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Rating Action:

Moody's affirms Clearway's ratings; stable outlook

11 Oct 2018

New York, October 11, 2018 -- Moody's Investors Service, ("Moody's") today affirmed Clearway Energy, Inc.'s (Clearway Energy) Ba2 Corporate Family Rating and Clearway Energy Operating LLC's (Clearway Operating) Ba2 senior unsecured rating. At the same time, we affirmed Clearway Energy's speculative grade liquidity rating (SGL) at SGL-2. In addition, in this rating action, Moody's is correcting the issuer attribution for the Ba2 senior unsecured debt to reflect the appropriate issuing legal entity, which should be Clearway Energy Operating LLC rather than Clearway Energy, Inc.

Outlook Actions:

..Issuer: Clearway Energy Operating LLC

....Outlook, Remains Stable

..Issuer: Clearway Energy, Inc.

....Outlook, Remains Stable

Affirmations:

..Issuer: Clearway Energy Operating LLC

....Senior Unsecured Regular Bond/Debenture, Affirmed Ba2 (LGD4)

..Issuer: Clearway Energy, Inc.

.... Probability of Default Rating, Affirmed Ba2-PD

.... Speculative Grade Liquidity Rating, Affirmed SGL-2

.... Corporate Family Rating, Affirmed Ba2

RATINGS RATIONALE

Clearway Energy's credit quality reflects its low business risk profile and the size and diversity of its portfolio. Cash flow diversity is strong, with approximately 125 project assets and a mix of renewable, gas and thermal assets. There is, however, some geographic concentration, as about 70% of cash flows are generated from projects in California.

Global Infrastructure Partners (GIP) recently acquired NRG Energy Inc.'s interest in NRG Yield, Inc. and renamed the company Clearway Energy, Inc. The acquisition was made through GIP's subsidiary, Clearway Energy Group.

We consider GIP to be a strong sponsor for Clearway Energy and Clearway Energy Group due to its large fund size and expertise in the infrastructure sector. Clearway Group has a strong pipeline of projects to support drop downs to Clearway Energy. Clearway Group currently has 8.9 gigawatts of development projects it acquired from NRG and SunPower Corporation. About 1 gigawatt of the development projects is in late stage development.

Offsetting these credit strengths are leverage ratios that will remain high. We project the ratio of consolidated debt to EBITDA to be around 6x to 7x while CFO Pre-WC/consolidated debt to be around 9%, both of which ratios are calculated on a P90 basis. The leverage ratios for full year results for 2018 are likely to be slightly above its run rate ratios because of the timing of the Carlsbad acquisition, which is expected to occur towards the end of 2018.

Liquidity

Clearway Energy has good liquidity, as reflected in its SGL-2 speculative grade liquidity rating. It has only a modest amount of capital expenditures in the near term and we expect it will generate a strong free cash flow in 2018 and 2019, of about $300 million per year. Additionally, as of June 30, 2018, the company had $130 million of unrestricted cash on hand and a $495 million revolving credit facility with $428 million unused.

Clearway Energy's revolving credit facility is sized to accommodate both operational liquidity and also provide bridge funding for new acquisitions.

The revolving credit facility expires in April 2023 and contains a material adverse change clause for new borrowings. Financial covenants include corporate debt to corporate EBITDA of 5.5x and interest coverage of 1.75x. Clearway Energy recorded a debt to EBITDA of 3.7x and an interest coverage of 5.3x as of the second quarter of 2018 for compliance certificate purposes.

Rating Outlook

Clearway Energy's stable outlook reflects its projected consistent cash flow and the diversity among individual projects. The stable outlook incorporates our expectation that Clearway Energy will finance these acquisitions in a way that does not significantly increase leverage or worsen liquidity.

Factors that Could Lead to an Upgrade

We may take positive rating action on Clearway Energy and Clearway Operating should Clearway Energy's CFO Pre-WC to consolidated debt rise to the mid-teens or should consolidated debt to EBITDA fall to 5.5x or below.

Factors that Could Lead to a Downgrade

A negative rating action could occur should the company's consolidated debt to EBITDA be sustained at above 7.5x, or if CFO Pre-W/C to consolidated debt fall below 9%, or if the cash flow from its projects proves to be more volatile or less resilient than our expectations. A downgrade can also occur should the company modify its financing strategy in a way that hurts credit quality, such as by using additional leverage to finance growth.

The principal methodology used in these ratings was Unregulated Utilities and Unregulated Power Companies published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Toby Shea
VP - Senior Credit Officer
Infrastructure Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Jim Hempstead
MD - Utilities
Infrastructure Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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