SEC Filing | Clearway Energy, Inc.

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cwen-20230930

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2023


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 333-203369

Clearway Energy LLC

(Exact name of registrant as specified in its charter)


Delaware			32-0407370
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

300 Carnegie Center, Suite 300	Princeton	New Jersey	08540
(Address of principal executive offices)			(Zip Code)

(609) 608-1525

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

As of October 31, 2023, there were 34,613,853 Class A units outstanding, 42,738,750 Class B units outstanding, 82,390,447 Class C units outstanding, and 42,336,750 Class D units outstanding. There is no public market for the registrant's outstanding units.

TABLE OF CONTENTS

Index


CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION			3
GLOSSARY OF TERMS			4
PART I — FINANCIAL INFORMATION			6
ITEM 1 — FINANCIAL STATEMENTS AND NOTES			6
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			34
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			51
ITEM 4 — CONTROLS AND PROCEDURES			52
PART II — OTHER INFORMATION			53
ITEM 1 — LEGAL PROCEEDINGS			53
ITEM 1A — RISK FACTORS			53
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			53
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES			53
ITEM 4 — MINE SAFETY DISCLOSURES			53
ITEM 5 — OTHER INFORMATION			53
ITEM 6 — EXHIBITS			54
SIGNATURES			55

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q of Clearway Energy LLC, together with its consolidated subsidiaries, or the Company, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The words “believes,” “projects,” “anticipates,” “plans,” “expects,” “intends,” “estimates” and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, risks and uncertainties include the factors described under Item 1A — Risk Factors in Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as well as the following:

•The Company’s ability to maintain and grow its quarterly distributions;

•Potential risks related to the Company's relationships with GIP, TotalEnergies and CEG;

•The Company’s ability to successfully identify, evaluate and consummate acquisitions from, and dispositions to, third parties;

•The Company’s ability to acquire assets from CEG;

•The Company’s ability to borrow additional funds and access capital markets, as well as the Company’s substantial indebtedness and the possibility that the Company may incur additional indebtedness going forward;

•Changes in law, including judicial decisions;

•Hazards customary to the power production industry and power generation operations such as fuel and electricity price volatility, unusual weather conditions (including wind and solar conditions), catastrophic weather-related or other damage to facilities, unscheduled generation outages, maintenance or repairs, unanticipated changes to fuel supply costs or availability due to higher demand, shortages, transportation problems or other developments, environmental incidents, or electric transmission or gas pipeline system constraints and the possibility that the Company may not have adequate insurance to cover losses as a result of such hazards;

•The Company’s ability to operate its businesses efficiently, manage maintenance capital expenditures and costs effectively, and generate earnings and cash flows from its asset-based businesses in relation to its debt and other obligations;

•The willingness and ability of counterparties to the Company’s offtake agreements to fulfill their obligations under such agreements;

•The Company’s ability to enter into contracts to sell power and procure fuel on acceptable terms and prices as current offtake agreements expire;

•Government regulation, including compliance with regulatory requirements and changes in market rules, rates, tariffs and environmental laws;

•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 the Senior Notes; and

•Cyber terrorism and inadequate cybersecurity, or the occurrence of a catastrophic loss and the possibility that the Company may not have adequate insurance to cover losses resulting from such hazards or the inability of the Company’s insurers to provide coverage.

Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause the Company’s actual results to differ materially from those contemplated in any forward-looking statements included in this Quarterly Report on Form 10-Q should not be construed as exhaustive.

GLOSSARY OF TERMS

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:


2028 Senior Notes			$850 million aggregate principal amount of 4.75% unsecured senior notes due 2028, issued by Clearway Energy Operating LLC
2031 Senior Notes			$925 million aggregate principal amount of 3.75% unsecured senior notes due 2031, issued by Clearway Energy Operating LLC
2032 Senior Notes			$350 million aggregate principal amount of 3.75% unsecured senior notes due 2032, issued by Clearway Energy Operating LLC
Adjusted EBITDA			A non-GAAP measure, represents earnings before interest (including loss on debt extinguishment), tax, depreciation and amortization adjusted for mark-to-market gains or losses, asset write offs and impairments; and factors which the Company does not consider indicative of future operating performance


ASC			The FASB Accounting Standards Codification, which the FASB established as the source of authoritative GAAP
ASU			Accounting Standards Updates - updates to the ASC
ATM Program			At-The-Market Equity Offering Program
Bridge Loan Agreement			Senior secured bridge credit agreement entered into by Clearway Energy Operating LLC that provided a term loan facility in an aggregate principal amount of $335 million that was repaid on May 3, 2022
BESS			Battery energy storage system
Black Start			The capability of a generating asset to restore the grid in the event of a blackout without relying on the external electric power transmission network
CAFD			A non-GAAP measure, Cash Available for Distribution is defined as of September 30, 2023 as Adjusted EBITDA plus cash distributions/return of investment from unconsolidated affiliates, cash receipts from notes receivable, cash distributions from noncontrolling interests, adjustments to reflect sales-type lease cash payments and payments for lease expenses, 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, changes in prepaid and accrued capacity payments and adjusted for development expenses
Capistrano Wind Portfolio			Five wind projects representing 413 MW of capacity, which includes Broken Bow and Crofton Bluffs located in Nebraska, Cedro Hill located in Texas and Mountain Wind Power I and II located in Wyoming
CEG			Clearway Energy Group LLC (formerly Zephyr Renewables LLC)
CEG Master Services Agreements			Master Services Agreements entered into as of August 31, 2018 and amended on February 2, 2023 between the Company, Clearway, Inc., Clearway Energy Operating LLC and CEG

Clearway, Inc.			Clearway Energy, Inc., the holder of the Company’s Class A and Class C units
Clearway Energy Group LLC			The holder of all of Clearway, Inc.’s Class B and Class D common stock, the Company’s Class B and Class D units and, from time to time, possibly shares of Clearway, Inc.’s Class A and/or Class C common stock
Clearway Energy Operating LLC			The holder of the project assets that are owned by the Company
Clearway Renew			Clearway Renew LLC, a subsidiary of CEG

Company			Clearway Energy LLC, together with its consolidated subsidiaries
CVSR			California Valley Solar Ranch
CVSR Holdco			CVSR Holdco LLC, the indirect owner of CVSR




Distributed Solar			Solar power projects, typically less than 20 MW in size (on an alternating current, or AC, basis), that primarily sell power produced to customers for usage on site, or are interconnected to sell power into the local distribution grid
Drop Down Assets			Assets under common control acquired by the Company from CEG






Exchange Act			The Securities Exchange Act of 1934, as amended
FASB			Financial Accounting Standards Board
GAAP			Accounting principles generally accepted in the U.S.
GenConn			GenConn Energy LLC


GIP			Global Infrastructure Partners
HLBV			Hypothetical Liquidation at Book Value



KKR			KKR Thor Bidco, LLC, an affiliate of Kohlberg Kravis Roberts & Co. L.P.
LIBOR			London Inter-Bank Offered Rate

Mesquite Star			Mesquite Star Special LLC

Mt. Storm			NedPower Mount Storm LLC
MW			Megawatt
MWh			Saleable megawatt hours, net of internal/parasitic load megawatt-hours
MWt			Megawatts Thermal Equivalent
Net Exposure			Counterparty credit exposure to Clearway, Inc. net of collateral


NPNS			Normal Purchases and Normal Sales

OCI/OCL			Other comprehensive income/loss
O&M			Operations and Maintenance
PG&E			Pacific Gas and Electric Company
PPA			Power Purchase Agreement

RA			Resource adequacy

RENOM			Clearway Renewable Operation & Maintenance LLC
Rosie Central BESS			Rosie BESS Devco LLC



SCE			Southern California Edison
SEC			U.S. Securities and Exchange Commission
Senior Notes			Collectively, the 2028 Senior Notes, the 2031 Senior Notes and the 2032 Senior Notes
SOFR			Secured Overnight Financing Rate
SPP			Solar Power Partners
SREC			Solar Renewable Energy Credit

Thermal Business			The Company’s thermal business, which consists of thermal infrastructure assets that provide steam, hot water and/or chilled water, and in some instances electricity, to commercial businesses, universities, hospitals and governmental units

TotalEnergies			TotalEnergies SE
U.S.			United States of America
Utah Solar Portfolio			Seven utility-scale solar farms located in Utah, representing 530 MW of capacity
Utility Scale Solar			Solar power projects, typically 20 MW or greater in size (on an alternating current, or AC, basis), that are interconnected into the transmission or distribution grid to sell power at a wholesale level
VIE			Variable Interest Entity

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

CLEARWAY ENERGY LLC

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
(In millions)	2023		2022		2023		2022
Operating Revenues
Total operating revenues	$	371	$	340	$	1,065	$	922
Operating Costs and Expenses
Cost of operations, exclusive of depreciation, amortization and accretion shown separately below	134		98		360		338
Depreciation, amortization and accretion	133		129		389		379

General and administrative	8		8		27		29
Transaction and integration costs	1		—		3		5
Development costs	—		—		—		2
Total operating costs and expenses	276		235		779		753
Gain on sale of business	—		—		—		1,291
Operating Income	95		105		286		1,460
Other Income (Expense)
Equity in earnings of unconsolidated affiliates	11		14		11		28


Other income, net	15		5		32		10
Loss on debt extinguishment	—		—		—		(2)
Interest expense	(48)		(49)		(202)		(143)
Total other expense, net	(22)		(30)		(159)		(107)
Net Income	73		75		127		1,353
Less: Net loss attributable to noncontrolling interests and redeemable noncontrolling interests	(32)		(3)		(62)		(49)
Net Income Attributable to Clearway Energy LLC	$	105	$	78	$	189	$	1,402

See accompanying notes to consolidated financial statements.

CLEARWAY ENERGY LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
(In millions)	2023		2022		2023		2022
Net Income	$	73	$	75	$	127	$	1,353
Other Comprehensive Income
Unrealized gain on derivatives and changes in accumulated OCI/OCL	9		14		9		37
Other comprehensive income	9		14		9		37
Comprehensive Income	82		89		136		1,390
Less: Comprehensive loss attributable to noncontrolling interests and redeemable noncontrolling interests	(28)		(1)		(58)		(43)
Comprehensive Income Attributable to Clearway Energy LLC	$	110	$	90	$	194	$	1,433

See accompanying notes to consolidated financial statements.

CLEARWAY ENERGY LLC

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2023		December 31, 2022
ASSETS	(Unaudited)
Current Assets
Cash and cash equivalents	$	566	$	657

Restricted cash	590		339
Accounts receivable — trade	196		153

Inventory	55		47
Derivative instruments	51		26

Note receivable — affiliate	215		—
Prepayments and other current assets	61		54
Total current assets	1,734		1,276
Property, plant and equipment, net	8,025		7,421
Other Assets
Equity investments in affiliates	373		364
Intangible assets for power purchase agreements, net	2,352		2,488
Other intangible assets, net	72		77
Derivative instruments	132		63
Right-of-use assets, net	569		527
Other non-current assets	113		96
Total other assets	3,611		3,615
Total Assets	$	13,370	$	12,312
LIABILITIES AND MEMBERS’ EQUITY
Current Liabilities
Current portion of long-term debt — external	$	522	$	322
Current portion of long-term debt — affiliate	2		2
Accounts payable — trade	73		55
Accounts payable — affiliates	74		24
Derivative instruments	54		50
Accrued interest expense	41		54

Accrued expenses and other current liabilities	75		95
Total current liabilities	841		602
Other Liabilities
Long-term debt — external	6,995		6,491
Deferred income taxes	4		4
Derivative instruments	271		303
Long-term lease liabilities	601		548
Other non-current liabilities	234		197
Total other liabilities	8,105		7,543
Total Liabilities	8,946		8,145
Redeemable noncontrolling interest in subsidiaries	18		7
Commitments and Contingencies
Members’ Equity
Contributed capital	1,233		1,308
Retained earnings	1,147		1,240
Accumulated other comprehensive income	26		21
Noncontrolling interest	2,000		1,591
Total Members’ Equity	4,406		4,160
Total Liabilities and Members’ Equity	$	13,370	$	12,312

See accompanying notes to consolidated financial statements.

CLEARWAY ENERGY LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended September 30,
(In millions)	2023		2022
Cash Flows from Operating Activities
Net Income	$	127	$	1,353
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of unconsolidated affiliates	(11)		(28)
Distributions from unconsolidated affiliates	17		25
Depreciation, amortization and accretion	389		379
Amortization of financing costs and debt discounts	9		10
Amortization of intangibles	139		123
Loss on debt extinguishment	—		2
Gain on sale of business	—		(1,291)
Reduction in carrying amount of right-of-use assets	11		10


Changes in derivative instruments and amortization of accumulated OCI/OCL	(64)		77

Cash used in changes in other working capital:
Changes in prepaid and accrued liabilities for tolling agreements	(23)		24
Changes in other working capital	(69)		(70)
Net Cash Provided by Operating Activities	525		614
Cash Flows from Investing Activities

Acquisition of Drop Down Assets, net of cash acquired	100		(51)
Acquisition of Capistrano Wind Portfolio, net of cash acquired	—		(223)
Increase in note receivable — affiliate	(215)		—
Capital expenditures	(143)		(95)


Return of investment from unconsolidated affiliates	14		12
Investments in unconsolidated affiliates	(28)		—

Proceeds from sale of business	—		1,457

Other	1		—
Net Cash (Used in) Provided by Investing Activities	(271)		1,100
Cash Flows from Financing Activities
Contributions from noncontrolling interests, net of distributions	219		2
Contributions from (distributions to) CEG, net	75		(16)


Payments of distributions	(231)		(214)
Tax-related distributions	(50)		(19)
Distributions to CEG of escrowed amounts	—		(64)
Proceeds from the revolving credit facility	—		80
Payments for the revolving credit facility	—		(325)
Proceeds from the issuance of long-term debt — external	293		219
Proceeds from the issuance of long-term debt — affiliate	—		5
Payments of debt issuance costs	(14)		(4)
Payments for long-term debt — external	(384)		(868)
Payments for long-term debt — affiliate	—		(1)
Other	(2)		(7)
Net Cash Used in Financing Activities	(94)		(1,212)

Net Increase in Cash, Cash Equivalents and Restricted Cash	160		502
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	996		654
Cash, Cash Equivalents and Restricted Cash at End of Period	$	1,156	$	1,156

See accompanying notes to consolidated financial statements.

CLEARWAY ENERGY LLC

CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

For the Nine Months Ended September 30, 2023

(Unaudited)


(In millions)	Contributed Capital		Retained Earnings		Accumulated Other Comprehensive Income		Noncontrolling Interest		Total Members’ Equity
Balances at December 31, 2022	$	1,308	$	1,240	$	21	$	1,591	$	4,160
Net loss	—		(22)		—		(33)		(55)
Unrealized loss on derivatives and changes in accumulated OCI	—		—		(3)		(1)		(4)

Contributions from CEG, net of distributions, cash	30		—		—		—		30
Contributions from noncontrolling interests, net of distributions, cash	—		—		—		215		215
Transfers of assets under common control	(59)		—		—		53		(6)

Distributions paid to Clearway, Inc.	—		(44)		—		—		(44)
Distributions paid to CEG Class B and Class D unit holders	—		(32)		—		—		(32)
Balances at March 31, 2023	1,279		1,142		18		1,825		4,264
Net income (loss)	—		106		—		(6)		100
Unrealized gain on derivatives	—		—		3		1		4

Distributions to CEG, cash	(4)		—		—		—		(4)
Distributions to noncontrolling interests, net of contributions, cash	—		—		—		(5)		(5)
Tax-related distributions	—		(45)		—		—		(45)
Distributions paid to Clearway, Inc.	—		(45)		—		—		(45)
Distributions paid to CEG Class B and Class D unit holders	—		(32)		—		—		(32)
Balances at June 30, 2023	1,275		1,126		21		1,815		4,237
Net income (loss)	—		105		—		(37)		68
Unrealized gain on derivatives	—		—		5		4		9

Distributions to CEG, cash	(1)		—		—		—		(1)
Contributions from noncontrolling interests, net of distributions, cash	—		—		—		12		12
Distributions to noncontrolling interests, non-cash	—		—		—		(7)		(7)
Tax-related distributions	—		(5)		—		—		(5)
Transfer of assets under common control	(42)		—		—		213		171
Distributions paid to Clearway, Inc.	—		(45)		—		—		(45)
Distributions paid to CEG Class B and Class D unit holders	—		(33)		—		—		(33)
Other	1		(1)		—		—		—
Balances at September 30, 2023	$	1,233	$	1,147	$	26	$	2,000	$	4,406

See accompanying notes to consolidated financial statements.

CLEARWAY ENERGY LLC

CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY

For the Nine Months Ended September 30, 2022

(Unaudited)


(In millions)	Contributed Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive(Loss) Income		Noncontrolling Interest		Total Members’ Equity
Balances at December 31, 2021	$	1,495	$	43	$	(13)	$	1,692	$	3,217
Net loss	—		(58)		—		(42)		(100)
Unrealized gain on derivatives and changes in accumulated OCL	—		—		13		3		16
Distributions to CEG, net of contributions, cash	(3)		—		—		—		(3)

Contributions from noncontrolling interests, net of distributions, cash	—		—		—		28		28
Transfers of assets under common control	(46)		—		—		9		(37)

Distributions paid to Clearway, Inc.	(40)		—		—		—		(40)
Distributions paid to CEG Class B and Class D unit holders	(5)		(25)		—		—		(30)
Balances at March 31, 2022	1,401		(40)		—		1,690		3,051
Net income (loss)	—		1,382		—		(10)		1,372
Unrealized gain on derivatives and changes in accumulated OCI	—		—		6		1		7
Contributions from (distributions to) CEG, cash	11		—		—		(31)		(20)
Distributions to noncontrolling interests, net of contributions, cash	—		—		—		(10)		(10)
Distributions paid to Clearway, Inc.	(41)		—		—		—		(41)
Distributions paid to CEG Class B and Class D unit holders	(30)		—		—		—		(30)
Balances at June 30, 2022	1,341		1,342		6		1,640		4,329
Net income (loss)	—		78		—		(6)		72
Unrealized gain on derivatives and changes in accumulated OCI	—		—		12		2		14
(Distributions to) contributions from CEG, non-cash	(17)		—		—		13		(4)
Contributions from (distributions to) CEG, cash	8		—		—		(1)		7
Distributions to noncontrolling interests, net of contributions, cash	—		—		—		(14)		(14)
Capistrano Wind Portfolio Acquisition	4		—		7		—		11
Kawailoa Sale to Clearway Renew LLC	(20)		—		—		(49)		(69)
Tax-related distributions	—		(19)		—		—		(19)
Distributions paid to Clearway, Inc.	—		(42)		—		—		(42)
Distributions paid to CEG Class B and Class D unit holders	—		(31)		—		—		(31)
Balances at September 30, 2022	$	1,316	$	1,328	$	25	$	1,585	$	4,254

See accompanying notes to consolidated financial statements.

CLEARWAY ENERGY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Nature of Business

Clearway Energy LLC, together with its consolidated subsidiaries, or the Company, is an energy infrastructure investor with a focus on investments in clean energy and owner of modern, sustainable and long-term contracted assets across North America. The Company is sponsored by GIP and TotalEnergies through the portfolio company, Clearway Energy Group LLC, or CEG, which is equally owned by GIP and TotalEnergies. GIP is an independent infrastructure fund manager that makes equity and debt investments in infrastructure assets and businesses. TotalEnergies is a global multi-energy company.

The Company is one of the largest renewable energy owners in the U.S. with over 5,500 net MW of installed wind and solar generation projects. The Company’s over 8,000 net MW of assets also includes approximately 2,500 net MW of environmentally-sound, highly efficient natural gas-fired generation facilities. Through this environmentally-sound, diversified and primarily contracted portfolio, the Company endeavors to increase distributions to its unit holders. The majority of the Company’s revenues are derived from long-term contractual arrangements for the output or capacity from these assets.

Clearway Energy, Inc., or Clearway, Inc., consolidates the results of the Company through its controlling interest, with CEG’s interest shown as contributed capital in the Company’s consolidated financial statements. The holders of Clearway, Inc.’s outstanding shares of Class A and Class C common stock are entitled to dividends as declared. CEG receives its distributions from the Company through its ownership of the Company’s Class B and Class D units.

As of September 30, 2023, Clearway, Inc. owned 57.90% of the economic interests of the Company, with CEG owning 42.10% of the economic interests of the Company.

The following table represents a summarized structure of the Company as of September 30, 2023:

https://cdn.kscope.io/5c0c7ae4274b97d7f57ad2733c025f2e-Clearway org picture as of 6.30.23 - 07.05.2023v3.jpg

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the SEC’s regulations for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the consolidated financial statements included in the Company’s 2022 Form 10-K. Interim results are not necessarily indicative of results for a full year.

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all material adjustments consisting of normal and recurring accruals necessary to present fairly the Company’s consolidated financial position as of September 30, 2023, and results of operations, comprehensive income and cash flows for the three and nine months ended September 30, 2023 and 2022.

Note 2 — Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions. These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amounts of net earnings during the reporting periods. Actual results could be different from these estimates.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include highly liquid investments with an original maturity of three months or less at the time of purchase. Cash and cash equivalents held at project subsidiaries was $125 million and $121 million as of September 30, 2023 and December 31, 2022, respectively.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows:


	September 30, 2023		December 31, 2022
	(In millions)
Cash and cash equivalents	$	566	$	657
Restricted cash	590		339
Cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	1,156	$	996

Restricted cash consists primarily of funds held to satisfy the requirements of certain debt agreements and funds held within the Company’s projects that are restricted in their use. As of September 30, 2023, these restricted funds were comprised of $160 million designated to fund operating expenses, $316 million designated for current debt service payments and $85 million restricted for reserves including debt service, performance obligations and other reserves as well as capital expenditures. The remaining $29 million is held in distributions reserve accounts.

Supplemental Cash Flow Information

The following table provides a disaggregation of the amounts classified as Acquisition of Drop Down Assets, net of cash acquired, shown in the consolidated statements of cash flows:


	Nine months ended September 30,
	2023		2022
	(In millions)
Cash paid to acquire Drop Down Assets	$	(34)	$	(51)
Cash acquired from the acquisition of Drop Down Assets	134		—
Acquisition of Drop Down Assets, net of cash acquired	$	100	$	(51)

Accumulated Depreciation and Accumulated Amortization

The following table presents the accumulated depreciation included in property, plant and equipment, net, and accumulated amortization included in intangible assets, net:


	September 30, 2023		December 31, 2022
	(In millions)
Property, Plant and Equipment Accumulated Depreciation	$	3,357	$	3,024
Intangible Assets Accumulated Amortization	1,018		877

Distributions

The following table lists distributions paid on the Company's Class A, B, C and D units during the nine months ended September 30, 2023:


	Third Quarter 2023		Second Quarter 2023		First Quarter 2023
Distributions per Class A, B, C and D unit	$	0.3891	$	0.3818	$	0.3745

On November 1, 2023, the Company declared a distribution on its Class A, Class B, Class C and Class D units of $0.3964 per unit payable on December 15, 2023 to unit holders of record as of December 1, 2023.

In addition to the quarterly distributions, the Company paid $50 million in additional distributions, $29 million of which was distributed to Clearway, Inc. and $21 million of which was distributed to CEG, during the nine months ended September 30, 2023, in order for Clearway, Inc. to make certain additional tax payments primarily associated with the sale of the Thermal Business.

Redeemable Noncontrolling Interests

To the extent that a third party has the right to redeem their interests for cash or other assets, the Company has included the noncontrolling interest attributable to the third party as a component of temporary equity in the mezzanine section of the consolidated balance sheet. The following table reflects the changes in the Company’s redeemable noncontrolling interest balance:


	(In millions)
Balance at December 31, 2022	$	7
Cash distributions to redeemable noncontrolling interests	(3)
Comprehensive income attributable to redeemable noncontrolling interests	14
Balance at September 30, 2023	$	18

Revenue Recognition

Disaggregated Revenues

The following tables represent the Company’s disaggregation of revenue from contracts with customers along with the reportable segment for each category:


	Three months ended September 30, 2023
(In millions)	Conventional Generation		Renewables		Total
Energy revenue (a)	$	57	$	280	$	337
Capacity revenue (a)	74		5		79
Other revenue	3		17		20
Contract amortization	(5)		(42)		(47)
Mark-to-market for economic hedges	3		(21)		(18)
Total operating revenues	132		239		371
Less: Mark-to-market for economic hedges	(3)		21		18
Less: Lease revenue	(41)		(233)		(274)
Less: Contract amortization	5		42		47
Total revenue from contracts with customers	$	93	$	69	$	162

(a) The following amounts of energy, capacity and other revenue relate to leases and are accounted for under ASC 842:


(In millions)	Conventional Generation		Renewables		Total
Energy revenue	$	2	$	228	$	230
Capacity revenue	39		5		44
Total	$	41	$	233	$	274


	Three months ended September 30, 2022
(In millions)	Conventional Generation		Renewables		Total
Energy revenue (a)	$	2	$	272	$	274
Capacity revenue (a)	106		1		107
Other revenue	—		18		18
Contract amortization	(6)		(36)		(42)
Mark-to-market for economic hedges	—		(17)		(17)
Total operating revenues	102		238		340
Less: Mark-to-market for economic hedges	—		17		17
Less: Lease revenue	(108)		(226)		(334)
Less: Contract amortization	6		36		42
Total revenue from contracts with customers	$	—	$	65	$	65

(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 842:


(In millions)	Conventional Generation		Renewables		Total
Energy revenue	$	2	$	226	$	228
Capacity revenue	106		—		106
Total	$	108	$	226	$	334


	Nine months ended September 30, 2023
(In millions)	Conventional Generation		Renewables		Total
Energy revenue (a)	$	61	$	753	$	814
Capacity revenue (a)	270		15		285
Other revenue (a)	24		56		80
Contract amortization	(16)		(125)		(141)
Mark-to-market for economic hedges	3		24		27
Total operating revenues	342		723		1,065
Less: Mark-to-market for economic hedges	(3)		(24)		(27)
Less: Lease revenue	(246)		(626)		(872)
Less: Contract amortization	16		125		141
Total revenue from contracts with customers	$	109	$	198	$	307

(a) The following amounts of energy, capacity and other revenue relate to leases and are accounted for under ASC 842:


(In millions)	Conventional Generation		Renewables		Total
Energy revenue	$	4	$	613	$	617
Capacity revenue	221		13		234
Other revenue (b)	21		—		21
Total	$	246	$	626	$	872

(b) On May 31, 2023, the Marsh Landing Black Start addition reached commercial operations and the Company will receive an annual fixed fee over a five-year term under the related agreement. The agreement was determined to be a sales-type lease resulting in the Company recording a lease receivable of $21 million included in total operating revenues, offset by net investment costs of $13 million included in cost of operations, resulting in a net pre-tax profit of $8 million.


	Nine months ended September 30, 2022
(In millions)	Conventional Generation		Renewables		Thermal		Total
Energy revenue (a)	$	5	$	773	$	48	$	826
Capacity revenue (a)	326		2		18		346
Other revenue	—		59		11		70
Contract amortization	(18)		(107)		—		(125)
Mark-to-market for economic hedges	—		(195)		—		(195)
Total operating revenues	313		532		77		922
Less: Mark-to-market for economic hedges	—		195		—		195
Less: Lease revenue	(331)		(656)		(1)		(988)
Less: Contract amortization	18		107		—		125
Total revenue from contracts with customers	$	—	$	178	$	76	$	254

(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 842:


(In millions)	Conventional Generation		Renewables		Thermal		Total
Energy revenue	$	5	$	656	$	1	$	662
Capacity revenue	326		—		—		326
Total	$	331	$	656	$	1	$	988

Contract Balances

The following table reflects the contract assets and liabilities included on the Company’s consolidated balance sheets:


	September 30, 2023		December 31, 2022
	(In millions)
Accounts receivable, net - Contracts with customers	$	67	$	37
Accounts receivable, net - Leases	129		116
Total accounts receivable, net	$	196	$	153

Recently Adopted Accounting Standards

In March 2020, the FASB issued ASU No. 2020-4, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide for optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. These amendments apply only to contracts that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform, which affects certain of the Company’s debt and interest rate swap agreements. The guidance is effective for all entities as of March 20, 2020 through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-6, Deferral of the Sunset Date of Reference Rate Reform, to extend the end of the transition period to December 31, 2024. As of July 14, 2023, the Company has amended all of the applicable contracts that previously used LIBOR as a reference rate and elected to apply the practical expedient to certain modified cash flow interest rate swap and debt agreements. The adoption did not have a material impact on the Company’s financial statements.

Note 3 — Acquisitions and Dispositions

Acquisitions

Victory Pass and Arica Drop Down — On October 31, 2023, the Company, through its indirect subsidiary, VP-Arica Parent Holdco LLC, acquired the Class A membership interests in VP-Arica TargetCo LLC, the indirect owner of Victory Pass, a 200 MW solar project with matching storage capacity, and Arica, a 263 MW solar project with matching storage capacity, that are both currently under construction in Riverside, California, from Clearway Renew for initial cash consideration of $46 million. Simultaneously, a cash equity investor acquired the Class B membership interests in VP-Arica TargetCo LLC from Clearway Renew for initial cash consideration of $87 million. At substantial completion, which is expected to occur in the first half of 2024, the Company will pay an additional $182 million to Clearway Renew and the cash equity investor will pay an additional $347 million to Clearway Renew. VP-Arica TargetCo LLC, a partnership between the Company and the cash equity investor, consolidates as primary beneficiary, VP-Arica TE Holdco LLC, a tax equity fund that owns the Victory Pass and Arica solar projects. Victory Pass and Arica each have PPAs with investment-grade counterparties that have a 15-year and 14-year weighted average contract duration, respectively, that commence when the underlying operating assets reach commercial operations, which is expected to occur in the first half of 2024. The acquisition was funded with existing sources of liquidity.

Daggett 2 Drop Down — On August 30, 2023, the Company, through its indirect subsidiary, Daggett Solar Investment LLC, acquired the Class A membership interests in Daggett 2 TargetCo LLC, the indirect owner of Daggett 2, a 182 MW solar project with matching storage capacity that is currently under construction in San Bernardino, California, from CEG for cash consideration of $13 million. Daggett 2 TargetCo LLC, a partnership between the Company and a cash equity investor, consolidates as primary beneficiary, Daggett 2 TE Holdco LLC, a tax equity fund that owns the Daggett 2 solar project, as further described in Note 4, Investments Accounted for by the Equity Method and Variable Interest Entities. Daggett 2 has PPAs with investment-grade counterparties that have a 15-year weighted average contract duration that commence when the underlying operating assets reach commercial operations, which is expected to occur for the majority of the assets in the fourth quarter of 2023. The Daggett 2 operations are reflected in the Company’s Renewables segment and the acquisition was funded with existing sources of liquidity. The acquisition was determined to be an asset acquisition and the Company consolidates Daggett 2 on a prospective basis in its financial statements. The assets, liabilities and noncontrolling interests transferred to the Company relate to interests under common control and were recorded at historical cost in accordance with ASC 805-50, Business Combinations - Related Issues. The sum of the historical cost of the Company’s acquired interests of $29 million and the cash paid of $13 million was recorded as an adjustment to CEG’s contributed capital balance.

The following is a summary of assets and liabilities transferred in connection with the acquisition as of August 30, 2023:


(In millions)	Daggett 2
Cash	$	1
Restricted cash (a)	119
Property, plant and equipment	379
Right-of-use-assets, net	22
Derivative assets	22

Total assets acquired	543

Long-term debt (b)	308
Long-term lease liabilities	23
Other current and non-current liabilities	28
Total liabilities assumed	359
Noncontrolling interests	213
Net assets acquired less noncontrolling interests	$	(29)

(a) Includes funds that were contributed by the cash equity investor and tax equity investor that must be used to pay off the tax equity bridge loan when the project reaches substantial completion, which is expected to occur in the fourth quarter of 2023.

(b) Includes a $107 million construction loan and $204 million tax equity bridge loan, offset by $3 million in unamortized debt issuance costs. See Note 7, Long-term Debt, for further discussion of the long-term debt assumed in the acquisition.

Daggett 3 Drop Down — On February 17, 2023, the Company, through its indirect subsidiary, Daggett Solar Investment LLC, acquired the Class A membership interests in Daggett TargetCo LLC, the indirect owner of Daggett 3, a 300 MW solar project with matching storage capacity that is located in San Bernardino, California, from Clearway Renew for cash consideration of $21 million. Simultaneously, a cash equity investor acquired the Class B membership interests in Daggett TargetCo LLC from Clearway Renew for cash consideration of $129 million. The Company and the cash equity investor then contributed their Class A and B membership interests, respectively, into Daggett Renewable Holdco LLC, a partnership between the Company and the cash equity investor, that consolidates Daggett TargetCo LLC. Daggett TargetCo LLC consolidates as primary beneficiary, Daggett TE Holdco LLC, a tax equity fund that owns the Daggett 3 solar project, as further described in Note 4, Investments Accounted for by the Equity Method and Variable Interest Entities. Daggett 3 has PPAs with investment-grade counterparties that have a 15-year weighted average contract duration that commence when the underlying assets reach commercial operations, which occurred for the majority of the assets during the third quarter of 2023. The Daggett 3 operations are reflected in the Company’s Renewables segment and the acquisition was funded with existing sources of liquidity. The acquisition was determined to be an asset acquisition and the Company consolidates Daggett 3 on a prospective basis in its financial statements. The assets and liabilities transferred to the Company relate to interests under common control and were recorded at historical cost in accordance with ASC 805-50, Business Combinations - Related Issues. The difference between the cash paid of $21 million and the historical cost of the Company’s net assets acquired of $15 million was recorded as an adjustment to CEG’s contributed capital balance. In addition, the Company reflected the entire $21 million of the Company’s purchase price, which was contributed back to the Company by CEG to pay down the acquired long-term debt, in the line item contributions from CEG, net of distributions in the consolidated statements of members’ equity.

The following is a summary of assets and liabilities transferred in connection with the acquisition as of February 17, 2023:


(In millions)	Daggett 3
Restricted cash	$	14
Property, plant and equipment	534
Right-of-use-assets, net	31
Derivative assets	27

Total assets acquired	606

Long-term debt (a)	480
Long-term lease liabilities	33
Other current and non-current liabilities (b)	78
Total liabilities assumed	591
Net assets acquired	$	15

(a) Includes a $181 million construction loan, $75 million sponsor equity bridge loan and $229 million tax equity bridge loan, offset by $5 million in unamortized debt issuance costs. See Note 7, Long-term Debt, for further discussion of the long-term debt assumed in the acquisition.

(b) Includes $32 million of project costs that were subsequently funded by CEG. Subsequent to the acquisition date, CEG funded an additional $21 million in project costs. The combined $53 million funded by CEG was repaid to CEG in October 2023.

Note 4 — Investments Accounted for by the Equity Method and Variable Interest Entities

Entities that are not Consolidated

The Company has interests in entities that are considered VIEs under ASC 810, but for which it is not considered the primary beneficiary. The Company accounts for its interests in these entities and entities in which it has a significant investment under the equity method of accounting, as further described under Item 15 — Note 5, Investments Accounted for by the Equity Method and Variable Interest Entities, to the consolidated financial statements included in the Company’s 2022 Form 10-K.

Rosie Central BESS — On June 30, 2023, the Company, through its indirect subsidiary, Rosie Class B LLC, the indirect owner of the Rosamond Central solar project, became the owner of the Class B membership interests of Rosie Central BESS in order to facilitate and fund the construction of a 147 MW BESS project that is co-located at the Rosamond Central solar facility. Clearway Renew indirectly owns the Class A membership interests and controls Rosie Central BESS. The Company accounts for its investment in Rosie Central BESS as an equity method investment. As of September 30, 2023, the Company’s investment consisted of $28 million contributed into Rosie Central BESS, funded through contributions from the Company and its cash equity investor in Rosie TargetCo LLC, which consolidates Rosie Class B LLC.

Additionally, on June 30, 2023, the Rosamond Central solar project entered into an asset purchase agreement with Clearway Renew to acquire the BESS project assets at mechanical completion, which is expected to occur in the fourth quarter of 2023, for initial cash consideration of $72 million, $17 million of which will be funded by the Company with the remaining $55 million to be funded through contributions from the cash equity investor in Rosie TargetCo LLC and the tax equity investor in Rosie TE HoldCo LLC. At substantial completion, which is expected to occur in the first half of 2024, the Rosamond Central solar project will pay an additional $288 million to Clearway Renew, $67 million of which will be funded by the Company with the remaining $221 million to be funded through contributions from the cash equity and tax equity investors. The BESS project has a PPA for capacity with an investment-grade utility that has a 15-year contract duration that will commence when the project reaches commercial operations, which is expected to occur in the first half of 2024. In order to facilitate and fund the construction of the BESS project, Rosie Class B LLC, the indirect owner of the Rosamond Central solar project, issued a loan to a consolidated subsidiary of Clearway Renew that is included in note receivable — affiliate on the Company’s consolidated balance sheet, as further discussed in Note 7, Long-term Debt.

The Company’s maximum exposure to loss as of September 30, 2023 is limited to its equity investment in the unconsolidated entities, as further summarized in the table below:


Name	Economic Interest	Investment Balance
		(In millions)
Avenal	50%	$	7
Desert Sunlight	25%	234
Elkhorn Ridge	67%	15
GenConn (a)	50%	79
Rosie Central BESS (a)	50%	28
San Juan Mesa	75%	10
		$	373

(a) GenConn and Rosie Central BESS are variable interest entities.

Entities that are Consolidated

As further described under Item 15 — Note 5, Investments Accounted for by the Equity Method and Variable Interest Entities, to the consolidated financial statements included in the Company’s 2022 Form 10-K, the Company has a controlling financial interest in certain entities which have been identified as VIEs under ASC 810, Consolidations, or ASC 810. These arrangements are primarily related to tax equity arrangements entered into with third parties in order to monetize certain tax credits associated with wind and solar facilities. The Company also has a controlling financial interest in certain partnership arrangements with third-party investors, which have also been identified as VIEs. Under the Company’s arrangements that have been identified as VIEs, the third-party investors are allocated earnings, tax attributes and distributable cash in accordance with the respective limited liability agreements. Many of these arrangements also provide a mechanism to facilitate achievement of the investor’s specified return by providing incremental cash distributions to the investor at a specified date if the specified return has not yet been achieved.

The discussion below describes material changes to VIEs during the nine months ended September 30, 2023.

Lighthouse Partnership Arrangements — On August 30, 2023, the Company and the cash equity investor in Lighthouse Renewable Holdco LLC and Lighthouse Renewable Holdco 2 LLC agreed to transfer Mesquite Star Class B Holdco LLC, the indirect owner of the Mesquite Star wind project, from Lighthouse Renewable Holdco LLC to Lighthouse Renewable Holdco 2 LLC.

Daggett 2 TargetCo LLC — As described in Note 3, Acquisitions and Dispositions, on August 30, 2023, Daggett Solar Investment LLC, an indirect subsidiary of the Company, acquired the Class A membership interests in Daggett 2 TargetCo LLC, a partnership between the Company and a cash equity investor. The Company consolidates Daggett 2 TargetCo LLC as a VIE as the Company is the primary beneficiary, through its role as managing member. The Company recorded the acquired noncontrolling interest of the cash equity investor in Daggett 2 TargetCo LLC at historical carrying amount. Daggett 2 TargetCo LLC consolidates as primary beneficiary, Daggett 2 TE Holdco LLC, a tax equity fund that owns the Daggett 2 solar project. The tax equity investor’s interest is shown as noncontrolling interest and the HLBV method is utilized to allocate the income or losses of Daggett 2 TE Holdco LLC.

Daggett Renewable Holdco LLC — As described in Note 3, Acquisitions and Dispositions, on February 17, 2023, Daggett Solar Investment LLC acquired the Class A membership interests in Daggett TargetCo LLC while a cash equity investor acquired the Class B membership interests. The Company and the cash equity investor then contributed their Class A and B membership interests, respectively, into Daggett Renewable Holdco LLC, a partnership between the Company and the cash equity investor, and concurrently, Daggett TargetCo LLC became a wholly-owned subsidiary of Daggett Renewable Holdco LLC. The Company consolidates Daggett Renewable Holdco LLC as a VIE as the Company is the primary beneficiary, through its role as managing member. The Company recorded the noncontrolling interest of the cash equity investor in Daggett Renewable Holdco LLC at historical carrying amount, with the offset to additional paid-in capital. Daggett TargetCo LLC consolidates as primary beneficiary, Daggett TE Holdco LLC, a tax equity fund that owns the Daggett 3 solar project. The tax equity investor’s interest is shown as noncontrolling interest and the HLBV method is utilized to allocate the income or losses of Daggett TE Holdco LLC.

Summarized financial information for the Company’s consolidated VIEs consisted of the following as of September 30, 2023:


(In millions)	Alta TE Holdco LLC		Buckthorn Holdings, LLC		DGPV Funds(a)		Daggett Renewable Holdco LLC (b)		Daggett 2 TargetCo LLC (c)		Langford TE Partnership LLC		Lighthouse Renewable Holdco LLC (d)
Other current and non-current assets	$	55	$	6	$	83	$	150	$	168	$	15	$	86
Property, plant and equipment	284		187		503		576		381		117		420
Intangible assets	190		—		13		—		—		2		—
Total assets	529		193		599		726		549		134		506
Current and non-current liabilities	38