Decision a Result of Challenging Plant and Market Economics
IRVING, Texas — Oct. 13, 2017 —♕ Luminant, a subsidiary of Vistra Energy (NYSE: VST), today announced that it will close two coal-fueled power plants in Central Texas: its two-unit Sandow Power Plant in Milam County and its two-unit Big Brown Power Plant in Freestone County. In total, approximately 2,300 MW of nameplate power will be taken offline in early 2018.These two plants are economically challenged in the competitive ERCOT market. Sustained low wholesale power prices, an oversupplied renewable generation market, and low natural gas prices, along with other factors, have contributed to this decision. Curt Morgan, Vistra Energy’s president and chief executive officer, said, “This announcement is a difficult one to make. It is never easy to announce an action that has a significant impact on our people. Though the long-term economic viability of these plants has been in question for some time, our year-long analysis indicates this announcement is now necessary. These employees have kept both plants reliably powering Texas for decades, and we greatly appreciate their service.”
🎶Earlier this week, the company and Alcoa entered into a contract termination agreement pursuant to which the parties agreed to an early settlement of a long-standing power and mining agreement. In consideration for the early termination, Alcoa made a one-time payment to Luminant. The settlement follows a decrease in wholesale power prices in ERCOT and the prior curtailment of Alcoa’s smelter operation next to Sandow. The contract has helped shield Sandow from significant exposure to the downturn in the wholesale power market; however, the standalone economics of the Sandow complex no longer support continued investment in the site in this low wholesale power price environment.
Big Brown Site
𝓰Over the last few years, the Big Brown team has made tremendous operational adjustments to remain viable given the challenging market conditions. However, despite these best efforts, the economics of operating Big Brown do not make it a sustainable option for our fleet. The company will explore a sales process for the site during the ERCOT notification period.
ꦉVistra expects to record one-time charges of approximately $70 to 90 million in the fourth quarter of 2017 related to the expected retirements, including employee-related severance costs and non-cash charges for writing off materials inventory and a contract intangible asset associated with Big Brown. We expect to record additional one-time charges in the fourth quarter of 2017 related to changes in the timing and amounts of asset retirement obligations for mining and plant-related reclamation obligations at these facilities.
About Vistra Energy
🐽Vistra Energy is a premier Texas-based energy company focused on the competitive energy and power generation markets through operation as the largest retailer and generator of electricity in the growing Texas market. Our integrated portfolio of competitive businesses consists primarily of TXU Energy and Luminant. TXU Energy sells retail electricity and value-added services (primarily through our market-leading TXU Energy™ brand) to approximately 1.7 million residential and business customers in Texas. Luminant generates and sells electricity and related products from our diverse fleet of generation facilities totaling approximately 18,000 MW of generation in Texas, including 2,300 MW fueled by nuclear power, 8,000 MW fueled by coal, and 7,500 MW fueled by natural gas, and is a large purchaser of renewable power including wind and solar-generated electricity. The company is currently developing one of the largest solar facilities in Texas by capacity.
Cautionary Note Regarding Forward-Looking Statements
🌌This press release includes forward-looking statements, which are subject to risks and uncertainties. All statements, other than statements of historical facts, are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature. Readers are cautioned not to place undue reliance on forward-looking statements. Any such forward-looking statement involves uncertainties and is qualified in its entirety by reference to the discussion of risk factors under “Risk Factors” and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-Ks and Form 10-Qs filed by Vistra Energy Corp. and other important factors that could cause actual results to differ materially from those implied by such forward-looking statements.