-
Modifying capital allocation approach due to Pacific Gas &
Electric’s (PG&E) bankruptcy filing
-
Reducing quarterly dividend to $0.20 per share in first quarter 2019
-
Global Infrastructure Partners III (GIP), Clearway Energy, Inc.’s
controlling shareholder, providing key long-term support through the
Carlsbad equity backstop and with continued investment in, and
advancement of, Clearway Group’s renewable development business
-
Lowering 2019 Cash Available for Distribution guidance due to
anticipated use of the Carlsbad equity backstop agreement with GIP
-
Currently not pursuing acquisition of remaining interest in Agua
Caliente from NRG Energy, Inc.
-
Hosting regularly scheduled year-end and fourth quarter 2018
earnings call on February 28, 2019
PRINCETON, N.J.--(BUSINESS WIRE)--Feb. 14, 2019--
Clearway Energy, Inc. (NYSE: CWEN, CWEN.A) is today announcing an update
to its business and capital allocation plans due to impacts resulting
from PG&E’s bankruptcy. This includes the announcement that the
Company’s Board of Directors declared a quarterly dividend on each of
the Company’s Class A and Class C common stock of $0.20 per share
payable on March 15, 2019 to shareholders of record as of March 1, 20191.
This compares to the quarterly dividend of $0.331 per share paid on
December 17, 2018.
“After careful deliberations with management, our board unanimously
approved today’s dividend reduction in order to proactively maintain
balance sheet and capital allocation flexibility during this period of
uncertainty with one of Clearway’s largest customers,” said Jonathan
Bram, Founding Partner of GIP and Chairman of the Board of Clearway
Energy, Inc. “GIP continues to be committed to the long-term success of
the Company by holding the Carlsbad project for a future acquisition by
the Company, expanding the ROFO Pipeline with the addition of Hawaii
Solar Phase II, and through ongoing investment in, and advancement of,
new renewable development at Clearway Group.”
“The PG&E bankruptcy has heightened the risk that project level cash
distributions could be restricted for an undetermined amount of time,
thereby impacting the Company’s corporate liquidity and corporate
leverage. Today’s announced dividend reduction, the exercise of GIP’s
equity backstop commitment for Carlsbad, and our decision to currently
forgo the potential acquisition of the additional interest in Agua
Caliente are prudent actions which provide the Company financial
flexibility to manage through this period of uncertainty.” said
Christopher Sotos, Clearway Energy, Inc.’s President and Chief Executive
Officer. “As time progresses and we receive more clarity on the PG&E
situation, including our ability to receive project distributions, we
will reassess the dividend. Over the long term, these actions will allow
us to maintain our balance sheet objectives, which will help the Company
grow CAFD per share despite the current lack of clarity around cash
distributions from projects impacted by the PG&E bankruptcy.”
PG&E Related Project Exposure
On January 29, 2019, Pacific Gas and Electric Company filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. The Company
either owns or invests in 1,200 net MW of electric generation projects
with long-term supply or capacity contracts with PG&E. As of December
31, 2018, the Company’s unaudited balance sheet included approximately
$1.4 billion of non-recourse debt associated with these projects.
Additionally, these projects represent approximately $90 million2
of potential exposure to 2019 project level CAFD. The PG&E bankruptcy
filing has triggered defaults under the power purchase agreements with
PG&E and related project level financing agreements. While the Company
is actively working with project level lenders on forbearance
agreements, unless such lenders for the related project level debt
otherwise agree, distributions to the Company from these projects may
not be made during the pendency of the bankruptcy, although the Company
currently expects these projects to otherwise operate in the normal
course of business. These restrictions, therefore, could result in the
Company accumulating less unrestricted cash and thus decrease the
Company’s corporate liquidity and cash available for shareholder
dividends and growth investments.
As of February 14, 2019, PG&E has neither assumed, rejected, or sought
to renegotiate contracts.
Quarterly Dividend Announcement
On February 12, 2019, Clearway Energy, Inc.’s Board of Directors
declared a quarterly dividend on Class A and Class C common stock of
$0.20 per share payable on March 15, 2019, to stockholders of record as
of March 1, 2019. This dividend is reduced from the last quarterly
dividend paid in December 2018 of $0.331 per share.
The Company will continue to assess the level of the dividend pending
developments in the PG&E bankruptcy, including the Company’s ability to
receive unrestricted project distributions.
Update to Growth Investments
Carlsbad Energy Center: Exercising the Backstop with GIP
The Company plans to exercise the equity backstop with GIP for the
acquisition of the Carlsbad Energy Center when the transaction with NRG
Energy, Inc. (NRG) closes, now expected in late February 2019. After
considering final purchase price adjustments, GIP is expected to acquire
Carlsbad from NRG for $387 million. Pursuant to the terms previously
agreed by and between the Company and GIP, the Company maintains the
option for a period of eighteen (18) months to acquire Carlsbad from GIP
at the same terms and conditions previously negotiated with NRG.
Interest in Agua Caliente: Forgoing the Drop Down Offer from NRG
Energy, Inc.
On November 1, 2018, NRG offered the Company the opportunity to acquire
Agua Caliente Borrower 1 LLC, which owns a 35% interest in Agua
Caliente, a 290 MW utility-scale solar project located in Dateland,
Arizona with PG&E as the project’s customer. The Company has elected to
forgo the acquisition at this time.
The Company continues to own a 16% interest in the project through Agua
Caliente Borrower 2 LLC.
Update to the ROFO Pipeline with Clearway Group
Clearway Energy Group, GIP’s portfolio company that has the controlling
ownership in the Company has added Hawaii Solar Phase II, the first
addition to the ROFO pipeline since the closing of the GIP Transaction.
Hawaii Solar Phase II consists of two solar and storage projects located
in Oahu, Hawaii with a combined capacity of 75MW. The Mililani I Solar
project, located in the Mililani Agricultural Park, is sized at 39 MW
and will include battery storage capability. The Waiawa Solar Power
project, located in the Waiawa region, is sized at 36 MW and will also
include battery storage capability. The expected commercial operations
date for these projects is 2021.
Corporate Financing Update
On February 1st, the Company repaid the remaining $220 million of 2019
convertible notes outstanding with cash on hand. Other than the
remaining $45 million of 2020 convertible notes due in June 2020, the
Company has no corporate debt maturity until 2024.
2019 Financial Guidance Update
Because the Company will exercise the Carlsbad backstop with GIP, the
Company is revising its 2019 CAFD guidance to $270 million from $295
million. This financial guidance reflects no additional corporate level
financing and assumes that all CAFD related to the projects impacted by
the PG&E bankruptcy is realized in 2019. Financial guidance for 2019
also continues to be based on median renewable energy production
estimates.
Business Update Conference Call
On February 14, 2019, Clearway Energy, Inc. will host a conference call
at 8:00 a.m. Eastern to discuss these updates. Investors, the news media
and others may access the live webcast of the conference call and
accompanying presentation materials by accessing Clearway Energy Inc.’s
website at http://www.clearwayenergy.com
and clicking on “Presentations & Webcasts” under “Investor Relations.”
The webcast will be archived on the website for those unable to listen
in real time.
As previously reported, management will continue to report its Full Year
and Fourth Quarter 2018 financial results during a conference call and
webcast on February 28, 2019 at 8:00 a.m. Eastern.
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 III (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.
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 our Net Income, Adjusted EBITDA, Cash from
Operating Activities, Cash Available for Distribution, the Company’s
future revenues, income, indebtedness, capital structure, strategy,
plans, expectations, objectives, projected financial performance and/or
business results and other future events, and views of economic and
market conditions.
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. Factors that
could cause actual results to differ materially from those contemplated
above include, among others, effects relating to the PG&E Bankruptcy,
general economic conditions, hazards customary in the power industry,
weather conditions, including wind and solar performance, impacts
related to climate change, competition in wholesale power markets, the
volatility of energy and fuel prices, failure of customers to perform
under contracts, changes in the wholesale power markets, changes in
government regulations, the condition of capital markets generally, our
ability to access capital markets, cyber terrorism and inadequate
cybersecurity, the ability to engage in successful acquisitions
activity, potential risks to the company as a result of GIP’s
acquisition of its ownership interest in the Company, unanticipated
outages at our generation facilities, adverse results in current and
future litigation, failure to identify, execute or successfully
implement acquisitions (including receipt of third party consents and
regulatory approvals), our ability to enter into new contracts as
existing contracts expire, our ability to acquire assets GIP III Zephyr
Acquisition Partners, L.P., Clearway Energy Group or third parties, our
ability to close drop down transactions, 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 our senior notes, and our ability to
maintain and grow our quarterly dividends. Furthermore, any dividends
are subject to available capital, market conditions, and compliance with
associated laws and regulations.
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. Adjusted EBITDA and Cash Available for
Distribution are estimates as of today’s date, February 14, 2019, and
are based on assumptions believed to be reasonable as of this date.
Clearway Energy expressly disclaims any current intention to update such
guidance. The foregoing review of factors that could cause Clearway
Energy’s actual results to differ materially from those contemplated in
the forward-looking statements included in this news release should be
considered in connection with information regarding risks and
uncertainties that may affect Clearway Energy’s future results included
in Clearway Energy’s filings with the Securities and Exchange Commission
at www.sec.gov.
In addition, Clearway Energy makes available free of charge at www.clearwayenergy.com,
copies of materials it files with, or furnishes to, the SEC.
Appendix Table A-1: Cash Available for Distribution Guidance and GAAP
Reconciliation
($ in millions)
|
|
|
|
Original 2019 Full Year Guidance3
|
|
|
Revised 2019 Full Year Guidance
|
Net Income
|
|
|
|
160
|
|
|
165
|
Income Tax Expense
|
|
|
|
30
|
|
|
30
|
Interest Expense, net
|
|
|
|
355
|
|
|
315
|
Depreciation, Amortization, and ARO Expense
|
|
|
|
455
|
|
|
395
|
Acquisition related transaction and integration costs
|
|
|
|
5
|
|
|
5
|
Adjustment to reflect CWEN share of Adjusted EBITDA in
unconsolidated affiliates
|
|
|
|
85
|
|
|
85
|
Adjusted EBITDA
|
|
|
|
1,090
|
|
|
995
|
Cash interest paid
|
|
|
|
(340)
|
|
|
(300)
|
Changes in prepaid and accrued liabilities for tolling agreements
|
|
|
|
(3)
|
|
|
4
|
Adjustment to reflect Walnut Creek investment payments
|
|
|
|
(1)
|
|
|
(1)
|
Pro-rata Adjusted EBITDA from unconsolidated affiliates
|
|
|
|
(215)
|
|
|
(215)
|
Cash distributions from unconsolidated affiliates
|
|
|
|
130
|
|
|
130
|
Cash from Operating Activities
|
|
|
|
661
|
|
|
613
|
Development Expense
|
|
|
|
4
|
|
|
4
|
Net Contributions from non-controlling interest
|
|
|
|
(4)
|
|
|
(4)
|
Maintenance capital expenditures
|
|
|
|
(33)
|
|
|
(30)
|
Principal amortization of indebtedness
|
|
|
|
(333)
|
|
|
(313)
|
Cash Available for Distribution
|
|
|
|
295
|
|
|
270
|
Add Back: Principal amortization of indebtedness
|
|
|
|
333
|
|
|
313
|
Adjusted Cash from Operations
|
|
|
|
628
|
|
|
583
|
|
|
|
|
|
|
|
|
Appendix Table A-2: Potential Exposure to 2019 CAFD Related to PG&E
Bankruptcy
($ in millions)
|
|
|
|
2019 Full Year
|
Net Income
|
|
|
|
105
|
Interest Expense, net
|
|
|
|
55
|
Depreciation, Amortization, and ARO Expense
|
|
|
|
70
|
Adjustment to reflect CWEN share of Adjusted EBITDA in
unconsolidated affiliates
|
|
|
|
50
|
Adjusted EBITDA
|
|
|
|
280
|
Cash interest paid
|
|
|
|
(53)
|
Pro-rata Adjusted EBITDA from unconsolidated affiliates
|
|
|
|
(73)
|
Cash distributions from unconsolidated affiliates
|
|
|
|
35
|
Cash from Operating Activities
|
|
|
|
189
|
Principal amortization of indebtedness
|
|
|
|
(99)
|
Cash Available for Distribution
|
|
|
|
90
|
|
|
|
|
|
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.
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. 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), a non-GAAP financial measure, is
Adjusted EBITDA plus cash distributions/return of investment from
unconsolidated affiliates, 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 cash
available for distribution 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.
1 Dividend to Class A and C common stock holders is
commensurate to the distribution received by the Class B and D unit
holders
2 See Appendix A-2 of this news release,
potential exposure includes Desert Sunlight 250 (contracted with
Southern California Edison) due to provisions in the financing
agreements with Desert Sunlight 300 (contracted with Pacific Gas &
Electric)
3 2019 Guidance factored in the impact of
financing updates, the contribution of committed growth investments
based on expected closing timelines, and assumed additional corporate
financing to refinance the tendered 2020 convertible notes in October
2018. 2019 financial guidance excluded any impact from the Agua Caliente
offer.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190214005403/en/
Source: Clearway Energy, Inc.
Investors:
Akil Marsh
akil.marsh@clearwayenergy.com
609-608-1500
Media:
Ray
Long
media@clearwayenergy.com