Clearway Energy, Inc. (CWEN)

ITEM 2 — Management’s Discussion and Analysis of Financial Condition and the Results of Operations

The following discussion analyzes the Company’s historical financial condition and results of operations.

As you read this discussion and analysis, refer to the Company’s consolidated financial statements to this Form 10-Q, which present the results of operations for the three months ended March 31, 2026 and 2025. Also refer to the Company’s 2025 Form 10-K, which includes detailed discussions of various items impacting the Company’s business, results of operations and financial condition.

The discussion and analysis below has been organized as follows:

•Executive Summary, including a description of the business and significant events that are important to understanding the results of operations and financial condition;

•Results of operations, including an explanation of significant differences between the periods in the specific line items of the consolidated statements of operations;

•Financial condition addressing liquidity position, sources and uses of cash, capital resources and requirements, commitments and off-balance sheet arrangements;

•Known trends that may affect the Company’s results of operations and financial condition in the future; and

•Critical accounting policies which are most important to both the portrayal of the Company’s financial condition and results of operations, and which require management’s most difficult, subjective or complex judgment.

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Executive Summary

Introduction and Overview

Clearway Energy, Inc., together with its consolidated subsidiaries, or the Company, is a publicly-traded energy infrastructure investor with a focus on investments in clean energy and owner of modern, sustainable and long-term contracted assets across North America. The Company is sponsored by Clearway Energy Group LLC, or CEG.

The Company is one of the largest owners of clean energy generation assets in the U.S. The Company’s portfolio comprises approximately 13.6 GW of gross capacity in 27 states, including approximately 10.8 GW of wind, solar and battery energy storage systems, or BESS, and approximately 2.8 GW of dispatchable combustion-based power generation assets included in the Flexible Generation segment that provide critical grid reliability services. Through this environmentally-sound, diversified and primarily contracted portfolio, the Company endeavors to provide its investors with stable and growing dividend income. The majority of the Company’s revenues are derived from long-term contractual arrangements for the output or capacity from these assets. The weighted average remaining contract duration of the Company’s Renewables & Storage segment offtake agreements was approximately 12 years as of March 31, 2026 based on CAFD.

As of March 31, 2026, the Company’s operating assets are comprised of the following facilities:

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(a) For owned facilities, net capacity represents the maximum, or rated, generating or storage capacity of the facility multiplied by the Company’s percentage ownership in the facility as of March 31, 2026.

(b) Facilities are part of tax equity arrangements, as further described in Note 4, Investments Accounted for by the Equity Method and Variable Interest Entities.

(c) Facilities are part of the Cardinal Portfolio acquisition, which closed on March 30, 2026, as further described in Note 3, Acquisitions.

(d) The Company leases 100% of the interests in the Catalina solar facility through a facility lease agreement that expires in October 2043.

(e) The Goat Mountain wind facility commenced repowering activities in February 2026 and was taken offline. Repowering commercial operations is expected to occur in the second half of 2027.

(f) Rattlesnake has a deliverable capacity of 144 MW.

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Significant Events

Third-Party Acquisitions

•On March 30, 2026, the Company, through its indirect subsidiaries, Cardinal Purchaser LLC and Cardinal JV Purchaser LLC, completed the acquisition of the Cardinal Portfolio for total cash consideration of $324 million, subject to post-closing adjustments. Of the total consideration, $244 million was paid by Cardinal Purchaser LLC related to facilities consolidated by the Company and $80 million was paid by Cardinal JV Purchaser LLC related to facilit

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Item 7 — Management’s Discussion and Analysis of Financial Condition and the Results of Operations

As you read this discussion and analysis, refer to the Company’s Consolidated Statements of Operations to this Form 10-K. Also refer to Item 1 — Business and Item 1A — Risk Factors, which include detailed discussions of various items impacting the Company’s business, results of operations and financial condition. Discussions of the year ended December 31, 2023 that are not included in this Annual Report on Form 10-K and year-to-year comparisons of the year ended December 31, 2024 and the year ended December 31, 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and the Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The discussion and analysis below has been organized as follows:

•Executive Summary, including a description of the business and significant events that are important to understanding the results of operations and financial condition;

•Results of operations, including an explanation of significant differences between the periods in the specific line items of the consolidated statements of operations;

•Financial condition addressing liquidity position, sources and uses of cash, capital resources and requirements, commitments and off-balance sheet arrangements;

•Known trends that may affect the Company’s results of operations and financial condition in the future; and

•Critical accounting policies which are most important to both the portrayal of the Company’s financial condition and results of operations, and which require management’s most difficult, subjective or complex judgment.

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Executive Summary

Introduction and Overview

Clearway Energy, Inc., together with its consolidated subsidiaries, or the Company, is a publicly-traded energy infrastructure investor with a focus on investments in clean energy and owner of modern, sustainable and long-term contracted assets across North America. The Company is sponsored by Clearway Energy Group LLC, or CEG.

The Company is one of the largest owners of clean energy generation assets in the U.S. The Company’s portfolio comprises approximately 12.9 GW of gross capacity in 27 states, including approximately 10.1 GW of wind, solar and battery energy storage systems, or BESS, and approximately 2.8 GW of dispatchable combustion-based power generation assets included in the Flexible Generation segment that provide critical grid reliability services. Through this environmentally-sound, diversified and primarily contracted portfolio, the Company endeavors to provide its investors with stable and growing dividend income. The majority of the Company’s revenues are derived from long-term contractual arrangements for the output or capacity from these assets. The weighted average remaining contract duration of the Company’s Renewables & Storage segment offtake agreements was approximately 12 years as of December 31, 2025 based on CAFD.

Significant Events

Third-Party Acquisitions

•On October 3, 2025, the Company entered into a binding agreement to acquire a 613 MW operational solar portfolio located in eight states, or the Deriva Solar Portfolio, from Deriva Energy, LLC for a base purchase price of approximately $305 million in cash, subject to certain customary price adjustments. For 12 facilities in the Deriva Solar Portfolio located in the Western U.S. and comprising of 227 MW, the Company will co-invest in a 50/50 joint venture with a third-party cash equity investor. The weighted average remaining contract duration of the Deriva Solar Portfolio is approximately 10 years. After factoring in estimated closing adjustments and proceeds from facility-level financings, including the third-party cash equity investor in a subset of the Deriva Solar Portfolio, the Company expects its net capital commitment to acquire the Deriva Solar Portfolio to be between $210 million and $230 million. The Company expects to fund the acquisition primarily utilizing existing sources of liquidity, which includes the Cardinal Investment Holdco LLC financing discussed further below. The consummation of the transaction is subject to customary closing conditions and certain third-party approvals and is expected to occur in the first half of 2026.

•On July 16, 2025, the Company, through its indirect subsidiary, Catalina Solar Investment LLC, acquired Catalina Solar Lessee Holdco LLC, which leases and operates the Catalina solar facility, for approximately $127 million, which excludes $1 million in transaction expenses incurred in connection with the acquisition. After factoring in cash reserves acquired and transaction expenses, the Company’s net capital investment in Catalina was $128 million. See Note 3, Acquisitions and Dispositions, for further discussion of the transaction.

•On April 29, 2025, the Company, through its indirect subsidiary, Washington Wind LLC, acquired the Tuolumne wind facility from an investment-grade regulated entity for approximately $210 million, which excludes $1 million in transaction expenses incurred in connection with the acquisition. The Company’s net capital investment in Tuolumne was $59 million. See Note 3, Acquisitions and Dispositions for further discussion of the transaction. In connection with the acquisition, the Company entered into a development services agreement with Clearway Renew related to a potential repowering of the facility. In February 2026, the Company approved the commencement of the Tuolumne repowering. The Company estimates that its total capital investment in the Tuolumne repowering will be $80 million, subject to closing adjustments. Contingent upon achieving commercial operations in 2027, the 137 MW facility will sell power under its existing PPA with an investment-grade regulated entity for an additional two years through 2042.

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Drop Down Transactions

•On June 10, 2025, the Company, through its indirect subsidiary, Pine Forest CE Class A Owner LLC, acquired the Class A membership interests in Pine Forest CE TargetCo LLC, or Pine Forest TargetCo, a partnership and the indirect owner of the Pine Forest solar and BESS facility, from Clearway Renew for initial cash consideration of $18 million. Simultaneously, a third-party cash equity investor acquired the Class B membership interests in Pine Forest TargetCo from Clearway Renew for initial cash consideration of $36 million. Also on June 10, 2025, the Company, through its indirect subsidiary, Pine Forest TE Class A Owner LLC, or Pine Forest TE Class A, contributed $9 million to acquire the Class A membership interests in Pine Forest TE HoldCo LLC. On December 17, 2025, when the facility reached substantial completion, the Company paid $50 million to Clearway Renew as additional purchase price for its Class A membership interests in Pine Forest TargetCo and contributed an additional $38 million for its Class A membership interests in Pine Forest TE HoldCo LLC. In addition, the third-party cash equity investor in Pine Forest TargetCo contributed an additional $144 million. The Company’s total capital investment in Pine Forest TargetCo was $115 million. See Note 3, Acquisitions and Dispositions, for further discussion of the transaction.

•On July 23, 2025, the Company entered into a development services agreement with Clearway Renew in connection with the repowering of the Goat Mountain wind facility. The Company estimates that its total capital investment in the Goat Mountain repowering will be $200 million, subject to closing adjustments. Contingent upon achieving commercial operations in 2027, the 360 MW facility will sell power to an investment-grade counterparty under a new 15-year PPA. In connection with the agreement, on December 12, 2025, the Company paid Clearway Renew $27 million, primarily related to the future delivery of equipment. See Note 15, Related Party Transactions, for further discussion of the transaction.

•On November 24, 2025, the Company, through an indirect subsidiary, entered into an agreement with Clearway Renew to acquire the Class A membership interests in Spindle, a 199 MW BESS facility currently under construction in Weld County, Colorado, and Rosamond South II, a 92 MW BESS facility currently under construction in Kern County, California, for $93 million in cash consideration, subject to closing adjustments. The consummation of the transaction is subject to customary closing conditions and certain third-party approvals and is expected in the second half of 2026.

•On October 30, 2025, the Company entered into a development services agreement with Clearway Renew in connection with the repowering of the San Juan Mesa wind facility, which is located in Elida, New Mexico. The Company estimates that its total capital investment in the San Juan Mesa repowering will be $50 million, subject to closing adjustments. Contingent upon achieving commercial operations in 2027, the 135 MW facility will sell power to an investment-grade counterparty under a new 20-year PPA.

•On October 15, 2025, the Company, through its indirect subsidiary, Honeycomb 1 Holdco LLC, acquired Honeycomb TargetCo LLC, or Honeycomb TargetCo, the indirect owner of the Honeycomb Portfolio, from Clearway Renew for initial cash consideration of $16 million. At substantial completion, which is expected to occur in the first half of 2026, the Company estimates it will pay an additional $62 million to Clearway Renew. The Company estimates that its total capital investment in Honeycomb TargetCo will be $78 million, excluding the impact of any closing adjustments noted in the purchase agreement. See Note 3, Acquisitions and Dispositions, for further discussion of the transaction.

•On October 2, 2025, the Company, through its indirect subsidiary, WV Wind Holdco LLC, sold 100% of its membership interests in Mount Storm Wind LLC, which owns Mt. Storm, to Clearway Renew for $152 million in cash consideration in order for Clearway Renew to repower the facility. The repowering of the facility is expected to increase the facility’s capacity to 335 MW. Mechanical completion of the first phase of the repowering is expected to occur in the second half of 2026 with the second phase of the repowering expected to occur in the second half of 2027. Also on October 2, 2025, the Company, through its indirect subsidiary, WV Wind Holdco LLC, entered into an agreement with Clearway Renew to acquire the Class B membership interests in the tax equity fund that, upon mechanical completion of the first phase of the repowering of the facility, will own Mt. Storm, for $336 million in cash consideration. The consummation of the transaction is subject to customary closing conditions and certain third-party approvals and is expected to occur in the second half of 2026. See Note 3, Acquisitions and Dispositions, for further discussion of the transactions. In connection with the agreement with Clearway Renew to sell its membership interests in Mt. Storm, on May 1, 2025, the Company bought down a portion of Mt. Storm’s contract to sell power to a counterparty through a hedge agreement and paid approximately $35 million to the hedge counterparty to reduce the contract by approximately 50%. On July 22, 2025, the Company paid approximately $39 million to the hedge counterparty to buy out the remaining contract.

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•On April 29, 2025, the Company, through its indirect subsidiary, LV-Daggett Parent Holdco LLC, acquired Daggett 1 Class B Member LLC, or Daggett 1 Class B, the indirect owner of the Daggett 1 BESS facility, from Clearway Renew for initial cash consideration of $11 million. On September 19, 2025, when the facility reached substantial completion, the Company paid $42 million to Clearway Renew as additional purchase price. On October 15, 2025, the Company paid $4 million to Clearway Renew as a final purchase price adjustment. The Company’s total capital investment in Daggett 1 Class B was $57 million. See Note 3, Acquisitions and Dispositions, for further discussion of the transaction.

•On April 29, 2025, the Company, through its indirect subsidiary, LV-Daggett Parent Holdco LLC, acquired Luna Valley Class B Member LLC, or Luna Valley Class B, the indirect owner of the Luna Valley solar facility, from Clearway Renew for initial cash consideration of $18 million. On September 4, 2025, when the facility reached substantial completion, the Company paid $72 million to Clearway Renew as additional purchase price. On October 15, 2025, the Company paid $29 million to Clearway Renew as a final purchase price adjustment. The Company's total capital investment in Luna Valley Class B was $119 million. See Note 3, Acquisitions and Dispositions, for further discussion of the transaction.

•On March 20, 2025, the Company, through its indirect subsidiary, Rosamond South Investment LLC, acquired the Class A membership interests in Rosie South TargetCo LLC, or Rosie South TargetCo, a partnership and the indirect owner of the Rosamond South I solar and BESS facility, from Clearway Renew for initial cash consideration of $4 million. Simultaneously, a third-party cash equity investor acquired the Class B membership interests in Rosie South TargetCo from Clearway Renew for initial cash consideration of $10 million. On August 13, 2025, when the facility reached substantial completion, the Company paid $29 million to Clearway Renew as additional purchase price and the third-party cash equity investor contributed an additional $41 million. The Company’s total capital investment in Rosie South TargetCo was $33 million. See Note 3, Acquisitions and Dispositions, for further discussion of the transaction.

RA Agreements

•On January 14, 2025, the Company contracted with a load serving entity to sell approximately 75 MW of El Segundo’s RA commencing in August 2026 and ending in December 2029. On February 4, 2025, the Company contracted with an additional load serving entity to sell approximately 197 MW of El Segundo’s RA commencing in August 2026 and ending in December 2029. El Segundo is now contracted for 100% of its capacity through 2027 and approximately 50% of its capacity through 2028.

Financing Activities

•In connection with the 2025 Drop Downs of Rosamond South I, Luna Valley, Daggett 1, Pine Forest and the Honeycomb Portfolio, the Company assumed non-recourse facility-level debt. See Note 10, Long-term Debt, for further discussion of the non-recourse facility-level debt associated with each facility.

•On February 5, 2026, in order to partially fund the third-party acquisition of the Deriva Solar Portfolio, the Company, through its indirect subsidiary, Cardinal Investment Holdco LLC, entered into a financing agreement that provides for a term loan of up to $100 million and $119 million in letters of credit in support of debt service and facility obligations. Upon funding, the term loan will bear interest a rate of SOFR plus 2.00% per annum and will mature 364 days after the funding date.

•On January 13, 2026, Clearway Energy Operating LLC completed the sale of $600 million aggregate principal amount of 5.75% senior unsecured notes due 2034, or the 2034 Senior Notes. See Note 10, Long-term Debt, for further discussion of the 2034 Senior Notes.

•On May 21, 2025, when the Dan’s Mountain wind facility reached substantial completion, the Company paid $36 million to Clearway Renew as additional purchase price in connection with the Company’s acquisition of the Class A membership interests in Dan’s Mountain TargetCo LLC, or Dan’s Mountain TargetCo, from Clearway Renew on November 18, 2024. Also, on May 21, 2025, a third-party cash equity investor contributed $45 million to acquire the Class B membership interests in Dan’s Mountain TargetCo from Clearway Renew and the tax equity investor contributed an additional $90 million. The Company utilized the combined proceeds to repay the cash equity bridge loan, to repay the tax equity bridge loan and to pay associated fees with the remaining proceeds distributed to CEG. The Company’s total capital investment in Dan’s Mountain TargetCo was $43 million. See Note 10, Long-term Debt, for further discussion of the transaction.

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•On April 29, 2025, in order to partially fund the third-party acquisition of the Tuolumne wind facility, the Company entered into a financing agreement, which included the issuance of a $163 million term loan, as well as $22 million in letters of credit in support of debt service and facility obligations. See Note 10, Long-term Debt, for further discussion of the financing agreement.

•On April 9, 2025, the Company, through its indirect subsidiary, Buckthorn Solar Portfolio LLC, refinanced its credit agreement, which was scheduled to mature in May 2025, resulting in the issuance of a $104 million term loan facility, as well as $22 million in letters of credit in support of debt service and facility obligations. The Company utilized the proceeds from the term loan and existing sources of liquidity to pay off the existing debt. See Note 10, Long-term Debt, for further discussion of the refinanced credit agreement.

Environmental Matters and Regulatory Matters

Details of environmental matters and regulatory matters are presented in Item 1 — Business, Regulatory Matters and Item 1A — Risk Factors. Details of some of this information relate to costs that may impact the Company’s financial results.

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Consolidated Results of Operations

The following table provides selected financial information:

(a) Volumes do not include the MWh generated/sold by the Company’s equity method investments.

(b) Typical average capacity factors for solar facilities is 25%. The weighted-average capacity factors can vary based on seasonality and weather.

(c) Typical average capacity factors for wind facilities is 25-45%. The weighted-average capacity factors can vary based on seasonality and weather.

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Management’s discussion of the results of operations for the years ended December 31, 2025 and 2024

Operating Revenues

Operating revenues increased by $58 million for the year ended December 31, 2025, compared to the same period in 2024, due to a combination of the drivers summarized in the table below:

Cost of Fuels

Cost of fuels decreased by $35 million during the year ended December 31, 2025, compared to the same period in 2024, primarily due to lower generation at the Walnut Creek, Marsh Landing and El Segundo facilities due to milder weather, which resulted in less fuel purchases.

Operations and Maintenance Expense

Operations and maintenance expense increased by $57 million during the year ended December 31, 2025, compared to the same period in 2024, primarily due to a combination of the drivers summarized below:

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Depreciation, Amortization and Accretion

Depreciation, amortization and accretion increased by $55 million during the year ended December 31, 2025, compared to the same period in 2024, primarily due to the solar and BESS acquisitions referenced above, as well as the accelerated depreciation in connection with the repowering of the Mt. Storm and Goat Mountain wind facilities, as further described in Note 4, Property, Plant and Equipment.

Interest Expense

Interest expense increased by $80 million during the year ended December 31, 2025, compared to the same period in 2024, primarily due to the following:

Income Tax Expense

For the year ended December 31, 2025, the Company recorded an income tax expense of $56 million on pretax loss of $175 million. For the same period in 2024, the Company recorded an income tax expense of $30 million on pretax loss of $33 million.

The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate:

(a) State taxes in California made up the majority of the tax effect in this category.

The effective income tax rate may vary from period to period depending on, among other factors, the geographic and business mix of earnings and losses, earnings and losses allocated to partners’ interest in Clearway Energy LLC, which includes the effects of applying the HLBV method of accounting for book purposes to certain partnerships, and changes in valuation allowances in accordance with ASC 740. These factors and others, including the Company’s history of pre-tax earnings and losses, are taken into account in assessing the ability to realize deferred tax assets.

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Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests

For the year ended December 31, 2025, the Company had a net loss of $400 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

For the year ended December 31, 2024, the Company had a net loss of $151 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

Liquidity and Capital Resources

The Company’s principal liquidity requirements are to meet its financial commitments, finance current operations, fund capital expenditures, including investments and acquisitions from time to time, service debt and pay dividends. As a normal part of the Company’s business, depending on market conditions, the Company will from time to time consider opportunities to repay, redeem, repurchase or refinance its indebtedness. Changes in the Company’s operating plans, lower than anticipated sales, increased expenses, investments, acquisitions or other events may cause the Company to seek additional debt or equity financing in future periods. There can be no guarantee that financing will be available on acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations and additional covenants and operating restrictions.

Current Liquidity Position

As of December 31, 2025 and 2024, the Company’s liquidity was approximately $1,061 million and $1,330 million, respectively, comprised of cash, restricted cash and availability under the Company’s revolving credit facility.

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The Company’s liquidity includes $587 million and $401 million of restricted cash balances as of December 31, 2025 and 2024, respectively. Restricted cash consists primarily of funds to satisfy the requirements of certain debt arrangements and funds held within the Company’s facilities that are restricted in their use. As of December 31, 2025, these restricted funds were comprised of $146 million designated to fund operating expenses, approximately $99 million designated for current debt service payments, and $85 million restricted for reserves, including debt service, performance obligations and other reserves, as well as capital expenditures. The remaining $257 million is held in distribution reserve accounts, of which $174 million relates to transferable ITCs for the Rosamond South I solar and BESS facility that were received on behalf of the tax equity investor in Rosie South TE Holdco LLC and subsequently distributed to that tax equity investor in January 2026.

Clearway Energy LLC and Clearway Energy Operating LLC Revolving Credit Facility

As of December 31, 2025, the Company had $361 million in outstanding borrowings under its revolving credit facility and $96 million in letters of credit outstanding. During January 2026, the Company repaid all of the outstanding borrowings under the revolving credit facility utilizing the proceeds from the sale of the 2034 Senior Notes. The facility will continue to be used for general corporate purposes, including financing of future investments or acquisitions and posting letters of credit.

Management believes that the Company’s liquidity position, cash flows from operations and availability under its revolving credit facility will be adequate to meet the Company’s financial commitments; debt service obligations; growth, operating and maintenance capital expenditures; and to fund dividends to holders of the Company’s Class A common stock and Class C common stock. Management continues to regularly monitor the Company’s ability to finance the needs of its operating, financing and investing activity within the dictates of prudent balance sheet management.

Credit Ratings

Credit rating agencies rate a firm’s public debt securities. These ratings are utilized by the debt markets in evaluating a firm’s credit risk. Ratings influence the price paid to issue new debt securities by indicating to the market the Company’s ability to pay principal, interest and preferred dividends. Rating agencies evaluate a firm’s industry, cash flow, leverage, liquidity and hedge profile, among other factors, in their credit analysis of a firm’s credit risk.

The following table summarizes the credit ratings for the Company and its Senior Notes as of December 31, 2025. The ratings outlook is stable.

Sources of Liquidity

The Company’s principal sources of liquidity include cash on hand, cash generated from operations, proceeds from sales of assets, borrowings under new and existing financing arrangements and the issuance of additional equity and debt securities as appropriate given market conditions. As described in Item 15 — Note 10, Long-term Debt, the Company’s financing arrangements consist of corporate level debt, which includes Senior Notes and the revolving credit facility; facility-level financings for its various assets; the ATM Program and the DSPP.

2034 Senior Notes — On January 13, 2026, Clearway Energy Operating LLC completed the sale of $600 million aggregate principal amount of senior unsecured notes due 2034, or the 2034 Senior Notes. The 2034 Senior Notes bear interest at 5.750% and mature on January 15, 2034. Interest on the 2034 Senior Notes is payable semi-annually on January 15 and July 15 of each year, beginning on July 15, 2026. The net proceeds from the 2034 Senior Notes were used to repay $361 million in outstanding borrowings under the revolving credit facility and for general corporate purposes.

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Mt. Storm Sale to Clearway Renew — On October 2, 2025, the Company, through its indirect subsidiary, WV Wind Holdco LLC, sold 100% of its membership interests in Mount Storm Wind LLC, which owns Mt. Storm to Clearway Renew for $152 million in cash consideration in order for Clearway Renew to repower the facility. The repowering of the facility is expected to increase the facility’s capacity to 335 MW. Mechanical completion of the first phase of the repowering is expected to occur in the second half of 2026 with the second phase of the repowering expected to occur in the second half of 2027. Also on October 2, 2025, the Company, through its indirect subsidiary, WV Wind Holdco LLC, entered into an agreement with Clearway Renew to acquire the Class B membership interests in the tax equity fund that, upon mechanical completion of the first phase of the repowering of the facility, will own Mt. Storm, for $336 million in cash consideration. The consummation of the transaction is subject to customary closing conditions and certain third-party approvals and is expected to occur in the second half of 2026. Upon achieving repowering commercial operations, which is expected to occur in the second half of 2026, the facility will sell power to Microsoft under a 20-year PPA. See Note 3, Acquisitions and Dispositions, for further discussion of the transactions.

At-the-Market Equity Offering Program — On August 6, 2025, the Company entered into an equity distribution agreement with Morgan Stanley & Co. LLC, BofA Securities, Inc., Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC, as sales agents. Pursuant to the terms of the agreement, the Company may offer and sell shares of its Class C common stock, from time to time through the sales agents, up to an aggregate sales price of $100 million through an at-the-market equity offering program, or ATM Program. During the year ended December 31, 2025, the Company issued 787,980 shares of Class C common stock under the ATM Program for gross proceeds of $25 million and incurred fees of less than $1 million, which were exchanged for 787,980 Class C units of Clearway Energy LLC. The net proceeds from the sale of shares under the ATM Program were used for general corporate purposes. As of December 31, 2025, approximately $75 million of Class C common stock remained available for issuance under the ATM Program.

Dividend Reinvestment and Direct Stock Purchase Plan — On August 6, 2025, the Company adopted a dividend reinvestment and direct stock purchase plan, or DRIP/DSPP, respectively, under which the Company registered and reserved for issuance up to an aggregate of 3,300,000 shares of Class C common stock. Under the DRIP, holders of the Company’s Class C common stock can designate all or a portion of their cash dividends, when paid, to be reinvested in additional shares of the Company’s Class C common stock. The DSPP allows (i) plan participants and registered stockholders of the Company who are not plan participants to purchase shares of Class C common stock in the minimum amount of $50 per investment up to a maximum aggregate amount of $150,000 per calendar year; (ii) new investors who do not own shares of Class C common stock to purchase shares by making an initial minimum investment of $250, up to a maximum aggregate amount of $150,000 per calendar year; and (iii) plan participants, other registered stockholders and new investors to request a waiver from the Company to make optional cash investments in excess of the maximum aggregate amount of $150,000 per calendar year. During the year ended December 31, 2025, the Company issued 793,202 shares of Class C common stock under the DSPP for gross proceeds of $25 million and incurred fees of less than $1 million, which were exchanged for 793,202 Class C units of Clearway Energy LLC. The net proceeds from the sale of shares under the DSPP were used for general corporate purposes. As of December 31, 2025, approximately 2,506,798 shares of Class C common stock remained available for issuance under the DRIP/DSPP.

In January 2026, the Company issued 1,445,244 shares of Class C common stock under the DSPP for gross proceeds of $50 million and incurred fees of less than $1 million, which were exchanged for 1,445,244 Class C units of Clearway Energy LLC. As of January 31, 2026, approximately 1,061,554 shares Class C common stock remained available for issuance under the DRIP/DSPP.

Uses of Liquidity

The Company’s requirements for liquidity and capital resources, other than for operating its facilities, are categorized as: (i) debt service obligations, as described more fully in Item 15 — Note 10, Long-term Debt; (ii) capital expenditures; (iii) off-balance sheet arrangements; (iv) acquisitions and investments, as described more fully in Item 15 — Note 3, Acquisitions and Dispositions and Note 15, Related Party Transactions; and (v) cash dividends to investors.

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Debt Service Obligations

Principal payments on debt as of December 31, 2025, are due in the following periods:

(a) At December 31, 2025, amount includes $431 million of construction-related financings recorded in long-term debt on the Company’s consolidated balance sheet that is either being funded through long-term equity contributions or is converting to long-term debt.

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Capital Expenditures

The Company’s capital spending program is mainly focused on maintenance capital expenditures, consisting of costs to maintain the assets currently operating, such as costs to replace or refurbish assets during routine maintenance, and growth capital expenditures, consisting of costs to construct new assets, costs to increase the operating capacity of existing assets and costs to complete the construction of assets where construction is in process.

For the years ended December 31, 2025 and 2024, the Company used approximately $319 million and $287 million, respectively, to fund capital expenditures, primarily in the Renewables & Storage segment, funded through construction-related financing. Growth capital expenditures included $313 million primarily in the Renewables & Storage segment, funded through construction-related financing. Growth capital expenditures included $81 million incurred in connection with the Rosamond South I solar and BESS facility, $58 million incurred in connection with the Pine Forest solar and BESS facility, $37 million incurred in connection with the Honeycomb Portfolio BESS facilities, $35 million incurred in connection with the Dan’s Mountain wind facility, $34 million incurred in connection with the Luna Valley solar facility, $27 million incurred in connection with the Daggett 1 BESS facility, $22 million incurred in connection with the repowering of the Cedro Hill wind facility, $12 million incurred in connection with the Victory Pass and Arica solar and BESS facilities and $7 million incurred by other facilities. In addition, for the years ended December 31, 2025 and 2024, the Company incurred $6 million and $11 million, respectively, of maintenance capital expenditures, which are net of credits received from equipment manufacturers.

The Company estimates $32 million of maintenance capital expenditures for 2026. These estimates are subject to continuing review and adjustment and actual capital expenditures may vary from these estimates.

Off-Balance Sheet Arrangements

Obligations under Certain Guarantee Contracts

The Company may enter into guarantee arrangements in the normal course of business to facilitate commercial transactions with third parties.

Retained or Contingent Interests

The Company does not have any material retained or contingent interests in assets transferred to an unconsolidated entity.

Obligations Arising Out of a Variable Interest in an Unconsolidated Entity

Variable interest in equity investments — As of December 31, 2025, the Company has several investments with an ownership interest percentage of 50% or less. GenConn is a VIE for which the Company is not the primary beneficiary. The Company’s pro-rata share of non-recourse debt held by unconsolidated affiliates was approximately $259 million as of December 31, 2025. This indebtedness may restrict the ability of these subsidiaries to issue dividends or distributions to the Company. See also Item 15 — Note 5, Investments Accounted for by the Equity Method and Variable Interest Entities.

Contractual Obligations and Commercial Commitments

In addition to the Company’s capital expenditure programs, the Company has a variety of contractual obligations and other commercial commitments that represent prospective cash requirements. The following table summarizes the Company’s contractual obligations. See Item 15 — Note 10, Long-term Debt and Note 17, Leases, for additional discussion.

(a) Includes water right agreements, service and maintenance agreements and LTSA commitments.

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Acquisitions and Investments

The Company intends to acquire generation assets developed and constructed by CEG as well as generation assets from third parties where the Company believes its knowledge of the market and operating expertise provides a competitive advantage, and to utilize such acquisitions as a means to grow its business.

Pine Forest Drop Down — On June 10, 2025, the Company, through its indirect subsidiary, Pine Forest CE Class A Owner LLC, acquired the Class A membership interests in Pine Forest TargetCo, a partnership and the indirect owner of the Pine Forest solar and BESS facility, from Clearway Renew for initial cash consideration of $18 million. Also on June 10, 2025, the Company, through its indirect subsidiary, Pine Forest TE Class A, contributed $9 million to acquire the Class A membership interests in Pine Forest TE HoldCo LLC. On December 17, 2025, when Pine Forest reached substantial completion, the Company paid $50 million to Clearway Renew as an additional purchase price and the Company contributed an additional $38 million for its Class A membership interests in Pine Forest TE HoldCo LLC. Pine Forest has PPAs for the solar facility with investment-grade counterparties and a 20-year weighted average contract duration that commenced in December 2025. The acquisition was funded with existing sources of liquidity. As part of the acquisition of Pine Forest, the Company assumed the facility’s financing agreement, which included a construction loan, a cash equity bridge loan, a tax equity bridge loan and a tax credit transfer bridge loan. Upon the facility reaching substantial completion, the third-party cash equity investor contributed $144 million and CEG contributed $49 million, which were utilized, along with the $9 million previously held in escrow, to repay the cash equity bridge loan, to repay the tax equity bridge loan, to partially repay the tax credit transfer bridge loan, to fund construction completion reserves and to pay associated fees. Additionally, on December 17, 2025, the outstanding construction loans were converted to a term loan. Subsequent to the acquisition during 2025, the Company borrowed an additional $52 million in cash equity bridge loans. The Company’s total capital investment in Pine Forest TargetCo was $115 million.

Since the Company holds the Class A membership interests in Pine Forest TE HoldCo LLC through Pine Forest TE Class A, net income attributable to Clearway Energy, Inc. will reflect HLBV allocations associated with Pine Forest’s tax attributes, which may result in larger losses allocated to the Company in early periods of the facility’s operations relative to other partnerships.

In January 2026, the Company repaid the $231 million outstanding on the tax credit transfer bridge loan utilizing the proceeds received from the sale of transferable ITCs, and distributed the remaining $51 million to CEG.

Goat Mountain Development Services Agreement — On July 23, 2025, the Company entered into a development services agreement with Clearway Renew in connection with the repowering of the Goat Mountain wind facility. The Company estimates that its total capital investment in the Goat Mountain repowering will be $200 million, subject to closing adjustments. Contingent upon achieving repowering commercial operations in 2027, the 360 MW facility will sell power to an investment-grade counterparty under a new 15-year PPA. In connection with the agreement, on December 12, 2025, the Company paid Clearway Renew $27 million, primarily related to the future delivery of equipment.

Honeycomb Portfolio Drop Down — On October 15, 2025, the Company, through its indirect subsidiary, Honeycomb 1 Holdco LLC, acquired Honeycomb TargetCo, the indirect owner of the Honeycomb Portfolio, from Clearway Renew for initial cash consideration of $16 million. At substantial completion, which is expected to occur in the first half of 2026, the Company estimates it will pay an additional $62 million to Clearway Renew. The Honeycomb Portfolio has 20-year PPAs with an investment-grade utility that will commence when the underlying operating assets reach commercial operations, which is expected to occur in the first half of 2026. The acquisition was funded with existing sources of liquidity. As part of the acquisition of the Honeycomb Portfolio, the Company assumed the facility’s financing agreement, which included a construction loan that converts to a term loan when the facility reaches substantial completion and a tax equity bridge loan, which will be completely paid off when the facility reaches substantial completion utilizing the proceeds from the Company’s additional purchase price and final proceeds received from the tax equity investor, along with their initial contribution at acquisition date that is being held in escrow. Subsequent to the acquisition during 2025, the Company borrowed an additional $38 million in construction loans through December 31, 2025. The Company estimates that its total capital investment in Honeycomb TargetCo will be $78 million, excluding the impact of any closing adjustments noted in the purchase agreement.

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Daggett 1 Drop Down — On April 29, 2025, the Company, through its indirect subsidiary, LV-Daggett Parent Holdco LLC, acquired Daggett 1 Class B, the indirect owner of the Daggett 1 BESS facility, from Clearway Renew for initial cash consideration of $11 million. On September 19, 2025, when the facility reached substantial completion, the Company paid $42 million to Clearway Renew as additional purchase price. Daggett 1 has a PPA for capacity with an investment-grade counterparty for a contract duration of 15 years that commenced in September 2025. The acquisition was funded with existing sources of liquidity. As part of the acquisition of Daggett 1, the Company assumed the facility’s financing agreement, which included a construction loan and a tax equity bridge loan. Upon the facility reaching substantial completion, the tax equity investor contributed an additional $108 million, which was utilized along with the $38 million previously held in escrow and $31 million in construction loan proceeds, to repay the tax equity bridge loan, to fund construction completion reserves and to pay associated fees with the remaining proceeds distributed to CEG. Also at substantial completion, the outstanding construction loans were converted to a term loan. Subsequent to the acquisition during 2025, the Company borrowed an additional $40 million in construction loans. On October 15, 2025, the Company paid $4 million to Clearway Renew as a final purchase price adjustment. The Company’s total capital investment in Daggett 1 Class B was $57 million.

Luna Valley Drop Down — On April 29, 2025, the Company, through its indirect subsidiary, LV-Daggett Parent Holdco LLC, acquired Luna Valley Class B, the indirect owner of the Luna Valley solar facility, from Clearway Renew for initial cash consideration of $18 million. On September 4, 2025, when the facility reached substantial completion, the Company paid $72 million to Clearway Renew as additional purchase price. Luna Valley has PPAs with investment-grade counterparties that have a 17-year weighted average contract duration that commenced in August 2025. The acquisition was funded with existing sources of liquidity. As part of the acquisition of Luna Valley, the Company assumed the facility’s financing agreement, which included a construction loan, a cash equity bridge loan that was partially paid off at acquisition date and a tax equity bridge loan. Upon the facility reaching substantial completion, the tax equity investor contributed an additional $114 million and CEG contributed $50 million, which were utilized, along with the $29 million previously held in escrow and $28 million in construction loan proceeds, to repay the cash equity bridge loan, to repay the tax equity bridge loan, to fund construction completion reserves and to pay associated fees. Also at substantial completion, the outstanding construction loans were converted to a term loan. Subsequent to the acquisition during 2025, the Company borrowed an additional $51 million in construction loans. On October 15, 2025, the Company paid $29 million to Clearway Renew as a final purchase price adjustment. The Company’s total capital investment in Luna Valley Class B was $119 million.

Rosamond South I Drop Down — On March 20, 2025, the Company, through its indirect subsidiary, Rosamond South Investment LLC, acquired the Class A membership interests in Rosie South TargetCo, a partnership and the indirect owner of the Rosamond South I solar and BESS facility, from Clearway Renew for initial cash consideration of $4 million. On August 13, 2025, when the facility reached substantial completion, the Company paid $29 million to Clearway Renew as additional purchase price. Rosamond South I has PPAs with investment-grade counterparties that have a 15-year weighted average contract duration that commence when the underlying operating assets reach commercial operations. The acquisition was funded with existing sources of liquidity. As part of the acquisition of Rosamond South I, the Company assumed the facility’s financing agreement, which included a construction loan, a cash equity bridge loan that was paid off at acquisition date and a tax equity bridge loan. Upon the facility reaching substantial completion, the third-party cash equity investor contributed an additional $41 million and the tax equity investor contributed an additional $226 million, which were utilized, along with the $58 million previously held in escrow and $13 million in construction loan proceeds, to repay the tax equity bridge loan, to fund construction completion reserves and to pay associated fees with the remaining proceeds distributed to CEG. Also at substantial completion, the outstanding construction loans were converted to a term loan. Subsequent to the acquisition during 2025, the Company borrowed an additional $49 million in construction loans and also received $46 million in contributions from CEG to pay for construction completion expenses. The Company’s total capital investment in Rosie South TargetCo was $33 million.

Catalina Solar Acquisition — On July 16, 2025, the Company, through its indirect subsidiary, Catalina Solar Investment LLC, acquired Catalina Solar Lessee Holdco LLC, which leases and operates the Catalina solar facility, from a third-party for approximately $127 million, which excludes $1 million in transaction expenses incurred in connection with the acquisition. Catalina reached commercial operations in 2013 and has a PPA with an investment-grade utility through 2038. The acquisition was funded with existing sources of liquidity. After factoring in cash reserves acquired and transaction expenses, the Company’s net capital investment in Catalina was $128 million.

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Dan’s Mountain Drop Down — On May 21, 2025, when the Dan’s Mountain wind facility reached substantial completion, the Company paid $36 million to Clearway Renew as additional purchase price in connection with the Company’s acquisition of the Class A membership interests in Dan’s Mountain TargetCo on November 18, 2024, which was funded with existing sources of liquidity. Also on May 21, 2025, a third-party cash equity investor contributed $45 million to acquire the Class B membership interests in Dan’s Mountain TargetCo from Clearway Renew and the tax equity investor contributed an additional $90 million. The Company utilized the combined proceeds from the third-party cash equity and tax equity investors, along with the Company’s entire additional purchase price, which was contributed back to the Company by CEG, and the $18 million previously held in escrow, to repay the tax equity bridge loan, to repay the cash equity bridge loan and to pay associated fees with the remaining proceeds distributed to CEG. Prior to substantial completion being reached, the Company borrowed an additional $18 million in tax equity bridge loans and also received $16 million in contributions from CEG to pay for construction completion expenses during 2025. The Company’s total capital investment in Dan’s Mountain TargetCo was $43 million.

Tuolumne Wind Acquisition — On April 29, 2025, the Company, through its indirect subsidiary, Washington Wind LLC, acquired the Tuolumne wind facility from an investment-grade regulated entity for approximately $210 million, which excludes $1 million in transaction expenses incurred in connection with the acquisition. Tuolumne reached commercial operations in 2009. In connection with the acquisition, the Company entered into a 15-year PPA with an investment-grade regulated entity that commenced in April 2025. Also in connection with the acquisition, the Company entered into a financing agreement, which included the issuance of a $163 million term loan, as well as $22 million in letters of credit in support of debt service and facility obligations, supported by the Company’s interests in the Tuolumne wind facility. The acquisition was funded with the borrowings under the new financing agreement, as well as existing sources of liquidity. The Company’s net capital investment in Tuolumne was $59 million. In connection with the acquisition, the Company entered into a development services agreement with Clearway Renew related to a potential repowering of the facility. In February 2026, the Company approved the commencement of the Tuolumne repowering. The Company estimates that its total capital investment in the Tuolumne repowering will be $80 million, subject to closing adjustments. Contingent upon achieving commercial operations in 2027, the 137 MW facility will sell power under its existing PPA with an investment-grade regulated entity for an additional two years.

Cash Dividends to Investors

The Company intends to use the amount of cash that it receives from its distributions from Clearway Energy LLC to pay quarterly dividends to the holders of its Class A common stock and Class C common stock. Clearway Energy LLC intends to distribute to its unit holders in the form of a quarterly distribution all of the CAFD that is generated each quarter less reserves for the prudent conduct of the business. Dividends on the Class A common stock and Class C common stock are subject to available capital, market conditions and compliance with associated laws, regulations and other contractual obligations. The Company expects that, based on current circumstances, comparable cash dividends will continue to be paid in the foreseeable future.

The following table lists the dividends paid on the Company’s Class A common stock and Class C common stock during the year ended December 31, 2025:

On February 17, 2026, the Company declared a quarterly dividend on its Class A and Class C common stock of $0.4602 per share payable on March 16, 2026 to stockholders of record as of March 2, 2026.

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Cash Flow Discussion

The following tables reflect the changes in cash flows for the comparative periods:

Net Cash Provided by Operating Activities

Net Cash Used In Investing Activities

Net Cash Provided by (Used in) Financing Activities

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NOLs, Deferred Tax Assets and Uncertain Tax Position Implications, under ASC 740

As of December 31, 2025, the Company has a cumulative federal NOL carryforward balance of $212 million for financial statement purposes, none of which are subject to expiration. Additionally, as of December 31, 2025, the Company has a cumulative state NOL carryforward balance of $100 million for financial statement purposes, which will expire between 2026 and 2042 if unutilized. The Company does not anticipate material income tax payments through at least 2030. In addition, as of December 31, 2025, the Company had PTC and ITC carryforward balances totaling $18 million, which will expire between 2036 and 2045 if unutilized.

As of December 31, 2025, the Company has an interest disallowance carryforward of $107 million as a result of Internal Revenue Code §163(j). The disallowed interest deduction has an indefinite carryforward period and any limitations on the utilization of this carryforward have been factored into the Company’s valuation allowance analysis. As of December 31, 2024, the Company had an interest disallowance carryforward of $82 million.

The Company, after the utilization of NOL and tax credit carryforwards, paid $1 million in income taxes during the year ended December 31, 2025. The Company does not anticipate being subject to the corporate minimum tax on financial statement income, which is discussed in further detail below.

Federal tax legislation enacted on July 4, 2025 contains a number of revisions to the Internal Revenue Code, including adjustments to the business interest expense disallowance calculation, accelerated tax depreciation and business tax credits and incentives for the development of clean energy facilities and production of clean energy, including wind, solar and BESS facilities. These changes did not have a material impact on the Company’s consolidated financial statements and the Company does not anticipate that these changes will have an adverse impact either (i) on the anticipated pipeline of facilities being developed by the Company’s sponsor, CEG, through at least 2030 or (ii) on the operation of facilities owned and operated by the Company. The Company will continue to monitor future guidance issued by the United States Department of the Treasury to assess for potential impacts on its consolidated financial statements.

The Company is subject to examination by taxing authorities for income tax returns filed in the U.S. federal and various state jurisdictions. All tax returns filed by the Company for the year ended December 31, 2013 and forward remain subject to audit. As of December 31, 2025, the U.S. federal partnership returns of two of the Company’s subsidiaries are under audit by the IRS. The Company and its subsidiaries are also periodically subject to various state tax audits, including one current audit as a result of filing an amended return in order to pursue a potential California tax refund. The IRS has not yet issued any proposed adjustments with respect to the two subsidiaries under audit. The Company believes that the ultimate resolution of each of these audits will not be material to the Company’s financial condition, results of operations or liquidity, and thus no material provision has been made for any adjustments that may result from tax examinations. The outcome of tax audits cannot be predicted with certainty and if any issues addressed in tax audits of the Company are resolved in a manner inconsistent with its expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

The Company has an unrecognized tax benefit of $19 million as of December 31, 2025.

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Fair Value of Derivative Instruments

The Company may enter into energy-related commodity contracts to mitigate variability in earnings due to fluctuations in spot market prices. In addition, in order to mitigate interest rate risk associated with the issuance of variable rate debt, the Company enters into interest rate swap agreements.

The tables below disclose the activities of non-exchange traded contracts accounted for at fair value in accordance with ASC 820. Specifically, these tables disaggregate realized and unrealized changes in fair value; disaggregate estimated fair values at December 31, 2025, based on their level within the fair value hierarchy defined in ASC 820; and indicate the maturities of contracts at December 31, 2025. For a full discussion of the Company’s valuation methodology of its contracts, see Derivative Fair Value Measurements in Item 15 — Note 6, Fair Value of Financial Instruments.

The Company has elected to disclose derivative assets and liabilities on a trade-by-trade basis and does not offset amounts at the counterparty master agreement level.

Critical Accounting Policies and Estimates

The Company’s discussion and analysis of the financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements and related disclosures in compliance with GAAP requires the application of appropriate technical accounting rules and guidance as well as the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. The application of these policies necessarily involves judgments regarding future events, including the likelihood of success of particular facilities, legal and regulatory challenges and the fair value of certain assets and liabilities. These judgments, in and of themselves, could materially affect the financial statements and disclosures based on varying assumptions, which may be appropriate to use. In addition, the financial and operating environment may also have a significant effect, not only on the operation of the business, but on the results reported through the application of accounting measures used in preparing the financial statements and related disclosures, even if the nature of the accounting policies has not changed.

On an ongoing basis, the Company evaluates these estimates, utilizing historic experience, consultation with experts and other methods the Company considers reasonable. Actual results may differ substantially from the Company’s estimates. Any effects on the Company’s business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the information that gives rise to the revision becomes known.

The Company’s significant accounting policies are summarized in Item 15 — Note 2, Summary of Significant Accounting Policies. The Company identifies its most critical accounting policies as those that are the most pervasive and important to the portrayal of the Company’s financial position and results of operations, and that require the most difficult, subjective and/or complex judgments by management regarding estimates about matters that are inherently uncertain. The Company’s critical accounting policies include income taxes and valuation allowance for deferred tax assets, accounting utilizing Hypothetical Liquidation at Book Value, or HLBV, and determining the fair value of financial instruments.

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Income Taxes and Valuation Allowance for Deferred Tax Assets

In determining whether a valuation allowance is required for deferred tax assets, the Company must assess whether it believes it is more likely than not that the results of future operations will generate sufficient taxable income which includes the future reversal of existing taxable temporary differences to realize deferred tax assets. The Company considers the timing and future realization of net deferred tax assets, the profit before tax generated in recent years as well as projections of future earnings and estimates of taxable income in arriving at this conclusion. The realization of deferred tax assets is primarily dependent upon earnings in federal and various state and local jurisdictions. Judgment is also required to continually assess changing tax regulations, interpretations and new legislation to determine the impact on the Company’s tax position.

Hypothetical Liquidation at Book Value (HLBV)

Certain portions of the Company’s redeemable noncontrolling interest in subsidiaries and noncontrolling interest represent third-party interests in the net assets under tax equity arrangements, which are consolidated by the Company, that were established to finance the cost of facilities eligible for certain tax credits and benefits. The Company has determined that the provisions in the contractual agreements of these redeemable noncontrolling interests and noncontrolling interests represent substantive profit sharing arrangements. Further, the Company has determined that the appropriate methodology for calculating the redeemable noncontrolling and noncontrolling interest that reflects the substantive profit sharing arrangements is a balance sheet approach utilizing the HLBV method. Under the HLBV method, the amounts reported as redeemable noncontrolling and noncontrolling interest represent the amounts the investors to the tax equity arrangements would hypothetically receive at each balance sheet date under the liquidation provisions of the contractual agreements, assuming the net assets of the funding structures were liquidated at their recorded amounts determined in accordance with GAAP. The investors’ interests in the results of operations of the funding structures are determined as the difference in redeemable noncontrolling and noncontrolling interest at the start and end of each reporting period, after taking into account any capital transactions between the structures and the funds’ investors. The calculations utilized to apply the HLBV method include estimated calculations of taxable income or losses for each reporting period as well as estimated calculations of tax capital accounts based on the relevant provisions of each agreement and the related tax guidance. In addition, these calculations often take into account the stipulated targeted investor return specified in the subsidiaries’ operating agreement and agreed by the members of the arrangement. In certain circumstances, the Company and its partners in the tax equity arrangements agree that certain tax benefits are to be utilized outside of the tax equity arrangements, which may result in differences in the amount an investor would hypothetically receive at the initial balance sheet date calculated strictly in accordance with related contractual agreements. These differences are recognized in the consolidated statements of operations using a systematic and rational method over the period during which the investor is expected to achieve its target return. In certain cases, the Company must apply judgment in determining the methodology for applying the HLBV method and changes in certain factors may have a significant impact on the amounts that an investor would receive upon a hypothetical liquidation. The use of the HLBV method to allocate income (loss) to the noncontrolling interest holders may create volatility in the consolidated statements of operations.

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Financial Instruments

The Company records its financial instruments, which primarily consist of derivative financial instruments, at fair value. The Company determines the fair value of its financial instruments using discounted cash flow models that require the use of assumptions concerning the amount of estimated future cash flows. The assumptions are determined using external, observable market inputs when available. When observable market inputs are not available, the Company must apply significant judgment to determine market participant assumptions such as future electricity prices, future natural gas prices, future interest rates and discount rates. As these inputs are based on estimates, fair values may not reflect the amounts actually realized from the related transaction.

Recent Accounting Developments

See Item 15 — Note 2, Summary of Significant Accounting Policies, for a discussion of recent accounting developments.

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