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Vistra Energy Corp. (NYSE:VST)
Q4 2019 Earnings Call
Feb 28, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to Vistra Energy's fourth-quarter and full-year 2019 results conference call. [Operator instructions] Please be advised that today's conference is being recorded. If you require any further assistance please press star zero. Thank you.

I would now like to hand the conference over to your speaker today, Molly Sorg, vice president of investor relations. Please go ahead.

Molly Sorg -- Vice President of Investor Relations

Thank you, and good morning, everyone. Welcome to Vistra Energy's investor webcast covering fourth-quarter and full-year 2019 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-K and the related earnings release. Joining me for today's call are Curt Morgan, president and chief executive officer, and David Campbell, executive vice president and chief financial officer.

We have a few 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 statements included on Slides 2 and 3 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, our earnings 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 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.

Curt 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. We know this is a busy time of the year, so we intend to keep today's remarks concise, focusing on what we believe are the key drivers of Vistra's success, past, present and future. First and foremost, as we will discuss shortly, Vistra has a strong track record of execution, supporting our conviction that we have the right strategy and business model for long-term success.

Second, I believe we have demonstrated that we know how to grow the company and create value for our shareholders. Experience and execution will be essential in the years ahead. And last, our underlying fundamentals remain sound, making Vista well positioned to continue to deliver consistent results, not only weathering future volatility, but also capitalizing on it. I'm going to start on Slide 6.

As you can see in the last row of the table, Vistra finished 2019 reporting adjusted EBITDA from its ongoing operations of $3.393 billion, results that are above the midpoint of Vistra's recently increased guidance range of 3.32 to $3.42 billion. Perhaps more important, however, is that this is the fourth year in a row that Vistra has delivered financial results above the midpoint of its guidance range. For those of you counting that is all four years Vistra has been a public company, meaning that we have established a consistent track record of delivering on our commitments. And not only that, in the same time frame, we have also grown EBITDA by more than 100% and returned nearly $5 billion of capital through our equity and debt holders.

All of this against the backdrop of a wide array of commodity prices in prompt and forward periods and changing customer preferences. As we lay out on the next slide, Slide 7, Vistra has been able to double its adjusted EBITDA from ongoing operations in just over three years through a disciplined approach to growth investments and a relentless focus on reducing costs and improving plant operational performance. We have grown our business through both acquisition and investment, with the acquisitions of Odessa, Crius and Ambit and investments in solar and battery storage at Upton 2 site in Texas and at our Moss Landing and Oakland sites in California, all of which are forecast to deliver very attractive returns, utilizing conservative assumptions. And as you know, the investment we announced in 2017 that continues to exceed expectations and offer outsized returns is the acquisition of Dynegy.

Since the time we announced the acquisition, we have more than doubled our EBITDA synergy and operational performance improvement targets from 350 to $715 million. We have also increased our after-tax free cash flow target by nearly five times and preserved the utilization of Dynegy's net operating losses, resulting in a net present value benefit of approximately $900 million. Applying an eight multiple to the EBITDA synergies and an 8% free cash flow yield to the free cash flow synergies would imply that we created more than $8 billion of value from the Dynegy merger alone. Not to mention, we have increased the expectation for 2020 financial results by more than $600 million above the 2020 adjusted EBITDA target projected in connection with the merger announcement, substantially more than filling the gap suggested by forward curves and from the Dynegy business due to a lower PJM capacity clear.

This increase is largely a result of the growth items I just discussed, as well as our relentless focus on cost management and plant performance. Including the Dynegy merger value leverage, we have identified nearly $1.5 billion of cost savings in just over three years. This impressive EBITDA growth, coupled with our high free cash flow conversion ratio of approximately 65 to 75%, has supported our diverse capital allocation plan, where, in addition to making prudent growth investments, Vistra has returned nearly $5 billion of capital to its financial stakeholders in just over three years through a combination of dividends, share repurchases and debt reduction. While in 2020, we are focusing on reducing debt to achieve our long-term leverage target of two and a half times net debt to EBITDA.

We expect we will be in a position to roll out our long-term capital allocation plan in the second part of this year. As I have mentioned in the past, Vistra's robust free cash flow should enable us to both reinvest in the business at modest levels, while returning a significant amount of capital to stakeholders. More to come on this topic later in the year, but suffice it to say that we are confident this business model will continue to generate meaningful free cash flow for allocation year after year. Our teams have a proven track record of identifying efficiencies that maximize the value of our operations.

And we have been successful in identifying tuck-in growth opportunities that are both EBITDA- and free cash flow-accretive with very attractive returns, while requiring only modest levels of our capital to pursue. In short, this is a business model we believe can endure. Turning now to Slides 8 and 9, we wanted to spend a few minutes reviewing the six key tenets of our business model as these tenets have formed the baseline of our success over the past four years and, importantly, remain intact to support our positive outlook for the future. They include financial discipline, low-cost operations, diversification, a leading retail platform and in the money generation fleet and commercial optimization.

Starting at the top, financial discipline is the foundation of our business model. It is imperative that commodity-exposed businesses operate with low leverage. A strong balance sheet allows the company to weather commodity cycles without creating financial distress and allows management teams to make sound investment decisions at the right times in the business cycles. Vistra is committed to achieving its long-term leverage target of two and a half times net debt to EBITDA, and we are equally committed to being good stewards of capital, making investments only when projected returns meet or exceed our investment threshold and returning a significant amount of capital to our financial stakeholders.

Just like I dubbed 2019 a year of execution, 2020 is the year of financial strength and capital allocation clarity. And of course, execution will always underpin everything we do. Vistra's financial strength is similarly supported by its commitment to low-cost operations and its diversified revenue streams. Vistra is a market leader in low-cost operations.

Through our operational performance improvement program, we have identified $425 million of annual EBITDA enhancements, putting our generation fleet in a position to remain viable as the supply landscape evolves. Our scale also enables us to operate with comparatively low overhead costs and gives us the unique ability to leverage our platform to create synergies when attractive growth opportunities present themselves. Vistra's scale and diversification further lessens any potential negative impacts from onetime weather events or regulatory changes, for example. With operations in six competitive markets in the U.S.

and diverse revenue streams from retail, capacity and energy, Vistra believes it is well positioned to deliver stable earnings in a variety of market price environments. It is also important to note that we have taken steps to transition our generation business to compete in the aid of climate change, going from mainly coal just a few years ago to mainly gas today, while prudently investing in renewable and battery storage technologies. On the retail front, following the closing of Crius and Ambit acquisitions in 2019, Vistra is now the largest competitive residential electric provider in the country, serving nearly 5 million customers, up from the approximately 1.7 million customers we served at the time our predecessor emerged from bankruptcy in October of 2016. Our Texas retail operations continue to demonstrate strength and stability, with our legacy residential business in Texas growing accounts in 2019 for the second year in a row.

We now have 12 brands and more than 200 product offerings and operate in 19 states and the District of Columbia. Our growth in retail, both organically and via acquisition, has resulted in our retail business being the consumer of nearly 60% of our generation output on an annual basis. Our retail segment is the most attractive channel for us to sell our generation, linked into as a result of the higher margins that offers in collateral and transaction efficiencies we realize when transacting on an integrated basis. Pairing retail and wholesale also helps to create more stability in our cash flows which we believe makes for a predictable and attractive investment.

This is true in part because of the nature of the assets in our generation fleet. Vistra's generation assets are relatively young, low-heat rate assets with over 60% of our capacity coming from gas field generation and more than 50% of our fleet comprised of highly efficient and flexible combined cycle gas turbines. This is important for two primary reasons. First, because our assets are generally in the money, meaning they are low enough on the supply stack that they run most of the time.

We have a great opportunity to hedge our forward commodity exposure at favorable pricing periods and create higher and more stable earnings. Second, as the country continues to transition to lower carbon technology, our flexible natural gas assets are very likely to remain an integral part of the generation mix. We expect our gas assets will be a critical backstop for the grid that is becoming increasingly reliant on an intermittent renewable resource. We have seen this phenomenon play out in renewable-heavy California and Texas in the past year.

As intermittent renewable resources become a greater percentage of the supply stack, the market is introducing risk of entire class of assets underperforming in a correlated fashion, meaning the grid is more likely to lose a significant percentage of its generation all at once. Historically, asset underperformance was predominantly a function of uncorrelated power plant forced outages. In order for the grid to remain reliable in this circumstance, we will need these low-cost dispatchable gas assets. As a result, we believe Vistra's generation fleet is well positioned to continue to derive meaningful EBITDA from energy, ancillary services and capacity revenues in the future.

The last component of Vistra's integrated business model is commercial optimization. Our ability to take advantage of the volatility in forward curves to hedge our open generation position at attractive pricing generally insulates our financial results from near-term fluctuations in commodity prices, in particular, natural gas prices. We saw this played out in 2019 and expect it, too, in 2020 as well. Importantly, our commercial team executes our hedging strategy with an approach to manage risk and a goal to create a stable earnings profile, and it has a proven track record of success in this regard.

When you combine in-the-money assets, price volatility and the financial strength of forward hedge, Vistra can construct a rolling, stable earnings profile. And we now have a four-year proven track record of success to support this thesis. Turning now to our full-year results on Slide 10. Vistra ended the year delivering adjusted EBITDA from ongoing operations of $3.393 billion, results that exceeded our increased guidance midpoint from November.

And when you back out the negative $40-million impact from ERCOT retail backwardation we talked about on our last earnings call, our 2019 adjusted EBITDA from ongoing operations would have been $3.433 billion which is higher than the upper end of our guidance range for the year. Recall that we did not plan for the volume or the impact of these long-dated contracts in our initial 2019 guidance. Meaning that our integrated operations absorbed this impact and still delivered financial results at the high end of our guidance range, another testament to the strength of this integrated business model. It is also notable that this drag on 2019 earnings will reverse itself in future years as increased EBITDA and the underlying transactions are NPV-positive.

Our 2019 ongoing operations adjusted free cash flow before growth was 2.437 billion, results that are 187 million above our guidance midpoint and 137 million above the high end of our guidance range. This favorability in our 2019 adjusted free cash flow before growth is a result of higher adjusted EBITDA, as well as continued capital expenditure discipline by our operational teams. The favorability was also due in part to the early receipt of an alternative minimum tax credit refund of $93 million which we had planned to receive in 2020 and included in our 2020 guidance. This robust free cash flow generation translates to a free cash flow conversion ratio of approximately 72% in 2019.

Consistent with our past practice, we are reaffirming our 2020 guidance range as shown on Slide 10, including the adjusted free cash flow before growth guidance range despite the timing of the AMT refund. We are very early in the year and a lot can change to improve our view of cash. As the year progresses, we will evaluate whether an update to our free cash flow before growth guidance range is warranted due to the timing impact of this tax refund. Before we move off of this slide, I want to, once again, comment on the outlook for 2021.

Well, the 2021 forward curves in ERCOT have come down from where they were trading in October of last year. We continue to believe that the forward curves are dislocated from fundamentals and not reflective of where pricing will ultimately settle, a view we have been accurate on for the last few years. Our fundamental view continues to support our belief that 2021 results have a good chance of being flat to, if not better than, 2020 results. I'm going to wrap up this morning on Slides 12 and 13.

Given the spotlight in recent months on the sustainable footprint of public companies, and specifically public companies with exposure to coal, we thought it would be helpful to provide some numbers behind our exposure while emphasizing where we think this trajectory is headed. As you can see on Slide 12, in just three years, with the retirement of seven coal plants and growth in retail, gas assets and renewables and storage, Vistra has reduced its exposure to coal by nearly half, with less than 30% of our capacity, approximately 20% of our revenues and only 17% of our EBITDA forecast to come from coal assets in 2020. This is a dramatic shift in a short period of time and one we expect will continue over the next decade. In fact, if you turn to the next slide, you will see a picture of what we believe our business could look like in 2030 based on the 10-year view we introduced on our third-quarter earnings call in November.

Clearly, this is an illustrative outlook, but it is rooted in rational market principles and fundamentals, a recognition of current power technology and a future asset mix that will be necessary to ensure system reliability and an expectation for realistic investment in the company at reasonable returns. Assuming economic and environmental challenges result in the retirement of another approximately 7,200 megawatts of coal assets over the next 10 years, and we invest approximately 25% of our free cash flow in renewable and battery assets and retail over that same time period, 10% or less of our EBITDA and capacity would come from coal assets in 2030. Under this scenario, not only would we transform our generation fleet to be nearly 20% renewable and batteries, we would also expect to derive more than 50% of our EBITDA from retail, renewables and batteries and nuclear. As we have mentioned many times, we believe natural gas generation will remain a key dispatchable resource needed for power system reliability with proliferation of intermittent renewables.

We have as efficient a gas fleet as any one, and we expect it will continue to be a strong component of our EBITDA contribution. Importantly, this business mix and market outlook is expected to grow EBITDA and result in approximately $15 billion of capital available to be returned to shareholders. And if we do not identify investments that meet our hurdle rates, we will return that capital as well. As we announced in October of last year, we have a clear line of sight to achieving a greater than 50% reduction in our CO2 equivalent emissions by 2030 as compared to 2010 baseline.

Full economics continue to be challenged, and I expect Vistra's exposure to coal will further decline meaningfully over the same time period. Our business is already participating in the energy transition, and I believe we will continue to be leaders in this effort in the future. Our unique capabilities with expertise managing risk, operating assets with scale and efficiency, and providing innovative products and services to our retail customers make us well positioned to capitalize on the transition to a lower-carbon economy, improving our environmental footprint while continuing to create value for our shareholders over the long term. Before I turn the call over to David, I feel compelled once again to comment on our stock price.

Setting aside the recent sell-off due to the coronavirus, not surprisingly, we believe the recent decline in our stock is unwarranted. And what was a significantly undervalued stock prior to this decline is now an absurdly undervalued stock. In our view, there is no rational explanation for an over 20% free cash flow yield, especially when compared to other commodity-exposed, capital-intensive energy companies with far more risk in the climate change age. Nevertheless, we believe we're on the right track, and we are committed to unlocking value.

I will now turn the call over to David Campbell.

David Campbell -- Executive Vice President and Chief Financial Officer

Thank you, Curt. Turning now to Slide 15. Vistra delivered 2019 adjusted EBITDA from ongoing operations of $3.393 billion, exceeding the midpoint of our guidance range. As you know, during our third-quarter call, we increased our 2019 guidance to reflect the effective impact of the Crius and Ambit acquisitions.

The favorability relative to our revised guidance was driven by higher gross margin from ERCOT segment compared to planned results. Our adjusted free cash flow before growth from ongoing operations also exceeded expectations, coming in above the high end of our guidance range of $2.437 billion. This favorability was due in part to the early receipt of an alternative minimum tax credit refund of $93 million which we previously expected in 2020. After excluding the AMT refund, our free cash flow before growth still exceeded the high end of our 2019 guidance range.

This outperformance was driven by higher adjusted EBITDA, as well as capital expenditure discipline, reflecting the impact of our ongoing operations performance improvement efforts. Focusing on the fourth quarter, our 2019 results were, $55 million higher than the same period in 2018, driven by the additions of Crius and Ambit and higher gross margins in ERCOT generation, partially offset by lower capacity revenue in our PJM and New York, New England generation segments. Before we move on to our final slide this morning, I will note that due to the retirement of four coal plants in our MISO segment in the fourth quarter, we moved the financial results of those plants out of the MISO segment and into the asset closure segment. We have similarly recast our 2018 results to account for this shift which is why you will see that our fourth-quarter adjusted EBITDA for 2018 is 1 million higher than what we reported at this time last year.

Slide 16 provides a summary of capital allocation. As of February 24, we have executed $1,418,000 of our $1.75 billion share repurchase program, leaving approximately $332 million of capital remaining for future share repurchases. You'll recognize that this is virtually the same amount of capital we had available under our share repurchase program as of our November earnings call. During the 2019 calendar year, we returned a total of 899 million to shareholders through dividends and share repurchases.

As we emphasized during our November earnings call, our capital allocation priority for 2020 is debt reduction. We believe the achievement of our targeted leverage levels will support an upgrade to our debt ratings and keep us on the path to investment grade. We also believe that advancing toward an investment-grade credit rating can be one of the most powerful catalysts to rerate our equity as it will be yet another proof point that the new business model we are operating is significantly de-risked from the IPPs of the past. We have heard from many investors that they will be more inclined to invest in our equity or will be more comfortable taking a larger position in the equity with an investment-grade credit profile.

We believe two and a half times net debt-to-EBITDA is the appropriate leverage level for our enterprise in order to withstand business cycles and maintain investment flexibility, independent of the consideration of investment-grade credit rating. As a result, we remain committed to debt reduction in 2020 and de-levering will be our near-term capital allocation priority. However, we will continue to opportunistically evaluate repurchasing shares or investing in promising growth opportunities, especially those that have a minimal impact on our credit metrics. Turning to our dividend.

We announced earlier in the week that our board of directors approved an 8% increase in our annual dividend, resulting in $0.135 quarterly or $0.54 per share on an annual basis. Our first 13.5 cents quarterly dividend will be paid on March 31 to shareholders of record as of March 17. As we look ahead, we expect to have significant cash available for allocation in 2021 and beyond. We plan to lay out our long-term capital allocation plan in the second part of this year.

Our history has demonstrated that we have the discipline to be good stewards of your capital, returning meaningful excess cash to our stakeholders while investing in growth only when attractive opportunities arise. You can expect that our long-term capital allocation plan will reflect a similar philosophy, including the significant return of cash annually to shareholders. We remain optimistic that with the ongoing successful execution of our business plan, our stock price will ultimately reflect its fundamental value. And with that, operator, we are now ready to open the lines for questions.

Questions & Answers:


Operator

[Operator instructions] Your first question comes from Shar Pourreza from Guggenheim Partners. Your line is open.

Shar Pourreza -- Guggenheim Partners -- Analyst

Hey, good morning guys. You know, you just raised your dividend by 8%. Your de-levering is on pace. Curt, could we just get a -- directionally talk about the scale of the next buyback with another 2.3, $2.4 billion of free cash flow that's kind of at your disposal in '21? I guess, I'm trying to get a sense on what you mean by significant annual return to capital to shareholders and exact timing when you're going to initiate, not announce the new program with '21 story being sort of going to IG ratings, I mean, could you start incremental buybacks this year versus the current 322 that remains under the old program?

Curt Morgan -- President and Chief Executive Officer

Thanks, Shar. So, look, I think, to be very clear about this, in 2020, we are focused on paying down our debt and getting debt to our leverage targets. Look, I think a time like this, frankly, essentially for me, reconfirms that where we're headed with our leverage is the right thing. When you get into situations, like what's going on with the pandemic, and it seems to be growing, I think financial strength is going to be -- prove out to be very key.

And so, while we would like to buy our shares back, I mean, let's just be honest, we know that we're trading now 20 plus some change. It's a very attractive buy. We are also equally committed to get our leverage to where we have said we were going to do it, and we're committed to do it in 2020. So, beyond that, we said later this year, we'll give a little more clarity about what we're going to do in 2021 and beyond.

But I think we've given a little bit of a view of that by saying we think we can invest in our business about a quarter of what we believe on an ongoing basis will be about 2 billion-plus dollars of free cash flow. So, I mean, the math just tells you that that's $1.5 billion that we can return to shareholders. I think the real question is going to be, for our company, is how do we do that. And I think that's a mix of recurring dividend and whether we decide with the board to change the yield that we're paying on the dividend that will definitely be on the table.

And then clearly, if we're trading below value and our thought of what fundamental value is in this company, then the remainder of that will go to buy back shares. I mean, it's not rocket science, and I'm not speaking out of turn. It's just that's the way we think about it. And so, that -- I think that's -- in the next couple of years, that's what it looks like.

But we need to get this, the debt, down to where we want it to be, and we're committed to do it in 2020. We pushed it out once before, and we're not going to do it again. I think this is the right thing. And I think, to strengthen the company from a financial standpoint, it's the right thing to do.

I also think it's very -- and David alluded to this in his comments that we believe that, ultimately, getting the debt down to where we want it to be will also be very accretive to the equity. So, that's what we're doing in '20 and '21 and beyond. We have substantial amount of a capital return, and it will be a mix of a recurring dividend and probably share repurchases.

Shar Pourreza -- Guggenheim Partners -- Analyst

Got it. Got it. And that's because, obviously, looking at inorganic opportunities, the threshold aren't there yet. OK.

And let me just ask you, Curt, one more question. There's obviously been a lot of headlines about strategic opportunities, including privatization which we get given this obviously very high or irrationally high free cash yields. What's your sort of updated thoughts there? What's your trigger point? Are you sort of patient right now? Do you want to see what happens with your free cash flow yield once you go to IG before making this decision? I guess, what's yours and the board's level of patience on these valuation levels?

Curt Morgan -- President and Chief Executive Officer

Yeah. So, very good question, Shar. Thanks for asking that. So, look, I think we are patient.

We believe that getting our debt down to the two and a half times net debt-to-EBITDA range this year is very important. And then I think also given clarity to that long-term capital allocation plan, putting another year behind us and showing that we can meet or exceed our expectations, I think, is also helpful. That's helpful to the agencies as well. I think one of the things they'd like to see is whether we can withstand the business cycles, including things like what's going on with the coronavirus right now which I think in 2020 we're going to have a very good year despite what could be symptoms of a recession off of that -- off the coronavirus, so I think we're a very strong company.

I think we'll show that in 2020, but I think it's very important for us to do that. Now in terms of the direct question about strategic options, I think we will be patient through '20 and into '21 to see that play out. But I can also assure you that the board continually thinks about what's the best way to unlock value. You know that I spent a lot of time in private equity.

And for me, the only difference between being a public company and a private company is that every day I wake up, I get a scorecard. I get my report card. It's in the form of a stock price. And from a private equity standpoint, they market on a quarterly basis, but I can assure you that most of those companies are marking their quarterly mark of their value based on what the public markets are trading at.

And frankly, at the end of the day, you unlock value the same way in both private and public market settings. You either do it over the long run, or you do it, in particular with the private equity firm, you look for an exit. And the exit is limited. You know this right now.

There's many private equity firms that would love to exit their generation, but there is no exit for them. And if they try to exit into the public markets, they have too much leverage and they don't have an integrated business model which is what it takes to compete in the public markets. So, we think we can unlock this value in a public market setting, it just may take a longer period of time, and we've got to be patient to do that. But I don't see that if there's some silver bullet, by becoming a private company, that all of a sudden there's going to be this huge value uplift because you've monetized the value of the company the same way, whether you're public or price.

Shar Pourreza -- Guggenheim Partners -- Analyst

Got it. That's helpful. And I completely agree with your exit strategy's the hindrance. I Appreciate it.

Operator

Your next question comes from Steve Fleishman from Wolfe Research. Your line is open.

Steve Fleishman -- Wolfe Research -- Analyst

Thanks. Good morning. So, just maybe -- just curious, Curt, if you could give us a little color on, as you mentioned, feel good on Texas market, I assume mainly Texas market fundamentals. So, could you just give me -- give a little bit of an update on just overall view of supply demand, impact of solar adds that you're seeing and things like that?

Curt Morgan -- President and Chief Executive Officer

Yeah. So, just -- you know this, Steve, that we do our own point of view when it comes to reserve margin. We have a -- and I don't know if this is well known, but we have a very good development team. And one of the best ways to get intelligence on what's going on in terms of development in any market is to have a team that's actually out there and doing it, and so we have a pretty good sense of things.

Plus, we know historically, in particular in Texas, kind of what the build-out rate has been from the CDR to what actually gets built which has been a little bit below 50%. And what happened in the CDR this time which I think most people know what that is, right? It's not -- I wouldn't take that to the bank. Anybody that invest on, by looking at the CDR, is foolish. I mean, at the end of the day, it doesn't have an economic overlay to it.

And so, what happened though is everything that was supposed to get built didn't get built in '20, got pushed into '21, and that's kind of what happened, and so it just keeps rolling out, so the CDR actually shows a big uptick in building. And we think there's probably a little bit less than 50% of that that's actually on the ground getting built for '20. What that results in is a very manageable reserve margin going into -- from '20 into '21, which, in our view, if you look at low growth -- and that's the big team really in Texas, but we've got some people who think it's going to be 3%, some people around -- more like us, around 2%. Either way, that new build is barely going to cover load growth in the state of Texas, so that's why we feel that the market is still fundamentally strong.

The last point I'd make about that is that the growing intermittent nature of the new build, because all that new build, by the way, is going to be solar and wind. And wind is dropping off, by the way, just because the PTC is going away. And so, wind -- or excuse me, solar is the build-out. And we all know that there's an intermittent nature to that, depending on how the sun shines on any particular day.

And we saw this last summer -- and reserve -- overall reserve margin is not as important, frankly, as the reserve margin ex the intermittent resources. How much steel is on the ground, and especially in the summer months when either the wind or the sun is -- are not performing at expectation, and that's really what's key to figuring out what the increase in pricing is going to be in the summer. And when you look at that, the market is really tight for those types of resources during those periods of time. We expect we're going to get probably four, five, maybe even up to 10 of those in any given summer, and we're going to see high pricing.

Then the key for us, frankly, is that we have assets that can perform. And we had our commercial availability which is basically when you're available, when you're in the money, weighted by margin opportunity, was almost 95% this year which is extraordinarily high when you've got older coal in your fleet, so we have to have that same performance. If we do that and we see these same kind of fly ups, and given the supply demand in Texas, we're going to see another good summer. And you can boil our company down in terms of the range that we give you guys on any given year, given the way that we hedge, you can boil it down to the summer months in ERCOT.

That's really the game for us. And we think we're well positioned in that. We like the length that we have, especially given the fundamentals in Texas, and so we're looking forward to this summer. We think, with the ORDC, the core increase in standard deviation, this is going to be a real interesting summer again, and is going to be a great opportunity for our company.

Steve Fleishman -- Wolfe Research -- Analyst

OK. And then, I guess, separately, just wanted to get more color how the Crius and Ambit deals are going in terms of just meeting the performers you had and overall dynamics in ERCOT retail market, market share, things like that.

Curt Morgan -- President and Chief Executive Officer

Sure, Steve. You know Jim Burke, he's here. I was going to have Jim address that. Jim, please.

Jim Burke -- Executive Vice President and Chief Operating Officer

Steve, yes, we obviously started to integrate Crius ahead of Ambit. I think both integrations are going really well. We have 45 to $50 million of synergy opportunities with those two. Some of that is technology-driven, so it's a multiyear process.

But from a hedging and supply standpoint, a customer behavior standpoint and the initial cost synergies achieved, those are on track. We'll continue to build synergies over the next two- to three-year time frame, but we like how those two books are operating at this point. And I think we feel really good about the multiples with which we acquired them. And the long-term value for this generation to retail match, particularly in ERCOT.

Steve Fleishman -- Wolfe Research -- Analyst

Thanks that's it for me. Thanks.

Operator

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

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

Hey, good morning team, can you hear me?

Curt Morgan -- President and Chief Executive Officer

You're a little fade, but we can hear you OK, Julien.

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

Good. Excellent. Perhaps just to come back to your commentary about the cash flow this year and the taxes. could you talk about some of the strategies to minimize taxes, not just this year, but especially on an ongoing basis? I mean, this has been something you've been successful at in the past.

You made allusion to it, if I heard you right on the call. What kind of strategies, what kind of opportunity exists there? Well, I'll ask it open-ended.

Curt Morgan -- President and Chief Executive Officer

OK. I'll take a shot and then, David, I'd like you to comment, too. I mean, you're just talking about like federal taxes, right? I mean, Julien that's what you're talking about.

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

Yeah, you made some comments about AMT earlier as well, so an improvement in the overall FCF this year.

Curt Morgan -- President and Chief Executive Officer

Sure. That AMT refund really came from the Dynegy acquisition. We're all too happy to have it, but that was really where that came from, that opportunity. But just to remind everybody, we haven't been, and we are not a taxpayer, I think through 2023 roughly.

And then after that, we always are looking -- we have a very good tax group, and we're always looking for opportunities to minimize our taxes. But we are not a taxpayer and have not been paying on the TRA and won't be until we project probably out into 2024. And then we'll, obviously, have plenty of time to try to see what tax strategies we might be able to deploy to minimize that. But we -- at least on the forecast right now, it looks like we'd be a taxpayer again in 2024.

And so, we really had -- a couple of things happened. One, the NOLs that we received, and there were some what I'll call esoteric sort of integration between new tax law and old tax law. We had a window of opportunity that happened and then closed after we -- right after we closed the Dynegy deal. But since we closed before that, we were availed to the opportunity to be able to use 100% of the Dynegy's roughly 4 billion-plus dollars of NOLs, which, as we've said many times, has an NPV of about 900 million, so that has been a big contributor to us not paying taxes.

David, do you have anything to add?

David Campbell -- Executive Vice President and Chief Financial Officer

All I'll add is, just to reemphasize Curt's point -- this is David, that we -- our tax group is very active managing this. Other than property taxes and some state franchise taxes, we do not pay. We do not have federal income tax liability or cash payments in 2019, and we don't expect to be a cash taxpayer for the next few years. And we're going to keep actively managing that to keep that trajectory going as long as we can.

Very important to us. And as we noted, we received an AMT payment of 93 million in the fourth quarter. We also received another 35 million in the first quarter this year related to, as Curt described, some AMT claims from the Dynegy situation. But we'll continue to very actively manage down our cash taxes.

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

Awesome. Excellent, guys. And then looking at the slides here on the hedging front, '21 versus '20, just as you provide the sort of initial look here, the expected output is backward-dated. I assume that's just tied to the forwards here, but just want to understand if there's anything changing in how you view things.

Curt Morgan -- President and Chief Executive Officer

You have it just right, Julien. These are based on forwards. If we were to show our proprietary point of view, you'd see very similar volumes to what you have in '20. And so, I think what the big key will be is just what ultimately plays out in the market.

But we feel pretty confident that our point of view which has played out over the last four years, will play out again for '21. And of course, then we'd have the same level of production volumes that we've had from '20 to '21.

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

Excellent. All righty. I'll pass it off. Thank you very much, guys.

Operator

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

Michael Weinstein -- Credit Suisse -- Analyst

Hi, guys. Along those same lines about production volumes, on Page 25, the hedge portfolio and portfolio sensitivities, it looks like generation -- total generation output is declining, especially in ERCOT and a little bit in PJM from 2020 to 2021. And I'm wondering how I can -- how do you square that with the comment on Slide 10 that says that the EBITDA for 2021 will be at or above 2020?

Curt Morgan -- President and Chief Executive Officer

Yeah. So, Michael, it's a good question. And I tried to address it there with Julien, but I'll try it again. I obviously didn't do a very good job of it.

If you were to take a strict mark -- strictly mark the curve -- off the curves, you get what we're showing on page, what is it? Page --

David Campbell -- Executive Vice President and Chief Financial Officer

25.

Curt Morgan -- President and Chief Executive Officer

So on a pure marked basis, because of the backwardation in the curve -- and I think you know this, but the -- what this is showing is our delta position which effectively means what is in the money at a particular curve. And so, -- and then what's the production -- resulting production from our power plant. And what we based the comment on, on Page 10 is our point of view which if we were to put the two curves up, 2021 point of view versus 2021 market, you would see -- and we've said this, we think there is a decoupling between where the curves are and where our point of view has been. We've also said that we've been saying this now for about four years where -- and we've been accurate on this, where the market has actually, as we rolled into the prompt year, for example, going from '20 to '21, we've seen those curves pop up as the market understands that the market remains tight and that the supply demand fundamentals are strong which we expect to happen, given our intelligence of what new build is going to look like and our understanding of what load growth looks like.

So, again, the Page 10 comment is based on our view of the world. And Page 25 is based on a strict mark of the curves.

Michael Weinstein -- Credit Suisse -- Analyst

I get it. Yes. So, over the course of the year, we'd expect this page to change with those numbers coming up.

Curt Morgan -- President and Chief Executive Officer

Yeah, that's correct.

Michael Weinstein -- Credit Suisse -- Analyst

It catches up with the point of view, right? And then also, another thing is --

Curt Morgan -- President and Chief Executive Officer

Michael, can I mention one other thing, really important. So, as the forward curves because they're going to be volatile, and there will be periods of time where the price will pop up, and that's what -- this is what we try to tell people, that's when we will hedge. And so, whether the market settles there or not, we are able to capture that value by hedging at the high point of where the curve is, and so that's another key piece of how we create value in this company.

Michael Weinstein -- Credit Suisse -- Analyst

All right. That makes sense. That's the value of having a point of view, I guess. But the -- also, the natural gas position, I guess, is this a normal thing, just in the early part of the year, to see a very big short position out in the 2021 time frame for ERCOT? Or is that representing something interesting?

David Campbell -- Executive Vice President and Chief Financial Officer

This is David Campbell. I'll pick up what you're pointing out, the short position that we have on natural gas in 2021. So, it is pretty natural when we think about hedging our natural gas equivalent position. So, we went into, given our forward position, we went in with a point of view that we wanted to hedge more of our gas position relative to our power position, so that's why you see the big relatively sizable short position on natural gas.

So, we're fully hedged for that relative to natural gas in 2020, in our view. We're about 85% hedged in our natural gas position for 2021, and that's just a view on, hey, we would like to -- we were -- we want to put that hedge on, and we're pleased that we did. So, that just reflects the desire to hedge a natural gas equivalent position, and we could do that separately in ERCOT relative to the underlying heat rate of powers.

Curt Morgan -- President and Chief Executive Officer

And I'll add, Michael. So, we're bearish in gas and -- we have been bearish gas and proven out to be right, and we hedge that. And then we continue to be bullish to heat rate. And that's how power trades -- that's where the liquidity is in ERCOT.

That's not true of all the markets, but in ERCOT, power sort of trades gas and heat rate. And so, we are less hedged on the heat rate, as you could tell, and we are more hedged on gas, and that is because we had a pretty strong conviction around just some bearishness around gas. And frankly, it's sort of proven out to be the case.

Michael Weinstein -- Credit Suisse -- Analyst

Right. Just to follow-up on Steve's question about retail. And I think I've asked you this before, but has there been any consideration toward going into residential solar or some of the higher growth sectors of the retail energy complex? I mean, the residential solar players are looking at growth rates anywhere from 15 to like 60% year over year. It's really pretty impressive.

And their stories get a lot of traction. I'm just wondering if that's something you might consider just from a strategy point of view.

Curt Morgan -- President and Chief Executive Officer

We have studied that. I mean, there's growth rates and then there's making money, and so we want to put our money where the best returns are. And we just haven't found them in that part. But we have our eyes on that.

I don't think we felt like we wanted to be an early mover on that. That we felt like if we wanted to get into it, we could probably buy our way into it at some point in time. But we have looked at that. We've looked at some other things as well like behind-the-meter type investments.

And we just can't quite get to the hurdle rates and get comfortable with the acquisition. But it is something we take a look at, and it's a good point on your -- from your standpoint, that there are a lot of growth rates. And we do expect, for example, in California, we expect, obviously, that to be a burgeoning part of the business. It's -- right now, it's kind of dispersed in a number of different players, and no one really has a particular business model that seems to work.

There are some good companies out there that are performing, but we just haven't found that it meets the hurdle rates. So, we have -- Jim, you have a comment?

Jim Burke -- Executive Vice President and Chief Operating Officer

Yeah. Curt, I would just add -- Michael, this is Jim Burke. From a customer interest standpoint, we do meet a lot of their needs, particularly in ERCOT, with some of our designs or products that we did off of our Upton 2 solar farm. And those products don't require an install on the roof, and you could still obviously get the solar energy.

When you look at rooftop, in most markets, it's a savings play. And in Texas, there is not full net metering, so the savings opportunities are not as attractive to put the rooftop solar on the house. And then when we've looked at these business models we have partnered with, so we will sell those systems through partners, but we've seen companies commit to a fixed capacity of sales and installation resources. And then that becomes its own cash burn that you have to be able to keep up with through the installed base.

So, as Curt noted, we know what the customer interest is, we participate in that sale, but we have not put the fixed cost structure in place to execute against it, and we will continue to monitor that. And if that becomes a bigger play for us, we will obviously be in front of it because we've got the customer insights to do so.

Michael Weinstein -- Credit Suisse -- Analyst

Understood. Thank you very much.

Operator

Your next question comes from Jonathan Arnold from Vertical Research. Your line is open.

Jonathan Arnold -- Vertical Research -- Analyst

Good morning, guys, and thanks for taking my question. I just -- could I ask you to give us a little update on your views on the fundamental update on PJM and maybe policy, as well as New England. I see you have a slide on FCA 14, and maybe if you could just kind of speak to that a little.

Curt Morgan -- President and Chief Executive Officer

Yeah. So, I assume you're talking, specifically PJM, about the FERC-PJM capacity order that had recently come out. Is that correct, Jonathan?

Jonathan Arnold -- Vertical Research -- Analyst

Yeah. I mean, and unless you feel there's other things you want to touch, but that would be top of mind then.

Curt Morgan -- President and Chief Executive Officer

OK. Yeah. So, I mean, that's probably the biggest thing. I know we have Fast-Start that we're waiting on, that kind of technical, kind of glitch to it that I think will get resolved.

And then the ORDC that -- that's pending in nowhere out of FERC that we think those two things will be, I'd say, modestly helpful on the energy side. But if you put those aside, I mean, the elephant in the room is what's going to happen given the PJM order from FERC? As we know, many, many people are asking for rehearing. Recently, I think people got a little bit confused by an order tolling for FERC to give -- tolling that, the rehearing decision which effectively means that they're going to continue to consider whether they're going to rehear anything. They probably will rehear some things, but that final decision has not been there.

I think the next big milestone, frankly, is the compliance filing that's coming out from PJM. Our own take on this has been and continues to be, and I think it's even further reinforced by some of the analysis that a lot of people are putting out, including the IMM and our own analysis, that when you look at the net ACR which is the net go-forward cost for many of the different assets such as renewables, such as nuclear, that it is unlikely to have much of an impact on the capacity clears, and it's not this big windfall that I think states were worried about, and some of the generators were celebrating. We think there's really a modest impact. And what's probably bigger is how much new build you get in any given year and how much retirement do you get in any given year.

And those fundamentals are what should drive the market. And what should not drive the market are subsidized resources and nor do we think that the market -- the ruling that came out of FERC should have also given us a big windfall. I mean, at the end of the day, we've got a market that's got nearly 30% reserve margin. And for a combined cycle plant, it returns about three-quarters of new build cost.

I'd say that's a functioning market. And so, we didn't expect a big windfall, and I don't think that's what's going to happen. Now, having said that, there's a lot of hyperbole, a lot of emotion going on about this, and there's hearings going on the state of Illinois which we are going to be a part of and others. And there's a lot -- people throwing around FRR.

What I have heard when I talk to people in Maryland -- and I talk -- and let's put New Jersey on the side because let's just say this, what this really is about, at the end of the day, is offshore wind. Those are the folks that are likely to get screened out because of the high cost of offshore wind and other types of renewables are still going to clear the market. And so, we don't think it's a big deal other than offshore wind, and that's where the big argument is going to come in. But given that, there's also an opportunity, through FRR, for some people to push things like a clean energy agenda.

However, we've been saying this, too, in Illinois, you could break apart clean energy and FRR. We're not opposed, by the way, to an FRR if that's what the state of Illinois wants to do. We can compete in that world as well. We just don't think that it is necessary, but we're happy to compete in an environment with FRR.

And we are trying to work with all stakeholders, including Exelon, who we have a very good relationship with, and others in Illinois to bring -- if there's going to be legislation, to bring proper legislation, to make sure that the elected officials understand what's at stake when they make that decision. So, I'll wrap up with what I said on the beginning which is we don't really see the order really changing much in terms of capacity price clears. And I think there's just -- like I said, been a lot of emotion around it. But when you put the pencil to paper, the analysis shows that it's really not going to make a big difference.

And on FCA 14, obviously, a disappointing clear, not a very big impact for us, but nevertheless a very disappointing clear. Bidding behavior was a large piece of that. And that's true of most of these capacity clears. We do think there's some fundamentals if, in fact, Mystic units are able to come out for FCA 15.

We think there will be an uptick, a potential uptick from the $2. If for some reason that Mystic cannot come out because ISO New England is not able to get their new weather-based order in place through FERC and the market adjustments that they want to make, then we might be down to $2 again. However, what I would say is there's a number of units that probably cleared it to $2 and decide to be a price taker who are not going to be able to stay in this market for multiple years of $2 clears. And so, that's the next piece.

And the next shoe to drop is do people come out of the -- do they come out of the market? I would expect that some may, but we cannot control that. So, I think we're in this place where we're somewhere between maybe the low threes to $2. We can run our business that way. Most of our plants can make it in that environment.

And we still make decent money up in ISO New England. But I have to admit, it's a disappointing clear and I don't think indicative of the value of the units that are necessary there to keep reliability in that system. And I suspect that ISO New England is somewhat worried about that as well.

Jonathan Arnold -- Vertical Research -- Analyst

Great. Thanks for the fulsome answer, Curt. And then just one quick housekeeping thing that probably maybe more for David, on the capex slide, the growth, I think you just reshuffled things a little bit, but could you just confirm that?

David Campbell -- Executive Vice President and Chief Financial Officer

Yeah. Thank you, Jonathan, for raising that. So, you're referring to Slide 22. We included -- in prior versions of this chart, we had not shown what we described as growth capex, we included a portion of it, so for example, the Moss Landing battery.

So, the way we've recast this page is to include all of our capital expenditures, including the growth capital expenditures. So, for example, we've shown the row of growth capex, 104 million in 2019 and 315 million in 2020, the significant majority of which relates to our Moss Landing development, the battery development in California. So, we just want to give folks a complete picture of capex because there is some confusion on our presentation, so an attempt to add to clarity.

Jonathan Arnold -- Vertical Research -- Analyst

OK. So, it's not that you've added things. It's that you've just shown things that wasn't in this particular --

David Campbell -- Executive Vice President and Chief Financial Officer

These were things that you could piece together previously, but you had to piece it together in different places. So, we've not added capex, we've just tried to show a holistic picture on this page in particular. Yes, if you look back from a year ago, our capital expenditures in 2019 were about 30 million lower than what we showed about a year ago, so the team showed good discipline in how they approached it. And relative to last quarter, for example, all-in capex for 2020 is unchanged from what we showed.

Jonathan Arnold -- Vertical Research -- Analyst

Perfect. Thanks a lot.

Operator

There are no further questions at this time, I'll turn the call back over to Mr. Curt Morgan. Please go ahead, sir.

Curt Morgan -- President and Chief Executive Officer

OK. Yes, thanks, everybody, for taking the time this morning. As I stated earlier, and as we always say, we really do appreciate your interest in Vistra, and we look forward to continuing the conversation about our company. Have a great day and a great weekend.

Operator

[Operator signoff]

Duration: 62 minutes

Call participants:

Molly Sorg -- Vice President of Investor Relations

Curt Morgan -- President and Chief Executive Officer

David Campbell -- Executive Vice President and Chief Financial Officer

Shar Pourreza -- Guggenheim Partners -- Analyst

Steve Fleishman -- Wolfe Research -- Analyst

Jim Burke -- Executive Vice President and Chief Operating Officer

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

Michael Weinstein -- Credit Suisse -- Analyst

Jonathan Arnold -- Vertical Research -- Analyst

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