Vistra Corp. (VST) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Vistra Virtual Investor Event. [Operator Instructions] I would now like to hand the conference over to your speaker today, Molly Sorg, Vice President, Investor Relations. Thank you. Please go ahead.

Thank you, and good morning, everyone. Welcome to Vistra's virtual investor event, which is being broadcast live from the Investor Relations section of our website at www.vistraenergy.com where you will also be able to find a copy of today's investor presentation and the related news release. Joining me for today's call are Curt Morgan, President and Chief Executive Officer; David Campbell, Executive Vice President and Chief Financial Officer; and Jim Burke, Executive Vice President and Chief Operating Officer. We have a few additional senior executives on the call to address questions in the second part of today's webcast 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 news release, investor presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measures are provided in the news release and in the appendix to the investor presentation. I will now turn the call over to Curt Morgan to kick off our discussion.

Thank you, Molly, and good morning to everyone on the call. We're excited to be talking with you today about Vistra's transformation, including our 2021 and 2022 capital allocation plan, portfolio management and investments in zero-carbon generation projects, all of which highlight our promising and sustainable future. In addition, we will update 2020 guidance, provide guidance for 2021, both of which support Vistra's continued strong financial performance, levels of performance well above those embedded in our inexplicably low stock price. While we had originally hoped we would be able to deliver this message in person, an in-person event was not in the cards in 2020. So thank you for carving time out of your busy schedules to attend our virtual event. As always, we appreciate your interest in Vistra and hope all of you are safe and healthy. I'm turning now to Slide 6, where I would like to begin today's conversation outlining the 5 key messages we are hoping to deliver today: First, as I will discuss in more detail momentarily, our integrated model is delivering. We are on-track this year to exceed our guidance midpoint for the fifth year in a row. And this is in face of an unprecedented pandemic tail event. Every year since Vistra has been a public company, we have delivered on our financial commitments, and we believe we are well-positioned to continue to deliver consistently strong long-term earnings into the future. Second, our relative earnings stability and robust free cash flow support our diverse capital allocation plan. We believe we will be able to return approximately $1.5 billion annually to our financial stakeholders while also investing prudent amounts of capital to grow and transition our business into the clean energy future. I'm very excited about the announcements we are making today as they are just the beginning of what we believe will be a significant transformation of our business over the next decade. Vistra is planning to invest over $1 billion in just the next 2 years in solar and storage projects in Texas and California, with returns expected to be above our internal investment threshold. Jim Burke will provide additional details about these projects, and he will also introduce our new carbon-free generation brand, Vistra Zero, which, following today's announcement, consists of nearly 4,000 megawatts of zero-carbon generating projects and operating assets. As we plan to discuss throughout the call today, our third takeaway is that we are well-positioned to participate in the renewable and battery storage transformation. In fact, by 2030, we project that more than 45% of our ongoing operations adjusted EBITDA will be derived from renewables, storage and refill. And when you add the expected financial contribution from our nuclear facility, Comanche Peak, more than half of Vistra's adjusted EBITDA is projected to come from zero-carbon sources by 2030. Takeaway #4. The balance of Vistra's 2030 adjusted EBITDA is expected to be derived primarily from our existing natural gas fleet. Importantly, as the lowest emitting, most efficient and flexible fossil fuel generation resource, we expect natural gas will remain a critical fuel to support the reliability of the electric grid, although that role may change over time from a baseload resource to a backstop for intermittency of renewables. Gas will also be fundamental to maintaining the affordability of electricity to households and businesses as well as meeting the expected growing demand for electricity over the next couple of decades as we electrify the economy. As recent events in California have demonstrated, when electric grids are heavily weighted toward intermittent renewables, dispatchable resources are necessary to satisfy demand during peak periods. In ERCOT, PJM, ISO New England and New York ISO, where Vistra competes, less than 5% of effective capacity is from renewables and batteries. Our analysis as well as others suggest that, generally, over the next 10 years, the likely investment in renewables and batteries will take their contribution to effective capacity up to approximately 10% at a cost of nearly $250 billion based on economics in ERCOT and renewable portfolio standards in the other markets. These investments will also likely hasten retirement and increase volatility, thereby, enhancing the need for reliable, efficient and flexible dispatchable resources. In fact, we estimate that nearly 40 gigawatts of assets will be retired in these markets by 2030 as we add renewables and batteries from a pool of over 100 gigawatts of at-risk coal, oil and inefficient gas units. Importantly, given their relative efficiency, lower emissions and flexibility, combined-cycle gas turbine, or CCGT, natural gas field generation will be important to transitioning to a zero-based carbon economy under any decarbonization plan. Even in ERCOT, where we project a greater build-out of renewables and batteries by 2030 reaching in the range of 35% of effective megawatts, we expect approximately 10,000 megawatts of retirements of coal, oil and less-efficient gas from an inventory of over 30,000 megawatts to come before CCGTs. In addition, our modeling shows continued compensatory pricing in ERCOT over the 10-year period due to the increased scarcity events and the operating reserve demand curve, albeit with increased volatility due to renewable intermittency. We believe Vistra is well-positioned to manage this volatility and create a relatively stable earnings and cash flow stream year after year. In the end, multiple studies show CCGT gas plants remain a key component in the supply stack up to 2040 and beyond, and Vistra will continue to invest in our transformation beyond 2030, delivering a company that is projected to be over 70% carbon-free by 2040, even under a scenario where federal and state policies accelerate the renewable and battery buildout beyond the current renewable portfolio standards. CCGTs remain important to the reliability and affordability of the bulk power system, and Vistra can participate in that buildout. As many of you know, the core of Vistra's EBITDA from thermal generation comes from CCGT gas plants. Accordingly, the last of the announcements we are making today support the acceleration of our greenhouse gas emissions reduction targets. We are now targeting a 60% reduction in our CO2 equivalent emissions by 2030 as compared to a 2010 baseline, up from our prior target of 50%, and we now have a firm target to achieve net zero emissions by 2050. We believe we have a clear path to achieving our 2030 target with the incremental coal plant retirements we will be announcing today. And while the path to achieving net zero-carbon emissions in the economy by 2050 is not as certain, we believe that over the next several years, technological innovation and supportive public policy will continue to advance to the point that the road will become clear. And we have everything it takes to invest and earn superior returns as part of that transformation of our generation base. And we are doing our part to support these advances, investing in a venture fund that focuses on technological innovation and sustainability to help accelerate the availability of carbon-free and carbon-reducing technologies and promoting a market-based economy-wide carbon fee and dividend plant with a border carbon adjustment to advance nationwide emissions reductions goals. As we highlight in our first-ever climate report published on our website this morning, electricity is an essential product. One, we expect the country will demand more, not less of as the economy electrifies. While the method with which we serve our customers might evolve over time, our role in the process to generate reliable, affordable and sustainable power for our customers, all while lowering emissions, will not. We believe Vistra is well-positioned to not only display resiliency during this important transition, but to lead and grow, as we've set forth on the next 2 slides. Turning now to Slide 7. Along with a strong balance sheet, Vistra's integrated model is the foundation on which our sustainable transformation will be built. Through financial execution, capital discipline, commercial prowess and operational excellence, we believe we will be able to create meaningful value for our stakeholders, building on the strong execution of our team over the last 4 years. Specifically, we are currently tracking to exceed the midpoint of our annual financial guidance for the fifth year in a row, and we are also on track to potentially even exceed the top end of our original 2020 guidance range. We convert an average of approximately 65% of our ongoing operations adjusted EBITDA to ongoing operations adjusted free cash flow before growth. This free cash flow generation is due in part to our team's disciplined cost management. In just 4 years, our team has captured nearly $1.5 billion in annual cost savings through internal restructuring, and synergy and operational performance improvement initiatives. We displayed the same discipline when allocating capital, investing in transformational growth opportunities only when returns are projected to exceed our internal investment threshold. As a result, we have significant excess cash to return to our financial stakeholders on an annual basis. In 4 years, we have already returned more than $6 billion to our financial stakeholders. We expect we will be able to return approximately $1.5 billion each year going forward, all while maintaining a strong balance sheet at a time when investors are looking for yield. How many companies offer the deep value opportunity that Vistra does? The substantial return of capital year in and year out and the ability to deploy modest levels of capital and grow earnings while fundamentally transforming itself, all with a relatively low-risk business model, including our targeted 2.5x net debt-to-EBITDA and a trajectory toward investment-grade credit ratings, we believe this offers a very unique investment opportunity. On the operational side, our retail business has generated stable and consistent EBITDA for the last decade while our generation team has produced safe and reliable electricity from a diverse fleet of primarily highly efficient, low-to-no carbon emitting resources. Our commercial team is the linchpin of our integrated model, focusing on capturing value from our assets that offer significant option value, managing risk from commodity price exposure and minimizing earnings volatility. In fact, it is the combination of Vistra's development, commercial, technical and operational capabilities, combined with our attractive sites and strong customer relationships that make Vistra a natural owner of renewable assets. Vistra is built for the long run, and we are not going anywhere. We do not have a terminal value issue. As we outlined on Slide 8, Vistra has an impressive pipeline of renewable and storage development opportunities totaling nearly 3,500 megawatts in Texas, California and Illinois. And these are only the near-term opportunities for which we have a clear line of sight to proceed with development. We expect that our renewable and storage portfolio will be 6,000 megawatts or greater by 2030. And we can achieve this level of transformational growth, investing only $500 million of equity per year on average over the next decade. We expect these transformational growth investments will generate at least $900 million to $1 billion in incremental EBITDA by 2030, contributing to an impressive projected total annual return per share through 2030 of 15% or greater when combined with the balance of Vistra's long-term capital allocation plan, including expected annual share repurchases. Let's turn now to Slide 9 for our 2020 guidance update. As I mentioned at the start of the call, Vistra is on track for the fifth year in a row to exceed our guidance midpoint. And we believe there is a reasonable chance we will finish the year above the top end of our original 2020 guidance range, all during a tail event pandemic. Our updated guidance ranges reflect new ongoing operations adjusted EBITDA and ongoing operations adjusted free cash flow before growth guidance midpoints at the top end of their previous guidance ranges. As we mentioned on our second quarter earnings call in August, we were tracking ahead of our guidance midpoint through June 30. The strong performance of our integrated operations in July and August have solidified our 2020 outlook, giving us conviction to raise our adjusted EBITDA guidance midpoint by $150 million, with an opportunity to beat even this higher target. We are similarly raising and narrowing our ongoing operations adjusted free cash flow before growth guidance range with our new midpoint, $165 million higher than our prior guidance. Our strong business performance and higher adjusted EBITDA estimate are driving this expected outperformance. With these updates, Vistra is now projecting a free cash flow conversion ratio of 69% for 2020. Turning now to Slide 10. We are also initiating our 2021 financial guidance today. As you know, we ordinarily would not provide guidance for the upcoming year until our third quarter earnings call in early November. That timing is intentional and is driven by our hedging strategy as we have usually hedged much more of the aircraft summer by the time we would initiate guidance. Our typical time line allows us to provide a relatively tight guidance band with a high degree of confidence on execution as our financial hedges are largely in place, minimizing our earnings volatility. Because we are initiating guidance approximately 6 weeks earlier than usual, our 2021 guidance today reflects a range of plus or minus $200 million or approximately 6% on either side of our guidance midpoint. In addition, COVID-19 continues to create economic uncertainty potentially into at least the first half of 2021. As you know, many companies have pulled their guidance for 2020 and are not providing guidance in 2021 due to the COVID uncertainty. We believe it is important to provide 2021 guidance, and our ranges are $3,075 million to $3,475 million for ongoing operations adjusted EBITDA with a midpoint of $3,275 million; and $1,765 million to $2,165 million for ongoing operations adjusted free cash flow before growth with a midpoint of $1,965 million, resulting in a free cash flow conversion ratio of approximately 60%, which is lower than our stated range. David Campbell will discuss the details behind this atypical lower conversion ratio. Our slightly lower 2021 guidance midpoint is consistent with our more recent comments of expecting adjusted EBITDA to be slightly lower-to-flat with our original 2020 guidance midpoint. It similarly reflects Vistra's currently larger summer open position, which is a direct result of the fact that we have yet to see the summer '21 forward curve trade at a price point that is more consistent with our fundamental analysis and point of view. While Texas demand in 2020 is back to pre-COVID-19 levels, COVID-19 did eliminate approximately 1 year of demand growth. We expect some renewable development will be delayed as a result. So in our view, the full impacts of COVID-19 are still being digested by the market. As we approach summer 2021 and the market absorbs the continued volatility driven by the intermittency of renewables and normal plant outages, we expect to see increased summer 2021 forward curves, which should provide incremental attractive hedging opportunities and make the upper end of our guidance range achievable. In addition, we always have the option to take more length into the summer 2021 day-ahead and real-time markets where the market fundamentals ultimately play out. It is also important to note that our assets and business positions offer several levers to pull to extract the embedded option value from our portfolio, leading to higher EBITDA and cash flow. Importantly, the average of our 2020 and 2021 ongoing operations adjusted EBITDA guidance midpoint is $3.43 billion, which is right in line with our original 2020 guidance midpoint in our prior 2021 financial outlook. In a commodity-exposed business such as ours, average results are most representative of Vistra's long-term sustainable earnings power. The key is to have the ability to capture the value from the opportunities when they present themselves, something our experienced operational and commercial teams excel at doing. In fact, looking ahead to 2022, our current expectations for the earnings power of our business are consistent with this average 2020 to 2021 view. Importantly, we believe we can manage our year-to-year earnings volatility to within less than 10% and the variance between our original 2020 guidance midpoint and our 2021 guidance midpoint is less than 5%. This ability to tightly manage our expected earnings and cash flow on an ongoing basis, if completely disconnected from the apparent assumption of long-term expectations embedded in our current stock price, through our ability to generate relatively stable EBITDA and convert on average approximately 65% of our ongoing operations adjusted EBITDA to ongoing operations adjusted free cash flow before growth, Vistra is in a unique position to return approximately $1.5 billion of cash to our financial stakeholders each year while at the same time reinvest in the business to continue to transform our generation portfolio and grow our retail business and our EBITDA and also maintain a strong balance sheet with access to nearly $4 billion of liquidity. Specifically, over the next 2 years, we expect we will have approximately $3.8 billion of free cash flow available to allocate with more than 70% of this cash flow expected to be returned to our financial stakeholders and the other approximately 30% expected to be invested in solar and storage projects in Texas and California at attractive returns. Slide 11 sets forth this capital allocation plan for 2021 and 2022, which reflects a balanced approach and includes debt reduction and enhanced dividend payment, a multiyear share repurchase program and an allocation of capital to transformational growth opportunities. As we've put together this capital allocation plan, the feedback we received from many of you greatly influenced what we ultimately determined would be the best use of capital for the business. Specifically, investor feedback came through loud and clear that in these uncertain times precipitated by a global pandemic, a strong balance sheet with a conservative approach to leverage was a key priority. As a result, we plan to allocate approximately $550 million to debt reduction over the next 2 years. While we believe this amount of debt repayment will maintain Vistra's strong balance sheet, we will continue to evaluate our debt levels and will not hesitate to repay additional debt if we believe it is appropriate. Not only do we think it is the right decision in the current macro environment, we also believe it is important to continue to reinforce our commitment to our long-term leverage target of 2.5x net debt-to-EBITDA. Leverage in this range would allow us to operate the company through volatile commodity and market cycles without putting our business at risk. In fact, we believe our lower business risk profile and strong credit metrics warrant investment-grade ratings, and we believe we are tracking well for that outcome. Just a couple of weeks ago, we received an upgrade to BB+ by Fitch Ratings who also maintained its positive outlook. This upgrade positions Vistra to one notch below investment-grade with both Moody's and Fitch. We expect both Moody's and Fitch will evaluate upgrading Vistra to investment-grade before the end of 2021. We remain BB+ outlook rated at S&P and remain cautiously optimistic for a potential upgrade in the near future. Balance sheet strength has always been a core priority for Vistra, and we believe our long-term capital allocation plan exemplifies that commitment. Another core priority of Vistra is to grow our business through various investments or acquisitions that have attractive return profiles and that support our continued retail or expansion into zero-carbon resources. In talking with all of you, we continue to receive support for this corporate priority, especially given our demonstrated discipline and achievement of superior return from previous investments. As I mentioned at the start of the call, and as Jim will discuss in more detail momentarily, I am excited to say that we have identified a portfolio of attractive projects we expect will not only grow our EBITDA, but will grow our zero-carbon portfolio to nearly 4,000 megawatts. In total, we expect we will allocate approximately $1.15 billion of capital to transformational growth investments over the next 2 years, which includes capital for our previously announced Moss Landing and Oakland battery storage projects as well as capital for our Texas Phase I renewable and storage development projects that we just announced today. All of these projects represent very attractive investment opportunities, exceeding our investment threshold of 500 to 600 basis points above our cost of equity. Rounding out our capital allocation plan, we intend to allocate the balance of our capital approximately $2.125 billion to our shareholders in form of dividends and share repurchases. First, as it relates to the dividend, it is our intention to grow the dividend over a multiyear period, taking a conservative approach in 2021 in recognition of the uncertainty that remains with COVID-19. While we believe we can comfortably support and sustain a dividend of a higher level given the significant free cash flow we expect to generate on an annual basis, we recognize that today's market is placing a premium on flexibility. As a result, it is our intention, subject to Board approval at the applicable times, to increase our dividend by approximately 8% in 2021 at the high end of our expected 6% to 8% annual growth rate, followed by a step-change increase in the annual dividend to $0.76 per share in 2022. At our recent stock price levels, this would result in a dividend yield in 2022 in the range of 4%. In total, we expect to allocate approximately $625 million to regular dividend payments over the next 2 years, and we'll continue to assess our dividend on an annual basis thereafter. Last, in September, our Board approved a $1.5 billion share repurchase program authorized to begin on January 1 of next year. The program, which replaces any repurchase authority that remains outstanding at the end of 2020 under our existing programs, does not have an expiration date. We'll be opportunistic in the execution of share repurchases over the next couple of years, and we could utilize all of the authorization by year-end 2022. It is important to emphasize that we view share repurchases as competitively sensitive, and we expect buybacks to be uneven based on opportunity. We will not be telegraphing the execution of our program. This balanced capital allocation plan is aligned with our core tenets of maintaining a strong balance sheet, investing in transformational growth opportunities that exceed our internal return thresholds and returning most of the cash available for allocation to our shareholders in the form of dividends and share repurchases. Extrapolating this plan out to 2030 at our current stock valuation, and we would have returned more capital to our shareholders than our current market cap. This is in addition to transforming the generation side of our business and growing our EBITDA through investments in zero-carbon resources and retail. As I've said before, I remain perplexed by our stock price performance, and I must admit, now more than ever. Given our continued high-performance in the current macro environment, however, we remain committed to our strategy and our capital allocation plan as we truly believe the public equity market will ultimately value us properly, especially as we buy back our shares and the remaining shares are in the hands of those who are committed to and understand the long-term value of the company. I will now turn the call over to David Campbell to provide additional details around our planned portfolio transformation. David?

Thank you, Curt, and good morning, everyone. We are grateful for the opportunity to connect with you virtually today. As we turn to the details of our portfolio transformation, it is helpful to highlight that this strategic pivot is designed around 2 key elements: first, retiring existing coal plants and thereby meaningfully decreasing the greenhouse gas emission produced by our operations; and second, increasing our ownership of renewable and energy storage resources by taking advantage of our unique capabilities and position in the market to develop projects with attractive returns. This morning, I'll be covering our plans for incremental coal plant retirements, and then Jim Burke will provide additional details regarding our renewable development pipeline. Slide 13 lays out the time line by which we plan to retire 7 additional coal plants between 2022 and 2027. We have previously announced the retirement of our Edwards coal plant in Downstate Illinois by year-end 2022. Today's announcement sets outside retirement dates for the remaining 6 coal plants operating in Downstate Illinois and Ohio, formalizing the retirement of our entire Midwest coal fleet. We expect the 2 plants, Baldwin and Joppa, will retire no later than year-end 2025 and potentially as early as 2022 if economic conditions dictate. As many of you know, we have been advocating in Illinois for the passage of a legislative plan called the Coal to Solar and Energy Storage Act. If this legislation is enacted in its current form, which includes transition payments for uneconomic coal plants through 2025 to support local communities and give the state time to transition to renewable power and energy storage, the support provided by the Act would enable Joppa to Baldwin to remain online through year-end 2025. Without such support, economic conditions at these sites could necessitate an earlier retirement. The remaining 4, Illinois and Ohio coal sites, Kincaid, Miami Fort, Newton and Zimmer, are expected to retire no later than year-end 2027 and potentially sooner if economic conditions dictate. In total, these 7 coal plants have a combined capacity of more than 6,800 megawatts, bringing the total of coal and gas retirements announced or implemented since 2010 to approximately 19,000 megawatts, with the majority of these retirements, approximately 16,000 megawatts, announced or implemented in just the last 4 years. Today's retirement announcements were prompted in part by recently finalized environmental rules that were discussed during our second quarter earnings call in August. At a very high level, the Environmental Protection Agency's Coal Combustion Residuals rule requires coal plants that dispose of coal ash and surface impoundments to either make necessary capital investments and operating changes to bring coal ash disposal sites into compliance with the federal rule or to permanently retire by 2020 to 2028, depending on the size of the service impoundment. Decisions on compliance must be made by the end of November this year. The EPA's recently finalized rule regarding excellent limitation guidelines will also drive incremental compliance costs. In the case of our Midwest coal fleet, the challenging economics do not support the incremental capital that would be necessary to comply with the environment rules. Moreover, Vistra is committed to leading in the effort to combat climate change by meaningfully reducing our greenhouse gas emissions, and the accelerated retirement of these coal plants supports this goal. As a result, we have made the decision to retire the assets rather than prolong their life, which is the right decision for our financial stakeholders and the environment. We do recognize, however, that retiring existing assets will introduce challenges or impact employees and local communities. It is our hope that the significant advanced notice provided by today's announcements will help to ease the transition for all of those impacted. The advanced notice allows us to take a just transition approach, providing job skills training and outplacing services to our employees and working with local communities on property tax plans as well as supporting legislation to redevelop the shuttered coal sites into new technologies. Following these retirements and after factoring in anticipated growth in renewable and storage resources, we expect coal will be less than 10% of our portfolio by 2030. And as we set forth on Slide 26 in the appendix, we further project that our generation of load match will be 81% pro forma for these retirements. We expect we could see this ratio of low degeneration growing even further in the future given the potential for opportunistic retail acquisitions. In tandem with significantly reducing our coal exposure by 2030, we expect the renewables and storage will represent nearly 20% of our capacity and nearly 20% of our EBITDA far exceeding any lost EBITDA from the coal plant retirements. The balanced capital allocation approach that Curt described should enable us to achieve this portfolio transformation while continuing to return the significant majority of our available free cash flow to our shareholders. As we set forth on Slide 14, with the significant reduction of our coal capacity, we are accelerating our 2030 and 2050 greenhouse gas emissions reduction targets with updated goals to achieve a 60% reduction in CO2 equivalent emissions by 2030 as compared to a 2010 baseline, up from our prior target of 50% and net zero-carbon emissions by 2050. Coincident with our CO2 equivalent emission reductions, we are also forecasting meaningful reductions in other air emissions, including a greater than 75% reduction in NOx emissions and approximately 85% reduction in SO2 emissions by 2030, each as compared to a 2010 baseline. Additional details regarding our climate-related governance and strategy can be found in our climate report also published this morning in accordance with the Task Force on Climate-related Financial Disclosures framework. The climate report is available in the sustainability section of our website, and there is also a link on this slide. Turning now to Slide 15, in conjunction with today's coal plant retirement announcement, we are updating our reporting segments in order to provide enhanced financial visibility into the segments of our business that will drive our long-term value. Specifically, beginning with our third quarter 2020 financial results, we'll be introducing a new sunset segment, which will include the financial results of our MISO and PJM Coal generation assets as well as a few peaking gas plants in Southern Illinois that also have known future retirement date. Upon retirement of any of these plants, financial results will move from sunset to asset closure, consistent with our current practice. Next, we have combined PJM New York and New England to one segment, the East Segment, comprising all of our generation plants in the eastern interconnection transmission grid. And as for California, it is a meaningful and growing segment and a strategic part of our long-term portfolio. We have created a new segment for California called West. Retail and ERCOT remain unchanged, but we did update the name of the ERCOT segment to Texas. As we move into the future, we expect our 4 core segments of retail, Texas, East and West will be the drivers of our EBITDA growth as we exit coal operations. We expect we'll be able to grow our retail EBITDA in the future through both organic growth as well as opportunistic M&A transactions. In Texas, we expect incremental growth will be driven by our current and future investments in solar and battery energy storage. Similarly, in the East, we have the opportunity to grow our EBITDA if the Illinois legislature passes some form of the Coal to Solar and Energy Storage Act, supporting our investment in renewable resources at shuttered coal sites. We expect to see promising opportunities to expand further in battery and energy storage in California at our existing sites. We hope this new segment breakdown and enhanced visibility into the limited financial contribution of our retiring coal assets will help you in your evaluation of the long-term earnings power of our business. Approximately 95% of our ongoing operations' adjusted EBITDA is derived from our 4 core operating segments: Retail, Texas, East and West, where we believe we have meaningful and attractive transformational growth opportunities into the future. Continuing to own and manage the MISO and PJM coal generation assets through their remaining use of life will also provide incremental free cash flow that can support our asset closure obligation. In fact, if you turn to Slide 16, you will see that we expect our asset closure segment will require approximately $155 million to $165 million of cash utilization in 2020. The cash flow that we expect to generate from our sunset segment, approximately $190 million in 2020, will more than offset this cash use. The same is true for 2021 where we again anticipate cash generated from the sunset segment to largely offset asset closure segment costs. As Curt has already covered our 2020 guidance update, I will spend minimal time on Slide 16. So I would like to reiterate that even with the revised midpoint at the top end of our guidance range, we still believe there is a meaningful opportunity we can finish the year at the high end of our new guidance range. Our integrated model executed well during the critical summer months, giving us confidence around the strength of our full year results. Slide 17 provides a more detailed breakdown of our 2021 financial guidance. As Curt also noted, we do believe the top end of our 2021 guidance range is achievable given the overall supply and demand fundamentals in the Texas market. We have maintained more -- some length in our ERCOT portfolio, and is customary at this time of year, so we can be ready to execute when and if opportunities materialize to hedge at attractive prices. I would also like to address our projected free cash flow conversion ratio of approximately 60% for 2021, which is lower than our average of approximately 65% to 70%. In 2021, we have a few uses of cash that are higher and more onetime in nature, with the first being a greater number of major planned outages during the year and the second being higher scheduled payments under the long-term maintenance contracts in place for our gas generation fleet. In 2022 and beyond, our forward plan projects a return to a free cash flow conversion ratio in the 65% to 70% range. With that, I will now turn the call over to Jim Burke to discuss the second key element of our portfolio transformation, the expansion of our renewable and energy storage portfolio.

Thank you, David. I'm excited to be talking with all of you today as we announce the first phase of our Texas renewable and energy storage development plant. We've been foreshadowing this announcement for some time through our commentary on our significant pipeline of zero-carbon resources primarily in Texas and California. Our California battery development portfolio has already been a subject of much discussion. We are excited today to provide specifics about our Texas pipeline. But before I jump into the details, let's turn first to Slide 19 where we have laid out Vistra's history of identifying and executing attractive growth investments and acquisitions. From the moment we became a public company in the fall of 2016, we have taken the same disciplined and opportunistic approach to capital allocation, growing our business through both acquisition and investment at an after-tax equity return in the range of 15% to 30%. We acquired Odessa, a West Texas gas plant in 2017 when power prices in Texas were at trough levels, giving us the opportunity to acquire the asset at a very attractive valuation. The valuation has only improved given very low gas prices in West Texas. The transaction we closed in 2018, the acquisition of Dynegy, continues to exceed expectations and offer outsized returns. From the time of the acquisition announcement to today, we have more than doubled our EBITDA synergy and operational performance improvement targets from $350 million to $715 million. We have also increased our after-tax free cash flow target by nearly 5x and preserved the utilization of Dynegy's net operating losses, resulting in a net present value tax benefit of approximately $900 million. Applying an 8x 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. And that describes no intrinsic value to the company at the acquisition price, which we know is not the case. Then in 2019, we acquired both Crius and Ambit at approximately 4x enterprise value to EBITDA or less, expanding our retail presence in the Midwest, Northeast and Texas, increasing our generation to load match and adding an estimated $250 million of EBITDA on a full run rate basis with projected synergies. These acquisitions made Vistra the largest competitive residential electricity provider in the country serving nearly 5 million customers, up from the approximately 1.7 million customers we served at the time we became a public company in October of 2016. Our retail business now has 12 brands and more than 200 product offerings and operates in 19 states in the District of Columbia. On the investment side, we expanded our operations to include renewable resources in 2017 with the development of our Upton 2 Solar and energy storage facility in West Texas, which was the state's largest operating solar facility when it came online in 2018. Also in 2018, we announced our first battery energy storage contract in California at our Moss Landing site, followed by a contract at our Oakland site. Both of these projects have since been expanded, and we now have nearly 450 megawatts of battery energy storage developments under contract in California. All these growth investments were executed to what we forecast to be very attractive after tax returns, exceeding our investment threshold of 500 to 600 basis points above our cost of equity. They've also been transformational in nature, growing our business from a Texas-only operation to one with operations in 20 states and the District of Columbia, expanding the reach and marketing channels of our retail business and marking our entrance into renewable and energy storage development, a business we plan to continue to grow over the next decade. In fact, now that we have nearly 4,000 megawatts of zero-carbon renewable storage and nuclear resources operating or in development, we have created a new brand, Vistra Zero, to collectively identify this group of assets. You can see this depicted on the next slide. Vistra Zero generates zero-carbon electricity, powering America and our company towards a clean energy future. As we think about the development of, zero-carbon resources, we wanted to spend some time today talking about Vistra's competitive advantage in the space. We have all heard that, in general, renewable developments are being bid to very low returns, such that at first glance, this might not seem like an attractive investment category for our business. However, Vistra has the capabilities, capital and customer relationships to support the continued expansion of our zero-carbon portfolio. And our unique market position enables us to capture higher returns on these investments as compared to a stand-alone developer. Let's talk through each of these points in a bit more detail. The first 3 are rather obvious. We have a market-leading commercial team, development project management skills, operational and maintenance capabilities and attractive sites, making Vistra a natural owner of these assets. Importantly, we know how to manage the volatility and risk associated with renewables, a skill many stand-alone developers do not have. We also own a portfolio of highly efficient, low-emitting natural gas assets that can provide reliable, dispatchable power and complement the intermittent nature of renewable resources, enabling Vistra to structure renewable products that could ensure reliability at an affordable price. And we serve nearly 5 million retail customers who are increasingly seeking to procure their electricity needs from renewable sources with multiple channels to sell to our customers and margin up. As a result, we can invest in renewable and energy storage resources using only a fraction of our free cash flow, generating attractive returns and creating products our retail customers depend. As it relates to project economics, Vistra also has competitive advantages that improve our project returns as compared to stand-alone developers. First, Vistra has the ability to finance development projects on balance sheet, which minimizes fees and enables us to capture the tax benefits. In addition, we can also realize cost savings by developing a portfolio of projects at once, taking advantage of the scale to garner more attractive pricing on panel procurement and construction costs. Similarly, we have been able to optimize the value of our existing sites and land as well as acquire certain projects at attractive valuations at various stages of development. Perhaps most important, however, is the fact that through our merchant development, we capture project economics through the entire value chain all the way to the end customer. This is in contrast to developers that typically rely on long-dated power purchase agreements to secure financing to enable their projects to move forward. The offtaker or the party that signs the power purchase agreement will do so if they receive an attractive price, which in turn challenges the economics for the developer. While our merchant approach has a broader range of outcomes, it also provides the opportunity to earn outsized returns. As I just discussed, we have an experienced commercial team skilled at managing this risk and the end-use customers who are interested in procuring electricity from renewable resources. It is these competitive advantages that allow Vistra to earn returns that are 500 to 600 basis points above our cost of equity on renewable and energy storage development. The projects that we're announcing today meet this return hurdle. As we are expecting, we will realize approximately 18% levered returns based on Vistra's overall leverage ratio from our Texas Phase I development. So let's turn now to Slide 21 and talk a little bit more about these projects. We have begun the development of nearly 950 megawatts of solar and energy storage as part of our Texas Phase I development. These 7 projects offer geographic diversity with about 5% of the capacity located in the South zone in Texas, approximately 23% in the West Zone and 72% in the North Zone near the DFW area. We expect one of these projects will be online by next summer, with 3 additional projects online by the summer of '22 and all 7 projects online by year-end '22. In addition to our solar development, our energy storage project is a pairing of battery technology with our natural gas peakers, which will help create an even faster response generation asset, which we believe will be in greater demand as more mid-resources come on to the grid. With an investment of approximately $850 million of transformational growth capital, we expect these projects will generate approximately $90 million to $100 million of EBITDA, resulting in leverage returns based on Vistra's overall leverage estimated at an average of approximately 18%. Collectively, these projects represent a unique opportunity for Vistra to meaningfully expand our renewable and energy storage portfolio at very attractive returns. And we believe these projects are only the start of Vistra's expansion into zero-carbon generating assets. We have more than 1,000 megawatts of incremental solar and storage opportunities in our Texas Phase II pipeline, in addition to more than 1,000 megawatts of incremental storage opportunity in California and 450 megawatts of solar and storage potential in Illinois. Assuming the passage of the Coal to Solar and Energy Storage Act, a significant near-term pipeline that we expect we will be able to continue to grow in the years ahead. I would like to turn the call back over to Curt Morgan to provide our closing remarks.

Thanks, Jim. As I hope you can tell from this morning's virtual event, we are passionate about and have a strong conviction in Vistra's future. We do not have a terminal value issue and expect we will grow EBITDA and free cash flow in the future. In fact, approximately 95% of our ongoing operations adjusted EBITDA is derived from our 4 core segments, retail, Texas, East and West, with meaningful growth potential. We are well-positioned to transform our generation base and expand our retail business. While we have not focused on retail in this presentation, we see several opportunities to grow retail through organic means and acquisitions, with the opportunity to further margin up our generation through multiple retail channels. As we execute on our capital allocation and portfolio transformation plans announced today, the Vistra 2030 and beyond will look very different, but what we do and do well, will not. We project we will own approximately 6,000 megawatts of renewable and storage resources by 2030, which, when combined with our low-cost nuclear facility, will result in over 8,000 megawatts of zero-carbon resources under our Vistra Zero brand. Similarly, we expect coal will be less than 10% of our portfolio by 2030. We can grow our EBITDA even while retiring the majority of our existing coal portfolio by investing only a modest fraction of our free cash flow back into the business. As I mentioned earlier, we expect to continue our strong execution and transform our company while generating total annual returns per share of 15% or greater through 2030 when combined with our anticipated share repurchases over the same time frame. And at our recent stock price, we could buy back the market cap of the company in less than 9 years, allocating only $1 billion per year to share repurchases, all while maintaining balance sheet strength. In short, we are a company that can manage its leverage, reinvest in the business to grow EBITDA even while retiring coal assets and return a significant amount of capital to our shareholders. With our current market discount, this makes Vistra both a deep value and a growth opportunity. I suspect not many businesses can say the same. The playing field is changing. ESG, in particular, environmental stewardship is an increasingly important component for portfolio managers' investment decisions. And Vistra is committed to lead in the transformation, beginning with the strategic direction we announced today, which builds on Vistra's legacy of consistent execution and capital discipline. We expect we will be able to create a sustainable company that can produce enduring value for our financial stakeholders in both the near and long term, reaching its fair and full value. Before I turn the call over for Q&A, I would be remiss not to mention Vistra's commitment to our broader stakeholder base, including our communities, customers, suppliers and employees. It is our strongly held view that developing and maintaining long-term relationships with all of our stakeholders is consistent with achieving long-term shareholder value. To that end, Vistra will continue to invest in these relationships, including playing a leadership role in social equity and justice. We cannot delegate this to others. We must and we will be a leader. With that, operator, we are now ready to open the lines for questions.

[Operator Instructions] Your first question comes from Shahriar Pourreza with Guggenheim Partners.

Just a couple of quick questions here. First, Curt, on the retail side, certainly, thanks for providing some pro forma slides excluding the sunset segment. Does the lower generation lessen sort of your desire to allocate growth CapEx to additional retail opportunities in the East? And are you still interested in adding customers in ERCOT, especially as one of your peers is at least sideline for now with the direct M&A deal?

Yes. So I'll just generally speak. Sorry, if -- I'll try to get direct to your question. We still are interested in growing across all our markets where we have generation and where we have linked. I think I've mentioned this before. Outside of ERCOT, I think we'd be comfortable, frankly, going up to even a matched balance, because given the liquidity in the markets, but also the lower volatility, at least today, we would be willing to do that. Now the real question is are the quality opportunities out there to grow your business? And can we grow organically to get their organic growth? It just takes a lot more time. But I think you'll see that we'll continue to put our effort into organic growth. And then if there are opportunities that we see that are attractive, small tuck-in acquisitions, we will do that. In ERCOT, we definitely are interested in continuing to add customers. We're still about 65 across the average in terms of match. But when you get into the peak, we're about 75%. I think we still would like to stay somewhat long in ERCOT, although, again, we believe we could manage a balanced wholesale retail position. But we're more interested in quality of retail, and that is becoming more difficult. And then size in retail is becoming more difficult because you guys know that most of the quality retail businesses have been purchased or they're under purchase consideration, I'll put it that way. But we definitely are interested in growing our retail business, and we think there are opportunities by the way. And your point is well-taken about one of our competitors being tied up. There are other opportunities out there. And we were the 2 kind of always looking at pretty much the same things. And I think that probably opens up opportunities for us.

Got it. And then just on the Eastern side, is storage -- you kind of touched this a little bit, is storage in MISO a possibility without Illinois legislation? If not, like is the impediment the revenue model? Why does it work in Texas and California but not the East, i.e., is merchant storage isn't just competitive there? Is it the state RFPs? Like I'm just kind of curious on the dynamics.

Yes. So I think the -- outside of California, where California is willing to put essentially rate payer money behind storage, frankly, without this share -- but without the RA payments, it would be very difficult in California, even with the duck curve. I'm not sure -- in fact, I know it would not be economic for us to do storage and make money just off of the periods of time where there's peak. Even in ERCOT, the reason we did the 10-megawatt storage around Upton 2 is because we had excess power on the site that we were clipping. So that helped our economics. The project we're looking at DeCordova, that is essentially a longer-term play on co-optimization and also ancillary services in the ERCOT market, which we believe will be quite lucrative and is going to be necessary. And so we see that as being an opportunity combined with that peaking plant and so there's some unique opportunities. Outside of that, when you look across almost every market, it's hard to look at storage on a stand-alone basis. There's not enough volatility. I mean it's a peaking plant, and it has a similar cost that a gas peaking plant does. And neither of those are economic on a stand-alone basis and certainly not in the MISO market. The capacity market is very difficult, and there's just not enough volatility. At least in ERCOT, there is an opportunity given the fact that you do have significant and growing volatility because of the increase in intermittent resources. That's what might make storage at some point attractive in ERCOT, and we think that is coming. But when you get outside of ERCOT, you don't see that same volatility. Now if we continue to see intermittent resources come into markets, in MISO market, PJM in more and more quantities -- by the way, that's going to take a long time. But when we do see that, what we are beginning to see in these markets, when you get upwards of somewhere around 20% effective capacity coming from intermittent resources, you start to see an expansion of scarcity value. And PJM, they're still waiting on their ORDC, their Operating Reserve Demand Curve, which I think is implemented in 2022. And so you'll start to see some higher fly-ups in pricing, but right now, it's not compensatory to build those assets outside of California with the RA payments and a few very unique circumstances in the ERCOT market.

Got it. And just one last one for me is just on the capital allocation front looking beyond '22 and sort of the first tranche of Texas investment. If you don't see sort of these attractive growth opportunities, could we just get a sense on how you're thinking about prioritizing returning excess capital because you'll theoretically be hopefully investment-grade by then? Your delevering initiative is sort of behind you. How do we sort of think about the interplay between buybacks and further dividends?

Well, that's a good question. I mean the math on the buyback is simply what do you think you're worth -- your value of your stock is relative to where you're trading. And so I think we always do our math, and we always try to compare investment in our company to that alternative, because that's always an alternative. And clearly, right now, a buyback for us is a very good program. The other side of the equation, though, the reality is, if we want to be a long-term sustaining company, we do have to invest in new technologies and transform our company. So what you, I think, you saw today is our version of trying to do both of those things. And we think we can do that and still return meaningful value back to our shareholders on an annual basis. Share repurchases right now until I see something or we see something else change are going to be the priority, because our stock is so cheap. But we also know that there are investors who like dividends who are interested in staying in our company for the long run, but also would like some return of capital and are interested in dividends. And we think having something in the 4% yield range eventually is probably the right idea for the company. If we get to the point where we don't think it's advisable to put money back into the business, and we have excess cash from what we talked about today, I think it will be really a decision between where our stock is trading. And of course, capital gain stacks and things like that, we'll have to take into account as well the tax effects of these things. So there'll be a number of different items we'll have to take into account. But from what I see today, we would probably do further share repurchases. Could that change or could it be more balanced than that? Yes, it could.

Our next question comes from Julien Dumoulin-Smith with Bank of America.

Congratulations, guys. Excellent results. Wanted to follow-up on the EBITDA expectations for 2021. Specifically, how are you thinking about COVID impacts and some of the tailwinds from work-at-home going into next year? I mean, obviously, this is ill-defined thus far, but I'm curious what you're specifically reflecting as far as that goes.

Yes. David, do you want to take that one?

Sure. So Julien, you'll see in our guidance, our expectations for retail for 2021, we thought -- we think that our performance in the business will continue to be strong. So we've had a really great year in retail and a nice job integrating our acquisitions, and so you see that we're getting very close to that $1 billion range in 2021. We thought about COVID in a couple of different ways. It's hard to predict how long the work-from-home dynamics is going to play out this year that has led to certainly an uptick in residential demand, that's a relatively more profitable segment that's been a bonus. In 2021, we do think that over time, well, the economy will normalize, but we think that across our portfolio of retail businesses, we'll be able to take advantage of whatever scenario plays out, frankly. If we continue to work from home, that will help our residential business. If the economy kicks starts and restarts, it will help the small and medium business and industrial segment. So we think the strength of our retail business and its breadth, we feel real confident where that will come out. We also think about COVID, Julien, in terms of how we think about demand and overall demand, and that has the highest impact in ERCOT. And as Curt described, we think that at the end of the day, COVID has knocked back a years' worth of demand growth in ERCOT. So we think that the Texas economy will rebound and be back on its growth trajectory overall in 2021, but it is going to be off of a baseline that reflects a year of demand destruction. But overall, we feel, particularly on the retail side, a great year, really responded well to the crisis, and we think that strong performance will continue.

Yes. I'll add just a little bit, Julien, just real quick. Dallas Fed just came out and showed that industrial production is up significantly in the third quarter in Texas. It's a pretty resilient economy. I think you have a good point, though, is when do we return back to a more normalized working situation? Look, we don't have a crystal ball on this. But you certainly can see a little more of a prolonged work-from-home environment, but also I think, a more safe -- sustainable work-from-home environment beyond COVID. Because what most companies have figured out is that their people can be very productive working from home. I know our company for one will likely go back to something that's more of a hybrid where some people will work during the week and then they may have a couple of days where they can work from home to allow people to have flexibility. I hear -- I'm on the business roundtable. I hear people talk about that. So where that's going to settle out longer term will be interesting, obviously, because of the margins are greater on the residential side. I think we're in a very good position either way. What may be a bit of a tailwind going forward, Julien, it would be where does the oil and gas sector sort of settle out and the West Texas production is down. However, you're starting to see -- as you saw moving forwards, gas prices are beginning to rise. It will really be a function, though of oil prices out in West Texas and to see where that settles out and whether that picks back up again. From the bad debt side of things, I think, we think that normalizes. We're seeing a significantly lower bad debt -- incremental bad debt due to COVID in 2020 than what we originally anticipated back in March. And we think that will continue that our bad debt will get back to something more normal when we get into '21. And the real wildcard will be vaccine. And I know that we surveyed our company, our employees. We've done this a couple of times, and we're seeing these similar results across the country that even with the vaccine, there are certain people that are still nervous about coming back into work until they see the vaccine has been proven effective. And so I think what that sets for '21 is we're probably going to see a little more of a prolonged work-from-home and transition than we've even estimated in some of our numbers, but I think that what most people have estimated based on what I'm seeing in terms of the attitudes of people.

If I can pivot back to the growth opportunity here. You've talked about it a little bit, but frankly, extensively in your remarks, but you only gave us '21 and '22. How do you think about the longer-term repowering opportunity of your legacy assets, right? You provided a runway of retirements of these thoughtful assets. How do you think about leveraging those sites for batteries and solar? And frankly, independent of any legislative support, for instance, in Illinois, right, how do you think about the lignite sites you have with those sort of legacy or intact interconnection injection rights?

Yes. So look, I think across the markets that really -- you do hit the right markets. I mean I think Texas is -- there are incremental opportunities for us at some of our existing coal sites in the long run that may open up opportunity for us, for example, around Martin Lake potentially on a longer-term basis, depending on how the market shapes out and how long that asset stays in the market. For right now, the market is doing quite well. In fact, it's doing very well. But it's also a very good site, and there may be some opportunities around that. And so we'll just have to see how all that plays out. Oak Grove is going to be around a while. I mean we're just now beginning to invest in opening up another mine that has really low-cost lignite. So we may be one of the last coal plants standing in the United States, just given the relative low cost. But we do still have other sites. And as Jim mentioned, we've got another 1,000 megawatts in Phase II that we think will start to come -- or start to be constructed somewhere in the '22-'23 time frame. So that's going to keep us busy going out for at least another 4 to 5 years. In Illinois, there's not -- the legislation is one way to get at a potential opportunity. The other one is if they were to change some of the rules around brownfield development. That's another possibility that could help stimulate investment in some of our sites. I don't -- I hate to predict any of this. But I would say that the idea of using the same sites, using the same transmission and bringing property tax value to towns -- most of these are small towns where we were the #1 property taxpayer, trying to help those towns out and using private money to invest in it seems to make a lot of sense. And we're hoping that the Coal to Solar and Battery Act will in some form or fashion will get passed along either stand-alone or with some other legislation. We think it makes a lot of sense. I would say though, Julien, outside of something happening on brownfield development, some incentive around that or the Coal to Solar Act, I think, it would be difficult to see, especially in MISO, the opportunity just on a stand-alone basis for economics to work with solar and batteries.

Maybe to clarify that. The 22,000, 23,000 megawatts sort of Phase II, where is that specifically just as you think about it right now?

Well, we haven't said it's a little bit -- and I don't -- this isn't -- I generally like to disclose things, but we've generally kept these things somewhat competitively sensitive because we don't want to telegraph where we're putting our projects. But I can only tell you this, that we have real projects that -- on real sites that we have available. I think we're staging them in based on our own cash availability, but also just -- we just think it's the right kind of thing to do for the market. So I'm not prepared to tell you exactly where those are right now. But I would say in the not-too-distant future, we'll be announcing Phase II.

Your next question comes from Jonathan Arnold with Vertical Research.

Just with -- you're obviously going to have the 8% dividend growth in '21 and then the step change in '22. Should we -- as we think about your view of how dividend fits into capital allocation in the long run, is that 6% to 8% sort of where your head is post '22? Or is it too early to say on that?

I think there's 2 things on that, Jonathan, to be very honest with you about that. I think 6% to 8%, if we're going to have annual -- go to an annual growth sort of situation, I think -- 6% to 8%, we think is the right level of annual growth. I do think that we will likely have a conversation, though, with the Board at the end of '22 about whether we want to stay at the $0.76 or whether we want to do potentially even another step function. The reason I mentioned that is, at that point in time, we feel pretty comfortable with where our leverage is. And the question is, what's the best way. We just -- I just answered this on another question, but what's the best split of the additional capital. Would you buy back shares or increase the dividend. I think that will be a function of feedback we get from investors and others like you guys, where our stock price is trading and the types of investors that are interested in coming into the stock at that point in time. So I think -- but I do think we will have a discussion about whether we want to do another step function change or whether we want to go do something that's more of a routine, 6% to 8% growth rate. And I think that will be a real discussion point when we get probably more into the mid-'22 time frame.

Great. And then just on Moss Landing and, obviously, with some of the developments in California this summer. I think right now, you've got the sort of Phase 1 and Phase 2 contracted. What -- can you talk at all about prospects for adding another phase in the near term?

Sure. Jim, do you want to -- Jim Burke, do you want to take that?

Sure. Yes, I'd be happy to. So we do have the Moss 300 and the Moss 100 under development. We've also got the interconnect approval, so that was 400 megawatts for those 2. We have the interconnect approval up to 750. So we're in discussions about a possibility of another 350. There's physical capacity to do another 750 on top of that, that's down the road. So I'd say the additional 350 is more near term.

Okay. No, meaning -- go ahead. Sorry, Jim.

I'm sorry, you wanted to clarify?

Well, when you say near term, is that something that you're sort of actively discussing now or more sort of out over the next couple of years?

It is a discussion. As you know, it's also a process because as you go through the discussions, then you need to seek CPUC approval. And then obviously, you have the construction time associated with it. So we're bringing these on in phases, that's the goal. And clearly, California has seen the need for additional storage. Our other sites, Oakland, we believe can go larger than the 36.25%. We think it can go up to 80%. And then Morro Bay is another site that we have further south that we think has possibilities as well, potentially up to 600. So we're developing the possibilities to work with all the major utilities there in California, but it's still a multiyear process, Jonathan, I think, to put something like 350 in the queue. But having a site is valuable, having access to transmission is valuable. We've also got the environmental permit to take the Moss Landing battery site all the way up to 1,500 megawatts, and that's a big hurdle, and we've already got that cleared. So it is a process, and I think we're moving down it, but it still takes a little bit of time.

Great. I was just, Curt, would you -- could you provide a little more sort of flavor perhaps on how conversations with stakeholders are going in Illinois? And what your current feeling is whether something could get passed in the call session? Or just anything to add there?

Yes. So there's active discussions. There's 2 kind of parallel path processes going on. The Senate, led by Mike Hastings there in the Senate is running sort of its own. He's the Head of the Energy Committee. He's running his own process. We are participating in that. And then the Governor's office is also running their own process, and we have a seat at the table on all that. I think it's what I would call right now, Jonathan, sort of information gathering, trying to sort of see what the ask is by everybody and what the need is. And I think they're trying to assess what they really want to do from a policy standpoint. I -- my own gut on this one is, is that I sort of handicap it less than 50% if something gets done on a more comprehensive basis in the veto session this year. And I would say over 50% that something gets done next year in 2021. I think they're doing the right things, and they've got the right people involved. And this is a situation this year where, I think, it's not being done sort of in close quarters with only a few people. I think it's -- everybody that has a stake in this is getting an opportunity. I know that we feel very comfortable with the opportunity that we've had to participate in this. The Governor came out what I think was a 9-point plan that came out. I thought that was a well thought out plan. I think what we're trying to do with our Coal to Solar fits right within that. And I think the good news is, is from our standpoint, our -- what we put together, I think, is viewed as very credible. Whether it will be enacted in its exact form? I would guess it's going to have to change a little bit, but I think we have a really good shot at being part of whatever legislation comes out. And again, I would handicap it a little bit more next year than in the veto session. But I've also seen how these things work, and things can coalesce rather quickly. The key really in all this is you got to have a seat at the table, and you got to be in the room when it happens. And I feel like we've worked our way to that point, and we have the credibility to be able to do that.

Your next question comes from Michael Weinstein with Crédit Suisse.

With growing experience in solar and storage development, I mean could you extend this to a national strategy to build contracted projects for the utility, similar to some of the ways that some of the utilities have been doing that?

That is a very good question. I will answer that, but Jim, if you want to jump in, too. But I think the short answer to that is yes, that it is -- we can replicate it. It can be extended. We have the kind of capability to do that. There are platforms out there that might be something we would consider taking on. I'm talking about development platforms that have already early-stage development in other markets like Georgia and South Carolina and places like that. And I think we do have that kind of capability, and we're certainly interested in that. Now the real question will be is, what do we do once we develop things? But I think we certainly have the capability to develop these projects. And I think it's a nice problem to have to figure out then how do you monetize those at the right point in time. Jim, anything you want to add?