Report: Vistra Energy in talks to purchase fellow generator Dynegy

Dive Brief:

  • Independent power producer Vistra Energy is in the early stages of discussions to purchase generator Dynegy, the Wall Street Journal reports, an inter-regional merger that would create one of the largest power producers in the United States.
  • Vistra, the generation company that emerged from bankruptcy proceedings of Energy Future Holdings, owns Texas power producers TXU Energy and Luminant. The Journal report cited unnamed sources close to the talks and neither company provided comment. 
  • Adding Dynegy's 50 plants in Texas, the Midwest and Northeast would give Vistra more than more than 46 GW of capacity, RTO Insider notes, surpassing NRG Energy, which claims to be the largest IPP in the country.

Dive Insight:

Consolidation rumors are swirling in the generation industry as companies across the nation feel the squeeze of low wholesale power prices due to cheap gas, growing renewable energy and subsidized nuclear generation in select states.

On May 10, the Journal reported generator Calpine is exploring a sale and attracting interest from private equity firms. Now fellow Houston-based generator Dynegy is being linked with a sale to another Texas giant — Vistra.

Last year TCEH Corp., the parent company of TXU Energy and Luminantemerged from Energy Future Holdings bankruptcy proceeding. In November, the company rebranded as Vistra Energy.

Luminant, Vistra's competitive generation arm, has about 17,000 MW of generation in Texas, including 2,300 MW of nuclear, 8,000 MW fueled by coal and 6,000 MW fueled by natural gas. The company says it is also a large purchaser of wind-generated electricity.

The deal is noteworthy not only for the sheer volume of capacity, but also the location of company assets.

Dynegy has only 15% of its 50 plants located in the Electric Reliability Council of Texas market, one where generators have been especially pressured by low power prices. Last month, Panda Temple Power, a gas plant that entered service in 2014, filed for bankruptcy and sued ERCOT for misrepresentation in its market outlook reports. 

This month, Calpine and NRG proposed changes to market rules to increase the frequency of scarcity pricing events — changes Texas regulators announced last week they would consider. 

Dynegy's plants are not immune to the pricing pressures, however. The company is considering an exit of the MISO Zone 4 market in southern Illinois after the state passed nuclear energy subsidies earlier this year — a move that could see it shed up to 5.5 GW of coal capacity. 

Dynegy officials say the coal plants cannot compete with the subsidized nuclear generation and has signed on to challenges to the subsidies in federal court and at the Federal Energy Regulatory Commission.

In addition to Luminant, Vistra also owns retail supplier TXU Energy, which serves 1.7 million customers in Texas. In an first quarter earnings call, CEO Curt Morgan said the company is off to a solid start this year, "despite some headwinds created by mild winter weather in Texas, once again demonstrating the resilience of our integrated model."

The company last week reported first quarter 2017 net income of $78 million and cash provided by operating activities of $141 million.

​Vistra also noted that it continues to see increased demand for renewable energy from retail customers, and has acquired a 180 MW solar development project located in West Texas which is expected to be operational in the summer of 2018. TXU has also launched a "Free Nights and Solar Days" offering, combining its most Right Time Pricing PlanSM with solar energy.

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Filed Under: Generation Regulation & Policy
Top image credit: Spectra Energy