Vistra Corp.

Please signal a comfort specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Megan Horn, Vice President, Investor Relations and Sustainability. Please go ahead.

Thank you. Good morning. Welcome to Vistra's Investor Webcast discussing fourth quarter and full year 2021 results, which is being broadcast live from the Investor Relations section of our website at www.vistracorp.com. Also available on our website are copies of today's investor presentation, our form 10-K, and the related press release. Joining me for today's call are Kurt Morgan, Chief Executive Officer, and Jim Burke, President and Chief Financial Officer. We have a few additional senior executives present to address questions during the second part of today's call as necessary. Before we begin our presentation, I encourage all listeners to review the Safe Harbor statements included on slides two and three in the investor presentation on our website. that explain the risks of forward-looking statements, the limitations of certain industry and market data included in the presentation, and the use of non-GAAP financial measures. Today's discussion will contain forward-looking statements which are 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. Further, today's press release, slide presentation, and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measures are provided in the press release and in the appendix to the investor presentation. I will now turn the call over to Kurt Morgan to kick off our discussion.

Thank you, Megan, and good morning to everyone on the call. As always, we appreciate your interest in Vistra. 2021 was undoubtedly a challenging year and in many ways a pivotal one for Vistra. We were faced with an unprecedented weather event at the beginning of the year with winter storm Uri, and the financial strength we worked so hard to put in place was challenged. Yet sitting here today, I'm proud of how our team came together to not only confront and mitigate the impact, but to then shift to building a stronger company. That strong balance sheet we built and the resilience of our team helped us stabilize the company and ultimately get back on track within months. Importantly, we accomplished what we set out to do following Yuri. We shifted our strategic direction and implemented an enhanced comprehensive capital allocation plan with substantial share repurchases, a new dividend policy, and an acceleration of our VISTA Zero portfolio, all while de-risking our company after URI. We believe we exited the year in a position of strength, and we are excited about our competitive positioning and the long-term value creation opportunity ahead. I'd like to now turn to slide six to begin the presentation to discuss the key takeaways from our 2021 performance. We delivered on our adjusted EBITDA from ongoing operations guidance we issued in November, which notably was an increased and narrowed range from what we had announced in April. After immediately stabilizing our company after URI, we conducted a thorough review of our business, announcing a capital allocation plan that returns billions of capital to shareholders, enables us to cost-effectively fund the development of DistroZero, and maintains a strong capital structure by continuing to pay down debt. We also made significant progress in establishing ourselves as a leader in ESG and the clean energy transition with our VISTA Zero carbon-free generation portfolio and our efforts regarding DEI and sustainability, including enhanced disclosures. In fact, in December, we issued the first ever green U.S. corporate perpetual preferred stock to fence our development and growth of Vistra Zero. We haven't emphasized this in a while, but we continued our OPI savings, realizing $500 million of such savings in 2021 from our generation segments. OPI is now part of our DNA with continuous idea generation, and conversion of ideas to executable opportunities on a regular basis. And our retail business rose to the challenge as well. We grew our ERCOT residential accounts by approximately 23,000 customers, the highest organic growth we've seen since 2008. Most of this growth was within our flagship retail brand, TXU Energy, demonstrating the strength of our brand promise and continued importance to our customers. In all, we ended the year back strong again and look forward to building on that momentum through the execution of our four strategic priorities, which we'll discuss in more detail a bit later. Before I get to that, I would like to turn to slide seven to discuss our 2021 performance in a little more detail. When the dust settled right after Yuri, we were facing an adjusted EBITDA picture of right around $1.2 billion. I recall thinking that this is not the way that 2021 is going to end. We've got to put this company on a positive path and improve this picture. We institute at a stretch target of $500 million in self-help, and in fact achieved the target coming in at $546 million. At the same time, we were very active in the Texas 2021 legislative and regulatory deliberations regarding URI, which, among other accomplishments, resulted in Vistra being allocated $544 million in ERCOT securitization payments. I want to thank those in the state of Texas that had to deal with the fallout of URI for their efforts and specifically securitization for their courage and foresight. The self-help and securitization efforts resulted in an improvement following URI of over a billion dollars and significantly contributed to improving that initial picture that I mentioned earlier. In November, we issued refined guidance that increased and narrowed our adjusted EBITDA from ongoing operations estimates we had issued in April, and we delivered at the midpoint of that November guidance at $1.994 billion prior to taking into account an opportunity we had to settle some URI-related retail bill credit liabilities. Specifically, at the end of the year, we settled a block of these bill credits for $53 million prior to their expected settles in 2022 and 2023, all with internal rates of return ranging from 20% to over 40% and an average of more than 30%. So while it did decrease our final adjusted EBITDA from ongoing operations for 2021, we expect the high IRR settlements will positively impact us in 2022 and 2023. Our adjusted free cash flow before growth from ongoing operations was $179 million for the year, which is within the guidance range we offered in November and excluding the early retail bill credit settlements that I just talked about. It would be over the midpoint at $232 million. Today, we're also reaffirming our 2022 guidance. We see some headwinds and tailwinds as is normal in the coming months. And though the upcoming summer months will be critical to our performance, we continue to anticipate that 2022 will be consistent with our previous statements of adjusted EBITDA from ongoing operations of $3 billion or more. We are not establishing guidance beyond 2022, but our long-term view of Bistra's earnings power remains consistent with our previous views. Our generation and retail performance outlook is strong. And as we always have, we will capitalize on opportunities to not only lock in adjusted EBITDA through hedging activities, but also incrementally add value through commercial optimization. The net of this activity, we believe, will be in the $3 billion plus adjusted EBITDA range. In addition, we are positioned to grow from this level as investments in our Vistra zero generation fleet become operational. which we will discuss in more detail shortly. This is all in despite the retirement of significant coal generation. Turning now to slide eight. In November, we announced four strategic priorities. Return capital to our shareholders, accelerate investment in our zero carbon generation growth through an appropriate capital structure, continue to maintain a strong balance sheet, and deliver long-term sustainable value. We delivered squarely on each of these priorities by year-end 2021 and are poised to continue delivering in the years ahead. First, we returned $290 million of capital to our shareholders via dividends in 2021 and have instituted our new $300 million dividend policy for 2022. We front-end loaded our share repurchases and spent $764 million of the $2 billion share buyback program as of February 22, 2022. The combination of the new dividend program and share repurchases has yielded an approximately 13% increase in declared dividends in Q1 2022 as compared to Q1 2021. And as we continue to buy back shares will lead to further increases on a per share basis. We are also well on the way to deliver the seven and a half billion dollars in shareholder capital returned by year end 2026. Finally, later this year, we expect to be in a position to announce the next phase of our share repurchase program after we complete the $2 billion program by the end of this year. As long as our stock has the kind of free cash flow yield that it does currently, we will be buying our shares. Second, we executed on our goal to further finance and grow our leading Vistra Zero portfolio. In December, we issued an upsized $1 billion in green perpetual preferred stock. Proceeds from this issuance will be used to fund Vistra Zero's growth while allowing us to retain full control of the business. We expect that these proceeds will also offset the once-anticipated $500 million per year equity contribution to Vistra Zero, freeing up that capital to be allocated to further execute on our share repurchase program. We expect Vistra Zero to be further financed as needed with project free cash flows and project-level financing. Third, we also continue to strengthen our balance sheet. We reduced debt in the fourth quarter of 2021 by approximately $625 million and are on a pace to reduce total debt exclusive of Vistra Zero project financing by $1.5 billion by year-end 2022. We've increased liquidity year-over-year by $180 million and further strengthened our balance sheet with cost-effective preferred stock of $2 billion and a $1 billion commodity-linked revolver that will help provide incremental liquidity for cash postings under various of our commodity contracts when power prices are high. With these endeavors and the planned activities in 2022, we expect our balance sheet to be back into the pre-URI range by year-end 2022. We continue to believe a strong balance sheet is essential to managing the risk of the company and creating long-term equity value. Finally, we continue to pursue long-term sustainable value for our shareholders. I already mentioned the $500 million OP value enhancements, which leads to a core set of generation that is highly efficient and necessary for the long-term grid reliability. You are beginning to see large asset managers essentially recognize the need for natural gas in the transition to net zero several years out. We possess a low cost, fleet of gas fuel generation that is likely to be needed for many years to come. Our retail segment saw significant organic customer growth, and we continue to implement de-risking activities, including our expenditures to further harden our generation fleet in ERCOT. Specifically, in 2021, we invested approximately $50 million, and we'll invest another $30 million in 2022, further de-risking our ERCOT fleet. We installed dual fuel capabilities at plants where it was economic and prudent and added onsite and offsite fuel storage. We also revised our commodity hedging approach and carried extra length heading into the winter months in 2022. We've taken these precautions at a relatively low cost to guard against a severe financial impact in the event of a storm similar to Yuri. And while the recent weather events in February 2022 in Texas were certainly not Yuri-like events, They have given us valuable insights into how our preparations would fare in a repeat situation. We are pleased to report that our fleet has performed exceptionally well with no weather-related outages. Moving on now to slide nine, we know there is quite a bit of interest in our VISTA zero growth pipeline. This visual shows you by state the projects and megawatts in the pipeline. We forecast that approximately 5,000 megawatts of projects will generate highly contracted revenue, resulting in approximately $450 to $500 million of adjusted EBITDA annually. This is in addition to our nuclear plant, Comanche Peak, at 2,300 megawatts. All in, VISTA Zero is expected to be in the range of at least 7,300 megawatts of carbon-free generation by 2026. We have a clear line of sight to our project pipeline as demonstrated by our recently announced Moss Landing expansion by another 350 megawatts. Our acquisition of the 110 megawatt Angus solar development in Texas and our 450 megawatt coal to solar initiative in Illinois. That's a total of 900 megawatts of planned renewable developments announced in the past five months. And we expect to bring on three projects in ERCOT in the very near future. 260 megawatts of storage at DeCordova plus 158 megawatts at Brightside and Emerald Grove. It is important to note that we continue to believe in the strength and growth opportunities at DistroZero despite the recent unplanned outages we have experienced at our Moss-Lemming 300 and 100 battery storage sites. We are committed to helping California and the country as a whole transition to cleaner sourced electricity. And batteries will undoubtedly play an important role. This is new technology, and it will continue to improve. These incidents give us and the industry important insights as we move the country forward in the energy transition. Notably, we believe the issue has not stemmed from the batteries, but instead appears to be related to failures in the water-based safety system. Our investigations have revealed that the safety system is working. It's just experiencing leaks. We will do what it takes to fix this issue quickly, get the systems back online as soon as practical, and as always, we will do it all with safety as our number one priority. With that, I will now turn the call over to Jim Burke to discuss our financial results in more detail. Jim?