Vistra Corp.

Good morning and welcome to VISTA's third quarter 2024 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference 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 Eric Misik, Vice President, Investor Relations. Please go ahead.

Good morning, and thank you for joining Vistra's Investor Webcast discussing our third 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, 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. Earnings released, 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 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 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 for joining us to discuss our third quarter 2024 operational and financial results. It has been an active year on a number of fronts, and I'm very proud of what the Vistra team has been able to deliver so far in 2024 while setting the stage for long-term value creations. Turning to slide five, I would like to recognize the VISTA team for another quarter of hard work and strong operational performance. Through their efforts, we achieved a solid quarterly financial result of ongoing operations adjusted EBITDA of $1,444,000,000 despite a continuation of the milder Texas weather we have experienced most of the year. The consistent execution from our team across generation, commercial and retail delivered reliable power and customer solutions that reflect the strength of our integrated business model. As you may remember from our second quarter results call, we indicated our 2024 ongoing operations adjusted EBITDA was trending toward the upper end of the guidance range. I am pleased to report that with the results announced today and our outlook for the fourth quarter, we are raising and narrowing our guidance range for 2024 ongoing operations adjusted EBITDA to $5.0 billion to $5.2 billion, with a midpoint above the upper end of our previous range. We are also raising and narrowing the guidance range for ongoing operations adjusted free cash flow before growth to $2.65 billion to $2.85 billion. As we noted on our previous results call, our guidance excludes any potential benefit related to the Nuclear Production Tax Credit, or PTC, as we await clarity from Treasury around the interpretation of gross receipts. However, based on year-to-date settled prices and the forward curve for the balance of the year, we believe the impact of the nuclear PTC to our 2024 ongoing operations adjusted EBITDA could be approximately $500 million. Moving to our longer-term outlook, we are introducing guidance ranges for 2025 ongoing operations adjusted EBITDA of $5.5 billion to $6.1 billion and ongoing operations adjusted free cash flow before growth of $3.0 billion to $3.6 billion. Notably, our ongoing operations adjusted EBITDA guidance midpoint of $5.8 billion is higher than the $5.7 billion upper end of our previously communicated range for 2025. While our ongoing operations adjusted EBITDA guidance for 2025 is not currently expected to benefit from the nuclear PTC in any significant amount, due to the current level of forward price curves, we do expect the availability of the nuclear PTC to provide downside protection in the event prices settle lower. For calendar year 2026, although our current hedge percentage has increased to approximately 64% of expected generation, a meaningful amount of gross margin variability remains. Further, the delay in the 2026-2027 PJM capacity auction including the potential modification of the associated auction parameters, creates some additional uncertainty. For these reasons, we are maintaining our outlook for a 2026 ongoing operations adjusted EBITDA midpoint opportunity of over $6 billion with line of sight to potentially be meaningfully higher. Finally, the third quarter marked an active period of capital allocation and capital returns. On September 16th, we announced the acquisition of the Vistra Vision 15% minority interest from our minority investors. We believe this acquisition will be highly accretive to our shareholders with an implied transaction multiple of less than eight times enterprise value to EBITDA, 100% ownership upon closing at year end, and financial flexibility allowed through an extended payment schedule. In addition, the significant share price weakness we experienced in late August and early September resulted in an uptick in repurchases we were able to execute in the quarter. In all, we repurchased approximately $400 million of shares in the open market in the third quarter at an average purchase price of approximately $83 per share. Combined with the VISTA revision 15% minority interest acquisition, which we view as similar to a forward share repurchase program with a deferred payment schedule, we were able to allocate a combined approximately $3.5 billion to the repurchase of our equity at an average indicative purchase price between $80 and $85 per share, roughly a 30% discount to our recent share price. Turning to slide six, our four key strategic priorities remain integral to our strong business performance. As we have previously stated, we believe our integrated business model and comprehensive hedging program provide our stakeholders increased visibility into our future financial performance. From an operational perspective, our team continues to deliver. Our generation team achieved overall commercial availability of approximately 96% for our gas and coal fleet. Our nuclear fleet also had an outstanding quarter with capacity factors averaging approximately 98% for the period as we continue to make great progress on our integration efforts. On the retail side, the team continues to outperform through both strong customer count performance in the Texas and Midwest Northeast markets, as well as disciplined margin management. Finally, we are seeing persistent growth in our large business market segment through longer-term customer relationships as a result of providing solutions to meet customers' goals, including sustainability objectives and budget certainty. Switching to capital allocation, we remain disciplined in our approach by targeting a significant return of capital and executing on attractive growth projects like the Energy Harbor acquisition, while also maintaining a strong balance sheet. As part of this approach, we continue to execute the capital return plan put in place during the fourth quarter of 2021. Since that time, we have returned approximately $5.4 billion to our investors through open market share repurchases and common stock dividends. Chris will cover capital allocation in more detail later in the presentation, but you will see that we expect at least an additional $1.5 billion of capital available to allocate through year-end 2026. This number is net of our current capital responsibilities, including the recently announced VIST revision 15% minority interest purchase, and the recent board authorization for an additional $1 billion of share repurchases expected to be executed by year-end 2026. Speaking of the balance sheet, our financial position remains strong with net debt at the end of the third quarter at approximately 2.7 times ongoing operations adjusted EBITDA. Although our net leverage is expected to move slightly above three times with the closing of the VISTA revision 15% minority interest purchase, We expect it to fall back below three times in 2025. Moving to energy transition, as you know, our approach continues to responsibly balance reliability, affordability, and sustainability while ensuring disciplined returns for our shareholders. The VIST Revision 15% minority interest purchase is a great example of this strategy as we view the transaction as an attractive investment in our carbon-free assets and retail franchise. In addition to repurchasing the minority interest in our best-in-class retail business, through this acquisition, we will increase our ownership of nuclear generation by approximately 970 megawatts across our four sites at an average price of approximately $2,100 per kilowatt. We believe this compares very favorably to per-unit costs for other nuclear generation alternatives such as plant upgrades, new build, or additional M&As. Finally, the acquisition will result in an approximately 200 megawatt increase in our solar and storage capacity assets, and we look forward to continued growth in this business through the disciplined execution of our existing project pipeline. As highlighted on slide seven and this year alone, we have seen numerous announcements of major manufacturing and data center additions by companies spanning across industries. These announcements have spurred heightened awareness and projections of power demand growth. Some grid operators have already raised their expectations for demand growth through mid-year updates, while numerous industry observers have published forecasts reflecting an acceleration in power demand across the country. We also discussed this growth dynamic on our first and second quarter calls, specifically highlighting many of the drivers of power demand growth, including the build-out of large chip manufacturing facilities partially due to the CHIPS Act, the electrification of oil and gas load in the Permian Basin of West Texas, the reshoring of industrial activity, and, of course, the build-out of data centers. As shown in the bar chart on the left, actual weather-adjusted low growth for 2024 in PJM and ERCOT not only exceeded historical rates but is trending towards long-term forecasted levels. We believe the level of growth across both markets confirms our view that low growth is already occurring and we expect it to continue. While there has been a lot of focus on FERC's rejection of the amended Talon Interconnection Service Agreement, or ISA, we believe there will be multiple paths to resolve any issues as it relates to that project and other similar projects. FERC's ruling was narrowly based on the Commission's view that the ISA failed to meet previous FERC precedent, leaving the door open for a refiling of a streamlined ISA. Nothing about FERC's ruling prevents us or other generators from contracting with customers who are seeking to co-locate for their needs. We will need to address open issues and find the path for approval of interconnection service agreements, which we believe is doable. As we've stated before, there will be many large load opportunities that will have a variety of configurations, whether located next to a generation facility or in a more traditional front-of-the-meter configuration. We don't believe there will be a one-size-fits-all approach to this, and there shouldn't be, as customer needs will vary. Vistra's mission is to meet these needs and that of our broader customer base, just as we do today. I'm sure we will discuss this more in the Q&A, but I will turn it over to Chris to provide a detailed review of our third quarter results, our outlook, and capital allocation.