contract amortization | ( | ( | ( | ( | |||||||||||||||||||
| Other revenue | |||||||||||||||||||||||
| Mark-to-market for economic hedges | ( | ( | |||||||||||||||||||||
| Total operating revenues | |||||||||||||||||||||||
| Less: Mark-to-market for economic hedges | |||||||||||||||||||||||
| Less: Lease revenue | ( | ( | ( | ( | |||||||||||||||||||
| Less: Contract amortization | |||||||||||||||||||||||
Total revenue from contracts with customers | $ | $ | ( | $ | $ | ||||||||||||||||||
(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 842:
| (In millions) | Conventional Generation | Renewables | Thermal | Total | |||||||||||||||||||
| Energy revenue | $ | $ | $ | $ | |||||||||||||||||||
| Capacity revenue | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
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Contract Amortization
Assets and liabilities recognized from power sales agreements assumed through acquisitions relating to the sale of electric capacity and energy in future periods arising from differences in contract and market prices are amortized to revenue over the term of each underlying contract based on actual generation and/or contracted volumes or on a straight-line basis, where applicable.
Contract Balances
The following table reflects the contract assets and liabilities included on the Company’s consolidated balance sheets as of March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||||||||
| (In millions) | ||||||||||||||
| Accounts receivable, net - Contracts with customers | $ | $ | ||||||||||||
| Accounts receivable, net - Leases | ||||||||||||||
| Total accounts receivable, net | $ | $ | ||||||||||||
Recently Adopted Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide for optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. These amendments apply only to contracts that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform, which affects certain of the Company’s debt and interest rate swap agreements. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. As of March 31, 2022, the Company has applied the amendments to all of its eligible contract modifications, where applicable, during the reference rate reform period. Additionally, the Company has not elected any optional expedients provided in the standard.
Note 3 — Acquisitions and Dispositions
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The following is a summary of assets and liabilities transferred in connection with the acquisition as of March 25, 2022:
| (In millions) | Mililani I | |||||||
| Other current and non-current assets | $ | |||||||
| Property, plant and equipment | ||||||||
| Right-of-use-assets | ||||||||
| Total assets acquired | ||||||||
Long-term debt (a) | ||||||||
| Long-term lease liabilities | ||||||||
| Other current and non-current liabilities | ||||||||
| Total liabilities assumed | ||||||||
| Net liabilities assumed | $ | ( | ||||||
(a) Includes a $16 million construction loan, $27 million sponsor equity bridge loan and $60 million tax equity bridge loan, offset by $3 million in unamortized debt issuance costs. The sponsor equity bridge loan was repaid at acquisition date utilizing $14 million from the cash equity investor, as well as $15 million of the Company's purchase price, which was contributed back to the Company by CEG, of which $27 million was utilized to pay down the acquired long-term debt and $2 million was utilized to pay associated fees. Also at acquisition date, the tax equity investor contributed $18 million into escrow, which is included in restricted cash on the Company's consolidated balance sheet at March 31, 2022. The tax equity investor will contribute an additional $42 million when the project reaches substantial completion, which will be utilized, along with the $18 million in escrow, to repay the $60 million tax equity bridge loan. The project is expected to achieve commercial operations in the second half of 2022.
Thermal Disposition — On May 1, 2022, the Company completed the sale of 100 % of its interests in the Thermal Business to KKR for net proceeds of approximately $1.46 billion, inclusive of working capital, which excludes approximately $20 million in transaction expenses that were incurred in connection with the disposition. The Company estimates that the Thermal Disposition will result in a gain of approximately $1.31 billion. Effective with the approval by the Board of Directors and signing of the agreement to sell the Thermal Business on October 22, 2021, the Company concluded that all entities that are included within the Thermal Business will be treated as held for sale on a prospective basis, thus the assets and liabilities were reported as separate held for sale line items on the Company’s consolidated balance sheets as of March 31, 2022 and December 31, 2021. As of March 31, 2022, property, plant and equipment represented 76 % and intangible assets represented 9 % of assets classified as held for sale while long-term debt represented 83 % of liabilities classified as held for sale. As of December 31, 2021, property, plant and equipment represented 78 % and intangible assets represented 9 % of assets classified as held for sale while long-term debt represented 85 % of liabilities classified as held for sale. The Company’s Thermal segment is comprised solely of the Thermal Business's results of operations.
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Note 4 — Investments Accounted for by the Equity Method and Variable Interest Entities
Entities that are Consolidated
The Company has a controlling financial interest in certain entities which have been identified as VIEs under ASC 810, Consolidations, or ASC 810. These arrangements are primarily related to tax equity arrangements entered into with third parties in order to monetize certain tax credits associated with wind and solar facilities, as further described under Item 15 — Note 5, Investments Accounted for by the Equity Method and Variable Interest Entities, to the consolidated financial statements included in the Company's 2021 Form 10-K.
Summarized financial information for the Company's consolidated VIEs consisted of the following as of March 31, 2022:
| (In millions) | Alta TE Holdco | Buckthorn Renewables, LLC | DGPV Funds(a) | Kawailoa Partnership | Langford TE Partnership LLC | Lighthouse Renewable Holdco LLC(b) | Lighthouse Renewable Holdco 2 LLC(c) | ||||||||||||||||||||||||||||||||||
| Other current and non-current assets | $ | $ | $ | $ | $ | $ | </ | ||||||||||||||||||||||||||||||||||