VISTRA CORP. The discussion below, as well as other portions of this quarterly report on Form 10-Q, contain forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. In addition, management may make forward-looking statements orally or in other writing, including, but not limited to, in press releases, quarterly earnings calls, executive presentations, in the annual report to stockholders and in other filings with theSEC . Readers can usually identify these forward-looking statements by the use of such words as "may," "will," "should," "likely," "plans," "projects," "expects," "anticipates," "believes" or similar words. These statements involve a number of risks and uncertainties. Actual results could materially differ from those anticipated by such forward-looking statements. For more discussion about risk factors that could cause or contribute to such differences, see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part I, Item 1A "Risk Factors" in the Company's 2021 Form 10-K and any updates contained herein. Forward-looking statements reflect the information only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statements to reflect future events, developments, or other information. IfVistra does update one or more forward-looking statements, no inference should be drawn that additional updates will be made regarding that statement or any other forward-looking statements. This discussion is intended to clarify and focus on our results of operations, certain changes in our financial position, liquidity, capital structure and business developments for the periods covered by the condensed consolidated financial statements included under Part I, Item 1 of this quarterly report on Form 10-Q for the three months endedMarch 31, 2022 . This discussion should be read in conjunction with those condensed consolidated financial statements and the related notes and is qualified by reference to them. The following discussion and analysis of our financial condition and results of operations for the three months endedMarch 31, 2022 and 2021 should be read in conjunction with our condensed consolidated financial statements and the notes to those statements.
All dollar amounts in the tables in the following discussion and analysis are
stated in millions of
Critical Accounting Policies and Estimates
The Company's discussion and analysis of its financial position and results of operations is based upon its condensed consolidated financial statements. The preparation of these condensed consolidated financial statements requires estimation and judgment that affect the reported amounts of revenue, expenses, assets and liabilities. The Company bases its estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the accounting for assets and liabilities that are not readily apparent from other sources. If the estimates differ materially from actual results, the impact on the condensed consolidated financial statements may be material. The Company's critical accounting policies are disclosed in our 2021 Form 10-K.
Business
Vistra is a holding company operating an integrated retail and electric power generation business primarily in markets throughout theU.S. Through our subsidiaries, we are engaged in competitive energy market activities including electricity generation, wholesale energy sales and purchases, commodity risk management and retail sales of electricity and natural gas to end users.
Operating Segments
Vistra has six reportable segments: (i) Retail, (ii)Texas , (iii) East, (iv) West, (v) Sunset and (vi) Asset Closure. See Note 16 to the Financial Statements for further information concerning our reportable business segments. 44 -------------------------------------------------------------------------------- Table of Contents CEO Transition InMarch 2022 ,Vistra announced that the Board had namedJim Burke as its next Chief Executive Officer (CEO), effectiveAugust 1, 2022 .Mr. Burke , who currently serves as President and Chief Financial Officer, will also join the Company's Board upon assuming his new role.Vistra's CEO and director,Curt Morgan , will remain in his current role throughAugust 1, 2022 , following which he will serve as a special advisor toMr. Burke and the Board untilApril 30, 2023 . The transition fromMr. Morgan toMr. Burke is a product of the Company's formal succession planning process.
Significant Activities and Events and Items Influencing Future Performance
Climate Change, Investments in Clean Energy and CO2 Reductions
Environmental Regulations - We are subject to extensive environmental regulation by governmental authorities, including theEPA and the environmental regulatory bodies of states in which we operate. Environmental regulations could have a material impact on our business, such as certain corrective action measures that may be required under the CCR rule and the ELG rule (see Note 11 to the Financial Statements). However, such rules and the regulatory environment are continuing to evolve and change, and we cannot predict the ultimate effect that such changes may have on our business. Emissions Reductions -Vistra is targeting to achieve a 60% reduction in Scope 1 and Scope 2 CO2 equivalent emissions by 2030 as compared to a 2010 baseline, with a long-term goal to achieve net-zero carbon emissions by 2050, assuming necessary advancements in technology and supportive market constructs and public policy. In furtherance ofVistra's efforts to meet its net-zero target,Vistra expects to deploy multiple levers to transition the Company to operating with net-zero emissions. Solar Generation andEnergy Storage Projects - InJanuary 2022 , we announced that, subject to approval by the CPUC, we would enter into a 15-year resource adequacy contract with PG&E to develop an additional 350 MW battery ESS at ourMoss Landing Power Plant site. The CPUC approved the resource adequacy contract inApril 2022 . InSeptember 2021 , we announced the planned development, at a cost of approximately$550 million , of up to 300 MW of solar photovoltaic power generation facilities and up to 150 MW of battery ESS at retired or to-be-retired plant sites inIllinois , based on the passage ofIllinois Senate Bill 2408, the Energy Transition Act. InSeptember 2020 , we announced the planned development, at a cost of approximately$850 million , of up to 768 MW of solar photovoltaic power generation facilities and 260 MW of battery ESS inTexas . We will only invest in these growth projects if we are confident in the expected returns. See Note 2 to the Financial Statements for a summary of our solar and battery energy storage projects. CO2 Reductions - InApril 2021 , we announced we would retire theJoppa generation facilities bySeptember 1, 2022 , and inJuly 2021 , we announced we would retire the Zimmer coal generation facility byMay 31, 2022 . See Note 3 to the Financial Statements for a summary of our planned generation retirements.
Moss Landing Outages
InSeptember 2021 , Moss Landing Phase I experienced an incident impacting a portion of the battery ESS. A review found the root cause originated in systems separate from the battery system. The facility will be offline as we perform the work necessary to return the facility to service. Moss Landing Phase II was not affected by this incident. InFebruary 2022 , Moss Landing Phase II experienced an incident impacting a portion of the Battery ESS. A review found the root cause originated in systems separate from the battery system. The facility will be offline as we perform the work necessary to return the facility to service. Moss Landing Phase I was not affected by this incident. We are continuing restoration work on the facilities and assuming our work continues as planned we expect to restore both facilities to service in phases beginning inJune 2022 with approximately 350 MW anticipated to be online by the end ofJune 2022 .
We do not expect these incidents to have a material impact on our results of operations.
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Winter Storm Uri
In
The weather event resulted in a$2.9 billion negative impact on the Company's pre-tax earnings in the three months endedMarch 31, 2021 . The weather event resulted in a$2.2 billion negative impact on the Company's pre-tax earnings in the year endedDecember 31, 2021 , after taking into account approximately$544 million in securitization proceedsVistra expects to receive fromERCOT as further described below. The primary drivers of the loss were the need to procure power inERCOT at market prices at or near the price cap due to lower output from our natural gas-fueled power plants driven by natural gas deliverability issues and our coal-fueled power plants driven by coal fuel handling challenges, high fuel costs, and high retail load costs. As part of the 2021 regularTexas legislative sessions and in response to extraordinary costs incurred by electricity market participants during Winter Storm Uri, theTexas legislature passed House Bill (HB) 4492 forERCOT to obtain financing to distribute to load-serving entities (LSEs) that were charged and paid toERCOT exceptionally high price adders and ancillary service costs during Winter Storm Uri. InOctober 2021 , the PUCT issued a debt obligation order approvingERCOT's $2.1 billion financing and the methodology for allocation of proceeds to the LSEs. InDecember 2021 ,ERCOT finalized the amount of allocations to the LSEs, and we expect to receive$544 million in proceeds fromERCOT in the second quarter of 2022. We concluded that the threshold for recognizing a receivable was met inDecember 2021 as the amounts to be received are determinable andERCOT was directed by its governing body, the PUCT, to take all actions required to effectuate the$2.1 billion funding approved in the debt obligation order. Accordingly, we recognized the$544 million in expected proceeds as an expense reduction in the fourth quarter of 2021 within fuel, purchased power costs and delivery fees in our consolidated statements of operation. The final financial impact of Winter Storm Uri continues to be subject to the outcome of litigation arising from the event, including any resulting corrective action taken byERCOT or the PUCT to resettle pricing during the week of the storm.Vistra has taken various actions to improve its risk profile for future weather-driven volatility events, including investing in improvements to further harden its coal fuel handling capabilities and to further weatherize itsERCOT fleet for even colder temperatures and longer durations; carrying more backup generation into the peak seasons after accounting for weatherization investments andERCOT market improvements implemented going forward; contracting for incremental gas storage to support its gas fleet; adding additional dual fuel capabilities at its gas steam units and increasing fuel oil inventory at its existing dual fuel sites; participating in processes with the PUCT andERCOT for registration of gas infrastructure as critical resources with the transmission and distribution utilities and for enhanced winterization of both gas and power assets in the state; and engaging in processes to evaluate potential market reforms.
Dividend Program
InNovember 2018 , we announced that the Board had adopted a dividend program, which we initiated in the first quarter of 2019. See Note 12 to the Financial Statements for more information about our dividend program.
Preferred Stock Offerings
InOctober 2021 , we issued 1,000,000 shares of Series A Preferred Stock in a private offering (Offering). The net proceeds of the Offering were approximately$990 million , after deducting underwriting commissions and offering expenses. We intend to use the net proceeds from the Offering to repurchase shares of our outstanding common stock under the Share Repurchase Program (discussed below). InDecember 2021 , we issued 1,000,000 shares of Series B Preferred Stock in a private offering (Series B Offering) under our Green Finance Framework. The net proceeds of the Series B Offering were approximately$985 million , after deducting underwriting commissions and offering expenses. We intend to use the proceeds from the Series B Offering to pay for or reimburse existing and new eligible renewable and battery ESS developments.
See Note 12 to the Financial Statements for more information concerning the Series A Preferred Stock and the Series B Preferred Stock.
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Share Repurchase Program
In October 2021 , we announced that the Board had authorized a new share
repurchase program (Share Repurchase Program) under which up to $2.0 billion of
our outstanding common stock may be repurchased. The Share Repurchase Program
became effective in October 2021 . The Share Repurchase Program supersedes the
$1.5 billion share repurchase program previously announced in September 2020
(2020 Share Repurchase Program). In the three months ended March 31, 2022 ,
27,560,901 shares of our common stock were repurchased under the Share
Repurchase Program for approximately $612 million at an average price of $22.21
per share of common stock (shares repurchased include 705,000 of unsettled
shares repurchased for $16 million as of March 31, 2022 ). As of March 31, 2022 ,
approximately $979 million was available for additional repurchases under the
Share Repurchase Program. From April 1, 2022 through May 3, 2022 , 7,080,499 of
our common stock had been repurchased under the Share Repurchase Program for
$174 million at an average price per share of common stock of $24.61 , and at May
3, 2022 , $805 million was available for repurchase under the Share Repurchase
Program. We expect to complete repurchases under the Share Repurchase Program by
the end of 2022. See Note 12 to the Financial Statements for more information
concerning the Share Repurchase Program and the 2020 Share Repurchase Program.
Debt Activity
We have stated our objective to reduce our consolidated net leverage. We also intend to continue to simplify and optimize our capital structure, maintain adequate liquidity and pursue opportunities to refinance our long-term debt to extend maturities and/or reduce ongoing interest expense. While the financial impacts resulting from Winter Storm Uri caused an increase in our consolidated net leverage, the Company remains committed to a strong balance sheet, and the anticipated securitization proceeds fromERCOT are expected to enable us to further execute this objective. See Note 1 to the Financial Statements for details of the securitization proceeds receivable fromERCOT , Note 10 to the Financial Statements for details of our long-term debt activity and Note 9 to the Financial Statements for details of our accounts receivable financing. Vistra Operations Credit Agreement Amendment - InApril 2022 , theVistra Operations Credit Agreement was amended to, among other things, (i) maintain extended revolving credit commitments of$2.8 billion (with ability to increase up to$3.0 billion pursuant to an incremental amendment), (ii) establish non-extended revolving credit commitments of$200 million , (iii) increase revolving letter of credit commitments to allow for the full amount of all revolving credit commitments to be utilized to issue letters of credit (and as of the closing of the amendment, the aggregate amount of revolving letter of credit commitments was$2.595 billion ) and (iv) extend the maturity date for the extended revolving credit commitments fromJune 14, 2023 toApril 29, 2027 . See Note 10 to the Financial Statements for details of the Vistra Operations Credit Agreement amendment. Commodity-Linked Revolving Credit Facility - OnFebruary 4, 2022 ,Vistra Operations entered into a credit agreement by and amongVistra Operations ,Vistra Intermediate , the lenders, joint lead arrangers and joint bookrunners party thereto, andCitibank, N.A ., as administrative agent and collateral agent. The Credit Agreement provides for a$1.0 billion senior secured commodity-linked revolving credit facility (the Commodity-Linked Facility).Vistra Operations intends to use the liquidity provided under the Commodity-Linked Facility to make cash postings as required under various commodity contracts to whichVistra Operations and its subsidiaries are parties as power prices increase from time-to time and for other working capital and general corporate purposes. In order to support our comprehensive hedging strategy, onMay 5, 2022 , we entered into an amendment to our Commodity-Linked Facility to increase the aggregate available commitments from$1.0 billion to$2.0 billion and to provide the flexibility, subject to our ability to obtain additional commitments, to further increase the size of the Commodity-Linked Facility by an additional$1.0 billion to$3.0 billion .
See Note 10 to the Financial Statements for more information concerning the Commodity-Linked Facility.
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Power Price, Natural Gas Price and Market Heat Rate Exposure
Estimated hedging levels for generation volumes in our
2022 2023
Nuclear/Renewable/Coal Generation:
Texas 94 % 73 %
Sunset 95 % 55 %
Gas Generation:
Texas 83 % 15 %
East 96 % 67 %
West 100 % 50 %
The following sensitivity table provides approximate estimates of the potential
impact of movements in power prices and spark spreads (the difference between
the power revenue and fuel expense of natural gas-fired generation as calculated
using an assumed heat rate of 7.2 MMBtu/MWh) on realized pre-tax earnings (in
millions) taking into account the hedge positions noted above for the periods
presented. The residual gas position is calculated based on two steps: first,
calculating the difference between actual heat rates of our natural gas
generation units and the assumed 7.2 heat rate used to calculate the sensitivity
to spark spreads; and second, calculating the residual natural gas exposure that
is not already included in the gas generation spark spread sensitivity shown in
the table below. The estimates related to price sensitivity are based on our
expected generation, related hedges and forward prices as of March 31, 2022 .
Balance 2022 2023
Nuclear/Renewable/Coal Generation:
6 $ 32
Nuclear/Renewable/Coal Generation: $2.50 /MWh decrease in power price $ (5) $ (31)
Gas Generation: $1.00 /MWh increase in spark spread $ 6 $ 36
Gas Generation: $1.00 /MWh decrease in spark spread $ (5) $ (35)
Residual Natural Gas Position: $0.25 /MMBtu increase in natural gas price $ (5) $ (28)
Residual Natural Gas Position: $0.25 /MMBtu decrease in natural gas price $ 5 $ 22
East:
Gas Generation: $1.00 /MWh increase in spark spread $ 2 $ 16
Gas Generation: $1.00 /MWh decrease in spark spread $ (1) $ (15)
Residual Natural Gas Position: $0.25 /MMBtu increase in natural gas price $ - $ -
Residual Natural Gas Position: $0.25 /MMBtu decrease in natural gas price $ - $ -
West:
Gas Generation: $1.00 /MWh increase in spark spread $ - $ 2
Gas Generation: $1.00 /MWh decrease in spark spread $ - $ (2)
Residual Natural Gas Position: $0.25 /MMBtu increase in natural gas price $ - $ 1
Residual Natural Gas Position: $0.25 /MMBtu decrease in natural gas price $ - $ (1)
Sunset:
Coal Generation: $2.50 /MWh increase in power price $ 3 $ 25
Coal Generation: $2.50 /MWh decrease in power price $ (3) $ (24)
Residual Natural Gas Position: $0.25 /MMBtu increase in natural gas price $ - $ (11)
Residual Natural Gas Position: $0.25 /MMBtu increase in natural gas price $ - $ 11
48-------------------------------------------------------------------------------- Table of Contents RESULTS OF OPERATIONS
Consolidated Financial Results - Three Months Ended
Three Months Ended Favorable
March 31, (Unfavorable)
2022 2021 $ Change
Operating revenues $ 3,125 $ 3,207 $ (82)
Fuel, purchased power costs and delivery fees (2,279) (4,745) 2,466
Operating costs (416) (371) (45)
Depreciation and amortization (430) (423) (7)
Selling, general and administrative expenses (288) (251) (37)
Operating loss (288) (2,583) 2,295
Other income 5 55 (50)
Other deductions (4) (5) 1
Interest expense and related charges (7) (29) 22
Impacts of Tax Receivable Agreement (81) 37 (118)
Loss before income taxes (375) (2,525) 2,150
Income tax benefit 91 485 (394)
Net loss $ (284) $ (2,040) $ 1,756
Three Months Ended March 31, 2022
Asset Eliminations / Vistra
Retail Texas East West Sunset Closure Corporate and Other Consolidated
Operating revenues $ 1,825 $ (1,095) $ 955 $ 72 $ (140) $ 107 $ 1,401 $ 3,125
Fuel, purchased power
costs and delivery fees 864 (526) (828) (73) (213) (102) (1,401) (2,279)
Operating costs (33) (201) (57) (12) (68) (44) (1) (416)
Depreciation and
amortization (36) (123) (179) (42) (19) (14) (17) (430)
Selling, general and
administrative expenses (188) (32) (17) (6) (10) (10) (25) (288)
Impairment of long-lived
assets - - - - - - - -
Operating income (loss) 2,432 (1,977) (126) (61) (450) (63) (43) (288)
Other income - 1 - - - 2 2 5
Other deductions (3) (1) - - - - - (4)
Interest expense and
related charges (1) 5 (2) - - (1) (8) (7)
Impacts of Tax Receivable
Agreement - - - - - - (81) (81)
Income (loss) before
income taxes 2,428 (1,972) (128) (61) (450) (62) (130) (375)
Income tax benefit - - - - - - 91 91
Net income (loss) $ 2,428 $ (1,972) $ (128) $ (61) $ (450) $ (62) $ (39) $ (284)
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Three Months Ended March 31, 2021
Asset Eliminations / Vistra
Retail Texas East West Sunset Closure Corporate and Other Consolidated
Operating revenues
$ 33 $ 257 $ 22 $ (662)$ 3,207 Fuel, purchased power costs and delivery fees (1,400) (3,318) (454) (48) (160) (27) 662 (4,745) Operating costs (31) (179) (54) (7) (60) (40) - (371) Depreciation and amortization (53) (124) (196) (5) (25) (4) (16) (423) Selling, general and administrative expenses (172) (18) (18) (8) (8) (15) (12) (251) Operating income (loss) 94 (2,556) 2 (35) 4 (64) (28) (2,583) Other income - 37 - - 1 16 1 55 Other deductions (4) (2) - - 1 - - (5) Interest expense and related charges (2) 3 (1) 4 (1) - (32) (29) Impacts of Tax Receivable Agreement - - - - - - 37 37 Income (loss) before income taxes 88 (2,518) 1 (31) 5 (48) (22) (2,525) Income tax benefit - - - - - - 485 485 Net income (loss)$ 88 $ (2,518) $ 1 $ (31) $ 5 $ (48) $ 463$ (2,040) In the first quarter 2022, our operating segments delivered strong operating performance with a disciplined focus on cost management, while generating and selling essential electricity in a safe and reliable manner. Our performance reflected the stability of our integrated model, including a diversified generation fleet, retail and commercial and hedging activities in support of our integrated business, to produce solid results and cash from operations of$591 million for the three months endedMarch 31, 2022 . We hedged longer-dated revenues and fuel costs to reduce risk and lock in value as forward power and gas curves moved up, and we executed on our share repurchase strategy. Operating loss decreased$2.295 billion to$288 million in the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 . The change in results is driven by the$2.9 billion loss associated with Winter Storm Uri in the first quarter of 2021. Partially offsetting the Winter Storm Uri impact, results were unfavorably impacted by$360 million in pre-tax unrealized losses on commodity hedging transactions in 2022 compared to$96 million in pre-tax unrealized gains on commodity hedging transactions in 2021. Power and natural gas forward market curves moved up during the three months endedMarch 31, 2022 , driving these net pre-tax unrealized losses on commodity hedging transactions. Interest expense and related charges decreased$22 million to$7 million in the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 driven by unrealized mark-to-market gains on interest rate swaps of$126 million in 2022 compared to$88 million in 2021, partially offset by an increase in interest paid/accrued of$14 million driven by higher average borrowings in 2022. See Note 17 to the Financial Statements. The Impacts of the Tax Receivable Agreement totaled expense of$81 million in the three months endedMarch 31, 2022 compared to income of$37 million in the three months endedMarch 31, 2021 . See Note 7 to the Financial Statements for discussion of the impacts of the Tax Receivable Agreement Obligation. For the three months endedMarch 31, 2022 , income tax benefit totaled$91 million and the effective tax rate was 24.3%. For the three months endedMarch 31, 2021 , income tax benefit totaled$485 million , and the effective tax rate was 19.2%. See Note 6 to the Financial Statements for reconciliation of the effective rates to theU.S. federal statutory rate. 50 -------------------------------------------------------------------------------- Table of Contents Discussion of Adjusted EBITDA Non-GAAP Measures - In analyzing and planning for our business, we supplement our use of GAAP financial measures with non-GAAP financial measures, including EBITDA and Adjusted EBITDA as performance measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures included in the tables below, may provide a more complete understanding of factors and trends affecting our business. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures and are, by definition, an incomplete understanding ofVistra and must be considered in conjunction with GAAP measures. In addition, non-GAAP financial measures are not standardized; therefore, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure. EBITDA and Adjusted EBITDA - We believe EBITDA and Adjusted EBITDA provide meaningful representations of our operating performance. We consider EBITDA as another way to measure financial performance on an ongoing basis. Adjusted EBITDA is meant to reflect the operating performance of our segments for the period presented. We define EBITDA as earnings (loss) before interest expense, income tax expense (benefit) and depreciation and amortization expense. We define Adjusted EBITDA as EBITDA adjusted to exclude (i) gains or losses on the sale or retirement of certain assets, (ii) the impacts of mark-to-market changes on derivatives, (iii) the impact of impairment charges, (iv) certain amounts associated with fresh-start reporting, acquisitions, dispositions, transition costs or restructurings, (v) non-cash compensation expense, (vi) impacts from the Tax Receivable Agreement and (vii) other material nonrecurring or unusual items.
Because EBITDA and Adjusted EBITDA are financial measures that management uses to allocate resources, determine our ability to fund capital expenditures, assess performance against our peers, and evaluate overall financial performance, we believe they provide useful information for investors.
When EBITDA or Adjusted EBITDA is discussed in reference to performance on a consolidated basis, the most directly comparable GAAP financial measure to EBITDA and Adjusted EBITDA is Net income (loss).
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Adjusted EBITDA - Three Months Ended March 31, 2022 Compared to Three Months
Ended March 31, 2021
Three Months Ended Favorable
March 31, (Unfavorable)
2022 2021 $ Change
Net loss $ (284) $ (2,040) $ 1,756
Income tax benefit (91) (485) 394
Interest expense and related charges (a) 7 29 (22)
Depreciation and amortization (b) 452 443 9
EBITDA before Adjustments 84 (2,053) 2,137
Unrealized net (gain) loss resulting from commodity hedging transactions (c)
360 (96) 456
Generation plant retirement expenses 6 2 4
Fresh start/purchase accounting impacts - 1 (1)
Impacts of Tax Receivable Agreement 81 (37) 118
Non-cash compensation expenses 17 17 -
Transition and merger expenses 17 (14) 31
Winter Storm Uri impact (d) (54) 934 (988)
Other, net 29 5 24
Adjusted EBITDA $ 541 $ (1,241) $ 1,782
____________
(a)Includes unrealized mark-to-market net gains on interest rate swaps of $126
million and $88 million for the three months ended March 31, 2022 and 2021,
respectively.
(b)Includes nuclear fuel amortization in the Texas segment of $22 million and
$21 million for the three months ended March 31, 2022 and 2021, respectively.
(c)Net pre-tax unrealized losses on commodity hedging transactions were driven
by the increase in power and natural gas forward market curves during the three
months ended March 31, 2022 .
(d)For the three months ended March 31, 2021 , includes the following Winter
Storm Uri impacts, which we believe are not reflective of our operating
performance: the allocation of ERCOT default uplift charges which are expected
to be paid over several decades under current protocols, accrual of Koch
earn-out amounts that we will pay by the end of the second quarter of 2022,
future bill credits related to Winter Storm Uri and Winter Storm Uri related
legal fees and other costs. The adjustment for future bill credits relates to
large commercial and industrial customers that curtailed their usage during
Winter Storm Uri and will reverse and impact Adjusted EBITDA in future periods
as the credits are applied to customer bills. The Company believes the inclusion
of the bill credits as a reduction to Adjusted EBITDA in the years in which such
bill credits are applied more accurately reflects its operating performance. For
the three months ended March 31, 2022 , includes a reduction in the allocation of
ERCOT default uplift charges of $42 million and reductions to Adjusted EBITDA
attributable to bill credit applications of $12 million .
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Three Months Ended March 31, 2022
Asset Eliminations / Vistra
Retail Texas East West Sunset Closure Corporate and Other ConsolidatedNet income (loss)$ 2,428 $ (1,972) $ (128) $ (61) $ (450) $ (62) $ (39)$ (284) Income tax benefit - - - - - - (91) (91) Interest expense and related charges (a) 1 (5) 2 - 1 - 8 7 Depreciation and amortization (b) 36 145 179 42 19 14 17 452 EBITDA before Adjustments 2,465 (1,832) 53 (19) (430) (48) (105) 84 Unrealized net (gain) loss resulting from hedging transactions (2,306) 2,031 93 44 465 33 - 360 Generation plant retirement expenses - - - - 4 2 - 6 Impacts of Tax Receivable Agreement - - - - - - 81 81 Non-cash compensation expenses - - - - - - 17 17 Transition and merger expenses 6 - 1 - - - 10 17 Winter Storm Uri impacts (c) (12) (42) - - - - - (54) Other, net 10 14 1 - 11 7 (13) 30 Adjusted EBITDA$ 163 $ 171 $ 148 $ 25 $ 50 $ (6) $ (10)$ 541 ____________ (a)Includes$126 million of unrealized mark-to-market net gains on interest rate swaps. (b)Includes nuclear fuel amortization of$22 million inTexas segment. (c)Adjusted EBITDA impacts of Winter Storm Uri reflects the application of bill credits to large commercial and industrial customers that curtailed their usage during Winter Storm Uri and a reduction in the allocation ofERCOT default uplift charges which are expected to be paid over several decades under current protocols. We estimate bill credit amounts to be applied in future periods are for the remainder of 2022 (approximately$119 million ), 2023 (approximately$57 million ), 2024 (approximately$43 million ) and 2025 (approximately$1 million ). 53
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Three Months Ended March 31, 2021
Asset Eliminations / Vistra
Retail Texas East West Sunset Closure Corporate and Other Consolidated
Net income (loss) $ 88 $ (2,518) $ 1 $ (31) $ 5 $ (48) $ 463 $ (2,040)
Income tax benefit - - - - - - (485) (485)
Interest expense and related
charges (a) 2 (3) 1 (4) 1 - 32 29
Depreciation and amortization (b) 53 144 196 5 25 4 16 443
EBITDA before Adjustments 143 (2,377) 198 (30) 31 (44) 26 (2,053)
Unrealized net (gain) loss
resulting from hedging
transactions (783) 522 20 53 67 25 - (96)
Generation plant retirement
expenses - - - - 1 - 1 2
Fresh start/purchase accounting
impacts 1 (1) (1) - 2 - - 1
Impacts of Tax Receivable
Agreement - - - - - - (37) (37)
Non-cash compensation expenses - - - - - - 17 17
Transition and merger expenses - - - - - (15) 1 (14)
Winter Storm Uri impacts (c) 432 501 - - 1 - - 934
Other, net 8 3 3 1 (1) 1 (10) 5
Adjusted EBITDA $ (199) $ (1,352) $ 220 $ 24 $ 101 $ (33) $ (2) $ (1,241) ____________
(a)Includes$88 million of unrealized mark-to-market net gains on interest rate swaps. (b)Includes nuclear fuel amortization of$21 million inTexas segment. (c)Includes the following Winter Storm Uri impacts, which we believe are not reflective of our operating performance: the allocation ofERCOT default uplift charges which are expected to be paid over several decades under current protocols, accrual of Koch earn-out amounts that we will pay by the end of the second quarter of 2022, future bill credits related to Winter Storm Uri and Winter Storm Uri related legal fees and other costs. The adjustment for future bill credits relates to large commercial and industrial customers that curtailed their usage during Winter Storm Uri and will reverse and impact Adjusted EBITDA in future periods as the credits are applied to customer bills. The Company believes the inclusion of the bill credits as a reduction to Adjusted EBITDA in the years in which such bill credits are applied more accurately reflects its operating performance. 54
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Table of Contents Retail Segment - Three Months EndedMarch 31, 2022 Compared to Three Months EndedMarch 31, 2021 Three Months Ended Favorable March 31, (Unfavorable) 2022 2021 Change Operating revenues: Revenues in ERCOT$ 1,551 $ 1,169 $ 382 Revenues in Northeast/Midwest 643 587 56 Amortization expense - (1) 1 Unrealized net losses on hedging activities (369) (5) (364) Total operating revenues 1,825 1,750 75 Fuel, purchased power costs and delivery fees: Purchases from affiliates (1,271) (1,451) 180 Unrealized net gains on hedging activities with affiliates 2,673 790 1,883 Unrealized net gains (losses) on hedging activities 2 (3) 5 Delivery fees (511) (441) (70) Other costs (a) (29) (295) 266 Total fuel, purchased power costs and delivery fees 864 (1,400) 2,264 Net income$ 2,428 $ 88$ 2,340 Adjusted EBITDA$ 163 $ (199) $ 362 Retail sales volumes (GWh): Retail electricity sales volumes: Sales volumes in ERCOT 14,213 12,847 1,366 Sales volumes in Northeast/Midwest 9,106 9,050 56 Total retail electricity sales volumes 23,319 21,897 1,422
Weather (
Heating degree days 117.9 % 116.4 % ____________ (a)For the three months endedMarch 31, 2021 , includes$163 million of future bill credits to large commercial and industrial customers. (b)Weather data is obtained fromWeatherbank, Inc. For the three months endedMarch 31, 2022 , normal is defined as the average over the 10-year period fromMarch 2012 toMarch 2021 . For the three months endedMarch 31, 2021 , normal is defined as the average over the 10-year period fromMarch 2011 toMarch 2020 . The following table presents changes in net income and Adjusted EBITDA for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 . Three Months Ended March 31, 2022 Compared to 2021 Winter Storm Uri, including bill credits $ 514 Higher seasonal commodity costs (115) Lower margins (24) Other driven by higher SG&A (13) Change in Adjusted EBITDA $ 362
Favorable impact of higher unrealized net gains on hedging activities
1,523
Future bill credits and other costs related to Winter Storm Uri 444
Decrease in depreciation and amortization expenses 17
Change in transition and merger and other expenses (6)
Change in net income $ 2,340
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Generation - Three Months Ended
Three Months Ended
Texas East West Sunset
2022 2021 2022 2021 2022 2021 2022 2021
Operating revenues:
Electricity sales $ 234 $ 700 $ 644 $ 335 $ 116 $ 85 $ 152 $ 205
Capacity revenue from
ISO/RTO - - (6) (4) - - 37 29
Sales to affiliates 644 924 516 428 2 1 108 99
Rolloff of unrealized net
gains (losses) representing
positions settled in the
current period 251 (26) 37 55 (4) (5) 49 (28)
Unrealized net gains
(losses) on hedging
activities (213) 158 272 (7) (43) (48) (331) (9)
Unrealized net gains
(losses) on hedging
activities with affiliates (2,011) (673) (509) (83) 1 - (153) (34)
Other revenues - - 1 - - - (2) (5)
Operating revenues (1,095) 1,083 955 724 72 33 (140) 257
Fuel, purchased power costs
and delivery fees:
Fuel for generation
facilities and purchased
power costs (410) (1,672) (929) (459) (74) (48) (181) (162)
Fuel for generation
facilities and purchased
power costs from affiliates - - - - - - (1) (1)
Unrealized (gains) losses
from hedging activities (55) 19 106 15 3 - (32) 4
Unrealized (gains) losses
from hedging activities with
affiliates (3) - 1 - - - 2 -
Ancillary and other costs (58) (1,665) (6) (10) (2) - (1) (1)
Fuel, purchased power costs
and delivery fees (526) (3,318) (828) (454) (73) (48) (213) (160)
Net income (loss) $ (1,972) $ (2,518) $ (128) $ 1 $ (61) $ (31) $ (450) $ 5
Adjusted EBITDA $ 171 $ (1,352) $ 148 $ 220 $ 25 $ 24 $ 50 $ 101
Production volumes (GWh):
Natural gas facilities 5,901 6,847 14,336 13,878 1,196 1,262
Lignite and coal facilities 6,370 5,892 6,649 7,036
Nuclear facilities 5,223 5,210
Solar/Battery facilities 166 96
Capacity factors:
CCGT facilities 34.1 % 38.5 % 61.5 % 59.6 % 53.9 % 57.3 %
Lignite and coal facilities 76.6 % 70.8 % 59.6 % 63.1 %
Nuclear facilities 105.2 % 104.9 %
Weather - percent of normal
(a):
Heating degree days 133.5 % 121.7 % 100.4 %
96.4 % 93.1 % 110.3 % 104.9 % 94.7 %
____________
(a)Reflects cooling degree days or heating degree days for the region based on
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Three Months Ended Three Months Ended
March 31, March 31,
2022 2021 2022 2021
Average Market On-Peak Power
Market pricing Prices ($MWh) (b):
Average ERCOT North power PJM West Hub $ 58.10 $ 34.69
price
($/MWh) $ 36.91 $ 490.91 AEP Dayton Hub $ 50.83 $ 34.73
Average NYMEX Henry Hub NYISO Zone C $ 72.41 $ 29.39
natural gas price ($/MMBtu)
$ 114.92 $ 54.44 Average natural gas price (a): Indiana Hub$ 55.92 $ 45.08 TetcoM3 ($/MMBtu)$ 6.73 $ 3.26 Northern Illinois Hub$ 44.45 $ 32.97
Algonquin Citygates ($/MMBtu)
___________
(a) Reflects the average of daily quoted prices for the periods presented and does not reflect costs incurred by us. (b)Reflects the average of day-ahead quoted prices for the periods presented and does not necessarily reflect prices we realized. The following table presents changes in net income (loss) and Adjusted EBITDA for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 . Three Months
Ended
Texas East West Sunset
Favorable/(unfavorable) change in revenue net of fuel
1,501 (50) - (17)
Favorable/(unfavorable) change in other operating costs (26)
(4) (5) (7)
Favorable/(unfavorable) change in selling, general and
administrative expenses (11) 2 1 (2)
Other (a) (35) 1 - 2
Change in Adjusted EBITDA $ 1,523
(1) 17 (37) 6
Change in unrealized net losses on hedging activities (1,509)
(73) 9 (398)
Generation plant retirement, transition and merger expenses
- (1) - (3)
Winter Storm Uri impact (
543 - - 1
Other (including interest and COVID-19 related expenses) (10)
- (3) (10)
Change in Net income (loss) $ 546 $ (129) $ (30) $ (455)
___________
(a) For the three months ended
The change inTexas segment results was primarily driven by the Winter Storm Uri impacts in 2021, partially offset by higher unrealized hedging losses in the three months endedMarch 31, 2022 versus the three months endedMarch 31, 2021 due to increases in forward power prices.
The change in East segment results was driven by favorable Winter Storm Uri
impacts recognized in the three months ended
The change in West segment results was driven by higher depreciation and amortization in the three months endedMarch 31, 2022 versus the three months endedMarch 31, 2021 reflecting battery ESS projects placed in service during summer 2021 (see Note 2 to the Financial Statements), partially offset by a favorable change in revenue net of fuel. The change in Sunset segment results was driven by higher unrealized hedging losses in the three months endedMarch 31, 2022 versus the three months endedMarch 31, 2021 due to increases in forward power prices. 57
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Asset Closure Segment - Three Months Ended
Three Months Ended Favorable
March 31, (Unfavorable)
2022 2021 Change
Operating revenues $ 107 $ 22 $ 85
Fuel, purchased power costs and delivery fees (102) (27) (75)
Operating costs $ (44) $ (40) $ (4)
Depreciation and amortization (14) (4) (10)
Selling, general and administrative expenses (10) (15) 5
Operating loss (63) (64) 1
Other income 2 16 (14)
Loss before income taxes (62) (48) (14)
Net loss $ (62) $ (48) $ (14)
Adjusted EBITDA $ (6) $ (33) $ 27
Production volumes (GWh) 3,199 1,497 1,702
Results and volumes for the Asset Closure segment include results from the
Zimmer and Joppa generation plants that we plan to retire in May 2022 and
September 2022 , respectively. Operating costs for the three months ended March
31, 2022 and 2021 also include ongoing costs associated with the decommissioning
and reclamation of retired plants and mines. The three months ended March 31,
2021 includes a gain on the settlement of rail transportation disputes (see Note
17 to the Financial Statements).
Energy-Related Commodity Contracts and Mark-to-Market Activities
The table below summarizes the changes in commodity contract assets and liabilities for the three months endedMarch 31, 2022 and 2021. The net change in these assets and liabilities, excluding "other activity" as described below, reflects$360 million in unrealized net losses and$96 million in unrealized net gains for the three months endedMarch 31, 2022 and 2021, respectively, arising from mark-to-market accounting for positions in the commodity contract portfolio. Three Months EndedMarch 31, 2022 2021
Commodity contract net liability at beginning of period
$ (75) Settlements/termination of positions (a) 375
(30)
Changes in fair value of positions in the portfolio (b) (735)
126
Other activity (c) (96)
(29)
Commodity contract net liability at end of period$ (1,322)
____________
(a)Represents reversals of previously recognized unrealized gains and losses
upon settlement/termination (offsets realized gains and losses recognized in the
settlement period). Excludes changes in fair value in the month the position
settled as well as amounts related to positions entered into, and settled, in
the same month.
(b)Represents unrealized net gains (losses) recognized, reflecting the effect of
changes in fair value. Excludes changes in fair value in the month the position
settled as well as amounts related to positions entered into, and settled, in
the same month.
(c)Represents changes in fair value of positions due to receipt or payment of
cash not reflected in unrealized gains or losses. Amounts are generally related
to premiums related to options purchased or sold as well as certain margin
deposits classified as settlement for certain transactions executed on the CME.
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Maturity Table - The following table presents the net commodity contract
liability arising from recognition of fair values at March 31, 2022 , scheduled
by the source of fair value and contractual settlement dates of the underlying
positions.
Maturity dates of unrealized
commodity contract net liability at
Less than Excess of
Source of fair value 1 year 1-3 years 4-5 years 5 years Total
Prices actively quoted $ (372) $ (155) $ 30 $ - $ (497)
Prices provided by other
external sources (52) (145) 2 (1) (196)
Prices based on models (268) (216) (81) (64) (629)
Total $ (692) $ (516) $ (49) $ (65) $ (1,322)
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Table of Contents FINANCIAL CONDITION Operating Cash Flows Cash provided by operating activities totaled$591 million for the three months endedMarch 31, 2022 compared to cash used in operating activities of$1.653 billion for the three months endedMarch 31, 2021 . The favorable change of$2.244 billion was primarily driven by lower cash from operations in 2021 due to Winter Storm Uri impacts and change in margin deposits related to commodity contracts. Depreciation and amortization expense reported as a reconciling adjustment in the condensed consolidated statements of cash flows exceeds the amount reported in the condensed consolidated statements of operations by$112 million and$88 million for the three months endedMarch 31, 2022 and 2021, respectively. The difference represented amortization of nuclear fuel, which is reported as fuel costs in the condensed consolidated statements of operations consistent with industry practice, and amortization of intangible net assets and liabilities that are reported in various other condensed consolidated statements of operations line items including operating revenues and fuel and purchased power costs and delivery fees. Investing Cash Flows Cash used in investing activities totaled$480 million and$129 million for the three months endedMarch 31, 2022 and 2021, respectively. Capital expenditures totaled$373 million and$192 million for the three months endedMarch 31, 2022 and 2021, respectively, and consisted of the following:
Three Months Ended
2022 2021
Capital expenditures, including LTSA prepayments $ 153 $ 108
Nuclear fuel purchases $ 103 $ 6
Growth and development expenditures $ 117 $ 78
Capital expenditures $ 373 $ 192
Cash used in investing activities for the three months ended March 31, 2022 and
2021 also reflected net purchases of environmental allowances of $109 million
and net sales of environmental allowances of $17 million , respectively. In the
three months ended March 31, 2022 and 2020, we received insurance proceeds of $1
million and $40 million , respectively.
Financing Cash Flows
Cash used in financing activities totaled$413 million in the three months endedMarch 31, 2022 compared to cash provided of$1.939 billion for the three months endedMarch 31, 2021 . The change was primarily driven by: •$710 million in cash paid for share repurchases in 2022, including$114 million of settled share repurchases accrued as ofDecember 31, 2021 and$16 million of share repurchases accrued as ofMarch 31, 2022 , compared to$175 million in cash paid in 2021; •$1.0 billion in cash received from the issuance of term loans under the Term Loan A Facility in 2021; •$500 million in cash received from the sale of a portion of the PJM capacity that cleared for Planning Years 2021-2022 in 2021; •Net borrowings of$300 million under the Revolving Credit Facility in 2021; These increases in cash used in financing activities are partially offset by net borrowings of$500 million under the accounts receivable financing facilities in 2022 compared to net borrowings of$425 million in 2021.
Debt Activity
The maturities of our long-term debt are relatively modest until 2023. See Note
9 to the Financial Statements for details of the Receivables Facility and
Repurchase Facility and Note 10 to the Financial Statements for details of the
Vistra Operations Credit Facilities and other long-term debt.
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Available Liquidity
The following table summarizes changes in available liquidity for the three
months ended
March 31, 2022 2021 Change
Cash and cash equivalents $ 1,022 $ 1,325 $ (303)
Vistra Operations Credit Facilities - Revolving
Credit Facility 1,113 1,254 (141)
Vistra Operations - Commodity-Linked Facility 1,000 - 1,000
Total available liquidity (a) $ 3,135 ____________
(a)Excludes amounts available to be borrowed under the Receivables Facility and the Repurchase Facility, respectively. See Note 9 to the Financial Statements for detail on our accounts receivable financing. The$556 million increase in available liquidity for the three months endedMarch 31, 2022 was primarily driven by cash provided by operations, including the change in margin deposits related to commodity contracts,$1.0 billion in availability under the new Commodity-Linked Facility and$500 million in net cash borrowings under the accounts receivable financing facilities, partially offset by$710 million in cash paid for share repurchases,$373 million of capital expenditures (including LTSA prepayments, nuclear fuel and development and growth expenditures), a$141 million increase in letters of credit outstanding under the Revolving Credit Facility and$77 million in dividends paid to common stockholders.
We believe that we will have access to sufficient liquidity to fund our anticipated cash requirements through at least the next 12 months. Our operational cash flows tend to be seasonal and weighted toward the second half of the year.
Global market demand, geopolitical events and higher gas prices have resulted in increased market prices for energy, and we expect these conditions to continue. We believe our hedging activity in these conditions will position us to significantly benefit Adjusted EBITDA from ongoing operations in 2023 and beyond. However, these higher market prices combined with our comprehensive hedging strategy have also resulted in increased collateral posting obligations sinceMarch 31, 2022 . The majority of this collateral relates to hedges in place through 2023 and is expected to be returned as we satisfy our obligations under those contracts. In order to support our comprehensive hedging strategy, onMay 5, 2022 , we entered into an amendment to our Commodity-Linked Facility to increase the aggregate available commitments from$1.0 billion to$2.0 billion and to provide the flexibility, subject to our ability to obtain additional commitments, to further increase the size of the Commodity-Linked Facility by an additional$1.0 billion to$3.0 billion . As ofMay 5, 2022 ,Vistra had approximately$2.1 billion of cash and availability under its credit facilities to meet its liquidity needs. The Company believes it has additional alternatives to maintain access to liquidity, including drawing upon available liquidity, accessing additional sources of capital, or reducing capital expenditures, planned voluntary debt repayments or operating costs.
Liquidity Effects of Commodity Hedging and Trading Activities
We have entered into commodity hedging and trading transactions that require us
to post collateral if the forward price of the underlying commodity moves such
that the hedging or trading instrument we hold has declined in value. We use
cash, letters of credit and other forms of credit support to satisfy such
collateral posting obligations. See Note 10 to the Financial Statements for
discussion of the Vistra Operations Credit Facilities and the Commodity-Linked
Facility.
Exchange cleared transactions typically require initial margin (i.e., the
upfront cash and/or letter of credit posted to take into account the size and
maturity of the positions and credit quality) in addition to variation margin
(i.e., the daily cash margin posted to take into account changes in the value of
the underlying commodity). The amount of initial margin required is generally
defined by exchange rules. Clearing agents, however, typically have the right to
request additional initial margin based on various factors, including market
depth, volatility and credit quality, which may be in the form of cash, letters
of credit, a guaranty or other forms as negotiated with the clearing agent. Cash
collateral received from counterparties is either used for working capital and
other business purposes, including reducing borrowings under credit facilities,
or is required to be deposited in a separate account and restricted from being
used for working capital and other corporate purposes. With respect to
over-the-counter transactions, counterparties generally have the right to
substitute letters of credit for such cash collateral. In such event, the cash
collateral previously posted would be returned to such counterparties, which
would reduce liquidity in the event the cash was not restricted.
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At
•$1.237 billion in cash has been posted with counterparties as compared to$1.263 billion posted atDecember 31, 2021 ; •$223 million in cash has been received from counterparties as compared to$39 million received atDecember 31, 2021 ; •$1.761 billion in letters of credit have been posted with counterparties as compared to$1.558 billion posted atDecember 31, 2021 ; and •$36 million in letters of credit have been received from counterparties as compared to$35 million received atDecember 31, 2021 .
See Collateral Support Obligations below for information related to collateral posted in accordance with the PUCT and ISO/RTO rules.
Income Tax Payments
In the next 12 months, we do not expect to make federal income tax payments due toVistra's NOL carryforwards. We expect to make approximately$38 million in state income tax payments, offset by$11 million in state tax refunds, and$1 million in TRA payments in the next 12 months.
For the three months ended
Financial Covenants
The Vistra Operations Credit Agreement includes a covenant, 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), that requires the consolidated first-lien net leverage ratio not exceed 4.25 to 1.00. As ofMarch 31, 2022 , we were in compliance with this financial covenant.
See Note 10 to the Financial Statements for discussion of other covenants related to the Vistra Operations Credit Facilities.
Collateral Support Obligations
The RCT has rules in place to assure that parties can meet their mining reclamation obligations. InSeptember 2016 , the RCT agreed to a collateral bond of up to$975 million to support Luminant's reclamation obligations. The collateral bond is effectively a first lien on all ofVistra Operations' assets (which ranks pari passu with the Vistra Operations Credit Facilities) that contractually enables the RCT to be paid (up to$975 million ) before the other first-lien lenders in the event of a liquidation of our assets. Collateral support relates to land mined or being mined and not yet reclaimed as well as land for which permits have been obtained but mining activities have not yet begun and land already reclaimed but not released from regulatory obligations by the RCT, and includes cost contingency amounts. The PUCT has rules in place to assure adequate creditworthiness of each REP, including the ability to return customer deposits, if necessary. Under these rules, atMarch 31, 2022 ,Vistra has posted letters of credit in the amount of$74 million with the PUCT, which is subject to adjustments. The ISOs/RTOs we operate in have rules in place to assure adequate creditworthiness of parties that participate in the markets operated by those ISOs/RTOs. Under these rules,Vistra has posted collateral support totaling$460 million in the form of letters of credit,$20 million in the form of a surety bond and$1 million of cash atMarch 31, 2022 (which is subject to daily adjustments based on settlement activity with the ISOs/RTOs).
Material Cross Default/Acceleration Provisions
Certain of our contractual arrangements contain provisions that could result in
an event of default if there were a failure under financing arrangements to meet
payment terms or to observe covenants that could result in an acceleration of
payments due. Such provisions are referred to as "cross default" or "cross
acceleration" provisions.
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A default by Vistra Operations or any of its restricted subsidiaries in respect
of certain specified indebtedness in an aggregate amount in excess of $300
million may result in a cross default under the Vistra Operations Credit
Facilities. Such a default would allow the lenders to accelerate the maturity of
outstanding balances under such facilities, which totaled approximately $2.536
billion at March 31, 2022 .
Each of Vistra Operations' (or its subsidiaries') commodity hedging agreements
and interest rate swap agreements that are secured with a lien on its assets on
a pari passu basis with the Vistra Operations Credit Facilities lenders contains
a cross-default provision. An event of a default by Vistra Operations or any of
its subsidiaries relating to indebtedness equal to or above a threshold defined
in the applicable agreement that results in the acceleration of such debt, would
give such counterparty under these hedging agreements the right to terminate its
hedge or interest rate swap agreement with Vistra Operations (or its applicable
subsidiary) and require all outstanding obligations under such agreement to be
settled.
Under the Vistra Operations Senior Unsecured Indentures and the Vistra
Operations Senior Secured Indenture, a default under any document evidencing
indebtedness for borrowed money by Vistra Operations or any Guarantor Subsidiary
for failure to pay principal when due at final maturity or that results in the
acceleration of such indebtedness in an aggregate amount of $300 million or more
may result in a cross default under the Vistra Operations Senior Unsecured
Notes, the Senior Secured Notes, the Vistra Operations Credit Facilities, the
Receivables Facility, the Alternate LOC Facilities, the Commodity-Linked
Facility and other current or future documents evidencing any indebtedness for
borrowed money by the applicable borrower or issuer, as the case may be, and the
applicable Guarantor Subsidiaries party thereto.
Additionally, we enter into energy-related physical and financial contracts, the
master forms of which contain provisions whereby an event of default or
acceleration of settlement would occur if we were to default under an obligation
in respect of borrowings in excess of thresholds, which may vary by contract.
The Receivables Facility contains a cross-default provision. The cross-default
provision applies, among other instances, if TXU Energy , Dynegy Energy Services,
Ambit Texas, Value Based Brands and TriEagle, each indirect subsidiaries of
Vistra and originators under the Receivables Facility (Originators), fails to
make a payment of principal or interest on any indebtedness that is outstanding
in a principal amount of at least $300 million , or, in the case of TXU Energy or
any of the other Originators, in a principal amount of at least $50 million ,
after the expiration of any applicable grace period, or if other events occur or
circumstances exist under such indebtedness which give rise to a right of the
debtholder to accelerate such indebtedness, or if such indebtedness becomes due
before its stated maturity. If this cross-default provision is triggered, a
termination event under the Receivables Facility would occur and the Receivables
Facility may be terminated.
The Repurchase Facility contains a cross-default provision. The cross-default
provision applies, among other instances, if an event of default (or similar
event) occurs under the Receivables Facility or the Vistra Operations Credit
Facilities. If this cross-default provision is triggered, a termination event
under the Repurchase Facility would occur and the Repurchase Facility may be
terminated.
Under the Secured LOC Facilities, a default under any document evidencing
indebtedness for borrowed money by Vistra Operations or any Guarantor Subsidiary
for failure to pay principal when due at final maturity or that results in the
acceleration of such indebtedness in an aggregate amount of $300 million or
more, may result in a termination of the Secured LOC Facilities.
Under the Commodity-Linked Facility, a default under any document evidencing
indebtedness for borrowed money by Vistra Operations or any Guarantor Subsidiary
for failure to pay principal when due at final maturity or that results in the
acceleration of such indebtedness in an aggregate amount of $300 million or
more, may result in a termination of the Commodity-Linked Facility.
Guarantees
See Note 11 to the Financial Statements for discussion of guarantees.
COMMITMENTS AND CONTINGENCIES
See Note 11 to the Financial Statements for discussion of commitments and contingencies.
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CHANGES IN ACCOUNTING STANDARDS
See Note 1 to the Financial Statements for discussion of changes in accounting standards.
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