Vistra - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered strong operating performance but GAAP optics were weak: Operating revenues rose to $3.93B (+29% YoY), while GAAP net loss widened to $(268)M on large unrealized derivative M2M losses; Ongoing Operations Adjusted EBITDA increased 53% YoY to $1.24B, driven by retail strength, higher wholesale prices, and two extra months of Energy Harbor contribution.
• Results vs Street: Revenue ($3.93B) and S&P “Primary EPS” ($0.32) missed consensus ($5.32B and $0.78), but profitability outperformed with company-reported Ongoing Ops Adjusted EBITDA of $1.24B vs S&P EBITDA consensus near ~$1.01B, reflecting hedging and fleet availability resiliency (methodology non-GAAP vs S&P EBITDA not perfectly comparable)*.
• Guidance unchanged: Reaffirmed FY 2025 Ongoing Ops Adjusted EBITDA of $5.5–$6.1B and Adjusted FCFbG of $3.0–$3.6B; 2026 midpoint “opportunity” still >$6B; ~100% of 2025 and ~90% of 2026 expected generation volumes hedged, supporting visibility.
• Capital returns and liquidity intact: $5.2B of buybacks executed since 2021; ~339.3M shares outstanding (-~30% from Nov-2021). Quarterly common dividend raised to $0.2250 in May (from $0.2235 in Feb). Liquidity stood at ~$3.9B at quarter-end.
• Potential stock reaction catalysts: durability of 2025 guide despite GAAP loss, expanding data-center load pipeline, Texas SB6/FERC colocation clarity over summer, and accretive NG portfolio acquisition announced mid-May (2.6GW at ~$743/kW, ~7x 2026E EBITDA).

What Went Well and What Went Wrong

• What Went Well

  • Profitability resilience: Ongoing Ops Adjusted EBITDA +$430M YoY to $1.24B on strong retail, higher realized wholesale pricing, and Energy Harbor contribution.
  • Operations excellence and retail momentum: ~95% fleet commercial availability through winter storms; retail grew in both volume and customer count YoY. CEO: “Our plants achieved commercial availability of approximately 95% while our retail business grew… These results…are evidence of the resiliency of our business…”.
  • Visibility: Reaffirmed 2025 guidance; hedged ~100% of 2025 and ~90% of 2026 generation, with CEO/CFO emphasizing stability through volatility and hedging “locking in value”.

• What Went Wrong

  • GAAP optics pressured by M2M: Net loss increased by $286M YoY, primarily due to unrealized mark-to-market losses as forward energy prices rose.
  • Headwinds/outages: Management cited an outage at Martin Lake Unit 1 and Moss Landing batteries being offline; still, guidance reaffirmed (implying offset elsewhere).
  • Street misses on revenue/EPS: Q1 revenue and S&P “Primary EPS” fell below consensus; non-comparable EBITDA definitions cloud profitability comparisons*.

Transcript

Operator (participant)

Good morning, everyone, and welcome to Vistra's First Quarter 2025 Earnings Call. All participants will be in a 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, press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. At this time, I'd like to turn the floor over to Eric Micek, VP of Investor Relations. Please go ahead.

Eric Micek (VP of Investor Relations)

Good morning, and thank you for joining Vistra's investor webcast discussing our first quarter 2025 results. Our discussion today is being broadcast live from the investor relations section of our website at www.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 Kris 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. Our earnings release, presentation, and other matters discussed in the call today include references to certain non-GAAP 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.

Reconciliations 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 will now turn the call over to our President and CEO, Jim Burke.

Jim Burke (President and CEO)

Thank you, Eric. Good morning, and thank you for joining us to discuss our first quarter 2025 operational and financial results. 2025 is off to a strong start for Vistra. We remain excited about the demand growth trends we are seeing across our markets, and we believe Vistra is poised to serve the growing needs of customers in numerous ways. While there has been a bit of turbulence the last few months in the macro environment, the administration is prioritizing AI and attempting to find ways to unlock America's leadership in this area. The hyperscalers have continued to affirm or even increase their CapEx investment levels with respect to data center investments. We believe to meet this growing load, it will require increased power generation from not only new assets but existing assets as well.

While there are policy challenges to solve, we see a growing willingness on the part of all stakeholders to come together on solutions that will serve new large loads while minimizing impacts for existing customers. Vistra is very well positioned to be a leader with respect to these solutions and to benefit from the tailwinds in our sector. Beginning on slide five, the team worked diligently across the business to maintain last year's strong momentum into 2025. As you can see from our results, our team was able to deliver, achieving adjusted EBITDA of $1,240 million for the quarter. Consistent execution from generation, commercial, and retail was key to this success, highlighting the strength of our integrated business model and our one-team approach.

We continue to believe that a diversified portfolio of generation assets, including nuclear and gas, combined with a best-in-class retail business and a strong commercial set of capabilities, creates a superior and resilient business model for navigating volatile power markets. We are reaffirming the guidance ranges for 2025 adjusted EBITDA of $5.5 billion-$6.1 billion and adjusted free cash flow before growth of $3 billion-$3.6 billion, both introduced on our third quarter 2024 call. Moving to 2026, while we have not updated our 2026 adjusted EBITDA midpoint opportunity, we remain confident in our ability to deliver significantly above the floor of $6 billion. Our confidence in our ability to deliver this outlook is primarily underpinned by our continued strong operational performance and our comprehensive hedging program, where we have successfully hedged approximately 95% of our expected generation over the 2025-2026 timeframe.

We continue to believe our comprehensive hedging program, which focuses on locking in value during periods of volatility, ensures a more stable and resilient earnings stream across varying economic cycles. Turning to slide six, our four strategic priorities continue to be central to our long-term success while driving strong operational and financial performance. As highlighted earlier, our integrated business model and comprehensive hedging program deliver consistent results and enhance visibility into our earnings potential while providing significant downside protection to our near-term outlook. The excellent teamwork across our business is central to the successful execution of our strategy. Operationally, our generation team achieved another strong quarter of commercial availability at approximately 95%, enabling us to perform for our customers during multiple winter storms in both our PJM and ERCOT markets.

On the retail side, we achieved another quarter of organic growth in the Texas market after a strong 2024, demonstrating the consistency and strength of our retail business. Switching to capital allocation, we maintain a disciplined approach of returning capital to shareholders, investing in select growth projects that achieve mid to high teens returns on capital, and maintaining a strong balance sheet with a long-term net leverage target of less than three times. As part of this approach, we continue to execute the capital return plan put in place during the fourth quarter of 2021. Since that time, we have returned approximately $6.3 billion to our investors through share repurchases and common stock dividends. We grew our zero-carbon business, including through the acquisition of Energy Harbor, and we achieved our long-term leverage target.

As part of this program, we expect to return at least an incremental $2 billion in total through share repurchases and dividends through the remainder of 2025 and 2026. On the subject of growth, we have two equipment queue positions for our Permian 1 and Permian 2 peakers, and we have an attractive cost profile given the timing of when we place these orders. We believe these projects, with build costs of approximately $1,000 per kW, are advantaged relative to current estimates for peakers of more than $1,500 per kW. We will continue to evaluate the returns for these projects and assess market reforms, including legislative activity in Texas and elsewhere, as we determine our best path forward. With respect to the strategic energy transition, we continue to execute on our strategy of utilizing existing land and interconnects to opportunistically complete solar and energy storage projects.

This quarter, we continue the construction on our Oak Hill, Texas, and Pulaski, Illinois sites in support of our contracts with Amazon and Microsoft, respectively. Once online, these facilities will add over 600 MW of renewable capacity to our portfolio. Our Oak Hill site is approximately 90% complete and on track for a fourth quarter 2025 commercial operations date. The Pulaski site is approximately 20% complete and on track for a fourth quarter 2026 commercial operations date. We also began mobilizing for construction on our Newton Battery and Storage site in Illinois. This site will add over 50 MW to the region with a planned commercial operations date in 2026. Importantly, cost structures for these projects remain insulated from recently announced tariffs. Moving to our nuclear portfolio, feasibility studies are underway for potential nuclear uprates.

As we noted last quarter, initial estimates indicate the potential for uprates across our nuclear fleet of approximately 10%. We expect to finalize these studies over the next year with target online dates in the early 2030s. You can expect future updates from us as we evaluate these opportunities and prioritize projects. Moving to slide seven, we continue to see electricity load growth as providing a structural tailwind for our sector. Similar to the summer and winter peak load growth highlighted in our fourth quarter results call, quarterly weather normalized load in the PJM and ERCOT markets continues to see accelerating growth trends. Our analysis suggests the sources of demand growth are durable and diversified across industries, with data center power demand being a key driver but not the only one.

Importantly, electricity demand growth has historically proven to be fairly inelastic over varying economic cycles, and we don't see recent concerns around economic growth impacting the structural change in demand that we see in today's power markets. While this growth provides an exciting opportunity for Vistra to serve customers in new and varied ways, the wide range of projections has garnered the attention of policymakers across the country, not only in competitive markets but in vertically integrated markets as well. We continue to believe the actual level of load growth will compound annually in a low to mid-single digits range through 2030 across our markets. This is consistent with what we shared last year on our Q1 results call, and now we see this dynamic playing out.

While this is a strong level of growth compared to the past 20 years in most areas of the country, we believe this demand can be reliably and cost-effectively served. Because grids are built to serve the highest demand during so-called super peak hours, the electric grid remains underutilized for most hours in the year. ERCOT's a perfect example, where peak load has been approximately 85 GW, but the average load is approximately 53 GW. We think this excess capacity during most days of the year provides a unique opportunity to meet a large portion of the pending load growth with existing capacity.

In the 1% or less of the hours that are super peak hours, which typically occur in peak summer or winter weather, there are relatively straightforward solutions like demand response, use of on-site backup generation at the customer's location, and higher utilization of existing assets to meet these needs. It is our view this combination can allow for new load to come into our markets in an orderly fashion and be served cost-effectively. Over time, as the load continues to grow, there will be time for additional investment in generation and transmission to serve customer needs. Importantly, given the market backdrop and the load growth materializing in the near term, existing dispatchable assets will be essential to delivering the resource adequacy grid operators and customers expect.

We believe Vistra, with its large and flexible fleet of generation assets, combined with own sites that can bring new generation, is well positioned for this environment. Our large CCGT fleet with nearly 20 GW of total capacity, which currently operates at average utilization rates of approximately 55%-60%, can run at substantially higher capacity factors, improving grid utilization and lowering unit costs for customers. Our approximately 2 GW of simple cycle peakers have the quick start capabilities to ramp up as load materializes, further contributing to grid reliability. On development, the diversity of the Vistra generation portfolio allows for multiple types of capacity additions through both the expansion of existing assets and development of new projects. Uprates at existing gas plants in ERCOT and the coal-to-gas conversion of our Coleto Creek plant represent near-term opportunities to add megawatts to the grid at attractive unit economics.

Other opportunities, like the previously mentioned Vistra Zero or nuclear uprate projects, represent longer-term prospects for capacity additions. Policymakers are also working on solutions to address the growing number of large loads that plan to connect to the grid. Importantly, whether these large loads connect directly onto the grid or co-locate with a power plant, the amount of power they consume and the net supply and demand balance are the same in either scenario. We will continue to work with policymakers and large load customers on solutions that meet all customer needs, including those of our residential and small commercial customers. We continue to advance our discussions with large load customers on various power solutions, and we are optimistic about regulatory developments and our ability to serve these customers.

With the Texas legislative session ending in early June and the PJM regulatory process related to the FERC co-location show cause order potentially concluding this summer, we are ready to navigate the evolving landscape and believe we are well positioned for success. Vistra remains committed to supporting a reliable, affordable, and sustainable grid, and our integrated business is poised to serve customers with growing needs. Now I'll turn it over to Kris to provide more details on our first quarter results, outlook, and capital allocation. Kris.

Kris Moldovan (EVP and CFO)

Thank you, Jim. Turning to slide nine, Vistra delivered first quarter results in 2025 that were approximately 53% higher year-over-year compared to Q1 2024, achieving adjusted EBITDA of approximately $1,240 million, including $1,056 million from generation and $184 million from retail.

The significant year-over-year increase was partially driven by the inclusion of two additional months of Energy Harbor's generation and retail results, given the transaction closed March 1st of last year. Generation also benefited from our comprehensive hedging program, which delivered average realized prices nearly $4 per MW hour higher compared to the same quarter last year. A better weather backdrop in January and February also led to higher capacity factors across our PJM and ERCOT assets. Turning to retail, the business continues to realize benefits from strong customer counts, margins, and supply management, as our consistent product development combined with strong brand recognition drove higher year-over-year customer additions in our key markets. Similar to generation, retail results were also bolstered by favorable weather in our Texas and Midwest Northeast markets compared to the first quarter last year, which was negatively impacted by the warmest winter on record.

As a reminder, due to higher hedged power costs in the winter and summer months, we expect the majority of adjusted EBITDA for retail to be realized in the second and fourth quarters. Depending on the shape of those power costs throughout any given year, the expected relative contribution from each quarter is subject to change. Notably, our expectation heading into the year for Q1 2025 was significantly higher than the first quarter results for retail in 2024. Moving to slide 10, we are reaffirming our 2025 adjusted EBITDA guidance range of $5.5 billion-$6.1 billion and our adjusted free cash flow before growth range of $3 billion-$3.6 billion. We believe the reaffirmed outlook for 2025 demonstrates the earnings resiliency afforded by the diversified model, especially in light of our outage at Martin Lake Unit 1 and our Moss Landing batteries being offline.

Turning to our outlook for 2026, as Jim mentioned, we continue to see our outlook develop positively. We are increasingly confident in an adjusted EBITDA midpoint opportunity outcome for 2026 approaching mid to high $6 billion and even possibly $7 billion. We expect to provide guidance for 2026 later in the year, likely on our third quarter call. As always, our guidance and near-term outlook remain supported by our comprehensive hedging program. For 2025, our gross margin remains highly hedged, with approximately 100% of our expected generation already sold. For 2026, our hedge ratio increased from approximately 80% to approximately 90% as our commercial team took advantage of market opportunities. Finally, turning to slide 11, we provide an update on the execution of our capital allocation plan.

Since beginning the program in November 2021, we have reduced our shares outstanding by approximately 30%, repurchasing approximately 163 million shares at an average price per share of just under $32. This reduction has notably led to a 49% increase in our dividend per share since the dividend paid in Q4 2021 to the dividend paid in Q1 2025. Regarding our balance sheet, Vistra's net leverage ratio currently sits just under three times adjusted EBITDA, in line with our long-term target of below three times. In terms of future capital deployment, we will maintain a disciplined approach towards further deleveraging, investment for growth, and shareholder return. We expect to invest just over $700 million on solar and energy storage projects in 2025, including the previously discussed solar projects supported by contracts with Amazon and Microsoft, along with our Newton site, which we began preparing for construction this quarter.

Based on our current project pipeline, we anticipate a reduction in solar and energy storage development CapEx for 2026, subject to change with any new offtake agreements. As a reminder, we expect to fund a significant portion of our growth expenditures with third-party capital, including non-recourse loans. We continue to believe these projects are a great opportunity to leverage existing sites to increase the proportion of our contracted EBITDA at attractive returns while limiting the impact of our cash available for allocation. Lastly, we believe Vistra continues to be well positioned to create sustained long-term value. The resilience of our business is evident in our strong results and reaffirmed earnings outlook amidst increased market volatility. Our team is focused on our core mission of lighting up lives and powering a better way forward.

We remain confident in our ability to be part of the solution to address our country's growing power demand in the coming years, and we look forward to the months and years ahead. With that, Operator, we're ready to open the line for questions.

Operator (participant)

Ladies and gentlemen, at this time, we'll begin the Q&A session. To ask a question, you may press star and then one on your touch-tone phones. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. Once again, that is star and then one to ask a question. At this time, we'll pause momentarily to assemble the roster. Our first question today comes from Shahriar Pourreza from Guggenheim Partners. Please go ahead with your question.

Shahriar Pourreza (Senior Managing Director)

Hey, guys.

Good morning.

Jim Burke (President and CEO)

Hey, Shar. Good morning.

Shahriar Pourreza (Senior Managing Director)

Good morning, Jim. Jim, I could not get a sense on the prepareds. Just on Comanche Peak deal conversations, are you waiting specifically for co-locations at this point, or could you be moving ahead with front-of-the-meter and virtual PPAs in the interim? The reason why I ask is one of your peers noted yesterday that FOM and BTM pricing is harmonizing in their customer conversations, which I think is counter to what Vistra has been messaging in the past. Just a little bit of a sense there. Thanks.

Jim Burke (President and CEO)

Sure. Shar, I think what I have tried to mention on previous calls, and I know we have covered a lot of ground really for the past year's worth of calls, that no two deals really are going to look alike. I think the customer needs really dictate that.

For some areas of the country, the front-of-the-meter may actually be as good of an opportunity set as co-location. From our perspective, when we've looked at the deals that we're working on with many customers, they're still looking at co-location as a potential speed advantage. Again, that's going to depend on which part of the country and how clear are the rules. I think from our team's perspective, the activity level has not slowed down. We remain very engaged with a number of these opportunities, and we're very pleased with the progress we're making. There is still a desire for clarity because, as we mentioned on previous calls, you have to contract through these deals, which are long-term deals, 10 years-20 years, and your contracts need to anticipate how rules and regulations are going to play out.

To the extent the rules and regulations can become clearer, it'll make the ease of contracting these, I think, a little bit more straightforward. As far as pricing, a lot of these customers look at alternatives around the country. What is the next best alternative to either a front-of-the-meter location or co-location with existing assets? That includes co-location potentially with even new assets. All of that creates a price spectrum. I think we've talked about the fact that there is going to be a spectrum of prices out there. I don't think there's enough deals signed to say that one deal is going to equal another deal because there just really, frankly, haven't been that many deals announced. I think it's too early to say that front-of-the-meter and behind-the-meter is harmonizing from our perspective.

I also think no two deals are going to look exactly the same. I do not think we should expect that. These are sophisticated customers. The markets all have different nuances in terms of their design and their ability to deliver for the customer. I think our ability to price that is going to be our ability to work with that customer that we can meet their needs. What I am excited about is that the hyperscalers have either reaffirmed or increased their CapEx. We are still talking about nearly $2 trillion between now and 2030 that the major four players intend to spend. The administration is prioritizing AI. They are setting a tone that we have got to win the AI race. We have got to make co-location work. We have got to make front-of-the-meter work.

We need to be able to build new assets as well as utilize existing ones. That is how we are approaching it, Shar.

Shahriar Pourreza (Senior Managing Director)

Got it. That is actually very consistent in the past. Jim, just lastly, I know this is not an easy question to answer, but just on general deal timeline at this point, does SB 6 finalization, does that unlock a Comanche deal?

Jim Burke (President and CEO)

I think SB 6, the end result of SB 6 will unlock a lot of things. We do not know how SB 6 is going to, frankly, turn out. I mean, there is a hearing today. It is the first time it is being picked up in the house. As we have covered in previous calls, Texas could attract a lot of load if we are able to lay out clear rules and regulations.

I think that could unlock a Comanche Peak deal, but I think it could unlock a lot of deals, including front-of-the-meter deals. SB 6 deals with both. We are active on SB 6, as are our peers, as is the large customer coalition, which is very active on this. The session ends in early June. The goal, obviously, would be to get clarity around that timeframe. I would expect that you will see some things announced shortly thereafter with the view that the deal parameters and the kinds of things that folks are trying to contract around would become more clear.

Shahriar Pourreza (Senior Managing Director)

Got it. Perfect. Thanks again, Jim. Very, very helpful color. Appreciate it as always.

Jim Burke (President and CEO)

Thank you, Shar.

Operator (participant)

Our next question comes from Julien Dumoulin-Smith from Jefferies LLC. Please go ahead with your question.

Julien Dumoulin-Smith (Research Analyst)

Hey, good morning, team. Thank you guys very much. Appreciate the time.

Guys, maybe just to follow up a little bit here on what you guys are saying about 2026 here and $7 billion. Can you guys comment briefly on 2027? I mean, the curve's been moving around. Obviously, the opportunity set you guys are seeing also moving around. But any, shall we say, initial commentary that you guys would really be willing to provide?

Jim Burke (President and CEO)

Julien, it has been. I think I used the word turbulent in the prepared remark. It is moving around. I think the good news is that that turbulence has showed strength before some of the concerns around the economy, and that has bounced back. Our team has been actively hedging, as you've heard the update that Kris gave.

I think I mentioned on the last call, and Kris was giving a nod to this in his remarks, 2026 is looking strong, and we see 2027 and even 2028. We see that holding similar strength. We're not hedging, obviously, as far out as you'd like to because the depth of the market isn't always there to be able to hedge as far out. The earnings profile is strong. Even with some of the anticipated coal retirements that we have, we see the strength of our current asset base becoming more valuable. The curves are reflecting that. I think that the earnings power looks very consistent from our point of view.

Julien Dumoulin-Smith (Research Analyst)

Got it. Just to make sure I understand, you've presumably hedged some degree out in 2027 here incrementally.

Even with the open position, the mark-to-market looks somewhat similar to what you're seeing on the 2026 as it stands today. I'll only hold it to you today.

Jim Burke (President and CEO)

Thank you, Julien. I appreciate that. The answer is yes.

Julien Dumoulin-Smith (Research Analyst)

All right. Awesome. All right. That's my two questions. Thank you guys very much. I appreciate it.

Operator (participant)

Our next question comes from Angie Storozynski from Seaport. Please go ahead with your question.

Angie Storozynski (Senior Equity Research Analyst)

Thank you. I'm just going to make a comment, [audio distortion]. When we listen to your prepared remarks, it's hard to tell that you have this upside potential, probably once in a generation, coming from AI. I mean, I know it might be just a different style of communications, but again, it would be hard to guess that there's this upside potential ahead of you.

Is it just because you're trying to manage our expectations? Is it that something has changed? Is it that you don't want to commit to a certain timeline? Again, I'm at a loss why you don't sound a little bit more upbeat.

Jim Burke (President and CEO)

Angie, I appreciate that. I would say we take this responsibility of how we think about messaging to our shareholders and how the complexity of this marketplace is a reality. I also think these large-scale customers, and we see it in the interconnect queues throughout the country, as we've communicated before, they have lots of opportunities. We think these interconnect queues, and I think all of our peers have described this at some level, may be overstated anywhere from three to five times what might actually materialize either in regulated markets or competitive markets.

I just respect the customer's ability to develop on multiple fronts around the country. It's our job to compete to win that deal. That's exactly what we're wired to do. We respect the fact that we have competitors, and we respect the fact that even regulated markets are competing for this load. I mean, competition benefits customers. I fully respect that. I've spent 25 years in the competitive market side, and I understand the ferocity of competition. I have had a style here, and it's been, I think, consistent from a team perspective that when we have something that's ready to disclose, we will. I can assure you of that. We're working extremely hard to have something to disclose.

Until that happens, it's just not been my style to predict, just given the fact that these customers are sophisticated, have choice, that until you're at the finish line, you're just not there yet. That's, I think, Angie, the color that I would provide.

Angie Storozynski (Senior Equity Research Analyst)

Okay. Just taking it maybe a step forward, for example, your 2026 guidance, you're very heavily hedged. You have a capacity auction that comes with a pricing floor. I mean, the math is relatively simple looking at your disclosures and, again, incorporating even the floor. That would be well in excess of that $6+ billion you're showing me. I understand that Kris alluded to that it could be even ahead of $7 billion. Again, it's unlikely that 2026 is going to be impacted by any of the potential AI-related deals. Yet you are not updating the numbers.

Kris Moldovan (EVP and CFO)

Yeah, Angie, I think we covered this a little bit last quarter. I think from our perspective, there are still some uncertainties. So we're not ready to provide actual guidance. I mean, you wouldn't expect us to provide guidance for next year. When we're those things, again, we still have some open length. We still have the capacity auction to clear. I mean, there is a distance between the floor and the cap. We still have some hedges to perfect. We're not ready to provide guidance. We've tried to give as much color as we can. We just want to think it makes sense to get back on schedule where we provide guidance, any update for the current year, and then guidance for the next succeeding year. Maybe in addition to that, a midpoint opportunity outlook for the following year after that.

We expect to do all that on the third quarter call. We are just trying to get back on that schedule where we do not update guidance every quarter. We are still, as you said, in our remarks, we have leaned in pretty hard to say that we are significantly above $6 billion. We just have not changed the number on the page. I think you will see us, again, return to that third quarter update, formal updates for guidance in multiple years.

Angie Storozynski (Senior Equity Research Analyst)

Understood. Thank you.

Operator (participant)

Our next question comes from Jeremy Tonet from JPMorgan. Please go ahead with your question.

Jeremy Tonet (Research Analyst and Managing Director)

Hi, good morning. Hey, Jeremy. Good morning. Just want to start off with, I think, kind of a two-pronged question if I could. Just wondering, with PJM and the auction collar now approved, just how you think that sets up new build incentives PJM next few years here.

Wanted to contrast this backdrop in PJM versus Texas and wondering if you could expand a bit more, I guess, on the Texas backdrop as you see it in data center proliferation there and the state desires to be a big player. Just wondering if you could give us your thoughts on the contrast there.

Jim Burke (President and CEO)

Sure. Look, the clear that occurred last July in PJM was a good clear relative to the three previous clears. We talked about that, that that's a material increase in the capacity clear. It actually garnered attention of a number of policymakers. Again, a lot of that is relative to the prior clears that had occurred that were quite low and drove a lot of retirements in PJM.

One thing that I think is interesting is that one clear, I think, has actually provided some incentive for this reliability resource initiative, which garnered a lot of attention in PJM where 27 GW applied and about 9,000 MW or 9 GW awarded. That is really on the basis of we have one clear that was in the 270 range, and now we have a cap and a floor, which means the boom-bust cycle of the auction is a little bit more stabilized. I think that sends a good investment signal. You might recall over the last 10 years, 30 GW of gas fired generation have been built in PJM through the capacity auction. I think, if anything, price signals matter. Price signals have shown in PJM that when they are appropriate, people bring investment. When they are too low, people retire assets. I think that is normal.

I also think price signals matter on the energy side, not just the capacity side. That price signal for energy can also encourage customers to conserve and effectively help the grid manage supply demand. I think PJM with the cap and the floor for just the next two auctions is a good bridge to what we hope the quadrennial review and what I think could happen in the future is the continued signals that PJM wants to send to build new resources, knowing that there is still a lot of coal that is going to retire in PJM. In ERCOT, I would say there has not been the same level of commitment to sending the price signal for dispatchable resources. There have been attempts for market reforms. Most of those have been put on hold.

There's still a little bit of work to do on one of the key ancillaries, the DRRS ancillary, this dispatchable reliability reserve service. Those details aren't known yet. I think from the standpoint of Texas is open for business, Texas wants people to invest. What we've seen is that the batteries and the solar have been viewed as the better way to invest in generation in Texas. The question, I think, will be going forward is if this data center load comes, it's our view that the first almost 8 GW-10 GW of that can actually be served with the existing capacity already in ERCOT. I think that's one of the key things that policymakers are looking at is if we can bring the 10 GW, which is really what our estimate of ERCOT might add in data center load between now and 2030.

If we can bring that and utilize existing resources, then all we need to worry about is the super peak hours. There has been legislation in Texas offered to help customers use their backup generation in a way that would be helpful from a grid reliability perspective. I think that's a key. I think that is a key to an unlock. The goal from an affordability standpoint for all these grids across the country ought to be that if capital investments have already been made in generation and capital investments have already been made in transmission and distribution, as a society, we should fully utilize those resources because that's the lowest cost way to serve all customer classes and not just focus on new build transmission, new build generation, because we have a lot of excess capacity on the grid as we see it.

We have talked about our peaker projects in Texas because we have a good queue position. The economics do not quite pencil for the peakers yet. We are still going through the test process. It is too early to say how that will turn out. I do think the peakers probably make a little bit more sense than the combined cycle build at today's investment signals. Obviously, it is a competitive market, so people can bring whatever resources they think make sense. That is how I would describe the policy environment at this point. I will turn it over to Stacey to see if she has anything she would like to add on color for those two markets.

Stacey Doré (Chief Strategy and Sustainability Officer and EVP of Public Affairs)

Yeah, sure. I think Jim captured the key points.

I agree that Texas is focused on figuring out how to be a leader in that data center effort and attract the load growth that can come with those customers. I think what they are grappling with, as Jim references, is really how to solve the very few hours of the year that we may not have excess capacity. I am really pleased to see the efforts of the legislature to come up with bills that address that by giving, for example, customers that bring backup generation some assurance that they can run that backup generation during grid emergencies and not be subject to environmental enforcement. I am pleased to see the efforts of the legislature on things like HB 14, where they were trying to give support for the development of new nuclear.

I think there are some good efforts underway to ensure that Texas can continue to be a leader in these areas. With respect to PJM, we're very pleased with efforts in some of our states like Ohio to recognize the value of dispatchable generation and to ensure that generators have the smoothest path possible to getting approval for new dispatchable generation and other types of projects that can bring megawatts to the grid. I think we see a lot of efforts to recognize the value of reliability and dispatchable generation. We continue to be highly engaged in those efforts.

Jim Burke (President and CEO)

Thank you, Stacey.

Jeremy Tonet (Research Analyst and Managing Director)

Got it. Thank you for all the details.

Operator (participant)

Oh, Jeremy, go ahead, Mr. Tonet.

Jeremy Tonet (Research Analyst and Managing Director)

Sorry. Just one more question. Just wondering if when you're looking to sign new contracts for data centers, does that ever interfere with the ability to conduct buybacks?

Was just wondering about the pace of buybacks amidst this volatility.

Kris Moldovan (EVP and CFO)

Yeah. Thanks, Jeremy. I would say that our buyback program is it would not affect that. Our program is generally consistent. We expect to have a consistent bid in the market pursuant to a 10b5-1. The main goal is to maintain a consistent daily bid in the market. We have been doing that pursuant to that 10b5-1 over time. You can see that as you look back when we negotiated and announced the Energy Harbor deal or the purchase of the minority interest. We have never paused the share buyback program since we started it in 2021. We do not expect to. We keep it going through open or closed windows and in periods where we might have material nonpublic information.

Jeremy Tonet (Research Analyst and Managing Director)

Very helpful. Thank you.

Operator (participant)

Our next question comes from David Arcaro from Morgan Stanley. Please go ahead with your question.

David Arcaro (Executive Director of Equity Research)

Hey, thanks so much. Good morning.

Jim Burke (President and CEO)

Hey, David. Good morning.

David Arcaro (Executive Director of Equity Research)

Hey, Jim. I was wondering if you could maybe elaborate on your outlook for market prices, I guess, as you talk about better utilizing your existing fleet, demand response, maybe backup generation, and using that for the market. What does that mean for the outlook for power prices?

Jim Burke (President and CEO)

Sure, David. It's one of the things that I think will help make sure the grid stays reliable is that these price signals, again, not just capacity, but energy, drive behavior both on the supply side and the demand side. I think the key is that people recognize that signals do need to actually be sent. There's always a policy desire to have low prices. That's important from an affordability standpoint.

You have to have signals every now and again to ensure reliability. I think from our view, the forward curves still do not assume the level of buildout from a data center standpoint that we think the CapEx budgets for the hyperscalers suggest. I think that's just a reluctance, I think, to, one, put those kind of bids in there at that point because it takes time to materialize. I mean, we're a year past the announcement of the first large colocation deal, and it has not made it all the way through the approval process at FERC. Things just take longer. If the CapEx budgets play out the way we see them playing out, you're going to see the demand side build and forecast that I do not think are reflective.

Even when we say 3%-5% of a compound growth rate in ERCOT, we don't see that in the forward curves, let alone the projections that we've seen come from the ISOs in various markets. I think demand response is important, but demand response should be coming in at the price signal that it should come in at, which is usually higher than where real-time prices have been settling for the last year to two years. I view those two things as complementary, David. I think backup generation is still an expensive asset to use, but it should be used when the grid needs it. That's usually in a higher price environment. That's how markets should work. I think that is a well-functioning marketplace.

I think when you try to do it through mandates or alerts, I do not think you are going to get the same customer behavior because customers do respond to economic incentives. That is the beauty, I think, of competitive markets, as it does send that signal. I just do not think those signals are out there fully yet in the forward curves, is our view.

David Arcaro (Executive Director of Equity Research)

Yeah. Absolutely. No, thank you for that. Then separately, I was wondering, Jim, how much time are you spending in D.C. recently, just given all the political gyrations going on? What issues are you focused on most at the federal level? Curious whether you might be kind of making efforts to differentiate the IPP space on issues where you might have a different view from, say, the traditional regulated utility on federal issues here.

Jim Burke (President and CEO)

Yeah.

I do spend quite a bit of time in D.C. I think the idea that this administration has been looking to sort of unleash the American Energy Dominance Council and look at how do we treat energy as a strategic resource. We have always talked about reliability, affordability, sustainability in that order. That is how we've messaged for years. I think that is very consistent with the executive orders that have come out so far. What we're trying to do is look at how do the executive orders potentially then manifest themselves and whatever rules or laws that would spawn from those that could affect markets. It's my belief that the best design ultimately for this is to have markets basically do resource allocation in most categories, including electricity.

It's not our philosophy that any of us are going to guess exactly what the winning technology is going to be, what is the right level of investment. I'm concerned that if people get approval to spend a lot of money and for some reason more is spent in infrastructure than is needed on a given timeframe, customers could bear that. Competitive markets put that risk on shareholders. I think that's where that risk belongs. Our message and the message of, I think, the competitive space is that let us do the best we can to meet customer needs and put shareholder capital at risk. That's a different model than where the regulated market design is today. I do think that we're going to need transmission and distribution to be built.

As I have mentioned in my prepared remarks, there is a lot of capacity on the existing system. If we can find the best places to unlock where that excess capacity is, that is a winner for everybody. Price signals will help do that, whether that is congestion price signals, capacity price signals, or wholesale energy price signals. I am spending a lot of time educating about the markets because this is a very fragmented industry developed over 100 years into a highly fragmented space that I think is hard to create a one-size-fits-all policy. Since more than half the country's megawatt hours and wholesale are competitive, we have a huge playing field.

I just want to make sure that we're able to tap that huge playing field and that if we do this right, I think the competitive markets should get more than their fair share of this low-growth opportunity. I think Texas has a chance to get more than its fair share of this low-growth opportunity coming from data centers.

David Arcaro (Executive Director of Equity Research)

Okay. Great. Yeah. Thank you for all the color. Appreciate it.

Jim Burke (President and CEO)

Thank you, David.

Operator (participant)

Our next question comes from Steve Fleishman from Wolfe Research. Please go ahead with your question.

Steven Fleishman (Managing Director and Senior Analyst)

Yeah. Hi, good morning. For what it's worth, I think your under-promise, over-deliver way of doing things is the best anyway. So appreciate that.

I guess just first on the data center kind of demand and maybe just to try to get a little better color on that, Jim, how would you characterize your views on that today versus maybe the year-end call a couple of months ago? Because it seems like some better conviction and on-demand pricing tone, but just maybe characterize it relative to where your head was a couple of months ago on the year-end call.

Jim Burke (President and CEO)

Yeah. Perfect, Steve. Thank you. I actually have increasing confidence over the last couple of months and frankly, even over the last year. I think what's happened is folks, again, shareholder capital is being used by these hyperscalers, which they don't take lightly, and they are spending it, and they're recommitting, and they're increasing their expected levels of investment.

That gives us increasing confidence that there is going to be opportunity, and then it's just where does that opportunity manifest itself. To me, it all starts with a customer, and they are the targeted customer base that everybody is seeking to partner with. In the last couple of months, of course, even if you go back earlier in the year to DeepSeek, I mean, there's just been this whole level of uncertainty. I think the commitment through it, which we've kind of been down and back up again as a sector, I think is highly encouraging. Having said that, we are talking about nearly $2 trillion of CapEx from these top four companies, plus other capital others will spend. They need to be good stewards of that capital. I think the business model of AI is still proving itself out.

I think that folks have conviction, but everyone is looking for the conviction around the revenue models and the ultimate sustainability of those CapEx levels. Given the level of interest and the discussions we're having and the stage at which our discussions are, we see increasing confidence from the customer base out there. I do think, Steve, that it's in a better place than probably where we were just a couple of months ago.

Steven Fleishman (Managing Director and Senior Analyst)

Yeah. Okay. Two other questions. First, just on the given the range that you're talking about for 2026, Chris, could you give us a sense of cash available beyond the kind of current buyback commitment just because you would think there'd be more room on your credit metrics at that kind of EBITDA level on allocated cash? Yeah. Yeah.

Kris Moldovan (EVP and CFO)

Steve, as you say, the cash generation power of the business continues to support a lot of optionality. If you—and we've said this, we've talked about this before. We'll stick with the lower projections. Even if you just look at our public, what's out there publicly, if you assume $5.8 billion of EBITDA in 2025 and only $6 billion in 2026, and you apply the 55%-60% conversion rate that we talk about, I mean, you can get there through all of our commitments to about $1.5 billion of cash that we have not yet allocated to anything for 2025 and 2026. As you increase that number from 2026 and you continue to put the 55%-60% conversion ratio, you could see that number getting into the $2 billion range of cash that we still have to allocate.

Steven Fleishman (Managing Director and Senior Analyst)

Okay.

Last question, just with the Trump administration executive order on coal, any kind of updated thoughts on your coal retirement plans? Could any of them—I know there are other rules and commitments related to those, but just could you give us any color on that?

Jim Burke (President and CEO)

Yes, Steve. I think the most immediate impact that we see is the potential for some of the MATS, the Mercury Compliance, to be pushed out a few years, which would really affect Martin Lake and Oak Grove, which are two large Texas sites that do not have retirement dates. As you know, the three sites in Illinois and the one in Ohio, those retirements are driven by other state and federal environmental rules, which are currently still in place. Unless there is a change there, the executive orders in and of themselves do not change that timeline.

We are looking at some potentially being coal-to-gas conversions. There is also a notion in the executive orders about they want to see some equivalent megawatt hour outputs if you do that conversion. There is a lot going on there, Steve, and I think it is pretty dynamic. Certainly, the emphasis on reliable resources sticking around longer is something that we have messaged for quite some time. The framework needs to acknowledge there still are existing laws that we have to abide by, and we will see how that develops.

Steven Fleishman (Managing Director and Senior Analyst)

Okay. Thank you.

Operator (participant)

Our next question comes from Durgesh Chopra from Evercore ISI. Please go ahead with your question.

Durgesh Chopra (Managing Director)

Hey, team. Good morning. Thanks for giving me time. Hey, Jim, you—hey, hey, Jim. Thank you. Thank you, sir. Just your thoughts on Senate Bill 6 as it currently sits?

In the past, you've kind of talked about the low curtailment provision. You've highlighted that. Just trying to gauge that, if it passes in its current form, what does that mean for future data center deals? Is that a bottleneck? Just any thoughts or color you could share there, please.

Jim Burke (President and CEO)

If it passes in its current form, I do think that the concerns that we've expressed before, we still share. I think the large customer coalitions, particularly data center coalitions, are expressing some concerns around things like the disconnect switch. Again, the control that they would like to have of their own assets, they're willing to participate in some of the demand response and the load shifting to manage a reliable grid. I do think there are concerns that the customers have around some of these provisions.

From our perspective, again, co-location, we think, is an advantage to meeting customer needs. Co-location is still getting a separate kind of focus in the version that the Senate passed. Our view is, since the reliability situation is the same between a front-of-the-meter and a co-located load, in fact, we do not have to build out the same level of transmission to serve it. It is actually a very efficient way to serve these large load customers and, again, take advantage of assets already being paid for by customers on the grid. Having said that, if SB 6 moves forward in its current form, folks are innovative. Folks work through it. We will be one of those companies working through it. As I said, I think Texas has a chance to get a disproportionate share of this large load. These are huge economic development opportunities.

I think if Senate Bill 6 is considered in the House and there are some revisions that we can work through in the House, I think it would set Texas up extremely well to win the AI race. As I mentioned in the hearings today, it's too early to predict where that goes. I think our comments from previous calls still are relevant. I think there's time to work through some of the potential changes.

Durgesh Chopra (Managing Director)

Got it, Jim. Thank you. That's very clear. Just really quickly, if I may, pivoting to PJM and FERC, are you in settlement discussions currently with the T&D operators there in that region? Where does that sit? As we think about Texas here, Senate Bill 6 getting resolved in June, what do you think is the timeline for getting some clarity there in the PJM area in particular?

Thank you.

Jim Burke (President and CEO)

Sure. We actually did not—it's just interesting—but we didn't file sort of seeking settlement discussions. We thought the record was ample at FERC, and the back and forth between PJM and FERC set up well, we thought, for a decision to be made. Now, we're always willing and able to get into any settlement discussions, but this has been a long time coming. I think everyone's ready to move forward. I think that's the most important thing. I think we'd still expect that whether there's settlement discussions or not, we could see clarity coming in the next, I think, couple, three months is possible. If the settlement discussions drag it out from there, I'd say kind of shame on all of us as an industry because, again, we have to meet customer needs, and these customers are moving forward.

We should be able to get there is our view. Senate Bill 6, as you know, would be wrapped up hopefully by the end of the session here in Texas in that first week of June. I think over the course of this summer, I think we have a chance for both markets to potentially have more clarity than they have at the moment. I'll turn it over to Stacey, see if there's anything she'd like to add.

Stacey Doré (Chief Strategy and Sustainability Officer and EVP of Public Affairs)

Yeah. The only thing I'd add on the FERC co-location docket is, as Jim said, we did not participate in the request for settlement discussions, but we did provide some very specific solutions to FERC that we think they could simply adopt on the record and move us forward. That's what we're interested in. The speed of resolution.

It's notable that the transmission owners, they filed, and they did not file in support of settlement discussions either. They've said they're open to them, as we all would be, if settlement discussions are ordered. Their position is that no changes are needed to the tariff. I think FERC has a clear record before it of the parties' various positions, including PJM. We would really urge FERC to make a decision on the very full and complete record before it.

Jim Burke (President and CEO)

I'd just add, Durgesh, that FERC did acknowledge our filing that co-location is specifically allowed in the PJM marketplace. We just need to work out the tariff issues. I think that was sort of lost in the process with the back and forth. Co-location is a viable model. We just have to get the details ironed out.

Durgesh Chopra (Managing Director)

Yeah. No, that was clear.

They're clearly supportive of co-location. That's good. Stacey, is there a timeline when FERC needs to rule on this thing by as it currently—I mean, there are so many deadlines here. I'm sorry if I'm forgetting. Just what's the next milestone for the FERC to kind of take action here?

Stacey Doré (Chief Strategy and Sustainability Officer and EVP of Public Affairs)

Yeah. I think, Durgesh, that FERC has a lot of flexibility in terms of when it rules. I think what we would point to is FERC itself saying that it understands the need for urgency here and that it would hope to rule within a couple of months of completion of the filings. If it does not go down the settlement path, then I think we could see a result or ruling this summer.

If it does order settlement, that probably does take an additional 60 days-90 days before FERC comes back in and makes a decision as the result of any settlement discussion. That's why our preference is for FERC to rule on the record before it. If they decide to order settlement discussions, we'll, of course, participate and try to reach the best solution that we can. I think if they were to order settlement discussions, you'd see a result more like at the earliest late summer or maybe fall.

Durgesh Chopra (Managing Director)

Thank you so much. Really appreciate the time.

Jim Burke (President and CEO)

Thank you, Durgesh.

Operator (participant)

Ladies and gentlemen, with that, we'll conclude today's Q&A session. I'd like to turn the floor back over to Jim Burke for closing remarks.

Jim Burke (President and CEO)

Yeah. Thanks, Jamie. I want to thank everybody for joining.

As we covered, 2025 is off to a fast start. I really want to thank our team for their continued execution and service to our customers and our communities. It's an exciting time for the industry, and it is certainly for Vistra, and we have a lot to do. We look forward to the next update. Thanks for joining, and have a great day.

Operator (participant)

Ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for attending. You may now disconnect your lines.