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Clearway Energy (CWEN) to Buy 35% Stake in Agua Caliente Solar

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Zacks Equity Research
·3 min read
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Clearway Energy CWEN announced that it has entered into a definite agreement to acquire an additional 35% interest in 290-megawatt (MW) Agua Caliente solar project — located in Dateland, AZ — for $202 million. The decision to acquire an additional interest in this solar farm will increase Clearway Energy’s stake in the same to 51%.  The deal is expected to close in first-quarter 2021, subject to the fulfillment of closing conditions. Clearway Energy is expected to fund the acquisition with the existing liquidity.

Acquisition of a majority stake in Aqua Caliente is in sync with the company’s long-term objective of expanding operations through the acquisition of generation assets from third parties. Clearway Energy believes that its knowledge of the market and operating expertise will provide it with a competitive advantage and boost cash flow.

The Aqua Caliente Solar Project was designed and built by First Solar FSLR, and will be operated and maintained for its owners. The project has a 25-year power purchase agreement with PG&E Corporation PCG, with nearly 19 years remaining under the agreement. This long-term agreement provides it with earnings visibility. Clearway Energy sells the majority of its output pursuant to long-term offtake agreements. The weighted average remaining contract duration of these long-term offtake agreements were nearly 13 years as of Sep 30, 2020.

Long-Term Plans

Clearway Energy acquires clean energy assets from Clearway Group from time to time via accepting the drop-down offer of the latter. The company has received an offer from Clearway Group for co-investment in a 1.6 gigawatt (“GW”) clean project under development. Clearway Energy is also engaged in structuring, and targets additional clean energy project investments in the tune of 1.1 GW between 2021 and 2023 commercial operational dates.

These projects will support and boost the company’s cash flow generation capability over the long term. In addition, since it is primarily focused on North America, it is saved from currency fluctuations and sovereign risks.

Zacks Rank & Key Pick

Clearway Energy currently carries a Zacks Rank #4 (Sell).

A better ranked stock in the same space is Ameresco Inc. AMRC, having a Zacks Rank #2 (Buy).

Ameresco delivered an average earnings surprise of 68.6% in the trailing four quarters. The Zacks Consensus Estimate for its 2020 and 2021 earnings has moved up 10.9% and 9.3%, respectively, in the past 60 days.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

Year to date, shares of the company have returned 51.3% against the industry’s 10.9% decline.

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First Solar, Inc. (FSLR) : Free Stock Analysis Report
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