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Vistra Energy (TXU, Dynegy Parent) Reports Higher Retail Adjusted EBITDA

Vistra CEO Does Not Expect Further Retail M&A In 2019, Harder To Say Beyond This Year

Vistra Sees A "Bit Of Attrition" In ERCOT Retail, Reports Customer Year-Over-Year Growth

May 3, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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Vistra Energy, the parent of various retail energy brands including TXU Energy and Dynegy, reported Adjusted EBITDA for its Retail segment of $257 million for the first quarter of 2019, up from $194 million a year ago

The company cited favorable ERCOT margins for the increase

The company also reported, "higher retail gross margin."

Retail segment results were, "in-line with management expectations reflecting strong cost management and operational performance," the company said

During an earnings call, Curt Morgan, Vistra's chief executive officer, said that retail margins, "continue to be strong"

Vistra reported its residential retail customer count as 1.528 million as of Q1 2019, up from 1.476 million as of Q1 2018

The year-ago totals did not include customers (or volumes) from Dynegy.

Morgan did state that the company did see a "bit of attrition" in ERCOT with respect to the residential retail business

However, Morgan feels good about the residential business, and sees an opportunity to gain residential customers due to potential ERCOT summer pricing and customer reaction to such conditions. Furthermore, to the extent there are exits of REPs due to summer conditions in ERCOT, that provides another potential opportunity to add customers, Morgan said

Overall, Vistra's retail brands serve approximately 2.9 million residential, commercial, and industrial customers

During an earnings call Morgan said that he would not expect further retail M&A during 2019 (apart from any potential customer acquisitions due to market defaults in ERCOT noted above), as the company focuses on organic growth

For retail M&A beyond 2019, it's harder to say, Morgan said, as the company would like to grow its retail business, and if an attractive opportunity presented itself, the company would take a hard look

Vistra reported Q1 2019 retail highlights as follows:

• "Demonstrated pricing discipline and risk management capabilities in higher power cost environment"

• "Continued strong sales performance in Business markets"

• "Expanded brand presence in PJM markets and announced acquisition of Crius Energy"

Vistra also highlighted the following previously reported retail activities during Q1 2019: Introduced new retail brand, Brighten Energy, in Illinois, Ohio, and Pennsylvania, and launched TXU Energy's new product: Free Pass Plan, giving retail customers free electricity on the seven highest usage days per month, all year long.

Q1 2019 Vistra retail volumes were 16,333 GWh (4,543 GWh residential, 9,452 GWh business, and 2,338 GWh muni aggregation). Q1 2018 Vistra retail volumes had been 9,193 GWh.

Q1 2019 Vistra Retail operating revenues were $1.386 billion, versus $972 million a year ago. The Q1 2019 Retail operating revenues by service area were $1.025 billion in ERCOT and $348 million in the Northeast/Midwest

Vistra said that it expects to close the Crius Energy acquisition in the second quarter of 2019, pending FERC approval. Vistra said that the acquisition is expected to be immediately accretive to EBITDA/share and FCF/share and to result in >90% FCF conversion

Vistra said that it executed approximately $1.053 billion of the previously authorized $1.75 billion share repurchase program through April 25, 2019, reducing shares outstanding to approximately 483 million shares as of the same date, approximately 8 percent lower than Vistra's share count as of the Dynegy merger close on April 9, 2018.

Vistra said that it expects to achieve ~2.5x net debt / EBITDA by YE 2020

As of March 31, 2019, Vistra had total available liquidity of approximately $2.324 billion. This available liquidity included cash and cash equivalents of $546 million, $1.753 billion of availability under its revolving credit facility, which remained undrawn but had $922 million of letters of credit outstanding as of March 31, 2019 primarily to support commodity hedging activities, and $25 million of availability under its alternate letter of credit facilities. The increase in available liquidity of $553 million as of March 31, 2019 as compared to Dec. 31, 2018 was primarily driven by $175 million of additional available capacity under the Revolving Credit Facility and $350 million of new available capacity under two new alternate letter of credit facilities. In April 2019, the aggregate available capacity under the alternate letter of credit facilities was increased to $450 million.

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