VISTRA ENERGY CORP., 10-K filed on 2/28/2020
Annual Report
v3.19.3.a.u2
Cover Page - USD ($)
12 Months Ended
Dec. 31, 2019
Feb. 24, 2020
Jun. 28, 2019
Document Information [Line Items]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2019    
Document Transition Report false    
Entity File Number 001-38086    
Entity Registrant Name Vistra Energy Corp.    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 36-4833255    
Entity Address, Address Line One 6555 Sierra Drive    
Entity Address, City or Town Irving,    
Entity Address, State or Province TX    
Entity Address, Postal Zip Code 75039    
City Area Code (214)    
Local Phone Number 812-4600    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 8,654,325,784
Entity Common Stock, Shares Outstanding   487,734,006  
Entity Central Index Key 0001692819    
Current Fiscal Year End Date --12-31    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Amendment Flag false    
Common stock, par value $0.01 per share      
Document Information [Line Items]      
Title of 12(b) Security Common stock, par value $0.01 per share    
Trading Symbol VST    
Security Exchange Name NYSE    
Warrant      
Document Information [Line Items]      
Title of 12(b) Security Warrants    
Trading Symbol VST.WS.A    
Security Exchange Name NYSE    
v3.19.3.a.u2
Consolidated Statements of Operations - USD ($)
$ in Millions
3 Months Ended 12 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]                      
Operating revenues $ 2,860 $ 3,194 $ 2,832 $ 2,923 $ 2,562 $ 3,243 $ 2,574 $ 765 $ 11,809 $ 9,144 $ 5,430
Fuel, purchased power costs and delivery fees                 (5,742) (5,036) (2,935)
Operating costs                 (1,530) (1,297) (973)
Depreciation and amortization                 (1,640) (1,394) (699)
Selling, general and administrative expenses                 (904) (926) (600)
Impairment of long-lived assets                 0 0 (25)
Operating income 334 440 729 490 4 650 231 (394) 1,993 491 198
Other income                 56 47 37
Other deductions                 (15) (5) (5)
Interest expense and related charges                 (797) (572) (193)
Impacts of Tax Receivable Agreement                 (37) (79) 213
Equity in earnings of unconsolidated investment                 16 17 0
Income (loss) before income taxes                 1,216 (101) 250
Income tax (expense) benefit                 (290) 45 (504)
Net income (loss) 234 114 354 224 (186) 331 105 (306) 926 (56) (254)
Net loss attributable to noncontrolling interest                 2 2 0
Net income (loss) attributable to Vistra Energy $ 234 $ 113 $ 356 $ 225 $ (186) $ 330 $ 108 $ (306) $ 928 $ (54) $ (254)
Weighted average shares of common stock outstanding:                      
Weighted average shares of common stock outstanding - basic                 494,146,268 504,954,371 427,761,460
Weighted average shares of common stock outstanding - diluted                 499,935,490 504,954,371 427,761,460
Net income (loss) per weighted average share of common stock outstanding:                      
Net income (loss) per weighted average share of common stock outstanding - basic $ 0.49 $ 0.23 $ 0.71 $ 0.45 $ (0.35) $ 0.62 $ 0.21 $ (0.71) $ 1.88 $ (0.11) $ (0.59)
Net income (loss) per weighted average share of common stock outstanding - diluted $ 0.49 $ 0.23 $ 0.70 $ 0.44 $ (0.35) $ 0.61 $ 0.20 $ (0.71) $ 1.86 $ (0.11) $ (0.59)
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Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Millions
3 Months Ended 12 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Comprehensive Income [Abstract]                      
Net income (loss) $ 234 $ 114 $ 354 $ 224 $ (186) $ 331 $ 105 $ (306) $ 926 $ (56) $ (254)
Other comprehensive income (loss), net of tax effects:                      
Effects related to pension and other retirement benefit obligations (net of tax benefit of $4, $2 and $6)                 (8) (6) (23)
Adoption of new accounting standard                 0 1 0
Total other comprehensive income (loss)                 (8) (5) (23)
Comprehensive income (loss)                 918 (61) (277)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest                 2 2 0
Comprehensive income (loss) attributable to Vistra Energy                 $ 920 $ (59) $ (277)
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Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Comprehensive Income [Abstract]      
Effect related to pension and other retirement obligations (tax) $ (4) $ (2) $ (6)
v3.19.3.a.u2
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash flows — operating activities:      
Net income (loss) $ 926 $ (56) $ (254)
Adjustments to reconcile net income (loss) to cash provided by operating activities:      
Depreciation and amortization 1,876 1,533 835
Deferred income tax expense (benefit), net 281 (62) 418
Unrealized net (gain) loss from mark-to-market valuations of commodities (696) 380 145
Unrealized net (gain) loss from mark-to-market valuations of interest rate swaps 220 5 (29)
Impairment of long-lived assets 0 0 25
Impacts of Tax Receivables Agreement 37 79 (213)
Change in asset retirement obligation liability (48) (27) 112
Asset retirement obligation accretion expense 53 50 60
Bad debt expense 82 55 39
Stock-based compensation 47 73 0
Other, net (12) 37 30
Changes in operating assets and liabilities:      
Accounts receivable — trade (88) (207) 7
Inventories (44) 61 22
Accounts payable — trade (221) 90 (30)
Commodity and other derivative contractual assets and liabilities 98 (80) (1)
Margin deposits, net 170 (221) 146
Accrued interest 80 (105) (10)
Accrued taxes (4) (64) 33
Accrued employee incentive 1 40 (24)
Alcoa contract settlement 0 0 238
Tax Receivable Agreement payment (2) (16) (26)
Payments for Settlement of Asset Retirement Obligation (121) (100) (35)
Major plant outage deferral (19) (22) (66)
Other — net assets (22) 73 4
Other — net liabilities 142 (45) (40)
Cash provided by operating activities 2,736 1,471 1,386
Cash flows — investing activities:      
Capital expenditures, including LTSA prepayments (520) (378) (114)
Nuclear fuel purchases (89) (118) (62)
Development and growth expenditures (104) (34) (190)
Ambit acquisition (net of cash acquired) (506) 0 0
Crius acquisition (net of cash acquired) (374) 0 0
Cash acquired in the Merger 0 445 0
Odessa acquisition 0 0 (355)
Proceeds from sales of nuclear decommissioning trust fund securities 431 252 252
Investments in nuclear decommissioning trust fund securities (453) (274) (272)
Proceeds from sales of environmental allowances 197 1 1
Purchases of environmental allowances (322) (5) (3)
Other, net 23 10 16
Cash used in investing activities (1,717) (101) (727)
Cash flows - financing activities:      
Issuances of long-term debt 6,507 1,000 0
Repayments/repurchases of debt (7,109) (3,075) (191)
Net borrowings under accounts receivable securitization program 111 339 0
Borrowings under Revolving Credit Facility 650 0 0
Repayments under Revolving Credit Facility (300) 0 0
Debt tender offer and other debt financing fees (203) (236) (8)
Stock repurchase (656) (763) 0
Dividends paid to stockholders (Note 14) (243) 0 0
Other, net 6 12 (2)
Cash used in financing activities (1,237) (2,723) (201)
Net change in cash, cash equivalents and restricted cash (218) (1,353) 458
Cash, cash equivalents and restricted cash — beginning balance 693 2,046 1,588
Cash, cash equivalents and restricted cash — ending balance $ 475 $ 693 $ 2,046
v3.19.3.a.u2
Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 300 $ 636
Restricted cash 147 57
Trade accounts receivable — net 1,365 1,087
Inventories 469 412
Commodity and other derivative contractual assets 1,333 730
Margin deposits related to commodity contracts 202 361
Prepaid expense and other current assets 298 152
Total current assets 4,114 3,435
Restricted cash 28 0
Investments 1,537 1,250
Investment in unconsolidated subsidiary 124 131
Operating lease right-of-use assets 44 0
Property, plant and equipment — net 13,914 14,612
Goodwill 2,553 2,068
Identifiable intangible assets — net 2,748 2,493
Commodity and other derivative contractual assets 136 109
Accumulated deferred income taxes 1,066 1,336
Other noncurrent assets 352 590
Total assets 26,616 26,024
Current liabilities:    
Short-term borrowings 350 0
Accounts receivable securitization program 450 339
Long-term debt due currently 277 191
Trade accounts payable 947 945
Commodity and other derivative contractual liabilities 1,529 1,376
Margin deposits related to commodity contracts 8 4
Accrued income taxes 1 10
Accrued taxes other than income 200 182
Accrued interest 151 77
Asset retirement obligations 141 156
Operating lease liabilities 14 0
Other current liabilities 506 345
Total current liabilities 4,574 3,625
Long-term debt, less amounts due currently 10,102 10,874
Operating lease liabilities 41 0
Commodity and other derivative contractual liabilities 396 270
Accumulated deferred income taxes 2 10
Tax Receivable Agreement obligation 455 420
Asset retirement obligation 2,097 2,217
Other noncurrent liabilities and deferred credits 989 741
Total liabilities 18,656 18,157
Commitments and Contingencies
Total equity:    
Common stock (par value — $0.01; number of shares authorized — 1,800,000,000) (shares outstanding: December 31, 2019 — 487,698,111; December 31, 2018 — 493,215,309) 5 5
Treasury stock, at cost (shares: December 31, 2019 — 41,043,224; December 31, 2018 — 32,815,783) (973) (778)
Additional paid-in-capital 9,721 10,107
Retained deficit (764) (1,449)
Accumulated other comprehensive income (loss) (30) (22)
Stockholders' equity 7,959 7,863
Noncontrolling interest in subsidiary 1 4
Total equity 7,960 7,867
Total liabilities and equity $ 26,616 $ 26,024
v3.19.3.a.u2
Consolidated Balance Sheets Consolidated Balance Sheets (Parenthetical)
Dec. 31, 2019
$ / shares
shares
Statement of Changes in Financial Position [Abstract]  
Common stock, par or stated value per share | $ / shares $ 0.01
Common stock, shares authorized 1,800,000,000
Common stock, shares outstanding 487,698,111
Treasury stock, common shares 41,043,224
v3.19.3.a.u2
Consolidated Statement of Changes in Equity - USD ($)
$ in Millions
Total
Common Stock [Member]
Treasury Stock [Member]
Additional Paid-in Capital [Member]
Retained Deficit [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Total Stockholders' Equity [Member]
Noncontrolling Interest in Subsidiary [Member]
Balances at beginning of the period (Parent) at Dec. 31, 2016   $ (4) $ 0 $ (7,742) $ 1,155 $ (6) $ (6,597)  
Balances at beginning of the period (Total Equity) at Dec. 31, 2016 $ (6,597)              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Effects of stock-based compensation 23     23     23  
Net income (loss) attributable to Vistra Energy (254)       (254)   (254)  
Net Income (Loss) Attributable to Noncontrolling Interest 0              
Net income (loss) (254)              
Pension and OPEB - change in funded status (23)         (23) (23)  
Other (1)       (1)   (1)  
Balances at end of the period (Parent) at Dec. 31, 2017   4 0 7,765 (1,410) (17) 6,342  
Balances at end of the period (Total Equity) at Dec. 31, 2017 6,342              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Stock and stock compensation awards issued in connection with the Merger 1,902 1   1,901     1,902  
Share repurchases (778)   (778)       (778)  
Effects of stock-based compensation 72     72     72  
Tangible equity units acquired 369     369     369  
Warrants acquired 2     2     2  
Net income (loss) attributable to Vistra Energy (54)       (54)   (54)  
Net Income (Loss) Attributable to Noncontrolling Interest (2)             $ (2)
Net income (loss) (56)              
Adoption of accounting standard 17       16 1 17  
Pension and OPEB - change in funded status (6)         (6) (6)  
Investment by noncontrolling interest 6             6
Other (3)     (2) (1)   (3)  
Balances at end of the period (Parent) at Dec. 31, 2018 7,863 5 (778) 10,107 (1,449) (22) 7,863  
Balances at end of period (Noncontrolling Interests) at Dec. 31, 2018 4             4
Balances at end of the period (Total Equity) at Dec. 31, 2018 7,867              
Balances at beginning of the period (Parent) at Dec. 31, 2017   4 0 7,765 (1,410) (17) 6,342  
Balances at beginning of the period (Total Equity) at Dec. 31, 2017 6,342              
Balances at end of the period (Parent) at Dec. 31, 2019 7,959 5 (973) 9,721 (764) (30) 7,959  
Balances at end of period (Noncontrolling Interests) at Dec. 31, 2019 1             1
Balances at end of the period (Total Equity) at Dec. 31, 2019 7,960              
Balances at beginning of the period (Parent) at Dec. 31, 2018 7,863 5 (778) 10,107 (1,449) (22) 7,863  
Balances at beginning of period (Noncontrolling Interests) at Dec. 31, 2018 4             4
Balances at beginning of the period (Total Equity) at Dec. 31, 2018 7,867              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Share repurchases (641)   (641)       (641)  
Shares issued for tangible equity unit contracts 0   446 (446)     0  
Effects of stock-based compensation 62     62     62  
Net income (loss) attributable to Vistra Energy 928       928   928  
Net Income (Loss) Attributable to Noncontrolling Interest (2)             (2)
Net income (loss) 926              
Dividends declared on common stock (243)       (243)   (243)  
Adoption of accounting standard (2)       (2)   (2)  
Pension and OPEB - change in funded status (8)         (8) (8)  
Other (1)     (2) 2   0 (1)
Balances at end of the period (Parent) at Dec. 31, 2019 7,959 $ 5 $ (973) $ 9,721 $ (764) $ (30) $ 7,959  
Balances at end of period (Noncontrolling Interests) at Dec. 31, 2019 1             $ 1
Balances at end of the period (Total Equity) at Dec. 31, 2019 $ 7,960              
v3.19.3.a.u2
Business And Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Business And Significant Accounting Policies 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. The PJM, NY/NE and MISO segments were established on the Merger Date to reflect markets served by businesses acquired in the Merger. See Note 20 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 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 own the operating business of Crius (Crius Transaction). Because the Crius Transaction closed on July 15, 2019, Vistra Energy's 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.

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. Because the Merger closed on April 9, 2018, Vistra Energy's consolidated financial statements and the notes related thereto do not include the financial condition or the operating results of Dynegy prior to April 9, 2018. See Note 2 for a summary of the Merger transaction and business combination accounting.

Basis of Presentation

The 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 2018 Form 10-K. All intercompany items and transactions have been eliminated in consolidation. 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.
Derivative Instruments and Mark-to-Market Accounting

We enter into contracts for the purchase and sale of electricity, natural gas, coal, uranium and other commodities utilizing instruments such as options, swaps, futures and forwards primarily to manage commodity price and interest rate risks. If the instrument meets the definition of a derivative under accounting standards related to derivative instruments and hedging activities, changes in the fair value of the derivative are recognized in net income as unrealized gains and losses. This recognition is referred to as mark-to-market accounting. The fair values of our unsettled derivative instruments under mark-to-market accounting are reported in the consolidated balance sheets as commodity and other derivative contractual assets or liabilities. We report derivative assets and liabilities in the consolidated balance sheets without taking into consideration netting arrangements we have with counterparties. Margin deposits that contractually offset these assets and liabilities are reported separately in the consolidated balance sheets, except for certain margin amounts related to changes in fair value on CME transactions that are legally characterized as settlement of derivative contracts rather than collateral. When derivative instruments are settled and realized gains and losses are recorded, the previously recorded unrealized gains and losses and derivative assets and liabilities are reversed. See Notes 15 and 16 for additional information regarding fair value measurement and commodity and other derivative contractual assets and liabilities. A commodity-related derivative contract may be designated as a normal purchase or sale if the commodity is to be physically received or delivered for use or sale in the normal course of business. If designated as normal, the derivative contract is accounted for under the accrual method of accounting (not marked-to-market) with no balance sheet or income statement recognition of the contract until settlement.

Because derivative instruments are frequently used as economic hedges, accounting standards related to derivative instruments and hedging activities allow for hedge accounting, which provides for the designation of such instruments as cash flow or fair value hedges if certain conditions are met. At December 31, 2019 and 2018, there were no derivative positions accounted for as cash flow or fair value hedges.

We report commodity hedging and trading results as revenue, fuel expense or purchased power in the consolidated statements of operations depending on the type of activity. Electricity hedges, financial natural gas hedges and trading activities are primarily reported as revenue. Physical or financial hedges for coal, diesel or uranium, along with physical natural gas trades, are primarily reported as fuel expense. Realized and unrealized gains and losses associated with interest rate swap transactions are reported in the consolidated statements of operations in interest expense.

Revenue Recognition

Revenue is recognized when electricity is delivered to our customers in an amount that we expect to invoice for volumes delivered or services provided. Sales tax is excluded from revenue. Energy sales and services that have been delivered but not billed by period end are estimated. Accrued unbilled revenues are based on estimates of customer usage since the date of the last meter reading provided by the independent system operators or electric distribution companies. Estimated amounts are adjusted when actual usage is known and billed.

We record wholesale generation revenue when volumes are delivered or services are performed for transactions that are not accounted for on a mark-to-market basis. These revenues primarily consist of physical electricity sales to the ISO or RTO, ancillary service revenue for reliability services, capacity revenue for making installed generation and demand response available for system reliability requirements, and certain other electricity sales contracts. See Note 5 for detailed descriptions of revenue from contracts with customers. See Derivative Instruments and Mark-to-Market Accounting for revenue recognition related to derivative contracts.

Advertising Expense

We expense advertising costs as incurred and include them within SG&A expenses. Advertising expenses totaled $49 million, $46 million and $44 million for the year ended December 31, 2019, 2018 and 2017, respectively.

Impairment of Long-Lived Assets

We evaluate long-lived assets (including intangible assets with finite lives) for impairment whenever indications of impairment exist. The carrying value of such assets is deemed to be impaired if the projected undiscounted cash flows are less than the carrying value. If there is such impairment, a loss would be recognized based on the amount by which the carrying value exceeds the fair value. Fair value is determined primarily by discounted cash flows, supported by available market valuations, if applicable.
Finite-lived intangibles identified as a result of fresh start reporting or purchase accounting are amortized over their estimated useful lives based on the expected realization of economic effects. See Note 6 for details of intangible assets with finite lives, including discussion of fair value determinations.

Goodwill and Intangible Assets with Indefinite Lives

As part of fresh start reporting and purchase accounting, reorganization value or the purchase consideration is generally allocated, first, to identifiable tangible assets and liabilities, identifiable intangible assets and liabilities, then any remaining excess reorganization value is allocated to goodwill. We evaluate goodwill and intangible assets with indefinite lives for impairment at least annually, or when indications of impairment exist. We have established October 1 as the date we evaluate goodwill and intangible assets with indefinite lives for impairment. See Note 6 for details of goodwill and intangible assets with indefinite lives, including discussion of fair value determinations.

Nuclear Fuel

Nuclear fuel is capitalized and reported as a component of our property, plant and equipment in our consolidated balance sheets. Amortization of nuclear fuel is calculated on the units-of-production method and is reported as a component of fuel, purchased power costs and delivery fees in our consolidated statements of operations.

Major Maintenance Costs

Major maintenance costs incurred during generation plant outages are deferred and amortized into operating costs over the period between the major maintenance outages for the respective asset. Other routine costs of maintenance activities are charged to expense as incurred and reported as operating costs in our consolidated statements of operations.

Defined Benefit Pension Plans and OPEB Plans

On the Merger Date, Vistra Energy assumed the pension and OPEB plans that Dynegy had provided to certain of its eligible employees and retirees. The excess of the benefit obligations over the fair value of plan assets was recognized as a liability. See Note 2 for additional information regarding the Merger.

Certain health care and life insurance benefits are offered to eligible employees and their dependents upon the retirement of such employee from the company. Pension benefits are offered to eligible employees under collective bargaining agreements based on either a traditional defined benefit formula or a cash balance formula. Effective January 1, 2017, the OPEB plan was amended to discontinue the life insurance benefits for active employees. Costs of pension and OPEB plans are dependent upon numerous factors, assumptions and estimates.

See Note 17 for additional information regarding pension and OPEB plans.

Stock-Based Compensation

Stock-based compensation is accounted for in accordance with ASC 718, Compensation - Stock Compensation. The fair value of our non-qualified stock options is estimated on the date of grant using the Black-Scholes option-pricing model. Forfeitures are recognized as they occur. We recognize compensation expense for graded vesting awards on a straight-line basis over the requisite service period for the entire award. See Note 18 for additional information regarding stock-based compensation.

Sales and Excise Taxes

Sales and excise taxes are accounted for as "pass through" items on the consolidated balance sheets with no effect on the consolidated statements of operations (i.e., the tax is billed to customers and recorded as trade accounts receivable with an offsetting amount recorded as a liability to the taxing jurisdiction in other current liabilities in our consolidated statements of operations).
Franchise and Revenue-Based Taxes

Unlike sales and excise taxes, franchise and gross receipt taxes are not "pass through" items. These taxes are imposed on us by state and local taxing authorities, based on revenues or kWh delivered, as a cost of doing business and are recorded as an expense. Rates we charge to customers are intended to recover our costs, including the franchise and gross receipt taxes, but we are not acting as an agent to collect the taxes from customers. We report franchise and revenue-based taxes in SG&A expense in our consolidated statements of operations.

Income Taxes

On the Merger Date, Vistra Energy and Dynegy effected a merger transaction that for tax purposes was treated as a tax-free reorganization in which Vistra Energy survived as the parent entity. In general, all of Dynegy's tax basis and attributes were transferred to Vistra Energy, including approximately $4.5 billion of utilizable NOLs and refundable AMT tax credits.

Investment tax credits are accounted for under the deferral method, which resulted in a reduction to the basis of the Upton 2 solar and battery storage facility of $2 million and $78 million and a corresponding increase in the deferred tax assets in 2019 and 2018, respectively.

Deferred income taxes are provided for temporary differences between the book and tax basis of assets and liabilities as required under accounting rules. See Note 7.

We report interest and penalties related to uncertain tax positions as current income tax expense. See Note 7.

Tax Receivable Agreement (TRA)

The Company accounts for its obligations under the TRA as a liability in our consolidated balance sheets (see Note 8). The carrying value of the TRA obligation 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 and state corporate income tax rates and (b) estimates of our taxable income in the current and future years. Our taxable income takes into consideration the current federal tax code and reflects our current estimates of future results of the business.

The carrying value of the obligation is being accreted to the amount of the gross expected obligation using the effective interest method and the interest rate estimated at the Emergence Date. Changes in the estimated amount of this obligation resulting from changes to either the timing or amount of TRA payments are recognized in the period of change and are included on our consolidated statements of operations under the heading of Impacts of Tax Receivable Agreement.

Accounting for Contingencies

Our financial results may be affected by judgments and estimates related to loss contingencies. Accruals for loss contingencies are recorded when management determines that it is probable that a liability has been incurred and that such economic loss can be reasonably estimated. Such determinations are subject to interpretations of current facts and circumstances, forecasts of future events and estimates of the financial impacts of such events. See Note 13 for a discussion of contingencies.

Cash and Cash Equivalents

For purposes of reporting cash and cash equivalents, temporary cash investments purchased with a remaining maturity of three months or less are considered cash equivalents.

Restricted Cash

The terms of certain agreements require the restriction of cash for specific purposes. See Note 21 for more details regarding restricted cash.
Property, Plant and Equipment

Property, plant and equipment has been recorded at estimated fair values at the time of acquisition for assets acquired or at cost for capital improvements and individual facilities developed (see Notes 2 and 3). Significant improvements or additions to our property, plant and equipment that extend the life of the respective asset are capitalized at cost, while other costs are expensed when incurred. The cost of self-constructed property additions includes materials and both direct and indirect labor, including payroll-related costs. Interest related to qualifying construction projects and qualifying software projects is capitalized in accordance with accounting guidance related to capitalization of interest cost. See Note 21.

Depreciation of our property, plant and equipment (except for nuclear fuel) is calculated on a straight-line basis over the estimated service lives of the properties. Depreciation expense is calculated on an asset-by-asset basis. Estimated depreciable lives are based on management's estimates of the assets' economic useful lives. See Note 21.

Asset Retirement Obligations (ARO)

A liability is initially recorded at fair value for an asset retirement obligation associated with the legal obligation associated with law, regulatory, contractual or constructive retirement requirements of tangible long-lived assets in the period in which it is incurred if a fair value is reasonably estimable. At initial recognition of an ARO obligation, an offsetting asset is also recorded for the long-lived asset that the liability corresponds with, which is subsequently depreciated over the estimated useful life of the asset. These liabilities primarily relate to our nuclear generation plant decommissioning, land reclamation related to lignite mining and removal of lignite/coal-fueled plant ash treatment facilities. Over time, the liability is accreted for the change in present value and the initial capitalized costs are depreciated over the remaining useful lives of the assets. Generally, changes in estimates related to ARO obligations are recorded as increases or decreases to the liability and related asset as information becomes available. Changes in estimates related to assets that have been retired or for which capitalized costs are not recoverable are recorded as operating costs in the consolidated statements of operations. See Note 21.

Inventories

Inventories consist of materials and supplies, fuel stock and natural gas in storage. Materials and supplies inventory is valued at weighted average cost and is expensed or capitalized when used for repairs/maintenance or capital projects, respectively. Fuel stock and natural gas in storage are reported at the lower of cost (on a weighted average basis) or market. We expect to recover the value of inventory costs in the normal course of business. See Note 21.

Investments

Investments in a nuclear decommissioning trust fund are carried at current market value in the consolidated balance sheets. Assets related to employee benefit plans represent investments held to satisfy deferred compensation liabilities and are recorded at current market value. See Note 21 for discussion of these and other investments.

Unconsolidated Investments

We use the equity method of accounting for investments in affiliates over which we exercise significant influence. Our share of net income (loss) from these affiliates is recorded to equity in earnings (loss) of unconsolidated investment in the consolidated statements of operations. See Note 21.

Noncontrolling Interest

Noncontrolling interest is comprised of the 20% of Electric Energy, Inc. (EEI) that we do not own. EEI is our consolidated subsidiary that owns a coal facility in Joppa, Illinois. This noncontrolling interest is classified as a component of equity separate from stockholders' equity in the consolidated balance sheets.
Treasury Stock

Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock, which is presented in our consolidated balance sheets as a reduction to additional paid-in capital. See Note 14.

Leases

At the inception of a contract we determine if it is or contains a lease, which involves the contract conveying the right to control the use of explicitly or implicitly identified property, plant, or equipment for a period of time in exchange for consideration.

Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date of the underlying lease based on the present value of lease payments over the lease term. We use our secured incremental borrowing rate based on the information available at the lease commencement date to determine the present value of lease payments. Operating leases are included in operating lease ROU assets, operating lease liabilities (current) and operating lease liabilities (noncurrent) on our consolidated balance sheet. Finance leases are included in property, plant and equipment, other current liabilities and other noncurrent liabilities and deferred credits on our consolidated balance sheet. Lease term includes options to extend or terminate the lease when it is reasonably certain that we will exercise the option. At adoption, we elected the practical expedient which permits us to not reassess under the new standard our prior conclusion about lease classification and initial direct costs. We have also elected the practical expedient to not separate lease and non-lease components for a majority of the lease asset classes. We have also elected the hindsight practical expedient to determine the lease term.

Leases with an initial lease term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

We also present lessor sublease income on a net basis against the related lessee lease expense.

Adoption of New Accounting Standards

Leases — On January 1, 2019, we adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) and all related amendments (new lease standard) using the modified retrospective method with the cumulative-effect adjustment to the opening balance of retained deficit for all contracts outstanding at the time of adoption. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new lease standard to be immaterial to our net income on an ongoing basis. The impact of adopting the new lease standard primarily relates to recognition of lease liabilities and ROU assets for all leases classified as operating leases. Under the new lease standard, each ROU asset will be amortized over the lease term and liability settled at the end of the lease term.

We recognized the effect of initially applying the new lease standard by recording ROU assets of $85 million and lease liabilities of $123 million in our consolidated balance sheet.
As of January 1, 2019, the cumulative effect of the changes made to our consolidated balance sheet for the adoption of the new lease standard was as follows:
December 31, 2018Adoption of New Lease StandardJanuary 1,
2019
Impact on consolidated balance sheet:
Assets
Property, plant and equipment — net$14,612  $15  $14,627  
Operating lease right-of-use assets—  70  70  
Prepaid expense and other current assets152  (2) 150  
Accumulated deferred income taxes1,336   1,337  
Liabilities
Other current liabilities345  (1) 344  
Operating lease liabilities—  109  109  
Identifiable intangible liabilities401  (36) 365  
Other noncurrent liabilities and deferred credits340  14  354  
Equity
Retained deficit(1,449) (2) (1,451) 

See Note 12 for the disclosures required by the new lease standard.

Changes to the Disclosure Requirements for Defined Benefit Plans In August 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans. The ASU removes disclosure requirements for (a) the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, (b) related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan and (c) the effects of a one-percentage-point change in assumed health care cost trend rates on the aggregate of the service and interest cost components of net periodic benefit costs and benefit obligation for postretirement health care benefits. The ASU requires new disclosures for (a) the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and (b) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. We adopted this ASU in the fourth quarter of 2018, and the updated disclosures are included in Note 17.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The ASU permits the reclassification of income tax effects of the TCJA on items within accumulated other comprehensive income (AOCI) to retained earnings. We adopted this ASU in the fourth quarter of 2018, and the impact was additional tax expense to AOCI of $1 million with the offset to retained deficit (see Note 7).

Revenue from Contracts with Customers On January 1, 2018, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) and all related amendments (new revenue standard) using the modified retrospective method for all contracts outstanding at the time of adoption. We recognized the cumulative effect of initially applying the revenue standard as an adjustment to the opening balance of retained deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The impact of the adoption of the revenue standard was immaterial and we expect the adoption to continue to be immaterial to our net income on an ongoing basis. Our retail energy charges and wholesale generation, capacity and contract revenues will continue to be recognized when electricity and other services are delivered to our customers. The impact of adopting the revenue standard primarily relates to the deferral of acquisition costs associated with retail contracts with customers that were previously expensed as incurred. Under the revenue standard, these amounts are capitalized and amortized over the expected life of the customer.
Statement of Cash Flows In November 2016, the FASB issued ASU 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The ASU requires restricted cash to be included in the cash and cash equivalents and a reconciliation between the change in cash and cash equivalents and the amounts presented on the balance sheet. We adopted the standard on January 1, 2018. The ASU modified our presentation of our consolidated statements of cash flows, and retrospective application to comparative periods presented was required. For the year ended December 31, 2017, our consolidated statements of cash flows previously reflected a source of cash of $186 million, reported as changes in restricted cash, that is now reported in net change in cash, cash equivalents and restricted cash. See the consolidated statements of cash flows and Note 21 for disclosures related to the adoption of this accounting standard.

Changes in Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The ASU will be effective for fiscal years beginning after December 15, 2020 and early adoption is permitted. 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 are currently evaluating the impact of this ASU on our financial statements, but we do not expect it to have a material impact upon adoption.

In August 2018, the FASB issued ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement. The ASU will be effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. 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 will require 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 do not expect the ASU to have a material impact on our financial statements.

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 will be effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. 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 do not expect the ASU to 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. The ASU will be effective for fiscal years beginning after December 31, 2019. We do not expect the ASU to have a material impact on our financial statements.
v3.19.3.a.u2
Acquisitions, Merger Transaction and Business Combination Accounting (Notes)
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Acquisitions, Merger Transaction and Business Combination Accounting 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. See Note 11 for discussion of debt assumed in the Crius Transaction.

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 with 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 with 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 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 15), is listed below:

Working capital was valued using available market information (Level 2).
Acquired derivatives were valued using the methods described in Note 15 (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. During the three months ended December 31, 2019, we updated the preliminary purchase price allocation of the Crius Transaction reported as of September 30, 2019 with revised valuation estimates by decreasing net working capital by $37 million, decreasing identifiable intangible assets by $2 million, increasing goodwill by $52 million, decreasing other noncurrent assets by $2 million, decreasing identifiable intangible liabilities by $36 million, increasing other noncurrent liabilities and deferred credits by $1 million and changing accumulated deferred income taxes from an asset of $36 million to a liability of $9 million. 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.
Ambit and Crius Transactions Preliminary Purchase Price Allocations
Ambit Transaction  Crius Transaction  
Cash and cash equivalents and restricted cash$49  $26  
Net working capital29  (4) 
Identifiable intangible assets263  292  
Goodwill214  257  
Commodity and other derivative contractual assets23  18  
Other noncurrent assets13  18  
Total assets and net working capital acquired591  607  
Long-term debt, including amounts due currently—  141  
Commodity and other derivative contractual liabilities28  40  
Accumulated deferred income taxes—   
Other noncurrent liabilities and deferred credits 17  
Total liabilities assumed36  207  
Identifiable net assets acquired$555  $400  

In the year ended December 31, 2019, acquisition costs incurred in the Ambit and Crius Transactions totaled $1 million and $2 million, respectively. For the Ambit Acquisition Date through December 31, 2019, our consolidated statements of operations include revenues and net income acquired in the Ambit Transaction totaling $193 million and $2 million, respectively. For the Crius Acquisition Date through December 31, 2019, our consolidated statements of operations include revenues and net income acquired in the Crius Transaction totaling $453 million and zero, respectively. The net income acquired in the Ambit and Crius Transactions include intangible amortization and transition related expenses.
Ambit and Crius Transaction Unaudited Pro Forma Financial Information — The following unaudited consolidated pro forma financial information for the years ended December 31, 2019 and 2018 assumes that the Ambit and Crius Transactions occurred on January 1, 2018 (i.e., represents our results for the years ended December 31, 2019 and 2018 plus the results for either Ambit or Crius for the period not owned by us, respectively). The unaudited consolidated pro forma financial information is provided for informational purposes only and is not necessarily indicative of the results of operations that would have occurred had the Ambit and Crius Transactions been completed on January 1, 2018, nor is the unaudited consolidated pro forma financial information indicative of future results of operations, which may differ materially from the consolidated pro forma financial information presented here.
Ambit Transaction  Crius Transaction  
Year Ended December 31,  Year Ended December 31,  
2019201820192018
Revenues$12,931  $10,446  $12,373  $10,379  
Net income (loss) (a)$949  $(95) $876  $(43) 
Net income (loss) attributable to Vistra Energy$951  $(93) $878  $(41) 
Net income (loss) attributable to Vistra Energy per weighted average share of common stock outstanding — basic$1.92  $(0.18) $1.78  $(0.08) 
Net income (loss) attributable to Vistra Energy per weighted average share of common stock outstanding — diluted$1.90  $(0.18) $1.76  $(0.08) 
__________
(a)Decrease in pro forma net income compared to consolidated net income is driven by unrealized losses on hedging activities of Crius and amortization of intangible assets.

The consolidated unaudited pro forma financial information presented above includes adjustments for incremental depreciation and amortization as a result of the fair value determination of the net assets acquired and the related impacts on tax expense.

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.

Dynegy Business Combination Accounting

We believe the Merger has provided and continues to provide significant strategic benefits and opportunities to Vistra Energy, including increased scale and market diversification, rebalanced asset portfolio and improved earnings and cash flow. The Merger was 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 Merger Date. The combined results of operations are reported in our consolidated financial statements beginning as of the Merger Date. 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 15), is listed below:

Working capital was valued using available market information (Level 2).
Acquired property, plant and equipment was valued using a combination of an income approach and a market approach. The income approach utilized a discounted cash flow analysis based upon a debt-free, free cash flow model (Level 3).
Acquired derivatives were valued using the methods described in Note 15 (Level 1, Level 2 or Level 3).
Contracts with terms that were not at current market prices were also valued using a discounted cash flow analysis (Level 3). The cash flows generated by the contracts were compared with their cash flows based on current market prices with the resulting difference discounted to present value and recorded as either an intangible asset or liability.
Long-term debt was valued using a market approach (Level 2).
AROs were recorded in accordance with ASC 410, Asset Retirement and Environmental Obligations (Level 3).

The following table summarizes the consideration paid and the final allocation of the purchase price to the fair value amounts recognized for the assets acquired and liabilities assumed related to the Merger as of the Merger Date. Based on the opening price of Vistra Energy common stock on the Merger Date, the purchase price was approximately $2.3 billion. During the three months ended March 31, 2019, the purchase price allocation was completed. During the period from April 9, 2018 through March 31, 2019, we updated the initial purchase price allocation with final valuations by increasing property, plant and equipment by $173 million, decreasing intangible assets by $36 million, increasing goodwill by $175 million, decreasing accounts receivable, inventory, prepaid expenses and other current assets by $10 million, increasing accumulated deferred tax asset by $127 million, decreasing other noncurrent assets by $113 million, increasing trade accounts payable and other current liabilities by $89 million, increasing other noncurrent liabilities by $177 million, increasing asset retirement obligations, including amounts due currently by $56 million as well as other minor adjustments. The valuation revisions were a result of updated inputs used in determining the fair value of the acquired assets and liabilities.

Dynegy shares outstanding as of April 9, 2018 (in millions)144.8  
Exchange Ratio0.652  
Vistra Energy shares issued for Dynegy shares outstanding (in millions)94.4  
Opening price of Vistra Energy common stock on April 9, 2018$19.87  
Purchase price for common stock$1,876  
Fair value of equity component of tangible equity units369  
Fair value of outstanding stock compensation awards attributable to pre-combination service26  
Fair value of outstanding warrants 
Total purchase price$2,273  


Dynegy Merger Final Purchase Price Allocation
Cash and cash equivalents$445  
Trade accounts receivables, inventories, prepaid expenses and other current assets853  
Property, plant and equipment10,535  
Accumulated deferred income taxes518  
Identifiable intangible assets351  
Goodwill175  
Other noncurrent assets419  
Total assets acquired13,296  
Trade accounts payable and other current liabilities733  
Commodity and other derivative contractual assets and liabilities, net422  
Asset retirement obligations, including amounts due currently475  
Long-term debt, including amounts due currently8,919  
Other noncurrent liabilities469  
Total liabilities assumed11,018  
Identifiable net assets acquired2,278  
Noncontrolling interest in subsidiary 
Total purchase price$2,273  
Acquisition costs incurred in the Merger totaled less than $1 million and $25 million for the years ended December 31, 2019 and 2018, respectively. For the period from the Merger Date through December 31, 2018, our consolidated statements of operations include revenues and net income (loss) acquired in the Merger totaling $3.902 billion and $224 million respectively.

Dynegy Merger Unaudited Pro Forma Financial Information — The following unaudited pro forma financial information for the year ended December 31, 2018 and 2017 assumes that the Merger occurred on January 1, 2017. The unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of the results of operations that would have occurred had the Merger been completed on January 1, 2017, nor is the unaudited pro forma financial information indicative of future results of operations, which may differ materially from the pro forma financial information presented here.
Year Ended December 31,
20182017
Revenues$10,595  $10,509  
Net loss$(268) $(969) 
Net loss attributable to Vistra Energy$(265) $(983) 
Net loss attributable to Vistra Energy per weighted average share of common stock outstanding — basic$(0.52) $(1.83) 
Net loss attributable to Vistra Energy per weighted average share of common stock outstanding — diluted$(0.52) $(1.83) 

The unaudited pro forma financial information presented above includes adjustments for incremental depreciation and amortization as a result of the fair value determination of the net assets acquired, interest expense on debt assumed in the Merger, effects of the Merger on tax expense (benefit), changes in the expected impacts of the tax receivable agreement due to the Merger, and other related adjustments.
v3.19.3.a.u2
Acquisition and Development of Generation Facilities (Notes)
12 Months Ended
Dec. 31, 2019
Acquisition And Development Of Generation Facilities [Abstract]  
Acquisition and Development of Generation Facilities ACQUISITION AND DEVELOPMENT OF GENERATION FACILITIES
Battery Energy Storage Projects

Upton 2 — We have completed the construction of our first battery energy storage system (ESS). In October 2018, we were awarded a $1 million grant from the TCEQ for our battery ESS at our Upton 2 solar facility. The grant is part of the Texas Emissions Reduction Plan. The 10 MW lithium-ion ESS captures excess solar energy produced during the day and releases the energy in late afternoon and early evening, when demand is highest. The Upton 2 battery ESS became operational in December 2018.

Oakland — In June 2019, East Bay Community Energy 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. The contract is pending a concurrent utility Market Capability Agreement contract for review and signature. The utility Market Capability Agreement will then be sent to the California Public Utilities Commission (CPUC) for approval.

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 Pacific Gas and Electric Company (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 December 31, 2019, we had accumulated approximately $64 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. On October 15, 2019, PG&E filed a motion in its bankruptcy proceeding requesting approval of the assumption of the resource adequacy contract. In early November, the bankruptcy court approved the assumption motion subject to the CPUC approving the terms of the amendment. The CPUC approved the terms of the amendment on January 22, 2020 so the resource adequacy contract as amended is now assumed and fully enforceable against PG&E.

Solar Development Project

Upton 2 — In May 2017, we acquired the rights to develop, construct and operate a utility scale solar photovoltaic power generation facility in Upton County, Texas (Upton 2). As part of this project, we entered into a turnkey engineering, procurement and construction agreement to construct the approximately 180 MW facility. We spent approximately $231 million related to this project primarily for progress payments under the engineering, procurement and construction agreement and the acquisition of the development rights. The facility began test operations in March 2018 and commercial operations began in June 2018.

Odessa Acquisition

In August 2017, La Frontera Holdings, LLC (La Frontera), an indirect wholly owned subsidiary of Vistra Energy, purchased a 1,054 MW CCGT natural gas-fueled generation plant (and other related assets and liabilities) located in Odessa, Texas (Odessa Facility) from Odessa-Ector Power Partners, L.P., an indirect wholly owned subsidiary of Koch Ag & Energy Solutions, LLC (Koch) (altogether, the Odessa Acquisition). La Frontera paid an aggregate purchase price of approximately $355 million, plus a five-year earn-out provision, to acquire the Odessa Facility. The purchase price was funded by cash on hand.

The Odessa Acquisition was accounted for as an asset acquisition. Substantially all of the approximately $355 million purchase price was assigned to property, plant and equipment in our consolidated balance sheet. Additionally, the initial fair value associated with an earn-out provision of approximately $16 million was included as consideration in the overall purchase price. The earn-out provision requires cash payments to be made to Koch if spark-spreads related to the pricing point of the Odessa Facility exceed certain thresholds. Subsequent to the acquisition, the earn-out provision has been accounted for as a derivative in our consolidated financial statements. Partial buybacks of the earn-out provision were settled in February and May 2018.
v3.19.3.a.u2
Retirement of Generation Facilities (Notes)
12 Months Ended
Dec. 31, 2019
Retirement of Generation Facilities [Abstract]  
Retirement of Generation Facilities 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 court in November 2019, we will retire the Edwards facility by the end of 2022 (see Note 13). 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 that require us to retire approximately 2,000 MW of generation capacity (see Note 13). 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 year ended December 31, 2019 and are 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 consolidated statements of operations. The following table details the units that have been or will be retired in Illinois totaling 2,653 MW. 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.
NameLocation (all in the state of Illinois)Fuel TypeNet Generation Capacity (MW)Number of UnitsDates Units Taken Offline
CoffeenCoffeen, ILCoal915   November 1, 2019
Duck CreekCanton, ILCoal425   December 15, 2019
HavanaHavana, ILCoal434   November 1, 2019
HennepinHennepin, ILCoal294   November 1, 2019
EdwardsBartonville, ILCoal585   By the end of 2022  
Total
2,653   

PJM — In August 2018, we filed a notice of suspension of operation with PJM and other mandatory regulatory notifications related to the retirement of our 51 MW Northeastern Power Company waste coal facility in McAdoo, Pennsylvania (Northeastern Facility). We decided to retire the Northeastern Facility due to its uneconomic operations and financial outlook. Following the receipt of regulatory approvals, the Northeastern Facility was retired in October 2018. The decision to retire the Northeastern Facility did not result in a material impact to the financial statements, and the operational results of the Northeastern Facility are included in our Asset Closure segment.

Two of our non-operated, jointly held power plants acquired in the Merger, for which our proportional generation capacity was 883 MW, were retired in May 2018. These units were retired as previously scheduled. No gain or loss was recorded in conjunction with the retirement of these units, and the operational results of these facilities are included in our Asset Closure segment. The following table details the units retired.
NameLocationFuel TypeNet Generation Capacity (MW)Ownership InterestDate Units Taken Offline
KillenManchester, OhioCoal204  33%  May 31, 2018
StuartAberdeen, OhioCoal679  39%  May 24, 2018
Total
883  
ERCOT — In January and February 2018, we retired three power plants in Texas with a total installed nameplate generation capacity of 4,167 MW. We decided to retire these units because they were projected to be uneconomic based on then current market conditions and would have faced significant environmental costs associated with operating such units. In the case of the Sandow units, the decision also reflected the execution of a contract termination agreement pursuant to which the Company and Alcoa agreed to an early settlement of a long-standing power and mining agreement. Expected retirement expenses were accrued in the third and fourth quarter of 2017 and, as a result, no retirement expenses were recorded related to these facilities in the year ended December 31, 2018. The operational results of these facilities are included in our Asset Closure segment. The following table details the units retired.
NameLocation (all in the state of Texas)Fuel TypeInstalled Nameplate Generation Capacity (MW)Number of UnitsDate Units Taken Offline
MonticelloTitus CountyLignite/Coal1,880   January 4, 2018
SandowMilam CountyLignite1,137   January 11, 2018
Big BrownFreestone CountyLignite/Coal1,150   February 12, 2018
Total
4,167   

We recorded a charge of approximately $206 million in 2017 related to the retirements, including employee-related severance costs, non-cash charges for writing off materials inventory and capitalized improvements and changes to the timing and amounts of asset retirement obligations for mining and plant-related reclamation at these facilities. The charge, all of which related to our Asset Closure segment, was recorded to operating costs and impairment of long-lived assets in our consolidated statements of operations. In addition, we will continue the ongoing reclamation work at the plants' mines.

In October 2017, the Company and Alcoa entered into a contract termination agreement pursuant to which the parties agreed to an early settlement of a long-standing power and mining agreement. In consideration for the early termination, Alcoa made a payment to Luminant of approximately $238 million in October 2017. The contract termination and related payment did not result in a material gain or loss. The contract had been important to the overall economic viability of the Sandow plant.
v3.19.3.a.u2
Revenue (Notes)
12 Months Ended
Dec. 31, 2019
Revenue from Contract with Customer [Abstract]  
Revenue REVENUE
The following tables disaggregate our revenue by major source:
Year Ended December 31, 2019
RetailERCOTPJMNY/NEMISOAsset
Closure
CAISO/EliminationsConsolidated
Revenue from contracts with customers:
Retail energy charge in ERCOT$4,983  $—  $—  $—  $—  $—  $—  $4,983  
Retail energy charge in Northeast/Midwest1,818  —  —  —  —  —  —  1,818  
Wholesale generation revenue from ISO/RTO—  1,629  579  434  215  194  193  3,244  
Capacity revenue—  —  162  181  24  11  —  378  
Revenue from other wholesale contracts—  264  521  181  147    1,124  
Total revenue from contracts with customers6,801  1,893  1,262  796  386  207  202  11,547  
Other revenues:
Intangible amortization(15) —  —  (4) (17) —   (32) 
Hedging and other revenues (a)86  (245) 105  162  12  42  132  294  
Affiliate sales—  2,345  1,075  181  277  92  (3,970) —  
Total other revenues71  2,100  1,180  339  272  134  (3,834) 262  
Total revenues$6,872  $3,993  $2,442  $1,135  $658  $341  $(3,632) $11,809  
____________
(a)Includes $682 million of unrealized net gains from mark-to-market valuations of commodity positions. See Note 20 for unrealized net gains (losses) by segment.
Year Ended December 31, 2018
RetailERCOTPJMNY/NEMISOAsset
Closure
CAISO/EliminationsConsolidated
Revenue from contracts with customers:
Retail energy charge in ERCOT$4,426  $—  $—  $—  $—  $—  $—  $4,426  
Retail energy charge in Northeast/Midwest1,123  —  —  —  —  —  —  1,123  
Wholesale generation revenue from ISO/RTO—  1,151  792  544  254  218  167  3,126  
Capacity revenue—  —  369  240  25  34  30  698  
Revenue from other wholesale contracts—  214  29  42  133  —   424  
Total revenue from contracts with customers5,549  1,365  1,190  826  412  252  203  9,797  
Other revenues:
Intangible amortization(26) (1)  (9) (9) —  —  (43) 
Hedging and other revenues (a)74  (362) (62) (41) (120) (106)  (610) 
Affiliate sales—  1,632  595  41  116  225  (2,609) —  
Total other revenues48  1,269  535  (9) (13) 119  (2,602) (653) 
Total revenues$5,597  $2,634  $1,725  $817  $399  $371  $(2,399) $9,144  
____________
(a)Includes $380 million of unrealized net losses from mark-to-market valuations of commodity positions. See Note 20 for unrealized net gains (losses) by segment.

Retail Energy Charges

Revenue is recognized when electricity is delivered to our customers in an amount that we expect to invoice for volumes delivered or services provided. Sales tax is excluded from revenue. Payment terms vary from 15 to 45 days from invoice date. Revenue is recognized over-time using the output method based on kilowatt hours delivered. Energy charges are delivered as a series of distinct services and are accounted for as a single performance obligation.

Energy sales and services that have been delivered but not billed by period end are estimated. Accrued unbilled revenues are based on estimates of customer usage since the date of the last meter reading provided by the independent system operators or electric distribution companies. Estimated amounts are adjusted when actual usage is known and billed.

As contracts for retail electricity can be for multi-year periods, the Company has performance obligations under these contracts that have not yet been satisfied. These performance obligations have transaction prices that are both fixed and variable, and that vary based on the contract duration and customer type. For the fixed price contracts, the amount of any unsatisfied performance obligations will vary based on customer usage, which will depend on factors such as weather and customer activity and therefore it is not practicable to estimate such amounts.

Wholesale Generation Revenue from ISOs/RTOs

Revenue is recognized when volumes are delivered to the ISO or RTO. Revenue is recognized over time using the output method based on kilowatt hours delivered and cash is settled within 10 days of invoicing. Vistra Energy operates as a market participant within ERCOT, PJM, NYISO, ISO-NE, MISO and CAISO and expects to continue to remain under contract with each ISO or RTO indefinitely. Wholesale generation revenues are delivered as a series of distinct services and are accounted for as a single performance obligation. When electricity is sold to and purchased from the same ISO or RTO in the same period, the excess of the amount sold over the amount purchased is reflected in wholesale generation revenues.
Capacity Revenue

We provide capacity to customers through participation in capacity auctions held by the ISO or RTO, or through bilateral sales. Generation facilities are awarded auction volumes through the ISO or RTO auction and bilateral sales are based on executed contracts with customers. Capacity revenues consist of revenues billed to a third party at either the market or a negotiated contract price for making installed generation and demand response capacity available in order to satisfy system integrity and reliability requirements. Capacity revenues are recognized when the performance obligation is satisfied ratably over time in accordance with the contracts as our power generation facilities stand ready to deliver power to the customer. Penalties are assessed by the ISO or RTO against generation facilities if the facility is not available during the capacity period. The penalties are recorded as a reduction to revenue.

Revenue from Other Wholesale Contracts

Other wholesale contracts include other revenue activity with the ISO or RTO, such as ancillary services, auction revenue, neutrality revenue and revenue from nonaffiliated retail electric providers, municipalities or other wholesale counterparties. Revenue is recognized when the service is performed. Revenue is recognized over time using the output method based on kilowatt hours delivered or other applicable measurements, and cash settles shortly after invoicing. Vistra Energy operates as a market participant within ERCOT, PJM, NYISO, ISO-NE, MISO and CAISO and expects to continue to remain under contract with each ISO or RTO indefinitely. Other wholesale contracts are delivered as a series of distinct services and are accounted for as a single performance obligation.

Other Revenues

Some of our contracts for the sale of electricity meet the definition of a derivative under the accounting standards related to derivative instruments. Revenue from derivative contracts is not considered revenue from contracts with customers under the accounting standards related to revenue. Our revenue from the sale of electricity under derivative contracts, including the impact of unrealized gains or losses on those contracts, is reported in the table above as hedging and other revenues. We have classified all sales to affiliates that are eliminated in consolidation as other revenues in the table above.

Contract and Other Customer Acquisition Costs

We defer costs to acquire retail contracts and amortize these costs over the expected life of the contract. The expected life of a retail contract is calculated using historical attrition rates, which we believe to be an accurate indicator of future attrition rates. The deferred acquisition and contract cost balance as of December 31, 2019 and 2018 and January 1, 2018 was $53 million, $38 million and $22 million, respectively. The amortization related to these costs during the year ended December 31, 2019 and 2018 totaled $21 million and $10 million, respectively, recorded as SG&A expenses, and $9 million and $7 million, respectively, recorded as a reduction to operating revenues in the consolidated statements of operations.

Practical Expedients

The vast majority of revenues are recognized under the right to invoice practical expedient, which allows us to recognize revenue in the same amount that we have a right to invoice our customers. Unbilled revenues are recorded based on the volumes delivered and services provided to the customers at the end of the period, using the right to invoice practical expedient. We have elected to not disclose the value of unsatisfied performance obligations for contracts with variable consideration for which we recognize revenue using the right to invoice practical expedient. We use the portfolio approach in evaluating similar customer contracts with similar performance obligations. Sales taxes are not included in revenue.

Performance Obligations

As of December 31, 2019, 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 through bilateral sales. Therefore, an obligation exists as of the date of the results of the respective ISO or RTO capacity auction or the contract execution date for bilateral customers. The transaction price is also set by the results of the capacity auction and/or executed contract. These obligations total $784 million, $732 million, $426 million, $96 million and $29 million that will be recognized in the years ending December 31, 2020, 2021, 2022, 2023 and 2024, respectively, and $47 million thereafter. Capacity revenues are recognized as capacity is made available to the related ISOs or RTOs or bilateral 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:
December 31,
20192018
Trade accounts receivable from contracts with customers — net$1,246  $951  
Other trade accounts receivable — net119  136  
Total trade accounts receivable — net$1,365  $1,087  
____________
(a)At December 31, 2019, includes $175 million of trade accounts receivable related to operations acquired in the Ambit and Crius Transactions.
v3.19.3.a.u2
Goodwill and Identifiable Intangible Assets and Liabilities (Notes)
12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Identifiable Intangible Assets and Liabilities GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS AND LIABILITIES
Goodwill

The following table provides information regarding our goodwill balance. There have been no impairments of goodwill since Emergence.

Balance at December 31, 2016 and 2017 (a)$1,907  
Goodwill recorded in connection with the Merger (b)161  
Balance at December 31, 20182,068  
Goodwill recorded in connection with the Merger (b)14  
Goodwill recorded in connection with the Crius Transaction (c)257  
Goodwill recorded in connection with the Ambit Transaction (c)214  
Balance at December 31, 2019$2,553  
_______________
(a)Goodwill totaling $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.
(b)Goodwill totaling $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 (see Note 2).
(c)Preliminary goodwill arising in connection with the Ambit and Crius Transactions is unassigned to a reporting unit pending completion of the purchase price allocations. None of the goodwill related to the Crius Transaction is deductible for tax purposes. The goodwill related to the Ambit Transaction of $214 million is deductible for tax purposes over 15 years on a straight-line basis.

Goodwill and intangible assets with indefinite useful lives are required to be evaluated for impairment at least annually or whenever events or changes in circumstances indicate an impairment may exist. As of the Effective Date, we have selected October 1 as our annual goodwill test date. On the most recent goodwill testing date, we applied qualitative factors and determined that it was more likely than not that the fair value of our ERCOT Generation and ERCOT Retail reporting units exceeded their carrying value at October 1, 2019. Significant qualitative factors evaluated included reporting unit financial performance and market multiples, cost factors, customer attrition, and changes in reporting unit book value.
Identifiable Intangible Assets and Liabilities

Identifiable intangible assets are comprised of the following:
December 31, 2019December 31, 2018
Identifiable Intangible AssetGross
Carrying
Amount
Accumulated
Amortization
NetGross
Carrying
Amount
Accumulated
Amortization