Vistra Corp.

Good day, and welcome to the Vistra First Quarter 2024 Earnings 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 a 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 Eric Misik, VP, Investor Relations. Please go ahead.

Good morning, and thank you all for joining Vistra's Investor Webcast discussing our first quarter of 2024 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 earnings release. Leading the call today are Jim Burke, Vistra's President and Chief Executive Officer, and 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. Earnings released, presentation, and other matters discussed on the call today include references to certain non-GAAP financial measures, reconciliations of 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. 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 certain risks and uncertainties that could cause actual results to differ materially from those projected or implied. We assume no obligation to update 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 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. I appreciate all of you taking the time to join our first quarter 2024 results call. This call is taking place in conjunction with a major milestone for Vistra, namely the first day of inclusion of our stock in the S&P 500. I want to recognize the hard work of our Vistra team and the support and patience exhibited by our shareholders as this is a result of both strong execution over time, bolstered by improving market dynamics in the power sector. We are pleased to be included in the index and excited about the future prospects for Vistra and its stakeholders. Turning to slide five, before we cover the positive results for the quarter, it's worth noting that we see a significant increase in Vistra's long-term outlook. Our team's been hard at work to ensure Vistra's best position for the increasing power demand fundamentals while providing reliable, affordable, and sustainable power to our customers. Continuing the theme of execution, our integration teams were hard at work during this quarter. With the closing of our acquisition of Energy Harbor on March 1st, we were ready on day one to unify under the Vistra name and welcome our new colleagues. The core theme throughout the integration process has been one team, And we believe that is crucial to a sustainable high performance organization. The sites are working closely with each other to share best practices and create a culture of continuous improvement. As a result, the teams identified the potential for several operational and performance improvements throughout the nuclear fleet. As Chris will cover later, including the expected financial benefits of these improvements and the additional synergies we've identified, We now expect the run rate adjusted EBITDA contribution from Energy Harbor to exceed $1.1 billion beginning in 2026. 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've returned to our investors approximately $4.6 billion, including $3.9 billion of share repurchases through May 3rd of this year. We continue to view our shares as an attractive investment and expect to execute at least $2.25 billion of share repurchases throughout 24 and 25. Crucially, our balance sheet remains strong, enabling the ongoing capital return plan. Our net leverage finished the quarter at approximately three times, exceeding our expectations indicated on the previous quarter results call. We expect net leverage to be below three times by year end 2024. Our disciplined capital approach also enables us to invest in solar and energy storage growth that capitalizes on site-centered connects in the Vistra portfolio. Our Baldwin and Coffeen sites, where construction began earlier this year on paired solar and energy storage facilities, are good examples of this strategy. And we expect these to be online by the end of the year. Finally, we've completed our first non-recourse financing in Vistra Zero, providing attractive capital for our growing portfolio of operating renewable assets. Moving to slide six, we achieved ongoing operations adjusted EBITDA of $813 million, a 47% increase compared to the first quarter of 2023. As you can see, many of the themes contributing to results last year continued into the first quarter of this year. The first quarter of 2024 again reflected the benefits of our comprehensive hedging program as the warmest winter on record in the U.S. led to lower than expected cleared power prices across the country. Specifically, while power prices in the markets we serve cleared below $30 per megawatt hour on average for the first quarter, our first quarter results reflect an average realized power price of over $50 per megawatt hour. In these volatile weather environments, which included a winter event in mid-January and then mild weather in February and March, our generation team once again delivered with another strong quarter of commercial availability at approximately 98%. Being flexible with not only daily operations, including ramping down when economics signal us to do so, but rescheduling planned outages to optimize opportunities enabled the business to deliver strong results. Finally, the retail team delivered another positive quarter of customer account growth across our Texas and Midwest and Northeast geographies. With the acquisition of Energy Harbor now complete, we're initiating a guidance on a combined basis for ongoing operations adjusted EBITDA of $4,550,000,000 to $5,050,000,000 and ongoing operations adjusted free cash flow before growth of $2,200,000,000 to $2,700,000,000. It's important to note that this guidance excludes any potential benefit from the Nuclear Production Tax Credit, or PTC, given the uncertainty around how it will be implemented when the regulations are issued later this year. However, based on where prices settled in the first quarter and the forward curves for the balance of the year, We believe the PTC could add a significant amount to our 2024 ongoing operations adjusted EBITDA guidance range. Finally, you will note that the implied conversion rate from ongoing operations adjusted EBITDA to ongoing operations adjusted free cash flow before growth for 2024 is below our stated target of 55 to 60%, primarily due to a couple of timing impacts. we expect a return to our target 55 to 60% range in 2025 and beyond. While we are not providing guidance to reflect specific ranges for VISTA revision and VISTA tradition, our view is that each is expected to contribute roughly half of our adjusted EBITDA over time. However, given the business mix and current capital structure, you can expect VISTA revision will convert adjusted EBITDA to free cash flow before growth at a higher rate over time, roughly 60 to 65%, compared to district tradition, which we expect to convert at a rate of approximately 50 to 55%. Turning to slide seven, there has been much discussion in recent months about the substantial power demand growth forecast, including from the potential build out of data centers and other sources of electricity demand. Third-party research indicates data center-related activity could approach 35 gigawatts of additional demand by 2030. However, our teams also see multiple additional potential drivers of demand in the geographies we serve. These drivers include continued reshoring of industrial activity, as evidenced by multiple large chip manufacturing site build-outs, partially due to the CHIPS Act. increased electrification of commercial, industrial, and residential load across the country, as evidenced by the expectation of approximately 20 gigawatts of additional power demand in West Texas by 2030, and strong population growth, particularly in the state of Texas, which has been steady at 1.5% to 2% per year. With these drivers, we see the potential demand outcomes skewing higher, albeit with a wider range. In their most recent report, PJM's load growth expectations through 2030 doubled from their 2023 estimate. In Texas, recent reports from ERCOT suggest load growth through 2030 in a wide range, from as low as 1.6% per year to as high as 6% growth per year, or even higher if more than half of the large loads recently discussed at ERCOT actually materialize. The trailing 10 years has been approximately 2.5%. And that was before some of these more recent drivers of the Permian electrification, the CHIPS Act, and the data center demand. This increase in demand across the country will need to be served by an electric grid that will continue to see coal plant retirements in all markets. The Inflation Reduction Act will continue to incentivize wind, solar, and battery resources. We will also need gas-fired generation to back up those intermittent sources. The new greenhouse gas rules issued from the EPA on April 25th are expected to make it more challenging to economically build baseload combined cycle gas turbine facilities. But we expect those rules to be litigated and it's unclear what the final outcome will be. Natural gas peakers could be a solution that threads the needle of environmental rules and demand needs. In addition, it is likely that existing assets will need to run at higher capacity factors to meet overall annual energy needs as more coal retires. We see VISTA as well positioned for these trends given our diversified portfolio of reliable and sustainable assets in growing markets. As you can see on slide eight, the forward curves have moved up considerably in both the Texas and PJM markets on the improved demand outlook, particularly on the longer end of the curve. As an example, ERCOT North around-the-clock fixed price forwards for calendar 2026 increased over $7 per megawatt hour, or approximately 13% since we last provided guidance in November 2023. For 2027 and 2028, the increases were even more significant. In the past, we've commented that the backwardation and forward curves did not reflect the tighter grid conditions that we expected to result from continued load growth and plan thermal asset retirements. With the recent improvement of both forward power prices and some additional market interest in transacting farther out on the curve, we believe the market is beginning to recognize these dynamics. As I stated at the beginning of the call, our integrated business model, which combines increasingly critical dispatchable generation assets with a premier retail business, positions us well to create long-term value in this dynamic and growing market. As a result, based on recent market curves, we are currently estimating a combined ongoing operations adjusted EBITDA midpoint opportunity for 2025 of $5 billion to $5.5 billion. In addition, while significant uncertainty to both the upside and downside remains for 2026, given our 2026 hedge percentage, which is approximately 50%, We have line of sight to an ongoing operations adjusted EBITDA midpoint opportunity of more than $6 billion. Like the 2024 guidance, our long-term outlook excludes any potential benefit from the nuclear PTC, and we will continue to evaluate the appropriate timing for including any of that potential benefit. Even without the inclusion of any PTC benefit, the improvement in near-term and long-term outlook for Vistra is expected to result and a meaningful amount of unallocated capital through 2026. And with that, I will turn it over to Chris to provide a detailed review of our first quarter results. Chris.