Vistra Corp. [VST] Filings

10-Q 1 vistra-20210930.htm 10-Q vistra-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

— OR —


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __ to __

Commission File Number 001-38086

Vistra Corp.

(Exact name of registrant as specified in its charter)

Delaware

36-4833255

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6555 Sierra Drive,

Irving,

Texas

75039

(214)

812-4600

(Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common stock, par value $0.01 per share

VST

New York Stock Exchange

Warrants

VST.WS.A

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 2, 2021, there were 482,627,520 shares of common stock, par value $0.01, outstanding of Vistra Corp.

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TABLE OF CONTENTS


		PAGE
GLOSSARY		ii
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations — Three and Nine Months Ended September 30, 2021 and 2020	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three and Nine Months Ended September 30, 2021 and 2020	1
	Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2021 and 2020	2
	Condensed Consolidated Balance Sheets — September 30, 2021 and December 31, 2020	3
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	74
Item 4.	Controls and Procedures	79
PART II.	OTHER INFORMATION	80
Item 1.	Legal Proceedings	80
Item 1A.	Risk Factors	80
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81
Item 3.	Defaults Upon Senior Securities	81
Item 4.	Mine Safety Disclosures	81
Item 5.	Other Information	81
Item 6.	Exhibits	81
SIGNATURE		85

Vistra Corp.'s (Vistra) annual reports, quarterly reports, current reports and any amendments to those reports are made available to the public, free of charge, on the Vistra website at http://www.vistracorp.com, as soon as reasonably practicable after they have been filed with or furnished to the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. Additionally, Vistra posts important information, including press releases, investor presentations, sustainability reports, and notices of upcoming events on its website and utilizes its website as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD. Investors may be notified of posting to the website by signing up for email alerts and RSS feeds on the "Investor Relations" page of Vistra's website. The information on Vistra's website shall not be deemed a part of, or incorporated by reference into, this quarterly report on Form 10-Q. The representations and warranties contained in any agreement that we have filed as an exhibit to this quarterly report on Form 10-Q, or that we have or may publicly file in the future, may contain representations and warranties that may (i) be made by and to the parties thereto at specific dates, (ii) be subject to exceptions and qualifications contained in separate disclosure schedules, (iii) represent the parties' risk allocation in the particular transaction, or (iv) be qualified by materiality standards that differ from what may be viewed as material for securities law purposes.

This quarterly report on Form 10-Q and other Securities and Exchange Commission filings of Vistra and its subsidiaries occasionally make references to Vistra (or "we," "our," "us" or "the Company"), Luminant, TXU Energy, Ambit, Value Based Brands, Dynegy Energy Services, Homefield Energy, TriEagle Energy, Public Power or U.S. Gas & Electric, when describing actions, rights or obligations of their respective subsidiaries. These references reflect the fact that the subsidiaries are consolidated with, or otherwise reflected in, the Vistra financial statements for financial reporting purposes. However, these references should not be interpreted to imply that the parent company is actually undertaking the action or has the rights or obligations of the relevant subsidiary company or vice versa.

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GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.


2020 Form 10-K						Vistra's annual report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021
Ambit or Ambit Energy						Ambit Holdings, LLC, and/or its subsidiaries (d/b/a Ambit), depending on context
ARO						asset retirement and mining reclamation obligation
CAISO						The California Independent System Operator
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
CCGT						combined cycle gas turbine
CCR						coal combustion residuals
CFTC						U.S. Commodity Futures Trading Commission
CME						Chicago Mercantile Exchange
CO2						carbon dioxide
CPUC						California Public Utilities Commission
Crius						Crius Energy Trust and/or its subsidiaries, depending on context
Dynegy						Dynegy Inc., and/or its subsidiaries, depending on context
Dynegy Energy Services						Dynegy Energy Services, LLC and Dynegy Energy Services (East), LLC (each d/b/a Dynegy, Better Buy Energy, Brighten Energy, Honor Energy and True Fit Energy), indirect, wholly owned subsidiaries of Vistra, that are REPs in certain areas of MISO and PJM, respectively, and are engaged in the retail sale of electricity to residential and business customers.
EBITDA						earnings (net income) before interest expense, income taxes, depreciation and amortization
Effective Date						October 3, 2016, the date our predecessor completed its reorganization under Chapter 11 of the U.S. Bankruptcy Code
Emergence						emergence of our predecessor from reorganization under Chapter 11 of the U.S. Bankruptcy Code as subsidiaries of a newly formed company, Vistra, on the Effective Date
EPA						U.S. Environmental Protection Agency
ERCOT						Electric Reliability Council of Texas, Inc.
ESS						energy storage system
Exchange Act						Securities Exchange Act of 1934, as amended
FERC						U.S. Federal Energy Regulatory Commission
GAAP						generally accepted accounting principles
GHG						greenhouse gas
GWh						gigawatt-hours
Homefield Energy						Illinois Power Marketing Company (d/b/a Homefield Energy), an indirect, wholly owned subsidiary of Vistra, a REP in certain areas of MISO that is engaged in the retail sale of electricity to municipal customers
ICE						Intercontinental Exchange
IEPA						Illinois Environmental Protection Agency
IPCB						Illinois Pollution Control Board
IRC						Internal Revenue Code of 1986, as amended
IRS						U.S. Internal Revenue Service
ISO						independent system operator
ISO-NE						ISO New England Inc.
LIBOR						London Interbank Offered Rate, an interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market
load						demand for electricity
LTSA						long-term service agreements for plant maintenance
Luminant						subsidiaries of Vistra engaged in competitive market activities consisting of electricity generation and wholesale energy sales and purchases as well as commodity risk management

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market heat rate						Heat rate is a measure of the efficiency of converting a fuel source to electricity. Market heat rate is the implied relationship between wholesale electricity prices and natural gas prices and is calculated by dividing the wholesale market price of electricity, which is based on the price offer of the marginal supplier (generally natural gas plants), by the market price of natural gas.
Merger						the merger of Dynegy with and into Vistra, with Vistra as the surviving corporation
Merger Date						April 9, 2018, the date Vistra and Dynegy completed the transactions contemplated by the Agreement and Plan of Merger, dated as of October 29, 2017, by and between Vistra and Dynegy
MISO						Midcontinent Independent System Operator, Inc.
MMBtu						million British thermal units
Moody's						Moody's Investors Service, Inc. (a credit rating agency)
MSHA						U.S. Mine Safety and Health Administration
MW						megawatts
MWh						megawatt-hours
NELP						Northeast Energy, LP, a joint venture between Dynegy Northeast Generation GP, Inc. and Dynegy Northeast Associates LP, Inc., both indirect subsidiaries of Vistra, and certain subsidiaries of NextEra Energy, Inc. Prior to the NELP Transaction, NELP indirectly owned Bellingham NEA facility and the Sayreville facility.
NELP Transaction						a transaction among Dynegy Northeast Generation GP, Inc., Dynegy Northeast Associates LP, Inc. and certain subsidiaries of NextEra Energy, Inc. wherein the indirect subsidiaries of Vistra redeemed their ownership interest in NELP partnership in exchange for 100% ownership interest in NJEA, the entity which owns the Sayreville facility
NERC						North American Electric Reliability Corporation
NJEA						North Jersey Energy Associates, A Limited Partnership
NOX						nitrogen oxide
NRC						U.S. Nuclear Regulatory Commission
NYISO						New York Independent System Operator, Inc.
NYMEX						the New York Mercantile Exchange, a commodity derivatives exchange
OPEB						postretirement employee benefits other than pensions
Parent						Vistra Corp.
PJM						PJM Interconnection, LLC
Plan of Reorganization						Third Amended Joint Plan of Reorganization filed by the parent company of our predecessor in August 2016 and confirmed by the U.S. Bankruptcy Court for the District of Delaware in August 2016 solely with respect to our predecessor
PrefCo						Vistra Preferred Inc.
PrefCo Preferred Stock Sale						as part of the tax-free spin-off from Energy Future Holdings Corp., executed pursuant to the Plan of Reorganization on the Effective Date by our predecessor, the contribution of certain of the assets of our predecessor and its subsidiaries by a subsidiary of TEX Energy LLC to PrefCo in exchange for all of PrefCo's authorized preferred stock, consisting of 70,000 shares, par value $0.01 per share
Public Power						Public Power, LLC (d/b/a Public Power), an indirect, wholly owned subsidiary of Vistra, a REP in certain areas of PJM, ISO-NE, NYISO and MISO that is engaged in the retail sale of electricity to residential and business customers
PUCT						Public Utility Commission of Texas
REP						retail electric provider
RCT						Railroad Commission of Texas, which among other things, has oversight of lignite mining activity in Texas, and has jurisdiction over oil and natural gas exploration and production, permitting and inspecting intrastate pipelines, and overseeing natural gas utility rates and compliance
RTO						regional transmission organization
S&P						Standard & Poor's Ratings (a credit rating agency)
Series A Preferred Stock						Vistra's 8.0% Series A Fixed Rate Reset Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value, with a liquidation preference of $1,000 per share

iii

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SEC						U.S. Securities and Exchange Commission
Securities Act						Securities Act of 1933, as amended
SG&A						selling, general and administrative
SO2						sulfur dioxide
Tax Matters Agreement						Tax Matters Agreement, dated as of the Effective Date, by and among Energy Future Holdings Corp. (EFH Corp.), Energy Future Intermediate Holding Company LLC, EFIH Finance Inc. and EFH Merger Co. LLC
TCEH						Texas Competitive Electric Holdings Company LLC, a direct, wholly owned subsidiary of Energy Future Competitive Holdings Company LLC, and, prior to the Effective Date, the parent company of our predecessor, depending on context, that were engaged in electricity generation and wholesale and retail energy market activities, and whose major subsidiaries included Luminant and TXU Energy
TCEQ						Texas Commission on Environmental Quality
TRA						Tax Receivables Agreement, containing certain rights (TRA Rights) to receive payments from Vistra related to certain tax benefits, including benefits realized as a result of certain transactions entered into at Emergence (see Note 7 to the Financial Statements)
TRE						Texas Reliability Entity, Inc., an independent organization that develops reliability standards for the ERCOT region and monitors and enforces compliance with NERC standards and monitors compliance with ERCOT protocols
TriEagle Energy						TriEagle Energy LP (d/b/a TriEagle Energy, TriEagle Energy Services, Eagle Energy, Energy Rewards, Power House Energy and Viridian Energy), an indirect, wholly owned subsidiary of Vistra, a REP in certain areas of ERCOT and PJM that is engaged in the retail sale of electricity to residential and business customers
TWh						terawatt-hours
TXU Energy						TXU Energy Retail Company LLC (d/b/a TXU), an indirect, wholly owned subsidiary of Vistra that is a REP in competitive areas of ERCOT and is engaged in the retail sale of electricity to residential and business customers
U.S.						United States of America
U.S. Gas & Electric						U.S. Gas and Electric, Inc. (d/b/a USG&E, Illinois Gas & Electric and ILG&E), an indirect, wholly owned subsidiary of Vistra, a REP in certain areas of PJM, ISO-NE, NYISO and MISO that is engaged in the retail sale of electricity to residential and business customers
Value Based Brands						Value Based Brands LLC (d/b/a 4Change Energy, Express Energy and Veteran Energy), an indirect, wholly owned subsidiary of Vistra that is a REP in competitive areas of ERCOT and is engaged in the retail sale of electricity to residential and business customers
Vistra						Vistra Corp. and/or its subsidiaries, depending on context. Effective July 2, 2020, Vistra Energy Corp. changed its name to Vistra Corp.
Vistra Intermediate						Vistra Intermediate Company LLC, a direct, wholly owned subsidiary of Vistra
Vistra Operations						Vistra Operations Company LLC, an indirect, wholly owned subsidiary of Vistra that is the issuer of certain series of notes (see Note 10 to the Financial Statements) and borrower under the Vistra Operations Credit Facilities
Vistra Operations Credit Facilities						Vistra Operations senior secured financing facilities (see Note 10 to the Financial Statements)

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PART I. FINANCIAL INFORMATION

Item 1.FINANCIAL STATEMENTS

VISTRA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (Millions of Dollars, Except Per Share Amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating revenues (Note 4)	$	2,991	$	3,552	$	8,763	$	8,919
Fuel, purchased power costs and delivery fees	(1,763)		(1,469)		(7,827)		(3,832)
Operating costs	(372)		(457)		(1,173)		(1,249)
Depreciation and amortization	(468)		(410)		(1,355)		(1,284)
Selling, general and administrative expenses	(269)		(268)		(771)		(755)

Impairment of long-lived assets (Note 17)	—		(272)		(38)		(356)
Operating income (loss)	119		676		(2,401)		1,443
Other income (Note 17)	16		8		108		19
Other deductions (Note 17)	(5)		—		(13)		(35)
Interest expense and related charges (Note 17)	(124)		(101)		(288)		(541)
Impacts of Tax Receivable Agreement (Note 7)	35		58		31		44
Equity in earnings of unconsolidated investment	—		—		—		4
Income (loss) before income taxes	41		641		(2,563)		934
Income tax (expense) benefit (Note 6)	(31)		(199)		569		(283)
Net income (loss)	$	10	$	442	$	(1,994)	$	651
Net (income) loss attributable to noncontrolling interest	(3)		1		(6)		14
Net income (loss) attributable to Vistra	$	7	$	443	$	(2,000)	$	665
Weighted average shares of common stock outstanding:
Basic	482,516,965		488,824,580		483,150,213		488,484,441
Diluted	484,494,546		491,025,940		483,150,213		490,914,478
Net income (loss) per weighted average share of common stock outstanding:
Basic	$	0.01	$	0.91	$	(4.14)	$	1.36
Diluted	$	0.01	$	0.90	$	(4.14)	$	1.35

See Notes to the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited) (Millions of Dollars)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	10	$	442	$	(1,994)	$	651
Other comprehensive income (loss), net of tax effects:
Effects related to pension and other retirement benefit obligations (net of tax (expense) benefit of $(4), $1, $(5) and $8)	14		(4)		17		(26)

Total other comprehensive income (loss)	14		(4)		17		(26)
Comprehensive income (loss)	$	24	$	438	$	(1,977)	$	625
Comprehensive (income) loss attributable to noncontrolling interest	(3)		1		(6)		14
Comprehensive income (loss) attributable to Vistra	$	21	$	439	$	(1,983)	$	639

See Notes to the Condensed Consolidated Financial Statements.

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VISTRA CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Millions of Dollars)
	Nine Months Ended September 30,
	2021		2020
Cash flows — operating activities:
Net income (loss)	$	(1,994)	$	651
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	1,551		1,512
Deferred income tax expense (benefit), net	(587)		264

Impairment of long-lived assets (Note 17)	38		356
Loss on disposal of investment in NELP (Note 17)	—		29

Unrealized net (gain) loss from mark-to-market valuations of commodities	771		(444)
Unrealized net (gain) loss from mark-to-market valuations of interest rate swaps	(92)		181
Asset retirement obligation accretion expense	27		33
Impacts of Tax Receivable Agreement (Note 7)	(31)		(44)
Stock-based compensation	36		46
Other, net	79		115
Changes in operating assets and liabilities:
Margin deposits, net	(767)		60
Accrued interest	(55)		(97)
Accrued taxes	(63)		(35)
Accrued employee incentive	(86)		(20)
Other operating assets and liabilities	680		(257)
Cash provided by (used in) operating activities	(493)		2,350
Cash flows — investing activities:
Capital expenditures, including nuclear fuel purchases and LTSA prepayments	(790)		(838)

Proceeds from sales of nuclear decommissioning trust fund securities (Note 17)	366		291
Investments in nuclear decommissioning trust fund securities (Note 17)	(382)		(307)
Proceeds from sales of environmental allowances	102		91
Purchases of environmental allowances	(247)		(210)
Insurance proceeds	74		15
Proceeds from sale of assets	7		23
Other, net	27		8
Cash used in investing activities	(843)		(927)
Cash flows — financing activities:
Issuances of long-term debt (Note 10)	1,250		—
Borrowings under Term Loan A (Note 10)	1,250		—
Repayment under Term Loan A (Note 10)	(1,250)		—
Proceeds from forward capacity agreement (Note 10)	500		—
Repayments/repurchases of debt (Note 10)	(234)		(955)
Net borrowings under accounts receivable financing (Note 9)	175		175
Borrowings under Revolving Credit Facility (Note 10)	1,300		1,075
Repayments under Revolving Credit Facility (Note 10)	(1,300)		(1,425)
Share repurchases (Note 12)	(175)		—
Dividends paid to stockholders (Note 12)	(219)		(198)
Debt tender offer and other financing fees (Note 10)	(13)		(17)
Other, net	(5)		(3)
Cash provided by (used in) financing activities	1,279		(1,348)

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VISTRA CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Millions of Dollars)
	Nine Months Ended September 30,
	2021		2020
Net change in cash, cash equivalents and restricted cash	(57)		75
Cash, cash equivalents and restricted cash — beginning balance	444		475
Cash, cash equivalents and restricted cash — ending balance	$	387	$	550

See Notes to the Condensed Consolidated Financial Statements.


VISTRA CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Millions of Dollars)
	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	351	$	406
Restricted cash (Note 17)	22		19
Trade accounts receivable — net (Note 17)	1,529		1,279
Income taxes receivable	7		—
Inventories (Note 17)	471		515
Commodity and other derivative contractual assets (Note 14)	4,187		748
Margin deposits related to commodity contracts	1,048		257
Prepaid expense and other current assets	231		205
Total current assets	7,846		3,429
Restricted cash (Note 17)	14		19
Investments (Note 17)	1,915		1,759

Property, plant and equipment — net (Note 17)	13,100		13,499
Operating lease right-of-use assets	35		45

Goodwill (Note 5)	2,583		2,583
Identifiable intangible assets — net (Note 5)	2,229		2,446
Commodity and other derivative contractual assets (Note 14)	454		258
Accumulated deferred income taxes	1,421		838
Other noncurrent assets	335		332
Total assets	$	29,932	$	25,208
LIABILITIES AND EQUITY
Current liabilities:

Accounts receivable financing (Note 9)	475		300
Long-term debt due currently (Note 10)	382		95
Trade accounts payable	1,172		880
Commodity and other derivative contractual liabilities (Note 14)	4,948		789
Margin deposits related to commodity contracts	57		33
Accrued income taxes	—		16
Accrued taxes other than income	163		210
Accrued interest	76		131
Asset retirement obligations (Note 17)	110		103
Operating lease liabilities	5		8

Other current liabilities	534		471
Total current liabilities	7,922		3,036

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VISTRA CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Millions of Dollars)
	September 30, 2021		December 31, 2020
Long-term debt, less amounts due currently (Note 10)	10,493		9,235
Operating lease liabilities	33		40

Commodity and other derivative contractual liabilities (Note 14)	896		624
Accumulated deferred income taxes	1		1
Tax Receivable Agreement obligation (Note 7)	416		447
Asset retirement obligations (Note 17)	2,326		2,333

Other noncurrent liabilities and deferred credits (Note 17)	1,814		1,131
Total liabilities	23,901		16,847
Commitments and Contingencies (Note 11)
Total equity (Note 12):
Common stock (par value — $0.01; number of shares authorized — 1,800,000,000) (shares outstanding: September 30, 2021 — 482,551,344; December 31, 2020 — 489,305,888)	5		5
Treasury stock, at cost (shares: September 30, 2021 — 49,701,377; December 31, 2020 — 41,043,224)	(1,148)		(973)
Additional paid-in-capital	9,829		9,786
Retained deficit	(2,619)		(399)
Accumulated other comprehensive loss	(31)		(48)
Stockholders' equity	6,036		8,371
Noncontrolling interest in subsidiary	(5)		(10)
Total equity	6,031		8,361
Total liabilities and equity	$	29,932	$	25,208

See Notes to the Condensed Consolidated Financial Statements.

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VISTRA CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

References in this report to "we," "our," "us" and "the Company" are to Vistra and/or its subsidiaries, as apparent in the context. See Glossary for defined terms.

Vistra is a holding company operating an integrated retail and electric power generation business primarily in markets throughout the U.S. Through our subsidiaries, we are engaged in competitive energy market activities including power generation, wholesale energy sales and purchases, commodity risk management and retail sales of electricity and natural gas to end users.

Vistra has six reportable segments: (i) Retail, (ii) Texas, (iii) East, (iv) West, (v) Sunset and (vi) Asset Closure. See Note 16 for further information concerning reportable business segments.

Winter Storm Uri

In February 2021, a severe winter storm with extremely cold temperatures affected much of the U.S., including Texas. Winter Storm Uri had a material adverse impact on our results of operations and operating cash flows. This severe weather resulted in surging demand for power, gas supply shortages, operational challenges for generators, and a significant load shed event that was ordered by ERCOT beginning on February 15, 2021 and continuing through February 18, 2021. The final financial impact of Winter Storm Uri continues to be subject to the outcome of potential litigation and legislative actions arising from the event, or any corrective action taken by the State of Texas, ERCOT, the RCT or the PUCT to resettle pricing across any portion of the supply chain (i.e. fuel supply, wholesale pricing of generation, or allocating the financial impacts of market-wide load shed ratably across all retail market participants), that is currently being considered or may be considered by any such parties.

In September 2021, the PUCT approved a settlement agreement among ERCOT, PUCT staff and certain ERCOT market participants who are parties to the PUCT proceeding in which ERCOT has applied for an order to finance, administer and distribute to eligible ERCOT market participants the securitization provided for under Texas House Bill 4492 (HB 4492). HB 4492 authorizes ERCOT to securitize up to $2.1 billion of certain costs allocated by ERCOT to load-serving entities (LSEs) during Winter Storm Uri. HB 4492, and final terms related thereto, are subject to the final financing order issued in October 2021, together with ERCOT obtaining sufficient financing related thereto. Though the final allocations will be determined following the completion of an administrative process, including final determination of which LSEs will participate in or opt out of the program, we expect to receive approximately $500 million of proceeds.

COVID-19 Pandemic

In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a pandemic, and the U.S. Government declared the COVID-19 outbreak a national emergency. The U.S. government has deemed electricity generation, transmission and distribution as “critical infrastructure” providing essential services during this global emergency. As a provider of critical infrastructure, Vistra has an obligation to provide critically needed power to homes, businesses, hospitals and other customers. Vistra remains focused on protecting the health and well-being of its employees and the communities in which it operates while assuring the continuity of its business operations.

The Company's condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there have been no material adverse impacts on the Company's results of operations for the three or nine months ended September 30, 2021.

In response to the global pandemic related to COVID-19, the CARES Act was signed into law in March 2020. See Note 6 for a summary of certain anticipated tax-related impacts of the CARES Act to the Company.

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Recent Developments

Series A Preferred Stock Offering — On October 15, 2021, we issued of 1,000,000 shares of Series A Preferred Stock in a private offering (Offering). The net proceeds of the Offering were approximately $990 million, after deducting underwriting commissions and offering expenses. We intend to use the net proceeds from the Offering to repurchase shares of our outstanding common stock under the Share Repurchase Program (see Note 12). See Note 12 for more information concerning the Series A Preferred Stock.

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and on the same basis as the audited financial statements included in our 2020 Form 10-K. The condensed consolidated financial information herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. All such adjustments are of a normal nature. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and footnotes required by U.S. GAAP, they should be read in conjunction with the audited financial statements and related notes contained in our 2020 Form 10-K. The results of operations for an interim period may not give a true indication of results for a full year. All dollar amounts in the financial statements and tables in the notes are stated in millions of U.S. dollars unless otherwise indicated.

The Company determined that depreciation expense on certain property, plant, and equipment assets was calculated incorrectly in prior years as a result of incorrectly assigned useful lives to these assets, which resulted in a misstatement to depreciation expense and accumulated depreciation. Additionally, an error was identified related to assets that were incorrectly retired prior to the end of their useful lives. The Company identified that depreciation expense and accumulated depreciation was understated by $23 million, $39 million and $3 million for the years ended December 31, 2018, 2019, and 2020, respectively, and overstated by $20 million for the six-month period ended June 30, 2021. In order to correct for the misstatements, the Company recorded an out-of-period adjustment to depreciation expense of $45 million for the three months ended September 30, 2021. The Company evaluated the effects of this out-of-period adjustment, both qualitatively and quantitatively, and concluded that this adjustment was not material to the Company's financial position or results of operations for the current or any prior periods.

Use of Estimates

Preparation of financial statements requires estimates and assumptions about future events that affect the reporting of assets and liabilities at the balance sheet dates and the reported amounts of revenue and expense, including fair value measurements, estimates of expected obligations, judgments related to the potential timing of events and other estimates. In the event estimates and/or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.

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2. DEVELOPMENT OF GENERATION FACILITIES

Texas Segment Solar Generation and Energy Storage Projects

In September 2020, we announced the planned development of up to 668 MW of solar photovoltaic power generation facilities and 260 MW of battery ESS in Texas. Estimated commercial operation dates for these facilities range from first quarter of 2022 to fourth quarter of 2023. At September 30, 2021, we had accumulated approximately $204 million in construction-work-in-process for these Texas segment solar generation and battery ESS projects.

East Segment Solar Generation and Energy Storage Projects

In September 2021, we announced the planned development of up to 300 MW of solar photovoltaic power generation facilities and up to 150 MW of battery ESS at retired or to-be-retired plant sites in Illinois, based on the passage of Illinois Senate Bill 2408, the Energy Transition Act. Estimated commercial operation dates for these facilities range from 2023 to 2025.

West Segment Energy Storage Projects

Oakland — In June 2019, East Bay Community Energy (EBCE) signed a ten-year contract to receive resource adequacy capacity from the planned development of a 20 MW battery ESS at our Oakland Power Plant site in California. In April 2020, the project received necessary approvals from EBCE and from Pacific Gas and Electric Company (PG&E). The contract was amended to increase the capacity of the planned development to a 36.25 MW battery ESS. In April 2020, the concurrent Local Area Reliability Service (LARS) agreement to ensure grid reliability as part of the Oakland Clean Energy Initiative was signed, but required California Public Utilities Commission (CPUC) approval. PG&E did not receive CPUC approval as of April 15, 2021. On April 16, 2021, Vistra terminated the LARS agreement with PG&E. We are continuing development of the Oakland battery ESS project while seeking another contractual arrangement that will allow the investment to move forward.

Moss Landing — In June 2018, we announced that, subject to approval by the CPUC, we would enter into a 20-year resource adequacy contract with PG&E to develop a 300 MW battery ESS at our Moss Landing Power Plant site in California (Moss Landing Phase I). PG&E filed its application with the CPUC in June 2018 and the CPUC approved the resource adequacy contract in November 2018. Under the contract, PG&E will pay us a fixed monthly resource adequacy payment, while we will receive the energy revenues and incur the costs from dispatching and charging the ESS. Moss Landing Phase I commenced commercial operations in May 2021.

In May 2020, we announced that, subject to approval by the CPUC, we would enter into a 10-year resource adequacy contract with PG&E to develop an additional 100 MW battery ESS at our Moss Landing Power Plant site (Moss Landing Phase II). PG&E filed its application with the CPUC in May 2020 and the CPUC approved the resource adequacy contract in August 2020. Moss Landing Phase II commenced commercial operations in July 2021.

The total development costs for Moss Landing Phases I and II totaled approximately $600 million.

Moss Landing Phase I Outage — On September 4, 2021, Moss Landing Phase I experienced an incident impacting a portion of the battery ESS. An initial review has found that only a small, single-digit percentage of batteries at the facility were impacted. The facility will be offline as the company continues to safely advance its root cause analysis and perform the work necessary to return the facility to service. We do not currently have an estimated return to service date for the facility. Moss Landing Phase II was not affected and remains operational. We do not expect the incident to have a material impact on our results of operations.

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3. RETIREMENT OF GENERATION FACILITIES

In September and December 2020, we announced our intention to retire all of our remaining coal generation facilities in Illinois and Ohio, one coal generation facility in Texas and one natural gas facility in Illinois no later than year-end 2027 due to economic challenges, including incremental expenditures that would be required to comply with the CCR rule and ELG rule (see Note 11), and in furtherance of our efforts to significantly reduce our carbon footprint. Expected plant retirement expenses of $43 million, driven by severance cost, were accrued in the three months ended September 30, 2020 in operating costs of our Sunset segment. In April 2021, we announced we would retire the Joppa generation facilities by September 1, 2022 in order to settle a complaint filed with the Illinois Pollution Control Board (IPCB) by the Sierra Club in 2018 (see Note 11). We had previously announced that Joppa would retire no later than the end of 2027. In July 2021, we announced we would retire the Zimmer coal generation facility by May 31, 2022 due to the inability to secure capacity revenues for the plant in the latest PJM capacity auction held in May 2021. We had previously announced that Zimmer would retire no later than the end of 2027.

In September 2019, we announced the settlement of a lawsuit alleging violations of opacity and particulate matter limits at our Edwards coal generation facility in Illinois. As part of the settlement, which was approved by the U.S. District Court for the Central District of Illinois in November 2019, we will retire the Edwards facility by the end of 2022.

Operational results for plants with planned retirements are included in our Sunset segment beginning in the quarter when a retirement plan is announced. See Note 17 for discussion of impairments recorded in connection with these announcements.

Name

Location

ISO/RTO

Fuel Type

Net Generation Capacity (MW)

Expected Retirement Date (a)

Baldwin

Baldwin, IL

MISO

Coal

1,185

By the end of 2025

Coleto Creek

Goliad, TX

ERCOT

Coal

650

By the end of 2027

Edwards

Bartonville, IL

MISO

Coal

585

By the end of 2022

Joppa

Joppa, IL

MISO

Coal

802

By September 1, 2022

Joppa

Joppa, IL

MISO

Natural Gas

221

By September 1, 2022

Kincaid

Kincaid, IL

PJM

Coal

1,108

By the end of 2027

Miami Fort

North Bend, OH

PJM

Coal

1,020

By the end of 2027

Newton

Newton, IL

MISO/PJM

Coal

615

By the end of 2027

Zimmer

Moscow, OH

PJM

Coal

1,300

By May 31, 2022

Total

7,486

____________

(a)Generation facilities may retire earlier than expected dates if economic or other conditions dictate.

In December 2020, we announced the retirement of our 83 MW Wharton natural gas facility in Texas due to its age, cost profile and small scale, as well as low power prices, limited operational windows and substantial costs to repair, maintain and upgrade the facility. Operational results for the Wharton facility are included in the Asset Closure segment. The previously announced retirement of our 244 MW Trinidad natural gas facility in Texas was rescinded in April 2021.

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Vistra Corp. [VST] Filings
10-Q	[2021-11-05]
10-Q	[2021-08-05]
10-Q	[2021-05-04]
10-K	[2021-02-26]
10-Q	[2020-11-04]
10-Q	[2020-08-05]
10-Q	[2020-05-05]
10-K	[2020-02-28]
10-Q	[2019-11-05]
10-Q	[2019-08-02]
10-Q	[2019-05-03]
10-K	[2019-02-28]
10-Q	[2018-11-02]
10-Q	[2018-08-06]
10-Q	[2018-05-04]
10-K	[2018-02-26]
10-Q	[2017-11-03]
10-Q	[2017-08-04]
10-Q	[2017-05-18]
S-1	[2016-12-23]