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Monday, 08/06/2018 11:00:08 PM

Monday, August 06, 2018 11:00:08 PM

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Vistra Energy Reports Second Quarter 2018 Results Above Expectations, Reaffirms 2018 / 2019 Ongoing Operations Guidance (8/06/18)

Second Quarter Highlights

- Closed merger with Dynegy Inc. (Dynegy) on April 9, raising expected EBITDA value levers by approximately 43 percent to $500 million, increasing after-tax free cash flow value levers by approximately 300 percent to $260 million, and improving its five-year cash tax and TRA forecast by approximately $1.7 billion, all as compared to initial expectations at the time of the merger announcement

- Announced 2019 full-year adjusted EBITDA and free cash flow guidance of $3.2 to $3.5 billion and $2.05 to $2.35 billion, respectively, highlighting the company's significant earnings power and EBITDA to free cash flow conversion with nearly full run-rate value levers

- Authorized $500 million share repurchase program in June, to be executed opportunistically over eighteen months, and repurchased approximately 6.4 million shares for $150 million through July 31, 2018

- Repaid the $850 million aggregate principal amount of 6.75 percent senior notes due 2019 on May 1, 2018 and on track to achieve 2.5 times net debt to EBITDA target by year-end 2019 while maintaining flexibility to pursue other capital allocation priorities

- Executed secured debt transaction that optimized over $5 billion of Vistra's debt through refinancing, repricing, and repayment, generating $23 million of annual after-tax savings; also consolidated Vistra and Dynegy revolvers into a new, five-year $2.5 billion Revolving Credit Facility

- Entered into $3 billion notional value of interest rate swaps effective from July 2023 to July 2026, extending Vistra's protection from rising interest rates for an additional three years
Announced Moss Landing battery storage project, a 300-megawatt / 1,200-megawatt hour battery project that will be the largest of its kind in the world with an associated 20-year resource adequacy contract, highlighting Vistra's ability to identify what are expected to be opportunistic, high-return investments that establish market leadership in emerging technologies

- Achieved commercial operations of 180-megawatt Upton County 2 solar facility on June 1, 2018 and the Upton 2 battery project remains on track for a fourth quarter 2018 COD

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For the three months ended June 30, 2018, Vistra reported net income from ongoing operations of $103 million and adjusted EBITDA from ongoing operations of $653 million. Vistra's second quarter adjusted EBITDA exceeded expectations as a result of higher realized prices, lower than forecast operations and maintenance expenses, and strong ERCOT retail performance that was offset by higher power costs than planned for our Ohio retail portfolio.

For the first half of 2018, Vistra reported a net loss from ongoing operations of $181 million, which includes unrealized net losses on hedging activities of $199 million, and adjusted EBITDA from ongoing operations of $916 million. Excluding the impact to adjusted EBITDA of negative $28 million during the period resulting from the partial buybacks of the Odessa Power Plant earnout in February and May, Vistra's year-to-date adjusted EBITDA would have been $944 million. When the Odessa earnout buybacks were executed, Vistra estimated the economic benefit of the transactions, net of the premiums paid, would be approximately $25 million.

Curt Morgan, Vistra's chief executive officer, commented, "Our company had another strong quarter, delivering adjusted EBITDA that exceeded expectations. Following the close of the Dynegy merger on April 9, our integration efforts are in full swing and we remain on track to achieve the full $500 million run-rate value lever targets by year-end 2019. We are confident our low-cost, low-leverage, integrated business model will generate strong, stable EBITDA while converting approximately 60 percent of adjusted EBITDA to adjusted free cash flow on an annual basis. This kind of performance will enable a diverse set of capital allocation alternatives to create and return value for our shareholders."

Reportable Segments

Following the closing of the merger with Dynegy, Vistra has six reportable segments: (i) Retail, (ii) ERCOT, (iii) PJM, (iv) NY/NE (comprising NYISO and ISO-NE), (v) MISO, and (vi) Asset Closure.

Vistra Energy is reaffirming its 2018 Ongoing Operations guidance ranges, forecasting an Ongoing Operations adjusted EBITDA range of $2,700 to $2,900 million and an Ongoing Operations adjusted free cash flow range of $1,400 to $1,600 million. The 2018 guidance ranges reflect Vistra's results on a stand-alone basis for the period prior to April 9, 2018 and anticipated results of the combined company for the period from April 9 through December 31, 2018.

Vistra is also reaffirming its 2019 Ongoing Operations guidance ranges, forecasting adjusted EBITDA of $3,200 to $3,500 million and adjusted free cash flow of $2,050 to $2,350 million.

Completed Merger with Dynegy

Vistra closed its merger with Dynegy on April 9, 2018, creating the leading, lowest-cost integrated power company across the key competitive markets in the United States. Through the combination, Vistra has achieved earnings, geographic, and fuel diversification and transformed into a highly efficient, natural gas-centric power plant fleet with approximately 41,000 megawatts of capacity (84 percent of which is in the attractive ERCOT, PJM, and ISO-NE regions). In addition, Vistra has expanded its retail footprint and created a platform for further retail growth and integration, while maintaining a strong and liquid balance sheet – with an intention to de-lever to a 2.5 times net debt to EBITDA target by year-end 2019.

On May 4, 2018, Vistra increased its anticipated annual EBITDA value levers and free cash flow value levers by approximately 43 percent and 300 percent, respectively. Integration and execution of all synergy and operations performance initiative value levers remains on schedule.

Share Repurchase Program

On June 12, 2018, Vistra announced that its board of directors authorized a $500 million share repurchase program. Vistra plans to execute the program on an opportunistic basis over eighteen months. As of July 31, 2018, Vistra had purchased approximately 6.4 million shares for approximately $150 million.

Financing Update

On May 1, 2018, Vistra repaid the $850 million aggregate principal amount of 6.75 percent senior notes due 2019.
On June 14, 2018, Vistra closed a transaction that optimized over $5 billion of the company's secured debt, resulting in anticipated after-tax interest savings of $23 million annually. Through the transaction, Vistra refinanced over $2 billion in term loans, repriced Vistra's $2.8 billion term loan, repaid the $500 million Term Loan C letter of credit facility with its restricted cash balance, and consolidated legacy Vistra and Dynegy revolvers into a new, five-year $2.5 billion Revolving Credit Facility. In addition, the transaction simplified the company's capital structure from the "silo" structure following the merger.

Vistra also entered into approximately $3 billion of notional value fixed interest rate swaps with effective dates from 2023 to 2026 during the quarter.

Liquidity

As of June 30, 2018, Vistra had total available liquidity of approximately $1.822 billion, including cash and cash equivalents of $757 million and $1,065 million of availability under its revolving credit facility, which remained undrawn but had $1,435 million of letters of credit outstanding as of June 30, 2018.

Announced 300-megawatt Battery Storage Project at Moss Landing
On June 29, 2018, Vistra announced its intention to develop the world's largest battery storage project: a 300-megawatt / 1,200-megawatt hour battery storage project at its Moss Landing Power Plant site in Moss Landing, California. The company has entered into a 20-year resource adequacy contract for the project with investment grade off-taker Pacific Gas & Electric (PG&E), creating a low-risk project with anticipated unlevered returns in excess of Vistra's investment criteria. The contract is subject to approval by the California Public Utilities Commission (CPUC).

Development will begin following CPUC approval, which is expected within 90 days of PG&E's application to the CPUC. The project will use the existing interconnection and other infrastructure from mothballed Moss Landing units 6 and 7, and is expected to go into service during the fourth quarter of 2020.

Upton 2 Solar COD

On June 1, 2018, Vistra achieved commercial operations at the 180-megawatt Upton 2 solar power plant in West Texas – the largest operating solar facility in the state. The output from the Upton 2 plant will further diversify Luminant's generation capacity while enhancing Vistra's market-leading retail solar offerings and capabilities in ERCOT, highlighting the value created from the company's integrated business model. In addition, Upton 2 provides a platform for economic battery storage development, and the company is currently developing a 10-megawatt (42-megawatt hour) battery project at the site.

Earnings Webcast

Vistra will host a webcast today, Aug. 6, 2018, beginning at 8 a.m. ET (7 a.m. CT) to discuss these results and related matters. The live, listen-only webcast and the accompanying slides that will be discussed on the call can be accessed via the investor relations section of Vistra's website at www.vistraenergy.com. A replay of the webcast will be available on the Vistra website for one year following the live event.

About Vistra Energy

Vistra Energy (NYSE: VST) is a premier, integrated power company based in Irving, Texas, combining an innovative, customer-centric approach to retail with a focus on safe, reliable, and efficient power generation. Through its retail and generation businesses which include TXU Energy, Homefield Energy, Dynegy, and Luminant, Vistra operates in 12 states and six of the seven competitive markets in the U.S., with about 6,000 employees. Vistra's retail brands serve approximately 2.9 million residential, commercial, and industrial customers across five top retail states, and its generation fleet totals approximately 41,000 megawatts of highly efficient generation capacity, with a diverse portfolio of natural gas, nuclear, coal, and solar facilities.

https://www.prnewswire.com/news-releases/vistra-energy-reports-second-quarter-2018-results-above-expectations-reaffirms-2018--2019-ongoing-operations-guidance-300692074.html

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