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TXU Parent To Acquire Nearly 1,100 MW of Generation in ERCOT

July 6, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Vistra Energy, the parent company for TXU Energy and Luminant, announced today it has entered into a definitive agreement to acquire a 1,054 MW combined cycle, combustion turbine power plant located in Odessa, Texas from a subsidiary of Koch Ag & Energy Solutions, LLC.

Vistra Energy said that the purchase price is $350 million (~$332 per installed kilowatt of 1,054 MW) plus a spark spread-based earn-out payable only if market conditions meaningfully improve. The purchase will be funded with cash on hand

Vistra said that the plant will provide hedging efficiencies with generation matched against TXU Energy's load position in the ERCOT West Zone

Curt Morgan, Vistra Energy's chief executive officer, remarked, "The Odessa plant is an efficient, well-maintained asset that will provide critical flexible generation capabilities to Luminant's ERCOT portfolio."

Morgan added, "Perhaps even more important, the Odessa plant brings geographic diversity to the Luminant fleet, as it is ideally situated in West Texas to capture the current natural gas price advantage in the Permian Basin. We expect this price advantage to continue for the next several years until adequate pipeline infrastructure is constructed to transport the large volumes of associated gas out of the region."

"Moreover, this transaction is consistent with Vistra Energy's strategy to opportunistically acquire more efficient and flexible gas-fired generation and renewable generation to support our retail business," Morgan said. "By purchasing this asset at what we estimate to be a nearly 60 percent discount to new construction cost, and with a near-term fuel cost advantage, we believe the acquisition will provide incremental value to our shareholders in the years to come."

Vistra listed additional highlights of the acquisition as:

• Access to deeply discounted gas supply from the Permian Basin, which we believe will be sufficient to materially improve the economics of the Odessa plant and other existing West Texas power plants, although still insufficient to support new build CCGT in the region

• Future gas supply optionality via access to three different gas pipelines

Vistra listed Odessa plant statistics and other key factors as:

• Located in Odessa, Texas in the ERCOT West Zone

• 1,054 MW installed capacity

• Full load heat rate of 7.1 MMBtu/MWh

• Opportunity to conduct routine replacement of parts in gas turbines during scheduled outages in 2019 and 2020 that, consistent with the vendor's expectations for the replacement parts, could result in a decrease in the frequency of scheduled routine maintenance, heat rate improvement from 7.1 to 6.9 MMBtu/MWh, the ability to operate at original nameplate capacity of 1,150 MW, and a reduction in the plant's NOx emissions/MWh

• Commercial operation date of August 2001

Pending the receipt of all necessary government approvals and the fulfillment of all other customary closing conditions, Vistra Energy anticipates the transaction will close in the third quarter of 2017.

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