VISTRA ENERGY CORP., 10-Q filed on 5/5/2020
Quarterly Report
v3.20.1
Cover Page - shares
3 Months Ended
Mar. 31, 2020
Apr. 30, 2020
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2020  
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   488,578,428
Entity Central Index Key 0001692819  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Common stock, par value $0.01 per share    
Document Information [Line Items]    
Title of 12(b) Security Common stock, par value $0.01 per share  
Trading Symbol VST  
Security Exchange Name NYSE  
Warrants    
Document Information [Line Items]    
Title of 12(b) Security Warrants  
Trading Symbol VST.WS.A  
Security Exchange Name NYSE  
v3.20.1
Condensed Statements Of Consolidated Income (Loss) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Income Statement [Abstract]    
Operating revenues $ 2,858 $ 2,923
Fuel, purchased power costs and delivery fees (1,333) (1,461)
Operating costs (379) (385)
Depreciation and amortization (419) (405)
Selling, general and administrative expenses (252) (182)
Impairment of long-lived assets (84) 0
Operating income 391 490
Other income 7 25
Other deductions (31) (2)
Interest expense and related charges (300) (222)
Impacts of Tax Receivable Agreement (8) 3
Equity in earnings of unconsolidated investments 3 7
Income before income taxes 62 301
Income tax expense (17) (77)
Net income 45 224
Net loss attributable to noncontrolling interest 11 1
Net income attributable to Vistra Energy $ 56 $ 225
Weighted average shares of common stock outstanding:    
Weighted average shares of common stock outstanding - basic 487,944,564 502,367,299
Weighted average shares of common stock outstanding - diluted 490,638,626 509,139,988
Net income per weighted average share of common stock outstanding:    
Net income per weighted average share of common stock outstanding - basic $ 0.11 $ 0.45
Net income per weighted average share of common stock outstanding - diluted $ 0.11 $ 0.44
v3.20.1
Condensed Statements Of Consolidated Comprehensive Income (Loss) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement of Comprehensive Income [Abstract]    
Net income $ 45 $ 224
Other comprehensive income, net of tax effects:    
Effects related to pension and other retirement benefit obligations (net of tax benefit of $7 and $—) (23) 1
Total other comprehensive income (loss) (23) 1
Comprehensive income 22 225
Comprehensive loss attributable to noncontrolling interest 11 1
Comprehensive income attributable to Vistra Energy $ 33 $ 226
v3.20.1
Condensed Statements Of Consolidated Comprehensive Income (Loss) (Parenthetical) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement of Comprehensive Income [Abstract]    
Effect related to pension and other retirement benefit obligations (tax) $ 7 $ 0
v3.20.1
Condensed Statements Of Consolidated Cash Flows - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Cash flows — operating activities:    
Net income $ 45 $ 224
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization 489 461
Deferred income tax expense, net 13 70
Impairment of long-lived assets 84 0
Loss on disposal of investment in NELP 28 0
Unrealized net gain from mark-to-market valuations of commodities (125) (186)
Unrealized net loss from mark-to-market valuations of interest rate swaps 174 80
Asset retirement obligation accretion expense 12 14
Impacts of Tax Receivable Agreement 8 (3)
Stock-based compensation 14 12
Other, net 3 (32)
Changes in operating assets and liabilities:    
Margin deposits, net 99 34
Accrued interest (77) 15
Accrued taxes (110) (75)
Accrued employee incentive (90) (90)
Other operating assets and liabilities (15) (136)
Cash provided by operating activities 552 388
Cash flows — investing activities:    
Capital expenditures, including nuclear fuel purchases and LTSA prepayments (261) (153)
Proceeds from sales of nuclear decommissioning trust fund securities 75 78
Investments in nuclear decommissioning trust fund securities (80) (83)
Proceeds from sales of environmental allowances 74 0
Purchases of environmental allowances (106) (1)
Other, net 14 10
Cash used in investing activities (284) (149)
Cash flows — financing activities:    
Issuances of long-term debt 0 1,300
Repayments/repurchases of debt (223) (1,282)
Net borrowings under accounts receivable securitization program 0 11
Borrowings under Revolving Credit Facility 425 0
Repayments under Revolving Credit Facility (75) 0
Stock repurchase 0 (248)
Dividends paid to stockholders (66) (61)
Debt tender offer and other financing fees (5) (64)
Other, net (4) 0
Cash provided by (used in) financing activities 52 (344)
Net change in cash, cash equivalents and restricted cash 320 (105)
Cash, cash equivalents and restricted cash — beginning balance 475 693
Cash, cash equivalents and restricted cash — ending balance $ 795 $ 588
v3.20.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 717 $ 300
Restricted cash 50 147
Trade accounts receivable — net 1,097 1,365
Inventories 514 469
Commodity and other derivative contractual assets 1,685 1,333
Margin deposits related to commodity contracts 137 202
Prepaid expense and other current assets 359 298
Total current assets 4,559 4,114
Restricted cash 28 28
Investments 1,374 1,537
Investment in unconsolidated subsidiary 0 124
Property, plant and equipment — net 13,818 13,914
Operating lease right-of-use assets 47 44
Goodwill 2,608 2,553
Identifiable intangible assets — net 2,578 2,748
Commodity and other derivative contractual assets 269 136
Accumulated deferred income taxes 1,058 1,066
Other noncurrent assets 330 352
Total assets 26,669 26,616
Current liabilities:    
Short-term borrowings 700 350
Accounts receivable securitization program 450 450
Long-term debt due currently 169 277
Trade accounts payable 804 947
Commodity and other derivative contractual liabilities 1,753 1,529
Margin deposits related to commodity contracts 31 8
Accrued income taxes 6 1
Accrued taxes other than income 86 200
Accrued interest 73 151
Asset retirement obligations 151 141
Operating lease liabilities 10 14
Other current liabilities 371 506
Total current liabilities 4,604 4,574
Long-term debt, less amounts due currently 9,969 10,102
Operating lease liabilities 42 41
Commodity and other derivative contractual liabilities 686 396
Accumulated deferred income taxes 2 2
Tax Receivable Agreement obligation 463 455
Asset retirement obligation 2,089 2,097
Other noncurrent liabilities and deferred credits 888 989
Total liabilities 18,743 18,656
Commitments and Contingencies
Total equity:    
Common stock (par value — $0.01; number of shares authorized — 1,800,000,000) (shares outstanding: March 31, 2020 — 488,448,029; December 31, 2019 — 487,698,111) 5 5
Treasury stock, at cost (shares: March 31, 2020 — 41,043,224; December 31, 2019 — 41,043,224) (973) (973)
Additional paid-in-capital 9,737 9,721
Retained deficit (780) (764)
Accumulated other comprehensive loss (53) (30)
Stockholders' equity 7,936 7,959
Noncontrolling interest in subsidiary (10) 1
Total equity 7,926 7,960
Total liabilities and equity $ 26,669 $ 26,616
Common stock, par or stated value per share $ 0.01  
Common stock, shares authorized 1,800,000,000  
Common stock, shares, outstanding 488,448,029 487,698,111
Treasury stock, held in treasury 41,043,224 41,043,224
v3.20.1
Business And Significant Accounting Policies
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Business And Significant Accounting Policies BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business

References in this report to "we," "our," "us" and "the Company" are to Vistra Energy and/or its subsidiaries, as apparent in the context. See Glossary for defined terms.

Vistra Energy is a holding company operating an integrated retail and generation business primarily in markets throughout the U.S. Through our subsidiaries, we are engaged in competitive energy market activities including power generation, wholesale energy sales and purchases, commodity risk management and retail sales of electricity and natural gas to end users.

Vistra Energy has six reportable segments: (i) Retail, (ii) ERCOT, (iii) PJM, (iv) NY/NE (comprising NYISO and ISO-NE), (v) MISO and (vi) Asset Closure. See Note 17 for further information concerning reportable business segments.

Ambit Transaction

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

Crius Transaction

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

COVID-19 Pandemic

In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a pandemic, and the President of the United States (the President) declared the COVID-19 outbreak a national emergency. The U.S. government has deemed electricity generation, transmission and distribution as “critical infrastructure” providing essential services during this global emergency. As a provider of critical infrastructure, Vistra Energy has an obligation to provide critically needed power to homes, businesses, hospitals and other customers. Vistra Energy remains focused on protecting the health and well-being of its employees and the communities in which it operates while assuring the continuity of its business operations.

The Company's condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company's first quarter 2020 results of operations.

In response to the global pandemic related to COVID-19, the President signed into law the CARES Act on March 27, 2020. See Note 7 for a summary of certain anticipated tax-related impacts of the CARES Act to the Company.
Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and on the same basis as the audited financial statements included in our 2019 Form 10-K. The condensed consolidated financial information herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. All such adjustments are of a normal nature. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and footnotes required by U.S. GAAP, they should be read in conjunction with the audited financial statements and related notes contained in our 2019 Form 10-K. The results of operations for an interim period may not give a true indication of results for a full year. All dollar amounts in the financial statements and tables in the notes are stated in millions of U.S. dollars unless otherwise indicated.

Use of Estimates

Preparation of financial statements requires estimates and assumptions about future events that affect the reporting of assets and liabilities at the balance sheet dates and the reported amounts of revenue and expense, including fair value measurements, estimates of expected obligations, judgments related to the potential timing of events and other estimates. In the event estimates and/or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.

Adoption of Accounting Standards

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The ASU enhances and simplifies various aspects of the income tax accounting guidance including the elimination of certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. We adopted all provisions of this ASU in the first quarter of 2020, and it did not have a material impact on our financial statements.

In August 2018, the FASB issued ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement. The ASU removes disclosure requirements for (a) the reasons for transfers between Level 1 and Level 2, (b) the policy for timing of transfers between levels and (c) the valuation processes for Level 3. The ASU requires new disclosures around (a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. We adopted this ASU in the first quarter of 2020, and the updated disclosures are included in Note 14.

In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ASU requires a customer in a cloud hosting arrangement that is a service contract to determine which implementation costs to capitalize and which costs to expense based on the project stage of the implementation. The ASU also requires the customer to expense the capitalized implementation costs over the term of the hosting arrangement. The customer is required to apply the existing impairment and abandonment guidance on the capitalized implementation costs. We adopted this ASU in the first quarter of 2020, and it did not have a material impact on our financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses. The ASU requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. We adopted this ASU in the first quarter of 2020, and it did not have a material impact on our financial statements.
Changes in Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in the ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of this guidance did not have a material impact on our financial statements.
v3.20.1
Acquisitions, Merger Transaction and Business Combination Accounting (Notes)
3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Acquisitions, Merger Transaction and Business Combination Accounting ACQUISITIONS, MERGER TRANSACTION AND BUSINESS COMBINATION ACCOUNTING
Ambit Transaction

On November 1, 2019 (Ambit Acquisition Date), Volt Asset Company, Inc., an indirect, wholly owned subsidiary of Vistra Energy, completed the Ambit Transaction. Ambit is an energy retailer selling both electricity and natural gas products to residential and small business customers in 17 states. Vistra Energy funded the purchase price of $555 million (including cash acquired and net working capital) using cash on hand. All of Ambit's outstanding debt was repaid from the purchase price at closing and not assumed by Vistra Energy.

Crius Transaction

On July 15, 2019 (Crius Acquisition Date), Vienna Acquisition B.C. Ltd., an indirect, wholly owned subsidiary of Vistra Energy, completed the acquisition of the equity interests of two wholly owned subsidiaries of Crius that indirectly own the operating business of Crius. Crius is an energy retailer selling both electricity and natural gas products to residential and small business customers in 19 states. Vistra Energy funded the purchase price of $400 million (including $382 million for outstanding trust units) using cash on hand.

Ambit and Crius Business Combination Accounting

We believe the Ambit Transaction has (i) augmented Vistra Energy's existing retail marketing capabilities with additional direct selling capability and a proprietary technology platform, (ii) reduced risk and aided expansion into higher margin channels by improving Vistra Energy's match of its generation to load profile due to a high degree of overlap of Vistra Energy's generation fleet with Ambit's approximately 11 TWh of annual load, primarily in ERCOT and PJM and (iii) enhanced the integrated value proposition through collateral and transaction efficiencies, particularly via Ambit's retail electric portfolio.

We believe the Crius Transaction has (i) reduced risk and aided expansion into higher margin channels by improving Vistra Energy's match of its generation to load profile due to a high degree of overlap of Vistra Energy's generation fleet with Crius' approximately 10 TWh of annual electricity load, (ii) established a platform for growth by leveraging Vistra Energy's existing retail marketing capabilities and Crius' experienced team and (iii) enhanced the integrated value proposition through collateral and transaction efficiencies, particularly via Crius' retail electric portfolio.

The Ambit and Crius Transactions are being accounted for in accordance with ASC 805, Business Combinations (ASC 805), with identifiable assets acquired and liabilities assumed recorded at their estimated fair values on the Ambit and Crius Acquisition Dates, respectively. The combined results of operations are reported in our condensed consolidated financial statements beginning as of the respective Ambit and Crius Acquisition Dates. A summary of the techniques used to estimate the fair value of the identifiable assets and liabilities, as well as their classification within the fair value hierarchy (see Note 14), is listed below:

Working capital was valued using available market information (Level 2).
Acquired derivatives were valued using the methods described in Note 14 (Level 2 or Level 3).
Acquired retail customer relationship was valued based on discounted cash flow analysis of acquired customers and estimated attrition rates (Level 3).
Crius' long-term debt was valued using a market approach (Level 2).

The following table summarizes the preliminary allocation of the purchase price to the fair value amounts recognized for the assets acquired and liabilities assumed related to the Ambit and Crius Transactions as of the Ambit and Crius Acquisition Dates, respectively. The Ambit Transaction purchase price was $555 million (including cash acquired and net working capital), and the Crius Transaction purchase price was $400 million. The purchase price allocations are ongoing and are dependent upon final valuation determinations, which have not been completed. The preliminary values included below represent our current best estimates for accumulated deferred income taxes, identifiable intangible assets, net working capital and long-term debt. The purchase price allocations are preliminary and each of the values included below may change materially based upon the receipt of more detailed information, additional analyses and completed valuations. The final purchase price allocation is expected to be completed no later than the second quarter of 2020 for the Crius Transaction and no later than the third quarter of 2020 for the Ambit Transaction, respectively.
Ambit and Crius Transactions Preliminary Purchase Price Allocations
Ambit TransactionCrius Transaction
Updated Preliminary Purchase Price AllocationMeasurement Period Adjustments recorded through
March 31, 2020
Updated Preliminary Purchase Price AllocationMeasurement Period Adjustments recorded through
March 31, 2020
Cash and cash equivalents$49  $—  $26  $—  
Net working capital30   (2) (35) 
Accumulated deferred income taxes—  —  —  (36) 
Identifiable intangible assets200  (63) 302   
Goodwill278  64  248  43  
Commodity and other derivative contractual assets23  —  18  —  
Other noncurrent assets13  —  17  (3) 
Total assets acquired593   609  (23) 
Identifiable intangible liabilities—  —   (33) 
Long-term debt, including amounts due currently—  —  140  —  
Commodity and other derivative contractual liabilities28  —  40  —  
Accumulated deferred income taxes—  —  10  10  
Other noncurrent liabilities and deferred credits10   16  —  
Total liabilities assumed38   209  (23) 
Identifiable net assets acquired$555  $—  $400  $—  

Dynegy Merger Transaction

On the Merger Date, Vistra Energy and Dynegy completed the transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, Dynegy merged with and into Vistra Energy, with Vistra Energy continuing as the surviving corporation. The Merger was intended to qualify as a tax-free reorganization under the Internal Revenue Code, as amended, so that none of Vistra Energy, Dynegy or any of the Dynegy stockholders would recognize any gain or loss in the transaction, except that Dynegy stockholders could recognize a gain or loss with respect to cash received in lieu of fractional shares of Vistra Energy's common stock. Vistra Energy is the acquirer for both federal tax and accounting purposes.

At the closing of the Merger, each issued and outstanding share of Dynegy common stock, par value $0.01 per share, other than shares owned by Vistra Energy or its subsidiaries, held in treasury by Dynegy or held by a subsidiary of Dynegy, was automatically converted into 0.652 shares of common stock, par value $0.01 per share, of Vistra Energy (the Exchange Ratio), except that cash was paid in lieu of fractional shares, which resulted in Vistra Energy issuing 94,409,573 shares of Vistra Energy common stock to the former Dynegy stockholders, as well as converting stock options, equity-based awards, tangible equity units and warrants. The total number of Vistra Energy shares outstanding at the close of the Merger was 522,932,453 shares. Dynegy stock options and equity-based awards outstanding immediately prior to the Merger Date were generally automatically converted upon completion of the Merger into stock options and equity-based awards, respectively, with respect to Vistra Energy's common stock, after giving effect to the Exchange Ratio.
v3.20.1
Acquisition and Development of Generation Facilities (Notes)
3 Months Ended
Mar. 31, 2020
Acquisition And Development Of Generation Facilities [Abstract]  
Development of Generation Facilities DEVELOPMENT OF GENERATION FACILITIES
Battery Energy Storage Projects

Oakland — In June 2019, East Bay Community Energy (EBCE) signed a ten-year contract to receive resource adequacy capacity from the planned development of a 20 MW battery ESS at our Oakland Power Plant site in California. In April 2020, the project received necessary approvals from EBCE and from Pacific Gas and Electric Company (PG&E), and the contract was amended to increase the capacity of the planned development to a 36.25 MW battery ESS. In April 2020, the concurrent local area reliability service agreement to ensure grid reliability as part of the Oakland Clean Energy Initiative was signed and sent to the California Public Utilities Commission (CPUC) for approval. The battery ESS project is expected to enter commercial operations by January 2022.

Moss Landing — In June 2018, we announced that, subject to approval by the CPUC, we would enter into a 20-year resource adequacy contract with PG&E to develop a 300 MW battery ESS at our Moss Landing Power Plant site in California. PG&E filed its application with the CPUC in June 2018 and the CPUC approved the resource adequacy contract in November 2018. At March 31, 2020, we had accumulated approximately $165 million in construction work-in-process for this ESS. Under the contract, PG&E will pay us a fixed monthly resource adequacy payment, while we will receive the energy revenues and incur the costs from dispatching and charging the ESS. We anticipate the Moss Landing battery ESS will commence commercial operations in the fourth quarter of 2020. PG&E filed for Chapter 11 bankruptcy protection in January 2019. In October 2019, PG&E filed a motion in its bankruptcy proceeding requesting approval of the assumption of the resource adequacy contract. In November 2019, the bankruptcy court approved the assumption motion subject to the CPUC approving the terms of the amendment, and the CPUC approved the terms of the amendment in January 2020. The resource adequacy contract as amended is now assumed and fully enforceable against PG&E.
v3.20.1
Retirement of Generation Facilities (Notes)
3 Months Ended
Mar. 31, 2020
Retirement of Generation Facilities [Abstract]  
Retirement of generation facilities RETIREMENT OF GENERATION FACILITIES
MISO — In September 2019, we announced the settlement of a lawsuit alleging violations of opacity and particulate matter limits at our Edwards facility in Bartonville, Illinois. As part of the settlement, which was approved by the U.S. District Court for the Central District of Illinois in November 2019, we will retire the Edwards facility by the end of 2022 (see Note 12). In August 2019, we announced the planned retirement of four power plants in Illinois with a total installed nameplate generation capacity of 2,068 MW. We retired these units due to changes in the Illinois multi-pollutant standard rule (MPS rule) that require us to retire approximately 2,000 MW of generation capacity (see Note 12). In light of the provisions of the Federal Power Act and the FERC regulations thereunder, the affected subsidiaries of Vistra Energy identified the retired units by analyzing the economics of each of our Illinois plants and designating the least economic units for retirement. Expected plant retirement expenses of $47 million, driven by severance costs, were accrued in the three months ended September 30, 2019 and were included primarily in operating costs of our Asset Closure segment. In August 2019, we remeasured our pension and OPEB plans resulting in an increase to the benefit obligation liability of $21 million, pretax other comprehensive loss of $18 million and curtailment expense of $3 million recognized as other deductions in our condensed consolidated statements of operations. The following table details the units in Illinois totaling 2,653 MW, that have been or will be retired. Operational results for retired plants are included in the Asset Closure segment, which is engaged in the decommissioning and reclamation of retired plants and mines.
NameLocationFuel TypeNet Generation Capacity (MW)Number of UnitsDates Units to Be Taken Offline
CoffeenCoffeen, ILCoal915  2November 1, 2019
Duck CreekCanton, ILCoal425  1December 15, 2019
HavanaHavana, ILCoal434  1November 1, 2019
HennepinHennepin, ILCoal294  2November 1, 2019
EdwardsBartonville, ILCoal585  2By the end of 2022
Total
2,653  8
v3.20.1
Revenue (Notes)
3 Months Ended
Mar. 31, 2020
Revenue Recognition and Deferred Revenue [Abstract]  
Revenue REVENUE
The following tables disaggregate our revenue by major source:
Three Months Ended March 31, 2020
RetailERCOTPJMNY/NEMISOAsset
Closure
CAISO/EliminationsConsolidated
Revenue from contracts with customers:
Retail energy charge in ERCOT$1,253  $—  $—  $—  $—  $—  $—  $1,253  
Retail energy charge in Northeast/Midwest640  —  —  —  —  —  —  640  
Wholesale generation revenue from ISO/RTO—  98  76  41  13  —  33  261  
Capacity revenue from ISO/RTO—  —  14  26   —  —  45  
Revenue from other wholesale contracts—  50  152  12  49  —   267  
Total revenue from contracts with customers1,893  148  242  79  67  —  37  2,466  
Other revenues:
Intangible amortization(4) —  —  —  (4) —  —  (8) 
Hedging and other revenues (a)19  251  39  39   —  44  400  
Affiliate sales—  467  367  167  71  —  (1,072) —  
Total other revenues15  718  406  206  75  —  (1,028) 392  
Total revenues$1,908  $866  $648  $285  $142  $—  $(991) $2,858  
____________
(a)Includes $201 million of unrealized net gains from mark-to-market valuations of commodity positions. See Note 17 for unrealized net gains (losses) by segment.

Three Months Ended March 31, 2019
RetailERCOTPJMNY/NEMISOAsset
Closure
CAISO/EliminationsConsolidated
Revenue from contracts with customers:
Retail energy charge in ERCOT$1,025  $—  $—  $—  $—  $—  $—  $1,025  
Retail energy charge in Northeast/Midwest348  —  —  —  —  —  —  348  
Wholesale generation revenue from ISO/RTO—  247  221  195  72  67  73  875  
Capacity revenue from ISO/RTO—  —  67  80  10   —  160  
Revenue from other wholesale contracts—  44  72   15    142  
Total revenue from contracts with customers1,373  291  360  282  97  71  76  2,550  
Other revenues:
Intangible amortization(9) —  —  (2) (5) —   (15) 
Hedging and other revenues (a)22  158  91  49  13  14  41  388  
Affiliate sales—  505  254  15  64  —  (838) —  
Total other revenues13  663  345  62  72  14  (796) 373  
Total revenues$1,386  $954  $705  $344  $169  $85  $(720) $2,923  
____________
(a)Includes $158 million of unrealized net gains from mark-to-market valuations of commodity positions. See Note 17 for unrealized net gains (losses) by segment.
Performance Obligations

As of March 31, 2020, we have future performance obligations that are unsatisfied, or partially unsatisfied, relating to capacity auction volumes awarded through capacity auctions held by the ISO or RTO or contracts with customers. Therefore, an obligation exists as of the date of the results of the respective ISO or RTO capacity auction or the contract execution date. The transaction price is also set by the results of the capacity auction. These obligations total $576 million, $822 million, $473 million, $123 million and $38 million that will be recognized, in the balance of the year ended December 31, 2020 and the years ending December 31, 2021, 2022, 2023 and 2024, respectively, and $19 million thereafter. Capacity revenues are recognized as capacity is made available to the related ISOs or RTOs or counterparties.

Accounts Receivable

The following table presents trade accounts receivable (net of allowance for uncollectible accounts) relating to both contracts with customers and other activities:
March 31,
2020
December 31, 2019
Trade accounts receivable from contracts with customers — net$1,017  $1,246  
Other trade accounts receivable — net80  119  
Total trade accounts receivable — net$1,097  $1,365  
v3.20.1
Goodwill and Identifiable Intangible Assets and Liabilities (Notes)
3 Months Ended
Mar. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill And Identifiable Intangible Assets GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS AND LIABILITIES
Goodwill

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

Balance at December 31, 2019
$2,553  
Measurement period adjustments recorded in connection with the Ambit Transaction64  
Measurement period adjustments recorded in connection with the Crius Transaction(9) 
Balance at March 31, 2020
$2,608  

At March 31, 2020, the goodwill balance of $2.608 billion consisted of the following:

$1.907 billion arose in connection with our application of fresh start reporting at Emergence and was allocated entirely to our ERCOT Retail reporting unit. Of the goodwill recorded at Emergence, $1.686 billion is deductible for tax purposes over 15 years on a straight-line basis.
$175 million arose in connection with the Merger, of which $122 million is recorded in our ERCOT Generation reporting unit and $53 million is recorded in our ERCOT Retail reporting unit. None of the goodwill related to the Merger is deductible for tax purposes.
$278 million and $248 million of preliminary goodwill arose in connection with the Ambit and Crius Transactions, respectively, and is unassigned to a reporting unit pending completion of the purchase price allocations. The goodwill related to the Ambit Transaction of $278 million is deductible for tax purposes over 15 years on a straight-line basis. None of the goodwill related to the Crius Transaction is deductible for tax purposes.
Identifiable Intangible Assets and Liabilities

Identifiable intangible assets are comprised of the following:
March 31, 2020December 31, 2019
Identifiable Intangible Asset
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
Retail customer relationship$2,047  $1,225  $822  $2,078  $1,151  $927  
Software and other technology-related assets354  140  214  341  125  216  
Retail and wholesale contracts272  181  91  315  182  133  
Contractual service agreements (a)59   54  59   54  
Other identifiable intangible assets (b)42  16  26  40  15  25  
Total identifiable intangible assets subject to amortization$2,774  $1,567  1,207  $2,833  $1,478  1,355  
Retail trade names (not subject to amortization)1,369  1,391  
Mineral interests (not currently subject to amortization)  
Total identifiable intangible assets$2,578  $2,748  
____________
(a)At March 31, 2020, amounts related to contractual service agreements that have become liabilities due to amortization of the economic impacts of the intangibles have been removed from both the gross carrying amount and accumulated amortization.
(b)Includes mining development costs and environmental allowances (emissions allowances and renewable energy certificates).

Identifiable intangible liabilities are comprised of the following:
Identifiable Intangible LiabilityMarch 31,
2020
December 31, 2019
Contractual service agreements$111  $110  
Purchase and sale of power and capacity96  100  
Fuel and transportation purchase contracts72  76  
Total identifiable intangible liabilities$279  $286  

Expense related to finite-lived identifiable intangible assets and liabilities (including the classification in the condensed consolidated statements of operations) consisted of:
Identifiable Intangible Assets and LiabilitiesCondensed Consolidated Statements of OperationsThree Months Ended March 31,
20202019
Retail customer relationshipDepreciation and amortization$74  $55  
Software and other technology-related assetsDepreciation and amortization17  13  
Retail and wholesale contracts/purchase and sale/fuel and transportation contractsOperating revenues/fuel, purchased power costs and delivery fees 12  
Other identifiable intangible assetsOperating revenues/fuel, purchased power costs and delivery fees/depreciation and amortization52  27  
Total intangible asset expense (a)$145  $107  
____________
(a)Amounts recorded in depreciation and amortization totaled $91 million and $69 million for the three months ended March 31, 2020 and 2019, respectively. Amounts exclude contractual services agreements. Amounts include all expenses associated with environmental allowances including expenses accrued to comply with emissions allowance programs and renewable portfolio standards which are presented in fuel, purchased power costs and delivery fees on our condensed consolidated statements of operations. Emissions allowance obligations are accrued as associated electricity is generated and renewable energy credit obligations are accrued as retail electricity delivery occurs.
Estimated Amortization of Identifiable Intangible Assets and Liabilities

As of March 31, 2020, the estimated aggregate amortization expense of identifiable intangible assets and liabilities for each of the next five fiscal years is as shown below.
YearEstimated Amortization Expense
2020$355  
2021$248  
2022$155  
2023$113  
2024$76  
v3.20.1
Income Taxes (Notes)
3 Months Ended
Mar. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Income Tax Expense

The calculation of our effective tax rate is as follows:
Three Months Ended March 31,
20202019
Income before income taxes$62  $301  
Income tax expense$(17) $(77) 
Effective tax rate27.4 %25.6 %

For the three months ended March 31, 2020, the effective tax rate of 27.4% was higher than the U.S. federal statutory rate of 21% due primarily to nondeductible impacts of the TRA and state income taxes.

For the three months ended March 31, 2019, the effective tax rate of 25.6% was higher than the U.S. federal statutory rate of 21% due primarily to nondeductible impacts of the TRA and state income taxes.

Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

In response to the global pandemic related to COVID-19, the President signed into law the CARES Act on March 27, 2020. The CARES Act provides numerous relief provisions for corporate taxpayers, including modification of the utilization limitations on net operating losses, favorable expansion of the deduction for business interest expense under Internal Revenue Code Section 163(j) (Section 163(j)), the ability to accelerate timing of refundable AMT credits and the temporary suspension of certain payment requirements for the employer portion of social security taxes. While Vistra Energy is still evaluating the impact of certain tax-related benefits available under the CARES Act, we anticipate the acceleration of alternative minimum tax (AMT) refunds and the expansion of the Section 163(j) limitation from 30% to 50% of adjusted taxable income to have material impacts to Vistra Energy. Specifically, we expect to receive approximately $64 million in 2020 relating to the acceleration of AMT refunds and an approximate $500 million increase in interest expense deduction over the 2019 and 2020 tax years under Section 163(j). We do not anticipate a material impact to the effective tax rate from these impacts. Vistra Energy will continue to monitor legislative developments related to COVID-19.

Liability for Uncertain Tax Positions

Vistra Energy and its subsidiaries file income tax returns in U.S. federal and state jurisdictions and are expected to be subject to examinations by the IRS and other taxing authorities. Vistra Energy is not currently under audit by the IRS for any period, although review of Dynegy's final pre-acquisition tax year 2018 continues to progress through the IRS's Compliance Assurance Process audit program. Crius is currently under audit by the IRS for the tax years 2015, 2016 and 2017. Uncertain tax positions totaled $125 million and $126 million at March 31, 2020 and December 31, 2019, respectively.
v3.20.1
Tax Receivable Agreement Obligation (Notes)
3 Months Ended
Mar. 31, 2020
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 16).

During the three months ended March 31, 2020, we recorded a decrease to the carrying value of the TRA obligation totaling $9 million as a result of adjustments to forecasted taxable income, including the impacts of the CARES Act changes to Section 163(j) percentage limitation amount. During the three months ended March 31, 2019, we recorded a decrease to the carrying value of the TRA obligation totaling $19 million as a result of adjustments to forecasted taxable income and higher net operating losses acquired in the Merger.

The following table summarizes the changes to the TRA obligation, reported as other current liabilities and Tax Receivable Agreement obligation in our condensed consolidated balance sheets, for the three months ended March 31, 2020 and 2019:
Three Months Ended March 31,
20202019
TRA obligation at the beginning of the period$455  $420  
Accretion expense17  16  
Changes in tax assumptions impacting timing of payments(9) (19) 
Impacts of Tax Receivable Agreement (3) 
TRA obligation at the end of the period$463  $417  

As of March 31, 2020, the estimated carrying value of the TRA obligation totaled $463 million, which represents the discounted amount of projected payments under the TRA. The projected payments are based on certain assumptions, including but not limited to (a) the federal corporate income tax rate of 21%, (b) estimates of our taxable income in the current and future years and (c) additional states that Vistra Energy now operates in, including the relevant tax rate and apportionment factor for each state. Our taxable income takes into consideration the current federal tax code, various relevant state tax laws and reflects our current estimates of future results of the business. These assumptions are subject to change, and those changes could have a material impact on the carrying value of the TRA obligation. As of March 31, 2020, the aggregate amount of undiscounted federal and state payments under the TRA is estimated to be approximately $1.4 billion, with more than half of such amount expected to be paid during the next 15 years, and the final payment expected to be made around the year 2056 (if the TRA is not terminated earlier pursuant to its terms).

The carrying value of the obligation is being accreted to the amount of the gross expected obligation using the effective interest method. Changes in the amount of this obligation resulting from changes to either the timing or amount of TRA payments are recognized in the period of change and measured using the discount rate inherent in the initial fair value of the obligation.
v3.20.1
Earnings Per Share (Notes)
3 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Earnings Per Share EARNINGS PER SHARE
Basic earnings per share available to common stockholders are based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the treasury stock method and includes the effect of all potential issuances of common shares under stock-based incentive compensation arrangements.
Three Months Ended March 31,
20202019
Net income attributable to common stock — basic$56  $225  
Weighted average shares of common stock outstanding — basic (a)487,944,564  502,367,299  
Net income per weighted average share of common stock outstanding — basic$0.11  $0.45  
Dilutive securities: Stock-based incentive compensation plan2,694,062  6,772,689  
Weighted average shares of common stock outstanding — diluted490,638,626  509,139,988  
Net income per weighted average share of common stock outstanding — diluted$0.11  $0.44  
____________
(a)For the three months ended March 31, 2019, the minimum settlement amount of tangible equity units, or 15,128,940 shares, are considered to be outstanding and are included in the computation of basic net income per share.

Stock-based incentive compensation plan awards excluded from the calculation of diluted earnings per share because the effect would have been antidilutive totaled 10,872,836 and 6,243,220 shares for the three months ended March 31, 2020 and 2019, respectively.
v3.20.1
Accounts Receivable Securitization Program (Notes)
3 Months Ended
Mar. 31, 2020
Accounts Receivable Securitization Program [Abstract]  
Accounts Receivable Securitization Program [Text Block] ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM
TXU Energy Receivables Company LLC (RecCo), an indirect subsidiary of Vistra Energy, has an accounts receivable financing facility (Receivables Facility) provided by issuers of asset-backed commercial paper and commercial banks (Purchasers). The Receivables Facility was renewed in July 2019, extending its scheduled termination from August 2019 to July 2020, with the ability to borrow up to $600 million up to the settlement date in November 2019, after which the amount available for RecCo was set to revert to $450 million. The agreement was subsequently amended to allow for a one-time, $560 million borrowing in November 2019 to take advantage of a seasonally-high receivable balance. The borrowing limit returned to $450 million thereafter.

Under the Receivables Facility, TXU Energy and Dynegy Energy Services are obligated to sell or contribute, on an ongoing basis and without recourse, their accounts receivable to TXU Energy's special purpose subsidiary, RecCo, a consolidated, wholly owned, bankruptcy-remote, direct subsidiary of TXU Energy. RecCo, in turn, is subject to certain conditions, and may, from time to time, sell an undivided interest in all the receivables acquired from TXU Energy and Dynegy Energy Services to the Purchasers, and its assets and credit are not available to satisfy the debts and obligations of any person, including affiliates of RecCo. Amounts funded by the Purchasers to RecCo are reflected as short-term borrowings on the condensed consolidated balance sheets. Proceeds and repayments under the Receivables Facility are reflected as cash flows from financing activities in our condensed consolidated statements of cash flows. Receivables transferred to the Purchasers remain on Vistra Energy's balance sheet and Vistra Energy reflects a liability equal to the amount advanced by the Purchasers. The Company records interest expense on amounts advanced. TXU Energy continues to service, administer and collect the trade receivables on behalf of RecCo and the Purchasers, as applicable.

As of March 31, 2020, outstanding borrowings under the receivables facility totaled $450 million and were supported by $555 million of RecCo gross receivables. As of December 31, 2019, outstanding borrowings under the receivables facility totaled $450 million and were supported by $629 million of RecCo gross receivables.
v3.20.1
Long-Term Debt (Notes)
3 Months Ended
Mar. 31, 2020
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.
March 31,
2020
December 31,
2019
Vistra Operations Credit Facilities$2,593  $2,700  
Vistra Operations Senior Secured Notes:
3.550% Senior Secured Notes, due July 15, 2024
1,500  1,500  
3.700% Senior Secured Notes, due January 30, 2027
800  800  
4.300% Senior Secured Notes, due July 15, 2029
800  800  
Total Vistra Operations Senior Secured Notes3,100  3,100  
Vistra Operations Senior Unsecured Notes:
5.500% Senior Unsecured Notes, due September 1, 2026
1,000  1,000  
5.625% Senior Unsecured Notes, due February 15, 2027
1,300  1,300  
5.000% Senior Unsecured Notes, due July 31, 2027
1,300  1,300  
Total Vistra Operations Senior Unsecured Notes3,600  3,600  
Vistra Energy Senior Unsecured Notes:
5.875% Senior Unsecured Notes, due June 1, 2023
500  500  
8.000% Senior Unsecured Notes, due January 15, 2025
—  81  
8.125% Senior Unsecured Notes, due January 30, 2026
166  166  
Total Vistra Energy Senior Unsecured Notes666  747  
Other:
Forward Capacity Agreements130  161  
Equipment Financing Agreements91  99  
8.82% Building Financing due semiannually through February 11, 2022 (a)
13  15  
Other 12  
Total other long-term debt238  287  
Unamortized debt premiums, discounts and issuance costs (b)(59) (55) 
Total long-term debt including amounts due currently10,138  10,379  
Less amounts due currently(169) (277) 
Total long-term debt less amounts due currently$9,969  $10,102  
____________
(a)Obligation related to a corporate office space finance lease. This obligation will be funded by amounts held in an escrow account that is reflected in other noncurrent assets in our condensed consolidated balance sheets.
(b)Includes impact of recording debt assumed in the Merger at fair value.

Vistra Operations Credit Facilities

At March 31, 2020, the Vistra Operations Credit Facilities consisted of up to $5.318 billion in senior secured, first-lien revolving credit commitments and outstanding term loans, which consisted of revolving credit commitments of up to $2.725 billion, including a $2.35 billion letter of credit sub-facility (Revolving Credit Facility) and term loans of $2.593 billion (Term Loan B-3 Facility).

In March 2020, Vistra Operations repurchased $100 million principal amount of Term Loan B-3 Facility borrowings at a weighted average price of $93.875 and cancelled them. We recorded an extinguishment gain of $6 million on the transaction in the three months ended March 31, 2020.

In February 2020, we repaid $75 million under the Revolving Credit Facility. In March 2020, we borrowed $425 million under the Revolving Credit Facility with proceeds used for general corporate purposes. In April 2020, we repaid $550 million under the Revolving Credit Facility.
In March 2019 and May 2019 the Vistra Operations Credit Facilities were amended whereby we obtained $225 million of incremental Revolving Credit Facility commitments. The letter of credit sub-facility was also increased by $50 million. Fees and expenses related to the amendments to the Vistra Operations Credit Facilities totaled $1 million in the three months ended March 31, 2019, which were capitalized as a noncurrent asset.

The Vistra Operations Credit Facilities and related available capacity at March 31, 2020 are presented below.
March 31, 2020
Vistra Operations Credit FacilitiesMaturity DateFacility
Limit
Cash
Borrowings
Available
Capacity
Revolving Credit Facility (a)June 14, 2023$2,725  $700  $1,117  
Term Loan B-3 FacilityDecember 31, 20252,593  2,593  —  
Total Vistra Operations Credit Facilities$5,318  $3,293  $1,117  
___________
(a)Facility to be used for general corporate purposes. Facility includes a $2.35 billion letter of credit sub-facility, of which $908 million of letters of credit were outstanding at March 31, 2020 and which reduce our available capacity. Cash borrowings under the Revolving Credit Facility are reported in short-term borrowings in our condensed consolidated balance sheets.

At March 31, 2020, cash borrowings under the Revolving Credit Facility bear interest based on applicable LIBOR rates, plus a fixed spread of 1.75%, and there were $700 million outstanding borrowings. Letters of credit issued under the Revolving Credit Facility bear interest of 1.75%. Amounts borrowed under the Term Loan B-3 Facility bears interest based on applicable LIBOR rates plus fixed spreads of 1.75%. At March 31, 2020, the weighted average interest rates before taking into consideration interest rate swaps on outstanding borrowings was 2.68% including both the Revolving Credit Facility and the Term Loan B-3 Facility. The Vistra Operations Credit Facilities also provide for certain additional fees payable to the agents and lenders, including fronting fees with respect to outstanding letters of credit and availability fees payable with respect to any unused portion of the available Revolving Credit Facility.

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

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

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

The Vistra Operations Credit Facilities provide for certain customary events of default, including events of default resulting from non-payment of principal, interest or fees when due, material breaches of representations and warranties, material breaches of covenants in the Vistra Operations Credit Facilities or ancillary loan documents, cross-defaults under other agreements or instruments and the entry of material judgments against Vistra Operations. Solely with respect to the Revolving Credit Facility, and solely during a compliance period (which, in general, is applicable when the aggregate revolving borrowings and issued revolving letters of credit (in excess of $300 million) exceed 30% of the revolving commitments), the agreement includes a covenant that requires the consolidated first lien net leverage ratio, which is based on the ratio of net first-lien debt compared to an EBITDA calculation defined under the terms of the Vistra Operations Credit Facilities, not to exceed 4.25 to 1.00. As of March 31, 2020, we were in compliance with this financial covenant. Upon the existence of an event of default, the Vistra Operations Credit Facilities provide that all principal, interest and other amounts due thereunder will become immediately due and payable, either automatically or at the election of specified lenders.
Interest Rate Swaps — Vistra Energy employs interest rate swaps to hedge our exposure to variable rate debt. As of March 31, 2020, Vistra Energy has entered into the following series of interest rate swap transactions.
Notional AmountExpiration DateRate Range
Swapped to fixed$3,000July 20233.67 %-3.91%  
Swapped to variable$700July 20233.20 %-3.23%  
Swapped to fixed$720February 20243.71 %-3.72%  
Swapped to variable$720February 20243.20 %-3.20%  
Swapped to fixed (a)$3,000July 20264.72 %-4.79%  
Swapped to variable (a)$700July 20263.28 %-3.33%  
____________
(a)Effective from July 2023 through July 2026.

During 2019, Vistra Energy entered into $2.120 billion of new interest rate swaps, pursuant to which Vistra Energy will pay a variable rate and receive a fixed rate. The terms of these new swaps were matched against the terms of certain existing swaps, effectively offsetting the hedge of the existing swaps and fixing the out-of-the-money position of such swaps. These matched swaps will settle over time, in accordance with the original contractual terms. The remaining existing swaps continue to hedge our exposure on $2.3 billion of debt through July 2026.

Alternate Letter of Credit Facilities

Two alternate letter of credit facilities (each, an Alternative LOC Facility, and collectively, the Alternate LOC Facilities) with an aggregate facility limit of $500 million became effective in the year ended December 31, 2019. At March 31, 2020, $500 million of letters of credit were outstanding under the Alternate LOC Facilities. Of the total facility limit, $250 million matures in December 2020 and $250 million matures in December 2021.

Vistra Operations Senior Secured Notes

The Vistra Operations senior secured notes (Senior Secured Notes) are and will be fully and unconditionally guaranteed by certain of Vistra Operations' current and future subsidiaries that also guarantee the Vistra Operations Credit Facilities. The Senior Secured Notes are secured by a first-priority security interest in the same collateral that is pledged for the benefit of the lenders under the Vistra Operations Credit Facilities, which consists of a substantial portion of the property, assets and rights owned by Vistra Operations and certain direct and indirect subsidiaries of Vistra Operations as subsidiary guarantors (collectively, the Guarantor Subsidiaries) as well as the stock of Vistra Operations held by Vistra Intermediate. The collateral securing the Senior Secured Notes will be released if Vistra Operations' senior, unsecured long-term debt securities obtain an investment grade rating from two out of the three rating agencies, subject to reversion if such rating agencies withdraw the investment grade rating of Vistra Operations' senior, unsecured long-term debt securities or downgrade such rating below investment grade.

Vistra Operations Senior Unsecured Notes

In February 2019, Vistra Operations issued and sold $1.3 billion aggregate principal amount of 5.625% senior unsecured notes due 2027 (5.625% senior notes) in an offering to eligible purchasers under Rule 144A and Regulation S under the Securities Act (the February 2019 Notes Offering). The 5.625% senior notes were sold pursuant to a purchase agreement by and among Vistra Operations, the Guarantor Subsidiaries and J.P. Morgan Securities LLC, as representative of the several initial purchasers. Fees and expenses related to the offering totaled $16 million in the three months ended March 31, 2019, which were capitalized as a reduction in the carrying amount of the debt. Net proceeds from the February 2019 Notes Offering totaling approximately $1.287 billion, together with cash on hand, were used to pay the purchase price and accrued interest (together with fees and expenses) required in connection with (i) the February 2019 Tender Offer described below, (ii) the redemption of approximately $35 million aggregate principal amount of our 7.375% senior unsecured notes due 2022 and (iii) the redemption of approximately $25 million aggregate principal amount of our outstanding 8.034% senior unsecured notes due 2024 (8.034% senior notes). The 5.625% senior notes mature in February 2027, with interest payable in cash semiannually in arrears on February 15 and August 15 beginning August 15, 2019.
The indentures governing the 5.000% senior unsecured notes due 2027, the 5.625% senior notes and the 5.500% senior unsecured notes due 2026 (collectively, as each may be amended or supplemented from time to time, the Vistra Operations Senior Unsecured Indentures) provide for the full and unconditional guarantee by the Guarantor Subsidiaries of the punctual payment of the principal and interest on such notes. The Vistra Operations Senior Unsecured Indentures contain certain covenants and restrictions, including, among others, restrictions on the ability of the Issuer and its subsidiaries, as applicable, to create certain liens, merge or consolidate with another entity, and sell all or substantially all of their assets.

Debt Repurchase Program

In November 2018, our board of directors (the Board) authorized a bond repurchase program under which up to $200 million principal amount of outstanding Vistra Energy Senior Unsecured Notes could be repurchased. In July 2019, the Board authorized up to $1.0 billion to repay or repurchase any outstanding debt of the Company (or its subsidiaries), with that authority superseding the remaining availability under the $200 million bond repurchase program. Through March 31, 2020, $684 million principal amount of debt had been repurchased under the $1.0 billion authorization, including the repurchase of $100 million principal amount of Term Loan B-3 Facility borrowings discussed above and the redemption of $81 million aggregate principal amount outstanding of 8.000% senior unsecured notes due 2025 (8.000% senior notes) discussed below. In April 2020, the Board authorized up to $1.0 billion to repay or repurchase additional outstanding debt, with this new authority superseding and replacing the $316 million of availability under the previously authorized $1.0 billion debt repurchase program.

Vistra Energy Senior Unsecured Notes

Redemption of 5.875% Senior Notes Due 2023 — In May 2020, we issued a notice of redemption to holders of the outstanding $500 million aggregate principal amount of 5.875% senior unsecured notes due 2023 (5.875% senior notes). Pursuant to the notice of redemption, the 5.875% senior notes will be redeemed on June 1, 2020 (Redemption Date) at a redemption price equal to 100.979% of the principal amount of the 5.875% senior notes plus accrued and unpaid interest up to, but not including, the Redemption Date.

January 2020 Redemption — In January 2020, Vistra Energy redeemed the entire $81 million aggregate principal amount outstanding of 8.000% senior notes at a redemption price equal to 104.0% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of redemption. We recorded an extinguishment gain of $2 million on the transactions in the three months ended March 31, 2020.

February 2019 Tender Offer and Consent Solicitation — In February 2019, Vistra Energy used the net proceeds from the February 2019 Notes Offering to fund a cash tender offer (the February 2019 Tender Offer) to purchase for cash $1.193 billion aggregate principal amount of 7.375% senior notes assumed in the Merger. We recorded an extinguishment gain of $7 million on the transactions in the three months ended March 31, 2019.

In connection with the February 2019 Tender Offer, Vistra Energy also commenced a solicitation of consents from holders of the 7.375% senior notes. Vistra Energy received the requisite consents from the holders of the 7.375% senior notes and amended the indenture governing these senior notes to, among other things, eliminate substantially all of the restrictive covenants and certain events of default.

The senior notes that remain outstanding after the closing of the Tender Offers are unsecured and unsubordinated obligations of Vistra Energy and are guaranteed by substantially all of its current and future wholly owned domestic subsidiaries that from time to time are a borrower or guarantor under the agreement governing the Vistra Operations Credit Facilities (Credit Facilities Agreement). Except with respect to the Consent Senior Notes, the respective indentures of the senior notes of Vistra Energy (collectively, as each may be amended or supplemented from time to time, the Vistra Energy Senior Unsecured Indentures) limit, among other things, the ability of the Company or any of the guarantors to create liens upon any principal property to secure debt for borrowed money in excess of, among other limitations, 30% of total assets. The Vistra Energy Senior Unsecured Indentures also contain customary events of default which would permit the holders of the applicable series of senior notes to declare such notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely principal or interest payments on such notes or (except with respect to the Consent Senior Notes) other indebtedness aggregating $100 million or more, and, except with respect to the Consent Senior Notes, the failure to satisfy covenants, and specified events of bankruptcy and insolvency.
Other Long-Term Debt

Forward Capacity Agreements — On the Merger Date, the Company assumed the obligation of Dynegy's agreements under which a portion of the PJM capacity that cleared for Planning Years 2018-2019, 2019-2020 and 2020-2021 was sold to a financial institution (Forward Capacity Agreements). The buyer in this transaction will receive capacity payments from PJM during the Planning Years 2019-2020 and 2020-2021 in the amounts of $20 million and $110 million, respectively. We will continue to be subject to the performance obligations as well as any associated performance penalties and bonus payments for those planning years. As a result, this transaction is accounted for as long-term debt of $130 million with an implied interest rate of 2.73%.

Equipment Financing Agreements — On the Merger Date, the Company assumed Dynegy's Equipment Financing Agreements. Under certain of our contractual service agreements in which we receive maintenance and capital improvements for our gas-fueled generation fleet, we have obtained parts and equipment intended to increase the output, efficiency and availability of our generation units. We have financed these parts and equipment under agreements with maturities ranging from 2020 to 2026. The portion of future payments attributable to principal will be classified as cash outflows from financing activities, and the portion of future payments attributable to interest will be classified as cash outflows from operating activities in our condensed consolidated statements of cash flows.

Letter of Credit Obligations Assumed in Ambit Transaction — At March 31, 2020, approximately $6 million of letters of credit were outstanding under legacy Ambit agreements, all of which are collateralized with cash and recorded as restricted cash in the condensed consolidated balance sheets.

Maturities

Long-term debt maturities at March 31, 2020 are as follows:
March 31, 2020
Remainder of 2020$133  
202196  
202244  
2023540  
20241,540  
Thereafter7,844  
Unamortized premiums, discounts and debt issuance costs(59) 
Total long-term debt, including amounts due currently$10,138  
v3.20.1
Commitments and Contingencies (Notes)
3 Months Ended
Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments And Contingencies COMMITMENTS AND CONTINGENCIES
Guarantees

We have entered into contracts that contain guarantees to unaffiliated parties that could require performance or payment under certain conditions. As of March 31, 2020, there are no material outstanding claims related to our guarantee obligations, and we do not anticipate we will be required to make any material payments under these guarantees in the near term.

Letters of Credit

At March 31, 2020, we had outstanding letters of credit totaling $1.415 billion as follows:

$1.058 billion to support commodity risk management collateral requirements in the normal course of business, including over-the-counter and exchange-traded transactions and collateral postings with ISOs or RTOs;
$170 million to support battery and solar development projects;
$45 million to support executory contracts and insurance agreements;
$81 million to support our REP financial requirements with the PUCT, and
$61 million for other credit support requirements.
Surety Bonds

At March 31, 2020, we had outstanding surety bonds totaling $64 million to support performance under various contracts and legal obligations in the normal course of business.

Litigation and Regulatory Proceedings

Our material legal proceedings and regulatory proceedings affecting our business are described below. We believe that we have valid defenses to the legal proceedings described below and intend to defend them vigorously. We also intend to participate in the regulatory processes described below. We record reserves for estimated losses related to these matters when information available indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. As applicable, we have established an adequate reserve for the matters discussed below. In addition, legal costs are expensed as incurred. Management has assessed each of the following legal matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought, and the probability of success. Unless specified below, we are unable to predict the outcome of these matters or reasonably estimate the scope or amount of any associated costs and potential liabilities, but they could have a material impact on our results of operations, liquidity, or financial condition. As additional information becomes available, we adjust our assessment and estimates of such contingencies accordingly. Because litigation and rulemaking proceedings are subject to inherent uncertainties and unfavorable rulings or developments, it is possible that the ultimate resolution of these matters could be at amounts that are different from our currently recorded reserves and that such differences could be material.

Gas Index Pricing Litigation — We, through our subsidiaries, and other energy companies are named as defendants in several lawsuits claiming damages resulting from alleged price manipulation through false reporting of natural gas prices to various index publications, wash trading and churn trading from 2000-2002. The plaintiffs in these cases allege that the defendants engaged in an antitrust conspiracy to inflate natural gas prices during the relevant time period and seek damages under the respective state antitrust statutes. We remain as defendants in two consolidated putative class actions (Wisconsin) and one individual action (Kansas) both pending in federal court in those states.

Wood River Rail Dispute — In November 2017, Dynegy Midwest Generation, LLC (DMG) received notification that BNSF Railway Company and Norfolk Southern Railway Company were initiating dispute resolution related to DMG's suspension of its Wood River Rail Transportation Agreement with the railroads. Settlement discussions required under the dispute resolution process have been unsuccessful. In March 2018, BNSF Railway Company (BNSF) and Norfolk Southern Railway Company (NS) filed a demand for arbitration and an arbitration hearing is currently scheduled for November 2020.

Coffeen and Duck Creek Rail Disputes — In April 2020, IPH, LLC (IPH) received notification that BNSF and NS were initiating dispute resolution related to IPH's suspension of its Coffeen Rail Transportation Agreement with the railroads, and Illinois Power Resources Generating, LLC (IPRG), received notification that BNSF was initiating dispute resolution related to IPRG's suspension of its Duck Creek Rail Transportation Agreement with BNSF. In November 2019, IPH and IPRG sent suspension notices to the railroads asserting that the MPS rule requirement to retire at least 2,000 megawatts of generation (see discussion below) was a change-in-law under the agreement that rendered continued operation of the plants no longer economically feasible. In addition, IPH and IPRG asserted that the MPS rule's retirement requirement also qualified as a force majeure event under the agreements excusing performance.

ME2C Patent Dispute — In July 2019, Midwest Energy Emissions Corporation and MES Inc. (collectively, the plaintiffs) filed a patent infringement complaint in federal court in Delaware against numerous parties, including Vistra Energy and some of its subsidiaries (collectively, the Vistra defendants). The complaint alleges that the Vistra defendants infringed two patents owned by the plaintiffs by using specific processes for mercury control at certain coal-fueled plants. The complaint seeks injunctive relief and unspecified damages. In September 2019, the Vistra defendants filed a motion to dismiss that lawsuit and that remains pending. In addition, in April 2020, the Vistra defendants along with certain other defendants began implementing its defense strategy by filing an inter partes review before the U.S. Patent and Trademark Office challenging the validity of one of the patents at issue.
Greenhouse Gas Emissions

In August 2015, the EPA finalized rules to address greenhouse gas (GHG) emissions from electricity generation units, referred to as the Clean Power Plan, including rules for existing facilities that would establish state-specific emissions rate goals to reduce nationwide CO2 emissions. Various parties filed petitions for review in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court). In July 2019, petitioners filed a joint motion to dismiss in light of the EPA's new rule that replaces the Clean Power Plan, the Affordable Clean Energy rule, discussed below. In September 2019, the D.C. Circuit Court granted petitioners' motion to dismiss and dismissed all of the petitions challenging the Clean Power Plan as moot.

In July 2019, the EPA finalized a rule to repeal the Clean Power Plan, with new regulations addressing GHG emissions from existing coal-fueled electric generation units, referred to as the Affordable Clean Energy (ACE) rule. The ACE rule develops emission guidelines that states must use when developing plans to regulate GHG emissions from existing coal-fueled electric generating units. States must submit their plans for regulating GHG emissions from existing facilities by July 2022. States where we operate coal plants (Texas, Illinois and Ohio) have begun the development of their state plans to comply with the rule. Environmental groups and certain states filed petitions for review of the ACE rule and the repeal of the Clean Power Plan in the D.C. Circuit Court. Additionally, in December 2018, the EPA issued proposed revisions to the emission standards for new, modified and reconstructed units. Vistra Energy submitted comments on that proposed rulemaking.

Regional Haze — Reasonable Progress and Best Available Retrofit Technology (BART) for Texas

In January 2016, the EPA issued a final rule approving in part and disapproving in part Texas's 2009 State Implementation Plan (SIP) as it relates to the reasonable progress component of the Regional Haze program and issuing a Federal Implementation Plan (FIP). The EPA's emission limits in the FIP assume additional control equipment for specific lignite/coal-fueled generation units across Texas, including new flue gas desulfurization systems (scrubbers) at seven electricity generation units (including Big Brown Units 1 and 2, Monticello Units 1 and 2 and Coleto Creek) and upgrades to existing scrubbers at seven generation units (including Martin Lake Units 1, 2 and 3, Monticello Unit 3 and Sandow Unit 4).

In March 2016, various parties (including Luminant and the State of Texas) filed petitions for review in the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit Court) challenging the FIP's Texas requirements. In July 2016, the Fifth Circuit Court granted motions to stay the rule pending final review of the petitions for review. In March 2017, the Fifth Circuit Court granted a motion by the EPA to remand the rule back to the EPA for reconsideration. The stay of the rule (and the emission control requirements) remains in effect. The retirements of our Monticello, Big Brown and Sandow 4 plants should have a favorable impact on this rulemaking and litigation since these plants constitute a large portion of the plants that the rule seeks to regulate. Further, we believe that these retirements and the BART rule (see discussion below) obviates the need for any additional limits on our remaining Texas plants to address the requirements in the regional haze rule.

In September 2017, the EPA signed a final rule addressing BART for Texas electricity generation units, with the rule serving as a partial approval of Texas's 2009 SIP and a partial FIP. For SO2, the rule established an intrastate Texas emission allowance trading program as a "BART alternative" that operates in a similar fashion to a CSAPR trading program. The program includes 39 generating units (including our Martin Lake, Big Brown, Monticello, Sandow 4, Coleto Creek, Stryker 2 and Graham 2 plants). The compliance obligations in the program started on January 1, 2019. The retirements of our Monticello, Big Brown and Sandow 4 plants have enhanced our ability to comply with this BART rule for SO2. For NOX, the rule adopted the CSAPR's ozone program as BART and for particulate matter, the rule approved Texas's SIP that determines that no electricity generation units are subject to BART for particulate matter. Various parties filed a petition challenging the rule in the Fifth Circuit Court as well as a petition for reconsideration filed with the EPA. Luminant intervened on behalf of the EPA in the Fifth Circuit Court action. In March 2018, the Fifth Circuit Court abated its proceedings pending conclusion of the EPA's reconsideration process. In August 2018, the EPA issued a proposal to affirm the prior BART final rule and sought comments on that proposal, which were due in October 2018. We submitted comments supporting the EPA's proposal to affirm the BART final rule. In November 2019, the EPA proposed additional revisions to the BART final rule, and we submitted comments on that proposal in January 2020. If the EPA adopts the rule as proposed in August 2018 or adopts the rule with the revisions proposed in November 2019, we expect that we would be able to comply with the BART rule.
Affirmative Defenses During Malfunctions

In May 2015, the EPA finalized a rule requiring 36 states, including Texas, Illinois and Ohio, to remove or replace either EPA-approved exemptions or affirmative defense provisions for excess emissions during upset events and unplanned maintenance and startup and shutdown events, referred to as the SIP Call. Various parties (including Luminant, the State of Texas and the State of Ohio) filed petitions for review of the EPA's final rule, and all of those petitions were consolidated in the D.C. Circuit Court. In April 2017, the D.C. Circuit Court ordered the case to be held in abeyance. In April 2019, the EPA Region 6 proposed a rule to withdraw the SIP Call with respect to the Texas affirmative defense provisions. We submitted comments on that proposed rulemaking in June 2019. In February 2020, the EPA issued the final rule withdrawing the Texas SIP Call. In April 2020, a group of environmental petitioners, including the Sierra Club, filed a petition in the D.C. Circuit Court challenging the EPA's action.

Illinois Multi-Pollutant Standards (MPS)

In August 2019, changes proposed by the Illinois Pollution Control Board to the MPS rule, which places NOx, SO2 and mercury emissions limits on our coal plants located in MISO went into effect. Under the revised MPS rule, our allowable SO2 and NOX emissions from the MISO fleet are 48% and 42% lower, respectively, than prior to the rule changes. The revised MPS rule requires the continuous operation of existing selective catalytic reduction (SCR) control systems during the ozone season, requires SCR-controlled units to meet an ozone season NOX emission rate limit, and set an additional, site-specific annual SO2 limit for our Joppa Power Station. Additionally, in 2019, the Company retired its Havana, Hennepin, Coffeen and Duck Creek plants in order to comply with the MPS rule's requirement to retire at least 2,000 MW of our generation in MISO. See Note 4 for information regarding the retirement of these four plants.

SO2 Designations for Texas

In November 2016, the EPA finalized its nonattainment designations for counties surrounding our Big Brown, Monticello and Martin Lake generation plants. The final designations require Texas to develop nonattainment plans for these areas. In February 2017, the State of Texas and Luminant filed challenges to the nonattainment designations in the Fifth Circuit Court. Subsequently, in October 2017, the Fifth Circuit Court granted the EPA's motion to hold the case in abeyance considering the EPA's representation that it intended to revisit the nonattainment rule. In December 2017, the TCEQ submitted a petition for reconsideration to the EPA. In August 2019, the EPA issued a proposed Error Correction Rule for all three areas, which, if finalized, would revise its previous nonattainment designations and each area at issue would be designated unclassifiable. In September 2019, we submitted comments in support of the proposed Error Correction Rule.

Effluent Limitation Guidelines (ELGs)

In November 2015, the EPA revised the ELGs for steam electricity generation facilities, which will impose more stringent standards (as individual permits are renewed) for wastewater streams, such as flue gas desulfurization (FGD), fly ash, bottom ash and flue gas mercury control wastewaters. Various parties filed petitions for review of the ELG rule, and the petitions were consolidated in the Fifth Circuit Court. In April 2017, the EPA granted petitions requesting reconsideration of the ELG rule and administratively stayed the rule's compliance date deadlines. In August 2017, the EPA announced that its reconsideration of the ELG rule would be limited to a review of the effluent limitations applicable to FGD and bottom ash wastewaters and the agency subsequently postponed the earliest compliance dates in the ELG rule for the application of effluent limitations for FGD and bottom ash wastewaters from November 1, 2018 to November 1, 2020. Based on these administrative developments, the Fifth Circuit Court agreed to sever and hold in abeyance challenges to effluent limitations. The remainder of the case proceeded, and in April 2019 the Fifth Circuit Court vacated and remanded portions of the EPA's ELG rule pertaining to effluent limitations for legacy wastewater and leachate. In November 2019, the EPA issued a proposal that would extend the compliance deadline for FGD wastewater to no later than December 31, 2025 and maintains the December 31, 2023 compliance date for bottom ash transport water. The proposal also creates new sub-categories of facilities with more flexible FGD compliance options, including a retirement exemption to 2028 and a low utilization boiler exemption. The proposed rule also modified some of the FGD final effluent limitations. We filed comments on the proposal in January 2020.

Given the EPA's decision to reconsider the FGD and bottom ash wastewater provisions of the ELG rule, the rule postponing the ELG rule's earliest compliance dates for those provisions, the uncertainty stemming from the vacatur of the effluent limitations for legacy wastewater and leachate, and the intertwined relationship of the ELG rule with the Coal Combustion Residuals rule discussed below, which is also being reconsidered by the EPA, as well as pending legal challenges concerning both rules, substantial uncertainty exists regarding our projected capital expenditures for ELG compliance, including the timing of such expenditures.
CAA Matters

Zimmer NOVs — In December 2014, the EPA issued a notice of violation (NOV) alleging violation of opacity standards at the Zimmer facility. The EPA previously had issued NOVs to Zimmer in 2008 and 2010 alleging violations of the CAA, the Ohio State Implementation Plan and the station's air permits including standards applicable to opacity, sulfur dioxide, sulfuric acid mist and heat input. In January 2020, the U.S. Department of Justice filed a complaint and proposed consent decree agreed to by Dynegy Zimmer, LLC in the U.S. District Court for the Southern District of Ohio that would resolve claims alleged in the 2008, 2010 and 2014 NOVs. We expect the consent decree will be effective in the second quarter of 2020. We believe the consent decree will not have a material impact on our results of operations, liquidity or financial condition.

Coal Combustion Residuals (CCR)/Groundwater

In July 2018, the EPA published a final rule, which became effective in August 2018, that amends certain provisions of the CCR rule that the agency issued in 2015. Among other changes, the 2018 revisions extend closure deadlines to October 31, 2020, related to the aquifer location restriction and groundwater monitoring requirements. Also, in August 2018, the D.C. Circuit Court issued a decision that vacates and remands certain provisions of the 2015 CCR rule, including an applicability exemption for legacy impoundments. The EPA is expected to undertake further revisions to its CCR regulations in response to the D.C. Circuit Court's ruling. In October 2018, the rule that extends certain closure deadlines to 2020 was challenged in the D.C. Circuit Court. In March 2019, the D.C. Circuit Court granted the EPA's request for remand without vacatur. In December 2019, the EPA issued a proposed rule that would revise the closure deadlines for unlined CCR impoundments from October 31, 2020 to August 31, 2020 and establish new procedures for seeking extensions of that revised closure deadline. One of the new proposed extension procedures would require the generation plant electing this option to notify the EPA by May 2020 that it will retire by either 2023 or 2028 depending on the size of the impoundment at issue. If the rule is finalized as proposed, we may decide to avail ourselves of this compliance mechanism for some of our facilities. We filed comments on the proposal in January 2020.

MISO — In 2012, the Illinois Environmental Protection Agency (IEPA) issued violation notices alleging violations of groundwater standards onsite at our Baldwin and Vermilion facilities' CCR surface impoundments. These violation notices remain unresolved; however, in 2016, the IEPA approved our closure and post-closure care plans for the Baldwin old east, east, and west fly ash CCR surface impoundments. We are working towards implementation of those closure plans.

At our retired Vermilion facility, which was not subject to the EPA's 2015 CCR rule until the aforementioned D.C. Circuit Court decision in August 2018, we submitted proposed corrective action plans involving closure of two CCR surface impoundments (i.e., the old east and the north impoundments) to the IEPA in 2012, and we submitted revised plans in 2014. In May 2017, in response to a request from the IEPA for additional information regarding the closure of these Vermilion surface impoundments, we agreed to perform additional groundwater sampling and closure options and riverbank stabilizing options. In May 2018, Prairie Rivers Network filed a citizen suit in federal court in Illinois against DMG, alleging violations of the Clean Water Act for alleged unauthorized discharges. In August 2018, we filed a motion to dismiss the lawsuit. In November 2018, the district court granted our motion to dismiss and judgment was entered in our favor. Plaintiffs have appealed the judgment to the U.S. Court of Appeals for the Seventh Circuit. That appeal is now stayed. In April 2019, PRN also filed a complaint against DMG before the IPCB, alleging that groundwater flows allegedly associated with the ash impoundments at the Vermilion site have resulted in exceedances both of surface water standards and Illinois groundwater standards dating back to 1992. This matter is in the very early stages.

In 2012, the IEPA issued violation notices alleging violations of groundwater standards at the Newton and Coffeen facilities' CCR surface impoundments. We are addressing these CCR surface impoundments in accordance with the federal CCR rule. In June 2018, the IEPA issued a violation notice for alleged seep discharges claimed to be coming from the surface impoundments at our retired Vermilion facility and that notice has since been referred to the Illinois Attorney General.

In December 2018, the Sierra Club filed a complaint with the IPCB alleging the disposal and storage of coal ash at the Coffeen, Edwards and Joppa generation facilities are causing exceedances of the applicable groundwater standards.

In July 2019, coal ash disposal and storage legislation in Illinois was enacted. The legislation addresses state requirements for the proper closure of coal ash ponds in the state of Illinois. The law tasks the IEPA and the IPCB to set up a series of guidelines, rules and permit requirements for closure of ash ponds. In March 2020, IEPA issued its proposed rule and we expect the rulemaking process should be completed by early 2021. Under the proposed rule, coal ash impoundment owners would be required to submit a closure alternative analysis to the IEPA for the selection of the best method for coal ash remediation at a particular site. The proposed rule does not mandate closure by removal at any site.
For all of the above matters, if certain corrective action measures, including groundwater treatment or removal of ash, are required at any of our coal-fueled facilities, we may incur significant costs that could have a material adverse effect on our financial condition, results of operations and cash flows. Until the revisions to the EPA's CCR rule and the Illinois coal ash rulemaking are finalized and we undertake further site specific evaluations required by each program we will not know the full range of costs of groundwater remediation, if any, that ultimately may be required under those rules. However, the currently anticipated CCR surface impoundment and landfill closure costs, as contained in our AROs, reflect the costs of closure methods that our operations and environmental services teams believe are appropriate and protective of the environment for each location.

MISO 2015-2016 Planning Resource Auction

In May 2015, three complaints were filed at FERC regarding the Zone 4 results for the 2015-2016 planning resource auction (PRA) conducted by MISO. Dynegy is a named party in one of the complaints. The complainants, Public Citizen, Inc., the Illinois Attorney General and Southwestern Electric Cooperative, Inc. (Complainants), challenged the results of the PRA as unjust and unreasonable, requested rate relief/refunds, and requested changes to the MISO planning resource auction structure going forward. Complainants also alleged that Dynegy may have engaged in economic or physical withholding in Zone 4 constituting market manipulation in the PRA. The Independent Market Monitor for MISO (MISO IMM), which was responsible for monitoring the PRA, determined that all offers were competitive and that no physical or economic withholding occurred. The MISO IMM also stated, in a filing responding to the complaints, that there is no basis for the remedies sought by the Complainants. We filed our answer to these complaints explaining that we complied fully with the terms of the MISO tariff in connection with the PRA and disputing the allegations. The Illinois Industrial Energy Consumers filed a related complaint at FERC against MISO in June 2015 requesting prospective changes to the MISO tariff. Dynegy also responded to this complaint with respect to Dynegy's conduct alleged in the complaint.

In October 2015, FERC issued an order of nonpublic, formal investigation (the investigation) into whether market manipulation or other potential violations of FERC orders, rules and regulations occurred before or during the PRA.

In December 2015, FERC issued an order on the complaints requiring a number of prospective changes to the MISO tariff provisions effective as of the 2016-2017 planning resource auction. The order did not address the arguments of the Complainants regarding the PRA and stated that those issues remained under consideration and would be addressed in a future order.

In July 2019, FERC issued an order denying the remaining issues raised by the complaints and noted that the investigation into Dynegy was closed. FERC found that Dynegy's conduct did not constitute market manipulation and the results of the PRA were just and reasonable because the PRA was conducted in accordance with MISO's tariff. With the issuance of the order, this matter has been resolved in Dynegy's favor. The request for rehearing was denied by FERC in March 2020 and remains subject to appeal.

Other Matters