Energy Harbor deal, stronger Texas retail results boost Vistra quarterly EBITDA

Vistra on Aug. 8 reported lower second-quarter income than Q2 2023 but substantially stronger EBITDA, largely related to its acquisition of Energy Harbor, an Ohio nuclear generation and retail energy supplier, and strong retail margins in Texas.

Vistra reported second-quarter GAAP earnings of $318 million, or 92.4 cents/share of common stock, in the second quarter, compared with Q2 2023's $439 million, or about $1.26/share.

Net income fell mainly because of "higher depreciation and interest expense partially offset by operating income generated from the acquisition of Energy Harbor," Vistra said.

Adjusted EBITDA totaled almost $1.4 billion in the second quarter, compared with Q2 2023's less than $1.1 billion.

"Ongoing operations adjusted EBITDA for the second quarter 2024 increased by $406 million compared to the second quarter 2023 driven primarily by the inclusion of results from the acquisition of Energy Harbor, favorable commercial optimization of the fleet, and strong retail margins and customer count performance in Texas," Vistra said.

Surging output, sales

Vistra closed on the $3.4 billion acquisition of Energy Harbor on May 1, adding about 4 GW of nuclear generation and about 1 million retail customers.

With Energy Harbor, Vistra's total generation climbed to 46.4 TWh in the second quarter, up 8 GW or 20.8% from Q2 2023's 38.4 TWh. Retail sales also increased substantially. Retail sales totaled almost 35 TWh in the second quarter, up 11.6 TWh, or almost 50% from Q2 2023's 23.3 TWh.

"While results benefited from the inclusion of the first full quarter contribution from the Energy Harbor businesses, consistent execution from our generation, commercial and retail teams played a major role in this achievement," said James Burke, Vistra president, CEO and director. "Specifically, our diversified portfolio of generation assets produced record levels of power for our customers while completing the planned outages needed to prepare the fleet for the crucial summer months."

Also, Vistra's TXU Energy retail business in Texas "delivered year-over-year growth while producing solid margin performance and maintaining a top score on the Public Utility Commission of Texas Power to Choose scorecard," Burke said.

Vistra's residential count increased about 15% to almost 2.8 million in the second quarter, partly driven by organic growth and the inclusion of the Lubbock, Texas, market in Texas' competitive retail power market, the company said.

"Finally, despite the weather volatility across the country, in general, power prices cleared below our hedge levels," Burke said. "Through strong execution of our comprehensive hedging program by our commercial team, our second quarter results reflect the solid performance anticipated when we set our expectations for the year."

Opportunities in PJM, ERCOT

Vistra also sees opportunities in the PJM Interconnection and Electric Reliability Council of Texas markets, Burke said.

"During our first-quarter results call, we outlined the potential multiple drivers of future demand, and these include the reshoring of industrial activity, partially due to the CHIPS Act, the build-out of data centers, whether behind the meter or in front of the meter, increased electrification of commercial, industrial and residential loads, and strong population growth, particularly in Texas," Burke said.

The Semiconductor Industry Association has estimated that the Creating Helpful Incentives to Produce Semiconductors Act resulted in companies announcing plans to invest about $450 billion more in US semiconductor manufacturing.

"In addition to this demand growth, we believe current environmental policies will drive significant retirements of dispatchable thermal generation, notably coal plants, through the end of the decade, creating a supply-demand gap," Burke said. "Many of these policies are driven by decisions at the state level and are less influenced by federal policies."

Based on demand growth and retirements, Vistra sees a potential supply gap of about 40 GW in both PJM and ERCOT markets, Burke said.

"Supported by PJM's recent market reforms, the higher clearing prices for the 2025-2026 capacity auction are beginning to signal to competitive market participants, leading investors who can respond to this supply gap," Burke said. "While it is only one auction, capacity revenues over time can help offset lower wholesale energy prices, which have softened in the outer years since our last call in May."

In ERCOT, the Texas Energy Fund's providing of low-cost financing totaling about $5 billion drew 72 applications for 38.4 GW of capacity.

"This does provide some financial support for new build, but we believe forward price signals and market reforms will be necessary to attract sufficient equity capital to build new gas-fueled generation," Burke said. "However, in a competitive market, as has been the case in Texas for nearly 30 years, there will be many market participants and investors to evaluate their opportunities and decide their best path forward."