<Results Analysis> 3Q23 results a miss, though remains aligned with management’s guidance
- 3Q23 CAFD was a miss, although remains aligned with management’s FY23 guidance; New 2024 CAFD guidance aligned with expectations
- Declared quarterly dividend of US$0.3964 per share (+2% q-o-q), which translates into US$1.5856 per share or c.7% yield in annualized terms; Reiterate 5-8% DPS growth through 2026
- Strong sponsor’s pipeline of c. 29GW (including 7GW of late-stage projects), nearly quadruple of current capacity of c.8GW (of which 5.6GW is renewable) provides long-term growth visibility. Maintain BUY with unchanged TP of US$25.
3Q23 CAFD a miss, though remains on track with guidance; New FY24 CAFD guidance aligned with expectations. Clearway Energy, Inc. (CWEN) generated adjusted EBITDA of US$323.0m (+2% qoq, +0% yoy) which was aligned with estimates, although Cash Available for Distribution (CAFD) of US$156m (+14% qoq, +1% yoy) missed consensus estimates by 9%. Following recent quarters that also came in below expectations, the deficit in 3Q23 CAFD was a result of (i) lower energy gross margin at conventional and (ii) weak wind resources in Aug and Sept. Nevertheless, management has reaffirmed its FY23 CAFD guidance at US$330-360m (after being previously downgraded in 2Q23 by 15%), with 9M23 CAFD well on track with management guidance at 80% – 88%. Further, management has also initiated their FY24 CAFD guidance at US$395m, which reflects +14% CAFD growth y-o-y, aligned with consensus’s expectations. Post 3Q23 results, consensus has trimmed their FY23F and FY24F CAFD estimates by -2%, with FY23F CAFD at lower end of management’s guidance at US$335m and FY24F CAFD estimate at US$393m respectively, aligned with management’s guidance. Management has increased the quarterly dividend by 2% qoq to US$0.3964 per share in 3Q23, or US$1.5856 per share in annualized terms (implied annualised yield of c. 7%) and continues to target DPS growth in the upper range of 5-8% through 2026. Management targets 7% DPS growth in 2024, aligned with its medium term target of 5-8% growth through 2026.
Reaffirming long-term targets, with no external equity/debt. CWEN has raised over US$1.3bn of corporate level capital in 2022 from the sale of its thermal business, of which US$0.6bn has been allocated in prior commitments, with the remaining US$0.7bn expected to be allocated going forward. Management has continued to reiterate its FY26 DPS growth target, where they have slightly trimmed their FY26 CAFD per share target to US$2.05 per share (down from previous US$2.08) on the back of recent growth commitments offset by higher renewable budgetary costs, with management citing FY26 CAFD per share of US$2.15 in line of sight with no external equity/debt. Thus far, total capacity under construction totalled ~2GW (c.25% of current capacity of c. 8GW) with an additional >2GW expected to commence construction within the next 12 months. We believe CWEN’s long-term growth outlook remains visible as supported by the sponsor’s strong development pipeline of c.29GW, including c.7GW of late-stage projects expected to feature commercial operations in the next 4 years, that could potentially be dropped down to CWEN.