Last year didn't start the way Clearway Energy (CWEN 0.59%)(NYSE: CWEN-A) expected. The renewable energy-focused company initially anticipated that it would be able to grow its dividend by 5% to 8% above 2018's level. Instead, its dividend went in the opposite direction as it slashed the payout by 40% after one of its larger customers, California-based utility PG&E (PCG 0.40%), declared bankruptcy.
The situation with PG&E was one of several issues that weighed on the company's financial results last year. However, it was able to regroup and use the financial flexibility it gained by reducing its dividend to make several growth-focused investments. As a result, it's in a position to deliver high-powered growth this year.
Here's a closer look at its results as well as what the renewable energy company sees ahead for 2020.
A look at Clearway Energy's fourth-quarter earnings
|
Metric |
Q4 2019 |
Q4 2018 |
Year-Over-Year Change |
|---|---|---|---|
|
Adjusted EBITDA |
$194 million |
$200 million |
(3%) |
|
Cash from operating activities |
$103 million |
$102 million |
1% |
|
Cash available for distribution |
$22 million |
$41 million |
(46.3%) |
Data source: Clearway Energy.
Clearway Energy's adjusted EBITDA dipped a bit during the fourth quarter, mainly due to weaker renewable energy conditions. That offset the contribution from its growth-focused investments. Cash available for distribution (CAFD), meanwhile, appeared to plunge during the quarter. However, that was mainly due to the timing of corporate interest payments on some bonds.
For the full year, Clearway generated $963 million of adjusted EBITDA, down 2% year over year, due to weaker renewable energy conditions and an outage at one of its facilities earlier this year. CAFD, meanwhile, came in at $254 million, which was down about 13% year over year because of those same issues and the higher interest payments. However, CAFD ended slightly higher than its guidance of $250 million.
Image source: Getty Images.
A look at what's ahead for Clearway Energy
Clearway Energy was very active during the fourth quarter. Highlights included:
- Raising $700 million in capital via a $100 million stock sale and $600 million debt issuance that will mature in 2028.
- Repurchasing $412 million of senior notes due in 2024 while calling for the redemption of the remaining $88 million of those notes.
- Closing the acquisition of the Carlsbad Energy Center. It paid $184 million in cash and assumed $803 million in debt.
- Being offered the opportunity to acquire and invest in three projects: 100% of Rattlesnake Wind, its parent's remaining interest in Repowering Partnership II, and a partnership to repower the Pinnacle Wind Project.
As a result of these transactions, Clearway Energy has updated its 2020 financial guidance. The renewable energy producer now expects to generate $310 million in CAFD this year, up from its prior estimate of $295 million and 22% above 2019's level. This forecast assumes that PG&E continues to make payments on its power purchase agreements with Clearway and that the company's renewable energy production is around the historical average. This outlook gave Clearway the confidence to increase its dividend by 5% from its reset level.
Hitting the accelerator in 2020
Clearway Energy was able to manage through PG&E's bankruptcy by reducing its dividend last year, which freed up some cash to invest in growth initiatives. Those investments should pay dividends this year by driving accelerated cash flow growth. That visible increase, when combined with the likelihood that PG&E will exit bankruptcy without altering its contracts with Clearway, sets the company up to potentially generate strong total returns this year.
