Enterprising Investor
7 months ago
Energy Transition and Environmental Management LLC Completes Fossil Fuel Portfolio Acquisition from Energy Harbor Corp. (9/11/23)
HOUSTON, Sept. 11, 2023 /PRNewswire/ -- Energy Transition and Environmental Management LLC (ETEM), an affiliate of Hull Street Energy, LLC, has completed a series of transactions with subsidiaries of Energy Harbor Corp. (collectively, Energy Harbor) designed to facilitate Energy Harbor's divestiture of fossil-fueled electric generating assets and associated liabilities.
In December 2022, ETEM acquired the Pleasants Power Plant, a 1,280 megawatt coal-fired power plant located in Pleasants County, West Virginia from Energy Harbor (the Pleasants Station). In August 2023, ETEM sold the Pleasants Station to a California-based company that intends to retrofit the Pleasants Station to burn hydrogen gas produced at the site, thereby reducing carbon emissions, extending the plant life, and preserving hundreds of local jobs.
On September 8, ETEM acquired the W.H. Sammis Power Plant, a 2,220 megawatt coal-fired power plant located in Stratton, Ohio (Sammis Station) and the Hollow Rock Landfill (Hollow Rock) from Energy Harbor. ETEM expects to demolish the structures, remediate environmental conditions at the Sammis Station and Hollow Rock, and repurpose the sites for next use as the power grid transitions to a reduced carbon footprint.
In total, these highly customized transactions are expected to provide numerous economic and environmental benefits to regional stakeholders; and reflect ETEM's collaborative approach to structuring portfolio solutions that optimize outcomes.
Babst, Calland, Clements and Zomnir, P.C. was transactional counsel for ETEM.
Akin and Black McCuskey Souers & Arbaugh were counsel for Energy Harbor.
ETEM is a?Texas-based energy transition and liability transfer company focused on acquiring, remediating, and repurposing fossil fired electric generation. ETEM offers generation owners a full and final transfer of all the risks and liabilities associated with retired and operating generation. For more information, visit?www.etem.eco.? ?
Hull Street Energy, LLC is a private equity firm that specializes in deploying capital into the power sector as it decarbonizes. Headquartered in Bethesda, Maryland, the team leverages its decades of experience and unique knowledge of North American electricity infrastructure, fundamentals, and grid operations, including fuel inputs, commodity contract structuring, renewable and fossil powered generation assets, energy storage, transmission and distribution systems, and electricity demand-side businesses to build value for stakeholders. For further information about Hull Street Energy please see www.hullstreetenergy.com.?
https://www.prnewswire.com/news-releases/energy-transition-and-environmental-management-llc-completes-fossil-fuel-portfolio-acquisition-from-energy-harbor-corp-301923743.html
Enterprising Investor
10 months ago
Vistra-Energy Harbor deal poses market power risks, say Ohio rate payer advocate, PJM market monitor (6/26/23)
By Ethan Howland
Dive Brief:
- Vistra’s plan to buy Energy Harbor’s nuclear power plants and other assets will hurt competition in wholesale and retail markets and should be rejected, the Ohio ratepayer advocate and the Northeast Ohio Public Energy Council, or NOPEC, told the Federal Energy Regulatory Commission on Friday.
- “Vistra currently has market power in the PJM energy and capacity markets, especially in local markets defined by frequently binding constraints, and adding the Energy Harbor nuclear units to its fleet will increase the incentive to exercise market power,” Monitoring Analytics, the PJM Interconnection’s market monitor, said.
- FERC should only approve the $3.4 billion transaction if it imposes conditions aimed at preventing Vistra from using its market power to affect energy and capacity prices, according to the market monitor.
Dive Insight:
Under the deal announced in early March, Vistra will buy three nuclear power plants in Ohio and Pennsylvania — Beaver Valley, Besse-Davis and Perry — totaling 4,048 MW. The acquisition will also add about 5 million Energy Harbor retail customers to Vistra’s portfolio.
If approved, the assets will be held in Vistra Vision, a subsidiary holding company. Nuveen Asset Management and Avenue Capital Management II, which together own 63% of Energy Harbor, will have a 15% passive, non-voting stake in Vistra Vision, according to an application at FERC.
Vistra and Energy Harbor said the planned deal wouldn’t hurt competition, raise electric rates or reduce regulatory oversight. They asked FERC to approve the transaction by July 17.
However, if approved, the transaction increases structural market power in PJM’s energy market and in local markets defined by transmission constraints as well as in the capacity market, according to Monitoring Analytics.
Monitoring Analytics said FERC should condition the deal on four behavioral limits for Vistra:
- Forbid price-based offers that cross cost-based offers;
- Require operating parameters based on physical limits;
Require Vistra to use a capacity market offer cap equal to its net avoidable cost rate; and
- Commit to reducing “capacity interconnection rights” based on the addition of behind the generator load at the acquired nuclear power plants.
The Office of the Ohio Consumers’ Counsel said the deal could allow Vistra and its affiliates to exercise “significant” market power in Ohio, likely increasing electricity prices. The office represents residential ratepayers.
“This merger would provide Energy Harbor, Dynegy and other Vistra affiliates incentives for withholding supply in order to raise prices in both the Standard Service Offer auctions and in the competitive services provided by their retail marketing affiliates,” the OCC said.
Also, the proposed merger would decrease competition in PJM’s capacity and energy wholesale markets, which could lead to higher prices for consumers when transmission constraints develop, the office said.
NOPEC, a governmental aggregator that buys electricity and gas for more than 200 Ohio communities, echoed the OCC’s concerns.
In the last five years, the number of companies supplying Ohio’s standard offer market, which serves customers that don’t buy electricity from third-party suppliers, has shrunk to six from 11, NOPEC said.
FERC should consider how the proposed deal would affect retail customers because the Ohio Public Utilities Commission lacks the authority to review it, according to NOPEC.
Vistra and Energy Harbor, formerly FirstEnergy Solutions, failed to say whether Nuveen and Avenue would have representatives on Vistra’s board after the deal closes, according to NOPEC.
When considering Vistra’s incentives to engage in anticompetitive behavior, FERC should keep in mind that agency staff said in September that its subsidiary, Dynegy, engaged in market manipulation, NOPEC said.
https://www.utilitydive.com/news/vistra-energy-harbor-nuclear-market-power-ferc-pjm/653876/
Enterprising Investor
1 year ago
Vistra to Create "Vistra Vision," a Leading Zero-Carbon Generation and Retail Platform, Through the Acquisition of Energy Harbor (3/06/23)
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
https://www.prnewswire.com/news-releases/vistra-to-create-vistra-vision-a-leading-zero-carbon-generation-and-retail-platform-through-the-acquisition-of-energy-harbor-301763264.html
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