VISTRA ENERGY CORP., 10-Q filed on 8/6/2018
Quarterly Report
v3.10.0.1
Document And Entity Information - shares
6 Months Ended
Jun. 30, 2018
Aug. 02, 2018
Document And Entity Information [Abstract]    
Entity Registrant Name Vistra Energy Corp.  
Entity Central Index Key 0001692819  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Document Type 10-Q  
Document Period End Date Jun. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   518,617,157
v3.10.0.1
Condensed Statements Of Consolidated Income (Loss) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Income Statement [Abstract]        
Operating revenues $ 2,574 $ 1,296 $ 3,338 $ 2,653
Fuel, purchased power costs and delivery fees (1,216) (729) (1,866) (1,411)
Operating costs (386) (195) (580) (409)
Depreciation and amortization (389) (172) (542) (341)
Selling, general and administrative expenses (352) (147) (514) (285)
Operating income (loss) 231 53 (164) 207
Other income 7 9 18 18
Other deductions (1) (5) (3) (5)
Interest expense and related charges (146) (69) (137) (93)
Impacts of tax receivable agreement (64) (22) (82) (42)
Equity in earnings of unconsolidated investments 4 0 4 0
Income (loss) before income taxes 31 (34) (364) 85
Income tax benefit (expense) 74 8 163 (33)
Net income (loss) 105 (26) (201) 52
Less: Net loss attributable to noncontrolling interest (3) 0 (3) 0
Net income (loss) attributable to Vistra Energy $ 108 $ (26) $ (198) $ 52
Weighted average shares of common stock outstanding:        
Weighted average shares of common stock outstanding - basic 526,332,862 427,587,401 477,662,016 427,585,381
Weighted average shares of common stock outstanding - diluted 533,786,824 427,587,401 477,662,016 427,846,563
Net income (loss) per weighted average share of common stock outstanding:        
Net income (loss) per weighted average share of common stock outstanding - basic $ 0.21 $ (0.06) $ (0.41) $ 0.12
Net income (loss) per weighted average share of common stock outstanding - diluted $ 0.20 $ (0.06) $ (0.41) $ 0.12
v3.10.0.1
Condensed Statements Of Consolidated Comprehensive Income (Loss) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Statement of Comprehensive Income [Abstract]        
Net income (loss) $ 105 $ (26) $ (201) $ 52
Other comprehensive income (loss), net of tax effects:        
Effect related to pension and other retirement benefit obligations (net of tax benefit of $— in all periods) 0 0 1 0
Total other comprehensive income 0 0 1 0
Comprehensive income (loss) 105 (26) (200) 52
Less: Comprehensive loss attributable to noncontrolling interest (3) 0 (3) 0
Comprehensive income (loss) attributable to Vistra Energy $ 108 $ (26) $ (197) $ 52
v3.10.0.1
Condensed Statements Of Consolidated Comprehensive Income (Loss) (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Statement of Comprehensive Income [Abstract]        
Effects related to pension and other retirement benefit obligations (net of tax benefit of $— in all periods) $ 0 $ 0 $ 1 $ 0
v3.10.0.1
Condensed Statements Of Consolidated Cash Flows - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Cash flows — operating activities:    
Net income (loss) $ (201) $ 52
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:    
Depreciation and amortization 619 437
Deferred income tax (benefit) expense, net (159) 29
Unrealized net (gain) loss from mark-to-market valuations of commodities 199 (54)
Unrealized net (gain) loss from mark-to-market valuations of interest rate swaps (86) 6
Accretion expense 44 29
Impacts of Tax Receivable Agreement 82 42
Stock-based compensation 59 8
Other, net (6) (7)
Changes in operating assets and liabilities:    
Margin deposits, net (61) 147
Accrued interest (74) (29)
Accrued taxes (112) (73)
Accrued incentive plan (31) (60)
Other operating assets and liabilities (302) (194)
Cash provided by (used in) operating activities (29) 333
Cash flows — financing activities:    
Repayments/repurchases of debt (1,338) (24)
Stock repurchase (63) 0
Debt financing fee (46) (3)
Other, net 4 0
Cash used in financing activities (1,443) (27)
Cash flows — investing activities:    
Capital expenditures (153) (63)
Nuclear fuel purchases (28) (35)
Cash acquired in the Merger 445 0
Solar development expenditures (21) (96)
Proceeds from sales of nuclear decommissioning trust fund securities 93 98
Investments in nuclear decommissioning trust fund securities (103) (107)
Other, net 9 9
Cash provided by (used in) investing activities 242 (194)
Net change in cash, cash equivalents and restricted cash (1,230) 112
Cash, cash equivalents and restricted cash — beginning balance 2,046 1,588
Cash, cash equivalents and restricted cash — ending balance $ 816 $ 1,700
v3.10.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Jun. 30, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 757 $ 1,487
Restricted cash 59 59
Trade accounts receivable — net 1,149 582
Income taxes receivable 11 0
Inventories 465 253
Commodity and other derivative contractual assets 598 190
Margin deposits related to commodity contracts 200 30
Prepaid expense and other current assets 135 72
Total current assets 3,374 2,673
Restricted cash 0 500
Investments 1,290 1,240
Investment in unconsolidated subsidiary (Note 19) 135 0
Property, plant and equipment — net 14,981 4,820
Goodwill 1,907 1,907
Identifiable intangible assets — net 2,698 2,530
Commodity and other derivative contractual assets 244 58
Accumulated deferred income taxes 1,260 710
Other noncurrent assets 581 162
Total assets 26,470 14,600
Current liabilities:    
Less amounts due currently 156 44
Trade accounts payable 795 473
Commodity and other derivative contractual liabilities 883 224
Margin deposits related to commodity contracts 3 4
Accrued income taxes 0 58
Accrued taxes other than income 143 136
Accrued interest 108 16
Asset retirement obligations 171 99
Other current liabilities 387 297
Total current liabilities 2,646 1,351
Long-term debt, less amounts due currently 11,807 4,379
Commodity and other derivative contractual liabilities 495 102
Accumulated deferred income taxes 5 0
Tax Receivable Agreement obligation 414 333
Asset retirement obligation 2,151 1,837
Identifiable intangible liabilities - net 187 36
Other noncurrent liabilities and deferred credits 345 220
Total liabilities 18,050 8,258
Commitments and Contingencies
Total equity:    
Common stock (par value — $0.01; number of shares authorized — 1,800,000,000) (shares outstanding: June 30, 2018 — 521,214,879; December 31, 2017 — 428,398,802) 5 4
Additional paid-in-capital 10,015 7,765
Retained deficit (1,591) (1,410)
Accumulated other comprehensive income (16) (17)
Stockholders' equity 8,413 6,342
Noncontrolling interest in subsidiary 7 0
Total equity 8,420 6,342
Total liabilities and equity $ 26,470 $ 14,600
v3.10.0.1
Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2018
Apr. 09, 2018
Dec. 31, 2017
Jun. 30, 2017
Dec. 31, 2016
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     1,800,000,000  
Common stock, shares outstanding 521,214,879 522,932,453 428,398,802 427,587,401 427,580,232
v3.10.0.1
Business And Significant Accounting Policies
6 Months Ended
Jun. 30, 2018
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 electricity market activities including power generation, wholesale energy sales and purchases, commodity risk management and retail sales of electricity 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 Asset Closure segment was established as of January 1, 2018, and we have recast prior period information to reflect this change in reportable segments. See Note 18 for further information concerning reportable business segments.

Merger Transaction

On the Merger Date, Vistra Energy and Dynegy completed the transactions contemplated by the Merger Agreement entered into in October 2017. 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 2017 Form 10-K, with the exception of the changes in reportable segments as detailed above. 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 2017 Form 10-K. The results of operations for an interim period may not give a true indication of results for a full year. All dollar amounts in the financial statements and tables in the notes are stated in millions of U.S. dollars unless otherwise indicated.

Use of Estimates

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

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 condensed statements of consolidated net income (loss). We use the cost method of accounting where we do not exercise significant influence. See Note 19.

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 condensed 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 condensed consolidated balance sheets as a reduction to additional paid-in capital. See Note 12.

Adoption of New Accounting Standards

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 new revenue standard as an adjustment to the opening balance of retained earnings. 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 new 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 new revenue standard primarily relates to the deferral of acquisition costs associated with retail contracts with customers that were previously expensed as incurred. Under the new revenue standard, these amounts will be capitalized and amortized over the expected life of the customer.

As of January 1, 2018, the cumulative effect of the changes made to our condensed consolidated balance sheet for the adoption of the new revenue standard was as follows:
 
December 31, 2017
 
Adoption of New Revenue Standard
 
January 1,
2018
Impact on condensed consolidated balance sheet:
 
 
 
 
 
Assets
 
 
 
 
 
Prepaid expense and other current assets
$
72

 
$
5

 
$
77

Accumulated deferred income taxes
$
710

 
$
(4
)
 
$
706

Other noncurrent assets
$
162

 
$
16

 
$
178

Equity
 
 
 
 
 
Retained deficit
$
(1,410
)
 
$
17

 
$
(1,393
)

The disclosure of the impact of adoption on our condensed statement of consolidated income (loss) and condensed consolidated balance sheet was as follows:
 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
 
As Reported
 
Amount Without Adoption of New Revenue Standard
 
Effect of Change
Higher (Lower)
 
As Reported
 
Amount Without Adoption of New Revenue Standard
 
Effect of Change
Higher (Lower)
Impact on condensed statement of consolidated income (loss):
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
$
2,574

 
$
2,573

 
$
1

 
$
3,338

 
$
3,336

 
$
2

Selling, general and administrative expenses
(352
)
 
(355
)
 
3

 
(514
)
 
(520
)
 
6

Net income (loss)
105

 
102

 
3

 
(201
)
 
(207
)
 
6


 
June 30, 2018
 
As Reported
 
Balances Without Adoption of New Revenue Standard
 
Effect of Change
Higher (Lower)
Impact on condensed consolidated balance sheet:
 
 
 
 
 
Assets
 
 
 
 
 
Prepaid expense and other current assets
$
135

 
$
129

 
$
6

Accumulated deferred income taxes
1,260

 
1,264

 
(4
)
Other noncurrent assets
581

 
558

 
23

Equity
 
 
 
 
 
Retained deficit
$
(1,591
)
 
$
(1,614
)
 
$
23



See Note 5 for the disclosures required by the new revenue standard.

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 (see Note 19). We adopted the standard on January 1, 2018. The ASU modified our presentation of our condensed statements of consolidated cash flows, and retrospective application to comparative periods presented was required. For the six months ended June 30, 2017, our condensed statement of consolidated cash flows previously reflected a source of cash of $31 million reported as changes in restricted cash that is now reported in net change in cash, cash equivalents and restricted cash. See the condensed statements of consolidated cash flows and Note 19 for disclosures related to the adoption of this accounting standard.

Changes in Accounting Standards

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, Leases. The ASU amends previous GAAP to require the recognition of lease assets and liabilities for operating leases. The ASU will be effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Retrospective application to comparative periods presented will be required in the year of adoption. We have identified the contracts that are within the scope of this ASU and are currently evaluating the impact of this ASU on our financial statements.
v3.10.0.1
Merger Transaction and Business Combination Accounting (Notes)
6 Months Ended
Jun. 30, 2018
Business Combinations [Abstract]  
Merger Transaction [Text Block]
MERGER TRANSACTION AND BUSINESS COMBINATION ACCOUNTING

Merger Transaction

On the Merger Date, Vistra Energy and Dynegy completed the transactions contemplated by the Merger Agreement entered into in October 2017. Pursuant to the Merger Agreement, Dynegy merged with and into Vistra Energy, with Vistra Energy continuing as the surviving corporation. The Merger is 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 will 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.

Business Combination Accounting

We believe the Merger provides a number of significant potential strategic benefits and opportunities to Vistra Energy, including increased scale and market diversification, rebalanced asset portfolio and improved earnings and cash flow. The Merger 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 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 preliminary fair value of the identifiable assets and liabilities, as well as their classification within the fair value hierarchy (see Note 13), 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 13 (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 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 preliminary 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 preliminary purchase price was approximately $2.3 billion. 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 property plant and equipment, identifiable intangible assets and liabilities, inventories, asset retirement obligations and deferred taxes. The purchase price allocation is preliminary and each of these may change materially based upon the receipt of more detailed information, additional analyses and completed valuations. We currently expect the final purchase price allocation will be completed no later than the second quarter of 2019.
Dynegy shares outstanding as of April 9, 2018 (in millions)
173
Exchange Ratio
0.652

Vistra Energy shares issued for Dynegy shares outstanding (in millions)
113

Opening price of Vistra Energy common stock on April 9, 2018
$
19.87

Purchase price for common stock
$
2,245

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

Fair value of outstanding warrants
$
2

Total purchase price
$
2,273


Preliminary Purchase Price Allocation
Cash and cash equivalents
$
445

Trade accounts receivables, inventories, prepaid expenses and other current assets
863

Property, plant and equipment
10,362

Accumulated deferred income taxes
391

Identifiable intangible assets
387

Other noncurrent assets
532

Total assets acquired
12,980

Trade accounts payable and other current liabilities
644

Commodity and other derivative contractual assets and liabilities, net
422

Asset retirement obligations, including amounts due currently
419

Long-term debt, including amounts due currently
8,920

Other noncurrent liabilities
292

Total liabilities assumed
10,697

Identifiable net assets acquired
2,283

Noncontrolling interest in subsidiary
10

Total purchase price
$
2,273



Acquisition costs incurred in the Merger totaled $50 million and $52 million for the three and six months ended June 30, 2018, respectively For the period from the Merger Date through June 30, 2018, our condensed statements of consolidated income (loss) include revenues and net income (loss) acquired in the Merger totaling $1.248 billion and $97 million, respectively.

Unaudited Pro Forma Financial Information — The following unaudited pro forma financial information for the six months ended June 30, 2018 and 2017 assumes that the Merger occurred on January 1, 2017. The unaudited pro forma financial information is provided for information 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.
 
Six Months Ended June 30,
 
2018
 
2017
Revenues
$
4,789

 
$
5,213

Net income (loss)
$
(439
)
 
$
18

Net income (loss) attributable to Vistra Energy
$
(435
)
 
$
7

Net income (loss) attributable to Vistra Energy per weighted average share of common stock outstanding — basic
$
(0.83
)
 
$
0.01

Net income (loss) attributable to Vistra Energy per weighted average share of common stock outstanding — diluted
$
(0.83
)
 
$
0.01



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.
v3.10.0.1
Acquisition and Development of Generation Facilities (Notes)
6 Months Ended
Jun. 30, 2018
Acquisition And Development Of Generation Facilities [Abstract]  
Business Combination Disclosure [Text Block]
ACQUISITION AND DEVELOPMENT OF GENERATION FACILITIES

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, and partial buybacks of the earn-out provision were settled in February and May 2018.

Upton Solar Development

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). As part of this project, we entered a turnkey engineering, procurement and construction agreement to construct the approximately 180 MW facility. For the six months ended June 30, 2018, we have spent approximately $21 million related to this project primarily for progress payments under the engineering, procurement and construction agreement. The facility began test operations in March 2018 and commercial operations began in June 2018.

Battery Energy Storage Project

In June 2018, we announced that, subject to approval by the California Public Utilities Commission (CPUC), we will enter into a 20-year resource adequacy contract with Pacific Gas and Electric Company (PG&E) to develop a 300 MW battery energy storage project at our Moss Landing Power Plant site in California. In late June 2018, PG&E filed its application with the CPUC to approve the contract, and a decision is expected within 90 days of the filing. Pending the receipt of CPUC approval, we anticipate the battery storage project will enter commercial operations by the fourth quarter of 2020.
v3.10.0.1
Retirement of Generation Facilities (Notes)
6 Months Ended
Jun. 30, 2018
Retirement of Generation Facilities [Abstract]  
Retirement of generation facilities
RETIREMENT OF GENERATION FACILITIES

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 with a total installed nameplate generation capacity of 4,167 MW. Luminant 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 both the three and six months ended June 30, 2018. The operational results of these facilities are included in our Asset Closure segment. 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
 
 
v3.10.0.1
Revenue (Notes)
6 Months Ended
Jun. 30, 2018
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 June 30, 2018
 
Retail
 
ERCOT
 
PJM
 
NY/NE
 
MISO
 
Asset
Closure
 
CAISO/Eliminations
 
Consolidated
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail energy charge in ERCOT
$
1,111

 
$

 
$

 
$

 
$

 
$

 
$

 
$
1,111

Retail energy charge in Northeast/Midwest
336

 

 

 

 

 

 

 
336

Wholesale generation revenue from ISO

 
208

 
367

 
118

 
180

 
15

 
13

 
901

Capacity revenue

 

 
119

 
82

 
29

 
10

 
11

 
251

Revenue from other wholesale contracts

 
50

 
8

 
6

 
12

 

 
2

 
78

Total revenue from contracts with customers
1,447

 
258

 
494

 
206

 
221

 
25

 
26

 
2,677

Other revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible amortization
(15
)
 

 

 
(2
)
 
(6
)
 

 

 
(23
)
Hedging and other revenues
22

 
229

 
(161
)
 
(29
)
 
(121
)
 
(25
)
 
5

 
(80
)
Affiliate sales

 
840

 
152

 
12

 
163

 
21

 
(1,188
)
 

Total other revenues
7

 
1,069

 
(9
)
 
(19
)
 
36

 
(4
)
 
(1,183
)
 
(103
)
Total revenues
$
1,454

 
$
1,327

 
$
485

 
$
187

 
$
257

 
$
21

 
$
(1,157
)
 
$
2,574


 
Six Months Ended June 30, 2018
 
Retail
 
ERCOT
 
PJM
 
NY/NE
 
MISO
 
Asset
Closure
 
CAISO/Eliminations
 
Consolidated
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail energy charge in ERCOT
$
2,059

 
$

 
$

 
$

 
$

 
$

 
$

 
$
2,059

Retail energy charge in Northeast/Midwest
336

 

 

 

 

 

 

 
336

Wholesale generation revenue from ISO

 
383

 
367

 
118

 
180

 
51

 
13

 
1,112

Capacity revenue

 

 
119

 
82

 
29

 
10

 
11

 
251

Revenue from other wholesale contracts

 
102

 
8

 
6

 
12

 
1

 
2

 
131

Total revenue from contracts with customers
2,395

 
485

 
494

 
206

 
221

 
62

 
26

 
3,889

Other revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail contract amortization
(27
)
 
(1
)
 

 
(2
)
 
(6
)
 

 

 
(36
)
Hedging and other revenues
58

 
(233
)
 
(161
)
 
(29
)
 
(121
)
 
(34
)
 
5

 
(515
)
Affiliate sales

 
543

 
152

 
12

 
163

 
21

 
(891
)
 

Total other revenues
31

 
309

 
(9
)
 
(19
)
 
36

 
(13
)
 
(886
)
 
(551
)
Total revenues
$
2,426

 
$
794

 
$
485

 
$
187

 
$
257

 
$
49

 
$
(860
)
 
$
3,338



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.

Wholesale Generation Revenue from ISOs

Revenue is recognized when volumes are delivered to the ISO. 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 indefinitely. Wholesale generation revenues are delivered as a series of distinct services and are accounted for as a single performance obligation.

Capacity Revenue

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. We provide capacity to customers through participation in capacity auctions held by the ISO or through bilateral sales. Generation facilities are awarded auction volumes through the ISO auction and bilateral sales are based on executed contracts with customers.

Revenue from Other Wholesale Contracts

Other wholesale contracts include other revenue activity with the ISOs, such as ancillary services, auction revenue, neutrality revenue and revenue from nonaffiliated retail electric providers. 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 as invoiced. 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 indefinitely. Other wholesale contracts are delivered as a series of distinct services and are accounted for as a single performance obligation.

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 June 30, 2018 and January 1, 2018 was $31 million and $22 million, respectively. The amortization related to these costs during the three and six months ended June 30, 2018 totaled $3 million and $6 million, respectively, recorded as a reduction to selling, general and administrative expenses, and $1 million and $2 million, respectively, recorded as operating revenues in the condensed statement of consolidated income (loss).

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 invoice our customers. We do not disclose the value of unsatisfied performance obligations for contracts 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
 
Performance Obligations as of June 30, 2018
 
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter (a)
Total capacity sold (MW)
17,829
 
17,429
 
14,826
 
13,619
 
5,947
 
338
Average price per kW-month
$
5.66

 
$
4.99

 
$
4.22

 
$
4.46

 
$
4.76

 
$
4.39

____________
(a)
Average of performance obligations from 2023-2027.

The table above includes future performance obligations that are unsatisfied, or partially unsatisfied, at the end of the reporting period. Our performance obligations relate to capacity auction volumes awarded through capacity auctions held by the ISO or through bilateral sales. Therefore, an obligation exists as of the date of the results of the respective ISO capacity auction, or the contract execution date for bilateral customers. The transaction price is also set by the results of the capacity auction or executed contract.

Accounts Receivable

The following table presents trade accounts receivable relating to both contracts with customers and other activities:
 
June 30, 2018
Trade accounts receivable from contracts with customers — net
$
1,044

Other trade accounts receivable — net
105

Total trade accounts receivable — net
$
1,149

v3.10.0.1
Goodwill and Identifiable Intangible Assets and Liabilities (Notes)
6 Months Ended
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill And Identifiable Intangible Assets
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS AND LIABILITIES

Goodwill

The carrying value of goodwill totaling $1.907 billion at both June 30, 2018 and December 31, 2017 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 and liabilities are comprised of the following:
 
 
June 30, 2018
 
December 31, 2017
Identifiable Intangible Asset
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Retail customer relationship
 
$
1,678

 
$
722

 
$
956

 
$
1,648

 
$
572

 
$
1,076

Software and other technology-related assets
 
227

 
76

 
151

 
183

 
47

 
136

Retail and wholesale contracts
 
445

 
126

 
319

 
154

 
87

 
67

Other identifiable intangible assets (a)
 
34

 
11

 
23

 
33

 
11

 
22

Total identifiable intangible assets subject to amortization
 
$
2,384

 
$
935

 
1,449

 
$
2,018

 
$
717

 
1,301

Retail trade names (not subject to amortization)
 
 
 
 
 
1,245

 
 
 
 
 
1,225

Mineral interests (not currently subject to amortization)
 
 
 
 
 
4

 
 
 
 
 
4

Total identifiable intangible assets
 
 
 
 
 
$
2,698

 
 
 
 
 
$
2,530

Identifiable Intangible Liability
 
 
 
 
 
 
 
 
 
 
 
 
Contractual service agreements
 
$
139

 
$

 
$
139

 
$

 
$

 
$

Purchase and sales contracts
 
69

 
21

 
48

 
49

 
13

 
36

Total identifiable intangible liabilities
 
$
208

 
$
21

 
$
187

 
$
49

 
$
13

 
$
36


____________
(a)
Includes mining development costs and environmental allowances and credits.

Amortization expense related to finite-lived identifiable intangible assets and liabilities (including the classification in the condensed statements of consolidated income (loss)) consisted of:
Identifiable Intangible Assets and Liabilities
 
Condensed Statements of Consolidated Income (Loss) Line
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Retail customer relationship
 
Depreciation and amortization
$
77

 
$
105

 
$
150

 
$
210

Software and other technology-related assets
 
Depreciation and amortization
19

 
9

 
30

 
17

Retail and wholesale contracts/purchase and sales contracts
 
Operating revenues/fuel, purchased power costs and delivery fees
23

 
21

 
32

 
45

Other identifiable intangible assets
 
Operating revenues/fuel, purchased power costs and delivery fees/depreciation and amortization
2

 
4

 
3

 
8

Total amortization expense (a)
$
121

 
$
139

 
$
215

 
$
280


____________
(a)
Amounts recorded in depreciation and amortization totaled $97 million and $116 million for the three months ended June 30, 2018 and 2017, respectively, and $182 million and $231 million for the six months ended June 30, 2018 and 2017, respectively.

Following is a description of the separately identifiable intangible assets and liabilities recorded in connection with the Merger (see Note 2). As part of purchase accounting, the intangible assets were adjusted based on their estimated fair value as of the Merger Date, based on observable prices or estimates of fair value using valuation models. The purchase price allocation is ongoing and is dependent upon final valuation determinations, which have not been completed.

Retail customer relationship – The acquired retail customer relationship intangible asset represents the estimated fair value of our non-contracted Northeast/Midwest retail customer base, including residential and business customers, and is being amortized using an accelerated method based on historical customer attrition rates and reflecting the expected pattern in which economic benefits are realized over their estimated useful life.

Retail trade names – Our acquired retail trade name intangible asset represents the fair value of the Homefield and Dynegy Energy Services trade names and was determined to be an indefinite-lived asset not subject to amortization. This intangible asset will be evaluated for impairment at least annually in accordance with accounting guidance related to goodwill and other indefinite-lived intangible assets.

Retail and wholesale contracts/purchase and sales contracts – Our acquired retail and wholesale contracts and purchase and sales contracts represent various types of customer and supplier contracts, including municipal supplier contracts, capacity contracts, gas transportation contracts, and other contracts. The contracts were identified as either assets or liabilities based on the respective fair values at the time of the Merger utilizing prevailing market prices for commodities or services compared to fixed prices contained in these agreements. The intangible assets and liabilities are being amortized in relation to the economic terms of the related contracts.

Contractual service agreements – Our acquired contractual service agreements represent the estimated fair value of unfavorable contract obligations with respect to long-term plant maintenance agreements and are being amortized based on the expected usage of the service agreements over the contract terms.

Estimated Amortization of Identifiable Intangible Assets and Liabilities

As of June 30, 2018, 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
2018
 
$
401

2019
 
$
321

2020
 
$
245

2021
 
$
175

2022
 
$
109

v3.10.0.1
Income Taxes (Notes)
6 Months Ended
Jun. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES

Income Tax Expense (Benefit)

The calculation of our effective tax rate is as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Income (loss) before income taxes
$
31

 
$
(34
)
 
$
(364
)
 
$
85

Income tax benefit (expense)
$
74

 
$
8

 
$
163

 
$
(33
)
Effective tax rate
(238.7
)%
 
23.5
%
 
44.8
%
 
38.8
%


For the three months ended June 30, 2018, the effective tax rate of (238.7)% related to our income tax benefit was lower than the U.S. federal statutory rate of 21% due primarily to (a) Vistra Energy's expanded state tax footprint requiring a one-time remeasurement of historical Vistra Energy deferred tax balances and (b) the difference in the forecasted effective tax rate and the statutory tax rate applied to mark-to-market unrealized gains, partially offset by an increase in state tax expense. For the six months ended June 30, 2018, the effective tax rate of 44.8% related to our income tax benefit was higher than the U.S. federal statutory rate of 21% due primarily to Vistra Energy's expanded state tax footprint requiring a one-time remeasurement of historical Vistra Energy deferred tax balances and an increase in state tax expense.

For the three months ended June 30, 2017, the effective tax rate of 23.5% related to our income tax expense was lower than the U.S. federal statutory rate of 35% due primarily to the difference in the forecasted effective tax rate and the statutory tax rate applied to mark-to-market unrealized losses, offset by nondeductible TRA accretion and the Texas margin tax, net of federal benefit. For the six months ended June 30, 2017, the effective tax rate of 38.8% related to our income tax expense was higher than the U.S. federal statutory rate of 35% due primarily to nondeductible TRA accretion and the Texas margin tax, net of federal benefit, offset by the difference in the forecasted effective tax rate and the statutory tax rate applied to mark-to-market unrealized gains.

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 has limited operational history and filed its first federal tax return in October 2017. Vistra Energy is not currently under audit for any period. Uncertain tax positions totaling $41 million at June 30, 2018 arose in connection with the Merger and our assessment of the assumed liabilities is not complete as discussed in Note 2. We had no uncertain tax positions at December 31, 2017.
v3.10.0.1
Tax Receivable Agreement Obligation (Notes)
6 Months Ended
Jun. 30, 2018
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 our predecessor. 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 subject to various transfer restrictions described in the TRA and are entitled to certain registration rights more fully described in the Registration Rights Agreement (see Note 17).

During the three months ended June 30, 2018, we recorded an increase to the carrying value of the TRA obligation totaling approximately $46 million related to changes in the timing of estimated payments and new multistate tax impacts resulting from the Merger.

The following table summarizes the changes to the TRA obligation, reported as other current liabilities and Tax Receivable Agreement obligation in our condensed consolidated balance sheets, for the six months ended June 30, 2018 and 2017:
 
Six Months Ended June 30,
 
2018
 
2017
TRA obligation at the beginning of the period
$
357

 
$
596

Accretion expense
36

 
42

Changes in tax assumptions impacting timing of payments
46

 

TRA obligation at the end of the period
439

 
638

Less amounts due currently
(25
)
 
(16
)
Noncurrent TRA obligation at the end of the period
$
414

 
$
622



As of June 30, 2018, the estimated carrying value of the TRA obligation totaled $439 million, which represents the discounted amount of projected payments under the TRA. The primary driver of the change in the obligation for the three months ended June 30, 2018 is the Merger and the addition of estimated multistate tax benefit payments. The projected payments are based on certain assumptions, including but not limited to (a) the federal corporate income tax rate of 21%, (b) estimates of our taxable income in the current and future years and (c) additional states that Vistra Energy now operates in, its relevant tax rate and apportionment factor. Our taxable income takes into consideration the current federal tax code, various relevant state tax laws and reflects our current estimates of future results of the business. These assumptions are subject to change, and those changes could have a material impact on the carrying value of the TRA obligation. The aggregate amount of undiscounted federal and state payments under the TRA is estimated to be approximately $1.4 billion, with more than half of such amount expected to be attributable to the first 15 tax years following Emergence, and the final payment expected to be made approximately 40 years following Emergence (assuming that the TRA is not terminated earlier pursuant to its terms).

The carrying value of the obligation is being accreted to the amount of the gross expected obligation using the effective interest method. Changes in the amount of this obligation resulting from changes to either the timing or amount of TRA payments are recognized in the period of change and measured using the discount rate inherent in the initial fair value of the obligation. During the three and six months ended June 30, 2018, the Impacts of Tax Receivable Agreement on the condensed statements of consolidated income (loss) totaled expense of $64 million and $82 million, respectively, which represents an increase to the carrying value of the TRA obligation discussed above and accretion expense totaling $18 million and $36 million, respectively. During the three and six months ended June 30, 2017, the Impacts of Tax Receivable Agreement on the condensed statements of consolidated income (loss) totaled $22 million and $42 million, respectively, which represents accretion expense for the period.
v3.10.0.1
Earnings Per Share (Notes)
6 Months Ended
Jun. 30, 2018
Earnings Per Share [Abstract]  
Earnings Per Share
EARNINGS PER SHARE

Basic earnings per share available to common shareholders are based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the treasury stock method and includes the effect of all potential issuances of common shares under stock-based incentive compensation arrangements.
 
Three Months Ended June 30, 2018
 
Three Months Ended June 30, 2017
 
Net Income
 
Shares
 
Per Share Amount
 
Net Loss
 
Shares
 
Per Share Amount
Net income (loss) available for common stock — basic (a)
$
108

 
526,332,862

 
$
0.21

 
$
(26
)
 
427,587,401

 
$
(0.06
)
Dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
Stock-based incentive compensation plan

 
7,453,962

 
0.01

 

 

 

Net income (loss) available for common stock — diluted
$
108

 
533,786,824

 
$
0.20

 
$
(26
)
 
427,587,401

 
$
(0.06
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
 
Net Loss
 
Shares
 
Per Share Amount
 
Net Income
 
Shares
 
Per Share Amount
Net income (loss) available for common stock — basic (a)
$
(198
)
 
477,662,016

 
$
(0.41
)
 
$
52

 
427,585,381

 
$
0.12

Dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
Stock-based incentive compensation plan

 

 

 

 
261,182

 

Net income (loss) available for common stock — diluted
$
(198
)
 
477,662,016

 
$
(0.41
)
 
$
52

 
427,846,563

 
$
0.12


____________
(a)
The minimum settlement amount of tangible equity units, or 15,056,260 shares, are considered to be outstanding and are included in the computation of basic net income (loss) per share (see Note 12).

Stock-based incentive compensation plan awards excluded from the calculation of diluted earnings per share because the effect would have been antidilutive totaled 8,064,657 and 1,088,670 shares in the three months ended June 30, 2018 and 2017, respectively, and 18,392,470 and 692,860 shares in the six months ended June 30, 2018 and 2017, respectively.
v3.10.0.1
Long-Term Debt (Notes)
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Long-Term Debt
LONG-TERM DEBT

Amounts in the table below represent the categories of long-term debt obligations incurred by the Company.
 
June 30,
2018
 
December 31,
2017
Vistra Operations Credit Facilities
$
5,842

 
$
4,311

Senior Notes:
 
 
 
7.375% Senior Notes, due November 1, 2022
1,750

 

5.875% Senior Notes, due June 1, 2023
500

 

7.625% Senior Notes, due November 1, 2024
1,250

 

8.034% Senior Notes, due February 2, 2024
188

 

8.000% Senior Notes, due January 15, 2025
750

 

8.125% Senior Notes, due January 30, 2026
850

 

Total Senior Notes
5,288

 

Other:
 
 
 
7.000% Amortizing Notes, due July 1, 2019
38

 

Forward Capacity Agreements
241

 

Equipment Financing Agreements
138

 

Mandatorily redeemable subsidiary preferred stock (a)
70

 
70

8.82% Building Financing due semiannually through February 11, 2022 (b)
24

 
27

Total other long-term debt
511

 
97

Unamortized debt premiums, discounts and issuance costs
322

 
15

Total long-term debt including amounts due currently
11,963

 
4,423

Less amounts due currently
(156
)
 
(44
)
Total long-term debt less amounts due currently
$
11,807

 
$
4,379

____________
(a)
Shares of mandatorily redeemable preferred stock in PrefCo issued as part of the Plan of Reorganization. This subsidiary preferred stock is accounted for as a debt instrument under relevant accounting guidance.
(b)
Obligation related to a corporate office space capital lease. This obligation will be funded by amounts held in an escrow account that is reflected in other noncurrent assets in our condensed consolidated balance sheets.

Vistra Operations Credit Facilities

At June 30, 2018, the Vistra Operations Credit Facilities consisted of up to $8.342 billion in senior secured, first lien revolving credit commitments and outstanding term loans, consisting of revolving credit commitments of up to $2.5 billion, including a $2.3 billion letter of credit sub-facility (Revolving Credit Facility) and term loans of $2.807 billion (Term Loan B-1 Facility), $985 million (Term Loan B-2 Facility) and $2.050 billion (Term Loan B-3 Facility, and together with the Term Loan B-1 Facility and the Term Loan B-2 Facility, the Term Loan B Facility).

These amounts reflect an amendment to the Vistra Operations Credit Facilities in June 2018 whereby we incurred $2.050 billion of borrowings under the new Term Loan B-3 Facility and obtained $1.640 billion of incremental Revolving Credit Facility commitments. The letter of credit sub-facility was also increased by $1.585 billion. The maturity date of the Revolving Credit Facility was extended from August 4, 2021 to June 14, 2023. As discussed below, the proceeds from the Term Loan B-3 Facility were used to repay borrowings under the credit agreement that Vistra Energy assumed from Dynegy in connection with the Merger. Additionally, letter of credit term loans totaling $500 million (Term Loan C Facility) were repaid using $500 million of cash from collateral accounts used to backstop letters of credit. Fees and expenses related to the amendment to the Vistra Operations Credit Facilities totaled $45 million in the three months ended June 30, 2018, of which $34 million was recorded as interest expense and other charges on the condensed statements of consolidated income (loss) and $11 million was capitalized as a reduction in the carrying amount of the debt.

The Vistra Operations Credit Facilities and related available capacity at June 30, 2018 are presented below.
 
 
 
 
June 30, 2018
Vistra Operations Credit Facilities
 
Maturity Date
 
Facility
Limit
 
Cash
Borrowings
 
Available
Capacity
Revolving Credit Facility (a)
 
June 14, 2023
 
$
2,500

 
$

 
$
1,065

Term Loan B-1 Facility (b)
 
August 4, 2023
 
2,807

 
2,807

 

Term Loan B-2 Facility (b)
 
December 14, 2023
 
985

 
985

 

Term Loan B-3 Facility (b)
 
December 31, 2025
 
2,050

 
2,050

 

Total Vistra Operations Credit Facilities
 
 
 
$
8,342

 
$
5,842

 
$
1,065

___________
(a)
Facility to be used for general corporate purposes. Facility includes a $2.3 billion letter of credit sub-facility, of which $1.435 billion of letters of credit were outstanding at June 30, 2018 and which reduce our available capacity.
(b)
Cash borrowings under the Term Loan B Facility reflect required scheduled quarterly payment in annual amount equal to 1% of the original principal amount with the balance paid at maturity. Principal amounts paid cannot be reborrowed.

In February and June 2018, certain pricing terms for the Vistra Operations Credit Facilities were amended. We accounted for these transactions as a modification of debt. At June 30, 2018, cash borrowings under the Revolving Credit Facility would bear interest based on applicable LIBOR rates, plus a fixed spread of 1.75%, and there were no outstanding borrowings. Letters of credit issued under the Revolving Credit Facility bear interest of 1.75%. Amounts borrowed under the Term Loan B-1 Facility bear interest based on applicable LIBOR rates plus a fixed spread of 2.00%. Amounts borrowed under the Term Loan B-2 Facility bear interest based on applicable LIBOR rates plus a fixed spread of 2.25%. Amounts borrowed under the Term Loan B-3 Facility bear interest based on applicable LIBOR rates plus a fixed spread of 2.00%. At June 30, 2018, the weighted average interest rates before taking into consideration interest rate swaps on outstanding borrowings were 4.09%, 4.34% and 4.07% under the Term Loan B-1, B-2 and B-3 Facilities, respectively. The Vistra Operations Credit Facilities also provide for certain additional fees payable to the agents and lenders, including fronting fees with respect to outstanding letters of credit and availability fees payable with respect to any unused portion of the Revolving Credit Facility.

Obligations under the Vistra Operations Credit Facilities are secured by a lien covering substantially all of Vistra Operations' (and its subsidiaries') consolidated assets, rights and properties, subject to certain exceptions set forth in the Vistra Operations Credit Facilities, provided that the amount of loans outstanding under the Vistra Operations Credit Facilities that may be secured by a lien covering certain principal properties of the Company is expressly limited by the terms of the Vistra Operations Credit Facilities.

The Vistra Operations Credit Facilities also permit certain hedging agreements to be secured on a pari-passu basis with the Vistra Operations Credit Facilities in the event those hedging agreements met certain criteria set forth in the Vistra Operations Credit Facilities.

The Vistra Operations Credit Facilities provide for affirmative and negative covenants applicable to Vistra Operations (and its restricted subsidiaries), including affirmative covenants requiring it to provide financial and other information to the agents under the Vistra Operations Credit Facilities and to not change its lines of business, and negative covenants restricting Vistra Operations' (and its restricted subsidiaries') ability to incur additional indebtedness, make investments, dispose of assets, pay dividends, grant liens or take certain other actions, in each case, except as permitted in the Vistra Operations Credit Facilities. Vistra Operations' ability to borrow under the Vistra Operations Credit Facilities is subject to the satisfaction of certain customary conditions precedent set forth therein.

The Vistra Operations Credit Facilities provide for certain customary events of default, including events of default resulting from non-payment of principal, interest or fees when due, material breaches of representations and warranties, material breaches of covenants in the Vistra Operations Credit Facilities or ancillary loan documents, cross-defaults under other agreements or instruments and the entry of material judgments against Vistra Operations. Solely with respect to the Revolving Credit Facility, and solely during a compliance period (which, in general, is applicable when the aggregate revolving borrowings and issued revolving letters of credit (in excess of $300 million) exceed 30% of the revolving commitments), the agreement includes a covenant that requires the consolidated first lien net leverage ratio, which is based on the ratio of net first lien debt compared to an EBITDA calculation defined under the terms of the facilities, not to exceed 4.25 to 1.00. As of June 30, 2018, we were in compliance with this financial covenant. Upon the existence of an event of default, the Vistra Operations Credit Facilities provide that all principal, interest and other amounts due thereunder will become immediately due and payable, either automatically or at the election of specified lenders.

Interest Rate Swaps — Effective January 2017, we entered into $3.0 billion notional amount of interest rate swaps to hedge a portion of our exposure to our variable rate debt. The interest rate swaps expire in July 2023. In May and June 2018, we entered into $3.0 billion notional amount of interest rate swaps that become effective in July 2023 and expire in July 2026.

In June 2018, we completed the novation of $1.959 billion of Vistra Energy (legacy Dynegy) interest rate swaps to Vistra Operations Company LLC (Vistra Operations). In June 2018, $238 million of these interest rate swaps expired. The remaining interest rate swaps expire between March 2019 and February 2024.

The interest rate swaps effectively fix the interest rates between 4.13% and 4.38% on $4.721 billion of our variable rate debt. The interest rate swaps that become effective in July 2023 and expire in July 2026 effectively fix the interest rates between 4.97% and 5.04% on $3.0 billion of our variable rate debt during the period. The interest rate swaps are secured by a first lien secured interest on a pari-passu basis with the Vistra Operations Credit Facilities.

Vistra Energy (legacy Dynegy) Credit Agreement

On the Merger Date, Vistra Energy assumed the obligations under Dynegy's $3.563 billion credit agreement consisting of a $2.018 billion senior secured term loan facility due 2024 and a $1.545 billion senior secured revolving credit facility. As of the Merger Date, there were no cash borrowings and $656 million of letters of credit outstanding under the senior secured revolving credit facility. On April 23, 2018, $70 million of the senior secured revolving credit facility matured. In June 2018, the $2.018 billion senior secured term loan facility due 2024 was repaid using proceeds from the Term Loan B-3 Facility. In addition, all letters of credit outstanding under the senior secured revolving credit facility were replaced with letters of credit under the amended Vistra Operations Credit Facilities discussed above, and the revolving credit facility assumed from Dynegy in connection with the Merger was paid off in full and terminated.

Senior Notes

On the Merger Date, Vistra Energy assumed $6.138 billion principal amount of Dynegy's senior notes. In May 2018, $850 million of outstanding 6.75% Senior Notes due 2019 were redeemed at a redemption price of 101.688% of the aggregate principal amount, plus accrued and unpaid interest to but not including the date of redemption. In June 2018, each of the Company's subsidiaries that guaranteed the Vistra Operations Credit Facilities (and did not already guarantee the senior notes) provided a guarantee on the senior notes that remained outstanding.

The senior notes are unsecured and unsubordinated obligations of Vistra Energy and are guaranteed by substantially all of its current and future wholly-owned domestic subsidiaries that from time to time are a borrower or guarantor under the agreement governing the Vistra Operations Credit Facilities (Credit Facilities Agreement) (see Note 20). The respective indentures of the senior notes limit, among other things, the ability of the Company or any of the guarantors to create liens upon any principal property to secure debt for borrowed money in excess of, among other limitations, 30% of total assets. The respective indentures of the senior notes also contain customary events of default which would permit the holders of the applicable series of senior notes to declare such notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely principal or interest payments on such notes or other indebtedness aggregating $100 million or more, the failure to satisfy covenants, and specified events of bankruptcy and insolvency.

Amortizing Notes

On the Merger Date, Vistra Energy assumed the obligations of Dynegy's senior amortizing note (Amortizing Notes) maturing on July 1, 2019. The Amortizing Notes were issued in connection with the issuance of the tangible equity units (TEUs) by Dynegy (see Note 12). Each installment payment per Amortizing Note will be paid in cash and will constitute a partial repayment of principal and a payment of interest, computed at an annual rate of 7.00%. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Payments will be applied first to the interest due and payable and then to the reduction of the unpaid principal amount, allocated as set forth in the indenture.

The indenture for the Amortizing Notes limits, among other things, the ability of the Company to consolidate, merge, sell, or dispose all or substantially all of its assets. If a fundamental change occurs, or if the Company elects to settle the prepaid stock purchase contracts early, then the holders of the Amortizing Notes will have the right to require the Company to repurchase the Amortizing Notes at a repurchase price equal to the principal amount of the Amortizing Notes as of the repurchase date (as described in the supplemental indenture) plus accrued and unpaid interest. The indenture also contains customary events of default which would permit the holders of the Amortizing Notes to declare those Amortizing Notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely installment payments on the Amortizing Notes or other material indebtedness aggregating $100 million or more, the failure to satisfy covenants, and specified events of bankruptcy and insolvency.

Forward Capacity Agreements

On the Merger Date, the Company assumed the obligation of Dynegy's agreements under which a portion of the PJM capacity that cleared for Planning Years 2018-2019, 2019-2020 and 2020-2021 was sold to a financial institution (Forward Capacity Agreements). The buyer in this transaction will receive capacity payments from PJM during the Planning Years 2018-2019, 2019-2020 and 2020-2021 in the amounts of $10 million, $121 million and $110 million, respectively. We will continue to be subject to the performance obligations as well as any associated performance penalties and bonus payments for those planning years. As a result, this transaction is accounted for as a debt issuance of $241 million with an implied interest rate of 4.90%.

Equipment Financing Agreements

On the Merger Date, the Company assumed Dynegy's Equipment Financing Agreements. Under certain of our contractual service agreements in which we receive maintenance and capital improvements for our gas-fueled generation fleet, we have obtained parts and equipment intended to increase the output, efficiency and availability of our generation units. We have financed these parts and equipment under agreements with maturities ranging from 2019 to 2026. The portion of future payments attributable to principal will be classified as cash outflows from financing activities, and the portion of future payments attributable to interest will be classified as cash outflows from operating activities in our condensed statements of consolidated cash flows.

Maturities

Long-term debt maturities at June 30, 2018 are as follows:
 
June 30, 2018
Remainder of 2018
$
85

2019
182

2020
204

2021
130

2022
1,824

Thereafter
9,216

Unamortized premiums, discounts and debt issuance costs
322

Total long-term debt, including amounts due currently
$
11,963

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Commitments and Contingencies (Notes)
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments And Contingencies
COMMITMENTS AND CONTINGENCIES

Guarantees