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US yieldco Clearway targets 3.5% CAFD growth in 2019

Clearway Energy Inc., the US renewables yieldco known formerly as NRG Yield, reported its first quarterly results under new sponsor Global Infrastructure Partners, saying it expects to chalk up a 3.5% increase in cash available for distribution (CAFD) to shareholders in 2019 as it begins adding to its multi-gigawatt renewables portfolio.

In August Global Infrastructure Partners, a major infrastructure fund based in New York, finalised its acquisition of NRG Energy’s yieldco and renewables development platform, with NRG largely returning to its roots as a generator and retailer of gas- and coal-fired power.

The deal makes Global Infrastructure Partners one of the most important companies in US renewables. Clearway Energy, which trades on the New York Stock Exchange, owns more than 3GW of operating wind and solar capacity, including the country’s largest wind farm – the multi-phase 947MW Alta Wind in Tehachapi, California. The yieldco also owns nearly 2GW of conventional generating assets.

Global Infrastructure Partners controls the yieldco through its privately held Clearway Energy Group subsidiary, which will develop and buy projects to be dropped-down to the yieldco. This summer the Clearway Group acquired a 4.7GW pipeline of utility-scale solar projects from SunPower, giving years of visibility into potential growth and acquisitions for Clearway Energy.

That growth will start slowly at first, at least for CAFD, a critical metric for yieldcos. Clearway Energy initiated its 2019 guidance with a $295m target for CAFD. That compares to the $285m in CAFD it expects this year, alongside its anticipated $985m of adjusted EBITDA.

Clearway’s net income came in at $49m in the third quarter, up from $31m during the same period last year under NRG, with particularly strong growth coming from renewables thanks to stronger winds in the western US. Quarterly adjusted EBITDA rose 7% to $290m.

“We are ... pleased to report that the company realised strong results in the third quarter as renewable energy conditions, primarily at Alta, were above expectations,” says Clearway Energy chief executive Christopher Sotos.

Similar to US yieldco peers like NextEra Energy Partners and TerraForm Power, Clearway Energy will focus primarily on the relatively low-risk business of generating and selling clean electricity – while attempting to deliver stable and steadily growing dividends to shareholders. Most project development risk will be left to its sponsor company.

Clearway Energy recently announced it will repower 283MW of wind assets, at the Wildorado and Elbow Creek projects. It’s also in the process of acquiring the 527MW gas-fired Carlsbad Energy Center in California and a 35% stake in the 290MW Agua Caliente solar project in Arizona from NRG Energy.

Clearway's 2019 CAFD guidance does not include the potential impact of the Agua Caliente acquisition, which has not yet been finalised.

“Looking forward to next year, we remain focused on the closing of key transactions such as Carlsbad and Agua Caliente while also building upon our partnership with Clearway Group to support our long-term objective of delivering 5-8% annual dividend per share growth,” Sotos says.