Renewable Energy Expansion And Battery Storage Will Transform Energy Markets

Key Takeaways

• Strong project pipeline, customer contracts, and diversified assets position Clearway for sustained growth, stable cash flow, and margin expansion as clean energy demand rises.
  
• Efficient asset optimization and favorable financing reinforce the company's ability to invest in growth while maintaining competitiveness and steady earnings.
  
• Reliance on favorable financing, contract trends, regional policies, and incentives exposes the company to margin pressures, regulatory risks, and potential earnings volatility.

Catalysts

Operates in the clean energy generation assets business in the United States.

• Clearway's significant pipeline of renewable and battery storage projects-much of which already qualifies for tax credits through 2029-positions the company to benefit directly from increasing demand for decarbonized energy as electrification and clean energy mandates accelerate, supporting sustained revenue and CAFD growth.
  
• Strategic long-term contracts with hyperscale data center customers and utilities are expanding, capitalizing on the rapid growth in corporate and industrial demand for renewable PPAs, which increases revenue visibility and underpins stable cash flows and earnings growth.
  
• The company's diversified asset base across wind, solar, and storage in multiple core U.S. markets, with continued investment in grid-relevant battery projects, reduces exposure to regional volatility and supports steady net margin expansion as grid modernization deepens.
  
• Ongoing repowering and optimization of existing assets with high, accretive CAFD yields extend the useful life of projects and improve operating efficiency, driving incremental increases in earnings and net margins.
  
• Enhanced access to capital at scale through growing investor preference for ESG-aligned companies and proactive interest rate hedging is expected to keep financing costs competitive, enabling Clearway to fund growth investments without materially pressuring margins.

Clearway Energy Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Clearway Energy's revenue will grow by 8.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.3% today to 9.1% in 3 years time.
• Analysts expect earnings to reach $166.6 million (and earnings per share of $0.52) by about September 2028, up from $76.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $191.3 million in earnings, and the most bearish expecting $40.9 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 59.5x on those 2028 earnings, up from 42.2x today. This future PE is greater than the current PE for the US Renewable Energy industry at 42.0x.
• Analysts expect the number of shares outstanding to grow by 0.37% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.42%, as per the Simply Wall St company report.

Clearway Energy Future Earnings Per Share Growth

Risks

• The company's growth plans rely on modestly increasing equity issuances and leveraging additional debt capacity, which could become more costly or less available if interest rates rise or credit markets tighten, negatively impacting net margins and future earnings.
  
• Heavier use of Power Purchase Agreements (PPAs) with large, sophisticated customers such as hyperscalers and utilities may expose Clearway to risk if wholesale power markets or contract pricing trends move unfavorably, potentially reducing future revenue and CAFD per share growth.
  
• Ongoing diversification into battery storage represents a growing share of the project pipeline, but increasing competition, rapid technology shifts, and evolving supply chain or tariff risks in the energy storage market could compress margins or delay projects, adversely affecting earnings and revenue predictability from new assets.
  
• Clearway's geographic concentration in core markets like California, PJM, and the Western states exposes the company to local regulatory, policy, or weather-related risks which could lead to earnings volatility, especially if regional Renewable Attribute (RA) pricing or contract structures change unfavorably.
  
• Although Clearway has pre-qualified much of its pipeline for tax credits, the company's future capital investment economics remain partially dependent on the continuation of favorable policy, subsidy, and tax incentive frameworks; any government policy rollback or accelerated phase-out of incentives could erode profitability and impair long-term revenue growth.

Valuation

• The analysts have a consensus price target of $36.111 for Clearway Energy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $40.0, and the most bearish reporting a price target of just $34.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.8 billion, earnings will come to $166.6 million, and it would be trading on a PE ratio of 59.5x, assuming you use a discount rate of 10.4%.
• Given the current share price of $27.22, the analyst price target of $36.11 is 24.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.