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Vistra To Acquire Energy Harbor

March 6, 2023

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Copyright 2010-21
Reporting by Paul Ring •

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Today, Vistra Corp. 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."

Under the transaction, Vistra will add ~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," Vistra said

All of Vistra's 5 million retail customers will be organized under the new Vistra Vision subsidiary

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 a 15% ownership interest.

Vistra will own 85% of Vistra Vision as well as 100% of the entities holding Vistra's remaining conventional generation assets, referred to generally as "Vistra Tradition."

"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," Vistra said

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. In addition, Vistra Vision will assume ~$430 million of net debt from Energy Harbor in the transaction. 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.

Vistra Vision 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.

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 said

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 said

Vistra President and CEO Jim Burke stated, "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."

Burke said, "We look forward to welcoming the Energy Harbor generation and retail teams in Ohio and Pennsylvania to Vistra."

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.

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.

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.


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