Vistra Corp. - Quarter Report: 2020 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020

— OR —


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __ to __

Commission File Number 001-38086

Vistra Corp.

(Exact name of registrant as specified in its charter)

Delaware

36-4833255

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6555 Sierra Drive,

Irving,

Texas

75039

(214)

812-4600

(Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common stock, par value $0.01 per share

VST

New York Stock Exchange

Warrants

VST.WS.A

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-Accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 30, 2020, there were 489,133,516 shares of common stock, par value $0.01, outstanding of Vistra Corp.

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TABLE OF CONTENTS


		PAGE
GLOSSARY		ii
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations — Three and Nine Months Ended September 30, 2020 and 2019	1
	Condensed Consolidated Statements of Comprehensive Income — Three and Nine Months Ended September 30, 2020 and 2019	1
	Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2020 and 2019	2
	Condensed Consolidated Balance Sheets — September 30, 2020 and December 31, 2019	3
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 4.	Controls and Procedures	83
PART II.	OTHER INFORMATION	84
Item 1.	Legal Proceedings	84
Item 1A.	Risk Factors	84
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	85
Item 6.	Exhibits	85
SIGNATURE		88

Vistra Corp.'s (Vistra) annual reports, quarterly reports, current reports and any amendments to those reports are made available to the public, free of charge, on the Vistra website at http://www.vistracorp.com, as soon as reasonably practicable after they have been filed with or furnished to the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. Additionally, Vistra posts important information, including press releases, investor presentations, sustainability reports, and notices of upcoming events on its website and utilizes its website as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD. Investors may be notified of posting to the website by signing up for email alerts and RSS feeds on the "Investor Relations" page of Vistra's website. The information on Vistra's website shall not be deemed a part of, or incorporated by reference into, this quarterly report on Form 10-Q. The representations and warranties contained in any agreement that we have filed as an exhibit to this quarterly report on Form 10-Q, or that we have or may publicly file in the future, may contain representations and warranties that may (i) be made by and to the parties thereto at specific dates, (ii) be subject to exceptions and qualifications contained in separate disclosure schedules, (iii) represent the parties' risk allocation in the particular transaction, or (iv) be qualified by materiality standards that differ from what may be viewed as material for securities law purposes.

This quarterly report on Form 10-Q and other Securities and Exchange Commission filings of Vistra and its subsidiaries occasionally make references to Vistra (or "we," "our," "us" or "the Company"), Luminant, TXU Energy, Ambit, Value Based Brands, Dynegy Energy Services, Homefield Energy, TriEagle Energy, Public Power or U.S. Gas & Electric, when describing actions, rights or obligations of their respective subsidiaries. These references reflect the fact that the subsidiaries are consolidated with, or otherwise reflected in, the Vistra financial statements for financial reporting purposes. However, these references should not be interpreted to imply that the parent company is actually undertaking the action or has the rights or obligations of the relevant subsidiary company or vice versa.

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GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.


2019 Form 10-K						Vistra's annual report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 28, 2020
Ambit						Ambit Holdings, LLC, and/or its subsidiaries (d/b/a Ambit), depending on context
ARO						asset retirement and mining reclamation obligation
CAA						Clean Air Act
CAISO						The California Independent System Operator
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
CCGT						combined cycle gas turbine
CFTC						U.S. Commodity Futures Trading Commission
CME						Chicago Mercantile Exchange
CO2						carbon dioxide
CPUC						California Public Utilities Commission
Crius						Crius Energy Trust and/or its subsidiaries, depending on context
Dynegy						Dynegy Inc., and/or its subsidiaries, depending on context
Dynegy Energy Services						Dynegy Energy Services, LLC and Dynegy Energy Services (East), LLC (each d/b/a Dynegy, Better Buy Energy, Brighten Energy, Honor Energy and True Fit Energy), indirect, wholly owned subsidiaries of Vistra, that are REPs in certain areas of MISO and PJM, respectively, and are engaged in the retail sale of electricity to residential and business customers.
EBITDA						earnings (net income) before interest expense, income taxes, depreciation and amortization
Effective Date						October 3, 2016, the date our predecessor completed its reorganization under Chapter 11 of the U.S. Bankruptcy Code
Emergence						emergence of our predecessor from reorganization under Chapter 11 of the U.S. Bankruptcy Code as subsidiaries of a newly formed company, Vistra, on the Effective Date
EPA						U.S. Environmental Protection Agency
ERCOT						Electric Reliability Council of Texas, Inc.
ESS						energy storage system
Exchange Act						Securities Exchange Act of 1934, as amended
FERC						U.S. Federal Energy Regulatory Commission
GAAP						generally accepted accounting principles
GHG						greenhouse gas
GWh						gigawatt-hours
Homefield Energy						Illinois Power Marketing Company (d/b/a Homefield Energy), an indirect, wholly owned subsidiary of Vistra, a REP in certain areas of MISO that is engaged in the retail sale of electricity to municipal customers
ICE						Intercontinental Exchange
IRC						Internal Revenue Code of 1986, as amended
IRS						U.S. Internal Revenue Service
ISO						independent system operator
ISO-NE						ISO New England Inc.
LIBOR						London Interbank Offered Rate, an interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market
load						demand for electricity
LTSA						long-term service agreements for plant maintenance
Luminant						subsidiaries of Vistra engaged in competitive market activities consisting of electricity generation and wholesale energy sales and purchases as well as commodity risk management

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market heat rate						Heat rate is a measure of the efficiency of converting a fuel source to electricity. Market heat rate is the implied relationship between wholesale electricity prices and natural gas prices and is calculated by dividing the wholesale market price of electricity, which is based on the price offer of the marginal supplier (generally natural gas plants), by the market price of natural gas.
Merger						the merger of Dynegy with and into Vistra, with Vistra as the surviving corporation
Merger Agreement						the Agreement and Plan of Merger, dated as of October 29, 2017, by and between Vistra and Dynegy
Merger Date						April 9, 2018, the date Vistra and Dynegy completed the transactions contemplated by the Merger Agreement
MISO						Midcontinent Independent System Operator, Inc.
MMBtu						million British thermal units
Moody's						Moody's Investors Service, Inc. (a credit rating agency)
MSHA						U.S. Mine Safety and Health Administration
MW						megawatts
MWh						megawatt-hours
NELP						Northeast Energy, LP, a joint venture between Dynegy Northeast Generation GP, Inc. and Dynegy Northeast Associates LP, Inc., both indirect subsidiaries of Vistra, and certain subsidiaries of NextEra Energy, Inc. Prior to the NELP Transaction, NELP indirectly owned Bellingham NEA facility and the Sayreville facility.
NELP Transaction						a transaction among Dynegy Northeast Generation GP, Inc., Dynegy Northeast Associates LP, Inc. and certain subsidiaries of NextEra Energy, Inc. wherein the indirect subsidiaries of Vistra redeemed their ownership interest in NELP partnership in exchange for 100% ownership interest in NJEA, the entity which owns the Sayreville facility.
NERC						North American Electric Reliability Corporation
NJEA						North Jersey Energy Associates, A Limited Partnership
NOX						nitrogen oxide
NRC						U.S. Nuclear Regulatory Commission
NYISO						New York Independent System Operator, Inc.
NYMEX						the New York Mercantile Exchange, a commodity derivatives exchange
OPEB						postretirement employee benefits other than pensions
Parent						Vistra Corp.
PJM						PJM Interconnection, LLC
Plan of Reorganization						Third Amended Joint Plan of Reorganization filed by the parent company of our predecessor in August 2016 and confirmed by the U.S. Bankruptcy Court for the District of Delaware in August 2016 solely with respect to our predecessor
PrefCo						Vistra Preferred Inc.
PrefCo Preferred Stock Sale						as part of the tax-free spin-off from Energy Future Holdings Corp., executed pursuant to the Plan of Reorganization on the Effective Date by our predecessor, the contribution of certain of the assets of our predecessor and its subsidiaries by a subsidiary of TEX Energy LLC to PrefCo in exchange for all of PrefCo's authorized preferred stock, consisting of 70,000 shares, par value $0.01 per share
Public Power						Public Power, LLC (d/b/a Public Power), an indirect, wholly owned subsidiary of Vistra, a REP in certain areas of PJM, ISO-NE, NYISO and MISO that is engaged in the retail sale of electricity to residential and business customers
PUCT						Public Utility Commission of Texas
REP						retail electric provider
RCT						Railroad Commission of Texas, which among other things, has oversight of lignite mining activity in Texas
RTO						regional transmission organization
S&P						Standard & Poor's Ratings (a credit rating agency)
SEC						U.S. Securities and Exchange Commission
Securities Act						Securities Act of 1933, as amended
SO2						sulfur dioxide

iii

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Tax Matters Agreement						Tax Matters Agreement, dated as of the Effective Date, by and among Energy Future Holdings Corp. (EFH Corp.), Energy Future Intermediate Holding Company LLC, EFIH Finance Inc. and EFH Merger Co. LLC
TCEH						Texas Competitive Electric Holdings Company LLC, a direct, wholly owned subsidiary of Energy Future Competitive Holdings Company LLC, and, prior to the Effective Date, the parent company of our predecessor, depending on context, that were engaged in electricity generation and wholesale and retail energy market activities, and whose major subsidiaries included Luminant and TXU Energy
TCEQ						Texas Commission on Environmental Quality
TRA						Tax Receivables Agreement, containing certain rights (TRA Rights) to receive payments from Vistra related to certain tax benefits, including benefits realized as a result of certain transactions entered into at Emergence (see Note 8 to the Financial Statements)
TRE						Texas Reliability Entity, Inc., an independent organization that develops reliability standards for the ERCOT region and monitors and enforces compliance with NERC standards and monitors compliance with ERCOT protocols
TriEagle Energy						TriEagle Energy, LP (d/b/a TriEagle Energy, TriEagle Energy Services, Eagle Energy, Energy Rewards, Power House Energy and Viridian Energy), an indirect, wholly owned subsidiary of Vistra, a REP in certain areas of ERCOT and PJM that is engaged in the retail sale of electricity to residential and business customers
TWh						terawatt-hours
TXU Energy						TXU Energy Retail Company LLC (d/b/a TXU), an indirect, wholly owned subsidiary of Vistra that is a REP in competitive areas of ERCOT and is engaged in the retail sale of electricity to residential and business customers
U.S.						United States of America
U.S. Gas & Electric						U.S. Gas and Electric, Inc. (d/b/a USG&E, Illinois Gas & Electric and ILG&E), an indirect, wholly owned subsidiary of Vistra, a REP in certain areas of PJM, ISO-NE, NYISO and MISO that is engaged in the retail sale of electricity to residential and business customers
Value Based Brands						Value Based Brands LLC (d/b/a 4Change, 4Change Energy and Express Energy), an indirect, wholly owned subsidiary of Vistra that is a REP in competitive areas of ERCOT and is engaged in the retail sale of electricity to residential and business customers
Vistra						Vistra Corp. and/or its subsidiaries, depending on context. Effective July 2, 2020, Vistra Energy Corp. changed its name to Vistra Corp.
Vistra Intermediate						Vistra Intermediate Company LLC, a direct, wholly owned subsidiary of Vistra
Vistra Operations						Vistra Operations Company LLC, an indirect, wholly owned subsidiary of Vistra that is the issuer of certain series of notes (see Note 11 to the Financial Statements) and borrower under the Vistra Operations Credit Facilities
Vistra Operations Credit Facilities						Vistra Operations Company LLC's $5.304 billion senior secured financing facilities (see Note 11 to the Financial Statements)

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PART I. FINANCIAL INFORMATION

Item 1.FINANCIAL STATEMENTS

VISTRA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (Millions of Dollars, Except Per Share Amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating revenues (Note 5)	$	3,552	$	3,194	$	8,919	$	8,949
Fuel, purchased power costs and delivery fees	(1,469)		(1,687)		(3,832)		(4,287)
Operating costs	(457)		(397)		(1,249)		(1,153)
Depreciation and amortization	(410)		(424)		(1,284)		(1,213)
Selling, general and administrative expenses	(268)		(246)		(755)		(637)

Impairment of long-lived assets (Note 18)	(272)		—		(356)		—
Operating income	676		440		1,443		1,659
Other income (Note 18)	8		6		19		45
Other deductions (Note 18)	—		(4)		(35)		(9)
Interest expense and related charges (Note 18)	(101)		(224)		(541)		(720)
Impacts of Tax Receivable Agreement (Note 8)	58		(62)		44		(26)
Equity in earnings of unconsolidated investment	—		3		4		13
Income before income taxes	641		159		934		962
Income tax expense (Note 7)	(199)		(45)		(283)		(270)
Net income	$	442	$	114	$	651	$	692
Net (income) loss attributable to noncontrolling interest	1		(1)		14		2
Net income attributable to Vistra	$	443	$	113	$	665	$	694
Weighted average shares of common stock outstanding:
Basic	488,824,580		490,562,179		488,484,441		486,215,356
Diluted	491,025,940		493,670,295		490,914,478		490,226,743
Net income per weighted average share of common stock outstanding:
Basic	$	0.91	$	0.23	$	1.36	$	1.43
Diluted	$	0.90	$	0.23	$	1.35	$	1.42

See Notes to the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) (Millions of Dollars)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income	$	442	$	114	$	651	$	692
Other comprehensive income, net of tax effects:
Effects related to pension and other retirement benefit obligations (net of tax benefit of $1, $4, $8 and $4)	(4)		(13)		(26)		(12)

Total other comprehensive income (loss)	(4)		(13)		(26)		(12)
Comprehensive income	$	438	$	101	$	625	$	680
Comprehensive income (loss) attributable to noncontrolling interest	1		(1)		14		2
Comprehensive income attributable to Vistra	$	439	$	100	$	639	$	682

See Notes to the Condensed Consolidated Financial Statements.

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VISTRA CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Millions of Dollars)
	Nine Months Ended September 30,
	2020		2019
Cash flows — operating activities:
Net income	$	651	$	692
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	1,512		1,394
Deferred income tax expense, net	264		254

Impairment of long-lived assets (Note 18)	356		—
Loss on disposal of investment in NELP (Note 18)	29		—

Unrealized net gain from mark-to-market valuations of commodities	(444)		(625)
Unrealized net loss from mark-to-market valuations of interest rate swaps	181		275
Asset retirement obligation accretion expense	33		40
Impacts of Tax Receivable Agreement (Note 8)	(44)		26
Stock-based compensation	46		35
Other, net	115		12
Changes in operating assets and liabilities:
Margin deposits, net	60		129
Accrued interest	(97)		15
Accrued taxes	(35)		(31)
Accrued employee incentive	(20)		(53)
Other operating assets and liabilities	(257)		(340)
Cash provided by operating activities	2,350		1,823
Cash flows — investing activities:
Capital expenditures, including nuclear fuel purchases and LTSA prepayments	(838)		(474)
Crius acquisition (net of cash acquired) (Note 2)	—		(374)
Proceeds from sales of nuclear decommissioning trust fund securities (Note 18)	291		354
Investments in nuclear decommissioning trust fund securities (Note 18)	(307)		(370)
Proceeds from sales of environmental allowances	91		32
Purchases of environmental allowances	(210)		(169)
Proceeds from sale of assets	23		6
Other, net	23		16
Cash used in investing activities	(927)		(979)
Cash flows — financing activities:
Issuances of long-term debt (Note 11)	—		4,600
Repayments/repurchases of debt (Note 11)	(955)		(4,668)
Net borrowings under accounts receivable securitization program (Note 10)	175		261
Borrowings under Revolving Credit Facility (Note 11)	1,075		100
Repayments under Revolving Credit Facility (Note 11)	(1,425)		(100)
Stock repurchase (Note 13)	—		(632)
Dividends paid to stockholders (Note 13)	(198)		(181)
Debt tender offer and other financing fees (Note 11)	(17)		(170)
Other, net	(3)		6
Cash used in financing activities	(1,348)		(784)

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VISTRA CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Millions of Dollars)
	Nine Months Ended September 30,
	2020		2019
Net change in cash, cash equivalents and restricted cash	75		60
Cash, cash equivalents and restricted cash — beginning balance	475		693
Cash, cash equivalents and restricted cash — ending balance	$	550	$	753

See Notes to the Condensed Consolidated Financial Statements.

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VISTRA CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Millions of Dollars)
	September 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	500	$	300
Restricted cash (Note 18)	28		147
Trade accounts receivable — net (Note 18)	1,372		1,365

Inventories (Note 18)	508		469
Commodity and other derivative contractual assets (Note 15)	883		1,333
Margin deposits related to commodity contracts	155		202
Prepaid expense and other current assets	311		298
Total current assets	3,757		4,114
Restricted cash (Note 18)	22		28
Investments (Note 18)	1,632		1,537
Investment in unconsolidated subsidiary (Note 18)	—		124
Property, plant and equipment — net (Note 18)	13,564		13,914
Operating lease right-of-use assets	45		44

Goodwill (Note 6)	2,583		2,553
Identifiable intangible assets — net (Note 6)	2,464		2,748
Commodity and other derivative contractual assets (Note 15)	321		136
Accumulated deferred income taxes	805		1,066
Other noncurrent assets	306		352
Total assets	$	25,499	$	26,616
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings (Note 11)	$	—	$	350
Accounts receivable securitization program (Note 10)	625		450
Long-term debt due currently (Note 11)	127		277
Trade accounts payable	897		947
Commodity and other derivative contractual liabilities (Note 15)	858		1,529
Margin deposits related to commodity contracts	11		8
Accrued income taxes	—		1
Accrued taxes other than income	171		200
Accrued interest	53		151
Asset retirement obligations (Note 18)	115		141
Operating lease liabilities	10		14

Other current liabilities	516		506
Total current liabilities	3,383		4,574
Long-term debt, less amounts due currently (Note 11)	9,253		10,102
Operating lease liabilities	39		41

Commodity and other derivative contractual liabilities (Note 15)	532		396
Accumulated deferred income taxes	2		2
Tax Receivable Agreement obligation (Note 8)	411		455
Asset retirement obligations (Note 18)	2,353		2,097

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VISTRA CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Millions of Dollars)
	September 30, 2020		December 31, 2019
Other noncurrent liabilities and deferred credits (Note 18)	1,095		989
Total liabilities	17,068		18,656
Commitments and Contingencies (Note 12)
Total equity (Note 13):
Common stock (par value — $0.01; number of shares authorized — 1,800,000,000) (shares outstanding: September 30, 2020 — 488,874,505; December 31, 2019 — 487,698,111)	5		5
Treasury stock, at cost (shares: September 30, 2020 — 41,043,224; December 31, 2019 — 41,043,224)	(973)		(973)
Additional paid-in-capital	9,771		9,721
Retained deficit	(303)		(764)
Accumulated other comprehensive loss	(56)		(30)
Stockholders' equity	8,444		7,959
Noncontrolling interest in subsidiary	(13)		1
Total equity	8,431		7,960
Total liabilities and equity	$	25,499	$	26,616

See Notes to the Condensed Consolidated Financial Statements.

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VISTRA CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

References in this report to "we," "our," "us" and "the Company" are to Vistra and/or its subsidiaries, as apparent in the context. See Glossary for defined terms.

Vistra is a holding company operating an integrated retail and electric power generation business primarily in markets throughout the U.S. Through our subsidiaries, we are engaged in competitive energy market activities including power generation, wholesale energy sales and purchases, commodity risk management and retail sales of electricity and natural gas to end users. Effective July 2, 2020, we changed our name from Vistra Energy Corp. to Vistra Corp. (Vistra) to distinguish from companies that are involved in exploring for, producing, refining, or transporting fossil fuels (many of which use "energy" in their names) and to better reflect our integrated business model, which combines a retail electricity and natural gas business focused on serving its customers with new and innovative products and services and an electric power generation business powering the communities we serve with safe, reliable power.

Vistra has six reportable segments: (i) Retail, (ii) Texas, (iii) East, (iv) West, (v) Sunset and (vi) Asset Closure. In the third quarter of 2020, Vistra updated its reportable segments to reflect changes in how the Company's Chief Operating Decision Maker (CODM) makes operating decisions, assesses performance and allocates resources. Management believes that the revised reportable segments provide enhanced transparency into the Company's long-term sustainable assets and its commitment to managing the retirement of economically and environmentally challenged plants. The following is a summary of the updated segments:

•The East segment represents Vistra's electricity generation operations in the Eastern Interconnection of the U.S. electric grid, other than assets that are now part of the Sunset or Asset Closure segments, and includes operations in PJM, ISO-NE and NYISO that were previously reported in the PJM and NY/NE segments.

•The West segment represents Vistra's electricity generation operations in CAISO and was previously reported in the Corporate and Other non-segment. As reflected by the Moss Landing and Oakland ESS projects (see Note 3), the company expects to expand its operations in the West.

•The Sunset segment represents plants with announced retirement dates that were previously reported in the PJM and MISO segments. No separate segment previously existed to differentiate operating plants with defined retirement dates from operating plants without defined retirement plans.

In addition, the ERCOT segment was renamed the Texas segment. There were no changes to the Retail and Asset Closure segments. All historical segment results within these condensed consolidated financial statements have been recast to be in alignment with our new segmentation. See Note 17 for further information concerning reportable business segments.

Ambit Transaction

On November 1, 2019, an indirect, wholly owned subsidiary of Vistra completed the acquisition of Ambit (Ambit Transaction). Because the Ambit Transaction closed on November 1, 2019, Vistra's condensed consolidated financial statements and the notes related thereto do not include the financial condition or the operating results of Ambit and its subsidiaries prior to November 1, 2019. See Note 2 for a summary of the Ambit Transaction.

Crius Transaction

On July 15, 2019, an indirect, wholly owned subsidiary of Vistra completed the acquisition of the equity interests of two wholly owned subsidiaries of Crius that indirectly owned the operating business of Crius (Crius Transaction). Because the Crius Transaction closed on July 15, 2019, Vistra's condensed consolidated financial statements and the notes related thereto do not include the financial condition or the operating results of Crius and its subsidiaries prior to July 15, 2019. See Note 2 for a summary of the Crius Transaction.

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COVID-19 Pandemic

In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a pandemic, and the President of the United States (the President) declared the COVID-19 outbreak a national emergency. The U.S. government has deemed electricity generation, transmission and distribution as “critical infrastructure” providing essential services during this global emergency. As a provider of critical infrastructure, Vistra has an obligation to provide critically needed power to homes, businesses, hospitals and other customers. Vistra remains focused on protecting the health and well-being of its employees and the communities in which it operates while assuring the continuity of its business operations.

The Company's condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there have been no material adverse impacts on the Company's results of operations for the three or nine months ended September 30, 2020.

In response to the global pandemic related to COVID-19, the President signed into law the CARES Act on March 27, 2020. See Note 7 for a summary of certain anticipated tax-related impacts of the CARES Act to the Company.

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and on the same basis as the audited financial statements included in our 2019 Form 10-K. The condensed consolidated financial information herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. All such adjustments are of a normal nature. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and footnotes required by U.S. GAAP, they should be read in conjunction with the audited financial statements and related notes contained in our 2019 Form 10-K. The results of operations for an interim period may not give a true indication of results for a full year. All dollar amounts in the financial statements and tables in the notes are stated in millions of U.S. dollars unless otherwise indicated.

Use of Estimates

Preparation of financial statements requires estimates and assumptions about future events that affect the reporting of assets and liabilities at the balance sheet dates and the reported amounts of revenue and expense, including fair value measurements, estimates of expected obligations, judgments related to the potential timing of events and other estimates. In the event estimates and/or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.

Adoption of Accounting Standards

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The ASU enhances and simplifies various aspects of the income tax accounting guidance including the elimination of certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. We adopted all provisions of this ASU in the first quarter of 2020, and it did not have a material impact on our financial statements.

In August 2018, the FASB issued ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement. The ASU removes disclosure requirements for (a) the reasons for transfers between Level 1 and Level 2, (b) the policy for timing of transfers between levels and (c) the valuation processes for Level 3. The ASU requires new disclosures around (a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. We adopted this ASU in the first quarter of 2020, and the updated disclosures are included in Note 14.

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In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ASU requires a customer in a cloud hosting arrangement that is a service contract to determine which implementation costs to capitalize and which costs to expense based on the project stage of the implementation. The ASU also requires the customer to expense the capitalized implementation costs over the term of the hosting arrangement. The customer is required to apply the existing impairment and abandonment guidance on the capitalized implementation costs. We adopted this ASU in the first quarter of 2020, and it did not have a material impact on our financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses. The ASU requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. We adopted this ASU in the first quarter of 2020, and it did not have a material impact on our financial statements.

Changes in Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in the ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of this guidance did not have a material impact on our financial statements.

In March 2020, the SEC amended Rule 3-10 of Regulation S-X regarding financial disclosure requirements for registered debt offerings involving subsidiaries as either issuers or guarantors and affiliates whose securities are pledged as collateral. This new guidance narrows the circumstances that require separate financial statements of subsidiary issuers and guarantors and streamlines the alternative disclosures required in lieu of those statements. This rule is effective January 4, 2021 with earlier adoption permitted. We elected to adopt this rule in the first quarter of 2020. Accordingly, summarized financial information has been presented only for the issuer and guarantors of the Company's registered debt securities, and the location of the required disclosures has been moved outside the Notes to the Consolidated Financial Statements and is provided in Part I, Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations under Financial Condition - Guarantor Summary Financial Information.

2. ACQUISITIONS, MERGER TRANSACTION AND BUSINESS COMBINATION ACCOUNTING

Ambit Transaction

On November 1, 2019 (Ambit Acquisition Date), Volt Asset Company, Inc., an indirect, wholly owned subsidiary of Vistra, completed the Ambit Transaction. Ambit is an energy retailer selling both electricity and natural gas products to residential and small business customers in 17 states. Vistra funded the purchase price of $555 million (including cash acquired and net working capital) using cash on hand. All of Ambit's outstanding debt was repaid from the purchase price at closing and not assumed by Vistra.

Crius Transaction

On July 15, 2019 (Crius Acquisition Date), Vienna Acquisition B.C. Ltd., an indirect, wholly owned subsidiary of Vistra, completed the acquisition of the equity interests of two wholly owned subsidiaries of Crius that indirectly own the operating business of Crius. Crius is an energy retailer selling both electricity and natural gas products to residential and small business customers in 19 states. Vistra funded the purchase price of $400 million (including $382 million for outstanding trust units) using cash on hand. In addition, Vistra assumed $140 million of outstanding debt and acquired $26 million of cash at the closing of the Crius Transaction.

Ambit and Crius Business Combination Accounting

We believe the Ambit Transaction has (i) augmented Vistra's existing retail marketing capabilities with additional direct selling capability and a proprietary technology platform, (ii) reduced risk and aided expansion into higher margin channels by improving Vistra's match of its generation to load profile due to a high degree of overlap of Vistra's generation fleet with Ambit's approximately 11 TWh of annual load, primarily in ERCOT and PJM and (iii) enhanced the integrated value proposition through collateral and transaction efficiencies, particularly via Ambit's retail electric portfolio.

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We believe the Crius Transaction has (i) reduced risk and aided expansion into higher margin channels by improving Vistra's match of its generation to load profile due to a high degree of overlap of Vistra's generation fleet with Crius' approximately 10 TWh of annual electricity load, (ii) established a platform for growth by leveraging Vistra's existing retail marketing capabilities and Crius' experienced team and (iii) enhanced the integrated value proposition through collateral and transaction efficiencies, particularly via Crius' retail electric portfolio.

Each of the Ambit Transaction and Crius Transaction, respectively, was accounted for in accordance with ASC 805, Business Combinations (ASC 805), with identifiable assets acquired and liabilities assumed recorded at their estimated fair values on the Ambit Acquisition Date and Crius Acquisition Date, respectively. The combined results of operations are reported in our condensed consolidated financial statements beginning as of the respective Ambit Acquisition Date and Crius Acquisition Date. A summary of the techniques used to estimate the fair value of the identifiable assets and liabilities, as well as their classification within the fair value hierarchy (see Note 14), is listed below:

•Working capital was valued using available market information (Level 2).

•Acquired derivatives were valued using the methods described in Note 14 (Level 2 or Level 3).

•Acquired retail customer relationship was valued based on discounted cash flow analysis of acquired customers and estimated attrition rates (Level 3).

•Crius' long-term debt was valued using a market approach (Level 2).

The following table summarizes the allocation of the purchase price to the fair value amounts recognized for the assets acquired and liabilities assumed related to the Ambit Transaction and Crius Transaction, respectively, as of the Ambit Acquisition Date and Crius Acquisition Date, respectively. The Ambit Transaction purchase price was $555 million (including cash acquired and net working capital) and the Crius Transaction purchase price was $400 million. The final purchase price allocations were completed in the second quarter of 2020 for the Crius Transaction and the third quarter of 2020 for the Ambit Transaction.


Ambit Transaction and Crius Transaction Final Purchase Price Allocations
	Ambit Transaction				Crius Transaction
	Final Purchase Price Allocation		Measurement Period Adjustments recorded through September 30, 2020		Final Purchase Price Allocation
Cash and cash equivalents	$	49	$	—	$	26
Net working capital	32		3		(9)
Accumulated deferred income taxes	—		—		—
Identifiable intangible assets	218		(45)		317
Goodwill	258		44		243
Commodity and other derivative contractual assets	23		—		18
Other noncurrent assets	13		—		17
Total assets acquired	593		2		612
Identifiable intangible liabilities	—		—		2
Long-term debt, including amounts due currently	—		—		140
Commodity and other derivative contractual liabilities	28		—		40
Accumulated deferred income taxes	—		—		14
Other noncurrent liabilities and deferred credits	10		2		16
Total liabilities assumed	38		2		212
Identifiable net assets acquired	$	555	$	—	$	400

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Crius Transaction Unaudited Pro Forma Financial Information

The following unaudited consolidated pro forma financial information for the nine months ended September 30, 2019 assumes that the Crius Transaction occurred on January 1, 2019 (i.e., represents our results for the nine months ended September 30, 2019 plus the results for Crius for the period not owned by us). The unaudited consolidated pro forma financial information is provided for informational purposes only and is not necessarily indicative of the results of operations that would have occurred had the Crius Transaction been completed on January 1, 2019, nor is the unaudited consolidated pro forma financial information indicative of future results of operations, which may differ materially from the consolidated pro forma financial information presented here.


	Nine Months Ended September 30, 2019

Revenues	$	9,513
Net income (a)	$	629
Net income attributable to Vistra	$	631
Net income attributable to Vistra per weighted average share of common stock outstanding — basic	$	1.30
Net income attributable to Vistra per weighted average share of common stock outstanding — diluted	$	1.29

__________

(a) Decrease in pro forma net income compared to consolidated net income is driven by unrealized losses on hedging activities of Crius and amortization of intangible assets.

The consolidated unaudited pro forma financial information presented above includes adjustments for incremental depreciation and amortization as a result of the fair value determination of the net assets acquired and the related impacts on tax expense.

Dynegy Merger Transaction

On the Merger Date, Vistra and Dynegy completed the transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, Dynegy merged with and into Vistra, with Vistra continuing as the surviving corporation. The Merger was intended to qualify as a tax-free reorganization under the IRC, so that none of Vistra, Dynegy or any of the Dynegy stockholders would recognize any gain or loss in the transaction, except that Dynegy stockholders could recognize a gain or loss with respect to cash received in lieu of fractional shares of Vistra's common stock. Vistra is the acquirer for both federal tax and accounting purposes.

On the Merger Date, each issued and outstanding share of Dynegy common stock, par value $0.01 per share, other than shares owned by Vistra or its subsidiaries, held in treasury by Dynegy or held by a subsidiary of Dynegy, was automatically converted into 0.652 shares of common stock, par value $0.01 per share, of Vistra (the Exchange Ratio), except that cash was paid in lieu of fractional shares, which resulted in Vistra issuing 94,409,573 shares of Vistra common stock to the former Dynegy stockholders, as well as converting stock options, equity-based awards, tangible equity units and warrants. The total number of Vistra shares outstanding at the close of the Merger was 522,932,453 shares. Dynegy stock options and equity-based awards outstanding immediately prior to the Merger Date were generally automatically converted upon completion of the Merger into stock options and equity-based awards, respectively, with respect to Vistra's common stock, after giving effect to the Exchange Ratio.

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3. DEVELOPMENT OF GENERATION FACILITIES

Texas Segment Solar Generation and Energy Storage Projects

In September 2020, we announced the planned development of 668 MW of solar photovoltaic power generation facilities and 260 MW of battery ESS in Texas.

Project

Location in Texas

Technology

Capacity (MW)

Estimated Commercial Operation Date

Brightside

Live Oak County

Solar

Summer 2021

Andrews

Andrews County

Solar

100

Fall 2021

Emerald Grove

Crane County

Solar

108

Fall 2021

Upton 2 Phase III

Upton County

Solar

Fall 2021

DeCordova

Hood County

Energy Storage

260

Spring 2022

Oak Hill

Rusk County

Solar

200

Fall 2022

Forest Grove

Henderson County

Solar

200

Fall 2022

West Segment Energy Storage Projects

Oakland — In June 2019, East Bay Community Energy (EBCE) signed a ten-year contract to receive resource adequacy capacity from the planned development of a 20 MW battery ESS at our Oakland Power Plant site in California. In April 2020, the project received necessary approvals from EBCE and from Pacific Gas and Electric Company (PG&E). The contract was amended to increase the capacity of the planned development to a 36.25 MW battery ESS. In April 2020, the concurrent local area reliability service agreement to ensure grid reliability as part of the Oakland Clean Energy Initiative was signed and sent to the California Public Utilities Commission (CPUC) for approval which is expected prior to the second quarter of 2021. The battery ESS project is expected to enter commercial operations by January 2022.

Moss Landing — In June 2018, we announced that, subject to approval by the CPUC, we would enter into a 20-year resource adequacy contract with PG&E to develop a 300 MW battery ESS at our Moss Landing Power Plant site in California (Moss Landing Phase I). PG&E filed its application with the CPUC in June 2018 and the CPUC approved the resource adequacy contract in November 2018. As of September 30, 2020, we had accumulated approximately $356 million in construction work-in-process for Moss Landing Phase I. Under the contract, PG&E will pay us a fixed monthly resource adequacy payment, while we will receive the energy revenues and incur the costs from dispatching and charging the ESS. We anticipate the Moss Landing Phase I will commence commercial operations in December 2020. PG&E filed for Chapter 11 bankruptcy protection in January 2019. In November 2019, the bankruptcy court approved PG&E's motion requesting approval of the assumption of the resource adequacy contract subject to the CPUC approving the terms of an amendment to the resource adequacy contract, and the CPUC approved the terms of the amendment in January 2020. PG&E emerged from bankruptcy protection in July 2020.

In May 2020, we announced that, subject to approval by the CPUC, we would enter into a 10-year resource adequacy contract with PG&E to develop an additional 100 MW battery ESS at our Moss Landing Power Plant site (Moss Landing Phase II). PG&E filed its application with the CPUC in May 2020 and the CPUC approved the resource adequacy contract in August 2020. We anticipate Moss Landing Phase II will commence commercial operations in the third quarter of 2021.

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4. RETIREMENT OF GENERATION FACILITIES

2020 Announcements

In September 2020, we announced our intention to retire all of our remaining coal generation facilities in Illinois and Ohio and one natural gas facility in Illinois no later than year-end 2027 due to economic challenges, including incremental expenditures that would be required to comply with the CCR rule and ELG rule (see Note 12), and in furtherance of our efforts to significantly reduce our carbon footprint. Expected plant retirement expenses of $43 million, driven by severance cost, were accrued in the three months ended September 30, 2020 in operating costs of our Sunset segment. Operational results for plants with planned retirement dates are included in our Sunset segment beginning in the quarter when a retirement plan is announced. See Note 18 for discussion of impairments recorded in connection with these announcements.

Name

Location

ISO/RTO

Fuel Type

Net Generation Capacity (MW)

Expected Retirement Date (a)

Baldwin

Baldwin, IL

MISO

Coal

1,185

By the end of 2025

Joppa

Joppa, IL

MISO

Coal

802

By the end of 2025

Joppa

Joppa, IL

MISO

Natural Gas

221

By the end of 2025

Kincaid

Kincaid, IL

PJM

Coal

1,108

By the end of 2027

Miami Fort

North Bend, OH

PJM

Coal

1,020

By the end of 2027

Newton

Newton, IL

MISO/PJM

Coal

615

By the end of 2027

Zimmer

Moscow, OH

PJM

Coal

1,300

By the end of 2027

Total

6,251

____________

(a)Generation facilities may retire earlier than expected dates if economic or other conditions dictate.

2019 Announcements

In September 2019, we announced the settlement of a lawsuit alleging violations of opacity and particulate matter limits at our Edwards facility in Bartonville, Illinois. As part of the settlement, which was approved by the U.S. District Court for the Central District of Illinois in November 2019, we will retire the Edwards facility by the end of 2022 (see Note 12). In August 2019, we announced the planned retirement of four additional power plants in Illinois with a total installed nameplate generation capacity of 2,068 MW. We retired these units due to changes in the Illinois multi-pollutant standard rule (MPS rule) that require us to retire approximately 2,000 MW of generation capacity (see Note 12). In light of the provisions of the Federal Power Act and the FERC regulations thereunder, the affected subsidiaries of Vistra identified the retired units by analyzing the economics of each of our Illinois plants and designating the least economic units for retirement. Expected plant retirement expenses of $47 million, driven by severance costs, were accrued in the three months ended September 30, 2019 and were included primarily in operating costs of our Asset Closure segment. In August 2019, we remeasured our pension and OPEB plans resulting in an increase to the benefit obligation liability of $21 million, pretax other comprehensive loss of $18 million and curtailment expense of $3 million recognized as other deductions in our condensed consolidated statements of operations. The following table details the units in Illinois totaling 2,653 MW that have been or will be retired. Operational results for the four retired plants identified below are included in the Asset Closure segment, which is engaged in the decommissioning and reclamation of retired plants and mines. Operational results for the Edwards facility are included in the Sunset segment.

Name

Location

ISO/RTO

Fuel Type

Net Generation Capacity (MW)

Dates Units Retired or
Expected Retirement Date

Coffeen

Coffeen, IL

MISO

Coal

915

November 1, 2019

Duck Creek

Canton, IL

MISO

Coal

425

December 15, 2019

Havana

Havana, IL

MISO

Coal

434

November 1, 2019

Hennepin

Hennepin, IL

MISO

Coal

294

November 1, 2019

Edwards

Bartonville, IL

MISO

Coal

585

By the end of 2022

Total

2,653

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5. REVENUE

The following tables disaggregate our revenue by major source:


	Three Months Ended September 30, 2020
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations		Consolidated
Revenue from contracts with customers:
Retail energy charge in ERCOT	$	1,824	$	—	$	—	$	—	$	—	$	—	$	—	$	1,824
Retail energy charge in Northeast/Midwest	683		—		—		—		—		—		—		683


Wholesale generation revenue from ISO/RTO	—		152		78		37		139		—		—		406
Capacity revenue from ISO/RTO (b)	—		—		(25)		—		40		—		—		15
Revenue from other wholesale contracts	—		68		183		16		43		—		—		310
Total revenue from contracts with customers	2,507		220		236		53		222		—		—		3,238
Other revenues:
Intangible amortization	7		—		1		—		(4)		—		—		4
Hedging and other revenues (a)	7		253		57		30		(37)		—		—		310
Affiliate sales	—		1,118		350		1		69		—		(1,538)		—
Total other revenues	14		1,371		408		31		28		—		(1,538)		314
Total revenues	$	2,521	$	1,591	$	644	$	84	$	250	$	—	$	(1,538)	$	3,552

____________

(a)Includes $287 million of unrealized net gains from mark-to-market valuations of commodity positions. See Note 17 for unrealized net gains (losses) by segment.

(b)Represents net capacity sold (purchased) in each ISO/RTO. The East segment includes net purchases of capacity in the PJM market and the Sunset segment includes net sales of capacity in the PJM market.


	Three Months Ended September 30, 2019
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations		Consolidated
Revenue from contracts with customers:
Retail energy charge in ERCOT	$	1,600	$	—	$	—	$	—	$	—	$	—	$	—	$	1,600
Retail energy charge in Northeast/Midwest	576		—		—		—		—		—		—		576


Wholesale generation revenue from ISO/RTO	—		990		108		46		165		59		—		1,368
Capacity revenue from ISO/RTO	—		—		9		—		40		3		—		52
Revenue from other wholesale contracts	—		110		271		1		47		1		—		430
Total revenue from contracts with customers	2,176		1,100		388		47		252		63		—		4,026
Other revenues:
Intangible amortization	12		—		—		—		(4)		—		—		8
Hedging and other revenues (a)	19		(813)		(35)		48		(70)		11		—		(840)
Affiliate sales	—		444		200		—		49		—		(693)		—
Total other revenues	31		(369)		165		48		(25)		11		(693)		(832)
Total revenues	$	2,207	$	731	$	553	$	95	$	227	$	74	$	(693)	$	3,194

____________

(a)Includes $86 million of unrealized net losses from mark-to-market valuations of commodity positions. See Note 17 for unrealized net gains (losses) by segment.

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	Nine Months Ended September 30, 2020
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations		Consolidated
Revenue from contracts with customers:
Retail energy charge in ERCOT	$	4,489	$	—	$	—	$	—	$	—	$	—	$	—	$	4,489
Retail energy charge in Northeast/Midwest	1,862		—		—		—		—		—		—		1,862
Wholesale generation revenue from ISO/RTO	—		326		177		83		263		—		—		849
Capacity revenue from ISO/RTO (b)	—		—		(34)		—		124		—		—		90
Revenue from other wholesale contracts	—		183		508		40		146		—		—		877
Total revenue from contracts with customers	6,351		509		651		123		533		—		—		8,167
Other revenues:
Intangible amortization	(1)		—		1		—		(16)		—		—		(16)
Hedging and other revenues (a)	35		564		25		85		59		—		—		768
Affiliate sales	—		2,250		1,168		3		212		—		(3,633)		—
Total other revenues	34		2,814		1,194		88		255		—		(3,633)		752
Total revenues	$	6,385	$	3,323	$	1,845	$	211	$	788	$	—	$	(3,633)	$	8,919

____________

(a)Includes $418 million of unrealized net gains from mark-to-market valuations of commodity positions. See Note 17 for unrealized net gains (losses) by segment.


	Nine Months Ended September 30, 2019
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations		Consolidated
Revenue from contracts with customers:
Retail energy charge in ERCOT	$	3,716	$	—	$	—	$	—	$	—	$	—	$	—	$	3,716
Retail energy charge in Northeast/Midwest	1,239		—		—		—		—		—		—		1,239
Wholesale generation revenue from ISO/RTO	—		1,426		527		141		475		170		—		2,739
Capacity revenue from ISO/RTO	—		—		185		—		156		9		—		350
Revenue from other wholesale contracts	—		207		443		7		104		2		—		763
Total revenue from contracts with customers	4,955		1,633		1,155		148		735		181		—		8,807
Other revenues:
Intangible amortization	(7)		—		(3)		3		(13)		—		—		(20)
Hedging and other revenues (a)	66		(253)		42		108		163		36		—		162
Affiliate sales	—		1,976		839		—		208		—		(3,023)		—
Total other revenues	59		1,723		878		111		358		36		(3,023)		142
Total revenues	$	5,014	$	3,356	$	2,033	$	259	$	1,093	$	217	$	(3,023)	$	8,949

____________

(a)Includes $611 million of unrealized net gains from mark-to-market valuations of commodity positions. See Note 17 for unrealized net gains (losses) by segment.

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Performance Obligations

As of September 30, 2020, we have future performance obligations that are unsatisfied, or partially unsatisfied, relating to capacity auction volumes awarded through capacity auctions held by the ISO or RTO or contracts with customers. Therefore, an obligation exists as of the date of the results of the respective ISO or RTO capacity auction or the contract execution date. These obligations total $189 million, $828 million, $486 million, $121 million and $38 million that will be recognized, in the balance of the year ended December 31, 2020 and the years ending December 31, 2021, 2022, 2023 and 2024, respectively, and $18 million thereafter. Capacity revenues are recognized as capacity is made available to the related ISOs or RTOs or counterparties.

Accounts Receivable

The following table presents trade accounts receivable (net of allowance for uncollectible accounts) relating to both contracts with customers and other activities:


	September 30, 2020		December 31, 2019
Trade accounts receivable from contracts with customers — net	$	1,263	$	1,246
Other trade accounts receivable — net	109		119
Total trade accounts receivable — net	$	1,372	$	1,365

6. GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS AND LIABILITIES

Goodwill

The following table provides information regarding our goodwill balance. There have been no impairments of goodwill.


Balance at December 31, 2019	$	2,553
Measurement period adjustments recorded in connection with the Ambit Transaction	44
Measurement period adjustments recorded in connection with the Crius Transaction	(14)
Balance at September 30, 2020	$	2,583

At September 30, 2020, the goodwill balance of $2.583 billion consisted of the following:

•$1.907 billion arose in connection with our application of fresh start reporting at Emergence and was allocated entirely to our Retail reporting unit. Of the goodwill recorded at Emergence, $1.686 billion is deductible for tax purposes over 15 years on a straight-line basis.

•$175 million arose in connection with the Merger, of which $122 million was allocated to our ERCOT Generation reporting unit and $53 million was allocated to our Retail reporting unit. None of the goodwill related to the Merger is deductible for tax purposes.

•$243 million of goodwill arose in connection with the Crius Transaction and was allocated entirely to our Retail reporting unit. None of the goodwill related to the Crius Transaction is deductible for tax purposes.

•$258 million of goodwill arose in connection with the Ambit Transaction and was allocated entirely to our Retail reporting unit. The goodwill related to the Ambit Transaction is deductible for tax purposes over 15 years on a straight-line basis.

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Identifiable Intangible Assets and Liabilities

Identifiable intangible assets are comprised of the following:


	September 30, 2020						December 31, 2019
Identifiable Intangible Asset	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Retail customer relationship	$	2,069	$	1,365	$	704	$	2,078	$	1,151	$	927
Software and other technology-related assets	392		170		222		341		125		216
Retail and wholesale contracts	272		194		78		315		182		133
Contractual service agreements (a)	55		2		53		59		5		54
Other identifiable intangible assets (b)	49		17		32		40		15		25
Total identifiable intangible assets subject to amortization	$	2,837	$	1,748	1,089		$	2,833	$	1,478	1,355
Retail trade names (not subject to amortization)					1,374						1,391
Mineral interests (not currently subject to amortization)					1						2
Total identifiable intangible assets					$	2,464					$	2,748

____________

(a)At September 30, 2020, amounts related to contractual service agreements that have become liabilities due to amortization of the economic impacts of the intangibles have been removed from both the gross carrying amount and accumulated amortization.

(b)Includes mining development costs and environmental allowances (emissions allowances and renewable energy certificates).

Identifiable intangible liabilities are comprised of the following:


Identifiable Intangible Liability	September 30, 2020		December 31, 2019
Contractual service agreements	$	127	$	110
Purchase and sale of power and capacity	90		100
Fuel and transportation purchase contracts	74		76
Total identifiable intangible liabilities	$	291	$	286

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Expense related to finite-lived identifiable intangible assets and liabilities (including the classification in the condensed consolidated statements of operations) consisted of:


Identifiable Intangible Assets and Liabilities	Condensed Consolidated Statements of Operations	Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019
Retail customer relationship	Depreciation and amortization	$	62	$	82	$	214	$	193
Software and other technology-related assets	Depreciation and amortization	19		16		56		45
Retail and wholesale contracts/purchase and sale/fuel and transportation contracts	Operating revenues/fuel, purchased power costs and delivery fees	(4)		(9)		11		14
Other identifiable intangible assets	Operating revenues/fuel, purchased power costs and delivery fees/depreciation and amortization	66		76		162		116
Total intangible asset expense (a)		$	143	$	165	$	443	$	368

____________

(a)Amounts recorded in depreciation and amortization totaled $82 million and $99 million for the three months ended September 30, 2020 and 2019, respectively, and $272 million and $240 million for the nine months ended September 30, 2020 and 2019, respectively. Amounts exclude contractual services agreements. Amounts include all expenses associated with environmental allowances including expenses accrued to comply with emissions allowance programs and renewable portfolio standards which are presented in fuel, purchased power costs and delivery fees on our condensed consolidated statements of operations. Emissions allowance obligations are accrued as associated electricity is generated and renewable energy certificate obligations are accrued as retail electricity delivery occurs.

Estimated Amortization of Identifiable Intangible Assets and Liabilities

As of September 30, 2020, the estimated aggregate amortization expense of identifiable intangible assets and liabilities for each of the next five fiscal years is as shown below.


Year	Estimated Amortization Expense
2020	$	371
2021	$	263
2022	$	170
2023	$	126
2024	$	80

7. INCOME TAXES

Income Tax Expense

The calculation of our effective tax rate is as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Income before income taxes	$	641		$	159		$	934		$	962
Income tax expense	$	(199)		$	(45)		$	(283)		$	(270)
Effective tax rate	31.0		%	28.3		%	30.3		%	28.1		%

For the three months ended September 30, 2020, the effective tax rate of 31.0% was higher than the U.S. federal statutory rate of 21% due primarily to nondeductible impacts of the TRA and state income taxes, including the impact of an increase in the valuation allowance on a portion of state net operating losses. For the nine months ended September 30, 2020, the effective tax rate of 30.3% was higher than the U.S. federal statutory rate of 21% due primarily to nondeductible impacts of the TRA and state income taxes.

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For the three months ended September 30, 2019, the effective tax rate of 28.3% was higher than the U.S. federal statutory rate of 21% due primarily to nondeductible impacts of the TRA and state income taxes. For the nine months ended September 30, 2019, the effective tax rate of 28.1% was higher than the U.S. federal statutory rate of 21% due primarily to state income taxes, including the impact of a valuation allowance on a portion of the State of Illinois net operating loss.

Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Final Section 163(j) Regulations

In response to the global pandemic related to COVID-19, the President signed into law the CARES Act on March 27, 2020. The CARES Act provides numerous relief provisions for corporate taxpayers, including modification of the utilization limitations on net operating losses, favorable expansion of the deduction for business interest expense under IRC Section 163(j) (Section 163(j)), the ability to accelerate timing of refundable alternative minimum tax (AMT) credits and the temporary suspension of certain payment requirements for the employer portion of social security taxes. Additionally, the final Section 163(j) regulations were issued in July 2020 and provided a critical correction to the proposed regulations with respect to the computation of adjusted taxable income. Vistra continues to expect to receive approximately $64 million in 2020 relating to the acceleration of AMT refunds and an approximate $350 million increase in interest expense deduction over the 2019 and 2020 tax years under the cumulative impact of these final laws and regulation pertaining to Section 163(j). Additionally, Vistra expects to receive an approximate $250 million increase in interest expense deduction in the 2021 tax year under the final Section 163(j) regulations. We do not anticipate a material impact to the effective tax rate from these impacts. Vistra is also utilizing the CARES Act payroll deferral mechanism to defer the payment of approximately $21 million from 2020 to 2021.

Liability for Uncertain Tax Positions

Vistra and its subsidiaries file income tax returns in U.S. federal and state jurisdictions and are expected to be subject to examinations by the IRS and other taxing authorities. Vistra is not currently under audit by the IRS for any period. Crius is currently under audit by the IRS for the tax years 2015, 2016 and 2017. Uncertain tax positions totaled $36 million and $126 million at September 30, 2020 and December 31, 2019, respectively. The final regulations under Section 163(j) were released in July 2020, and we have adjusted deferred tax assets and liabilities by $87 million in the three months ended September 30, 2020.

8. TAX RECEIVABLE AGREEMENT OBLIGATION

On the Effective Date, Vistra entered into a tax receivable agreement (the TRA) with a transfer agent on behalf of certain former first-lien creditors of TCEH. The TRA generally provides for the payment by us to holders of TRA Rights of 85% of the amount of cash savings, if any, in U.S. federal and state income tax that we realize in periods after Emergence as a result of (a) certain transactions consummated pursuant to the Plan of Reorganization (including the step-up in tax basis in our assets resulting from the PrefCo Preferred Stock Sale), (b) the tax basis of all assets acquired in connection with the acquisition of two CCGT natural gas-fueled generation facilities in April 2016 and (c) tax benefits related to imputed interest deemed to be paid by us as a result of payments under the TRA, plus interest accruing from the due date of the applicable tax return.

Pursuant to the TRA, we issued the TRA Rights for the benefit of the first-lien secured creditors of TCEH entitled to receive such TRA Rights under the Plan of Reorganization. Such TRA Rights are entitled to certain registration rights more fully described in the Registration Rights Agreement (see Note 16).

The following table summarizes the changes to the TRA obligation, reported as other current liabilities and Tax Receivable Agreement obligation in our condensed consolidated balance sheets, for the nine months ended September 30, 2020 and 2019:


	Nine Months Ended September 30,
	2020		2019
TRA obligation at the beginning of the period	$	455	$	420
Accretion expense	50		45
Changes in tax assumptions impacting timing of payments (a)	(94)		(19)
Impacts of Tax Receivable Agreement	(44)		26

TRA obligation at the end of the period	411		446
Less amounts due currently	—		(3)
TRA obligation at the end of the period (noncurrent)	$	411	$	443

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(a)During the three and nine months ended September 30, 2020, we recorded decreases to the carrying value of the TRA obligation totaling $74 million and $94 million, respectively, as a result of adjustments to forecasted taxable income, including the impacts of the CARES Act, changes to the Section 163(j) percentage limitation amount, the impacts from the issuance of final Section 163(j) regulations and the anticipated tax benefits from renewable development projects. During the three and nine months ended September 30, 2019, we recorded an increase of $48 million and a decrease of $19 million, respectively, to the carrying value of the TRA obligation as a result of adjustments to the timing of forecasted taxable income and state apportionment due to the expansion of Vistra's state income tax profile, including the Dynegy and Crius acquisitions.

As of September 30, 2020, the estimated carrying value of the TRA obligation totaled $411 million, which represents the discounted amount of projected payments under the TRA. The projected payments are based on certain assumptions, including but not limited to (a) the federal corporate income tax rate of 21%, (b) estimates of our taxable income in the current and future years and (c) additional states that Vistra now operates in, including the relevant tax rate and apportionment factor for each state. Our taxable income takes into consideration the current federal tax code, various relevant state tax laws and reflects our current estimates of future results of the business. These assumptions are subject to change, and those changes could have a material impact on the carrying value of the TRA obligation. As of September 30, 2020, the aggregate amount of undiscounted federal and state payments under the TRA is estimated to be approximately $1.4 billion, with more than half of such amount expected to be paid during the next 15 years, and the final payment expected to be made around the year 2056 (if the TRA is not terminated earlier pursuant to its terms).

The carrying value of the obligation is being accreted to the amount of the gross expected obligation using the effective interest method. Changes in the amount of this obligation resulting from changes to either the timing or amount of TRA payments are recognized in the period of change and measured using the discount rate inherent in the initial fair value of the obligation.

9. EARNINGS PER SHARE

Basic earnings per share available to common stockholders are based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the treasury stock method and includes the effect of all potential issuances of common shares under stock-based incentive compensation arrangements.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income attributable to common stock — basic	$	443	$	113	$	665	$	694
Weighted average shares of common stock outstanding — basic	488,824,580		490,562,179		488,484,441		486,215,356
Net income per weighted average share of common stock outstanding — basic	$	0.91	$	0.23	$	1.36	$	1.43
Dilutive securities: Stock-based incentive compensation plan	2,201,360		3,108,116		2,430,037		4,011,387
Weighted average shares of common stock outstanding — diluted	491,025,940		493,670,295		490,914,478		490,226,743
Net income per weighted average share of common stock outstanding — diluted	$	0.90	$	0.23	$	1.35	$	1.42

Stock-based incentive compensation plan awards excluded from the calculation of diluted earnings per share because the effect would have been antidilutive totaled 13,778,275 and 7,145,662 for the three months ended September 30, 2020 and 2019, respectively, and 12,471,806 and 7,104,523 shares for the nine months ended September 30, 2020 and 2019, respectively.

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10. ACCOUNTS RECEIVABLE FINANCING

Accounts Receivable Securitization Program

TXU Energy Receivables Company LLC (RecCo), an indirect subsidiary of Vistra, has an accounts receivable financing facility (Receivables Facility) provided by issuers of asset-backed commercial paper and commercial banks (Purchasers). The Receivables Facility was renewed in July 2020, extending the term of the Receivables Facility from July 2020 to July 2021, with the ability to borrow $550 million beginning with the settlement date in July 2020 until the settlement date in August 2020, $625 million from the settlement date in August 2020 until the settlement date in November 2020, $550 million from the settlement date in November 2020 until the settlement date in December 2020 and $450 million thereafter for the remaining term of the Receivables Facility.

Under the Receivables Facility, TXU Energy and Dynegy Energy Services are obligated to sell or contribute, on an ongoing basis and without recourse, their accounts receivable to TXU Energy's special purpose subsidiary, RecCo, a consolidated, wholly owned, bankruptcy-remote, direct subsidiary of TXU Energy. RecCo, in turn, is subject to certain conditions, and may, from time to time, sell an undivided interest in all the receivables acquired from TXU Energy and Dynegy Energy Services to the Purchasers, and its assets and credit are not available to satisfy the debts and obligations of any person, including affiliates of RecCo. Amounts funded by the Purchasers to RecCo are reflected as short-term borrowings on the condensed consolidated balance sheets. Proceeds and repayments under the Receivables Facility are reflected as cash flows from financing activities in our condensed consolidated statements of cash flows. Receivables transferred to the Purchasers remain on Vistra's balance sheet and Vistra reflects a liability equal to the amount advanced by the Purchasers. The Company records interest expense on amounts advanced. TXU Energy continues to service, administer and collect the trade receivables on behalf of RecCo and the Purchasers, as applicable.

As of September 30, 2020, outstanding borrowings under the Receivables Facility totaled $625 million and were supported by $717 million of RecCo gross receivables. As of December 31, 2019, outstanding borrowings under the Receivables Facility totaled $450 million and were supported by $629 million of RecCo gross receivables.

Repurchase Facility

In October 2020, TXU Energy and the other originators under the Receivables Facility entered into a $125 million repurchase facility (Repurchase Facility) that is provided on an uncommitted basis by a commercial bank as buyer (Buyer). The Repurchase Facility is collateralized by a subordinated note (Subordinated Note) issued by RecCo in favor of TXU Energy for the benefit of originators under the Receivables Facility and representing a portion of the outstanding balance of the receivables sold by the originators to RecCo under the Receivables Facility. Under the Repurchase Facility, TXU Energy may request that Buyer transfer funds to TXU Energy in exchange for a transfer of the Subordinated Note, with a simultaneous agreement by TXU Energy to transfer funds to Buyer at a date certain or on demand in exchange for the return of the Subordinated Note (collectively, the Transactions). Each Transaction is expected to have a term of one month, unless terminated earlier on demand by TXU Energy or terminated by Buyer after an event of default.

TXU Energy has granted Buyer a first-priority security interest in the Subordinated Note to secure its obligations under the agreements governing the Repurchase Facility, and Vistra Operations has agreed to guarantee the obligations under the agreements governing the Repurchase Facility. Unless terminated early, the Repurchase Facility will terminate concurrently with the termination of the Receivables Facility.

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11. LONG-TERM DEBT

Amounts in the table below represent the categories of long-term debt obligations incurred by the Company.


	September 30, 2020		December 31, 2019
Vistra Operations Credit Facilities	$	2,579	$	2,700
Vistra Operations Senior Secured Notes:
3.550% Senior Secured Notes, due July 15, 2024	1,500		1,500
3.700% Senior Secured Notes, due January 30, 2027	800		800
4.300% Senior Secured Notes, due July 15, 2029	800		800
Total Vistra Operations Senior Secured Notes	3,100		3,100
Vistra Operations Senior Unsecured Notes:
5.500% Senior Unsecured Notes, due September 1, 2026	1,000		1,000
5.625% Senior Unsecured Notes, due February 15, 2027	1,300		1,300
5.000% Senior Unsecured Notes, due July 31, 2027	1,300		1,300
Total Vistra Operations Senior Unsecured Notes	3,600		3,600
Vistra Senior Unsecured Notes:
5.875% Senior Unsecured Notes, due June 1, 2023	—		500
8.000% Senior Unsecured Notes, due January 15, 2025	—		81
8.125% Senior Unsecured Notes, due January 30, 2026	—		166
Total Vistra Senior Unsecured Notes	—		747
Other:
Forward Capacity Agreements	73		161
Equipment Financing Agreements	88		99
8.82% Building Financing due semiannually through February 11, 2022 (a)	10		15
Other	3		12
Total other long-term debt	174		287
Unamortized debt premiums, discounts and issuance costs (b)	(73)		(55)
Total long-term debt including amounts due currently	9,380		10,379
Less amounts due currently	(127)		(277)
Total long-term debt less amounts due currently	$	9,253	$	10,102

____________

(a)Obligation related to a corporate office space finance lease. This obligation will be funded by amounts held in an escrow account that is reflected in other noncurrent assets in our condensed consolidated balance sheets.

(b)Includes impact of recording debt assumed in the Merger at fair value.

Vistra Operations Credit Facilities

At September 30, 2020, the Vistra Operations Credit Facilities consisted of up to $5.304 billion in senior secured, first-lien revolving credit commitments and outstanding term loans, which consisted of revolving credit commitments of up to $2.725 billion, including a $2.35 billion letter of credit sub-facility (Revolving Credit Facility) and term loans of $2.579 billion (Term Loan B-3 Facility).

In March 2020, Vistra Operations repurchased $100 million principal amount of Term Loan B-3 Facility borrowings at a weighted average price of $93.875 and cancelled them. We recorded an extinguishment gain of $6 million on the transaction in the nine months ended September 30, 2020.

During the nine months ended September 30, 2020, we borrowed $1.075 billion and repaid $1.425 billion under the Revolving Credit Facility, with proceeds from the borrowings used for general corporate purposes.

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In June 2019, Vistra Operations used the net proceeds from the June 2019 Senior Secured Notes Offerings (described below) to repay $889 million under the Term Loan B-1 Facility, the entire amount outstanding of $977 million under Term Loan B-2 Facility (and together with the Term Loan B-1 Facility and the Term Loan B-3 Facility, the Term Loan B Facility) and $134 million under the Term Loan B-3 Facility. We recorded an extinguishment loss of $4 million on the transactions in the nine months ended September 30, 2019.

In March 2019 and May 2019 the Vistra Operations Credit Facilities were amended whereby we obtained $225 million of incremental Revolving Credit Facility commitments. The letter of credit sub-facility was also increased by $50 million. Fees and expenses related to the amendments to the Vistra Operations Credit Facilities totaled $2 million for the nine months ended September 30, 2019, which were capitalized as a noncurrent asset.

The Vistra Operations Credit Facilities and related available capacity at September 30, 2020 are presented below.


		September 30, 2020
Vistra Operations Credit Facilities	Maturity Date	Facility Limit		Cash Borrowings		Available Capacity
Revolving Credit Facility (a)	June 14, 2023	$	2,725	$	—	$	2,057
Term Loan B-3 Facility	December 31, 2025	2,579		2,579		—
Total Vistra Operations Credit Facilities		$	5,304	$	2,579	$	2,057

___________

(a)Revolving Credit Facility to be used for general corporate purposes. The Facility includes a $2.35 billion letter of credit sub-facility, of which $668 million of letters of credit were outstanding at September 30, 2020 and which reduce our available capacity. Cash borrowings under the Revolving Credit Facility are reported in short-term borrowings in our condensed consolidated balance sheets.

At September 30, 2020, cash borrowings under the Revolving Credit Facility bear interest based on applicable LIBOR rates, plus a fixed spread of 1.75%, and there were no outstanding borrowings. Letters of credit issued under the Revolving Credit Facility bear interest of 1.75%. Amounts borrowed under the Term Loan B-3 Facility bears interest based on applicable LIBOR rates plus fixed spreads of 1.75%. At September 30, 2020, the weighted average interest rates before taking into consideration interest rate swaps on outstanding borrowings was 1.90% under the Term Loan B-3 Facility. The Vistra Operations Credit Facilities also provide for certain additional fees payable to the agents and lenders, including fronting fees with respect to outstanding letters of credit and availability fees payable with respect to any unused portion of the available Revolving Credit Facility.

Obligations under the Vistra Operations Credit Facilities are secured by a lien covering substantially all of Vistra Operations' (and its subsidiaries') consolidated assets, rights and properties, subject to certain exceptions set forth in the Vistra Operations Credit Facilities, provided that the amount of loans outstanding under the Vistra Operations Credit Facilities that may be secured by a lien covering certain principal properties of the Company is expressly limited by the terms of the Vistra Operations Credit Facilities.

The Vistra Operations Credit Facilities also permit certain hedging agreements to be secured on a pari-passu basis with the Vistra Operations Credit Facilities in the event those hedging agreements met certain criteria set forth in the Vistra Operations Credit Facilities.

The Vistra Operations Credit Facilities provide for affirmative and negative covenants applicable to Vistra Operations (and its restricted subsidiaries), including affirmative covenants requiring it to provide financial and other information to the agents under the Vistra Operations Credit Facilities and to not change its lines of business, and negative covenants restricting Vistra Operations' (and its restricted subsidiaries') ability to incur additional indebtedness, make investments, dispose of assets, pay dividends, grant liens or take certain other actions, in each case, except as permitted in the Vistra Operations Credit Facilities. Vistra Operations' ability to borrow under the Vistra Operations Credit Facilities is subject to the satisfaction of certain customary conditions precedent set forth therein.

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The Vistra Operations Credit Facilities provide for certain customary events of default, including events of default resulting from non-payment of principal, interest or fees when due, material breaches of representations and warranties, material breaches of covenants in the Vistra Operations Credit Facilities or ancillary loan documents, cross-defaults under other agreements or instruments and the entry of material judgments against Vistra Operations. Solely with respect to the Revolving Credit Facility, and solely during a compliance period (which, in general, is applicable when the aggregate revolving borrowings and issued revolving letters of credit (in excess of $300 million) exceed 30% of the revolving commitments), the agreement includes a covenant that requires the consolidated first lien net leverage ratio, which is based on the ratio of net first-lien debt compared to an EBITDA calculation defined under the terms of the Vistra Operations Credit Facilities, not to exceed 4.25 to 1.00. Although the period ended September 30, 2020 was not a compliance period, we would have been in compliance with this financial covenant if it was required to be tested at such time. Upon the existence of an event of default, the Vistra Operations Credit Facilities provide that all principal, interest and other amounts due thereunder will become immediately due and payable, either automatically or at the election of specified lenders.

Interest Rate Swaps — Vistra employs interest rate swaps to hedge our exposure to variable rate debt. As of September 30, 2020, Vistra has entered into the following series of interest rate swap transactions.


	Notional Amount	Expiration Date	Rate Range
Swapped to fixed	$3,000	July 2023	3.67	%	-	3.91%
Swapped to variable	$700	July 2023	3.20	%	-	3.23%
Swapped to fixed	$720	February 2024	3.71	%	-	3.72%
Swapped to variable	$720	February 2024	3.20	%	-	3.20%
Swapped to fixed (a)	$3,000	July 2026	4.72	%	-	4.79%
Swapped to variable (a)	$700	July 2026	3.28	%	-	3.33%

____________

(a)Effective from July 2023 through July 2026.

During 2019, Vistra entered into $2.12 billion of new interest rate swaps, pursuant to which Vistra will pay a variable rate and receive a fixed rate. The terms of these new swaps were matched against the terms of certain existing swaps, effectively offsetting the hedge of the existing swaps and fixing the out-of-the-money position of such swaps. These matched swaps will settle over time, in accordance with the original contractual terms. The remaining existing swaps continue to hedge our exposure on $2.30 billion of debt through July 2026.

Secured Letter of Credit Facilities

In August and September 2020, Vistra entered into four uncommitted 364-day standby letter of credit facilities (Secured LOC Facilities) that are each secured by a first lien on all of Vistra Operations' assets (which ranks pari passu with the Vistra Operations Credit Facilities). At September 30, 2020, $166 million of letters of credit were outstanding under the Secured LOC Facilities.

Alternate Letter of Credit Facilities

Two alternate letter of credit facilities (each, an Alternative LOC Facility, and collectively, the Alternate LOC Facilities) with an aggregate facility limit of $500 million became effective in the year ended December 31, 2019. At September 30, 2020, $500 million of letters of credit were outstanding under the Alternate LOC Facilities. Of the total facility limit, $250 million matures in December 2020 and $250 million matures in December 2021.

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Vistra Operations Senior Secured Notes

In the nine months ended September 30, 2019, Vistra Operations issued and sold $2.0 billion aggregate principal amount of senior secured notes (June 2019 Senior Secured Notes) in offerings to eligible purchasers under Rule 144A and Regulation S under the Securities Act (June 2019 Senior Secured Notes Offerings) consisting of the following:


Senior Secured Notes	Maturity Year	Interest Terms (Due Semiannually in Arrears)	June 2019 Senior Secured Notes Offerings (a)
3.550% Senior Secured Notes	2024	January 15 and July 15	$	1,200

4.300% Senior Secured Notes	2029	January 15 and July 15	800
Total senior secured notes			$	2,000
Net proceeds			$	1,976
Debt issuance and other fees (b)			$	20

___________

(a)The June 2019 Senior Secured Notes were sold pursuant to a purchase agreement by and among Vistra Operations, certain direct and indirect subsidiaries of Vistra Operations and Citigroup Global Markets Inc., as representative of the several initial purchasers. Net proceeds, together with cash on hand, were used to prepay certain amounts outstanding and accrued interest (together with fees and expenses) under the Vistra Operations Credit Facility's Term Loan B Facility.

(b)Capitalized as a reduction in the carrying amount of the debt.

The indenture (as may be amended or supplemented from time to time, the Vistra Operations Senior Secured Indenture) governing the June 2019 Senior Secured Notes and the 3.700% senior secured notes due 2027 (collectively, the Senior Secured Notes) provides for the full and unconditional guarantee by certain of Vistra Operations' current and future subsidiaries that also guarantee the Vistra Operations Credit Facilities. The Senior Secured Notes are secured by a first-priority security interest in the same collateral that is pledged for the benefit of the lenders under the Vistra Operations Credit Facilities, which consists of a substantial portion of the property, assets and rights owned by Vistra Operations and certain direct and indirect subsidiaries of Vistra Operations as subsidiary guarantors (collectively, the Guarantor Subsidiaries) as well as the stock of Vistra Operations held by Vistra Intermediate. The collateral securing the Senior Secured Notes will be released if Vistra Operations' senior, unsecured long-term debt securities obtain an investment grade rating from two out of the three rating agencies, subject to reversion if such rating agencies withdraw the investment grade rating of Vistra Operations' senior, unsecured long-term debt securities or downgrade such rating below investment grade. The Vistra Operations Senior Secured Indenture contains certain covenants and restrictions, including, among others, restrictions on the ability of Vistra Operations and its subsidiaries, as applicable, to create certain liens, merge or consolidate with another entity, and sell all or substantially all of their assets.

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Vistra Operations Senior Unsecured Notes

In the nine months ended September 30, 2019, Vistra Operations issued and sold $2.6 billion aggregate principal amount of senior unsecured notes in offerings (the February 2019 Senior Unsecured Notes Offering and the June 2019 Senior Unsecured Notes Offering) to eligible purchasers under Rule 144A and Regulation S under the Securities Act consisting of the following:


Senior Unsecured Notes	Maturity Year	Interest Terms (Due Semiannually in Arrears)	February 2019 Senior Unsecured Notes Offering (a)		June 2019 Senior Unsecured Notes Offering (b)

5.625% Senior Unsecured Notes	2027	February 15 and August 15	1,300		—
5.000% Senior Unsecured Notes	2027	January 31 and July 31	—		1,300
Total			$	1,300	$	1,300
Net Proceeds			$	1,287	$	1,287
Debt issuance and other fees (c)			$	16	$	13

___________

(a)The 5.625% senior unsecured notes due 2027 (the February 2019 Senior Unsecured Notes) were sold pursuant to a purchase agreement by and among Vistra Operations, the Guarantor Subsidiaries and J.P. Morgan Securities LLC, as representative of the several initial purchasers. Net proceeds, together with cash on hand, were used to pay the purchase price and accrued interest (together with fees and expenses) required in connection with (i) the February 2019 Tender Offer (defined below) and (ii) the redemption of approximately $35 million aggregate principal amount of our 7.375% senior unsecured notes due 2022 (7.375% senior notes) and approximately $25 million aggregate principal amount of our outstanding 8.034% senior unsecured notes due 2024 (8.034% senior notes).

(b)The 5.000% senior unsecured notes due 2027 (the June 2019 Senior Unsecured Notes) were sold pursuant to a purchase agreement by and among Vistra Operations, the Guarantor Subsidiaries and Goldman Sachs & Co. LLC, as representative of the several initial purchasers. Net proceeds, together with cash on hand, were used to pay the purchase price and accrued interest (together with fees and expenses) required in connection with (i) the June 2019 Tender Offer (defined below) and (ii) the redemption of approximately $306 million of our outstanding 7.375% senior notes and approximately $87 million of our 7.625% senior unsecured notes due 2024 (7.625% senior notes) in July 2019. We recorded an extinguishment gain of $2 million on the redemptions in the nine months ended September 30, 2019.

(c)Capitalized as a reduction in the carrying amount of the debt.

The indentures governing the June 2019 Senior Unsecured Notes, the February 2019 Senior Unsecured Notes and the 5.500% senior unsecured notes due 2026 (collectively, as each may be amended or supplemented from time to time, the Vistra Operations Senior Unsecured Indentures) provide for the full and unconditional guarantee by the Guarantor Subsidiaries of the punctual payment of the principal and interest on such notes. The Vistra Operations Senior Unsecured Indentures contain certain covenants and restrictions, including, among others, restrictions on the ability of Vistra Operations and its subsidiaries, as applicable, to create certain liens, merge or consolidate with another entity, and sell all or substantially all of their assets.

Debt Repurchase Program

In November 2018, our board of directors (the Board) authorized a bond repurchase program under which up to $200 million principal amount of outstanding Vistra Senior Unsecured Notes could be repurchased. In July 2019, the Board authorized up to $1.0 billion to repay or repurchase any outstanding debt of the Company (or its subsidiaries), with that authority superseding the remaining availability under the $200 million bond repurchase program. Through April 2020, $684 million amount of debt had been repurchased under the $1.0 billion July 2019 authorization, including the repurchase of $100 million principal amount of Term Loan B-3 Facility borrowings discussed above and the redemption of $81 million aggregate principal amount outstanding of 8.000% senior unsecured notes due 2025 (8.000% senior notes) discussed below. In April 2020, the Board authorized up to $1.0 billion to repay or repurchase additional outstanding debt, with this new authority superseding and replacing the $316 million of availability under the previously authorized $1.0 billion debt repurchase program. Through September 30, 2020, approximately $666 million had been repurchased under the $1.0 billion April 2020 authorization, consisting of the redemption of the Vistra 5.875% senior unsecured notes due 2023 (5.875% senior notes) and the redemption of the Vistra 8.125% senior unsecured notes due 2026 (8.125% senior notes), each as described below.

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Vistra Senior Unsecured Notes

July 2020 Redemption — In July 2020, Vistra redeemed the entire $166 million aggregate principal amount of 8.125% senior notes, at a redemption price equal to 104.063% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of redemption (July 2020 Redemption). We recorded an extinguishment gain of $6 million on the transaction in the nine months ended September 30, 2020. Following the July 2020 Redemption, Vistra had no outstanding senior notes at the Parent level.

June 2020 Redemption — In June 2020, Vistra redeemed the entire $500 million aggregate principal amount outstanding of 5.875% senior notes at a redemption price equal to 100.979% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of redemption (the June 2020 Redemption). We recorded an extinguishment gain of $3 million on the transaction in the nine months ended September 30, 2020.

January 2020 Redemption — In January 2020, Vistra redeemed the entire $81 million aggregate principal amount outstanding of 8.000% senior notes at a redemption price equal to 104.0% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of redemption (January 2020 Redemption, and together with the June 2020 Redemption and the July 2020 Redemption, the Redemptions). We recorded an extinguishment gain of $2 million on the transaction in the nine months ended September 30, 2020.

June 2019 Tender Offer — In June 2019, Vistra used the net proceeds from the June 2019 Senior Unsecured Notes Offering to fund a cash tender offer (June 2019 Tender Offer) to purchase for cash $845 million aggregate principal amount of certain notes assumed in the Merger, including $173 million of 7.375% senior notes and $672 million of 7.625% senior notes. We recorded an extinguishment gain of $7 million on the transactions in the nine months ended September 30, 2019. In July 2019, Vistra accepted and settled an additional approximately $1 million aggregate principal amount of outstanding 7.625% senior notes that were tendered after the early tender date of the June 2019 Tender Offer.

February 2019 Tender Offer and Consent Solicitation — In February 2019, Vistra used the net proceeds from the February 2019 Senior Unsecured Notes Offering to fund a cash tender offer (February 2019 Tender Offer, and together with the June 2019 Tender Offer, the Tender Offers) to purchase for cash $1.193 billion aggregate principal amount of 7.375% senior notes assumed in the Merger. We recorded an extinguishment gain of $7 million on the transactions in the nine months ended September 30, 2019.

In connection with the February 2019 Tender Offer, Vistra also commenced a solicitation of consents from holders of the 7.375% senior notes. Vistra received the requisite consents from the holders of the 7.375% senior notes and amended the indenture governing these senior notes to, among other things, eliminate substantially all of the restrictive covenants and certain events of default.

Other Long-Term Debt

Forward Capacity Agreements — On the Merger Date, the Company assumed the obligation of Dynegy's agreements under which a portion of the PJM capacity that cleared for Planning Years 2018-2019, 2019-2020 and 2020-2021 was sold to a financial institution (Forward Capacity Agreements). The buyer in this transaction will receive capacity payments from PJM during the Planning Years 2020-2021 in the amount of $73 million. We will continue to be subject to the performance obligations as well as any associated performance penalties and bonus payments for those planning years. As a result, this transaction is accounted for as long-term debt with an implied interest rate of 1.71%.

Equipment Financing Agreements — On the Merger Date, the Company assumed Dynegy's Equipment Financing Agreements. Under certain of our contractual service agreements in which we receive maintenance and capital improvements for our gas-fueled generation fleet, we have obtained parts and equipment intended to increase the output, efficiency and availability of our generation units. We financed these parts and equipment under agreements with maturities ranging from 2020 to 2026.

Letter of Credit Obligations Assumed in Ambit Transaction — At September 30, 2020, approximately $2 million of letters of credit were outstanding under legacy Ambit agreements, all of which are collateralized with cash and recorded as restricted cash in the condensed consolidated balance sheets.

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Debt Assumed in Crius Transaction — On the Crius Acquisition Date, Vistra assumed $140 million in long-term debt obligations in connection with the Crius Transaction. In July 2019, borrowings of $88 million under the legacy Crius credit facility were repaid using cash on hand. In November 2019, (i) borrowings of approximately $38 million under the 2025 promissory notes were repaid using cash on hand and (ii) borrowings of approximately $2 million were offset by legacy indemnification obligations of the holders of the 2025 promissory notes. In November 2019, borrowings of $8 million under the Connecticut Department of Economic and Community Development term loans were repaid using cash on hand.

Maturities

Long-term debt maturities at September 30, 2020 are as follows:


	September 30, 2020
Remainder of 2020	$	55
2021	98
2022	44
2023	40
2024	1,540
Thereafter	7,676
Unamortized premiums, discounts and debt issuance costs	(73)
Total long-term debt, including amounts due currently	$	9,380

12. COMMITMENTS AND CONTINGENCIES

Guarantees

We have entered into contracts that contain guarantees to unaffiliated parties that could require performance or payment under certain conditions. As of September 30, 2020, there are no material outstanding claims related to our guarantee obligations, and we do not anticipate we will be required to make any material payments under these guarantees in the near term.

Letters of Credit

At September 30, 2020, we had outstanding letters of credit totaling $1.336 billion as follows:

•$1.034 billion to support commodity risk management collateral requirements in the normal course of business, including over-the-counter and exchange-traded transactions and collateral postings with ISOs or RTOs;

•$103 million to support battery and solar development projects;

•$38 million to support executory contracts and insurance agreements;

•$98 million to support our REP financial requirements with the PUCT, and

•$63 million for other credit support requirements.

Surety Bonds

At September 30, 2020, we had outstanding surety bonds totaling $99 million to support performance under various contracts and legal obligations in the normal course of business.

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Litigation and Regulatory Proceedings

Our material legal proceedings and regulatory proceedings affecting our business are described below. We believe that we have valid defenses to the legal proceedings described below and intend to defend them vigorously. We also intend to participate in the regulatory processes described below. We record reserves for estimated losses related to these matters when information available indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. As applicable, we have established an adequate reserve for the matters discussed below. In addition, legal costs are expensed as incurred. Management has assessed each of the following legal matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought, and the probability of success. Unless specified below, we are unable to predict the outcome of these matters or reasonably estimate the scope or amount of any associated costs and potential liabilities, but they could have a material impact on our results of operations, liquidity, or financial condition. As additional information becomes available, we adjust our assessment and estimates of such contingencies accordingly. Because litigation and rulemaking proceedings are subject to inherent uncertainties and unfavorable rulings or developments, it is possible that the ultimate resolution of these matters could be at amounts that are different from our currently recorded reserves and that such differences could be material.

Gas Index Pricing Litigation — We, through our subsidiaries, and other companies are named as defendants in several lawsuits claiming damages resulting from alleged price manipulation through false reporting of natural gas prices to various index publications, wash trading and churn trading from 2000-2002. The plaintiffs in these cases allege that the defendants engaged in an antitrust conspiracy to inflate natural gas prices during the relevant time period and seek damages under the respective state antitrust statutes. We remain as defendants in two consolidated putative class actions (Wisconsin) and one individual action (Kansas) both pending in federal court in those states.

Wood River Rail Dispute — In November 2017, Dynegy Midwest Generation, LLC (DMG) received notification that BNSF Railway Company and Norfolk Southern Railway Company were initiating dispute resolution related to DMG's suspension of its Wood River Rail Transportation Agreement with the railroads. Settlement discussions required under the dispute resolution process have been unsuccessful. In March 2018, BNSF Railway Company (BNSF) and Norfolk Southern Railway Company (NS) filed a demand for arbitration and an arbitration hearing is currently scheduled for March 2021.

Coffeen and Duck Creek Rail Disputes — In April 2020, IPH, LLC (IPH) received notification that BNSF and NS were initiating dispute resolution related to IPH's suspension of its Coffeen Rail Transportation Agreement with the railroads, and Illinois Power Resources Generating, LLC (IPRG), received notification that BNSF was initiating dispute resolution related to IPRG's suspension of its Duck Creek Rail Transportation Agreement with BNSF. In November 2019, IPH and IPRG sent suspension notices to the railroads asserting that the MPS rule requirement to retire at least 2,000 megawatts of generation (see discussion below) was a change-in-law under the agreement that rendered continued operation of the plants no longer economically feasible. In addition, IPH and IPRG asserted that the MPS rule's retirement requirement also qualified as a force majeure event under the agreements excusing performance.

ME2C Patent Dispute — In July 2019, Midwest Energy Emissions Corporation and MES Inc. (collectively, the plaintiffs) filed a patent infringement complaint in federal court in Delaware against numerous parties, including Vistra and some of its subsidiaries (collectively, the Vistra defendants), and its amended complaint in July 2020. The amended complaint alleges that the Vistra defendants infringed five patents owned by the plaintiffs by using specific processes for mercury control at certain coal-fueled plants. The amended complaint seeks injunctive relief and unspecified damages. In July 2020, the plaintiffs and the Vistra defendants entered into an agreement resolving all the claims alleged against the Vistra defendants in the complaint. The court signed its stipulation and order of dismissal in July 2020, dismissing the Vistra defendants from the lawsuit.

Greenhouse Gas Emissions

In August 2015, the EPA finalized rules to address greenhouse gas (GHG) emissions from electricity generation units, referred to as the Clean Power Plan, including rules for existing facilities that would establish state-specific emissions rate goals to reduce nationwide CO2 emissions. Various parties filed petitions for review in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court). In July 2019, petitioners filed a joint motion to dismiss in light of the EPA's new rule that replaces the Clean Power Plan, the Affordable Clean Energy rule, discussed below. In September 2019, the D.C. Circuit Court granted petitioners' motion to dismiss and dismissed all of the petitions challenging the Clean Power Plan as moot.

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In July 2019, the EPA finalized a rule to repeal the Clean Power Plan, with new regulations addressing GHG emissions from existing coal-fueled electric generation units, referred to as the Affordable Clean Energy (ACE) rule. The ACE rule develops emission guidelines that states must use when developing plans to regulate GHG emissions from existing coal-fueled electric generating units. States must submit their plans for regulating GHG emissions from existing facilities by July 2022. States where we operate coal plants (Texas, Illinois and Ohio) have begun the development of their state plans to comply with the rule. Environmental groups and certain states filed petitions for review of the ACE rule and the repeal of the Clean Power Plan in the D.C. Circuit Court, and the D.C. Circuit Court heard argument on those issues in October 2020. Additionally, in December 2018, the EPA issued proposed revisions to the emission standards for new, modified and reconstructed units. Vistra submitted comments on that proposed rulemaking in March 2019.

Regional Haze — Reasonable Progress and Best Available Retrofit Technology (BART) for Texas

In October 2017, the EPA issued a final rule addressing BART for Texas electricity generation units, with the rule serving as a partial approval of Texas's 2009 SIP and a partial FIP. For SO2, the rule established an intrastate Texas emission allowance trading program as a "BART alternative" that operates in a similar fashion to a CSAPR trading program. The program includes 39 generating units (including our Martin Lake, Big Brown, Monticello, Sandow 4, Coleto Creek, Stryker 2 and Graham 2 plants). The compliance obligations in the program started on January 1, 2019. The retirements of our Monticello, Big Brown and Sandow 4 plants have enhanced our ability to comply with this BART rule for SO2. For NOX, the rule adopted the CSAPR's ozone program as BART and for particulate matter, the rule approved Texas's SIP that determines that no electricity generation units are subject to BART for particulate matter. Various parties filed a petition challenging the rule in the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit Court) as well as a petition for reconsideration filed with the EPA. Luminant intervened on behalf of the EPA in the Fifth Circuit Court action. In March 2018, the Fifth Circuit Court abated its proceedings pending conclusion of the EPA's reconsideration process. In August 2020, the EPA issued a final rule affirming the prior BART final rule but also included additional revisions that were proposed in November 2019. In October 2020, environmental groups petitioned for review of this rule in both the D.C. Circuit Court and the Fifth Circuit Court. As finalized, we expect that we will be able to comply with the rule.

Affirmative Defenses During Malfunctions

In May 2015, the EPA finalized a rule requiring 36 states, including Texas, Illinois and Ohio, to remove or replace either EPA-approved exemptions or affirmative defense provisions for excess emissions during upset events and unplanned maintenance and startup and shutdown events, referred to as the SIP Call. Various parties (including Luminant, the State of Texas and the State of Ohio) filed petitions for review of the EPA's final rule, and all of those petitions were consolidated in the D.C. Circuit Court. In April 2017, the D.C. Circuit Court ordered the case to be held in abeyance. In April 2019, the EPA Region 6 proposed a rule to withdraw the SIP Call with respect to the Texas affirmative defense provisions. We submitted comments on that proposed rulemaking in June 2019. In February 2020, the EPA issued the final rule withdrawing the Texas SIP Call. In April 2020, a group of environmental petitioners, including the Sierra Club, filed a petition in the D.C. Circuit Court challenging the EPA's action with respect to Texas. In October 2020, the EPA issued new guidance on the inclusion of startup, shutdown and malfunction (SSM) provisions in SIPs, which is intended to supersede the policy in the multi-state SIP Call. The guidance provides that the SIPs may contain provisions for SSM events if certain conditions are met.

Illinois Multi-Pollutant Standards (MPS)

In August 2019, changes proposed by the Illinois Pollution Control Board to the MPS rule, which places NOx, SO2 and mercury emissions limits on our coal plants located in MISO went into effect. Under the revised MPS rule, our allowable SO2 and NOX emissions from the MISO fleet are 48% and 42% lower, respectively, than prior to the rule changes. The revised MPS rule requires the continuous operation of existing selective catalytic reduction (SCR) control systems during the ozone season, requires SCR-controlled units to meet an ozone season NOX emission rate limit, and set an additional, site-specific annual SO2 limit for our Joppa Power Station. Additionally, in 2019, the Company retired its Havana, Hennepin, Coffeen and Duck Creek plants in order to comply with the MPS rule's requirement to retire at least 2,000 MW of our generation in MISO. See Note 4 for information regarding the retirement of these four plants.

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SO2 Designations for Texas

In November 2016, the EPA finalized its nonattainment designations for counties surrounding our Big Brown, Monticello and Martin Lake generation plants. The final designations require Texas to develop nonattainment plans for these areas. In February 2017, the State of Texas and Luminant filed challenges to the nonattainment designations in the Fifth Circuit Court. Subsequently, in October 2017, the Fifth Circuit Court granted the EPA's motion to hold the case in abeyance considering the EPA's representation that it intended to revisit the nonattainment rule. In December 2017, the TCEQ submitted a petition for reconsideration to the EPA. In August 2019, the EPA issued a proposed Error Correction Rule for all three areas, which, if finalized, would revise its previous nonattainment designations and each area at issue would be designated unclassifiable. In September 2019, we submitted comments in support of the proposed Error Correction Rule. In April 2020, the Sierra Club filed suit to compel the EPA to issue a Finding of Failure to submit an attainment plan with respect to the three areas in Texas. In August 2020, the EPA issued a Finding of Failure for Texas to submit an attainment plan. In September 2020, the EPA proposed a "Clean Data" determination for the areas surrounding the retired Big Brown and Monticello plants, which, if finalized, would redesignate those areas as attainment based on monitoring data supporting an attainment designation.

Effluent Limitation Guidelines (ELGs)

In November 2015, the EPA revised the ELGs for steam electricity generation facilities, which will impose more stringent standards (as individual permits are renewed) for wastewater streams, such as flue gas desulfurization (FGD), fly ash, bottom ash and flue gas mercury control wastewaters. Various parties filed petitions for review of the ELG rule, and the petitions were consolidated in the Fifth Circuit Court. In April 2017, the EPA granted petitions requesting reconsideration of the ELG rule and administratively stayed the rule's compliance date deadlines. In August 2017, the EPA announced that its reconsideration of the ELG rule would be limited to a review of the effluent limitations applicable to FGD and bottom ash wastewaters and the agency subsequently postponed the earliest compliance dates in the ELG rule for the application of effluent limitations for FGD and bottom ash wastewaters from November 1, 2018 to November 1, 2020. Based on these administrative developments, the Fifth Circuit Court agreed to sever and hold in abeyance challenges to effluent limitations. The remainder of the case proceeded, and in April 2019 the Fifth Circuit Court vacated and remanded portions of the EPA's ELG rule pertaining to effluent limitations for legacy wastewater and leachate. In November 2019, the EPA issued a proposal that would extend the compliance deadline for FGD wastewater to no later than December 31, 2025 and maintains the December 31, 2023 compliance date for bottom ash transport water. The proposal also creates new sub-categories of facilities with more flexible FGD compliance options, including a retirement exemption to 2028 and a low utilization boiler exemption. The proposed rule also modified some of the FGD final effluent limitations. We filed comments on the proposal in January 2020. The EPA published the final rule in October 2020. The final rule extends the compliance date for both FGD and bottom ash transport water to no later than December 2025, as negotiated with the state permitting agency. Additionally, the final rule allows for a retirement exemption that exempts facilities certifying that units will retire by December 2028 provided certain effluent limitations are met. Notification to the state agency on the retirement exemption is due by October 2021.

Coal Combustion Residuals (CCR)/Groundwater

In July 2018, the EPA published a final rule, which became effective in August 2018, that amends certain provisions of the CCR rule that the agency issued in 2015. Among other changes, the 2018 revisions extend closure deadlines to October 31, 2020, related to the aquifer location restriction and groundwater monitoring requirements. Also, in August 2018, the D.C. Circuit Court issued a decision that vacates and remands certain provisions of the 2015 CCR rule, including an applicability exemption for legacy impoundments. In December 2019, the EPA issued a proposed rule containing a revised closure deadline for unlined CCR impoundments and new procedures for seeking extensions of that revised closure deadline. We filed comments on the proposal in January 2020. In August 2020, the EPA issued a rule finalizing the December 2019 proposal, establishing a deadline of April 11, 2021 to cease receipt of waste and initiate closure at unlined CCR impoundments. The final rule allows a generation plant to seek the EPA's approval to extend this deadline if no alternative disposal capacity is available and either a conversion to comply with the CCR rule is underway or retirement will occur by either 2023 or 2028 (depending on the size of the impoundment at issue). In September 2020, we submitted applications to the EPA requesting compliance extensions under both conversion and retirement scenarios. In October 2020, the EPA published an advanced notice of proposed rulemaking requesting information to inform the EPA in the development of a rule to address legacy impoundments that existed prior to the 2015 CCR regulation as required by the August 2018 D.C. Circuit Court decision. Comments on this proposal are due in December 2020.

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MISO — In 2012, the Illinois Environmental Protection Agency (IEPA) issued violation notices alleging violations of groundwater standards onsite at our Baldwin and Vermilion facilities' CCR surface impoundments. These violation notices remain unresolved; however, in 2016, the IEPA approved our closure and post-closure care plans for the Baldwin old east, east, and west fly ash CCR surface impoundments. We are working towards implementation of those closure plans.

At our retired Vermilion facility, which was not subject to the EPA's 2015 CCR rule until the aforementioned D.C. Circuit Court decision in August 2018, we submitted proposed corrective action plans involving closure of two CCR surface impoundments (i.e., the old east and the north impoundments) to the IEPA in 2012, and we submitted revised plans in 2014. In May 2017, in response to a request from the IEPA for additional information regarding the closure of these Vermilion surface impoundments, we agreed to perform additional groundwater sampling and closure options and riverbank stabilizing options. In May 2018, Prairie Rivers Network filed a citizen suit in federal court in Illinois against DMG, alleging violations of the Clean Water Act for alleged unauthorized discharges. In August 2018, we filed a motion to dismiss the lawsuit. In November 2018, the district court granted our motion to dismiss and judgment was entered in our favor. Plaintiffs have appealed the judgment to the U.S. Court of Appeals for the Seventh Circuit and argument is set for November 2020. In April 2019, PRN also filed a complaint against DMG before the IPCB, alleging that groundwater flows allegedly associated with the ash impoundments at the Vermilion site have resulted in exceedances both of surface water standards and Illinois groundwater standards dating back to 1992. This matter is in the very early stages.

In 2012, the IEPA issued violation notices alleging violations of groundwater standards at the Newton and Coffeen facilities' CCR surface impoundments. We are addressing these CCR surface impoundments in accordance with the federal CCR rule. In June 2018, the IEPA issued a violation notice for alleged seep discharges claimed to be coming from the surface impoundments at our retired Vermilion facility and that notice has since been referred to the Illinois Attorney General.

In December 2018, the Sierra Club filed a complaint with the IPCB alleging the disposal and storage of coal ash at the Coffeen, Edwards and Joppa generation facilities are causing exceedances of the applicable groundwater standards.

In July 2019, coal ash disposal and storage legislation in Illinois was enacted. The legislation addresses state requirements for the proper closure of coal ash ponds in the state of Illinois. The law tasks the IEPA and the IPCB to set up a series of guidelines, rules and permit requirements for closure of ash ponds. In March 2020, IEPA issued its proposed rule and we expect the rulemaking process should be completed by early 2021. Under the proposed rule, coal ash impoundment owners would be required to submit a closure alternative analysis to the IEPA for the selection of the best method for coal ash remediation at a particular site. The proposed rule does not mandate closure by removal at any site. Public hearings for the proposed rule were held in August 2020 and September 2020.

For all of the above matters, if certain corrective action measures, including groundwater treatment or removal of ash, are required at any of our coal-fueled facilities, we may incur significant costs that could have a material adverse effect on our financial condition, results of operations and cash flows. Until the revisions to the EPA's CCR rule and the Illinois coal ash rulemaking are finalized and we undertake further site specific evaluations required by each program we will not know the full range of costs of groundwater remediation, if any, that ultimately may be required under those rules. However, the currently anticipated CCR surface impoundment and landfill closure costs, as contained in our AROs, reflect the costs of closure methods that our operations and environmental services teams believe are appropriate and protective of the environment for each location.

MISO 2015-2016 Planning Resource Auction

In May 2015, three complaints were filed at FERC regarding the Zone 4 results for the 2015-2016 planning resource auction (PRA) conducted by MISO. Dynegy is a named party in one of the complaints. The complainants, Public Citizen, Inc., the Illinois Attorney General and Southwestern Electric Cooperative, Inc. (Complainants), challenged the results of the PRA as unjust and unreasonable, requested rate relief/refunds, and requested changes to the MISO planning resource auction structure going forward. Complainants also alleged that Dynegy may have engaged in economic or physical withholding in Zone 4 constituting market manipulation in the PRA. The Independent Market Monitor for MISO (MISO IMM), which was responsible for monitoring the PRA, determined that all offers were competitive and that no physical or economic withholding occurred. The MISO IMM also stated, in a filing responding to the complaints, that there is no basis for the remedies sought by the Complainants. We filed our answer to these complaints explaining that we complied fully with the terms of the MISO tariff in connection with the PRA and disputing the allegations. The Illinois Industrial Energy Consumers filed a related complaint at FERC against MISO in June 2015 requesting prospective changes to the MISO tariff. Dynegy also responded to this complaint with respect to Dynegy's conduct alleged in the complaint.

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In October 2015, FERC issued an order of nonpublic, formal investigation (the investigation) into whether market manipulation or other potential violations of FERC orders, rules and regulations occurred before or during the PRA.

In December 2015, FERC issued an order on the complaints requiring a number of prospective changes to the MISO tariff provisions effective as of the 2016-2017 planning resource auction. The order did not address the arguments of the Complainants regarding the PRA and stated that those issues remained under consideration and would be addressed in a future order.

In July 2019, FERC issued an order denying the remaining issues raised by the complaints and noted that the investigation into Dynegy was closed. FERC found that Dynegy's conduct did not constitute market manipulation and the results of the PRA were just and reasonable because the PRA was conducted in accordance with MISO's tariff. With the issuance of the order, this matter has been resolved in Dynegy's favor. The request for rehearing was denied by FERC in March 2020. The order was appealed by Public Citizen, Inc. to the D.C. Circuit Court in May 2020, and Vistra, Dynegy and Illinois Power Marketing Company intervened in the case in June 2020. The appeal remains pending.

Other Matters

We are involved in various legal and administrative proceedings in the normal course of business, the ultimate resolutions of which, in the opinion of management, are not anticipated to have a material effect on our results of operations, liquidity or financial condition.

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13. EQUITY

Share Repurchase Programs

In September 2020, we announced that the Board authorized a new share repurchase program (Share Repurchase Program) under which up to $1.5 billion of our outstanding shares of common stock may be repurchased. The Share Repurchase Program will be effective January 1, 2021, at which time the Prior Share Repurchase Plan (described below) and any authorization remaining as of such date will terminate.

In June 2018, we announced that the Board had authorized a share repurchase program under which up to $500 million of our outstanding common stock may be purchased, and this authorized amount was fully utilized in 2018. In November 2018, we announced that the Board had authorized an incremental share repurchase program under which up to $1.250 billion of our outstanding stock may be purchased, resulting in an aggregate $1.750 billion share repurchase program (collectively, Prior Share Repurchase Program). No repurchases were made under the Prior Share Repurchase Program in the three and nine months ended September 30, 2020. In the three months ended September 30, 2019, 7,407,199 shares of our common stock were repurchased under the Prior Share Repurchase Program for approximately $171 million (including related fees and expenses) at an average price of $23.07 per share of common stock. In the nine months ended September 30, 2019, 25,507,528 shares of our common stock were repurchased under the Prior Share Repurchase Program for approximately $619 million (including related fees and expenses) at an average price of $24.27 per share of common stock. On a cumulative basis, 59,817,182 shares of our common stock have been repurchased under the Prior Share Repurchase Program for approximately $1.418 billion (including related fees and expenses) at an average price of $23.72 per share of common stock. As of September 30, 2020, approximately $332 million was available for additional repurchases under the Prior Share Repurchase Program.

Under both plans, shares of the Company's common stock may be repurchased in open market transactions at prevailing market prices, in privately negotiated transactions, pursuant to plans complying with the Exchange Act, or by other means in accordance with federal securities laws. The actual timing, number and value of shares repurchased under either plan or otherwise will be determined at our discretion and will depend on a number of factors, including our capital allocation priorities, the market price of our stock, general market and economic conditions, applicable legal requirements and compliance with the terms of our debt agreements and the Tax Matters Agreement.

Dividends

In November 2018, Vistra announced the Board adopted a dividend program which we initiated in the first quarter of 2019. Each dividend under the program will be subject to declaration by the Board and, thus, may be subject to numerous factors in existence at the time of any such declaration including, but not limited to, prevailing market conditions, Vistra's results of operations, financial condition and liquidity, Delaware law and any contractual limitations.

In February 2019, May 2019, July 2019 and October 2019, the Board declared quarterly dividends of $0.125 per share that were paid in March 2019, June 2019, September 2019 and December 2019, respectively.

In February 2020, April 2020 and July 2020, the Board declared quarterly dividends of $0.135 per share that were paid in March 2020, June 2020 and September 2020, respectively. In October 2020, the Board declared a quarterly dividend of $0.135 per share that will be paid in December 2020.

Dividend Restrictions

The Credit Facilities Agreement generally restricts the ability of Vistra Operations to make distributions to any direct or indirect parent unless such distributions are expressly permitted thereunder. As of September 30, 2020, Vistra Operations can distribute approximately $6.0 billion to Parent under the Credit Facilities Agreement without the consent of any party. The amount that can be distributed by Vistra Operations to Parent was partially reduced by distributions made by Vistra Operations to Parent of approximately $255 million and $1.105 billion during the three and nine months ended September 30, 2020, respectively, and approximately $3.9 billion, $4.7 billion and $1.1 billion during the years ended December 31, 2019, 2018 and 2017, respectively. Additionally, Vistra Operations may make distributions to Parent in amounts sufficient for Parent to make any payments required under the TRA or the Tax Matters Agreement or, to the extent arising out of Parent's ownership or operation of Vistra Operations, to pay any taxes or general operating or corporate overhead expenses. As of September 30, 2020, the maximum amount of restricted net assets of Vistra Operations that may not be distributed to Parent totaled approximately $1.8 billion.

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In addition to the restrictions under the Credit Facilities Agreement, under applicable Delaware law, we are only permitted to make distributions either out of "surplus," which is defined as the excess of our net assets above our capital (the aggregate par value of all outstanding shares of our stock), or out of net profits for the fiscal year in which the distribution is declared or the prior fiscal year.

Warrants

At the Merger Date, the Company entered into an agreement whereby the holder of each outstanding warrant previously issued by Dynegy would be entitled to receive, upon paying an exercise price of $35.00 (subject to adjustment from time to time), the number of shares of Vistra common stock that such holder would have been entitled to receive if it had held one share of Dynegy common stock at the closing of the Merger, or 0.652 shares of Vistra common stock. Accordingly, upon exercise, a warrant holder would effectively pay $53.68 (subject to adjustment of the exercise price from time to time) per share of Vistra common stock received. As of September 30, 2020, approximately nine million warrants expiring in 2024 were outstanding. The warrants are immaterial and reflected as equity in our condensed consolidated balance sheets.

Tangible Equity Units (TEUs)

At the Merger Date, the Company assumed the obligations of Dynegy's 4,600,000 7.00% TEUs, each with a stated amount of $100.00 and each comprised of (i) a prepaid stock purchase contract that delivered to the holder, on July 1, 2019, 4.0813 shares of Vistra common stock per contract with cash paid in lieu of any fractional shares at a rate of $22.5954 per share and (ii) a senior amortizing note with an outstanding principal amount of $38 million at the Merger Date that paid an equal quarterly cash installment of $1.75 per amortizing note (see Note 11). In the aggregate, the annual quarterly cash installments were equivalent to a 7.00% cash payment per year with respect to each $100.00 stated amount of TEUs. The amortizing notes were accounted for as debt while the stock purchase contract was included in equity based on the fair value of the contract at the Merger Date (see Note 11). The entire class of TEUs were suspended from trading on the New York Stock Exchange on July 1, 2019 and removed from listing and registration on July 12, 2019. On July 1, 2019, approximately 18.8 million treasury shares of Vistra common stock were issued in connection with the settlement of all outstanding TEUs.

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Equity

The following table presents the changes to equity for the three months ended September 30, 2020:


	Common Stock (a)		Treasury Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Noncontrolling Interest		Total Equity
Balance at June 30, 2020	$	5	$	(973)	$	9,754	$	(678)	$	(52)	$	8,056	$	(12)	$	8,044


Dividends declared on common stock	—		—		—		(66)		—		(66)		—		(66)
Effects of stock-based incentive compensation plans	—		—		18		—		—		18		—		18
Net income (loss)	—		—		—		443		—		443		(1)		442

Change in accumulated other comprehensive income (loss)	—		—		—		—		(4)		(4)		—		(4)

Other	—		—		(1)		(2)		—		(3)		—		(3)
Balance at September 30, 2020	$	5	$	(973)	$	9,771	$	(303)	$	(56)	$	8,444	$	(13)	$	8,431

The following table presents the changes to equity for the nine months ended September 30, 2020:


	Common Stock (a)		Treasury Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Noncontrolling Interest		Total Equity
Balance at December 31, 2019	$	5	$	(973)	$	9,721	$	(764)	$	(30)	$	7,959	$	1	$	7,960


Dividends declared on common stock	—		—		—		(198)		—		(198)		—		(198)
Effects of stock-based incentive compensation plans	—		—		48		—		—		48		—		48
Net income (loss)	—		—		—		665		—		665		(14)		651
Adoption of accounting standard	—		—		—		(4)		—		(4)		—		(4)
Change in accumulated other comprehensive income (loss)	—		—		—		—		(26)		(26)		—		(26)

Other	—		—		2		(2)		—		—		—		—
Balance at September 30, 2020	$	5	$	(973)	$	9,771	$	(303)	$	(56)	$	8,444	$	(13)	$	8,431

________________

(a)Authorized shares totaled 1,800,000,000 at September 30, 2020. Outstanding common shares totaled 488,874,505 and 487,698,111 at September 30, 2020 and December 31, 2019, respectively. Treasury shares totaled 41,043,224 at both September 30, 2020 and December 31, 2019.

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The following table presents the changes to equity for the three months ended September 30, 2019:


	Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Noncontrolling Interest		Total Equity
Balance at June 30, 2019	$	5	$	(1,226)	$	10,135	$	(989)	$	(21)	$	7,904	$	—	$	7,904
Stock repurchase	—		(171)		—		—		—		(171)		—		(171)
Shares issued for tangible equity unit contracts	—		446		(446)		—		—		—		—		—
Dividends declared on common stock	—		—		—		(61)		—		(61)		—		(61)
Effects of stock-based incentive compensation plans	—		—		17		—		—		17		—		17
Net income	—		—		—		113		—		113		1		114

Change in accumulated other comprehensive income (loss)	—		—		—		—		(13)		(13)		—		(13)

Other	—		—		2		1		—		3		(1)		2
Balance at September 30, 2019	$	5	$	(951)	$	9,708	$	(936)	$	(34)	$	7,792	$	—	$	7,792

The following table presents the changes to equity for the nine months ended September 30, 2019:


	Common Stock (a)		Treasury Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Noncontrolling Interest		Total Equity
Balance at December 31, 2018	$	5	$	(778)	$	10,107	$	(1,449)	$	(22)	$	7,863	$	4	$	7,867
Stock repurchase	—		(619)		—		—		—		(619)		—		(619)
Shares issued for tangible equity unit contracts	—		446		(446)		—		—		—		—		—
Dividends declared on common stock	—		—		—		(181)		—		(181)		—		(181)
Effects of stock-based incentive compensation plans	—		—		45		—		—		45		—		45
Net income (loss)	—		—		—		694		—		694		(2)		692
Adoption of accounting standard	—		—		—		(2)		—		(2)		—		(2)
Change in accumulated other comprehensive income (loss)	—		—		—		—		(12)		(12)		—		(12)

Other	—		—		2		2		—		4		(2)		2
Balance at September 30, 2019	$	5	$	(951)	$	9,708	$	(936)	$	(34)	$	7,792	$	—	$	7,792

________________

(a)Authorized shares totaled 1,800,000,000 at September 30, 2019. Outstanding common shares totaled 487,783,432 and 493,215,309 at September 30, 2019 and December 31, 2018, respectively. Treasury shares totaled 58,925,846 and 32,815,783 at September 30, 2019 and December 31, 2018, respectively.

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14. FAIR VALUE MEASUREMENTS

We utilize several different valuation techniques to measure the fair value of assets and liabilities, relying primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities for those items that are measured on a recurring basis. We use a mid-market valuation convention (the mid-point price between bid and ask prices) as a practical expedient to measure fair value for the majority of our assets and liabilities and use valuation techniques to maximize the use of observable inputs and minimize the use of unobservable inputs. Our valuation policies and procedures were developed, maintained and validated by a centralized risk management group that reports to the Vistra Chief Financial Officer.

Fair value measurements of derivative assets and liabilities incorporate an adjustment for credit-related nonperformance risk. These nonperformance risk adjustments take into consideration master netting arrangements, credit enhancements and the credit risks associated with our credit standing and the credit standing of our counterparties (see Note 15 for additional information regarding credit risk associated with our derivatives). We utilize credit ratings and default rate factors in calculating these fair value measurement adjustments.

We categorize our assets and liabilities recorded at fair value based upon the following fair value hierarchy:

•Level 1 valuations use quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. Our Level 1 assets and liabilities include CME or ICE (electronic commodity derivative exchanges) futures and options transacted through clearing brokers for which prices are actively quoted. We report the fair value of CME and ICE transactions without taking into consideration margin deposits, with the exception of certain margin amounts related to changes in fair value on certain CME transactions that, beginning in January 2017, are legally characterized as settlement of derivative contracts rather than collateral.

•Level 2 valuations utilize over-the-counter broker quotes, quoted prices for similar assets or liabilities that are corroborated by correlations or other mathematical means, and other valuation inputs such as interest rates and yield curves observable at commonly quoted intervals. We attempt to obtain multiple quotes from brokers that are active in the markets in which we participate and require at least one quote from two brokers to determine a pricing input as observable. The number of broker quotes received for certain pricing inputs varies depending on the depth of the trading market, each individual broker's publication policy, recent trading volume trends and various other factors.

•Level 3 valuations use unobservable inputs for the asset or liability. Unobservable inputs are used to the extent observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. We use the most meaningful information available from the market combined with internally developed valuation methodologies to develop our best estimate of fair value. Significant unobservable inputs used to develop the valuation models include volatility curves, correlation curves, illiquid pricing delivery periods and locations and credit-related nonperformance risk assumptions. These inputs and valuation models are developed and maintained by employees trained and experienced in market operations and fair value measurements and validated by the Company's risk management group.

With respect to amounts presented in the following fair value hierarchy tables, the fair value measurement of an asset or liability (e.g., a contract) is required to fall in its entirety in one level, based on the lowest level input that is significant to the fair value measurement.

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Assets and liabilities measured at fair value on a recurring basis consisted of the following at the respective balance sheet dates shown below:


	September 30, 2020										December 31, 2019
	Level 1		Level 2		Level 3 (a)		Reclass (b)		Total		Level 1		Level 2		Level 3 (a)		Reclass (b)		Total
Assets:
Commodity contracts	$	609	$	267	$	222	$	24	$	1,122	$	1,047	$	172	$	239	$	11	$	1,469
Interest rate swaps	—		82		—		—		82		—		—		—		—		—
Nuclear decommissioning trust – equity securities (c)	569		—		—				569		564		—		—				564
Nuclear decommissioning trust – debt securities (c)	—		593		—				593		—		521		—				521
Sub-total	$	1,178	$	942	$	222	$	24	2,366		$	1,611	$	693	$	239	$	11	2,554
Assets measured at net asset value (d):
Nuclear decommissioning trust – equity securities (c)									387										366
Total assets									$	2,753									$	2,920
Liabilities:
Commodity contracts	$	609	$	211	$	106	$	24	$	950	$	985	$	439	$	313	$	11	$	1,748
Interest rate swaps	—		440		—		—		440		—		177		—		—		177
Total liabilities	$	609	$	651	$	106	$	24	$	1,390	$	985	$	616	$	313	$	11	$	1,925

___________

(a)See table below for description of Level 3 assets and liabilities.

(b)Fair values are determined on a contract basis, but certain contracts result in a current asset and a noncurrent liability, or vice versa, as presented in our condensed consolidated balance sheets.

(c)The nuclear decommissioning trust investment is included in the investments line in our condensed consolidated balance sheets. See Note 18.

(d)The fair value amounts presented in this line are intended to permit reconciliation of the fair value hierarchy to the amounts presented in our condensed consolidated balance sheets. Certain investments measured at fair value using the net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.

Commodity contracts consist primarily of natural gas, electricity, coal and emissions agreements and include financial instruments entered into for economic hedging purposes as well as physical contracts that have not been designated as normal purchases or sales. Interest rate swaps are used to reduce exposure to interest rate changes by converting floating-rate interest to fixed rates. See Note 15 for further discussion regarding derivative instruments.

Nuclear decommissioning trust assets represent securities held for the purpose of funding the future retirement and decommissioning of our nuclear generation facility. These investments include equity, debt and other fixed-income securities consistent with investment rules established by the NRC and the PUCT.

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The following tables present the fair value of the Level 3 assets and liabilities by major contract type and the significant unobservable inputs used in the valuations at September 30, 2020 and December 31, 2019:


September 30, 2020
	Fair Value
Contract Type (a)	Assets		Liabilities		Total		Valuation Technique	Significant Unobservable Input	Range (b)					Average (b)
Electricity purchases and sales	$	95	$	(30)	$	65	Income Approach	Hourly price curve shape (c)	$	—		to	$100	$50
									MWh
								Illiquid delivery periods for hub power prices and heat rates (d)	$	20		to	$120	$70
									MWh
Options	34		(46)		(12)		Option Pricing Model	Gas to power correlation (e)	30		%	to	100%	60%
								Power and gas volatility (e)	5		%	to	670%	330%
Financial transmission rights	82		(10)		72		Market Approach (f)	Illiquid price differences between settlement points (g)	$	(5)		to	$50	$30
									MWh





Other (h)	11		(20)		(9)
Total	$	222	$	(106)	$	116


December 31, 2019
	Fair Value
Contract Type (a)	Assets		Liabilities		Total		Valuation Technique	Significant Unobservable Input	Range (b)					Average (b)
Electricity purchases and sales	$	64	$	(53)	$	11	Income Approach	Hourly price curve shape (c)	$	—		to	$115	$58
									MWh
								Illiquid delivery periods for ERCOT hub power prices and heat rates (d)	$	20		to	$120	$70
									MWh
Options	38		(188)		(150)		Option Pricing Model	Gas to power correlation (e)	10		%	to	100%	55%
								Power and gas volatility (e)	5		%	to	440%	223%
Financial transmission rights	120		(26)		94		Market Approach (f)	Illiquid price differences between settlement points (g)	$	(10)		to	$40	$15
									MWh





Other (h)	17		(46)		(29)
Total	$	239	$	(313)	$	(74)

____________

(a)Electricity purchase and sales contracts include power and heat rate positions in ERCOT, PJM, ISO-NE, NYISO and MISO regions. The forward purchase contracts (swaps and options) used to hedge electricity price differences between settlement points are referred to as congestion revenue rights (CRRs) in ERCOT and financial transmission rights (FTRs) in PJM, ISO-NE, NYISO and MISO regions. Options consist of physical electricity options, spread options, swaptions and natural gas options.

(b)The range of the inputs may be influenced by factors such as time of day, delivery period, season and location. The average represents the arithmetic average of the inputs and is not weighted by the related fair value or notional amount.

(c)Primarily based on the historical range of forward average hourly ERCOT North Hub prices.

(d)Primarily based on historical forward ERCOT and PJM power prices and ERCOT heat rate variability.

(e)Primarily based on the historical forward correlation and volatility within ERCOT.

(f)While we use the market approach, there is insufficient market data to consider the valuation liquid.

(g)Primarily based on the historical price differences between settlement points within ERCOT hubs and load zones.

(h)Other includes contracts for natural gas, coal and emissions.

See the table below for discussion of transfers between Level 2 and Level 3 for the three and nine months ended September 30, 2020 and 2019.

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The following table presents the changes in fair value of the Level 3 assets and liabilities for the three and nine months ended September 30, 2020 and 2019.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net asset (liability) balance at beginning of period	$	114	$	4	$	(74)	$	(135)
Total unrealized valuation gains (losses)	(22)		(112)		77		13
Purchases, issuances and settlements (a):
Purchases	39		28		129		107
Issuances	(6)		(4)		(12)		(21)
Settlements	(20)		8		(68)		(34)
Transfers into Level 3 (b)	4		1		3		7
Transfers out of Level 3 (b)	7		23		61		11


Net change (c)	2		(56)		190		83
Net asset (liability) balance at end of period	$	116	$	(52)	$	116	$	(52)
Unrealized valuation gains (losses) relating to instruments held at end of period	$	(12)	$	(79)	$	119	$	(56)

____________

(a)Settlements reflect reversals of unrealized mark-to-market valuations previously recognized in net income. Purchases and issuances reflect option premiums paid or received, including CRRs and FTRs.

(b)Includes transfers due to changes in the observability of significant inputs. All Level 3 transfers during the periods presented are in and out of Level 2. For the three months ended September 30, 2020, transfers out of Level 3 primarily consist of power derivatives where forward pricing inputs have become observable. For the nine months ended September 30, 2020, transfers out of Level 3 primarily consist of gas, power and coal derivatives where forward pricing inputs have become observable.

(c)Activity excludes change in fair value in the month positions settle. Substantially all changes in values of commodity contracts (excluding the net liabilities assumed in connection with the Merger) are reported as operating revenues in our condensed consolidated statements of operations.

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15.COMMODITY AND OTHER DERIVATIVE CONTRACTUAL ASSETS AND LIABILITIES

Strategic Use of Derivatives

We transact in derivative instruments, such as options, swaps, futures and forward contracts, to manage commodity price and interest rate risk. See Note 14 for a discussion of the fair value of derivatives.

Commodity Hedging and Trading Activity — We utilize natural gas and electricity derivatives to reduce exposure to changes in electricity prices primarily to hedge future revenues from electricity sales from our generation assets and to hedge future purchased power costs for our retail operations. We also utilize short-term electricity, natural gas, coal, and emissions derivative instruments for fuel hedging and other purposes. Counterparties to these transactions include energy companies, financial institutions, electric utilities, independent power producers, oil and gas producers, local distribution companies and energy marketing companies. Unrealized gains and losses arising from changes in the fair value of derivative instruments as well as realized gains and losses upon settlement of the instruments are reported in our condensed consolidated statements of operations in operating revenues and fuel, purchased power costs and delivery fees.

Interest Rate Swaps — Interest rate swap agreements are used to reduce exposure to interest rate changes by converting floating-rate interest rates to fixed rates, thereby hedging future interest costs and related cash flows. Unrealized gains and losses arising from changes in the fair value of the swaps as well as realized gains and losses upon settlement of the swaps are reported in our condensed consolidated statements of operations in interest expense and related charges.

Financial Statement Effects of Derivatives

Substantially all derivative contractual assets and liabilities are accounted for under mark-to-market accounting consistent with accounting standards related to derivative instruments and hedging activities. The following tables provide detail of derivative contractual assets and liabilities as reported in our condensed consolidated balance sheets at September 30, 2020 and December 31, 2019. Derivative asset and liability totals represent the net value of the contract, while the balance sheet totals represent the gross value of the contract.


	September 30, 2020
	Derivative Assets				Derivative Liabilities
	Commodity Contracts		Interest Rate Swaps		Commodity Contracts		Interest Rate Swaps		Total
Current assets	$	855	$	19	$	9	$	—	$	883
Noncurrent assets	254		63		4		—		321
Current liabilities	(5)		—		(782)		(71)		(858)
Noncurrent liabilities	(6)		—		(157)		(369)		(532)
Net assets (liabilities)	$	1,098	$	82	$	(926)	$	(440)	$	(186)


	December 31, 2019
	Derivative Assets				Derivative Liabilities
	Commodity Contracts		Interest Rate Swaps		Commodity Contracts		Interest Rate Swaps		Total
Current assets	$	1,323	$	—	$	10	$	—	$	1,333
Noncurrent assets	136		—		—		—		136
Current liabilities	(1)		—		(1,510)		(18)		(1,529)
Noncurrent liabilities	—		—		(237)		(159)		(396)
Net assets (liabilities)	$	1,458	$	—	$	(1,737)	$	(177)	$	(456)

At September 30, 2020 and December 31, 2019, there were no derivative positions accounted for as cash flow or fair value hedges.

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The following table presents the pretax effect of derivative gains (losses) on net income, including realized and unrealized effects. Amount represents changes in fair value of positions in the derivative portfolio during the period, as realized amounts related to positions settled are assumed to equal reversals of previously recorded unrealized amounts.


Derivative (condensed consolidated statements of operations presentation)	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Commodity contracts (Operating revenues)	$	147	$	(482)	$	410	$	295
Commodity contracts (Fuel, purchased power costs and delivery fees)	18		6		(40)		9
Interest rate swaps (Interest expense and related charges)	(2)		(74)		(209)		(257)
Net gain (loss)	$	163	$	(550)	$	161	$	47

Balance Sheet Presentation of Derivatives

We elect to report derivative assets and liabilities in our condensed consolidated balance sheets on a gross basis without taking into consideration netting arrangements we have with counterparties to those derivatives. We maintain standardized master netting agreements with certain counterparties that allow for the right to offset assets and liabilities and collateral in order to reduce credit exposure between us and the counterparty. These agreements contain specific language related to margin requirements, monthly settlement netting, cross-commodity netting and early termination netting, which is negotiated with the contract counterparty.

Generally, margin deposits that contractually offset these derivative instruments are reported separately in our condensed consolidated balance sheets, with the exception of certain margin amounts related to changes in fair value on CME transactions that are legally characterized as settlement of forward exposure rather than collateral. Margin deposits received from counterparties are primarily used for working capital or other general corporate purposes.

The following tables reconcile our derivative assets and liabilities on a contract basis to net amounts after taking into consideration netting arrangements with counterparties and financial collateral:


	September 30, 2020								December 31, 2019
	Derivative Assets and Liabilities		Offsetting Instruments (a)		Cash Collateral (Received) Pledged (b)		Net Amounts		Derivative Assets and Liabilities		Offsetting Instruments (a)		Cash Collateral (Received) Pledged (b)		Net Amounts
Derivative assets:
Commodity contracts	$	1,098	$	(804)	$	(5)	$	289	$	1,458	$	(1,113)	$	—	$	345
Interest rate swaps	82		(82)		—		—		—		—		—		—
Total derivative assets	1,180		(886)		(5)		289		1,458		(1,113)		—		345
Derivative liabilities:
Commodity contracts	(926)		804		—		(122)		(1,737)		1,113		40		(584)
Interest rate swaps	(440)		82		—		(358)		(177)		—		—		(177)
Total derivative liabilities	(1,366)		886		—		(480)		(1,914)		1,113		40		(761)
Net amounts	$	(186)	$	—	$	(5)	$	(191)	$	(456)	$	—	$	40	$	(416)

____________

(a)Amounts presented exclude trade accounts receivable and payable related to settled financial instruments.

(b)Represents cash amounts received or pledged pursuant to a master netting arrangement, including fair value-based margin requirements, and to a lesser extent, initial margin requirements.

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Derivative Volumes

The following table presents the gross notional amounts of derivative volumes at September 30, 2020 and December 31, 2019:


	September 30, 2020		December 31, 2019
Derivative type	Notional Volume				Unit of Measure
Natural gas (a)	5,318		6,160		Million MMBtu
Electricity	409,353		428,367		GWh
Financial transmission rights (b)	203,902		199,648		GWh
Coal	13		22		Million U.S. tons
Fuel oil	153		33		Million gallons

Emissions	37		20		Million tons
Renewable energy certificates	16		11		Million certificates

Interest rate swaps – variable/fixed (c)	$	6,720	$	6,720	Million U.S. dollars
Interest rate swaps – fixed/variable (c)	$	2,120	$	2,120	Million U.S. dollars

____________

(a)Represents gross notional forward sales, purchases and options transactions, locational basis swaps and other natural gas transactions.

(b)Represents gross forward purchases associated with instruments used to hedge electricity price differences between settlement points within regions.

(c)Includes notional amounts of interest rate swaps with maturity dates through July 2026.

Credit Risk-Related Contingent Features of Derivatives

Our derivative contracts may contain certain credit risk-related contingent features that could trigger liquidity requirements in the form of cash collateral, letters of credit or some other form of credit enhancement. Certain of these agreements require the posting of collateral if our credit rating is downgraded by one or more credit rating agencies or include cross-default contractual provisions that could result in the settlement of such contracts if there was a failure under other financing arrangements related to payment terms or other covenants.

The following table presents the commodity derivative liabilities subject to credit risk-related contingent features that are not fully collateralized:


	September 30, 2020		December 31, 2019
Fair value of derivative contract liabilities (a)	$	(672)	$	(692)
Offsetting fair value under netting arrangements (b)	266		167
Cash collateral and letters of credit	18		67
Liquidity exposure	$	(388)	$	(458)

____________

(a)Excludes fair value of contracts that contain contingent features that do not provide specific amounts to be posted if features are triggered, including provisions that generally provide the right to request additional collateral (material adverse change, performance assurance and other clauses).

(b)Amounts include the offsetting fair value of in-the-money derivative contracts and net accounts receivable under master netting arrangements.

Concentrations of Credit Risk Related to Derivatives

We have concentrations of credit risk with the counterparties to our derivative contracts. At September 30, 2020, total credit risk exposure to all counterparties related to derivative contracts totaled $1.307 billion (including associated accounts receivable). The net exposure to those counterparties totaled $393 million at September 30, 2020, after taking into effect netting arrangements, setoff provisions and collateral, with the largest net exposure to a single counterparty totaling $85 million. At September 30, 2020, the credit risk exposure to the banking and financial sector represented 72% of the total credit risk exposure and 34% of the net exposure.

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Exposure to banking and financial sector counterparties is considered to be within an acceptable level of risk tolerance because all of this exposure is with counterparties with investment grade credit ratings. However, this concentration increases the risk that a default by any of these counterparties would have a material effect on our financial condition, results of operations and liquidity. The transactions with these counterparties contain certain provisions that would require the counterparties to post collateral in the event of a material downgrade in their credit rating.

We maintain credit risk policies with regard to our counterparties to minimize overall credit risk. These policies authorize specific risk mitigation tools including, but not limited to, use of standardized master agreements that allow for netting of positive and negative exposures associated with a single counterparty. Credit enhancements such as parent guarantees, letters of credit, surety bonds, liens on assets and margin deposits are also utilized. Prospective material changes in the payment history or financial condition of a counterparty or downgrade of its credit quality result in the reassessment of the credit limit with that counterparty. The process can result in the subsequent reduction of the credit limit or a request for additional financial assurances. An event of default by one or more counterparties could subsequently result in termination-related settlement payments that reduce available liquidity if amounts are owed to the counterparties related to the derivative contracts or delays in receipts of expected settlements if the counterparties owe amounts to us.

16.RELATED PARTY TRANSACTIONS

In connection with Emergence, we entered into agreements with certain of our affiliates and with parties who received shares of common stock and TRA Rights in exchange for their claims.

Registration Rights Agreement

Pursuant to the Plan of Reorganization, on the Effective Date, we entered into a Registration Rights Agreement (the Registration Rights Agreement) with certain selling stockholders providing for registration of the resale of the Vistra common stock held by such selling stockholders.

In December 2016, we filed a Form S-1 registration statement with the SEC to register for resale the shares of Vistra common stock held by certain significant stockholders pursuant to the Registration Rights Agreement, which was declared effective by the SEC in May 2017. The registration statement was amended in March 2018. Pursuant to the Registration Rights Agreement, in June 2018, we filed a post-effective amendment to the Form S-1 registration statement on Form S-3, which was declared effective by the SEC in July 2018. Among other things, under the terms of the Registration Rights Agreement:

•if we propose to file certain types of registration statements under the Securities Act with respect to an offering of equity securities, we will be required to use our reasonable best efforts to offer the other parties to the Registration Rights Agreement the opportunity to register all or part of their shares on the terms and conditions set forth in the Registration Rights Agreement; and

•the selling stockholders received the right, subject to certain conditions and exceptions, to request that we file registration statements or amend or supplement registration statements, with the SEC for an underwritten offering of all or part of their respective shares of Vistra common stock (a Demand Registration), and the Company is required to cause any such registration statement or amendment or supplement (a) to be filed with the SEC promptly and, in any event, on or before the date that is 45 days, in the case of a registration statement on Form S-1, or 30 days, in the case of a registration statement on Form S-3, after we receive the written request from the relevant selling stockholders to effectuate the Demand Registration (as defined in the Registration Rights Agreement) and (b) to become effective as promptly as reasonably practicable and in any event no later than 120 days after it is initially filed.

All expenses of registration under the Registration Rights Agreement, including the legal fees of one counsel retained by or on behalf of the selling stockholders, will be paid by us. Legal fee expenses paid or accrued by Vistra on behalf of the selling stockholders totaled less than $1 million during both the three and nine months ended September 30, 2020 and 2019.

Tax Receivable Agreement

On the Effective Date, Vistra entered into the TRA with a transfer agent on behalf of certain former first-lien creditors of TCEH. See Note 8 for discussion of the TRA.

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17.SEGMENT INFORMATION

The operations of Vistra are aligned into six reportable business segments: (i) Retail, (ii) Texas, (iii) East, (iv) West, (v) Sunset and (vi) Asset Closure. In the third quarter of 2020, Vistra updated its reportable segments to reflect changes in how the Company's Chief Operating Decision Maker (CODM) makes operating decisions, assesses performance and allocates resources. Management believes that the revised reportable segments provide enhanced transparency into the Company's long-term sustainable assets and its commitment to managing the retirement of economically and environmentally challenged plants. The following is a summary of the updated segments:

•The Sunset segment represents plants with announced retirement dates that were previously reported in the PJM and MISO segments No separate segment previously existed to differentiate operating plants with defined retirement dates from operating plants without defined retirement dates.

Our CODM reviews the results of these segments separately and allocates resources to the respective segments as part of our strategic operations. A measure of assets is not applicable, as segment assets are not regularly reviewed by the CODM for evaluating performance or allocating resources.

The Retail segment is engaged in retail sales of electricity and natural gas to residential, commercial and industrial customers. Substantially all of these activities are conducted by TXU Energy, Ambit, Value Based Brands, Dynegy Energy Services, Homefield Energy, TriEagle Energy, Public Power and U.S. Gas & Electric across 19 states in the U.S.

The Texas and East segments are engaged in electricity generation, wholesale energy sales and purchases, commodity risk management activities, fuel production and fuel logistics management. The Texas segment represents results from the ERCOT market and was referred to as the ERCOT segment prior to the third quarter of 2020. The East segment represents results from the PJM, ISO-NE and NYISO markets. We determined it was appropriate to aggregate results from these markets into one reportable segment, East, given similar economic characteristics.

The West segment represents results from the CAISO market, including our development of battery ESS projects at our Moss Landing and Oakland power plant sites (see Note 3).

The Sunset segment consists of generation plants with announced retirement dates. Separately reporting the Sunset segment differentiates operating plants with announced retirement dates from our other operating plants in the Texas, East and West segments. We have allocated unrealized gains and losses on the commodity risk management activities to the Sunset segment for the generation plants that have announced retirement dates.

The Asset Closure segment is engaged in the decommissioning and reclamation of retired plants and mines (see Note 4). Separately reporting the Asset Closure segment provides management with better information related to the performance and earnings power of Vistra's ongoing operations and facilitates management's focus on minimizing the cost associated with decommissioning and reclamation of retired plants and mines. We have not allocated any unrealized gains or losses on the commodity risk management activities to the Asset Closure segment for the generation plants that were retired in 2018 and 2019.

Corporate and Other represents the remaining non-segment operations consisting primarily of general corporate expenses, interest, taxes and other expenses related to our support functions that provide shared services to our operating segments.

The accounting policies of the business segments are the same as those described in the summary of significant accounting policies in Note 1. Our chief operating decision maker uses more than one measure to assess segment performance, including segment net income (loss), which is the measure most comparable to consolidated net income (loss) prepared based on U.S. GAAP. We account for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at market prices. Certain shared services costs are allocated to the segments.

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Three months ended	Retail		Texas		East		West		Sunset		Asset Closure		Corporate and Other (b)		Eliminations		Consolidated
Operating revenues (a):
September 30, 2020	$	2,521	$	1,591	$	644	$	84	$	250	$	—	$	—	$	(1,538)	$	3,552
September 30, 2019	2,207		731		553		95		227		74		—		(693)		3,194
Depreciation and amortization:
September 30, 2020	$	(67)	$	(117)	$	(181)	$	(5)	$	(13)	$	(10)	$	(17)	$	—	$	(410)
September 30, 2019	(86)		(126)		(170)		(5)		(21)		—		(16)		—		(424)
Operating income (loss):
September 30, 2020	$	110	$	925	$	102	$	25	$	(387)	$	(65)	$	(34)	$	—	$	676
September 30, 2019	581		(11)		14		41		(96)		(53)		(36)		—		440
Net income (loss):
September 30, 2020	$	109	$	925	$	100	$	29	$	(385)	$	(60)	$	(276)	$	—	$	442
September 30, 2019	573		(10)		14		41		(97)		(54)		(352)		(1)		114



Nine months ended	Retail		Texas		East		West		Sunset		Asset Closure		Corporate and Other (b)		Eliminations		Consolidated
Operating revenues (a):
September 30, 2020	$	6,385	$	3,323	$	1,845	$	211	$	788	$	—	$	—	$	(3,633)	$	8,919
September 30, 2019	5,014		3,356		2,033		259		1,093		217		—		(3,023)		8,949
Depreciation and amortization:
September 30, 2020	$	(229)	$	(370)	$	(540)	$	(14)	$	(73)	$	(10)	$	(48)	$	—	$	(1,284)
September 30, 2019	(204)		(385)		(506)		(14)		(59)		—		(45)		—		(1,213)
Operating income (loss):
September 30, 2020	$	440	$	1,478	$	150	$	42	$	(471)	$	(95)	$	(101)	$	—	$	1,443
September 30, 2019	19		1,324		260		79		166		(103)		(86)		—		1,659
Net income (loss):
September 30, 2020	$	433	$	1,482	$	119	$	49	$	(465)	$	(91)	$	(876)	$	—	$	651
September 30, 2019	3		1,346		263		79		166		(103)		(1,062)		—		692
Capital expenditures, including nuclear fuel and excluding LTSA prepayments and development and growth expenditures:
September 30, 2020	$	1	$	245	$	55	$	1	$	46	$	—	$	53	$	—	$	401
September 30, 2019	1		218		26		2		34		—		44		—		325

___________

(a)The following unrealized net gains (losses) from mark-to-market valuations of commodity positions are included in operating revenues:


Three months ended	Retail		Texas		East		West		Sunset		Asset Closure		Corporate and Other		Eliminations (1)		Consolidated
September 30, 2020	$	(8)	$	79	$	23	$	5	$	(133)	$	—	$	—	$	321	$	287
September 30, 2019	3		(681)		(63)		22		(125)		—		—		758		$	(86)
Nine months ended	Retail		Texas		East		West		Sunset		Asset Closure		Corporate and Other		Eliminations (1)		Consolidated
September 30, 2020	$	(12)	$	462	$	9	$	4	$	(172)	$	—	$	—	$	127	$	418
September 30, 2019	8		606		63		42		102		—		—		(210)		$	611

____________

(1)Amounts offset in fuel, purchased power costs and delivery fees in the Retail segment, with no impact to consolidated results.

(b)Income tax expense is not reflected in net income of the segments but is reflected entirely in Corporate and Other net income.

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18.SUPPLEMENTARY FINANCIAL INFORMATION

Pension and OPEB Plans — Components of Net Benefit Cost

For the three and nine months ended September 30, 2020 and 2019, net periodic benefit costs consisted of the following:


	Pension Benefits								OPEB Benefits
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019		2020		2019		2020		2019
Service cost	$	2	$	1	$	6	$	5	$	—	$	1	$	—	$	1
Other costs	—		1		1		1		—		3		4		7
Net periodic benefit cost	$	2	$	2	$	7	$	6	$	—	$	4	$	4	$	8

Impairment of Long-Lived Assets

In September 2020, we recognized impairment losses of $173 million related to our Kincaid coal generation facility in Illinois and $99 million related to our Zimmer coal generation facility in Ohio, each as a result of a significant decrease in the estimated useful life of the facility, reflecting our recently announced plan to retire both facilities by the end of 2027 in response to the final CCR rule (see Notes 4 and 12). The impairment losses are reported in our Sunset segment and include a $260 million write-down of property, plant and equipment and a $12 million write-down of inventory. In determining the fair value of the impaired assets, we equally weighted a market approach valuation based on transactions of similar assets and an income approach valuation discounting our projected cash flows through the respective plant retirement dates.

In March 2020, we recognized an impairment loss of $52 million related to our Joppa/EEI coal generation facility in Illinois as a result of a significant decrease in the estimated useful life of the facility, reflecting a decrease in the economic forecast of the facility and changes to the operating assumption based on lower forecasted wholesale electricity prices. We also recorded a $32 million impairment to a capacity contract which was linked in part to the Joppa/EEI facility and therefore determined to have a significant decrease in estimated useful life. The impairments are reported in our Sunset segment and include a $45 million write-down of property, plant and equipment, a $32 million write-down of intangible assets and a $7 million write-down of inventory.

Two of our generation facilities could individually be subject to impairment if forward wholesale electricity prices continue to decline or if additional environmental regulations increase the cost of producing electricity at the facilities. The combined net book value of the two asset groups was approximately $500 million as of September 30, 2020.

Interest Expense and Related Charges


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Interest paid/accrued	$	113	$	140	$	362	$	445
Unrealized mark-to-market net (gains) losses on interest rate swaps	(11)		76		181		275
Amortization of debt issuance costs, discounts and premiums	5		4		12		2
Debt extinguishment gain	(6)		(2)		(17)		(12)
Capitalized interest	(5)		(2)		(14)		(9)
Other	5		8		17		19
Total interest expense and related charges	$	101	$	224	$	541	$	720

The weighted average interest rate applicable to the Vistra Operations Credit Facilities, taking into account the interest rate swaps discussed in Note 11, was 3.88% and 4.02% at September 30, 2020 and 2019.

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Other Income and Deductions


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Other income:


Insurance settlement (a)	$	1	$	—	$	6	$	19
Funds released from escrow to settle pre-petition claims of our predecessor	—		—		—		9

Sale of land (b)	6		—		6		—
Interest income	—		2		1		9
All other	1		4		6		8
Total other income	$	8	$	6	$	19	$	45
Other deductions:


Loss on disposal of investment in NELP (c)	$	—	$	—	$	29	$	—

Curtailment expense (Note 4) (d)	—		3		—		3
All other	—		1		6		6
Total other deductions	$	—	$	4	$	35	$	9

____________

(a)The amount for the three months ended September 30, 2020 reported in the Texas segment. For the nine months ended September 30, 2020, $3 million reported in the Corporate and Other non-segment and $3 million reported in the Texas segment. The amount for the nine months ended September 30, 2019 reported in the Texas segment.

(b)Reported in the Texas segment.

(c)Reported in the East segment.

(d)Reported in the Sunset segment.

Restricted Cash


	September 30, 2020				December 31, 2019
	Current Assets		Noncurrent Assets		Current Assets		Noncurrent Assets

Amounts related to remediation escrow accounts	$	22	$	22	$	15	$	28
Amounts related to restructuring escrow accounts	3		—		43		—

Amounts related to Ambit customer deposits	—		—		19		—
Amounts related to Ambit commodity trading agreement	—		—		62		—
Amounts related to Ambit letters of credit (Note 11)	3		—		8		—

Total restricted cash	$	28	$	22	$	147	$	28

Trade Accounts Receivable


	September 30, 2020		December 31, 2019
Wholesale and retail trade accounts receivable	$	1,430	$	1,401
Allowance for uncollectible accounts	(58)		(36)
Trade accounts receivable — net	$	1,372	$	1,365

Gross trade accounts receivable at September 30, 2020 and December 31, 2019 included unbilled retail revenues of $459 million and $494 million, respectively.

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Allowance for Uncollectible Accounts Receivable


	Nine Months Ended September 30,
	2020		2019
Allowance for uncollectible accounts receivable at beginning of period (a)	$	42	$	19
Increase for bad debt expense	85		56
Decrease for account write-offs	(69)		(43)

Allowance for uncollectible accounts receivable at end of period	$	58	$	32

____________

(a)Includes a $6 million increase recorded due to the adoption of ASU 2016-13, Financial Instruments—Credit Losses (see Note 1).

Inventories by Major Category


	September 30, 2020		December 31, 2019
Materials and supplies	$	263	$	278
Fuel stock	225		172
Natural gas in storage	20		19
Total inventories	$	508	$	469

Investments


	September 30, 2020		December 31, 2019
Nuclear plant decommissioning trust	$	1,549	$	1,451
Assets related to employee benefit plans	38		37
Land	45		49

Total investments	$	1,632	$	1,537

Investment in Unconsolidated Subsidiary

On the Merger Date, we assumed Dynegy's 50% interest in Northeast Energy, LP (NELP), a joint venture with NextEra Energy, Inc., which indirectly owned the Bellingham NEA facility and the Sayreville facility. At December 31, 2019, our investment in NELP totaled $123 million.

In December 2019, Dynegy Northeast Generation GP, Inc. and Dynegy Northeast Associates LP, Inc., indirect subsidiaries of Vistra, entered into a transaction agreement with NELP and certain indirect subsidiaries of NextEra Energy, Inc. wherein the indirect subsidiaries of Vistra redeemed their ownership interest in NELP in exchange for 100% ownership interest in NJEA, the company which owns the Sayreville facility. The NELP Transaction was approved by FERC in February 2020, and the NELP Transaction closed on March 2, 2020. As a result of the NELP Transaction, Vistra indirectly owns 100% of the Sayreville facility and no longer has any ownership interest in the Bellingham NEA facility. A loss of $29 million was recognized in connection with the NELP Transaction, reflecting the difference between our derecognized investment in NELP and the value of our acquired 100% interest in North Jersey Energy Associates, which was measured in accordance with ASC 805. The loss is reported in our condensed consolidated statements of operations in other deductions.

Equity earnings related to our investment in NELP totaled $2 million for the three months ended September 30, 2019 and $3 million and $11 million for the nine months ended September 30, 2020 and 2019, respectively, recorded in equity in earnings (loss) of unconsolidated investment in our condensed consolidated statements of operations. We received distributions totaling $5 million for the three months ended September 30, 2019 and $3 million and $19 million for the nine months ended September 30, 2020 and 2019, respectively.

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Nuclear Decommissioning Trust

Investments in a trust that will be used to fund the costs to decommission the Comanche Peak nuclear generation plant are carried at fair value. Decommissioning costs are being recovered from Oncor Electric Delivery Company LLC's (Oncor) customers as a delivery fee surcharge over the life of the plant and deposited by Vistra (and prior to the Effective Date, a subsidiary of TCEH) in the trust fund. Income and expense, including gains and losses associated with the trust fund assets and the decommissioning liability are offset by a corresponding change in a regulatory asset/liability (currently a regulatory asset reported in other noncurrent assets) that will ultimately be settled through changes in Oncor's delivery fees rates. If funds recovered from Oncor's customers held in the trust fund are determined to be inadequate to decommission the Comanche Peak nuclear generation plant, Oncor would be required to collect all additional amounts from its customers, with no obligation from Vistra, provided that Vistra complied with PUCT rules and regulations regarding decommissioning trusts. A summary of the fair market value of investments in the fund follows:


	September 30, 2020		December 31, 2019
Debt securities (a)	$	593	$	521
Equity securities (b)	956		930
Total	$	1,549	$	1,451

____________

(a)The investment objective for debt securities is to invest in a diversified tax efficient portfolio with an overall portfolio rating of AA or above as graded by S&P or Aa2 by Moody's. The debt securities are heavily weighted with government and municipal bonds and investment grade corporate bonds. The debt securities had an average coupon rate of 3.07% and 3.42% at September 30, 2020 and December 31, 2019, respectively, and an average maturity of ten years and nine years at September 30, 2020 and December 31, 2019, respectively.

(b)The investment objective for equity securities is to invest tax efficiently and to match the performance of the S&P 500 Index for U.S. equity investments and the MSCI EAFE Index for non-U.S. equity investments.

Debt securities held at September 30, 2020 mature as follows: $186 million in one to five years, $175 million in five to 10 years and $232 million after 10 years.

The following table summarizes proceeds from sales of securities and investments in new securities.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Proceeds from sales of securities	$	67	$	62	$	291	$	354
Investments in securities	$	(73)	$	(68)	$	(307)	$	(370)

Property, Plant and Equipment


	September 30, 2020		December 31, 2019
Power generation and structures	$	15,138	$	15,205
Land	619		622
Office and other equipment	173		164
Total	15,930		15,991
Less accumulated depreciation	(3,320)		(2,553)
Net of accumulated depreciation	12,610		13,438
Finance lease right-of-use assets	184		59
Nuclear fuel (net of accumulated amortization of $179 million and $216 million)	209		197
Construction work in progress	561		220
Property, plant and equipment — net	$	13,564	$	13,914

Depreciation expenses totaled $328 million and $325 million for the three months ended September 30, 2020 and 2019, respectively, and $1.012 billion and $973 million for nine months ended September 30, 2020 and 2019, respectively.

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Asset Retirement and Mining Reclamation Obligations (ARO)

These liabilities primarily relate to nuclear generation plant decommissioning, land reclamation related to lignite mining, remediation or closure of coal ash basins, and generation plant disposal costs. There is no earnings impact with respect to changes in the nuclear plant decommissioning liability, as all costs are recoverable through the regulatory process as part of delivery fees charged by Oncor. We have also identified conditional AROs for asbestos removal and disposal, which are specific to certain generation assets. However, because the period of remediation is indeterminable no removal liabilities have been recognized.

At September 30, 2020, the carrying value of our ARO related to our nuclear generation plant decommissioning totaled $1.573 billion, which is higher than the fair value of the assets contained in the nuclear decommissioning trust. Since the costs to ultimately decommission that plant are recoverable through the regulatory rate making process as part of Oncor's delivery fees, a corresponding regulatory asset has been recorded to our condensed consolidated balance sheet of $24 million in other noncurrent assets.

The following table summarizes the changes to these obligations, reported as AROs (current and noncurrent liabilities) in our condensed consolidated balance sheets, for the nine months ended September 30, 2020 and 2019.


	Nine Months Ended September 30, 2020								Nine Months Ended September 30, 2019
	Nuclear Plant Decom- missioning		Mining Land Reclamation		Coal Ash and Other		Total		Nuclear Plant Decom- missioning		Mining Land Reclamation		Coal Ash and Other		Total
Liability at beginning of period	$	1,320	$	410	$	508	$	2,238	$	1,276	$	442	$	655	$	2,373
Additions:
Accretion	34		15		18		67		33		17		23		73
Adjustment for change in estimates (a)	219		(10)		36		245		—		12		(17)		(5)

Adjustment for obligations assumed through acquisitions	—		—		—		—		—		—		(3)		(3)
Reductions:
Payments	—		(48)		(34)		(82)		—		(54)		(26)		(80)

Liability transfer (b)	—		—		—		—		—		—		(34)		(34)
Liability at end of period	1,573		367		528		2,468		1,309		417		598		2,324
Less amounts due currently	—		(98)		(17)		(115)		—		(105)		(62)		(167)
Noncurrent liability at end of period	$	1,573	$	269	$	511	$	2,353	1,309		312		536		2,157

____________

(a)The adjustment for nuclear plant decommissioning resulted from a new cost estimate completed in the second quarter of 2020. Under applicable accounting standards, the liability is remeasured when significant changes in the amount or timing of cash flows occur, and the PUCT requires a new cost estimate at least every five years. The increase in the liability was driven by changes in assumptions including increased costs for labor, equipment and services and a delay in timing of when the U.S. Department of Energy is estimated to begin accepting spent fuel offsite.

(b)Represents ARO transferred to a third party for remediation. Any remaining unpaid third-party obligation has been reclassified to other current liabilities and other noncurrent liabilities and deferred credits in our condensed consolidated balance sheets.

Leases

In the three months ended September 30, 2020, Vistra entered into a new office lease. The lease has a base term through 2036 with options to renew for up to 15 years. The lease resulted in the recognition of a finance lease right-of-use asset and finance lease liability of $106 million. Aside from the addition of this new lease, there have been no material changes to our lease activity as reported in our 2019 Form 10-K.

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Other Noncurrent Liabilities and Deferred Credits

The balance of other noncurrent liabilities and deferred credits consists of the following:


	September 30, 2020		December 31, 2019
Retirement and other employee benefits (a)	$	320	$	295
Identifiable intangible liabilities (Note 6)	291		286
Regulatory liability	—		131
Finance lease liabilities	206		78
Uncertain tax positions, including accrued interest	10		10
Liability for third-party remediation	34		41
Environmental allowances	58		52
Accrued severance costs	61		12
Other accrued expenses	115		84
Total other noncurrent liabilities and deferred credits	$	1,095	$	989

____________

(a)We have applied settlement accounting in 2020 due to distributions exceeding the current period service and interest costs. For the three and nine months ended September 30, 2020, the remeasurement of our pension plan in connection with settlement accounting resulted in an increase in the benefit obligation liability of $2 million and $35 million, respectively, pretax other comprehensive loss of $1 million and $31 million, respectively, and settlement expense of $1 million and $4 million, respectively, recognized as other deductions in our condensed consolidated statements of operations.

Fair Value of Debt


		September 30, 2020				December 31, 2019
Long-term debt (see Note 11):	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt under the Vistra Operations Credit Facilities	Level 2	$	2,586	$	2,540	$	2,715	$	2,717
Vistra Operations Senior Notes	Level 2	6,631		7,084		6,620		6,926
Vistra Senior Notes	Level 2	—		—		774		772
Forward Capacity Agreements	Level 3	72		72		155		155
Equipment Financing Agreements	Level 3	78		78		87		87
Building Financing	Level 2	10		10		16		16
Other debt	Level 3	3		3		12		12

We determine fair value in accordance with accounting standards as discussed in Note 14. We obtain security pricing from an independent party who uses broker quotes and third-party pricing services to determine fair values. Where relevant, these prices are validated through subscription services, such as Bloomberg.

Supplemental Cash Flow Information

The following table reconciles cash, cash equivalents and restricted cash reported in our condensed consolidated statements of cash flows to the amounts reported in our condensed consolidated balance sheets at September 30, 2020 and December 31, 2019:


	September 30, 2020		December 31, 2019
Cash and cash equivalents	$	500	$	300
Restricted cash included in current assets	28		147
Restricted cash included in noncurrent assets	22		28
Total cash, cash equivalents and restricted cash	$	550	$	475

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The following table summarizes our supplemental cash flow information for the nine months ended September 30, 2020 and 2019:


	Nine Months Ended September 30,
	2020		2019
Cash payments related to:
Interest paid	$	468	$	444
Capitalized interest	(14)		(9)
Interest paid (net of capitalized interest)	$	454	$	435
Income taxes paid (refunds received) (a)	$	(11)	$	19

Noncash investing and financing activities:

Disposition of investment in NELP	$	123	$	—
Acquisition of investment in North Jersey Energy Associates	$	90	$	—
Shares issued for tangible equity unit contracts (Note 14)	$	—	$	446

____________

(a)For the nine months ended September 30, 2020 and 2019, we paid state income taxes of $32 million and $40 million, respectively, received federal tax refunds of $37 million and $21 million, respectively, and received state tax refunds of $6 million and zero, respectively.

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Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion below, as well as other portions of this quarterly report on Form 10-Q, contain forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. In addition, management may make forward-looking statements orally or in other writing, including, but not limited to, in press releases, quarterly earnings calls, executive presentations, in the annual report to stockholders and in other filings with the SEC. Readers can usually identify these forward-looking statements by the use of such words as “may,” “will,” “should,” “likely,” “plans,” “projects,” “expects,” “anticipates,” “believes” or similar words. These statements involve a number of risks and uncertainties. Actual results could materially differ from those anticipated by such forward-looking statements. For more discussion about risk factors that could cause or contribute to such differences, see Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Part I, Item 1A "Risk Factors" in the Company’s 2019 Form 10-K, Part II, Item 1A "Risk Factors" in the Company's quarterly report on Form 10-Q for the period ended June 30, 2020 and any updates contained herein. Forward-looking statements reflect the information only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statements to reflect future events, developments, or other information. If Vistra does update one or more forward-looking statements, no inference should be drawn that additional updates will be made regarding that statement or any other forward-looking statements. This discussion is intended to clarify and focus on our results of operations, certain changes in our financial position, liquidity, capital structure and business developments for the periods covered by the consolidated financial statements included under Item 1 of this quarterly report on Form 10-Q for the three and nine months ended September 30, 2020. This discussion should be read in conjunction with those consolidated financial statements and the related notes and is qualified by reference to them.

The following discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2020 and 2019 should be read in conjunction with our condensed consolidated financial statements and the notes to those statements. Results are impacted by the effects of the Ambit Transaction and the Crius Transaction (see Note 2 to the Financial Statements). Operational results for four facilities retired in late 2019 were recast from the MISO segment to the Asset Closure segment (see Note 4 to the Financial Statements).

All dollar amounts in the tables in the following discussion and analysis are stated in millions of U.S. dollars unless otherwise indicated.

Critical Accounting Policies and Estimates

The Company's discussion and analysis of its financial position and results of operations is based upon its consolidated financial statements. The preparation of these consolidated financial statements requires estimation and judgment that affect the reported amounts of revenue, expenses, assets and liabilities. The Company bases its estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the accounting for assets and liabilities that are not readily apparent from other sources. If the estimates differ materially from actual results, the impact on the consolidated financial statements may be material. The Company's critical accounting policies are disclosed in our 2019 Form 10-K.

Business

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Operating Segments

Vistra has six reportable segments: (i) Retail, (ii) Texas, (iii) East, (iv) West, (v) Sunset and (vi) Asset Closure. In the third quarter of 2020, Vistra updated its reportable segments to reflect changes in how the Company's CODM makes operating decisions, assesses performance and allocates resources. Management believes that the revised reportable segments provide enhanced transparency into the Company's long-term sustainable assets and its commitment to managing the retirement of economically and environmentally challenged plants. See Notes 1 and 17 to the Financial Statements for further information concerning the updates to our reportable business segments.

Significant Activities and Events and Items Influencing Future Performance

Investments in Clean Energy and CO2 Reductions

In September 2020, we announced the planned development of 668 MW of solar photovoltaic power generation facilities and 260 MW of battery ESS in Texas. See Note 3 to the Financial Statements for a summary of our solar and battery energy storage projects.

Also in September 2020, we announced our intention to retire all of our remaining coal generation facilities in Illinois and Ohio and one natural gas facility in Illinois no later than year-end 2027 due to economic challenges, including incremental expenditures that would be required to comply with the CCR rule and ELG rule (see Note 12 to the Financial Statements), and in furtherance of our efforts to significantly reduce our carbon footprint. See Note 4 to the Financial Statements for a summary of these planned generation retirements in 2025-2027 as well as our generation plant retirements in 2019.

COVID-19 Pandemic

With the global outbreak of the novel coronavirus (COVID-19) and the declaration of a pandemic by the World Health Organization on March 11, 2020, the U.S. government has deemed electricity generation, transmission and distribution as “critical infrastructure” providing essential services during this global emergency. As a provider of critical infrastructure, Vistra has an obligation to provide critically needed power to homes, businesses, hospitals and other customers. Vistra remains focused on protecting the health and well-being of its employees and the communities in which it operates while assuring the continuity of its business operations.

We have updated and implemented our company-wide pandemic plan to address specific aspects of the COVID-19 pandemic to guide our emergency response, business continuity, and the precautionary measures we are taking on behalf of employees and the public. We will continue to monitor developments affecting both our workforce and our customers, and we have taken, and will continue to take, health and safety measures that we determine are necessary in order to mitigate the impacts. To date, as a result of these business continuity measures, the Company has not experienced material disruptions in our operations due to COVID-19.

The fundamentals of the Company remain strong. Vistra believes it has sufficient available liquidity to continue business operations during this volatile period. As described under Available Liquidity, the Company has total available liquidity of $2.557 billion as of September 30, 2020, consisting of cash on hand and available capacity under our Revolving Credit Facility. In addition, the maturities of our long-term debt are relatively modest until 2023. If the Company experienced a significant reduction in revenues, the Company believes it would have additional alternatives to maintain access to liquidity, including capital expenditure reductions, reductions to planned voluntary debt repayments and cost reductions. As a result of the Company's ongoing initiatives, the Company believes it is well positioned to be able to respond to changes in customer demand, regulation or other factors impacting the Company's business related to the COVID-19 pandemic.

The COVID-19 pandemic presents potential new risks to the Company's business. Although there have been logistical and other challenges to date, there has been no material adverse impact on the Company's first, second or third quarter 2020 results of operations. The situation surrounding COVID-19 remains fluid and the potential for a material impact on the Company's results of operations, financial condition and liquidity increases the longer the virus impacts the level of economic activity in the U.S. and globally. As a result, COVID-19 may have a range of impacts on the Company's operations, the full extent and scope of which are currently unknown. See Part II, Item 1A Risk Factors — The outbreak of COVID-19, or the future outbreak of any other highly infectious or contagious diseases, could have a material and adverse effect on our business, financial condition, and results of operations.

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In response to the economic and employment impacts of the COVID-19 outbreak, various states have instituted moratoriums or other conditions on disconnections for retail electricity customers. For example, in March and April 2020, the PUCT issued multiple orders requiring REPs in the ERCOT market to suspend late fees for residential customers through May 15, 2020, and to offer deferred payment plans to customers upon request. The PUCT also enacted the COVID-19 Electricity Relief Program whereby REPs must forego disconnecting customers certified as experiencing COVID-19-related hardship, and if such customer would otherwise be subject to disconnection and meets other qualifications, such REP would request suppression of the delivery charges from the transmission and distribution utility and request a proxy energy charge reimbursement from the COVID-19 Electricity Relief Program of $0.04/kWh. The PUCT ceased accepting new enrollments under the COVID-19 Electricity Relief Program after August 31, 2020, and the disconnection protections and financial assistance expired after September 30, 2020.

See Note 7 to the Financial Statements for a summary of certain anticipated tax-related impacts of the CARES Act to the Company.

Ambit Transaction

On November 1, 2019 (Ambit Acquisition Date), Volt Asset Company, Inc., an indirect, wholly owned subsidiary of Vistra, completed the acquisition of Ambit (Ambit Transaction). See Note 2 to the Financial Statements for a summary of the Ambit Transaction and business combination accounting.

Crius Transaction

On July 15, 2019, Vienna Acquisition B.C. Ltd., an indirect, wholly owned subsidiary of Vistra, completed the acquisition of the equity interests of two wholly owned subsidiaries of Crius that indirectly own the operating business of Crius (Crius Transaction). See Note 2 to the Financial Statements for a summary of the Crius Transaction and business combination accounting.

Dividend Program

In November 2018, we announced that the Board had adopted a dividend program, which we initiated in the first quarter of 2019. See Note 13 to the Financial Statements for more information about our dividend program.

Share Repurchase Program

In September 2020, we announced that the Board had authorized a new share repurchase program (Share Repurchase Program) under which up to $1.5 billion of our outstanding common stock may be repurchased. The Share Repurchase Program will be effective January 1, 2021, at which time the Prior Share Repurchase Plan will terminate. See Note 13 to the Financial Statements for more information concerning the Share Repurchase Program and the Prior Share Repurchase Program, including shares repurchased and remaining amounts available under the Prior Share Repurchase Program.

Debt Activity

We have stated our objective to reduce our consolidated net leverage. We also intend to continue to simplify and optimize our capital structure, maintain adequate liquidity and pursue opportunities to refinance our long-term debt to extend maturities and/or reduce ongoing interest expense. In 2019 and 2020, we completed several transactions, including the redemption and repayment of all previously outstanding senior notes issued by Parent, that we believe, in the aggregate, advanced all of these goals. See Note 11 to the Financial Statements for details of our long-term debt activity and Note 10 to the Financial Statements for details of our accounts receivable financing.

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Power Price, Natural Gas Price and Market Heat Rate Exposure

Estimated hedging levels for generation volumes in our Texas, East, West and Sunset segments at September 30, 2020 were as follows:


	2020		2021
Nuclear/Renewable/Coal Generation:
Texas	100	%	86	%
Sunset	100	%	92	%
Gas Generation:
Texas	100	%	63	%
East	98	%	83	%
West	100	%	93	%

The following sensitivity table provides approximate estimates of the potential impact of movements in power prices and spark spreads (the difference between the power revenue and fuel expense of natural gas-fired generation as calculated using an assumed heat rate of 7.2 MMBtu/MWh) on realized pretax earnings (in millions) taking into account the hedge positions noted above for the periods presented. The residual gas position is calculated based on two steps: first, calculating the difference between actual heat rates of our natural gas generation units and the assumed 7.2 heat rate used to calculate the sensitivity to spark spreads; and second, calculating the residual natural gas exposure that is not already included in the gas generation spark spread sensitivity shown in the table below. The estimates related to price sensitivity are based on our expected generation, related hedges and forward prices as of September 30, 2020.


	Balance 2020 (a)		2021
Texas:
Nuclear/Renewable/Coal Generation: $2.50/MWh increase in power price	$	—	$	19
Nuclear/Renewable/Coal Generation: $2.50/MWh decrease in power price	$	—	$	(16)
Gas Generation: $1.00/MWh increase in spark spread	$	1	$	15
Gas Generation: $1.00/MWh decrease in spark spread	$	—	$	(12)
Residual Natural Gas Position: $0.25/MMBtu increase in natural gas price	$	—	$	(22)
Residual Natural Gas Position: $0.25/MMBtu decrease in natural gas price	$	—	$	11
East:
Gas Generation: $1.00/MWh increase in spark spread	$	1	$	9
Gas Generation: $1.00/MWh decrease in spark spread	$	—	$	(5)
Residual Natural Gas Position: $0.25/MMBtu increase in natural gas price	$	(1)	$	(3)
Residual Natural Gas Position: $0.25/MMBtu decrease in natural gas price	$	1	$	3





Sunset:
Coal Generation: $2.50/MWh increase in power price	$	1	$	9
Coal Generation: $2.50/MWh decrease in power price	$	—	$	(4)

___________

(a)Balance of 2020 is from October 1, 2020 through December 31, 2020.

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RESULTS OF OPERATIONS

Consolidated Financial Results — Three and Nine Months Ended September 30, 2020 Compared to Three and Nine Months Ended September 30, 2019


	Three Months Ended September 30,				Favorable (Unfavorable) $ Change		Nine Months Ended September 30,				Favorable (Unfavorable) $ Change
	2020		2019				2020		2019
Operating revenues	$	3,552	$	3,194	$	358	$	8,919	$	8,949	$	(30)
Fuel, purchased power costs and delivery fees	(1,469)		(1,687)		218		(3,832)		(4,287)		455
Operating costs	(457)		(397)		(60)		(1,249)		(1,153)		(96)
Depreciation and amortization	(410)		(424)		14		(1,284)		(1,213)		(71)
Selling, general and administrative expenses	(268)		(246)		(22)		(755)		(637)		(118)

Impairment of long-lived assets	(272)		—		(272)		(356)		—		(356)
Operating income	676		440		236		1,443		1,659		(216)
Other income	8		6		2		19		45		(26)
Other deductions	—		(4)		4		(35)		(9)		(26)
Interest expense and related charges	(101)		(224)		123		(541)		(720)		179
Impacts of Tax Receivable Agreement	58		(62)		120		44		(26)		70
Equity in earnings of unconsolidated investment	—		3		(3)		4		13		(9)
Income before income taxes	641		159		482		934		962		(28)
Income tax expense	(199)		(45)		(154)		(283)		(270)		(13)
Net income	$	442	$	114	$	328	$	651	$	692	$	(41)


	Three Months Ended September 30, 2020
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations / Corporate and Other		Vistra Consolidated
Operating revenues	$	2,521	$	1,591	$	644	$	84	$	250	$	—	$	(1,538)	$	3,552
Fuel, purchased power costs and delivery fees	(2,119)		(346)		(295)		(38)		(209)		—		1,538		(1,469)
Operating costs	(35)		(185)		(54)		(8)		(128)		(47)		—		(457)
Depreciation and amortization	(67)		(117)		(181)		(5)		(13)		(10)		(17)		(410)
Selling, general and administrative expenses	(190)		(18)		(12)		(8)		(15)		(8)		(17)		(268)

Impairment of long-lived assets	—		—		—		—		(272)		—		—		(272)
Operating income (loss)	110		925		102		25		(387)		(65)		(34)		676
Other income	1		1		—		1		—		5		—		8
Other deductions	—		(3)		—		—		3		—		—		—
Interest expense and related charges	(2)		2		(2)		3		(1)		—		(101)		(101)
Impacts of Tax Receivable Agreement	—		—		—		—		—		—		58		58

Income (loss) before income taxes	109		925		100		29		(385)		(60)		(77)		641
Income tax expense	—		—		—		—		—		—		(199)		(199)
Net income (loss)	$	109	$	925	$	100	$	29	$	(385)	$	(60)	$	(276)	$	442

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	Three Months Ended September 30, 2019
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations / Corporate and Other		Vistra Consolidated
Operating revenues	$	2,207	$	731	$	553	$	95	$	227	$	74	$	(693)	$	3,194
Fuel, purchased power costs and delivery fees	(1,358)		(429)		(299)		(40)		(197)		(57)		693		(1,687)
Operating costs	(22)		(166)		(49)		(6)		(96)		(58)		—		(397)
Depreciation and amortization	(86)		(126)		(170)		(5)		(21)		—		(16)		(424)
Selling, general and administrative expenses	(160)		(21)		(21)		(3)		(9)		(12)		(20)		(246)


Operating income (loss)	581		(11)		14		41		(96)		(53)		(36)		440
Other income	—		1		—		—		1		1		3		6
Other deductions	—		(2)		—		—		—		(2)		—		(4)
Interest expense and related charges	(8)		2		(3)		—		(2)		—		(213)		(224)
Impacts of Tax Receivable Agreement	—		—		—		—		—		—		(62)		(62)
Equity in earnings of unconsolidated investment	—		—		3		—		—		—		—		3
Income (loss) before income taxes	573		(10)		14		41		(97)		(54)		(308)		159
Income tax expense	—		—		—		—		—		—		(45)		(45)
Net income (loss)	$	573	$	(10)	$	14	$	41	$	(97)	$	(54)	$	(353)	$	114

Our operating segments delivered strong operating performance with a disciplined focus on cost management, while generating and selling essential electricity in a safe and reliable manner during a period of significant economic disruption. Our performance reflected the stability of our integrated model, including a diversified generation fleet, retail and commercial and hedging activities in support of our integrated business, to produce results in line with expectations and significant cash from operations of $1.041 billion in the three months ended September 30, 2020 despite general uncertainty in the overall economy.

Consolidated results increased $328 million to net income of $442 million in the three months ended September 30, 2020 compared to the three months ended September 30, 2019. The change in results is driven by $321 million in pre-tax unrealized net gains on hedging transactions in 2020 compared to $79 million in pre-tax unrealized net losses on hedging transactions in 2019 and strong Texas wholesale operating results, partially offset by a $272 million pre-tax impairment of assets related to our Kincaid and Zimmer coal generation facilities.

For the three months ended September 30, 2020 and 2019, operating costs increased $60 million to $457 million primarily driven by higher estimated costs for ARO.

For the three months ended September 30, 2020 and 2019, selling, general and administrative expense increased by $22 million, primarily due to the increased expense resulting from the acquisition of Crius in July 2019 and Ambit in November 2019.

Interest expense and related charges decreased $123 million to $101 million in the three months ended September 30, 2020 compared to the three months ended September 30, 2019 driven by unrealized mark-to-market gains of $11 million in 2020 compared to unrealized mark-to-market losses of $76 million in 2019 and a $27 million decrease in interest paid/accrued reflecting the reduction in higher interest Vistra senior unsecured notes through the Redemptions and Tender Offers in 2019 and 2020. See Note 18 to the Financial Statements.

For the three months ended September 30, 2020 and 2019, the Impacts of the Tax Receivable Agreement totaled income of $58 million and expense of $62 million, respectively. See Note 8 to the Financial Statements for discussion of the impacts of the Tax Receivable Agreement Obligation.

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For the three months ended September 30, 2020, income tax expense totaled $199 million and the effective tax rate was 31.0%. For the three months ended September 30, 2019, income tax expense totaled $45 million and the effective tax rate was 28.3%. See Note 7 to the Financial Statements for reconciliation of the effective rates to the U.S. federal statutory rate.


	Nine Months Ended September 30, 2020
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations / Corporate and Other		Vistra Consolidated
Operating revenues	$	6,385	$	3,323	$	1,845	$	211	$	788	$	—	$	(3,633)	$	8,919
Fuel, purchased power costs and delivery fees	(5,133)		(840)		(897)		(115)		(480)		—		3,633		(3,832)
Operating costs	(94)		(577)		(192)		(22)		(298)		(65)		(1)		(1,249)
Depreciation and amortization	(229)		(370)		(540)		(14)		(73)		(10)		(48)		(1,284)
Selling, general and administrative expenses	(489)		(58)		(66)		(18)		(52)		(20)		(52)		(755)

Impairment of long-lived assets	—		—		—		—		(356)		—		—		(356)
Operating income (loss)	440		1,478		150		42		(471)		(95)		(101)		1,443
Other income	1		5		1		1		4		6		1		19
Other deductions	—		(7)		(30)		—		4		(2)		—		(35)
Interest expense and related charges	(8)		6		(6)		6		(2)		—		(537)		(541)
Impacts of Tax Receivable Agreement	—		—		—		—		—		—		44		44
Equity in earnings of unconsolidated investment	—		—		4		—		—		—		—		4
Income (loss) before income taxes	433		1,482		119		49		(465)		(91)		(593)		934
Income tax expense	—		—		—		—		—		—		(283)		(283)
Net income (loss)	$	433	$	1,482	$	119	$	49	$	(465)	$	(91)	$	(876)	$	651

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	Nine Months Ended September 30, 2019
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations / Corporate and Other		Vistra Consolidated
Operating revenues	$	5,014	$	3,356	$	2,033	$	259	$	1,093	$	217	$	(3,023)	$	8,949
Fuel, purchased power costs and delivery fees	(4,383)		(1,062)		(1,036)		(131)		(540)		(158)		3,023		(4,287)
Operating costs	(44)		(525)		(170)		(22)		(263)		(129)		—		(1,153)
Depreciation and amortization	(204)		(385)		(506)		(14)		(59)		—		(45)		(1,213)
Selling, general and administrative expenses	(364)		(60)		(61)		(13)		(65)		(33)		(41)		(637)


Operating income (loss)	19		1,324		260		79		166		(103)		(86)		1,659
Other income	—		21		—		—		5		2		17		45
Other deductions	—		(6)		—		—		—		(2)		(1)		(9)
Interest expense and related charges	(16)		7		(10)		—		(5)		—		(696)		(720)
Impacts of Tax Receivable Agreement	—		—		—		—		—		—		(26)		(26)
Equity in earnings of unconsolidated investment	—		—		13		—		—		—		—		13
Income (loss) before income taxes	3		1,346		263		79		166		(103)		(792)		962
Income tax benefit	—		—		—		—		—		—		(270)		(270)
Net income (loss)	$	3	$	1,346	$	263	$	79	$	166	$	(103)	$	(1,062)	$	692

Our operating segments delivered strong operating performance with a disciplined focus on cost management, while generating and selling essential electricity in a safe and reliable manner during a period of significant economic disruption. Our performance reflected the stability of our integrated model, including a diversified generation fleet, retail and commercial and hedging activities in support of our integrated business, to produce results in line with expectations and significant cash from operations of $2.350 billion for the nine months ended September 30, 2020 despite general uncertainty in the overall economy.

Consolidated results decreased $41 million to net income of $651 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The change in results is driven by a $181 million pre-tax decrease in unrealized gains on hedging transactions, a $356 million pre-tax impairment of assets related to our Kincaid, Zimmer and Joppa/EEI coal generation facilities and a $29 million pre-tax loss on disposal of our equity method investment in Northeast Energy, LP (NELP), almost completely offset by strong Texas wholesale operating results and the addition of Crius and Ambit. See Note 18 to the Financial Statements.

For the nine months ended September 30, 2020 and 2019, operating costs increased $96 million to $1,249 million primarily driven by higher estimated costs for ARO, increased LTSA costs and COVID-related expenses.

For the nine months ended September 30, 2020 and 2019, selling, general and administrative expense increased by $118 million, primarily due to the increased expense resulting from the acquisition of Crius in July 2019 and Ambit in November 2019.

Interest expense and related charges decreased $179 million to $541 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 driven by a $83 million decrease in interest paid/accrued reflecting the reduction in higher interest Vistra senior unsecured notes through the Redemptions and Tender Offers in 2019 and 2020 and a $94 million decrease in unrealized mark-to-market losses on interest rate swaps. See Note 18 to the Financial Statements.

For the nine months ended September 30, 2020 and 2019, the Impacts of the Tax Receivable Agreement totaled income of $44 million and expense of $26 million, respectively. See Note 8 to the Financial Statements for discussion of the impacts of the Tax Receivable Agreement Obligation.

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For the nine months ended September 30, 2020, income tax expense totaled $283 million and the effective tax rate was 30.3%. For the nine months ended September 30, 2019, income tax expense totaled $270 million and the effective tax rate was 28.1%. See Note 7 to the Financial Statements for reconciliation of the effective rates to the U.S. federal statutory rate.

Discussion of Adjusted EBITDA

Non-GAAP Measures — In analyzing and planning for our business, we supplement our use of GAAP financial measures with non-GAAP financial measures, including EBITDA and Adjusted EBITDA as performance measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures included in the tables below, may provide a more complete understanding of factors and trends affecting our business. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures and are, by definition, an incomplete understanding of Vistra and must be considered in conjunction with GAAP measures. In addition, non-GAAP financial measures are not standardized; therefore, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

EBITDA and Adjusted EBITDA — We believe EBITDA and Adjusted EBITDA provide meaningful representations of our operating performance. We consider EBITDA as another way to measure financial performance on an ongoing basis. Adjusted EBITDA is meant to reflect the operating performance of our segments for the period presented. We define EBITDA as earnings (loss) before interest expense, income tax expense (benefit) and depreciation and amortization expense. We define Adjusted EBITDA as EBITDA adjusted to exclude (i) gains or losses on the sale or retirement of certain assets, (ii) the impacts of mark-to-market changes on derivatives, (iii) the impact of impairment charges, (iv) certain amounts associated with fresh-start reporting, acquisitions, dispositions, transition costs or restructurings, (v) non-cash compensation expense, (vi) impacts from the Tax Receivable Agreement and (vii) other material nonrecurring or unusual items.

Because EBITDA and Adjusted EBITDA are financial measures that management uses to allocate resources, determine our ability to fund capital expenditures, assess performance against our peers, and evaluate overall financial performance, we believe they provide useful information for investors.

When EBITDA or Adjusted EBITDA is discussed in reference to performance on a consolidated basis, the most directly comparable GAAP financial measure to EBITDA and Adjusted EBITDA is Net income (loss).

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Adjusted EBITDA — Three and Nine Months Ended September 30, 2020 Compared to Three and Nine Months Ended September 30, 2019


	Three Months Ended September 30,				Favorable (Unfavorable) $ Change		Nine Months Ended September 30,				Favorable (Unfavorable) $ Change
	2020		2019				2020		2019
Net income	$	442	$	114	$	328	$	651	$	692	$	(41)
Income tax expense	199		45		154		283		270		13
Interest expense and related charges (a)	101		224		(123)		541		720		(179)
Depreciation and amortization (b)	431		444		(13)		1,341		1,266		75
EBITDA before Adjustments	1,173		827		346		2,816		2,948		(132)
Unrealized net (gain) loss resulting from hedging transactions	(321)		79		(400)		(444)		(625)		181
Generation plant retirement expenses	43		49		(6)		43		49		(6)
Fresh start/purchase accounting impacts	—		(8)		8		34		26		8
Impacts of Tax Receivable Agreement	(58)		62		(120)		(44)		26		(70)

Non-cash compensation expenses	16		12		4		46		36		10
Transition and merger expenses	(2)		38		(40)		17		82		(65)
Impairment of long-lived assets	272		—		272		356		—		356
Loss on disposal of investment in NELP	—		—		—		29		—		29
COVID-19-related expenses (c)	3		—		3		18		—		18
Other, net	11		1		10		14		12		2
Adjusted EBITDA	$	1,137	$	1,060	$	77	$	2,885	$	2,554	$	331

____________

(a)Includes unrealized mark-to-market net gains on interest rate swaps of $11 million and unrealized mark-to-market net losses on interest rate swaps of $76 million for the three months ended September 30, 2020 and 2019, respectively. Includes unrealized mark-to-market net losses on interest rate swaps of $181 million and $275 million for the nine months ended September 30, 2020 and 2019, respectively.

(b)Includes nuclear fuel amortization in the Texas segment of $20 million and $20 million for the three months ended September 30, 2020 and 2019, respectively, and $57 million and $53 million for the nine months ended September 30, 2020 and 2019, respectively.

(c)Includes material and supplies and other incremental costs related to our COVID-19 response.

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	Three Months Ended September 30, 2020
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations / Corporate and Other		Vistra Consolidated
Net income (loss)	$	109	$	925	$	100	$	29	$	(385)	$	(60)	$	(276)	$	442
Income tax expense	—		—		—		—		—		—		199		199
Interest expense and related charges (a)	2		(2)		2		(3)		1		—		101		101
Depreciation and amortization (b)	67		138		181		5		13		10		17		431
EBITDA before Adjustments	178		1,061		283		31		(371)		(50)		41		1,173
Unrealized net (gain) loss resulting from hedging transactions	(316)		(78)		(40)		(9)		122		—		—		(321)
Generation plant retirement expenses	—		—		—		—		43		—		—		43
Fresh start/purchase accounting impacts	(6)		—		6		—		—		—		—		—
Impacts of Tax Receivable Agreement	—		—		—		—		—		—		(58)		(58)

Non-cash compensation expenses	—		—		—		—		—		—		16		16
Transition and merger expenses	1		—		(5)		—		—		—		2		(2)
Impairment of long lived assets	—		—		—		—		272		—		—		272

COVID-19-related expenses (c)	—		2		—		—		1		—		—		3
Other, net	3		15		1		1		—		2		(11)		11
Adjusted EBITDA	$	(140)	$	1,000	$	245	$	23	$	67	$	(48)	$	(10)	$	1,137

____________

(a)Includes $11 million of unrealized mark-to-market net gains on interest rate swaps.

(b)Includes nuclear fuel amortization of $20 million in Texas segment.

(c)Includes material and supplies and other incremental costs related to our COVID-19 response.


	Three Months Ended September 30, 2019
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations / Corporate and Other		Vistra Consolidated
Net income (loss)	$	573	$	(10)	$	14	$	41	$	(97)	$	(54)	$	(353)	$	114
Income tax expense	—		—								—		45		45
Interest expense and related charges (a)	8		(2)		3		—		2		—		213		224
Depreciation and amortization (b)	86		146		170		5		21		—		16		444
EBITDA before Adjustments	667		134		187		46		(74)		(54)		(79)		827
Unrealized net (gain) loss resulting from hedging transactions	(769)		682		60		(21)		127		—		—		79
Generation plant retirement expenses	—		—		—		—		11		38		—		49
Fresh start/purchase accounting impacts	(12)		—		—		(1)		8		(3)		—		(8)
Impacts of Tax Receivable Agreement	—		—		—		—		—		—		62		62

Non-cash compensation expenses	—		—		—		—		—		—		12		12
Transition and merger expenses	24		5		1		—		2		1		5		38
Other, net	3		2		6		—		(1)		1		(10)		1
Adjusted EBITDA	$	(87)	$	823	$	254	$	24	$	73	$	(17)	$	(10)	$	1,060

____________

(a)Includes $76 million of unrealized mark-to-market net losses on interest rate swaps.

(b)Includes nuclear fuel amortization of $20 million in Texas segment.

Table of Contents


	Nine Months Ended September 30, 2020
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations / Corporate and Other		Vistra Consolidated
Net income (loss)	$	433	$	1,482	$	119	$	49	$	(465)	$	(91)	$	(876)	$	651
Income tax expense	—		—		—		—		—		—		283		283
Interest expense and related charges (a)	8		(6)		6		(6)		2		—		537		541
Depreciation and amortization (b)	229		427		540		14		73		10		48		1,341
EBITDA before Adjustments	670		1,903		665		57		(390)		(81)		(8)		2,816
Unrealized net (gain) loss resulting from hedging transactions	(114)		(449)		(37)		(1)		157		—		—		(444)
Generation plant retirement expenses	—		—		—		—		43		—		—		43
Fresh start/purchase accounting impacts	1		(4)		23		—		14		—		—		34
Impacts of Tax Receivable Agreement	—		—		—		—		—		—		(44)		(44)

Non-cash compensation expenses	—		—		—		—		—		—		46		46
Transition and merger expenses	8		(2)		1		—		—		—		10		17
Impairment of long-lived assets	—		—		—		—		356		—		—		356
Loss on disposal of investment in NELP	—		—		29		—		—		—		—		29
COVID-19-related expenses (c)	—		12		2		—		3		—		1		18
Other, net	7		17		8		3		2		2		(25)		14
Adjusted EBITDA	$	572	$	1,477	$	691	$	59	$	185	$	(79)	$	(20)	$	2,885

____________

(a)Includes $181 million of unrealized mark-to-market net losses on interest rate swaps.

(b)Includes nuclear fuel amortization of $57 million in Texas segment.

(c)Includes material and supplies and other incremental costs related to our COVID-19 response.


	Nine Months Ended September 30, 2019
	Retail		Texas		East		West		Sunset		Asset Closure		Eliminations / Corporate and Other		Vistra Consolidated
Net income (loss)	$	3	$	1,346	$	263	$	79	$	166	$	(103)	$	(1,062)	$	692
Income tax expense	—		—		—		—		—		—		270		270
Interest expense and related charges (a)	16		(7)		10		—		5		—		696		720
Depreciation and amortization (b)	204		438		506		14		59		—		45		1,266
EBITDA before Adjustments	223		1,777		779		93		230		(103)		(51)		2,948
Unrealized net (gain) loss resulting from hedging transactions	192		(616)		(74)		(45)		(82)		—		—		(625)
Generation plant retirement expenses	—		—		—		—		11		38		—		49
Fresh start/purchase accounting impacts	17		—		4		(3)		10		(2)		—		26
Impacts of Tax Receivable Agreement	—		—		—		—		—		—		26		26

Non-cash compensation expenses	—		—		—		—		—		—		36		36
Transition and merger expenses	24		11		5		1		26		—		15		82
Other, net	7		11		20		2		10		3		(41)		12
Adjusted EBITDA	$	463	$	1,183	$	734	$	48	$	205	$	(64)	$	(15)	$	2,554

____________

(a)Includes $275 million of unrealized mark-to-market net losses on interest rate swaps.

(b)Includes nuclear fuel amortization of $53 million in Texas segment.

Table of Contents

Retail Segment — Three and Nine Months Ended September 30, 2020 Compared to Three and Nine Months Ended September 30, 2019


	Three Months Ended September 30,						Favorable (Unfavorable) Change		Nine Months Ended September 30,						Favorable (Unfavorable) Change
	2020			2019					2020			2019
Operating revenues:
Revenues in ERCOT	$	1,839		$	1,600		$	239	$	4,536		$	3,716		$	820
Revenues in Northeast/Midwest	683			576			107		1,862			1,239			623
Amortization expense	7			12			(5)		(1)			(7)			6
Other revenues	(8)			19			(27)		(12)			66			(78)
Total operating revenues	2,521			2,207			314		6,385			5,014			1,371
Fuel, purchased power costs and delivery fees:
Purchases from affiliates	(1,859)			(1,451)			(408)		(3,761)			(2,813)			(948)
Unrealized net gains (losses) on hedging activities with affiliates	324			757			(433)		126			(209)			335

Delivery fees	(570)			(497)			(73)		(1,446)			(1,192)			(254)
Other costs (a)	(14)			(167)			153		(52)			(169)			117
Total fuel, purchased power costs and delivery fees	(2,119)			(1,358)			(761)		(5,133)			(4,383)			(750)









Net income (loss)	$	109		$	573		$	(464)	$	433		$	3		$	430










Adjusted EBITDA	$	(140)		$	(87)		$	(53)	$	572		$	463		$	109
Retail sales volumes (GWh):
Retail electricity sales volumes:
Sales volumes in ERCOT	16,573			15,251			1,322		41,547			35,727			5,820
Sales volumes in Northeast/Midwest	11,103			9,193			1,910		28,640			21,756			6,884
Total retail electricity sales volumes	27,676			24,444			3,232		70,187			57,483			12,704
Weather (North Texas average) - percent of normal (b):
Cooling degree days	89.0		%	106.0		%			91.0		%	96.0		%
Heating degree days	—		%	—		%			88.0		%	111.0		%

____________

(a)For the three and nine months ended September 30, 2020, includes third-party fuel and power purchases of $13 million and $50 million, respectively.

(b)Weather data is obtained from Weatherbank, Inc. For the three and nine months ended September 30, 2020, normal is defined as the average over the 10-year period from September 2010 to September 2019. For the three and nine months ended September 30, 2019, normal is defined as the average over the 10-year period from September 2009 to September 2018.

Table of Contents

Net income decreased by $464 million to $109 million and Adjusted EBITDA decreased by $53 million to negative Adjusted EBITDA of $140 million in the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Net income increased by $430 million to $433 million and Adjusted EBITDA increased by $109 million to $572 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.


	Three Months Ended September 30, 2020 Compared to 2019		Nine Months Ended September 30, 2020 Compared to 2019

Margin primarily driven by the addition of Crius acquired in July 2019 and Ambit acquired in November 2019	(3)		$	250

Other driven by higher SG&A expense (including bad debt expense) primarily due to the addition of Crius and Ambit	(50)		(141)
Change in Adjusted EBITDA	$	(53)	$	109
Change in depreciation and amortization expenses driven by Crius/Ambit intangibles	25		(17)
(Unfavorable)/favorable impact of lower unrealized net gains/losses on hedging activities	(453)		306
Lower transition and merger and other expenses	17		32
Change in net income (loss)	$	(464)	$	430

Generation — Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019


	Three Months Ended September 30,
	Texas				East				West				Sunset
	2020		2019		2020		2019		2020		2019		2020		2019
Operating revenues:
Electricity sales	$	206	$	321	$	210	$	332	$	78	$	73	$	231	$	230
Capacity revenue from ISO/RTO	—		—		(25)		9		—		—		40		40
Sales to affiliates	1,307		1,090		436		275		1		—		116		86
Rolloff of unrealized net gains (losses) representing positions settled in the current period	138		380		41		56		4		(6)		(41)		(32)
Unrealized net gains (losses) on hedging activities	129		(415)		67		(44)		1		28		(44)		(56)
Unrealized net gains (losses) on hedging activities with affiliates	(189)		(646)		(85)		(75)		—		—		(48)		(37)
Other revenues	—		1		—		—		—		—		(4)		(4)
Operating revenues	1,591		731		644		553		84		95		250		227
Fuel, purchased power costs and delivery fees:
Fuel for generation facilities and purchased power costs	(311)		(341)		(301)		(298)		(41)		(39)		(217)		(193)
Fuel for generation facilities and purchased power costs from affiliates	2		—		(4)		(2)		—		—		1		1
Unrealized (gains) losses from hedging activities	(1)		(1)		19		4		4		(1)		11		(3)
Unrealized net (gains) losses on hedging activities with affiliates	—		—		(2)		—		—		—		—		—
Ancillary and other costs	(36)		(87)		(7)		(3)		(1)		—		(4)		(2)
Fuel, purchased power costs and delivery fees	(346)		(429)		(295)		(299)		(38)		(40)		(209)		(197)










Net income (loss)	$	925	$	(10)	$	100	$	14	$	29	$	41	$	(385)	$	(97)












Adjusted EBITDA	$	1,000	$	823	$	245	$	254	$	23	$	24	$	67	$	73

Table of Contents


	Three Months Ended September 30,
	Texas						East				West				Sunset
	2020			2019			2020		2019		2020		2019		2020		2019
Production volumes (GWh):
Natural gas facilities	10,722			12,924			16,248		15,484		1,347		1,320
Lignite and coal facilities	8,051			7,833											8,685		8,667
Nuclear facilities	5,270			5,274
Solar/Battery facilities	133			137
Capacity factors:
CCGT facilities	58.7		%	69.5		%	66.4	%	63.5	%	59.7	%	58.6	%
Lignite and coal facilities	81.0		%	78.8		%									59.4	%	59.3	%
Nuclear facilities	103.8		%	103.8		%
Weather - percent of normal (a):
Cooling degree days	96.0		%	108.0		%	108.0	%	109.0	%	114.0	%	110.0	%	102.0	%	119.0	%
Heating degree days	—		%	—		%	144.0	%	47.0	%	—	%	—	%	98.0	%	—	%

	Generation
	Three Months Ended September 30,
	2020			2019
Market pricing:
Average ERCOT North power price ($/MWh)	$	24.86		$	71.13
Average NYMEX Henry Hub natural gas price ($/MMBTU)	$	1.95		$	2.33
Average Market On-Peak Power Prices ($MWh) (b):
PJM West Hub	$	28.35		$	31.17
AEP Dayton Hub	$	28.44		$	32.28
NYISO Zone C	$	23.09		$	25.85
Massachusetts Hub	$	27.22		$	29.69
Indiana Hub	$	29.84		$	32.00
Northern Illinois Hub	$	25.80		$	29.79
Average natural gas price (c):
TetcoM3 ($/MMBtu)	$	1.45		$	1.87
Algonquin Citygates ($/MMBtu)	$	1.52		$	2.09

____________

(a)Reflects cooling degree days or heating degree days for the region based on Weather Services International (WSI) data.

(b)Reflects the average of day-ahead quoted prices for the periods presented and does not necessarily reflect prices we realized.

(c)Reflects the average of daily quoted prices for the periods presented and does not reflect costs incurred by us.

Table of Contents

The following table presents changes in net income (loss) and Adjusted EBITDA for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.


	Three Months Ended September 30, 2020 Compared to 2019
	Texas		East		West		Sunset

Favorable/(unfavorable) change in revenue net of fuel	$	196	$	(3)	$	5	$	(1)
Favorable/(unfavorable) change in other operating costs	(18)		(3)		(2)		1
Favorable/(unfavorable) change in selling. general and administrative expenses	(1)		3		(4)		(8)
Other	—		(6)		—		2
Change in Adjusted EBITDA	$	177	$	(9)	$	(1)	$	(6)
Favorable/(unfavorable) change in depreciation and amortization	8		(11)		—		8
Change in unrealized net (gains)/losses on hedging activities	760		89		(12)		16
Impairment of long-lived assets	—		—		—		(272)
Generation plant retirement expenses	—		—		—		(32)
Fresh start/purchase accounting impacts	—		(6)		(1)		8
Transition and merger expenses	5		6		—		2
Other (including interest and COVID-19 related expenses)	(15)		17		2		(12)
Change in Net income (loss)	$	935	$	86	$	(12)	$	(288)

The change in Texas segment results was driven by improved realized margin through hedging activities and plant optimization efforts, and higher unrealized gains, partially offset by higher operating expenses and other costs.

The change in East segment results was driven by higher unrealized hedging gains and improved realized margin through hedging activities and plant optimization efforts, partially offset by lower capacity revenue and increased depreciation expenses.

The change in West segment results was driven by lower unrealized gains.

The change in Sunset segment results was driven by impairment of assets related to our Kincaid and Zimmer coal generation facilities and related generation plant retirement expenses, partially offset by lower unrealized hedging losses.

Generation — Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019


	Nine Months Ended September 30,
	Texas				East				West				Sunset
	2020		2019		2020		2019		2020		2019		2020		2019
Operating revenues:
Electricity sales	$	676	$	908	$	582	$	1,039	$	204	$	214	$	566	$	625
Capacity revenue from ISO/RTO	—		—		(34)		184		—		—		124		156
Sales to affiliates	2,185		1,840		1,287		750		3		—		286		223
Rolloff of unrealized net gains (losses) representing positions settled in the current period	74		370		138		19		(21)		(5)		(173)		(64)
Unrealized net gains on hedging activities	322		100		(10)		(45)		25		47		75		181
Unrealized net gains (losses) on hedging activities with affiliates	66		136		(119)		89		—		—		(74)		(15)
Other revenues	—		2		1		(3)		—		3		(16)		(13)
Operating revenues	3,323		3,356		1,845		2,033		211		259		788		1,093
Fuel, purchased power costs and delivery fees:
Fuel for generation facilities and purchased power costs	(730)		(928)		(888)		(1,039)		(110)		(134)		(492)		(514)

Table of Contents


	Nine Months Ended September 30,
	Texas						East						West						Sunset
	2020			2019			2020			2019			2020			2019			2020			2019
Fuel for generation facilities and purchased power costs from affiliates	5			—			(8)			(2)			—			—			2			1
Unrealized (gains) losses from hedging activities	(13)			10			28			10			(3)			3			15			(19)

Ancillary and other costs	(102)			(144)			(29)			(5)			(2)			—			(5)			(8)
Fuel, purchased power costs and delivery fees	(840)			(1,062)			(897)			(1,036)			(115)			(131)			(480)			(540)










Net income (loss)	$	1,482		$	1,346		$	119		$	263		$	49		$	79		$	(465)		$	166












Adjusted EBITDA	$	1,477		$	1,183		$	691		$	734		$	59		$	48		$	185		$	205
Production volumes (GWh):
Natural gas facilities	27,111			30,255			41,682			41,582			3,755			3,530
Lignite and coal facilities	20,330			20,613															19,083			24,289
Nuclear facilities	15,045			13,951
Solar/Battery facilities	341			354
Capacity factors:
CCGT facilities	50.7		%	55.9		%	57.8		%	58.5		%	56.1		%	52.8		%
Lignite and coal facilities	69.0		%	69.9		%													44.0		%	56.0		%
Nuclear facilities	99.8		%	92.6		%
Weather - percent of normal (a):
Cooling degree days	98.0		%	100.0		%	106.0		%	103.0		%	126.0		%	105.0		%	103.0		%	110.0		%
Heating degree days	81.0		%	110.0		%	93.0		%	99.0		%	91.0		%	117.0		%	89.0		%	98.0		%

	Generation
	Nine Months Ended September 30,
	2020			2019
Market pricing:
Average ERCOT North power price ($/MWh)	$	20.25		$	40.38
Average NYMEX Henry Hub natural gas price ($/MMBTU)	$	1.82		$	2.57
Average Market On-Peak Power Prices ($MWh) (b):
PJM West Hub	$	23.91		$	31.22
AEP Dayton Hub	$	24.06		$	31.27
NYISO Zone C	$	19.26		$	27.15
Massachusetts Hub	$	24.06		$	34.83
Indiana Hub	$	26.23		$	31.87
Northern Illinois Hub	$	22.12		$	28.81
Average natural gas price (c):
TetcoM3 ($/MMBtu)	$	1.55		$	2.47
Algonquin Citygates ($/MMBtu)	$	1.75		$	3.16

____________

(a)Reflects cooling degree days or heating degree days for the region based on Weather Services International (WSI) data.

(b)Reflects the average of day-ahead quoted prices for the periods presented and does not necessarily reflect prices we realized.

Table of Contents

(c)Reflects the average of daily quoted prices for the periods presented and does not reflect costs incurred by us.

The following table presents changes in net income (loss) and Adjusted EBITDA for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.


	Nine Months Ended September 30, 2020 Compared to 2019
	Texas		East		West		Sunset

Favorable/(unfavorable) change in revenue net of fuel	$	363	$	(14)	$	15	$	(2)
Favorable/(unfavorable) change in other operating costs	(43)		(1)		—		(1)
Unfavorable change in selling. general and administrative expenses	(8)		1		(4)		(9)
Other	(18)		(29)		—		(8)
Change in Adjusted EBITDA	$	294	$	(43)	$	11	$	(20)
Favorable/(unfavorable) change in depreciation and amortization	11		(34)		—		(14)
Change in unrealized net (gains)/losses on hedging activities	(167)		(37)		(44)		(239)
Impairment of long-lived assets	—		—		—		(356)
Generation plant retirement expenses	—		—		—		(32)
Fresh start/purchase accounting impacts	4		(19)		(3)		(4)
Transition and merger expenses	13		4		1		26
Loss on disposal of investment in NELP	—		(30)		—		—
Other (including interest and COVID-19 related expenses)	(19)		15		5		8
Change in Net income (loss)	$	136	$	(144)	$	(30)	$	(631)

The change in Texas segment results was driven by higher realized prices through hedging activities and plant optimization efforts, partially offset by lower unrealized hedging gains, lower insurance reimbursement and COVID-19 related expenses in the current year.

The change in East segment results was driven by lower unrealized hedging gains, lower capacity revenue, loss on disposal of equity method investment in NELP for 100% ownership of North Jersey Energy Associates (see Note 18 to the Financial Statements) and COVID-19 related expenses in the current year.

The change in West segment results was driven by lower unrealized hedging gains, partially offset by higher realized prices through hedging activities and plant optimization efforts.

The change in Sunset segment results was driven by impairment of assets related to our Kincaid, Zimmer and Joppa/EEI coal generation facilities and related generation plant retirement expenses, higher unrealized hedging losses, lower capacity revenue, and higher operating costs.

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Asset Closure Segment — Three and Nine Months Ended September 30, 2020 Compared to Three and Nine Months Ended September 30, 2019


	Three Months Ended September 30,				Favorable (Unfavorable) Change		Nine Months Ended September 30,				Favorable (Unfavorable) Change
	2020		2019				2020		2019
Operating revenues	$	—	$	74	$	(74)	$	—	$	217	$	(217)
Fuel, purchased power costs and delivery fees	—		(57)		57		—		(158)		158
Operating costs	(47)		(58)		11		(65)		(129)		64
Depreciation and amortization	(10)		—		(10)		(10)		—		(10)
Selling, general and administrative expenses	(8)		(12)		4		(20)		(33)		13


Operating loss	(65)		(53)		(12)		(95)		(103)		8
Other income	5		1		4		6		2		4
Other deductions	—		(2)		2		(2)		(2)		—


Loss before income taxes	(60)		(54)		(6)		(91)		(103)		12

Net loss	$	(60)	$	(54)	$	(6)	$	(91)	$	(103)	$	12






Adjusted EBITDA	$	(48)	$	(17)	$	(31)	$	(79)	$	(64)	$	(15)
Production volumes (GWh)	—		2,276		(2,276)		—		6,568		(6,568)

Results for the Asset Closure segment primarily reflect the retirement of the Coffeen, Duck Creek, Havana and Hennepin plants in November and December 2019 (see Note 4 to the Financial Statements). Operating costs for the three and nine months ended September 30, 2020 included ongoing costs associated with the decommissioning and reclamation of retired plants and mines.

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Energy-Related Commodity Contracts and Mark-to-Market Activities

The table below summarizes the changes in commodity contract assets and liabilities for the nine months ended September 30, 2020 and 2019. The net change in these assets and liabilities, excluding "other activity" as described below, reflects $444 million and $625 million in unrealized net gains for the nine months ended September 30, 2020 and 2019, respectively, arising from mark-to-market accounting for positions in the commodity contract portfolio.


	Nine Months Ended September 30,
	2020		2019
Commodity contract net liability at beginning of period	$	(279)	$	(850)
Settlements/termination of positions (a)	74		321
Changes in fair value of positions in the portfolio (b)	370		304
Acquired commodity contracts (c)	—		(22)
Other activity (d)	7		(131)
Commodity contract net asset (liability) at end of period	$	172	$	(378)

____________

(a)Represents reversals of previously recognized unrealized gains and losses upon settlement/termination (offsets realized gains and losses recognized in the settlement period). The nine months ended September 30, 2020 and 2019 include reversals of $1 million and $1 million of previously recorded unrealized losses related to Vistra beginning balances, respectively. The nine months ended September 30, 2020 and 2019 also include reversals of $7 million and $116 million, respectively, of previously recorded unrealized losses related to commodity contracts acquired in the Merger, Crius Transaction and Ambit Transaction. Excludes changes in fair value in the month the position settled as well as amounts related to positions entered into, and settled, in the same month.

(b)Represents unrealized net gains (losses) recognized, reflecting the effect of changes in fair value. Excludes changes in fair value in the month the position settled as well as amounts related to positions entered into, and settled, in the same month.

(c)Includes fair value of commodity contracts acquired on the Crius Acquisition Date in 2019 (see Note 2 to the Financial Statements).

(d)Represents changes in fair value of positions due to receipt or payment of cash not reflected in unrealized gains or losses. Amounts are generally related to premiums related to options purchased or sold as well as certain margin deposits classified as settlement for certain transactions executed on the CME.

Maturity Table — The following table presents the net commodity contract asset arising from recognition of fair values at September 30, 2020, scheduled by the source of fair value and contractual settlement dates of the underlying positions.


	Maturity dates of unrealized commodity contract net asset at September 30, 2020
	Less than 1 year		1-3 years		4-5 years		Excess of 5 years		Total
Prices actively quoted	$	63	$	(62)	$	(1)	$	—	$	—
Prices provided by other external sources	33		24		(1)		—		56
Prices based on models	44		85		11		(24)		116
Total	$	140	$	47	$	9	$	(24)	$	172

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FINANCIAL CONDITION

Operating Cash Flows

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 — Cash provided by operating activities totaled $2.350 billion and $1.823 billion for the nine months ended September 30, 2020 and 2019, respectively. The favorable change of $527 million was primarily driven by increased cash from operations and a decrease in cash margin deposits posted with third-parties.

Depreciation and amortization expense reported as a reconciling adjustment in the condensed consolidated statements of cash flows exceeds the amount reported in the condensed consolidated statements of operations by $228 million and $181 million for the nine months ended September 30, 2020 and 2019, respectively. The difference represented amortization of nuclear fuel, which is reported as fuel costs in the condensed consolidated statements of operations consistent with industry practice, and amortization of intangible net assets and liabilities that are reported in various other condensed consolidated statements of operations line items including operating revenues and fuel and purchased power costs and delivery fees.

Investing Cash Flows

Cash used in investing activities totaled $927 million and $979 million for the nine months ended September 30, 2020 and 2019, respectively. Capital expenditures totaled $838 million and $474 million for the nine months ended September 30, 2020 and 2019, respectively. Cash used in investing activities for the nine months ended September 30, 2020 and 2019 also reflected net purchases of environmental allowances of $119 million and $137 million, respectively. For the nine months ended September 30, 2020 and 2019, capital expenditures consisted of:


	Nine Months Ended September 30,
	2020		2019
Capital expenditures, including LTSA prepayments	$	439	$	348
Nuclear fuel purchases	$	69	$	33
Growth and development expenditures	$	330	$	93
Capital expenditures	$	838	$	474

Financing Cash Flows

Cash used in financing activities totaled $1,348 million and $784 million for the nine months ended September 30, 2020 and 2019, respectively. The change was primarily driven by:

•issuance of $4.6 billion principal amount of Vistra Operations senior secured and unsecured notes in 2019;

•redemption of $166 million principal amount of outstanding of 8.125% senior notes in July 2020;

•redemption of $500 million principal amount of outstanding of 5.875% senior notes in June 2020;

•net repayment of $350 million in short-term borrowings under the Revolving Credit Facility in 2020;

•repayment of $100 million of term loans under the Vistra Operations Credit Facility in March 2020, and

•redemption of $81 million principal amount of outstanding of 8.000% senior notes in January 2020,

partially offset by:

•cash tender offers and early redemptions to purchase approximately $2.5 billion of senior unsecured notes assumed in the Merger in 2019;

•repayment of approximately $2.0 billion of term loans under the Vistra Operations Credit Facilities in 2019;

•$632 million in cash paid for share repurchases in 2019, and

•$153 million decrease in debt tender offer and other financing fees in 2020 compared to 2019.

Debt Activity

See Note 11 to the Financial Statements for details of the Vistra Operations Credit Facilities and other long-term debt.

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Available Liquidity

The following table summarizes changes in available liquidity for the nine months ended September 30, 2020:


	September 30, 2020		December 31, 2019		Change
Cash and cash equivalents	$	500	$	300	$	200
Vistra Operations Credit Facilities — Revolving Credit Facility	2,057		1,426		631

Total available liquidity	$	2,557	$	1,726	$	831

The $831 million increase in available liquidity for the nine months ended September 30, 2020 was primarily driven by cash from operations, repayments of cash borrowings under the Revolving Credit Facility and a reduction in letters of credit outstanding under the Revolving Credit Facility reflecting the issuance of $166 million of letters of credit under the new Secured LOC Facilities, partially offset by $838 million of capital expenditures (including LTSA prepayments, nuclear fuel and development and growth expenditures), $747 million principal amount of outstanding Vistra senior unsecured notes redeemed in 2020, $100 million of term loans under the Vistra Operations Credit Facility repaid in March 2020, $81 million principal amount of outstanding of 8.000% senior notes redeemed in January 2020 and $198 million in dividends paid to shareholders.

Based upon our current internal financial forecasts, we believe that we will have sufficient liquidity to fund our anticipated cash requirements, including those related to our capital allocation initiatives, through at least the next 12 months. Our operational cash flows tend to be seasonal and weighted toward the second half of the year.

Liquidity Effects of Commodity Hedging and Trading Activities

We have entered into commodity hedging and trading transactions that require us to post collateral if the forward price of the underlying commodity moves such that the hedging or trading instrument we hold has declined in value. We use cash, letters of credit and other forms of credit support to satisfy such collateral posting obligations. See Note 11 to the Financial Statements for discussion of the Vistra Operations Credit Facilities.

Exchange cleared transactions typically require initial margin (i.e., the upfront cash and/or letter of credit posted to take into account the size and maturity of the positions and credit quality) in addition to variation margin (i.e., the daily cash margin posted to take into account changes in the value of the underlying commodity). The amount of initial margin required is generally defined by exchange rules. Clearing agents, however, typically have the right to request additional initial margin based on various factors, including market depth, volatility and credit quality, which may be in the form of cash, letters of credit, a guaranty or other forms as negotiated with the clearing agent. Cash collateral received from counterparties is either used for working capital and other business purposes, including reducing borrowings under credit facilities, or is required to be deposited in a separate account and restricted from being used for working capital and other corporate purposes. With respect to over-the-counter transactions, counterparties generally have the right to substitute letters of credit for such cash collateral. In such event, the cash collateral previously posted would be returned to such counterparties, which would reduce liquidity in the event the cash was not restricted.

At September 30, 2020, we received or posted cash and letters of credit for commodity hedging and trading activities as follows:

•$155 million in cash has been posted with counterparties as compared to $202 million posted at December 31, 2019;

•$11 million in cash has been received from counterparties as compared to $8 million received at December 31, 2019;

•$1.034 billion in letters of credit have been posted with counterparties as compared to $1.150 billion posted at December 31, 2019, and

•$20 million in letters of credit have been received from counterparties as compared to $17 million received at December 31, 2019.

Income Tax Payments

In the next 12 months, we do not expect to make federal income tax payments due to Vistra's use of NOL carryforwards. We expect to make approximately $35 million in state income tax payments, offset by $11 million in state tax refunds, and no TRA payments in the next 12 months. In addition, we expect to receive approximately $129 million in AMT refundable credits in the next 12 months.

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For the nine months ended September 30, 2020, we received a refund of $37 million related to alternative minimum tax credits claimed on Dynegy tax returns. For the nine months ended September 30, 2020, there were no federal income tax payments, $32 million in state income tax payments, $6 million in state income tax refunds and no TRA payments.

Financial Covenants

The Credit Facilities Agreement includes a covenant, solely with respect to the Revolving Credit Facility and solely during a compliance period (which, in general, is applicable when the aggregate revolving borrowings and issued revolving letters of credit (in excess of $300 million) exceed 30% of the revolving commitments), that requires the consolidated first-lien net leverage ratio not exceed 4.25 to 1.00. Although the period ended September 30, 2020 was not a compliance period, we would have been in compliance with this financial covenant if it was required to be tested at such date.

See Note 11 to the Financial Statements for discussion of other covenants related to the Vistra Operations Credit Facilities.

Collateral Support Obligations

The RCT has rules in place to assure that parties can meet their mining reclamation obligations. In September 2016, the RCT agreed to a collateral bond of up to $975 million to support Luminant's reclamation obligations. The collateral bond is effectively a first lien on all of Vistra Operations' assets (which ranks pari passu with the Vistra Operations Credit Facilities) that contractually enables the RCT to be paid (up to $975 million) before the other first-lien lenders in the event of a liquidation of our assets. Collateral support relates to land mined or being mined and not yet reclaimed as well as land for which permits have been obtained but mining activities have not yet begun and land already reclaimed but not released from regulatory obligations by the RCT, and includes cost contingency amounts.

The PUCT has rules in place to assure adequate creditworthiness of each REP, including the ability to return customer deposits, if necessary. Under these rules, at September 30, 2020, Vistra has posted letters of credit in the amount of $98 million with the PUCT, which is subject to adjustments.

The ISOs/RTOs we operate in have rules in place to assure adequate creditworthiness of parties that participate in the markets operated by those ISOs/RTOs. Under these rules, Vistra has posted collateral support totaling $351 million in the form of letters of credit, $10 million in the form of a surety bond and $2 million of cash at September 30, 2020 (which is subject to daily adjustments based on settlement activity with the ISOs/RTOs).

Material Cross Default/Acceleration Provisions

Certain of our contractual arrangements contain provisions that could result in an event of default if there was a failure under financing arrangements to meet payment terms or to observe covenants that could result in an acceleration of payments due. Such provisions are referred to as "cross default" or "cross acceleration" provisions.

A default by Vistra Operations or any of its restricted subsidiaries in respect of certain specified indebtedness in an aggregate amount in excess of $300 million may result in a cross default under the Vistra Operations Credit Facilities. Such a default would allow the lenders to accelerate the maturity of outstanding balances (approximately $2.6 billion at September 30, 2020) under such facilities.

Each of Vistra Operations' (or its subsidiaries') commodity hedging agreements and interest rate swap agreements that are secured with a lien on its assets on a pari passu basis with the Vistra Operations Credit Facilities lenders contains a cross default provision. An event of a default by Vistra Operations or any of its subsidiaries relating to indebtedness equal to or above a threshold defined in the applicable agreement that results in the acceleration of such debt, would give such counterparty under these hedging agreements the right to terminate its hedge or interest rate swap agreement with Vistra Operations (or its applicable subsidiary) and require all outstanding obligations under such agreement to be settled.

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Under (i) the Vistra Operations Senior Unsecured Indentures and the Vistra Operations Senior Secured Indenture, a default under any document evidencing indebtedness for borrowed money by Vistra Operations or any Guarantor Subsidiary for failure to pay principal when due at final maturity or that results in the acceleration of such indebtedness in an aggregate amount of $300 million or more may have resulted in a cross default under the Vistra Operations Senior Unsecured Notes, the Senior Secured Notes, the Vistra Operations Credit Facilities, the Receivables Facility, the Alternate LOC Facilities, and other current or future documents evidencing any indebtedness for borrowed money by the applicable borrower or issuer, as the case may be, and the applicable Guarantor Subsidiaries party thereto.

Additionally, we enter into energy-related physical and financial contracts, the master forms of which contain provisions whereby an event of default or acceleration of settlement would occur if we were to default under an obligation in respect of borrowings in excess of thresholds, which may vary by contract.

The Receivables Facility contains a cross-default provision. The cross default provision applies, among other instances, if Vistra Operations, the performance guarantor, fails to make a payment of principal or interest on any indebtedness that is outstanding in a principal amount of at least $300 million, or, in the case of TXU Energy, the originator and servicer, in a principal amount of at least $50 million, or if other events occur or circumstances exist under such indebtedness which give rise to a right of the debtholder to accelerate such indebtedness, or if such indebtedness becomes due before its stated maturity. If this cross-default provision is triggered, a termination event under the Receivables Facility would occur and the Receivables Facility may be terminated.

The Repurchase Facility contains a cross-default provision. The cross-default provision applies, among other instances, if an event of default (or similar event) occurs under the Receivables Facility or the Vistra Operations Credit Facilities. If this cross-default provision is triggered, a termination event under the Repurchase Facility would occur and the Repurchase Facility may be terminated.

Under the Alternate LOC Facilities, a default under any document evidencing indebtedness for borrowed money by Vistra Operations or any Guarantor Subsidiary for failure to pay principal when due at final maturity or that results in the acceleration of such indebtedness in an aggregate amount of $300 million or more, may result in a termination of the Alternate LOC Facilities.

Under the Secured LOC Facilities, a default under any document evidencing indebtedness for borrowed money by Vistra Operations or any Guarantor Subsidiary for failure to pay principal when due at final maturity or that results in the acceleration of such indebtedness in an aggregate amount of $300 million or more, may result in a termination of the Secured LOC Facilities.

Guarantor Summary Financial Information

During the three months ended September 30, 2020, our 8.125% senior notes were guaranteed by substantially all of our wholly owned subsidiaries. We fully redeemed the 8.125% senior notes on in July 2020. The following tables summarize the combined financial information of (i) Vistra Corp. (Parent), which is the ultimate parent company and issuer of the senior notes with effect as of the Merger Date, on a stand-alone, unconsolidated basis and (ii) the guarantor subsidiaries of Vistra (Guarantor Subsidiaries). The Guarantor Subsidiaries consist of the wholly owned subsidiaries, which jointly, severally, fully and unconditionally, guarantee the payment obligations under the senior notes. See Note 11 to the Financial Statements for discussion of the senior notes and Note 13 to the Financial Statements for discussion of dividend restrictions of Vistra Operations (a guarantor subsidiary of Vistra) and Parent.

This financial information should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto of Vistra. Transactions between the Parent and the Guarantor Subsidiaries have been eliminated. The inclusion of Vistra's subsidiaries as Guarantor Subsidiaries in the summary financial information is determined as of the most recent balance sheet date presented.

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The Parent files a consolidated U.S. federal income tax return. All consolidated income tax expense or benefits and deferred tax assets and liabilities are included in the Guarantor summary financial information presented below.


	Nine Months Ended September 30, 2020
Revenues	$	8,550
Operating income	$	1,493
Net income	$	705
Net income attributable to Vistra	$	705


	September 30, 2020			September 30, 2020
Current assets	$	2,781	Current liabilities	$	2,267
Noncurrent assets	21,275		Noncurrent liabilities	13,486
Total assets	$	24,056	Total liabilities	$	15,753
			Noncontrolling interest	$	—

Guarantees

See Note 12 to the Financial Statements for discussion of guarantees.

OFF–BALANCE SHEET ARRANGEMENTS

As of September 30, 2020, we have no off-balance sheet arrangements which are expected to have any material impact on our financial condition, results of operations or liquidity.

COMMITMENTS AND CONTINGENCIES

See Note 12 to the Financial Statements for discussion of commitments and contingencies.

CHANGES IN ACCOUNTING STANDARDS

See Note 1 to the Financial Statements for discussion of changes in accounting standards.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk that in the normal course of business we may experience a loss in value due to changes in market conditions that affect economic factors such as commodity prices, interest rates and counterparty credit. Our exposure to market risk is affected by several factors, including the size, duration and composition of our energy and financial portfolio, as well as the volatility and liquidity of markets.

Risk Oversight

We manage the commodity price, counterparty credit and commodity-related operational risk related to the competitive energy business within limitations established by senior management and in accordance with overall risk management framework established and overseen by the Company's board of directors (Board) and the sustainability and risk committee of the Board, as applicable. Interest rate risk is managed centrally by our treasury function. Market risks are monitored by risk management groups that operate independently of the wholesale commercial operations, utilizing defined practices and analytical methodologies. These techniques measure the risk of change in value of the portfolio of contracts and the hypothetical effect on this value from changes in market conditions and include, but are not limited to, position reporting and review, Value at Risk (VaR) methodologies and stress test scenarios. Key risk control activities include, but are not limited to, transaction review and approval (including credit review), operational and market risk measurement, transaction authority oversight, validation of transaction capture, market price validation and reporting, and portfolio valuation and reporting.

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Commodity Price Risk

Our business is subject to the inherent risks of market fluctuations in the price of electricity, natural gas and other energy-related products it markets or purchases. We actively manage the portfolio of generation assets, fuel supply and retail sales load to mitigate the near-term impacts of these risks on results of operations. Similar to other participants in the market, we cannot fully manage the long-term value impact of structural declines or increases in natural gas and power prices.

In managing energy price risk, we enter into a variety of market transactions including, but not limited to, short- and long-term contracts for physical delivery, exchange-traded and over-the-counter financial contracts and bilateral contracts with customers. Activities include hedging, the structuring of long-term contractual arrangements and proprietary trading. We continuously monitor the valuation of identified risks and adjust positions based on current market conditions.

VaR Methodology — A VaR methodology is used to measure the amount of market risk that exists within the portfolio under a variety of market conditions. The resultant VaR produces an estimate of a portfolio's potential for loss given a specified confidence level and considers, among other things, market movements utilizing standard statistical techniques given historical and projected market prices and volatilities.

Parametric processes are used to calculate VaR and are considered by management to be the most effective way to estimate changes in a portfolio's value based on assumed market conditions for liquid markets. The use of this method requires a number of key assumptions, such as use of (i) an assumed confidence level, (ii) an assumed holding period (i.e., the time necessary for management action, such as to liquidate positions) and (iii) historical estimates of volatility and correlation data. The table below details a VaR measure related to various portfolios of contracts.

VaR for Underlying Generation Assets and Energy-Related Contracts — This measurement estimates the potential loss in value, due to changes in market conditions, of all underlying generation assets and contracts, based on a 95% confidence level and an assumed holding period of 60 days. The forward period covered by this calculation includes the current and subsequent calendar year at the time of calculation.


	Nine Months Ended September 30, 2020		Year Ended December 31, 2019
Month-end average VaR	$	251	$	263
Month-end high VaR	$	361	$	520
Month-end low VaR	$	185	$	103

The VaR risk measures in 2020 were primarily comparable to the prior year. Month-end high VaR was lower in 2020 due to lower prices and a decrease in volatility in ERCOT as compared to the prior year.

Interest Rate Risk

At September 30, 2020, the potential reduction of annual pretax earnings over the next twelve months due to a one percentage-point (100 basis points) increase in floating interest rates on long-term debt totaled approximately $9 million, taking into account the interest rate swaps discussed in Note 11 to Financial Statements.

Credit Risk

Credit risk relates to the risk of loss associated with nonperformance by counterparties. We minimize credit risk by evaluating potential counterparties, monitoring ongoing counterparty risk and assessing overall portfolio risk. This includes review of counterparty financial condition, current and potential credit exposures, credit rating and other quantitative and qualitative credit criteria. We also employ certain risk mitigation practices, including utilization of standardized master agreements that provide for netting and setoff rights, as well as credit enhancements such as margin deposits and customer deposits, letters of credit, parental guarantees and surety bonds. See Note 15 to the Financial Statements for further discussion of this exposure.

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Bankruptcies — We are party to (i) certain gas transportation agreements with PG&E and (ii) a long-term resource adequacy contract with PG&E in connection with the Moss Landing battery storage project, which was originally approved by the California Public Utilities Commission (CPUC) in November 2018. PG&E filed for Chapter 11 bankruptcy protection in January 2019. In November 2019, the bankruptcy court approved PG&E's motion requesting approval of the assumption of the resource adequacy contract subject to the CPUC approving the terms of an amendment to the resource adequacy contract, and the CPUC approved the terms of the amendment in January 2020. PG&E emerged from bankruptcy protection in July 2020.

As of September 30, 2020, we had no outstanding accounts receivable from PG&E and accordingly, we have not recorded a reserve related to the pre-petition receivables. While our assumptions and conclusions may change, we could have future impairment losses or be required to seek alternative, higher-cost fuel transportation methods if any of the terms of the gas transportation agreements are not honored by PG&E or the gas transportation agreements are rejected through the bankruptcy process.

Credit Exposure — Our gross credit exposure (excluding collateral impacts) associated with retail and wholesale trade accounts receivable and net derivative assets arising from commodity contracts and hedging and trading activities totaled $1.502 billion at September 30, 2020.

At September 30, 2020, Retail segment credit exposure totaled $1.110 billion, including $1.108 billion of trade accounts receivable and $2 million related to derivative assets. Cash deposits and letters of credit held as collateral for these receivables totaled $76 million, resulting in a net exposure of $1.034 billion. Allowances for uncollectible accounts receivable are established for the potential loss from nonpayment by these customers based on historical experience, market or operational conditions and changes in the financial condition of large business customers.

At September 30, 2020, aggregate Texas, East and Sunset segments credit exposure totaled $392 million including $287 million related to derivative assets and $105 million of trade accounts receivable, after taking into account master netting agreement provisions but excluding collateral impacts.

Including collateral posted to us by counterparties, our net Texas, East and Sunset segments exposure was $386 million, substantially all of which is with investment grade customers as seen in the following table that presents the distribution of credit exposure at September 30, 2020. Credit collateral includes cash and letters of credit but excludes other credit enhancements such as guarantees or liens on assets.


	Exposure Before Credit Collateral		Credit Collateral		Net Exposure
Investment grade	$	357	$	—	$	357
Below investment grade or no rating	35		6		29
Totals	$	392	$	6	$	386

Significant (i.e., 10% or greater) concentration of credit exposure exists with four counterparties, which represented an aggregate $230 million, or 60%, of the total net exposure. We view exposure to these counterparties to be within an acceptable level of risk tolerance due to the counterparties' credit ratings, each of which is rated as investment grade, the counterparties' market role and deemed creditworthiness and the importance of our business relationship with the counterparties. An event of default by one or more counterparties could subsequently result in termination-related settlement payments that reduce available liquidity if amounts such as margin deposits are owed to the counterparties or delays in receipts of expected settlements owed to us.

Contracts classified as "normal" purchase or sale and non-derivative contractual commitments are not marked-to-market in the financial statements and are excluded from the detail above. Such contractual commitments may contain pricing that is favorable considering current market conditions and therefore represent economic risk if the counterparties do not perform.

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FORWARD-LOOKING STATEMENTS

This report and other presentations made by us contain "forward-looking statements." All statements, other than statements of historical facts, that are included in this report, or made in presentations, in response to questions or otherwise, that address activities, events or developments that may occur in the future, including (without limitation) such matters as activities related to our financial or operational projections, capital allocation, capital expenditures, liquidity, 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 such as "intends," "plans," "will likely," "unlikely," "expected," "anticipated," "estimated," "should," "may," "projection," "target," "goal," "objective" and "outlook"), are forward-looking statements. Although we believe that in making any such forward-looking statement our expectations are based on reasonable assumptions, any such forward-looking statement involves uncertainties and risks and is qualified in its entirety by reference to the discussion under Part II, Item 1A Risk Factors and Part I, Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations in this quarterly report on Form 10-Q and the following important factors, among others, that could cause our actual results to differ materially from those projected in or implied by such forward-looking statements:

•the actions and decisions of judicial and regulatory authorities;

•prohibitions and other restrictions on our operations due to the terms of our agreements;

•prevailing federal, state and local governmental policies and regulatory actions, including those of the legislatures and other government actions of states in which we operate, the U.S. Congress, the FERC, the NERC, the TRE, the public utility commissions of states and locales in which we operate, CAISO, ERCOT, ISO-NE, MISO, NYISO, PJM, the RCT, the NRC, the EPA, the environmental regulatory bodies of states in which we operate, the MSHA and the CFTC, with respect to, among other things:

▪allowed prices;

▪industry, market and rate structure;

▪purchased power and recovery of investments;

▪operations of nuclear generation facilities;

▪operations of fossil-fueled generation facilities;

▪operations of mines;

▪acquisition and disposal of assets and facilities;

▪development, construction and operation of facilities;

▪decommissioning costs;

▪present or prospective wholesale and retail competition;

▪changes in federal, state and local tax laws, rates and policies, including additional regulation, interpretations, amendments, or technical corrections to The Tax Cuts and Jobs Act of 2017;

▪changes in and compliance with environmental and safety laws and policies, including the Coal Combustion Residuals Rule, National Ambient Air Quality Standards, the Cross-State Air Pollution Rule, the Mercury and Air Toxics Standard, regional haze program implementation and GHG and other climate change initiatives, and

▪clearing over-the-counter derivatives through exchanges and posting of cash collateral therewith;

•expectations regarding, or impacts of, environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts, and other laws and regulations that we are, or could become, subject to, which could increase our costs, result in an impairment of our assets, cause us to limit or terminate the operation of certain of our facilities, or otherwise negatively impact our financial results or stock price;

•legal and administrative proceedings and settlements;

•general industry trends;

•economic conditions, including the impact of any recession or economic downturn;

•pandemics (including COVID-19), weather conditions (including drought and limitations on access to water), and other natural phenomena, and the financial and operational impacts related thereto;

•acts of sabotage, wars or terrorist or cybersecurity threats or activities;

•risk of contract performance claims by us or our counterparties, and risks of, or costs associated with, pursuing or defending such claims;

•our ability to collect trade receivables from counterparties in the amount or at the time expected, if at all;

•our ability to attract, retain and profitably serve customers;

•restrictions on competitive retail pricing or direct-selling businesses;

•adverse publicity associated with our retail products or direct selling businesses, including our ability to address the marketplace and regulators regarding our compliance with applicable laws;

•changes in wholesale electricity prices or energy commodity prices, including the price of natural gas;

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•changes in prices of transportation of natural gas, coal, fuel oil and other refined products;

•sufficiency of, access to, and costs associated with coal, fuel oil, and natural gas inventories and transportation and storage thereof;

•changes in the ability of vendors to provide or deliver commodities as needed;

•beliefs and assumptions about the benefits of state- or federal-based subsidies to our market competition, and the corresponding impacts on us, including if such subsidies are disproportionately available to our competitors;

•the effects of, or changes to, market design and the power and capacity procurement processes in the markets in which we operate;

•changes in market heat rates in the CAISO, ERCOT, ISO-NE, MISO, NYISO and PJM electricity markets;

•our ability to effectively hedge against unfavorable commodity prices, including the price of natural gas, market heat rates and interest rates;

•population growth or decline, or changes in market supply or demand and demographic patterns, particularly in ERCOT, MISO and PJM;

•our ability to mitigate forced outage risk, including managing risk associated with Capacity Performance in PJM and performance incentives in ISO-NE;

•efforts to identify opportunities to reduce congestion and improve busbar power prices;

•access to adequate transmission facilities to meet changing demands;

•changes in interest rates, commodity prices, rates of inflation or foreign exchange rates;

•changes in operating expenses, liquidity needs and capital expenditures;

•commercial bank market and capital market conditions and the potential impact of disruptions in U.S. and international credit markets;

•access to capital, the attractiveness of the cost and other terms of such capital and the success of financing and refinancing efforts, including availability of funds in capital markets;

•our ability to maintain prudent financial leverage and achieve our capital allocation objectives;

•our ability to generate sufficient cash flow to make principal and interest payments in respect of, or refinance, our debt obligations;

•our expectation that we will continue to pay a comparable cash dividend on a quarterly basis;

•our ability to implement and successfully execute upon our growth strategy, including the completion and integration of mergers, acquisitions and/or joint venture activity, the identification and completion of sales and divestitures activity, and the completion and commercialization of our other business development and construction projects;

•competition for new energy development and other business opportunities;

•inability of various counterparties to meet their obligations with respect to our financial instruments;

•counterparties' collateral demands and other factors affecting our liquidity position and financial condition;

•changes in technology (including large scale electricity storage) used by and services offered by us;

•changes in electricity transmission that allow additional power generation to compete with our generation assets;

•our ability to attract and retain qualified employees;

•significant changes in our relationship with our employees, including the availability of qualified personnel, and the potential adverse effects if labor disputes or grievances were to occur or changes in laws or regulations relating to independent contractor status;

•changes in assumptions used to estimate costs of providing employee benefits, including medical and dental benefits, pension and other postretirement employee benefits, and future funding requirements related thereto, including joint and several liability exposure under ERISA;

•hazards customary to the industry and the possibility that we may not have adequate insurance to cover losses resulting from such hazards;

•the impact of our obligations under the TRA;

•our ability to optimize our assets through targeted investment in cost-effective technology enhancements and operations performance initiatives;

•our ability to effectively and efficiently plan, prepare for and execute expected asset retirements and reclamation obligations and the impacts thereof;

•our ability to successfully complete the integration of businesses acquired by Vistra and our ability to successfully capture the full amount of projected operational and financial synergies relating to such transactions, and

•actions by credit rating agencies.

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Any forward-looking statement speaks only at the date on which it is made, and except as may be required by law, we undertake no 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 or circumstances. New factors emerge from time to time, and it is not possible for us to predict them. In addition, we may be unable to assess the impact of any such event or condition or the extent to which any such event or condition, or combination of events or conditions, may cause results to differ materially from those contained in or implied by any forward-looking statement. As such, you should not unduly rely on such forward-looking statements.

INDUSTRY AND MARKET INFORMATION

Certain industry and market data and other statistical information used throughout this report are based on independent industry publications, government publications, reports by market research firms or other published independent sources, including certain data published by CAISO, ERCOT, ISO-NE, MISO, NYISO, PJM, the environmental regulatory bodies of states in which we operate and NYMEX. We did not commission any of these publications, reports or other sources. Some data is also based on good faith estimates, which are derived from our review of internal surveys, as well as the independent sources listed above. Industry publications, reports and other sources generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. While we believe that each of these studies, publications, reports and other sources is reliable, we have not independently investigated or verified the information contained or referred to therein and make no representation as to the accuracy or completeness of such information. Forecasts are particularly likely to be inaccurate, especially over long periods of time, and we do not know what assumptions were used in preparing such forecasts. Statements regarding industry and market data and other statistical information used throughout this report involve risks and uncertainties and are subject to change based on various factors.

Item 4.CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15a-15(e) of the Exchange Act) in effect at September 30, 2020. On the Ambit Acquisition Date, we completed the Ambit Transaction. Vistra is currently in the process of integrating certain processes, technology and operations of Ambit, and will continue to evaluate the impact of any related changes to the internal control over financial reporting. Based on the evaluation performed, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective. During the fiscal quarter covered by this quarterly report on Form 10-Q, other than the changes resulting from the Ambit Transaction, there have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(e) and 15a-15(e) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Furthermore, with respect to the fiscal quarter covered by this quarterly report on Form 10-Q, we have not experienced any material impact to our internal controls over financial reporting due to the COVID-19 pandemic. We are continually monitoring and assessing the design and operating effectiveness of our internal controls in light of the COVID-19 situation and the fact that the majority of our employees that do not work in our power generation facilities are working remotely.

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PART II. OTHER INFORMATION

Item 1.LEGAL PROCEEDINGS

Reference is made to the discussion in Note 12 to the Financial Statements regarding legal proceedings.

Item 1A.RISK FACTORS

There have been no material changes to our risk factors disclosed in our 2019 Form 10-K, except as set forth below.

The outbreak of COVID-19, or the future outbreak of any other highly infectious or contagious diseases, could have a material and adverse effect on our business, financial condition, and results of operations.

The outbreak of the COVID-19 pandemic has adversely impacted economic activity and conditions worldwide, and we are responding to the outbreak by taking steps to mitigate the potential risks to us posed by its spread. We continue to examine the impacts of the pandemic on our workforce, liquidity, reliability, cybersecurity, customers, suppliers, along with other macroeconomic conditions and cannot currently predict whether COVID-19 will have a material impact on our results of operations, financial condition, and cash flows.

Because we are deemed a critical infrastructure provider that provides a critical service to our customers, we must keep our employees who operate our businesses safe and minimize unnecessary risk of exposure. We have updated and implemented our company-wide pandemic plan to address specific aspects of the COVID-19 pandemic. This plan guides our emergency response, business continuity, and the precautionary measures we are taking on behalf of employees and the public. We will continue to monitor developments affecting both our workforce and our customers, and we will take additional precautions that we determine are necessary in order to mitigate the impacts. In particular, we have taken extra precautions for our employees who work in the field and for employees who continue to work in our facilities including requiring, for both employees and contractors, social distancing where possible and requiring the use of appropriate personal protective equipment in certain circumstances. We have implemented work-from-home policies and other safety measures where appropriate, including, but not limited to, temperature testing at all of our locations for employees, contractors, and other essential visitors and closing our facilities to non-essential visitors. While our systems and operations remain vulnerable to cyber-attacks and other disruptions due in part to the fact that a portion of our workforce continues to work remotely, we have implemented physical and cyber-security measures to ensure that our systems remain functional in order to both serve our operational needs with a remote workforce and keep them running to ensure uninterrupted service to our customers. We will continue to review and modify our plans as conditions change.

Measures to control the spread of COVID-19, including restrictions on travel, public gatherings, and certain business operations, have affected the demand for the products and services of many businesses in the areas in which we operate and disrupted supply chains around the world. The full scope and extent of the impacts of COVID-19 on our operations are unknown at this time. However, COVID-19 or another pandemic could have material and adverse effects on our results of operations, financial condition and cash flows due to, among other factors, a protracted slowdown of broad sectors of the economy, changes in demand or supply for commodities, significant changes in legislation or regulatory policy to address the pandemic (including moratoriums or conditions or disconnections and limits or restrictions or late fees), reduced demand for electricity (particularly from commercial and industrial customers), increased late or uncollectible customer payments, and the inability of the Company's contractors, suppliers, and other business partners to fulfill their contractual obligations.

Despite our efforts to manage these impacts to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of this outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. To the extent COVID-19 adversely affects our business and financial results, it may also have the effect of hastening, heightening, or increasing the negative impacts of, many of the other risks described in this Risk Factors section and in our 2019 Form 10-K.

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Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about our repurchase of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the quarter ended September 30, 2020.


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program	Maximum Dollar Amount of Shares that may yet be Purchased under the Program (in millions)
July 1 - July 31, 2020	—	$	—	—	$	332
August 1 - August 31, 2020	—	$	—	—	$	332
September 1 - September 30, 2020	—	$	—	—	$	332
For the quarter ended September 30, 2020	—	$	—	—	$	332

In June 2018, we announced that the Board had authorized a share repurchase program under which up to $500 million of our outstanding common stock may be purchased, and in November 2018, we announced that the Board had authorized an incremental share repurchase program under which up to $1.250 billion of our outstanding stock may be purchased, resulting in an aggregate $1.750 billion share repurchase program (Prior Share Repurchase Program). The Prior Share Repurchase Program has no set expiration date and will continue until complete or terminated by the Board. At September 30, 2020, $332 million was available for additional repurchases under the Prior Share Repurchase Program.

Under each share repurchase program, any purchases of shares of the Company's stock may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, pursuant to plans complying with the Exchange Act or by other means in accordance with federal securities laws. The actual timing, number and value of shares repurchased under the plans or otherwise will be determined at our discretion and will depend on a number of factors, including our capital allocation priorities, the market price of our stock, general market and economic conditions, applicable legal requirements and compliance with the terms of our debt agreements and the Tax Matters Agreement.

See Note 13 to the Financial Statements for more information concerning the Share Repurchase Program and the Prior Share Repurchase Program.

Item 3.DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Vistra currently owns and operates, or is in the process of reclaiming, 12 surface lignite coal mines in Texas to provide fuel for its electricity generation facilities. Vistra also owns or leases, and is in the process of reclaiming, two waste-to-energy surface facilities in Pennsylvania. These mining operations are regulated by the MSHA under the Federal Mine Safety and Health Act of 1977, as amended (the Mine Act), as well as other federal and state regulatory agencies such as the RCT and Office of Surface Mining. The MSHA inspects U.S. mines, including Vistra's mines, on a regular basis, and if it believes a violation of the Mine Act or any health or safety standard or other regulation has occurred, it may issue a citation or order, generally accompanied by a proposed fine or assessment. Such citations and orders can be contested and appealed, which often results in a reduction of the severity and amount of fines and assessments and sometimes results in dismissal. Disclosure of MSHA citations, orders and proposed assessments are provided in Exhibit 95.1 to this quarterly report on Form 10-Q.

Item 5.OTHER INFORMATION

None

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Item 6. EXHIBITS

(a) Exhibits filed or furnished as part of Part II are:


Exhibits	Previously Filed With File Number*	As Exhibit

(3(i))	Articles of Incorporation

3.1	001-38086 Form 8-K (filed May 4, 2020)	3.1	—	Restated Certificate of Incorporation of Vistra Energy Corp.

3.2	001-38086 Form 8-K (filed June 29, 2020)	3.1	—	Certificate of Amendment to Restated Certificate of Incorporation of Vistra Corp., effective July 2, 2020

(3(ii))	Bylaws

3.2	001-38086 Form 8-K (filed June 29, 2020)	3.2	—	Restated Bylaws of Vistra Corp., effective July 2, 2020

(4)	Instruments Defining the Rights of Security Holders, Including Indentures

4.1	001-38086 Form 8-K (filed July 16, 2020)	4.1	—	Fifth Amendment to Receivables Purchase Agreement, dated as of July 13, 2020, amon g TXU Energy Receivables Company LLC, as seller, TXU Energy Retail Company LLC, as servicer, Vistra Operations Company LLC, as performance guarantor, certain purchaser agents and purchasers named therein and Credit Agricole Co rp orate and Investment Bank, as administrator

4.2	001-38086 Form 8-K (filed October 16, 2020)	4.2	—	Sixth Amendment to Receivables Purchase Agreement, dated as of October 9, 2020, among TXU Energy Receivables Company LLC, as seller, TXU Energy Retail Company LLC, as servicer, Vistra Operations Company LLC, as performance guarantor, certain purchaser agents and purchasers named therein and Credit Agricole Corporate and Investment Bank, as administrator

4.3	001-38086 Form 8-K (filed October 16, 2020)	4.1	—	Fourth Amendment to Purchase and Sale Agreement, dated as of October 9, 2020, among TXU Energy Retail Company LLC, as an originator and servicer, the other originators named therein, and TXU Energy Receivables Company LLC, as purchaser

(10)	Material Contracts

10.1	001-38086 Form 8-K (filed October 16, 2020)	10.1	—	Master Framework Agreement, dated as of October 9, 2020, by and among TXU Energy Retail Company LLC, as seller and seller party agent, certain originators named therein, and MUFG Bank, Ltd., as buyer

10.2	001-38086 Form 8-K (filed October 16, 2020)	10.2	—	Master Repurchase Agreement, dated as of October 9, 2020, between TXU Energy Retail Company LLC and MUFG Bank, Ltd.

(31)	Rule 13a-14(a) / 15d-14(a) Certifications

31.1	**		—	Certification of Curtis A. Morgan, principal executive officer of Vistra Corp., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	**		—	Certification of David A. Campbell, principal financial officer of Vistra Corp., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(32)	Section 1350 Certifications

32.1	***		—	Certification of Curtis A. Morgan, principal executive officer of Vistra Corp., pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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Exhibits

Previously Filed With File Number*

Exhibit

32.2

***

—

Certification of David A. Campbell, principal financial officer of Vistra Corp., pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(95)

Mine Safety Disclosures

95.1

—

Mine Safety Disclosures

XBRL Data Files

101.INS

—

The following financial information from Vistra Corp.'s Quarterly Report on Form 10-Q for the period ended September 30, 2020 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Balance Sheets and (v) the Notes to the Condensed Consolidated Financial Statements

101.SCH

—

XBRL Taxonomy Extension Schema Document

101.CAL

—

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

—

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

—

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

—

XBRL Taxonomy Extension Presentation Linkbase Document

104

—

The Cover Page Interactive Data File does not appear in Exhibit 104 because its XBRL tags are embedded within the Inline XBRL document

____________________

* Incorporated herein by reference

** Filed herewith

*** Furnished herewith

**** Indicates a management contract or compensatory plan or arrangement.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Vistra Corp.

By:

/s/ CHRISTY DOBRY

Name:

Christy Dobry

Title:

Vice President and Controller

(Principal Accounting Officer)

Date: November 4, 2020