In an era of power shortages, why is this American energy company worth following?

Electricity demand is rising explosively. With the frenzied expansion of AI data centers, the power grids in the northeastern and midwestern United States are starting to tighten—some areas are even experiencing coal plant closures, nuclear power outages, and slow progress in new construction. This is Vistra Energy(VST)'s current window of opportunity.

What is this company doing

Vistra is one of the largest independent power producers in the United States, serving over 5 million customers. It is not a traditional utility company, but rather a pure commercial electricity trader — selling electricity directly to wholesale markets across 18 states and Washington D.C. This means it does not rely on a specific power plant or region, but instead stabilizes cash flow through derivatives hedging.

In other words: where electricity is tight, prices are high, and that's where Vistra makes money.

Capacity expansion is in progress

Recently, Vistra acquired 7 natural gas power plants from Lotus Infrastructure Company, adding 2600MW of capacity. At the same time, the power plant in the Permian Basin in West Texas is expanding its advanced gas turbine units by 860MW - the capacity of this plant will rise from 325MW to 1185MW (to be completed in 2028).

This is not a coincidence. Oil and gas companies are electrifying, and data centers are expanding, both trends pointing in the same direction: electricity becoming a commodity.

Price volatility is both a risk and an opportunity

Vistra's weaknesses are also evident: commercial power generators are directly exposed to fluctuations in electricity prices. But now this has turned into an advantage – because there is a general tightening of supply in the market. The retirement of coal plants and nuclear power stations is outpacing the construction of new power plants, while supply chain and labor shortages are further extending the construction period.

The wholesale electricity prices in the PJM region (one of the largest electricity markets in the United States) have been on a long-term rise, which is particularly beneficial for commercial power generators.

How is the valuation now?

The VST stock price fell from a high of $220 in September to below $190, a decline of about 18%. The current PE ratio is compressed from 28 times to 22.8 times (2025 forecast), with the 2026 forecast at 18.2 times.

The reasons for the decline are simple — the market is concerned about the construction speed of AI data centers, and some believe that the good news has already been digested. However, from the supply side, the issue of power shortages has not been resolved and is instead worsening.

Why this pullback might be an opportunity

TD Cowen analysts say this is a “once in a century” rise opportunity for electric companies. AI, data centers, and grid upgrades all require electricity. Vistra happens to be at the forefront of this industry chain and is already expanding its capacity.

The decline in stock prices is not due to a deterioration in fundamentals, but rather because of fluctuations in market sentiment. Once the reality of power shortages becomes more pronounced (for example, when certain regions begin to implement power restrictions or blackouts), these companies will once again come into focus.