Q2 2020 Vistra Corp Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the this trust second quarter Twentytwenty results Conference call.
At this time all participants are in they listen only mode.
After the speakers presentation, there will be a question and answer session.
Yes. Good question during the session you would need to press star one on your telephone.
If you require any further assistance at least for Star zero.
I'll now like turn the conference over to your speaker today. The Smalley sore. Thank you. Please go ahead Molly.
Thank you and good morning, everyone welcome to investors Investor webcast every second quarter, 2020 result, which is being broadcast live from the Investor Relations section of our website at Www Dot District Court Dotcom also available on our website or a copy of today's investor presentation, our form 10-Q, and the related earnings release.
Joining me for today's call or hurt Morgan, President and Chief Executive Officer, and David Campbell Executive Vice President and Chief Financial Officer, We have a few additional senior executives on the call to address questions in the second part of today's webcast as necessary.
Before we begin our presentation I encourage all listeners to review the Safe Harbor statements included on slide two and three in the Investor presentation on our website that explain the risks the forward looking statements the limitations on certain industry in market data included in the presentation and the use of non-GAAP financial measures. Today's discussion will contain forward looking statements, which are based on assumptions we.
We'd be reasonable only as of today they.
Such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected or implied we assume no obligation to update our forward looking statements.
Further our earnings release slide presentation and discussions on this call will include certain non-GAAP financial measures for such measures reconciliations to the most directly comparable GAAP measures are provided in the earnings release and in the appendix to the Investor presentation, I will now turn the call over to Curt Morgan pick up.
Thank you Mali and good morning, everyone on the call as always we appreciate your interest in this true.
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Cases of covert 19 have been rising throughout the country, including in many of the state's racing social unrest as citizens are fighting for equality and demanding change.
While the political climate is polarizing and masked by uncertainty tool election season.
Well it all seeds overwhelming.
He will get through this and we will be better than ever.
I've seen proof of the resiliency of the American people through the lens of our own team members.
And their dedication and commitment to keeping the lights on in the face of these macro challenges.
Instead of the strife in our country device.
As a team and as a family.
Taking a better understanding them.
The way, we advanced as a company and as a country is the listen.
Oh do for all.
We say it Vista, we want to be a company that works for everyone.
Okay.
Or people are number one asset and they have continued to show up operational excellence, our stakeholders expect from us and our customers dessert.
The second quarter results, we're announcing today are evidence of this dedication.
On slide six.
We show our strong second quarter and year to date result.
Durations of 900.
And $29 million, which is third quarter 2019 result.
The quarter over quarter favorability was driven by the acquisitions of Korea, Asuncin, but in the second half of 29 team as well as strong execution by our retail Jeff.
And ration and commercial teams.
Specifically, our retail team grew customer counts in the second quarter in all five of our Urquhart residential, earning all time highs in our post interaction customer service.
Yes, reflecting our teams late summer service levels during this pandemic.
Our next generation team executed 86 spring maintenance outages in the.
Paul performance came in on time.
And under budget. Despite the challenges presented by coal Goodnight team positioning our fleet to be available for the critical summer months. In addition, our teams continued to drive savings and revenue enhancements through the I'm going execution of our operations performance improvement initiative.
Which we expect will deliver an incremental $100 million of adjusted EBITDA in 2020, reaching an annual run rate of nearly $700 million by year end.
And lastly, our commercial team once again optimize the value of our generation fleet through hedging it optimization transactions.
As for second quarter 2020 financial results benefited from both portfolio positioning executed in anticipates from higher hedged energy.
PJM.
This spring.
Delivered year to date adjusted EBITDA from ongoing operations $29 billion results that are tracking ahead of expectations for the period and solidly above 29 team results by more than.
15% further evidence of the resiliency of being it as a result of this strong performance through the first half of the year, we're real both ongoing operations adjusted.
These adjusted free cash flow before growth.
As set forth on slide six.
And while it deserves.
Early in the year to formally reset our guidance.
Ranges with the important summer months ahead.
We are currently tracking above the midpoint of our 2020 guidance ranges.
From covert 19 that we outlined on our first quarter earnings call and made year to date results would indicate that these initial estimates could prove to be overstated.
We will continue to monitor businesses.
Situation, especially given the in Texas and now that the fed.
As of July 30 Onest.
Despite the political wrangling in DC.
C. We continue to believe there will be a phase four stimulus package that will help bolster the economy.
Although perhaps the unemployment benefits after all it is an election year and.
Neither side wants to come up short when it.
On retail volumes in the second quarter residential uses woodruff approximately 5% why.
5% to 15% during the quarter with significant improvement in demand seen across all markets by the ended the quarter as states.
Began to reopen.
Importantly demand is now virtually flat to expected pretty cove at levels, even with the rising cases in the state as we depict on slide seven.
On this slide we've updated the demand declined in package as of mid to late July.
Hi, as compared to those we observed.
Because the market, where we do.
Adjusted EBITDA is the most resilient with peak demand already.
Back to expected pretty cold with levels the balance of the markets, where we operator also show.
But meaningful recovery with demand within 1% to 5% of expected pre covert levels across the board in demand, particularly in ERCOT is it's a positive data point for our 20 wide eight.
This is fundamental point of view continues to suggest that our 2021 ongoing operations adjusted EBITDA.
Good track in line with or potentially.
Our guidance midpoint.
Even though forward curve for the summer 2021 peak have recently fall off the lows.
We do not believe this is where the.
You settle as we have see this pattern play out in each of the path.
Fundamentals remain tight in are caught and we believe stronger pricing than current pool.
Words is supported by our detailed funded but it'll analysis.
In fact, it has always been our view there.
On a single point in time on the forward curve marginalizes, our opportunistic catching capabilities and ignores the volatility in New York up forwards volatility to optimize the value of Barclays.
Rather we have consist.
In line with our point of view, reflecting the stability of our integrated up.
Sure.
To illustrate the graph on the slide demonstrates how.
Historically ERCOT forward curve.
Firms have risen in the late summer or early fall of the immediately prudent during this time when retailers start to hedge their exposure for the.
So from the prop summer to the forward summer increasing liquidity as such the forward summer begins to reflect normal weather and supply.
The placed on the specifics and sentiments of the problem solver.
Actually remain tight the risk of scarcity pricing remains we anticipate pace this risk to persist in the <unk>.
The annual demand growth in Texas.
Coupled with the markets increasing global resources during peak hours.
All it takes its.
In either low wind output for.
City pricing to materialize.
Yeah.
While market participants might be currently bearish summer 2021, because we have yet ensign 2020 recall that we were in the same place.
At this time last year.
In 2019, we observed a couple of weeks.
When was also strong and unit performance was exceptional.
Scarcity pricing did not much.
It's 16 summer prices fell to the <unk> by the end of July but then.
15 minute intervals of $1000.
First per megawatt hour or higher holes that reached the 9000 dollar per megawatt hour pack, primarily driven by high temperatures.
And low wind.
It would have to move higher to reflect the underlying.
Hi, 16 summer prices rising more.
$150 per megawatt hour by the end of October.
Much of Texas Summer shows its teeth in August and September so the greatest suffered.
Certainly for scarcity pricing remains in the expected pre coven levels. We expect 2021 forward curves to once again rise. This fall in anticipation of another tight summer and we will be there to take advantage of it.
As we illustrate on slide nine.
ERCOT price.
Hi, there unplanned outages or low.
In 2018, and 2019 Urquhart saw totaled 31 hour first where prices were greater than that.
Thousand dollars per megawatt hour.
Well.
The average price for these high priced hours was too.
2920 increase the a round the clock price by $5.17 per month.
Ghibli, whether we'll be a critical variable driving the incidence and scarce.
See pricing intervals both this.
And next summer and with residential higher than expected prequel good levels.
We could see meaningful new Pete.
The man records as residential demand is both relatively inelastic and more sensitive to temperature swings duty increase in air condition.
Turning low Moreover, we expect year over year demand growth in ERCOT to remain strong necessitating. The addition of incremental renewable resources just to keep pace with the higher anticipated low.
Resources coming online in ERCOT to serve this load or renewable resources.
Which by definition or the more the grid relies on these renewable resources to satisfy.
Five peak demand the greater bringing a feature.
In summary, all of the necessary ingredients to drive scarcity pricing.
Intervals, both this summer and Nexstar present tight supply demand fundamentals year over year demand eight or canceled new renewable development and an increasing reliance on.
Intermittent renewable resources just.
While the Texas well.
Pricing intervals in the early.
Part of 2020 historical data tells us that it is at these events will occur.
Especially now that we are seeing wind output returned to more than the last few days, we've seen wind output in the.
Hundreds to low thousands you couple that with high temperatures.
So you're going to see scarcity value.
Just like in 29, TV, we expect our company will be ready different opportunities present themselves.
We continue to believe our integrated model is well positioned to deliver relatively consistent financial result, while generating a substantial amount of free cash flow on an annual basis.
He was important to stress that we believe in balance and integration between retail and generation, we're not a short retailer.
And believe owning generation remains fundamental to risk management, especially as intermittent or percentage of the supply base.
Nickel and commercial capabilities to.
Capture attractive Standalone returns in generation with superior integrated returns, we look forward to talking more about how we plan to allocate our significant capital.
We have spent most of our time this morning talking about the financial strength of our organization.
Of course, our investors are interested in our financial result, but as you all know, yes, GE is garnering greater and greater interest.
We believe that is a good thing.
So we would be remiss not to spend some time talking about the value we place on all of our stakeholders, including our employees customers and communities, including the environment for principal states, we care about.
Out our key stakeholders, including our people customers communities suppliers and investors.
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We also are committed to maintain aboveboard honest and ethical relationships with elected officials and regulators.
Another one of our core principles is we do business the right way.
Hey, just company is this will leave attract and retain.
His talent customers and investors.
And the second quarter, our company brought these core principles to the forefront as we continued our long tradition of corporate stewardship and initiated some new programs.
One in particular that has meant more work to me as a CEO than perhaps any other initiative, which I've ever been apart.
In June in response in particular to the George Floyd death, we initiated sessions with our employees where members of the leadership team came together and small groups with employees to listen to their thoughts of experiences on race in their lives in within the workplace.
Something just went off in my mind.
Life's playing field.
In this country, where people have color, especially African Americans and blacks.
We're still not level as much as I wanted to believe it was.
I wanted to believe so badly.
The stories, our employee shared about.
The challenges they continue to face most outside of the office, but something within our own vault <unk>.
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Simply because of the color of their skin were sobering.
We have now completed 21 listening sessions in just over a month period 40 hour work week and I have attended every single one of them.
The feeds valuable helping us to identify.
By pockets of issues, we must address to unlock the full potential our employees in our company.
As a result, we have new diversity and inclusion initiatives in flight that we're excited to roll out in the weeks and months ahead.
Some of their social issues identified or of course bigger than bistro.
But we will start with what we can control.
We intend to become more vocal on issues that are occurring outside of our company as well.
In addition to the listening sessions.
For a new initiative for Investor in the second quarter, We also could boys and contractors do the Cook.
Over 19 pandemic, while ensuring a reliable electricity supply.
We have maintained many initiatives we instituted in the first quarter, including our work from home policy for all employees with remote one of our facilities between shifts temperature.
For testing and entry question here is that all of our locations and requiring painful coverings and distancing where possible we continue to test.
Employees for antibodies in the virus, if they show symptoms or suspect potential infection and support quarantine with pay.
In the first half of the year, we shipped our employees and their families more than 5000 facial coverings to help keep them safe in the public spaces and also sent nearly 30000 mass two organizations in our local communities, including hospitals.
We have similarly contender to support our customers launching our 22nd annual beat the heat program by tripling the funding due to covert.
Beat the he just a critical program, including drive from distributions of New Air conditioning units and fans education on he safety tips for saving on energy costs and financial assistance for TX you energy customers and told we assisted 4400 customers impacted by Cobot 19.
Hey, there for electric bills through $1.1 million in donations to T X you energy aid, which is in addition to the $2 million, we donated to nonprofits and social service agencies for covert 19 relief.
Similarly in June with a focus towards social justice in equity, we made a commitment to donate $10 million over the next five years to support the advancement of business in education, and diverse communities, including enhancing our minority and women veteran and LGBTQ plus supplier programs in the second quarter. We also enhance.
At our environmental stewardship initiatives by publishing our 2019 sustainability report that for the first time adopts the global reporting initiative and sustainability accounting standards Board frameworks, a link to our sustainability report is available on slide 10.
We recognize the importance of providing complete and transparent information to the many stakeholders who have interest in our E. S fee related activities and the publication of our 2019 sustainability report in June was the first step toward enhancing these disclosures. This fall we intend to publish a climate report adopting the task force on climb.
But related financial disclosures framework. So please keep an eye on the sustainability section of our website for the latest news and events around our social economic and environmental initiatives.
On the development front in the second quarter, we announced the expansion of both of our battery energy storage projects in California Phase two of the Moss landing project will add an additional 100 megawatts for a total of 400 megawatts with commercial operations are expected to begin prior to August 2021.
In addition, we increased the capacity as a result, we now have nearly 450 megawatts a battery energy storage development.
Under contract in California, with another nearly 3000 megawatts of solar and battery storage projects in our development pipeline primarily in America.
We believe these projects are only to start investors expansion into zero carbon generating assets with our market, leading commercial team development project management skills technical prowess operational and maintenance capabilities and attractive sites.
We know how to manage the book.
Noble's and we serve nearly five.
5 million retail customers, who are increasingly seeking to procure their electricity needs from renewable resources.
Were also a large purchaser of renewables through long term agreements with over a thousand megawatts contractor more details regarding our near.
During our virtual investor event.
Before I turn the call over to David I did want to comment on effect.
General rule, the environmental Protection agency finalize last week relating to coal combustion residuals. We have mentioned this pending rule in the past as we believe it will have far reaching implications for the power assembled a rule requires certain coal plants to dispose of coal ash in Sir.
Purpose impoundments to other made necessary capital investments and operating changes to bring these coal ash disposal sites into compliance with the federal rule or to park.
For 2028.
Tom It.
Importantly.
Decisions on compliance must be made by the end of November. This now that the rules have been finalized.
And we'll be published in the Federal Register in the next couple of weeks, we're fine each of our impacted sites.
Those of our plans on a site.
For event in September is important to note that our value.
Several coal plants, especially in PJ.
And that will be under pressure due.
As I close this morning, I want to reiterate that Visteon is committed to lead as we strive to achieve a safe inclusive in environmentally conscious company and one that is a positive contributor to society.
In doing so we.
Nimble company that can produce.
Holders in both the near and long.
Sure and full value.
I will now turn the call over.
Thank you Kurt.
As shown on slide 12, Mr delivered another strong quarter.
Your operations of $929 million.
Which was $212 million higher than the same period in 2019.
Our retail segment increased by $108 million period over business were up a collective 104 <unk>.
In dollars.
The positive year over year variance for ongoing acquisitions of creates an ambition and favorite.
For ability and our Urquhart impeded our operations performance improvement initiatives and commercial optimization contributing to higher energy margin.
As a reminder, due to the retirement or for coal plants in our micro segment in the fourth quarter associated movement of the financial results in those.
Plants into the asset closures.
Belts, and then recast increasing the ongoing operations adjusted EBITDA.
Grew 29 team and $10 million in the second quarter 2090.
Year to date Msrs ongoing operations adjusted EBITDA in 1 billion $779 billion.
For 200.
Comparable 2019 results.
The favorability is driven by the acquisitions it creates an element as well as higher end.
Segments.
In both the second quarter and the first half a year.
Coming in ahead of management expectations.
As a result, Mr is currently tracking toward the upper half of its guidance range.
Turning now to slide 13.
This remains committed to reducing our leverage in 2020 as we approach our long term leverage target of 2.5 times net debt to EBITDA.
As of July 31st we have paid down nearly $750 million of getting the redemption of the entire 500 million.
Billion dollar principal amount of EUR, 5.875% senior unsecured notes due 2023.
Well as redemption of the entire 166 million dollar principal amount.
Of our 8.1% to 5% senior unsecured notes due 2026.
Last week, we also announced that our board of directors approved our third quarter dividend of 13 assets or 54 cents per share on an annual basis.
To address.
Represents an 8% increase from annual dues.
We plan to provide deed tales regarding our long term capital allocation plan at our virtual Investor event on September 29.
You can expect that our plan for 2021 and beyond will remain aligned with our core tenets of maintaining a strong balance sheet being opportunistic and disciplined with respect to growth investments investing in retail and renewable growth opportunities only when our internal return thresholds are met.
And in aggregate returning most of the cash available for allocation to our shareholders in the form of dividends and share repurchases.
As part of our virtual Investor event in September we plan to provide details regarding a two year share repurchase program.
As well as a multiyear dividend announcement.
A high level agenda planned topic. So the event can be found on slide 14.
We also expect to update our 2020 guidance introduce preliminary 2021 guidance.
And describe our plans to further transform our generation portfolio between now and 2030.
On the portfolio side, we plan to provide additional details regarding our expected reduction in coal exposure over the next decade.
As well as details about our current growth pipeline.
It should be an exciting event and we hope you'll be able to join us.
In closing Misra strong financial performance for the first half from 2020.
In the midst of a global pandemic continues to support when we believe is our attractive value proposition.
Which is our ability to deliver consistent financial results.
For the high conversion of EBITDA cash flow as well.
It's an acquisitions.
Our low debt low cost integrated model, well can and does deliver.
With that operator, we're now ready to open the line for questions.
And once again, ladies and gentlemen, if you would like to ask a question over the phone lines that is start then the number one on your telephone keypad.
Once again, if you would like to ask a question over the phone lines, but a star they number one and we'll pause for just one moment call the Gionee Rob.
And comes from the line of Shar Pourreza with Guggenheim partners.
The Janus, which are congrats on a great quarter and looking forward to some.
I'll just say good morning questions for you.
Building up a severe cold mid data points are you seeing or expecting any inorganic retail opportunities to arise in Texas, where the east due to the virus.
Any stress on smaller books.
Well, yeah, we I mean, we have seen pockets of books and and and companies that have seen some signs of stress.
You know the summer.
Hasnt shown up here yet in ERCOT band. So you know that that has provided some relief for some of those companies but.
You know, we could see that and we're active as you might guess and most people are going to come to us before.
They transact and somebody else. So you know we're in the flow on that and we are seeing some of it and I would expect if we see what we think we're gonna see in terms of scarcity value, particularly in aircraft.
We we may see some some more of those books come available.
I will say that you know when.
We evaluate goes we're obviously looking for quality books it can extend.
Beyond a year in some of these companies have.
The value of their company is atrophied, because you know they may be door to door, a you know more face to face type contacting and what's happening with the virus those types of channels have been a little more difficult in so you've got to really dig under and just make sure you're getting something.
Value and a you know we're not going to do a deal just to do one or we want to make sure we get value I don't know of Jim Burke saw the line Jim.
Jim obviously is over our retail business you want to add anything to that.
[laughter], Kurt I think you covered it well the only thing I would add is that.
With some of the cobot impacts, having a little bit more focus on the business impacts to demand some of the lower margin.
Business focus books are seeing a little bit more pressure than some of the residential books, but in general the thing that curve mentioned that the summer.
Hasn't shown up yet and are cod is probably the prevailing consideration and we're constantly monitoring the market for these opportunities.
Gotcha. Thanks goes and then this one might be more for David but can you give us an absence with the rating agencies you know.
Maybe by the end of next year or has that kind of slip to 22.
Either.
Yes, so the.
Your conversations the agencies continue to go well.
The.
With S&P, they've indicated and right now, they're they're accretive some positive outlook for getting the double B plus name indicated that that review will happen.
As early as a the third quarter, that's possible that wait for the third quarter results, we expected that review will happen.
It really is a third quarter of this year and now they put a fix timeline out for consideration to.
The investment grade, but often can take a year or so after your Moody's is on our faster trajectory.
They in there, but they upgraded us to the equivalent of Dolby plus indicated that they would consider an upgrade as early as the middle part of 2021. So obviously, we don't control the timeline.
Your next year middle or latter part of next year, but the key thing is it I think agencies in both recognizing affirmed that the strength of our company.
Through the pandemic into the financial crime.
This is something that related questions related to endemic is something that there.
Watching in evaluating and can help to reinforce the resiliency of our business in our business model and we think this quarter's results and our expectation so you're only reinforce that so we think we're on a positive trajectory with Sofia.
Great guys. That's it for me thanks for everything congrats on great quarter looking forward to September thanks.
Thank you.
And your next question comes from line of Julien Dumoulin Smith with Bank of America.
Good morning team. Thank very much of the time, so if I can ask a couple of questions.
Let me start first with a high level question.
As you think about this this larger update in the next couple of months, how do you think about growth investments in where you would it be position on that front.
And I'm thinking specifically on storage, but but I'll also just in terms of generation you've seen your peers answer more into TPH structures to.
To further align their generation business with retail how do you see the growth savvy equation initially coming in and I know this is to certain extent preempting. Some of your updates coming ahead here, but just think more strategically here on growth as part of the capital allocation.
Where is going with it.
Yeah, Julien So how are you doing and thanks for the question.
You.
And I tried to lose a little bit in the comments to this or not and I will say obviously some for September some of the details, but I think more at a 10000 foot level strategic Lee and I made a very specific comment for for a good reason I think we may take a little bit differently.
Then or maybe other competitors do but you know we kind of balance between having investment in physical assets in generation and new technologies renewables and batteries and PA is like I said, we've got over a thousand megawatts of pp ace as well.
As you know we've invested in batteries in California, we put up can too which is a battery.
And I I think you should expect us to do the same I mean, there are times, where we have opportunities to sign up a PPA.
That is good value and we made back to back that with the retail deal and then we also have times, where we have because of a have a location we might have or because of our retail business and also because of our commercial capabilities.
And our ability to manage costs are managed projects those types of things we have the capability to also invest in solar predominantly solar and batteries course, we've got a really good location in March and Moss landing and then also Oakland in California, you can only imagined given the size of our.
Company in Texas, We've got a number of really good sites and when it comes to renewables in batteries.
It's kinda like real estate its location location location and I think theres an opportunity for us.
To use our skills and capabilities as well as our locations and to invest in in a assets as well and we like that balance we like a balance of both a new technology investments and then we also like to balance of PT A's I'm also little to exit the PPA Mark.
Okay.
And and so you know also you don't want to put drags all at one basket, because if you're going to try to cover a short position.
You know with TPH. Please indicate the ace or not there you know then you've gotta go to something else and lean on the market and so we like a balanced approach and that is also manifest itself in a balanced capital allocation plan and that means we're going to put a little bit money back into our company and we're gonna <unk> and we're going to put a little a lot of the money back to the shareholder.
And that we're going to get into us very you know into the very detailed specifics.
Of that and our overall portfolio and how we expect to manage it in September.
And so we just wanted to see this summer play out a little bit and I think were by the time, we'll get to September will be in a very good place to lay all that out but we do we do see ourselves as a balanced and integrated player with a balanced mix of assets NPPA phase and that we are gone food deploy some capital.
Into.
Ah projects that we know we have an advantage and have superior returns and we've also said if we don't binary. So we don't have goes and we'll be able to get into the details of September.
There were plenty of fine with you know returning capital to shareholders. In fact, you know we're excited about the fact that we're getting our debt down middle level, now, where we have to allocate less and less to debt pay down and we can now start to allocate more and more could returning capital to shareholders.
Drilling you still there.
And it looks like we May have lost Julian Julien.
Are you on mute.
Well, maybe we can getting back on here to minute.
Okay, and we'll move onto the next question on your next question comes from Michael Weinstein with Credit Suisse.
Hi, good morning, guys.
Hey, Michael.
Hey.
Hey.
Is there any reason.
Why you're tracking in the upper half of the guidance range is there any reason why the second half of the year might bring that back down to the midpoint of the range at this point I mean or is there or any specific things you're looking at or is it just so that 19 certainty that yes worried about.
Well I you know look I think certainly galvanizing and you know we still continue to believe.
That we may do better on the bad debt expense side, but you know you just don't know and like we said in our in our remarks I'm a little worried about you know the additional a unemployment is Sherman insurance payments continental coming off into the end of July we think thats been helpful people paying their bills.
And we want to tread little bit lightly you guys know the cases in Texas have exploded.
And this has really unchartered waters, so you know I.
And then that's one of the things that I think could be a place where we might give something back we haven't played out the whole summer out yet and we still carry a little bit of leg in the summer and so we'd like to see how that plays out but I think we're also trying to say in our remarks that we feel pretty good about where we are.
At this point in time, and so we didn't want to change the ranges. We typically don't do at this early I think we'll probably talk about that in September that's even earlier than we normally do but I think we're going to be in a position to talk about you know 20 in the range that then in September I think you know for US. He any if you know as well I think you do.
You know for US even talk about the fact that were tracking above the midpoint. I think tells you that we're feeling good about 2020, but I you know I I do want to emphasize there is still there are still some things out there that we want to keep an eye on.
<unk> for the remainder of the year, but we're feeling good about it and I don't know David do you. If there's anything you want to specifically mention please jump in.
Great I just emphasize your where you close was that we feel good about how we're we're tracking your commentary I think you you can see my own the scrip reflects our view their work we're tracking well so.
Q3 is always a big quarter for us. So that's why we typically don't.
Don't update the range at this time of year, but we're feeling good about how we're tracking businesses performed well and.
It's an unusual year, so that plus the normal dynamics is up to three being the biggest quarter or why we haven't changed the range, but I'll mention signaling a strike.
But.
Sorry about that David I I will mention this Michael that I.
I think people.
I think they now know there's about it but we we kind of have a balanced year that we have sort of retail does pretty good and can do pretty well in the shoulder months, where the supply costs, because we have levelized retail price. They were the supply costs are lower and then in the summer we don't make as much money in retail, although we are doing.
Pretty well, obviously right now and then in the in the winter months in the fall in the winter, we get that we get that lower supply cost again, and so it's important that volumes stay strong for us in the remainder of the year on the retail side. So October can be a big month for Us November and December can.
The big months on the retail side and if you got it if it's if you had a situation where in Texas you had an issue with demand because of co good that might be a little bit of a drag we're not seeing that though we haven't seen it through the up to now and we've seen obviously a lot of cases, and so we're pretty optimistic that we're not going to.
I see it.
But also the relief program and in in ERCOT is coming off at the end of August.
And so all those things are going to factor into what's going to happen with our retail business, where the manner. The year, we're optimistic but we want to keep an eye on it and we've provisioned for it to.
And when we're telling you where we think we're gonna be you know we're also take into account that we do think that there could be higher bad debt expense than we normally have.
Right and one place you mentioned about.
That renewable investments would only be done it said nature a return criteria.
How does that look now I, our renewable investments.
Presenting some attractive return possibilities for you and I'm not just talking about just in Texas and maybe in other states with gas and electric prices like a little higher.
Yeah. So you know there are there are opportunities out there for people like us.
You know that that have you know the locations the capabilities.
I have the integrated nature of the business.
You can see.
You can see what I'd call US you know attractive returns.
And we're going to get more into that and we'll actually when September when we go through this well actually show you how that builds up because I know what people have in their mind. They have a P.P.A. sort of what the returns are for some of the developers that are putting these projects out there and and there wondering how are you, making something that looks at track.
Active.
Somebody is getting that value that value exists and given where market prices are clearing in ERCOT, it's who's getting it and so the developer wants to get paid the development fee and they need to get financing to get the project ago. So they need a PPA with an investment grade affirmed or an order do that.
And then somebody the ingress that investment grade from its getting the value how they choose to monetize that value is after that they could sell the P. Eight us and we come back to back or with a retail deal. They can take into the market. Many of these guys don't want to take it to the market.
Because there's risk taking it to the market and if you don't have the capability to do that and you don't want that risk and so you're going to awfully that risk, but the value is in the market and as we move more and more Michael to two merchant investment because not everything in truck, Texas or across this country can be built through a PPA structure.
When we get to the point, where somebody has to put down real dollars per merchant.
Then there were kind of returns that were looking for and that we see.
There are justified they need to be there in order to justify the risk and then you have to have the capability you have to deal with basis risk and market risk and whether risk and all of those things that go into it we have that ability to do that we've got a whole infrastructure that knows how to do that not everybody knows how to do that and so but we are seeing the.
Opportunity and we're one of them in my view one of the view players that really have the integrated nature and the capabilities to actually monetize entered into extract those kind of returns.
Okay. Thank you very much correct.
Thank you Mark we could talk to you.
Yeah.
And your next question comes line of Jonathan Arnold with vertical research partners.
Good morning, guys.
Hi, Jonathan.
I'm just one quick question on the retail side. They saw the customer account versus March came down maybe about 1% and you'll see your slide says you grew count soon I caught across all classes. So.
Hi, I'm presuming other regions. So a custom accounts come in and it maybe that was partly sort of intentional but could you just give us a some perspective on on what's going on now.
Yeah.
David you want so Johnson <unk> Johnson to be clear you or do you want us to talk about what's going on like in the PJM area ISO New England, just what you know what what's going on customer counts there as well as aircraft I just want to make sure that I got the question right. If you could touch bus and I just am I correct. The counts did come come down in PJM.
Or elsewhere.
All right.
Hey, guys it Jim I'm happy to take it Yeah go ahead, Jim Yeah go ahead you.
Yeah, Hey, Jonathan So we had we had talked on the last call that a couple of our partners you know the brands that we acquired creative send and that.
Our more dependent on face to face selling and the Midwest northeast markets. It had some of the biggest restrictions.
On face to face selling so creates an ambit for instance did well in Texas, Texas reopened a in mid June do allow some face to face selling.
Many of the other markets, particularly, Illinois, and Ohio, where we've got.
Sizeable presidents have not reopened yet so the quarter one's a quarter to drop is largely a function of the markets not enabling that kind of channel performance. We haven't we have moved to other channels is more online activity.
Oh that you would expect there's there's there's definitely more we're doing through the phones, but not through face to face selling so that's the main driver and Fortunately the stronger caught performance of T X you as well as the other brands and are caught more than overcame that in the quarter and that and we see sort of the whole.
Your planned out in a similar fashion.
Perfect. Thank you very much in.
Then just.
One question on a you know last quarter, you talked about your point of view and you'd also had a specific comment on what you'd where you thought 21 would track relative to Twentytwenty based on the amount scored cabs.
I mean, they don't seem to move very much so I'm curious about prior.
Comments still stands Oh, we've you know hedging and other things might have moved the needle though.
Yeah. So I think we're pretty much where we were we said we were trying to convey.
Message that yeah, we're kind of flat flattish the midpoint guidance from 2020, which was you know the thing is like 3435 were kind of flattish to lower.
We also I think if you remember Jonathan we said that we had stressed we had stress down further than that and we worked with within 10% of EBITDA, but that was to give you guys is sense, because we were getting feedback from people that you know.
Especially in we were in a minute really in the throws of Covidien. It was really knew at the time you know they wanted to see what a stress case would look like but you know I think where we are right. Now is we're sort of flattish to slightly lower and and that's and that was similar to where we had come out last time, we haven't seen anything yeah.
That would change that view and we'll probably no more because we'll be through most of the summer and into September will also be able to see where the 21 curves go as we roll out of this summer and into that fall period that that we showed on that graphic where you start to see people turning their attention.
Through the next summer and that's where you get liquidity and that's where pricing starts to firm up you know some of that pricing is is supported by what happens in the summer people a the prompt some are people like to look and see what was their scarcity or wouldn't conditions for scarcity showed up they didn't show up.
That kind of thing does affect the market and so.
You know, we'll see where the rest this summer goes but if we get some.
Hi temperatures in low wind or people will be looking to see how the market reacts to that all that sort of factors into affecting the forward curves and for US I think you know this we would prefer to hedge up most of our long exposure in Urquhart in particular as we go into the and.
Into the next year, and then you know filling the gaps throughout the <unk> or the the initial part of the year and going into the summer.
I don't know, whether we'll get that opportunity, but we think we will and that's what we're going to be looking for and that's when you'll see more of the summer exposure that we have a hedging will occur sort of between now.
On the balance.
Of the year.
And then you'll you'll see a sort of shape it a little bit as we go into next year, but we feel pretty confident we're going to get the opportunity.
You know for 21 summer, which is really our biggest its exposure for leg work will get well get plenty of opportunities to be able to hedge going into that.
And we still feel really good when we look at our you know detail supply demand fundamentals on a modeling we still feel good that we have a pretty tight market and it's a market that is relying more and more on intermittent resources. In fact, you know you no longer have a situation aircraft, where you can supply all a peak load.
With Dispatchable resources like coal and gas and nuclear that's so you have to rely on a certain level of.
Renewable resources in order to be a reliable market can to actually you know meat meet that demand in the market and with the volatility in intermittent nature of those resources the inherent nature of that you're going to get a few days in a in a market like Urquhart, where you have extremely high temperatures in July.
In August and September timeframe, they are going to be some days, where it's going to be tight and that's where the scarcity or comes into play on what the or do you see center deviation moving up this year, we ought to see some pretty good pricing it'll be a function of weather of course in wind and unit performance, but we would we.
We're pretty sure we go into this with a pretty confident that we'll see opportunities.
Great. Thank you and I just one final thing I you know you feel most obvious listed here reorganize the segments of this yet to be to say more kind of an integrated look of the businesses.
Something you would potentially consider or do you expect you'll continue reporting the way you off.
You know that's a good question I don't think we're going to do what they did but I think in September you'll see that we have a slightly different way that we're going to take a look at our business that I that we hope will will actually increase transparency and provide more information to you guys.
And that will be the goal of what we do and we'll give you a better sense of you know the business you know from a longevity standpoint and are in our strategic focus. So we do have an idea that we've been working on for sometime now and where we would like to roll that out you know you know a commensurate with the remain.
Under of you know our longer term capital allocation plan.
Great look the same out and thanks for the time this morning.
Yeah. Thank you.
And there are no further questions at this time I'll now hand, the call back over to Curt Morgan for closing remarks.
Okay.
Hi, Thank you for taking the time to join US a this morning and as I stated at the beginning of the call. We do appreciate your interest investor and we look forward to continuing the conversation I hope everybody stays healthy and say Oh through these trying times.
Thank you.
And this concludes today's conference call. Thank you for your participation you may now disconnect.