Vistra Energy Corp. (VST) Q2 2018 Earnings Conference Call Transcript

Vistra Energy Corp. (VST -0.33%)
Q2 2018 Earnings Conference Call
August 6, 2018, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Tim and I will be your conference operator today. At this time, I'd like to welcome everyone to the Vistra Energy second quarter 2018 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question at this time, simply press * then the number 1 on your telephone keypad. If you'd like to withdraw your question, press the # key. Thank you. Miss Molly Sorg, you may begin your conference.

Molly Sorg -- Vice President of Investor Relations 

Thank you and good morning, everyone. Welcome to Vistra Energy's investor webcast discussing second quarter 2018 results, which is being broadcast live from the Investor Relations section of our website at www.vistraenergy.com. Also available on our website are a copy of today's investor presentation, our 10-Q, and the related earnings release.

Joining me for today's call are Curt Morgan, President and Chief Executive Officer, Bill Holden, Executive Vice President and Chief Financial Officer, and Steve Muscato, Senior Vice President and Chief Commercial Officer. We also have additional senior executives in the room to address questions in the second part of today's call as necessary.

Before we begin our presentation, I encourage all listeners to review the safe harbor statement included on slides two and three in the investor presentation on our website, which 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.

Further, our earnings release, slide presentation, and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliation to certain comparable GAAP measures are in the earnings release and in the appendix to the investor presentation.

I will now turn the call over to Curt Morgan to kick off our discussion.

Curtis A. Morgan -- President and Chief Executive Officer

Thank you, Molly and good morning to everyone on the call. As always, we appreciate your interest in Vistra Energy. I'm going to turn to slide six and I'd like to cover our second quarter highlights starting with our quarter and year to date 2018 financial results.

We had another very good quarter. This is even after initiating our combined company guidance in May, which reflects higher forward curves and increased retail expectations, particularly in ERCOT. We concluded the quarter delivering $653 million in adjusted EBITDA from our ongoing operations. Results had exceeded our expectations for the quarter, primarily as a result of higher realized prices, lower than forecast operations and maintenance expenses, and ERCOT retail favorability that was offset by higher power costs than planned for Ohio retail portfolio.

A meaningful yet imperfect comparison we thought might be of interest is a comparison of second quarter 2017 versus second quarter 2018 results using Dynegy's and Vistra's previously disclosed stand-alone quarterly results for 2017. This comparison indicates a more than 20% increase in 2018 over 2017, driven primarily by higher ERCOT retail and wholesale contribution margins and realized merger synergies.

Similar to the first quarter of 2018, we once again executed a partial buyback of the Odessa powerplant earnout in May, which reduced second quarter adjusted EBITDA by approximately $10 million. We expect the three-year impact of the transaction, net of the premium pay, to be a positive $2 million. Excluding this second quarter negative impact, Vistra's adjusted EBITDA from its ongoing operations would have been $663 million.

I would also like to highlight that in the second quarter, our retail team grew residential customer counts in ERCOT by more than 1% year over year, ending the quarter with 1.493 million customers. This is the highest ERCOT residential customer count we have had since 2015 and it demonstrates how the strength of our retail brands and volatility and wholesale power prices can present an opportunity to acquire and retain new customers.

Notably, during volatility wholesale price environments, our retail business has historically experienced growth as customers switch providers due to higher bills. This is very important not only in the short-run, but we are generally able to retain the customer for the long-run. Year to date, Vistra's adjusted EBITDA from its ongoing operations is $916 million. Excluding the impact to adjusted EBITDA of negative $28 million resulting from the partial buybacks of the Odessa powerplant earnout in February and May, Vistra's year to date adjusted EBITDA would have been $944 million.

When we executed the Odessa earnout buybacks, the economic benefit net of the premium pay was approximately $25 million, which we largely locked in around the time of execution. In addition to Vistra's results through June 30th tracking ahead of internal expectations, July is shaping up to be a strong month, as we saw high temperatures and strong demand in the second half of the month. ERCOT set multiple peak demand records in July with the highest peak demand being 73,259 megawatts, meaningfully higher than ERCOT's forecast summer peak of 72.8 gigawatts.

Given these high temperatures, day ahead hourly prices were regularly higher than $1,000.00 per megawatt hour. Vistra was able to capture some of this favorability in the day ahead hourly prices and our integrated operations performed well to meet retail customer demand.

It is important to note that the July real time prices settled largely consistent with our expectations when taking into account normally actual wind and strong ERCOTwide plant performance. It appears the hype was over done coming into the summer just like the response recently on August 2018 forwards and 2019 and 2020 forwards to the downside.

As Steve Muscato will discuss in more detail later on the call, we continue to believe 2019 and 2020 will experience increasingly tight market conditions and forward curves will offer us multiple opportunities to hedge above our point of view, especially as retail players look to hedge those periods.

Despite the recent softening in the ERCOT 2018 August and 2019 forwards since we first provided combined company guidance in May, we are confident today reaffirming both our 2018 and our 2019 ongoing operations guidance ranges, which are set forth on slide six.

It is worth mentioning again that we increased our guidance for both companies in May when we initiated guidance for the combined company. If we were comparing performance today to our original guidance issued in November of last year, the beat would be significantly greater.

I also want to point out that even though current forwards are below their year to date highs, Vistra was able to hedge some of its August 2018 and summer 2019 in the spring when the forward curve ran up and was higher than our fundamental point of view. As you know, it is this volatility in the forward curve that allows Vistra to construct a realized price curve that has historically been meaningfully higher than several prices and above our point of view.

Now, you might be wondering why we are not updating our 2018 ongoing operations guidance ranges given the year to date performance that has exceeded expectations embedded in the May guidance. First of all, we already increased guidance in May to reflect higher curves in ERCOT and better expected retail results.

In addition, it would be atypical for us to update our guidance prior to closing out the summer as Vistra would typically expect to generate around 40% of its adjusted EBITDA in the third quarter. August is a very important month for wholesale operations, especially in ERCOT and the first half of September is also important in ERCOT.

As we have discussed on previous earnings calls, our ERCOT retail business performs well in the shoulder months, especially in October and December. We believe it is prudent at this point to reaffirm our guidance and wait until our third quarter call to consider and update the 2018 and 2019 guidance ranges. However, we feel very good about where we are at this point in time.

Moving on to our merger value lever targets that are shown on slide seven, I am happy to report that we remain on track to deliver the $500 million of EBITDA value levers and the $260 million of additional after tax free cashflow benefits we previously announced to achieve by year-end 2019. We also remain on track to capture the substantial tax and TRA savings and AMT credit refunds of approximately $1.7 billion.

Specifically, as we depict on slide seven, of the $275 million in traditional merger synergies, we remain on track to realize $115 million in 2018 and $260 million in 2019. We expect to achieve the full run rate of $275 million by year end 2019, allowing us to realize the full amount in 2020.

Similarly, of the $225 million of operations, performance initiative EBITDA value lever targets, we remain on track to realize $50 million in 2018 and $160 million in 2019. We expect to achieve the full run rate of $225 million by year end 2019, resulting in realization of the full run rate amount in 2020. You may recall that we are already realizing $50 million on a run rate basis from a previous OPI work completed on the Vistra ERCOT fossil fuel fleet.

On the free cashflow side, of the $260 million of additional after tax free cashflow benefit, we expect to realize approximately $70 million of benefits in 2018 and $190 million of benefits in 2019. We expect to achieve the full run rate of $260 million by year end 2019, resulting in realization of the full run rate amount in 2020.

As I have mentioned previously, we believe there could be more OPI value to come. However, it would take the balance of 2018 to prove this out, so please stay tuned for further updates on this topic. In addition, as our team continues to optimize the balance sheet to reduce Vistra's overall cost of borrowing. We could continue to see improvements in our adjusted free cashflow forecast from further interest expense savings. We will keep you apprised of these potential future benefits as they are identified.

Last on taxes, Vistra is forecasting an approximately $25 million TRA payment in 2018 related to the 2017 tax year and is now forecasting it will pay just under $10 million in TRA payments from 2020 through 2022. Importantly, Vistra still expects to not be a federal cash taxpayer from 2018 through 2022. We are also still forecasting to receive approximately $240 million in AMT credit refunds during the same period.

Turning now to slide eight, we have a few updates as it relates to capital allocation. As you will likely recall from our June analyst day presentation, we are forecasting we will have approximately $1 billion of cash available for allocation through year end 2019. This is after allocating approximately $3.6 billion of capital toward debt reduction over the same time period. Allocating cash toward debt reduction is Vistra's highest priority for capital allocation in the near term, as Vistra is focused first and foremost on achieving its long-term leverage target of approximately 2.5 times net debt to EBITDA by year end 2019.

As we announced at our analyst day in June, Vistra's board approved the allocation of up to $500 million for opportunistic share repurchases through year end 2019, We believe our stock is currently meaningfully undervalued and as a result, we have been executing on our share repurchase program since its launch on June 13th.

As of July 31st, we have repurchased approximately 6.4 million shares at an average price of approximately $23.46 per share. As such, we have executed on approximately 30% of our current authorization, leaving approximately $350 million of capital remaining to be deployed under the program.

We now expect to have approximately $550 million available for capital allocation through 2019 beyond a repurchase program. As we have discussed previously, we will be discussing a number of attractive opportunities to allocate this capital, including initiation of a dividend, investment to optimize the balance sheet and further incremental share repurchases. We will also allocate some of this capital to previously announced Moss Landing battery Storage Project.

As you may recall, this project is still subject to the California Public Utility Commission approval and will have a 20-year resource adequacy contract with PG&E. Given the PG&E contract and the enormous need for flexible peaking assets in California due to substantial solar generation, we believe Moss Landing will be a relatively low risk project and we forecast it will yield attractive returns, exceeding our 50 to 60 basis points above our cost to capital investment threshold.

We have flexibility in how much we deploy to this project in 2019 and we are likely to fund it 100% on balance sheet because we like the returns. The spreads are not that attractive and we want to keep our capital structure as straightforward and simple as possible. Of course, we always retain the flexibility to do a project financing. In the end, as we execute as expected in 2018 and 2019, we can move on a number of capital allocation fronts, including potentially initiating a dividend in 2019, which will likely be decided by year end 2018.

I'm moving now to slide nine. As you can see, beginning in 2020, after we have paid off about $3.6 billion of debt and achieved our long-term leverage target, Vistra is forecasting we'll have more than $6 billion in capital available for allocation through year end 2022. As we expect, we will convert approximately 60% of our adjusted EBITDA to adjusted free cashflow.

This meaningful free cashflow generation should enable Vistra to pursue a wide variety of capital allocation alternatives, including supporting and growing our recurring dividend, including opportunistically executing on incremental share repurchases and investing in additional strategic growth opportunities. As always, we will be disciplined in the pursuit of growth, picking opportunities that we project will satisfy our return threshold.

As you have heard me say many times before, the 60% free cashflow conversion ratio is significantly higher than that of other commodity-based capital intensive energy industries. As a result, we believe over time this unique financial characteristic will lead to a full valuation for Vistra.

It takes very little maintenance capital to support the EBITDA of the company, given the combination of highly efficient, low-cost, in the money fleet and our top-tier retail business, in addition to low cost of debt from a very strong balance sheet. We also have the commercial prowess and market liquidity to capitalize on volatility and lock in value on a two to three-year forward basis, contributing to certainty, stability, and visibility of our EBITDA and free cashflow.

However, we do not believe our stock price reflects the favorable attributes of our business. While we would like to see our stock reflect its low value, we are focused on what we control, which is executing our business plan and continuing to deliver on our commitment as we prove to the market our new business model and commitment to it can create strong, stable earnings and significant cashflow conversion, even in a challenging wholesale power price environment.

In fact, I believe the recent volatility in our stock price, which has been highly correlated to recent volatility in ERCOT North Hub August 2018 power prices, is a bit puzzling. As you know, Vistra is largely hedged for 2018. We took advantage of the previous run up to 2019 to lock in value significantly above our point of view. As Steve Muscato will discuss momentarily, we are confident we will have ample opportunity to hedge 2019 and 2020 at attractive prices above our point of view.

However, what is interesting is the volatility and recognition of tight market conditions seems to be contained to about a year forward, leaving the longer-term forwards steeply backwardated and unsupportive of new build, especially thermal.

It is our view that any thermal new build with the current forward curves would have to be underwrote on the balance sheet by a strategic, as it seems project financing would be very difficult and would require a substantial equity infusion. We do not see any more strategic lining up to place that bet.

Overall, investment in new thermal asset in ERCOT would be a very risky proposition, especially for one-off projects. In the end, if the forwards remain backwardated, the ERCOT market should remain tight and attractive.

Before I leave the new build subject, I would like to comment on a recent Platts Megawatt Daily article that suggested ERCOT has 3,550 megawatts under construction that will help relieve the tight supply/demand dynamics in the market. In the article, Platts Megawatt Daily indicated that 848 megawatts of new gas peakers are under construction. In fact, our research suggests that all of those assets are either in commercial operations already or they're in testing mode ready to be released, they're abandoned, or behind the fence.

In short, to the best of our knowledge, there are no new or material plants under construction in ERCOT between now and summer 2019. Most of the balance of new build cited in the article is wind capacity, but the article is reporting nameplate capacity, ignoring the fact that the peak contribution of wind is generally only around 20% of nameplate capacity, thus meaningfully overstating supply that would be available to market, not to mention congestion issues in the panhandle, where wind is at its best.

It is also important to note that peak ERCOT load is forecast to grow by approximately 2% each year, which is about 1,400 megawatts and with no plants under construction, we believe reserve margins will remain well below ERCOT's target reserve margin of 13.75% for their foreseeable future.

We remain excited about the future of our company and the value proposition we bring to investors. We believe our business model, centered on low leverage, integrated in low-cost operations, disciplined growth, and a commitment to return substantial capital to shareholders is a winning formula and will lead to long-term shareholder value.

I would now like to turn the call over to Steve Muscato, our Chief Commercial Officer, to give an update on the ERCOT wholesale power market. Steve?

Steve Muscato -- Senior Vice President and Chief Commercial Officer

Thanks, Curt. Turning now to slide 11, we wanted to spend a few minutes on the call today discussing the state of the ERCOT market. As many of you know, Texas experienced extreme temperatures the last two weeks of July. During this period, ERCOT saw meaningful daily and intraday volatility, as is depicted on the two graphs on the slide.

During the two-week period, ERCOT North Hub on peak day-ahead average prices were consistently above $100.00 per megawatt hour and even reached $401.00 per megawatt hour on July 23rd, with a single hour exceeding $2,000.00 per megawatt hour. These high day-ahead prices provided Vistra the opportunity to sell unhedged length at attractive prices during the month of July.

However, while day-ahead prices during the month of July were strong, real time prices came in meaningfully lower during the month. Real time prices settled below the day-ahead market because ERCOT had sufficient supply to meet the demand despite the above average temperatures, specifically, July 2018 wind production at the peak hour was right around the average wind production at the peak hour over the last three years in July.

Outages in July this year, however, were well below the July average over the last three years. As a result, generation supply in ERCOT was robust enough to meet the peak demand, as represented by real time prices.

Importantly, however, even though July prices did not reach the scarcity extremes that some might have expected during the July heatwave, average July on peak day-ahead prices still averaged approximately $112.00 per megawatt hour. As a result, we are well-positioned heading into August.

Turning now to slide 12, you can see there has been meaningful volatility in the ERCOT 5x16 summer heat rates, particularly for 2018. It is this volatility that gives Vistra the chance to opportunistically hedge when forwards are above our fundamental point of view. In the spring of 2018, for example, ERCOT forwards traded above Vistra's fundamental point of view and we took the opportunity to hedge some incremental open length into this attractive forward pricing. Vistra's hedging approach turns this price volatility into earnings stability. It is important to note that Vistra is net long generation. When we talk about our hedging approach, it reflects locking in value against this net long position.

Even though we have seen less volatility in the 2019 and 2020 forward curves, Vistra has still been able to hedge incrementally in those years when volatility was present. In particular, as you will see on slide 26 in the appendix, Vistra is now approximately 91% hedged on a natural gas equivalent basis in 2019 and approximately 58% hedged on a heat rate basis in 2019. We continue to believe both the 2019 and 2020 forward curves will improve from their current trading levels.

Much like the 2018 forward curve did not move meaningfully higher until the early part of 2018, we believe 2019 and 2020 forward curves will continue to improve as we get closer to the prompt summer. Load in ERCOT is expected to grow at approximately 2% a year and ERCOT is not expected to see any meaningfully new thermal generation over the next two years.

As a result, we believe the supply demand forecast will remain tight and the forward curves will only improve in the months to come, as we depict on slide 13. In the chart on the left-hand part of the slide, we have taken the ERCOT May CDR and backed out any new thermal generation that is in the CDR forecast for 2019 and 2020, but that is not yet under construction on the premise that if you are not yet under construction today, you will not be online by 2020.

Making only this adjustment, ERCOT should see a declining reserve margin from 2018 through 2020, implying that tight supply and demand conditions are only going to persist in ERCOT in the coming years.

Despite these declining reserve margins, the current 7x16 North Hub Spark Spreads are meaningfully backwarded, as we depict on the right-hand side of the slide. Given the tight reserve margins, we expect through at least summer 2020, we believe this backwardation will reverse at some point in the future.

Importantly, and as Curt indicated earlier in the call, the backwardation earlier in the curve makes the development and construction of a new CCGT in ERCOT uneconomic and highly unlikely, especially because ERCOT is an energy-only market, making it difficult to secure financing. As a result, so long as financial players make rational decisions as it relates to new investment, it remains our view that the supply/demand dynamics in ERCOT will remain favorable, likely even beyond summer of 2020.

With that, I would like to turn the call over to Bill Holden to discuss second quarter financial highlights.

William "Bill" Holden -- Executive Vice President and Chief Financial Officer

Thank you, Steve. Turning now to slide 15, as Curt mentioned, Vistra concluded the second quarter of 2018 delivering $653 million in adjusted EBITDA from our ongoing operations, exceeding our expectations for the quarter that were embedded in our guidance. Excluding the negative $10 million impact of the partial buyback of the Odessa powerplant earnout in May, Vistra's adjusted EBITDA from its ongoing operations would have been $663 million. Expect this partial buyback to have a three-year impact net of the premium pay of $2 million.

Vistra's second quarter 2018 adjusted EBITDA from ongoing operations of $653 million compares favorably to our expectations for the quarter because of higher realized prices and strong unit performance in our key generation segments, lower operating cost, and favorable results in ERCOT retail that were offset by higher power costs in the Ohio retail market.

Segment results for the quarter can be found on slide 20 in the appendix. You will see that following the merger with Dynegy, Vistra is now reporting six segments -- nationwide retail, ERCOT wholesale, PJM wholesale, New York/New England wholesale, MISO wholesale, and the asset closure segment. The corporate and other non-segments consist primarily of corporate expenses, interest, and taxes and CAISO operations.

Year to date, Vistra's adjusted EBITDA from its ongoing operations is $916 million, which reflects six months of results from the legacy Vistra operations and results from the legacy Dynegy operations for the period from April 9th, 2018 through June 30th, 2018. Excluding the negative $28 million impact of he partial buybacks of the Odessa powerplant earnout that we executed in February and May, Vistra's adjusted EBITDA from ongoing operations would have been $944 million for the period. We expect these partial buybacks to have a positive impact net of the premium paid over the period from 2018 through 2020.

Turning now to slide 16, you will see that Vistra is reaffirming its 2018 and 2019 guidance for its ongoing operations. As a reminder, Vistra's 2018 guidance reflects Vistra's results on a stand-alone basis for the period prior to April 9th, 2018, and anticipated results of the combined company for the period from April 9th through December 31st, 2018.

Vistra is reaffirming its 2018 guidance, forecasting adjusted EBITDA from ongoing operations of $2.7 billion to $2.9 billion and adjusted free cashflow from ongoing operations of $1.4 billion to $1.6 billion. Vistra is also reaffirming its 2019 guidance, forecasting adjusted EBITDA from ongoing operations of $3.2 billion to $3.5 billion and adjusted free cashflow from ongoing operations of $2.05 billion to $2.35 billion.

You'll see on slide 16 that we have updated our 2018 and 2019 forecast for the asset closure segment. As we continue to finalize purchase accounting and evaluate the asset closure obligations of the legacy Dynegy fleet, we expect the forecast for this segment could continue to shift in future quarters.

I would note that we included our current 10-year forecast for the asset closure segment on slide 21 in the appendix for today's investor presentation. Adjusted free cashflow for the asset closure segment is driven mostly by expenditures from mine reclamation work and plan retirement costs. It also includes property taxes, fees, and allocated support costs. As you will see, we expect the cash spend for the asset closure segment to fall off significantly beginning in year six. We expect the cash spend to decline even further beyond year ten.

It is important to note that much of the spend in the next ten years is included in the ARO reserve on our balance sheet. In addition, the current forecast does not reflect potential optimization opportunities, including potential sales of property. As always, Molly is available to answer any detail questions you may have.

Finally, turning to slide 17, as we discussed at our June analyst day, Vistra has already begun to reduce its leverage and optimize its capital structure, most recently repricing and refinancing approximately $5 billion in debt and consolidating the legacy Vistra and legacy Dynegy revolvers into a new $2.5 billion facility.

As a result of the increase in revolver capacity from $2.3 billion to $2.5 billion, Vistra has reduced its minimum cash requirement from $500 million to $400 million as is now reflected in the table on slide 17.

Following the anticipated voluntary retirement of approximately $2.4 billion of senior notes through year end 2019, we expect to achieve our long-term leverage target of 2.5 times net debt to EBTIDA and have approximately $550 million of capital for allocation. This $550 million is in addition to the $500 million of capital that has already been allocated to opportunistic share repurchases.

As we continue to optimize our balance sheet and reduce our total debt, Vistra also will continue to focus on minimizing our total borrowing costs, which could provide incremental opportunities to improve our free cashflow savings from the merger.

As Curt mentioned previously, assuming we achieve our long-term leverage target at year-end 2019, Vistra's capital available for allocation is forecast to increase materially. Vistra's forecasting it will have more than $6 billion of capital as a return of capital through share repurchases or dividends or to invest in strategic growth investments from 2020 through 2022.

This healthy cashflow forecast is a direct result of our ability to convert approximately 60% of our adjusted EBITDA from ongoing operations to adjusted free cashflow, an operating characteristic that we believe sets us apart from other commodity-exposed capital-intensive industries and one that we expect will create meaningful shareholder value over the long-term.

With that, Operator, we are now ready to open the line for questions.

Questions and Answers:

Operator

At this time, I'd like to remind everyone in order to ask a question, please press * then the number 1 on your telephone keypad. Your first question comes from the line of Shar Pourreza with Guggenheim Partners. Your line is open.

Shar Pourreza -- Guggenheim Partners -- Analyst

Hey, good morning, guys. So, Curt, if you're correct around the curves and you layer on incremental hedges post-summer peaks, you could actually end up with somewhat higher available capital than you currently project, right? So, how are you thinking about the size of buybacks, especially given the recent weakness in the shares? The stock is trading somewhere in the mid-double-digit free cashflow yields here. So, has the size of the buybacks, has thought process even evolved since the analyst day or could it evolve?

Curtis A. Morgan -- President and Chief Executive Officer

Yeah, Shar, it could evolve. I think the way we have discussed it with the board is that depending on where our share price is, it could continue to be the best investment that we can make. I think it's a trade-off, frankly, in '18, '19 because this is not an issue once you pay down debt in '19 because then our cashflow is strong.

But it's a real question of whether you continue to do share buybacks or whether you institution a dividend. We're very focused, as you know, because you've been with us talking to investors. We're trying to get feedback as to what we think the right use of that capital would be in '19 because that's really where the choice has to be made because we're so focused on paying down debt and we're going to have some excess cash.

Now, if we have better cash picture than what we're talking about right now, you can do both. So, we're going to look at that, obviously, and try to manage that. Right now, given where our stock is, we think it is a very good investment for the company to buy back our shares. We still have a significant amount left to do and we're going to be focused on it.

I will add too that I think when we instituted the buyback program, we were at around $24.00. We would have gone meaningfully above that and continued to buy back because we feel our share price is well north of even that. I think you'll see us execute that $500 million. I think we'll talk to the board near the end of this year about what we're going to do.

This is why we also want to see how we come out of the summer and what our cash position looks like. I think by the end of this year, we're going to be able to come back out to the market probably around the Q3 call and we'll be able to talk about what capital allocation might look like in '19. That will definitely include both share buybacks as well as a recurring dividend.

Shar Pourreza -- Guggenheim Partners -- Analyst

Okay. That's perfect. Just remind us the recurring dividend, assuming the board approves it, obviously, assuming when you can pay out your first.

Curtis A. Morgan -- President and Chief Executive Officer

So, the timing is what you're asking me?

Shar Pourreza -- Guggenheim Partners -- Analyst

That's correct.

Curtis A. Morgan -- President and Chief Executive Officer

I think this is a question we need to talk to the board about. It has to do with what our cash picture looks like. I don't want to get out in front of the board on this one. If we did so, it would be some time in '19 and I would guess it would probably be more in the first half, but we need to talk to the board about this, but it's in that kind of time frame.

Shar Pourreza -- Guggenheim Partners -- Analyst

Got it. Just on the leverage, since you mentioned it, how are conversations, if any, going with the rating agencies as far as thinking about maybe an investment-grade rating?

Curtis A. Morgan -- President and Chief Executive Officer

We have not had a conversation with the agencies yet because we're still above where we want to get to. I feel like that's a '19 issue that maybe late '18, '19 where we'll engage with them. I think we also, they're like everybody else about this sector. They want to see it first. So, I think we have to execute and demonstrate to them.

We have not yet engaged. We've had some cursory discussions with the agencies, but we have not had a detailed discussion. I think what we will end up doing is going in to see them with a detailed presentation of what our financial plan looks like and have direct discussions, but that's probably later this year, early '19 before we engage in that.

Shar Pourreza -- Guggenheim Partners -- Analyst

Got it. Then just lastly on the synergy stuff, it's good to see you guys are achieving them ahead of schedule and like there's upside. On the timing of the upside as far as the adjusted EBITDA or free cashflow levers, is the 2019 story as well or are we going into 2020 as you think about incremental opportunities.

And then just in general, I think in some of your prepared remarks, you gave some color there, but where are the incremental levers coming from? Is it around further optimization, additional maybe one or two cold retirements, refis? Just a little bit of color around where you're seeing the incremental levers post deal closing.

Curtis A. Morgan -- President and Chief Executive Officer

So, on just the operations performance initiative, the OPI process, that's probably more'19, later '19 and probably into '20 because it takes time to get through each of these plants. Each plant, there's probably 100 different ideas that end up getting implemented. That's all about getting through our process. I would guess that's what that looks like.

In terms of incremental interest expense savings through optimization of the balance sheet, that could be later '18 into '19. So, there are things that we're looking at right now that could reduce interest expense and optimize the balance sheet. There may be a little bit on the synergy side, but we probably wouldn't talk about that until the Q3 call and it's not a material amount. I think those are the things that we still have available to us.

I think the nice thing is Q3 call, we will have a little bit to talk about there and then extending into '19, we'll have a lot to talk about. If you think about it, we're going to have a good year this year relative to any expectation. Shar, I do want to reemphasize to folks here that we came out with guidance back in November. We used October curves. That's what everybody else is using. We then increased it to basically the end of March curves, which were substantially higher.

So, we already increased guidance already this year once and then we're beating relative to that, whereas the other guidance that you guys are hearing are probably back into the October of 2017 curves, which are meaningfully lower. We're continuing to produce strong earnings, strong cash. We have catalysts coming forward as well around the OPI effort and other balance sheet improvements.

Then we're going to talk to the market about whether we're going to continue to buy back shares and/or do a recurring dividend. We feel good about the catalysts coming forward in the next six months and we'll have a lot to talk about.

Shar Pourreza -- Guggenheim Partners -- Analyst

Got it. Yeah, you guys have a lot of near-term catalysts. Appreciate it. Congrats.

Curtis A. Morgan -- President and Chief Executive Officer

Thanks.

Operator

Your next question comes from the line of Praful Mehta with Citigroup. Your line is open.

Praful Mehta -- Citigroup -- Analyst

Thanks so much. Hi, guys.

Curtis A. Morgan -- President and Chief Executive Officer

Hey, Praful.

Praful Mehta -- Citigroup -- Analyst

Quickly on the EBITDA for this quarter, you mentioned this was higher than what you have embedded in your guidance. Can you give us any sense for how much higher was the EBITDA and obviously, you're going to look at full-year guidance as well, but is there any color you can give us on where that is tracking broadly?

Curtis A. Morgan -- President and Chief Executive Officer

So, on the front end, Bill, do you want to -- I think we can tell generally how much higher it was, right?

William "Bill" Holden -- Executive Vice President and Chief Financial Officer

Yeah. Basically, I'd say retail was roughly in line. The wholesale segment was higher. It's probably in the $60 million to $70 million range.

Curtis A. Morgan -- President and Chief Executive Officer

I think that's right. Then on the full-year basis, we're not ready to -- remember, this is against the higher guidance that we gave in May. We're not ready to do anything with full-year guidance. I think that's because August is playing out. Weather has subsided a bit in early August, but you guys know this -- ERCOT weather can change on a dime. So, I think it's prudent for us not to do anything yet on full-year guidance. We'll have a lot to talk about at the Q3 call around that.

So, I think it's better for us to hold on at this point on full-year guidance. As I said in my prepared remarks, we feel pretty good about where we are for 2018, especially given the fact that we had increased guidance to much higher curves than the back of the October '17 curves that others are using.

Praful Mehta -- Citigroup -- Analyst

Understood. Thanks. Then this asset closure segment -- just so we understand, the MPV of almost $500 million you're negative, you said there were funds on the balance sheet to support most of it. Can you just give us a sense of how much cash is sitting to kind of support this asset closure investment over time?

William "Bill" Holden -- Executive Vice President and Chief Financial Officer

Yeah. Praful, I think what we're referring to is the asset retirement obligation for which a liability has already been booked for those expenditures. If you look at it, the total at the end of Q2 for mining and plant retirement, asset retirement obligations was about $1.68 billion in total and roughly half of that would be attributable to the asset closure segment.

Curtis A. Morgan -- President and Chief Executive Officer

So, Praful, another way to say this is if you were looking at the asset retirement obligation on the balance sheet of both Vistra and Dynegy all along, which I assume you guys look at it because that is the MPV of what the future expected retirement obligations are of the company. That number has not changed much.

So, that total has been and continues to be about the same and about half of that relates to the asset closure segment. There's another rather large obligation related to the nuclear plant, Comanche Peak. You probably know this. There's a surcharge in the encore rates that will actually go against that. We do have a large reserve against that particular obligation that grows over time as that surcharge is collected. Then obviously we invest in conservative securities to earn a return on what we have in the reserve to go against that.

Praful Mehta -- Citigroup -- Analyst

Gotcha. Super helpful. Then finally, just quickly on ERCOT -- there's ongoing debates on what's actually better for IPPs, whether it's the volatility like this and not enough price movement to attract new build or do you prefer to have the spikes and see some new build come in over time just to keep some kind of stability on the ERCOT market? Where do you see your preference? What would you rather see in ERCOT and how should it play out?

Curtis A. Morgan -- President and Chief Executive Officer

I think somebody called it -- I can't remember which one of you guys called it the Goldilocks, we want it just right. What's just right? I think for us, in particular, we like summers and kind of the 105-106 range. That's a good sweet spot for us in the way that we're set up. But we can't be too concerned about what the new build situation is going to be.

I think we would prefer, actually, I would prefer to see stronger forwards two or three years out because I think it would reflect reality in that there's not new development. Would that bring on new development, I don't know. All I know is the previous time when this market came out and the forward curves did respond two to three years out, people built into it and they overbuilt the market and some people, there were bankruptcies.

So, I would hope that investors would be mindful of that because there's always that balance of wanting the forwards to reflect what reality is and that we can hedge into, but then the overexuberance of developers that push projects and overbuild the market. It's really a delicate situation. It's hard for us because we don't control it. We have been very open about this. We run the economics on new build and we just don't see it on the thermal side in the forwards right now.

For us, the way that plays out is as we roll into the prompt year, forwards keep popping up and then we hedge into that and we'll take advantage of it. What is, I guess, uncomfortable is when investors look at it and you guys look at it, you don't see a higher forward curve and so it's hard for you to ascribe higher earnings power to the company because it's not reflected in the forward curves, but we do the fundamental analysis and when you do that, the supply and demand is not going to change.

In fact, it gets more favorable for existing generation over the next couple of years. There is definitely a dilemma here when you look at the market and you say, "Well, the curves don't reflect it, yet the fundamentals do. All that we can do is take advantage of the volatility and hedge into it when it's above our point of view and that's what we're doing." Again, if you ask me what I would like to see, I'd rather see the forward curves come up and reflect reality in '19 and '20 and take the risk on the development side because I think that it's not that long ago where people were going bankrupt.

I also think there's no strategic right now who are out there willing to plump down $1+ billion in ERCOT again. I think it's going to be developers. Then it's very, very difficult. I know this. When I was at ECP, it's extremely difficult to get financing on an ERCOT-based asset, even an existing one that we acquired when I was at ECP. So, I prefer to see the forwards reflect reality. I just don't think it's doing that right now. That's our own fundamental view and that's what we would prefer.

Praful Mehta -- Citigroup -- Analyst

Thanks so much, guys.

Operator

Your next question comes from the line of Steve Fleishman with Wolfe. Your line is open.

Steve Fleishman -- Wolfe Research -- Managing Director

Hi, good morning. Just on the asset closure segment. The slide 21 reflects, I think, the costs per closure. Could you just remind us of the EBITDA benefits so we have the full picture together?

Curtis A. Morgan -- President and Chief Executive Officer

You're talking about the benefit from shutting down the three ERCOT plants, Steve? Is that what you were talking about?

Steve Fleishman -- Wolfe Research -- Managing Director

My recollection is you'd already pulled out -- part of your guidance is the savings from closure and then this is the cost. I just want to kind of have the full picture. Maybe this is the net cost including the EBITDA benefits.

Curtis A. Morgan -- President and Chief Executive Officer

I just want to make sure I understand the question. The EBITDA we're showing is the actual EBITDA effect and it's on slide 16, from the asset closure segment. That's a drag, if you see that, Steve, that's on 16. Then we have the actual cash expenditure, which is, just to be clear, in the first five years, it is largely the remediation of the mines. That's why you see that substantial decline. We expect it to further decline after the tenth year as well over time.

Frankly, those have always been our ARO. It's just an acceleration of that because we decided to shut down plants. I think, Steve, if I'm getting you right, you're asking is there -- I will tell you we have not pulled out what you would call -- you could say the drag is what the savings is. We are not going to get the drag anymore. I think that's a way of thinking about had we had those in there, that drag in there...

Steve Fleishman -- Wolfe Research -- Managing Director

Right. Correct. And then the 2019 asset closure, if you go to slide 16, that EBITDA and that free cashflow benefit, essentially getting rid of that drag, those would be roughly the ongoing impacts as well for when we're trying to match the cost versus that benefit of avoiding this drag.

Curtis A. Morgan -- President and Chief Executive Officer

Yeah. It actually declines a bit too over time. So, we did not provide those, but that EBITDA declines as well, not on a proportional basis, but it does decline I think into the $40 million to $50 million range over time. If you would see that also decline, that benefit, if you will.

Steve Fleishman -- Wolfe Research -- Managing Director

Okay. And then just any way to give a sense of the Moss Landing investment size?

Curtis A. Morgan -- President and Chief Executive Officer

Yeah. I think we have some confidentiality issues, which is what we've been dealing with. I don't want you guys to think we're being difficult here. I think we used, I think, $300.00 of kWh range. I think the map is if you take that against 1,200. That's about as clear as I want to get on that. I'd hate to be that way, but we've got some issues around what we can disclosure directly.

Steve Fleishman -- Wolfe Research -- Managing Director

Is it like a 50/50 investment or are you going to own the whole thing?

Curtis A. Morgan -- President and Chief Executive Officer

We're thinking about basically doing it on balance sheet. We like the returns. The spreads are just not compelling. You know a little bit about what's going on with PG&E, but they are still investment grade, but the spreads just aren't that compelling. At this point in time, our view is we would do this 100% on balance sheet.

Steve Fleishman -- Wolfe Research -- Managing Director

And you own the whole project?

Curtis A. Morgan -- President and Chief Executive Officer

Yeah. The other thing is Steve, you know that I've got enough battle scars on me going back into the late 90s, early 2000s where everybody was project financing and trying to have mezzanine-type financing, all kinds of things. Our view is that it's a lot better to simplify our capital strategy. To the extent we like the returns and the spreads aren't great, we'd prefer to keep our capital structure simple. So, we are likely to do this 100%. We could project finance it at any time, but we believe it's better to be on balance sheet.

Steve Fleishman -- Wolfe Research -- Managing Director

And then just one last quick one on the -- just your quick take on the FERC order on subsidized generation and capacity and potential alternative FRR?

Curtis A. Morgan -- President and Chief Executive Officer

Yeah, so PGM?

Steve Fleishman -- Wolfe Research -- Managing Director

Yes.

Curtis A. Morgan -- President and Chief Executive Officer

Well, first of all, I think FERC -- I said this analyst day and I'll say it again -- I think FERC has largely been constructive over the years. I can remember LICAP and ICAP and PCM, but LICAP and ISO-New England, these things were clearing at next to zero. We've actually seen much higher capacity clears. But I also will say equally that states are getting more and more proactive in what they're doing.

But I believe that PGM and FERC are going to come up with a solution that will be either net neutral. I just can't imagine them agreeing to something that when you model it out would be negative to where we are today. I think it will be at least net neutral. I think FRR has the potential -- by the way, the devil is in the details of how FRR is implemented because the details around that, how much load do you take out?

How much do you credit against a single resource, which is a block resource against a shape demand curve? How much do you actually cut out? I don't want to get too into the weeds here. Depending on how that plays out, FRR could actually be slightly positive to neutral.

We actually have an idea which I don't want to front-run right now because we're trying to work this with a group of people that we think is -- I won't say it's a better idea. Let's put it this way -- with the way that FERC is constructed right now with Commissioner Powelson leaving, you've got to cobble together three votes inside of FERC. We believe there's a path where we believe there are three votes.

I think that's important too, Steve, to get those three votes and be able to put something in place because the status quo today is not good, where they're able to offer into the market, where there are no restrictions on renewables coming into the market. There are basically three exemptions right now in the market. We do think there are a couple of ideas we're trying to go forward with.

We're trying to work, as I said, with a number of different parties to try to get people to sign off. I think the strength is in numbers when we go to FERC and we think we may have a coalition. I think it can be net neutral to positive. I think FRR is probably the weakest in our view for what it would be for us.

Again, the devil is in the detail on that. There are a couple of other structures that we like. I don't believe you'll get through a straight MOPR-Ex with complete exemptions that shuts out the states. I think if folks are holding out for that, I believe that has an extremely low chance of success because I do believe FERC believes that part of their role is to try to work with states and some of the things that states are trying to accomplish.

The good news is there are probably some things in between that are good for the capacity market, not perfect, but good, and would be good for our company and that's what we're trying to work on is a coalition to get something done that would be net positive but that FERC could live with from a states rights standpoint.

Steve Fleishman -- Wolfe Research -- Managing Director

Interesting. Thank you.

Operator

Your next question comes from the line of Julien Dumoulin-Smith with Bank of America Merrill Lynch. Your line is open.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Hey, good morning.

Curtis A. Morgan -- President and Chief Executive Officer

Hey, Julien. How are you doing?

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Good. Thank you very much. Excellent. I just wanted to follow-up maybe to complete the last thought here on capital availability. You talked about Moss Landing CapEx being in the zip code of, say, $400 million, my words, not yours. How do you take about the timing of that between '19 and '20 relative to the $500 million remaining available for allocation? Should we basically think about that as $200 million and $200 million? Take $550 million and take out a couple hundred million for Moss?

Curtis A. Morgan -- President and Chief Executive Officer

It could be. The good news is there are a couple of things we could do if we wanted to manage cash for '19. It's really just a '19 issue at the end of the day. We could do a construction financing or we could work with our suppliers in terms of timing of payment. There are all kinds of things we can do around how we end up paying the cash out the door for that project. So, I think for modeling purposes. I think if you said $200 million and $200 million, that's probably fair enough or you split it half and half. I think we can optimize around that.

I think that will depend on what the opportunities are from a capital allocation standpoint, whether that be additional share repurchases or whether that would be a recurring dividend and the timing of that recurring dividend. There could be other sources of cash that may come in as well that we may use against that as well. I think we have -- the good news is it's a '19 issue. I think it's a good issue to have. We can manage it. We can push more into '20 if we wanted to.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Excellent. Just turning to slide 25 really quickly and the commercial ops -- maybe this is a Steve question -- can you elaborate a little bit versus 1Q, versus 2Q, you've had some changes in estimated generation. If you multiply relative to the estimated '19 realized price, it doesn't seem like too much of a change, but can you elaborate on some of the puts and takes going on there? It might be slightly lower across all that regions.

William "Bill" Holden -- Executive Vice President and Chief Financial Officer

I can start, Steve, with at least one thing. If you're talking about ERCOT, which I think is probably where most of that shows up, as we've incorporated the Dynegy assets, we've put their combined cycle plans on our dispatch protocols and essentially, we're showing less generation during the lower cost shoulder hours than would have been in the Dynegy forest.

Steve Muscato -- Senior Vice President and Chief Commercial Officer

Yeah. Basically, it's cycling the combined cycle a little bit more in our models than it did in the Dynegy models, previous.

Curtis A. Morgan -- President and Chief Executive Officer

Hey, Julien, I'll add something. We did a study before -- I think this is helpful when you think about combined cycle plans and given their ability to cycle on and off. That movement -- about 80% of the runtime for combine cycles is in the money. The other 20% of that is generally sort of a breakeven-type pricing. So, if volumes move within that ban, it really doesn't move margin at all. We modeled that and not only modeled it, we then have back-tested it with reality. So, there's just not a lot of margin in those hours.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Got it. Hence, at the end of the day, '19 elections aren't really moving around all that much, especially practically speaking given this was always your expectation of combined cycle output on the margin?

Curtis A. Morgan -- President and Chief Executive Officer

That's right. Yeah.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Got it. Alright. Thank you.

Curtis A. Morgan -- President and Chief Executive Officer

Thanks a lot, Julien.

Operator

Your next question comes from the line of Abe Azar with Deutsche Bank. Your line is open.

Abe Azar -- Deutsche Bank -- Analyst

Good morning. Can you talk about the hedging strategy, why you hedge natural gas more aggressively than heat rate in the second quarter?

Curtis A. Morgan -- President and Chief Executive Officer

Sure. Steven, go ahead.

Steve Muscato -- Senior Vice President and Chief Commercial Officer

Sure, I can take that. When we looked at the production growth associated with gas coming out of places like the Permian, with strong oil prices, that continues to grow pretty rapidly. In addition, the Freeport LNG was delayed. So, when we looked at the combination of those two events, we just thought there was more probability of downsizing gas than upside, so we wanted to take that risk out, which is why we increased our hedge percentage pretty dramatically, up to around 91% in the 2019 period.

Abe Azar -- Deutsche Bank -- Analyst

Great.

Curtis A. Morgan -- President and Chief Executive Officer

Abe, I'll add we're pretty bearish at a point with gas in the next couple of years. There's just a ton of gas that keeps coming. The one thing -- I can't get into any of the details -- but we have ways of doing this too where we basically stop out the downside. We do that on an almost costless basis. We give up some of the upside on gas.

Because our skew is more to the downside on gas, we're willing to give that upside away. And we're able to hit our $3+ billion EBITDA target. So, while you're given a little bit of upside away, you're preserving a band of upside in a way that we do this, but the key is you're really protecting your downside, which is where we see the greater probability of occurrence.

Abe Azar -- Deutsche Bank -- Analyst

Great. My follow-up is what have you learned about supply and demand balance in Texas from the summer that informs your view of future tightness? Is there anything in the way the supply stack performed that makes it different than your assumptions going into the summer?

Curtis A. Morgan -- President and Chief Executive Officer

Well, I'll add some and then Steve, if you want to add to it, you can. The fleet, meaning the entire ERCOT fleet of assets, has outperformed the summer, meaning relative to the last three years, outages have been I'd say materially below. So, you can argue that's a good thing for keeping the lights on, but I think it has -- people got prepared, they saw it coming, they did the investments they needed for the summer and so far, they have performed.

The real question is if you get another heatwave or two, what happens here is you get the fatigue of some of the plants and we'll see what happens. But so far, I think that has outperformed in the market from what we've seen.

The thing that was largely within expectations, we did see a little bit of supply come in imported that we were not expecting to come in. I think it came in -- Steve, you want to just mention that?

Steve Muscato -- Senior Vice President and Chief Commercial Officer

Sure. Up in the Panhandle -- the only issue, I would say, is there are units up in the Panhandle that are NSPP that can switch back and forth. So, they switched into ERCOT and were able to flow over the Panhandle lines because the Panhandle wind was low. That's really the only, I guess, material issue that we have to watch.

Curtis A. Morgan -- President and Chief Executive Officer

And that's not that huge a surprise, although we hadn't seen it recently, but that's just because prices had been dead. So, to have that swing in wasn't a huge surprise to us, but it did happen. That's because we had strong pricing. Other than that, though, it largely has come in the way that we saw it come in and I think we were prepared for it. The good news is too our integrated model worked. Our generation generated value and in some cases our retail business had higher costs for the incremental volume. The generation was more than offsetting. So, at the end of the day, it worked out pretty darn well for us.

Abe Azar -- Deutsche Bank -- Analyst

Great. Then shifting gears a bit -- is there an opportunity to sell the assets from the asset closure segment such that you don't have an ongoing liability similar to the way some companies have divested the nuclear plants, recently?

Curtis A. Morgan -- President and Chief Executive Officer

Yes. The short answer to that is yes. We have not baked that in. That's an optimization opportunity. We're actually in the process of running an RFP for a number of these, scrap metal guys and others, as appropriate. I expect us to manage that liability down. We're being conservative and we have not put that against it. I think Dynegy did that at Brayton Point. You saw that. That was a significant reduction in what they would have had to end up paying on that. You can expect that we will be looking to do the same.

One thing I do want to make a point about is that on the remediation as it relates to the mines, we have to do that work. We could offload it to somebody else if they wanted that land -- and there is interest in it -- the point being with the dismantlement and recovery of a site with a powerplant, you have some time to do that. There's nothing that's compelling you that you have to do it. You can wait for scrap metal, the markets to be better.

As it relates to the remediation of mines, you have to do that pretty much immediately after you shut those down. Then ash ponds, you have a timeframe, but it's relatively near-term. We have a little bit of flexibility around it, but that's why we're out right now trying to run some of these RFPs because we want to get out in front of this. We could see a meaningful change in this liability if we can do that. We don't know that and so we don't want to bet on it.

Abe Azar -- Deutsche Bank -- Analyst

Thank you.

Operator

Your next question comes from the line of Michael Weinstein with Credit Suisse. Your line is open.

Michael Weinstein -- Credit Suisse -- Analyst

Hi, guys. Steve, maybe you can talk a little bit about -- you mentioned it's puzzling that tightness doesn't extend beyond one year. In your conversations with other market participants in ERCOT, what's the driving factor that you see behind the reason why people aren't willing to buy beyond one year at this point?

Steve Muscato -- Senior Vice President and Chief Commercial Officer

I think it's driven by two things. One is the contract period for retailers, they don't typically buy three to five years. There's a lot of buying typically on the front. That's just what we'll call a supply and demand dynamic. I think the other thing is this is kind of a show me market. We've historically seen either strategics, like other companies come in, like Exelon previously building combined cycles on balance sheet and prior to that, we saw Panda come in and finance some units. So, I think people are kind of waiting and seeing to see if there's any type of irrational build, but I think it's a combination of those two factors.

Michael Weinstein -- Credit Suisse -- Analyst

That makes sense. Also, just generally speaking, the 60% cash flow conversion rate from EBITDA, do you look at that as a fixed number going forward or is that something that trends in an upward direction over time? I'm just curious.

Curtis A. Morgan -- President and Chief Executive Officer

I'm sorry. Can you say that again?

Michael Weinstein -- Credit Suisse -- Analyst

Yeah, more for Bill. The 60% cashflow conversion rate -- I'm just wondering if that's something you view as kind of a consistent constant over time or is that something that trends in one direction or another?

William "Bill" Holden -- Executive Vice President and Chief Financial Officer

Yeah. I think in general, on average, 60% over time now. Curt did mention that we have the potential to do some things going forward like additional transactions to reduce interest expense, those types of things that become a net pickup for the balance of the forecast and the free cashflow conversion ratio.

Michael Weinstein -- Credit Suisse -- Analyst

And the extra $50 million that seems to be available for the second half of the capital allocation program, that's driven mostly by the results so far this year? Is that safe to say?

William "Bill" Holden -- Executive Vice President and Chief Financial Officer

Yeah. I think the biggest change is when we completed all the secured debt financing transactions that we closed in mid-June, we were able to get a revolving credit facility that was $2.5 billion. The combined company, the sum of the two revolvers that we had before that were a little bit less than that. So, essentially, we're able to reduce our minimum cash requirement by about $100 million and that flowed through into the cash available.

Michael Weinstein -- Credit Suisse -- Analyst

Gotcha. And then one other thing -- I think Curt, you may have just misspoke or maybe this was kind of an off the record comment, but I think you said you would definitely be including more buybacks in 2019. Obviously, that's going to be pending a board decision. Is that something you see is at least part of the capital allocation, the part of it that would almost definitely be additional buybacks in addition to everything else?

Curtis A. Morgan -- President and Chief Executive Officer

I think it's a function of where our stock trades relative to what we see as the value. So, what I was trying to make a point is I think we got a couple of good allocation opportunities. One is our shares, if they're attractive, but two is a recurring dividend.

I think other than paying down debt, those would likely be the things we would look at doing. Bill mentioned that we may do some things, what I would refer to as an investment in our balance sheet that may use a little bit of cash, but overall, our focus is pretty clear. It's pay down debt and then have some allocation opportunities that would return capital to shareholders.

Then of course, there are other things we may end up doing that might shore up the cash picture of the company. We might rationalize the portfolio a little bit. We may consider that. Clearly, looking at the Illinois fleet and rationalizing that, if that's what the answer becomes, all can be helpful in the cash picture of the company. I think those are a real focus for us over the next six months.

Michael Weinstein -- Credit Suisse -- Analyst

Just one last question on that same point -- asset rationalization, you talked about California and as you just mentioned Illinois and possibly the one asset you have in New York. When do you think those decisions could be made? Is that more of a 2019 issue as well?

Curtis A. Morgan -- President and Chief Executive Officer

I think the MISO strategy is going to play out over multiple periods. I would say as early as maybe later this year and into '19, we have some decisions to make. I think the sooner the better on that. If we're losing money, we have to make some choices and you would expect us to do that.

Independence Plant is a very good plant. We're actually looking at how Independence could play in terms of the other markets that are adjacent to New York and whether there's other opportunities. We haven't made any decisions around independence. We don't feel compelled to do that. It would have to be a pretty strong value proposition and it would have to be accretive to us to do that transaction.

California, we're building a nice little business with the 300-megawatt battery installation. We've got a good combined cycle plant that we think will be useful over the next several years. That site at Moss Landing has additional opportunity for batteries to be put in there. We know that California is going to continue to grow their RPS.

So, there's going to be need for more batteries. We can work with PG&E around that. Then Oakland, even though it's a smaller site, we think it's a perfect place to put a battery installation. They need to do something because they're going to shut the current -- we're going to basically retire the current plant because the RMR contract is going to go away and they need that site. It's the perfect site for battery installation.

I think we can develop a nice little business in California. So, that's what we're thinking about now in California. I think MISO is where you would probably see more near-term action because we can't sit here and wait for legislators or FERC or others to save us. We've got to save ourselves.

Michael Weinstein -- Credit Suisse -- Analyst

Great. That makes sense. Thank you.

Operator

Your next question comes from the line of Angie Storozynski with Macquarie. Your line is open.

Angie Storozynski -- Macquarie Capital -- Analyst

Thank you. Most of my questions have been asked and answered, but you made a comment about growing your retail customer count. Given what has happened so far this summer in Texas and your past ambitions to maybe grow the business through acquisitions, does it change your perspective? Do you think the summer is going to be more difficult to acquire large retail books in Texas and in the absence of that, do you think there is a way to grow this business organically?

Curtis A. Morgan -- President and Chief Executive Officer

Yeah. So, a couple of things -- one, I think the volatility and higher prices actually make it more favorable to buy books in ERCOT. That increase in customer count that we've experienced -- I'll remind everybody that we're now growing customers. Our net attrition was down to a half a percent. We're growing customers this year.

I think it's a direct result of that phenomenon that people, whether people actively go because they want to be with someone that's a stronger, bigger entity or whether that entity raises their prices in response to spikes in prices and that activates them to come to somebody like us, we've seen it happen.

Then we think we're going to continue to pick that up and if we continue to see tightness in this market, I think our ERCOT book is only going to benefit from that. I think what's more important than anything, picking up the customer is one thing, but typically, because of the way we work with customers, we can keep those customers for a number of years.

That's really powerful for us to be able to get the customer number one and then retain the customer and we've been able to do that. We saw this before in ERCOT where we were able to pick up customers and we retained them for a while. This is really an advantaged situation for us. This is purely organic, really. With regard to growth, we've looked at a lot of books and we just have found something that we feel comfortable with. There's a number of reasons why, but whether it's value or whether it's a combination of that and we just don't like the business model, whatever it might be, maybe you can call us picking, but that's precisely what we are when it comes to buying something in retail because you've got to make sure it's real. We worry about that.

So, what we are doing, because we picked up a nice footprint out of Dynegy, is that we are going to put an effort together. We're already embarking on it to grow our retail business organically outside of ERCOT. We'll do that prudent. We'll do that methodically. We're not going to get out over our skis and put a ton of money into it, but we're going to basically have a prudent effort to grow our retail business on an organic basis.

We've done the work and anybody who's grown this business on an organic basis, you shouldn't expect it to be $200 million like NRG came out with. It's not going to be that. NRG hasn't performed that kind of number. If you're going to grow at $200 million or something like that, we think you have to buy something.

Could we find something at some point in time to acquire? Maybe. But I just don't see it right now in the near-term. We would be interested if there was a retailer that had an ERCOT position because we can get larger in ERCOT. We would be interested in buying selective books if somebody was struggling and we saw a value proposition, we would do that.

We would step in and do it. We've looked at one and maybe others. I do know that we would be open to that, but we think this is a time of opportunity for us for retail in ERCOT in particular.

Angie Storozynski -- Macquarie Capital -- Analyst

Okay. Thank you.

Operator

This concludes the question and answer portion of our call. I'd now like to turn the call over to Curt Morgan for closing remarks.

Curtis A. Morgan -- President and Chief Executive Officer

Thanks again for joining us on our Q2 2018 earnings call. I'm sure we'll be talking to you soon. Thank you very much for your interest in Vistra.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 80 minutes

Call participants:

Molly Sorg -- Vice President of Investor Relations 

Curtis A. Morgan -- President and Chief Executive Officer

J William "Bill" Holden -- Executive Vice President and Chief Financial Officer

Steve Muscato -- Senior Vice President and Chief Commercial Officer

Shar Pourreza -- Guggenheim Partners -- Analyst

Praful Mehta -- Citigroup -- Analyst

Steve Fleishman -- Wolfe Research -- Managing Director

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Abe Azar -- Deutsche Bank -- Analyst

Michael Weinstein -- Credit Suisse -- Analyst

Angie Storozynski -- Macquarie Capital -- Analyst

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