Vistra Increases Estimate For Negative Financial Impact From Winter Storm Uri -- EnergyChoiceMatters.com

Updated With Reissued Retail Segment Guidance

Vistra Increases Estimate For Negative Financial Impact From Winter Storm Uri

April 26, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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Updated, 8:00 a.m. ET

Vistra provided some additional details in an investor call and presentation

With respect to the reissued 2021 guidance initially reported in our earlier story below, Vistra's presentation also listed the specific guidance for the retail segment

Specifically, for the Retail segment, the Ongoing Operations Adjusted EBITDA reissued guidance was as follows ($ in millions):

Initial 2021 Guidance (September 2020)
• Ongoing Ops. Adj. EBITDA: $935 - $1,055
Reissued 2021 Guidance (April 2021)
• Ongoing Ops. Adj. EBITDA: $500 - $700

With respect to gas supply issues, Vistra said that, though Vistra did have issues with fuel delivery and handling at its coal plants, Vistra kept some generation length unhedged to mitigate this unit contingency risk. This length offset Vistra’s losses from its coal fleet underperformance

Vistra estimates >$2.5 billion of its loss is attributable to the lack of available gas supply, causing its fleet to run at reduced capacity factors, and the incredibly high costs to secure gas

Natural gas storage avoided an additional ~$800 million of risk when gas was unavailable Fuel oil at peaking units avoided an additional ~$600 million of risk when gas was unavailable

As reported earlier, absent the issues with gas deliverability and increased costs, Vistra estimates that the 2021 Adjusted EBITDA impact of Uri would have been a slight positive, despite the increased retail load

Vistra said that it is taking the following actions to improve its risk profile:

• Analyzing additional weatherization of ERCOT fleet, including hardening generation for cold temperatures with the expectation of reasonable costs to implement
• Reserving ~1,000+ MW additional generation length in peak seasons for a total of ~2,200+ MW with the expectation of manageable impacts on the expected EBITDA guidance ranges
• Adding incremental gas storage for certain gas assets -- Vistra is advocating for a peak season ancillary service product for dual fuel and storage in the current Texas legislative session
• Planning for dual fuel capabilities at gas steam units (in addition to existing dual fuel capabilities at CTs) and increasing fuel oil inventory at CT sites1 with the expectation of workable capital expenditures and reliable operations from proven technology
• Advocating with the Texas legislature for registration of gas infrastructure as critical with the transmission and distribution utilities and enhanced winterization of both gas and power assets to alleviate gas deliverability issues

Earlier:

Vistra, the parent of TXU Energy, today updated its estimate for the financial impact of winter storm Uri to now be negative $1.6 billion.

Vistra said that, since its initial announcement regarding the estimated financial impact of Uri on Feb. 26, 2021, Vistra has received additional customer load information, which drove a negative variance to its previous estimate of $(900) million to $(1,300) million.

"Vistra also had a line of sight to relatively high probability self-help initiatives that, until mid-April, kept the net estimate of the 2021 Adjusted EBITDA impact at the high end of this previous range, with knowledge that ERCOT's 55-day resettlement statements would be forthcoming. These self-help initiatives include the monetization of certain commercial positions, generation savings from lower O&M project work, retail savings and forecasted performance, and IT and SG&A savings, which are expected to total ~$500 million in the balance of the year," Vistra said

In mid-April, Vistra received the 55-day resettlement statements from ERCOT, which drove an estimated negative variance of more than $200 million.

Vistra now estimates the net financial impact of Uri on its 2021 Ongoing Operations Adjusted EBITDA and Ongoing Operations Adjusted FCFbG is ~$(1,600) million.

This estimate includes the expected benefit of the self-help initiatives, but assumes no recovery from potential successful outcomes of various legal and regulatory challenges related to Uri.

"Vistra estimates the entire 2021 Adjusted EBITDA impact from the storm was less than the negative impact from gas deliverability issues and the incredibly high costs to procure gas. Vistra's firm gas contracts that were not honored by third parties led to the company procuring replacement gas at incredibly high costs, while the lack of physical gas and insufficient pressures on the pipelines impacted the company's ability to generate power at full capacity. As a result of these challenges, Vistra had to procure power in the ERCOT market at prices at or near the price cap to meet its supply obligations. Absent these issues with gas deliverability and increased gas costs, Vistra estimates that the 2021 Adjusted EBITDA impact of Uri would have been a slight positive," Vistra said

"Vistra positioned itself to handle the unprecedented Winter Storm Uri in Texas and executed well in the areas that we could control. The storm led to a confluence of unpredictable events and substantially altered the company's risk profile, driven by issues with the integrated gas and electric systems, principally impaired gas deliverability, that we had never before seen. We are obviously very disappointed with the financial loss as a result of the effects of Uri and it is even more difficult to accept given our team members' preparation and execution before, during, and after the storm," said Curt Morgan, Vistra's chief executive officer. "The results do not reflect our performance; however, we understand the reality in front of us and are prepared to move the company forward. We have a strong core to build from and have faith in our business model and strategic direction, especially as we implement a number of measures to mitigate the risks we observed from the winter storm event. Vistra is confident in the company's ability to bounce back in 2021 and get back on track with our transformation, the execution of our long-term capital allocation plan, and creating value for our stakeholders over the long-term."

Vistra provided reissued 2021 guidance as follows ($ in millions) (Excludes the Asset Closure segment)

Initial 2021 (September 2020)
• Ongoing Ops. Adj. EBITDA: $3,075 – 3,475
• Ongoing Ops. Adj. FCFbG: $1,765 – 2,165
Reissued 2021 (April 2021)
• Ongoing Ops. Adj. EBITDA: $1,475 – 1,875
• Ongoing Ops. Adj. FCFbG: $200 – 600

Vistra is reissuing its 2021 Ongoing Operations Adjusted EBITDA and Ongoing Operations Adjusted FCFbG guidance ranges at $1,475 to $1,875 million and $200 to $600 million, respectively. The sole change to Vistra's 2021 guidance ranges as compared to its initial guidance is the estimated net ~$(1,600) million Adjusted EBITDA impact of Uri, which includes Vistra's identified self-help initiatives.

Liquidity and Related Financing Transactions

"In the first quarter of 2021, Vistra took various steps to strengthen liquidity due to the impacts of Uri and enhance liquidity heading into the summer, including increasing borrowings under its Accounts Receivables financing agreements by $425 million, executing a new $1,250 million, 364-Day Term Loan A, and implementing a new $515 million PJM Forward Capacity Agreement," Vistra said

As of April 19, 2021, Vistra had total available liquidity of ~$2,784 million, including cash and cash equivalents of ~$549 million and $2,235 million of aggregate availability under its revolving credit facility and bi-lateral letter of credit facilities.

Capital Allocation

Through March 31, 2021, Vistra executed ~$175 million of its $1,500 million share repurchase program, repurchasing ~8.7 million shares at an average price of $20.21/share. Given the reduction in the amount of available capital in 2021 as a result of the financial impact from Uri, Vistra does not currently plan to repurchase any additional shares in 2021.

"Vistra remains committed to its quarterly dividend of $0.15 per share1 ($0.60 per share annually) in 2021 and to advancing its renewable development projects. The company is evaluating financing alternatives to help fund and/or to potentially accelerate the pace of development of its Texas and California renewable and energy storage projects," Vistra said

"Vistra also remains committed to maintaining a strong balance sheet. The company's net debt increased by ~$2,050 million in the first quarter of 2021. In the last three quarters of 2021, Vistra expects to reduce net debt by ~$1,250 million," Vistra said

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