Vistra Corp. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Amounts are U.S. dollars; financial statement amounts are in millions unless noted. Vistra operates retail electricity and natural gas businesses and power generation across U.S. markets.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Operating revenue | $2,565 | $2,509 | $5,772 | $5,367 |
| Operating income (loss) | $62 | $377 | $(2,521) | $766 |
| Net income (loss) | $35 | $164 | $(2,004) | $209 |
| Net income (loss) attributable to Vistra | $36 | $166 | $(2,006) | $222 |
| Adjusted EBITDA, non-GAAP | $811 | $916 | $(430) | $1,749 |
| Cash from (used in) operating activities | Not separately shown here | $(1,057) | $1,309 |
Revenue increased 2% in Q2 and 8% for the half year, but reported operating results were sharply lower. Management attributed the six-month deterioration primarily to Winter Storm Uri and also cited unrealized commodity-hedging losses. Q2 results included $278 million of unrealized net hedging losses in the company’s Adjusted EBITDA reconciliation. No standalone margin guidance or operating-margin measure is provided in the filing.
For the six months, cash used in operations was $1.057 billion, versus $1.309 billion generated a year earlier, primarily because of Uri-related cash impacts and higher cash margin deposits. Investing cash outflow was $575 million, including $546 million of capital expenditures. Financing provided $1.671 billion.
Balance sheet, debt and liquidity
- At June 30, cash and cash equivalents were $444 million; total available liquidity was $2.337 billion, comprising cash and $1.893 billion of available revolving-credit capacity. Management said it expected sufficient liquidity for anticipated needs through at least the next 12 months and noted cash flows are seasonal, weighted toward the second half.
- Long-term debt, including current maturities, was $10.995 billion; $511 million was due currently. Accounts-receivable financing of $661 million was reported separately as a current liability. The May issuance of $1.25 billion of 4.375% notes due 2029 was used with cash on hand to repay the $1.25 billion Term Loan A borrowing.
- Current assets were $4.749 billion and current liabilities $5.223 billion. Derivative contractual assets and liabilities were significant and reported gross on the balance sheet.
- The company had $1.405 billion of letters of credit outstanding and $513 million of surety bonds. Commodity collateral included $507 million of cash posted and $1.067 billion of letters of credit posted.
Material changes, outlook and risks
- Winter Storm Uri: Management estimated a $2.9 billion negative pre-tax earnings impact for the six months. The loss reflected costly ERCOT power purchases, reduced generation from gas deliverability and coal-handling problems, high fuel costs and high retail-load costs. Final impacts remained subject to ERCOT settlements, customer billing, legislation, litigation and possible regulatory repricing.
- Contingencies: Vistra recorded a $286 million liability for a disputed Koch earn-out claim and said it believes it may prevail. The company also disclosed Uri-related regulatory investigations, litigation and potential market or winterization rule changes; ultimate effects could be material but were not estimable. The filing identifies environmental and coal-ash compliance, retirement and reclamation costs, commodity and counterparty risks, and collateral demands as additional exposures.
- Generation plans: After quarter-end, Vistra announced Zimmer’s retirement by May 31, 2022, citing the PJM capacity auction. Joppa was scheduled to retire by September 1, 2022. The company also described planned Texas solar and battery projects and battery storage development at Moss Landing; Moss Landing Phase I began commercial operation in May 2021 and Phase II in July 2021.
- Capital allocation: Vistra repurchased $175 million of shares during the first six months under its $1.5 billion program and paid $147 million in dividends. A $0.15-per-share quarterly dividend was declared in July for payment in September. Management stated an objective to reduce net leverage and optimize its capital structure.
- Tax and unusual items: The six-month income tax benefit was $600 million despite the pre-tax loss; reported effective tax rate was 23%. Management’s non-GAAP Adjusted EBITDA excludes specified items, including hedging marks, impairments and storm-related items; review its reconciliation alongside GAAP results. The filing gave no specific earnings guidance.
Investor verification priorities
- Track final ERCOT settlement data, customer billing and any legislative, regulatory or court actions affecting the estimated Uri impact.
- Review cash generation, collateral postings and liquidity as seasonal operating cash flows develop; verify the terms and availability of receivables financing and revolver capacity.
- Assess the $286 million Koch dispute and other Uri-related liabilities, including timing and potential cash consequences.
- Reconcile GAAP results with Adjusted EBITDA, focusing on commodity mark-to-market effects and the treatment and future reversal of customer bill credits.
- Monitor retirement schedules, environmental and reclamation obligations, and execution and returns on solar and battery projects.