Clearway Energy: Misunderstood By The Market With 75% Return Potential

Summary

• Clearway Energy has lately been punished by the market due to strengthening of the "higher for longer" interest rate scenario, just as any other power producer.
• Yet, the underlying fundamentals of the Company indicate that the cash flows are largely isolated from the interest rate risk.
• Instead, there is a solid ground to talk about strong and predictable growth via portfolio expansion, where a notable part of new projects are already funded with cash.
• The current P/CF multiple of 4.2x does not match the growth bias. Plus, it is below its 3-year average because of the market's incorrect assumption about interest rate risk.
• Investors now get a chance to invest and expect ~75% returns via multiple expansion / convergence back to the historical norm and ~7.5% dividend, while waiting the thesis to play out.

pidjoe

Clearway Energy (NYSE:CWEN) is a U.S. based power producer, which owns and operates 5.5 GW of renewables and 2.5 GW of natural gas generation facilities. The distribution of CFAD among these three energy generation sources is balanced with wind accounting

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.