Vistra Board
increases aggregate share repurchase authorization by $1 billion; remaining ~$1.8 billion authorization expected to be
completed by year-end 2024
Highlights
- Transaction will combine Energy Harbor's nuclear and retail
businesses with Vistra's nuclear and retail businesses and Vistra
Zero renewables and storage projects under a newly formed
subsidiary holding company, referred to generally as "Vistra
Vision."
- Accelerates the growth of Vistra's zero-carbon operations,
adding ~4,000 megawatts (MW) of nuclear capacity and ~1 million
retail customers.
- In total, Vistra Vision will be a large-scale ~7,800 MW
zero-carbon generation business with ~5 million retail customers
across the United States, and it
will also have access to a growth pipeline of ~1,100 MW of
additional renewables projects.
- Consideration to Energy Harbor for this combination includes
$3 billion cash and a 15% ownership
interest in Vistra Vision; in addition, Vistra Vision will assume
~$430 million of net debt from Energy
Harbor. Most Energy Harbor shareholders will receive cash at
closing, and the two largest shareholders, Avenue Capital Group and
Nuveen, will receive a combination of cash and the 15% ownership
interest.
- Transaction is expected to generate at least $125 million in annual run-rate synergies by
year-end 2025 from increased scale, optimized operations, and cost
structure efficiencies.
- Vistra will own 85% of Vistra Vision as well as 100% of the
entities holding its remaining conventional generation assets,
referred to generally as "Vistra Tradition."
- Vistra does not expect any significant changes to its capital
allocation plan, including its long-term net leverage target of
less than 3x (excluding any non-recourse financing at Vistra
Vision), and the expected return of capital to its shareholders by
way of the expected $300 million in
annual dividends and at least $1
billion of share repurchases each year.
- Vistra to host a conference call today, March 6, 2023, at 9:00
a.m. Eastern.
IRVING,
Texas, March 6, 2023 /PRNewswire/ -- Today,
Vistra Corp. (NYSE: VST) announced that it has executed a
definitive agreement with Energy Harbor Corp., pursuant to which
Energy Harbor will merge with and into a newly-formed subsidiary of
Vistra. The transaction will combine Energy Harbor's nuclear and
retail businesses with Vistra's nuclear and retail businesses and
Vistra Zero renewables and storage projects under a newly-formed
subsidiary holding company, referred to generally as "Vistra
Vision." This combination creates a leading integrated retail
electricity and zero-carbon generation company with the
second-largest competitive nuclear fleet in the country, along with
a growing renewables and energy storage portfolio. The agreement
has been approved by both companies' boards of directors.
Sufficient stockholder approval for the transaction has been
committed through support agreements signed by a majority of the
Energy Harbor stockholders.
Vistra President and CEO
Jim Burke stated, "We are excited to
announce this unique combination and the many benefits it brings to
our key stakeholders – customers, employees, communities, and
shareholders. Vistra has been focused on responsibly transitioning
our power generation profile, and though we've made significant
progress over the past several years, there are few opportunities
to grow a reliable and dispatchable zero-carbon generation
portfolio at scale this quickly. As our country navigates a massive
energy transition to cleaner sources of electricity, nuclear energy
provides the unique capability of being both carbon-free and a
dependable, always-on source of reliable power. With the enactment
of the zero-emission nuclear production tax credit (I.R.C. Sec.
45U), nuclear power generation now has down-side protection against
lower power prices, resulting in tremendous upside opportunity
compared to other generation with similar attributes."
Burke continued, "This transaction provides the first
opportunity to unlock the value of our Vistra Zero portfolio, and
we've structured it in a way that aligns squarely with our capital
allocation plan so that we can continue our share repurchase
program and dividend payments as we originally announced in
November 2021. Importantly, Vistra
will continue its focus on an integrated model, ensuring customers
are served in a reliable, affordable, and sustainable manner. We
have a tremendous business platform with Vistra Vision and a
portfolio of efficient, reliable, dispatchable generation assets
with Vistra Tradition. We operate assets that are well run, meet
the customers' needs, and are supported by strong risk management
and commercial capabilities. Vistra is well-positioned to lead in
the competitive electric sector."
"As an active investor committed to the global energy
transition, we believe Vistra has designed an attractive investment
and structure that will create value for all stakeholders while
continuing to advance zero-carbon solutions," said John Miller, head of municipals at Nuveen. "This
new platform will be a meaningful force for decarbonization in the
energy industry, and we look forward to being part of it."
"We are proud of Avenue's four-year partnership with the Energy
Harbor team and look forward to our unique investment in Vistra
Vision, which combines a growing set of nuclear, solar, and storage
assets with an innovative retail business essential for the energy
transition," shared Avenue Capital Group's Senior Portfolio Manager
Matt Kimble.
Burke concluded, "We look forward to welcoming the Energy Harbor
generation and retail teams in Ohio and Pennsylvania to Vistra. We focus on being a
preferred place to work and a core member of the communities where
our plants, retail offices, and customers are located, which will
soon include Akron among other
locations in Ohio and Pennsylvania. Our purpose at Vistra, 'Lighting
up lives, powering a better way forward,' will be greatly
reinforced with this exciting opportunity. I want to thank Energy
Harbor for their confidence in our team at Vistra."
Transaction Structure
Vistra will form a new subsidiary holding company, referred to
generally as Vistra Vision, which will own all of Vistra's nuclear
and retail businesses, as well as Vistra Zero assets. At closing of
the transaction, Energy Harbor will merge with and into a
subsidiary of Vistra, thereby becoming a wholly owned subsidiary of
Vistra Vision. Total compensation will consist of $3 billion cash and a 15% equity interest in
Vistra Vision. Most Energy Harbor shareholders will receive cash at
closing, and the two largest shareholders, Avenue Capital Group and
Nuveen, will receive a combination of cash and the 15% ownership
interest. In addition, Vistra Vision will assume ~$430 million of net debt from Energy Harbor in
the transaction. Vistra will continue to own 85% of Vistra Vision,
as well as 100% of Vistra Tradition, Vistra's highly efficient gas
and coal generation fleet. Vistra intends to finance the majority
of the $3 billion of cash
consideration through debt financing at Vistra Operations, with all
or a portion of the debt expected to be invested in Vistra Vision
via an inter-company loan. At closing, it is expected that the net
debt of Vistra Vision will be ~$3.430
billion.
Vistra has committed financing sufficient to fund the cash
consideration and plans to execute long-term financings prior to
the closing of the transaction.
Vistra will not acquire Energy Harbor's legacy conventional
generation fleet. Energy Harbor has previously signed definitive
agreements to sell these assets to third parties.
Projected Strategic and Financial Benefits
Vistra Vision will be a premier zero-carbon generation and
retail growth company. With a continuing safety-first culture, it
will operate the second-largest competitive nuclear fleet in the
country with four nuclear plants totaling more than 6,400 MW across
ERCOT and PJM. This fleet provides critical, zero-carbon baseload
generation that produces enough electricity to power 3.2 million
U.S. homes. Vistra Vision will also own a portfolio of ~340 MW of
operating solar assets and ~1,020 MW of operating storage assets,
including 350 MW of storage through the Phase 3 expansion of its
Moss Landing Energy Storage Facility, expected online mid-2023. The
operating portfolio is expected to grow through time, including
through an identified development pipeline of ~1,100 MW of
renewables and storage assets; this growth is expected to be
primarily funded by non-recourse financing and free cash flow
generated by the Vistra Zero assets.
Additionally, Vistra Vision will operate one of the largest
retail businesses in the country with ~5 million customers across
18 states. Through Vistra Vision and Vistra Tradition, Vistra will
continue to operate as a fully integrated power company, leveraging
commercial acumen and back office and fleet support.
Vistra Vision and Vistra Tradition will each produce significant
Adjusted EBITDA and Adjusted FCFbG for Vistra
shareholders. Vistra Vision's earnings power and free cash
flows are expected to benefit from significant downside protection
through the nuclear production tax credit, for which all four of
the nuclear assets it will own following this transaction are
eligible through at least 2032. Throughout the past several months,
Vistra has performed detailed diligence of the Energy Harbor
assets, including site visits and extensive third-party operational
analysis. Vistra has also identified a significant amount of
synergy opportunities through scale efficiencies by combining the
businesses. Specifically, Vistra expects the combination to result
in at least $125 million of run-rate
annual synergies by year-end 2025 from optimized operations and
cost structure efficiencies.
Vistra's Continuing Capital Allocation Plan
As of Feb. 23, 2023, Vistra had
~$800 million remaining under its
$3.25 billion share repurchase
authorization. On March 5, 2023,
Vistra's board authorized an additional $1
billion of share repurchases, effective immediately. Vistra
expects to complete the upsized ~$1.8
billion authorization by year-end 2024. In addition, Vistra
continues to expect to repurchase $1
billion of stock each year 2025-2026, as well as pay
$300 million in aggregate dividends
in each year 2023-2026 (subject to board approval), in line with
its original capital allocation plan announced in November 2021.
Management and Headquarters
Following the close of the transaction, the combined company
will be led by Jim Burke, Vistra's
president and CEO, and will continue to trade on the NYSE under
ticker VST. The Energy Harbor senior leadership is expected to
remain with that company through at least the closing of the
transaction. The combined company will be headquartered in
Irving, Texas, with retail offices
in Texas, Ohio, Pennsylvania, and Illinois.
Conditions and Timing
The companies anticipate closing the transaction in the second
half of 2023. The transaction is subject to certain regulatory
approvals, including by the Nuclear Regulatory Commission, the
Federal Energy Regulatory Commission, and the Department of Justice
under the Hart-Scott-Rodino Act.
Advisors
Citi is serving as exclusive financial advisor, and Latham &
Watkins LLP and Balch & Bingham LLP are serving as legal
advisors to Vistra.
Goldman Sachs & Co. LLC and RBC Capital Markets, LLC are
serving as financial advisors, Dechert LLP is serving as corporate
legal counsel, and Morgan, Lewis & Bockius LLP is serving as
regulatory counsel to Energy Harbor.
Webcast
Vistra will host a webcast today, March
6, 2023, beginning at 9:00 a.m.
ET (8:00 a.m. CT) to discuss
this transaction. The live webcast and the accompanying slides that
will be discussed on the call can be accessed via Vistra's website
at www.vistracorp.com under "Investor Relations" and then "Events
& Presentations." Participants can also listen by phone by
registering here prior to the start time of the call to receive a
conference call dial-in number. A replay of the webcast will be
available on Vistra's website for one year following the live
event.
About Non-GAAP Financial Measures and Items Affecting
Comparability
"Adjusted EBITDA" (EBITDA as adjusted for unrealized gains or
losses from hedging activities, tax receivable agreement impacts,
reorganization items, and certain other items described from time
to time in Vistra's earnings releases), "Adjusted Free Cash Flow
before Growth" (or "Adjusted FCFbG") (cash from operating
activities excluding changes in margin deposits and working capital
and adjusted for capital expenditures (including capital
expenditures for growth investments), other net investment
activities, and other items described from time to time in Vistra's
earnings releases), "Ongoing Operations Adjusted EBITDA" (adjusted
EBITDA less adjusted EBITDA from Asset Closure segment), "Net
Income (Loss) from Ongoing Operations" (net income less net income
from Asset Closure segment), and "Ongoing Operations Adjusted Free
Cash Flow before Growth" or "Ongoing Operations Adjusted FCFbG"
(adjusted free cash flow before growth less cash flow from
operating activities from Asset Closure segment before growth) are
"non-GAAP financial measures." A non-GAAP financial measure is a
numerical measure of financial performance that excludes or
includes amounts so as to be different than the most directly
comparable measure calculated and presented in accordance with GAAP
in Vistra's consolidated statements of operations, comprehensive
income, changes in stockholders' equity and cash flows. Non-GAAP
financial measures should not be considered in isolation or as a
substitute for the most directly comparable GAAP measures. Vistra's
non-GAAP financial measures may be different from non-GAAP
financial measures used by other companies.
Vistra uses Adjusted EBITDA as a measure of performance and
believes that analysis of its business by external users is
enhanced by visibility to both Net Income prepared in accordance
with GAAP and Adjusted EBITDA. Vistra uses Adjusted Free Cash Flow
before Growth as a measure of liquidity and believes that analysis
of its ability to service its cash obligations is supported by
disclosure of both cash provided by (used in) operating activities
prepared in accordance with GAAP as well as Adjusted Free Cash Flow
before Growth. Vistra uses Ongoing Operations Adjusted EBITDA as a
measure of performance and Ongoing Operations Adjusted Free Cash
Flow before Growth as a measure of liquidity, and Vistra's
management and board of directors have found it informative to view
the Asset Closure segment as separate and distinct from Vistra's
ongoing operations. Vistra uses Net Income (Loss) from Ongoing
Operations as a non-GAAP measure that is most comparable to the
GAAP measure Net Income in order to illustrate the company's Net
Income excluding the effects of the Asset Closure segment, as well
as a measure to compare to Ongoing Operations Adjusted EBITDA. The
schedules attached to this earnings release reconcile the non-GAAP
financial measures to the most directly comparable financial
measures calculated and presented in accordance with U.S. GAAP.
About Vistra
Vistra (NYSE: VST) is a leading Fortune 500 integrated retail
electricity and power generation company based in Irving, Texas, providing essential resources
for customers, commerce, and communities. Vistra combines an
innovative, customer-centric approach to retail with safe,
reliable, diverse, and efficient power generation. The company
brings its products and services to market in 20 states and the
District of Columbia, including
six of the seven competitive wholesale markets in the U.S. Serving
approximately 4 million residential, commercial, and industrial
retail customers with electricity and natural gas, Vistra is one of
the largest competitive electricity providers in the country and
offers over 50 renewable energy plans. The company is also the
largest competitive power generator in the U.S. with a capacity of
approximately 37,000 megawatts powered by a diverse portfolio,
including natural gas, nuclear, solar, and battery energy storage
facilities. In addition, Vistra is a large purchaser of wind power.
The company owns and operates the 400-MW/1,600-MWh battery energy
storage system in Moss Landing,
California, the largest of its kind in the world. Vistra is
guided by four core principles: we do business the right way, we
work as a team, we compete to win, and we care about our
stakeholders, including our customers, our communities where we
work and live, our employees, and our investors. Learn more about
our environmental, social, and governance efforts and read the
company's sustainability report at
https://www.vistracorp.com/sustainability/.
About Energy Harbor
Energy Harbor is a highly reliable provider of carbon free
baseload electricity committed to Environmental, Social and
Governance (ESG) principles critical to meeting the nation's
emissions goals and accelerating the country's clean energy
transition. Our success is driven by our unwavering employee
commitment to safe, reliable operations, financial stability and
best in class service to meet the energy and sustainability needs
of our customers.
For more information on Energy Harbor visit
www.energyharbor.com
Cautionary Note Regarding Forward-Looking
Statements
The information presented herein includes forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements, which are
based on current expectations, estimates and projections about the
industry and markets in which Vistra Corp. ("Vistra") operates and
beliefs of and assumptions made by Vistra's management, involve
risks and uncertainties, which are difficult to predict and are not
guarantees of future performance, that could significantly affect
the financial results of Vistra. All statements, other than
statements of historical facts, that are presented herein, or in
response to questions or otherwise, that address activities, events
or developments that may occur in the future, including such
matters as activities related to our financial or operational
projections, financial condition and cash flows, projected synergy,
value lever and net debt targets, capital allocation, capital
expenditures, liquidity, projected Adjusted EBITDA to free cash
flow conversion rate, dividend policy, business strategy,
competitive strengths, goals, future acquisitions or dispositions,
development or operation of power generation assets, market and
industry developments and the growth of our businesses and
operations (often, but not always, through the use of words or
phrases, or the negative variations of those words or other
comparable words of a future or forward-looking nature, including,
but not limited to: "intends," "plans," "will likely," "unlikely,"
"believe," "confident", "expect," "seek," "anticipate," "estimate,"
"continue," "will," "shall," "should," "could," "may," "might,"
"predict," "project," "forecast," "target," "potential," "goal,"
"objective," "guidance" and "outlook"), are forward-looking
statements. Readers are cautioned not to place undue reliance on
forward-looking statements. Although Vistra believes that in making
any such forward-looking statement, Vistra's expectations are based
on reasonable assumptions, any such forward-looking statement
involves uncertainties and risks that could cause results to differ
materially from those projected in or implied by any such
forward-looking statement, including, but not limited to: (i)
adverse changes in general economic or market conditions (including
changes in interest rates) or changes in political conditions or
federal or state laws and regulations; (ii) the ability of Vistra
to execute upon its contemplated strategic, capital allocation,
performance, and cost-saving initiatives and to successfully
integrate acquired businesses; (iii) actions by credit ratings
agencies; (iv) the severity, magnitude and duration of pandemics,
and the resulting effects on our results of operations, financial
condition and cash flows; (v) the severity, magnitude and duration
of extreme weather events, contingencies and uncertainties relating
thereto, most of which are difficult to predict and many of which
are beyond our control, and the resulting effects on our results of
operations, financial condition and cash flows; and (vi) those
additional risks and factors discussed in reports filed with the
Securities and Exchange Commission by Vistra from time to time,
including the uncertainties and risks discussed in the sections
entitled "Risk Factors" and "Forward-Looking Statements" in
Vistra's annual report on Form 10-K for the year ended December 31, 2022 and any subsequently filed
quarterly reports on Form 10-Q.
Any forward-looking statement speaks only at the date on which
it is made, and except as may be required by law, Vistra will not
undertake any obligation to update any forward-looking statement to
reflect events or circumstances after the date on which it is made
or to reflect the occurrence of unanticipated events. New factors
emerge from time to time, and it is not possible to predict all of
them; nor can Vistra assess the impact of each such factor or the
extent to which any factor, or combination of factors, may cause
results to differ materially from those contained in any
forward-looking statement.
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