Datacenter demand not yet 'actionable' for Vistra

Vistra Corp. is not yet ready to allocate a chunk of its capital to supporting datacenter clients behind the meter or on the grid, the independent power producer's chief executive said Feb. 28.

"I would say that I'm not in the detail at a level of comfort yet that I would tell you that's actionable," Vistra President and CEO James Burke told analysts and investors during a fourth-quarter 2023 earnings call. "We know that from a free cash flow yield perspective, it's still pretty attractive for us to be returning capital through buybacks, so we would need to see a level of what I'd call transactable economics that have the long-term agreements to bring that to bear as an alternative to our capital allocation strategy."

Still, Vistra is not concerned that the single-unit nuclear plants it will acquire in its $3.4 billion Energy Harbor Corp. merger deal may not attract datacenter customers interested in behind-the-meter services.

"Between the colocation companies and the hyperscalers, speed is very important to them, so while the redundancy may not be there on a single unit site, pulling from the grid would still be an option," Burke said. "I think there's going to be a balance of factors that the potential datacenter companies will be considering when they do a site selection, and speed is one of them. Economics is one of them, access to water is another one, so there's a number of variables there beyond just the two units versus one unit."

Potential datacenter clients are also "entertaining gas plants for behind-the-meter opportunities" as inquiries into Vistra's business boom, Burke added.

"We're seeing customers approach us at a rate that we haven't seen in my history with this industry," Burke said.

Other independent power producers such as Constellation Energy Corp. and NRG Energy Inc., as well as several utility companies, described similar datacenter demand opportunities during their fourth-quarter 2023 earnings conference calls.

The Federal Energy Regulatory Commission has approved the Energy Harbor transaction and the contingent sales of two Ohio power plants to ensure that Vistra's acquisition of Energy Harbor's nuclear facilities and retail business does not negatively affect competitive pricing in the PJM Interconnection LLC

The deal is scheduled to close March 1.

Vistra reported fourth-quarter 2023 adjusted EBITDA from ongoing operations of $965 million, up from $784 million in the fourth quarter of 2022.

For full year 2023, Vistra posted adjusted EBITDA from ongoing operations of $4.14 billion, up from $3.12 billion in 2022.