Vistra - Q4 2022

Transcript

Operator (participant)

Good morning. Welcome to Vistra's fourth quarter and full year results conference call. All participants will be in listen only mode. Should you need assistance, please signal conference business by pressing star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the call over to Meagan Horn, Vice President of Investor Relations. Please go ahead.

Meagan Horn (VP of Investor Relations)

Thank you. Good morning, everyone, and welcome to Vistra's Investor Webcast discussing fourth quarter and full year 2022 results, which is being broadcast live from the investor relations section of our website at www.vistracorp.com. Also available on our website are copies of today's investor presentation, the related press release and recent annual and quarterly reports on forms 10-K and 10-Q. Joining me for today's call are Jim Burke, our President and Chief Executive Officer, and Kris Moldovan, our Executive Vice President and Chief Financial Officer. We have a few additional senior executives present to address questions during the second part of today's call as necessary. Before we begin our presentation, I would like to note that today's press release, slide presentation and discussions on this call all include certain non-GAAP financial measures.

Reconciliations to the most directly comparable GAAP measures are provided in the press release and in the appendix to the investor presentation available in the investor relations section of the company's website. Also, today's discussion will contain 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. Thank you, and I'll now turn the call over to our President and CEO, Jim Burke.

Jim Burke (President and CEO)

Thank you, Meagan. Good morning. I'm pleased to be here with you all to discuss our fourth quarter and full year 2022 results, which we believe is a positive and straightforward message. Beginning on slide five, as we've reiterated over these past quarters, we remain vigilant and focused on our strategic priorities throughout the year, and the 2022 results demonstrate that focus and set us up well for the future. We believe that operating an integrated business model provides the stability and consistency that our customers and our shareholders expect. Our operations throughout extreme weather events this past year, we believe have proved this thesis. You recall that we initiated guidance for 2022 for adjusted EBITDA from ongoing operations with a midpoint of $3.06 billion.

Despite extreme volatility in commodities and numerous weather events, including Winter Storm Elliott at the end of December, we ended the year exceeding this midpoint by $55 million. Importantly, we delivered strong adjusted free cash flows along with these higher earnings, delivering a final adjusted free cash flow before growth of $129 million above the midpoint of the narrow guidance range we introduced in the third quarter of 2022. Our integrated portfolio also supported our comprehensive hedging strategy we executed throughout 2022 with the goal of locking in out year earnings potential in years 2023-2025. Kris will speak to this in more detail later, we concluded the year at approximately 73% hedged across 2023-2025 across all markets.

This hedging percentage and the current forward curves continue to support the estimated $3.5 billion-$3.7 billion midpoint of adjusted EBITDA earnings potentials in those years. With our 2023 adjusted EBITDA guidance midpoint set at $3.7 billion, we look forward to executing squarely on these opportunities. We continue to see Vistra generate significant cash flows and our strategic priorities remain focused on returning meaningful value to our shareholders. Kris will provide a detailed update on our capital allocation plan, but I will note that we returned approximately $2.25 billion to shareholders via our share repurchase program from November 2021 through December 2022, approximately $250 million more than we had originally planned.

We paid out $300 million in common stock dividends in 2022 as planned, with each quarter's dividend per share growing as the share count was reduced. The fourth quarter dividend paid in December 2022 represented a 29% increase over the fourth quarter dividend paid in December 2021. We expect shareholders to continue to experience increases in dividend returns into 2023 as we expect to continue to pay out an aggregate $300 million in annual dividends to a decreasing number of shares of Vistra common stock. We remain vigilant this year in maintaining a strong balance sheet. Our debt balance did grow to provide the liquidity we needed to support our comprehensive hedging strategy, we achieved our goal of a sub 3x leverage after margin deposits are considered at year-end.

We held our debt capacity steady at year-end as we saw less return of margin than originally expected. We have seen the margin deposits start to return to us in the first quarter of 2023. We continue to actively manage our liquidity and focus on opportunistic timing and structures to further optimize our balance sheet with the goal to achieve our long-term sub 3x debt leverage ratio target on a pre-margin deposit basis over time. We are proud of the results we saw in our Vistra Zero business this past year. We added over 400 MW of renewable and storage capacity in 2022. We expect to add another 350 MW of storage capacity in California at our Moss Landing phase III facility in mid-2023.

We also retired approximately 2,900 MW of Ohio and Illinois coal facilities at our Zimmer, Joppa, and Edwards plants. We appreciate the dedication of our teams who worked at these sites for decades, powering their communities and always with a sharp focus on safety. We are pleased to be able to redevelop these sites in the future Vistra Zero energy facilities. Notably, the Joppa and Edwards sites are part of our Illinois Coal to Solar program, where we are transitioning numerous sites into solar and or storage facilities. Turning to slide six, we had a strong 2022, ending the year with $3.115 billion of ongoing operations adjusted EBITDA. This is $55 million above the $3.06 billion midpoint we set in the third quarter of 2021.

We achieved nearly $2.4 billion of adjusted free cash flow before growth, $129 million higher than the narrowed guidance midpoint we set in the third quarter of 2022. Our financial achievements were underscored by the strong performance of our retail and generation teams. Our flagship retail brand, TXU Energy, continues to execute well, growing Texas residential customers nearly 2% year-over-year, while maintaining its PUCT five-star rating. Our generation team has proven its ability to perform in extreme weather conditions in both the summer and winter months, optimizing the maintenance of our fleet to stand ready to perform when needed. The team's commitment is illustrated by the 95.4% commercial availability achieved fleet-wide this past year. Safety remains our top priority. The culture of continuous improvement is exemplified in our Vistra Best Defended Safety program.

I'm pleased with our performance in 2022. Through continuous improvement, we see opportunities to perform operationally at an even higher level in 2023. We now look forward to delivering on the financial guidance we set forth last quarter for 2023. We are reaffirming our $3.4 billion-$4 billion adjusted EBITDA from ongoing operations range for 2023, as well as reaffirming our $1.75 billion-$2.35 billion adjusted free cash flow before growth guidance range. It is early in the year. Notably, despite the volatility in commodity prices we've experienced lately, we continue to have the line of sight to achieve the expectations we've set for ourselves, given the potential value our comprehensive hedging program has locked in for 2023.

I will now hand the call over to Kris to discuss the 2022 fourth quarter and annual performance in more detail.

Kris Moldovan (EVP and CFO)

Thank you, Jim. Starting on slide eight, Vistra delivered solid fourth quarter results in 2022, with ongoing operations adjusted EBITDA of approximately $771 million, including $359 million from retail and $412 million from generation. For the year, Vistra delivered $3.115 billion of adjusted EBITDA from ongoing operations, including $923 million from retail and $2.192 billion from generation. Retail's results exceeded the midpoint of its component of our 2022 adjusted EBITDA from ongoing operations guidance of $700 million by $223 million. Our favorable results were primarily driven by strong residential margins, churn management and customer counts in ERCOT, offset partially by PJM and New York, New England counts and margins.

Moving now to generation, its adjusted EBITDA from ongoing operations results came in under the midpoint of the generation component of guidance by $168 million, primarily driven by low first quarter prices in ERCOT, coal constraints and higher default service costs, partially offset by higher realized prices and strong commercial availability. Turning now to slide nine, we are providing an update on the progress we've made on our capital allocation plan. As of February 23rd, we have executed approximately $2.45 billion of share repurchases since beginning the program in the fourth quarter of 2021. This includes an incremental $200 million since the end of 2022. We expect to utilize the remaining approximately $800 million of authorization by year-end in 2023.

Notably, as of February 23rd, our outstanding share count had fallen to approximately 381 million shares outstanding, which represents an approximately 21% reduction from the aggregate number of shares that were outstanding just under 16 months ago. Additionally, in 2022, we delivered on our goal to pay $300 million in dividends to our common stockholders each year, and we continue to execute against that goal as we head into 2023. To that end, we recently declared a quarterly dividend to be paid on Vistra's common stock in the amount of $0.1975 per share for approximately $75 million in the aggregate, payable on March 31st, 2023. This is an approximately 16% growth in dividend per share as compared to the dividend paid in the first quarter of 2022.

While returning cash directly to our shareholders remains a priority, we also continue to focus on maintaining a strong balance sheet. Importantly, we continue to target a long-term net leverage ratio, excluding any non-recourse debt at Vistra Zero, of less than three times.

While we did end the year with a higher debt balance than we planned, that higher balance corresponds to the higher levels of adjusted EBITDA opportunities we now have in years 2023 through 2025 as a result of our comprehensive hedging strategy, the execution of which required additional liquidity. Even with the higher debt balance, we achieved a sub-3x leverage on an after-margin deposit basis at year-end. As we have reported in prior quarters, we continue to pursue Vistra Zero growth, and once again, we emphasize that we anticipate financing that growth by using primarily third-party capital, along with the remaining proceeds from the issuance of the $1 billion of green preferred stock and ongoing Vistra Zero free cash flow. Turning to slide 10.

As Jim mentioned earlier, we are reaffirming our guidance for ongoing operations adjusted EBITDA with a $3.7 billion midpoint for 2023. As you can see on slide 10, we are providing an update on the forward power and gas price curves as of February 23rd. While there has been noticeable volatility over the past year, prices are still holding in the range of the April 29th, 2022 curves, which were the basis for the estimated $3.5 billion-$3.7 billion of potential ongoing operations adjusted EBITDA midpoint range for each of years 2024 and 2025. Importantly, as of the end of 2022, we were approximately 73% hedged on an average across all markets for 2023 through 2025, with 2023 approximately 90% hedged and 2024 approximately 76% hedged.

As Jim stated, we are pleased with our 2022 accomplishments, but we are focused on continuous improvement as we deliver on our 2023 priorities. With that operator, we're ready to open the line for questions.

Operator (participant)

We will now begin the question and answer session. To ask a question, press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily for some more questions. Our first question will come from Shahriar Pourreza with Guggenheim Partners. You may now go ahead.

Shahriar Pourreza (Managing Director and Head of North American Power, Energy and Utilities Research)

Hey, good morning, guys.

Jim Burke (President and CEO)

Morning, Shahriar.

Kris Moldovan (EVP and CFO)

Morning, Shahriar.

Shahriar Pourreza (Managing Director and Head of North American Power, Energy and Utilities Research)

Good morning. realize it still kind of weighs off, but I guess given the volatility we've seen in the backdrop, I think it'd be kind of helpful for the street. How should we sort of think about, you know, the EBITDA on 2026 and beyond? The curves would imply a bit of a step down, obviously not as liquid that far out from a hedging perspective. I guess any general sense you can give there like you've been doing for 2025?

Jim Burke (President and CEO)

Sure. Shar, this is Jim.

Shahriar Pourreza (Managing Director and Head of North American Power, Energy and Utilities Research)

Hey, Jim.

Jim Burke (President and CEO)

We knew when we put out three-year kind of views we'd get asked about before. It's not surprising. You know, what's interesting about the curves is that 2026 is actually hanging in there relative to 2025. You see gas obviously still has a little bit of contango in it. We're seeing the heat rates hold up. We're certainly way more open in 2026, and the liquidity there is not obviously the same as the near term. Right now, you know, it's just that we're really open in 2026, Shar, but actually the 2026 on just sort of a view as to where the curves are today, if we could, you know, actually lock that in, we'd feel pretty good about where we would guide for 2026.

It's just that's a long ways off and, you know, it's not as liquid as we'd like it to be to be able to act on it. I'm not even sure from a point of view that we would act on it fully if we could. I think we think that some things might be a little bit overdone on, at least as we see the view now with the mild winter and that putting, you know, that kind of downward pressure we've seen on the complex overall. It's a good question. It's one we talk about every day as we look at how we commercially optimize the business. 2026 is hanging in there.

Shahriar Pourreza (Managing Director and Head of North American Power, Energy and Utilities Research)

Perfect. Then Jim, a lot of different data points flying around this winter on the PCM and ERCOT. I realize it's not yet a completely done deal, but I guess how should we sort of think about potential uplift to your assets if it's passed? Have you guys should have done the math? You know, obviously, you know, is there still a door open to do something else down there? Thanks.

Jim Burke (President and CEO)

Sure. Yeah. The PCM, as you know, is the leading concept at the moment, as a proposal passed by the Public Utility Commission 5-0 in January. A lot of alternatives still being discussed there. The one thing to note about the PCM is it was passed, I would say, more with a conceptual framework. The details are still to be worked out. Things like what is the reliability standard that the state is actually gonna procure resources to ensure reliability? What is the Net CONE? What's the slope of the demand curve? There's just a lot of things to work out. This idea of trying to calculate its value, I think there's really a couple concepts we would wanna make sure when we get through the stakeholder process. One is it material enough to attract investment?

That's one of the ideas that, you know, is the concept behind doing anything with market reform. Is it enough to retain the generation that's currently there? To the extent that we end up with a PCM that just does not have a lot of value in it could be a concept and it could be implemented, but it may not do much attracting of investment or retaining of assets. I think you'll hear in the debate down there that's happening in Austin, there are many stakeholders that do not believe that we have to do significant market reform.

We're concerned about market reform from the standpoint that the state of Texas, from a reliability standpoint, will need to actually incentivize new generation while retaining the existing because we are such a strong economy and we're seeing the load growth here, in markets, unlike anywhere else in the country. I think, Shar, it's too early to say what the PCM is going to provide. Obviously, we believe in the dispatchable resource emphasis around PCM. We think that's core to grid reliability, but there's too many things to still work out in the stakeholder process if this is the leading concept coming out of the legislative session.

Shahriar Pourreza (Managing Director and Head of North American Power, Energy and Utilities Research)

Perfect. Jim, one last one for me, I promise. Just on the inorganic side, I mean, we've seen nuclear assets in the east come to market in recent months. One of your peers obviously has been very vocal that they couldn't bridge the bid ask there. Is this something you've considered or would you consider in the future? Any thoughts there would be appreciated. Thank you so much.

Jim Burke (President and CEO)

Yeah, sure, Shar. You know, we're obviously not gonna comment on any specific aspect of M&A, but you've seen us in the past. If they can leverage our core capabilities, it'd be a consideration. We've done it with Dynegy, Crius, Ambit. I view it as, I think we're good at three things. You know, I think we're very good at operating plants, serving customers, and commercially integrating these two activities, which as you know, operate in a volatile commodity market. I think we would look at things, and we have been around processes, and that's part of just our core strategy of looking at ways that we can maximize value for shareholders. I would put a caveat. Our investors have been very clear that they do like our return of capital strategy.

We try to be very consistent with that approach, as Kris laid out, and I think that still remains our priority. Anything that we're gonna consider in that front, I believe needs to fit within that framework. That may or may not be possible, but we have a priority around returning capital to shareholders. If we can do that and leverage our core capabilities, we'd be interested.

Shahriar Pourreza (Managing Director and Head of North American Power, Energy and Utilities Research)

Terrific, guys. Congrats on the execution and, much appreciated.

Jim Burke (President and CEO)

Thank you, Shar.

Operator (participant)

Our next question will come from David Arcaro with Morgan Stanley. You may now go ahead.

David Arcaro (Executive Director and Lead Analyst of Utilities)

Oh, hey, good morning. Thanks so much for taking my question.

Jim Burke (President and CEO)

Hey, David.

David Arcaro (Executive Director and Lead Analyst of Utilities)

I was wondering, let's see. Could you speak just a little bit more to the Winter Storm Elliott event? Curious if you could just elaborate a bit on how your generation facilities operated, if there were any penalties that you might have experienced. Also on the retail side of things, how did you manage the unexpectedly strong load and get through that weather event?

Jim Burke (President and CEO)

Sure. It's a good question. Obviously we ended the year with a really strong, you know, weather system that affected not just one market, but multiple markets. You know, when we go into these events, some of this has been refined since Uri, we carry more length into these events because we've seen that particularly in winter events, you can actually have some fuel disruptions, not just asset performance challenges. We try to take that into consideration. We hold back length on the generation side, we expect that retail load, particularly in extremely cold weather, can swing even more than what we would normally have expected on a winter day. We expect those two to offset each other. In Winter Storm Elliott, that's what happened.

We were able to run our ERCOT fleet, and our fleet performed really well and in PJM, and that extra length from an energy perspective covered the extra swing that we experienced on the retail side. On the penalty specifically, because PJM has yet another aspect to it with the penalties, you know, you could be in a bonus or a penalty situation. Our view at this point, although we do not have full information yet from PJM, is that we're in a net bonus situation, not by a lot, but we are in a net bonus situation. We haircut bonus expectations because of some of the default risk that others are concerned about.

This actual process could take 8 or 9 months to receive payments for people that are in a penalty, and they need to pay in order for us to receive a bonus. We've assumed for this purpose that we basically have a break even penalty bonus situation in PJM with that haircut on the bonuses. We came out of the storm where we expected to be. What we like about our business is we can handle these events. What you tend to see in the aftermath of these events is some more volatility potentially in the forward curve. We try to hedge into that, and that's how we're able to provide the guidance that we provide.

We don't go into any one event looking for it to be a significantly positive or negative event because we're on both sides, the gen and the retail, and we try to come out of that even. We had a good performance in Elliott.

David Arcaro (Executive Director and Lead Analyst of Utilities)

Got it. That's great to hear. Obviously a very tough event for a lot of generators. I was curious if you could just give an update on the margin deposits so far this year. Is there a level that you could give us as to what that currently stands at? I think you made mention that it was kind of coming back in slower than expected. Curious if that's started to improve.

Kris Moldovan (EVP and CFO)

This is Kris. As of the end of the fourth quarter, we talked about we had expected to start seeing margin deposits come back as we settled our settled some of those hedges in the fourth quarter. With the volatility that continued on in the fourth quarter, especially in December, we actually saw margin deposits go up from September 30th through the end of the year.

Over the past month and a half, prices and volatility have settled a little bit, and we are seeing some return of cash. We've also settled some additional hedges. We are seeing cash come back in, and we do expect more cash to come in the near term and over the course of the year. Over the course of the year, we would expect a significant portion of the over $3 billion of cash that we had posted to come back.

David Arcaro (Executive Director and Lead Analyst of Utilities)

Okay, that's helpful. Thanks so much.

Jim Burke (President and CEO)

Thank you, David.

Operator (participant)

Our next question will come from Durgesh Chopra with Evercore ISI. You may now go ahead.

Durgesh Chopra (Managing Director and Head of Power and Utilities Research)

Hey, team. Good morning. Thanks for taking my questions. Hey, just Jim. Good morning, Jim. Hey, Jim, can we get your updated thoughts on capital allocation, share buybacks, et cetera. On the Q2 call last year, you know, you announced $1.25 billion in additional share buybacks that you're gonna complete this year. Just can we get your latest thoughts there? When should we From a timing perspective, when should us and investors be looking for an update in terms of your forward-looking share buyback plans?

Kris Moldovan (EVP and CFO)

Durgesh, this is Kris. I appreciate the question. When we did upsize the program in the middle of the year last year, that was in part as we were seeing increased opportunity for 2023, that we went ahead and added that increase into the middle of last year. We added a $250 million. As we disclosed this morning, we ended up completing the first $2.25 billion approximately of the program by the end of the year. As you know, we have a $3.25 upsize program that we said it would be by the end of this year. That left a $1 billion for 2023.

We had said that we thought share buybacks would be at least $1 billion starting in 2023 through 2026. We have also disclosed today that we have already, through February 23rd, executed another approximately $200 million. That would leave approximately $800 million for the final 10 months of the year, which is consistent with going into the year how we thought about it. We will, as the same as last year, any changes to capital allocation, including share buybacks, we wouldn't likely consider those and talk to our board about those until after we get through the important winter and summer months.

I'm not predicting any changes or updates as we have last year, but if there were to be any, that would probably come after we've gotten through a couple of the summer months.

Durgesh Chopra (Managing Director and Head of Power and Utilities Research)

Got it. That back half of the year. I appreciate that, and thank you for going through all that stuff. My next question is on the nuclear fuel. I see sort of you kind of reiterated your nuclear fuel expense projections for 2023. You know, some of your peers are showing a pretty sizable ramp-up in nuclear fuel costs looking out in the future. Can you comment on that, please?

Jim Burke (President and CEO)

Sure. It's a good question. It's one that we're staying close to. We forward buy nuclear fuel, as you would expect. We buy the various components that allow us to have the fuel assemblies for our reloads. On a historical basis, we've seen it be somewhere around $5 a megawatt hour is a fairly good estimate if you were to take all the capital costs and kind of spread them out over the megawatt hours of production. The team has been forward buying, that's why you saw a bigger CapEx number in 2022. We have a bigger CapEx number in 2023. Our best view of this is as you spread that out over the time period in the 2025, 2026, that fuel cost is working its way up from $5 to just sub $6.

If you put that on a, on a Comanche Peak size unit, you know, $1 is about a $20 million per year impact. It's not jumping to $6, just kinda migrating from a $5 cost on average historically to hedged. It's looking like it's gonna be sub $6, but heading towards $6 around that 2026 timeframe. That gives you a sense that, you know, it is definitely on the upward trend where there'll be some domestic opportunities for supply down the road, that remains to be seen. I think the team's done a very nice job of getting ahead of the nuclear fuel cost escalation and sourcing. That gives you a kind of a range of magnitude as to how we're managing through it.

Durgesh Chopra (Managing Director and Head of Power and Utilities Research)

Perfect. Super helpful, Jim. Thanks so much, guys. Appreciate it.

Jim Burke (President and CEO)

Thank you.

Operator (participant)

Due to the limited time, we only have time for one more question. That question will come from Angie Storozynski with Seaport Research Partners. You may now go ahead.

Angie Storozynski (Managing Director and Senior Equity Research Analyst)

Thank you. Maybe a little bit more about Vistra Zero. Thank you for the additional slides. I'm just wondering, I mean, it doesn't seem like the market is giving you any credit for that business. You know, if you could comment both on how you could extract some value from this business, and two, what's the long term, you know, view on the profitability of this business? Or maybe, you know, as a percentage of total EBITDA, what do you think is gonna come from that business? You know, again, any way to extract value?

Jim Burke (President and CEO)

Sure. Angie, thank you. That's a very good question. Vistra Zero has been off to in our view, a really strong start on the projects that we've got line of sight to. Right now, you know, we did deliver the 3 that were in Texas in 2022, actually on time, on budget. Our focus right now is Moss 350, which will come online for this summer, which adds to the already large battery assembly of 400 megawatts will become 750. Then we have nine coal to solar projects in Illinois that we're focused on the balance of this year and in 2024 to bring those on in late 2024 and 2025.

What we've done in you put all that together, Angie, you're still looking at about a $200 million-$250 million kind of EBITDA business. On the basis of a 3.7, it's still not, you know, a sizable share, but it's a meaningful share. What we've done in Texas, as you know, is we slowed down some of the merchant solar development because we've seen those returns be challenged, based on not only EPC costs and panel costs, but solar is already starting to cannibalize solar in terms of price realization. We would want to do additional solar under the right circumstances, which would likely be if it were contracted. We slowed our process down at this point because we wanna make sure that those projects make sense for us.

As we stated since we announced Vistra Zero, we hold these options ourselves. They're not on a time constraint that if we don't exercise them, we lose them. Some of these sites, I think, could end up being more valuable through time as we see these interconnect queues are really hard to get through all over the country. We own dozens and dozens of interconnect queues that we're not utilizing right now that we'd like to. It is absolutely an option for us. I think you'll see that, we will continue to grow this in a very deliberate way. I think we've also tried to show discipline, that we did not give you a headline megawatt number and just go pursue it regardless of returns.

I think we've been very disciplined about the approach and the market opportunity, clearly with the Inflation Reduction Act, is improving some of these returns, even on the projects that we've already announced and are executing, like Moss 350 and Coal to Solar. I feel very good about our portfolio that we're executing on, but there is still uncertainty about the back half of the Vistra Zero portfolio and whether they can generate adequate returns. If they do, we'll pursue it. If they don't, then we're gonna be disciplined and we'll wait because we still own the sites and have the options.

Angie Storozynski (Managing Director and Senior Equity Research Analyst)

Okay. You know, there were questions about Comanche Peak. I'm looking at the size of your generation in Texas and under your retail book. I mean, you know, how core of an asset is it to serve your retail load? Again, just judging by your multiple and, you know, comparable comps for nuclear plants, it seems like it would be an easy way to generate value by selling the assets. I'm just wondering how core of an asset is it for your generation retail strategy?

Jim Burke (President and CEO)

You know, dispatchable assets are core to serving retail load. In fact, I think we had seen, and this is what Steve Muscato and his commercial team focus on every day is, can you serve retail loads successfully simply with renewables and batteries? It's a really tough effort, you know, to manage the risk around that. Dispatchable assets clearly are required to be successful with risk management on retail. Comanche Peak itself, we talked about with the anchor tenant in Vistra Zero when we first announced Vistra Zero. Obviously, it's got additional support from the production tax credit. We just obviously put in for the relicensing of it, and it operates at one of the lowest cost structures, if not the lowest cost structure, in the industry.

We do occasionally get inbounds from people that ask that question, Angie. We are obviously interested in long-term value creation, but we like the Comanche Peak asset. It fits within our portfolio in Texas, given our sizable retail presence. Obviously, nuclear has been given a new level of interest given the Inflation Reduction Act. You know, we will always engage ideas. In the core competencies of we run plants well, we serve customers well, and we commercially risk manage the two, I think it's a core asset.

Angie Storozynski (Managing Director and Senior Equity Research Analyst)

Okay. Thank you.

Jim Burke (President and CEO)

Thank you, Angie.

Operator (participant)

This concludes our question and answer session. I would now like to turn the conference over to Jim Burke for any closing remarks.

Jim Burke (President and CEO)

I just wanna thank everybody for joining. I wanna thank the hardworking team at Vistra for a strong 2022, and we've turned our attention and we're focused on delivering in 2023. Hope everybody has a great morning. Look forward to talking to you again soon.

Operator (participant)

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.