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Combined Vistra-Dynegy must sell 1,281 MW to stay under cap: Texas PUC staff

Houston (Platts)--6 Feb 2018 601 pm EST/2301 GMT


A merged Vistra Energy and Dynegy must divest at least 1,281 MW of Texas generation to stay under the state-mandated cap of 20% of Electric Reliability Council of Texas installed capacity, state regulatory staff said Monday, and Vistra said Tuesday it has "a pathway" to comply, if regulators require divestiture.

On October 30, Dynegy and Dallas-based Vistra Energy announced plans to merge in an all-stock transaction valued at about $1.74 billion, with Vistra as the surviving entity by mid-2018.

On November 22, Vistra Energy's Luminant Power generation subsidiary filed an application for the deal's approval by the Public Utility Commission of Texas.

The PUC staff's final recommendation filed Monday concludes that the combined company would own and control more than 20% of installed capacity that is deliverable in ERCOT, partly because Dynegy owns 820 MW of generation in the Eastern Interconnection "that are capable of delivering electricity to ERCOT" over DC ties, and "that capacity must be included in Luminant's market share calculation."

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In an email Tuesday, Vistra spokesman Allan Koenig said the staff recommendation "was an expected and required part of the process."

"This is a factual case in which the Commission must determine solely if our total electric generation is under the 20 percent limit for participants which own and control generation in the Electric Reliability Council of Texas region," Koenig said. "We look forward to presenting our case to the Commissioners as they consider the agency staff's recommendations and the legal arguments we present. Importantly, nothing has changed with our merger process, and Vistra Energy has a pathway to get under the 20 percent cap if the Commission determines that the combined company will exceed it."


VISTRA-DYNEGY WOULD OWN 18,807 MW IN ERCOT


Before the transaction, Luminant will own 13,945 MW of generation in ERCOT, while Dynegy's total in Texas will be 4,042 MW, and its total outside of Texas will be 22,399 MW, of which only 820 MW is deliverable because of DC tie limitations.

Dynegy's non-Texas generation assets are in California, Connecticut, Illinois, Maine, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, Virginia and West Virginia.

Thus, the proposed combined Vistra-Dynegy would own and control 18,807 MW of ERCOT's 87,632 MW of capacity, which equals 21.46%.

Therefore, the staff memo recommended the following conditions for approving Vistra's acquisition of Dynegy:

* Luminant commits to divesting at least 1,281 MW of installed generation capacity in ERCOT.
* The combined entity files an affidavit certifying sale of the capacity before the merger is completed.
* Luminant terminates a voluntary market power mitigation plan approved in May 2015.
* Luminant files quarterly reports to ensure compliance with the 20% cap for two years or until the combined entity's installed capacity falls below 18.5% of ERCOT's total.
* If Luminant fails to comply with the 20% cap, Luminant files a written report within 30 days.

--Mark Watson, markham.watson@spglobal.com
--Edited by Rocco Canonica, newsdesk@spglobal.com



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