Vistra Reports Lower Customer Count Versus Q1 2020

Retail Segment Earnings Higher On Acquisitions

Vistra "Active" In Reviewing Retail Book Acquisition Opportunities From REPs Experiencing Stress From COVID-19

August 5, 2020

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Vistra, the parent of TXU and other retail brands, reported earnings for the quarter ending June 30, 2020.

Vistra reported second quarter Adjusted EBITDA for the Retail segment of $401 million, $108 million higher than the $293 million recorded in the second quarter of 2019, driven by the acquisitions of Crius and Ambit

On a GAAP basis, net income for the Retail segment was $229 million, versus a GAAP loss of $585 million a year ago, which reflects unrealized impacts from hedging

Vistra reported its residential retail customer count as 2.764 million as of Q2 2020, versus 2.791 million as of Q1 2020, and 1.528 million as of a year ago. The residential customer count reflects direct-to-consumer electric/gas residential counts excluding municipal aggregation and international customers.

Vistra said in a presentation that it, "grew residential counts in ERCOT across all retail brands while managing operational and channel impacts of COVID-19."

The decline in residential customer count versus Q1 2020 was attributed to the Northeast, due to COVID-related restrictions on certain sales channels.

Vistra also said that it, "Exceeded Business Markets sales performance goals for the quarter."

Retail volumes for the second quarter were as follows:

Vistra Retail Volumes (TWh)
                               
            Q2 2019   Q2 2020
Residential   4.9       8.2
Business      9.3       9.5
Muni Agg.     2.6       3.8

Total        16.7      21.5

----------------------------

ERCOT        10.7      13.1
Non-ERCOT     6.0       8.3

Total Retail operating revenues were $1.956 billion for the second quarter of 20202, versus $1.421 billion a year ago

Retail operating revenues in ERCOT were $1.426 billion for the second quarter of 2020, versus $1.110 billion a year ago

With respect to opportunities for inorganic retail growth through book purchases from retail suppliers experiencing stress from COVID-19, Vistra CEO Curt Morgan said, "We have seen pockets of books and companies that have seen some signs of stress," but Morgan noted that, in ERCOT, summer hasn't "shown up" yet, providing some relief to such retail providers

"We're active," in reviewing any such retail book opportunities, Morgan said, who expects more books to become available if scarcity pricing, which Vistra expects, occurs in ERCOT

COO Jim Burke added that Vistra is, "constantly monitoring the [retail] market for [book] opportunities."

Morgan stressed that Vistra is looking for "quality books" that provide value, warning that the value of several retail suppliers has atrophied because the books were built on door-to-door or other face-to-face channels that have been challenged from COVID-19.

Concerning capital allocation, Vistra said that, for 2020, the priority is to reduce debt to track toward long-term leverage target of ~2.5x Net Debt/EBITDA. Vistra anticipates >$1.3 billion of capital will be allocated toward debt reduction in 2020, with ~$750 million of debt paid down as of July 31, 2020

For 2021, core tenants of Vistra's long-term capital allocation plan are

• Maintain balance sheet strength

• Capital allocated to growth investments on an opportunistic basis in retail and renewables only if investment thresholds are met

• Most of capital returned to stakeholders including via share repurchases and a competitive dividend

Vistra reported that it is projected to achieve nearly $700 million of the ~$760 million of identified Dynegy, Crius Energy, and Ambit Energy transaction synergies and Operations Performance Initiative (OPI) EBITDA value lever targets by year-end 2020

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