Vistra Corp

2. ACQUISITIONS

Energy Harbor Business Combination

On March 1, 2024 (Merger Date), pursuant to a transaction agreement dated March 6, 2023 (Transaction Agreement), (i) Vistra Operations transferred certain of its subsidiary entities into Vistra Vision, (ii) Black Pen Inc., a wholly owned subsidiary of Vistra, merged with and into Energy Harbor, (iii) Energy Harbor became a wholly-owned subsidiary of Vistra Vision, and (iv) affiliates of Nuveen Asset Management, LLC (Nuveen) and Avenue Capital Management II, L.P. (Avenue) exchanged a portion of the Energy Harbor shares held by Nuveen and Avenue for a 15% equity interest of Vistra Vision (collectively, Energy Harbor Merger). The Energy Harbor Merger combines Energy Harbor's and Vistra's nuclear and retail businesses and certain Vistra Zero renewables and energy storage facilities to provide diversification and scale across multiple carbon-free technologies (dispatchable and renewables/storage) and the retail business.

The Energy Harbor Merger was accounted for using the acquisition method in accordance with ASC 805, Business Combinations (ASC 805), which requires identifiable assets acquired and liabilities assumed to be recorded at their estimated fair values on the Merger Date. The combined results of operations are reported in the condensed consolidated financial statements beginning as of the Merger Date.

The following table summarizes the acquisition date fair value of Energy Harbor associated with the Energy Harbor Merger on the Merger Date:

(a)Valued using a discounted cash flow analysis of the contributed subsidiaries including contributed debt.

(b)Represents 15% of the acquisition date fair value implied from the fair value of consideration transferred.

As a result of the Energy Harbor Merger, Vistra maintained an 85% ownership interest in Vistra Vision and recorded the remaining 15% equity interest as a noncontrolling interest in the condensed consolidated balance sheets as of the Merger Date. On the Merger Date, we reclassified the carrying value of assets contributed to Vistra Vision of $749 million from additional paid-in-capital of Vistra (the controlling interest) to the noncontrolling interest in subsidiary.

Provisional fair value measurements were made for acquired assets and liabilities in the first quarter of 2024 and adjustments to those measurements were made in the second and third quarters of 2024. Additional adjustments may be made in subsequent periods (up to one year from the acquisition date) as information necessary to complete the fair value analysis is obtained. The provisional fair values assigned to assets acquired and liabilities assumed are as follows:

(a)Investments represent securities held in nuclear decommissioning trusts (NDT) for the purpose of funding the future retirement and decommissioning of the PJM nuclear generation facilities. These investments include equity, debt and other fixed-income securities consistent with investment rules established by the NRC. They are valued using a market approach (Level 1 or Level 2 depending on security).

(b)Acquired property, plant and equipment are valued using a combination of an income approach and a market approach. The income approach utilized a discounted cash flow analysis based upon a debt-free, free cash flow model (Level 3).

(c)Includes acquired nuclear fuel supply contracts valued based on contractual cash flow projections over approximately five years compared with cash flows based on current market prices with the resulting difference discounted to present value (Level 3). Also includes acquired retail customer relationships which are valued based on discounted cash flow analysis of acquired customers and estimated attrition rates (Level 3).

(d)Acquired derivatives are valued using the methods described in Note 11 (Level 1, Level 2 or Level 3). Contracts with terms that were not at current market prices are also valued using a discounted cash flow analysis (Level 3).

(e)Asset retirement obligations are valued using a discounted cash flow model which, on a unit-by-unit basis, considers multiple decommissioning methods and are based on decommissioning cost studies (Level 3).

(f)The excess of the consideration transferred over the fair value of identifiable assets acquired and liabilities assumed is recorded as goodwill. Goodwill represents expected synergies to be generated by Vistra Vision from combining operations of Energy Harbor with the contributed net assets of Vistra. None of the Goodwill is deductible for income tax purposes.

The following unaudited pro forma financial information for the three and nine months ended September 30, 2024 and 2023 assumes that the Energy Harbor Merger occurred on January 1, 2023. The unaudited 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 Energy Harbor Merger been completed on January 1, 2023, nor is the unaudited pro forma financial information indicative of future results of operations, which may differ materially from the pro forma financial information presented here.

The 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, interest expense on debt assumed in the Energy Harbor Merger, effects of the Energy Harbor Merger on tax expense (benefit), and other related adjustments. Determining the amounts of revenue and earnings of Energy Harbor since the acquisition date is impractical as operations have been integrated into our commercial platform which is managed at a portfolio level.

Acquisition costs incurred in the Energy Harbor Merger totaled $1 million and $8 million for the three months ended September 30, 2024 and 2023, respectively, and $25 million and $21 million for the nine months ended September 30, 2024 and 2023, respectively, and are classified as selling, general and administrative expenses in the condensed consolidated statements of operations.

Acquisition of Non-Controlling Interest

On September 18, 2024 (the UPA Transaction Date), Vistra Operations and Vistra Vision Holdings I LLC, an indirect wholly owned subsidiary of Vistra Operations (Vistra Vision Holdings), entered into separate Unit Purchase Agreements (the UPAs) with each of Nuveen and Avenue, pursuant to which Vistra Vision Holdings has agreed to purchase each of Nuveen's and Avenue's combined 15% noncontrolling interest in Vistra Vision for $3.248 billion in cash, not including the adjustment for dividends of $165 million (collectively, the Transaction). If Nuveen and Avenue receive less than $165 million in dividend distributions from Vistra Vision for the remainder of 2024, then the purchase price payable on the Closing Date will be adjusted upward by the difference, and if they receive distributions in excess of $165 million, then the purchase price payable at the Closing Date will be adjusted downward by the difference. Total scheduled payments under the UPAs are $3.413 billion. The Transaction is expected to close on December 31, 2024 (the Closing Date), subject to the satisfaction of certain closing conditions, at which time Vistra Vision Holdings will own 100% of the equity interests in Vistra Vision.

In accordance with the UPAs, the payments to Nuveen and Avenue will be paid in multiple installments through December 31, 2026. Vistra Vision Holdings' obligation to pay the purchase price will be guaranteed by Vistra Operations and certain of its subsidiaries that guarantee Vistra Operations' unsecured notes. Cash payments including estimated dividends for the remainder of 2024 and thereafter are expected as follows:

The UPAs are subject to certain closing conditions outside our control and therefore represent conditional redemption obligations that require us to reflect the Transaction as redeemable noncontrolling interest within the mezzanine section of the condensed consolidated balance sheet. We accounted for the Transaction on the UPA Transaction Date as follows:

(a)Fair value represents the total scheduled payments under the UPAs of $3.413 billion discounted at 6%.

(b)Represents the carrying value of Nuveen's and Avenue's combined 15% noncontrolling interest in Vistra Vision at the UPA Transaction Date.

Upon satisfaction of all closing conditions, remaining payment obligations will be reflected as a financing obligation on the consolidated balance sheets.