By Tom Kleckner
Vistra Energy has approached Dynegy regarding a potential takeover that would create the nation’s largest independent power producer with more than 46 GW of capacity, The Wall Street Journal reported Friday.
The Journal, citing unnamed sources, said the two Texas companies are in preliminary talks, but there is no guarantee the deal would go through.
Luminant, Dallas-based Vistra’s competitive generation arm, has 16,760 MW of capacity in Texas. Houston-based Dynegy operates about 31,400 MW of generation in the Northeast, Mid-Atlantic and Midwest (including almost 1,800 MW from plants in which it shares ownership).
A Luminant-Dynegy combination would own almost 46,400 MW alone, surpassing NRG Energy, which claims to be “#1 in competitive generation” with 45,909 MW of net capacity in 29 states, including 1,120 MW of nameplate wind and solar.
The takeover would expand Vistra’s footprint beyond Texas, which saw record low wholesale prices last year. However, to do so, it would have to absorb Dynegy debt said to be about $9 billion, much of it incurred in recent years.
Dynegy entered the ERCOT market in February 2016, when it completed an acquisition of ENGIE’s U.S. power plants for $3.3 billion with private equity firm Energy Capital Partners. (See Dynegy, Energy Capital to Buy 8.7 GW in $3.3B Deal.)
ERCOT represents 15% of Dynegy’s capacity, which is dominated by PJM (43%). A combined Luminant and Dynegy would own almost 21.5 GW in ERCOT — about 45% of the company’s total — while reducing PJM’s share of the total to 29%.
Both Dynegy and Luminant have dealt with Chapter 11 bankruptcy in recent years. Dynegy filed and emerged from bankruptcy protection in 2012 after a failed takeover bid by private-equity firm Blackstone Group. Vistra is the new name for the generation and retail spinoff of Energy Future Holdings, which has been in bankruptcy court since 2014. (See TXU Energy, Luminant Rebrand as Vistra Energy.)
Vistra’s restructuring eliminated more than $33 billion in EFH debt, putting the company into a position where it could suggest an acquisition to Dynegy. According to the Journal, Vistra had only $4.5 billion in debt as of March.
Both companies also have retail businesses. Dynegy has about 963,000 residential customers in Illinois, Ohio and Pennsylvania, while Vistra’s TXU Energy provides energy to approximately 1.7 million residential and business customers in Texas’ deregulated market.
Vistra shares, which started trading on the New York Stock Exchange on May 11, dropped as low as $14.50 Friday but recovered to close at $15.04, down 21 cents (-1.4%). Dynegy shares opened Friday at $9.24 and finished at $9.12; the company’s stock has lost almost 75% in value since June 2014, when it stood at $36/share.
Meanwhile, shares of IPP Calpine, which owns 25,908 MW of generation, have risen by more than a third since the Journal reported May 10 that it was considering a sale.
