Clearway Energy, Inc. Announces Equity Commitment in Repowering Partnership
Clearway Energy, Inc. (NYSE: CWEN, CWEN.A) (“Company”), today announced
that, through an indirect subsidiary of the Company, it has entered into
binding equity commitment agreements in the previously announced
partnership with Clearway Group to enable the repowering of two of its
existing wind assets, Wildorado and Elbow Creek. These agreements commit
the Company to invest an estimated $111 million in net corporate capital1,
subject to closing adjustments. The transaction is expected to
contribute incremental asset CAFD on an average annual basis of
approximately $12 million beginning in 20202, which reflects
the improved operational profile of the projects and the impact from the
new non-recourse capital structure employed at the partnership.
“Our commitment to invest in the repowering of these two important wind
assets highlights a new area of organic growth for the Company," said
Christopher Sotos, Clearway Energy, Inc.’s President and Chief Executive
Officer. “We are pleased to achieve this important milestone in
collaboration with our partner Clearway Group and look forward to
working together in the future to prudently and accretively repower
other projects in the Company’s portfolio.”
“Repowering our wind energy assets will extend the life of these
projects with modern technology that is more efficient and
cost-effective than ever,” said Craig Cornelius, Chief Executive Officer
at Clearway Group, “We’re proud to collaborate on this important
investment and continue to play a leading role in our nation’s growing
clean energy economy.”
Highlights of the transaction include:
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283 MW of Repowered Wind Projects:
The 161 MW Wildorado Wind Project, located in Vega, TX, and the 122 MW
Elbow Creek Wind Project, located in Howard County, TX
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Improved Operational Profile:
Benefits of the repowering include the extension of design life, the
reduction in operational and maintenance expenditures, and new
warranty coverage
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Enhanced Contract Duration: Elbow
Creek has entered into a new hedging arrangement with an
investment-grade bank counterparty via which a majority of Elbow
Creek’s output will now be contracted through 2029 rather than through
2022; the existing Wildorado PPA with a subsidiary of Xcel Energy
(A-/A3) continues to run through 2027
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Non-Recourse Partnership Financing Summary:
The partnership entered into a tax equity arrangement which, in
combination with the Company’s equity investment, will be used to
repay construction financing and costs related to the Repowering and
to reduce outstanding principal at the existing Viento project
financing through the removal of Wildorado from the Viento collateral
package
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Corporate Funding Approach: The
corporate capital commitment will be funded at Repowering COD of each
project, will utilize existing corporate liquidity, and will have a
limited impact on the Company’s corporate leverage ratio
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Construction Management: As part
of the partnership, Clearway Group will manage all aspects of the
construction process
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Technology: Siemens Gamesa
Renewable Energy turbines
The Company expects to fully close the transaction by the end of 2019.
Completion of the investment is subject to customary closing conditions,
including approval by the Public Utility Commission of Texas.
About Clearway Energy, Inc.
Clearway Energy, Inc. is a leading publicly-traded energy infrastructure
investor focused on modern, sustainable and long-term contracted assets
across North America. Clearway Energy’s environmentally-sound asset
portfolio includes over 7,000 megawatts of wind, solar and natural
gas-fired power generation facilities, as well as district energy
systems. Through this diversified and contracted portfolio, Clearway
Energy endeavors to provide its investors with stable and growing
dividend income. Clearway Energy’s Class C and Class A common stock are
traded on the New York Stock Exchange under the symbols CWEN and CWEN.A,
respectively. Clearway Energy, Inc. is sponsored by its controlling
investor Global Infrastructure Partners (GIP), an independent
infrastructure fund manager that invests in infrastructure and
businesses in both OECD and select emerging market countries, through
GIP’s portfolio company, Clearway Energy Group.
About Clearway Energy Group
Clearway Energy Group is accelerating the world’s transformation to a
clean energy future. With more than 4.1 gigawatts of solar and wind
energy assets in 25 states and a development pipeline across the
country, we are offsetting the equivalent of nearly 9 million tons of
carbon emissions for our customers. The company is headquartered in San
Francisco, CA with offices in Carlsbad, CA; Scottsdale, AZ; Houston, TX;
and New York, NY. For more information, visit www.clearwayenergygroup.com.
Safe Harbor Disclosure
This news release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements are
subject to certain risks, uncertainties and assumptions, and typically
can be identified by the use of words such as “expect,” “estimate,”
“anticipate,” “forecast,” “plan,” “outlook,” “believe” and similar
terms. Such forward-looking statements include, but are not limited to,
statements regarding the potential operational and economic benefits of
the Repowering transaction. These forward-looking statements are subject
to a variety of risks and uncertainties. Such risks and uncertainties
include, but are not limited to, the possibility that the operational
and financial benefits of the Repowering transaction will not be
realized, as well as factors described from time to time in Clearway
Energy, Inc.'s filings with the Securities and Exchange Commission at www.sec.gov.
In addition, Clearway Energy, Inc. makes available free of charge at www.clearwayenergy.com
copies of materials it files with, or furnishes to, the SEC.
Although Clearway Energy, Inc. believes that the expectations are
reasonable, it can give no assurance that these expectations will prove
to be correct, and actual results may vary materially. Clearway Energy,
Inc. undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by law. The Adjusted EBITDA and Cash
Available for Distribution are estimates as of today’s date, June 17,
2019, and are based on assumptions believed to be reasonable as of this
date. Clearway Energy, Inc. expressly disclaims any current intention to
update such guidance.
Appendix Table A-1: Adjusted EBITDA and Cash Available for
Distribution Reconciliation
The following table summarizes the calculation of Estimated Cash
Available for Distribution and provides a reconciliation to Net
Income/(Loss):
($ in millions)
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Repowering 5 Year Ave. - 2020-2024
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Net Income
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$4
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Interest Expense, net
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(4)
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Adjusted EBITDA
|
|
|
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-
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Cash interest paid
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|
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4
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Cash from Operating Activities
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4
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Net distributions to non-controlling interest
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(7)
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Maintenance capital expenditures
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3
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Principal amortization of indebtedness
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12
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Estimated Cash Available for Distribution
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12
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EBITDA and Adjusted EBITDA are non-GAAP financial measures. These
measurements are not recognized in accordance with GAAP and should not
be viewed as an alternative to GAAP measures of performance. The
presentation of Adjusted EBITDA should not be construed as an inference
that Clearway Energy's future results will be unaffected by unusual or
non-recurring items.
EBITDA represents net income before interest (including loss on debt
extinguishment), taxes, depreciation and amortization. EBITDA is
presented because Clearway Energy considers it an important supplemental
measure of its performance and believes debt and equity holders
frequently use EBITDA to analyze operating performance and debt service
capacity. EBITDA has limitations as an analytical tool, and you should
not consider it in isolation, or as a substitute for analysis of our
operating results as reported under GAAP. Some of these limitations are:
EBITDA does not reflect cash expenditures, or future requirements for
capital expenditures, or contractual commitments;
EBITDA does not reflect changes in, or cash requirements for, working
capital needs;
EBITDA does not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments, on
debt or cash income tax payments;
Although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized will often have to be replaced in the
future, and EBITDA does not reflect any cash requirements for such
replacements; and
Other companies in this industry may calculate EBITDA differently than
Clearway Energy does, limiting its usefulness as a comparative measure.
Because of these limitations, EBITDA should not be considered as a
measure of discretionary cash available to use to invest in the growth
of Clearway Energy's business. Clearway Energy compensates for these
limitations by relying primarily on our GAAP results and using EBITDA
and Adjusted EBITDA only supplementally. See the statements of cash flow
included in the financial statements that are a part of this news
release.
Adjusted EBITDA is presented as a further supplemental measure of
operating performance. Adjusted EBITDA represents EBITDA adjusted for
mark-to-market gains or losses, non-cash equity compensation expense,
asset write offs and impairments; and factors which we do not consider
indicative of future operating performance such as transition and
integration related costs. The reader is encouraged to evaluate each
adjustment and the reasons Clearway Energy considers it appropriate for
supplemental analysis. As an analytical tool, Adjusted EBITDA is subject
to all of the limitations applicable to EBITDA. In addition, in
evaluating Adjusted EBITDA, the reader should be aware that in the
future Clearway Energy may incur expenses similar to the adjustments in
this news release.
Management believes Adjusted EBITDA is useful to investors and other
users of our financial statements in evaluating our operating
performance because it provides them with an additional tool to compare
business performance across companies and across periods. This measure
is widely used by investors to measure a company's operating performance
without regard to items such as interest expense, taxes, depreciation
and amortization, which can vary substantially from company to company
depending upon accounting methods and book value of assets, capital
structure and the method by which assets were acquired.
Additionally, Management believes that investors commonly adjust EBITDA
information to eliminate the effect of restructuring and other expenses,
which vary widely from company to company and impair comparability. As
we define it, Adjusted EBITDA represents EBITDA adjusted for the effects
of impairment losses, gains or losses on sales, non-cash equity
compensation expense, dispositions or retirements of assets, any
mark-to-market gains or losses from accounting for derivatives,
adjustments to exclude gains or losses on the repurchase, modification
or extinguishment of debt, and any extraordinary, unusual or
non-recurring items plus adjustments to reflect the Adjusted EBITDA from
our unconsolidated investments. We adjust for these items in our
Adjusted EBITDA as our management believes that these items would
distort their ability to efficiently view and assess our core operating
trends.
In summary, our management uses Adjusted EBITDA as a measure of
operating performance to assist in comparing performance from period to
period on a consistent basis and to readily view operating trends, as a
measure for planning and forecasting overall expectations and for
evaluating actual results against such expectations, and in
communications with our Board of Directors, shareholders, creditors,
analysts and investors concerning our financial performance.
Cash Available for Distribution (CAFD) is Adjusted EBITDA plus cash
distributions/return of investment from unconsolidated affiliates,
adjustments to reflect CAFD generated by unconsolidated investments that
are unable to distribute project dividends due to the PG&E bankruptcy,
cash receipts from notes receivable, cash distributions from
noncontrolling interests, 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, Walnut Creek investment
payments, changes in prepaid and accrued capacity payments, and adjusted
for development expenses. Management believes CAFD is a relevant
supplemental measure of the Company's ability to earn and distribute
cash returns to investors.
We believe CAFD is useful to investors in evaluating our operating
performance because securities analysts and other interested parties use
such calculations as a measure of our ability to make quarterly
distributions. In addition, CAFD is used by our management team for
determining future acquisitions and managing our growth. The GAAP
measure most directly comparable to CAFD is cash provided by operating
activities.
However, CAFD has limitations as an analytical tool because it does not
include changes in operating assets and liabilities and excludes the
effect of certain other cash flow items, all of which could have a
material effect on our financial condition and results from operations.
CAFD is a non GAAP measure and should not be considered an alternative
to cash provided by operating activities or any other performance or
liquidity measure determined in accordance with GAAP, nor is it
indicative of funds available to fund our cash needs. In addition, our
calculations of CAFD are not necessarily comparable to CAFD as
calculated by other companies. Investors should not rely on these
measures as a substitute for any GAAP measure, including cash provided
by operating activities.
_____________________________________
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1 Net corporate capital is subject to closing
adjustments; however, per terms of the partnership agreement, the
Company’s asset level CAFD yield will be no lower than 11% at
closing
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2 CAFD average over the 5-year period from 2020-2024 and
is based on the currently estimated net corporate capital commitment
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