Q1 2025 Vistra Corp Earnings Call

Speaker Change: With grateful honor and pride is my St. Lawrence Franco Academy, arabella I am. St. Lawrence college TORONTO 2015 TORONTO2015.org

Speaker Change: Good morning everyone and welcome to Vistra's first quarter, 2025 earnings call.

Speaker Change: All participants will be in a listen-only mode. If you need assistance, please say no to a conference specialist by pressing the star key followed by zero.

Speaker Change: At this time I'd like to turn the floor over to Eric Micek, VP of Investor Relations. Please go ahead.

Eric Micek: Good morning, and thank you for joining Vistra's investor webcast discussing our first quarter of 2025 results.

Speaker Change: Our discussion today is being broadcast live from the Investor Relations section of our website at www.vistrecorp.com. There you can also find copies of today's Investor presentation and earnings release.

Beatina Call today, Jim Burke. .

Chris Moldovan: Mrs. President and Chief Executive Officer and Chris Moldovan, Mrs. Executive Vice President and Chief Financial Officer [inaudible]

Chris Moldovan: They are joined by other Vistra's senior executives to address questions during the second part of today's call as necessary. Arning's release presentation in other matters discussed in the call today include references to certain non-GAAP financial measures.

Chris Moldovan: 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.

Jim Burke: Thank you Eric Good morning, and thank you for joining us to discuss our first quarter 2025 operational and financial results.

Jim Burke: 2025 is off to a strong start for described we remain excited about the demand growth trends, we are seeing across our markets and we believe history is poised to serve the growing needs of customers in numerous ways.

Jim Burke: While there has been a bit of turbulence in the last few months in the macro environment. The administration is prioritizing AI and attempting to find ways to unlock America's leadership in this area the.

Jim Burke: The hyperscale or have continued to affirm or even increased their capex investment levels with respect to data center investments.

Jim Burke: We believe to meet this growing load it will require increased power generation, not only new assets, but existing assets as well.

Jim Burke: There are policy challenges to solve we see you're growing willingness on the part of all stakeholders to come together on solutions that will serve new large loads, while minimizing impacts for existing customers.

Jim Burke: Mr is very well positioned to be a leader with respect to these solutions and to benefit from the tailwind in our sector.

Jim Burke: Beginning on slide five the team worked diligently across the business to maintain last year's strong momentum into 2025.

Jim Burke: As you can see from our results our team was able to deliver achieving adjusted EBITDA of $1.240 billion for the quarter.

Jim Burke: Consistent execution from generation commercial and retail was key to this success highlighting the strength of our integrated business model and our one team approach.

Jim Burke: We continue to believe that a diversified portfolio of generation assets, including nuclear and gas combined with our best in class retail business and a strong commercial set of capabilities creates a superior and resilient business model for navigating volatile power markets.

Jim Burke: We are reaffirming the guidance ranges for 2025, adjusted EBITDA of $5 5 billion to $6 $1 billion in adjusted free cash flow before growth of 3 billion to $3 $6 billion. Both introduced on our third quarter 2024 call.

Jim Burke: Moving to 2026, while we have not updated our 2026 adjusted EBITDA midpoint opportunity, we remain confident in our ability to deliver significantly above the floor of $6 billion.

Jim Burke: Our confidence in our ability to deliver this outlook is primarily underpinned by our continued strong operational performance and our comprehensive hedging program, where we have successfully hedged approximately 95% of our expected generation over the 2025 to 2026 timeframe.

Jim Burke: We continue to believe our comprehensive hedging program, which focuses on locking in value during periods of volatility ensures a more stable and resilient earnings stream across varying economic cycles.

Jim Burke: Turning to slide six our four strategic priorities continue to be central to our long term success, while driving strong operational and financial performance.

Jim Burke: As highlighted earlier, our integrated business model and comprehensive hedging program to deliver consistent results and enhanced visibility into our earnings potential while providing a significant downside protection to our near term outlook.

Jim Burke: The excellent team work across our business is central to the successful execution of our strategy.

Jim Burke: Operationally our generation team achieved another strong quarter of commercial availability at approximately 95%.

Jim Burke: Enabling us to perform for our customers driving multiple winter storms in both our PJM and ERCOT markets.

Jim Burke: On the retail side, we achieved another quarter of organic growth in the Texas market. After a strong 2020 for demonstrating the consistency and strength of our retail business.

Jim Burke: Switching to capital allocation, we maintain a disciplined approach of returning capital to shareholders investing in select growth projects that achieve mid to high teens returns on capital and maintaining a strong balance sheet with a long term net leverage target of less than three times.

Jim Burke: As part of this approach we continue to execute the capital return plan put in place during the fourth quarter of 2021.

Jim Burke: Since that time, we have returned approximately $6 $3 billion to our investors through share repurchases and common stock dividends, we grew our zero carbon business, including through the acquisition of Energy Harbor.

Jim Burke: And we achieved our long term leverage target as.

Jim Burke: As part of this program, we expect to return at least an incremental $2 billion in total through share repurchases and dividends through the.

Jim Burke: Under a 2025 and 2026.

Jim Burke: On the subject of growth, we have two equipment acute positions for our Permian one in Permian to Peters.

Jim Burke: And we have an attractive cost profile given the timing of when we place these orders.

Jim Burke: We believe these projects with build cost of approximately $1000 per kilowatt are advantaged relative to current estimates for peak or is it more than $1500 per kilowatt.

Jim Burke: We will continue to evaluate the returns for these projects and SaaS market reforms, including legislative activity in Texas and elsewhere as we determine our best path forward.

Jim Burke: With respect to the strategic energy transition, we continue to execute on our strategy of utilizing existing land and interconnects to Opportunistically complete solar and energy storage projects. This quarter. We continue the construction on our Oak Hill, Texas, and Pulaski, Illinois sites in support of our contracts with Amazon and Microsoft.

Jim Burke: <unk> respectively.

Jim Burke: Once online these facilities were at over 600 megawatts of renewable capacity to our portfolio.

Jim Burke: Our Oak Hill side is approximately 90% complete and on track for a fourth quarter 2025 commercial operations date.

Jim Burke: Pulaski side is approximately 20% complete and on track for a fourth quarter 2026 commercial operations date.

Jim Burke: We also began mobilizing for construction on our Dayton battery storage site in Illinois.

Jim Burke: This site will add over 50 megawatts of the region with a planned commercial operations date in 2026.

Jim Burke: Importantly cost structures for these projects remain insulated from recently announced tariffs.

Jim Burke: Moving to our nuclear portfolio feasibility studies are underway for potential nuclear operates as we noted last quarter initial estimates indicate the potential for op rates across our nuclear fleet of approximately 10%.

Jim Burke: We expect to finalize these studies over the next year with target online dates in the early 20 <unk>.

Jim Burke: You can expect future updates from us as we evaluate these opportunities and prioritize projects.

Jim Burke: Moving to slide seven we continue to see electricity load growth as providing a structural tailwind for our sector.

Jim Burke: Similar to the summer and winter peak load growth highlighted in our fourth quarter results call quarterly weather normalized load in the PJM and ERCOT markets continues to see accelerating growth trends.

Jim Burke: Our analysis suggests the sources of demand growths are durable and diversified across industries with data center power demand being a key driver, but not the only one.

Jim Burke: Importantly, electricity demand growth has historically proven to be fairly inelastic over varying economic cycles, and we don't see recent concerns around economic growth impacting the structural change in demand that we see in todays power markets.

Jim Burke: While this growth provides an exciting opportunity for vickery to serve customers in new and varied ways.

Jim Burke: Why range of projections has garnered the attention of policymakers across the country not only in competitive markets, but in vertically integrated markets as well.

Jim Burke: We continue to believe the actual level of load growth will compound annually in a low to mid single digits range through 'twenty 30 across our markets.

Jim Burke: This is consistent with what we shared last year on our Q1 results call and now we see this dynamic playing out well.

Jim Burke: While this is a strong level of growth compared to the past 20 years in most areas of the country.

Jim Burke: We believe this demand can be reliably and cost effectively served.

Jim Burke: Because grids are built to serve the highest demand during so called Super peak hours. The electric grid remains underutilized for most hours in the year ERCOT is a perfect example, where peak load has been approximately 85 gigawatts, but the average load is approximately 53 gigawatts, we think this excess capacity.

Jim Burke: City during most days of the year provides a unique opportunity to meet a large portion of the pending load growth with existing capacity.

Jim Burke: And the 1% or less of the hours that are super peak hours, which typically occur in peak summer or winter weather. There are relatively straightforward solutions like demand response use of onsite backup generation at the customer's location and higher utilization of existing assets to meet these needs.

Jim Burke: It is our view this combination can allow for new load to come into our markets in an orderly fashion N b serve cost effectively.

Jim Burke: Over time as the load continues to grow there will be time for additional investment in generation and transmission to serve customer needs.

Jim Burke: Importantly, given the market backdrop, and the load growth materializing in the near term existing this fashionable assets will be essential to delivering the resource adequacy grid operators and customers expect.

Jim Burke: We believe <unk> with its large and flexible fleet of generation assets combined with one sites that can bring new generation is well positioned for this environment.

Jim Burke: Our large C. C. G T fleet with nearly 20 Gigawatts of total capacity, which currently operates at average utilization rates of approximately 55% to 60%.

Jim Burke: And run it substantially higher capacity factors, improving great utilization and lowering unit costs for customers.

Jim Burke: Approximately two gigawatts of simple cycle peak or have the quick start capabilities to ramp up as load materializes further contributing to grid reliability.

Jim Burke: On development the diversity of the Vista regeneration portfolio allows for multiple types of capacity additions through both the expansion of existing assets and development of new projects.

Jim Burke: Operates at existing gas plants in ERCOT and the coal to gas conversion of our collateral Creek plant represent near term opportunities to add megawatts to the grid at attractive unit economics.

Jim Burke: Other opportunities like the previously mentioned dystrophy zero or nuclear operating projects represent longer term prospects for capacity additions.

Jim Burke: Allison makers are also working on solutions to address the growing number of large loads that plan to connect to the grid.

Jim Burke: Importantly, whether these large loads connect directly onto the grid or co locate with a power plant the amount of power or they consume and the net supply and demand balance are the same in either scenario.

Jim Burke: We will continue to work with policymakers and large load customers on solutions that meet all customer needs, including those of our residential and small commercial customers.

Jim Burke: We continue to advance our discussions with large load customers on various power solutions and we are optimistic about regulatory developments and our ability to serve these customers.

Jim Burke: With the Texas Legislative session ending in early June and the P. J M regulatory process related to the FERC Colocation show cause order potentially concluding this summer we are ready to navigate the evolving landscape and believe we are well positioned for success.

Mr remains committed to supporting our reliable affordable and sustainable grid and our integrated business is poised to serve customers with growing needs now.

Jim Burke: Now I will turn it over to Chris to provide more details on our first quarter results outlook and capital allocation Chris.

Chris Moldovan: Thank you Jim turning to slide nine Mr delivered first quarter results and 2025 that were approximately 53% higher year over year compared to Q1 2020 for achieving adjusted EBITDA of approximately $1 $240 million, including $1 $56 million from generation and 100.

Jim Burke: $84 million from retail to.

Jim Burke: The significant year over year increase was partially driven by the inclusion of two additional months of energy harvest generation retail results.

Jim Burke: Given the transaction closed March 1st of last year.

Jim Burke: Generation also benefited from our comprehensive hedging program, which delivered averaged realized prices nearly $4 per megawatt hour higher compared to the same quarter last year, a better weather backdrop in January and February also led to higher capacity factor is across our PJM and ERCOT assets.

Jim Burke: Turning to retail the business continues to realize benefits from strong customer counts margins and supply management as our consistent product development combined with strong brand recognition drove higher year over year customer additions in our key markets.

Jim Burke: Similar to generation retail results were also bolstered by favorable weather in our Texas and Midwest northeast markets compared to the first quarter last year, which was negatively impacted by the warmest winter on record.

Jim Burke: As a reminder, due to higher hedge power cost in the winter and summer months, we expect the majority of adjusted EBITDA for retail to be realized in the second and fourth quarters depending.

Jim Burke: Depending on the shape of those power costs throughout any given year, the expected relative contribution from each quarter and subject to change, notably our expectation heading into the year for Q1 2025 was significantly higher than the first quarter results for retail in 2024.

Jim Burke: Moving to slide 10, we are reaffirming our 2025 adjusted EBITDA guidance range of $5 5 billion to $6 $1 billion and our adjusted free cash flow before growth range of 3 billion to $3 $6 billion.

Jim Burke: We believe the reaffirmed our outlook for 2025 demonstrates the earnings resiliency afforded by the diversified model, especially in light of our outage of Martin Lake unit, one at our Moss landing batteries being offline.

Jim Burke: Turning to our outlook for 2026 as Jim mentioned, we continue to see our outlook developed positively.

Jim Burke: We are increasingly confident and then adjusted EBITDA midpoint opportunity outcome for 2026 approaching mid to high $6 billion, and even possibly $7 billion.

Jim Burke: We expect to provide guidance for 2026 later in the year likely on our third quarter call.

Jim Burke: As always our guidance and near term outlook remains supported by our comprehensive hedging program for 2025, our gross margin remains highly hedged with approximately 100% of our expected generation already sold for 2026, our hedge ratio increased from approximately 80% to approximately 90% as our commercial team.

Jim Burke: The advantage of market opportunities.

Jim Burke: Finally, turning to slide 11, we provide an update on the execution of our capital allocation plan.

Jim Burke: Since beginning the program in November 2021, we have reduced our shares outstanding by approximately 30% repurchasing approximately 163 million shares at an average price per share of just under $32.

Jim Burke: This reduction has notably led to a 49% increase in our dividend per share since the dividend paid in Q4 2021 to the dividend paid in Q1 2025.

Jim Burke: Regarding our balance sheet mistras not leverage ratio currently sits just under three times adjusted EBITDA in line with our long term target of below three times.

Jim Burke: In terms of future capital deployment, we will maintain a disciplined approach towards further deleveraging investment for growth and shareholder return, we expect to invest just over $700 million on solar and energy storage projects in 2025, including the previously discussed solar projects supported by contracts.

Jim Burke: With Amazon and Microsoft along with our Newton site, which we began preparing for construction this quarter.

Jim Burke: Based on our current project pipeline, we anticipate a reduction in solar and energy storage development Capex for 2026 subject to change with any new off take agreements.

Jim Burke: As a reminder, we expect to fund a significant portion of our growth expenditures when third party capital, including nonrecourse loans.

Jim Burke: We continue to believe these projects are a great opportunity to leverage existing sites to increase the proportion of our contracted EBITDA at attractive returns, while eliminating the impact of our cash available for allocation.

Jim Burke: Lastly, we believe Mr continues to be well positioned to create sustained long term value. The resilience of our business is evident in our strong results and reaffirmed earnings outlook amidst increased market volatility. Our team is focused on our core mission of lighting up lives empowering a better way forward we remain confident.

Jim Burke: <unk> and our ability to be part of the solution to address our country's growing power demand in the coming years, and we look forward to the months and years ahead and with that operator, we're ready to open the line for questions.

Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session to ask a question you May Press Star and then one on your Touchtone phones. If you are using a speaker phone would you ask that you. Please pickup your handset before pressing the keys to ensure the best sound quality.

Speaker Change: So withdraw your questions you May press star and to once again that is star and then one to ask a question.

Speaker Change: Time, we'll pause momentarily to assemble the roster.

Speaker Change: And our first question today comes from Shar <unk> from Guggenheim Partners. Please go ahead with your question.

Speaker Change: Hey, guys good morning.

Speaker Change: Hey, Shar good morning.

Speaker Change: Good morning, Jim.

Speaker Change: Jim I couldn't get a sense on the prepared just on Comanche peak deal conversations are you waiting specifically for co locations at this point or could you be moving ahead with front of the meter and virtual P. P. As in the interim and the reason why I ask is you know one of your peers noted yesterday that F. A women btn price.

Speaker Change: <unk> is harmonizing and their customer conversations, which I think is counter to what <unk> been messaging in the past is just a little bit of a sense there. Thanks.

Speaker Change: Sure.

Speaker Change: Sure I think what I've tried to mentioned on previous calls and I know, we've covered a lot of ground.

Speaker Change: Really for the past Years' worth of calls that no. Two deals really are gonna look alike, I think the customer needs.

Speaker Change: Really dictate that and for some areas of the country in the front of the meter may actually be as good of an opportunity set as co location from our perspective, when we looked at the deals that we're working on with with many customers, they're still looking at co location as a potential speed.

Speaker Change: Vantage.

Speaker Change: And again, that's going to depend on which part of the country and how clear are the rules I think from our team's perspective the activity level has not slowed down.

Speaker Change: We remain very engaged with a number of these opportunities and we're very.

Speaker Change: I'm pleased with the progress we're making.

Speaker Change: There is still a desire for clarity because as we mentioned on previous calls you have to contract.

Speaker Change: Through these deals which are long term deals 10 to 20 years and you contracts need to anticipate how rules and regulations are going to play out so to the extent the rules regulations can become clear it'll make the ease of contracting. These I think a little bit more straightforward as far as pricing a lot of these custom.

Speaker Change: <unk> looked at alternatives around the country. So what is the next best alternative to either a front of the meter location or co location with existing assets and that includes co location potentially would even new assets.

Speaker Change: All of that creates a price spectrum and I think we've talked about the fact that they there is going to be a spectrum of prices out there I don't think there's enough deals signed to say that one deal is going to equal another deal because they're just really frankly haven't been that many deals.

Speaker Change: And so I think it's too early to say that front of the meter and behind the meter is harmonizing from our perspective, but I also think no. Two deals are going to look exactly the same and I don't think we should expect that these are sophisticated customers. The markets all have different nuances in terms of their design and their ability to deliver for them.

Speaker Change: Customer and I think our ability to price that is going to be our ability to work with that customer that that we can meet their needs and so.

Speaker Change: What I'm excited about is that the hyperscale or has it either reaffirmed or increase their capex. So we're still talking about nearly two trillion dollars between now and 2030 that the major four players intend to spend and the administration is prioritizing.

Speaker Change: They are setting a tone that we've got to win the a I raised so we've gotta make co location work, we've got to make front of the meter work, we need to be able to build new assets as well as utilize existing ones and so that's how we're approaching it sure.

Speaker Change: Got it and then that's actually very consistent as in the past and then Jim Just lastly, I know this is not an easy question to answer but just on general deal timeline at this point does SB six finalization does that unlock of Comanche deal.

Speaker Change: I think S V. Six that they were in result of SB six will unlock a lot of things.

Speaker Change: We don't know how SB fix is gonna frankly turn out I mean, there's a hearing today. It's the first time, it's being picked up.

Speaker Change: In the house and as we've covered in previous calls, Texas could attract a lot of load. If we're able to lay out clear rules and regulations and I think that could unlock of Comanche peak deal, but I think it can unlock a lot of deals, including the front of the meter deals S. P. Six deals with both and so we're active on.

Speaker Change: S B six as our peers as is the large customer.

Speaker Change: Coalition is very active on this so the session ends in early June the goal, obviously would be to get clarity.

Speaker Change: Beyond that time frame and I would expect that you'll see some things announced shortly thereafter with the view that the deal parameters and the kinds of things that folks are trying to contract around would become more clear.

Chris Moldovan: Got it perfect. Thanks, again, Jim very a very helpful color I appreciate it as always.

Speaker Change: Thank you Shar.

Speaker Change: Okay.

Speaker Change: Our next question comes from Julien Dumoulin Smith from Jefferies. LLC. Please go ahead with your question.

Speaker Change: Hey, good good morning, and.

Speaker Change: Thank you guys very much appreciate the time guys, maybe just to follow up a little bit here on what you guys are thinking about 26 here in $7 billion can you guys comment briefly on 27 I mean, the the curves have been moving around obviously the opportunity. You said you guys are saying also moving around but are there any shall we say initial commentary that you guys would really be willing to provide.

Speaker Change: Okay.

Speaker Change: And Julien it it has been I think I use the word turbulent.

Speaker Change: In the prepared remarks so.

Speaker Change: It is moving around I think the good news is is that.

Chris Moldovan: That turbulence as you know showed strength before some of the concerns around the economy and that has bounced back and so our team has been actively hedging as you've heard the update that Chris gave and I think I mentioned on the last call and it Chris was given a nod to this in his remarks 20.

Chris Moldovan: <unk> is looking strong and we see 27 and even 28.

Chris Moldovan: We see that holding similar strength.

Chris Moldovan: We're not hedging obviously as far out as you would guess you'd like to because the depth of the market isn't always there to be able to hedge as far out but the earnings profile is strong so even with some of the anticipated coal retirements that we have we see the strength of our current ASP.

Chris Moldovan: That base, becoming more valuable the curves are reflecting that.

Chris Moldovan: And I think that the earnings power looks very consistent from our point of view.

Chris Moldovan: Got it so just to make sure I understand you presumably had some degree out in 27 year incrementally, but given even with the opening position the mark to market looks somewhat similar to what you're seeing on the 26 as it stand.

Speaker Change: Good day, and I'll only hold it to you today.

Thank you Jill and I appreciate that and the answer is yes.

Speaker Change: Awesome alright, well.

Speaker Change: That's my two questions. Thank you guys very much I appreciate it.

Speaker Change: Our next question comes from Angie stores Lynskey from Seaport. Please go ahead with your question.

Speaker Change: Thank you I'm I'm I'm, just kind of make a comment that sorry. It's so you know when we listen to your prepared remarks, it's hard to test that you have this upside potential probably once in a generation coming.

Speaker Change: Coming from a I mean, I know it might be just a different style of communications about it again, it's it's a it would be hard to guess that there is does that upside potential ahead of the U N. So again is it just because you know we're trying to manage our expectations is it that something has changed or is it that you don't.

Speaker Change: Want to commit to a certain timeline again I'm I'm I'm at a loss way you know it sounds a little bit more upbeat.

Speaker Change: Well Angie I appreciate that.

Speaker Change: I would say we take the <unk>.

Speaker Change: This responsibility of how we think about messaging to our shareholders.

Speaker Change: And how the complexity of this marketplace is is a reality and I also think.

Speaker Change: These large scale customers.

Speaker Change: And we see it in the interconnect cues throughout the country.

Speaker Change: As we've communicated before they have lots of opportunities. We think these interconnect Qs and I. Thank all of our peers have described this at some level.

Speaker Change: They may be overstated anywhere from three to five times, what might actually materialize either in regulated markets or competitive markets. So I I've just respect the customers ability to develop on multiple fronts around the country, it's our job to come.

Speaker Change: Pete to win that deal.

That's exactly what we're wired to do but.

Speaker Change: But we respect the fact that we have competitors and we respect the fact that even regulated markets are competing for this loan.

Speaker Change: Competition benefits customers and I fully respect that I spent 25 years and the competitive market side and I understand the ferocity of competition. So.

Speaker Change: I have had a style here and it's been I think consistent from a team perspective that when we have something that's ready to disclose we will.

Speaker Change: And I can assure you of that and we're working extremely hard to have something to disclose but until that happens. It's just not been as my style to predict.

Speaker Change: Given the fact that these customers are sophisticated have choice that until youre at the finish line.

Speaker Change: You're just not there yet so that's I think a N G. The color that I would provide.

Speaker Change: Okay. So just taking it maybe a step forward.

Speaker Change: For example, you got 26 guidance Youre very heavily hedged you have I've got capacity auction that comes with a pricing floor.

Speaker Change: I mean, the math is.

Speaker Change: The simple looking at your disclosures and again, incorporating even the floor and that would be well in excess of that 6 million plus showing me yeah, I understand that Chris alluded to that it could be even ahead of $7 billion and again you are that's unlikely that 26 is going to be impacted by any of the potential.

Speaker Change: AI related deals.

Speaker Change: And yet you're not updating the numbers.

Speaker Change: Yeah, Angie I think we covered this a little bit last quarter I think from our perspective, there are still some uncertainty. So we're not ready to provide actual guidance. I mean, you wouldn't expect us to provide guidance for next year and so when there are those things that again, we still have some open lines, we still have the capacity.

Speaker Change: The auction to clear I mean, there is a distance between the floor in the cab and we still have some hedges to perfect. So we're not ready to provide guidance. We've tried to give as much color. As we can we just want to think it makes sense to get back on schedule, where we provide guidance any update for the current year and then guidance for the next.

Speaker Change: Succeeding year and then maybe in addition to that our midpoint opportunity outlook for the following year. After that we expect to do with all of that on the third quarter call. So we're just trying to get back on that schedule, where we don't update guidance every quarter or you know, but we're still as you said in our in our remark.

Speaker Change: We believed then pretty hard to say that word significantly above 6 billion. We just haven't changed the number on the page and I think you'll you'll see US you know again returned to the third quarter update formal updates for for guidance in multiple years.

Speaker Change: Understood. Thank you.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Jeremy Tonet from Jpmorgan. Please go ahead with your question.

Jeremy Tonet: Hi, good morning.

Speaker Change: Hey, Jeremy good morning.

Speaker Change: I just wanted to start off with I think kind of a two pronged question. If I could just wondering with PJM and the auction caller now proved just how do you think that sets up newbuild incentives P. G. M. Next few years here and.

Speaker Change: Wanted to contrast, this backdrop in PJM versus Texas, I'm wondering if you could expand a bit more I guess on the Texas backdrop as you see it in.

Speaker Change: Data center proliferation, there in the state desires to be a big player I was just wondering if you could give us your thoughts on the contract there.

Speaker Change: Sure looked at the the clearer that occurred last July in PJM.

Speaker Change: Does a good clear relative to the three previous clears and we talked about that that that's a material.

Speaker Change: The increase in the capacity clear and it actually garnered attention.

Speaker Change: <unk> policymakers and again a lot of that is relative to the prior clears that had occurred that were quite low and drove a lot of retirements in PJM.

Speaker Change: One thing that I think is interesting is that one clear I think has actually provided some incentive for this rollout reliability resource initiative, which which garnered a lot of attention in PJM, where 27 gigawatts.

Speaker Change: Applied is about 9000 9000 megawatts are not gigawatts awarded and that's really on the basis of we have a one clear that was the $2 70 range and now we have a cap on the floor, which means the boom bust cycle of the auction is a little bit more stabilized and I think.

Speaker Change: It sends a good investment signals you might recall over the last 10 years 30 Gigawatts of gas fire generation had been built in PJM through the capacity auction. So I think if anything price signals matter and price signals have shown in PJM that when they're appropriate people bring investment when there.

Speaker Change: Two low people retire assets and I think that's normal I also think price signals matter on the energy side, not just the capacity side and that price signal for energy can also encourage customers to conserve.

Speaker Change: And and and and effectively help the grid manage supply and demand.

Speaker Change: I think P. J M with the cap in the floor for just the next two auctions is a good bridge to what we hope the quadrennial review and what I think could happen in the future is the continued signals that P. J M wants to send to build new resources, knowing that theres still a lot of coal that's going to retire and P. J M.

Speaker Change: In ERCOT I would say there has not been the same level of commitment to sending the price signal for dispatch of bowls resources, there have been attempts for market reforms.

Speaker Change: Most of those have been put on hold there's still a little bit of work to do.

Speaker Change: And one of the key ancillary D. R. R. S. Ancillary this dispatch reliability reserve service those details aren't known yet.

Speaker Change: But I think from the standpoint of Texas is open for business, Texas once people to invest and what we've seen is that the batteries and the solar has been viewed as the better way to invest in generation in Texas. The question I think will be going forward as if this data center load comes it's ours.

Speaker Change: Hugh.

Speaker Change: That the first almost eight to 10 gigawatts of that can actually be served with the existing capacity already in ERCOT and I think that's one of the key things that <unk>.

Speaker Change: Policymakers are looking at is if we can bring that 10 gigawatts was what really what our estimate of ERCOT might add in datacenter load between now and 'twenty 30.

Speaker Change: If we can bring that and utilize existing resources then all we need to worry about is the Super peak hours and there has been legislation in Texas offered to help customers use their backup generation in a way that would be helpful. From a grid reliability perspective, and I think that's a key I think.

Speaker Change: That is a key to unlock and they go from an affordability standpoint for all of these grids across the country automated as capital investments have already been made in generation and capital investments have already been made in transmission and distribution as a society, we should fully utilize those resources because that's the lowest cost.

Speaker Change: <unk> way to serve all customer classes and not just focus on newbuild transmission Newbuild generation, because we had a lot of excess capacity on the grid as we see it. So we have talked about our peak or projects in Texas, because we have a good Q position the economics don't quite.

Speaker Change: Pencil for the peak or is yet we're still going through the test process and it's too early to say how that will turn out but I do think the peak or is probably make a little bit more sense than the combined cycle build at today's.

Speaker Change: Investment signals.

Speaker Change: But obviously that's it.

Speaker Change: Better market. So people can bring whatever resources. They think it makes sense, but that's how I would describe the policy environment at this point and I'll turn it over to Stacy to see if she has got anything she'd like to add on color for those two markets.

Stacy: Sure well I think I think Jim captured the key points and I agree that you know, Texas is focused on figuring out how to be a leader and that data center effort and attract the low ground that can come with those customers.

Stacy: And I think you know what theyre grappling with as Jim referenced is really how to solve the very few hours of the year.

Stacy: And that we may not have excess capacity and I'm really pleased to see the efforts as a legislature to come up with bills that address that by giving for example customers that bring backup generation.

Stacy: Some assurance that they can run that backup generation during great emergencies, and not be subject to environmental enforcement.

Stacy: I'm pleased to see the efforts of the legislature on things like H D 14, where they were trying to give support for the development of new nuclear So I think there are some good efforts underway to ensure the Texas can continue to be a leader in these areas with respect to PJM, we're very pleased with our efforts in some of our <unk>.

Stacy: It's like Ohio to recognize the value of dispatch coal generation and to ensure that and generators has the smoothest path possible to get a approval for at nudist asphalt generation and other types of projects that can be brain megawatts to the grid. So I think we see a lot of efforts to recognize the valley.

Stacy: E L F reliability and dispatch of generation and we continue to be highly engaged in those efforts.

Stacy: Stacey.

Stacey: Got it. Thank you there are no other questions.

Oh, Yes, I think go ahead Mr. Today.

Speaker Change: Sorry, just one more question just wondering if when you are looking to sign new contracts for Datacenters does that ever.

Stacey: Interfere with the ability for.

Stacey: To conduct buybacks I was just wondering about the pace of buybacks amidst this volatility.

Speaker Change: Yes, Thanks Jeremy.

Stacey: I would say that our buyback program as you know.

Stacey: It would not affect that our program is generally consistent we expect to have a consistent bid in the market pursuant to its N V by one.

Stacey: And so we the main goal is to maintain a consistent daily bid in the market. So we've been doing that pursuant to that tend to be five one over time and you can see that as you look back when we negotiated and announced the energy Harbor deal or the purchase of the minority interest we have never pause the share buyback program. Since we started it in 2010.

Stacey: One and we don't expect too so we keep it going through open or closed windows and in periods, where we might have material nonpublic information.

Speaker Change: Very helpful. Thank you.

Speaker Change: And now our next question comes from David Arcaro from Morgan Stanley. Please go ahead with your question.

David Arcaro: Hey, thanks, so much good morning.

Speaker Change: Hey, David Good morning.

Jeremy Tonet: Hey, Jim I was wondering if you could maybe elaborate on your outlook for market prices I guess as you talk about you know better utilizing your existing fleet. A demand response, you know maybe backup generation and using that for the market what does that mean for the outlook for power prices.

Jim Burke: Sure David It's one of the things that I think will help make sure. The grid stays reliable is that these these price signals again, not just capacity, but energy drive behavior, both on the supply side and the demand side I think the key is is that people recognize that signals do.

Jim Burke: Need to actually be sand and Theres always a policy desire to have low prices and that's important from an affordability standpoint, but it also you have to have signals every now and again to ensure reliability I think from our view the forward curves still do not assume the level of build out.

Jim Burke: From a data center standpoint that we think the capex budgets for the Hyperscale or suggest and I think that's just a.

Reluctance I think too one those kind of bids in there at that point because it takes time to materialize I mean, we're a year past the announcement of the first large co location deal and that hasn't made it all the way through the approval process at.

Jim Burke: At FERC, so things just take longer but is the capex budgets.

Jim Burke: Play out the way, we see them playing out you're going to see the demand side build and forecast that I don't think are reflective even when we say, 3% to 5% of our compound growth rate in ERCOT, we don't see that in the forward curves.

Jim Burke: Let alone the projections that we've seen come from the isos in various markets. So I think demand response is important but demand response should be coming in at the price signal that it should come in at which is usually higher than where real time prices have been settling for the last year to two years.

Speaker Change: So I view those two things as complementary David I think backup generation, it's still an expensive asset to us, but it should be used when the grid needs and that's usually in a higher price environment. That's how market should work and I think that is a well functioning marketplace and I think when you try to do it.

Jim Burke: Through mandates or alerts.

Jim Burke: I don't think you're going to get the same customer behavior, because customers do respond to economic incentives and that's the beauty I think of competitive markets as it does send that signal I. Just don't think those signals are out there fully yet and the forward curves.

Jim Burke: Is our view.

Speaker Change: Yeah, absolutely yeah. Thank you for that and then separately I was wondering Jim how much time are you spending in D. C. Recently, you know just given all the political gyrations going on are there what issues are you focused on most at the federal level I'm curious whether you.

Jim Burke: You might be kind of making efforts to differentiate.

Jim Burke: The IPP space on an issues, where you might have a different view from say the traditional regulated utility on non federal issues here.

Jim Burke: Yeah, well I do spend quite a bit of time in D. C. I think the the.

Jim Burke: The idea that disadvantage straighten has been looking to sort of unleash the American energy dominance counsel and look at how do we treat energy as a strategic resource.

Jim Burke: We have always talked about reliability affordability sustainability in that order and that's how we've messaged for years I think that's very consistent with the executive orders.

Jim Burke: That have come out so far what we're trying to do is look at how did the executive orders potentially then manifest themselves and whatever rules or laws that whatever that would spawn from those that can affect markets.

Jim Burke: It's my belief that the best design ultimately for this is to have markets basically do resource allocation in most categories, including electricity, it's not our philosophy that any of us are going to guess exactly what the winning technology is going to be.

Jim Burke: What is the right level of investment so I'm concerned that if people get approval to spend a lot of money and for some reason. It's more has spent an infrastructure that is needed on a given timeframe customers could bear that.

Jim Burke: Competitive markets put that risk on shareholders, I think that's where that risk belongs and so our message in that.

Jim Burke: A message of I think the competitive space is that.

Jim Burke: Let us do the best we can to meet customer needs and put shareholder capital at risk and that's a different model than where the regulated market design is today and I do think that we're going to need transmission and distribution to be built but as I've mentioned in my prepared remarks, there's a lot of capacity on the existing system.

Jim Burke: And if we can find the best places to unlock where that excess capacity is that's a winner for everybody and price signals will help do that whether that's congestion price signals capacity price signals, our wholesale energy price signals. So I'm spending a lot of time educating about the markets. Because this is a very fragmented industry.

Jim Burke: Developed over 100 years into a highly fragmented space that I think is hard to create a one size fits all policy, but since more than half the country's megawatt hours in wholesale our competitors, we have a huge playing field.

Jim Burke: And so I just wanted to make sure that we're able to tap that huge playing field and that if we do this right I think the competitive market should get more than their fair share of this low growth opportunity and I think Texas has a chance to get more than its fair share of this low growth opportunity coming from data centers.

Speaker Change: Okay, great Yeah. Thank you for all the color I appreciate it.

David Arcaro: Thank you David.

Speaker Change: Our next question comes from Steve Fleishman from Wolfe Research. Please go ahead with your question.

David Arcaro: Okay.

Steve Fleishman: Yeah, Hi, good morning.

Steve Fleishman: For what it's worth I think you're under promise over deliver way of doing things is this the best anyway. So.

Speaker Change: I appreciate that the.

Steve Fleishman: I guess just first on the data center.

Speaker Change:

Speaker Change: Demand in May maybe just to try to get a little better color on that Jim How would you characterize view your views on that today versus maybe the euro the year end call a couple of months ago, because it seems like.

Speaker Change: Some better conviction on demand pricing tone, but just maybe characterize it relative to where your head was.

Speaker Change: A couple of months ago into your own call.

Speaker Change: Yeah perfect. Thank you.

Speaker Change: I actually have increasing confidence over the last couple of months and frankly, even over the last year.

Speaker Change: I think whats happened is.

Speaker Change: Folks again shareholder capital is being used by these hyperscale, which they don't take lightly and they are spending it and they're recommitting and they're increasing their expected levels of investment that gives us increasing confidence that there is going to be opportunity and then its just where does that opportune.

Speaker Change: <unk> manifest itself to me it all starts with the customer and they are the targeted customer base that everybody is.

Speaker Change: Seeking to partner with so in the last couple of months of course, even if you go back earlier in the year that deep seek I mean, theres just been this whole level of uncertainty and I think the commitment through it which we've kind of been down and back up again as a as a sector.

Speaker Change: I think it's highly encouraging having said that we are talking about nearly two trillion dollars of capex from these top four companies plus other capital others will spend and they need to be good stewards of that capital and I think you know.

Speaker Change: The business model of AI is still proving itself out I think that as folks have conviction.

Speaker Change: Everyone is looking for the conviction around the revenue models in the ultimate sustainability of those capex levels, but given the level of interest in the discussions we're having and the stage at which our discussions are we see increasing confidence from the customer base out there and so I do think Steve that it's in a better place than probably.

Speaker Change: Where we were just a couple of months ago, Yeah, Okay, and then to two more two other questions first just on the.

Speaker Change: You know given the range that you're talking about for 2026, Chris just could you give us a sense of cash available.

Speaker Change: Beyond the kind of current buyback commitment just you know because you would think there'd be more room on your.

Speaker Change: On your credit metrics.

Speaker Change: That those kind of at that kind of EBITDA level.

Speaker Change: Unallocated.

Speaker Change: Yes, it was paid in cash.

Speaker Change: Generation power of the business continues to support a lot of.

Speaker Change: Lot of Optionality, you know if you I mean, we've said that we've talked about this before and we'll stick with.

Speaker Change: The lower projections, but even if you just look at our public what's out there publicly if you assume $5 8 billion of EBITDA in 2025, and 6 billion only 6 billion in 2026, and you do apply the 55% to 60% conversion rate that we've talked about I mean, you can get there through all of our commitments to about 1 billion and a half.

Speaker Change: Of cash that we have not yet allocated.

Speaker Change: To do anything for 25 and 26, so as you as you increase that number from from 2026 and you continue to put the 55% to 60% conversion ratio you can see that number getting.

Speaker Change: So the $2 billion range of cash that we still have to okay.

Speaker Change: Okay and then last question just with the with the Trump Administration executive order on coal Ash.

Speaker Change: Any kind of updated thoughts on your call retirement plans could any of them I know there's other.

Speaker Change: <unk> and commitments related to those but just could you give us any color on that.

Speaker Change: Yeah, Steve I think the most immediate impact that we see as the potential for some of the mats Mercury compliance to be pushed out a few years, which would really affect Martin Lake and Oak Grove, which are two large texas sites that don't have.

Speaker Change: Entire mandates as you know the three sites in Illinois, and the one in Ohio. Those retirements are driven by other state and federal Environmental rules, which are currently still in place so unless there's a change there the executive orders in and of themselves don't change that timeline.

Speaker Change: We are looking at some potentially being coal to gas conversions.

Speaker Change: There's also a notion in the executive orders about they want to see some equivalent megawatt hour outputs. If you do that conversion. So there is a lot going on there, Steve and I think it's pretty dynamic.

Speaker Change: But certainly the emphasis on reliable resources sticking around longer.

Speaker Change: Thing that we have messaged for quite some time, but the framework needs to acknowledge there is still our existing laws that we have to abide by and we'll see how that develops.

Speaker Change: Mhm.

Speaker Change: Okay. Thank you.

Speaker Change: Our next question comes from <unk> Chopra from Evercore ISI. Please go ahead with your question.

Speaker Change: Hey, Deane good morning, Thanks for giving me time, Hey, Jim.

Speaker Change: Hey, Jim. Thank you. Thank you Sir just your thoughts on Senate Bill six as it currently stands.

Speaker Change: Past, you've got talked about the low curtailment provision you've highlighted that just just trying to gauge that if it passes in its current form.

Speaker Change: What does that mean for future data center deals is that a bottleneck. So just any thoughts or color you could share there. Please.

Sure well if it passes in its current form I do think that the concerns that we've expressed before.

We still share I think the large customer coalitions, particularly datacenter coalitions are expressing some concerns around things like the disconnect switch and again the control that they would like to have their own assets. They are willing to participate in some of the demand response in the load shifting to manager really.

Speaker Change: Liable grid.

Speaker Change: But I do think there are concerns that the customers have around some of these provisions from our perspective again co location. We think is an advantage to meeting customer needs and co location is still getting a separate kind of focus and the version that the Senate passed.

Speaker Change: And our view is that since the reliability situation is the same between our front of the meter and a co located load in fact, we don't have to build out the same level of transmission to serve it it's actually a very efficient way to serve these large load customers and again take advantage of assets already being paid for by customers.

Speaker Change: On the grid.

Speaker Change: Having said that if SB six moves forward in its current form folks are innovative folks work through it will be one of those companies working through it but as I said I think Texas has a chance to get a disproportionate share of this large load and these are huge economic development opportunities. So I think if Senate Bill six is.

Speaker Change: Centered in the house and there are some revisions that we can work through in the house I think it would set Texas up extremely well to win the AI race, but as I've mentioned the hearings today, it's too early to predict where that goes but I think our comments from previous calls still are relevant but I think there is time to work.

Speaker Change: Through some of the potential changes.

Speaker Change: Got it. Thank you that's very clear and then just really quickly if I may a pivoting to PJM and park. Just are you in settlement discussions currently with the T&D operators there in that region, what does that set and then as we think about.

Speaker Change: You know, Texas Senate Bill six getting resolved in June what do you think is the timeline for getting some clarity there in the PJM area in particular, thank you sure.

Speaker Change: Well, we actually did not just its just interesting, but we didn't file sort of seeking settlement discussions we thought the record.

Speaker Change: Ample at FERC, and the back and forth between PJM and FERC set up well, we thought for a decision to be made now we're always willing and enable to get into any settlement discussions, but this has been a longtime coming and I think everyone's ready to move forward and I think that's the most important thing and I think we still expect that whether their settlement.

Speaker Change: Discussions or not we could see clarity coming in the next I think couple of three months as possible. If the settlement discussions drag it out from there I'd say kind of a shame on all of us as an industry because again, we have to meet customer needs and these customers are moving forward. So we should be able to get there is our view.

Speaker Change: Senate Bill six as you know would be wrapped up hopefully by the end of the session here in Texas in that first week of June So I think over the course of this summer I think we have a chance for both markets to potentially have more clarity than they have at the moment and I'll I'll turn it over to Stacie, if theres anything she'd like to add.

Stacie: Yeah, the only thing I'd add on the FERC Colocation market is and as Jim said, we did not participate in request for settlement discussions, but we did provide some very specific solutions to.

Stacie: And we think they can simply adopt on the record and Linzess forward and that's what we're interested in is speed of resolution.

Stacie: Yeah, it's notable that the transmission owners.

Stacie: They filed and they did not file in support of settlement discussions either as they've said, they're open to them as we all would be a settlement discussions are ordered and that their position is that no changes are needed to the tariff. So I think I think for kind of a clear record before it as the parties various positions, including PJM and <unk>.

Stacie: And we really urge FERC to make a decision on the very full and complete record before it.

Stacie: And I'd just add their guests that FERC.

Stacie: <unk> did acknowledge our filing that co location, specifically allowed in the PJM marketplace. We just need to work out the tariff issues and I think that was sort of lost in the process with the back and forth, but co location as a viable model. We just have to get the details ironed out.

Stacie: Yeah.

Stacie: That was clear there'll clearly supportive of collocation, that's good states ease their timeline.

Stacie: When.

Stacie: <unk> needs to rule on this thing by as it currently I mean, there's so many deadlines.

Speaker Change: I'm sorry.

Speaker Change: Forgetting, but just what's the next milestone for the FERC to take action here.

Speaker Change: Yeah, I think your guess that there.

Speaker Change: It has a lot of flexibility in terms of when it rules, but I think what we would point to is if FERC itself, saying that it understands the need for Argentina here and that it would help to all with an eye on a couple of months as completion of the filings and so is it does not go down the settling.

Speaker Change: The past then I think we could see a result, and a ruling this summer.

And if it does order settlement you know that probably does taken additional sick.

Speaker Change: 60 to 90 days before FERC comes back in it makes a decision and as a result of any settlement discussions. So again, that's why you know our preference is perfect to rule on the record before it but if they decide the orders that are in my discussions with them of course participate in and try to reach the best solution that we can but I think if.

Speaker Change: They were to order settlement discussions you'd see a result more like at the earliest late summer or maybe fall.

Speaker Change: Thank you so much really appreciate the time.

Dinesh: Thank you Dinesh.

Speaker Change: And ladies and gentlemen, with that we'll conclude today's question and answer session I would like to turn the floor back over to Jim Burke for closing remarks.

Jim Burke: Yeah. Thanks, Jami I want to thank everybody for joining as we covered 2025 is off to a fast start and I really want to thank our team for their continued execution and service to our customers and our communities.

Speaker Change: It's an exciting time for the industry and it certainly for Vista, and we have a lot to do.

Jim Burke: We look forward to the next update thanks for joining and have a great day.

Jim Burke: And ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending you may now disconnect your lines.

Jim Burke: Yeah.

Jim Burke: Sure.