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 Energy and/or its subsidiaries, as apparent in the context. See Glossary for defined terms.
Vistra Energy is a holding company operating an integrated retail and 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 Energy has six reportable segments: (i) Retail, (ii) ERCOT, (iii) PJM, (iv) NY/NE (comprising NYISO and ISO-NE), (v) MISO and (vi) Asset Closure. See Note 17 for further information concerning reportable business segments.
Ambit Transaction
On November 1, 2019, an indirect, wholly owned subsidiary of Vistra Energy completed the acquisition of Ambit (Ambit Transaction). Because the Ambit Transaction closed on November 1, 2019, Vistra Energy's condensed consolidated financial statements and the notes related thereto do not include the financial condition or the operating results of Ambit and its subsidiaries prior to November 1, 2019. See Note 2 for a summary of the Ambit Transaction.
Crius Transaction
On July 15, 2019, an indirect, wholly owned subsidiary of Vistra Energy completed the acquisition of the equity interests of two wholly owned subsidiaries of Crius that indirectly owned the operating business of Crius (Crius Transaction). Because the Crius Transaction closed on July 15, 2019, Vistra Energy's condensed consolidated financial statements and the notes related thereto do not include the financial condition or the operating results of Crius and its subsidiaries prior to July 15, 2019. See Note 2 for a summary of the Crius Transaction.
COVID-19 Pandemic
In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a pandemic, and the President of the United States (the President) 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 Energy has an obligation to provide critically needed power to homes, businesses, hospitals and other customers. Vistra Energy 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 were no material adverse impacts on the Company's first quarter 2020 results of operations.
In response to the global pandemic related to COVID-19, the President signed into law the CARES Act on March 27, 2020. See Note 7 for a summary of certain anticipated tax-related impacts of the CARES Act to the Company.
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 2019 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 2019 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.
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.
Adoption of Accounting Standards
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The ASU enhances and simplifies various aspects of the income tax accounting guidance including the elimination of certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. We adopted all provisions of this ASU in the first quarter of 2020, and it did not have a material impact on our financial statements.
In August 2018, the FASB issued ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement. The ASU removes disclosure requirements for (a) the reasons for transfers between Level 1 and Level 2, (b) the policy for timing of transfers between levels and (c) the valuation processes for Level 3. The ASU requires new disclosures around (a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. We adopted this ASU in the first quarter of 2020, and the updated disclosures are included in Note 14.
In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ASU requires a customer in a cloud hosting arrangement that is a service contract to determine which implementation costs to capitalize and which costs to expense based on the project stage of the implementation. The ASU also requires the customer to expense the capitalized implementation costs over the term of the hosting arrangement. The customer is required to apply the existing impairment and abandonment guidance on the capitalized implementation costs. We adopted this ASU in the first quarter of 2020, and it did not have a material impact on our financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses. The ASU requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. We adopted this ASU in the first quarter of 2020, and it did not have a material impact on our financial statements.
Changes in Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in the ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of this guidance did not have a material impact on our financial statements.
In March 2020, the SEC amended Rule 3-10 of Regulation S-X regarding financial disclosure requirements for registered debt offerings involving subsidiaries as either issuers or guarantors and affiliates whose securities are pledged as collateral. This new guidance narrows the circumstances that require separate financial statements of subsidiary issuers and guarantors and streamlines the alternative disclosures required in lieu of those statements. This rule is effective January 4, 2021 with earlier adoption permitted. We early adopted this rule in the first quarter of 2020 and the adoption did not have a material impact on our financial statements.
2. ACQUISITIONS, MERGER TRANSACTION AND BUSINESS COMBINATION ACCOUNTING
Ambit Transaction
On November 1, 2019 (Ambit Acquisition Date), Volt Asset Company, Inc., an indirect, wholly owned subsidiary of Vistra Energy, completed the Ambit Transaction. Ambit is an energy retailer selling both electricity and natural gas products to residential and small business customers in 17 states. Vistra Energy funded the purchase price of $555 million (including cash acquired and net working capital) using cash on hand. All of Ambit's outstanding debt was repaid from the purchase price at closing and not assumed by Vistra Energy.
Crius Transaction
On July 15, 2019 (Crius Acquisition Date), Vienna Acquisition B.C. Ltd., an indirect, wholly owned subsidiary of Vistra Energy, completed the acquisition of the equity interests of two wholly owned subsidiaries of Crius that indirectly own the operating business of Crius. Crius is an energy retailer selling both electricity and natural gas products to residential and small business customers in 19 states. Vistra Energy funded the purchase price of $400 million (including $382 million for outstanding trust units) using cash on hand.
Ambit and Crius Business Combination Accounting
We believe the Ambit Transaction has (i) augmented Vistra Energy's existing retail marketing capabilities with additional direct selling capability and a proprietary technology platform, (ii) reduced risk and aided expansion into higher margin channels by improving Vistra Energy's match of its generation to load profile due to a high degree of overlap of Vistra Energy's generation fleet with Ambit's approximately 11 TWh of annual load, primarily in ERCOT and PJM and (iii) enhanced the integrated value proposition through collateral and transaction efficiencies, particularly via Ambit's retail electric portfolio.
We believe the Crius Transaction has (i) reduced risk and aided expansion into higher margin channels by improving Vistra Energy's match of its generation to load profile due to a high degree of overlap of Vistra Energy's generation fleet with Crius' approximately 10 TWh of annual electricity load, (ii) established a platform for growth by leveraging Vistra Energy's existing retail marketing capabilities and Crius' experienced team and (iii) enhanced the integrated value proposition through collateral and transaction efficiencies, particularly via Crius' retail electric portfolio.
The Ambit and Crius Transactions are being accounted for in accordance with ASC 805, Business Combinations (ASC 805), with identifiable assets acquired and liabilities assumed recorded at their estimated fair values on the Ambit and Crius Acquisition Dates, respectively. The combined results of operations are reported in our condensed consolidated financial statements beginning as of the respective Ambit and Crius Acquisition Dates. A summary of the techniques used to estimate the fair value of the identifiable assets and liabilities, as well as their classification within the fair value hierarchy (see Note 14), is listed below:
•Working capital was valued using available market information (Level 2).
•Acquired derivatives were valued using the methods described in Note 14 (Level 2 or Level 3).
•Acquired retail customer relationship was valued based on discounted cash flow analysis of acquired customers and estimated attrition rates (Level 3).
•Crius' long-term debt was valued using a market approach (Level 2).
The following table summarizes the preliminary allocation of the purchase price to the fair value amounts recognized for the assets acquired and liabilities assumed related to the Ambit and Crius Transactions as of the Ambit and Crius Acquisition Dates, respectively. The Ambit Transaction purchase price was $555 million (including cash acquired and net working capital), and the Crius Transaction purchase price was $400 million. The purchase price allocations are ongoing and are dependent upon final valuation determinations, which have not been completed. The preliminary values included below represent our current best estimates for accumulated deferred income taxes, identifiable intangible assets, net working capital and long-term debt. The purchase price allocations are preliminary and each of the values included below may change materially based upon the receipt of more detailed information, additional analyses and completed valuations. The final purchase price allocation is expected to be completed no later than the second quarter of 2020 for the Crius Transaction and no later than the third quarter of 2020 for the Ambit Transaction, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ambit and Crius Transactions Preliminary Purchase Price Allocations
|
|
|
|
|
|
|
|
|
Ambit Transaction
|
|
|
|
Crius Transaction
|
|
|
|
Updated Preliminary Purchase Price Allocation
|
|
Measurement Period Adjustments recorded through
March 31, 2020
|
|
Updated Preliminary Purchase Price Allocation
|
|
Measurement Period Adjustments recorded through
March 31, 2020
|
Cash and cash equivalents
|
$
|
49
|
|
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
—
|
|
Net working capital
|
30
|
|
|
1
|
|
|
(2)
|
|
|
(35)
|
|
Accumulated deferred income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
(36)
|
|
Identifiable intangible assets
|
200
|
|
|
(63)
|
|
|
302
|
|
|
8
|
|
Goodwill
|
278
|
|
|
64
|
|
|
248
|
|
|
43
|
|
Commodity and other derivative contractual assets
|
23
|
|
|
—
|
|
|
18
|
|
|
—
|
|
Other noncurrent assets
|
13
|
|
|
—
|
|
|
17
|
|
|
(3)
|
|
Total assets acquired
|
593
|
|
|
2
|
|
|
609
|
|
|
(23)
|
|
Identifiable intangible liabilities
|
—
|
|
|
—
|
|
|
3
|
|
|
(33)
|
|
Long-term debt, including amounts due currently
|
—
|
|
|
—
|
|
|
140
|
|
|
—
|
|
Commodity and other derivative contractual liabilities
|
28
|
|
|
—
|
|
|
40
|
|
|
—
|
|
Accumulated deferred income taxes
|
—
|
|
|
—
|
|
|
10
|
|
|
10
|
|
Other noncurrent liabilities and deferred credits
|
10
|
|
|
2
|
|
|
16
|
|
|
—
|
|
Total liabilities assumed
|
38
|
|
|
2
|
|
|
209
|
|
|
(23)
|
|
Identifiable net assets acquired
|
$
|
555
|
|
|
$
|
—
|
|
|
$
|
400
|
|
|
$
|
—
|
|
Dynegy Merger Transaction
On the Merger Date, Vistra Energy and Dynegy completed the transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, Dynegy merged with and into Vistra Energy, with Vistra Energy continuing as the surviving corporation. The Merger was intended to qualify as a tax-free reorganization under the Internal Revenue Code, as amended, so that none of Vistra Energy, Dynegy or any of the Dynegy stockholders would recognize any gain or loss in the transaction, except that Dynegy stockholders could recognize a gain or loss with respect to cash received in lieu of fractional shares of Vistra Energy's common stock. Vistra Energy is the acquirer for both federal tax and accounting purposes.
At the closing of the Merger, each issued and outstanding share of Dynegy common stock, par value $0.01 per share, other than shares owned by Vistra Energy or its subsidiaries, held in treasury by Dynegy or held by a subsidiary of Dynegy, was automatically converted into 0.652 shares of common stock, par value $0.01 per share, of Vistra Energy (the Exchange Ratio), except that cash was paid in lieu of fractional shares, which resulted in Vistra Energy issuing 94,409,573 shares of Vistra Energy common stock to the former Dynegy stockholders, as well as converting stock options, equity-based awards, tangible equity units and warrants. The total number of Vistra Energy shares outstanding at the close of the Merger was 522,932,453 shares. Dynegy stock options and equity-based awards outstanding immediately prior to the Merger Date were generally automatically converted upon completion of the Merger into stock options and equity-based awards, respectively, with respect to Vistra Energy's common stock, after giving effect to the Exchange Ratio.
3. DEVELOPMENT OF GENERATION FACILITIES
Battery 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), and 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 agreement to ensure grid reliability as part of the Oakland Clean Energy Initiative was signed and sent to the California Public Utilities Commission (CPUC) for approval. The battery ESS project is expected to enter commercial operations by January 2022.
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. PG&E filed its application with the CPUC in June 2018 and the CPUC approved the resource adequacy contract in November 2018. At March 31, 2020, we had accumulated approximately $165 million in construction work-in-process for this ESS. 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. We anticipate the Moss Landing battery ESS will commence commercial operations in the fourth quarter of 2020. PG&E filed for Chapter 11 bankruptcy protection in January 2019. In October 2019, PG&E filed a motion in its bankruptcy proceeding requesting approval of the assumption of the resource adequacy contract. In November 2019, the bankruptcy court approved the assumption motion subject to the CPUC approving the terms of the amendment, and the CPUC approved the terms of the amendment in January 2020. The resource adequacy contract as amended is now assumed and fully enforceable against PG&E.
4. RETIREMENT OF GENERATION FACILITIES
MISO — In September 2019, we announced the settlement of a lawsuit alleging violations of opacity and particulate matter limits at our Edwards facility in Bartonville, 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 (see Note 12). In August 2019, we announced the planned retirement of four power plants in Illinois with a total installed nameplate generation capacity of 2,068 MW. We retired these units due to changes in the Illinois multi-pollutant standard rule (MPS rule) that require us to retire approximately 2,000 MW of generation capacity (see Note 12). In light of the provisions of the Federal Power Act and the FERC regulations thereunder, the affected subsidiaries of Vistra Energy identified the retired units by analyzing the economics of each of our Illinois plants and designating the least economic units for retirement. Expected plant retirement expenses of $47 million, driven by severance costs, were accrued in the three months ended September 30, 2019 and were included primarily in operating costs of our Asset Closure segment. In August 2019, we remeasured our pension and OPEB plans resulting in an increase to the benefit obligation liability of $21 million, pretax other comprehensive loss of $18 million and curtailment expense of $3 million recognized as other deductions in our condensed consolidated statements of operations. The following table details the units in Illinois totaling 2,653 MW, that have been or will be retired. Operational results for retired plants are included in the Asset Closure segment, which is engaged in the decommissioning and reclamation of retired plants and mines.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Location
|
|
Fuel Type
|
|
Net Generation Capacity (MW)
|
|
Number of Units
|
|
Dates Units to Be Taken Offline
|
Coffeen
|
|
Coffeen, IL
|
|
Coal
|
|
915
|
|
|
2
|
|
November 1, 2019
|
Duck Creek
|
|
Canton, IL
|
|
Coal
|
|
425
|
|
|
1
|
|
December 15, 2019
|
Havana
|
|
Havana, IL
|
|
Coal
|
|
434
|
|
|
1
|
|
November 1, 2019
|
Hennepin
|
|
Hennepin, IL
|
|
Coal
|
|
294
|
|
|
2
|
|
November 1, 2019
|
Edwards
|
|
Bartonville, IL
|
|
Coal
|
|
585
|
|
|
2
|
|
By the end of 2022
|
Total
|
|
|
|
|
|
2,653
|
|
|
8
|
|
|
5. REVENUE
The following tables disaggregate our revenue by major source:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
ERCOT
|
|
PJM
|
|
NY/NE
|
|
MISO
|
|
Asset
Closure
|
|
CAISO/Eliminations
|
|
Consolidated
|
Revenue from contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail energy charge in ERCOT
|
$
|
1,253
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,253
|
|
Retail energy charge in Northeast/Midwest
|
640
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
640
|
|
Wholesale generation revenue from ISO/RTO
|
—
|
|
|
98
|
|
|
76
|
|
|
41
|
|
|
13
|
|
|
—
|
|
|
33
|
|
|
261
|
|
Capacity revenue from ISO/RTO
|
—
|
|
|
—
|
|
|
14
|
|
|
26
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
45
|
|
Revenue from other wholesale contracts
|
—
|
|
|
50
|
|
|
152
|
|
|
12
|
|
|
49
|
|
|
—
|
|
|
4
|
|
|
267
|
|
Total revenue from contracts with customers
|
1,893
|
|
|
148
|
|
|
242
|
|
|
79
|
|
|
67
|
|
|
—
|
|
|
37
|
|
|
2,466
|
|
Other revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible amortization
|
(4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
Hedging and other revenues (a)
|
19
|
|
|
251
|
|
|
39
|
|
|
39
|
|
|
8
|
|
|
—
|
|
|
44
|
|
|
400
|
|
Affiliate sales
|
—
|
|
|
467
|
|
|
367
|
|
|
167
|
|
|
71
|
|
|
—
|
|
|
(1,072)
|
|
|
—
|
|
Total other revenues
|
15
|
|
|
718
|
|
|
406
|
|
|
206
|
|
|
75
|
|
|
—
|
|
|
(1,028)
|
|
|
392
|
|
Total revenues
|
$
|
1,908
|
|
|
$
|
866
|
|
|
$
|
648
|
|
|
$
|
285
|
|
|
$
|
142
|
|
|
$
|
—
|
|
|
$
|
(991)
|
|
|
$
|
2,858
|
|
____________
(a)Includes $201 million of unrealized net gains from mark-to-market valuations of commodity positions. See Note 17 for unrealized net gains (losses) by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
ERCOT
|
|
PJM
|
|
NY/NE
|
|
MISO
|
|
Asset
Closure
|
|
|
|
CAISO/Eliminations
|
|
Consolidated
|
Revenue from contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail energy charge in ERCOT
|
$
|
1,025
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
1,025
|
|
Retail energy charge in Northeast/Midwest
|
348
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
348
|
|
Wholesale generation revenue from ISO/RTO
|
—
|
|
|
247
|
|
|
221
|
|
|
195
|
|
|
72
|
|
|
67
|
|
|
|
|
73
|
|
|
875
|
|
Capacity revenue from ISO/RTO
|
—
|
|
|
—
|
|
|
67
|
|
|
80
|
|
|
10
|
|
|
3
|
|
|
|
|
—
|
|
|
160
|
|
Revenue from other wholesale contracts
|
—
|
|
|
44
|
|
|
72
|
|
|
7
|
|
|
15
|
|
|
1
|
|
|
|
|
3
|
|
|
142
|
|
Total revenue from contracts with customers
|
1,373
|
|
|
291
|
|
|
360
|
|
|
282
|
|
|
97
|
|
|
71
|
|
|
|
|
76
|
|
|
2,550
|
|
Other revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible amortization
|
(9)
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
(5)
|
|
|
—
|
|
|
|
|
1
|
|
|
(15)
|
|
Hedging and other revenues (a)
|
22
|
|
|
158
|
|
|
91
|
|
|
49
|
|
|
13
|
|
|
14
|
|
|
|
|
41
|
|
|
388
|
|
Affiliate sales
|
—
|
|
|
505
|
|
|
254
|
|
|
15
|
|
|
64
|
|
|
—
|
|
|
|
|
(838)
|
|
|
—
|
|
Total other revenues
|
13
|
|
|
663
|
|
|
345
|
|
|
62
|
|
|
72
|
|
|
14
|
|
|
|
|
(796)
|
|
|
373
|
|
Total revenues
|
$
|
1,386
|
|
|
$
|
954
|
|
|
$
|
705
|
|
|
$
|
344
|
|
|
$
|
169
|
|
|
$
|
85
|
|
|
|
|
$
|
(720)
|
|
|
$
|
2,923
|
|
____________
(a)Includes $158 million of unrealized net gains from mark-to-market valuations of commodity positions. See Note 17 for unrealized net gains (losses) by segment.
Performance Obligations
As of March 31, 2020, we have future performance obligations that are unsatisfied, or partially unsatisfied, relating to capacity auction volumes awarded through capacity auctions held by the ISO or RTO or contracts with customers. Therefore, an obligation exists as of the date of the results of the respective ISO or RTO capacity auction or the contract execution date. The transaction price is also set by the results of the capacity auction. These obligations total $576 million, $822 million, $473 million, $123 million and $38 million that will be recognized, in the balance of the year ended December 31, 2020 and the years ending December 31, 2021, 2022, 2023 and 2024, respectively, and $19 million thereafter. Capacity revenues are recognized as capacity is made available to the related ISOs or RTOs or counterparties.
Accounts Receivable
The following table presents trade accounts receivable (net of allowance for uncollectible accounts) relating to both contracts with customers and other activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31, 2019
|
Trade accounts receivable from contracts with customers — net
|
$
|
1,017
|
|
|
$
|
1,246
|
|
Other trade accounts receivable — net
|
80
|
|
|
119
|
|
Total trade accounts receivable — net
|
$
|
1,097
|
|
|
$
|
1,365
|
|
6. GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS AND LIABILITIES
Goodwill
The following table provides information regarding our goodwill balance. There have been no impairments of goodwill.
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
2,553
|
|
Measurement period adjustments recorded in connection with the Ambit Transaction
|
64
|
|
Measurement period adjustments recorded in connection with the Crius Transaction
|
(9)
|
|
Balance at March 31, 2020
|
$
|
2,608
|
|
At March 31, 2020, the goodwill balance of $2.608 billion consisted of the following:
•$1.907 billion arose in connection with our application of fresh start reporting at Emergence and was allocated entirely to our ERCOT Retail reporting unit. Of the goodwill recorded at Emergence, $1.686 billion is deductible for tax purposes over 15 years on a straight-line basis.
•$175 million arose in connection with the Merger, of which $122 million is recorded in our ERCOT Generation reporting unit and $53 million is recorded in our ERCOT Retail reporting unit. None of the goodwill related to the Merger is deductible for tax purposes.
•$278 million and $248 million of preliminary goodwill arose in connection with the Ambit and Crius Transactions, respectively, and is unassigned to a reporting unit pending completion of the purchase price allocations. The goodwill related to the Ambit Transaction of $278 million is deductible for tax purposes over 15 years on a straight-line basis. None of the goodwill related to the Crius Transaction is deductible for tax purposes.
Identifiable Intangible Assets and Liabilities
Identifiable intangible assets are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
Identifiable Intangible Asset
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
Retail customer relationship
|
|
$
|
2,047
|
|
|
$
|
1,225
|
|
|
$
|
822
|
|
|
$
|
2,078
|
|
|
$
|
1,151
|
|
|
$
|
927
|
|
Software and other technology-related assets
|
|
354
|
|
|
140
|
|
|
214
|
|
|
341
|
|
|
125
|
|
|
216
|
|
Retail and wholesale contracts
|
|
272
|
|
|
181
|
|
|
91
|
|
|
315
|
|
|
182
|
|
|
133
|
|
Contractual service agreements (a)
|
|
59
|
|
|
5
|
|
|
54
|
|
|
59
|
|
|
5
|
|
|
54
|
|
Other identifiable intangible assets (b)
|
|
42
|
|
|
16
|
|
|
26
|
|
|
40
|
|
|
15
|
|
|
25
|
|
Total identifiable intangible assets subject to amortization
|
|
$
|
2,774
|
|
|
$
|
1,567
|
|
|
1,207
|
|
|
$
|
2,833
|
|
|
$
|
1,478
|
|
|
1,355
|
|
Retail trade names (not subject to amortization)
|
|
|
|
|
|
1,369
|
|
|
|
|
|
|
1,391
|
|
Mineral interests (not currently subject to amortization)
|
|
|
|
|
|
2
|
|
|
|
|
|
|
2
|
|
Total identifiable intangible assets
|
|
|
|
|
|
$
|
2,578
|
|
|
|
|
|
|
$
|
2,748
|
|
____________
(a)At March 31, 2020, amounts related to contractual service agreements that have become liabilities due to amortization of the economic impacts of the intangibles have been removed from both the gross carrying amount and accumulated amortization.
(b)Includes mining development costs and environmental allowances (emissions allowances and renewable energy certificates).
Identifiable intangible liabilities are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable Intangible Liability
|
March 31,
2020
|
|
December 31, 2019
|
Contractual service agreements
|
$
|
111
|
|
|
$
|
110
|
|
Purchase and sale of power and capacity
|
96
|
|
|
100
|
|
Fuel and transportation purchase contracts
|
72
|
|
|
76
|
|
Total identifiable intangible liabilities
|
$
|
279
|
|
|
$
|
286
|
|
Expense related to finite-lived identifiable intangible assets and liabilities (including the classification in the condensed consolidated statements of operations) consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable Intangible Assets and Liabilities
|
|
Condensed Consolidated Statements of Operations
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Retail customer relationship
|
|
Depreciation and amortization
|
|
|
|
|
$
|
74
|
|
|
$
|
55
|
|
Software and other technology-related assets
|
|
Depreciation and amortization
|
|
|
|
|
17
|
|
|
13
|
|
Retail and wholesale contracts/purchase and sale/fuel and transportation contracts
|
|
Operating revenues/fuel, purchased power costs and delivery fees
|
|
|
|
|
2
|
|
|
12
|
|
Other identifiable intangible assets
|
|
Operating revenues/fuel, purchased power costs and delivery fees/depreciation and amortization
|
|
|
|
|
52
|
|
|
27
|
|
Total intangible asset expense (a)
|
|
|
|
|
|
|
$
|
145
|
|
|
$
|
107
|
|
____________
(a)Amounts recorded in depreciation and amortization totaled $91 million and $69 million for the three months ended March 31, 2020 and 2019, respectively. Amounts exclude contractual services agreements. Amounts include all expenses associated with environmental allowances including expenses accrued to comply with emissions allowance programs and renewable portfolio standards which are presented in fuel, purchased power costs and delivery fees on our condensed consolidated statements of operations. Emissions allowance obligations are accrued as associated electricity is generated and renewable energy credit obligations are accrued as retail electricity delivery occurs.
Estimated Amortization of Identifiable Intangible Assets and Liabilities
As of March 31, 2020, the estimated aggregate amortization expense of identifiable intangible assets and liabilities for each of the next five fiscal years is as shown below.
|
|
|
|
|
|
|
|
|
Year
|
|
Estimated Amortization Expense
|
2020
|
|
$
|
355
|
|
2021
|
|
$
|
248
|
|
2022
|
|
$
|
155
|
|
2023
|
|
$
|
113
|
|
2024
|
|
$
|
76
|
|
7. INCOME TAXES
Income Tax Expense
The calculation of our effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Income before income taxes
|
|
|
|
|
$
|
62
|
|
|
$
|
301
|
|
Income tax expense
|
|
|
|
|
$
|
(17)
|
|
|
$
|
(77)
|
|
Effective tax rate
|
|
|
|
|
27.4
|
%
|
|
25.6
|
%
|
For the three months ended March 31, 2020, the effective tax rate of 27.4% was higher than the U.S. federal statutory rate of 21% due primarily to nondeductible impacts of the TRA and state income taxes.
For the three months ended March 31, 2019, the effective tax rate of 25.6% was higher than the U.S. federal statutory rate of 21% due primarily to nondeductible impacts of the TRA and state income taxes.
Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
In response to the global pandemic related to COVID-19, the President signed into law the CARES Act on March 27, 2020. The CARES Act provides numerous relief provisions for corporate taxpayers, including modification of the utilization limitations on net operating losses, favorable expansion of the deduction for business interest expense under Internal Revenue Code Section 163(j) (Section 163(j)), the ability to accelerate timing of refundable AMT credits and the temporary suspension of certain payment requirements for the employer portion of social security taxes. While Vistra Energy is still evaluating the impact of certain tax-related benefits available under the CARES Act, we anticipate the acceleration of alternative minimum tax (AMT) refunds and the expansion of the Section 163(j) limitation from 30% to 50% of adjusted taxable income to have material impacts to Vistra Energy. Specifically, we expect to receive approximately $64 million in 2020 relating to the acceleration of AMT refunds and an approximate $500 million increase in interest expense deduction over the 2019 and 2020 tax years under Section 163(j). We do not anticipate a material impact to the effective tax rate from these impacts. Vistra Energy will continue to monitor legislative developments related to COVID-19.
Liability for Uncertain Tax Positions
Vistra Energy and its subsidiaries file income tax returns in U.S. federal and state jurisdictions and are expected to be subject to examinations by the IRS and other taxing authorities. Vistra Energy is not currently under audit by the IRS for any period, although review of Dynegy's final pre-acquisition tax year 2018 continues to progress through the IRS's Compliance Assurance Process audit program. Crius is currently under audit by the IRS for the tax years 2015, 2016 and 2017. Uncertain tax positions totaled $125 million and $126 million at March 31, 2020 and December 31, 2019, respectively.
8. TAX RECEIVABLE AGREEMENT OBLIGATION
On the Effective Date, Vistra Energy entered into a tax receivable agreement (the TRA) with a transfer agent on behalf of certain former first-lien creditors of TCEH. The TRA generally provides for the payment by us to holders of TRA Rights of 85% of the amount of cash savings, if any, in U.S. federal and state income tax that we realize in periods after Emergence as a result of (a) certain transactions consummated pursuant to the Plan of Reorganization (including the step-up in tax basis in our assets resulting from the PrefCo Preferred Stock Sale), (b) the tax basis of all assets acquired in connection with the acquisition of two CCGT natural gas-fueled generation facilities in April 2016 and (c) tax benefits related to imputed interest deemed to be paid by us as a result of payments under the TRA, plus interest accruing from the due date of the applicable tax return.
Pursuant to the TRA, we issued the TRA Rights for the benefit of the first-lien secured creditors of TCEH entitled to receive such TRA Rights under the Plan of Reorganization. Such TRA Rights are entitled to certain registration rights more fully described in the Registration Rights Agreement (see Note 16).
During the three months ended March 31, 2020, we recorded a decrease to the carrying value of the TRA obligation totaling $9 million as a result of adjustments to forecasted taxable income, including the impacts of the CARES Act changes to Section 163(j) percentage limitation amount. During the three months ended March 31, 2019, we recorded a decrease to the carrying value of the TRA obligation totaling $19 million as a result of adjustments to forecasted taxable income and higher net operating losses acquired in the Merger.
The following table summarizes the changes to the TRA obligation, reported as other current liabilities and Tax Receivable Agreement obligation in our condensed consolidated balance sheets, for the three months ended March 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
2019
|
TRA obligation at the beginning of the period
|
$
|
455
|
|
|
$
|
420
|
|
Accretion expense
|
17
|
|
|
16
|
|
Changes in tax assumptions impacting timing of payments
|
(9)
|
|
|
(19)
|
|
Impacts of Tax Receivable Agreement
|
8
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRA obligation at the end of the period
|
$
|
463
|
|
|
$
|
417
|
|
As of March 31, 2020, the estimated carrying value of the TRA obligation totaled $463 million, which represents the discounted amount of projected payments under the TRA. The projected payments are based on certain assumptions, including but not limited to (a) the federal corporate income tax rate of 21%, (b) estimates of our taxable income in the current and future years and (c) additional states that Vistra Energy now operates in, including the relevant tax rate and apportionment factor for each state. Our taxable income takes into consideration the current federal tax code, various relevant state tax laws and reflects our current estimates of future results of the business. These assumptions are subject to change, and those changes could have a material impact on the carrying value of the TRA obligation. As of March 31, 2020, the aggregate amount of undiscounted federal and state payments under the TRA is estimated to be approximately $1.4 billion, with more than half of such amount expected to be paid during the next 15 years, and the final payment expected to be made around the year 2056 (if the TRA is not terminated earlier pursuant to its terms).
The carrying value of the obligation is being accreted to the amount of the gross expected obligation using the effective interest method. Changes in the amount of this obligation resulting from changes to either the timing or amount of TRA payments are recognized in the period of change and measured using the discount rate inherent in the initial fair value of the obligation.
9. EARNINGS PER SHARE
Basic earnings per share available to common stockholders are based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the treasury stock method and includes the effect of all potential issuances of common shares under stock-based incentive compensation arrangements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Net income attributable to common stock — basic
|
|
|
|
|
$
|
56
|
|
|
$
|
225
|
|
Weighted average shares of common stock outstanding — basic (a)
|
|
|
|
|
487,944,564
|
|
|
502,367,299
|
|
Net income per weighted average share of common stock outstanding — basic
|
|
|
|
|
$
|
0.11
|
|
|
$
|
0.45
|
|
Dilutive securities: Stock-based incentive compensation plan
|
|
|
|
|
2,694,062
|
|
|
6,772,689
|
|
Weighted average shares of common stock outstanding — diluted
|
|
|
|
|
490,638,626
|
|
|
509,139,988
|
|
Net income per weighted average share of common stock outstanding — diluted
|
|
|
|
|
$
|
0.11
|
|
|
$
|
0.44
|
|
____________
(a)For the three months ended March 31, 2019, the minimum settlement amount of tangible equity units, or 15,128,940 shares, are considered to be outstanding and are included in the computation of basic net income per share.
Stock-based incentive compensation plan awards excluded from the calculation of diluted earnings per share because the effect would have been antidilutive totaled 10,872,836 and 6,243,220 shares for the three months ended March 31, 2020 and 2019, respectively.
10. ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM
TXU Energy Receivables Company LLC (RecCo), an indirect subsidiary of Vistra Energy, has an accounts receivable financing facility (Receivables Facility) provided by issuers of asset-backed commercial paper and commercial banks (Purchasers). The Receivables Facility was renewed in July 2019, extending its scheduled termination from August 2019 to July 2020, with the ability to borrow up to $600 million up to the settlement date in November 2019, after which the amount available for RecCo was set to revert to $450 million. The agreement was subsequently amended to allow for a one-time, $560 million borrowing in November 2019 to take advantage of a seasonally-high receivable balance. The borrowing limit returned to $450 million thereafter.
Under the Receivables Facility, TXU Energy and Dynegy Energy Services are obligated to sell or contribute, on an ongoing basis and without recourse, their accounts receivable to TXU Energy's special purpose subsidiary, RecCo, a consolidated, wholly owned, bankruptcy-remote, direct subsidiary of TXU Energy. RecCo, in turn, is subject to certain conditions, and may, from time to time, sell an undivided interest in all the receivables acquired from TXU Energy and Dynegy Energy Services to the Purchasers, and its assets and credit are not available to satisfy the debts and obligations of any person, including affiliates of RecCo. Amounts funded by the Purchasers to RecCo are reflected as short-term borrowings on the condensed consolidated balance sheets. Proceeds and repayments under the Receivables Facility are reflected as cash flows from financing activities in our condensed consolidated statements of cash flows. Receivables transferred to the Purchasers remain on Vistra Energy's balance sheet and Vistra Energy reflects a liability equal to the amount advanced by the Purchasers. The Company records interest expense on amounts advanced. TXU Energy continues to service, administer and collect the trade receivables on behalf of RecCo and the Purchasers, as applicable.
As of March 31, 2020, outstanding borrowings under the receivables facility totaled $450 million and were supported by $555 million of RecCo gross receivables. As of December 31, 2019, outstanding borrowings under the receivables facility totaled $450 million and were supported by $629 million of RecCo gross receivables.
11. LONG-TERM DEBT
Amounts in the table below represent the categories of long-term debt obligations incurred by the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Vistra Operations Credit Facilities
|
$
|
2,593
|
|
|
$
|
2,700
|
|
Vistra Operations Senior Secured Notes:
|
|
|
|
3.550% Senior Secured Notes, due July 15, 2024
|
1,500
|
|
|
1,500
|
|
3.700% Senior Secured Notes, due January 30, 2027
|
800
|
|
|
800
|
|
4.300% Senior Secured Notes, due July 15, 2029
|
800
|
|
|
800
|
|
Total Vistra Operations Senior Secured Notes
|
3,100
|
|
|
3,100
|
|
Vistra Operations Senior Unsecured Notes:
|
|
|
|
5.500% Senior Unsecured Notes, due September 1, 2026
|
1,000
|
|
|
1,000
|
|
5.625% Senior Unsecured Notes, due February 15, 2027
|
1,300
|
|
|
1,300
|
|
5.000% Senior Unsecured Notes, due July 31, 2027
|
1,300
|
|
|
1,300
|
|
Total Vistra Operations Senior Unsecured Notes
|
3,600
|
|
|
3,600
|
|
Vistra Energy Senior Unsecured Notes:
|
|
|
|
5.875% Senior Unsecured Notes, due June 1, 2023
|
500
|
|
|
500
|
|
8.000% Senior Unsecured Notes, due January 15, 2025
|
—
|
|
|
81
|
|
8.125% Senior Unsecured Notes, due January 30, 2026
|
166
|
|
|
166
|
|
Total Vistra Energy Senior Unsecured Notes
|
666
|
|
|
747
|
|
Other:
|
|
|
|
Forward Capacity Agreements
|
130
|
|
|
161
|
|
Equipment Financing Agreements
|
91
|
|
|
99
|
|
8.82% Building Financing due semiannually through February 11, 2022 (a)
|
13
|
|
|
15
|
|
Other
|
4
|
|
|
12
|
|
Total other long-term debt
|
238
|
|
|
287
|
|
Unamortized debt premiums, discounts and issuance costs (b)
|
(59)
|
|
|
(55)
|
|
Total long-term debt including amounts due currently
|
10,138
|
|
|
10,379
|
|
Less amounts due currently
|
(169)
|
|
|
(277)
|
|
Total long-term debt less amounts due currently
|
$
|
9,969
|
|
|
$
|
10,102
|
|
____________
(a)Obligation related to a corporate office space finance lease. This obligation will be funded by amounts held in an escrow account that is reflected in other noncurrent assets in our condensed consolidated balance sheets.
(b)Includes impact of recording debt assumed in the Merger at fair value.
Vistra Operations Credit Facilities
At March 31, 2020, the Vistra Operations Credit Facilities consisted of up to $5.318 billion in senior secured, first-lien revolving credit commitments and outstanding term loans, which consisted of revolving credit commitments of up to $2.725 billion, including a $2.35 billion letter of credit sub-facility (Revolving Credit Facility) and term loans of $2.593 billion (Term Loan B-3 Facility).
In March 2020, Vistra Operations repurchased $100 million principal amount of Term Loan B-3 Facility borrowings at a weighted average price of $93.875 and cancelled them. We recorded an extinguishment gain of $6 million on the transaction in the three months ended March 31, 2020.
In February 2020, we repaid $75 million under the Revolving Credit Facility. In March 2020, we borrowed $425 million under the Revolving Credit Facility with proceeds used for general corporate purposes. In April 2020, we repaid $550 million under the Revolving Credit Facility.
In March 2019 and May 2019 the Vistra Operations Credit Facilities were amended whereby we obtained $225 million of incremental Revolving Credit Facility commitments. The letter of credit sub-facility was also increased by $50 million. Fees and expenses related to the amendments to the Vistra Operations Credit Facilities totaled $1 million in the three months ended March 31, 2019, which were capitalized as a noncurrent asset.
The Vistra Operations Credit Facilities and related available capacity at March 31, 2020 are presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
Vistra Operations Credit Facilities
|
|
Maturity Date
|
|
Facility
Limit
|
|
Cash
Borrowings
|
|
Available
Capacity
|
Revolving Credit Facility (a)
|
|
June 14, 2023
|
|
$
|
2,725
|
|
|
$
|
700
|
|
|
$
|
1,117
|
|
Term Loan B-3 Facility
|
|
December 31, 2025
|
|
2,593
|
|
|
2,593
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total Vistra Operations Credit Facilities
|
|
|
|
$
|
5,318
|
|
|
$
|
3,293
|
|
|
$
|
1,117
|
|
___________
(a)Facility to be used for general corporate purposes. Facility includes a $2.35 billion letter of credit sub-facility, of which $908 million of letters of credit were outstanding at March 31, 2020 and which reduce our available capacity. Cash borrowings under the Revolving Credit Facility are reported in short-term borrowings in our condensed consolidated balance sheets.
At March 31, 2020, cash borrowings under the Revolving Credit Facility bear interest based on applicable LIBOR rates, plus a fixed spread of 1.75%, and there were $700 million outstanding borrowings. Letters of credit issued under the Revolving Credit Facility bear interest of 1.75%. Amounts borrowed under the Term Loan B-3 Facility bears interest based on applicable LIBOR rates plus fixed spreads of 1.75%. At March 31, 2020, the weighted average interest rates before taking into consideration interest rate swaps on outstanding borrowings was 2.68% including both the Revolving Credit Facility and the Term Loan B-3 Facility. The Vistra Operations Credit Facilities also provide for certain additional fees payable to the agents and lenders, including fronting fees with respect to outstanding letters of credit and availability fees payable with respect to any unused portion of the available Revolving Credit Facility.
Obligations under the Vistra Operations Credit Facilities are secured by a lien covering substantially all of Vistra Operations' (and its subsidiaries') consolidated assets, rights and properties, subject to certain exceptions set forth in the Vistra Operations Credit Facilities, provided that the amount of loans outstanding under the Vistra Operations Credit Facilities that may be secured by a lien covering certain principal properties of the Company is expressly limited by the terms of the Vistra Operations Credit Facilities.
The Vistra Operations Credit Facilities also permit certain hedging agreements to be secured on a pari-passu basis with the Vistra Operations Credit Facilities in the event those hedging agreements met certain criteria set forth in the Vistra Operations Credit Facilities.
The Vistra Operations Credit Facilities provide for affirmative and negative covenants applicable to Vistra Operations (and its restricted subsidiaries), including affirmative covenants requiring it to provide financial and other information to the agents under the Vistra Operations Credit Facilities and to not change its lines of business, and negative covenants restricting Vistra Operations' (and its restricted subsidiaries') ability to incur additional indebtedness, make investments, dispose of assets, pay dividends, grant liens or take certain other actions, in each case, except as permitted in the Vistra Operations Credit Facilities. Vistra Operations' ability to borrow under the Vistra Operations Credit Facilities is subject to the satisfaction of certain customary conditions precedent set forth therein.
The Vistra Operations Credit Facilities provide for certain customary events of default, including events of default resulting from non-payment of principal, interest or fees when due, material breaches of representations and warranties, material breaches of covenants in the Vistra Operations Credit Facilities or ancillary loan documents, cross-defaults under other agreements or instruments and the entry of material judgments against Vistra Operations. Solely with respect to the Revolving Credit Facility, and solely during a compliance period (which, in general, is applicable when the aggregate revolving borrowings and issued revolving letters of credit (in excess of $300 million) exceed 30% of the revolving commitments), the agreement includes a covenant that requires the consolidated first lien net leverage ratio, which is based on the ratio of net first-lien debt compared to an EBITDA calculation defined under the terms of the Vistra Operations Credit Facilities, not to exceed 4.25 to 1.00. As of March 31, 2020, we were in compliance with this financial covenant. Upon the existence of an event of default, the Vistra Operations Credit Facilities provide that all principal, interest and other amounts due thereunder will become immediately due and payable, either automatically or at the election of specified lenders.
Interest Rate Swaps — Vistra Energy employs interest rate swaps to hedge our exposure to variable rate debt. As of March 31, 2020, Vistra Energy has entered into the following series of interest rate swap transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
Expiration Date
|
|
Rate Range
|
|
|
Swapped to fixed
|
|
$3,000
|
|
July 2023
|
|
3.67
|
%
|
-
|
3.91%
|
|
Swapped to variable
|
|
$700
|
|
July 2023
|
|
3.20
|
%
|
-
|
3.23%
|
|
Swapped to fixed
|
|
$720
|
|
February 2024
|
|
3.71
|
%
|
-
|
3.72%
|
|
Swapped to variable
|
|
$720
|
|
February 2024
|
|
3.20
|
%
|
-
|
3.20%
|
|
Swapped to fixed (a)
|
|
$3,000
|
|
July 2026
|
|
4.72
|
%
|
-
|
4.79%
|
|
Swapped to variable (a)
|
|
$700
|
|
July 2026
|
|
3.28
|
%
|
-
|
3.33%
|
|
____________
(a)Effective from July 2023 through July 2026.
During 2019, Vistra Energy entered into $2.120 billion of new interest rate swaps, pursuant to which Vistra Energy will pay a variable rate and receive a fixed rate. The terms of these new swaps were matched against the terms of certain existing swaps, effectively offsetting the hedge of the existing swaps and fixing the out-of-the-money position of such swaps. These matched swaps will settle over time, in accordance with the original contractual terms. The remaining existing swaps continue to hedge our exposure on $2.3 billion of debt through July 2026.
Alternate Letter of Credit Facilities
Two alternate letter of credit facilities (each, an Alternative LOC Facility, and collectively, the Alternate LOC Facilities) with an aggregate facility limit of $500 million became effective in the year ended December 31, 2019. At March 31, 2020, $500 million of letters of credit were outstanding under the Alternate LOC Facilities. Of the total facility limit, $250 million matures in December 2020 and $250 million matures in December 2021.
Vistra Operations Senior Secured Notes
The Vistra Operations senior secured notes (Senior Secured Notes) are and will be fully and unconditionally guaranteed by certain of Vistra Operations' current and future subsidiaries that also guarantee the Vistra Operations Credit Facilities. The Senior Secured Notes are secured by a first-priority security interest in the same collateral that is pledged for the benefit of the lenders under the Vistra Operations Credit Facilities, which consists of a substantial portion of the property, assets and rights owned by Vistra Operations and certain direct and indirect subsidiaries of Vistra Operations as subsidiary guarantors (collectively, the Guarantor Subsidiaries) as well as the stock of Vistra Operations held by Vistra Intermediate. The collateral securing the Senior Secured Notes will be released if Vistra Operations' senior, unsecured long-term debt securities obtain an investment grade rating from two out of the three rating agencies, subject to reversion if such rating agencies withdraw the investment grade rating of Vistra Operations' senior, unsecured long-term debt securities or downgrade such rating below investment grade.
Vistra Operations Senior Unsecured Notes
In February 2019, Vistra Operations issued and sold $1.3 billion aggregate principal amount of 5.625% senior unsecured notes due 2027 (5.625% senior notes) in an offering to eligible purchasers under Rule 144A and Regulation S under the Securities Act (the February 2019 Notes Offering). The 5.625% senior notes were sold pursuant to a purchase agreement by and among Vistra Operations, the Guarantor Subsidiaries and J.P. Morgan Securities LLC, as representative of the several initial purchasers. Fees and expenses related to the offering totaled $16 million in the three months ended March 31, 2019, which were capitalized as a reduction in the carrying amount of the debt. Net proceeds from the February 2019 Notes Offering totaling approximately $1.287 billion, together with cash on hand, were used to pay the purchase price and accrued interest (together with fees and expenses) required in connection with (i) the February 2019 Tender Offer described below, (ii) the redemption of approximately $35 million aggregate principal amount of our 7.375% senior unsecured notes due 2022 and (iii) the redemption of approximately $25 million aggregate principal amount of our outstanding 8.034% senior unsecured notes due 2024 (8.034% senior notes). The 5.625% senior notes mature in February 2027, with interest payable in cash semiannually in arrears on February 15 and August 15 beginning August 15, 2019.
The indentures governing the 5.000% senior unsecured notes due 2027, the 5.625% senior notes and the 5.500% senior unsecured notes due 2026 (collectively, as each may be amended or supplemented from time to time, the Vistra Operations Senior Unsecured Indentures) provide for the full and unconditional guarantee by the Guarantor Subsidiaries of the punctual payment of the principal and interest on such notes. The Vistra Operations Senior Unsecured Indentures contain certain covenants and restrictions, including, among others, restrictions on the ability of the Issuer and its subsidiaries, as applicable, to create certain liens, merge or consolidate with another entity, and sell all or substantially all of their assets.
Debt Repurchase Program
In November 2018, our board of directors (the Board) authorized a bond repurchase program under which up to $200 million principal amount of outstanding Vistra Energy Senior Unsecured Notes could be repurchased. In July 2019, the Board authorized up to $1.0 billion to repay or repurchase any outstanding debt of the Company (or its subsidiaries), with that authority superseding the remaining availability under the $200 million bond repurchase program. Through March 31, 2020, $684 million principal amount of debt had been repurchased under the $1.0 billion authorization, including the repurchase of $100 million principal amount of Term Loan B-3 Facility borrowings discussed above and the redemption of $81 million aggregate principal amount outstanding of 8.000% senior unsecured notes due 2025 (8.000% senior notes) discussed below. In April 2020, the Board authorized up to $1.0 billion to repay or repurchase additional outstanding debt, with this new authority superseding and replacing the $316 million of availability under the previously authorized $1.0 billion debt repurchase program.
Vistra Energy Senior Unsecured Notes
Redemption of 5.875% Senior Notes Due 2023 — In May 2020, we issued a notice of redemption to holders of the outstanding $500 million aggregate principal amount of 5.875% senior unsecured notes due 2023 (5.875% senior notes). Pursuant to the notice of redemption, the 5.875% senior notes will be redeemed on June 1, 2020 (Redemption Date) at a redemption price equal to 100.979% of the principal amount of the 5.875% senior notes plus accrued and unpaid interest up to, but not including, the Redemption Date.
January 2020 Redemption — In January 2020, Vistra Energy redeemed the entire $81 million aggregate principal amount outstanding of 8.000% senior notes at a redemption price equal to 104.0% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of redemption. We recorded an extinguishment gain of $2 million on the transactions in the three months ended March 31, 2020.
February 2019 Tender Offer and Consent Solicitation — In February 2019, Vistra Energy used the net proceeds from the February 2019 Notes Offering to fund a cash tender offer (the February 2019 Tender Offer) to purchase for cash $1.193 billion aggregate principal amount of 7.375% senior notes assumed in the Merger. We recorded an extinguishment gain of $7 million on the transactions in the three months ended March 31, 2019.
In connection with the February 2019 Tender Offer, Vistra Energy also commenced a solicitation of consents from holders of the 7.375% senior notes. Vistra Energy received the requisite consents from the holders of the 7.375% senior notes and amended the indenture governing these senior notes to, among other things, eliminate substantially all of the restrictive covenants and certain events of default.
The senior notes that remain outstanding after the closing of the Tender Offers are unsecured and unsubordinated obligations of Vistra Energy and are guaranteed by substantially all of its current and future wholly owned domestic subsidiaries that from time to time are a borrower or guarantor under the agreement governing the Vistra Operations Credit Facilities (Credit Facilities Agreement). Except with respect to the Consent Senior Notes, the respective indentures of the senior notes of Vistra Energy (collectively, as each may be amended or supplemented from time to time, the Vistra Energy Senior Unsecured Indentures) limit, among other things, the ability of the Company or any of the guarantors to create liens upon any principal property to secure debt for borrowed money in excess of, among other limitations, 30% of total assets. The Vistra Energy Senior Unsecured Indentures also contain customary events of default which would permit the holders of the applicable series of senior notes to declare such notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely principal or interest payments on such notes or (except with respect to the Consent Senior Notes) other indebtedness aggregating $100 million or more, and, except with respect to the Consent Senior Notes, the failure to satisfy covenants, and specified events of bankruptcy and insolvency.
Other Long-Term Debt
Forward Capacity Agreements — On the Merger Date, the Company assumed the obligation of Dynegy's agreements under which a portion of the PJM capacity that cleared for Planning Years 2018-2019, 2019-2020 and 2020-2021 was sold to a financial institution (Forward Capacity Agreements). The buyer in this transaction will receive capacity payments from PJM during the Planning Years 2019-2020 and 2020-2021 in the amounts of $20 million and $110 million, respectively. We will continue to be subject to the performance obligations as well as any associated performance penalties and bonus payments for those planning years. As a result, this transaction is accounted for as long-term debt of $130 million with an implied interest rate of 2.73%.
Equipment Financing Agreements — On the Merger Date, the Company assumed Dynegy's Equipment Financing Agreements. Under certain of our contractual service agreements in which we receive maintenance and capital improvements for our gas-fueled generation fleet, we have obtained parts and equipment intended to increase the output, efficiency and availability of our generation units. We have financed these parts and equipment under agreements with maturities ranging from 2020 to 2026. The portion of future payments attributable to principal will be classified as cash outflows from financing activities, and the portion of future payments attributable to interest will be classified as cash outflows from operating activities in our condensed consolidated statements of cash flows.
Letter of Credit Obligations Assumed in Ambit Transaction — At March 31, 2020, approximately $6 million of letters of credit were outstanding under legacy Ambit agreements, all of which are collateralized with cash and recorded as restricted cash in the condensed consolidated balance sheets.
Maturities
Long-term debt maturities at March 31, 2020 are as follows:
|
|
|
|
|
|
|
March 31, 2020
|
Remainder of 2020
|
$
|
133
|
|
2021
|
96
|
|
2022
|
44
|
|
2023
|
540
|
|
2024
|
1,540
|
|
Thereafter
|
7,844
|
|
Unamortized premiums, discounts and debt issuance costs
|
(59)
|
|
Total long-term debt, including amounts due currently
|
$
|
10,138
|
|
12. COMMITMENTS AND CONTINGENCIES
Guarantees
We have entered into contracts that contain guarantees to unaffiliated parties that could require performance or payment under certain conditions. As of March 31, 2020, there are no material outstanding claims related to our guarantee obligations, and we do not anticipate we will be required to make any material payments under these guarantees in the near term.
Letters of Credit
At March 31, 2020, we had outstanding letters of credit totaling $1.415 billion as follows:
•$1.058 billion to support commodity risk management collateral requirements in the normal course of business, including over-the-counter and exchange-traded transactions and collateral postings with ISOs or RTOs;
•$170 million to support battery and solar development projects;
•$45 million to support executory contracts and insurance agreements;
•$81 million to support our REP financial requirements with the PUCT, and
•$61 million for other credit support requirements.
Surety Bonds
At March 31, 2020, we had outstanding surety bonds totaling $64 million to support performance under various contracts and legal obligations in the normal course of business.
Litigation and Regulatory Proceedings
Our material legal proceedings and regulatory proceedings affecting our business are described below. We believe that we have valid defenses to the legal proceedings described below and intend to defend them vigorously. We also intend to participate in the regulatory processes described below. We record reserves for estimated losses related to these matters when information available indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. As applicable, we have established an adequate reserve for the matters discussed below. In addition, legal costs are expensed as incurred. Management has assessed each of the following legal matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought, and the probability of success. Unless specified below, we are unable to predict the outcome of these matters or reasonably estimate the scope or amount of any associated costs and potential liabilities, but they could have a material impact on our results of operations, liquidity, or financial condition. As additional information becomes available, we adjust our assessment and estimates of such contingencies accordingly. Because litigation and rulemaking proceedings are subject to inherent uncertainties and unfavorable rulings or developments, it is possible that the ultimate resolution of these matters could be at amounts that are different from our currently recorded reserves and that such differences could be material.
Gas Index Pricing Litigation — We, through our subsidiaries, and other energy companies are named as defendants in several lawsuits claiming damages resulting from alleged price manipulation through false reporting of natural gas prices to various index publications, wash trading and churn trading from 2000-2002. The plaintiffs in these cases allege that the defendants engaged in an antitrust conspiracy to inflate natural gas prices during the relevant time period and seek damages under the respective state antitrust statutes. We remain as defendants in two consolidated putative class actions (Wisconsin) and one individual action (Kansas) both pending in federal court in those states.
Wood River Rail Dispute — In November 2017, Dynegy Midwest Generation, LLC (DMG) received notification that BNSF Railway Company and Norfolk Southern Railway Company were initiating dispute resolution related to DMG's suspension of its Wood River Rail Transportation Agreement with the railroads. Settlement discussions required under the dispute resolution process have been unsuccessful. In March 2018, BNSF Railway Company (BNSF) and Norfolk Southern Railway Company (NS) filed a demand for arbitration and an arbitration hearing is currently scheduled for November 2020.
Coffeen and Duck Creek Rail Disputes — In April 2020, IPH, LLC (IPH) received notification that BNSF and NS were initiating dispute resolution related to IPH's suspension of its Coffeen Rail Transportation Agreement with the railroads, and Illinois Power Resources Generating, LLC (IPRG), received notification that BNSF was initiating dispute resolution related to IPRG's suspension of its Duck Creek Rail Transportation Agreement with BNSF. In November 2019, IPH and IPRG sent suspension notices to the railroads asserting that the MPS rule requirement to retire at least 2,000 megawatts of generation (see discussion below) was a change-in-law under the agreement that rendered continued operation of the plants no longer economically feasible. In addition, IPH and IPRG asserted that the MPS rule's retirement requirement also qualified as a force majeure event under the agreements excusing performance.
ME2C Patent Dispute — In July 2019, Midwest Energy Emissions Corporation and MES Inc. (collectively, the plaintiffs) filed a patent infringement complaint in federal court in Delaware against numerous parties, including Vistra Energy and some of its subsidiaries (collectively, the Vistra defendants). The complaint alleges that the Vistra defendants infringed two patents owned by the plaintiffs by using specific processes for mercury control at certain coal-fueled plants. The complaint seeks injunctive relief and unspecified damages. In September 2019, the Vistra defendants filed a motion to dismiss that lawsuit and that remains pending. In addition, in April 2020, the Vistra defendants along with certain other defendants began implementing its defense strategy by filing an inter partes review before the U.S. Patent and Trademark Office challenging the validity of one of the patents at issue.
Greenhouse Gas Emissions
In August 2015, the EPA finalized rules to address greenhouse gas (GHG) emissions from electricity generation units, referred to as the Clean Power Plan, including rules for existing facilities that would establish state-specific emissions rate goals to reduce nationwide CO2 emissions. Various parties filed petitions for review in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court). In July 2019, petitioners filed a joint motion to dismiss in light of the EPA's new rule that replaces the Clean Power Plan, the Affordable Clean Energy rule, discussed below. In September 2019, the D.C. Circuit Court granted petitioners' motion to dismiss and dismissed all of the petitions challenging the Clean Power Plan as moot.
In July 2019, the EPA finalized a rule to repeal the Clean Power Plan, with new regulations addressing GHG emissions from existing coal-fueled electric generation units, referred to as the Affordable Clean Energy (ACE) rule. The ACE rule develops emission guidelines that states must use when developing plans to regulate GHG emissions from existing coal-fueled electric generating units. States must submit their plans for regulating GHG emissions from existing facilities by July 2022. States where we operate coal plants (Texas, Illinois and Ohio) have begun the development of their state plans to comply with the rule. Environmental groups and certain states filed petitions for review of the ACE rule and the repeal of the Clean Power Plan in the D.C. Circuit Court. Additionally, in December 2018, the EPA issued proposed revisions to the emission standards for new, modified and reconstructed units. Vistra Energy submitted comments on that proposed rulemaking.
Regional Haze — Reasonable Progress and Best Available Retrofit Technology (BART) for Texas
In January 2016, the EPA issued a final rule approving in part and disapproving in part Texas's 2009 State Implementation Plan (SIP) as it relates to the reasonable progress component of the Regional Haze program and issuing a Federal Implementation Plan (FIP). The EPA's emission limits in the FIP assume additional control equipment for specific lignite/coal-fueled generation units across Texas, including new flue gas desulfurization systems (scrubbers) at seven electricity generation units (including Big Brown Units 1 and 2, Monticello Units 1 and 2 and Coleto Creek) and upgrades to existing scrubbers at seven generation units (including Martin Lake Units 1, 2 and 3, Monticello Unit 3 and Sandow Unit 4).
In March 2016, various parties (including Luminant and the State of Texas) filed petitions for review in the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit Court) challenging the FIP's Texas requirements. In July 2016, the Fifth Circuit Court granted motions to stay the rule pending final review of the petitions for review. In March 2017, the Fifth Circuit Court granted a motion by the EPA to remand the rule back to the EPA for reconsideration. The stay of the rule (and the emission control requirements) remains in effect. The retirements of our Monticello, Big Brown and Sandow 4 plants should have a favorable impact on this rulemaking and litigation since these plants constitute a large portion of the plants that the rule seeks to regulate. Further, we believe that these retirements and the BART rule (see discussion below) obviates the need for any additional limits on our remaining Texas plants to address the requirements in the regional haze rule.
In September 2017, the EPA signed a final rule addressing BART for Texas electricity generation units, with the rule serving as a partial approval of Texas's 2009 SIP and a partial FIP. For SO2, the rule established an intrastate Texas emission allowance trading program as a "BART alternative" that operates in a similar fashion to a CSAPR trading program. The program includes 39 generating units (including our Martin Lake, Big Brown, Monticello, Sandow 4, Coleto Creek, Stryker 2 and Graham 2 plants). The compliance obligations in the program started on January 1, 2019. The retirements of our Monticello, Big Brown and Sandow 4 plants have enhanced our ability to comply with this BART rule for SO2. For NOX, the rule adopted the CSAPR's ozone program as BART and for particulate matter, the rule approved Texas's SIP that determines that no electricity generation units are subject to BART for particulate matter. Various parties filed a petition challenging the rule in the Fifth Circuit Court as well as a petition for reconsideration filed with the EPA. Luminant intervened on behalf of the EPA in the Fifth Circuit Court action. In March 2018, the Fifth Circuit Court abated its proceedings pending conclusion of the EPA's reconsideration process. In August 2018, the EPA issued a proposal to affirm the prior BART final rule and sought comments on that proposal, which were due in October 2018. We submitted comments supporting the EPA's proposal to affirm the BART final rule. In November 2019, the EPA proposed additional revisions to the BART final rule, and we submitted comments on that proposal in January 2020. If the EPA adopts the rule as proposed in August 2018 or adopts the rule with the revisions proposed in November 2019, we expect that we would be able to comply with the BART rule.
Affirmative Defenses During Malfunctions
In May 2015, the EPA finalized a rule requiring 36 states, including Texas, Illinois and Ohio, to remove or replace either EPA-approved exemptions or affirmative defense provisions for excess emissions during upset events and unplanned maintenance and startup and shutdown events, referred to as the SIP Call. Various parties (including Luminant, the State of Texas and the State of Ohio) filed petitions for review of the EPA's final rule, and all of those petitions were consolidated in the D.C. Circuit Court. In April 2017, the D.C. Circuit Court ordered the case to be held in abeyance. In April 2019, the EPA Region 6 proposed a rule to withdraw the SIP Call with respect to the Texas affirmative defense provisions. We submitted comments on that proposed rulemaking in June 2019. In February 2020, the EPA issued the final rule withdrawing the Texas SIP Call. In April 2020, a group of environmental petitioners, including the Sierra Club, filed a petition in the D.C. Circuit Court challenging the EPA's action.
Illinois Multi-Pollutant Standards (MPS)
In August 2019, changes proposed by the Illinois Pollution Control Board to the MPS rule, which places NOx, SO2 and mercury emissions limits on our coal plants located in MISO went into effect. Under the revised MPS rule, our allowable SO2 and NOX emissions from the MISO fleet are 48% and 42% lower, respectively, than prior to the rule changes. The revised MPS rule requires the continuous operation of existing selective catalytic reduction (SCR) control systems during the ozone season, requires SCR-controlled units to meet an ozone season NOX emission rate limit, and set an additional, site-specific annual SO2 limit for our Joppa Power Station. Additionally, in 2019, the Company retired its Havana, Hennepin, Coffeen and Duck Creek plants in order to comply with the MPS rule's requirement to retire at least 2,000 MW of our generation in MISO. See Note 4 for information regarding the retirement of these four plants.
SO2 Designations for Texas
In November 2016, the EPA finalized its nonattainment designations for counties surrounding our Big Brown, Monticello and Martin Lake generation plants. The final designations require Texas to develop nonattainment plans for these areas. In February 2017, the State of Texas and Luminant filed challenges to the nonattainment designations in the Fifth Circuit Court. Subsequently, in October 2017, the Fifth Circuit Court granted the EPA's motion to hold the case in abeyance considering the EPA's representation that it intended to revisit the nonattainment rule. In December 2017, the TCEQ submitted a petition for reconsideration to the EPA. In August 2019, the EPA issued a proposed Error Correction Rule for all three areas, which, if finalized, would revise its previous nonattainment designations and each area at issue would be designated unclassifiable. In September 2019, we submitted comments in support of the proposed Error Correction Rule.
Effluent Limitation Guidelines (ELGs)
In November 2015, the EPA revised the ELGs for steam electricity generation facilities, which will impose more stringent standards (as individual permits are renewed) for wastewater streams, such as flue gas desulfurization (FGD), fly ash, bottom ash and flue gas mercury control wastewaters. Various parties filed petitions for review of the ELG rule, and the petitions were consolidated in the Fifth Circuit Court. In April 2017, the EPA granted petitions requesting reconsideration of the ELG rule and administratively stayed the rule's compliance date deadlines. In August 2017, the EPA announced that its reconsideration of the ELG rule would be limited to a review of the effluent limitations applicable to FGD and bottom ash wastewaters and the agency subsequently postponed the earliest compliance dates in the ELG rule for the application of effluent limitations for FGD and bottom ash wastewaters from November 1, 2018 to November 1, 2020. Based on these administrative developments, the Fifth Circuit Court agreed to sever and hold in abeyance challenges to effluent limitations. The remainder of the case proceeded, and in April 2019 the Fifth Circuit Court vacated and remanded portions of the EPA's ELG rule pertaining to effluent limitations for legacy wastewater and leachate. In November 2019, the EPA issued a proposal that would extend the compliance deadline for FGD wastewater to no later than December 31, 2025 and maintains the December 31, 2023 compliance date for bottom ash transport water. The proposal also creates new sub-categories of facilities with more flexible FGD compliance options, including a retirement exemption to 2028 and a low utilization boiler exemption. The proposed rule also modified some of the FGD final effluent limitations. We filed comments on the proposal in January 2020.
Given the EPA's decision to reconsider the FGD and bottom ash wastewater provisions of the ELG rule, the rule postponing the ELG rule's earliest compliance dates for those provisions, the uncertainty stemming from the vacatur of the effluent limitations for legacy wastewater and leachate, and the intertwined relationship of the ELG rule with the Coal Combustion Residuals rule discussed below, which is also being reconsidered by the EPA, as well as pending legal challenges concerning both rules, substantial uncertainty exists regarding our projected capital expenditures for ELG compliance, including the timing of such expenditures.
CAA Matters
Zimmer NOVs — In December 2014, the EPA issued a notice of violation (NOV) alleging violation of opacity standards at the Zimmer facility. The EPA previously had issued NOVs to Zimmer in 2008 and 2010 alleging violations of the CAA, the Ohio State Implementation Plan and the station's air permits including standards applicable to opacity, sulfur dioxide, sulfuric acid mist and heat input. In January 2020, the U.S. Department of Justice filed a complaint and proposed consent decree agreed to by Dynegy Zimmer, LLC in the U.S. District Court for the Southern District of Ohio that would resolve claims alleged in the 2008, 2010 and 2014 NOVs. We expect the consent decree will be effective in the second quarter of 2020. We believe the consent decree will not have a material impact on our results of operations, liquidity or financial condition.
Coal Combustion Residuals (CCR)/Groundwater
In July 2018, the EPA published a final rule, which became effective in August 2018, that amends certain provisions of the CCR rule that the agency issued in 2015. Among other changes, the 2018 revisions extend closure deadlines to October 31, 2020, related to the aquifer location restriction and groundwater monitoring requirements. Also, in August 2018, the D.C. Circuit Court issued a decision that vacates and remands certain provisions of the 2015 CCR rule, including an applicability exemption for legacy impoundments. The EPA is expected to undertake further revisions to its CCR regulations in response to the D.C. Circuit Court's ruling. In October 2018, the rule that extends certain closure deadlines to 2020 was challenged in the D.C. Circuit Court. In March 2019, the D.C. Circuit Court granted the EPA's request for remand without vacatur. In December 2019, the EPA issued a proposed rule that would revise the closure deadlines for unlined CCR impoundments from October 31, 2020 to August 31, 2020 and establish new procedures for seeking extensions of that revised closure deadline. One of the new proposed extension procedures would require the generation plant electing this option to notify the EPA by May 2020 that it will retire by either 2023 or 2028 depending on the size of the impoundment at issue. If the rule is finalized as proposed, we may decide to avail ourselves of this compliance mechanism for some of our facilities. We filed comments on the proposal in January 2020.
MISO — In 2012, the Illinois Environmental Protection Agency (IEPA) issued violation notices alleging violations of groundwater standards onsite at our Baldwin and Vermilion facilities' CCR surface impoundments. These violation notices remain unresolved; however, in 2016, the IEPA approved our closure and post-closure care plans for the Baldwin old east, east, and west fly ash CCR surface impoundments. We are working towards implementation of those closure plans.
At our retired Vermilion facility, which was not subject to the EPA's 2015 CCR rule until the aforementioned D.C. Circuit Court decision in August 2018, we submitted proposed corrective action plans involving closure of two CCR surface impoundments (i.e., the old east and the north impoundments) to the IEPA in 2012, and we submitted revised plans in 2014. In May 2017, in response to a request from the IEPA for additional information regarding the closure of these Vermilion surface impoundments, we agreed to perform additional groundwater sampling and closure options and riverbank stabilizing options. In May 2018, Prairie Rivers Network filed a citizen suit in federal court in Illinois against DMG, alleging violations of the Clean Water Act for alleged unauthorized discharges. In August 2018, we filed a motion to dismiss the lawsuit. In November 2018, the district court granted our motion to dismiss and judgment was entered in our favor. Plaintiffs have appealed the judgment to the U.S. Court of Appeals for the Seventh Circuit. That appeal is now stayed. In April 2019, PRN also filed a complaint against DMG before the IPCB, alleging that groundwater flows allegedly associated with the ash impoundments at the Vermilion site have resulted in exceedances both of surface water standards and Illinois groundwater standards dating back to 1992. This matter is in the very early stages.
In 2012, the IEPA issued violation notices alleging violations of groundwater standards at the Newton and Coffeen facilities' CCR surface impoundments. We are addressing these CCR surface impoundments in accordance with the federal CCR rule. In June 2018, the IEPA issued a violation notice for alleged seep discharges claimed to be coming from the surface impoundments at our retired Vermilion facility and that notice has since been referred to the Illinois Attorney General.
In December 2018, the Sierra Club filed a complaint with the IPCB alleging the disposal and storage of coal ash at the Coffeen, Edwards and Joppa generation facilities are causing exceedances of the applicable groundwater standards.
In July 2019, coal ash disposal and storage legislation in Illinois was enacted. The legislation addresses state requirements for the proper closure of coal ash ponds in the state of Illinois. The law tasks the IEPA and the IPCB to set up a series of guidelines, rules and permit requirements for closure of ash ponds. In March 2020, IEPA issued its proposed rule and we expect the rulemaking process should be completed by early 2021. Under the proposed rule, coal ash impoundment owners would be required to submit a closure alternative analysis to the IEPA for the selection of the best method for coal ash remediation at a particular site. The proposed rule does not mandate closure by removal at any site.
For all of the above matters, if certain corrective action measures, including groundwater treatment or removal of ash, are required at any of our coal-fueled facilities, we may incur significant costs that could have a material adverse effect on our financial condition, results of operations and cash flows. Until the revisions to the EPA's CCR rule and the Illinois coal ash rulemaking are finalized and we undertake further site specific evaluations required by each program we will not know the full range of costs of groundwater remediation, if any, that ultimately may be required under those rules. However, the currently anticipated CCR surface impoundment and landfill closure costs, as contained in our AROs, reflect the costs of closure methods that our operations and environmental services teams believe are appropriate and protective of the environment for each location.
MISO 2015-2016 Planning Resource Auction
In May 2015, three complaints were filed at FERC regarding the Zone 4 results for the 2015-2016 planning resource auction (PRA) conducted by MISO. Dynegy is a named party in one of the complaints. The complainants, Public Citizen, Inc., the Illinois Attorney General and Southwestern Electric Cooperative, Inc. (Complainants), challenged the results of the PRA as unjust and unreasonable, requested rate relief/refunds, and requested changes to the MISO planning resource auction structure going forward. Complainants also alleged that Dynegy may have engaged in economic or physical withholding in Zone 4 constituting market manipulation in the PRA. The Independent Market Monitor for MISO (MISO IMM), which was responsible for monitoring the PRA, determined that all offers were competitive and that no physical or economic withholding occurred. The MISO IMM also stated, in a filing responding to the complaints, that there is no basis for the remedies sought by the Complainants. We filed our answer to these complaints explaining that we complied fully with the terms of the MISO tariff in connection with the PRA and disputing the allegations. The Illinois Industrial Energy Consumers filed a related complaint at FERC against MISO in June 2015 requesting prospective changes to the MISO tariff. Dynegy also responded to this complaint with respect to Dynegy's conduct alleged in the complaint.
In October 2015, FERC issued an order of nonpublic, formal investigation (the investigation) into whether market manipulation or other potential violations of FERC orders, rules and regulations occurred before or during the PRA.
In December 2015, FERC issued an order on the complaints requiring a number of prospective changes to the MISO tariff provisions effective as of the 2016-2017 planning resource auction. The order did not address the arguments of the Complainants regarding the PRA and stated that those issues remained under consideration and would be addressed in a future order.
In July 2019, FERC issued an order denying the remaining issues raised by the complaints and noted that the investigation into Dynegy was closed. FERC found that Dynegy's conduct did not constitute market manipulation and the results of the PRA were just and reasonable because the PRA was conducted in accordance with MISO's tariff. With the issuance of the order, this matter has been resolved in Dynegy's favor. The request for rehearing was denied by FERC in March 2020 and remains subject to appeal.
Other Matters
We are involved in various legal and administrative proceedings in the normal course of business, the ultimate resolutions of which, in the opinion of management, are not anticipated to have a material effect on our results of operations, liquidity or financial condition.
13. EQUITY
Share Repurchase Program
In November 2018, we announced that the Board had authorized an incremental share repurchase program (Program) under which up to $1.250 billion of our outstanding stock may be purchased. No repurchases were made in the three months ended March 31, 2020. In the three months ended March 31, 2019, 9,541,617 shares of our common stock were repurchased for approximately $236 million (including related fees and expenses) at an average price of $24.78 per share of common stock. On a cumulative basis, 38,395,257 shares of our common stock have been repurchased under the Program for approximately $918 million (including related fees and expenses) at an average price of $23.92 per share of common stock. At March 31, 2020, approximately $332 million was available for additional repurchases under the Program.
Shares of the Company's common stock may be repurchased in open market transactions at prevailing market prices, in privately negotiated transactions, pursuant to plans complying with the Exchange Act, or by other means in accordance with federal securities laws. The actual timing, number and value of shares repurchased under the Program or otherwise will be determined at our discretion and will depend on a number of factors, including our capital allocation priorities, the market price of our stock, general market and economic conditions, applicable legal requirements and compliance with the terms of our debt agreements and the Tax Matters Agreement.
Dividends
In November 2018, Vistra Energy announced the Board had adopted a dividend program which we initiated in the first quarter of 2019. Each dividend under the program will be subject to declaration by the Board and, thus, may be subject to numerous factors in existence at the time of any such declaration including, but not limited to, prevailing market conditions, Vistra Energy's results of operations, financial condition and liquidity, Delaware law and any contractual limitations.
In February 2019, May 2019, July 2019 and October 2019, the Board declared quarterly dividends of $0.125 per share that were paid in March 2019, June 2019, September 2019 and December 2019, respectively.
In February 2020, the Board declared a quarterly dividend of $0.135 per share that was paid in March 2020. In April 2020, the Board declared a quarterly dividend of $0.135 per share that will be paid in June 2020.
Dividend Restrictions
The Credit Facilities Agreement generally restricts the ability of Vistra Operations to make distributions to any direct or indirect parent unless such distributions are expressly permitted thereunder. As of March 31, 2020, Vistra Operations can distribute approximately $6.0 billion to Parent under the Credit Facilities Agreement without the consent of any party. The amount that can be distributed by Vistra Operations to Parent was partially reduced by distributions made by Vistra Operations to Parent of approximately $110 million during the three months ended March 31, 2020 and approximately $3.9 billion, $4.7 billion and $1.1 billion during the years ended December 31, 2019, 2018 and 2017, respectively. Additionally, Vistra Operations may make distributions to Parent in amounts sufficient for Parent to make any payments required under the TRA or the Tax Matters Agreement or, to the extent arising out of Parent's ownership or operation of Vistra Operations, to pay any taxes or general operating or corporate overhead expenses. As of March 31, 2020, the maximum amount of restricted net assets of Vistra Operations that may not be distributed to Parent totaled approximately $2.1 billion.
In addition to the restrictions under the Credit Facilities Agreement, under applicable Delaware law, we are only permitted to make distributions either out of "surplus," which is defined as the excess of our net assets above our capital (the aggregate par value of all outstanding shares of our stock), or out of net profits for the fiscal year in which the distribution is declared or the prior fiscal year.
Warrants
At the Merger Date, the Company entered into an agreement whereby holders of each outstanding warrant previously issued by Dynegy will be entitled to receive, upon exercise, the equity securities to which the holder would have been entitled to receive of Dynegy common stock converted into shares of Vistra Energy common stock at the Exchange Ratio. As of March 31, 2020, nine million warrants expiring in 2024 with an exercise price of $35.00 (subject to adjustment from time to time) were outstanding, each of which can be redeemed for 0.652 share of Vistra Energy common stock. The warrants are recorded as equity in our condensed consolidated balance sheets.
Equity
The following table presents the changes to equity for the three months ended March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock (a)
|
|
Treasury Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings (Deficit)
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total Stockholders' Equity
|
|
Noncontrolling Interest
|
|
Total Equity
|
Balance at
December 31, 2019
|
$
|
5
|
|
|
$
|
(973)
|
|
|
$
|
9,721
|
|
|
$
|
(764)
|
|
|
$
|
(30)
|
|
|
$
|
7,959
|
|
|
$
|
1
|
|
|
$
|
7,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared on common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(66)
|
|
|
—
|
|
|
(66)
|
|
|
—
|
|
|
(66)
|
|
Effects of stock-based incentive compensation plans
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56
|
|
|
—
|
|
|
56
|
|
|
(11)
|
|
|
45
|
|
Adoption of accounting standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(4)
|
|
Change in accumulated other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23)
|
|
|
(23)
|
|
|
—
|
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance at March 31, 2020
|
$
|
5
|
|
|
$
|
(973)
|
|
|
$
|
9,737
|
|
|
$
|
(780)
|
|
|
$
|
(53)
|
|
|
$
|
7,936
|
|
|
$
|
(10)
|
|
|
$
|
7,926
|
|
________________
(a)Authorized shares totaled 1,800,000,000 at March 31, 2020. Outstanding common shares totaled 488,448,029 and 487,698,111 at March 31, 2020 and December 31, 2019, respectively. Treasury shares totaled 41,043,224 at both March 31, 2020 and December 31, 2019.
The following table presents the changes to equity for the three months ended March 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock (a)
|
|
Treasury Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings (Deficit)
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total Stockholders' Equity
|
|
Noncontrolling Interest
|
|
Total Equity
|
Balance at
December 31, 2018
|
$
|
5
|
|
|
$
|
(778)
|
|
|
$
|
10,107
|
|
|
$
|
(1,449)
|
|
|
$
|
(22)
|
|
|
$
|
7,863
|
|
|
$
|
4
|
|
|
$
|
7,867
|
|
Stock repurchase
|
|
—
|
|
|
(236)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(236)
|
|
|
—
|
|
|
(236)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared on common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(61)
|
|
|
—
|
|
|
(61)
|
|
|
—
|
|
|
(61)
|
|
Effects of stock-based incentive compensation plans
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
12
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
225
|
|
|
—
|
|
|
225
|
|
|
(1)
|
|
|
224
|
|
Adoption of accounting standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
Change in accumulated other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
(1)
|
|
|
1
|
|
Balance at March 31, 2019
|
$
|
5
|
|
|
$
|
(1,014)
|
|
|
$
|
10,119
|
|
|
$
|
(1,285)
|
|
|
$
|
(21)
|
|
|
$
|
7,804
|
|
|
$
|
2
|
|
|
$
|
7,806
|
|
________________
(a)Authorized shares totaled 1,800,000,000 at March 31, 2019. Outstanding common shares totaled 484,235,663 and 493,215,309 at March 31, 2019 and December 31, 2018, respectively. Treasury shares totaled 42,879,724 and 32,815,783 at March 31, 2019 and December 31, 2018, respectively.
14. FAIR VALUE MEASUREMENTS
We utilize several different valuation techniques to measure the fair value of assets and liabilities, relying primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities for those items that are measured on a recurring basis. We use a mid-market valuation convention (the mid-point price between bid and ask prices) as a practical expedient to measure fair value for the majority of our assets and liabilities and use valuation techniques to maximize the use of observable inputs and minimize the use of unobservable inputs. Our valuation policies and procedures were developed, maintained and validated by a centralized risk management group that reports to the Vistra Energy Chief Financial Officer.
Fair value measurements of derivative assets and liabilities incorporate an adjustment for credit-related nonperformance risk. These nonperformance risk adjustments take into consideration master netting arrangements, credit enhancements and the credit risks associated with our credit standing and the credit standing of our counterparties (see Note 15 for additional information regarding credit risk associated with our derivatives). We utilize credit ratings and default rate factors in calculating these fair value measurement adjustments.
We categorize our assets and liabilities recorded at fair value based upon the following fair value hierarchy:
•Level 1 valuations use quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. Our Level 1 assets and liabilities include CME or ICE (electronic commodity derivative exchanges) futures and options transacted through clearing brokers for which prices are actively quoted. We report the fair value of CME and ICE transactions without taking into consideration margin deposits, with the exception of certain margin amounts related to changes in fair value on certain CME transactions that, beginning in January 2017, are legally characterized as settlement of derivative contracts rather than collateral.
•Level 2 valuations utilize over-the-counter broker quotes, quoted prices for similar assets or liabilities that are corroborated by correlations or other mathematical means, and other valuation inputs such as interest rates and yield curves observable at commonly quoted intervals. We attempt to obtain multiple quotes from brokers that are active in the markets in which we participate and require at least one quote from two brokers to determine a pricing input as observable. The number of broker quotes received for certain pricing inputs varies depending on the depth of the trading market, each individual broker's publication policy, recent trading volume trends and various other factors.
•Level 3 valuations use unobservable inputs for the asset or liability. Unobservable inputs are used to the extent observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. We use the most meaningful information available from the market combined with internally developed valuation methodologies to develop our best estimate of fair value. Significant unobservable inputs used to develop the valuation models include volatility curves, correlation curves, illiquid pricing delivery periods and locations and credit-related nonperformance risk assumptions. These inputs and valuation models are developed and maintained by employees trained and experienced in market operations and fair value measurements and validated by the Company's risk management group.
With respect to amounts presented in the following fair value hierarchy tables, the fair value measurement of an asset or liability (e.g., a contract) is required to fall in its entirety in one level, based on the lowest level input that is significant to the fair value measurement.
Assets and liabilities measured at fair value on a recurring basis consisted of the following at the respective balance sheet dates shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
Level
1
|
|
Level
2
|
|
Level
3 (a)
|
|
Reclass
(b)
|
|
Total
|
|
Level
1
|
|
Level
2
|
|
Level
3 (a)
|
|
Reclass
(b)
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
$
|
1,379
|
|
|
$
|
164
|
|
|
$
|
311
|
|
|
$
|
24
|
|
|
$
|
1,878
|
|
|
$
|
1,047
|
|
|
$
|
172
|
|
|
$
|
239
|
|
|
$
|
11
|
|
|
$
|
1,469
|
|
Interest rate swaps
|
—
|
|
|
76
|
|
|
—
|
|
|
—
|
|
|
76
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Nuclear decommissioning trust – equity securities (c)
|
452
|
|
|
—
|
|
|
—
|
|
|
|
|
|
452
|
|
|
564
|
|
|
—
|
|
|
—
|
|
|
|
|
|
564
|
|
Nuclear decommissioning trust – debt securities (c)
|
—
|
|
|
543
|
|
|
—
|
|
|
|
|
|
543
|
|
|
—
|
|
|
521
|
|
|
—
|
|
|
|
|
|
521
|
|
Sub-total
|
$
|
1,831
|
|
|
$
|
783
|
|
|
$
|
311
|
|
|
$
|
24
|
|
|
2,949
|
|
|
$
|
1,611
|
|
|
$
|
693
|
|
|
$
|
239
|
|
|
$
|
11
|
|
|
2,554
|
|
Assets measured at net asset value (d):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust – equity securities (c)
|
|
|
|
|
|
|
|
|
294
|
|
|
|
|
|
|
|
|
|
|
366
|
|
Total assets
|
|
|
|
|
|
|
|
|
$
|
3,243
|
|
|
|
|
|
|
|
|
|
|
$
|
2,920
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
$
|
1,238
|
|
|
$
|
467
|
|
|
$
|
283
|
|
|
$
|
24
|
|
|
$
|
2,012
|
|
|
$
|
985
|
|
|
$
|
439
|
|
|
$
|
313
|
|
|
$
|
11
|
|
|
$
|
1,748
|
|
Interest rate swaps
|
—
|
|
|
427
|
|
|
—
|
|
|
—
|
|
|
427
|
|
|
—
|
|
|
177
|
|
|
—
|
|
|
—
|
|
|
177
|
|
Total liabilities
|
$
|
1,238
|
|
|
$
|
894
|
|
|
$
|
283
|
|
|
$
|
24
|
|
|
$
|
2,439
|
|
|
$
|
985
|
|
|
$
|
616
|
|
|
$
|
313
|
|
|
$
|
11
|
|
|
$
|
1,925
|
|
___________
(a)See table below for description of Level 3 assets and liabilities.
(b)Fair values are determined on a contract basis, but certain contracts result in a current asset and a noncurrent liability, or vice versa, as presented in our condensed consolidated balance sheets.
(c)The nuclear decommissioning trust investment is included in the investments line in our condensed consolidated balance sheets. See Note 18.
(d)The fair value amounts presented in this line are intended to permit reconciliation of the fair value hierarchy to the amounts presented in our condensed consolidated balance sheets. Certain investments measured at fair value using the net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.
Commodity contracts consist primarily of natural gas, electricity, coal and emissions agreements and include financial instruments entered into for economic hedging purposes as well as physical contracts that have not been designated as normal purchases or sales. Interest rate swaps are used to reduce exposure to interest rate changes by converting floating-rate interest to fixed rates. See Note 15 for further discussion regarding derivative instruments.
Nuclear decommissioning trust assets represent securities held for the purpose of funding the future retirement and decommissioning of our nuclear generation facility. These investments include equity, debt and other fixed-income securities consistent with investment rules established by the NRC and the PUCT.
The following tables present the fair value of the Level 3 assets and liabilities by major contract type and the significant unobservable inputs used in the valuations at March 31, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Type (a)
|
|
Assets
|
|
Liabilities
|
|
Total
|
|
Valuation Technique
|
|
Significant Unobservable Input
|
|
Range (b)
|
|
|
|
Average (b)
|
Electricity purchases and sales
|
|
$
|
127
|
|
|
$
|
(36)
|
|
|
$
|
91
|
|
|
Valuation Model
|
|
Hourly price curve shape (c)
|
|
$
|
—
|
|
to
|
$110
|
|
|
$56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MWh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquid delivery periods for ERCOT hub power prices and heat rates (d)
|
|
$
|
20
|
|
to
|
$120
|
|
|
$70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MWh
|
|
|
|
|
|
Options
|
|
55
|
|
|
(203)
|
|
|
(148)
|
|
|
Option Pricing Model
|
|
Gas to power correlation (e)
|
|
10
|
%
|
to
|
100%
|
|
|
55%
|
|
|
|
|
|
|
|
|
|
|
|
Power and gas volatility (e)
|
|
5
|
%
|
to
|
440%
|
|
|
221%
|
|
Financial transmission rights
|
|
118
|
|
|
(16)
|
|
|
102
|
|
|
Market Approach (f)
|
|
Illiquid price differences between settlement points (g)
|
|
$
|
(10)
|
|
to
|
$45
|
|
|
$19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MWh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (h)
|
|
11
|
|
|
(28)
|
|
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
311
|
|
|
$
|
(283)
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Type (a)
|
|
Assets
|
|
Liabilities
|
|
Total
|
|
Valuation Technique
|
|
Significant Unobservable Input
|
|
Range (b)
|
|
|
|
Average (b)
|
Electricity purchases and sales
|
|
$
|
64
|
|
|
$
|
(53)
|
|
|
$
|
11
|
|
|
Valuation Model
|
|
Hourly price curve shape (c)
|
|
$
|
—
|
|
to
|
$115
|
|
|
$58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MWh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquid delivery periods for ERCOT hub power prices and heat rates (d)
|
|
$
|
20
|
|
to
|
$120
|
|
|
$70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MWh
|
|
|
|
|
Options
|
|
38
|
|
|
(188)
|
|
|
(150)
|
|
|
Option Pricing Model
|
|
Gas to power correlation (e)
|
|
10
|
%
|
to
|
100%
|
|
|
55%
|
|
|
|
|
|
|
|
|
|
|
|
Power and gas volatility (e)
|
|
5
|
%
|
to
|
440%
|
|
|
223%
|
|
Financial transmission rights
|
|
120
|
|
|
(26)
|
|
|
94
|
|
|
Market Approach (f)
|
|
Illiquid price differences between settlement points (g)
|
|
$
|
(10)
|
|
to
|
$40
|
|
|
$15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MWh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (h)
|
|
17
|
|
|
(46)
|
|
|
(29)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
239
|
|
|
$
|
(313)
|
|
|
$
|
(74)
|
|
|
|
|
|
|
|
|
|
|
|
____________
(a)Electricity purchase and sales contracts include power and heat rate positions in ERCOT, PJM, NYISO, ISO-NE and MISO regions. The forward purchase contracts (swaps and options) used to hedge electricity price differences between settlement points are referred to as congestion revenue rights in ERCOT and financial transmission rights in PJM, NYISO, ISO-NE and MISO regions. Options consist of physical electricity options, spread options, swaptions and natural gas options.
(b)The range of the inputs may be influenced by factors such as time of day, delivery period, season and location. The average represents the arithmetic average of the inputs and is not weighted by the related fair value or notional amount.
(c)Primarily based on the historical range of forward average hourly ERCOT North Hub prices.
(d)Primarily based on historical forward ERCOT and PJM power prices and ERCOT heat rate variability.
(e)Primarily based on the historical forward correlation and volatility within ERCOT.
(f)While we use the market approach, there is insufficient market data to consider the valuation liquid.
(g)Primarily based on the historical price differences between settlement points within ERCOT hubs and load zones.
(h)Other includes contracts for natural gas, coal and emissions.
See the table below for discussion of transfers between Level 2 and Level 3 for the three months ended March 31, 2020 and 2019.
The following table presents the changes in fair value of the Level 3 assets and liabilities for the three months ended March 31, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Net liability balance at beginning of period
|
|
|
|
|
$
|
(74)
|
|
|
$
|
(135)
|
|
Total unrealized valuation gains (losses)
|
|
|
|
|
(6)
|
|
|
37
|
|
Purchases, issuances and settlements (a):
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
55
|
|
|
19
|
|
Issuances
|
|
|
|
|
(3)
|
|
|
(7)
|
|
Settlements
|
|
|
|
|
(13)
|
|
|
(22)
|
|
Transfers into Level 3 (b)
|
|
|
|
|
1
|
|
|
3
|
|
Transfers out of Level 3 (b)
|
|
|
|
|
68
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change (c)
|
|
|
|
|
102
|
|
|
22
|
|
Net asset (liability) balance at end of period
|
|
|
|
|
$
|
28
|
|
|
$
|
(113)
|
|
Unrealized valuation gains relating to instruments held at end of period
|
|
|
|
|
$
|
23
|
|
|
$
|
25
|
|
____________
(a)Settlements reflect reversals of unrealized mark-to-market valuations previously recognized in net income. Purchases and issuances reflect option premiums paid or received and purchases of Financial Transmission Rights.
(b)Includes transfers due to changes in the observability of significant inputs. All Level 3 transfers during the periods presented are in and out of Level 2. For the three months ended March 31, 2020, transfers out of Level 3 primarily consist of gas and coal derivatives where forward pricing inputs have become observable.
(c)Activity excludes change in fair value in the month positions settle. Substantially all changes in values of commodity contracts (excluding the net liabilities assumed in connection with the Merger) are reported as operating revenues in our condensed consolidated statements of operations.
15.COMMODITY AND OTHER DERIVATIVE CONTRACTUAL ASSETS AND LIABILITIES
Strategic Use of Derivatives
We transact in derivative instruments, such as options, swaps, futures and forward contracts, to manage commodity price and interest rate risk. See Note 14 for a discussion of the fair value of derivatives.
Commodity Hedging and Trading Activity — We utilize natural gas and electricity derivatives to reduce exposure to changes in electricity prices primarily to hedge future revenues from electricity sales from our generation assets and to hedge future purchased power costs for our retail operations. We also utilize short-term electricity, natural gas, coal, and emissions derivative instruments for fuel hedging and other purposes. Counterparties to these transactions include energy companies, financial institutions, electric utilities, independent power producers, oil and gas producers, local distribution companies and energy marketing companies. Unrealized gains and losses arising from changes in the fair value of derivative instruments as well as realized gains and losses upon settlement of the instruments are reported in our condensed consolidated statements of operations in operating revenues and fuel, purchased power costs and delivery fees.
Interest Rate Swaps — Interest rate swap agreements are used to reduce exposure to interest rate changes by converting floating-rate interest rates to fixed rates, thereby hedging future interest costs and related cash flows. Unrealized gains and losses arising from changes in the fair value of the swaps as well as realized gains and losses upon settlement of the swaps are reported in our condensed consolidated statements of operations in interest expense and related charges.
Financial Statement Effects of Derivatives
Substantially all derivative contractual assets and liabilities are accounted for under mark-to-market accounting consistent with accounting standards related to derivative instruments and hedging activities. The following tables provide detail of derivative contractual assets and liabilities as reported in our condensed consolidated balance sheets at March 31, 2020 and December 31, 2019. Derivative asset and liability totals represent the net value of the contract, while the balance sheet totals represent the gross value of the contract.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
Derivative Assets
|
|
|
|
Derivative Liabilities
|
|
|
|
|
|
Commodity Contracts
|
|
Interest Rate Swaps
|
|
Commodity Contracts
|
|
Interest Rate Swaps
|
|
Total
|
Current assets
|
$
|
1,655
|
|
|
$
|
16
|
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
1,685
|
|
Noncurrent assets
|
209
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
269
|
|
Current liabilities
|
(5)
|
|
|
—
|
|
|
(1,685)
|
|
|
(63)
|
|
|
(1,753)
|
|
Noncurrent liabilities
|
(5)
|
|
|
—
|
|
|
(317)
|
|
|
(364)
|
|
|
(686)
|
|
Net assets (liabilities)
|
$
|
1,854
|
|
|
$
|
76
|
|
|
$
|
(1,988)
|
|
|
$
|
(427)
|
|
|
$
|
(485)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
Derivative Assets
|
|
|
|
Derivative Liabilities
|
|
|
|
|
|
Commodity Contracts
|
|
Interest Rate Swaps
|
|
Commodity Contracts
|
|
Interest Rate Swaps
|
|
Total
|
Current assets
|
$
|
1,323
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
1,333
|
|
Noncurrent assets
|
136
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
136
|
|
Current liabilities
|
(1)
|
|
|
—
|
|
|
(1,510)
|
|
|
(18)
|
|
|
(1,529)
|
|
Noncurrent liabilities
|
—
|
|
|
—
|
|
|
(237)
|
|
|
(159)
|
|
|
(396)
|
|
Net assets (liabilities)
|
$
|
1,458
|
|
|
$
|
—
|
|
|
$
|
(1,737)
|
|
|
$
|
(177)
|
|
|
$
|
(456)
|
|
At March 31, 2020 and December 31, 2019, there were no derivative positions accounted for as cash flow or fair value hedges.
The following table presents the pretax effect of derivative gains (losses) on net income, including realized and unrealized effects. Amount represents changes in fair value of positions in the derivative portfolio during the period, as realized amounts related to positions settled are assumed to equal reversals of previously recorded unrealized amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative (condensed consolidated statements of operations presentation)
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Commodity contracts (Operating revenues)
|
|
|
|
|
$
|
257
|
|
|
$
|
227
|
|
Commodity contracts (Fuel, purchased power costs and delivery fees)
|
|
|
|
|
(106)
|
|
|
27
|
|
Interest rate swaps (Interest expense and related charges)
|
|
|
|
|
(178)
|
|
|
(76)
|
|
Net gain (loss)
|
|
|
|
|
$
|
(27)
|
|
|
$
|
178
|
|
Balance Sheet Presentation of Derivatives
We elect to report derivative assets and liabilities in our condensed consolidated balance sheets on a gross basis without taking into consideration netting arrangements we have with counterparties to those derivatives. We maintain standardized master netting agreements with certain counterparties that allow for the right to offset assets and liabilities and collateral in order to reduce credit exposure between us and the counterparty. These agreements contain specific language related to margin requirements, monthly settlement netting, cross-commodity netting and early termination netting, which is negotiated with the contract counterparty.
Generally, margin deposits that contractually offset these derivative instruments are reported separately in our condensed consolidated balance sheets, with the exception of certain margin amounts related to changes in fair value on CME transactions that are legally characterized as settlement of forward exposure rather than collateral. Margin deposits received from counterparties are primarily used for working capital or other general corporate purposes.
The following tables reconcile our derivative assets and liabilities on a contract basis to net amounts after taking into consideration netting arrangements with counterparties and financial collateral:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Derivative Assets
and Liabilities
|
|
Offsetting Instruments (a)
|
|
Cash Collateral (Received) Pledged (b)
|
|
Net Amounts
|
|
Derivative Assets
and Liabilities
|
|
Offsetting Instruments (a)
|
|
Cash Collateral (Received) Pledged (b)
|
|
Net Amounts
|
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
$
|
1,854
|
|
|
$
|
(1,410)
|
|
|
$
|
(23)
|
|
|
$
|
421
|
|
|
$
|
1,458
|
|
|
$
|
(1,113)
|
|
|
$
|
—
|
|
|
$
|
345
|
|
Interest rate swaps
|
|
76
|
|
|
(76)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total derivative assets
|
|
1,930
|
|
|
(1,486)
|
|
|
(23)
|
|
|
421
|
|
|
1,458
|
|
|
(1,113)
|
|
|
—
|
|
|
345
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
(1,988)
|
|
|
1,410
|
|
|
24
|
|
|
(554)
|
|
|
(1,737)
|
|
|
1,113
|
|
|
40
|
|
|
(584)
|
|
Interest rate swaps
|
|
(427)
|
|
|
76
|
|
|
—
|
|
|
(351)
|
|
|
(177)
|
|
|
—
|
|
|
—
|
|
|
(177)
|
|
Total derivative liabilities
|
|
(2,415)
|
|
|
1,486
|
|
|
24
|
|
|
(905)
|
|
|
(1,914)
|
|
|
1,113
|
|
|
40
|
|
|
(761)
|
|
Net amounts
|
|
$
|
(485)
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(484)
|
|
|
$
|
(456)
|
|
|
$
|
—
|
|
|
$
|
40
|
|
|
$
|
(416)
|
|
____________
(a)Amounts presented exclude trade accounts receivable and payable related to settled financial instruments.
(b)Represents cash amounts received or pledged pursuant to a master netting arrangement, including fair value-based margin requirements, and to a lesser extent, initial margin requirements.
Derivative Volumes
The following table presents the gross notional amounts of derivative volumes at March 31, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
Derivative type
|
|
Notional Volume
|
|
|
|
Unit of Measure
|
Natural gas (a)
|
|
5,828
|
|
|
6,160
|
|
|
Million MMBtu
|
Electricity
|
|
423,535
|
|
|
428,367
|
|
|
GWh
|
Financial transmission rights (b)
|
|
173,577
|
|
|
199,648
|
|
|
GWh
|
Coal
|
|
18
|
|
|
22
|
|
|
Million U.S. tons
|
Fuel oil
|
|
181
|
|
|
33
|
|
|
Million gallons
|
|
|
|
|
|
|
|
Emissions
|
|
34
|
|
|
20
|
|
|
Million tons
|
Renewable energy certificates
|
|
12
|
|
|
11
|
|
|
Million certificates
|
Interest rate swaps – variable/fixed (c)
|
|
$
|
6,720
|
|
|
$
|
6,720
|
|
|
Million U.S. dollars
|
Interest rate swaps – fixed/variable (c)
|
|
$
|
2,120
|
|
|
$
|
2,120
|
|
|
Million U.S. dollars
|
____________
(a)Represents gross notional forward sales, purchases and options transactions, locational basis swaps and other natural gas transactions.
(b)Represents gross forward purchases associated with instruments used to hedge electricity price differences between settlement points within regions.
(c)Includes notional amounts of interest rate swaps with maturity dates through July 2026.
Credit Risk-Related Contingent Features of Derivatives
Our derivative contracts may contain certain credit risk-related contingent features that could trigger liquidity requirements in the form of cash collateral, letters of credit or some other form of credit enhancement. Certain of these agreements require the posting of collateral if our credit rating is downgraded by one or more credit rating agencies or include cross-default contractual provisions that could result in the settlement of such contracts if there was a failure under other financing arrangements related to payment terms or other covenants.
The following table presents the commodity derivative liabilities subject to credit risk-related contingent features that are not fully collateralized:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Fair value of derivative contract liabilities (a)
|
$
|
(966)
|
|
|
$
|
(692)
|
|
Offsetting fair value under netting arrangements (b)
|
264
|
|
|
167
|
|
Cash collateral and letters of credit
|
100
|
|
|
67
|
|
Liquidity exposure
|
$
|
(602)
|
|
|
$
|
(458)
|
|
____________
(a)Excludes fair value of contracts that contain contingent features that do not provide specific amounts to be posted if features are triggered, including provisions that generally provide the right to request additional collateral (material adverse change, performance assurance and other clauses).
(b)Amounts include the offsetting fair value of in-the-money derivative contracts and net accounts receivable under master netting arrangements.
Concentrations of Credit Risk Related to Derivatives
We have concentrations of credit risk with the counterparties to our derivative contracts. At March 31, 2020, total credit risk exposure to all counterparties related to derivative contracts totaled $2.038 billion (including associated accounts receivable). The net exposure to those counterparties totaled $468 million at March 31, 2020, after taking into effect netting arrangements, setoff provisions and collateral, with the largest net exposure to a single counterparty totaling $131 million. At March 31, 2020, the credit risk exposure to the banking and financial sector represented 83% of the total credit risk exposure and 50% of the net exposure.
Exposure to banking and financial sector counterparties is considered to be within an acceptable level of risk tolerance because all of this exposure is with counterparties with investment grade credit ratings. However, this concentration increases the risk that a default by any of these counterparties would have a material effect on our financial condition, results of operations and liquidity. The transactions with these counterparties contain certain provisions that would require the counterparties to post collateral in the event of a material downgrade in their credit rating.
We maintain credit risk policies with regard to our counterparties to minimize overall credit risk. These policies authorize specific risk mitigation tools including, but not limited to, use of standardized master agreements that allow for netting of positive and negative exposures associated with a single counterparty. Credit enhancements such as parent guarantees, letters of credit, surety bonds, liens on assets and margin deposits are also utilized. Prospective material changes in the payment history or financial condition of a counterparty or downgrade of its credit quality result in the reassessment of the credit limit with that counterparty. The process can result in the subsequent reduction of the credit limit or a request for additional financial assurances. An event of default by one or more counterparties could subsequently result in termination-related settlement payments that reduce available liquidity if amounts are owed to the counterparties related to the derivative contracts or delays in receipts of expected settlements if the counterparties owe amounts to us.
16.RELATED PARTY TRANSACTIONS
In connection with Emergence, we entered into agreements with certain of our affiliates and with parties who received shares of common stock and TRA Rights in exchange for their claims.
Registration Rights Agreement
Pursuant to the Plan of Reorganization, on the Effective Date, we entered into a Registration Rights Agreement (the Registration Rights Agreement) with certain selling stockholders providing for registration of the resale of the Vistra Energy common stock held by such selling stockholders.
In December 2016, we filed a Form S-1 registration statement with the SEC to register for resale the shares of Vistra Energy common stock held by certain significant stockholders pursuant to the Registration Rights Agreement, which was declared effective by the SEC in May 2017. The registration statement was amended in March 2018. Pursuant to the Registration Rights Agreement, in June 2018, we filed a post-effective amendment to the Form S-1 registration statement on Form S-3, which was declared effective by the SEC in July 2018. Among other things, under the terms of the Registration Rights Agreement:
•if we propose to file certain types of registration statements under the Securities Act with respect to an offering of equity securities, we will be required to use our reasonable best efforts to offer the other parties to the Registration Rights Agreement the opportunity to register all or part of their shares on the terms and conditions set forth in the Registration Rights Agreement; and
•the selling stockholders received the right, subject to certain conditions and exceptions, to request that we file registration statements or amend or supplement registration statements, with the SEC for an underwritten offering of all or part of their respective shares of Vistra Energy common stock (a Demand Registration), and the Company is required to cause any such registration statement or amendment or supplement (a) to be filed with the SEC promptly and, in any event, on or before the date that is 45 days, in the case of a registration statement on Form S-1, or 30 days, in the case of a registration statement on Form S-3, after we receive the written request from the relevant selling stockholders to effectuate the Demand Registration (as defined in the Registration Rights Agreement) and (b) to become effective as promptly as reasonably practicable and in any event no later than 120 days after it is initially filed.
All expenses of registration under the Registration Rights Agreement, including the legal fees of one counsel retained by or on behalf of the selling stockholders, will be paid by us. Legal fee expenses paid or accrued by Vistra Energy on behalf of the selling stockholders totaled less than $1 million during both the three months ended March 31, 2020 and 2019.
Tax Receivable Agreement
On the Effective Date, Vistra Energy entered into the TRA with a transfer agent on behalf of certain former first-lien creditors of TCEH. See Note 8 for discussion of the TRA.
17.SEGMENT INFORMATION
The operations of Vistra Energy are aligned into six reportable business segments: (i) Retail, (ii) ERCOT, (iii) PJM, (iv) NY/NE, (v) MISO and (vi) Asset Closure. Our chief operating decision maker (CODM) reviews the results of these segments separately and allocates resources to the respective segments as part of our strategic operations. A measure of assets is not applicable, as segment assets are not regularly reviewed by the CODM for evaluating performance or allocating resources. Operational results for four facilities retired in late 2019 were recast from the MISO segment to the Asset Closure segment (see Note 4).
The Retail segment is engaged in retail sales of electricity and natural gas to residential, commercial and industrial customers. Substantially all of these activities are conducted by TXU Energy, Ambit, Value Based Brands, Dynegy Energy Services, Homefield Energy, TriEagle Energy, Public Power and U.S. Gas & Electric across 19 states in the U.S.
The ERCOT, PJM, NY/NE (comprising NYISO and ISO-NE) and MISO segments are engaged in electricity generation, wholesale energy sales and purchases, commodity risk management activities, fuel production and fuel logistics management, all largely within their respective RTO/ISO market.
The Asset Closure segment is engaged in the decommissioning and reclamation of retired plants and mines (see Note 4). Separately reporting the Asset Closure segment provides management with better information related to the performance and earnings power of Vistra Energy's ongoing operations and facilitates management's focus on minimizing the cost associated with decommissioning and reclamation of retired plants and mines. We have not allocated any unrealized gains or losses on the commodity risk management activities to the Asset Closure segment for the generation plants that were retired in 2018 and 2019.
Corporate and Other represents the remaining non-segment operations consisting primarily of (i) general corporate expenses, interest, taxes and other expenses related to our support functions that provide shared services to our operating segments and (ii) CAISO operations.
The accounting policies of the business segments are the same as those described in the summary of significant accounting policies in Note 1. Our chief operating decision maker uses more than one measure to assess segment performance, including segment net income (loss), which is the measure most comparable to consolidated net income (loss) prepared based on U.S. GAAP. We account for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at market prices. Certain shared services costs are allocated to the segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Retail
|
|
ERCOT
|
|
PJM
|
|
NY/NE
|
|
MISO
|
|
Asset Closure
|
|
Corporate and Other (b)
|
|
Eliminations
|
|
Consolidated
|
Operating revenues (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
$
|
1,908
|
|
|
$
|
866
|
|
|
$
|
648
|
|
|
$
|
285
|
|
|
$
|
142
|
|
|
$
|
—
|
|
|
$
|
82
|
|
|
|
$
|
(1,073)
|
|
|
|
$
|
2,858
|
|
March 31, 2019
|
|
1,386
|
|
|
954
|
|
|
705
|
|
|
344
|
|
|
169
|
|
|
85
|
|
|
118
|
|
|
|
(838)
|
|
|
|
2,923
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
$
|
(80)
|
|
|
$
|
(122)
|
|
|
$
|
(139)
|
|
|
$
|
(48)
|
|
|
$
|
(11)
|
|
|
$
|
—
|
|
|
$
|
(19)
|
|
|
|
$
|
—
|
|
|
|
$
|
(419)
|
|
March 31, 2019
|
|
(59)
|
|
|
(132)
|
|
|
(130)
|
|
|
(64)
|
|
|
(3)
|
|
|
—
|
|
|
(17)
|
|
|
|
—
|
|
|
|
(405)
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
$
|
99
|
|
|
$
|
257
|
|
|
$
|
133
|
|
|
$
|
27
|
|
|
$
|
(81)
|
|
|
$
|
(16)
|
|
|
$
|
(28)
|
|
|
|
$
|
—
|
|
|
|
$
|
391
|
|
March 31, 2019
|
|
18
|
|
|
288
|
|
|
164
|
|
|
16
|
|
|
22
|
|
|
(24)
|
|
|
6
|
|
|
|
—
|
|
|
|
490
|
|
Net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
$
|
95
|
|
|
$
|
258
|
|
|
$
|
118
|
|
|
$
|
15
|
|
|
$
|
(79)
|
|
|
$
|
(17)
|
|
|
$
|
(345)
|
|
|
|
$
|
—
|
|
|
|
$
|
45
|
|
March 31, 2019
|
|
15
|
|
|
301
|
|
|
162
|
|
|
21
|
|
|
21
|
|
|
(24)
|
|
|
(272)
|
|
|
|
—
|
|
|
|
224
|
|
Capital expenditures, including nuclear fuel and excluding LTSA prepayments and development and growth expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
$
|
—
|
|
|
$
|
69
|
|
|
$
|
24
|
|
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
|
$
|
—
|
|
|
|
$
|
122
|
|
March 31, 2019
|
|
—
|
|
|
89
|
|
|
10
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
12
|
|
|
|
—
|
|
|
|
116
|
|
___________
(a)The following unrealized net gains (losses) from mark-to-market valuations of commodity positions are included in operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Retail
|
|
ERCOT
|
|
PJM
|
|
NY/NE
|
|
MISO
|
|
Asset Closure
|
|
Corporate and Other (b)
|
|
Eliminations (1)
|
|
Consolidated
|
March 31, 2020
|
|
$
|
1
|
|
|
|
$
|
203
|
|
|
|
$
|
80
|
|
|
|
$
|
30
|
|
|
|
$
|
(1)
|
|
|
|
$
|
—
|
|
|
|
$
|
7
|
|
|
|
$
|
(119)
|
|
|
|
$
|
201
|
|
March 31, 2019
|
|
(1)
|
|
|
|
237
|
|
|
|
91
|
|
|
|
1
|
|
|
|
(21)
|
|
|
|
—
|
|
|
|
16
|
|
|
|
(165)
|
|
|
|
$
|
158
|
|
____________
(1)Amounts offset in fuel, purchased power costs and delivery fees in the Retail segment, with no impact to consolidated results.
(b)Other includes CAISO operations. Income tax expense is not reflected in net income of the segments but is reflected entirely in Corporate and Other net income.
18.SUPPLEMENTARY FINANCIAL INFORMATION
Pension and OPEB Plans — Components of Net Benefit Cost
For the three months ended March 31, 2020 and 2019, net periodic benefit costs consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
|
|
|
|
OPEB Benefits
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
2020
|
|
2019
|
Service cost
|
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other costs
|
|
|
|
|
1
|
|
|
—
|
|
|
|
|
|
|
2
|
|
|
2
|
|
Net periodic benefit cost
|
|
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Impairment of Long-Lived Assets
In March 2020, we recognized an impairment loss of $52 million related to our Joppa/EEI coal generation facility in Illinois as a result of a significant decrease in the estimated useful life of the facility, reflecting a decrease in the economic forecast of the facility and changes to the operating assumption based on lower forecasted wholesale electricity prices. We also recorded a $32 million impairment to a capacity contract which was linked in part to the Joppa/EEI facility and therefore determined to have a significant decrease in estimated useful life. The impairments are reported in our MISO segment and include a $45 million write-down of property, plant and equipment, a $32 million write-down of intangible assets and a $7 million write-down of inventory.
Impairments may occur in the future at coal generation facilities if forward wholesale electricity prices continue to decline or if additional environmental regulations increase the cost of producing electricity at our generation facilities.
Interest Expense and Related Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Interest paid/accrued
|
|
|
|
|
$
|
128
|
|
|
$
|
150
|
|
Unrealized mark-to-market net losses on interest rate swaps
|
|
|
|
|
174
|
|
|
80
|
|
Amortization of debt issuance costs, discounts and premiums
|
|
|
|
|
4
|
|
|
(2)
|
|
Debt extinguishment gain
|
|
|
|
|
(8)
|
|
|
(7)
|
|
Capitalized interest
|
|
|
|
|
(3)
|
|
|
(3)
|
|
Other
|
|
|
|
|
5
|
|
|
4
|
|
Total interest expense and related charges
|
|
|
|
|
$
|
300
|
|
|
$
|
222
|
|
The weighted average interest rate applicable to the Vistra Operations Credit Facilities, taking into account the interest rate swaps discussed in Note 11, was 3.67% and 4.23% at March 31, 2020 and 2019.
Other Income and Deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance settlement (a)
|
|
|
|
|
|
$
|
3
|
|
|
$
|
11
|
|
Funds released from escrow to settle pre-petition claims of our predecessor
|
|
|
|
|
|
—
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
1
|
|
|
4
|
|
All other
|
|
|
|
|
|
3
|
|
|
1
|
|
Total other income
|
|
|
|
|
|
$
|
7
|
|
|
$
|
25
|
|
Other deductions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposal of investment in NELP (b)
|
|
|
|
|
|
$
|
28
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
All other
|
|
|
|
|
|
3
|
|
|
2
|
|
Total other deductions
|
|
|
|
|
|
$
|
31
|
|
|
$
|
2
|
|
____________
(a)The amount for the three months ended March 31, 2020 reported in the Corporate and Other non-segment. The amount for the three months ended March 31, 2019 reported in the ERCOT segment.
(b)Loss of $15 million reported in the NY/NE segment and $13 million in the PJM segment.
Restricted Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
December 31, 2019
|
|
|
|
Current Assets
|
|
Noncurrent Assets
|
|
Current Assets
|
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
Amounts related to remediation escrow accounts
|
$
|
21
|
|
|
$
|
28
|
|
|
$
|
15
|
|
|
$
|
28
|
|
Amounts related to restructuring escrow accounts
|
4
|
|
|
—
|
|
|
43
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Amounts related to Ambit customer deposits
|
19
|
|
|
—
|
|
|
19
|
|
|
—
|
|
Amounts related to Ambit commodity trading agreement
|
—
|
|
|
—
|
|
|
62
|
|
|
—
|
|
Amounts related to Ambit letters of credit (Note 11)
|
6
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Total restricted cash
|
$
|
50
|
|
|
$
|
28
|
|
|
$
|
147
|
|
|
$
|
28
|
|
Trade Accounts Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Wholesale and retail trade accounts receivable
|
$
|
1,137
|
|
|
$
|
1,401
|
|
Allowance for uncollectible accounts
|
(40)
|
|
|
(36)
|
|
Trade accounts receivable — net
|
$
|
1,097
|
|
|
$
|
1,365
|
|
Gross trade accounts receivable at March 31, 2020 and December 31, 2019 included unbilled retail revenues of $391 million and $494 million, respectively.
Allowance for Uncollectible Accounts Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
2019
|
Allowance for uncollectible accounts receivable at beginning of period (a)
|
$
|
42
|
|
|
$
|
19
|
|
Increase for bad debt expense
|
26
|
|
|
15
|
|
Decrease for account write-offs
|
(28)
|
|
|
(15)
|
|
|
|
|
|
Allowance for uncollectible accounts receivable at end of period
|
$
|
40
|
|
|
$
|
19
|
|
____________
(a)Includes a $6 million increase recorded due to the adoption of ASU 2016-13, Financial Instruments—Credit Losses (see Note 1).
Inventories by Major Category
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Materials and supplies
|
$
|
276
|
|
|
$
|
278
|
|
Fuel stock
|
221
|
|
|
172
|
|
Natural gas in storage
|
17
|
|
|
19
|
|
Total inventories
|
$
|
514
|
|
|
$
|
469
|
|
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Nuclear plant decommissioning trust
|
$
|
1,289
|
|
|
$
|
1,451
|
|
Assets related to employee benefit plans
|
36
|
|
|
37
|
|
Land
|
49
|
|
|
49
|
|
|
|
|
|
Total investments
|
$
|
1,374
|
|
|
$
|
1,537
|
|
Investment in Unconsolidated Subsidiary
On the Merger Date, we assumed Dynegy's 50% interest in Northeast Energy, LP (NELP), a joint venture with NextEra Energy, Inc., which indirectly owns the Bellingham NEA facility and the Sayreville facility. At December 31, 2019, our investment in NELP totaled $123 million.
Equity earnings related to our investment in NELP totaled $3 million and $7 million for the three months ended March 31, 2020 and 2019, respectively, recorded in equity in earnings (loss) of unconsolidated investment in our condensed consolidated statements of operations. We received distributions totaling $3 million and $4 million for the three months ended March 31, 2020 and 2019, respectively.
In December 2019, Dynegy Northeast Generation GP, Inc. and Dynegy Northeast Associates LP, Inc., indirect subsidiaries of Vistra Energy, entered into a transaction agreement with NELP and certain indirect subsidiaries of NextEra Energy, Inc. wherein the indirect subsidiaries of Vistra redeemed their ownership interest in NELP in exchange for 100% ownership interest in North Jersey Energy Associates, the company which owns the Sayreville facility (the NELP Transaction). The agreement was approved by FERC in February 2020, and the transaction closed on March 2, 2020. As a result of the NELP Transaction, Vistra Energy indirectly owns 100% of the Sayreville facility and no longer has any ownership interest in the Bellingham NEA facility. A loss of $28 million was recognized in connection with the NELP Transaction, reflecting the difference between our derecognized investment in NELP and the value of our acquired 100% interest in North Jersey Energy Associates, which was measured in accordance with ASC 805. The loss is reported in our condensed consolidated statements of operations in other deductions.
Nuclear Decommissioning Trust
Investments in a trust that will be used to fund the costs to decommission the Comanche Peak nuclear generation plant are carried at fair value. Decommissioning costs are being recovered from Oncor Electric Delivery Company LLC's (Oncor) customers as a delivery fee surcharge over the life of the plant and deposited by Vistra Energy (and prior to the Effective Date, a subsidiary of TCEH) in the trust fund. Income and expense, including gains and losses associated with the trust fund assets and the decommissioning liability are offset by a corresponding change in a regulatory asset/liability (currently a regulatory asset reported in other noncurrent assets) that will ultimately be settled through changes in Oncor's delivery fees rates. If funds recovered from Oncor's customers held in the trust fund are determined to be inadequate to decommission the Comanche Peak nuclear generation plant, Oncor would be required to collect all additional amounts from its customers, with no obligation from Vistra Energy, provided that Vistra Energy complied with PUCT rules and regulations regarding decommissioning trusts. A summary of the fair market value of investments in the fund follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31, 2019
|
Debt securities (a)
|
$
|
543
|
|
|
|
$
|
521
|
|
Equity securities (b)
|
746
|
|
|
|
930
|
|
Total
|
$
|
1,289
|
|
|
$
|
1,451
|
|
____________
(a)The investment objective for debt securities is to invest in a diversified tax efficient portfolio with an overall portfolio rating of AA or above as graded by S&P or Aa2 by Moody's. The debt securities are heavily weighted with government and municipal bonds and investment grade corporate bonds. The debt securities had an average coupon rate of 3.36% and 3.42% at March 31, 2020 and December 31, 2019, respectively, and an average maturity of nine years at both March 31, 2020 and December 31, 2019.
(b)The investment objective for equity securities is to invest tax efficiently and to match the performance of the S&P 500 Index for U.S. equity investments and the MSCI EAFE Index for non-U.S. equity investments.
Debt securities held at March 31, 2020 mature as follows: $172 million in one to five years, $157 million in five to 10 years and $214 million after 10 years.
The following table summarizes proceeds from sales of securities and investments in new securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Proceeds from sales of securities
|
|
|
|
|
$
|
75
|
|
|
$
|
78
|
|
Investments in securities
|
|
|
|
|
$
|
(80)
|
|
|
$
|
(83)
|
|
Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Power generation and structures
|
$
|
15,285
|
|
|
$
|
15,205
|
|
Land
|
623
|
|
|
622
|
|
Office and other equipment
|
169
|
|
|
164
|
|
Total
|
16,077
|
|
|
15,991
|
|
Less accumulated depreciation
|
(2,862)
|
|
|
(2,553)
|
|
Net of accumulated depreciation
|
13,215
|
|
|
13,438
|
|
Finance lease right-of-use assets
|
58
|
|
|
59
|
|
Nuclear fuel (net of accumulated amortization of $236 million and $216 million)
|
200
|
|
|
197
|
|
Construction work in progress
|
345
|
|
|
220
|
|
Property, plant and equipment — net
|
$
|
13,818
|
|
|
$
|
13,914
|
|
Depreciation expenses totaled $328 million and $335 million for three months ended March 31, 2020 and 2019, respectively.
Asset Retirement and Mining Reclamation Obligations (ARO)
These liabilities primarily relate to nuclear generation plant decommissioning, land reclamation related to lignite mining, remediation or closure of coal ash basins, and generation plant disposal costs. There is no earnings impact with respect to changes in the nuclear plant decommissioning liability, as all costs are recoverable through the regulatory process as part of delivery fees charged by Oncor. We have also identified conditional AROs for asbestos removal and disposal, which are specific to certain generation assets. However, because the period of remediation is indeterminable no removal liabilities have been recognized.
At March 31, 2020, the carrying value of our ARO related to our nuclear generation plant decommissioning totaled $1.331 billion, which is higher than the fair value of the assets contained in the nuclear decommissioning trust. Since the costs to ultimately decommission that plant are recoverable through the regulatory rate making process as part of Oncor's delivery fees, a corresponding regulatory asset has been recorded to our condensed consolidated balance sheet of $42 million in other noncurrent assets.
The following tables summarize the changes to these obligations, reported as AROs (current and noncurrent liabilities) in our condensed consolidated balance sheets, for the three months ended March 31, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuclear Plant Decommissioning
|
|
Mining Land Reclamation
|
|
Coal Ash and Other
|
|
Total
|
Liability at December 31, 2019
|
$
|
1,320
|
|
|
$
|
410
|
|
|
$
|
508
|
|
|
$
|
2,238
|
|
Additions:
|
|
|
|
|
|
|
|
Accretion
|
11
|
|
|
5
|
|
|
7
|
|
|
23
|
|
Adjustment for change in estimates
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reductions:
|
|
|
|
|
|
|
|
Payments
|
—
|
|
|
(13)
|
|
|
(7)
|
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability at March 31, 2020
|
1,331
|
|
|
401
|
|
|
508
|
|
|
2,240
|
|
Less amounts due currently
|
—
|
|
|
(97)
|
|
|
(54)
|
|
|
(151)
|
|
Noncurrent liability at March 31, 2020
|
$
|
1,331
|
|
|
$
|
304
|
|
|
$
|
454
|
|
|
$
|
2,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuclear Plant Decommissioning
|
|
Mining Land Reclamation
|
|
Coal Ash and Other
|
|
Total
|
Liability at December 31, 2018
|
$
|
1,276
|
|
|
$
|
442
|
|
|
$
|
655
|
|
|
$
|
2,373
|
|
Additions:
|
|
|
|
|
|
|
|
Accretion
|
11
|
|
|
6
|
|
|
8
|
|
|
25
|
|
Adjustment for change in estimates
|
—
|
|
|
(1)
|
|
|
(2)
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
Adjustment for obligations assumed through acquisitions
|
—
|
|
|
—
|
|
|
(3)
|
|
|
(3)
|
|
Reductions:
|
|
|
|
|
|
|
|
Payments
|
—
|
|
|
(14)
|
|
|
(8)
|
|
|
(22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability at March 31, 2019
|
1,287
|
|
|
433
|
|
|
650
|
|
|
2,370
|
|
Less amounts due currently
|
—
|
|
|
(120)
|
|
|
(74)
|
|
|
(194)
|
|
Noncurrent liability at March 31, 2019
|
$
|
1,287
|
|
|
$
|
313
|
|
|
$
|
576
|
|
|
$
|
2,176
|
|
Other Noncurrent Liabilities and Deferred Credits
The balance of other noncurrent liabilities and deferred credits consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Retirement and other employee benefits (a)
|
$
|
327
|
|
|
$
|
295
|
|
Identifiable intangible liabilities (Note 6)
|
279
|
|
|
286
|
|
Regulatory liability
|
—
|
|
|
131
|
|
Finance lease liabilities
|
81
|
|
|
78
|
|
Uncertain tax positions, including accrued interest
|
9
|
|
|
10
|
|
Liability for third-party remediation
|
42
|
|
|
41
|
|
Environmental allowances
|
47
|
|
|
52
|
|
Other accrued expenses
|
103
|
|
|
96
|
|
Total other noncurrent liabilities and deferred credits
|
$
|
888
|
|
|
$
|
989
|
|
____________
(a)In March 2020, we remeasured our pension plan resulting in an increase in the benefit obligation liability of $32 million, pretax other comprehensive loss of $30 million and settlement expense of $2 million recognized as other deductions in our condensed consolidated statements of operations.
Fair Value of Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
December 31, 2019
|
|
|
Long-term debt (see Note 11):
|
|
Fair Value Hierarchy
|
|
Carrying Amount
|
|
Fair
Value
|
|
Carrying Amount
|
|
Fair
Value
|
Long-term debt under the Vistra Operations Credit Facilities
|
|
Level 2
|
|
$
|
2,601
|
|
|
$
|
2,437
|
|
|
$
|
2,715
|
|
|
$
|
2,717
|
|
Vistra Operations Senior Notes
|
|
Level 2
|
|
6,627
|
|
|
6,500
|
|
|
6,620
|
|
|
6,926
|
|
Vistra Energy Senior Notes
|
|
Level 2
|
|
687
|
|
|
671
|
|
|
774
|
|
|
772
|
|
Forward Capacity Agreements
|
|
Level 3
|
|
127
|
|
|
127
|
|
|
155
|
|
|
155
|
|
Equipment Financing Agreements
|
|
Level 3
|
|
79
|
|
|
79
|
|
|
87
|
|
|
87
|
|
Building Financing
|
|
Level 2
|
|
13
|
|
|
13
|
|
|
16
|
|
|
16
|
|
Other debt
|
|
Level 3
|
|
4
|
|
|
4
|
|
|
12
|
|
|
12
|
|
We determine fair value in accordance with accounting standards as discussed in Note 14. We obtain security pricing from an independent party who uses broker quotes and third-party pricing services to determine fair values. Where relevant, these prices are validated through subscription services, such as Bloomberg.
Supplemental Cash Flow Information
The following table reconciles cash, cash equivalents and restricted cash reported in our condensed consolidated statements of cash flows to the amounts reported in our condensed consolidated balance sheets at March 31, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Cash and cash equivalents
|
$
|
717
|
|
|
$
|
300
|
|
Restricted cash included in current assets
|
50
|
|
|
147
|
|
Restricted cash included in noncurrent assets
|
28
|
|
|
28
|
|
Total cash, cash equivalents and restricted cash
|
$
|
795
|
|
|
$
|
475
|
|
The following table summarizes our supplemental cash flow information for the three months ended March 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
2019
|
Cash payments related to:
|
|
|
|
Interest paid
|
$
|
208
|
|
|
$
|
139
|
|
Capitalized interest
|
(3)
|
|
|
(3)
|
|
Interest paid (net of capitalized interest)
|
$
|
205
|
|
|
$
|
136
|
|
Income taxes paid (refunds received) (a)
|
$
|
(36)
|
|
|
$
|
(17)
|
|
|
|
|
|
Noncash investing and financing activities:
|
|
|
|
Construction expenditures (b)
|
$
|
20
|
|
|
$
|
45
|
|
Disposition of investment in NELP
|
$
|
123
|
|
|
$
|
—
|
|
Acquisition of investment in North Jersey Energy Associates
|
$
|
90
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________
(a)For the three months ended March 31, 2020 and 2019, we paid state income taxes of $1 million and $4 million, respectively, and received federal tax refunds of $37 million and $21 million, respectively.
(b)Represents end-of-period accruals for ongoing construction projects.