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Clearway Energy (CWEN) to Acquire Renewable Energy Projects

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Zacks Equity Research
·3 min read
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Clearway Energy Inc. CWEN announced that it has entered into an agreement related to the drop-down offer from Clearway Group to acquire and invest in a portfolio of renewable energy projects. Per the agreement, Clearway Energy — on closure of the acquisition — will invest $241 million, subject to closing adjustments. The wind projects are expected to begin commercial operations by the end of 2020. Clearway Energy expects to fund the transactions with the existing corporate liquidity.

One of the wind assets, Rattlesnake Wind Project has a 20-year power purchase agreement with Avista Corporation AVA and another asset, Pinnacle Wind Project has power purchase agreements that run through 2031.

Assets acquired by the company generally have long-term power purchase agreements, which make these accretive to earnings and contribute to an increase in cash flows.

Acquisitions Strengthen Clean Generation
The above investment will diversify the company’s asset base. The transaction is expected to have a five-year average annual Cash Available for Distribution of $23 million prior to corporate financing costs.

Clearway Energy has already acquired 80 megawatt (“MW”) of solar projects from Clearway Group under the Right to First Offer (“ROFO”) mode.  Additionally, the company currently has 634 MW ROFO projects, which include 175 MW of solar projects and 459 MW of wind projects. These acquisitions will further strengthen operations of the company and create growth opportunities.

Clearway Energy’s current portfolio of electric generation assets, which are non-emitting sources, consists of more than 7,000 MW of wind, solar and natural gas-fired power generation facilities. Through organic growth and acquisitions, the company continues to expand the clean generation portfolio.

Generation From Renewable Sources

Per the U.S. Energy Information Administration’s (EIA) short-term energy outlook, novel coronavirus pandemic’s effects on electricity supply are very uncertain because of rapidly changing economic conditions.

Per the report, most of the generating capacity that has been scheduled to come online in 2020 is fueled by renewable energy sources — including solar and wind — and natural gas. Generation from non-hydroelectric renewable sources is likely to touch 472.59 billion kilowatt (kWh) in 2020, indicating 5.8% year-over-year growth. Per EIA, generation from coal will drop 19.9% year over year to 773.32 billion kWh in 2020.

Price Performance

Shares of Clearway Energy have outperformed the industry in the past 12 months.

Zacks Rank & Key Picks

Clearway Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector are Murphy USA Inc. MUSA and Renewable Energy Group, Inc. REGI, each currently holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Murphy USA and Renewable Energy Group delivered four-quarter positive earnings surprise of 16.6% and 1,379.7%, respectively, on average.

The 2020 Zacks Consensus Estimate for Murphy USA and Renewable Energy Group has been revised 11.1% and 6.7% upward, respectively, in the past 60 days.

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