Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Clearway Energy third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press the star then the one key on your touchtone telephone. If you require operator assistance, please press star then zero. I would now like to hand the conference over to your speaker host, Mr. Chris Sotos, President and CEO of Clearway Energy. Please go ahead, sir.
Thank you. Good morning, and let me first thank you for taking the time to join today's call. Joining me this morning are Akil Marsh, Senior Manager of Investor Relations, Chad Plotkin, our Chief Financial Officer, and Craig Cornelius, President and CEO of Clearway Energy Group. Craig will be available for the Q&A portion of our presentation. Before we begin, I'd like to quickly note that today's discussion will contain forward-looking statements, which are based on assumptions that we believe to be reasonable as of this date. Actual results may differ materially. Please review the Safe Harbor in today's presentation, as well as the risk factors in our SEC filings. In addition, we refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures, please refer to today's presentation. Turning to page four.
2021 was a historic year for Clearway Energy. From an operational performance and CAFD generation standpoint, we exceeded our objectives for the year. We also deployed approximately $820 million into accretive growth projects, while our sponsor made significant strides in expanding its development portfolio, which will help drive our future growth. We materially reduced the risk in our natural gas portfolio with new contracts. Finally, Clearway Energy announced the sale of our thermal business at a very attractive multiple. As a result of all these efforts, Clearway enters 2022 with unprecedented flexibility. This flexibility provides Clearway with the longest visible runway for dividend per share growth in its history, with $750 million of net proceeds remaining for capital deployment after the thermal sale. In summary, we are very well-positioned for 2022 and beyond.
For 2021, our CAFD generation performed well, with full-year CAFD of $336 million, ahead of our guidance. Clearway also announced an increase in its quarterly dividend by 2% or $1.3872 per share on an annualized basis. The sale of our thermal business is on track, with anticipated closing in the second quarter. We're also increasing the amount of remaining capital as a result of the sale from $680 million to now $750 million. This is primarily due to a recent change in California law, where a prior suspension in a company's ability to utilize state NOLs in 2022 was reversed.
For 2022, taking into account the sale of thermal and our current committed growth commitments, we are on track for $385 million of pro forma CAFD, translating into $1.90 per share, with $520 million out of the $600 million in capital commitments already funded. Moving forward, CEG is working to deploy the $750 million of remaining capital to drive CAFD and dividend per share. In working with our Clearway Energy Group colleagues, we have line of sight to a minimum of $250 million, or roughly a third, of this capital being allocated to the next dropdown, with Clearway Energy Group's development pipeline growing to 19 GW.
This $250 million of capital deployment we view as a floor that would potentially be increased depending on what climate and clean energy tax provisions working their way through Congress are ultimately passed. With the full deployment of the $750 million of remaining capital, Clearway will be able to drive CAFD per share to over $2.15 on a long-term basis. Clearway is also announcing a goal in 2050 of net zero GHG emissions. The ownership of our long-term contracted clean energy assets is at the heart of what Clearway does every day and represents the significant majority of our CAFD and EBITDA generation going forward, as well as a platform for future accretive renewable growth through dropdowns from our sponsor or through opportunistic third-party M&A.
However, we thought it was important to formally state our board-approved long-term goal around climate change and our emissions, given our natural gas holdings. As a leader in the clean energy transition, Clearway is well positioned for 2022 and beyond to achieve the upper range of its long-term 5%-8% DPS growth target through 2026. Turning to page five. This provides a roadmap for our anticipated CAFD growth utilizing the now $750 million of remaining capital resulting from the thermal sale. Starting on the left side of the page, the $385 million or $1.90 CAFD per share takes into account the disposition of thermal as well as the committed growth investments.
The next column indicates the anticipated CAFD on our next dropdown from our sponsor with an anticipated minimum capital requirement of $250 million at an average 8%-9% CAFD yield. Due to this dropdown, we now have line of sight to deployment of a third of the remaining proceeds from the sale of thermal. As discussed on previous calls, Clearway is always focused on efficiency of capital deployment with an emphasis on accretive growth. We are continuing to work to commit the remaining $500 million of thermal sale proceeds to accretive growth investments, driving CAFD on a long-term basis to approximately $440 million and CAFD per share to $2.15 or greater, depending on CAFD yield. In this process, we'll remain focused on meeting our underwriting criteria.
If we cannot meet this criteria, we retain the option to evaluate other means of capital allocation, including return to shareholders. Page six provides an illustration of our environmental footprint. Clearway Energy has one of the lowest GHG intensities in the U.S. power sector, driven by 5.2 GW of net-owned renewable generation. As a result, approximately 91% of our electricity megawatt-hours in 2021 were from renewable generation. This number should increase in the future as the size of our renewable fleet grows through investment in our sponsor's 19 GW renewable development pipeline, as well as third-party acquisitions. This renewable footprint also provides the vast majority of Clearway's economic value, with 75% of our pro forma CAFD and 82% of our pro forma adjusted EBITDA coming from renewables after accounting for the thermal sale.
As we discussed over the years, Clearway views its gas fleet as essential for the transition to renewable energy of California's electricity generation. Our natural gas assets are predominantly peaking assets that help ensure the grid's reliability during periods of high demand and for electric grids with high penetrations of renewables. Our California gas assets characteristics of being fast start, efficient, and load pockets are critical providing electricity during periods in which renewable generation may be waning. As I mentioned earlier, the board has approved a net zero GHG emission target by 2050, aligned with the Paris Climate Agreement. Taken together, Clearway is a leader in clean energy and a premium investment opportunity in the energy transition space. With that, I'll turn it over to Chad. Chad?
Thank you, Chris. Turning to slide eight. Clearway had an excellent 2021, both operationally and strategically. The company finished the year strong with fourth quarter cash available for distribution, or CAFD, of $35 million and adjusted EBITDA of $250 million. This brought full year 2021 results to $336 million in CAFD, or above our guidance of $325 million, and adjusted EBITDA to $1.15 billion overall. As a reminder, full year CAFD results were impacted by approximately $25 million from Winter Storm Uri almost one year ago. Excluding that impact, CAFD would have been approximately $360 million for 2021. During the fourth quarter, the company's portfolio was balanced.
In the non-renewable part of our business, both the conventional and thermal segments performed materially in line with expectations, leading to a strong year overall. For renewables, production across the wind portfolio during the fourth quarter was modestly above expectations, providing an offset to lower solar volumes. As a reminder from the third quarter call, strategic efforts did impact fourth quarter results relative to original expectations due to a change in the timing of project-level interest payments, such that payments were made in the third quarter versus the fourth quarter. On the strategic financing front, the company continued to manage the corporate balance sheet in 2021 through effective liability management, capital formation in line with our leverage targets, and by implementing temporary solutions to execute on growth in advance of receiving the net proceeds from the thermal transaction.
During the year, we raised $1.3 billion in new corporate-level green bonds, which in part, the company utilized to refinance the $950 million in the then outstanding 2025 and 2026 senior notes. Through these efforts, and on a weighted average basis for the new financings, we reduced interest costs from approximately 5.5% to 3.75% in the aggregate, extended the maturities to 2031, and raised additional cost-effective debt capital for growth. Importantly, Clearway has further mitigated its interest rate exposure, as the company's earliest corporate maturity is now in 2028, and when also including the project-level non-recourse debt, approximately 99% of the company's consolidated long-term debt interest costs are fixed.
As mentioned on the last earnings call, due to the timing of when we expected to receive the net proceeds from the thermal sale relative to when we needed to finance committed growth investments, we required a temporary solution to bridge the company's capital needs. To accommodate this requirement, in November, we agreed with the company's bank group on an amendment to the revolving credit facility, providing for the ability to temporarily operate at higher leverage ratios and to enter into a bridge loan to facilitate the closing of the $335 million acquisition of the remaining interest in Utah Solar. Through these efforts, the company achieved significant financial operating flexibility to advance its strategic growth objectives.
This included the ability to fund $520 million of growth commitments since November, which was instrumental to meet both 2022 CAFD guidance and its pro forma CAFD outlook. We do, however, wanna emphasize that these efforts should not be interpreted as a long-term change in our leverage targets. Upon the closing of the thermal transaction, the company will repay both the bridge loan and outstanding balances under the credit facility and see its leverage ratios move back to a more normalized level. For 2022, we continue to maintain full-year CAFD guidance of $395 million. However, and as noted on the company's last earnings call, due to the uncertainty of when the thermal transaction may close, guidance does continue to factor in the estimated full-year contribution of $40 million in CAFD from the thermal business.
As is our normal practice for strategic transactions, we will provide an update to full year 2022 expectations after the closing of the thermal transaction. Lastly, we wanna also remind you that 2022 CAFD guidance also does not fully capture all CAFD expected relative to five-year averages from committed growth investments, which informs the company's $385 million in pro forma CAFD outlook, a figure that already excludes any contribution from thermal. With that, I'll turn the call back to Chris for closing remarks.
Thank you, Chad. Turning to page 10.
As I discussed at the beginning of the call, 2021 was an exceptionally strong year for Clearway Energy, in which we delivered on our financial commitments, invest and raise capital in an efficient and accretive manner, expand the hedge profile of our natural gas assets, sign the sale of our thermal portfolio at a strong multiple, and as a result of all these efforts, reduced our risk and create a high degree of financial flexibility that supports our view of growing CAFD per share at the upper range of our long-term 5%-8% dividend per share growth rate through 2026. In establishing our 2022 goals, we are focused as always on the near term and also the long-term achievement of our 2022 guidance within sensitivities, growing our DPS at the upper end of the range and closing the sale of our thermal business.
In parallel with the sale of our thermal business, we are working with Clearway Energy Group to create a strong succession of drop-down opportunities that can be completed from their existing late-stage pipeline under current law, even as we look to potential upside in capital deployment and cap to contribution if the climate and clean energy tax provisions moving through Congress are passed. While we made significant progress in reducing the near-term risk profile of our natural gas assets in 2021, we still have work to do, and this will be a continuing area of focus in 2022. Finally, I would like to thank the employees of Clearway through the entire enterprise for all their hard work during another difficult year of the pandemic.
To work through the Texas weather event, operate projects at high levels of reliability and safety, engage and support third-party M&A, drop-down and capital raising activity, as well as deliver on the construction of new assets in this challenging environment is an achievement we can all be proud of. Thank you. Operator, please open the lines for questions.
Thank you. Ladies and gentlemen, if you'd like to ask a question at this time, please press the star then the one key on your touchtone telephone. To withdraw your question, you may press the pound key. Please stand by and we'll compile the Q&A roster. Now, first question coming from the line of Julien Dumoulin-Smith with Bank of America. Your line is open.
Hey, good morning to you. Can you hear me?
Yes, we can.
Excellent. Thanks for the time and the opportunity. First off, let's just start at a high level here. I'd just be curious, how would you compare the backdrop available for renewable assets quarter-over-quarter here as we've seen inflationary impacts and especially just the impact of higher rates filter itself out? I mean, how much does that change pricing? Perhaps more specifically here, if you don't mind, we saw one of your peers, Hannon Armstrong here, announce something of late in Texas, with Clearway Energy Group. Can you comment on what that means for your business, especially as you think about the palatability and desirability of large-scale solar, for instance? Perhaps there might be something to that as well. Thank you.
Sure. No problem. Probably go to your second question first and then back. So for the Hannon Armstrong, you know, Hannon's a good partner that we have in Lighthouse currently. I think, you know, we do have a letter agreement with CEG to work on that asset. I think, you know, we're both of us are kind of interested in that. I think the view of long-term solar and ERCOT is a positive one, especially given our portfolio. I think, yeah, nothing in particular there other than that's one of the assets that underpins kind of our view of growth going forward. To your first question around comparing the backdrop, you know, Q-on-Q, I'll also ask, you know, Craig a little bit for his view, obviously kind of working it more day-to-day.
It's from our perspective. I don't necessarily think in terms of, you know, PPA pricing, which I think is the base of your question, Julien. There probably has been a big change in the near term. Longer term, there might be, but I think your question is probably underpinning a PPA question. I don't think you've probably seen that work through in today's environment. Craig, I don't know if there's any additional color.
Yeah, sure. I mean, I think, Julien, first, in terms of the overall demand picture, it remains as robust as we've really ever seen it in the two decades that we've been building this industry here in the U.S. You know, wholesale demands continue to accelerate. It's being driven by decarbonization goals and a greater resource plan among utilities, planned coal retirements. In total, the demand that we're tracking here in the U.S. sums to over 240 GW of demand just from IRPs that we plan to be able to serve as a company. We project 80 GW worth of coal retirements that will open up serviceable demand in the wholesale markets as well. Across different corporate sustainability goals that will require additional clean energy PPAs for virtual power purchase agreements.
There are tens of gigawatts more that will need to be signed and built over the coming three to five years. When we look across that whole picture, the ability to serve that demand at prices that reflect today's cost structure is certainly there while providing a desirable customer value proposition. We've worked with customers on new projects that we're building to be able to set price that makes business objectives for them that they have meetable while also allowing for our projects to be economically accretive. The outlook that I have for our industry to be able to serve that demand, even in an inflationary environment, is very strong.
Got it. Excellent. Thank you. Chris, if you don't mind me going back to this question just to clarify this. Just how do you imagine this going forward on that project in Texas here? You know, you say that you've got a letter agreement with CEG to quote work on that asset. Is this something that you could imagine a split? Is this a competitive bid at some point? Sorry to nitpick on it. I'm more curious on what it means more holistically, but also as it pertains to the specific arrangement as you allude to.
Yeah, sure. Maybe you're reading too much into it, Julien. I think it's very similar to what you saw in Lighthouse, where we probably would have a partnership with Hannon on that asset. It's not. If your question is, are we both bidding on it to own 100%, that's not what we're doing. I think it's much more the partnership mode that you saw on Lighthouse in the end of 2020 that we deployed capital to in this year.
Got it. Okay. More of a split situation. Sorry. Go for it, Chad.
Yeah. Sorry, Julien, this is Craig. Yeah, just to add to it, I mean, I think we think of the portfolio that we're building for Clearway Energy, Inc. with Hannon as a partner, as a portfolio that over time can incorporate additional assets that are complementary to the range of resource profiles and customer profiles that are in that existing owned portfolio. What I think you see referenced there is just the next in a succession of complementary solar and storage opportunities that we hope both enterprises will ultimately see from us.
Great. Excellent. I mean, and maybe the underlying point here is you see a wealth of opportunities. It doesn't really faze you that you would be potentially splitting something here with CEG.
No.
Excellent. All right, I'll leave it there. Thank you, guys. Thank you, Craig.
Now, next question coming from the line of Colton Bean with Tudor Pickering Holt. Your line is open.
Morning. Just on the potential $250 million drop, you know, looking at the timing of the CEG backlog, is that weighted to projects with commercial in service of 2023? A related question there, any updated thoughts on third-party M&A and if that could play a role in the remaining $500 million of proceeds?
Sure. Yeah, it's definitely back weighted to kind of 2023 through probably the first quarter of 2025. So yeah, if your question is it gonna come online in 2022, the answer in general is no. It's much more kind of 2023 and beyond. To your second question, definitely third-party M&A is something we're looking at. It was part of our capital deployment in 2021 with Mt. Storm in Utah. You know, we look at third-party M&A all the time, and when we have a binding agreement on something, we would announce it.
Maybe a related question there. I know it's still early days, but with interest rates moving higher, have you seen any shift in valuation discussions, whether that be third party processes or potential CEG drops?
I would say no to both. It's a little bit too early, and I think while obviously the interest rate moved from around 70 basis points in the 10-year to, depending where the quote may be this morning, at 1.9 is significant in multiple terms. It's at the end of the day about a 100 basis point move, which, you know, maybe I've just been in the industry too long. You know, a 100 basis points move do happen. You know, from my view, I don't think to date that has moved pricing around that much, either in a dropdown context, or in a third party M&A to date.
Just a final one on El Segundo. I know recontracting was expected sometime in 2022. Any updates to where we sit in that process and just differences in expectations versus what you were able to get done on the peaker plants?
Frankly, no. That process kinda continues. Once again, you know, as we covered in the peaking facilities, the RFPs by the investor-owned utilities basically happen in kind of the second quarter. We also work to hedge them with other parties as well outside of that process. I'd say, you know, no new items or developments remains on track for the normal timing.
Got it. Appreciate the time.
As a reminder, ladies and gentlemen, to ask a question, please press star one. Our next question coming from the line of Noah Kaye with Oppenheimer. Your line is open.
Thanks. Just one around the development environment to start, or maybe two actually. The first part of it is just around project timing. You know, looks like really no change overall to the amount of projects expected to hit COD in 2022. Just look comparing, you know, quarter-over-quarter, it looks like maybe a little bit of shift out of 2023 to 2024. So the first part is really just around, you know, what you're having to go through operationally in terms of the timing of some of these projects dropping down. Overall, looks like you're managing things well, but just any color you can give us on supply chain, you know, labor availability, all that.
Yeah. Craig, if you don't mind, you're closer to that.
Yeah. Yeah, of course. Yeah, thanks for noticing. You know, I think we're pretty satisfied with how we've managed this environment generally and as compared to peers. We think that the shareholders of Clearway Energy, Inc. should be satisfied as well. You know, we've been able to manage equipment availability and schedule risks really to keep our entire construction program that we've had planned for the next two years on track. That's really first and foremost been driven by our ability to leverage, you know, our priority customer status and the large volumes that we're procuring. It also reflects what I think has been insightful selection of equipment vendors that were more resilient to some of the factors that have driven both cost inflation and availability of equipment as a function of U.S. policy.
Mm-hmm.
It's meant that we've been managing shipping costs directly with logistics and freight providers in ways that, other peers might not be able to, accelerating payments to lock in supply and hedge costs on long-lead components, secure freight, conduit. Not all that has been costless to us as a sponsor entity, but it's certainly been more manageable for us than peers and, also really reflects the strong commitment that we've been looking to maintain for the planned pace of growth for operating cash flows and dividends at Clearway Energy, Inc.
That's very helpful. Then the second part of that development question is just, I mean, the overall pipeline going from 17 GW to 19.1 GW sequentially and obviously more of this just in the, you know, earlier stage. Does it really just come back to what you were talking about earlier around, you know, the appetite from corporates and others extending the opportunity set? Is there something in the development engine that is, you know, maybe experiencing a little bit of a step function in terms of ability to drive projects into construction?
Yeah. You know, I mean, I think it really starts with the demand picture, which isn't strictly limited to commercial and industrial customers. Utilities and load-serving entities across the country have made a transition in the fuel mix a real central part of their plan for this decade. That's allowed for us to make investments really that span the continent, targeting the plans for a fuel mix transition that each of those different customer classes have. What excites us about the development pipeline that we're building is the way that as it is evolved over time, it will really build out a portfolio of owned assets within Clearway Energy, Inc. Which is certainly sizable, but also increasingly diverse and will allow for us to really enhance the type of balance that Chad touched on earlier.
First, it just reflects our confidence in the demand picture over time. Second, certainly each quarter and each year we get better and bigger as a company. The types of capabilities that we can deploy behind development allow us to plan larger projects that have multiple components to them, integrating storage, for example, in places where one not historically would have anticipated it. Then lastly, I think we're constructive that ultimately the policy environment here in the U.S. government is really going to help make projects in some places that might not have been economically viable quite as soon economically viable for construction.
As we look ahead to the mid-decade, I'm very optimistic about how the family of these development activities are gonna turn into construction cadence and in terms of operating cash flows within the fleet.
Super helpful. Let me take it one on the thermal. There's really two-parter here, I guess, again. You mentioned Crescent Bank expectations for the second quarter close, and that's really no change. Can you just sort of give us some indication, if possible at all, if you have a bias towards, you know, early or late in the quarter? Any kind of color on remaining steps to be taken? I think you mentioned in prepared remarks that just due to the, you know, tax treatment here, that the cash proceeds are gonna be potentially greater. Just remind us, you know, once the acquisition or rather once the divestiture is done, where you expect to shake out from a leverage perspective.
Sure. I'll kind of take the first part and then turn over to Chad for tax. To your first question, really, you know, not to cheat, it would almost be the middle, you know, kind of May, if we had to pick the, you know, fat part of the curve, so to speak. Once again, we're driving to move it sooner. You know, we obviously would like to get the cash in, but once again, no kind of steer either way of size. For us also part of it's not only the regulatory process, but also kind of working with other counterparties well to make sure the transition occurs appropriately. You know, in terms of expectations, second quarter, we feel very strongly about.
Once again, you know, we'll take the mid as kind of the expected outcome kind of May timeframe, but could be earlier, could be later. Chad, on the tax side?
Sure. Yeah. A couple points. I think first on the cash proceeds or at least the estimated net proceeds. I think as Chris indicated, we spoke about $1.35 billion as our current estimate now. Before that was $1.3 billion. The driver of that $50 million estimated change at this point was driven by California enacting Senate Bill 113 in the early part of February. This happened pretty rapidly, and what that did was it reversed a law that was put in place in 2020 at the start of the COVID pandemic, where they had suspended companies' abilities to use state NOLs for the tax periods from 2020 to 2022. For 2022, we're permitted to use state NOLs.
As a result of that, given how we looked at our current estimate in 2022 business activity and the apportionment that would go to California, that reduced that number. Excuse me, the potential immediate tax impact. I would remind that, you know, these are estimates for taxes. Naturally, business activity through the course of 2022 is going to affect that. Obviously we realize because of the gain that will ultimately be generated by the thermal sale, there will be some leakage. On the leverage side, you know, simply put, once we close the thermal deal, all the temporary borrowings that we have currently on the balance sheet will effectively be paid off. That will reduce borrowings inclusive of the bridge facility we put in place for Utah by over $500 million.
At that point, as we look at our pro forma targets, we'll be back in our range of 4-4.5x , and a little bit more on the 4.5x , but we're in range of where we would expect to be.
Terrific. Thanks so much.
Sure.
Our next question coming from the line of Michael Lapides with Goldman Sachs. Your line is open.
Hey, guys. Thank you for taking my question and congrats on a good 2021. Just real quick, given the move in valuations across pretty much everything clean energy related, how are you on the board and the sponsor thinking about broader corporate M&A and whether the market volatility in clean energy since, call it the end of 2020, has increased the attractiveness of corporate M&A? Corporate M&A as a use of proceeds or a use of cash flow and balance sheet relative to the returns you would generate from drop-downs from your sponsor?
Sure. I don't think the backdrop has changed that much in terms of I think we've always looked at value in terms of what we think is the best value for risk in terms of the company. I think, Michael, to your question, we'll always look at drop-downs because obviously that's the most transparent kind of dependable growth from our sponsor. To your question about corporate M&A, you know, we look at project-level M&A, for example, third party, as we talked about Mt. Storm and Utah in 2021, and we look at broader corporate M&A as well. I think, you know, all of those are available to us. I think as well, you know, the big part is where can we generate the best risk-adjusted return? That's the focus.
I'm not sure if it's really changed that much in the past year, from our perspective on the corporate side.
Got it. Meaning the valuation moved lower for a lot of your peers among the publicly traded renewable companies, that move lower hasn't made corporate M&A more attractive.
It really depends. There's not a list of 100 different candidates out there, if that's your question, Michael, to kind of look at. It really is relative among a couple of them. I don't think there's that many paradigm changes in that math over the past 12 months.
Got it. Chad, one for you. I'm just looking at slides 23 and 24 in the appendices. Can you remind me the CAFD and the adjusted EBITDA numbers are, and especially the EBITDA numbers are pretty different between those two slides. Can you remind me the difference, what's in 23 versus 24?
Yeah, sorry, I'm just looking at the slides right now. Yeah, I think if you're probably focused is, if I would guess, Michael, it's the drop in a projected adjusted EBITDA. Is that what you're focused on?
Well, like one of them has the EBITDA. Like, if I look at, what is it? Slide 23, it's got adjusted EBITDA of $1.27 billion, slide 24 of $1.05 billion. Just what's, you know, what's the-
Yeah. I think the main driver there I'd remind you of is when we go out to our pro forma outlook, we've indicated that, you know, is post a period of time in which the existing three California natural gas assets. I would say that obviously when we do our estimates like that on a pro forma basis, there's a number of moving variables, but the material point of that would be the drop in expected EBITDA that we would have and being mindful that that's something we've been consistent about because as those projects become unlevered, we don't need the amount of revenue in order to sustain CAFD on an unlevered project basis, principally because you're not having to generate revenue to support the debt service.
Got it. Okay, that makes sense. I guess one last one, speaking of those California assets. Can you remind me in the post-2023 timeframe, what percent of those assets have you signed up under RA agreements for 2024 and beyond?
Sure. It's 100% of Walnut Creek. There's 80% hedged through, I'll call it, you know, 1/1/2027 of Marsh Landing with a 100100 MW tail out longer than that, and then 0% of El Segundo.
Got it. Thank you, guys. Much appreciated.
Our next question coming from the line of William Grippin with UBS. Your line is open.
Great. Thank you, and good morning, everybody. Just one quick one for me. The press release talking about the investment in Daggett 3 noted that the investment subject to some certain milestones and that project is still in development. I'm just curious, are you investing in that project before it's actually brought online? I guess more broadly, how do you think about, you know, investing in projects after COD versus possibly doing earlier stage investments, to capture higher returns? Thanks.
Sure. To your first question, no, it's not as though we're investing well before COD. You might do a little bit before COD in terms of months just for tax equity, credit and the like. But yes, significantly, no is the simple answer to your first question. To your second question, basically for repowerings where we have a much better view of what the asset looks like, because obviously we've owned it for a period of time, we might start to walk a little bit more during construction. But pure development, in general, we wouldn't. I think if I, you know, kind of define your question in terms of development, that's a no.
In terms of maybe moving up a little bit closer to, you know, full notice to proceed or when there's financing in place on a repowering project, we may look to that in the future just because we already obviously own the asset, have a much better view of what it is, so on and so forth. For drop-downs in general, I don't think we're trying to move earlier in the construction cycle as a generalization.
Got it. Thanks very much.
I am showing no further questions at this time. I would now like to turn the call back over to Mr. Sotos for any closing remarks.
Once again, thank you all for joining the call and look forward to talking to you next quarter. Take care.
That does end our conference call today. Thank you for your participation. You may now disconnect.