On Monday, BofA Securities initiated coverage on Clearway Energy (NYSE:CWENa) Inc. (NYSE:CWEN) with a Buy rating and set a price target of $33.00. The coverage reinstatement by BofA Securities suggests a potential total return of approximately 22% for Clearway (NYSE:CWEN) Energy's shares.
Clearway Energy operates in the renewable energy sector, with a focus on utility-scale solar, storage, wind, and natural gas assets. The company is poised to benefit from its relationship with its sponsor, Clearway Energy Group (CEG), which has a significant 41.8% economic interest in Clearway Energy Inc. This connection is expected to provide a steady stream of acquisitions for Clearway Energy, sourced from a substantial 30GW pipeline of projects under development by CEG.
The analyst at BofA Securities highlighted the strategic advantage Clearway Energy has due to its sponsor's large pipeline of projects. The alignment between the two entities is seen as a defensive strength against the volatility often observed in the broader sector. The steady flow of drop-down acquisitions from the sponsor to Clearway Energy is considered to be largely de-risked, adding an element of stability to the company's growth prospects.
Furthermore, it is estimated that only a small portion of the sponsor's pipeline, between 3-4%, needs to reach commercial operation annually to sustain Clearway Energy's growth trajectory. This provides a clear visibility into the company's future development and supports the positive outlook reflected in the Buy rating.
The $33.00 price target set by BofA Securities indicates a bullish stance on the stock, suggesting that Clearway Energy is well-positioned to capitalize on the ongoing transition towards renewable energy sources and the supportive dynamics of its partnership with Clearway Energy Group.
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