TXU Parent Vistra Reports Decline In Residential Customers In Texas Versus Q3
Vistra Provides Amounts For Expected Synergies From Crius, Also Says Will Avoid $29M Of Organic Retail Growth Investment
"Solid" Residential Margins Aid Improvement In Earnings
February 28, 2019 Email This Story Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • email@example.com
The following story is brought free of charge to readers byEC Infosystems, the exclusive EDI provider of EnergyChoiceMatters.com
In reporting Q4 and full year 2018 earnings this morning, Vistra Energy reported a lower residential customer count in ERCOT versus Q3 2018
As of Q4 2018, Vistra was serving 1.487 million residential customers in ERCOT, down from 1.492 million residential customers as of Q3 2018, but up versus 1.472 million a year ago.
The decline of 5,000 residential customers in ERCOT from Q3 2018 to Q4 2018 compares to a relatively flat residential customer count (loss of only 1,000 customers) from Q2 2018 to Q3 2018.
The net growth of 15,000 residential customers in ERCOT from Q4 2017 to Q4 2018 was organic, Vistra said
Vistra's retail volumes for Q4 2018 in ERCOT were 9,676 GWh (5,157 GWh business, 4,519 GWh residential), versus 8,965 GWh (4,489 GWh business, 4,476 GWh residential) a year ago.
Vistra's total retail volumes for Q4 2018 were 16,054 GWh (8,752 GWh business, 4,519 GWh residential, and 2,783 GWh municipal aggregation)
Vistra's Retail segment reported Adjusted EBITDA for Q4 2018 of $250 million, versus $207 million a year ago, with the improvement attributed to, "retail shaping and Dynegy assets contribution."
"Retail realized solid residential margins in ERCOT," Vistra said
Vistra's Retail segment reported net income for Q4 2018 of $315 million, which reflects the unrealized net gain resulting from hedging transactions
Vistra's Retail segment reported Adjusted EBITDA for the full year 2018 of $845 million. "Retail exceeded expectations driven by residential customer counts, weather, and lower SG&A," Vistra said of the year-end result.
As previously reported, Vistra recently announced an agreement to acquire Crius Energy Trust for approximately $378 million plus the assumption of Crius Energy net debt of approximately $108 million.
Vistra said that it expects to achieve $15 million of annual EBITDA synergies and an additional $12 million of annual free cash flow synergies resulting from supply and financing efficiencies.
In addition, Vistra expects it will avoid a cumulative $29 million of organic retail growth investment over the period from 2019 through 2023 as a result of the acquisition.
Pro forma for the full run-rate of synergies, Vistra estimates the purchase at approximately 4.0 times EV/EBITDA, which is projected to be accretive to both EBITDA and free cash flow and to exceed Vistra's investment threshold of mid- to high-teens unlevered returns.
Vistra reiterated the Crius transaction benefits as follows:
• "Impressive track record of new customer gains through various sales channels across multiple brands
complements Vistra’s brand management expertise, disciplined sales channel management, and digital / mobile capabilities"
• "Strong customer retention through segmentation and lifecycle management as demonstrated by industry-leading
• "Expands Vistra into higher value channels ex-ERCOT with a portfolio comprised primarily of residential and small
business customers while improving Vistra’s generation to load match"
• "Enhances Vistra’s sales and marketing channels through integrated energy platform offerings"
• "Brings established brands, sales channels, and infrastructure as a platform for Vistra to build out organic growth"
• "Expands Retail presence from 5 to 19 states and the District of Columbia, adding dual-energy market offerings"
Vistra noted that Crius has approximately 1 million residential customer equivalents
Vistra also highlighted Crius's:
• "Strong customer
by lowest attrition rates
• "Focus on high-margin
customers in residential
and small commercial
• "Exclusive partnership
Vistra further said, "As one of the largest purchasers of natural gas in the nation, expanding Vistra’s retail gas product
offering complements existing commercial operations with higher margin opportunity."
Furthermore, Vistra said,"Following the closing of the Crius acquisition Vistra expects it will be
45-55% matched in its core operating markets of ERCOT, PJM, and ISO-NE, resulting in
increased sales to its retail subsidiaries, the highest margin channel for wholesale length."
Vistra listed generation-to-load match by region as follows (also includes limited default service volumes):
NYE [sic] 17%
Vistra further noted the, "meaningfully lower collateral requirements," from sales of its own generation through Vistra retail