XPLR (XIFR) Q3 2026 Earnings Call Transcript

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DATE

Nov. 3, 2026

CALL PARTICIPANTS

• Director of Investor Relations - Kanghee Jeon
• President and Chief Executive Officer - S. Alan Liu
• Chief Financial Officer - Jessica Geoffroy

TAKEAWAYS

• Operating Revenues -- $332 million for the third quarter, compared with $315 million in the prior-year period.
• Adjusted EBITDA -- $471 million for the quarter, including a $49 million year-over-year increase from existing projects driven by normalized wind resource.
• Free Cash Flow Before Growth -- $164 million for the third quarter, reflecting higher project financing costs and corporate interest payments.
• Net Income Attributable to XPLR -- $51 million, representing $0.54 per diluted common unit for the quarter.
• 2026 Repowering Execution -- Approximately 85% of planned repowerings for 2026 are complete as of the earnings call date.
• Interconnection Asset Sales -- 400 megawatts of surplus interconnection assets and rights sold to NextEra Energy Resources between August and October 2026.
• Corporate Debt Retirement -- $33 million in unsecured notes retired in October, leaving no remaining corporate debt maturities for the 2026 calendar year.
• 2026 Adjusted EBITDA Guidance -- Management expects the full-year result to finish in the lower half of the $1.75 billion to $1.95 billion range.
• 2026 FCFBG Guidance -- Full-year free cash flow before growth is projected at or near the low end of the $600 million to $700 million range.
• 2027 Adjusted EBITDA Outlook -- Introduced at a range of $1.56 billion to $1.70 billion, primarily reflecting the expiration of tax credit eligibility for maturing assets.
• 2027 FCFBG Outlook -- Introduced at a range of $525 million to $600 million, including a projected $20 million increase in net interest expense.
• Wind Resource Sensitivity -- Every 1% deviation in wind production across the fleet equates to an impact of $4 million to $6 million on adjusted EBITDA for the remainder of 2026.
• El Nino Weather Impact -- Outlook reflects expectations for at least 3% lower wind resource for the balance of 2026 and a potential $32 million impact on 2027 adjusted EBITDA.
• West Region Generation -- Weaker than expected wind and solar resource in the West Region impacted energy revenue due to higher-value power purchase agreement contracts in that area.
• 2028 Financial Outlook -- Management expects 2028 free cash flow before growth to be in line with 2027 performance.
• Interconnection Asset Potential -- The company maintains multiple gigawatts of surplus interconnection assets available for future monetization or redeployment.
• Tax Credit Roll-off -- The anticipated reduction in production tax credits reflects the maturation of the renewable portfolio and associated tax equity arrangements.
• March 2025 Unsecured Notes -- Current quarter results reflect full semiannual interest payments on $1.75 billion of notes issued in the prior year.
• Operations and Maintenance Expenses -- $119 million for the third quarter, down from $151 million in the comparable prior year period.
• Capital Maintenance Expenditures -- $6 million for the third quarter, focused on sustaining existing asset performance.

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RISKS

• Geoffroy stated, "While average wind and solar resource has been strong across the fleet overall this year, it has been weaker than expected in the West Region," which contains higher-value power purchase agreement contracts.
• Geoffroy warned that the company's outlook "reflects expectations for at least 3% lower wind resource related to El Nino weather conditions" for the balance of 2026.
• Geoffroy noted that the "primary driver of the expected step down in adjusted EBITDA for 2027 as compared to 2026 is the expiration of tax credit eligibility for certain assets within the existing portfolio."

SUMMARY

XPLR Infrastructure, LP (NYSE:XIFR) reported quarterly results and introduced financial guidance for 2027, highlighting a transition period as the renewable portfolio matures and legacy tax credits expire. Management reported that the underlying business characteristics support a durable long-term cash flow profile despite near-term headwinds from weather variability and higher interest expenses. The partnership is actively monetizing surplus interconnection assets to fund capital priorities, including battery storage co-investments and internal project upgrades. Management stated that the roll-off of production tax credits will lead to simplified ownership structures and an increased share of project cash flows as tax equity investors achieve their targeted returns. Additionally, the company is engaging in early contract optimization discussions with customers as legacy power purchase agreements approach their expiration dates.

• CEO Liu stated, "XPLR owns multiple gigawatts of surplus interconnections, and so we view these as embedded options within the portfolio."
• The company completed the sale of 200 megawatts of interconnection assets specifically to support reinvestment in several underlying projects.
• CFO Geoffroy stated, "As the associated tax equity arrangements mature, and investors achieve their targeted returns, we expect to benefit from simplified ownership structures and an increased share of project cash flows."
• Management noted that 2027 guidance incorporates a potential $32 million impact from lower wind resource concentrated in the first quarter due to El Nino.
• The company is leveraging contract optimization to enhance long-term economics and free cash flow before growth rather than focusing solely on contract extensions.

INDUSTRY GLOSSARY

• Adjusted EBITDA: A non-GAAP financial measure that represents earnings before interest, taxes, depreciation, and amortization, adjusted for specific non-cash or non-recurring items.
• FCFBG (Free Cash Flow Before Growth): A measure of cash generated from operations available for debt service, distributions, and capital allocation, excluding growth-related capital expenditures.
• Interconnection: The infrastructure and legal rights required to connect a power generation facility to the electrical grid.
• PPA (Power Purchase Agreement): A long-term contract between an electricity generator and a customer, typically at a fixed price per megawatt hour.
• PTC (Production Tax Credit): A federal tax incentive for every kilowatt hour of electricity generated by qualified renewable energy facilities.
• Repowering: The process of replacing older components of a renewable energy project with newer, more efficient technology to extend the asset's life and improve performance.
• Tax Equity: A financing structure where an investor provides capital to a project in exchange for federal tax credits and other tax benefits.

Full Conference Call Transcript

Operator: Good day, welcome to the XPLR Infrastructure Third Quarter 26 Earnings Call and Webcast. All participants will be in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Kanghee Jeon, Director of Investor Relations. Please go ahead.

Kanghee Jeon: Good morning, everyone, and thank you for joining our third quarter 26 financial results conference call for XPLR Infrastructure. With me this morning are S. Alan Liu, President and Chief Executive Officer of Explore Infrastructure Jessica Geoffroy, Chief Financial Officer of Explore Infrastructure. Alan will walk through our business highlights and Jessica will provide an overview of our financial results. After that, our executive team will be available to answer your questions. On this call, we will be making forward-looking statements based on current expectations and assumptions which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect.

Or because of other factors discussed in today's earnings news release, the comments made during this conference call, in the Risk Factors section of the accompanying presentation, or in our latest reports and filings with the Securities and Exchange Commission each of which can be found on our website www.xplrinfrastructure.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non GAAP measures to the closest GAAP financial measure. With that, I will turn the call over to Alan.

S. Alan Liu: Thank you, Kanghee. Good morning, everyone. Since our last update, the Explore team has continued to make progress across our key priorities. With repowering, execution remains on track. To date, we have completed approximately 85% of our planned repowerings for 2026. The remaining program is progressing and is expected to enhance the long term value of our portfolio. We also remain focused on our previously announced interconnection sales and battery storage co investment agreement with NextEra Energy Resources. The first 2 joint ventures formed in July and we are continuing to work on the remaining projects contemplated under the agreement.

XPLR also completed the sales of approximately 400 megawatts of additional interconnection assets and rights to NextEra Energy Resources, August and October. Approximately 200 megawatts were sold in connection with the agreement with proceeds expected to fund a portion of XPLR's net equity investment in the 4 battery storage projects. Proceeds from the sale of the remaining approximately 200 megawatts are expected to support reinvestment in the underlying projects. We continue to evaluate opportunities for monetization of interconnection assets and rights, where they make economic sense. We view these transactions as an important example of the optionality embedded within our existing portfolio.

We are leveraging existing interconnection assets or rights that are already part of our asset base to unlock incremental value and to redeploy capital across the portfolio, including to support reinvestment and an incremental investment in storage. While maintaining a disciplined approach to capital allocation and balance sheet management. We also continue to execute on our previously outlined financial plan by retiring the remaining approximately $33 million balance of our 26 unsecured notes in October leaving us with no remaining corporate debt maturities in 2026. Alongside this progress, we are seeing opportunities to enhance the value of our existing assets through contract optimization.

While we expect this opportunity to grow over time as more legacy contracts approach expiration, we are engaging with potential counterparties across multiple markets and evaluating opportunities to extend or optimize contracts where market conditions support attractive economics. We are seeing increasing interest from customers and beginning these discussions well ahead of contract expiration as they evaluate their longer-term power needs. We will remain disciplined in evaluating these opportunities. Our objective is not simply to extend contracts, but to pursue opportunities that can enhance the long-term economics and free cash flow before growth profile of the underlying assets. With that, let me turn it over to Jessica.

Jessica Geoffroy: Thank you, Alan, and good morning, everyone. Let's turn to XPLR's detailed results. For the third quarter of 26, XPLR's portfolio generated approximately $471 million in adjusted EBITDA and $164 million in free cash flow before growth. Existing projects delivered a year-over-year increase of $49 million in adjusted EBITDA and $24 million in free cash flow before growth. Primarily reflecting more normalized wind resource compared with the prior year period and a favorable year over year comparison on net operating expenses. For free cash flow before growth, these benefits were partially offset by a decline in proceeds from tax equity investors and higher project financing costs related to the funding of our 2025 repowering program.

In addition, results for both adjusted EBITDA and free cash flow before growth reflect the impact of asset dispositions completed in September 2025. Free cash flow before growth was further impacted by higher corporate interest payments on the approximately $1.75 billion of unsecured notes issued in March 2025. Specifically, current quarter results reflect the full semiannual interest payments on those notes, whereas the payments in the prior year comparable quarter included only partial period of related interest expense. Turning to our financial expectations for 2026. As we approach year end, we have greater clarity on our full year outlook.

We now expect full year adjusted EBITDA to finish in the lower half of our prior guidance range and full year free cash flow before growth to come in at or near the low end of the prior guidance range. There are a number of factors impacting our updated outlook for this year. While average wind and solar resource has been strong across the fleet overall this year, it has been weaker than expected in the West Region. Unfavorable generation in the West creates more significant energy revenue reduction because the region contains higher value PPA contracts on a dollar per megawatt hour basis.

Looking to the balance of the year, our outlook also reflects expectations for at least 3% lower wind resource related to El Nino weather conditions. As a reminder, a 1% deviation in wind production across the fleet equates to $4 million to $6 million of adjusted EBITDA for the balance of 2026. In addition, we have incorporated slightly higher expectations for net operating and maintenance expenses for the rest of the year. Today, we are also introducing our financial expectations for 2027. We expect adjusted EBITDA of $1.56 billion to $1.7 billion and free cash flow before growth of $525 million to $600 million In establishing these ranges, we have considered a range of potential resource outcomes.

The lower end of the ranges contemplates the potential impact from lower wind resource related to El Nino weather conditions anticipated in the first half of next year. The primary driver of the expected step down in adjusted EBITDA for 2027 as compared to 2026 is the expiration of tax credit eligibility for certain assets within the existing portfolio. The anticipated roll off of production tax credits reflects the normal maturation of our renewable energy portfolio. These credits were largely allocated to third party tax equity investors. Whose investments provided upfront financing for the projects.

As the associated tax equity arrangements mature, and investors achieve their targeted returns, we expect to benefit from simplified ownership structures and an increased share of project cash flows. Partially offsetting the reduction in reported adjusted EBITDA. For free cash flow before growth in 2027, the net expected impact from tax credit changes is roughly $25 million. This impact is less than for adjusted EBITDA because free cash flow before growth only reflects the portion of tax credit economics retained by XPLR and its unitholders after tax equity allocations. The year over year change in free cash flow before growth also reflects approximately $20 million higher net interest expense.

Looking ahead to 2028, based on our current outlook, we expect free cash flow before growth to be in line with 2027. Beyond that, we believe the underlying characteristics of the business support a durable free cash flow profile over the longer term. With several factors that could create upside from the existing portfolio. We anticipate continued benefits from investments under our existing capital plan as more projects come online. The portfolio is also well positioned to capitalize on re contracting opportunities that we expect may emerge over the coming years. At the same time, delivering on this performance requires us to continue managing operations and maintenance costs and running the portfolio efficiently.

As always, our expectations assume our usual caveats. In summary, we continue to operate a large diversified portfolio of contracted infrastructure assets that generate meaningful free cash flow before growth. We are executing against the priorities we have previously laid out and are maintaining a disciplined approach to capital allocation and balance sheet management. Looking ahead, our focus remains on strong execution maintaining financial flexibility and pursuing opportunities that can enhance the long term value of the portfolio for XPLR unitholders. That concludes our prepared remarks and we will now open the line for questions.

Operator: We will now begin the question and answer session. The first question comes from Julien Dumoulin-Smith from Jefferies. Please go ahead.

Julien Dumoulin-Smith: Hi there. This is Anouhea Elliott on for Julien. So following the roughly 400 megawatts of interconnection asset and rights sale completed this year, can you just help quantify the remaining interconnection monetization opportunity across the portfolio? I guess should we view these additional proceeds as recurring support for battery co investments and project reinvestment Or were these transactions, more opportunistic?

S. Alan Liu: Hi. Good morning. I will take that question. As we have noted before, XPLR owns multiple gigawatts of surplus interconnections, and so we view these as embedded options within the portfolio. They are assets that do not generate cash today, and can be over time monetized. And so we are going to continue to evaluate opportunities to monetize these where they make sense. As you have seen, we have demonstrated there is multiple pathways to monetizing them, including the battery's cost low investments co investment opportunity that we have negotiated and collaborated with Nelson. We have certainly pursued direct sales where that makes more sense. And so, yes, we are going to continue to evaluate opportunities to monetize these assets.

Julien Dumoulin-Smith: Okay, great. And then I guess my second question. For 2027 guidance, what brings you guys to the high and low end of the range, particularly with regard to what is assumed for the El Nino impact? You mentioned that you expect lower wind resources, but I guess any other color on the magnitude of that?

Jessica Geoffroy: Sure. Hi, it is Jessica. So for 2027, we did give specific sensitivities for wind lower wind resource on the El Niño front? So we incorporated into the lower end of the range for adjusted EBITDA, approximately $32 million potential impact. And $25 million potential impact on the free cash flow before growth side. That equates to roughly 6% lower wind estimate that we have for El Niño in the first half of next year. Awesome. Thank you guys so much. In the first quarter, sorry, Okay. Thank you.

Operator: The next question comes from Nelson Ng from RBC Capital Markets. Please go ahead.

Nelson Ng: Great. Thanks. Jessica, just to clarify. So on your El Nino assumptions, like obviously, baked in some caution for Q4 of this year. But you are expecting from your guidance perspective that El Nino lasts from Q4 of this year through Q1 and kind of stops there?

Jessica Geoffroy: Well, we said in the script, right, recall in my prepared remarks, we said in the first half of next year. The number that I quoted the $25 million is an assumption of roughly 5.8% lower wind resource concentrated in the first quarter of next year. Again, are the best estimates we have at this time for both 2026 and 2027. The portfolio is subject to short term resource variability, but those are the sort of best numbers that we have at this time in terms of estimate for the El Niño impact. Okay, got it.

Nelson Ng: And then next question just relates to the allocation of the proceeds from the interconnection sales. I know it is not a big number, but 12 million of the proceeds are being allocated to reinvestments in the underlying projects. You just clarify whether we should think of this as like organic growth CapEx Or is this are you funding some, like, major maintenance or refurbishment that is needed in some of the underlying projects.

S. Alan Liu: Hey, Nelson. it is Alan. We had some planned upgrades to site controls and communications infrastructure at some of these projects. And so they are already in the plan. Opportunity came up and to answer an earlier question, it was opportunistic. To monetize the surplus interconnects at a value, an attractive evaluation and money. Once you have converted that option into cash, it is fungible. We are just planning on leaving the cash at the projects to offset the spending that was already planned. Okay. Got it.

Nelson Ng: And then just 1 last question. In terms of your guidance, like does the repowering plans and also I know, like, the contract expirations are pretty limited in the next year or so, but like, does that make any, like, has that made any, like, does that have, much of an impact on your on your guidance for next year? Or is it very incremental?

S. Alan Liu: In terms of the guidance, it is incremental. But we are bullish on this front. We are, as we mentioned in the remarks, we are seeing traction in customer dialogue of people willing to engage with us on potential recontracting, reoptimization of the existing contracts, well in advance of where the existing contract expires. So, you know, we are optimistic on this front And so then we do think that there is incremental opportunities in the next couple of years. Great. I will leave it there. Thank you.

Operator: The next question comes from Anthony Crowdell from Mizuho. Please go ahead.

Analyst: Hey, good morning team. Just hopefully 2 quick questions. 1 on the tax equity roll off. You said maturing tax equity gives you a larger share of the project cash flows. So how much of the 2027 tax credit hit does that offset? And does that offset growth in 2020 does that offset grow in 2028?

Jessica Geoffroy: Yeah. Hi. it is Jessica. So if you take a look at that, 170 million number on adjusted EBITDA for the 2027 guidance versus 2026, that is a net number. So it is not. that is not directly, hey. Here's the eligibility roll off specifically for tax credits that came off assets that were expiring from their 10-year period. it is inclusive of the offset on repowering contributions and PTC escalators. So the net impact on adjusted EBITDA accounts for that. Free cash flow for growth, right, you have a smaller number and a small variability, but you have adjustments for PAYGOs that change as tax equities come off.

And then as there are tax equity investors who are, effectively bought out of the structure through the allocation of tax credits, then they would no longer get that small share of cash flows from the projects that they were getting. So all of that is baked into the expectations in those categories that we have laid out.

Analyst: Great. And then just. I think you may have already hit it just on the weak West wind and solar, think hit your higher price BPAs in 26. Is that only weather or is there something structural that may impact on your 2027?

S. Alan Liu: I think that was more recent experience in 2026 that Jessica was referring to, right, if you think about our assets in California and the WACC, generally much higher PPAs and contracts, right, or a contract. And so this is a reflection of the fact that in the short term, you are going to have variability, and it is also is not always a direct correlation of overall megawatt hours to how it reflects on revenue. Right? it is kind of dependent on which region is impacted by the megawatt hours. Again, short term, you will see this variability Over the long term, these things even out.

And as we provide expectations going forward, generally, we are assuming normal weather. it is just that as we look at El Niño and the information we are seeing, particularly as we are getting up, up-to-date reports every week on kind of the balance of the year. We felt it was prudent to start to incorporate some of that into the expectations in the short term. Great. that is all I had. Thanks for taking my questions.

Operator: Great. Thank you. This concludes our question and answer session, and the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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