Q4 2023 Vistra Corp Earnings Call

Operator: Good day, and welcome to Vistra's fourth quarter 2023 earnings conference call. All participants will be in listen-only mode.

Good day and welcome to the distress fourth quarter 2023 earnings conference call.

All participants will be in listen only mode showed.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-down phone.

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Operator: Again, press star one. To withdraw your question, please press star then 2, if need be. Please note this event is being recorded. And now... I would like to take the conference call to Eric Micek, please go ahead. Good morning, and thank you all for joining Vistra's investor webcast discussing our fourth quarter and full year 2023 results. Our discussion today is being broadcast live from the investor relations section of our website at www.vistracorp.com. There, you can also find copies of today's investor presentation and the earnings release. Leading the call today are Jim Burke, Vistra's President and Chief Executive Officer, and Chris Moldovan, Vistra's Executive Vice President and Chief Financial Officer.

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And now.

I would like to take the conference too Eric My thick. Please go ahead.

Eric: Good morning, and thank you all for joining districts Investor webcast discussing our fourth quarter and full year 2023 results. Our discussion today is being broadcast live from the Investor Relations section of our website at Www Dot District Court Dot com.

Eric Myrick: Here you can also find copies of today's investor presentation, and the earnings release, leading the call today are Jim Burke This as President and Chief Executive Officer, and Chris Mulder then interest executive Vice President and Chief Financial Officer, They're joined by other districts senior executives to address questions. During the second part of today's call as necessary earnings.

Operator: They will be joined by other Vistra senior executives to address questions during the second part of today's call, as necessary. The earnings release, presentation, and other matters discussed on the call today include references to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are provided in the earnings release and in the appendix to the investor presentation available in the investor relations section of Vistra's website.

Eric Myrick: Please presentation and other matters discussed on the call today include references to certain non-GAAP financial measure measures reconciliations to the most directly comparable GAAP measures are provided in the earnings release and in the appendix to the Investor presentation available in the Investor Relations section of investors website also today's discussion contains forward looking.

Operator: Also, today's discussion contains forward-looking statements that are based 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 statements.

Eric Myrick: <unk>, which are based 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 statements.

Eric Micek: I encourage all listeners to review the safe harbor statements included on slide two of the investor presentation on our website that explain the risks of forward-looking statements, the limitations of certain industry and market data included in the presentation, and the use of non-GAAP financial measures. I will now turn the call over to our President and CEO, Jim Burke. Thank you, Eric.

Eric Myrick: Orange all listeners to review the Safe Harbor statements included on slide two of the Investor presentation on our website that explain the risks of forward looking statements the limitations of certain industry and market data included in the presentation and the use of non-GAAP financial measures I will now turn the call over to our President and CEO Jim Burke.

James A. Burke: Thank you Eric I appreciate all of you taking the time to join our fourth quarter 2023 earnings call first I am proud to share with the very strong results that the hardworking disparate team delivered in 2023 and second I am excited to announce that we expect to close the energy Harbor acquisition on Friday March one.

James A. Burke: I appreciate all of you taking the time to join our fourth quarter 2023 earnings call. First, I am proud to share the very strong results that the hardworking Vistra team delivered in 2023. And second, I am excited to announce that we expect to close the Energy Harbor Acquisition on Friday, March 1. The Energy Harbor acquisition fits squarely with our continued focus on our four strategic priorities as laid out on slide 5, which starts with operating an integrated business model that combines retail and wholesale operations, leading to more resilient and sustainable earnings in a variety of weather and pricing environments. This was not only true in delivering results $440 million above our original guidance level in 2023, but it was recently apparent during winter storm Heather in January of this year, where our core competency of operating generation assets was evidenced by our 98% commercial availability, which is particularly impressive in an environment where the ERCOT overall market outage rate for the five days impacted by the storm was two and a half times Vistra's outage rate.

James A. Burke: The energy Harbor acquisition fits squarely with our continued focus on our four strategic priorities as laid out on slide five which starts with operating an integrated business model that combines retail and wholesale operations, leading to more resilient and sustainable earnings in a variety of weather and pricing environment.

James A. Burke: This was not only true in delivering results $440 million above our original guidance level in 2023, but was recently apparent during winter storm Heather in January of this year, where our core competency of operating generation assets was evidenced by our 98% commercial availability, which is particularly.

James A. Burke: Really impressive in an environment, where the ERCOT overall market outage rate for the five days impacted by the storm was two and a half times this was outage rate.

James A. Burke: Turning to the other key priorities, we continue to execute on our capital return plan put in place during the fourth quarter of 2021. Since that time, we have returned to our investors approximately $4.3 billion through share repurchases and dividends. Further, we are excited to announce the board approval of an additional $1.5 billion of share repurchases, which we expect to fully utilize by year-end 2025. Importantly, we have strengthened and simplified our balance sheet while maintaining our capital return plan.

James A. Burke: Turning to the other key priorities, we continue to execute on our capital return plan put in place during the fourth quarter of 2021.

James A. Burke: Since that time, we have returned to our investors approximately $4 $3 billion through share repurchases and dividends. Further we are excited to announce the board approval of an additional $1.5 billion of share repurchases, which we expect to fully utilized by year end 2025.

James A. Burke: Importantly, we have strengthened and simplified our balance sheet, while maintaining our capital return plan net leverage remains low at 2.4 times and although we expect to be slightly above our three times net leverage target what energy Harbor closes we project a return to below three times by year end 2020 for the successful repurchase.

James A. Burke: Net leverage remains low at 2.4 times, and although we expect to be slightly above our three-times net leverage target when Energy Harbor closes, we project a return to below three times by year-end 2024. The successful repurchase of approximately 98 percent of our outstanding tax-receivable agreement rights marks further progress in our efforts to simplify Vistra's capital structure while improving our free cash flow conversion over the foreseeable planning horizons. Our disciplined capital approach also enables us to invest in renewable energy storage growth that capitalizes on sites and interconnects in the Vistra portfolio. We delivered the Moth Landing 350-megawatt energy storage expansion in June of last year, and we will begin construction on three of our larger Illinois solar and energy storage developments located at our former coal plant sites in the spring of 2024.

James A. Burke: Approximately 98% of our outstanding tax receivable agreement rights Mark further progress in our efforts to simplify distressed capital structure, while improving our free cash flow conversion over the foreseeable planning horizon.

James A. Burke: Our disciplined capital approach also enables us to invest in renewables energy storage growth that capitalizes on sites and Interconnects and the Vista portfolio.

James A. Burke: We delivered the Moss landing 350 megawatt energy storage expansion in June of last year, and we began construction on three of our larger, Illinois solar and energy storage development located at our former coal plant sites in the spring of 'twenty 'twenty four.

James A. Burke: With grids in most of our markets tightening in the coming years as older fossil generation retires, load continues to grow, and with interconnection and transmission challenges, Vistra is well positioned to continue to find ways to serve our customers reliably, affordably, and sustainably while remaining disciplined about our capital allocation. Turning to slide six, we receive FERC's approval for both the acquisition of Energy Harbor and the corresponding sale of our Richland and Stryker generation facilities. Energy Harbor is a transformative acquisition and represents another significant step forward for our company. We are diligently working towards closing this transaction, which, as I have already mentioned, we expect to close on March 1st.

James A. Burke: With grids in most of our markets tightening in the coming years as older fossil generation retires load continues to grow and with interconnection and transmission challenges history is well positioned to continue to find ways to serve our customers reliably affordably and sustainably while remaining disciplined.

James A. Burke: Blend about our capital allocation.

James A. Burke: Turning to slide six we received FERC approval for both the acquisition of Energy Harbor, and the corresponding sale of our Richland and Stryker generation facilities.

James A. Burke: Energy harbors, a transformative acquisition and represents another significant step forward for our company.

James A. Burke: We are diligently working towards closing this transaction, which as I already mentioned, we expect to close on March 1st.

James A. Burke: Despite closing later than we had hoped, we remain comfortable with our ability to successfully integrate our teams and deliver the initial guidance of pre-tax run rate synergies of $125 million by year-end 2025. We are also reiterating a 12-month 2024 and 2025 ongoing operations adjusted EBITDA midpoint opportunities from Energy Harbor of $700 million and $800 million, respectively, as well as the expected run rate ongoing operations adjusted EBITDA midpoint opportunity on an unhedged and open basis of $900 million. However, given the anticipated closing date, you can expect our updated 2024 ongoing operations adjusted EBITDA guidance range, which we expect to provide on the first quarter 2024 results call, will reflect only 10 months of contribution from Energy Harbor this year. Moving now to slide seven.

James A. Burke: Despite closing later than we had hoped we remain comfortable with our ability to successfully integrate our teams and deliver the initial guidance of pre tax run rate synergies of $125 million by year end 2025.

James A. Burke: We are also reiterating a 12 month 'twenty 'twenty, four and 'twenty twenty-five ongoing operations adjusted EBITDA midpoint opportunities from energy Harbor of 700 million at $800 million, respectively, as well as the expected run rate ongoing operations adjusted EBITDA midpoint opportunity on it.

James A. Burke: Hedged and open basis of $900 million.

James A. Burke: However, given the anticipated closing date, you can expect our updated 2020 for ongoing operations adjusted EBITDA guidance range, which we expect to provide on the first quarter 2024 results call will reflect only 10 months of contribution from energy Harbor this year.

James A. Burke: Moving now to slide seven as a reminder, we began the year with initial guidance for 2023 ongoing operations adjusted EBITDA with a midpoint of $3 $7 billion. This guidance was subsequently revised on both our second and third quarter calls ultimately raised to a midpoint of $4 billion 25.

James A. Burke: As a reminder, we began the year with initial guidance for 2023 ongoing operations adjusted EBITDA with a midpoint of $3.7 billion. This guidance was subsequently revised on both our second and third quarter calls, ultimately raised to a midpoint of $4 billion and $25 million. As I stated earlier, despite another year of volatile weather, characterized by mostly mild weather excluding the unprecedented summer heat in ERCOT during the third quarter, we were able to exceed the midpoint of our original guidance range by $440 million. Importantly, this translated to higher than expected ongoing operations adjusted free cash flow before growth of approximately $2,491,000,000, exceeding the midpoint of our original guidance range by $441,000,000. These results were achieved through strong customer count and margin performance at our retail segment and a nearly 96% commercial availability rate for our generation segment.

James A. Burke: $5 million.

James A. Burke: As I stated earlier, despite another year of volatile weather characterized by mostly mild weather, excluding the unprecedented summer Eaton ERCOT during the third quarter.

James A. Burke: We were able to exceed the midpoint of our original guidance range by $440 million.

James A. Burke: Importantly, this translated to higher than expected ongoing operations adjusted free cash flow before growth of approximately $2.491 billion exceeding the midpoint of our original guidance range by $441 million. These results were achieved through strong customer count and margin perf.

James A. Burke: Formats at our retail segment and a nearly 96% commercial availability rate for our generation segment.

James A. Burke: Now I'd like to quickly turn to the 2024 guidance. Given the recent regulatory approval and the upcoming transaction closing, we anticipate providing combined Vistra and Energy Harbor guidance, including an update on synergies, as part of our first quarter 2024 results call. However, we can reaffirm the Vistra Standalone 2024 guidance for Ongoing Operations Adjusted EBITDA in the range of $3.7 to $4.1 billion and Ongoing Operations Adjusted Free Cash Flow Before Growth in the range of $1.9 to $2.3 billion.

James A. Burke: Now I'd like to quickly turn to the 'twenty 'twenty four guidance given the recent regulatory approval and the upcoming transaction closing, we anticipate providing combined Vista and energy Harbor guidance, including an update on synergies as part of our first quarter 2024 results call.

James A. Burke: However, we can reaffirm the distress Standalone 2024 guidance for ongoing operations adjusted EBITDA in the range of 3.7 to $4 $1 billion in ongoing operations adjusted free cash flow before growth in the range of one nine to $2 $3 billion.

Chris Moldovan: We are eager and excited to join with the men and women of Energy Harbor and execute on behalf of our customers and communities as one team. I'll now turn the call over to Chris to discuss our quarterly performance in more detail. Turning to slide nine, Vistra delivered strong fourth-quarter results in 2023, with ongoing operations adjusted even of approximately $965 million, including $463 million from retail and $502 million from generation. For the year, Vistra delivered $4,140,000,000 of ongoing operations adjusted EBITDA, including $1,105,000,000 from retail and $3,035,000,000 from generation.

James A. Burke: We are eager and excited to join with the men and women of energy Harbor and execute on behalf of our customers and communities as one team I'll now turn the call over to Chris to discuss our quarterly performance in more detail.

James A. Burke: Okay.

Chris Mulder: Thank you Jim turning to slide nine Vista delivered strong fourth quarter results and 2023 with ongoing operations adjusted EBITDA of approximately $965 million.

Chris Mulder: Including $463 million from retail and $502 million from generation for the year, Richard delivered $4.140 billion of ongoing operations, adjusted EBITDA, including $1.105 billion from retail and $3.035 billion from generation.

Chris Moldovan: Despite mild weather conditions for much of the year, the performance of our generation units, combined with our comprehensive hedging program and our ability to optimize our flexible assets, contributed to the significant year-over-year improvement in our generation results in every region in the country. Moving to the retail segment, the strong margin performance seen in the first nine months of the year continued in the fourth quarter. Negative residential customer count growth was driven by our multi-brand strategy, with organic growth by our flagship brand, TXU Energy, for the third consecutive year. Turning to slide 10, we provide an update on the execution of our capital allocation plan. As of February 23rd, we executed approximately $3.7 billion of share repurchases, leading to an approximately 28% reduction compared to the number of shares that were outstanding in November of 2021.

Chris Mulder: Mild weather conditions for much of the year the performance of our generation units combined with our comprehensive hedging program and our ability to optimize our flexible assets drove the significant year over year improvement in our generation results in every region in the country.

Chris Mulder: Moving to the retail segment the strong margin performance seen in the first nine months of the year continued in the fourth quarter positive residential customer count growth was driven by our multi brand strategy with organic growth by our flagship brand tier two energy for the third consecutive year.

Chris Mulder: Turning to slide 10, we provide an update on the execution of our capital allocation plan as of February 23rd we executed approximately $3 $7 billion of share repurchases, leading to an approximately 28% reduction compared to the number of shares that were outstanding in November 2021.

Chris Mulder: We expect to utilize $2 to $5 billion.

Chris Moldovan: We expect to utilize $2.25 billion, consisting of the $750 million remaining under the previous authorization as of the end of 2023 and the additional $1.5 billion of authorization announced today, over the course of 2024 and 2025. We will review our capital available for allocation after we close the Energy Harbor Acquisition and expect to share any updates later this year. Moving to our dividend program, we announced last week a fourth quarter 2023 common stock dividend of 21.5 cents per share, which represents an increase of approximately 9% over the dividend paid in Q1 2023 and an impressive 43% increase over the dividend paid in the fourth quarter of 2021, when our capital allocation plan was first established. Turning to the balance sheet, Vistra's net leverage ratio currently sits significantly below three times.

Chris Mulder: Consisting of $750 million remaining under the previous authorization as of the end of 2023, and the additional $1 $5 billion of authorization announced today over the course of 2024 and 2025.

Chris Mulder: We will review our capital available for allocation. After we close the energy Harbor acquisition unexpected share any updates later this year.

Chris Mulder: Moving to our dividend program, we announced last week, our fourth quarter 2023, common stock dividend of <unk> 21, and a half cents per share, which represents an increase of approximately 9% over the dividend paid in Q1, 2023, and an impressive 43% increase over the dividend paid in the fourth quarter of 2021, when our cash.

Chris Mulder: Oh allocation plan was first established.

Chris Mulder: Turning to the balance sheet. This was net leverage ratio currently sits significantly below three times as Jim stated earlier, although net debt will increase upon closing of the energy Harbor acquisition and will remain close to three times and we expect it to return to below three times by the end of 2024.

Chris Moldovan: As Jim stated earlier, although net debt will increase upon the closing of the Energy Harbor acquisition, it will remain close to three times, and we expect it to return to below three times by the end of 2024. In addition to maintaining low leverage, we took an important step to further simplify the balance sheet at the end of 2023 and the beginning of 2024. As of February 23, 2024, we had repurchased approximately 98 percent of the outstanding rights to receive payments under our tax receivable agreement to pay for these rights, which were entitled to receive approximately $1.4 billion over time on an undiscounted basis. We paid approximately $625 million, consisting of approximately $475 million in aggregate face value of Series C perpetual preferred stock and approximately $150 million of cash.

Chris Mulder: In addition to maintaining a low leverage we took an important step to further simplify the balance sheet at the end of 2023 and the beginning of 2024.

Chris Mulder: As of February 23, 2024, we have repurchased approximately 98% of the outstanding rights to receive payments under our tax receivable agreement.

Chris Mulder: To pay for these rights, which were entitled to receive approximately $1 $4 billion over time on an undiscovered basis.

Chris Mulder: We paid approximately $625 million.

Chris Mulder: Consisting of approximately $475 million in aggregate face value of series C. Perpetual preferred stock at approximately $150 million of cash.

Chris Mulder: Based on our forecast of payments that would have been due under the tax receivable agreement over the foreseeable planning horizon. We believe this transaction results in accretion to free cash flow over that time period and provides robust net present value to the company.

Chris Mulder: Finally, the team is preparing to begin construction activities at three of our larger, Illinois solar and energy storage developments at our former coal plant sites. This spring.

Chris Moldovan: Based on our forecast of payments that would have been due under the tax receivable agreement over the foreseeable planning horizon, we believe this transaction results in an increase in the free cash flow over that time period and provides robust net present value to the company. Finally, the team is preparing to begin construction activities at three of our larger Illinois solar and energy storage developments at our former coal plant sites this spring. We believe these projects will continue to exceed our targeted return thresholds despite some headwinds in this higher cost and interest rate environment. The three key tenets of a responsible energy transition—reliability, affordability, and sustainability—will continue to guide our renewables development program. We remain disciplined in our approach and continue to benchmark all projects against other uses of capital, including our share repurchase program.

Chris Mulder: We believe these projects will continue to exceed our targeted return thresholds. Despite some headwinds in this higher cost and interest rate environment.

Chris Mulder: The three key tenants of our responsible energy transition reliability affordability and sustainability will continue to guide our renewables development program.

Chris Mulder: We remain disciplined in our approach and continue to benchmark all projects against other uses of capital, including our share repurchase program.

Chris Mulder: Touching quickly on slide 11, as we have done in prior quarters. We have provided an update on the out year forward price curves as of February 23rd.

Chris Mulder: While the ERCOT forward price curves continued to reflect some backwardation.

Chris Mulder: Prices remain higher than the April 29, 2022 curves when we first spoke to you about increased EBITDA earnings potential in the out years.

Chris Moldovan: Touching quickly on slide 11, as we have done in prior quarters, we have provided an update on the out-year forward price curves as of February 23rd. While the ERCOT forward price curves continue to reflect some backwardation, the prices remain higher than the April 29, 2022 curves when we first spoke to you about increased EBITDA earnings potential in the out years.

Chris Mulder: These curves together with the continued execution of our comprehensive hedging program give us confidence in the ongoing operations adjusted EBITDA midpoint opportunity for 2025, and the range of three $8 billion to $4 billion for Mr. Standalone discussed last quarter.

Chris Mulder: Again, we expect to update the 2025 opportunity, including the expected contribution from energy Harbor on the first quarter results call.

Operator: These curves, together with the continued execution of our comprehensive hedging program, give us confidence in the ongoing operations adjusted EBITDA midpoint opportunity for 2025 in the range of $3.8 to $4 billion for Vistra standalone discussed last quarter. Again, we expect to update the 2025 opportunity, including the expected contribution from Energy Harbor, on the first quarter results call. We are extremely proud of the performance of our generation, retail, and commercial teams during 2023 and the start of 2024. We believe our commercial optimization activities and flexible generation assets, combined with an industry-leading retail business, provide significant opportunities going forward. We will continue to focus on being a reliable, cost-efficient operator of assets while producing adjusted free cash flow yields that translate directly into significant returns for our stockholders. With that, Operator, we're ready to open the line for questions. Thank you very much. We will now begin the question and answer session. To ask a question, you may press start, then one on your touchtone phone.

Chris Mulder: We are extremely proud of the performance of our generation retail and commercial teams during 2023 and the start of 2024, we believe our commercial optimization activities on flexible generation assets combined with an industry, leading retail business provide significant opportunities going forward.

Chris Mulder: We will continue to focus on being a reliable cost efficient operator of assets, while producing adjusted free cash flow yields that translate directly into significant returns for our stockholders.

Speaker Change: With that operator, we're ready to open the line for questions.

Speaker Change: Thank you very much we will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your Touchtone phone and if you are using a speakerphone. Please pick up your handset before pressing the keys.

Speaker Change: He said anytime your question has been addressed and you would like to withdraw your question then press star two.

Speaker Change: At this time, let's start with a question from Shar <unk> from Guggenheim Partners.

Shar: Please go ahead.

Shar: Can you hear me.

Shar: Yeah, Hey, Shar good morning.

Shar: Hey, Jim.

Operator: And if you're using a speakerphone, please pick up your handset before pressing. If at any time your question has been addressed and you would like to withdraw your question, then press star 2. At this time, we're going to start with a question from Shahriar Pourreza from Guggenheim Park. Shahriar, please go ahead. Can you hear me?

Shar: Start with that at low tech issues I guess, Jim you are getting closer to closing the energy Harbor, you repurchased the TRA to clean up the cap structure can we just get a little more color on how youre thinking about the longer term profile of the business. I mean do you see a pathway for tradition and vision to go their separate ways in the years.

Shahriar Pourreza: Yeah. Hey, Shahriar. Good morning. Hey, Jim. Sorry about that.

Shar: Ahead or is this kind of a longer data processing your mind.

James A. Burke: Yeah. Thank you Shar.

Shahriar Pourreza: It's a few tech issues. I guess, Jim, you're getting closer to closing the Energy Harbor. You repurchased the TRAs to clean up the cap structure. Can we just get a little more color on how you're thinking about the longer-term profile of the business? I mean, do you see a pathway for tradition and vision to go their separate ways in the years ahead, or is this kind of a longer-term process? Yeah, thank you, Shahriar.

James A. Burke: I'll, let Chris address the TRA, but I'll start with this with the direction, we're headed I think the energy Harbor.

Chris Mulder: Acquisition, as we said as transformative for the company. It obviously brings a dispatch of bold twenty-four whereby said that carbon free element to the portfolio enhances our starting point that we had with Comanche peak and <unk> zero.

Chris Mulder: The other part of the portfolio that I think is incredibly critical is the dispatch of all assets that we have with our fossil fleet.

James A. Burke: I'll let Chris address the TRA, but I'll start with the direction we're headed. I think the Energy Harbor acquisition, as we said, is transformative for the company. It obviously brings a dispatchable 24 by seven Carbon-free element to the portfolio and enhances our starting point that we had with Comanche Peak and Vistra Zero. The other part of the portfolio that I think is incredibly critical is the dispatchable assets that we have with our fossil fuels. Flexibility is an increasingly valuable attribute on these grids, particularly with the renewables penetration that we're seeing across the country, particularly ERCOT in California. So from our standpoint, with such a large retail position and a growing retail position, the integration of how we can match customer needs with assets that can provide the baseload and the ramp products is an important part of risk management and value creation for our company. So we still see this as one team.

Shar: Flexibility is increasingly valuable attribute on these grids, particularly with renewables penetration that were seeing across the country, particularly ERCOT, California.

Shar: So from our standpoint with such a large retail position in a growing retail position.

Shar: The integration of how we can match the customer needs with assets that can provide the base load and the ramp products is it is an important part of risk management and value creation for our company. So we see this still as one team we see it as described deliver.

Shar: On an integrated basis across our business for the long term and I think this excitement we have around closing energy Harbor is it's a path we've been on for quite some time with the other acquisitions. We've done. This is yet another one that fits neatly into what customers are looking for and that's why we're ready to get on to this <unk>.

Speaker Change: Chapter I'll, let Chris quick quickly address the TRA, yes sure again.

James A. Burke: We see it as Vistra delivering on an integrated basis across our business for the long term. And I think this excitement we have around Closing Energy Harbor is it's a path we've been on for quite some time with the other acquisitions we've done. This is yet another one that fits neatly into what customers are looking for. And that's why we're ready to get on to this next chapter. I'll let Chris quickly address the TRA. Yeah, sure. Again, as we noted in the comments, I think the primary purpose of the TRA does have some benefits that aren't economic related. But the primary purpose was economic.

Chris Mulder: We noted in the comments I think the primary purpose of the TRA.

Chris Mulder: It does have some benefits that arent economic related but the primary purpose was economic.

Chris Mulder: When you take.

Chris Mulder: Take a an instrument out is entitled to one $4 billion and we did it with a little bit more than $600 million.

Chris Mulder: And more than three quarters of that isn't as perpetual stock it just it.

Chris Mulder: Became.

Chris Mulder: A transaction that was very economically beneficial for the company and so we really focused on the economics of it as far as cleaning it up it does simplify the capital structure. It's a topic that we're pleased to not talk much about going forward, but it still is just one of the <unk>.

Chris Moldovan: When you take an instrument out that is entitled to $1.4 billion, and then we do it with a little bit more than $600 million, and more than three quarters of that is perpetual stock. It became a transaction that was very economically beneficial for the company, and so we really focused on the economics of it. As far as cleaning it up, it does simplify the capital structure. It's a topic that we're pleased to not talk much about going forward. But it is still just one of the impediments to a split. There is still other debt. NPR: Okay, perfect.

Chris Mulder: Pediment to a split there are still other debt securities at the midst of operations level and we still have preferred stock in place. So there would be other things to address so that wasn't the primary purpose for this transaction. It was really we thought it was a great economic benefit to the company, including a significant amount of NPV for us.

Shahriar Pourreza: That's helpful. And then, Jim, just on ERCOT, we've seen a few new bill announcements recently. It sounds like one of your peers is waiting for the loan program details before potentially pulling the trigger on a combined cycle.

Speaker Change: Okay perfect. That's helpful. And then Jim just on ERCOT and we've seen a few newbuild announcements recently it sounds like one of your peers is waiting for the loan program details before potentially pulling the trigger on a combined cycle. There has also been a substantial amount of noise regarding the ECR F. I guess, what's your house view on.

Shahriar Pourreza: There's also been a substantial amount of noise regarding the ECRS. I guess, what's your house view on the supply-demand backdrop and the sort of ongoing market? Yes, great question.

Shar: Supply demand backdrop, and sort of ongoing market reforms.

James A. Burke: Yes, great question, well the demand growths surprised I think many of us.

James A. Burke: Well, the demand growth surprised many of us, both what we saw last summer and even with Heather. So robust low growth in Texas coupled with extreme weather, you start to see the grid getting pushed obviously to a level of tightness we haven't seen in quite some time. The loan program clearly was a signal from the legislature and policymakers that they would like to see the dispatchable resources grow in Texas at a minimum to backstop the level of growth that we see with the intermittent resources in Texas. And we see, like in Winter Storm Heather, on the tightest days of Winter Storm Heather, about 5% during the hours that were the tightest, about 5% of the power coming was coming from intermittent sources, about 95% from dispatchable resources

James A. Burke: Both what we saw last summer.

James A. Burke: Even with Heather so robust load growth in Texas, coupled with extreme weather you start to see the great getting pushed obviously to a level of tightness, we haven't seen in quite some time.

James A. Burke: The loan program clearly was a signal from the legislature and policymakers that they would like to see the dispatch of <unk> resources grow in Texas.

James A. Burke: At a minimum to backstop the level of growth that we see with intermittent resources in Texas, and we see like in winter storm Heather on the tightest days of Winter storm Heather about 5% during the hours that were the tightest about 5% of the power coming were coming from intermittent sources about 95%.

James A. Burke: Dispatch them all so I think the desire is there the loan program is clearly a boost because the interest rate at 3% that's better than where market is but you raise another point that I think is critical which is there's a series of market reforms that are contemplated at the moment that sit between ERCOT in public utility.

James A. Burke: So I think the desire is there. The loan program is clearly a boost because the interest rate at 3% is better than where the market is. But you raise another point that I think is critical, which is there's a series of market reforms that are contemplated at the moment that sit between ERCOT and the Public Utility Commission. They generally are around the ancillary, so ECRS is one, DRRS is another, and there's details of these that are yet to be defined.

James A. Burke: The commission they generally are around the ancillary so E. Crs is one <unk>.

James A. Burke: <unk> is another.

James A. Burke: And there is details of these that are yet to be defined we hope to hear more about ECR S. Here in a few months, it's likely the ECR as could actually dispatch a little earlier could actually end up being brought into the market earlier than it was last summer, which could have a little bit of a dampening effect on.

James A. Burke: We hope to hear more about ECRS here in a few months. It's likely that ECRS could actually be dispatched a little earlier, could actually end up being brought into the market earlier than it was last summer, which could have a little bit of a dampening effect on prices. The DRS is pushed out in time, and it's unclear what kind of effect on price signals that might have. And then lastly, PCM, this performance credit mechanism, which is in the law, House Bill 1500, that is also probably on a 2027 timeframe. And I think the balance, Shahriar, that all policymakers are trying to strike is: what's the sufficient revenue stream to incentivize someone to write an equity check? And at the same time, deliver affordable electricity in Texas that's obviously reliable. And There's a tension between them.

James A. Burke: On prices the D. R S.

James A. Burke: Is pushed out in time, and it's unclear what kind of effect on price signals that might have.

James A. Burke: And then lastly, PCM this performance credit mechanism, which is in which is in the law. The house Bill 1500 that is also probably on a 2027 time frame and I think the balance Charlotte.

James A. Burke: All policymakers, we're trying to strike is what's the sufficient revenue stream to incentivize someone to write an equity check and at the same time deliver affordable electricity in Texas, Thats, obviously reliable and there's a there's a tension there and that tension shows up in some of the rule makings and the procedures that.

Shahriar Pourreza: And that tension shows up in some of the rulemakings and the procedures that are going to follow. We're going to learn more as they follow through on these in the next three to six months. So the loan program is certainly helpful. But we don't view that as sufficient as a revenue signal. You still see in our PowerPoint deck, there's backwardation in the spark spreads for ERCOT.

James A. Burke: That are going to follow we're going to learn more as they follow through on these are the next three to six months. So the loan program is certainly helpful. We don't view that as sufficient as a revenue signal you still see in the in our.

James A. Burke: Powerpoint deck, there's backwardation in the spark spreads for ERCOT. So why they are higher than they were when we first started to talk to you about long dated curves in 2022, Theres still backward aided we need to see some support for the price signals to be able to be confident that at 20 to 30 year life asset.

Shahriar Pourreza: So why are they higher than they were when we first started to talk to you about long-dated curves in 2022? They're still backwardated. We need to see some support for the price signals to be able to be confident that a 20 to 30 year life asset has a reasonable prospect for a return. And I think people are working hard to try to make that happen, but that's still TBD. Thank you very much, Jim. Congratulations on the execution. I'll see you soon.

James A. Burke: As a reasonable prospect for a return and I think people are working hard to try to make that happen, but that's still TBD.

Speaker Change: Perfect. Thank you very much Jim congrats on the execution <unk> I appreciate it.

David Alistair Campbell: And now we have a question from David Arcaro from Morgan Stanley. David, please go ahead. Oh, hey, thank you. Good morning.

James A. Burke: Sure.

James A. Burke: And now we have a question from David Arcaro from Morgan Stanley David. Please go ahead.

David Alistair Campbell: Alright, Thank you and good morning.

David Alistair Campbell: Hey, David.

David Alistair Campbell: Hey, David. Maybe a bit of a follow-on to that question, specifically on data center growth. And as we see that accelerate, wondering if you could speak to how you're thinking about the potential market impact and opportunities for your fleet, potentially, from new data centers. Sure.

David Alistair Campbell: Maybe a bit of a follow on to that question specifically on data center growth.

David Alistair Campbell: And as we see that accelerate wondering if you could speak to how you're thinking about the potential market impact.

David Alistair Campbell: And opportunities for your fleet potentially from new data centers coming on.

David Alistair Campbell: Sure, Yes, thanks, David for the question.

James A. Burke: Thanks, David, for the question. I'll step back just a second to say that as the grids have become a little bit tighter across the country, we're seeing fossil assets retire, particularly coal, and then we're seeing more electrification, and we're seeing customers approach us at a rate that we haven't seen in my history with this industry. And data centers, specifically, are looking for speed to market. So they're trying to get online as fast as they can.

Speaker Change: I'll step back just a second to say that as the grades have become a little bit tighter across the country. We're seeing the fossil assets retire, particularly coal and then we're seeing more electrification.

David Alistair Campbell: We're seeing customers approach us at a rate that we haven't seen it.

David Alistair Campbell: My history with this.

David Alistair Campbell: History, and datacenter specifically they are looking for speed to market. So theyre trying to get on line as fast as they can they are obviously looking for where they've got good fiber, particularly potentially access to water for cooling needs, but reliability is now entering that discussion. So many of them are talking about while they can.

James A. Burke: They're obviously looking for where they've got good fiber, particularly potentially access to water for cooling needs. But reliability is now entering that discussion. So many of them are talking about, while they can do it out on the grid, they're interested in also being behind the meter. And depending on who the customer is, it doesn't need to be a nuclear plant.

David Alistair Campbell: Ian do it out on the grid. They are interested in also being behind the meter and depending on who the customer is it doesn't need to be a nuclear plant. They are actually entertaining gas plants for behind the meter opportunities and we've done that with with some of the crypto load already in Texas, we've done some behind the meter so we're familiar with it.

James A. Burke: They're actually entertaining gas plants for behind the meter opportunities. And we've done that with some of the crypto load already in Texas. We've done some behind the meter, so we're familiar with it.

James A. Burke: Whether that load goes behind the meter or out on the grid, it's new demand. And that's part of this supply-demand equation that might also send price signals. That could also then incentivize new supply. But it's meaningful, David.

David Alistair Campbell: Whether that logos behind the meter are out on the grid, it's new demand and that's part of this supply and demand equation that might also send the price signals that could also that incentivize new supply, but it's meaningful David it's hard to get locked in on any one forecast, but most forecasts have a doubling of this.

James A. Burke: It's hard to get locked in on any one forecast, but most forecasts have a doubling of this data center load by 2030. Texas is a pretty easy place to do business. So Texas, which is already the second largest data center market in the country, may end up getting a disproportionate amount of it. But we do see this as a real opportunity for our company. I will tell you, in terms of customers approaching us, way more customers are approaching us around data centers than we've had so far on hydrogen, and part of that is just the regulatory uncertainty around hydrogen.

David Alistair Campbell: This data center load by 2030 <unk>.

David Alistair Campbell: Texas is a pretty easy place to do business in Texas, which is already the second largest data center market in the country may end up getting a disproportionate amount of it but we do see this as a real opportunity for our company I will tell you in terms of customers approaching us way more customers approaching us around data centers than we've had so far.

David Alistair Campbell: On hydrogen and part of that is just the rules uncertainty around hydrogen, but also I think we're serving our customer demand there's actually a demand for where this is going where is the hydrogen has been a little bit more supply driven than trying to create a product. That's in expenses. This is more pull from the customer and we're having a lot of <unk>.

David Alistair Campbell: But also, I think we're serving a customer demand. There's actually a demand for where this is going, whereas hydrogen's been a little bit more supply-driven in trying to create a product that's inexpensive. This is more pull from the customer, and we're having a lot of conversations. We're pretty excited about it. Yeah, got it. Thanks. I appreciate that perspective. How early is it?

David Alistair Campbell: Conversations were pretty excited about it.

David Alistair Campbell: Yeah.

Speaker Change: Yeah got it. Thanks I appreciate that perspective, how are how early is when do you think that you could see potential market impacts. If it's you know upside in the curve or potential contracts like you say with maybe behind the meter or contracted power with these customers.

James A. Burke: You know, when do you think that you could see potential market impacts if it's, you know, upside in the curve or potential contracts, like you say, with maybe behind the meter or contracted power with these customers? Yeah, the behind-the-meter activity, you know, it still takes some planning studies that we work on with ERCOT and the wires company. You may also need to be doing the substation construction; get some of the high-voltage switch gear.

Speaker Change: Yeah, the behind the meter activity it still takes.

Speaker Change: Takes some planning studies that when you work on with ERCOT and the wires company. You may also need to be doing the substation construction get some of the high voltage switch gear. So you could still be looking at a couple of years for something to go from concept to reality, so I wouldn't say that it's <unk>.

David Alistair Campbell: So you could still be looking at a couple of years for something to go from, you know, concept to reality. So I wouldn't say that it's immediately around the corner for something that's a new conversation. There are clearly some current data centers that could actually be repowered. Those can actually go from existing chips that are used more for cloud services to the more energy-intensive AI-purposed chips. That could be happening over the course of the next two years, but I would say it's a couple-year process, David, from my perspective. Okay. Very helpful.

Speaker Change: Immediately around the corner for something that's a new conversation.

Speaker Change: There are clearly some current data centers that could actually even the repower. Those can actually go from existing chips that are used more for cloud services to the more energy intensive.

Speaker Change: Purpose chips that could be happening over the course of the next two years, but I would say, it's a couple year process David from my perspective.

Speaker Change: Okay.

Speaker Change: Okay got it very helpful. Thanks, so much.

Julien Dumoulin: Yes, thanks, David. And we'll follow with a question from Julian Dumoulin-Smith from Bank of America. Julian, please go ahead.

Speaker Change: Thanks, David.

Speaker Change: And we will follow with a question from Julien Dumoulin Smith from Bank of American Julien. Please go ahead.

Julien Dumoulin: Hey, good morning team and congratulations on the progress here; nicely done. In fact, I wanted to follow up on the last question and the expectations for a 1Q update here. Can you give us an initial glance at how you think about capital allocation? I presume to a certain extent there could be capital commitments on your part to enable some of these data-oriented strategies, right, to perhaps provide some of the warehousing, etc. So how do you think about that impacting capital allocation, as you say, maybe a couple of years out, 25, 26? And then maybe to marry that up, how do you think about sustaining this level of buyback, or do you have any kind of broad heuristics that you might be willing to share as you think about buybacks, you know, beyond 25, or 25 and beyond here, as you think about this updated plan with 1Q? Yes, Julian, thank you very much for the questions.

Speaker Change: Hey, good morning team and congratulations on the progress here nicely done in.

Speaker Change: In fact, I wanted to follow up on the last question in the end.

Speaker Change: The expectations for <unk> update here can you give us an initial glimpse on how you think about capital allocation I presume to a certain extent there could be capital commitments on your part to enable some of these data oriented strategies right.

Speaker Change: Perhaps provide some of the warehousing et cetera. So how do you think about that impacting capital allocation as you say, maybe a couple of years out 'twenty five 'twenty six and then maybe to marry that up how do you think about sustaining this level of buyback or do you have any kind of broad heuristics that you might be willing to share as you think about buybacks.

Speaker Change: <unk> 25, 25 and beyond here as you think about this updated plan with <unk>.

Speaker Change: Yes, Julian Thank you very much for the questions I'll start with the.

Speaker Change: The data center opportunities as I mentioned weather behind the meter or whether out on the grid they have a natural.

Speaker Change: Sort of demand increase that could send some price signals for our wholesale power prices in the out years some of that could be factored into these curves already I think people have been reading about this the curves are stronger today than they were in the spring of 2022, when we first put out our.

James A. Burke: I'll start with the data center opportunities, as I mentioned, whether behind the meter or whether out on the grid, they have a natural sort of demand increase that could send, you know, some price signals for wholesale power prices in the future. Some of that could be factored into these curves already. I mean, people have been reading about this.

Speaker Change: Our multiyear guidance range. So I think this drew being net long in ERCOT has an opportunity whether we're directly involved with the data set are not so then begs the question when would we get directly involved.

James A. Burke: The curves are stronger today than they were in the spring of 2022, when we first put out our multi-year guidance rate. So I think Vistra being net long and ERCOT have an opportunity, whether we're directly involved with the data center or not. So then you beg the question, when would we get directly involved? It would be if we found that there was a return on that capital to do something that would make sense relative to our other capital allocation alternatives. I would say that I'm not, in detail, at a level of comfort yet that I would tell you that it's actionable.

Speaker Change: If we found that there is a return on that capital to do something that would make sense relative to our other capital allocation alternatives I would say that I am not.

Speaker Change: In the detail at a level of comfort yet I would tell you. That's actionable. So we know that from a free cash flow yield perspective, it's still pretty attractive for us to be returning capital through the buyback. So we would need to see.

Speaker Change: Level of what I'd call it transact able economics.

Speaker Change: That has the long term agreement to bring that to bear as an alternative to our capital allocation strategy in which case I think our shareholders would be.

James A. Burke: So we know that from a free cash flow yield perspective, it's still pretty attractive for us to be returning capital through the buyback. So we would need to see a level of what I'd call transactable economics, you know, that have the long-term agreement to bring that to bear as an alternative to our capital allocation strategy, in which case I think our shareholders would be, you know, pleased to see it. But I view this as an opportunity for us with our native position, and I think it's specifically an enhanced opportunity for our own assets if we choose to do something behind the meter. In addition, I didn't even mention, but in addition to the data center, of course, we have population growth in Texas, which is still strong, and we have a Permian Basin growth rate for load that ERCOT has put out some studies that suggest that That's oil and gas driven, it's population driven, and it's also got some data center low growth there.

Speaker Change: <unk> see it but I view this as an opportunity for us with our native position that I think it's specifically an enhanced opportunity for our own assets, if we choose to do something behind the meter.

Speaker Change: In addition, I didn't even mention but in addition to the data center of course, we have population growth in Texas, which is still strong and we have a Permian basin growth rate for low debt ERCOT has put out some studies that suggest that you could see 13 gigawatts of growth out west from 2023 to 2030.

Speaker Change: That's oil and gas driven its population driven it's also got some data center.

Speaker Change: Growth there. So this is a general theme and then how that I think will benefit.

Speaker Change: And asset position like this and then specifically, how we might target our own assets I view that as incremental upside none of which is factored in.

Chris Mulder: Who are our long range plan at this point and in terms of when we'll update from a capital allocation and how we think about longer term buybacks I'm going to have Chris jump in yeah, Julien I would say you hit it with the energy Harbor transactions. So as that closes as we look forward, we talked about expecting to spend $2.

James A. Burke: So this is a general theme, and then how that I think it will benefit an asset position like Vistra, and then specifically how we might target our own assets. I view that as incremental upside, none of which is factored in to our long-range plan at this point. And in terms of when we'll update from a capital allocation and how we think about longer-term buybacks, I'm going to have Chris jump in. Yeah, Julian, I would say you hit it with the Energy Harbor transaction.

Chris Mulder: Two 5 billion on share repurchases.

Chris Mulder: Over 2024, and 2025, we also have a little bit of debt to repay and we have some growth that youll see them for our renewables and energy storage business, but on top of that we do expect to have additional cash available for allocation that is unallocated.

Chris Moldovan: So as that closes, as we look forward, we talked about expecting to spend $2.25 billion on share repurchases. Over 2024 and 2025, we also have a little bit of debt to repay, and we have some growth that you see in our renewables and energy storage business. But on top of that, we do expect to have additional cash available for allocation that's unallocated. We think it's preliminary right now to get into the levels that that is because we just want to make sure to get this Energy Harbor deal closed and put the two businesses together, start integrating the businesses. But I do think we will come back to you and talk about an additional amount that we have to allocate over the next two years on top of the share repurchase estimate that we're making.

Chris Mulder: So we think it's preliminary right now to get into the levels that that is because we just wanted to make sure to get this energy Harbor deal closed and put the two businesses start integrating the businesses, but I do think we will come back to you and talk about an additional amount that over the next two years that we have to allocate on top of the share.

Chris Mulder: Repurchase.

Chris Mulder: But that we're making and so I don't believe that any of those opportunities would disrupt our pacing on share repurchases.

Speaker Change: Right, even as a percent of total cash flow beyond 'twenty five.

Speaker Change: I think well beyond 25, I think what we'll we're going to continue to come back I still think that the.

Chris Moldovan: And so I don't believe that any of those opportunities would disrupt our pacing on share repurchases. Right, even as a percent of total cash flow beyond 25. I think, well, beyond 25, I think we're going to continue to come back. I still think that the... We haven't ever announced it as a percentage, but I think as a gross amount in this billion-plus range on a per-year basis, we don't see anything that would move us off that now, but we will continue to evaluate that with our board. Wonderful. I know it's in flight.

Speaker Change: We haven't ever announced it as a percentage, but I think as a gross amount in this billion plus range on a per year basis.

Chris Mulder: We don't see anything that would move us off of that now, but we will continue to evaluate that with our board.

Speaker Change: Wonderful I know it's in flight good luck guys will speak to that.

Speaker Change: Thank you Julien.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Dara Geis Chopra.

Speaker Change: Evercore ICI.

Speaker Change: I am sorry pardon me your gas you May proceed yes.

Speaker Change: Yes. Thanks. Thanks, so much appreciate the time team good morning to you.

Speaker Change: Yes.

Julien Dumoulin: Good luck, guys. We'll speak to you then. Thank you, Joanne. Our next question comes from Durgesh Chopra from Evercore ICI. ISI, pardon me. Durgesh, you may proceed. Yes, thanks so much. Appreciate the time, team. Good morning to you.

Speaker Change: Hey, Good morning, Hey, Chris just.

Speaker Change: Maybe this is a stupid question.

Speaker Change: Ask it anyway.

Speaker Change: DRA.

Chris Mulder: The transaction that you did does that have any implication on like a forward look.

Speaker Change: Free cash flow guidance, you kind of talk to it as being somewhat cash flow accretive. So are there any implications as we think about sort of 25 guidance and beyond.

Durgesh Chopra: Hey, good morning, Jim. Hey, Chris, maybe this is a stupid question. Well, I'll ask it anyways. The TRA transaction that you did, does that have any implication on your forward-looking free cash flow guidance? You kind of talked about it as being somewhat cash flow creative. So are there any implications as we think about sort of 25 guidance and beyond? Yes.

Speaker Change: It does we do we do see some benefits on a just a straight free cash flow basis. It is positive from free cash flow and so if you. If you look at as we talked about we spent about $150 million of cash and then we issued the preferred and so over the course of five years, our cash cost for that repurchases.

Chris Moldovan: We do see some benefits on a just a straight free cash flow basis. It is positive from a free cash flow perspective. So if you look, as we talked about, we spent about $150 million in cash, and then we issued the preferred. And so over the course of five years, our cash costs for that repurchase are in the neighborhood of $350 million. Our estimates that we previously had would have shown that the TRA payments would have been roughly twice that.

Speaker Change: In the neighborhood of $350 million.

Speaker Change: Our estimates that we previously had would have shown that the TRA payments would've been roughly twice that so there's there is some free cash flow pick up and that will.

Speaker Change: Factor into our conversion percentage.

Speaker Change: We still see obviously, we're in a higher cost and higher interest rate environment. So there there are puts and takes and so I think we still feel really good about saying that our our expectation is that we would be 55% on average over the planning horizon. Some years, we expect to be more like this year you would see in <unk>.

Chris Moldovan: So there is some free cash flow pickup, and that will factor into our conversion percentage. We still see, obviously, we're in a higher cost and higher interest rate environment. So there are puts and takes. And so I think we still feel really good about saying that our expectation is that we would be 55% on average over the planning horizon, although some years we expect to be more like this year.

Speaker Change: Our materials that we ended up just over 60% conversion in some years, depending on the timing of maintenance capital could be a little bit lower but I think on average 55% of the mid fifties as the right place for our conversion ratio.

Chris Moldovan: You see in our materials that we ended up just over 60% conversion. And some years, depending on the timing of maintenance capital, could be a little bit lower. But I think, on average, 55% of the mid-50s is the right place for our conversion ratio. Okay, that's not super helpful, but it is.

Speaker Change: Okay, that's super helpful, but it is.

Speaker Change: Accretive to your cash flow guidance, but there are obviously other drags and you're comfortable with the with the 55% range of the key takeaway there. Okay. Thank you and then maybe just can I ask I don't want to jump the gun, but what to expect in terms of disclosures on the first quarter call.

Durgesh Chopra: Accretive to your cash flow guidance, but there are obviously other drags, and you're comfortable with the 55% range of the key takeover there. Okay, thank you. And then maybe just, can I ask, I don't want to jump the gun, but what to expect in terms of disclosures on the first quarter call? You know, whether ETH would die is still the metric. And then, you know, in terms of forward-looking years, what to expect if you could share any color?

Speaker Change: You know.

Speaker Change: What where the EBITDA is still the metric and then.

Speaker Change: In terms of forward looking years, what do you expect if you could share any color.

Speaker Change: Yes, so we.

Speaker Change: We're we're going to focus here on energy Harbor and getting it close I do think that whether it's on that call. Our future call. We are going to continue to assess what is the best way for us to communicate the ongoing value of this company and so.

Chris Moldovan: Yeah, so we, um... We're going to focus here on Energy Harbor and getting it closed. I do think that, whether it's on that call or a future call, we are going to continue to assess what is the best way for us to communicate the ongoing value of this company. And so I do think we will at the very... We do expect to plan... We do expect to give updated guidance for this year, but as we go forward, what metrics we use and how we communicate what we see as the value of the business, we're going to continue to work through that, and we will come back to you whether that... It could come on the May call, but it could also come later this year.

Speaker Change: I do think we will at the very we do expect to plan. We do expect to give updated guidance for this year, but as we go forward what metrics, we use and how we are.

Speaker Change: Communicate what we see as the value of the business, we're going to continue to work through that and we will come back to you whether that.

Speaker Change: It could come on the May call, but it could come also later this year, we're going to think through that and make sure that.

Speaker Change: We've thought through all the issues.

Speaker Change: I guess, what I would what I would add is once we close energy Harbor.

Speaker Change: We will go through a process to confirm the synergy numbers. So we'll talk about that on the May call that will then lead to the 2024 expectation as Chris said as the combined companies.

James A. Burke: We're going to think through that and make sure that we've thought through all the issues. Yeah, Durgash. What I would add is once we close Energy Harbor, we will go through a process to confirm the synergy numbers. So we'll talk about that on the May call. That will then lead to the 2024 expectation, as Chris said, of the combined companies. We will also, as he noted in his script, talk about where we see 2025 headed, as well, and obviously, the Synergies are part of that. Capital allocation, there will be an amount that's still unallocated that we see that we will be talking to our board with respect to how we think about the best use of that capital, but you could expect to hear about at least 2024 with a nod to 2025 with our guidance and then these updated synergy expectations.

Speaker Change: We will also as he noted in his script, we will talk about where we see the 2025 headed.

Speaker Change: As well and obviously the synergies are part of that.

Speaker Change: Capital allocation, there will be an amount that's still unallocated that we see that we will be talking to our board with with respect to how we think about that.

Speaker Change: Best use of that capital.

Speaker Change: But you can expect to hear about in May at least the 2024 with a nod to 2025 with our guidance and then these updated synergy expectations as far as the met the best metrics clearly with constellation's call yesterday very successful.

Speaker Change: In their description of how to think about the value drivers.

James A. Burke: As far as the best metrics go, clearly Constellation's call yesterday was very successful in their description of how to think about the value drivers. For our business, where we have looked at it, and since the buyback program was enhanced in 2021, so far, we've really focused on the return of cash and capital to the shareholders, and on a per share basis, between the buyback programs and the dividends, you're seeing that in the $4.45 on the high end, and that's an opportunity that's per share. That's just from a return on capital standpoint. In terms of the adjusted free cash flow before growth on a per share basis, it's much higher on a standalone basis.

Speaker Change: For our business, where we have looked at it.

Speaker Change: Since the buyback program was was enhanced in 2021, so far we've really focused on the return of cash and capital to the shareholders and on a per share basis between the buyback programs and the dividends.

Speaker Change: Youre seeing that in the sort of $4.

Speaker Change: 45 cents on the high end and that's an opportunity that <unk> per share and so that's just from a return of capital standpoint in terms of the adjusted free cash flow before growth on a per share basis, it's much higher on a standalone basis, that's closer to $6 a share.

James A. Burke: That's closer to $6 a share. As far as working through the gap and working through the mark to market, working through depreciation amortization, we will be taking a look at that. What we've tried to focus on to date has been much more about the proof points around the capital we're returning and the sustainability of that, and frankly, the upsizing of that, but clearly, the investor response yesterday was super positive, and if there's opportunities for us to be more clear about the value drivers and the comfort that investors were looking for for the long term, we owe it to them. We'll certainly be taking a look at I appreciate that very much. We're now taking a question from Michael Sullivan from Wolf Research.

Speaker Change: As far as working through GAAP and working through the Mark to market working through depreciation amortization, we will be taking a look at that what we've tried to focus on to date has been much more about the proof points around the capital, we're returning and the sustainability of that and frankly, the upsizing of that but clearly the <unk>.

Speaker Change: <unk> response yesterday was super positive.

Speaker Change: And if there is opportunities for us to be more clear about the value drivers and the comfort that investors were looking for for the long term.

Speaker Change: Oh it to them, we will be certainly taken a look at that.

Speaker Change: I appreciate that very much. Thank you both.

Speaker Change: We're now taking a question from Michael Sullivan from Wolfe Research Michael. Please go ahead.

James A. Burke: Michael, please go ahead. Hey, everyone. Good morning. Hey, Jim. You kind of answered this, but just wanted to confirm, so it sounds like the synergies from the original target you're going to kind of revisit and refresh, but the energy harbor guidance itself, what you're putting out there today, is that just kind of what you saw originally, or is that actually refreshed? assistant as of today.

Michael P. Sullivan: Hey, everyone. Good morning.

Michael P. Sullivan: Hey, Michael.

Michael P. Sullivan: Hey, Jim.

Michael P. Sullivan: Okay.

Michael P. Sullivan: Kind of answered this but just wanted to confirm so it sounds like.

Michael P. Sullivan: The synergies from the original target youre going to kind of revisit and refresh, but the energy harbor guidance itself, what youre putting out there today is that just kind of.

Michael P. Sullivan: What you saw originally or is that actually refreshed and just consistent.

Michael P. Sullivan: Yeah, Michael, I would say it is. We have been updating it ourselves as we're tracking kind of through the process of working to close. We feel good about it. So when we looked at 700 million on a 12 month basis, I do think we'll be in the ballpark of prorating, you know, 10-12th of that number. If you do that, and you add it to our Vistra standalone as we sit today, then you're in the 4.5 billion sort of range for calendar year 2024.

Michael P. Sullivan: Today.

Speaker Change: Yeah, Michael I would say it has been we have been updating it ourselves as we're tracking kind of through the process of working to close.

Speaker Change: We feel good about it so when we looked at $700 million on a 12 month basis.

Speaker Change: I do think we will be in the ballpark of Prorating.

Speaker Change: 10, 12 of that number if you do that and you add it to our Vista Standalone as we sit today in your in the $4 $5 billion sort of range for calendar year 2024, that's above where we were when we announced the acquisition in March of 2023.

James A. Burke: That's above where we were when we announced the acquisition in March of 2023. The synergy numbers, I think there'll be some upside to the synergy numbers, but not likely in calendar year 24, because we thought we could close this deal later last year, so we're getting a later start, but I think by the end of this year, we'll be about where we expected from a run rate perspective. I think there's upside to the out years on how we're thinking about it, so we'd expect to talk about that on the May call, but the way you're thinking about it is correct, Michael. I think it's always helpful to close a deal, work with the teams day in and day out, make sure we understand all the assumptions and then confirm, and if we see a chance to upsize some things on the May call, we Okay, this is super clear. Thanks.

Speaker Change: The synergy numbers I think there'll be some upside to the synergy numbers.

Speaker Change: But not likely in calendar year 'twenty four because we thought we could close this deal later last year. So we're getting a later start but I think by the end of this year, we'll be about where we expected from a run rate perspective, I think there is upside to the out years on how we're thinking about it. So we would expect to talk about that on the may call.

Speaker Change: But the way Youre thinking about it is correct Michael I think it's always helpful to close a deal work with the teams day in and day out make sure we understand all of the assumptions and then a firm and potentially we see a chance to upsize some things on the May call, we'll do it at that time.

Speaker Change: Yeah.

Speaker Change: Okay Super clear thanks.

Michael P. Sullivan: And then, you know, we continue to get questions on this. Just can you give us the latest on where you are in terms of having nuclear fuel secured both for Comanche and to the extent that you know Energy Harbor's position? Sure, yes.

Speaker Change: And then we continue to get questions. On this just can you give us the latest on where you are in terms of having nuclear fuel secured both for Comanche and to the extent.

Speaker Change: Energy harvest position sure yes, yes.

James A. Burke: Yes, we believe we're in really good shape. Michael, as I've indicated on previous calls, we have, as Vistra, done some additional procurements over time since we announced the transaction. Obviously, we had a high percentage likelihood in our view of being able to close the transaction. Either way, the markets continue to go up in price, you know, and that's been speculation on the part of a number of folks based on whether Russian bans or limitations would ultimately be put in place. So, we have a physical procurement strategy that we are secure for both energy harbor sites and our site, Comanche Peak, through 2027 refuelings, and we feel good about that. We're also substantially hedged into 2028 as well.

Speaker Change: Yes, we are.

Speaker Change: We believe we're in really good shape, Michael we have as I have indicated on previous calls we have is this.

Speaker Change: <unk> done some additional procurements through time since we announced the transaction obviously, we had a high percentage likelihood that our view of being able to close the transaction.

Speaker Change: Either way the market's continued to go up in price.

Speaker Change: And that's been speculation on the part of a number of folks based on whether Russia.

Speaker Change: <unk> limitations would ultimately be put in place.

Speaker Change: So we have a physical.

Speaker Change: Procurement strategy that we are secure for both energy Harbor sites and our site Comanche peak through 2027 refueling.

Speaker Change: And we feel good about that we're also substantially hedged into 2028 as well.

James A. Burke: So we feel good about the risk management around that. And, of course, long term, depending on where this goes with the domestic fuel supply capabilities and whether the federal government will incentivize more domestic capabilities for enrichment remains to be seen. But I think we have a very good line of sight and very consistent with everything that we've shared publicly so far and our expectations of this deal. Thanks for all the detail.

Speaker Change: So we feel good about the risk management around that and of course long term dip.

Speaker Change: Depending on where this goes with the domestic fuel supply capabilities and whether the federal government will incentivize more domestic capabilities for enrichment remains to be seen but I think we have a very good line of sight and very consistent with everything that we've shared publicly so far in <unk>.

Speaker Change: Expectations of this deal.

Speaker Change: Yes.

Speaker Change: Thanks for all the detail I appreciate it.

Michael P. Sullivan: Appreciate it, and Mark Watson. And just a reminder, if you still have a question, you may press star one to enter the queue. And now we have a question from Angie Strzelewski from Seaport. Angie, please go ahead. Thank you. Good morning.

Speaker Change: Thank you Michael.

Speaker Change: And just a reminder, if you still have a question you May press star one to enter the queue.

Speaker Change: And now we followed with a question from Angie <unk> from Seaport Angie. Please go ahead.

Angie: Thank you good morning.

Angie Strzelewski: So maybe, good morning, maybe first with, yeah, the fundamentals of power markets are tightening, but... We don't see it in forward power curves, and probably very low natural gas prices do not help, but I'm just wondering, you know, if you think that there will be a step change in those power curves on the back of big announcements about data centers, you name it. We've seen some positive surprises in capacity prices in New England. I'm wondering if you'd hope to see a similar message being sent at the next PJM capacity auction. And again.

Angie: So let me first.

Angie: Good morning, maybe first with them.

Angie: The fundamentals of that market the tightening but.

Angie: We don't see it in forward power curves from probably low.

Angie: Natural gas prices do not help but I'm just wondering if you think that there will be a step.

Speaker Change: Change in those kind of curves on the back of that big.

Speaker Change:

Speaker Change: Announcements about them.

Speaker Change: Data centers you name it.

Speaker Change: We've seen.

Speaker Change: Some positive surprise and capacity prices in new England, and I'm wondering if you'd hoped to see from a message being sent from the next PJM capacity auction and again.

Angie Strzelewski: How do you think? We will see more of a forward-looking signal about the profitability of your assets. Yes, Angie, thank you for that. New England was a better clear than we've seen in a while.

Speaker Change: How do you think.

Speaker Change: We will see more of them.

Speaker Change: Forward looking signals that the profitability of the assets until thing.

Speaker Change: Yes, <unk>, thank you for that.

Speaker Change: New England was a better clear than than we've seen in a while in fact.

James A. Burke: In fact, you know, about 50% higher in the 2027-28 auction than what we saw, you know, just prior to the previous auction. Good for our gas fleet, obviously, up in New England. PJM has delayed some of their auctions, so we have to play catch up, you know, with PJM. So we'll see what comes forth. There's going to be a number of auctions that happen in the next 12 months to get caught up in PJM. There have been market reforms proposed for PJM. Some of those are going to be implemented, and some of them were not supported by FERC.

Speaker Change: About 50% higher than the 2027, 2020, 782027, and 28 auction to what we saw just prior in the previous auction.

Speaker Change: Good for our gas fleet, obviously up in new England.

Speaker Change: PJM has delayed some of their auctions. So we have to play catch up.

Speaker Change: With PJM. So we'll see what comes for if theres going to be a number of auctions that happen in the next 12 months to get caught up in PJM. There had been market reforms proposed for PJM. Some of those are going to be implemented some of them were not supported by FERC.

James A. Burke: Again, it's still a little bit of a struggle as to what the effect on the capacity is going to be. Things like the market seller offer cap have been very difficult to move the needle on, which has had a dampening effect on capacity prices, but this effective load carrying capability or ELCC, where potentially the dispatchable assets get proportionally more credit than the intermittent, that's an opportunity for PJM to clear. So I think they are coming to the same conclusion that other grid operators have come to, which is that PJM used to be really flush with excess capacity, but a lot of it is retiring, and the gas plants are critical because the intermittent sources for wind and solar are not nearly as naturally supported in PJM as they are in places like ERCOT in California. As far as Texas is concerned, as I mentioned the spark, and you see it in the graph that Chris covered, the spark spread has definitely moved up. So gas prices went up, and the Russia-Ukraine conflict has come back down. Sparks have stayed elevated relative to that timeframe, but they're still strongly backward.

Speaker Change: So again, its still a little bit of a struggle as too.

Speaker Change: What is going to be the effect on the capacity things like market seller offer cap had been very difficult to move the needle on which has had a dampening effect on capacity prices, but this effective load carrying capability or el sissi, where potentially the dispatch of all assets get proportionately.

Speaker Change: More credit than the intermittent that's an opportunity for the PJM capacity clear so.

Speaker Change: They are coming to the same conclusion that other grid operators, which is we PJM used to be really flush with excess capacity, but a lot of it is retiring.

Speaker Change: And the gas plants are critical because the intermittent sources for wind and solar are not nearly as naturally supported in PJM as they are in places like ERCOT and California as far as Texas is concerned.

Speaker Change: I mentioned, the spark and you see it in the graph that Chris covered the spark spread has definitely moved up so gas prices went up and the Russia, Ukraine conflict have come back down Sparks have stayed elevated relative to that timeframe.

Speaker Change: But theres still strongly backward dated and I think that's still comes from the concern of how much renewables will continue to come in and then also will the market reforms support price formation.

James A. Burke: And I think that still comes from the concern of how much renewable energy will continue to come in. And then also, will market reforms support price formation in ERCOT?

Speaker Change: In ERCOT and Ecr's was an example, where price formation occurred last summer there was a lot of of concern from a lot of customers and others that maybe that was too much price formation and so they start having to revisit the rules and now I would say, it's just uncertain how some of these things like.

James A. Burke: And ECRS was an example of price formation occurring last summer. There was a lot of concern from a lot of customers and others that maybe that was too much price formation. And so they started having to revisit the rules.

James A. Burke: And now I would say it's just uncertain how some of these things like ECRS will play out. So certainty around some of these ancillaries will help, certainty around PCM will help. That, coupled with the demand growth that is actualized on the ground, I think could help address some of the backwardation in ERCOT, which could then help address the investment signal. But we've said that for a while, ERCOT has been backward for about forever.

Speaker Change: E Crs will play out so certainty around some of these ancillary will help certainty around PCM.

Speaker Change: Will help that coupled with the demand growth that is actualized on the ground I think could help address some of the backwardation in ERCOT, which could then help address the investments signal, but but we've said that for a while ERCOT has been backward aided for.

Speaker Change: How about forever. If you go long enough out and go back in history. So the profit will always be pretty strong because thats where reality.

Angie Strzelewski: If you go long enough back in history, the prompt will always be pretty strong because that's where reality meets supply and demand. But out in the forwards, you still see concern around whether the price signals will be there. That's part of the Texas market reform and ultimately the gas plan investment that folks are considering. But I think that's still yet to play out.

Speaker Change: The supply demand, but out in the forwards you still see concern around whether the price signals will be there and that that's part of the Texas market reform and ultimately the gas plant investment that folks are considering but I think that's still yet to play out.

Angie Strzelewski: Okay, and then changing topics. I understand that the Energy Harbor transaction hasn't closed, but I'm sure that as it was peaking months to close, you were probably looking at the assets you're acquiring and potential revenue and cost synergies. So we're waiting for probably the first collocation of a data center with a nuclear plant. And I'm just wondering, one, if you think that this will have an impact on other nuclear power owners, and also, how do you see the large portfolio of nuclear plants vis-a-vis that opportunity? I'm mostly asking, you know, most of your sites are single-unit nuclear plants, so there's this, you know, no backup from additional units that a data center would get. And would you think that it's somewhat of an impediment to, you know, the pursuit of such a collocation strategy on your site? Yes, Angie, it's a fair question. I would say the data center, growth behind the meter at a nuclear plant, is still early stages for anybody in the market. It's certainly been discussed and is being considered, but it still takes time for some of these things to play out.

Speaker Change: Okay, and then changing topics.

Speaker Change: So.

Speaker Change: I understand that the I know you have a transaction hasn't closed, but I'm sure that that's just about peaking months to come.

Speaker Change: You were company looking at the assets youre, acquiring and potential revenue and cost synergies.

Speaker Change: So we're waiting for it for probably.

Speaker Change: Probably the first co location of a data center with that within nuclear plant.

Speaker Change: Just wondering.

Speaker Change: One key thing.

Speaker Change: This will have an impact on other nuclear power owners and also how do you see the portfolio in large portfolios of nuclear plants, you're going to eat that up.

Speaker Change: Attunity most of the asking.

Speaker Change: You know most of your sites that single unit nuclear plants.

Speaker Change: Okay.

Speaker Change: No backup from additional units that got a data center with gaps and would you think that is somewhat.

Speaker Change: Somewhat of an impediment to that.

Speaker Change: The pursuit of such that co location strategy on your sites.

Speaker Change: Yes, Angie it's a fair question I would say the data center.

Speaker Change: Growth behind the meter at a nuclear plant is still early stages for any anybody in the market. It certainly been.

Speaker Change: Discussed and being considered but it still takes time for some of these to play out I do think the two units having an opportunity to have redundancy will be attractive for customers. So Beaver Valley has been the one that has been working towards this path.

James A. Burke: I do think the two units having an opportunity to have redundancy will be attractive for customers. So Beaver Valley has been the one that has been working towards this path, and then Comanche Peak as well.

Speaker Change: Then Comanche peak as well.

James A. Burke: However, I'll go back to a comment I made on an earlier question: between the colocation companies and the hyperscalers, speed is very important to them. So while the redundancy may not be there on a single unit site, pulling from the grid would still be an option. And that's how we manage the behind the meter that we work with in our gas plant. So while there's a preference list from a customer standpoint of things that check every box, I think there's going to be a balance of factors that potential data center companies will be considering when they make a site selection. And speed is one of them. Economics is one of them.

Speaker Change: However, I will go back to a comment I made on an earlier question.

Speaker Change: Tween, the co location companies and the hyper scaler.

Speaker Change: Speed is very important to them. So while the redundancy may not be there on a single unit site pulling from the grid would still be an option and that's how we manage the behind the meter that we work with our gas plant. So while there is a preference list from a customer standpoint of things that check every box.

Speaker Change: I think there's going to be a balance of factors that the potential data center companies will be considering when they do a site selection and speed is one of them economics is one of them access to water is a novel one so there's a number of variables there beyond just the two units versus one unit, but all things being equal that.

James A. Burke: Access to water is another one. So there's a number of variables there beyond just the two units versus one unit. But all things being equal, that would probably be your preferred site, Angie. But the fact that we're being approached about gas plants tells you that it isn't just about the carbon attributes.

Speaker Change: Would probably be your preferred.

Speaker Change: Sight Angie.

Speaker Change: The fact that we're being approached about gas plants tells you that it isn't just about the carbon attributes. It's it's about some of these others as well.

James A. Burke: It's about some of these others as well. Okay, and then lastly, I'm sorry that I'm asking so many questions, but if you were to be approached by, you know, some of these tech companies and offered long-term contracts, and again, against a very depressed forward power curves, would you be willing to actually lock in some of these assets? Or are you basically thinking that, you know, we're about to see a step change in how the market assesses the value of your assets, and so there's no need to actually lock the value at the bottom of the potential bottom? That is an excellent question, Angie. I don't know if it's an all-or-nothing approach because we have a lot of assets with a lot of length, but if you're speaking nuclear first with a production tax credit, that escalates with inflation and our curves are basically sitting at those levels, you would need to see something attractive from a customer to lock it in, and it would have to be at a reasonable premium to what your view is of the alternative, which is to stay long, to have the PTC as some support on the bottom, but still retain some of the upside for that asset.

Speaker Change: Okay, and then lastly, I'm, sorry that I'm asking so many questions, but if you were to be approached by you know some of these tech companies and offered long term contracts and again against a.

Speaker Change: Im very depressed forward power curves would you be willing to actually lock in some of these assets or are you basically thinking that.

Speaker Change: We're about to see a step change and how the market assesses the value of your assets. So there's no need to actually.

Speaker Change: Lochte.

Speaker Change: The value at the bottom of that potential bottom of the cycle.

Speaker Change: That is an excellent question Angie I don't know if it's an all or nothing approach because we have a lot of assets with a lot of length, but I was a if you're speaking nuclear first with the production tax credit.

Speaker Change: It escalates with inflation and our curves are basically sitting at those levels, you would need to see something attractive from a customer to lock it in and it would have to be at a reasonable premium to what your view is of the alternative which is to stay long.

Speaker Change: To have the PTC as some support on the bottom, but still retain some of the upside for that asset for other assets like the gas plants, I think you could potentially add more flexibility because youre not necessarily going to see that youre not going to see the PTC support for some of those but from a nuclear standpoint.

Angie Strzelewski: For other assets, like gas plants, I think you could potentially have more flexibility because you're not necessarily going to see the PTC support for some of those, but from a nuclear standpoint, I don't think there's a rush here for the reasons that you mentioned, and it also takes time because of the complexity of these to put them in place, so I think we agree with how you're framing the question, Angie, and we're Thank you. Thank you, Angie. And with that, we conclude our question and answer session. I would like to turn the conference back over to Jim Burke, the CEO of Vistra, for some closing remarks. Perfect.

Speaker Change: I don't think there is a rush here for the reasons that you mentioned and it also takes time because of the complexity of these to put these in place. So I think I think we agree with how you framed framing the question Angie and we're gonna be patient about how we think about these opportunities.

Speaker Change: Great. Thank you.

Speaker Change: Thank you Angie.

Speaker Change: Hi.

Speaker Change: And with that we conclude the question and answer session.

Speaker Change: Would like to turn the conference back over to Jim Burke.

James A. Burke: All of this is true for some closing remarks.

James A. Burke: Thank you. First, I want to start by just thanking the Vistra team. 2023 was a heck of a year, and we look forward to what is in store with Energy Harbor, who I also want to thank. They have done an excellent job running a business during a year of uncertainty. Whenever an announcement is made, the units are running very well. The team has been incredibly cooperative in our integration efforts, and we're excited about this Friday and becoming one team. We were going to continue to execute our plan, which includes returning capital in an environment of very strong long-term fundamentals. I think that came out in a number of the questions that we were asked.

James A. Burke: Perfect. Thank you first I wanted to start with just thanking the district team.

James A. Burke: 23 was a heck of a year and we look forward to to what is in store with energy Harbor, who I also want to think they have done an excellent job.

Speaker Change: Running a business during a year of uncertainty whenever the announcement is made the units are running very well. The team has been incredibly cooperative on our integration efforts and we're excited about this Friday and becoming one team.

Speaker Change: We're going to continue to execute our plan, which includes returning capital in an environment of very strong long term fundamentals I think that came out in a number of the questions that we were asked.

Operator: And I also hope that we get to see many of you in New York next week. We'll be up there for a couple of days, and it's always good to see folks face to face. So thank you for your time this morning, and we'll hopefully see you soon. And this conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Have a good day.

Speaker Change: And I also hope that we get to see many of you in New York next week, we'll be up there for a couple of days and it's always good to see folks face to face. So thank you for your time this morning, and we'll hopefully see you soon.

Speaker Change: And the conference is now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: Good day.