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Vistra Energy CEO: Even with the Dynegy acquisition, we'll have the lowest debt-to-earnings ratio in the industry

  • "Mad Money" host Jim Cramer and Vistra Energy CEO Curt Morgan discussed how Vistra's recently announced Dynegy acquisition could energize the power player.
  • The move is emblematic of broader consolidation in the energy space as indebted power producers search for profit-boosting strategies.
  • Morgan said that even with the $1.74 billion acquisition, the combined company will still have the lowest debt-to-EBITDA ratio in the industry.

Vistra Energy President and CEO Curt Morgan told CNBC on Tuesday that even with his energy company's $1.74 billion acquisition of Dynegy, Vistra will be less debt-ridden that its rivals.

"At the end of the deal, when we close, that day, ... we'll have roughly four times gross debt to our earnings, or EBITDA. That's still the lowest, after the deal closes, of anybody else in the business," Morgan told "Mad Money" host Jim Cramer in an exclusive interview.

The gross-debt-to-EBITDA ratio measures a company's total debt against its earnings before interest, tax, depreciation and amortization and helps analysts determine a company's ability to lower its debt.

"Within two years, we're back to our target of the three times gross debt to EBITDA, and that allows us, obviously, given the earnings power of the company and the cash flow power of the company, to deploy capital during the low parts of the cycle," Morgan said.

Vistra's acquisition comes as power companies laden with debt, like Dynegy, watch their profit margins shrink as low natural gas prices drive electricity costs down.

As a power generator with a retail energy business, Vistra's position is unique, Morgan said. Its unregulated revenue streams help the company deliver higher returns than its competitors, and its business components drive the company regardless of industry pricing, he told Cramer.

"The thing about our company is it's resilient in both low and high gas prices," the CEO said. "We're probably more leveraged to higher natural gas prices because that translates into higher power prices, but given our strong combined-cycle gas fleet, our natural-gas-fired generation fleet, we actually can make money on the downcycle of the gas business, which is really important to us."

Morgan called Vistra's retail energy business, which provides products and services and frequently develops new types of power products, "a differentiator."

Still, Dynegy will provide Vistra with new and improved business opportunities, the CEO said. Before the acquisition, Vistra only operated in Texas, where it has 24 percent market share.

"This is a complimentary deal," Morgan said. "We were exclusively in Texas and now we're in multiple states. It's also complimentary from the standpoint of fuel type. We're going to be a lot more natural-gas-fired generation, which is really the fuel of the future for the next 10 years, at least. And so, yeah, this is a great deal for us to diversify our business."

Watch Curt Morgan's full interview here:

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