Good morning, and welcome to Vistra's Investor Webcast Discussing First Quarter 2022 Results. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Meagan Horn, Vice President of Investor Relations. Please go ahead.
Thank you and good morning. Welcome to Vistra's Investor Webcast discussing Q1 2022 Results, which is being broadcast live from the investor relations section of our website at www.vistracorp.com. Also available on our website are copies of today's investor presentation, our Form 10-Q, and the related press release. Joining me for today's call are Curt Morgan, our Chief Executive Officer, and Jim Burke, our President and Chief Financial Officer. We have a few additional senior executives present to address questions during the second part of today's call, as necessary. Before we begin our presentation, I encourage all listeners to review the safe harbor statements included on slide 2 in the investor presentation on our website that explain the risks of forward-looking statements, the limitations of certain industry and market data included in the presentation, and the use of non-GAAP financial measures.
Today's discussion will contain forward-looking statements which are based on assumptions we believe to be reasonable only as of today's date. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected or implied. We assume no obligation to update our forward-looking statements. Further, today's press release, slide presentation, and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measures are provided in the press release and in the appendix to the investor presentation. I will now turn the call over to Curt Morgan to kick off our discussion.
Thank you, Meagan. Good morning to everyone, and thank you for your continued interest in Vistra. Getting started with slide 5, I've mentioned before that 2022 is a year of executing on the strategic priorities we outlined in the third quarter of 2021, shown on this slide. Importantly, Vistra has started on the right foot in 2022 with Q1 results consistent with our expectations, and it is noteworthy that our confidence regarding 2022 has grown. However, to me, the bigger story is the material movement in energy commodities complex forward curves for 2023 and beyond. Our emphasis on a comprehensive hedge strategy capitalizing on this move that began last year, continued in the first quarter, and continues today.
Notably, we expect this upward trend to continue given how the U.S. and world energy situation is set up, especially regarding ESG and boardroom actions in response, combined with strong demand and geopolitical events. In a nutshell, the U.S. natural gas complex is already tight and likely to be increasingly tied to world gas economics. As an expanding pivotal supplier on the world stage, we expect U.S. supply and demand to tighten even further. Higher natural gas prices in turn lead to higher power prices, and Vistra is long power and natural gas equivalents. Frankly, in my 40 years, I have not seen a confluence of events quite like this. Certainly, Vistra is in the right position to capitalize on the strong forward curves. The effectiveness of our execution will be key as the day-to-day volatility is extraordinary.
It is a rare opportunity presented to us, and it is our job to create the most value out of it while managing the risk. Our prudent hedging strategy has resulted in Vistra locking in material out-year value in the 2023-2025 timeframe, and it is worth noting that the forwards have also risen materially out to 2030. The market clearly believes there has been a fundamental shift in the energy commodity complex, and it started before the Russian aggression against Ukraine. This shift, as reflected in the forwards, offers continued opportunities to hedge more while remaining mindful of the potential liquidity requirements against further commodity price moves. The good news is that this offers right-way risk with our open position as well as the significant value already hedged.
We also have tandem hedged other risks associated with our commodity hedge positions such as fuel and basis differentials. Our generation fleet has also performed exceptionally well at an average commercial availability in the mid-90s% as a critical component of our hedging strategies. We bolstered this exceptional historical performance by the additional expenditures after Uri to de-risk our ERCOT plant operations. As we have mentioned in the past, we hold back generation to cover forced outages. All to manage any risk exposure that hedges can expose us to. Our primary focus when hedging is on managing risk while capturing value. We are not focused on picking the absolute peak. Our experience is that this futile endeavor leads to a significant risk of missing the opportunity entirely.
As it relates to 2022, while we were considerably hedged coming into the year, our open position in the summer months could now benefit from the power price environment, which we expect to remain intact given the likely continued strength of natural gas prices, as I just discussed. This is our expectation even without an extreme weather event. In addition, our retail business continues to deliver strong margins while organically growing customer counts as customers in ERCOT value quality retail names like TXU Energy and Ambit. Jim will speak to the significant value capture opportunity in more detail momentarily, but in sum, the EBITDA outlook for Vistra through 2025 has now increased to potentially over $1 billion, even with prudently conservative estimates, and the market has only continued to move up.
As briefly mentioned a moment ago, a robust hedging strategy of course requires significant liquidity as collateral postings are required. Notably, our commitment to a strong balance sheet with significant liquidity has positioned us with the cash and access to capital necessary to make the collateral postings while continuing to execute solidly on our $2 billion share repurchase program and pay out significant dividends to our shareholders of record. Of course, in this environment, you can never have enough liquidity. As such, we continually look for ways to efficiently manage our liquidity and are working diligently to enhance access to capital so we can further take advantage of the long-dated move up in forwards and capture value for our shareholders. We believe these efforts will be successful given the significant strength of our business and the amount of forward value we can lock in.
Finally, we remain committed to sensibly progressing our fleet of zero carbon generation. As of today's call, we have completed construction of our Brightside and Emerald Grove solar facilities and our De Cordova battery energy storage facility in ERCOT. Additionally, we've been working around the clock to install replacement connectors in the water-based heat suppression safety systems at Moss Landing 300 and Moss Landing 100 and expect to begin bringing those megawatts back online ahead of the hot California summer months. Despite the challenges, the supply chain issues or the uncertainties around solar panel procurement that the Department of Commerce's anti-circumvention investigation are causing the industry, we find ourselves well-positioned to navigate these particular headwinds as we continue to advance the growth of our Vistra Zero portfolio. Our planned 2022 development projects are constructed, and we've already procured panels for several of our next in-line solar projects.
Further, our remaining projects have a timeline that allows us to opportunistically contract at the right time. It is important to note that we will remain disciplined in our development efforts, especially given that we either have procured the equipment or have flexibility to time our projects with availability and pricing of equipment. It is also important to note that the supply chain bottlenecks and government actions are dampening the build-out of renewables in the U.S., placing more emphasis on the existing fleet of assets, especially natural gas-fueled and nuclear power plants. As we have said many times before, natural gas-fueled power plants are going to be critical to a rational and just transition to a decarbonized electric system. Moving now to slide 6. In the first quarter, we achieved $547 million of Adjusted EBITDA from ongoing operations, in line with our expectations.
Notably, this year, our first quarter results are a smaller contribution to our overall annual earnings as compared to certain prior year first quarters. This new earnings shape was expected for 2022 and is correlated to the seasonality of our retail business in the ERCOT market during the winter months with higher cost of goods sold locked in to hedge retail sales. However, there is greater margin opportunity expected in the remaining months in both our retail and wholesale businesses. With that said, the retail segment performed above expectations in Q1 in ERCOT with notable organic customer count growth and strong margin performance. Our generation segment came in a little below expectations, largely due to a greater open position and lower realized prices from a weaker winter. However, with very strong performance and commercial availability rates at the plants of approximately 96% in this first quarter.
We are reaffirming our previously announced guidance of Adjusted EBITDA from ongoing operations of $2.81 billion-$3.31 billion and adjusted free cash flows before growth from ongoing operations of $2.07 billion-$2.57 billion. We retain the ranges as we are still early in the year, have the summer months ahead of us, and at this point in time, we continue to carry a little more open position than in the past for risk management purposes. However, we reaffirm this guidance with increased confidence given the favorable energy commodities markets we continue to experience. In closing, Vistra is very well-positioned, especially given the current market environment. Execution is key in 2022 and beyond, especially related to our hedging in forward years and managing adequate liquidity.
Now, before I turn it over to Jim, as you are likely all aware, this will be my last earnings call as CEO of Vistra. It has been my distinct honor and privilege to serve you all for nearly six years. I want to thank our many stakeholders for their support throughout my tenure. In particular, all of you who entrusted us with your hard-earned money. I know I gave it my best to do business the right way and create value for our investors. I'm proud of all that we've accomplished and believe Vistra is well-positioned to drive continued industry leadership. This is simply the right time for me to transition the CEO role to Jim. Jim has done everything to be prepared for this demanding job.
After having worked with Jim for many years, I have the utmost confidence in his capabilities, commitment to Vistra, and his leadership skills. He has a deep experience and knowledge of our business, including an understanding of how the disparate parts of the company work together. I am certain, and our board is certain, that he is the right person to lead us through our next phase as we execute on our capital allocation plan, including substantial return of capital and expansion of our Vistra Zero portfolio. Finally, to the incredible team members at Vistra, I have never been more honored and proud to work with a group of people. Your light has shone brightly through thick and thin, and I am grateful for the time we had together.
I believe there is a tremendous opportunity ahead for Vistra as a leader in the power business, and look forward to watching that come to fruition. With that, I will turn the call over to Jim.
Thank you, Curt. I will get into additional details surrounding our first quarter's financial performance, outlook, and our strategy. Before I do so, I want to express my appreciation for all Curt has done to lead this company over the past six years. Curt has been a mentor and a friend to me, but more importantly, Curt has been a champion of Vistra and its many varied stakeholders. Vistra's accomplishments under Curt's leadership since he took the helm in 2016 are many. We grew our business by acquiring Dynegy, Crius, and Ambit, moving from a Texas-only company to one operating in over 20 states, delivering over $850 million a year in annual value drivers while pivoting the company to being predominantly a natural gas-powered fleet, serving over 4 million retail customers and well-positioned for future growth with Vistra Zero.
Curt championed the integrated model and highlighted the benefits of our commercial capability that is tightly integrated with our generation and retail businesses and the importance of a strong balance sheet. He pioneered our ESG and DEI efforts despite the challenges we faced with Uri and a COVID pandemic. These accomplishments, among many others, resulted in a doubling in value for our shareholders while also providing a strong foundation for the future. I want to reassure you all on the call today that as CEO, I'm ready to build on what we have achieved, and I intend to remain focused on our previously announced capital allocation plan with a commitment, as always, to delivering sustainable long-term value for our shareholders and other stakeholders. I am grateful to Curt and committed to do my best to lead Vistra going forward alongside some of the finest, most dedicated colleagues in our industry.
Turning now to slide eight. Vistra delivered strong financial results during the quarter that were in line with our expectations, with Adjusted EBITDA from ongoing operations of approximately $547 million. We recognize a quarter-over-quarter comparison is not meaningful given the Uri impacts to last year's earnings. Retail ended the first quarter in 2022 at $163 million of Adjusted EBITDA from ongoing operations, and our collective generation segments ended the quarter with $384 million in Adjusted EBITDA from ongoing operations. Despite the expected lower than historical contribution, we believe these first quarter results from ongoing operations positions us to achieve or exceed the midpoint of the EBITDA guidance previously announced. This quarter also continued the execution of our previously announced capital allocation plan.
We repurchased approximately 18.6 million shares since our last reported share count as of February 22nd, 2022. As of May 3rd, 2022, we've repurchased approximately 54 million shares since the share buyback program was initiated, accounting for a total of approximately 10.5% of shares then outstanding. Approximately 431.8 million shares remain outstanding as of May 3rd, 2022, and $805 million remains available for additional share repurchases for the remainder of 2022. The board has also approved a quarterly dividend to be paid on the common stock in the amount of $0.177 per share, payable on June 30th, 2022. This is approximately 18% growth in dividend per share as compared to the dividend paid in the second quarter of 2021.
We continue to prioritize a strong balance sheet in the near term and are balancing the hedging opportunities to lock in value with ensuring sufficient liquidity for these dynamic markets, especially given that the hedging activity is locking in materially higher future earnings. We will continue to provide updates on the $1.5 billion debt repayment as the year progresses and as we capitalize on opportunities to lock in value and manage liquidity. Similarly, we are committed to our transformational growth and are actively exploring avenues to support the Vistra Zero portfolio with non-recourse financing, where we find those financing markets remain open and with satisfactory interest rates. We can't discuss our capital allocation plan in full without acknowledging the commodities and power pricing environment that we've been experiencing this past quarter.
As reflected on slide 9, this quarter saw dramatic increases in both the ERCOT and PJM weighted spark spreads for 2023. These trends have continued through April and into May. Given the favorable environment, we've continued our hedging strategy to lock in value in 2023 and beyond. As of March 31st, 2022, we were 93% and 96% hedged in Texas and East segments, respectively, for 2022, and we were 60% and 67% hedged in those segments, respectively, for 2023. Turning now to slide 10. This slide illustrates in more detail the phenomena we've all been observing, reflecting that power price forwards are up dramatically in correlation with the increase in the gas price forwards. This environment increases margins across our fleet. In-the-money gas generation plants, coal, nuclear, and renewables.
In addition to locking in the revenue values, we have also been hedging coal, gas, and nuclear fuel costs. As a result of our comprehensive hedging strategy, Vistra is now over 50% hedged across the years 2023 to 2025. To provide a sense of magnitude, we have stated in the past that we expect to consistently earn above $3 billion of Adjusted EBITDA from ongoing operations on a go-forward basis. Given the marks as of April 29, we now anticipate a risk-adjusted midpoint in the range of $3.5 billion-$3.7 billion for Adjusted EBITDA from ongoing operations for the years 2023 through 2025. Again, we are just over 50% hedged, so there is still a significant range around this midpoint.
However, the curves have continued to move up materially since April twenty-ninth, so we believe that range of estimates to be on the conservative side. We are continuing to execute on our comprehensive hedging strategy to lock in as much of that value as possible. Notably, a comprehensive hedging strategy requires significant liquidity for collateral postings. We are aptly managing our liquidity requirements in a way that allows us to remain confident at this time that we can execute our hedging strategy and the capital allocation plan in tandem. In closing, we continue to focus on execution in 2022. Execution on the growth of our Vistra Zero portfolio, of our comprehensive hedging strategy, and of our previously announced capital allocation plan. We firmly believe in the value this execution will bring to our shareholders.
We look forward to updating you on our achievements as we progress throughout the remainder of 2022. With that, operator, we are now ready to open the lines for questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Shahriar Pourreza from Guggenheim Partners. Please go ahead.
Hey, good morning, guys.
Hey, Shah. How are you?
All right. Good, Curt. Maybe if we could start with earnings and the hedging outlook and sort of in light of the current commodity environment. It looks like you guys hedged into 2023 fairly well here versus February. Obviously, we appreciate the high-level color on 2024 and 2025 in the slides. Can you give us any more detail on the amount of hedging you've done into the outer years of the curve, if at all? I mean, put differently, have you departed from, you know, your typical hedging profile here, given the opportunities or fundamental view? I'm really thinking about your approach to 2025 and 2026, but I do obviously appreciate that the curves can get a little bit illiquid on the power side quickly, so.
Yeah. So look, I'll start with a couple opening questions, but Jim can then fill in with, you know, specifics and add his flavor to it. You know, look, I do think we've departed and we're gonna depart. You know, if anything, a message we deliver today is that, you know, we've got really one of the most rare opportunities in my career, and it's I've been around a long time.
To lock in significant value in the out years. The curves have moved up, you know, Shahriar Pourreza, even out into 2030. You know, the thing you have to balance, all of us do, even if you're investment grade, is margins and posting and having enough liquidity. We feel very good that we will be able to do that. But this is a rare opportunity for us, and this is a good news story. It's all about execution, and, you know, we feel good about it. Then of course, as these hedges realize, you know, you got to run the assets. The one thing that we've been very proud of through the years is, you know, just the incredible performance of our generating fleet to back up the hedges.
This is one of the best opportunities I've ever seen for a company like ours, and we just need to capitalize on it. Philosophically, we are departing a bit, and you know we are looking to hedge 2024, 2025. I suspect just given the way that the energy commodity price, you know, world markets are set up, we think this is going to be around a while, and we'll roll hedges into 2026, 2027, and beyond because we believe that, you know, you're going to see a strong natural gas market for many years to come. It's a rare situation and one we have to step up and capitalize on.
Jim can tell you a little more about the specifics, you know, what we've done in 2024, 2025, you know, because we have done some, you know, significant hedging, which is rare for us because you know this, Char, generally, these curves are backwardation. We are seeing pricing that is at or above, you know, our point of view. We've told you that when we see prices at or above our point of view, we expect to hedge. You know, we're not trying to pick the highs, we're just trying to lock value, and then we just have to execute from there. Jim, do you want to add?
You bet, Curt. Shahriar, the way Curt described it looked like a unique opportunity, and we're taking advantage of it because we have typically seen tremendous backwardation. We'll see prompt months and maybe a year show up, but then the outer periods have not responded. I think on slide 10 where you saw the curve moves, particularly gas-driven, but also the spark spreads that have driven considerably higher in the 2023, 2024 period, we decided to layer on more hedges. That's what gave us the confidence to talk about 2023 to 2025. As you know, we would normally talk about 2023 after the summer, and we would generally and I cannot recall that we've ever spoken specifically with confidence two and three years out.
We're representing that in our materials today because we have hedged over 50% in total for that three-year period, a little bit more in the front in 2023, a little bit less in 2025. There's still a range around that, and that's the important thing. That range can go higher. It could also go lower. We recognize that, and that's why we talk about that range as a midpoint. There's a chance for that number to go down. We would put this in the range of potentially $500 million - $600 million to the downside, possibly that to the upside. We think that's reasonable. Giving you a sense of how much we've hedged and putting that out we thought was important for investors because these opportunities, as Curt said, don't come around very often.
Got it.
Shahriar Pourreza, look, we know you guys model. Everybody does. You know, we want to give you some idea of this. I think it's important to also note that I think the skews to the upside, especially given that.
Commodity prices have moved up, and that $3.5-$3.7 range was a $4.29 vintage, and we've seen a pretty big move up this week alone. You know, we're just trying to give you an idea. The earnings power of this company for the next, you know, at least three years and beyond is significantly higher. It's just the realities of the situation. Like I said, it's our job now to manage that because it's not without risk. That's what we do, and we do it well. This is a good news story, but we need to execute.
Got it. As we think about sort of the potential for extra cash to come in the door versus your plans last fall, how does your, I guess, calculus shift at all? I mean, at a high level, how would you maybe prioritize the incremental cash? Should we be thinking about returning to shareholders, more delevering growth CapEx like Vistra Zero acceleration? The reason why I'm asking this is, this is obviously in light of your view that the curves, the moves in the curves aren't really transitory, right?
You know, look, you know, I think it really doesn't change much. I mean, we still like the value proposition of buying our shares. But you know, this, you know this, it's a function of where you're trading at in terms of your share price. If you said, "Okay, what would you do if you had a pile more of cash today?" You know, I think we'd say we'd buy back our shares. But you know, we also wanna maintain a strong balance sheet for sure. You know, we wanna pay a healthy dividend. You know, buying back our shares has helped us pay a healthy dividend and increase that over time for the shareholders of record.
I'm not sure that we would change that much. We've said that we would prefer not to use the cash flow from the core business on Vistra Zero to allow Vistra Zero to raise its own capital if we can get cost-effective capital there. We still have a high free cash flow yield. That may not be the best place to put it. I think it's the three primary capital allocation buckets that we've always talked about. Share repurchases would continue to be strong on that list. That's a function of where you're trading at any given time.
Terrific. Thanks, guys. I'll jump back in the queue. Curt and Jim, congrats on phase two, and Curt, we'll certainly miss you a lot, so thanks, guys.
Thanks, Shar.
Thank you, Shar.
The next question comes from Michael Sullivan with Wolfe Research. Please go ahead.
Hey, everyone. Good morning. Hey, Curt-
Hey, Mike.
Congrats and all the best. Jim, congrats to you as well and good luck here. Exciting times.
Thank you.
Thanks, Michael.
Yeah, maybe just wanted to start with a quick clarification that the $3.5 billion-$3.7 billion range you gave, is that true in each individual year, or is that an average over the 2023-2025?
Jim, do you wanna take that?
Yeah. Michael, first of all, it is a range that applies to all three years. Okay, we see all three years within that range. We didn't want to put out individual year guidance and individual year hedge percentages at this point because this is moving. You know, we've taken advantage of a lot of the hedging opportunities that the month of April provided us, where we really started to see this move. We're pretty flat over that three-year period because we have a little bit more hedges on at the beginning when the move started in the near term and a little bit more open to the out. Even though there's still backwardation, the captured value ends up being pretty similar across that three-year period.
Okay. That’s super helpful color. Maybe just on the liquidity side, Jim, if you could give us an update there and on some of the steps you’re taking. I think there was a revolver update yesterday. Just as things continue.
That's right.
To evolve here, and it sounds like you expect things to get increasingly more volatile. Just how you're thinking about that and what are some of the steps you can take to manage that liquidity? Just more color there would be helpful.
Yeah. You bet. Yes. Curt emphasized liquidity in his remarks, and it is front and center for us being able to capture this opportunity and make sure that as we continue to hedge, 'cause we like to do that, we like to continue to put more hedges on at these levels that we have adequate liquidity. You saw us increase the commodity-linked revolver so that we have $2.1 billion of available liquidity, as of yesterday. That is very helpful in managing the hedge levels that we already have put on.
We also are looking to do some additional raise and work with other counterparties in a more credit efficient way, which we can do with some of our first lien opportunities to hedge with parties, and we do that already, but we expect to increase that level of activity. Our view is that now is the time to make sure we have ample liquidity because we wanna not only hedge more, we wanna be able to withstand any further moves because the goal here is all this liquidity comes back to us, right? It all comes back as we operate and deliver the power through the various calendar years.
It's relatively cost-effective for us to load up on even additional liquidity to make sure we can hedge more because we know that this cash does return, and just make sure that we have the line of sight and continue to bring the range of outcomes in the out years, you know, even tighter. I think as Curt noted, I think the midpoint of this range is skewed to the upside. I think the midpoint can continue to move up, and we can give you that confidence as we continue to put more hedges on. We've had great access to liquidity. All of our partners that have worked with us have been very helpful because they understand this is right way risk.
As these hedges continue to be put on and we have to post more, they know the franchise value of the enterprise is continuing to grow. That's a great place to be, and this is gonna be something that we'll continue to actively manage.
Great. Thanks for that.
Michael, if I could just add something too. The nice thing about adding this liquidity is that, you know, we can, you know, we can keep it outstanding, and keep, you know, keep this on our balance sheet as long as it's necessary. If we continue in a high-priced volatile market, you know, we can continue to extend this liquidity and lock in value. The annual cost of that liquidity relative to the value locked in, as Jim just said, it is very low, so it's a compelling value proposition.
If we were to come back to, you know, a more recent historical normal level of commodity prices, which I'm not sure will happen, but let's just say that we did, you know, we can always then reoptimize the balance sheet and shrink, you know, the amount of liquidity that we have to the volatility in the marketplace at that given time. We can flex it. Because it's right way risk, and also because we tandem hedge, you know, all the risks, not just the commodity risk, but also basis and fuel. You know, we have a high confidence of achieving the cash flow levels that the hedges bring to us, which obviously satisfy the cost of the added liquidity.
in this instance right now, in this world for us, you know, liquidity is very important to us. We have access to it, and it allows us to go out and lock that significant value in for years to come. That's a rare opportunity for companies to have.
Thanks a lot for all that. Appreciate it.
Thank you.
Thank you, Michael.
The next question comes from Julien Dumoulin-Smith with Bank of America. Please go ahead.
Hey, good morning, and congratulations to both of you, but very well earned retirement here, sir.
Hey, Julien.
Hey, good morning. Leaving on a high note, as we say. I suppose just coming back to this quasi guidance, if you will. Just to reconcile that billion-dollar number you threw out in the comments versus the $3.6 billion midpoint that you just talked about a second ago. The billion dollars, that was relative to what? Just to make sure I understood that appropriately.
You mean when I said that.
Julien, yeah.
It was a billion dollars of value that we were adding? You're talking about what I said in my remarks? Jim, I mean, you can answer that because you know it too. Go ahead.
Yeah. Sure. Julien Dumoulin-Smith, that was in the remarks we said through 2025, nearly a billion dollars. That was a cumulative minimum value increase from 2023, 2024, 2025 of a billion dollars. Think about that as $333 million a year minimum. That gets to our $3.5 billion-$3.7 billion, which is higher than where anyone was really thinking we were ahead of these commodity moves, where we said we're a $3+ billion business. Some would say you're a 3.2, 3.3 kind of business. We're taking that delta and saying assume $300+ million a year. That gets you to this midpoint of the range we're talking about for three years is $1 billion.
All right.
Jim Burke, can I add that we debated on this one, Julien Dumoulin-Smith, because if you take the $3 billion+ that we always say, that number is, you know, close to $2 billion. If you take, you know, sort of the $3.3 that we sort of, I guess gave a wink and a nod to for 2023 previously, then that number is closer, you know, to a little over a billion dollars. You know, the reality is it's, you know, it's a significant amount above depending on what you want to use as your baseline. You know, we looked at consensus too, and that number is no matter how you slice it was at least over a billion dollars. That's why we felt comfortable saying that. You know, those two, we tried to reconcile those, what Jim , the $3.5 billion and $3.7 billion and what I said. No matter how you slice it's a billion dollars or more. You can argue with the $3 billion+ number, it's closer to $2 billion.
Yeah. No, indeed. Both numbers are conservative. I got you. I hear you. Well, listen, I mean, just to keep that focus going on the commodity front, what are you seeing with your coal counterparties and your logistics counterparties here? I mean, are the PRB suppliers finally ramping up? And to that end, how have you made arrangements and/or what are you seeing with logistics? And ultimately, what's priced into that $3.6, for instance, on delivered PRB and your lignite, et cetera?
Well, look, I'll say something.
Yeah, Julian
Jim, you can talk. Yeah, go ahead, Jim.
No, Julien , I'll start, and Curt Morgan, thank you for that. We have factored in that even in 2022, it has been tough for some of the PRB suppliers to fully ramp up. As you would expect, as gas continues to move up, everyone is trying to get more coal, and that's logical. It is difficult for some of these coal supply chains to respond. Some of it is simply hiring and having enough people to actually operate the equipment, and some of it is weather driven. There's been storms that have actually disrupted some supplies. We factored that in to how we think about 2022, and we have factored it in in the ranges we just gave you. We are not assuming perfect execution on the coal supply chain.
We do think over time this will get resolved either because there will be a more fulsome response to the supply chain, you know, maybe even outside of the 2022 timeframe before that happens, or gas may actually at some point dissipate and not put quite as much strain on the system. It has been a challenge more on the PRB and the train sets, less so with the barge coal that we have access to for, you know, for our Ohio plants. That is something we took into consideration when we provided these numbers. Go ahead, Curt.
Well, I'll add to this, Julien Smith, that you know we have good relationships with the BNSF, also with you know KCS, and then down with Coleto Creek, it's Union Pacific. We have good relationships. We have long-term historical relationships. I think you know we're going to continue to work, and I am and so is Jim Burke, with the leadership of those companies to try to help us through this, especially given you know that we've got a summer coming up in Texas. We want to make sure we have you know adequate access to coal, but it is. You know, they're struggling like everybody else on the supply chain side and having enough labor.
I can't remember the number, Jim, but it's like 6-9 months to train new people, you know, on the railroad.
Right.
You know, it takes a long time to get new people, fresh people in and get them trained. You know, this is an issue. The good news is, you know, we've been conserving where we can. We're going into the summer with, you know, a decent pile. We'd like to have more, and we'd like to see the train sets get picked up. I think we'll be able to work that out. This is something you just have to work together with the railroads on.
Got it. Okay. You're pricing in kind of current strip pricing or?
Yes.
Okay. All right. Got it. Excellent, guys. We'll leave it there. Again, congratulations.
Julien, thank you.
Thank you.
The next question comes from Jonathan Arnold with Vertical Research Partners. Please go ahead.
Yeah. Good morning, guys, and congratulations to you both.
Hey, Jonathan.
Thanks, Jonathan.
Just a quick one on, you know, given this big shift in the market, does it change any of your thoughts around your planned retirements that you have scheduled? Just curious there.
You know, some of our retirements are already scheduled because they are part of agreements that we have. I'd say there are some that are not, and certainly we're gonna look at, you know, the whole suite of things that we look at when we decide whether we retire a plant. You know, I think the other thing we have to balance is markets are tight, and we're part of the reliability of markets and also the affordability of our product, as well as emissions. You know, I could see a situation where maybe, you know, we would extend, you know, some of the coal plants, but we've also agreed to shut those down as part of the coal combustion residual, you know, rule at EPA.
You know, a lot to take into account. You know, could we say maybe go from 25 to 26 for something? We might. I think we just have to consider what does the market look like, you know, what's the need of the power plant. It's not, you know, it's not a foregone conclusion that, you know, all these are economic, even with these prices. Having said that, we're, you know, we're economic people, but we're also about trying to help with reliability in the markets that we serve and keeping prices, you know, affordable. We'll have to balance all that and see what that brings us.
We haven't made any, you know, definitive decisions on any of those other coal plants other than the ones that we have committed to retiring as part of, you know, some sort of a commitment.
Okay. You've not assumed anything like that in this outlook, I would imagine. Okay.
That's right.
That's right.
We have not.
Okay. Could I just a couple of things on liquidity. Could you maybe update for us just what the current numbers are relative to the ones you put in the release for the end of March? Given, you know, the April moves, I think you said you now have two available rather than one, but I wanna make sure, you know, net of moves and commodity, but I just wanna make sure we got that.
Yes.
Jim will take that.
Jonathan, yes, we had $3.1 billion available as of the end of March. We now have $2.1 billion available, and we added $1 billion to the commodity-linked revolving facility for capacity, because of the moves, particularly in April, and we wanted to take advantage of hedging more in the month of April. We increased our capacity some, but we still have the ability, you know, we still have the $2.1 billion available to us after all postings that we've made to date.
Okay. The implication of your prior comments is that you feel confident you could flex more if you needed to.
Correct. That's correct.
Just a different kind of liquidity question. As you look out in the out years, you know, in the past it's been challenging to find liquidity in power, you know, but maybe gas has been more liquid. You know, can you give us any sense of, you know, is that changing or how are you know, what's the nature of the hedges you're able to put on that far out?
It has been changing, Jonathan. I think both the sell side as well as the buy side sees this as, you know, either opportunity or potentially risk if they don't buy long term. We've been able to hedge both gas and power out through 25 with fairly deep markets compared to what we've seen historically. I think that is something that has occurred as people are thinking this is not temporary. You know, we've generally seen, as we talked earlier, things move up in the very short run and then you see some assumed corrections, but you don't even see that with the NYMEX curve now for the next 10 years. I think folks are seeing that the complex is moving up. They see difficulty in supply chains.
They see difficulties with some of the environmental restrictions that are happening. I think folks are concerned about where this whole commodity complex could go. There has been folks on the other side willing to make longer dated purchases that we haven't seen the same depth in prior markets.
Okay, great. Thank you very much.
Thank you.
Thank you. Thank you, Jonathan.
The next question comes from Durgesh Chopra from Evercore ISI. Please go ahead.
Hey. Good morning, team. Thank you for taking my question. Maybe just-
Sure
Curt and/or Jim, maybe can you talk to the first quarter of 2022 EBITDA? I appreciate sort of the profiling has changed post Uri, but just maybe a little bit color there. Then when you talk about margin opportunity or greater margin opportunity rest of the year, I get, I mean, obviously there's upside from the commodity standpoint or open positions. Is there something on the retail side in terms of profiling or expenses that we're missing? Any color there is appreciated.
Sure. Yeah, Durgesh, what ended up happening post Uri is the first quarter cost structure shifted up remarkably as people started to conclude that the winter has potentially even, if not more volatility built into it than the summer. ERCOT, as you know, has always been a summer focus. People have always talked about peak capacity and peak demand in the summer. Uri shifted that. Now we saw the first quarter part of the curve move up considerably. Retail has to buy that, but they generally flat price their customers. We don't have a lot of index-based structures with particularly residential customers. When we flat price, it basically means that the margins get squeezed considerably. Still positive, but definitely lower in the first quarter than historical patterns.
What that means is it really opens up the margins in 2Q and 4Q relative to what we have seen in the past. When Curt was alluding to we have greater earnings power in the back part of the year, that's not assuming anything with the open position. That's just simply if you were to model retail margins on a monthly basis, you would have historically seen a better first quarter margin than we're seeing at the moment because of the shape of the 12-month curve.
Got it. Okay, so just to be clear, it's the retail margins that we're talking about, the profiling of the retail margins, Q1 and then rest of the year, right? I mean, we're expecting.
That's correct.
to pick up. Okay.
Yeah.
Um-
I mean, if I could add though, I mean, look, the prices have moved up too, though, on the wholesale side. What we were talking about, specifically about what we were seeing, and we actually had factored in into our guidance was what Jim talked about, which was that shift in retail. That's right.
... margin. You know that, guys, this is a little disappointing that we don't give quarterly guidance. Unfortunately, you know, there is a consensus out there which is generally built on, you know, kind of an assumption of the percentage of EBITDA of the annual. The reality of the situation is that does move at times. We tandem hedge. When we sell retail, we tandem hedge with wholesale. We knew this. This was in our guidance number all along. We knew that we were gonna be a little skinnier on the first quarter, but higher in the second and the fourth. Now, we've also seen a move up a little bit on the third because of, you know, wholesale pricing. We'll see if that comes to fruition.
That's just how things work. You know, we just wanna be clear that we understood this phenomenon, and we're not seeing it in the outer years either. You know, we think things will probably, at least over time, move back to more of a traditional split or shape of earnings. It just happened in 2022, just given the way that Q1 traded relative to when we locked in retail. Got it. That's super helpful color. Just one quick one for me. On the topic of share repurchases, you know, the latest guidance you have for 2023 and beyond is, I believe, at least $1 billion a year.
We're looking at a sizable EBITDA cash flow upside, Kurt, that you alluded to, you know, in your commentary and the EBITDA estimates going forward. When should we expect sort of an update on that, the use of that excess cash that now you're seeing, you know, over 2023 and beyond? Is that sometime later this year? When should we expect an update on that, in the use of that cash proceeds? Thank you.
Yeah. Well, Jim, I don't wanna because I'm not gonna be here after August 1. I would expect that, you know, just the way we've normally done it is later this year after we get through the summer and we've done some more hedging. My guess is we'll talk about at least 2023 and, you know, we'll see about 2024 and 2025.
Got it. I appreciate you taking-
Kurt did-
Sorry, go ahead, Jim.
No, I was gonna say, Curt, I agree with that completely. I think we need to get through the summer. Let's look at the additional hedges that we anticipate putting on at these kind of levels. Obviously, you know, we won't hedge all the way up, but we still think there's value to capture here. We'll, again, emphasize on liquidity. All this money will come back to us eventually, but we do wanna preserve long-term value and take advantage. I think it would be prudent for us to come to talk about that in the fall when we give the guidance for next year. That'll be a good time for us to update our cash flow and our capital allocation assumptions for 2023.
Perfect guys. Thank you. Thanks for taking my question, and congratulations to both of you as you transition into your new roles. Thank you.
Thank you.
Thank you, Durgesh Chopra.
The last question today will come from James Thalacker from BMO Capital. Please go ahead.
Thanks, guys. Good morning.
Hey, James. How are you?
Hey, James.
I'm good. Congratulations, Curt. It's really been a pleasure.
Thank you.
Just had two real quick questions. Just following up on Julian's coal question. I know you said your outlook reflects basically the current curves on coal pricing. But is that coal pricing based on an FOB basis? I know that the rails are also having some labor issues also on deliveries, and that could be impacting, you know, upward pressure on transport costs. Just wondering what you guys are seeing there.
Well, I think it does.
Yes, we have.
Go ahead, Jim.
Yeah, I was gonna say, we have some long-dated transportation arrangements for our key facilities, James. Our issue has been less rail transport costs. It has been simply about quantity as it relates to PRB getting all the quantity that our plants could consume in the higher kind of power price and natural gas price worlds. We have been less exposed to the cost of transport. It's been, for us, a little bit more on the quantity side.
Okay, great. That's helpful. Just sticking along that same line, do you think that some of the recent move in power, you know, could also be a reflection of, you know, gas plants being dispatched out of merit to preserve some of these coal stockpiles? You know, some of the, you know, more regulated utilities we've talked to are down to like 20-25 days as we move into summer. Just wondering if that could be contributing to the, you know, sharpness in the move recently.
Absolutely. In fact, I'm certain of it, you know, that is affecting it because some people are, you know, they're holding on in the shoulder periods where, you know, the margin isn't that great on coal. They're backing off. Gas is, you know, having to come on. It's setting price. Yes, you know, that interplay between gas and coal is gonna continue, until, you know, the coal can solve the issue. Yes, that definitely is having an impact on price.
Okay, great. Then just the last question, and this is kind of, you know, I apologize for being greedy, and I know that we're only a week after the, you know, when you guys priced, you know, your upside of a billion dollars through 2025, but obviously prices has continued to kind of move up. But are you know, going back to that previous question, Curt, and Jim, do you think that, you know, pricing will kind of hold in this level and that you feel good about kind of being able to lock in that, say, $300 million across to 2025? Or do you think that, you know, we're kind of, you know, at a peak here, and we shouldn't really be sort of baking in any incremental upside from here?
Well-
Curt, do you want me to handle it?
Well, I'll just give you mine, Jim. I'd like to hear what you have to say. I'll pull out my crystal ball here. Look, I think here's what I would say about it. You know, we would like to continue to hedge, you know. 70%-80% would feel pretty good to us in those out years right now, the ones that we've talked about. But the one thing we're just gonna make sure, James, is that, you know, we also have the liquidity to go along with it. You know, we're being prudent about it. But I would also say that whether it's gonna stay at this level or go a little bit higher in the near term, things seem to be.
You know, there seems to be a fair amount of fear in the market around gas right now. How long that lasts, I don't know. I do believe that we're gonna stay at pretty strong levels on gas and power for a while. You know, we'll pick our shots. You know, look, we see a real opportunity here. We have a sense of urgency as a company. You don't get this opportunity very often, you can be rest assured that we're working urgently to lock in, you know, value at these kind of levels. I wouldn't be surprised to see us, you know, having increased our hedging between now and the next quarter when we talk to you again. I mean, I just think that.
We're not gonna worry about whether it's at the peak or not. What we really care about is it, you know, a fundamentally good value for the company. Jim, you wanna add to that?
Yes, Curt. Agree completely, and I would just add that if prices stay where they are and we continue to increase our hedge percentage, then we would see this range move up from where it is. That's what we meant by we were being conservative because we made this range off of the April 29th curves, James, and as you noted, they've moved up. If they stay where they are and we can continue to hedge into that, I would expect that you'd see this midpoint of this range move up.
Okay, great. Yeah, sorry about the greedy question, but I was just curious 'cause it seems.
No.
The biggest delimiter that you guys probably have, to your point, is really just maintaining adequate liquidity, as well as probably just, you know, sourcing liquidity in the markets, especially as we probably get out past 2024, 2025, 2026. I would think that it probably gets a little bit more thin out there, and so you might have to take, you know, some discount to sort of, you know, get those hedges on.
Yeah.
We might, James. As Curt said, we're not trying to get every last nickel here, so there's plenty of room for us to lock this in and move the midpoints up. As you said, liquidity is a key area of focus. We feel good about it, but we're gonna keep actively working that so that we can capture this opportunity. Sorry, Curt.
No, no, that's it. I think that's right.
Okay. Nope, that's great. Thank you so much for fitting me in. I know we're at the right time here, but congratulations again, and thanks for the great call.
All right, take care, man.
This concludes our question and answer session. I would like to turn the conference back over to Curt Morgan for any closing remarks.
Thanks again. It looks like we ran over time. Sorry about that. Great working with everybody. I'm hoping that I get to see people between now and August first, and now that we're also getting to see each other. Enjoyed it and look forward to it. You're in good hands with Jim, and the company is in as good a shape as ever. We're excited about the future. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.