Vistra will shrink its generating portfolio before growing it, CEO says

Dive Brief:

Vistra Energy President and CEO Curtis Morgan, in a June 12 analyst meeting, said he was “happy with what we have in conventional generation” but would shrink the company’s current portfolio “before we grow it.”
Morgan announced the company would begin a $500 million stock buyback program and could opt for further stock buybacks in 2019 or institute a recurring dividend sooner than anticipated.
Morgan also said Vistra is looking at some energy storage opportunities, particularly at two sites in Pacific Gas and Electric’s territory in California.

Dive Insight:

Vistra Energy, the company that emerged from the bankruptcy of Energy Future Holdings and recently completed the acquisition of Dynegy, has a new focus that emphasizes stability and low leverage. That focus stands in stark contrast to the company’s roots. Energy Future Holdings was the target of the largest ever leveraged buyout, a $45 billion deal led by KKR & Co., TPG Capital and a unit of Goldman Sachs.

Speaking to shareholders on Tuesday, Morgan emphasized the stability of the company’s retail business and its in-the-money, modern gas assets.

Vistra last year said it plans to close 4,200 MW of its Texas coal plants, and the company is now looking for a strong market for the output from its remaining Texas fleet as the state looks to the summer and possible price spikes.

The Texas wholesale power market has seen that scenario before and it has drawn out developers who built power plants to take advantage of the potential price spikes. But this time, Morgan said, “there has been a fundamental change in the discipline.”

“We are not going to build anything into” this market, Morgan said, and it would be difficult for private equity players to get the financing to build.

The Electric Reliability Council of Texas (ERCOT) market “is functioning the way it was designed to,” Morgan said, and while generally positive about other wholesale power markets, Morgan did single out Zone 4 in the Midcontinent ISO. “Zone 4 is not a market, and we will have to deal with that,” he said.

Vistra owns coal plants in Zone 4 as a result of its Dynegy acquisition. Morgan said Vistra is working on getting Zone 4 moved into the PJM Interconnection market where there is a more robust capacity market. If the changes he is looking for are not forthcoming, Morgan said, “we will make the right call, just like we did in in ERCOT.”

Morgan also addressed the state and federal market interventions that are occurring or being attempted in wholesale markets, such as the steps the Trump administration is proposing to keep coal and nuclear plants open on national security grounds.

“This is a dog fight,” Morgan said. “This is a fight we have to fight, and we have to win.” He said he is opposed to the administration’s efforts even though Vistra has coal plants at risk. “It is bad for the market” and it is “ill conceived” and “it is not even touching on [the] fundamental security problem, which is transmission.”

“The whole premise of the thing is not well founded,” Morgan said. “You can expect us to play a very strong role.”