Vistra Corp.

Good morning and welcome to the VISTA second quarter 2024 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 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 Eric Misek, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you all for joining Vistra's Investor Webcast discussing our second quarter 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, VISTA's President and Chief Executive Officer, and Chris Moldovan, VISTA's Executive Vice President and Chief Financial Officer. They are joined by other VISTA senior executives to address questions during the second part of today's call as necessary. Our earnings release, presentation, and other matters discussed on the call today include references to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are provided in the earnings release and in the appendix to the investor presentation available in the investor relations section of VISRA'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 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. I'll now turn the call over to our President and CEO, Jim Burke.

Thank you, Eric. Good morning, and thank you all for joining us to discuss our second quarter 2024 operational and financial results. Beginning on slide five, you can see the team has been hard at work across multiple parts of our business. Through their efforts, we achieved ongoing operations adjusted EBITDA of $1,414,000,000, a very strong second quarter against a backdrop of lower wholesale energy prices across the country. While results benefited from the inclusion of the first full quarter contribution from the Energy Harbor businesses, consistent execution from our generation commercial and retail teams played a major role in this achievement. Specifically, our diversified portfolio of generation assets produced record levels of power for our customers while completing the planned outages needed to prepare the fleet for the crucial summer months. Our retail business, led by our flagship TXU Energy brand, delivered year-over-year growth while producing solid margin performance and maintaining a top score on the PUC of Texas Power to Choose scorecard. Finally, despite the weather volatility across the country, in general, power prices cleared below our hedge levels. Through strong execution of our comprehensive hedging program by our commercial team, our second quarter results reflect the solid performance anticipated when we set our expectations for the year. Turning to guidance, we are reaffirming our guidance range for 2024 ongoing operations adjusted EBITDA of $4,550,000,000 to $5 billion, $50 million. Based on performance to date and our forecast for the remainder of the year, we are confident in our ability to deliver towards the upper end of this range. As we noted during our first quarter results call, our guidance excludes any potential benefit related to the Nuclear Production Tax Credit, or PTC, given the uncertainty around the interpretation of gross receipts and the regulations. However, based on where prices settled in the first seven months of the year, and the forward curves for the balance of the year, we believe the impact of the PTC to our 2024 ongoing operations adjusted EBITDA could be upwards of $400 million. Moving to our long-term outlook, our integrated business model, which combines critical dispatchable generation assets with a premier retail business, positions us well to create long-term value in the current volatile and growing markets. Given our hedging activity over the past several months and the recent 2025-2026 PJM planning year auction results, we are raising our estimated 2025 ongoing operations adjusted EBITDA midpoint opportunity range by $200 million to $5,200,000,000 to $5,700,000,000. Similar to our 2024 guidance, our range of 2025 ongoing operations midpoint opportunities excludes any estimates related to the nuclear PTC. However, it is important to note that we believe the nuclear PTC will provide downside support for such range of opportunities, and we will continue to evaluate the appropriate timing for including PTC estimates in our forecasts. Underpinning the improvement in our outlook is our focus on our four key strategic priorities outlined on slide six. Our integrated business model leverages our diverse portfolio of generation assets coupled with our strong retail brands to deliver more consistent results as evidenced by our second quarter performance. Our core tenant of one team continues to foster not only teamwork, but drives learning and best practices across all aspects of our company to create a culture of continuous improvement, including at our recently added PJM nuclear sites. As discussed on the previous slide, our commercial teams continue to execute on our comprehensive hedging program to provide visibility into the earnings power of the business while also providing meaningful downside protection to our long-term outlook. While our current 2024 guidance and long-term outlook both exclude any estimates related to the nuclear PTC, We believe the availability of a nuclear PTC de-risks a substantial portion of the earnings potential of our nuclear assets, making them increasingly more valuable. Switching to capital allocation, we view this as a critical responsibility, and we will remain disciplined in our allocation process. We continue to execute the capital return plan put in place during the fourth quarter of 2021. Since that time, we've returned approximately $5 billion to our investors, including $4.25 billion of share repurchases through August 5th of this year. We expect to execute at least $2.25 billion of share repurchases throughout 2024 and 2025. Moving to the balance sheet, our financial position remains strong with net leverage at the end of the quarter at three times ongoing operations adjusted EBITDA. We continue to expect net leverage to be below three times by year end 2024. On energy transition, we continue to be opportunistic in executing on a renewable development pipeline. We began construction on two new large-scale solar projects, one in Texas and one in Illinois. To ensure full offtake from these facilities, we executed new long-term power purchase agreements with two of the world's leading technology companies, one with Amazon and the other with Microsoft. We are excited to partner with these well-known companies to provide carbon-free electricity for their operations. Moving forward, our development opportunity pipeline remains robust. Our large geographic footprint across the country, which encompasses more than 70 sites with grid interconnects and thousands of acres of land for development, provides ample opportunities to meet customer needs for a particular energy technology or to co-locate operations. Our approach to the energy expansion continues to responsibly balance reliability, affordability, and sustainability while ensuring disciplined project returns for our shareholders. We have highlighted this approach in our most recent sustainability report, which we published on July 31st. We are proud of the approach we take to sustainability, which ensures that we are reducing our emissions while also creating a sustainable business strategy for all of our stakeholders. Moving to slide seven, we see a potential significant supply gap emerging in the largest markets we serve. During our first quarter results call, we outlined the potential multiple drivers of future demand, and these include the reshoring of industrial activity, partially due to the CHIPS Act, the build-out of data centers, whether behind the meter or in front of the meter, increased electrification of commercial, industrial, and residential loads, and strong population growth, particularly in Texas. In addition to this demand growth, we believe current environmental policies will drive significant retirements of dispatchable thermal generation, notably coal plants, through the end of the decade, creating a supply-demand gap. Many of these policies are driven by decisions at the state level and are less influenced by federal policies. Supported by PJM's recent market reforms, the higher clearing prices for the 2526 capacity auction are beginning to signal to competitive market participants, leading investors, who can respond to this supply gap. While it is only one auction clear, capacity revenues over time can help offset lower wholesale energy prices, which have softened in the outer years since our last call in May. Generation units are long-lived assets, and a consistent, predictable market framework focused on reliability is necessary to attract capital for new dispatchable supply. The Texas market relies almost exclusively on the wholesale energy price to incentivize new generation, and we have seen a lot of volatility in these forward curves. Policymakers have recently created the Texas Energy Fund to provide lower-cost financing and completion bonuses for up to 10 gigawatts of new gas-fueled dispatchable generation. This does provide some financial support for new buildings, but we believe forward price signals and market reforms will be necessary to attract sufficient equity capital to build new gas fuel generation. However, in a competitive market, as has been the case in Texas for nearly 30 years, there will be many market participants and investors to evaluate their opportunities and decide their best path forward. As we announced in late May, we are targeting up to 2,000 megawatts of dispatchable gas fuel generation additions at ERCOT This includes 500 megawatts of augmentations at existing facilities, nearly half of which we have brought online already this summer, and up to 600 megawatts from the conversion of our Coleto Creek coal plant to a gas-fueled unit, which will take place after the plant's retirement in the middle of 2027. These investments represent accretive opportunities for our company while preserving good-paying jobs for our fellow Texans. We also submitted our application in July for the Texas Energy Fund financing for up to 860 megawatts of advanced peaker plants in West Texas. As noted in our announcement, we are in the early stages of development of these plants as we monitor the successful implementation of key market reforms focused on grid reliability as well as sufficient market signals. These key reforms include a suite of ancillary services, the Performance Credit Mechanism, or PCM, and an effective reliability standard, a first for Texas. We will continue to work with policymakers and other stakeholders to shape a robust framework for investment in Texas. Looking broadly across the markets we serve, the interconnection queues are largely filled with wind, solar, and battery resources for a number of reasons, including tax incentives, state policies, and the preferences of large customers. The combination of low growth, coal plant retirements, and additional intermittent resources will require both base load and flexible dispatchable units. Vistra is well positioned with its diversified fleet, and we will continue to work with policymakers, customers, and communities to ensure their energy needs are met reliably, affordably, and sustainably. This is what drives our purpose at Vistra, and our team is excited about the future set of opportunities. And with that, I will turn it over to Chris to provide a detailed review of our first quarter results.