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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

☒ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2022

☐ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-36002
Clearway Energy, Inc.
(Exact name of registrant as specified in its charter)

Delaware |  | 46-1777204
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
300 Carnegie Center, Suite 300 | Princeton | New Jersey | 08540
(Address of principal executive offices) | (Zip Code)

(609) 608-1525
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Class A Common Stock, par value $0.01 | CWEN.A | New York Stock Exchange
Class C Common Stock, par value $0.01 | CWEN | New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ | Accelerated filer | ☐
Non-accelerated filer | ☐ | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of July 29, 2022, there were 34,599,645 shares of Class A common stock outstanding, par value $0.01 per share, 42,738,750 shares of Class B common stock outstanding, par value $0.01 per share, 82,196,386 shares of Class C common stock outstanding, par value $0.01 per share, and 42,738,750 shares of Class D common stock outstanding, par value $0.01 per share.

TABLE OF CONTENTS
Index

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION | 3
GLOSSARY OF TERMS | 4
PART I — FINANCIAL INFORMATION | 6
ITEM 1 — FINANCIAL STATEMENTS AND NOTES | 6
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 34
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 51
ITEM 4 — CONTROLS AND PROCEDURES | 52
PART II — OTHER INFORMATION | 53
ITEM 1 — LEGAL PROCEEDINGS | 53
ITEM 1A — RISK FACTORS | 53
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 53
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES | 53
ITEM 4 — MINE SAFETY DISCLOSURES | 53
ITEM 5 — OTHER INFORMATION | 53
ITEM 6 — EXHIBITS | 54
SIGNATURES | 55

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q of Clearway Energy, Inc., together with its consolidated subsidiaries, or the Company, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The words “believes,” “projects,” “anticipates,” “plans,” “expects,” “intends,” “estimates” and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, risks and uncertainties include the factors described under Item 1A — Risk Factors in Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as well as the following:
•The Company’s ability to maintain and grow its quarterly dividend;
•Potential risks related to COVID-19 (including any variant of the virus) or any other pandemic;
•Potential risks related to the Company's relationships with GIP and CEG, and following the expected closing of TotalEnergies’ acquisition of 50% of GIP’s interest in CEG, TotalEnergies;
•The Company’s ability to successfully identify, evaluate and consummate acquisitions from, and dispositions to, third parties;
•The Company’s ability to acquire assets from GIP or CEG;
•The Company’s ability to raise additional capital due to its indebtedness, corporate structure, market conditions or otherwise;
•Changes in law, including judicial decisions;
•Hazards customary to the power production industry and power generation operations such as fuel and electricity price volatility, unusual weather conditions (including wind and solar conditions), catastrophic weather-related or other damage to facilities, unscheduled generation outages, maintenance or repairs, unanticipated changes to fuel supply costs or availability due to higher demand, shortages, transportation problems or other developments, environmental incidents, or electric transmission or gas pipeline system constraints and the possibility that the Company may not have adequate insurance to cover losses as a result of such hazards;
•The Company’s ability to operate its businesses efficiently, manage maintenance capital expenditures and costs effectively, and generate earnings and cash flows from its asset-based businesses in relation to its debt and other obligations;
•The willingness and ability of counterparties to the Company’s offtake agreements to fulfill their obligations under such agreements;
•The Company’s ability to enter into contracts to sell power and procure fuel on acceptable terms and prices as current offtake agreements expire;
•Government regulation, including compliance with regulatory requirements and changes in market rules, rates, tariffs and environmental laws;
•Operating and financial restrictions placed on the Company that are contained in the project-level debt facilities and other agreements of certain subsidiaries and project-level subsidiaries generally, in the Clearway Energy Operating LLC amended and restated revolving credit facility and in the indentures governing the Senior Notes;
•Cyber terrorism and inadequate cybersecurity, or the occurrence of a catastrophic loss and the possibility that the Company may not have adequate insurance to cover losses resulting from such hazards or the inability of the Company’s insurers to provide coverage; and
•The Company’s ability to borrow additional funds and access capital markets, as well as the Company’s substantial indebtedness and the possibility that the Company may incur additional indebtedness going forward.
Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause the Company’s actual results to differ materially from those contemplated in any forward-looking statements included in this Quarterly Report on Form 10-Q should not be construed as exhaustive.
3

GLOSSARY OF TERMS
When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:

2025 Senior Notes | $600 million aggregate principal amount of 5.750% unsecured senior notes due 2025, issued by Clearway Energy Operating LLC, which were repurchased and redeemed in March 2021 |
2028 Senior Notes | $850 million aggregate principal amount of 4.750% unsecured senior notes due 2028, issued by Clearway Energy Operating LLC |
2031 Senior Notes | $925 million aggregate principal amount of 3.750% unsecured senior notes due 2031, issued by Clearway Energy Operating LLC |
2032 Senior Notes | $350 million aggregate principal amount of 3.750% unsecured senior notes due 2032, issued by Clearway Energy Operating LLC |
Adjusted EBITDA | A non-GAAP measure, represents earnings before interest (including loss on debt extinguishment), tax, depreciation and amortization adjusted for mark-to-market gains or losses, asset write offs and impairments; and factors which the Company does not consider indicative of future operating performance |
ASC | The FASB Accounting Standards Codification, which the FASB established as the source of authoritative GAAP |
ASU | Accounting Standards Updates - updates to the ASC |
ATM Programs | At-The-Market Equity Offering Programs |
Bridge Loan Agreement | Senior secured bridge credit agreement entered into by Clearway Energy Operating LLC that provided a term loan facility in an aggregate principal amount of $335 million and was repaid on May 3, 2022 |
CAFD | A non-GAAP measure, Cash Available for Distribution is defined as of June 30, 2022 as Adjusted EBITDA plus cash distributions/return of investment from unconsolidated affiliates, cash receipts from notes receivable, cash distributions from noncontrolling interests, adjustments to reflect sales-type lease cash payments and payments for lease expenses, less cash distributions to noncontrolling interests, maintenance capital expenditures, pro-rata Adjusted EBITDA from unconsolidated affiliates, cash interest paid, income taxes paid, principal amortization of indebtedness, changes in prepaid and accrued capacity payments and adjusted for development expenses |
CEG | Clearway Energy Group LLC (formerly Zephyr Renewables LLC) |
CEG Master Services Agreement | Master Services Agreements entered into as of August 31, 2018 between the Company, Clearway Energy LLC and Clearway Energy Operating LLC, and CEG |
Clearway Energy LLC | The holding company through which the projects are owned by Clearway Energy Group LLC, the holder of Class B and Class D units, and Clearway Energy, Inc., the holder of the Class A and Class C units |
Clearway Energy Group LLC | The holder of all of the Company’s Class B and Class D common shares and Clearway Energy LLC’s Class B and Class D units and from time to time, possibly shares of the Company’s Class A and/or Class C common stock |
Clearway Energy Operating LLC | The holder of the project assets that are owned by Clearway Energy LLC |
Company | Clearway Energy, Inc. together with its consolidated subsidiaries |
CVSR | California Valley Solar Ranch |
CVSR Holdco | CVSR Holdco LLC, the indirect owner of CVSR |
Distributed Solar | Solar power projects, typically less than 20 MW in size (on an alternating current, or AC, basis), that primarily sell power produced to customers for usage on site, or are interconnected to sell power into the local distribution grid |
Drop Down Assets | Assets under common control acquired by the Company from CEG |
Exchange Act | The Securities Exchange Act of 1934, as amended |
FASB | Financial Accounting Standards Board |
FWS | U.S. Fish & Wildlife Service |
GAAP | Accounting principles generally accepted in the U.S. |
GenConn | GenConn Energy LLC |
GIP | Global Infrastructure Partners |
HLBV | Hypothetical Liquidation at Book Value |

4

KKR | KKR Thor Bidco, LLC, an affiliate of Kohlberg Kravis Roberts & Co. L.P. |
LIBOR | London Inter-Bank Offered Rate |
Mesquite Star | Mesquite Star Special LLC |
MMBtu | Million British Thermal Units |
Mt. Storm | NedPower Mount Storm LLC |
MW | Megawatt |
MWh | Saleable megawatt hours, net of internal/parasitic load megawatt-hours |
MWt | Megawatts Thermal Equivalent |
Net Exposure | Counterparty credit exposure to Clearway Energy, Inc. net of collateral |
NOLs | Net Operating Losses |
NPNS | Normal Purchases and Normal Sales |
OCI | Other comprehensive income |
OCL | Other comprehensive loss |
O&M | Operations and Maintenance |
PG&E | Pacific Gas and Electric Company |
PPA | Power Purchase Agreement |
RENOM | Clearway Renewable Operation & Maintenance LLC |
SCE | Southern California Edison |
SEC | U.S. Securities and Exchange Commission |
Senior Notes | Collectively, the 2028 Senior Notes, the 2031 Senior Notes and the 2032 Senior Notes |
SOFR | Secured Overnight Financing Rate |
SPP | Solar Power Partners |
SREC | Solar Renewable Energy Credit |
Tax Act | Tax Cuts and Jobs Act of 2017 |
Thermal Business | The Company’s thermal business, which consists of thermal infrastructure assets that provide steam, hot water and/or chilled water, and in some instances electricity, to commercial businesses, universities, hospitals and governmental units |
Thermal Disposition | On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR |
TotalEnergies | TotalEnergies SE |
U.S. | United States of America |
Utah Solar Portfolio | Seven utility-scale solar farms located in Utah, representing 530 MW of capacity |
Utility Scale Solar | Solar power projects, typically 20 MW or greater in size (on an alternating current, or AC, basis), that are interconnected into the transmission or distribution grid to sell power at a wholesale level |
VaR | Value at Risk |
VIE | Variable Interest Entity |

5

PART I - FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS
CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

| Three months ended June 30, |  | Six months ended June 30,
(In millions, except per share amounts) | 2022 |  | 2021 |  | 2022 |  | 2021
Operating Revenues |  |  |  |  |  |  |
Total operating revenues | $ | 368 |  |  | $ | 380 |  |  | $ | 582 |  |  | $ | 617 |
Operating Costs and Expenses |  |  |  |  |  |  |
Cost of operations, exclusive of depreciation, amortization and accretion shown separately below | 112 |  |  | 107 |  |  | 240 |  |  | 217 |
Depreciation, amortization and accretion | 126 |  |  | 128 |  |  | 250 |  |  | 256 |
General and administrative | 11 |  |  | 10 |  |  | 23 |  |  | 20 |
Transaction and integration costs | 3 |  |  | 1 |  |  | 5 |  |  | 3 |
Development costs | 1 |  |  | 1 |  |  | 2 |  |  | 2 |
Total operating costs and expenses | 253 |  |  | 247 |  |  | 520 |  |  | 498 |
Gain on sale of business | 1,291 |  |  | — |  |  | 1,291 |  |  | — |
Operating Income | 1,406 |  |  | 133 |  |  | 1,353 |  |  | 119 |
Other Income (Expense) |  |  |  |  |  |  |
Equity in earnings of unconsolidated affiliates | 10 |  |  | 8 |  |  | 14 |  |  | 12 |
Other income, net | 5 |  |  | 1 |  |  | 5 |  |  | 2 |
Loss on debt extinguishment | — |  |  | — |  |  | (2) |  |  | (42) |
Interest expense | (47) |  |  | (103) |  |  | (94) |  |  | (148) |
Total other expense, net | (32) |  |  | (94) |  |  | (77) |  |  | (176) |
Income (Loss) Before Income Taxes | 1,374 |  |  | 39 |  |  | 1,276 |  |  | (57) |
Income tax expense (benefit) | 225 |  |  | 7 |  |  | 224 |  |  | (13) |
Net Income (Loss) | 1,149 |  |  | 32 |  |  | 1,052 |  |  | (44) |
Less: Income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | 579 |  |  | (3) |  |  | 514 |  |  | (82) |
Net Income Attributable to Clearway Energy, Inc. | $ | 570 |  |  | $ | 35 |  |  | $ | 538 |  |  | $ | 38 |
Earnings Per Share Attributable to Clearway Energy, Inc. Class A and Class C Common Stockholders |  |  |  |  |  |  |
Weighted average number of Class A common shares outstanding - basic and diluted | 35 |  |  | 35 |  |  | 35 |  |  | 35 |
Weighted average number of Class C common shares outstanding - basic and diluted | 82 |  |  | 82 |  |  | 82 |  |  | 82 |
Earnings per Weighted Average Class A and Class C Common Share - Basic and Diluted | $ | 4.89 |  |  | $ | 0.30 |  |  | $ | 4.62 |  |  | $ | 0.32 |
Dividends Per Class A Common Share | $ | 0.3536 |  |  | $ | 0.3290 |  |  | $ | 0.7004 |  |  | $ | 0.6530 |
Dividends Per Class C Common Share | $ | 0.3536 |  |  | $ | 0.3290 |  |  | $ | 0.7004 |  |  | $ | 0.6530 |

See accompanying notes to consolidated financial statements.
6

CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

| Three months ended June 30, |  | Six months ended June 30,
(In millions) | 2022 |  | 2021 |  | 2022 |  | 2021
Net Income (Loss) | $ | 1,149 |  |  | $ | 32 |  |  | $ | 1,052 |  |  | $ | (44) |
Other Comprehensive Income |  |  |  |  |  |  |
Unrealized gain on derivatives, net of income tax expense of, $1, $— ,$3 and $2 | 6 |  |  | — |  |  | 20 |  |  | 11 |
Other comprehensive income | 6 |  |  | — |  |  | 20 |  |  | 11 |
Comprehensive Income (Loss) | 1,155 |  |  | 32 |  |  | 1,072 |  |  | (33) |
Less: Comprehensive income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | 583 |  |  | (3) |  |  | 526 |  |  | (75) |
Comprehensive Income Attributable to Clearway Energy, Inc. | $ | 572 |  |  | $ | 35 |  |  | $ | 546 |  |  | $ | 42 |

See accompanying notes to consolidated financial statements.
7

CLEARWAY ENERGY, INC.
CONSOLIDATED BALANCE SHEETS

(In millions, except shares) | June 30, 2022 |  | December 31, 2021
ASSETS | (Unaudited) |  |
Current Assets |  |  |
Cash and cash equivalents | $ | 955 |  |  | $ | 179 |
Restricted cash | 333 |  |  | 475 |
Accounts receivable — trade | 222 |  |  | 144 |
Accounts receivable — affiliates | 2 |  |  | — |
Inventory | 39 |  |  | 37 |
Derivative instruments | 9 |  |  | — |
Current assets held-for-sale | — |  |  | 631 |
Prepayments and other current assets | 75 |  |  | 65 |
Total current assets | 1,635 |  |  | 1,531 |
Property, plant and equipment, net | 7,545 |  |  | 7,650 |
Other Assets |  |  |
Equity investments in affiliates | 375 |  |  | 381 |
Intangible assets for power purchase agreements, net | 2,340 |  |  | 2,419 |
Other intangible assets, net | 79 |  |  | 80 |
Derivative instruments | 35 |  |  | 6 |
Deferred income taxes | — |  |  | 95 |
Right-of-use assets, net | 510 |  |  | 550 |
Other non-current assets | 129 |  |  | 101 |
Total other assets | 3,468 |  |  | 3,632 |
Total Assets | $ | 12,648 |  |  | $ | 12,813 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |
Current Liabilities |  |  |
Current portion of long-term debt | $ | 457 |  |  | $ | 772 |
Accounts payable — trade | 59 |  |  | 74 |
Accounts payable — affiliates | 16 |  |  | 107 |
Derivative instruments | 75 |  |  | 46 |
Accrued interest expense | 57 |  |  | 54 |
Current liabilities held-for-sale | — |  |  | 494 |
Accrued expenses and other current liabilities | 85 |  |  | 84 |
Total current liabilities | 749 |  |  | 1,631 |
Other Liabilities |  |  |
Long-term debt | 6,605 |  |  | 6,939 |
Deferred income taxes | 110 |  |  | 13 |
Derivative instruments | 280 |  |  | 196 |
Long-term lease liabilities | 527 |  |  | 561 |
Other non-current liabilities | 184 |  |  | 173 |
Total other liabilities | 7,706 |  |  | 7,882 |
Total Liabilities | 8,455 |  |  | 9,513 |
Redeemable noncontrolling interest in subsidiaries | 4 |  |  | — |
Commitments and Contingencies |  |  |
Stockholders’ Equity |  |  |
Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued | — |  |  | — |
Class A, Class B, Class C and Class D common stock, $0.01 par value; 3,000,000,000 shares authorized (Class A 500,000,000, Class B 500,000,000, Class C 1,000,000,000, Class D 1,000,000,000); 202,273,531 shares issued and outstanding (Class A 34,599,645, Class B 42,738,750, Class C 82,196,386, Class D 42,738,750) at June 30, 2022 and 201,856,166 shares issued and outstanding (Class A 34,599,645, Class B 42,738,750, Class C 81,779,021, Class D 42,738,750) at December 31, 2021 | 1 |  |  | 1 |
Additional paid-in capital | 1,785 |  |  | 1,872 |
Retained earnings (accumulated deficit) | 505 |  |  | (33) |
Accumulated other comprehensive income (loss) | 2 |  |  | (6) |
Noncontrolling interest | 1,896 |  |  | 1,466 |
Total Stockholders’ Equity | 4,189 |  |  | 3,300 |
Total Liabilities and Stockholders’ Equity | $ | 12,648 |  |  | $ | 12,813 |

See accompanying notes to consolidated financial statements.
8

CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

| Six months ended June 30,
(In millions) | 2022 |  | 2021
Cash Flows from Operating Activities |  |  |
Net Income (Loss) | $ | 1,052 |  |  | $ | (44) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |
Equity in earnings of unconsolidated affiliates | (14) |  |  | (12) |
Distributions from unconsolidated affiliates | 17 |  |  | 16 |
Depreciation, amortization and accretion | 250 |  |  | 256 |
Amortization of financing costs and debt discounts | 7 |  |  | 7 |
Amortization of intangibles | 82 |  |  | 70 |
Loss on debt extinguishment | 2 |  |  | 42 |
Gain on sale of business | (1,291) |  |  | — |
Reduction in carrying amount of right-of-use assets | 7 |  |  | 5 |
Changes in deferred income taxes | 197 |  |  | (13) |
Changes in derivative instruments | 92 |  |  | 20 |
Cash used in changes in other working capital: |  |  |
Changes in prepaid and accrued liabilities for tolling agreements | (74) |  |  | (76) |
Changes in other working capital | (48) |  |  | (30) |
Net Cash Provided by Operating Activities | 279 |  |  | 241 |
Cash Flows from Investing Activities |  |  |
Acquisitions, net of cash acquired | — |  |  | (211) |
Acquisition of Drop Down Assets | (51) |  |  | (132) |
Capital expenditures | (81) |  |  | (93) |
Asset purchase from affiliate | — |  |  | (21) |
Return of investment from unconsolidated affiliates | 6 |  |  | 20 |
Cash receipts from notes receivable | — |  |  | 4 |
Proceeds from sale of business | 1,457 |  |  | — |
Other | — |  |  | 13 |
Net Cash Provided by (Used in) Investing Activities | 1,331 |  |  | (420) |
Cash Flows from Financing Activities |  |  |
(Distributions to) contributions from noncontrolling interests | (7) |  |  | 265 |
Payments of dividends and distributions | (141) |  |  | (132) |
Distributions to CEG of escrowed amounts | (64) |  |  | — |
Proceeds from the revolving credit facility | 80 |  |  | 300 |
Payments for the revolving credit facility | (325) |  |  | (233) |
Proceeds from the issuance of long-term debt | 214 |  |  | 1,016 |
Payments of debt issuance costs | (4) |  |  | (13) |
Payments for short-term and long-term debt | (722) |  |  | (1,028) |
Other | (7) |  |  | 9 |
Net Cash (Used in) Provided by Financing Activities | (976) |  |  | 184 |
Net Increase in Cash, Cash Equivalents and Restricted Cash | 634 |  |  | 5 |
Cash, Cash Equivalents and Restricted Cash at beginning of period | 654 |  |  | 465 |
Cash, Cash Equivalents and Restricted Cash at end of period | $ | 1,288 |  |  | $ | 470 |

See accompanying notes to consolidated financial statements.
9

CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Six Months Ended June 30, 2022
(Unaudited)

(In millions) | Preferred Stock |  | Common Stock |  | Additional Paid-In Capital |  | (Accumulated Deficit) Retained Earnings |  | Accumulated Other Comprehensive (Loss) Income |  | Noncontrolling Interest |  | Total Stockholders’ Equity
Balances at December 31, 2021 | $ | — |  |  | $ | 1 |  |  | $ | 1,872 |  |  | $ | (33) |  |  | $ | (6) |  |  | $ | 1,466 |  |  | $ | 3,300 |
Net loss | — |  |  | — |  |  | — |  |  | (32) |  |  | — |  |  | (67) |  |  | (99) |
Unrealized gain on derivatives, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | 6 |  |  | 8 |  |  | 14 |
Distributions to CEG, net of contributions, cash | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3) |  |  | (3) |
Contributions from noncontrolling interests, net of distributions, cash | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 28 |  |  | 28 |
Mesquite Sky Drop Down | — |  |  | — |  |  | (1) |  |  | — |  |  | — |  |  | (7) |  |  | (8) |
Black Rock Drop Down | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |  | 1 |
Mililani I Drop Down | — |  |  | — |  |  | (11) |  |  | — |  |  | — |  |  | (19) |  |  | (30) |
Non-cash adjustments for change in tax basis | — |  |  | — |  |  | 8 |  |  | — |  |  | — |  |  | — |  |  | 8 |
Stock based compensation | — |  |  | — |  |  | (2) |  |  | — |  |  | — |  |  | — |  |  | (2) |
Common stock dividends and distributions to CEG unit holders | — |  |  | — |  |  | (40) |  |  | — |  |  | — |  |  | (30) |  |  | (70) |
Balances at March 31, 2022 | $ | — |  |  | $ | 1 |  |  | $ | 1,826 |  |  | $ | (65) |  |  | $ | — |  |  | $ | 1,377 |  |  | $ | 3,139 |
Net income | — |  |  | — |  |  | — |  |  | 570 |  |  | — |  |  | 575 |  |  | 1,145 |
Unrealized gain on derivatives, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | 2 |  |  | 4 |  |  | 6 |
Distributions to CEG, net of contributions, cash | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (20) |  |  | (20) |
Distributions to noncontrolling interests, net of contributions, cash | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (10) |  |  | (10) |
Non-cash adjustments for change in tax basis | — |  |  | — |  |  | (1) |  |  | — |  |  | — |  |  | — |  |  | (1) |
Stock based compensation | — |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | 1 |
Common stock dividends and distributions to CEG unit holders | — |  |  | — |  |  | (41) |  |  | — |  |  | — |  |  | (30) |  |  | (71) |
Balances at June 30, 2022 | $ | — |  |  | $ | 1 |  |  | $ | 1,785 |  |  | $ | 505 |  |  | $ | 2 |  |  | $ | 1,896 |  |  | $ | 4,189 |

See accompanying notes to consolidated financial statements.
10

CLEARWAY ENERGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Six Months Ended June 30, 2021
(Unaudited)

(In millions) | Preferred Stock |  | Common Stock |  | Additional Paid-In Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Loss |  | Noncontrolling Interest |  | Total Stockholders’ Equity
Balances at December 31, 2020 | $ | — |  |  | $ | 1 |  |  | $ | 1,922 |  |  | $ | (84) |  |  | $ | (14) |  |  | $ | 890 |  |  | $ | 2,715 |
Net income (loss) | — |  |  | — |  |  | — |  |  | 3 |  |  | — |  |  | (81) |  |  | (78) |
Unrealized gain on derivatives, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | 4 |  |  | 7 |  |  | 11 |
Contributions from CEG, non-cash | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 27 |  |  | 27 |
Contributions from CEG, cash | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 103 |  |  | 103 |
Contributions from noncontrolling interests, net of distributions, cash | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 126 |  |  | 126 |
Agua Caliente acquisition | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 273 |  |  | 273 |
Rattlesnake Drop Down | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (118) |  |  | (118) |
Non-cash adjustments for change in tax basis | — |  |  | — |  |  | 2 |  |  | — |  |  | — |  |  | — |  |  | 2 |
Common stock dividends and distributions to CEG unit holders | — |  |  | — |  |  | (38) |  |  | — |  |  | — |  |  | (28) |  |  | (66) |
Balances at March 31, 2021 | $ | — |  |  | $ | 1 |  |  | $ | 1,886 |  |  | $ | (81) |  |  | $ | (10) |  |  | $ | 1,199 |  |  | $ | 2,995 |
Net income (loss) | — |  |  | — |  |  | — |  |  | 35 |  |  | — |  |  | (4) |  |  | 31 |
Unrealized gain (loss) on derivatives, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |  | (1) |  |  | — |
Contributions from CEG, non-cash | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3 |  |  | 3 |
Contributions from CEG, cash | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |  | 1 |
Contributions from noncontrolling interests, net of distributions, cash | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 38 |  |  | 38 |
Rattlesnake Drop Down | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |  | 1 |
Stock-based compensation | — |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | 1 |
Non-cash adjustment for change in tax basis | — |  |  | — |  |  | (1) |  |  | — |  |  | — |  |  | — |  |  | (1) |
Common stock dividends and distributions to CEG unit holders | — |  |  | — |  |  | (38) |  |  | — |  |  | — |  |  | (28) |  |  | (66) |
Balances at June 30, 2021 | $ | — |  |  | $ | 1 |  |  | $ | 1,848 |  |  | $ | (46) |  |  | $ | (9) |  |  | $ | 1,209 |  |  | $ | 3,003 |

See accompanying notes to consolidated financial statements.
11

CLEARWAY ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Nature of Business
Clearway Energy, Inc., together with its consolidated subsidiaries, or the Company, is a publicly-traded energy infrastructure investor in and owner of modern, sustainable and long-term contracted assets across North America. The Company is indirectly owned by Global Infrastructure Partners, or GIP. GIP is an independent infrastructure fund manager that makes equity and debt investments in infrastructure assets and businesses. The Company is sponsored by GIP through GIP’s portfolio company, Clearway Energy Group LLC, or CEG. On May 25, 2022, TotalEnergies entered into an agreement to acquire 50% of GIP’s interest in CEG. The closing of the transaction is subject to customary conditions, including regulatory approvals, and is expected to close in the second half of 2022.
The Company is one of the largest renewable energy owners in the U.S. with over 5,000 net MW of installed wind and solar generation projects. The Company’s over 7,500 net MW of assets also includes approximately 2,500 net MW of environmentally-sound, highly efficient natural gas-fired generation facilities. Through this environmentally-sound, diversified and primarily contracted portfolio, the Company endeavors to provide its investors with stable and growing dividend income. Substantially all of the Company’s generation assets are under long-term contractual arrangements for the output or capacity from these assets.
On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR. For further details of the Thermal Disposition, refer to Note 3, Acquisitions and Dispositions.
The Company consolidates the results of Clearway Energy LLC through its controlling interest, with CEG’s interest shown as non-controlling interest in the consolidated financial statements. The holders of the Company’s outstanding shares of Class A and Class C common stock are entitled to dividends as declared. CEG receives its distributions from Clearway Energy LLC through its ownership of Clearway Energy LLC Class B and Class D units. From time to time, CEG may also hold shares of the Company’s Class A and/or Class C common stock.
The Company owned 57.74% of the economic interests of Clearway Energy LLC, with CEG owning 42.26% of the economic interests of Clearway Energy LLC as of June 30, 2022.
12

The following table represents the structure of the Company as of June 30, 2022:
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the SEC’s regulations for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the consolidated financial statements included in the Company’s 2021 Form 10-K. Interim results are not necessarily indicative of results for a full year.
In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all material adjustments consisting of normal and recurring accruals necessary to present fairly the Company’s consolidated financial position as of June 30, 2022, and results of operations, comprehensive income and cash flows for the three and six months ended June 30, 2022 and 2021.
Note 2 — Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions. These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amounts of net earnings during the reporting periods. Actual results could be different from these estimates.
13

Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include highly liquid investments with an original maturity of three months or less at the time of purchase. Cash and cash equivalents held at project subsidiaries was $135 million and $146 million as of June 30, 2022 and December 31, 2021, respectively.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows:

| June 30, 2022 |  | December 31, 2021
| (In millions)
Cash and cash equivalents | $ | 955 |  |  | $ | 179 |
Restricted cash | 333 |  |  | 475 |
Cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | 1,288 |  |  | $ | 654 |

Restricted cash consists primarily of funds held to satisfy the requirements of certain debt agreements and funds held within the Company’s projects that are restricted in their use. As of June 30, 2022, these restricted funds were comprised of $143 million designated to fund operating expenses, $42 million designated for current debt service payments and $122 million restricted for reserves including debt service, performance obligations and other reserves as well as capital expenditures. The remaining $26 million is held in distributions reserve accounts.
In 2020, the members of the partnerships holding the Oahu Solar and Kawailoa Solar projects submitted applications to the state of Hawaii for refundable tax credits based on the cost of construction of the projects. In 2021, the members of the partnerships contributed their respective portions of the tax credits in the amount of $49 million to the Oahu Solar and Kawailoa project companies, which was recorded to restricted cash on the Company’s consolidated balance sheet with an offsetting adjustment to noncontrolling interests. In accordance with the projects’ related agreements, the cash is held in a restricted account and utilized to offset invoiced amounts under the projects’ PPAs. As of June 30, 2022, $30 million of the $49 million has been utilized to offset invoiced amounts under the projects’ PPAs.
Accumulated Depreciation and Accumulated Amortization
The following table presents the accumulated depreciation included in property, plant and equipment, net, and accumulated amortization included in intangible assets, net as of June 30, 2022 and December 31, 2021:

| June 30, 2022 |  | December 31, 2021
| (In millions)
Property, Plant and Equipment Accumulated Depreciation | $ | 2,745 |  |  | $ | 2,501 |
Intangible Assets Accumulated Amortization | 687 |  |  | 605 |

Dividends to Class A and Class C Common Stockholders
The following table lists the dividends paid on the Company's Class A and Class C common stock during the six months ended June 30, 2022:

|  |  |  |  | Second Quarter 2022 |  | First Quarter 2022
Dividends per Class A share |  |  |  |  | $ | 0.3536 |  |  | $ | 0.3468 |
Dividends per Class C share |  |  |  |  | 0.3536 |  |  | 0.3468 |

Dividends on the Class A 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.
On August 1, 2022, the Company declared quarterly dividends on its Class A and Class C common stock of $0.3604 per share payable on September 15, 2022 to stockholders of record as of September 1, 2022.
14

Noncontrolling Interests
Clearway Energy LLC Distributions to CEG
The following table lists distributions paid to CEG during the six months ended June 30, 2022 on Clearway Energy LLC’s Class B and D units:

|  |  |  |  | Second Quarter 2022 |  | First Quarter 2022
Distributions per Class B Unit |  |  |  |  | $ | 0.3536 |  |  | $ | 0.3468 |
Distributions per Class D Unit |  |  |  |  | 0.3536 |  |  | 0.3468 |

On August 1, 2022, Clearway Energy LLC declared a distribution on its Class B and Class D units of $0.3604 per unit payable on September 15, 2022 to unit holders of record as of September 1, 2022.
Redeemable Noncontrolling Interests
To the extent that a third party has the right to redeem their interests for cash or other assets, the Company has included the noncontrolling interest attributable to the third party as a component of temporary equity in the mezzanine section of the consolidated balance sheet. The following table reflects the changes in the Company’s redeemable noncontrolling interest balance for the six months ended June 30, 2022:

|  | (In millions)
Balance as of December 31, 2021 |  | $ | — |
Cash distributions to redeemable noncontrolling interests |  | (2) |
Comprehensive income attributable to redeemable noncontrolling interests |  | 6 |
Balance as of June 30, 2022 |  | $ | 4 |

Revenue Recognition
Revenue from Contracts with Customers
The Company applies the guidance in ASC 606, Revenue from Contracts with Customers, or Topic 606, when recognizing revenue associated with its contracts with customers. The Company’s policies with respect to its various revenue streams are detailed below. In general, the Company applies the invoicing practical expedient to recognize revenue for the revenue streams detailed below, except in circumstances where the invoiced amount does not represent the value transferred to the customer.
Power Purchase Agreements, or PPAs
The majority of the Company’s revenues are obtained through PPAs or similar contractual agreements. Energy, capacity and where applicable, renewable attributes, from the majority of the Company’s renewable energy assets and certain conventional energy plants is sold through long-term PPAs and tolling agreements to a single counterparty, which is often a utility or commercial customer. The majority of these PPAs are accounted for as operating leases as the Company retained its historical lease assessments and classification upon adoption of ASC 842, Leases. ASC 842 requires the minimum lease payments received to be amortized over the term of the lease and contingent rentals are recorded when the achievement of the contingency becomes probable. Judgment is required by management in determining the economic life of each generating facility, in evaluating whether certain lease provisions constitute minimum payments or represent contingent rent and other factors in determining whether a contract contains a lease and whether the lease is an operating lease or capital lease. Certain of these leases have no minimum lease payments and all of the rental income under these leases is recorded as contingent rent on an actual basis when the electricity is delivered.
Renewable Energy Credits, or RECs
Renewable energy credits, or RECs, are usually sold through long-term PPAs or through REC contracts with counterparties. Revenue from the sale of self-generated RECs is recognized when the related energy is generated and simultaneously delivered even in cases where there is a certification lag as it has been deemed to be perfunctory.
In a bundled contract to sell energy, capacity and/or self-generated RECs, all performance obligations are deemed to be delivered at the same time and hence, timing of recognition of revenue for all performance obligations is the same and occurs over time. In such cases, it is often unnecessary to allocate transaction price to multiple performance obligations.
15

Thermal Revenues
Steam and chilled water revenue is recognized as the Company transfers the product to the customer, based on customer usage as determined by meter readings taken at month-end. Some locations read customer meters throughout the month and recognize estimated revenue for the period between meter read date and month-end. For thermal contracts, the Company’s performance obligation to deliver steam and chilled water is satisfied over time and revenue is recognized based on the invoiced amount. The Thermal Business subsidiaries collect, and remit state and local taxes associated with sales to their customers, as required by governmental authorities. These taxes are presented on a net basis in the consolidated statements of income.
As contracts for steam and chilled water are long-term contracts, the Company has performance obligations under these contracts that have not yet been satisfied. These performance obligations have transaction prices that are both fixed and variable, and that vary based on the contract duration, customer type, inception date and other contract-specific factors. For the fixed price contracts, the Company cannot accurately estimate the amount of its unsatisfied performance obligations as it will vary based on customer usage, which will depend on factors such as weather and customer activity.
On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR. For further details of the Thermal Disposition, refer to Note 3, Acquisitions and Dispositions.
Disaggregated Revenues
The following tables represent the Company’s disaggregation of revenue from contracts with customers along with the reportable segment for each category for the three and six months ended June 30, 2022 and 2021, respectively:

| Three months ended June 30, 2022
(In millions) | Conventional Generation |  | Renewables |  | Thermal |  |  |  |  |  | Total
Energy revenue (a) | $ | 3 |  |  | $ | 306 |  |  | $ | 11 |  |  |  |  |  |  | $ | 320 |
Capacity revenue (a) | 106 |  |  | 1 |  |  | 4 |  |  |  |  |  |  | 111 |
Contract amortization | (6) |  |  | (35) |  |  | — |  |  |  |  |  |  | (41) |
Other revenue | — |  |  | 27 |  |  | 3 |  |  |  |  |  |  | 30 |
Mark-to-market for economic hedges | — |  |  | (52) |  |  | — |  |  |  |  |  |  | (52) |
Total operating revenues | 103 |  |  | 247 |  |  | 18 |  |  |  |  |  |  | 368 |
Less: Mark-to-market for economic hedges | — |  |  | 52 |  |  | — |  |  |  |  |  |  | 52 |
Less: Lease revenue | (109) |  |  | (268) |  |  | — |  |  |  |  |  |  | (377) |
Less: Contract amortization | 6 |  |  | 35 |  |  | — |  |  |  |  |  |  | 41 |
Total revenue from contracts with customers | $ | — |  |  | $ | 66 |  |  | $ | 18 |  |  |  |  |  |  | $ | 84 |

(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 842:

(In millions) | Conventional Generation |  | Renewables |  | Thermal |  | Total
Energy revenue | $ | 3 |  |  | $ | 268 |  |  | $ | — |  |  | $ | 271 |
Capacity revenue | 106 |  |  | — |  |  | — |  |  | 106 |
Total | $ | 109 |  |  | $ | 268 |  |  | $ | — |  |  | $ | 377 |

16

| Three months ended June 30, 2021
(In millions) | Conventional Generation |  | Renewables |  | Thermal |  |  |  |  |  | Total
Energy revenue (a) | $ | 2 |  |  | $ | 261 |  |  | $ | 29 |  |  |  |  |  |  | $ | 292 |
Capacity revenue (a) | 113 |  |  | — |  |  | 15 |  |  |  |  |  |  | 128 |
Contract amortization | (6) |  |  | (30) |  |  | (1) |  |  |  |  |  |  | (37) |
Other revenue | — |  |  | 22 |  |  | 6 |  |  |  |  |  |  | 28 |
Mark-to-market for economic hedges | — |  |  | (31) |  |  | — |  |  |  |  |  |  | (31) |
Total operating revenues | 109 |  |  | 222 |  |  | 49 |  |  |  |  |  |  | 380 |
Less: Mark-to-market for economic hedges | — |  |  | 31 |  |  | — |  |  |  |  |  |  | 31 |
Less: Lease revenue | (115) |  |  | (228) |  |  | — |  |  |  |  |  |  | (343) |
Less: Contract amortization | 6 |  |  | 30 |  |  | 1 |  |  |  |  |  |  | 37 |
Total revenue from contracts with customers | $ | — |  |  | $ | 55 |  |  | $ | 50 |  |  |  |  |  |  | $ | 105 |

(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 842:

(In millions) | Conventional Generation |  | Renewables |  | Thermal |  | Total
Energy revenue | $ | 2 |  |  | $ | 228 |  |  | $ | — |  |  | $ | 230 |
Capacity revenue | 113 |  |  | — |  |  | — |  |  | 113 |
Total | $ | 115 |  |  | $ | 228 |  |  | $ | — |  |  | $ | 343 |

| Six months ended June 30, 2022
(In millions) | Conventional Generation |  | Renewables |  | Thermal |  |  |  |  |  | Total
Energy revenue (a) | $ | 3 |  |  | $ | 501 |  |  | $ | 48 |  |  |  |  |  |  | $ | 552 |
Capacity revenue (a) | 220 |  |  | 1 |  |  | 18 |  |  |  |  |  |  | 239 |
Contract amortization | (12) |  |  | (71) |  |  | — |  |  |  |  |  |  | (83) |
Other revenue | — |  |  | 41 |  |  | 11 |  |  |  |  |  |  | 52 |
Mark-to-market for economic hedges | — |  |  | (178) |  |  | — |  |  |  |  |  |  | (178) |
Total operating revenues | 211 |  |  | 294 |  |  | 77 |  |  |  |  |  |  | 582 |
Less: Mark-to-market for economic hedges | — |  |  | 178 |  |  | — |  |  |  |  |  |  | 178 |
Less: Lease revenue | (223) |  |  | (430) |  |  | (1) |  |  |  |  |  |  | (654) |
Less: Contract amortization | 12 |  |  | 71 |  |  | — |  |  |  |  |  |  | 83 |
Total revenue from contracts with customers | $ | — |  |  | $ | 113 |  |  | $ | 76 |  |  |  |  |  |  | $ | 189 |

(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 842:

(In millions) | Conventional Generation |  | Renewables |  | Thermal |  | Total
Energy revenue | $ | 3 |  |  | $ | 430 |  |  | $ | 1 |  |  | $ | 434 |
Capacity revenue | 220 |  |  | — |  |  | — |  |  | 220 |
Total | $ | 223 |  |  | $ | 430 |  |  | $ | 1 |  |  | $ | 654 |

17

| Six months ended June 30, 2021
(In millions) | Conventional Generation |  | Renewables |  | Thermal |  |  |  | Total
Energy revenue (a) | $ | 3 |  |  | $ | 387 |  |  | $ | 58 |  |  |  |  | $ | 448 |
Capacity revenue (a) | 220 |  |  | — |  |  | 28 |  |  |  |  | 248 |
Contract amortization | (12) |  |  | (55) |  |  | (2) |  |  |  |  | (69) |
Other revenue | — |  |  | 31 |  |  | 14 |  |  |  |  | 45 |
Mark-to-market for economic hedges | — |  |  | (55) |  |  | — |  |  |  |  | (55) |
Total operating revenues | 211 |  |  | 308 |  |  | 98 |  |  |  |  | 617 |
Less: Mark-to-market for economic hedges | — |  |  | 55 |  |  | — |  |  |  |  | 55 |
Less: Lease revenue | (223) |  |  | (373) |  |  | (1) |  |  |  |  | (597) |
Less: Contract amortization | 12 |  |  | 55 |  |  | 2 |  |  |  |  | 69 |
Total revenue from contracts with customers | $ | — |  |  | $ | 45 |  |  | $ | 99 |  |  |  |  | $ | 144 |

(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 842:

(In millions) | Conventional Generation |  | Renewables |  | Thermal |  | Total
Energy revenue | $ | 3 |  |  | $ | 373 |  |  | $ | 1 |  |  | $ | 377 |
Capacity revenue | 220 |  |  | — |  |  | — |  |  | 220 |
Total | $ | 223 |  |  | $ | 373 |  |  | $ | 1 |  |  | $ | 597 |

Contract Amortization
Assets and liabilities recognized from power sales agreements assumed through acquisitions relating to the sale of electric capacity and energy in future periods arising from differences in contract and market prices are amortized to revenue over the term of each underlying contract based on actual generation and/or contracted volumes or on a straight-line basis, where applicable.
Contract Balances
The following table reflects the contract assets and liabilities included on the Company’s consolidated balance sheets as of June 30, 2022 and December 31, 2021:

| June 30, 2022 |  | December 31, 2021
| (In millions)
Accounts receivable, net - Contracts with customers | $ | 60 |  |  | $ | 44 |
Accounts receivable, net - Leases | 162 |  |  | 100 |
Total accounts receivable, net | $ | 222 |  |  | $ | 144 |

Recently Adopted Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide for optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. These amendments apply only to contracts that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform, which affects certain of the Company’s debt and interest rate swap agreements. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. As of June 30, 2022, the Company has applied the amendments to all of its eligible contract modifications, where applicable, during the reference rate reform period. Additionally, the Company has not elected any optional expedients provided in the standard.
18

Note 3 — Acquisitions and Dispositions
Mililani I Drop Down — On March 25, 2022, the Company, through its indirect subsidiary, Lighthouse Renewable Holdco LLC, acquired Mililani BL Borrower Holdco LLC, the indirect owner of the Mililani I solar project, a 39 MW solar project with 156 MWh of storage capacity that is currently under construction, located in Oahu, Hawaii, from Clearway Renew LLC, a subsidiary of CEG, for cash consideration of $22 million. Lighthouse Renewable Holdco LLC is a partnership between the Company and a third-party investor. The third-party investor also contributed cash consideration of $14 million utilized to acquire their portion of the acquired entity. Mililani BL Borrower Holdco LLC consolidates, as the direct owner of the primary beneficiary, a tax equity fund, Mililani TE Holdco LLC, which directly holds the Mililani I solar project, as further described in Note 4, Investments Accounted for by the Equity Method and Variable Interest Entities. Mililani I has a 20-year power purchase agreement with an investment-grade utility that commenced in July 2022. The Mililani I operations are reflected in the Company’s Renewables segment and the acquisition was funded with existing sources of liquidity. The acquisition was determined to be an asset acquisition and the Company consolidates Mililani I on a prospective basis in its financial statements. The assets and liabilities transferred to the Company relate to interests under common control by GIP and were recorded at historical cost in accordance with ASC 805-50, Business Combinations - Related Issues. The sum of the cash paid of $22 million and the historical cost of the Company’s net liabilities assumed of $8 million was recorded as an adjustment to CEG’s noncontrolling interest balance. In addition, the Company reflected $15 million of the Company’s purchase price, which was contributed back by CEG to pay down the acquired long-term debt, as distributions to CEG, net of contributions, in the consolidated statement of stockholders’ equity.
The following is a summary of assets and liabilities transferred in connection with the acquisition as of March 25, 2022:

(In millions) |  | Mililani I
Other current and non-current assets |  | $ | 2 |
Property, plant and equipment |  | 118 |
Right-of-use-assets |  | 19 |
Total assets acquired |  | 139 |
Long-term debt (a) |  | 100 |
Long-term lease liabilities |  | 20 |
Other current and non-current liabilities |  | 27 |
Total liabilities assumed |  | 147 |
Net liabilities assumed |  | $ | (8) |

(a) Includes a $16 million construction loan, $27 million sponsor equity bridge loan and $60 million tax equity bridge loan, offset by $3 million in unamortized debt issuance costs. The sponsor equity bridge loan was repaid at acquisition date utilizing $14 million from the cash equity investor, as well as $15 million of the Company’s purchase price, which was contributed back to the Company by CEG, of which $27 million was utilized to pay down the acquired long-term debt and $2 million was utilized to pay associated fees. Also at acquisition date, the tax equity investor contributed $18 million into escrow, which was included in restricted cash on the Company’s consolidated balance sheet. The tax equity investor will contribute an additional $42 million when the project reaches substantial completion, which will be utilized, along with the $18 million in escrow, to repay the $60 million tax equity bridge loan. The project is expected to achieve substantial completion in the second half of 2022.
Thermal Disposition — On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR for net proceeds of approximately $1.46 billion, inclusive of working capital adjustments, which excludes approximately $18 million in transaction expenses that were incurred in connection with the disposition. The Thermal Disposition resulted in a gain on sale of business of approximately $1.29 billion, which is net of the $18 million in transaction expenses referenced above. The proceeds from the sale were utilized to repay certain borrowings outstanding as further described in Note 7, Long-term Debt, with the remaining proceeds invested in short-term investments classified as cash and cash equivalents on the Company’s consolidated balance sheet as of June 30, 2022. Effective with the approval by the Board of Directors and signing of the agreement to sell the Thermal Business on October 22, 2021, the Company concluded that all entities that are included within the Thermal Business will be treated as held for sale on a prospective basis, thus the assets and liabilities were reported as separate held for sale line items on the Company’s consolidated balance sheets as of December 31, 2021. As of December 31, 2021, property, plant and equipment represented 78% and intangible assets represented 9% of assets classified as held for sale while long-term debt represented 85% of liabilities classified as held for sale. The Company’s Thermal segment is comprised solely of the Thermal Business's results of operations.
19

Note 4 — Investments Accounted for by the Equity Method and Variable Interest Entities
Entities that are Consolidated
The Company has a controlling financial interest in certain entities which have been identified as VIEs under ASC 810, Consolidations, or ASC 810. These arrangements are primarily related to tax equity arrangements entered into with third parties in order to monetize certain tax credits associated with wind and solar facilities, as further described under Item 15 — Note 5, Investments Accounted for by the Equity Method and Variable Interest Entities, to the consolidated financial statements included in the Company’s 2021 Form 10-K.
Summarized financial information for the Company’s consolidated VIEs consisted of the following as of June 30, 2022:

(In millions) | Alta TE Holdco |  | Buckthorn Renewables, LLC |  | DGPV Funds(a) |  | Kawailoa Partnership |  | Langford TE Partnership LLC |  | Lighthouse Renewable Holdco LLC (b) |  | Lighthouse Renewable Holdco 2 LLC (c)
Other current and non-current assets | $ | 61 |  |  | $ | 5 |  |  | $ | 92 |  |  | $ | 40 |  |  | $ | 15 |  |  | $ | 97 |  |  | $ | 56 |
Property, plant and equipment | 318 |  |  | 198 |  |  | 585 |  |  | 132 |  |  | 129 |  |  | 723 |  |  | 368 |
Intangible assets | 206 |  |  | — |  |  | 14 |  |  | — |  |  | 2 |  |  | — |  |  | — |
Total assets | 585 |  |  | 203 |  |  | 691 |  |  | 172 |  |  | 146 |  |  | 820 |  |  | 424 |
Current and non-current liabilities | 39 |  |  | 11 |  |  | 76 |  |  | 93 |  |  | 54 |  |  | 307 |  |  | 133 |
Total liabilities | 39 |  |  | 11 |  |  | 76 |  |  | 93 |  |  | 54 |  |  | 307 |  |  | 133 |
Noncontrolling interest | 31 |  |  | 37 |  |  | 10 |  |  | 51 |  |  | 62 |  |  | 423 |  |  | 234 |
Net assets less noncontrolling interests | $ | 515 |  |  | $ | 155 |  |  | $ | 605 |  |  | $ | 28 |  |  | $ | 30 |  |  | $ | 90 |  |  | $ | 57 |

(a) DGPV Funds is comprised of DGPV Fund 2 LLC, Clearway & EFS Distributed Solar LLC, DGPV Fund 4 LLC, Golden Puma Fund LLC, Renew Solar CS4 Fund LLC and Chestnut Fund LLC.
(b) Lighthouse Renewable Holdco LLC consolidates Mesquite Star Tax Equity Holdco LLC, Black Rock TE Holdco LLC and Mililani TE Holdco LLC, which are also consolidated VIEs.
(c) Lighthouse Renewable Holdco 2 LLC consolidates Mesquite Sky TE Holdco LLC, which is also a consolidated VIE.

(In millions) | Oahu Solar Partnership |  | Pinnacle Repowering Partnership LLC |  | Rattlesnake TE Holdco LLC |  | Rosie TargetCo LLC |  | Wildorado TE Holdco |  | Other (a)
Other current and non-current assets | $ | 50 |  |  | $ | 11 |  |  | $ | 14 |  |  | $ | 35 |  |  | $ | 22 |  |  | $ | 18 |
Property, plant and equipment | 168 |  |  | 105 |  |  | 189 |  |  | 243 |  |  | 217 |  |  | 162 |
Intangible assets | — |  |  | 17 |  |  | — |  |  | — |  |  | — |  |  | 1 |
Total assets | 218 |  |  | 133 |  |  | 203 |  |  | 278 |  |  | 239 |  |  | 181 |
Current and non-current liabilities | 105 |  |  | 4 |  |  | 16 |  |  | 100 |  |  | 18 |  |  | 69 |
Total liabilities | 105 |  |  | 4 |  |  | 16 |  |  | 100 |  |  | 18 |  |  | 69 |
Noncontrolling interest | 30 |  |  | 50 |  |  | 93 |  |  | 136 |  |  | 117 |  |  | 77 |
Net assets less noncontrolling interests | $ | 83 |  |  | $ | 79 |  |  | $ | 94 |  |  | $ | 42 |  |  | $ | 104 |  |  | $ | 35 |

(a) Other is comprised of Crosswind Transmission, LLC, Hardin Hilltop Wind LLC, Elbow Creek TE Holdco and Spring Canyon TE Holdco projects.
The discussion below describes material changes to VIEs during the six months ended June 30, 2022.
Lighthouse Renewable Holdco LLC — As described in Note 3, Acquisitions and Dispositions, on March 25, 2022, Lighthouse Renewable Holdco LLC acquired the Class B interests in a partnership, Mililani BL Borrower Holdco LLC, which consolidates, as the direct owner of the primary beneficiary, a tax equity fund, Mililani TE Holdco LLC, that holds the Mililani I solar project. The tax equity investor’s interest is shown as noncontrolling interest and the HLBV method is utilized to allocate the income or losses of Mililani TE Holdco LLC. The third-party investor in Lighthouse Renewable Holdco LLC also acquired and contributed an interest in Mililani BL Borrower Holdco LLC to Lighthouse Renewable Holdco LLC. The Company recorded the related noncontrolling interest at historical carrying amount, with the offset to contributed capital.
20

Entities that are not Consolidated
The Company has interests in entities that are considered VIEs under ASC 810, but for which it is not considered the primary beneficiary. The Company accounts for its interests in these entities and entities in which it has a significant investment under the equity method of accounting, as further described under Item 15 — Note 5, Investments Accounted for by the Equity Method and Variable Interest Entities, to the consolidated financial statements included in the Company’s 2021 Form 10-K.
The Company’s maximum exposure to loss as of June 30, 2022 is limited to its equity investment in the unconsolidated entities, as further summarized in the table below:

Name | Economic Interest | Investment Balance
|  | (In millions)
Avenal | 50% | $ | 5 |
Desert Sunlight | 25% | 239 |
Elkhorn Ridge | 67% | 26 |
GenConn (a) | 50% | 85 |
San Juan Mesa | 75% | 20 |
|  | $ | 375 |

(a) GenConn is a variable interest entity.
Note 5 — Fair Value of Financial Instruments
Fair Value Accounting under ASC 820
ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
•Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
•Level 2—inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
•Level 3—unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.
In accordance with ASC 820, the Company determines the level in the fair value hierarchy within which each fair value measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement.
For cash and cash equivalents, restricted cash, accounts receivable — trade, accounts receivable — affiliates, accounts payable — trade, accounts payable — affiliates and accrued expenses and other current liabilities, the carrying amounts approximate fair value because of the short-term maturity of those instruments and are classified as Level 1 within the fair value hierarchy.
The carrying amounts and estimated fair values of the Company’s recorded financial instruments not carried at fair market value or that do not approximate fair value are as follows:

| As of June 30, 2022 |  | As of December 31, 2021
| Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
(In millions) |
Long-term debt, including current portion (a) | $ | 7,131 |  |  | $ | 6,617 |  |  | $ | 7,782 |  |  | $ | 7,997 |

(a) Excludes net debt issuance costs, which are recorded as a reduction to long-term debt on the Company’s consolidated balance sheets.
21

The fair value of the Company’s publicly-traded long-term debt is based on quoted market prices and is classified as Level 2 within the fair value hierarchy. The fair value of debt securities, non-publicly traded long-term debt and certain notes receivable of the Company are based on expected future cash flows discounted at market interest rates, or current interest rates for similar instruments with equivalent credit quality and are classified as Level 3 within the fair value hierarchy. The following table presents the level within the fair value hierarchy for long-term debt, including current portion as of June 30, 2022 and December 31, 2021:

| As of June 30, 2022 |  | As of December 31, 2021
| Level 2 |  | Level 3 |  | Level 2 |  | Level 3
| (In millions)
Long-term debt, including current portion | $ | 1,795 |  |  | $ | 4,822 |  |  | $ | 2,159 |  |  | $ | 5,838 |

Recurring Fair Value Measurements
The Company records its derivative assets and liabilities at fair market value on its consolidated balance sheet. The following table presents assets and liabilities measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis and their level within the fair value hierarchy:

|  |  | As of June 30, 2022 |  | As of December 31, 2021
|  |  | Fair Value (a) |  | Fair Value (a)
(In millions) |  |  | Level 2 |  | Level 3 |  |  |  | Level 2 |  | Level 3 |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  |  | $ | 44 |  |  | $ | — |  |  |  |  | $ | 6 |  |  | $ | — |  |  |
Other financial instruments (b) |  |  | — |  |  | 21 |  |  |  |  | — |  |  | 25 |  |  |
Total assets |  |  | $ | 44 |  |  | $ | 21 |  |  |  |  | $ | 6 |  |  | $ | 25 |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | $ | — |  |  | $ | 353 |  |  |  |  | $ | — |  |  | $ | 179 |  |  |
Interest rate contracts |  |  | 2 |  |  | — |  |  |  |  | 63 |  |  | — |  |  |
Total liabilities |  |  | $ | 2 |  |  | $ | 353 |  |  |  |  | $ | 63 |  |  | $ | 179 |  |  |

(a) There were no derivative assets classified as Level 1 or Level 3 and no liabilities classified as Level 1 as of June 30, 2022 and December 31, 2021.
(b) SREC contract.
The following table reconciles the beginning and ending balances for instruments that are recognized at fair value in the consolidated financial statements using significant unobservable inputs:

|  | Three months ended June 30, |  | Six months ended June 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
(In millions) |  | Fair Value Measurement Using Significant Unobservable Inputs (Level 3) |  | Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
Beginning balance |  | $ | (280) |  |  | $ | (39) |  |  | $ | (154) |  |  | $ | (15) |
Total losses for the period included in earnings |  | (74) |  |  | (33) |  |  | (184) |  |  | (57) |
Additions due to loss of NPNS exception |  | — |  |  | — |  |  | (22) |  |  | — |
Purchases |  | — |  |  | (9) |  |  | — |  |  | (9) |
Settlements |  | 22 |  |  | 2 |  |  | 28 |  |  | 2 |
Ending balance |  | $ | (332) |  |  | $ | (79) |  |  | $ | (332) |  |  | $ | (79) |
Change in unrealized losses included in earnings for derivatives and other financial instruments held as of June 30, 2022 |  | $ | (74) |  |  |  |  | $ | (184) |  |  |

22

Derivative and Financial Instruments Fair Value Measurements
The Company's contracts are non-exchange-traded and valued using prices provided by external sources. The Company uses quoted observable forward prices to value its energy contracts. To the extent that observable forward prices are not available, the quoted prices reflect the average of the forward prices from the prior year, adjusted for inflation. As of June 30, 2022, contracts valued with prices provided by models and other valuation techniques make up 99% of derivative liabilities and 100% of other financial instruments.
The Company’s significant positions classified as Level 3 include physical commodity contracts executed in illiquid markets. The significant unobservable inputs used in developing fair value include illiquid power tenors and location pricing, which is derived by extrapolating pricing as a basis to liquid locations. The tenor pricing and basis spread are based on observable market data when available or derived from historic prices and forward market prices from similar observable markets when not available.
The following table quantifies the significant unobservable inputs used in developing the fair value of the Company’s Level 3 positions as of June 30, 2022:

| June 30, 2022
| Fair Value |  | Input/Range
| Assets | Liabilities | Valuation Technique | Significant Unobservable Input | Low | High | Weighted Average
| (In millions) |  |  |  |  |
Commodity Contracts | $ | — |  | $ | 353 |  | Discounted Cash Flow | Forward Market Price (per MWh) | $ | 21.68 |  | $ | 109.37 |  | $ | 39.23 |
Other Financial Instruments | 21 |  | — |  | Discounted Cash Flow | Forecast annual generation levels of certain DG solar facilities | 58,539 MWh | 117,078 MWh | 114,223 MWh

The following table provides the impact on the fair value measurements to increases/(decreases) in significant unobservable inputs as of June 30, 2022:

Significant Unobservable Input | Position | Change In Input | Impact on Fair Value Measurement
Forward Market Price Power | Sell | Increase/(Decrease) | Lower/(Higher)
Forecast Generation Levels | Sell | Increase/(Decrease) | Higher/(Lower)

The fair value of each contract is discounted using a risk-free interest rate. In addition, a credit reserve is applied to reflect credit risk, which is, for interest rate swaps, calculated based on credit default swaps using the bilateral method. For commodities, to the extent that the Net Exposure under a specific master agreement is an asset, the Company uses the counterparty’s default swap rate. If the Net Exposure under a specific master agreement is a liability, the Company uses a proxy of its own default swap rate. For interest rate swaps and commodities, the credit reserve is added to the discounted fair value to reflect the exit price that a market participant would be willing to receive to assume the liabilities or that a market participant would be willing to pay for the assets. As of June 30, 2022, the non-performance reserve was a $47 million gain recorded primarily to total operating revenues in the consolidated statement of income. It is possible that future market prices could vary from those used in recording assets and liabilities and such variations could be material.
Concentration of Credit Risk
In addition to the credit risk discussion as disclosed under Item 15 — Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s 2021 Form 10-K, the following item is a discussion of the concentration of credit risk for the Company’s financial instruments. Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. The Company monitors and manages credit risk through credit policies that include: (i) an established credit approval process; (ii) monitoring of counterparties' credit limits on as needed basis; (iii) as applicable, the use of credit mitigation measures such as margin, collateral, prepayment arrangements, or volumetric limits; (iv) the use of payment netting agreements; and (v) the use of master netting agreements that allow for the netting of positive and negative exposures of various contracts associated with a single counterparty. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of expected cash flows. The Company seeks to mitigate counterparty risk by having a diversified portfolio of counterparties.
23

Counterparty credit exposure includes credit risk exposure under certain long-term agreements, including solar and other PPAs. As external sources or observable market quotes are not available to estimate such exposure, the Company estimates the exposure related to these contracts based on various techniques including, but not limited to, internal models based on a fundamental analysis of the market and extrapolation of observable market data with similar characteristics. A significant portion of these commodity contracts are with utilities with strong credit quality and public utility commission or other regulatory support. However, such regulated utility counterparties can be impacted by changes in government regulations or adverse financial conditions, which the Company is unable to predict. Certain subsidiaries of the Company sell the output of their facilities to PG&E, a significant counterparty of the Company, under long-term PPAs, and PG&E’s credit rating is below investment-grade.
Note 6 — Derivative Instruments and Hedging Activities
This footnote should be read in conjunction with the complete description under Item 15 — Note 7, Accounting for Derivative Instruments and Hedging Activities, to the consolidated financial statements included in the Company’s 2021 Form 10-K.
Interest Rate Swaps
The Company enters into interest rate swap agreements in order to hedge the variability of expected future cash interest payments. As of June 30, 2022, the Company had interest rate derivative instruments on non-recourse debt extending through 2031, a portion of which were designated as cash flow hedges. Under the interest rate swap agreements, the Company pays a fixed rate and the counterparties to the agreements pay a variable interest rate.
Energy-Related Commodities
As of June 30, 2022, the Company had energy-related derivative instruments extending through 2033. At June 30, 2022, these contracts were not designated as cash flow or fair value hedges.
Volumetric Underlying Derivative Transactions
The following table summarizes the net notional volume buy/(sell) of the Company’s open derivative transactions broken out by commodity as of June 30, 2022 and December 31, 2021:

|  |  | Total Volume
|  |  | June 30, 2022 |  | December 31, 2021
Commodity | Units |  | (In millions)
Natural Gas | MMBtu |  | — |  |  | 2 |
Power | MWh |  | (19) |  |  | (17) |
Interest | Dollars |  | $ | 1,200 |  |  | $ | 1,326 |

24

Fair Value of Derivative Instruments
The following table summarizes the fair value within the derivative instrument valuation on the consolidated balance sheets:

| Fair Value
| Derivative Assets |  | Derivative Liabilities
| June 30, 2022 |  | December 31, 2021 |  | June 30, 2022 |  | December 31, 2021
| (In millions)
Derivatives Designated as Cash Flow Hedges: |  |  |  |  |  |  |
Interest rate contracts current | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | 5 |
Interest rate contracts long-term | 8 |  |  | 2 |  |  | — |  |  | 3 |
Total Derivatives Designated as Cash Flow Hedges | $ | 10 |  |  | $ | 2 |  |  | $ | — |  |  | $ | 8 |
Derivatives Not Designated as Cash Flow Hedges: |  |  |  |  |  |  |
Interest rate contracts current | $ | 7 |  |  | $ | — |  |  | $ | 1 |  |  | $ | 17 |
Interest rate contracts long-term | 27 |  |  | 4 |  |  | 1 |  |  | 38 |
Commodity contracts current | — |  |  | — |  |  | 74 |  |  | 24 |
Commodity contracts long-term | — |  |  | — |  |  | 279 |  |  | 155 |
Total Derivatives Not Designated as Cash Flow Hedges | $ | 34 |  |  | $ | 4 |  |  | $ | 355 |  |  | $ | 234 |
Total Derivatives | $ | 44 |  |  | $ | 6 |  |  | $ | 355 |  |  | $ | 242 |

The Company has elected to present derivative assets and liabilities on the balance sheet on a trade-by-trade basis and does not offset amounts at the counterparty level. As of June 30, 2022 and December 31, 2021, there was no outstanding collateral paid or received. The following tables summarize the offsetting of derivatives by counterparty:

| Gross Amounts Not Offset in the Statement of Financial Position
As of June 30, 2022 | Gross Amounts of Recognized Assets/Liabilities |  | Derivative Instruments |  | Net Amount
Commodity contracts | (In millions)
Derivative liabilities | $ | (353) |  |  | $ | — |  |  | $ | (353) |
Total commodity contracts | $ | (353) |  |  | $ | — |  |  | $ | (353) |
Interest rate contracts |  |  |  |  |
Derivative assets | $ | 44 |  |  | $ | (2) |  |  | $ | 42 |
Derivative liabilities | (2) |  |  | 2 |  |  | — |
Total interest rate contracts | $ | 42 |  |  | $ | — |  |  | $ | 42 |
Total derivative instruments | $ | (311) |  |  | $ | — |  |  | $ | (311) |

| Gross Amounts Not Offset in the Statement of Financial Position
As of December 31, 2021 | Gross Amounts of Recognized Assets/Liabilities |  | Derivative Instruments |  | Net Amount
Commodity contracts | (In millions)
Derivative liabilities | $ | (179) |  |  | $ | — |  |  | $ | (179) |
Total commodity contracts | $ | (179) |  |  | $ | — |  |  | $ | (179) |
Interest rate contracts: |
Derivative assets | $ | 6 |  |  | $ | (5) |  |  | $ | 1 |
Derivative liabilities | (63) |  |  | 5 |  |  | (58) |
Total interest rate contracts | $ | (57) |  |  | $ | — |  |  | $ | (57) |
Total derivative instruments | $ | (236) |  |  | $ | — |  |  | $ | (236) |

25

Accumulated Other Comprehensive Income (Loss)
The following table summarizes the effects on the Company’s accumulated OCI (OCL) balance attributable to interest rate swaps designated as cash flow hedge derivatives, net of tax:

| Three months ended June 30, |  | Six months ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
| (In millions)
Accumulated OCI (OCL) beginning balance | $ | 3 |  |  | $ | (19) |  |  | $ | (11) |  |  | $ | (30) |
Reclassified from accumulated OCI (OCL) to income due to realization of previously deferred amounts | 1 |  |  | 2 |  |  | 3 |  |  | 4 |
Mark-to-market of cash flow hedge accounting contracts | 5 |  |  | (2) |  |  | 17 |  |  | 7 |
Accumulated OCI (OCL) ending balance, net of income tax (benefit) expense of $—, $(4) ,$1 and $(4), respectively | 9 |  |  | (19) |  |  | 9 |  |  | (19) |
Accumulated OCI (OCL) attributable to noncontrolling interests | 7 |  |  | (10) |  |  | 7 |  |  | (10) |
Accumulated OCI (OCL) attributable to Clearway Energy, Inc. | $ | 2 |  |  | $ | (9) |  |  | $ | 2 |  |  | $ | (9) |
Losses expected to be realized from OCI during the next 12 months, net of income tax benefit of $— | $ | (1) |  |  |  |  | $ | (1) |  |  |

Amounts reclassified from accumulated OCI (OCL) into income are recorded to interest expense.
Impact of Derivative Instruments on the Consolidated Statements of Income
Mark-to-market gains and losses related to the Company’s derivatives are recorded in the consolidated statements of income as follows:

| Three months ended June 30, |  | Six months ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
| (In millions)
Interest Rate Contracts (Interest expense) | $ | 36 |  |  | $ | (11) |  |  | $ | 77 |  |  | $ | 36 |
Commodity Contracts (Mark-to-market for economic hedging activities) (a) | (49) |  |  | (28) |  |  | (174) |  |  | (50) |

(a) Relates to long-term commodity contracts at Elbow Creek Wind Project LLC, or Elbow Creek, Mesquite Star, Mt. Storm, Langford and Mesquite Sky and gains or losses are recognized in operating revenues. During the six months ended June 30, 2022, the commodity contract for Langford, which previously met the NPNS exception, no longer qualified for NPNS treatment and, accordingly, is accounted for as a derivative and marked to market value through operating revenues.
Prior to the Thermal Disposition, which is further described in Note 3, Acquisitions and Dispositions, a portion of the Company’s derivative commodity contracts were related to its Thermal Business for the purchase of fuel/electricity commodities based on the forecasted usage of the thermal district energy centers. Realized gains and losses on these contracts were reflected in the fuel costs that were permitted to be billed to customers through the related customer contracts or tariffs and, accordingly, no gains or losses were reflected in the consolidated statements of income for these contracts through the period that the Company owned the Thermal Business.
See Note 5, Fair Value of Financial Instruments, for a discussion regarding concentration of credit risk.
26

Note 7 — Long-term Debt
This note should be read in conjunction with the complete description under Item 15 — Note 10, Long-term Debt, to the consolidated financial statements included in the Company’s 2021 Form 10-K. The Company’s borrowings, including short-term and long-term portions consisted of the following:

(In millions, except rates) | June 30, 2022 |  | December 31, 2021 |  | June 30, 2022 interest rate % (a) |  | Letters of Credit Outstanding at June 30, 2022
2028 Senior Notes | $ | 850 |  |  | $ | 850 |  |  | 4.750 |  |  |
2031 Senior Notes | 925 |  |  | 925 |  |  | 3.750 |  |  |
2032 Senior Notes | 350 |  |  | 350 |  |  | 3.750 |  |  |
Clearway Energy LLC and Clearway Energy Operating LLC Revolving Credit Facility, due 2023 (b) | — |  |  | 245 |  |  | L+1.750 |  | $ | 87 |
Bridge Loan, due 2022 (c) | — |  |  | 335 |  | S+1.250 |  |
Project-level debt: |  |  |  |  |  |  |
Agua Caliente Solar LLC, due 2037 | 677 |  |  | 684 |  |  | 2.395 - 3.633 |  | 45 |
Alta Wind Asset Management LLC, due 2031 | 12 |  |  | 13 |  |  | L+2.625 |  | — |
Alta Wind I-V lease financing arrangements, due 2034 and 2035 | 727 |  |  | 756 |  |  | 5.696 - 7.015 |  | 22 |
Alta Wind Realty Investments LLC, due 2031 | 23 |  |  | 24 |  |  | 7.000 |  |  | — |
Borrego, due 2024 and 2038 | 54 |  |  | 54 |  |  | Various |  | — |
Buckthorn Solar, due 2025 | 122 |  |  | 123 |  |  | L+1.750 |  | 23 |
Carlsbad Energy Holdings LLC, due 2027 | 136 |  |  | 136 |  |  | L+1.750 |  | 82 |
Carlsbad Energy Holdings LLC, due 2038 | 407 |  |  | 407 |  |  | 4.120 |  |  | — |
Carlsbad Holdco, due 2038 | 203 |  |  | 205 |  |  | 4.210 |  |  | 10 |
CVSR, due 2037 | 638 |  |  | 652 |  |  | 2.339 - 3.775 |  | — |
CVSR Holdco Notes, due 2037 | 160 |  |  | 169 |  |  | 4.680 |  |  | 13 |
DG-CS Master Borrower LLC, due 2040 | 434 |  |  | 441 |  |  | 3.510 |  |  | 30 |
El Segundo Energy Center, due 2023 | 154 |  |  | 193 |  |  | L+1.875 - L+2.500 |  | 138 |
Kawailoa Solar Portfolio LLC, due 2026 | 78 |  |  | 78 |  |  | L+1.375 |  | 15 |
Laredo Ridge, due 2028 (d) | — |  |  | 72 |  |  | L+2.125 |  | — |
Marsh Landing, due 2023 | 65 |  |  | 84 |  |  | L+2.375 |  | 73 |
Mililani I, due 2022 and 2024 | 98 |  |  | — |  |  | L+1.000 - L+1.250 |  | 2 |
NIMH Solar, due 2024 | 171 |  |  | 176 |  |  | L+2.000 |  | 16 |
Oahu Solar Holdings LLC, due 2026 | 85 |  |  | 86 |  |  | L+1.375 |  | 11 |
Rosie Class B LLC, due 2027 | 78 |  |  | 78 |  |  | L+1.750 |  | 17 |
Tapestry Wind LLC, due 2031 (d) | — |  |  | 85 |  |  | L+1.375 |  | — |
Utah Solar Holdings, due 2036 | 267 |  |  | 273 |  |  | 3.590 |  |  | 15 |
Viento Funding II, LLC, due 2023 and 2029 (d) | 188 |  |  | 29 |  |  | S+1.475 |  | 26 |
Walnut Creek, due 2023 | 55 |  |  | 74 |  |  | L+1.750 |  | 133 |
WCEP Holdings, LLC, due 2023 | 28 |  |  | 30 |  |  | L+3.000 |  | — |
Other | 142 |  |  | 151 |  |  | Various |  | 191 |
Subtotal project-level debt: | 5,002 |  |  | 5,073 |  |  |  |  |
Total debt | 7,127 |  |  | 7,778 |  |  |  |  |
Less current maturities | (457) |  |  | (772) |  |  |  |  |
Less net debt issuance costs | (69) |  |  | (71) |  |  |  |  |
Add premiums (e) | 4 |  |  | 4 |  |  |  |  |
Total long-term debt | $ | 6,605 |  |  | $ | 6,939 |  |  |  |  |

(a) As of June 30, 2022, L+ equals 3 month LIBOR plus x%, except Clearway Energy Operating LLC Revolving Credit Facility, due 2023, Marsh Landing, due 2023, Mililani I, due 2022 and 2024, and Walnut Creek, due 2023, where L+ equals 1 month LIBOR plus x%.
(b) Applicable rate is determined by the borrower leverage ratio, as defined in the credit agreement.
(c) S+ equals SOFR, plus x%.
(d) Laredo Ridge, due 2028; Tapestry Wind, LLC, due 2031; and Viento Funding II, LLC, due 2023 project-level debt were repaid on March 16, 2022 totaling $186 million and was replaced with $190 million in new project-level debt under Viento Funding II, LLC that was obtained on March 16, 2022 and is due in 2029, as discussed further below.
(e) Premiums relate to the 2028 Senior Notes.
27

The financing arrangements listed above contain certain covenants, including financial covenants that the Company is required to be in compliance with during the term of the respective arrangement. As of June 30, 2022, the Company was in compliance with all of the required covenants.
The discussion below describes material changes to or additions of long-term debt for the six months ended June 30, 2022.
Clearway Energy LLC and Clearway Energy Operating LLC Revolving Credit Facility
As of June 30, 2022, the Company had no outstanding borrowings under the revolving credit facility and $87 million in letters of credit outstanding. During the six months ended June 30, 2022, the Company borrowed $80 million under the revolving credit facility and repaid $325 million, $305 million of which was repaid on May 3, 2022, utilizing the proceeds received from the Thermal Disposition.
Bridge Loan Agreement
On May 3, 2022, the Company repaid the $335 million in outstanding borrowings under the Bridge Loan Agreement utilizing proceeds received from the Thermal Disposition, as further described in Note 3, Acquisitions and Dispositions.
Project-level Debt
Mililani I
On March 25, 2022, as part of the acquisition of Mililani I, as further described in Note 3, Acquisitions and Dispositions, the Company assumed the project’s financing agreement which included a $16 million construction loan that converts to a term loan upon completion of construction, $60 million tax equity bridge loan and a $27 million sponsor equity bridge loan. The sponsor equity bridge loan was repaid at acquisition date, utilizing $14 million from the cash equity investor, as well as $15 million of the Company’s acquisition price, which was contributed back by CEG, and $2 million was utilized to pay associated fees. The tax equity bridge loan will be repaid with the final proceeds from the tax equity investor that will be received when Mililani I achieves substantial completion, which is expected to occur in the second half of 2022. Subsequent to the Mililani I acquisition, the Company borrowed an additional $22 million in construction loans. As of June 30, 2022, the Company had $38 million in outstanding construction loans in addition to the $60 million tax equity bridge loan referenced above.
Viento Funding II, LLC
On March 16, 2022, the Company, through its indirect subsidiary, Viento Funding II, LLC, entered into a financing agreement which included the issuance of a $190 million term loan as well as $35 million in letters of credit, supported by the Company’s interests in the Elkhorn Ridge, Laredo Ridge, San Juan Mesa and Taloga wind projects. The term loan bears annual interest at a rate of SOFR plus a spread of 0.10% and an applicable margin, which is 1.35% per annum through the fourth anniversary of the term loan and 1.50% per annum thereafter through the maturity date of March 16, 2029. The proceeds from the term loan were used to pay off the existing debt in the amount of $186 million related to Laredo Ridge, Tapestry Wind LLC and Viento Funding II, LLC and to pay related financing costs. The Company recorded a loss on debt extinguishment of $2 million to expense unamortized debt issuance costs.
28

Note 8 — Earnings Per Share
Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding. Shares issued during the year are weighted for the portion of the year that they were outstanding. Diluted earnings per share is computed in a manner consistent with that of basic earnings per share while giving effect to all potentially dilutive common shares that were outstanding during the period.
The reconciliation of the Company’s basic and diluted earnings per share is shown in the following tables:

| Three months ended June 30,
| 2022 | 2021
(In millions, except per share data) (a) | Common Class A |  | Common Class C |  | Common Class A |  | Common Class C
Basic and diluted earnings per share attributable to Clearway Energy, Inc. common stockholders |  |  |  |  |  |  |
Net income attributable to Clearway Energy, Inc. | $ | 169 |  |  | $ | 401 |  |  | $ | 10 |  |  | $ | 25 |
Weighted average number of common shares outstanding — basic and diluted | 35 |  |  | 82 |  |  | 35 |  |  | 82 |
Earnings per weighted average common share — basic and diluted | $ | 4.89 |  |  | $ | 4.89 |  |  | $ | 0.30 |  |  | $ | 0.30 |

(a) Net income attributable to Clearway Energy, Inc. and basic and diluted earnings per share might not recalculate due to presenting values in millions rather than whole dollars.

| Six months ended June 30,
| 2022 |  | 2021
(In millions, except per share data) (a) | Common Class A |  | Common Class C |  | Common Class A |  | Common Class C
Basic and diluted earnings per share attributable to Clearway Energy, Inc. common stockholders |  |  |  |  |  |  |
Net income attributable to Clearway Energy, Inc. | $ | 160 |  |  | $ | 378 |  |  | $ | 11 |  |  | $ | 27 |
Weighted average number of common shares outstanding — basic and diluted | 35 |  |  | 82 |  |  | 35 |  |  | 82 |
Earnings per weighted average common share — basic and diluted | $ | 4.62 |  |  | $ | 4.62 |  |  | $ | 0.32 |  |  | $ | 0.32 |

(a) Net income attributable to Clearway Energy, Inc. and basic and diluted earnings per share might not recalculate due to presenting values in millions rather than whole dollars.
29

Note 9 — Segment Reporting
The Company’s segment structure reflects how management currently operates and allocates resources. The Company’s businesses are segregated based on conventional power generation, renewable businesses which consist of solar and wind, and the Thermal Business, which was sold to KKR on May 1, 2022, as further described in Note 3, Acquisitions and Dispositions. The Corporate segment reflects the Company’s corporate costs and includes eliminating entries. The Company’s chief operating decision maker, its Chief Executive Officer, evaluates the performance of its segments based on operational measures including adjusted earnings before interest, taxes, depreciation and amortization, or Adjusted EBITDA, and CAFD, as well as net income (loss).

| Three months ended June 30, 2022 |  |  |  |
(In millions) | Conventional Generation |  | Renewables |  | Thermal (a) |  | Corporate (b) |  | Total |  |  |  |
Operating revenues | $ | 103 |  |  | $ | 247 |  |  | $ | 18 |  |  | $ | — |  |  | $ | 368 |  |  |  |  |
Cost of operations, exclusive of depreciation, amortization and accretion shown separately below | 28 |  |  | 73 |  |  | 11 |  |  | — |  |  | 112 |  |  |  |  |
Depreciation, amortization and accretion | 33 |  |  | 93 |  |  | — |  |  | — |  |  | 126 |  |  |  |  |
General and administrative | — |  |  | — |  |  | 1 |  |  | 10 |  |  | 11 |  |  |  |  |
Transaction and integration costs | — |  |  | — |  |  | — |  |  | 3 |  |  | 3 |  |  |  |  |
Development costs | — |  |  | — |  |  | 1 |  |  | — |  |  | 1 |  |  |  |  |
Total operating costs and expenses | 61 |  |  | 166 |  |  | 13 |  |  | 13 |  |  | 253 |  |  |  |  |
Gain on sale of business | — |  |  | — |  |  | — |  |  | 1,291 |  |  | 1,291 |  |  |  |  |
Operating income | 42 |  |  | 81 |  |  | 5 |  |  | 1,278 |  |  | 1,406 |  |  |  |  |
Equity in earnings of unconsolidated affiliates | 1 |  |  | 9 |  |  | — |  |  | — |  |  | 10 |  |  |  |  |
Other income, net | — |  |  | 4 |  |  | — |  |  | 1 |  |  | 5 |  |  |  |  |
Interest expense | (10) |  |  | (11) |  |  | (1) |  |  | (25) |  |  | (47) |  |  |  |  |
Income before income taxes | 33 |  |  | 83 |  |  | 4 |  |  | 1,254 |  |  | 1,374 |  |  |  |  |
Income tax expense | — |  |  | — |  |  | — |  |  | 225 |  |  | 225 |  |  |  |  |
Net Income | $ | 33 |  |  | $ | 83 |  |  | $ | 4 |  |  | $ | 1,029 |  |  | $ | 1,149 |  |  |  |  |
Total Assets (a) | 2,363 |  |  | 9,446 |  |  | — |  |  | 839 |  |  | 12,648 |  |  |  |  |

(a) The Thermal Business was sold on May 1, 2022.
(b) Includes eliminations.

| Three months ended June 30, 2021
(In millions) | Conventional Generation |  | Renewables |  | Thermal |  | Corporate |  | Total
Operating revenues | $ | 109 |  |  | $ | 222 |  |  | $ | 49 |  |  | $ | — |  |  | $ | 380 |
Cost of operations, exclusive of depreciation, amortization and accretion shown separately below | 23 |  |  | 54 |  |  | 31 |  |  | (1) |  |  | 107 |
Depreciation, amortization and accretion | 31 |  |  | 89 |  |  | 8 |  |  | — |  |  | 128 |
General and administrative | — |  |  | 1 |  |  | — |  |  | 9 |  |  | 10 |
Transaction and integration costs | — |  |  | — |  |  | — |  |  | 1 |  |  | 1 |
Development costs | — |  |  | — |  |  | 1 |  |  | — |  |  | 1 |
Operating income (loss) | 55 |  |  | 78 |  |  | 9 |  |  | (9) |  |  | 133 |
Equity in earnings of unconsolidated affiliates | 2 |  |  | 6 |  |  | — |  |  | — |  |  | 8 |
Other (expense) income, net | (1) |  |  | 1 |  |  | 1 |  |  | — |  |  | 1 |
Interest expense | (16) |  |  | (58) |  |  | (4) |  |  | (25) |  |  | (103) |
Income (loss) before income taxes | 40 |  |  | 27 |  |  | 6 |  |  | (34) |  |  | 39 |
Income tax expense | — |  |  | — |  |  | — |  |  | 7 |  |  | 7 |
Net Income (Loss) | $ | 40 |  |  | $ | 27 |  |  | $ | 6 |  |  | $ | (41) |  |  | $ | 32 |

30

| Six months ended June 30, 2022
(In millions) | Conventional Generation |  | Renewables |  | Thermal (a) |  | Corporate (b) |  | Total
Operating revenues | $ | 211 |  |  | $ | 294 |  |  | $ | 77 |  |  | $ | — |  |  | $ | 582 |
Cost of operations, exclusive of depreciation, amortization and accretion shown separately below | 49 |  |  | 141 |  |  | 50 |  |  | — |  |  | 240 |
Depreciation, amortization and accretion | 66 |  |  | 184 |  |  | — |  |  | — |  |  | 250 |
General and administrative | — |  |  | — |  |  | 2 |  |  | 21 |  |  | 23 |
Transaction and integration costs | — |  |  | — |  |  | — |  |  | 5 |  |  | 5 |
Development costs | — |  |  | — |  |  | 2 |  |  | — |  |  | 2 |
Total operating costs and expenses | 115 |  |  | 325 |  |  | 54 |  |  | 26 |  |  | 520 |
Gain on sale of business | — |  |  | — |  |  | — |  |  | 1,291 |  |  | 1,291 |
Operating income (loss) | 96 |  |  | (31) |  |  | 23 |  |  | 1,265 |  |  | 1,353 |
Equity in earnings of unconsolidated affiliates | 2 |  |  | 12 |  |  | — |  |  | — |  |  | 14 |
Other income, net | — |  |  | 4 |  |  | — |  |  | 1 |  |  | 5 |
Loss on debt extinguishment | — |  |  | (2) |  |  | — |  |  | — |  |  | (2) |
Interest expense | (18) |  |  | (19) |  |  | (6) |  |  | (51) |  |  | (94) |
Income (loss) before income taxes | 80 |  |  | (36) |  |  | 17 |  |  | 1,215 |  |  | 1,276 |
Income tax expense | — |  |  | — |  |  | — |  |  | 224 |  |  | 224 |
Net Income (Loss) | $ | 80 |  |  | $ | (36) |  |  | $ | 17 |  |  | $ | 991 |  |  | $ | 1,052 |

(a) The Thermal Business was sold on May 1, 2022.
(b) Includes eliminations.

| Six months ended June 30, 2021
(In millions) | Conventional Generation |  | Renewables |  | Thermal |  | Corporate |  | Total
Operating revenues | $ | 211 |  |  | $ | 308 |  |  | $ | 98 |  |  | $ | — |  |  | $ | 617 |
Cost of operations, exclusive of depreciation, amortization and accretion shown separately below | 50 |  |  | 106 |  |  | 62 |  |  | (1) |  |  | 217 |
Depreciation, amortization and accretion | 65 |  |  | 176 |  |  | 15 |  |  | — |  |  | 256 |
General and administrative | — |  |  | 1 |  |  | 1 |  |  | 18 |  |  | 20 |
Transaction and integration costs | — |  |  | — |  |  | — |  |  | 3 |  |  | 3 |
Development costs | — |  |  | — |  |  | 2 |  |  | — |  |  | 2 |
Operating income (loss) | 96 |  |  | 25 |  |  | 18 |  |  | (20) |  |  | 119 |
Equity in earnings of unconsolidated affiliates | 4 |  |  | 8 |  |  | — |  |  | — |  |  | 12 |
Other income, net | — |  |  | 1 |  |  | 1 |  |  | — |  |  | 2 |
Loss on debt extinguishment | — |  |  | (1) |  |  | — |  |  | (41) |  |  | (42) |
Interest expense | (27) |  |  | (62) |  |  | (9) |  |  | (50) |  |  | (148) |
Income (loss) before income taxes | 73 |  |  | (29) |  |  | 10 |  |  | (111) |  |  | (57) |
Income tax benefit | — |  |  | — |  |  | — |  |  | (13) |  |  | (13) |
Net Income (Loss) | $ | 73 |  |  | $ | (29) |  |  | $ | 10 |  |  | $ | (98) |  |  | $ | (44) |

31

Note 10 — Income Taxes
Effective Tax Rate
The income tax provision consisted of the following amounts:

| Three months ended June 30, |  | Six months ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
| (In millions, except percentages)
Income (loss) before income taxes | $ | 1,374 |  |  | $ | 39 |  |  | $ | 1,276 |  |  | $ | (57) |
Income tax expense (benefit) | 225 |  |  | 7 |  |  | 224 |  |  | (13) |
Effective income tax rate | 16.4 | % |  | 17.9 | % |  | 17.6 | % |  | 22.8 | %

For the three and six months ended June 30, 2022, the overall effective tax rate was different than the statutory rate of 21% primarily due to the allocation of taxable earnings and losses, including the gain on the sale of the Thermal Business, based on the partners' interest in Clearway Energy LLC, which includes the effects of applying HLBV method of accounting for book purposes for certain partnerships.
For the three and six months ended June 30, 2021, the overall effective tax rate was different than the statutory rate of 21% primarily due to the allocation of taxable earnings and losses based on the partners' interest in Clearway Energy LLC, which includes the effects of applying HLBV method of accounting for book purposes for certain partnerships.
The Company treated the sale of the Thermal Business as a discrete event and recorded the income taxes associated with the transaction during the three months ended June 30, 2022.
For tax purposes, Clearway Energy LLC is treated as a partnership; therefore, the Company and CEG each record their respective share of taxable income or loss.
Note 11 — Related Party Transactions
In addition to the transactions and relationships described elsewhere in the notes to the consolidated financial statements, certain subsidiaries of CEG provide services to the Company and its project entities. Amounts due to CEG subsidiaries are recorded as accounts payable — affiliates and amounts due to the Company from CEG subsidiaries are recorded as accounts receivable — affiliates in the Company’s consolidated balance sheets. The disclosures below summarize the Company’s material related party transactions with CEG and its subsidiaries that are included in the Company’s operating costs.
O&M Services Agreements by and between the Company and Clearway Renewable Operation & Maintenance LLC
Various wholly-owned subsidiaries of the Company in the Renewables segment are party to services agreements with Clearway Renewable Operation & Maintenance LLC, or RENOM, a wholly-owned subsidiary of CEG, which provides operation and maintenance, or O&M, services to these subsidiaries. The Company incurred total expenses for these services of $15 million and $14 million for the three months ended June 30, 2022 and 2021, respectively. The Company incurred total expenses for these services of $30 million and $27 million for the six months ended June 30, 2022 and 2021, respectively. There was a balance of $9 million due to RENOM as of both June 30, 2022 and December 31, 2021.
Administrative Services Agreements by and between the Company and CEG
Various wholly-owned subsidiaries of the Company are parties to services agreements with Clearway Asset Services LLC and Solar Asset Management LLC, two wholly-owned subsidiaries of CEG, which provide various administrative services to the Company's subsidiaries. The Company incurred expenses under these agreements of $5 million and $4 million for the three months ended June 30, 2022 and 2021, respectively. The Company incurred expenses under these agreements of $8 million and $7 million for the six months ended June 30, 2022 and 2021, respectively. There was a balance of $2 million due to CEG as of both June 30, 2022 and December 31, 2021.
32

CEG Master Services Agreements
The Company is a party to Master Services Agreements with CEG, or MSAs, pursuant to which CEG and certain of its affiliates or third-party service providers provide certain services to the Company, including operational and administrative services, which include human resources, information systems, external affairs, accounting, procurement and risk management services, and the Company provides certain services to CEG, including accounting, internal audit, tax and treasury services, in exchange for the payment of fees in respect of such services. The Company incurred net expenses of $1 million under these agreements for both the three months ended June 30, 2022, and 2021. The Company incurred net expenses of $2 million under these agreements for both the six months ended June 30, 2022, and 2021.
Note 12 — Contingencies
This note should be read in conjunction with the complete description under Item 15 — Note 16, Commitments and Contingencies, to the consolidated financial statements included in the Company’s 2021 Form 10-K.
The Company’s material legal proceedings are described below. The Company believes that it has valid defenses to these legal proceedings and intends to defend them vigorously. The Company records reserves for estimated losses from contingencies when information available indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. As applicable, the Company has established an adequate reserve for the matters discussed below. In addition, legal costs are expensed as incurred. Management assesses such matters based on current information and makes a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought, and the probability of success. The Company is unable to predict the outcome of the legal proceedings below or reasonably estimate the scope or amount of any associated costs and potential liabilities. As additional information becomes available, management adjusts its assessment and estimates of such contingencies accordingly. Because litigation is subject to inherent uncertainties and unfavorable rulings or developments, it is possible that the ultimate resolution of the Company’s liabilities and contingencies could be at amounts that are different from its currently recorded reserves and that such difference could be material.
In addition to the legal proceedings noted below, the Company and its subsidiaries are party to other litigation or legal proceedings arising in the ordinary course of business. In management’s opinion, the disposition of these ordinary course matters will not materially adversely affect the Company’s consolidated financial position, results of operations, or cash flows.
Buckthorn Solar Litigation
On October 8, 2019, the City of Georgetown, Texas, or Georgetown, filed a petition in the District Court of Williamson County, Texas naming Buckthorn Westex, LLC, the Company’s subsidiary that owns the Buckthorn Westex solar project, as the defendant, alleging fraud by nondisclosure and breach of contract in connection with the project and the PPA, and seeking (i) rescission and/or cancellation of the PPA, (ii) declaratory judgment that the alleged breaches constitute an event of default under the PPA entitling Georgetown to terminate, and (iii) recovery of all damages, costs of court, and attorneys’ fees. On November 15, 2019, Buckthorn Westex filed an original answer and counterclaims (i) denying Georgetown’s claims, (ii) alleging Georgetown has breached its contracts with Buckthorn Westex by failing to pay amounts due, and (iii) seeking relief in the form of (x) declaratory judgment that Georgetown’s alleged failure to pay amounts due constitute breaches of and an event of default under the PPA and that Buckthorn did not commit any events of default under the PPA, (y) recovery of costs, expenses, interest, and attorneys’ fees, and (z) such other relief to which it is entitled at law or in equity. The case is currently in discovery and is expected to proceed to trial in June 2023. Buckthorn Westex believes the allegations of Georgetown are meritless, and Buckthorn Westex is vigorously defending its rights under the PPA.
33

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 and six months ended June 30, 2022 and 2021. Also refer to the Company’s 2021 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 income;
•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.
34

Executive Summary
Introduction and Overview
Clearway Energy, Inc. together with its consolidated subsidiaries, or the Company, is a publicly-traded energy infrastructure investor in and owner of modern, sustainable and long-term contracted assets across North America. The Company is indirectly owned by Global Infrastructure Partners, or GIP. GIP is an independent infrastructure fund manager that makes equity and debt investments in infrastructure assets and businesses. The Company is sponsored by GIP through GIP's portfolio company, Clearway Energy Group LLC, or CEG. On May 25, 2022, TotalEnergies entered into an agreement to acquire 50% of GIP’s interest in CEG. The closing of the transaction is subject to customary conditions, including regulatory approvals, and is expected to close in the second half of 2022.
The Company is one of the largest renewable energy owners in the U.S. with over 5,000 net MW of installed wind and solar generation projects. The Company’s over 7,500 net MW of assets also includes approximately 2,500 net MW of environmentally-sound, highly efficient natural gas-fired generation facilities. Through this environmentally-sound, diversified and primarily contracted portfolio, the Company endeavors to provide its investors with stable and growing dividend income. Substantially all of the Company’s generation assets are under long-term contractual arrangements for the output or capacity from these assets. The weighted average remaining contract duration of these offtake agreements was approximately 11 years as of June 30, 2022 based on CAFD.
On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR. For further details of the Thermal Disposition, refer to Note 3, Acquisitions and Dispositions.
As of June 30, 2022, the Company’s operating assets are comprised of the following projects:

Projects |  | Percentage Ownership |  | Net Capacity (MW) (a) |  | Counterparty |  | Expiration
Conventional |  |  |  |  |  |  |  |
Carlsbad |  | 100 | % |  | 527 |  |  | San Diego Gas & Electric |  | 2038
El Segundo |  | 100 | % |  | 550 |  |  | SCE |  | 2023
GenConn Devon |  | 50 | % |  | 95 |  |  | Connecticut Light & Power |  | 2040
GenConn Middletown |  | 50 | % |  | 95 |  |  | Connecticut Light & Power |  | 2041
Marsh Landing |  | 100 | % |  | 720 |  |  | Various |  | 2023 - 2030
Walnut Creek |  | 100 | % |  | 485 |  |  | SCE |  | 2023 - 2026
Total Conventional |  |  |  | 2,472 |  |  |  |  |
Utility Scale Solar |  |  |  |  |  |  |  |
Agua Caliente |  | 51 | % |  | 148 |  |  | PG&E |  | 2039
Alpine |  | 100 | % |  | 66 |  |  | PG&E |  | 2033
Avenal |  | 50 | % |  | 23 |  |  | PG&E |  | 2031
Avra Valley |  | 100 | % |  | 27 |  |  | Tucson Electric Power |  | 2032
Blythe |  | 100 | % |  | 21 |  |  | SCE |  | 2029
Borrego |  | 100 | % |  | 26 |  |  | San Diego Gas and Electric |  | 2038
Buckthorn Solar (b) |  | 100 | % |  | 154 |  |  | City of Georgetown, TX |  | 2043
CVSR |  | 100 | % |  | 250 |  |  | PG&E |  | 2038
Desert Sunlight 250 |  | 25 | % |  | 63 |  |  | SCE |  | 2034
Desert Sunlight 300 |  | 25 | % |  | 75 |  |  | PG&E |  | 2039
Kansas South |  | 100 | % |  | 20 |  |  | PG&E |  | 2033
Kawailoa (b) |  | 48 | % |  | 24 |  |  | Hawaiian Electric Company |  | 2041
Oahu Solar Projects (b) |  | 95 | % |  | 58 |  |  | Hawaiian Electric Company |  | 2041
Roadrunner |  | 100 | % |  | 20 |  |  | El Paso Electric |  | 2031
Rosamond Central (b) |  | 50 | % |  | 96 |  |  | Various |  | 2035 - 2047
TA High Desert |  | 100 | % |  | 20 |  |  | SCE |  | 2033
Utah Solar Portfolio |  | 100 | % |  | 530 |  |  | PacifiCorp |  | 2036
Total Utility Scale Solar |  |  |  | 1,621 |  |  |  |  |
Distributed Solar |  |  |  |  |  |  |  |
DGPV Fund Projects (b) |  | 100 | % |  | 286 |  |  | Various |  | 2030 - 2044
Solar Power Partners (SPP) Projects |  | 100 | % |  | 25 |  |  | Various |  | 2026 - 2037
Other DG Projects |  | 100 | % |  | 21 |  |  | Various |  | 2023 - 2039
Total Distributed Solar |  |  |  | 332 |  |  |  |  |

35

Projects |  | Percentage Ownership |  | Net Capacity (MW) (a) |  | Counterparty |  | Expiration
Wind |  |  |  |  |  |  |  |
Alta I |  | 100 | % |  | 150 |  |  | SCE |  | 2035
Alta II |  | 100 | % |  | 150 |  |  | SCE |  | 2035
Alta III |  | 100 | % |  | 150 |  |  | SCE |  | 2035
Alta IV |  | 100 | % |  | 102 |  |  | SCE |  | 2035
Alta V |  | 100 | % |  | 168 |  |  | SCE |  | 2035
Alta X (b) |  | 100 | % |  | 137 |  |  | SCE |  | 2038
Alta XI (b) |  | 100 | % |  | 90 |  |  | SCE |  | 2038
Black Rock (b) |  | 50 | % |  | 58 |  |  | Toyota and AEP |  | 2036
Buffalo Bear |  | 100 | % |  | 19 |  |  | Western Farmers Electric Co-operative |  | 2033
Crosswinds |  | 99 | % |  | 21 |  |  | Corn Belt Power Cooperative |  | 2027
Elbow Creek (b) |  | 100 | % |  | 122 |  |  | Various |  | 2029
Elkhorn Ridge |  | 66.7 | % |  | 54 |  |  | Nebraska Public Power District |  | 2029
Forward |  | 100 | % |  | 29 |  |  | Constellation NewEnergy, Inc. |  | 2022
Goat Wind |  | 100 | % |  | 150 |  |  | Dow Pipeline Company |  | 2025
Hardin |  | 99 | % |  | 15 |  |  | Interstate Power and Light Company |  | 2027
Langford (b) |  | 100 | % |  | 160 |  |  | Goldman Sachs |  | 2033
Laredo Ridge |  | 100 | % |  | 81 |  |  | Nebraska Public Power District |  | 2031
Lookout (b) |  | 100 | % |  | 38 |  |  | Southern Maryland Electric Cooperative |  | 2030
Mesquite Sky (b) |  | 50 | % |  | 170 |  |  | Various |  | 2033 - 2036
Mesquite Star (b) |  | 50 | % |  | 210 |  |  | Various |  | 2032 - 2035
Mt. Storm |  | 100 | % |  | 264 |  |  | Citigroup |  | 2031
Ocotillo |  | 100 | % |  | 59 |  |  | N/A |  |
Odin |  | 99.9 | % |  | 21 |  |  | Missouri River Energy Services |  | 2028
Pinnacle (b) |  | 100 | % |  | 54 |  |  | Maryland Department of General Services and University System of Maryland |  | 2031
Rattlesnake (b) (c) |  | 100 | % |  | 160 |  |  | Avista Corporation |  | 2040
San Juan Mesa |  | 75 | % |  | 90 |  |  | Southwestern Public Service Company |  | 2025
Sleeping Bear |  | 100 | % |  | 95 |  |  | Public Service Company of Oklahoma |  | 2032
South Trent |  | 100 | % |  | 101 |  |  | AEP Energy Partners |  | 2029
Spanish Fork |  | 100 | % |  | 19 |  |  | PacifiCorp |  | 2028
Spring Canyon II (b) |  | 90.1 | % |  | 31 |  |  | Platte River Power Authority |  | 2039
Spring Canyon III (b) |  | 90.1 | % |  | 26 |  |  | Platte River Power Authority |  | 2039
Taloga |  | 100 | % |  | 130 |  |  | Oklahoma Gas & Electric |  | 2031
Wildorado (b) |  | 100 | % |  | 161 |  |  | Southwestern Public Service Company |  | 2027
Total Wind |  |  |  | 3,285 |  |  |  |  |
Total net generation capacity |  |  |  | 7,710 |  |  |  |  |

(a) Net capacity represents the maximum, or rated, generating capacity of the facility multiplied by the Company’s percentage ownership in the facility as of June 30, 2022.
(b) Projects are part of tax equity arrangements and ownership percentage is based on cash to be distributed, as further described in Note 4, Investments Accounted for by the Equity Method and Variable Interest Entities.
(c) Rattlesnake has a deliverable capacity of 144 MW.
36

Significant Events
Thermal Disposition
•On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR for net proceeds of approximately $1.46 billion, inclusive of working capital adjustments, which excludes approximately $18 million in transaction expenses that were incurred in connection with the disposition. The transaction resulted in a gain on sale of business of approximately $1.29 billion, which is net of the $18 million in transaction expenses referenced above. The proceeds from the sale were utilized to repay certain borrowings outstanding, as described under “Corporate Financing Activities” below, with the remaining proceeds invested in short-term investments classified as cash and cash equivalents on the Company’s consolidated balance sheet as of June 30, 2022.
Capistrano Portfolio Acquisition
•On June 23, 2022, an indirect subsidiary of the Company entered into a binding agreement to acquire the Capistrano Portfolio from Capistrano Wind Partners, LLC, an indirect subsidiary of CEG, for cash consideration of $255 million, plus the assumption of $160 million of non-recourse debt, subject to working capital and other closing adjustments. The Capistrano Portfolio consists of five wind projects located in Texas, Nebraska and Wyoming with a combined capacity of 413 MW. Concurrent with the acquisition, the Company has also entered into a development agreement with CEG, whereby CEG will pay $10 million to the Company to partially fund the acquisition of the Capistrano Portfolio for an exclusive right to develop, construct and repower the projects in the Capistrano Portfolio, or the Rights Fee. After factoring in estimated closing adjustments, proceeds from the Rights Fee and new non-recourse debt, the Company expects its long-term corporate capital commitment to acquire the Capistrano Portfolio to be between approximately $110 and $130 million, which the Company expects to fund with cash on hand. The transaction is subject to customary regulatory approvals and is expected to close in the second half of 2022.
Drop Down Transactions
•On March 25, 2022, the Company, through its indirect subsidiary, Lighthouse Renewable Holdco LLC, acquired Mililani BL Borrower Holdco LLC, the indirect owner of the Mililani I solar project, a 39 MW Solar project with 156 MWh of storage capacity that is currently under construction, located in Oahu, Hawaii, from Clearway Renew LLC, a subsidiary of CEG, for cash consideration of $22 million. Lighthouse Renewable Holdco LLC is a partnership between the Company and a third-party investor. The third-party investor also contributed cash consideration of $14 million utilized to acquire their portion of the acquired entity. Mililani BL Borrower Holdco LLC consolidates, as the direct owner of the primary beneficiary, a tax equity fund, Mililani TE Holdco LLC, which directly holds the Mililani I solar project. Mililani I has a 20-year power purchase agreement with an investment-grade utility that commenced in July 2022. The acquisition was funded with existing sources of liquidity. As part of the acquisition of Mililani I, the Company assumed the project’s financing agreement which included a $16 million construction loan that converts to a term loan upon completion of construction, $60 million tax equity bridge loan and a $27 million sponsor equity bridge loan. The sponsor equity bridge loan was repaid at acquisition date, utilizing $14 million from the cash equity investor, as well as $15 million of the Company’s acquisition price, which was contributed back by CEG, and $2 million was utilized to pay associated fees. The tax equity bridge loan will be repaid with the final proceeds from the tax equity investor that will be received when Mililani I achieves substantial completion, which is expected to occur in the second half of 2022.
•In February 2022, in connection with the Company’s 2021 acquisition of the Class B membership interests in Black Rock Wind Holding LLC, through its indirect subsidiary Lighthouse Renewable Holding Sub LLC, from Clearway Renew LLC, a subsidiary of CEG, the Company paid an additional $23 million as final funding after all remaining turbines of the Black Rock wind project became operational. Concurrent with the final funding, the $59 million that was contributed in 2021 by third-party investors, consisting of $36 million contributed by the cash equity investor and $23 million contributed by the tax equity investor, was released to Clearway Renew LLC.
Marsh Landing Resource Adequacy Agreements
•In July 2022, the Company contracted with several load serving entities to sell the remaining 20% of Marsh Landing’s available capacity commencing in May 2023. The agreements are for approximately three and a half years. Marsh Landing’s capacity is now 100% contracted for a weighted average contract tenor of approximately four years commencing in May 2023.
37

Corporate Financing Activities
•On May 3, 2022, the Company repaid (i) $305 million in outstanding borrowings under the revolving credit facility and (ii) $335 million in outstanding borrowings under the Bridge Loan Agreement utilizing proceeds received from the Thermal Disposition.
Project-level Financing Activities
•On March 16, 2022, the Company, through its indirect subsidiary, Viento Funding II, LLC, entered into a financing agreement which included the issuance of a $190 million term loan as well as $35 million in letters of credit, supported by the Company’s interests in the Elkhorn Ridge, Laredo Ridge, San Juan Mesa and Taloga wind projects. The proceeds from the term loan were used to pay off the existing debt in the amount of $186 million related to Laredo Ridge, Tapestry Wind LLC and Viento Funding II, LLC and to pay related financing costs.
Environmental Matters
The Company is subject to a wide range of environmental laws during the development, construction, ownership and operation of facilities. These existing and future laws generally require that governmental permits and approvals be obtained before construction and maintained during operation of facilities. The Company is obligated to comply with all environmental laws and regulations applicable within each jurisdiction and required to implement environmental programs and procedures to monitor and control risks associated with the construction, operation and decommissioning of regulated or permitted energy assets. Federal and state environmental laws have historically become more stringent over time, although this trend could change in the future.
Proposed Federal Reclassification of Northern Long-Eared Bat — On March 23, 2022, the U.S. Fish and Wildlife Service (FWS) announced a proposal to reclassify the northern long-eared bat as endangered under the Endangered Species Act. The bat, currently listed as threatened, faces extinction due to the range-wide impacts of white-nose syndrome, a deadly disease affecting cave-dwelling bats across the continent. The northern long-eared bat is found in 37 states in the eastern and north central United States and in Canada. The Company is working with renewable energy industry groups to provide comments on the proposed reclassification as this proposal could affect renewable energy facility siting and operations. The proposed listing was recently published by FWS in the Federal Register and comments on the proposal are due by May 23, 2022. The Company is participating in this comment process through the renewable industry group.
The Company’s environmental matters are further described in the Company’s 2021 Form 10-K in Item 1, Business — Environmental Matters and Item 1A, Risk Factors.
Regulatory Matters
The Company’s regulatory matters are described in the Company’s 2021 Form 10-K in Item 1, Business — Regulatory Matters and Item 1A, Risk Factors.
Trends Affecting Results of Operations and Future Business Performance
The Company’s trends are described in the Company’s 2021 Form 10-K in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Trends Affecting Results of Operations and Future Business Performance.
Recent Developments Affecting Industry Conditions and the Company’s Business
COVID-19 Update
As of the date of this report, the Company has not experienced any material financial or operational impacts related to COVID-19, or variants thereof. All of the Company’s facilities have remained operational. The Company will continue to assess any financial or operational impacts based on any future developments. For additional discussion regarding risks associated with the COVID-19 pandemic, see Part I, Item 1A, Risk Factors, of the Company’s 2021 Form 10-K.
38

Consolidated Results of Operations
The following table provides selected financial information:

| Three months ended June 30, |  | Six months ended June 30,
(In millions) | 2022 |  | 2021 |  | Change |  | 2022 |  | 2021 |  | Change
Operating Revenues |  |  |  |  |  |  |  |  |  |  |
Energy and capacity revenues | $ | 431 |  |  | $ | 420 |  |  | $ | 11 |  |  | $ | 791 |  |  | $ | 696 |  |  | $ | 95 |
Other revenues | 30 |  |  | 28 |  |  | 2 |  |  | 52 |  |  | 45 |  |  | 7 |
Contract amortization | (41) |  |  | (37) |  |  | (4) |  |  | (83) |  |  | (69) |  |  | (14) |
Mark-to-market for economic hedges | (52) |  |  | (31) |  |  | (21) |  |  | (178) |  |  | (55) |  |  | (123) |
Total operating revenues | 368 |  |  | 380 |  |  | (12) |  |  | 582 |  |  | 617 |  |  | (35) |
Operating Costs and Expenses |  |  |  |  |  |  |  |  |  |  |
Cost of fuels | 7 |  |  | 16 |  |  | (9) |  |  | 29 |  |  | 35 |  |  | (6) |
Operations and maintenance | 76 |  |  | 69 |  |  | 7 |  |  | 152 |  |  | 137 |  |  | 15 |
Other costs of operations | 29 |  |  | 22 |  |  | 7 |  |  | 59 |  |  | 45 |  |  | 14 |
Depreciation, amortization and accretion | 126 |  |  | 128 |  |  | (2) |  |  | 250 |  |  | 256 |  |  | (6) |
General and administrative | 11 |  |  | 10 |  |  | 1 |  |  | 23 |  |  | 20 |  |  | 3 |
Transaction and integration costs | 3 |  |  | 1 |  |  | 2 |  |  | 5 |  |  | 3 |  |  | 2 |
Development costs | 1 |  |  | 1 |  |  | — |  |  | 2 |  |  | 2 |  |  | — |
Total operating costs and expenses | 253 |  |  | 247 |  |  | 6 |  |  | 520 |  |  | 498 |  |  | 22 |
Gain on sale of business | 1,291 |  |  | — |  |  | 1,291 |  |  | 1,291 |  |  | — |  |  | 1,291 |
Operating Income | 1,406 |  |  | 133 |  |  | 1,273 |  |  | 1,353 |  |  | 119 |  |  | 1,234 |
Other Income (Expense) |  |  |  |  |  |  |  |  |  |  |
Equity in earnings of unconsolidated affiliates | 10 |  |  | 8 |  |  | 2 |  |  | 14 |  |  | 12 |  |  | 2 |
Other income, net | 5 |  |  | 1 |  |  | 4 |  |  | 5 |  |  | 2 |  |  | 3 |
Loss on debt extinguishment | — |  |  | — |  |  | — |  |  | (2) |  |  | (42) |  |  | 40 |
Derivative interest income (expense) | 36 |  |  | (11) |  |  | 47 |  |  | 77 |  |  | 36 |  |  | 41 |
Other interest expense | (83) |  |  | (92) |  |  | 9 |  |  | (171) |  |  | (184) |  |  | 13 |
Total other expense, net | (32) |  |  | (94) |  |  | 62 |  |  | (77) |  |  | (176) |  |  | 99 |
Income (Loss) Before Income Taxes | 1,374 |  |  | 39 |  |  | 1,335 |  |  | 1,276 |  |  | (57) |  |  | 1,333 |
Income tax expense (benefit) | 225 |  |  | 7 |  |  | 218 |  |  | 224 |  |  | (13) |  |  | 237 |
Net Income (Loss) | 1,149 |  |  | 32 |  |  | 1,117 |  |  | 1,052 |  |  | (44) |  |  | 1,096 |
Less: Income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | 579 |  |  | (3) |  |  | 582 |  |  | 514 |  |  | (82) |  |  | 596 |
Net Income Attributable to Clearway Energy, Inc. | $ | 570 |  |  | $ | 35 |  |  | $ | 535 |  |  | $ | 538 |  |  | $ | 38 |  |  | $ | 500 |

| Three months ended June 30, |  | Six months ended June 30,
Business metrics: | 2022 |  | 2021 |  | 2022 |  | 2021
Renewables MWh generated/sold (in thousands) (a) | 4,416 |  |  | 3,370 |  |  | 7,735 |  |  | 5,900 |
Thermal MWt sold (in thousands) (b) | 183 |  |  | 457 |  |  | 835 |  |  | 1,068 |
Thermal MWh sold (in thousands) (b) | 5 |  |  | 13 |  |  | 19 |  |  | 26 |
Conventional MWh generated (in thousands) (a) (c) | 289 |  |  | 282 |  |  | 421 |  |  | 447 |
Conventional equivalent availability factor | 88.3 | % |  | 97.2 | % |  | 91.8 | % |  | 90.2 | %

(a) Volumes do not include the MWh generated/sold by the Company’s equity method investments.
(b) On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR.
(c) Volumes generated are not sold as the Conventional facilities sell capacity rather than energy.
39

Management’s Discussion of the Results of Operations for the Three Months Ended June 30, 2022 and 2021
Operating Revenues
Operating revenues decreased by $12 million during the three months ended June 30, 2022, compared to the same period in 2021, due to a combination of the drivers summarized in the table below:

|  | (In millions)
Renewables Segment | Increase primarily due to the acquisitions of the Utah Solar Portfolio in December 2021 and Mt. Storm in April 2021, along with increased wind generation at Alta and various other wind facilities | $ | 51 |
Conventional Segment | Decrease driven by the timing of annual planned maintenance outages at the El Segundo facility | (6) |
Thermal Segment | Decrease primarily driven by the sale of the Thermal Business on May 1, 2022 | (32) |
Mark-to-market for economic hedges | Increase in unrealized losses from changes in the fair value of commodity contracts, primarily driven by the 2021 acquisitions of Mesquite Sky and Mt. Storm and the mark-to-market of the Langford commodity contract, which previously qualified for the NPNS exception | (21) |
Contract amortization | Increase primarily driven by amortization of the intangible assets for power purchase agreements related to the 2021 acquisition of the Utah Solar Portfolio | (4) |
|  | $ | (12) |

Cost of Fuels
Cost of fuels decreased by $9 million during the three months ended June 30, 2022, compared to the same period in 2021, due to the sale of the Thermal Business on May 1, 2022, as further described in Note 3, Acquisitions and Dispositions.
Operations and Maintenance Expense
Operations and maintenance expense increased by $7 million during the three months ended June 30, 2022, compared to the same period in 2021, due to a combination of the drivers summarized in the table below:

|  | (In millions)
Renewables Segment | Increase primarily from the 2021 acquisitions of the Utah Solar Portfolio, Mesquite Sky, Black Rock and Mt. Storm. | $ | 10 |
Conventional Segment | Increase primarily driven by the timing of the annual planned maintenance outages at El Segundo | 5 |
Thermal Segment | Decrease primarily driven by the sale of the Thermal Business on May 1, 2022 | (8) |
|  | $ | 7 |

Other Costs of Operations Expense
Other cost of operations increased $7 million during the three months ended June 30, 2022, compared to the same period in 2021, primarily from the 2021 acquisitions of Mt. Storm, Mesquite Sky, Black Rock and the Utah Solar Portfolio, as well as the timing of property tax payments.
Gain on Sale of Business
On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR resulting in a gain on sale of business of approximately $1.29 billion, as further described in Note 3, Acquisitions and Dispositions.
40

Interest Expense
Interest expense decreased by $56 million during the three months ended June 30, 2022, compared to the same period in 2021, primarily due to the following:

|  | (In millions)
Change in fair value of interest rate swaps |  | $ | (48) |
Decrease in interest expense due to decreased principal balances of project-level debt |  | (5) |
Decrease in interest due to the sale of the Thermal Business on May 1, 2022 |  | (3) |
|  | $ | (56) |

Income Tax Expense
For the three months ended June 30, 2022, the Company recorded an income tax expense of $225 million on pretax income of $1,374 million. For the same period in 2021, the Company recorded an income tax expense of $7 million on pretax income of $39 million. The primary driver of the $218 million increase in income tax expense is the gain recorded on the sale of the Thermal Business on May 1, 2022, as further described in Note 3, Acquisitions and Dispositions.
Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests
For the three months ended June 30, 2022, the Company had income of $579 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

|  | (In millions)
CEG’s economic interest in Clearway Energy LLC (primarily driven by the gain on sale of the Thermal Business) |  | $ | 585 |
Losses attributable to tax equity financing arrangements and the application of HLBV |  | (6) |
|  | $ | 579 |

For the three months ended June 30, 2021, the Company had a loss of $3 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

|  | (In millions)
Losses attributable to tax equity financing arrangements and the application of HLBV |  | $ | (36) |
CEG’s economic interest in Clearway Energy LLC |  | 32 |
Income attributable to third-party partnerships |  | 1 |
|  | $ | (3) |

41

Management’s Discussion of the Results of Operations for the Six Months Ended June 30, 2022 and 2021
Operating Revenues
Operating revenues decreased by $35 million during the six months ended June 30, 2022, compared to the same period in 2021, due to a combination of the drivers summarized in the table below:

|  | (In millions)
Renewables Segment | Increase due to a loss of $50 million in February 2021 related to net settlements of obligations for wind facilities that were unable to produce the required output during extreme weather conditions in Texas, as well as the 2021 acquisitions of the Utah Solar Portfolio, Agua Caliente, Mesquite Sky, Black Rock and Mt. Storm | $ | 125 |
Thermal Segment | Decrease due to the sale of the Thermal business on May 1, 2022 | (23) |
Mark-to-market economic hedging activities | Increase in unrealized losses from changes in the fair value of commodity contracts, primarily driven by an increase in forward power prices in the ERCOT and PJM markets, as well as the 2021 acquisitions of Mt. Storm and Mesquite Sky and the mark-to-market of the Langford commodity contract, which previously qualified for the NPNS exception | (123) |
Contract amortization | Increase primarily driven by amortization of the intangible assets for power purchase agreements related to the 2021 acquisitions of Agua Caliente and the Utah Solar Portfolio | (14) |
|  | $ | (35) |

Cost of Fuels
Cost of fuels decreased by $6 million during the six months ended June 30, 2022, compared to the same period in 2021, due to the sale of the Thermal Business on May 1, 2022, as further described in Note 3, Acquisitions and Dispositions.
Operations and Maintenance Expense
Operations and maintenance expense increased by $15 million during the six months ended June 30, 2022, compared to the same period in 2021, primarily due to the 2021 acquisitions of the Utah Solar Portfolio, Mesquite Sky, Black Rock and Mt. Storm, partially offset by the sale of the Thermal Business on May 1, 2022, as further described in Note 3, Acquisitions and Dispositions.
Other Costs of Operations Expense
Other costs of operations expense increased by $14 million during the six months ended June 30, 2022, compared to the same period in 2021, primarily from the 2021 acquisitions of Mt. Storm, Mesquite Sky, Black Rock and the Utah Solar Portfolio, as well as the timing of property tax payments and refunds for certain projects.
Gain on Sale of Business
On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR resulting in a gain on sale of business of approximately $1.29 billion, as further described in Note 3, Acquisitions and Dispositions.
Loss on Debt Extinguishment
The Company recorded a loss on debt extinguishment of $2 million during the six months ended June 30, 2022, which reflects the write-off of previously deferred finance costs related to the Laredo Ridge, Tapestry Wind LLC and Viento Funding II, LLC, as further described in Note 7, Long-term Debt.
The Company recorded a loss on debt extinguishment of $42 million during the six months ended, June 30, 2021, which primarily reflects the write-off of previously deferred finance costs and payment of premiums related to the redemption of the 2025 Senior Notes.
42

Interest Expense
Interest expense decreased by $54 million during the six months ended June 30, 2022, compared to the same period in 2021, primarily due to the following:

|  | (In millions)
Change in fair value of interest rate swaps |  | $ | (43) |
Decrease in interest expense due to decreased principal balances of project-level debt |  | (9) |
Decrease in interest expense due to the sale of the Thermal Business on May 1, 2022 |  | (3) |
Amortization of deferred financing costs related to the Bridge Loan that was entered into during the fourth quarter of 2021 and paid in full on May 3, 2022 |  | 1 |
|  | $ | (54) |

Income Tax Expense (Benefit)
For the six months ended June 30, 2022, the Company recorded an income tax expense of $224 million on pretax income of $1,276 million. For the same period in 2021, the Company recorded an income tax benefit of $13 million on a pretax loss of $57 million. The primary driver of the $237 million increase in income tax expense is the gain recorded on the sale of the Thermal Business on May 1, 2022, as further described in Note 3, Acquisitions and Dispositions.
Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests
For the six months ended June 30, 2022, the Company had income of $514 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

|  | (In millions)
CEG’s economic interest in Clearway Energy LLC (primarily driven by the gain on sale of the Thermal Business) |  | $ | 560 |
Losses attributable to tax equity financing arrangements and the application of HLBV |  | (24) |
Losses attributable to third-party partnerships |  | (22) |
|  | $ | 514 |

For the six months ended June 30, 2021, the Company had a loss of $82 million attributable to noncontrolling interests and redeemable noncontrolling interests comprised of the following:

|  | (In millions)
Losses attributable to tax equity financing arrangements and the application of HLBV |  | $ | (77) |
Losses attributable to third-party partnerships |  | (25) |
CEG’s economic interest in Clearway Energy LLC |  | 20 |
|  | $ | (82) |

Liquidity and Capital Resources
The Company’s principal liquidity requirements are to meet its financial commitments, finance current operations, fund capital expenditures, including 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, 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.
43

Current Liquidity Position
As of June 30, 2022 and December 31, 2021, the Company’s liquidity was approximately $1.70 billion and $821 million, respectively, comprised of cash, restricted cash and availability under the Company’s revolving credit facility.

(In millions) |  | June 30, 2022 |  | December 31, 2021
Cash and cash equivalents: |  |  |  |
Clearway Energy, Inc. and Clearway Energy LLC, excluding subsidiaries |  | $ | 820 |  |  | $ | 33 |
Subsidiaries |  | 135 |  |  | 146 |
Restricted cash: |  |  |  |
Operating accounts |  | 143 |  |  | 246 |
Reserves, including debt service, distributions, performance obligations and other reserves |  | 190 |  |  | 229 |
Total cash, cash equivalents and restricted cash |  | $ | 1,288 |  |  | $ | 654 |
Revolving credit facility availability |  | 408 |  |  | 167 |
Total liquidity |  | $ | 1,696 |  |  | $ | 821 |

The Company’s liquidity includes $333 million and $475 million of restricted cash balances as of June 30, 2022 and December 31, 2021, respectively. Restricted cash consists primarily of funds to satisfy the requirements of certain debt arrangements and funds held within the Company’s projects that are restricted in their use. As of June 30, 2022, these restricted funds were comprised of $143 million designated to fund operating expenses, approximately $42 million designated for current debt service payments and $122 million restricted for reserves including debt service, performance obligations and other reserves, as well as capital expenditures. The remaining $26 million is held in distribution reserve accounts.
As of June 30, 2022, the Company had no outstanding borrowings under the revolving credit facility and $87 million in letters of credit outstanding. During the six months ended June 30, 2022, the Company borrowed $80 million under the revolving credit facility and repaid $325 million, $305 million of which was repaid on May 3, 2022, utilizing the proceeds received from the Thermal Disposition. The facility will continue to be used for general corporate purposes including financing of future 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.
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 Note 7, Long-term Debt, to this Form 10-Q and Item 15 — Note 10, Long-term Debt, to the consolidated financial statements included in the Company’s 2021 Form 10-K, the Company’s financing arrangements consist of corporate level debt, which includes Senior Notes and the revolving credit facility; the ATM Programs; and project-level financings for its various assets.
Thermal Disposition
On May 1, 2022, the Company completed the sale of 100% of its interests in the Thermal Business to KKR for net proceeds of approximately $1.46 billion, inclusive of working capital adjustments, which excludes approximately $18 million in transaction expenses that were incurred in connection with the disposition. The transaction resulted in a gain on sale of business of approximately $1.29 billion, which is net of the $18 million in transaction expenses referenced above. The proceeds from the sale were utilized to repay certain borrowings outstanding, as further described in Note 7, Long-term Debt, with the remaining proceeds invested in short-term investments classified as cash and cash equivalents on the Company’s consolidated balance sheet as of June 30, 2022.
44

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 June 30, 2022:

| S&P |  | Moody’s |  |
Clearway Energy, Inc. | BB |  | Ba2 |  |
4.750% Senior Notes, due 2028 | BB |  | Ba2 |  |
3.750% Senior Notes, due 2031 | BB |  | Ba2 |  |
3.750% Senior Notes, due 2032 | BB |  | Ba2 |  |

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 Note 7, Long-term Debt, to the consolidated financial statements; (ii) capital expenditures; (iii) off-balance sheet arrangements; (iv) acquisitions and investments; and (v) cash dividends to investors.
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 complete the construction of assets where construction is in process, and capital expenditures related to acquiring additional thermal customers.
For the six months ended June 30, 2022, the Company used approximately $81 million to fund capital expenditures, including growth expenditures of $65 million in the Renewables segment, funded through construction-related financing. Renewables segment capital expenditures included $21 million incurred in connection with the Mililani solar project, $21 million incurred in connection with the Mesquite Sky wind project, $13 million incurred in connection with the Black Rock wind project, $5 million incurred in connection with the Rattlesnake wind project and $5 million incurred by other wind and solar projects. Prior to the sale of the Thermal Business on May 1, 2022, the Company incurred $4 million of growth capital expenditures in the Thermal segment in connection with various development projects. In addition, the Company incurred $12 million in maintenance capital expenditures. The Company estimates $30 million of maintenance expenditures for 2022. These estimates are subject to continuing review and adjustment. Actual capital expenditures may vary from these estimates.
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.
Capistrano Portfolio Acquisition — On June 23, 2022, an indirect subsidiary of the Company entered into a binding agreement to acquire the Capistrano Portfolio from Capistrano Wind Partners, LLC, an indirect subsidiary of CEG, for cash consideration of $255 million, plus the assumption of $160 million of non-recourse debt, subject to working capital and other closing adjustments. The Capistrano Portfolio consists of five wind projects located in Texas, Nebraska and Wyoming with a combined capacity of 413 MW. Concurrent with the acquisition, the Company has also entered into a development agreement with CEG, whereby CEG will pay $10 million to the Company to partially fund the acquisition of the Capistrano Portfolio for an exclusive right to develop, construct and repower the projects in the Capistrano Portfolio, or the Rights Fee. After factoring in estimated closing adjustments, proceeds from the Rights Fee and new non-recourse debt, the Company expects its long-term corporate capital commitment to acquire the Capistrano Portfolio to be between approximately $110 and $130 million, which the Company expects to fund with cash on hand. The transaction is subject to customary regulatory approvals and is expected to close in the second half of 2022.
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Mililani I Drop Down — On March 25, 2022, the Company, through its indirect subsidiary, Lighthouse Renewable Holdco LLC, acquired Mililani BL Borrower Holdco LLC, the indirect owner of the Mililani I solar project, a 39 MW Solar project with 156 MWh of storage capacity that is currently under construction, located in Oahu, Hawaii, from Clearway Renew LLC, a subsidiary of CEG, for cash consideration of $22 million. Lighthouse Renewable Holdco LLC is a partnership between the Company and a third-party investor. The third-party investor also contributed cash consideration of $14 million utilized to acquire their portion of the acquired entity. Mililani BL Borrower Holdco LLC consolidates, as the direct owner of the primary beneficiary, a tax equity fund, Mililani TE Holdco LLC, which directly holds the Mililani I solar project. Mililani I has a 20-year power purchase agreement with an investment-grade utility that commenced in July 2022. The acquisition was funded with existing sources of liquidity. As part of the acquisition of Mililani I, the Company assumed the project’s financing agreement which included a $16 million construction loan that converts to a term loan upon completion of construction, $60 million tax equity bridge loan and a $27 million sponsor equity bridge loan. The sponsor equity bridge loan was repaid at acquisition date, utilizing $14 million from the cash equity investor, as well as $15 million of the Company’s acquisition price, which was contributed back by CEG, and $2 million was utilized to pay associated fees. The tax equity bridge loan will be repaid with the final proceeds from the tax equity investor that will be received when Mililani I achieves substantial completion, which is expected to occur in the second half of 2022.
Black Rock Drop Down — In February 2022, in connection with the Company’s 2021 acquisition of the Class B membership interests in Black Rock Wind Holding LLC, through its indirect subsidiary Lighthouse Renewable Holding Sub LLC, from Clearway Renew LLC, as subsidiary of CEG, the Company paid an additional $23 million as final funding after all remaining turbines of the Black Rock wind project became operational. Concurrent with the final funding, the $59 million that was contributed in 2021 by third-party investors, consisting of $36 million contributed by the cash equity investor and $23 million contributed by the tax equity investor, was released to Clearway Renew LLC.
Bridge Loan Agreement
On May 3, 2022, the Company repaid the $335 million in outstanding borrowings under the Bridge Loan Agreement utilizing proceeds received from the Thermal Disposition.
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 t he 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 six months ended June 30, 2022:

|  |  |  |  | Second Quarter 2022 |  | First Quarter 2022
Dividends per Class A share |  |  |  |  | $ | 0.3536 |  |  | $ | 0.3468 |
Dividends per Class C share |  |  |  |  | 0.3536 |  |  | 0.3468 |

On August 1, 2022, the Company declared quarterly dividends on its Class A and Class C common stock of $0.3604 per share payable on September 15, 2022 to stockholders of record as of September 1, 2022.
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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
As of June 30, 2022, the Company has several investments with an ownership interest percentage of 50% or less in energy and an energy-related entity that is accounted for under the equity method. GenConn is a variable interest entity 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 $338 million as of June 30, 2022. This indebtedness may restrict the ability of these subsidiaries to issue dividends or distributions to the Company.
Contractual Obligations and Commercial Commitments
The Company has a variety of contractual obligations and other commercial commitments that represent prospective cash requirements in addition to the Company’s capital expenditure programs, as disclosed in the Company’s 2021 Form 10-K.
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Cash Flow Discussion
The following table reflects the changes in cash flows for the six months ended June 30, 2022, compared to the six months ended June 30, 2021:

| Six months ended June 30, |  |
| 2022 |  | 2021 |  | Change
| (In millions)
Net cash provided by operating activities | $ | 279 |  |  | $ | 241 |  |  | $ | 38 |
Net cash provided by (used in) investing activities | 1,331 |  |  | (420) |  |  | 1,751 |
Net cash (used in) provided by financing activities | (976) |  |  | 184 |  |  | (1,160) |

Net Cash Provided by Operating Activities

Changes to net cash provided by operating activities were driven by: | (In millions)
Increase in operating income adjusted for non-cash items | $ | 53 |
Increase in working capital primarily driven by the timing of accounts receivable collections and payments of accounts payable | 2 |
Increase in distributions from unconsolidated affiliates | 1 |
Transaction expenses paid on May 1, 2022 in connection with the sale of the Thermal Business | (18) |
| $ | 38 |

Net Cash Provided by (Used in) Investing Activities

Changes to net cash provided by (used in) investing activities were driven by: | (In millions)
Proceeds from the sale of the Thermal Business | $ | 1,457 |
Cash paid for Agua Caliente, net of cash acquired, in 2021 | 211 |
Decrease in cash paid for Drop Down assets | 81 |
Cash paid to CEG in 2021 for equipment for the Pinnacle wind project repowering | 21 |
Decrease in capital expenditures | 12 |
Decrease in the return of investment from unconsolidated affiliates | (14) |
Other | (17) |
| $ | 1,751 |

Net Cash (Used in) Provided by Financing Activities

Changes in net cash (used in) provided by financing activities were driven by: | (In millions)
Decrease in proceeds from the issuance of long-term debt, net of payments | $ | (496) |
Decrease in proceeds from the revolving credit facility, net of payments | (312) |
Decrease in contributions from noncontrolling interest members, net of distributions | (272) |
Cash released from escrow distributed to CEG in 2022 | (64) |
Increase in dividends paid to common stockholders and distributions paid to CEG unit holders | (9) |
Other | (7) |
| $ | (1,160) |

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NOLs, Deferred Tax Assets and Uncertain Tax Position Implications, under ASC 740
As of December 31, 2021, the Company had a cumulative federal NOL carryforward balance of $1.3 billion for financial statement purposes, of which $0.9 billion will begin expiring between 2033 to 2037 if unutilized. As a result of the sale of the Thermal Business, the Company estimates it will utilize $840 million of federal NOL carryforward. The Company does not anticipate any federal income tax payments for 2022, as a result of the federal NOL carryforward utilization. Additionally, as of December 31, 2021, the Company had a cumulative state NOL carryforward balance of $769 million for financial statement purposes, which will expire between 2023 to 2040 if unutilized. As a result of the sale of the Thermal Business, the Company expects, after the utilization of various state NOL carryforwards, to pay approximately $12 million in state income taxes before December 31, 2022, and pay an additional approximately $16 million in state income taxes by April 15, 2023.
In addition, the Company has PTC and ITC carryforward balances totaling $15 million, which will expire between 2034 and 2041 if unutilized.
Based on the Company’s current portfolio of assets, which include renewable assets that benefit from accelerated tax depreciation deductions and federal tax credits, current and expected NOL balances, and after taking into account the taxable gain from the sale of the Thermal Business, the Company estimates that it will not pay material federal income tax through 2027, but does expect to pay material state income tax across certain jurisdictions beginning in 2022, as indicated above.
As of December 31, 2021, the Company had an interest disallowance carryforward of $7 million as a result of the proposed and final regulations under §163(j) of the Internal Revenue Code, which was enacted as part of the Tax Act. The disallowed interest deduction has an indefinite carryforward period and any limitations on the utilization of this carryforward have been factored into our valuation allowance analysis.
On February 9, 2022, the governor of California signed Senate Bill 113, or SB 113, removing the suspension of California NOL utilization for tax year 2022. After assessing the law change, the Company expects SB 113 to have an immaterial impact on the consolidated financial statements.
The Company is subject to examination by taxing authorities for income tax returns filed in the U.S. federal jurisdiction and various state jurisdictions. The Company is not subject to U.S. federal or state income tax examinations for years prior to 2013.
The Company has no material uncertain tax benefits as of June 30, 2022.
Fair Value of Derivative Instruments
The Company may enter into commodity purchase contracts and other energy-related financial instruments 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 June 30, 2022, based on their level within the fair value hierarchy defined in ASC 820; and indicate the maturities of contracts at June 30, 2022. For a full discussion of the Company’s valuation methodology of its contracts, see Derivative Fair Value Measurements in Note 5, Fair Value of Financial Instruments.

Derivative Activity (Losses) Gains | (In millions)
Fair value of contracts as of December 31, 2021 | $ | (236) |
Contracts realized or otherwise settled during the period | 38 |
Contracts acquired during the period | (4) |
Contracts added due to loss of NPNS exception | (22) |
Changes in fair value | (87) |
Fair value of contracts as of June 30, 2022 | $ | (311) |

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| Fair value of contracts as of June 30, 2022
| Maturity |  |
Fair Value Hierarchy (Losses) Gains | 1 Year or Less |  | Greater Than 1 Year to 3 Years |  | Greater Than 3 Years to 5 Years |  | Greater Than 5 Years |  | Total Fair Value
| (In millions)
Level 2 | $ | 8 |  |  | $ | 20 |  |  | $ | 6 |  |  | $ | 8 |  |  | $ | 42 |
Level 3 | (74) |  |  | (89) |  |  | (68) |  |  | (122) |  |  | (353) |
Total | $ | (66) |  |  | $ | (69) |  |  | $ | (62) |  |  | $ | (114) |  |  | $ | (311) |

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. As discussed below in Quantitative and Qualitative Disclosures about Market Risk - Commodity Price Risk, the Company, measures the sensitivity of the portfolio to potential changes in market prices using VaR, a statistical model which attempts to predict risk of loss based on market price and volatility. The Company’s risk management policy places a limit on one-day holding period VaR, which limits the net open position.
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 projects, 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 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 acquisition accounting.
Recent Accounting Developments
See Note 2, Summary of Significant Accounting Policies, for a discussion of recent accounting developments.
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ITEM 3 — Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to several market risks in its normal business activities. Market risk is the potential loss that may result from market changes associated with the Company’s power generation or with an existing or forecasted financial or commodity transaction. The types of market risks the Company is exposed to are commodity price risk, interest rate risk, liquidity risk, and credit risk. The following disclosures about market risk provide an update to, and should be read in conjunction with, Item 7A — Quantitative and Qualitative Disclosures About Market Risk, of the Company’s 2021 Form 10-K.
Interest Rate Risk
The Company is exposed to fluctuations in interest rates through its issuance of variable rate debt. Exposures to interest rate fluctuations may be mitigated by entering into derivative instruments known as interest rate swaps, caps, collars and put or call options. These contracts reduce exposure to interest rate volatility and result in primarily fixed rate debt obligations when taking into account the combination of the variable rate debt and the interest rate derivative instrument. See Note 6, Derivative Instruments and Hedging Activities, for more information.
Most of the Company’s project subsidiaries enter into interest rate swaps, intended to hedge the risks associated with interest rates on non-recourse project-level debt. See Item 15 — Note 10, Long-term Debt, to the Company’s audited consolidated financial statements for the year ended December 31, 2021 included in the 2021 Form 10-K for more information about interest rate swaps of the Company’s project subsidiaries.
If all of the interest rate swaps had been discontinued on June 30, 2022, the Company would have owed the counterparties $34 million. Based on the credit ratings of the counterparties, the Company believes its exposure to credit risk due to nonperformance by counterparties to its hedge contracts to be insignificant.
The Company has long-term debt instruments that subject it to the risk of loss associated with movements in market interest rates. As of June 30, 2022, a change of 1%, or 100 basis points, in interest rates would result in an approximately $1 million change in market interest expense on a rolling twelve-month basis.
As of June 30, 2022, the fair value of the Company’s debt was $6.62 billion and the carrying value was $7.13 billion. The Company estimates that a decrease of 1%, or 100 basis points, in market interest rates would have increased the fair value of its long-term debt by approximately $389 million.
Liquidity Risk
Liquidity risk arises from the general funding needs of the Company’s activities and in the management of the Company’s assets and liabilities.
Commodity Price Risk
Commodity price risks result from exposures to changes in spot prices, forward prices, volatilities, and correlations between various commodities, such as electricity and emissions credits. The Company manages the commodity price risk of its merchant generation operations by entering into derivative or non-derivative instruments to hedge the variability in future cash flows from forecasted power sales. The portion of forecasted transactions hedged may vary based upon management's assessment of market, weather, operation and other factors.
Based on a sensitivity analysis using simplified assumptions, the impact of a $0.50 per MWh increase or decrease in power prices across the term of the derivatives contracts would cause a change of approximately $7 million to the net value of power derivatives as of June 30, 2022.
Counterparty Credit Risk
Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. The Company monitors and manages credit risk through credit policies that include: (i) an established credit approval process; and (ii) the use of credit mitigation measures such as prepayment arrangements or volumetric limits. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of expected cash flows. The Company seeks to mitigate counterparty risk by having a diversified portfolio of counterparties. See Note 5, Fair Value of Financial Instruments, to the consolidated financial statements for more information about concentration of credit risk.
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ITEM 4 — Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’s management, including its principal executive officer, principal financial officer and principal accounting officer, the Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act. Based on this evaluation, the Company’s principal executive officer, principal financial officer and principal accounting officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2022 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1 — LEGAL PROCEEDINGS
For a discussion of the material legal proceedings in which the Company was involved through June 30, 2022, see Note 12, Contingencies, to this Form 10-Q.
ITEM 1A — RISK FACTORS
Information regarding risk factors appears in Part I, Item 1A, Risk Factors, in the Company’s 2021 Form 10-K. There have been no material changes in the Company’s risk factors since those reported in its 2021 Form 10-K.
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 — MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 — OTHER INFORMATION
None.
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ITEM 6 — EXHIBITS

Number |  | Description |  | Method of Filing
4.1 |  | Eleventh Supplemental Indenture, dated as of May 25, 2022, among Clearway Energy Operating LLC, the guarantors named therein and Delaware Trust Company. |  | Incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on June 1, 2022.
4.2 |  | Third Supplemental Indenture, dated as of May 25, 2022, among Clearway Energy Operating LLC, the guarantors named therein and Delaware Trust Company. |  | Incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on June 1, 2022.
4.3 |  | Second Supplemental Indenture, dated as of May 25, 2022, among Clearway Energy Operating LLC, the guarantors named therein and Delaware Trust Company. |  | Incorporated herein by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on June 1, 2022.
31.1 |  | Rule 13a-14(a)/15d-14(a) certification of Christopher S. Sotos. |  | Filed herewith.
31.2 |  | Rule 13a-14(a)/15d-14(a) certification of Chad Plotkin. |  | Filed herewith.
31.3 |  | Rule 13a-14(a)/15d-14(a) certification of Sarah Rubenstein. |  | Filed herewith.
32 |  | Section 1350 Certification. |  | Furnished herewith.
101 INS |  | Inline XBRL Instance Document. |  | Filed herewith.
101 SCH |  | Inline XBRL Taxonomy Extension Schema. |  | Filed herewith.
101 CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase. |  | Filed herewith.
101 DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase. |  | Filed herewith.
101 LAB |  | Inline XBRL Taxonomy Extension Label Linkbase. |  | Filed herewith.
101 PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase. |  | Filed herewith.
104 |  | Cover Page Interactive Data File (the cover page interactive data file does not appear in Exhibit 104 because its Inline XBRL tags are embedded within the Inline XBRL document). |  | Filed herewith.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| CLEARWAY ENERGY, INC. (Registrant) |
| /s/ CHRISTOPHER S. SOTOS |
| Christopher S. Sotos |
| President and Chief Executive Officer (Principal Executive Officer) |
| /s/ CHAD PLOTKIN |
| Chad Plotkin |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
| /s/ SARAH RUBENSTEIN |
| Sarah Rubenstein |
Date: August 2, 2022 | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) |

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