Updated: Purchase Price For Acquired Retail Book Disclosed

Vistra, Parent Of TXU, Acquiring Retail Electric Customers From Two Texas REPs

Vistra's Retail Residential Customer Count Falls Versus Q2 2020

Vistra Cites "Strong Margin Results" For Retail Segment

November 4, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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Updated, 9:15 a.m. ET Nov. 4

Note: An earlier version of this story, concerning the acquisition of the Infinite/Veteran books and select customer and earnings data, was first posted at 6:50 a.m. ET; the story has been updated throughout

Vistra announced today an agreement to acquire the Texas retail electric customers of Infinite Energy and Veteran Energy at an estimated EV/EBITDA multiple of ~3.7 times, which the company said, "expand[s] Vistra's retail footprint in the attractive Texas market with a gain of ~60,000 residential customer equivalents."

Vistra executives said during an earnings call that the price paid for the acquisition was in the range of $13 million.

The Infinite & Veteran book that is being acquired is about 80% residential customers

The acquisition is expected to close by end of November 2020

As previously reported (story here), Gas South has announced the acquisition of Infinite Energy's retail and wholesale business outside of Texas

Vistra said that, "Retail continues to provide stability and strong financial results for the integrated model. We expect to continue to grow our portfolio both organically and through opportunistic acquisitions, as well as to strengthen our customer relationships via value-added offerings."

During an earnings call, a Vistra executive further said that the company continues to see retail acquisition opportunities come up, and that Vistra, "expect[s] that this will continue," in terms of pursuing smaller-type retail book acquisitions

As of Q3 2020, Vistra's residential retail customer count was 2,724,000, versus 2,764,000 as of Q2 2020, and 2,028,000 a year ago. These totals exclude municipal aggregation and international customers.

Vistra said that it, "grew residential customer counts in our Legacy Texas brands."

Retail volumes for the third quarter were as follows:

Vistra Retail Volumes (TWh)
                               
            Q3 2019   Q3 2020
Residential   8.7      10.9
Business     12.3      12.0
Muni Agg.     3.4       4.8

Total        24.4      27.7

----------------------------

ERCOT        15.3      16.6
Non-ERCOT     9.2      11.1

Vistra reported third quarter Adjusted EBITDA from its Retail segment of $(140) million, $53 million lower than the $(87) million recorded in the third quarter of 2019, driven by higher volumes from the Crius and Ambit acquisitions during negative margin months due to the seasonality of Texas retail margins.

"Retail Adjusted EBITDA is negative in the third quarter due to the seasonality of power costs in Texas. Margins are higher in the first, second, and fourth quarters, offsetting the negative third quarter margins," Vistra said

Vistra said of the Retail segment that, "Financial results outperformed expectations driven by cost management and strong margin results despite the mildest September in Texas in the past 15 years."

Vistra also cited, for the Retail segment, "strong financial performance even through COVID-19."

Net income for the Retail segment for the third quarter was $109 million, versus $573 million a year ago. The net income values reflect unrealized net gains resulting from hedging transactions

Retail operating revenues were $2.521 billion in Q3 2020, versus $2.207 billion a year ago. Retail operating revenues by market were as follows:

($ in millions)
                   Q3 2019      Q3 2020
ERCOT                1,600        1,839
Northeast/Midwest      576          683

Vistra said that it is projected to achieve nearly $700 million of the ~$760 million of identified Dynegy, Crius Energy (Crius), and Ambit Energy (Ambit) transaction synergies and Operations Performance Initiative EBITDA value lever targets by year-end 2020.

Vistra noted that it has announced a long-term capital allocation plan, with expectation to return ~$2.7 billion to its financial stakeholders over the next two years through debt repayment, dividends, and share repurchases, while simultaneously reinvesting to transition its generation portfolio.

"Vistra continued to reduce its debt obligation within the quarter as it approaches its long-term leverage target of 2.5x net debt to EBITDA. During the third quarter, Vistra repaid ~$750 million of debt, consisting of ~$166 million aggregate principal amount of Vistra's 8.125% senior unsecured notes due 2026, $550 million of outstanding borrowings under its revolving credit facility, and ~$35 million of other debt including term loan amortization and borrowings under the forward capacity agreement. Year-to-date, Vistra has reduced its debt by ~$1,150 million," Vistra said

"On Sept. 29, Vistra announced its long-term capital allocation plan for 2021 and 2022, which includes continued debt reduction, an enhanced dividend, a $1.5 billion authorized share repurchase program, and planned capital expenditures for transformational growth. The $1.5 billion share repurchase program authorized by the Board will begin Jan. 1, 2021, does not have an expiration date, and replaces any authorization under Vistra's existing repurchase plan that remains at the end of 2020. Vistra has not repurchased additional shares under its existing repurchase program since November 2019, as debt reduction has remained the priority year-to-date. Net shares outstanding are ~489 million as of Oct. 30, 2020," Vistra said

As of Sept. 30, 2020, Vistra had total available liquidity of ~$2,557 million, including cash and cash equivalents of $500 million and $2,057 million of availability under its revolving credit facility.

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