Vistra’s nuclear acquisition

30 November 2023

Energy Harbor’s nuclear businesses, including the Beaver Valley, Davis-Besse and Perry stations, are set to join the 3800 MW Comanche Peak nuclear plant under an acquisition deal. Does this signal a new era of attractive nuclear assets?

Above: Davis-Besse Nuclear Power Station

Nuclear's place is as part of a “zero-carbon generation and retail growth company” in the USA, according to US utility Vistra. The company expects to complete closing in the last quarter of 2023 on an acquisition of Energy Harbor’s nuclear and retail businesses. The deal received Nuclear Regulatory Commission (NRC) approval in October and awaits clearance from the Federal Energy Regulatory Commission.

Vistra currently owns the 3800 MW Comanche Peak nuclear plant in Somervell County, Texas, and it has 4 million retail customers. At the closing of the transaction, Energy Harbor will merge with Vistra and the Ohio-based company’s assets – which include the Beaver Valley, Davis-Besse and Perry nuclear stations – will be combined with Vistra’s nuclear and retail assets to become a 7,800 MW generation business with around 5 million domestic customers.

The combined business will join with the existing Vistra Zero renewables and storage projects under a newly- formed holding company, referred to as Vistra Vision, which has a further growth pipeline of around 1,100 MW of renewables projects.

In return, Energy Harbor will receive $3bn in cash (to be distributed to shareholders at closing) and a 15% ownership interest in Vistra Vision; in addition, Vistra Vision will assume $430m of net debt from Energy Harbor. Ratings agency Standard & Poor’s (S&P) said the price of Vistra Corp shares rose more than 16% when the deal was first announced.

Vistra said the acquisition “Accelerates the growth of Vistra’s zero-carbon operations”. It also ring-fences Vistra’s wholly-owned gas and coal generation assets, which will be referred to as Vistra Tradition – Vistra has 24 GW of natural gas-fired capacity and 8.4 GW of coal-fired plant. Vistra will not acquire Energy Harbor’s legacy conventional generation fleet, which had pre-existing agreements to sell these assets to third parties.

Vistra President and chief executive Jim Burke said, “Vistra has been focused on responsibly transitioning our power generation profile, and though we’ve made significant progress over the past several years, there are few opportunities to grow a reliable and dispatchable zero-carbon generation portfolio at scale this quickly.

As our country navigates a massive energy transition to cleaner sources of electricity, nuclear energy provides the unique capability of being both carbon-free and a dependable, always-on source of reliable power.”

S&P asked whether Vista might split the two companies further, into two publicly traded companies. “The way we’re thinking about this is we have a scale advantage right now running this platform the way we have and that scale provides value to both sides, the Vistra Vision and the Vistra Tradition,” Burke said. “The capital markets might view [a separation] as a good strategy, but that is not one that we have on our radar as we’ve got this deal squarely in our sights.”

Burke also said, “Vistra will continue its focus on an integrated model, ensuring customers are served in a reliable, affordable, and sustainable manner. We have a tremendous business platform with Vistra Vision and a portfolio of efficient, reliable, dispatchable generation assets with Vistra Tradition.”

John Miller, head of municipals at Energy Harbor shareholder Nuveen, said, “This new platform will be a meaningful force for decarbonisation in the energy industry, and we look forward to being part of it.”

Nuclear tax credits

Vistra said Vistra Vision will be a premier zero-carbon generation and retail growth company. It will operate the second-largest competitive nuclear fleet in the country, along with 340 MW of operating solar assets and 1020 MW of operating storage assets (with a development pipeline of 1100 MW). The combined company will be headquartered in Irving, Texas.

Vistra said detailed diligence of the Energy Harbor assets, including site visits and extensive third-party operational analysis, had identified significant synergy opportunities through scale efficiencies from combining the businesses. Specifically, Vistra expects the combination to result in at least $125m of annual synergies by year-end 2025 from increased scale, optimized operations, and cost structure efficiencies.

Another major attraction of the deal is financial support for the nuclear units enabled by the Biden Administration’s Inflation Reduction Act (IRA). Burke said, “With the enactment of the zero-emission nuclear production tax credit (I.R.C. Sec. 45U), nuclear power generation now has down-side protection against lower power prices, resulting in tremendous upside opportunity compared to other generation with similar attributes.” Vistra Vision’s earnings power and free cash flows are expected to benefit from significant downside protection through the tax credit, for which all four of the nuclear assets are eligible until at least the end of 2032.

The Comanche Peak NPP in Texas will be joined by the Beaver Valley, Davis-Besse and Perry nuclear stations under the Vistra deal.

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