Clearway Energy's Q3 2025 Earnings Call: Contradictions in Repowering Timelines, CAFD Contributions, and Strategic Priorities

Guidance:

• 2025 CAFD narrowed to $420M–$440M (top half of prior range)
• 2026 CAFD guidance $470M–$510M
• 2030 CAFD per share target $2.90–$3.10 (implies ~7%–8% CAGR from 2025 midpoint)
• Long-term payout ratio targeted to be <70% beyond 2030 and target corporate debt/EBITDA of 4.0–4.5x
• Plan to fund growth primarily with retained cash flow, prudent corporate debt and modest, opportunistic equity

Business Commentary:

* Financial Guidance and Growth Outlook: - Clearway Energy, Inc. (CWEN) narrowed its financial guidance for 2025 and set a 2030 growth target for CAFD (cash available for distribution) per share of $2.90 to $3.10. - The growth is attributed to successful execution of acquisitions, repowerings, and sponsor-developed drop-downs, as well as the company's robust pipeline of late-stage projects.

• Renewable Energy and Storage Segment Performance:
• The Renewables and Storage segment delivered adjusted EBITDA of $385 million and CAFD of $166 million for Q3 2025.

• Wind resources tracked close to median expectations, while solar benefited from executed growth investments, contributing to consistent performance.

• Capital Allocation and Equity Issuances:

• Clearway executed $50 million of equity issuances through ATM and dividend reinvestment, with plans to use retained cash flows as a greater funding source post-2030.

• This action aligns with the company's strategy to maintain a payout ratio below 70% long-term, focusing on efficient capital deployment.

• Repowering and Growth Investments:

• Repowering investments are expected to deliver high CAFD yields of 10% to 12%, with most contributions expected in 2028.

• The repowering campaign aims to enhance fleet efficiency and extend PPAs, ensuring longevity and stable cash flow.

• Data Center and Flexible Generation Opportunities:

• Clearway is developing flexible generation resources near hyperscaler clusters, recognizing the need for load following capabilities in data center load support.
• This development is part of the company's strategy to create complementary resource complexes that could meet significant data center demand in the gigawatt scale.

Sentiment Analysis:

Overall Tone: Positive

• Management narrowed 2025 guidance to the top half of the range after a strong Q3, reported Q3 adjusted EBITDA $385M and CAFD $166M, and established a 2030 CAFD/share target of $2.90–$3.10 with a stated 7%–8% CAGR, emphasizing confidence in multiple accretive growth pathways.

Q&A:

• Question from Dimple Gosai (BofA Securities): You flagged development of flexible gas paired with renewables near hyperscaler clusters. Can you give us a sense of timing of these opportunities and what returns do these hybrid data center complexes target and how you think of the risk return profile compared to traditional renewables?
  Response: These complexes are longer-term opportunities (accessible to CWEN in 2030+), built from existing development/operating footprints, expected to be contracted and to deliver risk‑adjusted returns at least as good as, if not superior to, current drop‑downs.

• Question from Dimple Gosai (BofA Securities): Repowering appears to be delivering 10% to 12% CAFD yields. Can you give us a sense of the timing of contribution and the size of that opportunity as it relates to Mt. Storm, Goat Mountain and San Juan Mesa?
  Response: Majority of repowering investments occur in 2027 with most CAFD uplift realized in 2028; individual projects (e.g., San Juan Mesa) have attractive PPAs and high CAFD yields as disclosed.

• Question from Justin Clare (ROTH Capital Partners): With rising power prices, are you seeing demand from offtakers to renew/extend PPAs earlier than expected and could that lead to growth in revenue or CAFD in the coming years?
  Response: Yes — contract extensions (example Wildorado, Mt. Storm) can extend longevity and compound cash flow into 2030+, and management will pursue extensions that are at least as cash‑generative as existing contracts.

• Question from Justin Clare (ROTH Capital Partners): The 2030 CAFD/share target implies ~3.5% CAGR from the high end of 2027 to 2030; why might growth appear to slow then reaccelerate?
  Response: Targets are set conservatively and updated as commercialization occurs; the company has a large pipeline and expects to revisit/raise targets as projects commercialize to achieve the stated 7%–8% CAGR from 2025.

• Question from Steven Fleishman (Wolfe Research): How much additional M&A opportunity are you seeing and can your existing funding framework scale if you have billions more to invest?
  Response: They will pursue M&A only if meaningfully accretive and financeable within their capital framework (recent deals showed wide spreads vs WACC), prioritizing deals that reduce payout ratio and increase self‑funding rather than indiscriminate scale.

• Question from Heidi Hauch (BNP Paribas): How are you thinking about asset dispositions as part of the broader funding strategy—are disposals core and which assets are most eligible?
  Response: Broad asset dispositions are not part of the plan; they may selectively sell small or non‑core assets if a purchaser values them more highly, but no core asset‑harvest campaign is planned.

• Question from Heidi Hauch (BNP Paribas): On the data center flexible gas projects, how soon might you formalize contracts given long equipment lead times and what is driving Clearway into developing flexible generation versus legacy renewables?
  Response: Flexible gas is a selective complement driven by customer (utilities/hyperscaler) demand and reliability needs; renewables and storage remain the bulk of the pipeline, and timing/contracting will be handled pragmatically given lead times.

• Question from Mark Jarvi (CIBC Capital Markets): Do the data center energy complex facilities build off existing renewable and battery installations or are they new development sites?
  Response: They all build off existing operating facilities or renewable/battery sites that have been in development for multiple years.

• Question from Mark Jarvi (CIBC Capital Markets): Will there be contracts on existing assets and does that drive the ability to generate higher returns from these projects?
  Response: Yes; credibility to deliver large, constructible plants (often with storage) on the existing footprint enables longer PPAs, higher capacity contributions and ultimately higher returns.

• Question from Nelson Ng (RBC Capital Markets): For your 2030 outlook, what are you assuming for the flexible generation portfolio and how contracted are those assets now?
  Response: The 2030 range conservatively embeds flexible‑gen contribution similar to 2024–25 levels; management expects upside from capacity and storage economics and can harvest additional value beyond the target if markets permit.

• Question from Nelson Ng (RBC Capital Markets): Given the pipeline exceeds CWEN needs, should we expect CWEN to buy ~50% of future projects or something lower than 100%?
  Response: Through 2027, projects identified for CWEN are planned as 100% CWEN equity investments; post‑2027 pacing, partnerships or partial investments will be evaluated based on CWEN's funding capacity.

• Question from Corinne Blanchard (Deutsche Bank): Clearway Group pipeline showed 27 GW versus 29 GW last quarter — what caused the decrease and shifts between early stage and prospect?
  Response: Management clarified the current pipeline is 30 GW (up QoQ); 27 GW referenced a pro forma subset after harmonizing non‑essential projects — they are prioritizing late‑stage projects essential to the multi‑year build plan.

Contradiction Point 1

Repowering Projects Timeline

It significantly impacts expectations regarding the timing and execution of strategic growth initiatives, which can affect future cash flows and investor confidence.

Can you explain the timeline and impact of repowering projects such as Mt. Storm, Goat Mountain, and San Juan Mesa? - Dimple Gosai(BofA Securities)

2025Q3: Most repowering investments are planned for 2027, with contributions in 2028. - Craig Cornelius(CEO)

Has the 2 GW wind repowering opportunity been accelerated before 2028 to avoid 2027 service issues? - Hannah Marie Velásquez(Jefferies)

2025Q2: The volume of repowering opportunities is actually larger than it was a quarter ago. - Craig Cornelius(CEO)

Contradiction Point 2

CAFD Contribution from Tuolumne

It involves differing descriptions of the financial contributions from a key project, which impacts investor expectations regarding financial performance.

What is the potential for PPA renewals with rising power prices? Could this drive growth in revenue or CAFD? - Justin Clare(ROTH Capital Partners)

2025Q3: Tuolumne is contributing at the top end of the original guidance range. - Craig Cornelius(CEO)

Is Tuolumne contributing to this year's guidance, or is it excluded? - Hannah Marie Velásquez(Jefferies)

2025Q2: Tuolumne is contributing at the top end of the original guidance range. - Craig Cornelius(CEO)

Contradiction Point 3

Battery Storage and Tariff Management

It reflects inconsistencies in the company's approach to managing tariff impacts on battery storage projects, which can significantly affect project costs and overall financial viability.

What are the prospects for developing flexible gas combined with renewables near hyperscaler clusters? How do these hybrid projects achieve returns, and how does their risk-return profile compare to traditional renewables? - Dimple Gosai(BofA Securities)

2025Q3: We value batteries as reliable revenue generators. The market recognizes their benefits for reliability and ratepayer costs. We're committed to executing our pipeline with prudence and craftsmanship, working with suppliers to minimize tariff impacts. - Craig Cornelius(CEO)

Can you discuss sourcing batteries outside China and mitigating tariff impacts? - Justin Clare(Roth Capital Partners, LLC)

2025Q1: Capital costs for wind and solar projects are manageable, but battery costs could increase by 30% due to tariffs. We've worked with suppliers to adjust delivery schedules and share costs, keeping projects on track. We're committed to domestic supply chain development, and our strategy aligns with national goals to reduce China reliance. - Craig Cornelius(CEO)

Contradiction Point 4

Growth Projections and Shareholder Returns

It involves differing expectations regarding growth projections and shareholder returns, which are crucial for maintaining investor confidence and strategic planning.

Why might growth slow before reaccelerating in the 2030s? - Justin Clare(ROTH Capital Partners)

2025Q3: Clearway sets realistic goals and consistently revises them as milestones are met. The growth profile is aimed at 7% to 8% through 2030, with potential to increase beyond the current target. - Craig Cornelius(CEO)

Do you need external equity to achieve the top end of your 2027 targets, and will you extend your growth projections beyond 2027? - Mark Jarvi(CIBC Capital Markets)

2025Q1: Our growth outlook for 2027 is an enterprise-level CAFD of $925 million to $1.1 billion, which equates to a per share CAFD of $1.78 to $2.11. Our growth outlook for 2025 is $645 million to $675 million of enterprise- level CAFD, which equates to a per share CAFD of $1.23 to $1.28. - Sarah Rubenstein(CFO)

Contradiction Point 5

Pipeline Adjustment and Project Focus

It involves differing perspectives on the company's project pipeline and focus areas, which could impact future growth expectations and strategic direction.

What caused the pipeline decrease, and what's the status of early-stage projects? - Corinne Blanchard(Deutsche Bank)

2025Q3: The pipeline adjustment primarily reflects a focus on necessary projects for the next 5 years. The pipeline remains substantial, with late-stage projects exceeding CWEN's needs. - Craig Cornelius(CEO)

What changes enabled the increase in excess debt capacity from $300 million to $300–$400 million? - Michael Lonegan(Evercore)

2024Q4: Our development pipeline, we think, is probably the best in the industry today, and it holds us in good stead over the longer term. - Craig Cornelius(CEO)