VISTRA ENERGY CORP., 10-Q filed on 11/5/2019
Quarterly Report
v3.19.3
Cover Page - shares
9 Months Ended
Sep. 30, 2019
Oct. 31, 2019
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 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 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 Common Stock, Shares Outstanding   487,394,276
Entity Central Index Key 0001692819  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Common stock, par value $0.01 per share    
Document Information [Line Items]    
Title of 12(b) Security Common stock, par value $0.01 per share  
Trading Symbol VST  
Security Exchange Name NYSE  
Warrants    
Document Information [Line Items]    
Title of 12(b) Security Warrants  
Trading Symbol VST.WS.A  
Security Exchange Name NYSE  
v3.19.3
Condensed Statements Of Consolidated Income (Loss) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Income Statement [Abstract]        
Operating revenues $ 3,194 $ 3,243 $ 8,949 $ 6,581
Fuel, purchased power costs and delivery fees (1,687) (1,627) (4,287) (3,492)
Operating costs (397) (346) (1,153) (926)
Depreciation and amortization (424) (426) (1,213) (967)
Selling, general and administrative expenses (246) (194) (637) (711)
Operating income 440 650 1,659 485
Other income 6 6 45 25
Other deductions (4) (1) (9) (4)
Interest expense and related charges (224) (154) (720) (291)
Impacts of Tax Receivable Agreement (62) 17 (26) (65)
Equity in earnings of unconsolidated investments 3 7 13 11
Income before income taxes 159 525 962 161
Income tax expense (45) (194) (270) (31)
Net income 114 331 692 130
Net (income) loss attributable to noncontrolling interest (1) (1) 2 2
Net income attributable to Vistra Energy $ 113 $ 330 $ 694 $ 132
Weighted average shares of common stock outstanding:        
Weighted average shares of common stock outstanding - basic 490,562,179 533,142,189 486,215,356 500,781,573
Weighted average shares of common stock outstanding - diluted 493,670,295 540,972,802 490,226,743 508,128,988
Net income per weighted average share of common stock outstanding:        
Net income per weighted average share of common stock outstanding - basic $ 0.23 $ 0.62 $ 1.43 $ 0.26
Net income per weighted average share of common stock outstanding - diluted $ 0.23 $ 0.61 $ 1.42 $ 0.26
v3.19.3
Condensed Statements Of Consolidated Comprehensive Income (Loss) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Statement of Comprehensive Income [Abstract]        
Net income $ 114 $ 331 $ 692 $ 130
Other comprehensive income, net of tax effects:        
Effects related to pension and other retirement benefit obligations (net of tax benefit of $4, $—, $4 and $—) (13) 1 (12) 2
Total other comprehensive income (loss) (13) 1 (12) 2
Comprehensive income 101 332 680 132
Comprehensive (income) loss attributable to noncontrolling interest (1) (1) 2 2
Comprehensive income attributable to Vistra Energy $ 100 $ 331 $ 682 $ 134
v3.19.3
Condensed Statements Of Consolidated Comprehensive Income (Loss) (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Statement of Comprehensive Income [Abstract]        
Effects related to pension and other retirement benefit obligations (net of tax benefit of $4, $—, $4 and $—) $ (4) $ 0 $ (4) $ 0
v3.19.3
Condensed Statements Of Consolidated Cash Flows - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Cash flows — operating activities:    
Net income $ 692 $ 130
Adjustments to reconcile net income to cash provided by (used in) operating activities:    
Depreciation and amortization 1,394 1,070
Deferred income tax expense, net 254 29
Unrealized net (gain) loss from mark-to-market valuations of commodities (625) 207
Unrealized net (gain) loss from mark-to-market valuations of interest rate swaps 275 (123)
Asset retirement obligation accretion expense 40 37
Impacts of Tax Receivable Agreement 26 65
Stock-based compensation 35 59
Other, net 12 64
Changes in operating assets and liabilities:    
Margin deposits, net 129 (39)
Accrued interest 15 (59)
Accrued taxes (31) (102)
Accrued employee incentive (53) (17)
Other operating assets and liabilities (340) (458)
Cash provided by operating activities 1,823 863
Cash flows — financing activities:    
Issuances of long-term debt 4,600 1,000
Repayments/repurchases of debt (4,668) (2,902)
Net borrowings under accounts receivable securitization program 261 350
Stock repurchase (632) (414)
Dividends paid to stockholders (181) 0
Debt tender offer and other financing fees (170) (216)
Other, net 6 10
Cash used in financing activities (784) (2,172)
Cash flows — investing activities:    
Capital expenditures, including LTSA prepayments (348) (209)
Nuclear fuel purchases (33) (66)
Development and growth expenditures (93) (28)
Crius acquisition (374) 0
Cash acquired in the Merger 0 445
Proceeds from sales of nuclear decommissioning trust fund securities 354 211
Investments in nuclear decommissioning trust fund securities (370) (227)
Proceeds from sale of environmental allowances 32 0
Purchases of environmental allowances (169) (4)
Other, net 22 11
Cash (used in) provided by investing activities (979) 133
Net change in cash, cash equivalents and restricted cash 60 (1,176)
Cash, cash equivalents and restricted cash — beginning balance 693 2,046
Cash, cash equivalents and restricted cash — ending balance $ 753 $ 870
v3.19.3
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Sep. 30, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 707 $ 636
Restricted cash 46 57
Trade accounts receivable — net 1,419 1,087
Inventories 430 412
Commodity and other derivative contractual assets 999 730
Margin deposits related to commodity contracts 236 361
Prepaid expense and other current assets 291 152
Total current assets 4,128 3,435
Investments 1,451 1,250
Investment in unconsolidated subsidiary 123 131
Property, plant and equipment — net 14,075 14,612
Operating lease right-of-use assets 50 0
Goodwill 2,287 2,068
Identifiable intangible assets — net 2,595 2,493
Commodity and other derivative contractual assets 181 109
Accumulated deferred income taxes 1,155 1,336
Other noncurrent assets 398 590
Total assets 26,443 26,024
Current liabilities:    
Accounts receivable securitization program 600 339
Long-term debt due currently 220 191
Trade accounts payable 916 945
Commodity and other derivative contractual liabilities 1,364 1,376
Margin deposits related to commodity contracts 8 4
Accrued income taxes 18 10
Accrued taxes other than income 152 182
Accrued interest 88 77
Asset retirement obligations 167 156
Operating lease liabilities 12 0
Other current liabilities 370 345
Total current liabilities 3,915 3,625
Long-term debt, less amounts due currently 10,728 10,874
Operating lease liabilities 53 0
Commodity and other derivative contractual liabilities 426 270
Accumulated deferred income taxes 10 10
Tax Receivable Agreement obligation 443 420
Asset retirement obligation 2,157 2,217
Identifiable intangible liabilities - net 381 401
Other noncurrent liabilities and deferred credits 538 340
Total liabilities 18,651 18,157
Commitments and Contingencies
Total equity:    
Common stock (par value — $0.01; number of shares authorized — 1,800,000,000) (shares outstanding: September 30, 2019 — 487,783,432; December 31, 2018 — 493,215,309) 5 5
Treasury stock, at cost (shares: September 30, 2019 — 40,151,888; December 31, 2018 — 32,815,783) (951) (778)
Additional paid-in-capital 9,708 10,107
Retained deficit (936) (1,449)
Accumulated other comprehensive income (loss) (34) (22)
Stockholders' equity 7,792 7,863
Noncontrolling interest in subsidiary 0 4
Total equity 7,792 7,867
Total liabilities and equity $ 26,443 $ 26,024
v3.19.3
Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2019
Dec. 31, 2018
Statement of Changes in Financial Position [Abstract]    
Common stock, par or stated value per share $ 0.01  
Common stock, shares authorized 1,800,000,000  
Common stock, shares outstanding 487,783,432 493,215,309
Treasury stock, held in treasury 40,151,888 32,815,783
v3.19.3
Business And Significant Accounting Policies
9 Months Ended
Sep. 30, 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 in markets throughout the U.S. Through our subsidiaries, we are engaged in competitive energy market activities including power generation, wholesale energy sales and purchases, commodity risk management and retail sales of electricity and natural gas to end users.

Vistra Energy has six reportable segments: (i) Retail, (ii) ERCOT, (iii) PJM, (iv) NY/NE (comprising NYISO and ISO-NE), (v) MISO and (vi) Asset Closure. See Note 18 for further information concerning reportable business segments.

Ambit Transaction

On November 1, 2019, an indirect, wholly owned subsidiary of Vistra Energy completed the acquisition of Ambit (Ambit Transaction). Because the Ambit Transaction closed on November 1, 2019, Vistra Energy's condensed consolidated financial statements and the notes related thereto do not include the financial condition or the operating results of Ambit and its subsidiaries. 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 condensed consolidated financial statements and the notes related thereto do not include the financial condition or the operating results of Crius and its subsidiaries prior to July 15, 2019. See Note 2 for a summary of the Crius Transaction.

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 condensed 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 condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and on the same basis as the audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2018. Adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been included therein. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and footnotes required by U.S. GAAP, they should be read in conjunction with the audited financial statements and related notes contained in our annual report on Form 10-K for the year ended December 31, 2018. The results of operations for an interim period may not give a true indication of results for a full year. All dollar amounts in the financial statements and tables in the notes are stated in millions of U.S. dollars unless otherwise indicated.

Use of Estimates

Preparation of financial statements requires estimates and assumptions about future events that affect the reporting of assets and liabilities at the balance sheet dates and the reported amounts of revenue and expense, including fair value measurements, estimates of expected obligations, judgment 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.

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 condensed consolidated balance sheet. Finance leases are included in property, plant and equipment, other current liabilities and other noncurrent liabilities and deferred credits on our condensed consolidated balance sheet. Lease term includes options to extend or terminate the lease when it is reasonably certain that we will exercise the option. We have 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 earnings 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 condensed consolidated balance sheet.

As of January 1, 2019, the cumulative effect of the changes made to our condensed consolidated balance sheet for the adoption of the new lease standard was as follows:
 
December 31, 2018
 
Adoption of New Lease Standard
 
January 1,
2019
Impact on condensed 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 assets
152

 
(2
)
 
150

Accumulated deferred income taxes
1,336

 
1

 
1,337

Liabilities
 
 
 
 
 
Other current liabilities
345

 
(1
)
 
344

Operating lease liabilities

 
109

 
109

Identifiable intangible liabilities
401

 
(36
)
 
365

Other noncurrent liabilities and deferred credits
340

 
14

 
354

Equity
 
 
 
 
 
Retained deficit
(1,449
)
 
(2
)
 
(1,451
)


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

Changes in Accounting Standards

In August 2018, the Financial Accounting Standards Board (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 are currently evaluating the impact of this ASU on our disclosures.

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 are currently evaluating the impact of this ASU 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
Acquisitions, Merger Transaction and Business Combination Accounting (Notes)
9 Months Ended
Sep. 30, 2019
Business Combinations [Abstract]  
Merger Transaction [Text Block] ACQUISITONS, 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 acquisition of Ambit (Ambit Transaction). Ambit is an energy retailer selling both electricity and natural gas products to residential and small business customers in 17 states.

The Ambit Transaction is expected to (i) augment Vistra Energy's existing retail marketing capabilities with additional direct selling capability and a proprietary technology platform, (ii) reduce risk and aid 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) enhance the integrated value proposition through collateral and transaction efficiencies.

The Ambit Transaction will be 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 Acquisition Date. Due to the limited time between the Acquisition Date and this filing, our purchase price allocation for the assets acquired and the liabilities assumed in the Ambit Acquisition has not been completed. The results of operations of Ambit will be reported in our consolidated financial statements beginning as of the Ambit Acquisition Date. Vistra Energy funded the purchase price of $475 million plus Ambit's outstanding net working capital using cash on hand. All of Ambit's outstanding debt was repaid at closing and not assumed by Vistra Energy. Our initial accounting for the purchase price allocation for the assets acquired and the liabilities assumed in the Ambit Transaction and the supplemental pro forma financial results is currently underway and will be presented no later than the fourth quarter of 2019.

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.

Crius Business Combination Accounting

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 Crius Transaction is 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 Crius Acquisition Date. The combined results of operations are reported in our consolidated financial statements beginning as of the Crius Acquisition 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 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).
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 Crius Transaction as of the Crius Acquisition Date. The purchase price was $400 million. The purchase price allocation is ongoing and is dependent upon final valuation determinations, which have not been completed. The preliminary values included below represent our current best estimates for accumulated deferred income taxes, identifiable intangible assets, net working capital and long-term debt. The purchase price allocation is 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 will be completed no later than the second quarter of 2020.
Crius Transaction Preliminary Purchase Price Allocation
Cash and cash equivalents
$
26

Net working capital
33

Accumulated deferred income taxes
36

Identifiable intangible assets
294

Goodwill
205

Other noncurrent assets and liabilities, net
4

Total assets acquired
598

Identifiable intangible liabilities
36

Long-term debt, including amounts due currently
140

Commodity and other derivative contractual assets and liabilities, net
22

Total liabilities assumed
198

Identifiable net assets acquired
$
400



Acquisition costs incurred in the Crius Transaction totaled $2 million and $4 million in the three and nine months ended September 30, 2019, respectively. For the Crius Acquisition Date through September 30, 2019, our condensed statements of consolidated income include revenues and net loss acquired in the Crius Transaction totaling $239 million and $16 million, respectively. The net loss acquired in the Crius Transaction includes intangible amortization and transition related expenses.

Crius Transaction Unaudited Pro Forma Financial Information — The following unaudited consolidated pro forma financial information for the nine months ended September 30, 2019 assumes that the Crius Transaction occurred on January 1, 2019. 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 Crius Transaction been completed on January 1, 2019, 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.
 
Nine Months Ended September 30, 2019
Revenues
$
9,513

Net income (a)
$
629

Net income attributable to Vistra Energy
$
631

Net income attributable to Vistra Energy per weighted average share of common stock outstanding — basic
$
1.30

Net income attributable to Vistra Energy per weighted average share of common stock outstanding — diluted
$
1.29


__________
(a)
Decrease in pro forma net income compared to consolidated net income is driven by unrealized losses on hedging activities of Crius and increased amortization.

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 Ratio
0.652

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 units
$
369

Fair value of outstanding stock compensation awards attributable to pre-combination service
$
26

Fair value of outstanding warrants
$
2

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 assets
853

Property, plant and equipment
10,535

Accumulated deferred income taxes
518

Identifiable intangible assets
351

Goodwill
175

Other noncurrent assets
419

Total assets acquired
13,296

Trade accounts payable and other current liabilities
733

Commodity and other derivative contractual assets and liabilities, net
422

Asset retirement obligations, including amounts due currently
475

Long-term debt, including amounts due currently
8,919

Other noncurrent liabilities
469

Total liabilities assumed
11,018

Identifiable net assets acquired
2,278

Noncontrolling interest in subsidiary
5

Total purchase price
$
2,273



Acquisition costs incurred in the Merger totaled less than $1 million and $25 million for the nine months ended September 30, 2019 and 2018, respectively.

Dynegy Merger Unaudited Pro Forma Financial Information — The following unaudited pro forma financial information for the nine months ended September 30, 2018 assumes that the Merger occurred on January 1, 2018. 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, 2018, 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.
 
Nine Months
Ended
September 30, 2018
Revenues
$
8,032

Net loss
$
(64
)
Net loss attributable to Vistra Energy
$
(61
)
Net loss attributable to Vistra Energy per weighted average share of common stock outstanding — basic
$
(0.12
)
Net loss attributable to Vistra Energy per weighted average share of common stock outstanding — diluted
$
(0.12
)


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, changes in the expected impacts of the tax receivable agreement due to the Merger, and other related adjustments.
v3.19.3
Acquisition and Development of Generation Facilities (Notes)
9 Months Ended
Sep. 30, 2019
Acquisition And Development Of Generation Facilities [Abstract]  
Business Combination Disclosure [Text Block]
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 September 30, 2019, we had accumulated approximately $50 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. If the terms of the resource adequacy contract are not honored by PG&E or the resource adequacy contract is rejected through the bankruptcy process, we could have future impairment losses.

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.
v3.19.3
Retirement of Generation Facilities (Notes)
9 Months Ended
Sep. 30, 2019
Retirement of Generation Facilities [Abstract]  
Retirement of generation facilities
RETIREMENT OF GENERATION FACILITIES

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 requires review by the Department of Justice and approval by the U.S. District Court for the Central District of Illinois, 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 are retiring 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 retiring units by analyzing each MISO plant's economics and designating the least economic units for retirement. Expected plant retirement expenses of $47 million were accrued in the three months ended September 30, 2019 and are included primarily in operating costs of our MISO segment. In August 2019, we remeasured our pension and OPEB plans resulting in an increase to the benefit obligation liability of $21 million, pretax other comprehensive loss of $18 million and curtailment expense of $3 million recognized as other deductions in our condensed statements of consolidated income. The following table details the units that have been or will be retired in Illinois totaling 2,653 MW. Operational results for these plants are included in the MISO segment for the three and nine months ended September 30, 2019 and 2018, but will be recast and included in the Asset Closure segment when they cease operations in the fourth quarter of 2019.
Name
 
Location (all in the state of Illinois)
 
Fuel Type
 
Net Generation Capacity (MW)
 
Number of Units
 
Dates Units To Be Taken Offline
Coffeen
 
Coffeen, IL
 
Coal
 
915

 
2
 
November 1, 2019
Duck Creek
 
Canton, IL
 
Coal
 
425

 
1
 
December 15, 2019
Havana
 
Havana, IL
 
Coal
 
434

 
1
 
November 1, 2019
Hennepin
 
Hennepin, IL
 
Coal
 
294

 
2
 
November 1, 2019
Edwards
 
Bartonville, IL
 
Coal
 
585

 
2
 
By the end of 2022
Total
 
 
 
 
 
2,653

 
8
 
 


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.
Name
 
Location
 
Fuel Type
 
Net Generation Capacity (MW)
 
Ownership Interest
 
Date Units Taken Offline
Killen
 
Manchester, Ohio
 
Coal
 
204

 
33%
 
May 31, 2018
Stuart
 
Aberdeen, Ohio
 
Coal
 
679

 
39%
 
May 24, 2018
Total
 
 
 
 
 
883

 

 
 


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 three and nine months ended September 30, 2018. The operational results of these facilities are included in our Asset Closure segment, which is engaged in the decommissioning and reclamation of retired plants and mines. The following table details the units retired.
Name
 
Location (all in the state of Texas)
 
Fuel Type
 
Installed Nameplate Generation Capacity (MW)
 
Number of Units
 
Date Units Taken Offline
Monticello
 
Titus County
 
Lignite/Coal
 
1,880

 
3
 
January 4, 2018
Sandow
 
Milam County
 
Lignite
 
1,137

 
2
 
January 11, 2018
Big Brown
 
Freestone County
 
Lignite/Coal
 
1,150

 
2
 
February 12, 2018
Total
 
 
 
 
 
4,167

 
7
 
 

v3.19.3
Revenue (Notes)
9 Months Ended
Sep. 30, 2019
Revenue Recognition and Deferred Revenue [Abstract]  
Revenue from Contract with Customer [Text Block]
REVENUE

The following tables disaggregate our revenue by major source:
 
Three Months Ended September 30, 2019
 
Retail
 
ERCOT
 
PJM
 
NY/NE
 
MISO
 
CAISO/Eliminations
 
Consolidated
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail energy charge in ERCOT
$
1,600

 
$

 
$

 
$

 
$

 
$

 
$
1,600

Retail energy charge in Northeast/Midwest
576

 

 

 

 

 

 
576

Wholesale generation revenue from ISO/RTO

 
990

 
137

 
79

 
116

 
46

 
1,368

Capacity revenue

 

 
24

 
23

 
5

 

 
52

Revenue from other wholesale contracts

 
110

 
187

 
84

 
48

 
1

 
430

Total revenue from contracts with customers
2,176

 
1,100

 
348

 
186

 
169

 
47

 
4,026

Other revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible amortization
12

 

 

 

 
(4
)
 

 
8

Hedging and other revenues (a)
19

 
(813
)
 
(83
)
 
6

 
(17
)
 
48

 
(840
)
Affiliate sales

 
444

 
178

 
22

 
49

 
(693
)
 

Total other revenues
31

 
(369
)
 
95

 
28

 
28

 
(645
)
 
(832
)
Total revenues
$
2,207

 
$
731

 
$
443

 
$
214

 
$
197

 
$
(598
)
 
$
3,194

____________
(a)
Includes $86 million of unrealized net losses from mark-to-market valuations of commodity positions. See Note 18 for unrealized net gains (losses) by segment.

 
Three Months Ended September 30, 2018
 
Retail
 
ERCOT
 
PJM
 
NY/NE
 
MISO
 
Asset
Closure
 
CAISO/Eliminations
 
Consolidated
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail energy charge in ERCOT
$
1,362

 
$

 
$

 
$

 
$

 
$

 
$

 
$
1,362

Retail energy charge in Northeast/Midwest
442

 

 

 

 

 

 

 
442

Wholesale generation revenue from ISO/RTO

 
393

 
502

 
244

 
255

 
1

 
81

 
1,476

Capacity revenue

 

 
164

 
79

 
15

 
(4
)
 
9

 
263

Revenue from other wholesale contracts

 
72

 
11

 
9

 
5

 
(2
)
 
3

 
98

Total revenue from contracts with customers
1,804

 
465

 
677

 
332

 
275

 
(5
)
 
93

 
3,641

Other revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible amortization
15

 

 

 
(4
)
 
(5
)
 

 

 
6

Hedging and other revenues (a)
(6
)
 
52

 
(275
)
 
(42
)
 
(136
)
 
5

 
(2
)
 
(404
)
Affiliate sales

 
879

 
218

 
15

 
96

 
(1
)
 
(1,207
)
 

Total other revenues
9

 
931

 
(57
)
 
(31
)
 
(45
)
 
4

 
(1,209
)
 
(398
)
Total revenues
$
1,813

 
$
1,396

 
$
620

 
$
301

 
$
230

 
$
(1
)
 
$
(1,116
)
 
$
3,243

____________
(a)
Includes $28 million of unrealized net losses from mark-to-market valuations of commodity positions. See Note 18 for unrealized net gains (losses) by segment.
 
Nine Months Ended September 30, 2019
 
Retail
 
ERCOT
 
PJM
 
NY/NE
 
MISO
 
CAISO/Eliminations
 
Consolidated
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail energy charge in ERCOT
$
3,716

 
$

 
$

 
$

 
$

 
$

 
$
3,716

Retail energy charge in Northeast/Midwest
1,239

 

 

 

 

 

 
1,239

Wholesale generation revenue from ISO/RTO

 
1,426

 
487

 
355

 
330

 
141

 
2,739

Capacity revenue

 

 
144

 
176

 
30

 

 
350

Revenue from other wholesale contracts

 
207

 
347

 
96

 
106

 
7

 
763

Total revenue from contracts with customers
4,955

 
1,633

 
978

 
627

 
466

 
148

 
8,807

Other revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible amortization
(7
)
 

 

 
(3
)
 
(13
)
 
3

 
(20
)
Hedging and other revenues (a)
66

 
(253
)
 
88

 
117

 
36

 
108

 
162

Affiliate sales

 
1,976

 
767

 
72

 
208

 
(3,023
)
 

Total other revenues
59

 
1,723

 
855

 
186

 
231

 
(2,912
)
 
142

Total revenues
$
5,014

 
$
3,356

 
$
1,833

 
$
813

 
$
697

 
$
(2,764
)
 
$
8,949


____________
(a)
Includes $611 million of unrealized net gains from mark-to-market valuations of commodity positions. See Note 18 for unrealized net gains (losses) by segment.

 
Nine Months Ended September 30, 2018
 
Retail
 
ERCOT
 
PJM
 
NY/NE
 
MISO
 
Asset
Closure
 
CAISO/Eliminations
 
Consolidated
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail energy charge in ERCOT
$
3,423

 
$

 
$

 
$

 
$

 
$

 
$

 
$
3,423

Retail energy charge in Northeast/Midwest
778

 

 

 

 

 

 

 
778

Wholesale generation revenue from ISO/RTO

 
775

 
869

 
362

 
436

 
52

 
95

 
2,589

Capacity revenue

 

 
283

 
162

 
44

 
6

 
20

 
515

Revenue from other wholesale contracts

 
175

 
18

 
14

 
16

 
(1
)
 
4

 
226

Total revenue from contracts with customers
4,201

 
950

 
1,170

 
538

 
496

 
57

 
119

 
7,531

Other revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible amortization
(12
)
 
(1
)
 

 
(6
)
 
(12
)
 

 

 
(31
)
Hedging and other revenues (a)
50

 
(181
)
 
(436
)
 
(71
)
 
(256
)
 
(29
)
 
4

 
(919
)
Affiliate sales

 
1,422

 
370

 
26

 
260

 
20

 
(2,098
)
 

Total other revenues
38

 
1,240

 
(66
)
 
(51
)
 
(8
)
 
(9
)
 
(2,094
)
 
(950
)
Total revenues
$
4,239

 
$
2,190

 
$
1,104

 
$
487

 
$
488

 
$
48

 
$
(1,975
)
 
$
6,581

____________
(a)
Includes $239 million of unrealized net losses from mark-to-market valuations of commodity positions. See Note 18 for unrealized net gains (losses) by segment.

Performance Obligations

As of September 30, 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 $217 million, $776 million, $725 million, $426 million and $96 million that will be recognized in the balance of the year ended December 31, 2019 and the years ending December 31, 2020, 2021, 2022 and 2023, respectively, and $65 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:
 
September 30,
2019
 
December 31, 2018
Trade accounts receivable from contracts with customers — net (a)
$
1,275

 
$
951

Other trade accounts receivable — net
144

 
136

Total trade accounts receivable — net
$
1,419

 
$
1,087


____________
(a)
At September 30, 2019, includes $136 million of trade accounts receivable related to operations acquired in the Crius Transaction.
v3.19.3
Goodwill and Identifiable Intangible Assets and Liabilities (Notes)
9 Months Ended
Sep. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill And Identifiable Intangible Assets
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS AND LIABILITIES

Goodwill

The carrying value of goodwill totaled $2.287 billion and $2.068 billion at September 30, 2019 and December 31, 2018, respectively. Of the total goodwill at September 30, 2019, (a) $205 million arose in connection with the Crius Acquisition, and is unassigned to a reporting unit pending completion of the purchase price allocation and (b) $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). The remaining $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.

Identifiable Intangible Assets and Liabilities

Identifiable intangible assets are comprised of the following:
 
 
September 30, 2019
 
December 31, 2018
Identifiable Intangible Asset
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Retail customer relationship
 
$
1,922

 
$
1,069

 
$
853

 
$
1,680

 
$
876

 
$
804

Software and other technology-related assets
 
304

 
109

 
195

 
270

 
105

 
165

Retail and wholesale contracts
 
315

 
167

 
148

 
316

 
138

 
178

Contractual service agreements (a)
 
60

 
2

 
58

 
70

 

 
70

Other identifiable intangible assets (b)
 
138

 
96

 
42

 
42

 
15

 
27

Total identifiable intangible assets subject to amortization
 
$
2,739

 
$
1,443

 
1,296

 
$
2,378

 
$
1,134

 
1,244

Retail trade names (not subject to amortization)
 
 
 
 
 
1,297

 
 
 
 
 
1,245

Mineral interests (not currently subject to amortization)
 
 
 
 
 
2

 
 
 
 
 
4

Total identifiable intangible assets
 
 
 
 
 
$
2,595

 
 
 
 
 
$
2,493


__________
(a)
At September 30, 2019, amounts related to contractual service agreements that have become liabilities due to amortization of the economic impacts of the intangibles have been removed from both the gross carrying amount and accumulated amortization.
(b)
Includes mining development costs and environmental allowances and credits.

Identifiable intangible liabilities are comprised of the following:
Identifiable Intangible Liability
September 30,
2019
 
December 31, 2018
Contractual service agreements
$
107

 
$
136

Purchase and sale contracts
179

 
195

Environmental allowances
95

 
70

Total identifiable intangible liabilities
$
381

 
$
401



Amortization expense related to finite-lived identifiable intangible assets and liabilities (including the classification in the condensed statements of consolidated income) consisted of:
Identifiable Intangible Assets and Liabilities
 
Condensed Statements of Consolidated Income Line
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Retail customer relationship
 
Depreciation and amortization
$
82

 
$
77

 
$
193

 
$
227

Software and other technology-related assets
 
Depreciation and amortization
16

 
6

 
45

 
36

Retail and wholesale contracts/purchase and sale contracts
 
Operating revenues/fuel, purchased power costs and delivery fees
(9
)
 
(5
)
 
14

 
28

Other identifiable intangible assets
 
Operating revenues/fuel, purchased power costs and delivery fees/depreciation and amortization
76

 
10

 
116

 
14

Total amortization expense (a)
$
165

 
$
88

 
$
368

 
$
305


____________
(a)
Amounts recorded in depreciation and amortization totaled $99 million and $84 million for the three months ended September 30, 2019 and 2018, respectively, and $240 million and $266 million for the nine months ended September 30, 2019 and 2018, respectively. Excludes contractual services agreements.

Estimated Amortization of Identifiable Intangible Assets and Liabilities

As of September 30, 2019, the estimated aggregate amortization expense of identifiable intangible assets and liabilities for each of the next five fiscal years is as shown below.
Year
 
Estimated Amortization Expense
2019
 
$
308

2020
 
$
211

2021
 
$
164

2022
 
$
101

2023
 
$
76


v3.19.3
Income Taxes (Notes)
9 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES

Income Tax Expense

The calculation of our effective tax rate is as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Income before income taxes
$
159

 
$
525

 
$
962

 
$
161

Income tax expense
$
(45
)
 
$
(194
)
 
$
(270
)
 
$
(31
)
Effective tax rate
28.3
%
 
37.0
%
 
28.1
%
 
19.3
%


For the three months ended September 30, 2019, the effective tax rate of 28.3% related to our income tax expense was higher than the U.S. federal statutory rate of 21% due primarily to nondeductible impacts of the TRA and state income taxes. For the nine months ended September 30, 2019, the effective tax rate of 28.1% was higher than the U.S. federal statutory rate of 21% due primarily to state income taxes, including the impact of a valuation allowance on a portion of the State of Illinois net operating loss.

For the three months ended September 30, 2018, the effective tax rate of 37.0% was higher than the U.S. federal statutory rate of 21% due primarily to nondeductible impacts of the TRA and state income taxes, including the impact of a partial valuation allowance on the State of Illinois net operating loss, partially offset by the return to provision adjustment for permanent book-tax differences. For the nine months ended September 30, 2018, the effective tax rate of 19.3% related to our income tax benefit was lower than the U.S. federal statutory rate of 21% due primarily to Vistra Energy's expanded state tax footprint requiring a remeasurement of historical Vistra Energy deferred tax balances and the return to provision adjustment for permanent book-tax differences, partially offset by an increase in state tax expense including a partial valuation allowance on the State of Illinois net operating loss.

Liability for Uncertain Tax Positions

Vistra Energy and its subsidiaries file income tax returns in U.S. federal and state jurisdictions and are expected to be subject to examinations by the IRS and other taxing authorities. Vistra Energy is not currently under audit by the IRS for any period, although review of Dynegy tax year 2018 continues to progress through the IRS's Compliance Assurance Process audit program. Crius is currently under audit by the IRS for the tax years 2015, 2016 and 2017. Uncertain tax positions totaling $38 million at September 30, 2019 reflect (i) the reversal of a $4 million reserve resulting from Vistra Energy's payment of a California State income tax assessment acquired in the Merger and (ii) the addition of a $2 million reserve associated with the acquired Crius tax position. Uncertain tax positions totaling $39 million at December 31, 2018 arose in connection with the Merger.
v3.19.3
Tax Receivable Agreement Obligation (Notes)
9 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
Tax Receivables Agreement Obligation
TAX RECEIVABLE AGREEMENT OBLIGATION

On the Effective Date, Vistra Energy entered into a tax receivable agreement (the TRA) with a transfer agent on behalf of certain former first-lien creditors of TCEH. The TRA generally provides for the payment by us to holders of TRA Rights of 85% of the amount of cash savings, if any, in U.S. federal and state income tax that we realize in periods after Emergence as a result of (a) certain transactions consummated pursuant to the Plan of Reorganization (including the step-up in tax basis in our assets resulting from the PrefCo Preferred Stock Sale), (b) the tax basis of all assets acquired in connection with the acquisition of two CCGT natural gas-fueled generation facilities in April 2016 and (c) tax benefits related to imputed interest deemed to be paid by us as a result of payments under the TRA, plus interest accruing from the due date of the applicable tax return.

Pursuant to the TRA, we issued the TRA Rights for the benefit of the first-lien secured creditors of TCEH entitled to receive such TRA Rights under the Plan of Reorganization. Such TRA Rights are entitled to certain registration rights more fully described in the Registration Rights Agreement (see Note 17).

During the three and nine months ended September 30, 2019, we recorded an increase of $48 million and a decrease of $19 million, respectively, to the carrying value of the TRA obligation as a result of adjustments to the timing of forecasted taxable income and state apportionment due to the expansion of Vistra Energy's state income tax profile, including Dynegy and Crius acquisitions.

During the three and nine months ended September 30, 2018, we recorded a decrease of $32 million and an increase of $14 million, respectively, to the carrying value of the TRA obligation related to changes in the timing of estimated payments resulting from the Merger, including new multistate tax impacts.

The following table summarizes the changes to the TRA obligation, reported as other current liabilities and Tax Receivable Agreement obligation in our condensed consolidated balance sheets, for the nine months ended September 30, 2019 and 2018:
 
Nine Months Ended September 30,
 
2019
 
2018
TRA obligation at the beginning of the period
$
420

 
$
357

Accretion expense
45

 
51

Changes in tax assumptions impacting timing of payments
(19
)
 
14

Impacts of Tax Receivable Agreement
26

 
65

TRA obligation at the end of the period
446

 
422

Less amounts due currently
(3
)