Summary
A deep dive into Clearway Energy (formerly NRG Yield) - a renewable energy yieldco with a new sponsor.
Planned acquisitions support a modestly growing dividend.
Key risks include weather variation, portfolio concentration, and interest rates.
Shares appear to be fairly valued.
A Bit of History
Clearway Energy (CWEN, CWEN.A), formerly known as NRG Yield, is a renewable energy yieldco that began its life as a subsidiary of NRG Energy. At its IPO in 2013, NRG Yield owned 21 assets with a combined power generation capacity of 2,545 MW and annual cash available for distribution (CAFD) of $105M. Since then, it has almost tripled in size, and now owns 125 assets with combined power generation capacity of 7,065 MW producing annual CAFD of $285M.
It was not always a smooth ride though: in 2015, the sponsor, NRG Energy, became concerned that it was losing control of the yieldco and forced a recapitalization event. At IPO, NRG Energy had 65% voting power via Class B shares, but by 2015, this had dwindled to 55% control due to continued issuance of Class A shares to fund dropdown acquisitions. In order to maintain control, the Class C and D shares were created and issued 1-to-1 for the then existing Class A and B shares. However, the newly issued shares only had 1/100 voting rights compared to the A and B shares. Since then, further equity issuances have only been of Class C shares, which minimally dilute the voting power of the sponsor.
