Vistra Corp.

Good morning and welcome to the Vistra second quarter 2023 results conference call. All participants will be in listen-only mode. 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 one on your touch-tone phone. 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 of Investor Relations. Please go ahead.

Good morning, and thank you all for joining Vistra's Investor Webcast discussing our second quarter 2023 results. Today's discussion 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 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. They are joined by other Vistra senior executives to address questions during the second part of today's call as necessary. Our earnings release, presentation, and other matters discussed on our call today include references to certain non-GAAP financial measures, reconciliations to the most directly comparable GAAP measures are provided in the press release and in the appendix to the investor presentation, all available in the investor relations section of Fisher's website. Also, today's discussion contains 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 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. I encourage all listeners to review the safe harbor statements included on slide two of the investor presentation on our website that explains 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. Thank you. I'll now turn the call over to our President and CEO, Jim Burke.

Thank you, Megan. Good morning, and thank you all for joining our second quarter 2023 earnings call. The second quarter proved to be another strong one for the business, as we delivered $1.8 billion in ongoing operations adjusted EBITDA. Typically, we do not formally adjust our guidance ranges until after we get through the critical summer months. But based on performance to date and our forecast for the remainder of the year, we are confident in our ability to deliver in the upper half of the guidance ranges introduced on the third quarter earnings call last year. Accordingly, we are narrowing that original range, which was $3.4 to $4.0 billion, to a new range of 3.6 to 4.0 billion for ongoing operations adjusted EBITDA. Looking beyond 2023, the market curves continue to support a strong, consistent outlook as well. Our commercial team is working to strategically lock in these opportunities, employing comprehensive hedging strategies to provide better line of sight to our earnings over our planning horizon which in turn allows us to plan for capital return to our shareholders that is consistent and predictable. In addition, I'm proud of the great strides we are making in the expansion of VISTA's zero carbon generation portfolio with our 350 megawatt addition to the Moss Landing Energy Storage Facility that came online this quarter. I'll speak to that milestone momentarily, but first I'd like to turn to slide five where we once again highlight our four strategic priorities. I think it's important to continue to reiterate our focus on these priorities each quarter with some notable accomplishments, as I believe these are critical to long-term value creation. This quarter saw continued strong generation and commercial team execution combined with our retail business that continues to deliver strong counts and margin performance. This was proving it can consistently deliver substantial and resilient earnings in a variety of power price and weather conditions. Just as last quarter, on average, we saw power prices this quarter clear lower than our realized hedge prices. This is highlighting the significant downside risk protection to our earnings that our comprehensive hedging strategy across the integrated business can and does consistently provide. These de-risked consistent earnings give Vistra the confidence to announce aggressive shareholder return programs and then stick with those programs in amounts equal to or higher than those originally announced. I'll let Chris provide the detailed update on our capital allocation plan, but of the aggregate upsized $7.75 billion capital return plan we originally announced in November of 2021, we've already returned $3.35 billion through August 4, 2023, which is approximately $250 million ahead of the originally announced plan levels. We regularly evaluate how best to bring value to our shareholders, and we expect to continue buying back stock and paying dividends that grow each quarter based on a reduced share count. Our balance sheet strength remains a top focus as well. You saw this quarter that we structured a $450 million PCAP transaction, which is unique in allowing us to post Treasury securities as margin deposits, returning more cash to the balance sheet. We expect to utilize that cash plus the margin deposits that have been returned as expected as our hedges have settled throughout this year to fund a significant portion of the purchase price we expect to pay in the fourth quarter for Energy Harbor, substantially reducing the amount of acquisition debt to be issued. Finally, as it relates to our opportunities with the energy transition, in addition to the progress we are making on the Energy Harbor acquisition, which I'll speak to in a minute, I would like to turn to slide six regarding our MOS landing facility. The VISTA team did an excellent job in bringing online an additional 350 megawatts to add to the existing 400 megawatts at our MOS landing site in California, which is the largest energy storage facility of its kind in the world. This addition came online ahead of schedule and on budget, despite a challenging supply chain environment and extreme rainfall. This is now a total of 750 megawatts of energy storage backed by contracted revenues through our PG&E resource adequacy agreements. Importantly, we continue to see additional opportunities to add batteries to this site in the future. The facility is located in the Kaiso Energy Market, which is experiencing significantly higher gas price volatility, as well as a potential for scarcity pricing due to high demand and import competition from the neighboring balancing authorities. These factors result in favorable conditions for the earnings outlook for our Moss Landing battery facility and our co-located combined cycle plant, which has 1,020 megawatts of capacity. This is a tremendous site and a great example of our ability to invest in a disciplined way in Vistra Zero while also providing for the reliable and affordable energy customers need. Moving to slide seven, the $1 billion, $8 billion of ongoing operations adjusted EBITDA achieved this quarter was a result of strong performance by each of our generation retail and commercial teams, with retail achieving attractive counts and margin performance in all customer categories, and our generation team delivering commercial availability of approximately 95%. Our people are working hard in this extended high-heat environment, and they continue to perform extremely well. When we originally announced 2023 guidance in the third quarter of last year, we estimated a range of $3.4 to $4.0 billion in adjusted EBITDA from ongoing operations. As mentioned earlier, we are confident in our ability to deliver in the upper half of that range, leading us to formally update our guidance to reflect the new range of $3.6 to $4.0 billion in adjusted EBITDA from ongoing operations and a new range for adjusted free cash flow before growth. Of course, there is a lot of execution still to go in the balance of the year, and our people remain focused on delivering for our customers and our shareholders. Turning to slide eight, I just wanted to reiterate that all three key agencies continue to work on the necessary approvals to close the Energy Harbor acquisition. We are working constructively with each agency and in all involved parties, and as I mentioned before, we continue to anticipate a fourth quarter closing. We believe Energy Harbor is a terrific transaction for Vistra, adding a substantial amount of nuclear generation with the support of the production tax credit. We continue to expect significant contributions from Energy Harbor, including the opportunities for synergies. I think back to the announcement of the Dynagy acquisition when we projected annual ongoing operations adjusted EBITDA of approximately $2.8 billion. Through the hard work of the Vistra and Dynagy teams, and including the acquisition and successful integration of Creus and Ambit, together with the expected closing of Energy Harbor later this year, it is exciting that we could see ongoing adjusted EBITDA on average in the 24 to 25 timeframe of $4.5 billion, including synergies and out-year prospects potentially even higher. Chris, I'll now turn the call over to you to discuss our quarterly performance in more detail.