Vistra to Acquire Equity Interests of Vistra Vision LLC from Minority Investors

Rhea-AI Summary

Vistra Corp. (NYSE: VST) has announced a significant transaction to acquire the remaining 15% equity interest in Vistra Vision from minority investors Nuveen and Avenue Capital Management. This $3.085 billion deal will make Vistra the sole owner of Vistra Vision, which includes zero-carbon nuclear, energy storage, solar generation assets, and retail business. The transaction is expected to close on Dec. 31, 2024, with payments structured over two years.

Key highlights include:

• Immediate accretion to shareholders
• Exceeding mid-teens levered return thresholds
• Commitment to long-term net leverage target of less than 3x
• Plans for at least $2.25 billion in share repurchases in 2024-2025, and $1 billion in 2026

This strategic move simplifies Vistra's structure and increases shareholder ownership of valuable carbon-free assets in key growing U.S. markets.

Positive

• Acquisition of remaining 15% equity in Vistra Vision for $3.085 billion, making Vistra the sole owner
• Transaction expected to exceed mid-teens levered return thresholds
• Forecasted to be immediately accretive to shareholders
• Increases Vistra's ownership of zero-carbon assets in key growing U.S. markets
• Commitment to at least $2.25 billion in share repurchases for 2024-2025, and $1 billion for 2026
• Maintenance of $300 million annual common dividends for 2024-2026

Negative

• Significant cash outlay of $3.085 billion over two years
• Potential impact on short-term liquidity due to structured payment schedule

Insights

Financial Analyst

This acquisition marks a significant strategic move for Vistra. By acquiring the remaining 15% stake in Vistra Vision, the company gains full control over its zero-carbon assets and retail business. The $3.085 billion net present value deal is expected to exceed mid-teens levered return thresholds and be immediately accretive to shareholders.

The transaction's structure, with payments spread over two years, allows Vistra to manage cash flow effectively. Importantly, the company maintains its capital allocation priorities, including the $2.25 billion share repurchase plan for 2024-2025 and an additional $1 billion in 2026. This balance between acquisition and shareholder returns demonstrates strong financial management.

Investors should note the potential for increased upside in nuclear, solar and battery assets, as well as the retail business. This move aligns with the growing demand for clean energy solutions and could position Vistra favorably in the evolving energy market.

Energy Market Analyst

Vistra's acquisition of the remaining stake in Vistra Vision is a strategic play in the evolving energy landscape. By gaining full ownership of its zero-carbon assets, Vistra is strengthening its position in the clean energy transition. This move aligns with the growing demand for reliable, affordable and sustainable power across the U.S.

The transaction highlights Vistra's commitment to its integrated model, pairing dispatchable generation assets with retail operations. This approach could prove advantageous as the grid faces challenges balancing intermittent renewable sources with baseload power needs. The full ownership of nuclear assets, in particular, provides Vistra with a stable, carbon-free baseload capacity that's increasingly valuable in a decarbonizing grid.

Investors should watch for potential synergies and efficiencies that may arise from full ownership, as well as Vistra's ability to leverage these assets in key growing markets. The move could enhance Vistra's competitiveness in the rapidly evolving energy sector.

Vistra to become the sole owner of Vistra Vision

Highlights

• Transaction, consisting of the acquisition of the entire 15% equity interest in Vistra Vision currently owned by affiliates of Nuveen and Avenue, is expected to close on Dec. 31, 2024.
• Net present value cash purchase price, which will be paid in installments over two years from the closing date, of $3.085 billion¹, subject to adjustment based on the amount of Vistra Vision dividends received by the minority investors prior to closing.
• Increases upside related to nuclear, solar, and battery assets, as well as its retail business currently majority owned and operated by Vistra.
• Transaction is expected to significantly exceed the company's mid-teens levered return thresholds and is forecasted to be immediately accretive to shareholders.
• Vistra remains committed to its long-term net leverage target of less than 3x² and continues to expect to execute at least $2.25 billion of share repurchases in 2024 and 2025, and at least $1 billion of additional share repurchases in 2026³.

IRVING, Texas, Sept. 18, 2024 /PRNewswire/ -- Vistra Corp. (NYSE: VST) today announced that it has executed definitive agreements with affiliates of Nuveen Asset Management, LLC, and Avenue Capital Management II, L.P., to acquire their combined 15% equity interest in Vistra Vision LLC. This will result in Vistra being the sole owner of its Vistra Vision subsidiary, which includes its zero-carbon nuclear, energy storage, and solar generation assets, as well as its retail business.

Vistra President and CEO Jim Burke stated, "This is another key milestone in the evolution of our company. Through this transaction we are simplifying the overall structure by acquiring the minority interest at an attractive valuation and increasing our shareholder's ownership to 100% of highly valuable, carbon-free assets in the key growing markets across the U.S." 

Burke concluded, "Vistra believes its strength is its integrated model of pairing a large fleet of dispatchable generation assets with best-in-class retail and commercial operations, ensuring customers are served in a reliable, affordable, and sustainable manner. Vistra continues to be well-positioned to assist with the growing power needs across our country."

Transaction Structure

Vistra will acquire the 15% equity interest collectively owned by Nuveen and Avenue for an undiscounted purchase price of $3.248 billion in cash, which it expects to pay in five installments of $1.18 billion on Dec. 31, 2024, $114 million on June 30, 2025, $1.0 billion on Dec. 31, 2025, $54 million on June 30, 2026, and $900 million on Dec. 31, 2026. The net present value of the purchase price as of Dec. 31, 2024, discounted at a 6% interest rate, is $3.085 billion.

Additionally, if Nuveen and Avenue receive less than $165 million in dividends from Vistra Vision for the remainder of 2024, then the amount of the installment payable on Dec. 31, 2024, will be adjusted upward by the difference, and if they receive dividends in excess of $165 million, then the amount will be adjusted downward by the difference.

Vistra's Capital Allocation Plan Unchanged

The agreement does not impact or change Vistra's capital allocation priorities. Vistra remains committed to its long-term net leverage target of less than 3x². Vistra also continues to expect to execute at least $2.25 billion of share repurchases in 2024 and 2025 and at least $1 billion in 2026³, as well as pay $300 million in aggregate common dividends in each year 2024-2026³.

Conditions and Timing

The transaction, which is not subject to any regulatory approvals, is expected to close on Dec. 31, 2024.

Advisors

Citi is serving as financial advisor, and Latham & Watkins LLP and Sidley Austin LLP are serving as legal advisors to Vistra.

Evercore and PJT Partners are serving as financial advisors and Kramer Levin Naftalis & Frankel LLP is serving as legal advisor to Nuveen and Avenue.

About Vistra Vision LLC

Assets owned by Vistra Vision LLC consist of the Beaver Valley, Comanche Peak, Davis-Besse, and Perry nuclear generation facilities with total capacity of approximately 6.4 GW, the Vistra Zero renewables and energy storage business, and Vistra's retail business. As of June 30, 2024, total debt outstanding and cash on hand at Vistra Vision LLC were approximately $3.55 billion and $375 million, respectively.

About Vistra

Vistra (NYSE: VST) is a leading Fortune 500 integrated retail electricity and power generation company that provides essential resources to customers, businesses, and communities from California to Maine, including the key markets of ERCOT, PJM and ISO New England. Based in Irving, Texas, Vistra is a leader in the energy transformation with an unyielding focus on reliability, affordability, and sustainability. The company safely operates a reliable, efficient, power generation fleet of natural gas, nuclear, coal, solar, and battery energy storage facilities while taking an innovative, customer-centric approach to its retail business. Learn more at https://www.vistracorp.com.

1. Calculated as of Dec. 31, 2024, utilizing a 6% discount rate.
2. Excluding any non-recourse debt at Vistra Zero and any benefit from margin deposits.
3. Subject to board authorization.

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, including Energy Harbor; (iii) actions by credit ratings agencies; (iv) 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 (v) 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 Dec. 31, 2023, and 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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SOURCE Vistra Corp

FAQ

What is the value of Vistra's acquisition of minority interests in Vistra Vision?

Vistra is acquiring the 15% minority interest in Vistra Vision for a net present value of $3.085 billion, to be paid in installments over two years from the closing date of December 31, 2024.

How will the Vistra Vision acquisition affect VST shareholders?

The acquisition is expected to be immediately accretive to VST shareholders and significantly exceed the company's mid-teens levered return thresholds. It also increases shareholder ownership of valuable carbon-free assets in key U.S. markets.

What are Vistra's share repurchase plans following the Vistra Vision transaction?

Vistra plans to execute at least $2.25 billion of share repurchases in 2024 and 2025, and at least $1 billion of additional share repurchases in 2026, despite the Vistra Vision acquisition.

How does the Vistra Vision acquisition align with VST's long-term financial goals?

Vistra remains committed to its long-term net leverage target of less than 3x, indicating that the acquisition aligns with the company's financial strategy and doesn't compromise its leverage goals.