Q4 2021 Vistra Corp Earnings Call
Okay.
Good morning, and welcome to the fourth quarter and full year 2021 the strong earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.
I would now like to turn the conference over to Megan Horn, Vice President Investor Relations and sustainability. Please go ahead.
Thank you and good morning, welcome to investors Investor webcast discussing fourth quarter and full year 'twenty 'twenty. One result, which is being broadcast live from the Investor Relations section of our website Www Dot. That's your Corp. Dot Com also available on our website a copy of today's investor presentation, our form.
10-K and related press release joining.
Joining me for today's call are Curt Morgan, Chief Executive Officer, and Jim Burke, President and Chief Financial Officer, We have a few additional senior executives tried them to address questions. During the second part of today's call as necessary.
Before we begin our presentation I encourage all listeners to review the Safe Harbor statements included on slides two and three in the Investor presentation on our website that explain the risks of forward looking statement limitations that certain industry and market data included in the presentation and the use of non-GAAP financial measures today's discussion will contain forward looking statements which are.
Just on assumptions, we believe to be reasonable only as of today's date 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 statement.
Further today's press 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 press release and in the appendix to the Investor presentation, I will now turn the call over to Curt Morgan to kick off our discussion.
Thank you Megan and good morning to everyone on the call as always we appreciate your interest in Vista.
2021 was undoubtedly a challenging year in many ways a pivotal one for Vista.
We were faced with an unprecedented weather event at the beginning of the year with winter storm Uri and the <unk>.
Financial strength, we work so hard to put in place was challenged.
Yeah sitting here today.
I'm proud of how our team came together to not only confront and mitigate the impact.
But to then shift to building a stronger company.
That strong balance sheet, we built and the resilience of our team helped us stabilize the company and ultimately get back on track within months importantly, we accomplished what we set out to do for Uri.
We shifted our strategic direction and implemented an enhanced comprehensive capital allocation plan with substantial share repurchases, a new dividend policy.
And an acceleration of our Vista zero portfolio, all while de risking our company after a year.
We believe we exited the year in a position of strength.
And we are excited about our competitive positioning in the long term value creation opportunity ahead.
I'd like to now turn to slide six to begin the presentation to discuss the key takeaways from our 2021 performance.
We delivered on our adjusted EBITDA from ongoing operations guidance, we issued in November , which notably was an increased and narrowed range from what we had announced in April .
After immediately stabilizing our company after a Uri we conducted a thorough review of our business announcing our capital allocation plan that returns billions of capital to shareholders enables us to cost effectively fund the development of distress zero and maintained a strong capital structure by Kantar.
Renewing to pay down debt.
We also made significant progress in establishing ourselves as a leader in ESG and the clean energy transition with our Mr Zero carbon free generation portfolio and our efforts regarding D E and sustainability, including enhanced disclosures in back in December we.
We issued the first ever Green U S corporate perpetual preferred stock to fund our development and growth of distress zero.
We haven't emphasized this in a while but we continued our oaky savings realizing $500 million of such savings in 2021 from our generation segments.
OPI is now part of our DNA with continuous idea generation and conversion of ideas to executable opportunities on a regular basis.
And our retail business rose to the challenge as well we grew our ERCOT residential counts by approximately 23000 customers the highest organic growth we've seen since 2008.
Most of this growth was within our flagship retail brand T X you energy.
Demonstrating the strength of our brand promise and continued importance to our customers.
In all we ended the year back strong again and look forward to building on that momentum through the execution of our four strategic priorities, which we'll discuss in more detail a bit later.
Before I get to that I would like to turn to slide seven to discuss our 2021 performance in a little more detail.
When the dust settled right. After Yuri we were facing an adjusted EBITDA picture.
Right around $1.2 billion.
I recall thinking that this is not the way.
The 2021 is going to end well.
We've got to put this company on a positive path.
And improve this picture.
We Institute is it a stretch target of $500 million in Soho and in fact achieved the target coming in at $546 million.
At the same time, we were very active in the Texas, 2021 legislative and regulatory deliberations regarding Europe , which among other accomplishments resulted in industrial being allocated $544 million in ERCOT securitization payments.
I want to thank those in the state of Texas that had to deal with the fallout of Uri.
For their efforts and specifically securitization.
For their courage and foresight.
The self help and securitization efforts resulted in an improvement fallen euro of over $1 billion.
Significantly contributed to improving that initial picture that I mentioned earlier.
In November we issued refined guidance that increased and narrowed our adjusted EBITDA from ongoing operations estimates we had issued in April and we delivered at the midpoint of that November guidance at $1.994 billion prior to taking into account an opportunity we had to <unk>.
Settle some yuri related retail bill credit liabilities, specifically at the end of the year, we settled a block of these bill credits for $53 million prior to their expected settles in 2022 and 'twenty 'twenty three.
All with internal rates of return ranging from 20% to over 40% and an average of more than 30%.
So while it did decrease our final adjusted EBITDA from ongoing operations for 2020 . One we expect the high IRR settlements will positively impact us in 2022 and 'twenty to 'twenty three.
Our adjusted free cash flow before growth from ongoing operations was $179 million for the year, which is within the guidance range. We offered in November and excluding the early retail bill credit settlements that I just talked about it would be over the midpoint at 200.
Third and $32 million.
Today, we're also reaffirming our 2022 guidance.
We see some headwinds in tailwind as is normal in the coming months.
And though the upcoming summer months will be critical to our performance. We continue to anticipate that 2022 will be consistent with our previous statements of adjusted EBITDA from ongoing operations of $3 billion or more.
We are not establishing guidance beyond 2022 but our long term view of distress earnings power remains consistent with our previous views our generation and retail performance outlook is strong and as we always have we will capitalize on opportunities to not only lock in.
Adjusted EBITDA through hedging activities, but also incrementally add value through commercial optimization.
The net of this activity, we believe will be in the 3 billion dollar plus adjusted EBITDA range.
In addition, we are positioned to grow from this level as investments in our Vista zero generation fleet become operational which we will discuss in more detail shortly.
This is all in despite the retirement of significant coal generation.
Turning now to slide eight.
In November we announced four strategic priorities returned capital to our shareholders accelerate investment in our zero carbon generation growth through an appropriate capital structure continue to maintain a strong balance sheet and deliver long term sustainable value.
We delivered squarely on each of these priorities by year end 2021 and are poised to continue delivering.
In the years ahead first we returned $290 million of capital to our shareholders via dividends in 2021 and have instituted our new $300 million dividend policy for 2022.
We front end loaded our share repurchases and spent $764 million up to $2 billion share buyback program as of February 22nd 2022.
The combination of the new dividend program and share repurchases has yielded an approximate 13% increase in declared dividends in Q1, 2022 as compared to Q1, 2021 and.
And as we continue to buy back shares will lead to further increases on a per share basis.
We are also well on the way to deliver the seven $5 billion in shareholder capital returned by year end 2026.
Finally later this year, we expect to be in a position to announce the next phase of our share repurchase program. After we complete the $2 billion program by the end of this year.
As long as our stock has the kind of free cash flow yield that it does currently.
We will be buying our shares.
Second we executed on our goal to further finance and grow our leading disturb zero portfolio in December we issued an upsized $1 billion in green perpetual preferred stock proceeds from this issuance will be used to fund distressed zeroes growth well.
Allowing us to retain full control of the business.
We expect that these proceeds will also offset the once anticipated 500 million dollar per your equity contribution to Vista zero, freeing up that capital to be allocated to further execute on our share repurchase program.
We expect this zero to be further financed as needed with project free cash flows and project level financing.
Third we also continued to strengthen our balance sheet, we reduced debt in the fourth quarter of 2021 by approximately $625 million and are on a pace to reduce total debt exclusive of district zero project financing by one and a half billion dollars by year end 2022.
We've increased liquidity year over year by $180 million and further strengthened our balance sheet with cost effective preferred stock of $2 billion and a 1 billion dollar commodity linked revolver that will help provide incremental liquidity for cash postings under various of our commodity contracts when.
Power prices are high.
With these endeavors and the planned activities in 2022, we expect our balance sheet to be back into the pre Yuri range by year end 2022 .
We continue to believe a strong balance sheet is essential to managing the risk of the company and creating long term equity value.
Finally, we continued to pursue long term sustainable value for our shareholders I already mentioned, the $500 million O P value enhancements, which leads to a core set of generation that is highly efficient.
And necessary for the long term grid reliability.
We're beginning to see large asset managers essentially recognize the need for natural gas in the transition to net zero several years out we possess a low cost fleet of gas deal generation that is likely to be needed for many years to come our retail segment segment saw significant organic customer growth.
And we continued to implement derisking activities, including our expenditures to further harden our generation fleet in ERCOT.
Specifically in 2020 , one we invested approximately $50 million and will invest another $30 million in 2022 further derisking our ERCOT fleet.
We installed dual fuel capabilities at plants, where it was economic and prudent and added onsite and offsite fuel storage. We also revised our commodity hedging approach and carried extra linked heading into the winter months in 'twenty 'twenty. Two we've taken these precautions at a relatively low cost to guard against the severe financial.
In the event of a storm similar to Europe .
And while the recent weather events in February 2022 in Texas, We're certainly not Yuri like of beds. They have given us valuable insights into how our preparations would fare in a repeat situation. We're pleased to report that our fleet has performed exceptionally well with no weather related outages moving.
Moving on now to slide nine we know there is quite a bit of interest in our Vista zero growth pipeline.
This visual.
Shows you by state the projects and megawatts in the pipeline.
We forecast that approximately 5000 megawatts of projects will generate highly contracted revenue, resulting in approximately $450 million to $500 million of adjusted EBITDA annually.
This is in addition to our nuclear plant Comanche peak in 'twenty 300 megawatts. All in Vista zero is expected to be in the range of at least 7300 megawatts of carbon free generation by 2026.
We have a clear line of sight to our project pipeline.
As demonstrated by our recently announced Moss landing expansion by another 350 megawatts our acquisition of the 110 megawatt Angus solar development in Texas, and our 450 megawatt coal to solar initiative in Illinois.
That's a total of 900 megawatts of planned renewable developments announced in the past five months and we expect to bring on three projects in ERCOT in the very near future 260 megawatts of storage at Decordova, plus 158 megawatts at bright side and Emerald growth.
It is important to note that we continue to believe in the strength and growth opportunities at distress zero. Despite the recent unplanned outages, we have experienced at our Moss landing 301 hundred battery storage sites, we are committed to helping California, and the country as a whole transition to cleaner.
Sourced electricity and batteries will undoubtedly play an important role.
This is a new technology.
And it will continue to improve.
These incidents give us and the industry important insights as we move the country forward in the energy transition.
Notably we believe the issue has not stem from the batteries, but instead appears to be related to failures in the water base safety system.
Our investigations have revealed that the safety system is working.
Experiencing leaks.
We will do what it takes to fix this issue quickly.
Get the systems back online as soon as practical and as always we will do it all with safety as our number one priority.
With that I will now turn the call over to Jim Burke to discuss our financial results in more detail.
Jim.
Thank you Kirk turning now to slide 11 district delivered strong financial results during the quarter with adjusted EBITDA from ongoing operations of approximately $1.2 billion, which is $363 million higher than 2020 reached.
Retail is approximately $526 million higher than Q4, 2020, primarily driven by our accrual of the expected $544 million of securitization proceeds.
The favorability was partially offset by mild weather.
Period over period.
The generation segments ended the quarter $163 million lower than fourth quarter, 2020, driven primarily by lower realized margin in ERCOT.
Our sunset segment's adjusted.
Adjusted EBITDA from ongoing operations was $1.941 billion for 2021 after subtracting the favorable bill credit settlement cost.
Year over year, the retail segment was $329 million higher than 2020, driven primarily by our self help initiatives, partially offset by net winter storm, Yuri impacts and milder weather in ERCOT.
The generation segment year over year was $2.15 billion lower than 2020, driven primarily by the winter storm losses.
While 2021 was significantly impacted by winter storm here. We believe we are back on track with 2022 adjusted EBITDA from ongoing operations Guy to do a midpoint of approximately $3 billion.
I'm, turning now to slide 12, which provides a more detailed breakdown of our 2021 execution on the announced capital allocation plan.
We executed on our $2 billion share buyback plan with a total of $764 million of buybacks occurring from February 22nd 2022.
This leaves just over $1.2 billion remaining of buybacks to be completed by year end 2022.
We remain confident that we will achieve this goal with those buybacks through February 22nd we have 448.8 million shares that remain outstanding.
Representing an approximately 7% reduction in share count or approximately 35 million shares since our last reported share count in the third quarter 2021 10-Q.
We continue to believe that buying back our shares will create a better supply and demand balance generating a share price more reflective of what we believe to be our true value.
Reducing our share count should also result in an increased dividend yield to our shareholders as we execute upon our announced plan to deliver $300 million in annual dividends to our common shareholders through 2026.
In keeping with this plan on February 23rd our board of Directors declared a quarterly dividend of 17 cents per share of our common stock approximately a 13% increase over our 2021 first quarter dividend about.
The 17 cents per share amount reflects an estimated $75 million of dividend payouts and this quarter the.
The common dividend will be paid on March 31st 2022 to shareholders of record as of March 22nd 2022.
The board of Directors also declared a dividend on the company's 8% series a fixed rate reset cumulative redeemable perpetual preferred stock a $40 per preferred share payable on April 15th to preferred holders of record on April 1st.
In accordance with our announced capital allocation plan. We also eliminated approximately $625 million of debt in the fourth quarter of 2021 and are on track to reach our goal of $1 5 billion dollar debt reduction by year end 2022 exclusive of project level financing incurred investors hero.
Finally, we previously announced our commitment to allocate capital to attractive strategic growth opportunities. We are executing on this commitment as we pursue the district zero portfolio.
Mr Zeros expected EBITDA of $450 million to $500 million per year from the five gigawatts of storage and renewables projects by 2026 is the type of investment that makes sense financially and is a key component to our portfolio transition. We are excited to be a leader in the energy transition taking shape across our ne.
Sure.
We saw that excitement echoed in the market when our green perpetual preferred stock issuance was upsized from $750 million to $1 billion, while still locking in the low dividend at 7%.
Even better we learned that green focused accounts drove nearly 25% of the total green perpetual preferred stock allocations and four of the top 10 holders where green focused accounts.
In closing we continue to believe that our execution of this capital allocation plan will continue to unlock the value of viscera as we returned significant amounts of capital to shareholders, while transitioning our asset base. We look forward to updating you on our achievements as we execute throughout 2022.
With that operator, we are now ready to open the lines for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Stephen Byrd with Morgan Stanley . Please.
Please go ahead.
Hey, good morning.
Thanks for taking my questions.
Hey, good morning, Steve.
So I wanted to start with a fairly high level question on.
Private market appetite for for assets or for cash flows now. This is a topic that I know you all think about a lot over time, but you know it's.
The I guess, our sense is the private market has a very strong bid for for assets with strong cash flows you. All obviously had very strong cash flows to those buyers also might have a different point of view on on leverage and you know we I just I see this large disconnect it's been around for quite some time and.
Terms of the kinds of valuations and cash flows that the private market would be willing to accept versus where the public market is pricing.
Your stock and you know you're you're taking great steps to you know to.
To take advantage of that you have a lot of capital flexibility, but there seems to be this persistent disconnect between the private and public market and I'm just curious to get your latest thoughts on on that disconnect or the ways to take advantage of that what's your latest thinking there.
Well I think I think you outlined the things from a private market perspective that would be attractive about a company.
Like ours right. So you know I can't argue.
With those attributes because I believe you know they exist, but I think I've said this before that.
You know, we're a big we're a big size a company in terms of you know a private market transaction.
I was with private equity firm they have their own set of issues with their Lps in terms of you know what they can invest in and they're getting the same pressures on E. S. P. As anybody else. So I think you know the long term valuation question that comes up with companies like ours and other fossil fuel oriented companies.
Even though we're we're shifting.
Tend to come up in a private market setting as they do in a public market setting having said that I think the investments were making would be attractive on a private market basis. So.
So look I think we shouldn't be attractive both in public markets and in private markets I get the point that you made that this company could be suitable to being in the private markets and you know I think there are attributes that make us attractive. So I can't argue with that and other than that I can't see.
Say anything more than that because there's nothing really to say.
Thank you.
You're right about that Steve.
Understood.
Are there ways beyond obviously, just at the corporate level more of the asset level, where you could optimize find ways to essentially bring cash back at yields that are essentially lower than the stock overall to take advantage of this dynamic.
There could be yeah, you know we at time to time have looked at that and well.
No. We did not see you know what we thought were accretive transactions.
But yes, there are opportunities and could be opportunities like that and that's something that we look at on an ongoing basis. So you know if there is an opportunity like that you know we'd be we'd be interested in it and so you know it's one of the things that we look at.
Understood just one last one for me just on storage you gave a good update there I was just curious in terms of just next steps and resolution of determining liability who's who's liable for the damages.
Are you optimistic about sort of a recovery of costs that you've incurred there what could you just speak a little bit more to kind of next steps are there on the on the storage operational issues.
Yeah. So look I mean, here's the reality, we have warranties are with our contractors and equipment suppliers and we have insurance, they're our deductibles with the insurance, but yeah. We we do one way or another we feel like you know we were covered in this from a cost standpoint.
Right.
The area, where it gets gray sometimes is when you want to improve the current situation, which we are undoubtedly going to want to do.
And then there's a question about you know who pays for those improvements.
And you know, we'll sort through that I think the biggest thing. We're doing now is we're focused with our contractors and equipment.
Manufacturers to work together.
Because this is bigger than just this right or bigger than any one contractor or manufacturer.
This is about the long term a transition in the energy sector.
Sector and batteries have to work and you know these these.
These two facilities are critical.
For the summer and beyond.
And so I think what we're trying to do is keep this.
In a situation, where we're working together and we're not splintered and I think once you start going to battle stations. On this then it creates even more issues I think there's a way to do this in partnership with with the folks that worked with us on bringing these two facilities up and that's what we're going to do.
Do but I think at the end of the day Stephen that you know, we have warranties and we have insurance and we believe that ultimately you know the lion's share of the cost of this they're gonna be born.
You know by others, but I'll I'll, just say that this company is committed.
Bringing these facilities back online the good news in my mind is it's not huge money to really fix these the way that they need to be fixed we are talking about.
Basically the transportation and storage of water and then the release of water into each individual battery module.
That should be able to be done and every building in every manufacturing facility and in this country in the world.
There are water based fire suppression systems that do that very thing and it's frustrating to me that you know we could not put a system in place that work. These with turnkey deals we expected the engineering to be right.
And we're going to get it right and I think we can do it do it relatively quickly and we will you'll get this done right. So we will sort out the rest of it but but we do have the things in place that you would expect us to to make sure that we're covered from a cost standpoint.
Really clear and very helpful. Thank you very much.
The next question comes from Steve Fleishman with Wolfe. Please go ahead.
Yeah, Good morning, Hi, Kurt.
Let me say just just on that topic on the.
But most of the lending issues.
The.
Is it.
You know the two units have different EPC contractors.
So I guess is it more the actual equipment not.
Kind of working as opposed to or design.
Or not clear.
Okay.
It's look I I gotta be careful about you know because we're still going through all this.
You know I think Steve there's a little bit of difference, we believe in and in what happened at Moss landing 300, you know the initial phase versus Moss landing 100, and there are subtleties to all of this.
But I think that you hit the areas that we're focused on it's whether the.
The parks some of the parks that were part of the water based heat suppression system.
Were either not installed correctly and or they had a defect.
To them.
Or that the design of the overall system.
You know me.
Needs to be improved and and I think there's frankly, Steve there's an element to all of that and that's what makes it a little complicated and sorting all this out.
And I'm, just being as honest as I can be about it that that that's what we're you know we'll end up sorting out in the long run and I think we've made a lot of progress on it.
We were making a lot of progress on March 300 until 100 happen.
And that opened up you know US you know some some additional learnings that we are taking into account and I think we will take all of those together.
And come up with the right game plan for both 301 hundred to get this right, but there are elements of each of the things you mentioned, Steve in both the March 300 in the March 100 ER situation.
But there are a little bit different for each one and that's about all I can say about it.
Okay.
And a separate topic just commodity exposure overall could you just.
Maybe give a sense of kind of how to think obviously commodities are moving around a decent amount of how to think about.
Kind of your position twenty-two, but maybe more importantly, 'twenty three 'twenty four.
To kind of come out I know you gave your hedging, but just maybe kind of frame it broadly.
We have to think about it.
Yeah. So in 'twenty, two we're pretty hedged. So you know probably not a lot to talk about although we are carrying a little more length going into this summer than what we would normally carry.
Yeah, I think you know that.
Most of the markets we're in.
The price of power is set and many hours by a natural gas units. So we effectively are long natural gas equivalents as a company, but we also have obviously, a big short position on which is our retail business, but we're net long.
And you know I think in 'twenty, three and beyond you know we have leg gas link.
And it feels to me you know it.
Not particularly good at it at a predicting commodities, but we're in it and I think we know it pretty well, but it does feel like we're in a in a period, where you know natural gas in particular is probably going to be set at a little bit higher level than the old 250 to $3.
It's feeling more to me like $3 50 to $4 or more you're seeing that U S gas is being <unk>.
<unk> two worldwide gas.
You know, we've got geopolitical issues and those are likely to persist for some time, you know with Russian gas into Europe , you know, China has a big appetite as well as the rest of Asia and so as you know gas is beginning to trade on a global basis and it feels like you know, whether it's artificial or not.
The there's tightness in that system on a worldwide basis, which is probably going to mean in the next few years potentially several years that we're just at a little higher plateau for gas that in the long run is good for our company given that we are long natural gas equivalent. So I think we're positioned well.
No.
The real key though is for us to manage the volatility and to take advantage of it because I do believe that regardless of where it settles. The one thing we can pretty much bet on it is that you know.
It's going to be volatile just given the geopolitical issues that persist in the world I think our team is up to that challenge and can take advantage of that volatility is something that you know if you're good at it you can benefit from it and I think we're in a good position to do that.
I don't know if jim's onto him. If he has anything he wants to add to that yeah sure Kurt Yeah, Hi, Steve I would only add that.
So as we put out our guidance last fall.
We have certainly seen a commodity complex move up considerably.
See it, particularly even outside of ERCOT spark spreads are up three to $5. We were largely open to that particularly when you get to 'twenty three and 'twenty four.
We're less than 20% hedged out in that 'twenty, four and beyond time frame that you see as you know more hedged in 'twenty three we just kept that hedge disclosure out, but still you know just about 25% hedged to spark out in 'twenty three so it's nice to see the diversification of the portfolio where at times, we've seen ERCOT.
Ron but not the other areas now we're seeing some of the other areas really have some swing up and and we have you know good good opportunities to capture that and as Curt mentioned, you know we will get through the summer, we'll come out with our guidance for for.
For 'twenty, three and we'll hopefully give some view as to how that the out years look, but it's been a favorable move overall over the complex since we put out the guidance last fall.
Hey, Steve one other thing you know one other thing just to tell you is that it.
In a while while we see forward to move the liquidity in the markets has been you know limited and that's because I think the markets.
You know the bid and the ask or trying to figure out.
Where this thing is going to settle out and whether some of these geopolitical issues are long lived or short lived.
And and and so.
No. It it takes some time and patience to manage in this type of an environment.
And you got to pick and choose you know are the right times to do it and and just the I guess, it's not a cautionary note, but more of just a factual one that you know the liquidity in the markets. He has been somewhat limited just because buyers and sellers are trying to sort out you know the whether these are long term moves.
Again, if if you're in the market every day and your patient.
And you take it as it comes you know you can take advantage of this and I think that's what we're trying to do.
Okay.
Last quick question just on the pace of the buyback should we.
I assume if the stock stays in this rough area that you're gonna.
Continue an aggressive pace or do you think you'll kind of more average it out over the rest of the period.
Well we've made.
Yeah, sorry.
I'll just say we've made obviously we've made the commitment to <unk>.
Continue down this buyback to be able to deliver.
The $2 billion buyback by the end of the year, we've made I think tremendous tremendous.
Progress so far Steve and I think you know hopefully these disclosures, which you know come out periodically people folks saw it with the dividend.
The increase of approximately 13%, obviously being reflective of how aggressive we've been on the buybacks, but since you know what.
We're just a little over a third of the way through that program. We've got a good ways to go.
Through the end of this year, but we feel very good about it and and then we've announced is as we've said before we intend to do another 1 billion in.
'twenty three so I think the program has been well executed up to this point and we're going to continue to be.
Be aggressive through the balance of the year.
Great. Thank you.
Yeah. Thanks, Dave.
The next question comes from Julien.
John Smith with Bank of America.
Please go ahead.
Hey, good morning team thanks for the time the opportunity.
Hey, Julien you hear me.
Yeah can you hear us excellent absolutely. Thank you so much.
Kurt It's Mike.
Go back we were talking a lot about Mr. Zero, a couple of questions ago, but that's you know of the 450 to 500 and how much of this EBITDA is effectively locked in if you will right can you talk about the cadence of this EBITDA materializing.
You've obviously had great success already.
How much of this effectively have you guys sort of captured how much of it is you know critical yet to go and effectively how much does it eventually comes from California, given your perhaps disproportionate successes in that geography.
Did you guys hear me excuse me.
Yeah, Yeah, sorry, I was I was I was talking to you.
Lynn and I started on mute.
So so I think we said at both Illinois, and California that the underlying revenue streams and an EBITDA. We're about you know sort of 50% contracted based on the construct and both of those are different construct but they ended up coming out about the same a little bit over that in Texas, you know we will contract essentially.
100%, you know of those with our Luckily with our retail business and so if you just look at Vista zero on an isolated basis.
You know and then on a megawatt basis, we're probably looking at.
You know maybe half coming out of a Texas or so.
And so that pushes you into kind of the I'd say you know two thirds contracted something like that just in pure math and so I'd say that's about what it is and then of course, we will try to hedge as we go on further Jim any anything you want to add to that but that's the quick math in my head tells me.
That will be somewhere in that range just given the way that we are contracted you know both in California, and Illinois, how we expect to contract in Texas.
Yes, Kurt that's correct and Julian was we'd put out announcements what we've tried to do is give the five year view, which we did in the fall and then we want to keep filling that in so that we can talk to our investors in the market about how are we progressing so we announced.
Since since the fall we had announced the fact that we had completed this this illinois coal to solar through.
Through the legislative activities, that's progressing well will be go into the procurement of the of the rec contracts here shortly the Angus solar facility and then the mast 350.
Which would be the third phase of Moss landing all of that the 900 megawatts. There you know it was going towards that five gigawatts, but then importantly, we've got three projects coming online right now we've got bright side at 50 megawatts and will grow to 108.
And eight megawatts of solar facilities in Texas, and then a deep Cordova energy storage will beyond this spring 260 megawatts. That's the unique hybrid project, where we pared the combustion turbine with a one hour battery.
Credibly flexible instant ramp, but with $24 seven duration if needed those are all coming online now and that's part of what we wanted to do is keep bringing the awareness that this is real it's coming online and we're going to continue the rollout the announcements both when we secure the projects and have the contracts tobacco, but.
Also as they come online and physically.
Maybe just.
Neither.
Julien sorry.
Sorry, but these are 10 to 15 to.
The 20 year.
Type contracts just to remind you that now there's a mix of that.
But go ahead, sorry, absolutely.
No no no. Please.
50 to 500, though so what's the cadence how quickly does that ramp right. So how do you think about the EBIT profile and say you know 'twenty three 'twenty four 'twenty five in the interim you know when I said locked in what I was trying to get at is how much of a line of sight do you have on that EBITDA ready versus having to win contracts still in California.
Well I E is there upside in that four five to 500, maybe even said differently.
Yeah, I think I'd really go ahead yeah.
Now in the earnings deck I do think you can get a view Curt.
Covered the map of the U S and what we've done here is put the items that are basically inked and ready to go we've itemized.
And then the other items, where we've left the queue, where we said here's what we have line of sight to but don't have a contract back in California that was that was just over a gigawatt of storage capabilities and then in Texas. We have 1.3 gigs of other opportunity some of those.
We do have within our portfolio, we're just not ready to announce those yet so of the five.
<unk>, roughly two and a half to.
Three.
What we would say line of sight secured and then the rest were going to continue to develop over the next couple of years and feel confident that by the 2026 timeframe. We can at least have accomplished this level of development.
Got it yeah at least.
Separately, but in parallel with this I mean, I did want to touch on the strategic aspect here. I mean, you guys have a substantial plants that are retiring or at least have existing latent transmission interconnect right. So you've got a leg up shall we say an independent renewable developers and in this environment in which some of these developers are struggling to get that interconnect can you speak to your <unk>.
<unk> to monetize them effectively capitalize on your existing positions on the grid from a transmission perspective.
It seems like Youre doing so already but I guess I'd I'd love to hear that from a even more holistic perspective.
Just you know the narrow context of the plants that you've talked about.
Yeah. So look I mean, it's been why we have been able to build this in my opinion, why we've been able to build this.
Business, because it's all started frankly with.
California, and with that Moss landing site, which if anybody's ever been out there its a world class industrial site in the state that doesn't have many of those so there's a scarcity value to.
To that site.
Scarcity value to our.
Oakland site as well as our Morro Bay site, all of which have transmission yards right next to them and access to transition transmission and then if you think about it you know we've got the same type.
Type of situation in Texas, we have multiple sites.
Where either purchased many years ago to put a power plant on it never happen, but have access to transmission because the site. The reason why we bought the sites because of their proximity to transmission or they already have a transmission interconnect and of course, you know the nine sites in Illinois, all had transmission.
Interconnects in fact.
The transmission system was built around those assets.
We also have the two sites at least the two sites in Ohio.
That the the two coal sites that we think ultimately will be available to US you know for batteries and solar same thing is we've got an opportunity.
At NAPCO site that came from Dynegy in Pennsylvania.
So there's a number of opportunities and transmission as you you're right about this I mean, we're seeing that that P. J M is struggling to keep up with transmission Interconnects are we now.
That MISO is because we're working with those guys as well and and so having that access and in particular that proximity because there's also a cost.
And many of those markets.
Interconnect and if it's significant it can weigh down the economics.
Of any particular project and if Youre right next to the transmission because that site was obviously used previously by a power plant. It just changes the game. So I think it's it's something that we started doing I'm not going to you know it was because we had a good site in P. J D knew it.
And they came to us, but it's something that we can replicate them you know across the country with the sites that we have as we retire plants.
We can add batteries and battery storage and solar are you know we would do when two if it was.
Although the right economic decision that just hasn't been that way.
Got it and I'll leave it there thank you.
Thanks.
The next question comes from Shar <unk> with Guggenheim. Please go ahead.
Hey, good morning, guys.
Okay sure.
Just you don't you guys I think you've hit the EBITDA question pretty well, but just given sort of the strong start you have visibility do you guys are fairly hedged any thoughts on narrowing the 22 range.
In Q Q versus the traditional Q3 Q timeframe. Following some visibility in June July I mean, the range you've remained somewhat wide and do you guys do have a lot of good visibility. So just some thoughts there.
Yeah, Yeah, well you know look I think we'll take a look at it around second quarter earnings because we will have you know July pretty much in the bucket and you know, but August is the biggest month for us in the west in the summer and because we've carried more length going into the summer and the winter months you know that.
Is what creates the wider distribution.
But I think you know look I think we always look at it.
And you know if we feel like we have a high degree of confidence one way or another we would come to the market with that but you know because August is such a big month, and then Texas September can all the first part of September can always be a game changer.
You know we've been hesitant you know really shar to come out and change that until we got into the third quarter call and in fact, you know from a retail perspective, the shoulder months of really what are key.
And that can be months like October so that's why we've been a little more hesitant to change, but because we did widen the guidance you know I think it will take a look at it.
I just think it's gonna be come down to confidence in because we came in a little bit more length. We may be less have less apt to do that but we'll see.
Got it and I know or it's minor, but it looks like year over year customer losses, and the eastern markets kind of continued for another quarter can you just maybe touch on what you're seeing in the segment in terms of attrition just the ability to add new customers. It seems like Texas is doing well, but any color there would be helpful.
Yeah.
Yeah, you know look I mean, let's let the what we'll call a spade a spade here I mean, Chris has been we've struggled and that's because it was a predominantly door to door.
Channel and door to door has suffered.
Because of Covid you know you can't go knocking on People's doors with Covid. So you know we have pivoted to digital offering, but it's you know it's been a struggle. The other thing is is that the standard service offers.
You know, we're hedged out and you know we've seen power prices go up and so whats happened is theres been a squeeze on margin and people also because they stay in our service offers have been lower than where market is you know from some of the retail.
Or it's like us.
They've moved over to standard offer that's gonna change you know as those standard offers roll off.
And and there'll be an opportunity and we're also beginning to get back out on the door to door, but we're also strengthening our other channels. So I think over time, we think we can build back what we've lost but you know it's an unfortunate thing that what happened with Covid and it disproportionately affected.
I'm curious because of the door to door nature of that channel, but we think we can build it back over time and you know Scott Hudson Who's on this call with US is you know he and his team have a good plan to do that and it's going to take time sure. It's not it's not an overnight thing.
We think we can do it the good news is and it has been.
Particularly good in Texas.
And we've also sort of moved gambit into more of a value.
Offering rather than just an offering on price we've been successful at that our consultants are doing a really good job in that in that particular channel and so we're you know we're very happy with the Abbott acquisition in particular in the aircraft market in Texas Korea has struggled some overall, though still.
Both very good acquisitions.
And you know they take a long run where the right things to do and Texas, just overall and particularly with T. X you energy you know when we went through Uri and some other things that flight to quality was big and and obviously T. X. You energy was you know part of that flight to quality and so we grew customers in a significant way 23000 customers.
In a year for us.
You know it is a big deal down in ERCOT, because you know you know we had typically lost.
Lost a slight amount of customers in the last few years.
But we've been able to turn that tide around and add customer. So that's kind of the lay of the land for retail.
Got it and then just just literally one last question I know I know you're getting this a lot on the private side single asset the whole company or whatever but just and it makes sense, given where valuations are but I just want to confirm something maybe just round out exactly what the key messages is is this an exercise even looked at.
I mean has there been serious considerations internally around this path or at this juncture when you're looking at sort of the visibility you are looking at the clean energy to transitioning its just the plan is to cement it to even give it a serious consideration. So could you just round out everything and just give us a sense on whether using them kick the tire.
It's around there.
Well, here's what I'll say about that is after Yuri shar.
You know.
Regardless of what we determined.
About why it happened.
You know you can't ignore the fact that it.
And then it happened and right and so the board and the management team went to work and so we looked at a very broad set of actions.
Actions that we should consider in the wake of that event and.
I'll, just say that everything got looked at and looked at it seriously and so I think the board along with the management team are and I know this is gonna sound cliche, but I honestly believe this because I was in the middle of this we were focused on what we thought was going to bring the most value to the table. The one thing we can.
Troll, obviously is our strategy and our capital allocation plan and we believe we did the right thing around that whether there's somebody out there someday that would pay more than what we think that strategy is worth.
We are way open minded on that and you know we are flexible in terms of that because that's our job at the end of the day is to get the most value for the company.
But you know in terms of just actively going out and pitching that we looked at that relative to other opportunities and that's all I can say about it I can't you know I got it.
Can't get into in more detail, but we are open minded people and our job is to maximize the value of this company for our current shareholders and I can guarantee you that's what we're trying to do.
Perfect. That's it. Thank you for that I just wanted to for you to hit that and concluded I. Appreciate it. Thank you guys.
Thank you.
The next question comes from Jonathan Arnold with vertical research partners. Please.
Go ahead, good morning, guys.
Hey, Jonathan how are you good thank you.
That's gonna be sure I understand on the dividend.
Intention is to run at this $75 million a corner level, but the declarant on a per share basis yeah.
Each quarter, so we could see that.
Multiple changes during the year or is it sat now because the whole 22, I make sure I got that right no yeah, I'll, let Jim Jim can take it through it because we looked at a couple of different options and you know made a call, but Jim do you want to take them through the detail sure. Yeah, Hey, Jonathan We are now we think one of the benefits of this.
Strategy is as we continue to buy back shares throughout the year widow constantly change dominator.
We go so for this quarter, when we announced the dividend we set the ex dividend date for March 21st in the record date for March 22nd.
We had to estimate.
How many shares do we think will be outstanding by that point in time, because we're going to continue to buyback.
Chairs and then that's how we set the dividend rate at 17 cents and then we're going to come back in the next quarter and we'll do the same thing. So you should expect to see as long as we're consistently out in the marketplace buying back our stock you would expect to see that increase each quarter as we go and that gives you know the investor.
Obviously, a sense of just how much of the equity we continue to buy back but also reward the holders that are continuing to hold the stock that they you know who will see double digit year over year increases in the dividend great.
Great Okay.
And then just on Mr Zero, and the way you intend to sort of communicate around its going forward do you foresee this being pulled out as a separate segment or.
Bedded within your current.
Segments.
Just curious how you plan to.
Highlight executing against the EBITDA target.
Jim you want to take that too.
Sure.
Jonathan as noted on this call and since we announced it.
Last fall there a lot of interest in seeing the visibility into Vista zero. So we're looking at our segmentation.
Across the business and.
Analyzing the best way to bring that to light because as folks have covered the space.
They are attributing different value to different asset classes and when do we take this investment and we contracted it becomes meaningful.
Is that a lot of the investors that were speaking to that are putting these much higher multiples.
On that asset class.
Relative to some of our base business.
So we will probably bring that forward at it it'll come shortly I don't know if it'll be.
At this next quarter, where it could but we're looking to bring.
Segmentation that allows our investors to see that as it continues to grow as you know the rest of the business. Our retail is an important part of the business that folks want to continue to have visibility into so I think it really will come down to how we think about some of our generating assets and which we see a lot of cash flow coming off.
Assets don't necessarily get as high a multiple as we think they deserve but we also think that's the power of the capital allocation plan is to buy back the equity obviously continued to pay down debt as we said consistent with our target, but if we can bring that Mr zero to light.
Continue to do the capital allocation steps that we have outlined last fall, we think both the sum of the parts as well as just the sheer force of the capital allocation program that we're that we have instituted we're going to realize a better destroy value overall.
Okay, great. Thank you for that and Oh, it'll leave at that.
Jonathan Thank you John includes.
This concludes our question and answer session I would like to.
Turn the conference back over to Curt Morgan for any closing remarks.
Yeah.
Well, thanks, everybody again for I know, it's a busy season here, obviously when all the earnings calls for thanks for being on.
You know look we we feel like we've turned the corner here and and strengthened our company, where we've derisked. It we've got a very good set of priorities that we're working on in our capital allocation plan that that matches that and so we think the future's bright so thank you for your time.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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