Vistra Corp. (VST) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Vistra Fireside Chat with Wolfe Research Webcast, hosted by Wolfe senior analyst covering utilities and midstream, Steve Fleishman. [Operator Instructions] And now I hand the call over to Steve.

Great. Thank you. Thanks, everyone, for joining today. I hope you and your families are staying safe and healthy at these difficult times. It's been a tough time in the market. And the economy is obviously in a lot of flux as are a lot of companies. So in that context, really appreciate Vistra CEO, Curt Morgan, being accessible to investors and joining today for our fireside chat. Also happy, we're going to have David Campbell, the CFO of Vistra, on as well. There'll be a replay of the call. And as Allan mentioned, we're going to spend a good time trying to answer questions. So the best way to get those questions to us is to type them in, and we'll start doing that soon. I'll start doing that around half past the hour. So Curt, thank you so much for joining, and I think speak for investors and appreciate you providing access today. Thank you.

Well, thanks, Steve, for asking us to be on, and thanks for everybody for joining the call. And I also want to echo Steve's comments about I hope everybody that you and your families are healthy and stay healthy through this. And I know many of you are probably in New York and that seems to now become -- have become the epicenter. So our thoughts and prayers are out for you guys. And we -- you guys know what we do day in and day out. We're going to try to make sure that the one thing you don't have to worry about is whether your power is working or not.

No. That's obviously key here. And look, I -- maybe just to start, Curt. Obviously, Vistra's stock, among many others, have been hurt in this downturn. So maybe you could just talk about just at a high level how you feel positioned to deal with the risk of the virus and economic weakness? And any kind of key message you really want to get across to the investors?

Sure. So give me a little latitude on this one, Steve. I do want to say a couple of things on the front end of this, just about our business. I mean, first of all, you guys all know that we have an essential product. I know people tend to take it somewhat for granted. But at the end of the day, if power doesn't reach customers, we can really have a mess in this country. So we take that very seriously. And you probably don't think about this every day. You think about it though in your home, if you allow somebody to come inside your home now that is infected, the likelihood that you become infected is extremely high. And with our power plants, it's no different than that. So our top priority is obviously keeping our employees healthy. But what's also important is that we make sure that we do not allow the virus to get inside the fence line. We were an early mover on something that, at first, I think people were a little surprised by but now is being used pretty much industry-wide. We instituted temperature testing at the entrance gates for all contractors and all power plant employees. And that has gone over very well. In fact, the employees are happy that we're doing it because it keeps them -- they believe it keeps them safe, and it's not an infringement at all on their privacy. And if anybody does complain, which is pretty interesting, the power plant employees let them know pretty quickly that, that's the way it's going to be. And we're in outage season now. And so we've worked with our contractors, Fluor and GE and others, to make sure that they agree that their workers, when they come onsite, are tested. And that's going well as we speak. I'll tell you that the resilience of our essential employees has been incredible. And it's not just the power plants, it goes to the plant dispatchers, which are on our 24/7 desk that's here in Irving, Texas, our call centers for our customers, in our IT technology people, security and others. And they haven't missed a beat. Many of those still have to come in to work every single day. But we've also done some things where we have -- where many, many of our people are working from home to try to reduce the risk to the essential people as well as to those individuals. This is a time, frankly, Steve, where it tests your leadership. And my view is frequent communication is critical. And one of the things we're doing is we have a weekly web call -- webcast call, which we're doing again today. We've been doing it for a while now. And you've just got to keep your employees focused on what they're doing, making sure they're okay. And so the reason I raise all this is that when we say we're an integrated business, it's not just the power plants that keep this thing going. We have to have every single person in our company, the accounting folks and others because we have to pay for fuel, we have to collect receivables and for this whole thing to work. And clearly, we have to keep the power on. And I think we have performed quite well. Now as it relates to where we are as a company, that test and that essential product actually turned out to be from a financial standpoint to be a strength for us. And I hate to talk about 2020 earnings and all that. But I know that we need to give people some idea of how the company is doing. And the reality is when we stress 2020 because of our hedging, we are seeing -- and also because we took some actions very early on to defend against what could happen, that we are looking very good relative to the midpoint of guidance even under some stress testing. And I think that's a tribute to the hedging that we did. It's also, I think, the business model that we have with the low cost, the low leverage and the integrated model, has helped us weather this storm. So 2020 looks to be largely intact even under some stress -- stressing of 2020. If it extends beyond for a longer time, more of a U-shaped than a V-shaped recessionary effect, we could have some effect on 2021. But we have modeled that under what I would consider reasonable stress conditions and a reasonable recovery, not an aggressive recovery but a reasonable one. And there's all kinds of reasons to believe that this would be a pretty strong recovery but just a reasonable one. We're looking at less than 10% effect on 2021 relative to 2020, because remember, we said 2021 would be relatively flat, and well in excess of the $3 billion-plus that we've always said that we thought that we could do. So even with some demand disruption, no growth in demand from '19 to '20 and then some modest growth from '20 to '21, which is what we looked at, the company is still very resilient. So I'll come up for air and let you ask some other questions, Steve.

Yes. No, that's great, Curt. And so when you look at -- that's great to hear. When you look at the key factors that are kind of stressed in this environment, maybe you could talk a little bit about just what those are. Is it mainly just -- is it mainly demand in ERCOT? Or is that really it? Or is there anything else that you're having to kind of manage most?

I think on a near-term basis, it really does come down to the summer in ERCOT. And frankly, we don't really know exactly the effect. We went back and looked at 2008, 2009. We looked at some others. And they're not necessarily good indicators for us because when the take-private happened with EFH, they had given some things around the retail business. They had some price caps. So you really can't go back to that and look at it. But I think that is probably the biggest concern. Our view on this is that you're going to see commercial and industrial volumes decline. But that's not where our margin is. The fact that people are now working from home actually could turn out to be an interesting outcome because residential margins, which is a big part of our EBITDA, could go up in this environment. So it's going to depend on the extent. Our own view on this is that the summer weather is probably more of an impact on what 2020 ends up looking like than the demand falloff in ERCOT as we're currently modeling it. Now I will put basically a caveat, all of this. And I think that's under an assumption that over the next couple of months that the country gets a handle on the virus and that we don't get into some prolonged U-shaped recession. But as I said before, even with that, 2020 still looks very resilient. I think the more U-shaped effect will have an impact more on 2021 than it would on 2020. So I think we are in pretty good shape. And I think the weather is still going to be a factor for us as it would have been anyway in 2020.

Okay. And maybe -- I mean, I guess, thinking about demand in ERCOT, there's really 2 things. There's the peak demand in the summer and then it's also -- which it sounds like you still think is more weather-driven. And then there's also the retail business and impacts, which it sounds like the mix change could be a factor for you. But maybe we could talk to each of those first. So in ERCOT, the -- maybe you could talk to the demand impact you've seen so far but also how the virus would impact supply and supply growth.

Yes. So let's just talk about what we've seen. We've been tracking it, as you would guess, on a daily basis. And until yesterday, we really hadn't seen much, in fact we've seen some days up and some days down. And we looked at it obviously on a weather-adjusted basis. But we did see some decline yesterday. I do believe that we are going to see decline largely out of C&I. And by the way, when I say we're going to largely come in, in 2020 pretty much around where the midpoint is, there are some negatives in that. And one of the negatives is around retail. So we do believe that we will -- that the way that things are shaping up with lower volumes that are likely to come out because of the effects from the virus, that we will see a lower effect on retail. But we've also done some other things already that have more than offset that or let's just say it's offset that, some positions that we put on that were protected positions for the company as we saw this coming. So there's some good and some bad. But I want to be clear, we do think that there will be a negative effect on the retail side, and we think it's volumetric in nature. As it relates to the supply side, what is interesting, I think you all know that we have a significant development organization and we're in the market all the time. And we saw about 6 to 9 months ago a number of developers who were almost in a panic state trying to find somebody to fund their projects. And we've also now seen them coming to us and essentially wanting to give our project -- their projects to us and just if we are willing to put the money in and then pay them some sort of fee if we actually develop it. I mentioned that because I don't think it's coronavirus or COVID-19 that impact it. We've seen this phenomenon coming. The PPA market has seemed to slow down, which is where most of the demand for supply was coming from. And my own theory on that is that many of the companies that are wanting to offset their conventional power purchases with an offset of green power are beginning to offset completely their demand, and there's just less demand for those types of deals. That means the market has to go to the merchant market model. And frankly, wind has -- because of the PTC going away, has struggled. And then on the solar side, there just has not been a financeable merchant model yet, especially in ERCOT. So we're already seeing signs of a bit of a slowdown on the supply side. Now we'll see how it goes. And I can't imagine that the virus is going to help that. But I did want to mention that we've seen a slowdown on that. We do expect that the 2020 newbuilds will come on. There was a lot of 2021 newbuild that were pushed from '20 into '21 in the CDR report. We don't see that happening. And we probably see less than what our point of view was prior to that just because of what we're seeing broadly in the marketplace on the supply side.

Okay. And maybe just to context the ERCOT market part of this, the -- at least from our data, the forward curve in ERCOT has held up relatively well despite the oil collapse and the virus and everything going on. Is that -- do you see it being -- and I know it's been backwardated for a while? Do you see it being kind of roughly fairly priced now or still too low given this or too high? Or any thoughts there?

Yes. I think 2020 is -- there's been a pretty -- I think people are trying to cover. And I think it's a bit overdone from where we see, even with some of the demand disruption. But we're largely hedged in that. 2021 to me right now hasn't moved much. First of all, we thought it was the backwardation in the curves in 2021 were below our fundamental view. We continue to believe that. But I think it's largely, Steve, that there is really not a good bid-ask out there. People are just extremely uncertain about what the next 30 days are going to be, let alone next summer. And so we have not seen a lot of liquidity. We're not sellers of our -- we're not sellers against the '21 curve right now. I mean we're somewhat hedged and reasonably hedged about where we should be this time of year for 2021. We think we're going to get our opportunities for 2021, and we're going to be patient about it. But we're not sellers right now at where the curves are.

Okay. Let me move over to retail, maybe particularly in ERCOT, but you can address PJM, too. So as you mentioned, pressure in C&I and maybe some benefit in residential. Could you talk about how that -- what is the impact of that in your business mix in retail? And then secondly, let's make sure we talk about the risk on bad debts in this environment and how you're thinking about kind of managing that issue.

Sure. So as I said earlier, I think we see the greater risk on the retail side being more in the commercial and industrial. And then ERCOT, I would say that some of that is -- and I think most of you know this, some of that is coming in the form of the Permian Basin area, where we see maybe 600 megawatts of demand disruption going on as the drilling activity and the hookup activity dries up completely, given where crude oil has been, given the Russia and Saudi Arabia shenanigans. But nevertheless, we expect that. Our own view is that we are likely not to see peak load grow from '19 to '20. That's our assumption now going in, most of that coming out of the commercial and industrial side of things, which I believe most of you know is a much smaller component of our EBITDA contribution from retail. I believe those numbers, and David, correct me if I'm wrong, I believe they're 90-10. 90 of it comes from small business and residential and most of it from residential. And then the remainder of that margin comes out of the C&I business, so...

Correct.

But we do expect -- you go ahead.

Yes, go ahead.

I was just agreeing with Curt, that's the right mix.

Okay. Thank you. So the one thing you mentioned that I think, just to explain how it works, outside of ERCOT, the retail businesses, the bad debt expense side of things, which is a real risk in this type of an environment, as you -- I'm sure you understand, that is borne by outside of ERCOT by the utility. In ERCOT, it's the retail energy provider that bears that risk. I'll give you, just our bad debt on a yearly basis, about $70 million. That is more than offset, generally speaking, by fees for late payments. We expect that $70 million to go up and maybe even double in that range. But we expect it to go up. What we are working on, and I feel pretty good about, we're working with the Public Utility Commission here in Texas, the transmission distribution utilities, other retail energy providers and generators, is a backstop mechanism for the period of time that the governor declares that we have an emergency due to the virus. And essentially, what that would mean is a recovery of any bad debts that are coming from the virus. So I think we have a -- this is not done yet. And it won't be done until the Governor agrees to it. But I am just telling you that there are things in motion that could be a good backstop for us on the bad debt side.

Okay. Maybe switching gears. The part of the story of the company, really a lot of the story is just the cash flow generation of the company and a better balance sheet. So maybe you could just context of as the stock has weakened up so much, just given that you're not seeing that much of a view on EBITDA, just how do you see the balance sheet and cash flow outlook? And just what does it do in terms of your thinking on allocating that cash at these levels?

Yes. Well, I'll make a couple of statements. And then David, on the back end of this, I think it would be good just to give people a snapshot of our liquidity position because I think that's important. My sense is -- and none of us knew this was going to happen. But we all knew that at some point, we would have some sort of a recession or it was likely. Part of our story has been from the beginning, way back in October 2016, is that the balance sheet was the cornerstone of our company and low debt was critical. And we've continued to work in that direction. I think this has only, in my opinion, served to strengthen our conviction in 2020 that we are going to pay down our debt and get to the range of our 2.5x. The way our cash flow comes in, just to remind everybody, that most of that paydown of that debt is going to happen at the end of the third quarter because that's where our cash comes in. And I think that's exactly a time where then we'll announce our longer-term capital allocation plan. So what I like about that is, is that we get to the point where we can then start to embark on our long-term capital allocation plan. So like 2019 was a year of execution, we dubbed 2020 as the year of balance sheet strength and capital allocation clarity. And we did that way back when. And now it has certainly seemed to come to fruition, that balance sheet strength is really important. Liquidity is very important. And then turning our sights to capital allocation. I think it's pretty easy to say that when we turn our sights to longer-term capital allocation, when we look where our stock is today, even when it was in the low 20s and high-teens, where it is today, I think it doesn't take a rocket scientist to know where we would put the majority of that money. We would certainly look at opportunities to grow the business. But the clear majority of this is going to go to buy back our shares if they are anywhere near where they are today. So that's kind of how we think about it. David, you might want to just add kind of what our liquidity situation looks like and what we've done to shore that up.

Sure. So this is David Campbell. I want to echo Curt's thoughts, wishing for everyone's health and well-being. We're strong in the liquidity front. We ended the year, as you saw in the K with $1.7 million of liquidity. We're about that level now. We've shifted the mix of cash versus revolver. So we've got about between $800 million and $900 million of cash on hand right now. So we've got a little bit extra cash buffer. We're expecting to be, as you all know, a very significant cash generator this year with the bulk of that in the third quarter. So we've stressed our liquidity scenarios, really punishing scenarios, and we are in a very comfortable liquidity situation even in very draconian situation. So we're in a good position liquidity-wise. We have a little extra cash on hand just to have it but strong liquidity overall.

Maybe for Curt or David, just on that, would you -- I know you're very focused this year on debt paydown to get to your target metrics. Would you consider, as debt markets have been a little weaker, kind of buying a little bit of that early before the maturities hit? Or do you think you'll just kind of wait for that?

No. I think -- well, I should say, and David, jump in here, but we are doing that, Steve. We're looking for those opportunities. And we've done some things, although they're just so small, not that really -- we didn't really make a big deal out of them. But we're absolutely looking for those types of opportunities, and we'll continue to do so.

Okay. And then how are you feeling about the -- being able to get to the investment-grade rating, I guess, both metrics but also rating that you're trying to target with this plan?

So we feel good about getting to the metrics. And I'll mention something about business risk here in a minute. But yes, so I think we feel good that we're going to get to those metrics, in particular as we look at Moody's and Fitch. I think S&P will also need an upgrade on the business risk environment. In my opinion, when we do well in 2020, which I believe we will, through what I think most people would consider one of the worst events in the history of the world, if not -- and certainly the country, and we come out of this in a strong position, which we are going to do everything we can to make sure that happen, that I don't know what else could prove that the business risk of this company has been reduced significantly and that we can make it through many different environments. And so I feel like this event might be for us a bit of a watershed event for the agencies in terms of the resilience of this business model. And that could help foster the investment-grade ratings. And that -- I believe that could happen. Now I do believe there will be a general negative reaction across all credit as these things tend to do. But I also think when the dust settles, they'll be looking at companies that weathered it better than others. And I think that we'll be able to demonstrate that we did. And I think that's a strong point for us as we head toward investment-grade ratings.

Okay. I'm going to ask one more financial question, then we'll go to broader questions. So just -- the last thing is just the dividend. So you now -- what started as a relatively small dividend is now a pretty big dividend yield? How do you feel about conviction on that dividend and growing the dividend 6% to 8% that you're targeting?

I think -- I don't believe that we think where our stock price is, is a long-term effect. So I think we think that yield will come back down again. But if it did stay at this level, we still feel like that is an amount of cash that we're paying out on an annual basis that we can easily do. And so -- and we think we can grow it with the pipeline of growth activities that we have. First of all, we can grow it out of just pure cash off the base business. But we think we can fund the longer-term growth with investment in the company in a modest way. So we're still convicted that it's the -- we have conviction around this dividend at the level it's at today. What I would say, Steve, is that I really believe ultimately, when we talk about our longer-term capital allocation plan, we'll take a look at the dividend at that point in time as well. Now this kind of world may make you think differently about it. And we'll see where we are come fall. But I do think it will be on the table.

Yes. I mean I think the -- my recollection is the dividend growth pretty much doesn't require you to actually grow the cash dividend, it just -- as your share count shrinks, it pretty much grows the dividend.

Yes.

Yes. Okay. All right. We've got a bunch of questions. So I'm going to start into questions and then I've got some others in the event that, that slows down. So Curt, the first question is how you anticipate managing potential reduction in load in retail, given the risk of load shedding. I think you addressed that some. But just maybe give a little more color on kind of in your stress testing, what the stress test on load, what are the scenarios you're kind of assuming?

Yes. I think the main scenario -- that's a good question. The main scenario that we looked at was that load growth between '19 and '20 was wiped out. And that is significant. That's over 2,000 megawatts. And then we did assume that the supply growth coming in, in '20, which isn't necessarily the case, but we just assumed that it would come in, in 2020, so a fairly significant swing between supply and demand. We also though put stress -- for liquidity purposes, we actually stressed it further than that, where you would have a demand disruption. Now ERCOT, even back in the 2008/2009 time frame, did not see significant demand disruption. They actually saw very low load growth but still load growth. And then the 2 years after that, they saw a substantial load growth. So we thought it was a reasonable planning case for the current situation to wipe out completely the demand-side growth and then -- but then -- but also not change the supply side. And that's what we did to get back to that, what I was telling you, where we come in pretty close to where the midpoint is. Does that help? And I don't know, David, -- and David, I don't know whether you want to add anything or not. But -- and we looked at other cases, Steve. But we did run a really draconian case for stressing liquidity. We're trying to make a decision whether we want to draw on the revolver. And none of us want to run out of cash. So we looked at something much more draconian than that.

Okay. I -- go ahead, David. Sorry.

I was going to say, we also ran a significant reduction in all LCI and small business load, a 3-month customer disconnect moratorium. So as part of that modeling 2020, the stress case that Curt described, we still feel good about our performance. We took a big hit in load and an increase in bad debt, as he described.

And David, remind me, in that, I believe we increased bad debt expense even though there may be a backstop that would eliminate that. So I think we left that in, if I remember correctly. Is that right?

That's absolutely right. Big increase we assumed in that stress case again that got us to stay in the line with the results. We had a 50% increase in bad debt basically.

So there's an upside, Steve. There's an upside to that if you get a backstop.

Okay. Great. And then this is a related question. So if there's nothing incremental, but the question is really when you did that 2021 stress test of a worst case, down 10%, were there any other factors, I guess, besides the ones you mentioned? Or were really those, those same factors, low supply, lower demand?

I think they were largely the same factors than what we saw. What I will tell you that more specifically on that is that we did not assume that you get back to the normal load growth from '20 to '21, that there is some load growth. But it doesn't get back to the sort of 2,000 megawatts or so. So we -- and I actually believe that we're going to see a bigger pop than that, but we did not do that for, I think, for conservatism. So anything else, David, though that may have been different? I can't think of anything though.

Those are the main things, Curt. We had some lingering effects, as you said, on the retail side that were some dampeners. But the main impacts were that fundamental supply-demand shift with the knock on the demand side.

And Steve, the biggest issue on that is, is we're just not as hedged. And so I told you before, our fundamental view is that we're still going to see higher prices than where the forwards are for 2021. So we obviously believe something different than that less than 10% effect on EBITDA. However, for the purposes of wanting to understand just our liquidity but also what a downside case would look like, we ran that obviously a reasonable downside case. But we don't think that, that's where the market will settle out or we would be hedging against the curve right now.

Okay. And then I guess there's a couple of questions here about -- I guess the one question here is how should we think about hedges on the retail side if volumes decline? So I guess the thought process is, make it into the integrated model, just degree you're hedging back-to-back retail, how are you managing the risk in the event that volumes decline?

Yes. So if that question is asking if we end up being -- if we're over-hedged ultimately, and I think that's where people -- that question is going, I mean, we manage that kind of situation all the time. We're constantly looking at our position in managing it against where the curves are. But if you get into the summer, and this is -- we've seen this happen before. We saw it not in '19 but in '18, where the volumes came in lower on the retail side and we're over-hedged, there can be, in that kind of situation, where prices are lower and you have lower demand, that you are having to sell into the market because you're over-hedged and you take a financial hit. And we've had that before. We think we're pretty well managed because you guys know, we are not fully hedged, so we take length. I think a bigger risk for us is on that open position. And by the way, in the 2020 numbers that we mentioned to you, we severely reduced the price at which we would get paid on our open position. But you can get in a situation where you're over-hedged. And we try to manage that before we get to the day ahead and real-time market. But if we have excess, you have to sell that into the market and you can't take a hit. But we've been pretty good about managing that.

Yes. And that, you did -- Curt, you did at the beginning bring up a point that you early on took actions to protect risk from this being an issue obviously operationally and also with liquidity. Did you do any changes in your hedging to also kind of protect from that standpoint?

Yes. It was more -- so the way we think of hedging, it's not just physical or even financial outright power or heat rate or gas. But we use, to some extent, options and derivatives and instruments to hedge potential ranges of outcomes. We did some of that, Steve. We also -- some of our mining operation requires us to use diesel fuel and other things. And so what we did is, is we had a view, we saw where we thought things were going and we put on some of those positions. We've since then, because things have come to fruition as we thought, and we've since then have monetized those, many of those positions. The diesel fuel issue was more of a 2021. And that was a pretty significant, I'd say, in the $20 million range, where we were able to reduce our overall cost of diesel fuel. But there were some like-type actions that we took for 2020 and probably similar in size that helped offset any kind of reductions that we might get on the retail side. And I'd prefer not to say much more than that just because I don't want to get into what the position taking is. But I can just tell you that we were -- and we were doing it all within obviously our risk management of our physical asset position. There wasn't any speculative trading going on. This was more against our open physical positions.

Okay. Here's a question is in the event that you have that bad scenario for 2021 or the kind of the stress test scenario, would you look to do more debt paydown in '21 to kind of keep your debt-to-EBITDA consistent?

I think what we're -- well, I don't want to get out ahead of the Board on this. But my view is when we get down to the 2.5x because, look, I think the metrics are strong at 2.5 or 2.6 or 2.65 or whatever, I think what we want to do is balance what is the most economic decision for the company, whether it's buying back shares, reinvesting in the company or continuing to pay down debt. But look, there is -- that could be what we do. And I would not be surprised over some period of time whether we continue to pay down some debt. But I think it will be a function of what we think is the best economic decision at the time.

Okay. I think you added -- someone is asking again about being able to buy back debt at discounts in this environment. So it sounded like you might -- you may be doing a little bit of that or have flexibility a little bit.

Yes.

Okay.

Yes.

Okay. Just an off-topic question on the PJM, just obviously it's gotten less attention as other crises get more attention. But just maybe you could give your views on the PJM compliance filing and how you're feeling about the auctions that may finally ultimately come and any state legislative impacts.

Yes. So the compliance filing itself, there was really nothing in that, that really surprised us. My view is the bigger news has been around the nuclear plants and just what the net go-forward cost, they call it net ACR, for dual-unit nuclear plants, which is they come in at 0. I think that actually bodes well, frankly, for the idea that maybe that states with nuclear positions and also have subsidies in place, maybe less inclined to do an FRR. Having said that, there are other factors that need to be taken into account. What I think is probably the bigger news maybe is just timing. You're getting different views, not surprisingly, from FERC. The Chairman didn't promise anything, but also said that he felt like that FERC needs to continue to conduct business and that the uncertainty from not running the auction was not good for the economy. And so that was an indicator that they were working on the compliance filing. And so who knows what that means because he wouldn't say. He was noncommittal on timing. Commissioner Glick, on the other hand, said that he believed that all work should really stop on that so that the states that are impacted by the capacity market in PJM. The order could focus on the coronavirus and not on this subject and that, that would be a better use of time. So who knows where that comes out? I think you know that the FERC has now constituted 3.1 and McNamee is still there. My own view is that I think they're going to try to move forward on the market. And they're going to view it as the government needs to continue to work even though we're going through this. So we'll see. I also think, Steve, that many of the states -- and I don't know this by any stretch. I felt like Illinois would probably do some kind of clean energy legislation. I thought there was at least a 50% chance that may happen in this legislative session. I wouldn't say that it's less than that now in my opinion just because government has sort of been ground to a halt. So they could do an extended session that goes into the summer. That's been done before. They could do it in an extended veto session or in the veto session. I still believe that clean energy legislation is going to be passed in Illinois. I just don't know exactly what that looks like. And I would say that -- I continue to say that we should separate clean energy legislation from FRR. I don't think those things have to happen together. I know there are parties that would like them to have together, but I don't think they have to. And I'm hearing more and more that some people are of the mindset that they would like to see how an auction clears under this new order. Given the compliance filing, they would like to see it clear before they make that decision. That's not just in Illinois, but I've heard that in Maryland as well. I continue to believe that New Jersey is the more likely to ultimately do something because their big push is offshore wind, which is very expensive and is unlikely to clear in a normal auction, whereas I think normal wind and solar may be able to clear on their own in the marketplace. And so the real question then, I think, also comes up is what newbuild comes into the market. And I think it's going to be difficult for a lot of newbuild to clear in this next auction. I guess we'll see. And what I'm speaking of is the gas CCGTs and we'll see what happens. But I think there may be less of that. So all of that, I guess, if you put that all together in a bag and shake it up and roll it out, it says to me that we could be anywhere from $100 to $110 a megawatt day all the way up to -- and then I'm talking about RTO, all the way up to $140, which is where we cleared. I think really the range looks kind of like that. Under FRR, it could be a little bit -- I still think it's probably going to be in that range. And the reason that would be is that Exelon would probably clear the units that they had not been clearing in the PJM auction previously. And so that would force it to the lower end of the range. I don't expect in this auction a bunch of retirements to happen. But if we did get that load cleared, I would expect in the next auction that the market will see some retirements and kind of settle back out into what it has over the last 4 or 5 years, probably in the $120 to $140 range for RTO. And the market will settle out into that. I believe strongly over time, it will settle back into that.

Okay. I just want to remind callers that we still have 5 or 10 minutes for questions if you want to throw any in. I've got one here. Just in the -- I know it's hard in a time like this, I guess, to think about kind of acquisitions or things. But just in the Texas, in particular, in retail or broadly, does this create an opportunity for more consolidation, just given that you probably still have a lot of other weaker players still in the business?

So good observation. And yes, it does. And we would be prepared if something like that became available. They're not going to be big in size, I don't think. But certainly -- and look, I think we get -- we're looked at. Both NRG and Vistra are looked at in some ways in Texas as being a provider of last resort in some respects. And that if somebody did have a hardship, would we step in and take over for the customers. They're thinking more from a customer standpoint. From my standpoint, it's an opportunity for us to grow our retail business. So we are on the lookout for that. We obviously can integrate those types of things pretty quickly. And I do believe that this is an environment where you could see that happen.

Okay. I had a question, just I'm not sure if this is still as relevant. But I think back a few months ago, you had talked about looking at even a higher dividend as another option for capital not beyond the 6% to 8% growth. Is that something you'd still be looking at when you kind of redo the capital allocation this fall or less so with, I guess, with the stock where it is?

Well, I think -- yes, I think it will be on the table. I think it will be discussed. Clearly, depending on where the stock is, where we want to allocate our money at that point in time in the fall, maybe different than what I was thinking when we talked about it previously. But I still believe that it will be one of the variables on the table. Now the timing, the timing by which we might take an action around the dividend, and I don't mean getting rid of the dividend or shrinking or anything like that, I'm talking about whether we'd increase it, might change. But it's one of the buckets that we're going to continue to look at in a way to get money back to shareholders and sharing the strong cash flow that we have.

Okay. And then one other question I have is just that you guys mentioned the higher cash balance of $800 million to $900 million. That's due to the revolver draw so that your overall liquidity is still about $1.7 billion (sic) [ $1.7 million ], but there's more in cash and less on the revolver availability.

Yes. David, do you want to take that?

Yes. That's correct, Steve.

Okay. I think that's all the questions we had. And so Curt, really appreciate you taking the time, and David, taking the time today. I don't know if there's anything you want to end us with, Curt, before we end the call.

No. I mean, look, again I appreciate everybody that joined the call. Thank you. And again, be safe and healthy. I hate to really hype things in this environment. But we've worked really, really hard to be in this position. And we felt all along that we have the right business model. And I think this is the time where it is really demonstrated, the strength of this business model. And when things turn around, we're as good as anybody in terms of being well positioned. And it's gratifying to see that what we did, I think, is paying off. I don't like the stock price. I know you don't either. But I don't. And so what I just mentioned to you is that we think this is the right model. David didn't say this. He's a modest person. And we didn't answer this one. Some maybe asking the question, why is management not buying stock? And I would like to buy a bunch of stock, but I didn't have the foresight to think we were going to have the COVID-19 virus. And we -- one of the things we've been doing as a management team when we get vested equity, as we sell equity to pay for the taxes because you get -- once you invest, you get taxable, what happens is then you are subject to the SEC's short-swing rules. And you'd have to disgorge all the profits on anything that you would buy. So we're effectively prohibited. However, I will say -- I think I can say this, David, that -- 2 things. One, our Board has been buying. And one in particular, our Chairman, has bought a lot of our stock. And I wish I could, but I cannot. And David, who has not been here as long, was not under the same short-swing rules. And I believe David has made some purchases recently as well. But I wish I could buy, but I can't. But I will -- the real point on all this is that we obviously think we're cheap. But we think what we're doing right now and what we have done is the right thing. And then it's proving out right now and we're well positioned when we come out of this.

Curt, thank you so much. And just since you brought it up, I have to ask, when are you allowed to buy stock again?

Well, so what I think we're going to do now is we're unlikely -- I think we're going to our use cash to pay tax. And so I think it was a -- I think, Molly, you may know this. But I don't know if she's on or not. Or David, you may know this. I don't know, I think maybe a 6-month period. And then if we don't obviously sell shares against our vesting, then after that, we should be able to. So unfortunately, I just -- we didn't have the foresight to think about it. And unfortunately, one of our senior leadership team actually did do this and had to write a check back to the company to disgorge the profits they had and kind of learn the hard way.

So Steve, it's a 6 months' look-forward and look-back. So it's -- I was able to buy shares because on sort of the same rules, I can -- I haven't had anything to vest in the look-back. And going forward, I've already made the election to cover -- and I'll cover the tax obligation in cash. So it's a 6 months, people have to be clear, both directions.

Got it. That's helpful to know. Thanks again, Curt and David. And thanks, everyone, for joining, and good luck today and be safe.

All right. Take care. Bye.