Vistra Corp.

Good day and welcome to the Vistra's second quarter 2025 earnings conference call. All participants will be in the 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 Misak, Vice President, Investor Relations. Please go ahead.

Good morning and thank you for joining Vistra's Investor Webcast discussing our second quarter 2025 results. Our discussion today is being broadcast live from the Investor Relations section of our website at .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 release, presentation, and other matters discussed in the call today include references to certain non-GAF financial measures. All references to adjusted EBITDA and adjusted free cash flow before growth throughout this presentation refer to ongoing operations adjusted EBITDA and ongoing operations adjusted free cash flow before growth. Reconciliation 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 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'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 second quarter of 2025 operational and financial results. The business continues to perform well and with our strong -to-date results, we remain on track to achieve a record result for the company in 2025. The trends in demand growth continue to persist in our major markets. The recent experience in PJM in the Northeast is a great example, with the late June heatwave resulting in PJM load hitting the highest level in 14 years, in New York the highest in 10 years, and in New England the highest in 12 years. The administration continues to pursue multiple avenues to accelerate America's development of AI and the electricity sources needed to power it. We continue to believe this will require a diversified solution with capacity coming from all types of generation sources, particularly dispatchable across all major power markets. We believe the challenge of meeting expected load growth in a way that minimizes the impacts to all customers is solvable, and as I will outline later, we believe Vistra is well positioned to be a leader in developing these solutions for the energy needs of our customers and our nation. Starting on slide five, the team has worked hard across the business and achieved adjusted EBITDA of ,000,000 for the quarter. The consistent execution from our team across generation, commercial, and retail, delivered reliable power and customer solutions that reflect the strength of our business model. The strong execution of our team year to date provides us with confidence that we will meet or exceed our plan despite the impacts of ongoing unplanned outages at a few of our units. Thus, we are reaffirming the guidance ranges for 2025 adjusted EBITDA of $5.5 billion to $6.1 billion and adjusted free cash flow before growth of $3 billion to $3.6 billion. Moving to growth, we recently announced our plans to acquire seven modern natural gas facilities from Lotus infrastructure partners with a combined capacity of approximately 2600 megawatts including 1800 megawatts in the PJM market. We believe these assets are highly complementary to our fleet and we look forward to closing the transaction later this year or early next year. Lastly, given our hedging activity over the past several months, combined with the results of the recently completed 2026-2027 PJM capacity auction, we are increasing our 2026 adjusted EBITDA midpoint opportunity, excluding any contribution from the Lotus assets, to be at least $6.8 billion. Turning to slide six, our four strategic priorities remain integral to our strong business performance and both our short-term and long-term success. Our integrated business model and comprehensive hedging program leverages our diverse portfolio of generation assets. This, combined with our strong retail brands and experienced commercial team, provide increased visibility into our earnings potential while providing considerable downside protection. Operationally, we achieve commercial availability in line with expectations as the team worked diligently to prepare the fleet for the critical summer months. This preparation was evident, especially during the June heat wave in PJM, MISO, and the Northeast markets. Despite the demands placed on the fleet, particularly during the hottest three days beginning June 23rd, our fleet performed very well with a commercial availability of approximately 95% across our diversified set of assets. On the retail side, we achieved another solid quarter of performance driven by growth in ERCOT across our portfolio of brands and strong complaint performance versus our competitors. We also continue to grow our large business markets franchise as customers are looking to secure power while managing price volatility. In fact, our Texas business markets volumes were 10% higher year over year with strong margins. Switching to capital allocation, we remain committed to our disciplined approach of returning capital to shareholders, executing on attractive growth opportunities like the announced acquisition of assets from Lotus infrastructure partners, while also maintaining a strong balance sheet. Since implementing the capital return plan put in place during the fourth quarter of 2021, we have returned over $6.5 billion to our investors through share repurchases and common stock dividends. We expect to return at least approximately $1.8 billion of incremental capital to shareholders through share repurchases and dividends through the end of 2026. We also expect this capital return to coincide with significant balance sheet deleveraging, which we believe will position us for an upgrade to investment grade ratings as our earnings grow and we complete remaining future payments related to the Fist Revision Minority Interest Acquisition. Moving to strategic energy transition, we continue to execute our strategy of utilizing existing land and interconnects to develop solar and energy storage projects. Our Oak Hill, Pulaski, and Newton sites remain on schedule for commercial operations in 2025 and 2026. We continue to evaluate the remainder of our development portfolio for additional opportunities as long-term power agreements materialize. Finally, we were excited to achieve the successful relicensing of our perinuclear power plant during the quarter. The Nuclear Regulatory Commission approved the license renewal through 2046, an additional 20 years beyond its original license, and we look forward to the continued operations of this key baseload asset. We believe nuclear power's unique combination of carbon-free, dispatchable power will continue to play a critical role in meeting our country's electricity needs for decades to come. Turning to slide seven, we continue to see a structurally improved demand backdrop which has significant positive implications for our business. While third-party forecasts and utility estimates have wide variation, we continue to see a structural shift in electricity consumption with recent growth in electricity demand across the country returning to pre-2000 trends after approximately two decades of stagnation. As we highlighted last quarter, energy growth in our biggest markets continues to track ahead of electricity demand growth for the entire country with weather normalized load in PJM growing approximately 2 to 3 percent and the ERCOP market growing approximately 6 percent year over year. Our fundamental view suggests the growth energy consumption will outpace the growth in peak energy demand. This will mean higher utilization of existing assets including generation and transmission and distribution assets, as well as demand response activities particularly from large customers including crypto, data centers, and other industrial customers. Our view is that markets are beginning to send the much-needed signals for investment in new generation. This is underpinned by the continued investment from industrial and commercial sectors including data center customers. Since the beginning of this year, the administration's push to drive investment into U.S. manufacturing has identified over $2 trillion of announced projects. As covered on recent quarterly investor calls, hyperscalers continue to invest in AI and data center infrastructure including capital expenditure budget increases of over 50 to 60 percent on average compared to the prior year. The recent PJM capacity auction clear is a sign of markets responding to this increased demand with recent prices signaling the value of additional capacity whether it's plant augmentations, deferring retirements, conversions, or new build. We believe returning the PJM capacity auction to its regular schedule with a three-year lead time combined with the necessary stronger auction clears will incentivize the capacity additions the system needs. Policymakers are understandably concerned about system reliability and system costs and programs like the Reliability Resource Initiative and PJM can help accelerate dispatchable generation additions. Finally, we continue to believe near-term demand can be reliably and cost-effectively served by the grid we have today given that electric grids remain underutilized for vast majority of hours in the year. This remains the case for both ERCOT and PJM where peak load has been approximately 85 gigawatts and 162 gigawatts respectively but the average load is approximately 55 to 60 percent of that level throughout the year. Our thermal fleet on average runs 50 to 55 percent capacity factors as most thermal assets do across the grid. These resources can scale to meet additional load requirements. The super peak hours can be reliably met with straightforward solutions like on-site backup generation and demand response allowing the new load to come into our markets utilizing the investments already made by the electricity sector both regulated and competitive. In the medium to long term to sustain the economic growth and meet customer demand more investment will be needed across the system. As outlined on we believe this diverse fleet of generation assets innovative retail business and development capabilities strategically positioned for success in the power sector through a variety of opportunities. Customers are looking for multiple tailored solutions to meet their energy needs and whether it is data center contract opportunities with existing assets or higher utilization of our more than 40,000 megawatts of existing assets we have multiple paths to create value. Our dedicated team is actively progressing these opportunities and we have good momentum. We have a number of short-term, medium-term, and long-term options across the generation fleet and we feel confident about the status of these opportunities and look forward to providing more details over the next few years. Our existing asset base provides a strong foundation from which to grow capacity through upgrades not only at gas plants but also at our nuclear sites where we expect to finish our upgrade studies by the end of the year. We anticipate being able to add more than 600 megawatts to our existing nuclear capacity by early to mid 2030s. Moving to our coal sites our Paleto Creek coal to gas conversion remains on track for 2027. We see additional potential conversion opportunities at our other retiring coal plants given the strong capacity clears and our improved market outlook including our Miami Fort coal plant located in Ohio. With the recent capacity auction clears combined with an improved outlook in forward energy prices and the state's dedication to markets with the passage of House Bill 15 in Ohio, we are taking concrete steps to prepare a potential conversion of the plant to gas allowing it to run beyond the mandated retirement date and adding key capacity to the PJM market for years to come. Turning to new generation we are proud that our development team's track record makes us a preferred parker including structuring and evaluating potential opportunities for new build gas generation in partnership with large customers. For renewables we view the VISTA zero strategy as complementary to our dispatchable generation assets and will continue to execute our pipeline by utilizing existing sites and interconnects to serve customer needs. Finally as we have demonstrated over time we believe acquiring and integrating generation and retail assets to be a core competency of the team. We will continue to take an opportunistic approach to M&A as market opportunities arise. On the topic of M&A I would like to briefly cover the recently announced Lotus transaction on slide nine. As you'll recall we announced mid-May an agreement to acquire seven modern natural gas facilities totaling 2,600 megawatts of capacity from Lotus infrastructure partners. The acquisition includes five combined cycle gas turbine facilities and two combustion turbine facilities located across PJM, New England, New York and California which will further geographically diversify VISTA's natural gas fleet while providing valuable dual fuel capabilities at three of the sites. This transaction which was struck at an attractive valuation of approximately $740 per kilowatt of capacity before taking into account any tax benefits will enhance our footprint in the northeast and provide additional optionality as power markets tighten while exceeding our mid-teens levered return target. The acquisition remains on track for close later years. In summary our financial outlook continues to strengthen while market tailwinds expand our opportunity set. We believe we have both the assets and the team to maximize value and deliver for our key stakeholders and we are excited about the numerous opportunities in front of us. Now I'll turn it over to Chris to provide more details on the second quarter results, outlook and capital allocation.