Clearway Energy Inc. CWEN is benefiting from its focus on North American operations and modern utility-scale clean renewable projects that ensure high fleet availability and low maintenance costs. Acquisition of renewable projects and use of asset sale proceeds are aiding the company to cut debts.
However, this Zacks Rank #3 (Hold) company has to face risks related to underperformance of its third-party transmission lines that are used to supply electricity.
Tailwinds
Clearway Energy is primarily focused on North America that saves it from foreign currency fluctuation risks. In addition, North America provides an excellent opportunity to expand its operation through acquisition of renewable and natural gas-fired generation assets. The company owns and operates utility scale renewable energy and natural gas-fired generation, as well as thermal and other infrastructure assets with low operating risks and stable cash flows.
Courtesy of its modern nature of generation portfolio that includes a substantial number of solar and wind generation assets, Clearway Energy expects to achieve high fleet availability and modest maintenance-related capital expenditure. The new and long-lived assets in the portfolio give the company a competitive advantage and boost margins.
Apart from organic growth, CWEN is making acquisitions to further expand its renewable operations. In August 2023, it joined global solar tracking technology and software manufacturer Nextracker at its new manufacturing line in Fremont, CA. The idea was to announce a strategic Volume Commitment Agreement of 2 gigawatts of solar trackers over the next three years.
Headwinds
Renewable energy generation is weather dependent. Clearway Energy recorded the lowest quarterly wind production index reading in the company’s history. This was primarily due to weak wind resource.
The company relies on certain electric interconnection and transmission facilities that are not owned or controlled by it. It also depends on others for wholesale sale of electricity from the electric generation assets. If these third-party facilities fail to provide Clearway Energy with adequate transmission capacity, its ability to deliver electric power may be restricted and it may either incur additional costs or forego revenues.
Stocks to Consider
Some other top-ranked stocks are FirstEnergy Corporation FE, OGE Energy Corp. OGE and Portland General Electric POR, each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FE’s long-term (three to five year) earnings growth rate is 6.45%. The Zacks Consensus Estimate for FE’s 2023 earnings per share (EPS) indicates an increase of 5% year over year.
OGE’s long-term earnings growth rate is 3.65%. It delivered an average earnings surprise of 3.8% in the last four quarters.
POR’s long-term earnings growth rate is 6.02%. It delivered an average earnings surprise of 4.2% in the last four quarters.
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