What changed in this filing

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Item 1A. Risk Factors

2022-02-25 compared with 2021-02-26 · 130 added, 128 removed, 559 unchanged (32% of the section changed)

6 unchanged sentences

• We purchase natural gas, coal, fuel oil, and nuclear fuel for our generation facilities, and higher than expected fuel costs or disruptions in these fuel markets may have an adverse impact on, our costs, revenues, results of operations, financial condition and cash flows.

• We have retired, announced planned retirements, and may be forced to retire or idle additional, underperforming generation units which could result in significant costs and have an adverse effect on our operating results.

• We have retired, announced planned retirements of, and may be forced to retire or idle additional underperforming generation units which could result in significant costs and have an adverse effect on our operating results.

• Our assets or positions cannot be fully hedged against changes in commodity prices and market heat rates, and hedging transactions may not work as planned or hedge counterparties may default on their obligations.

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• We may not be able to complete future acquisitions on favorable terms or at all, successfully integrate future acquisitions into our business, or effectively identify and invest in value-creating businesses, assets or projects, which could result in unanticipated expenses and losses or otherwise hinder or delay our growth strategy.

• Our solar generation, energy storage system, and other renewables development projects are subject to substantial uncertainties.

• Tax legislation initiatives or challenges to our tax positions, or potential future legislation or the imposition of new or increased taxes or fees, could have a material adverse affect on our financial condition, results of operations and cash flows.

• Our ability to achieve the expected growth of our Vistra Zero portfolio, consisting of our solar generation, ESS, and other renewables development projects, is subject to substantial capital requirements and other significant uncertainties.

• Tax legislation initiatives or challenges to our tax positions, or potential future legislation or the imposition of new or increased taxes or fees, could have a material adverse effect on our financial condition, results of operations and cash flows.

• We are required to pay the holders of TRA Rights for certain tax benefits, which amounts are expected to be substantial.

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• Our retail operations are subject to significant competition from other REPs, which could result in a loss of existing customers and the inability to attract new customers.

• The operation of our businesses is subject to cyber-based security and integrity risk.

• The operation of our businesses is subject to information security and operational technology risks, including cybersecurity breaches and failure of critical information and operations technology systems.

Attacks on our infrastructure that breach cyber/data security measures could expose us to significant liabilities, reputational damage, regulatory action, and disrupt business operations, which could have a material adverse effect on us.

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Risks Related to Our Structure and Ownership of our Common Stock

• Investor focus on environmental, social, and governance issues, including climate change and sustainability matters, could adversely affect our stock price.

• Evolving expectations from stakeholders, including investors, on ESG issues, including climate change and sustainability matters, and erosion of stakeholder trust or confidence could influence actions or decisions about our company and our industry and could adversely affect our business, operations, financial results, or stock price.

Please carefully consider the following discussion of significant factors, events, and uncertainties that make an investment in our securities risky.

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This severe weather event substantially increased the demand for natural gas used in our electric power generation business, and the cold further limited the availability of renewable generation across the region contributing to extremely high market prices for natural gas and electricity, which resulted in substantial increases in the costs to procure sufficient fuel supply and increased collateral posting requirements.

See "We may be materially and adversely affected by the effects of extreme weather conditions and seasonality" and Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations for additional discussion about the expected impacts of extreme weather, including the winter storm.

The majority of our facilities operate as "merchant" facilities without long-term power sales agreements.

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We rely on natural gas, coal, fuel oil, and nuclear fuel for the majority of our power generation facilities.

Delivery of these fuels to the facilities is dependent upon the continuing financial viability of contractual counterparties as well as upon the infrastructure (including mines, rail lines, rail cars, barge facilities, roadways, riverways and natural gas pipelines) available and functioning to serve each generation facility.

As a result, we are subject to the risks of disruptions or curtailments in the production of power at our generation facilities if no fuel is available at any price, if a counterparty fails to perform or if there is a disruption in the fuel delivery infrastructure.

Delivery of these fuels to the facilities is dependent upon the continuing availability of such fuels and financial viability of contractual counterparties as well as upon the infrastructure (including mines, rail lines, rail cars, barge facilities, roadways, riverways and natural gas pipelines) available and functioning to serve each generation facility.

As a result, we have experienced, and remain subject to the risks of disruptions or curtailments in the production of power at our generation facilities if no fuel is available at any price, if a counterparty fails to perform or if there is a disruption in the fuel delivery infrastructure.

Certain of our generation facilities rely on a limited number of counterparties, such as natural gas suppliers and railcar companies, to provide the necessary fuel.

Disputes relating to or non-performance of contractual arrangements, have resulted in, and may continue to result in adverse impacts to our costs, revenues, results of operations, financial condition, and cash flows.

We have sold forward a substantial portion of our expected power sales in the next one to two years in order to lock in long-term prices.

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If we are unable to procure fuel for physical delivery at prices we consider favorable, or if we are unable to procure these fuels at all, our financial condition, results of operations and cash flows could be materially adversely affected.

For example, supply challenges were among the primary drivers of the significant loss experienced in 2021 as a result of Winter Storm Uri.

We also buy significant quantities of fuel on a short-term or spot market basis.

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Volatility in market prices for fuel and electricity results from, among other factors:

• demand for energy commodities and general economic conditions;

• demand for energy commodities and general economic conditions, including impacts of inflation and the relative strength or weakness of U.S.

dollar compared to other currencies;

• volatility in commodity prices and the supply of commodities, including but not limited to natural gas, coal and fuel oil;

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• volatility in nuclear fuel and related enrichment and conversion services;

• disruption or other constraints or inefficiencies of electricity, natural gas or coal transmission or transportation;

• transmission or transportation disruptions, constraints, congestion, inoperability or inefficiencies of electricity, natural gas or coal transmission or transportation, or other changes in power transmission infrastructure;

• severe, sustained or unexpected weather conditions, including extreme cold, drought and limitations on access to water;

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• illiquidity in the wholesale electricity or other commodity markets;

• transmission or transportation disruptions, constraints, inoperability or inefficiencies, or other changes in power transmission infrastructure;

• importation of liquified natural gas to certain markets;

• development and availability of new fuels, new technologies and new forms of competition for the production and storage of power, including competitively priced alternative energy sources or storage;

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• changes in electric capacity, including the addition of new supplies of power as a result of the development of new plants, expansion of existing plants, the continued operation of uneconomic power plants due to federal, state or local subsidies, or additional transmission capacity;

• local, regional, national, or global supply chain constraints or shortages;

• our creditworthiness and liquidity and the willingness of fuel suppliers and transporters to do business with us;

1 unchanged sentence

• changes in production and storage levels of natural gas, lignite, coal, uranium, diesel and other refined products;

• natural disasters, wars, sabotage, terrorist acts, embargoes and other catastrophic events;

• pandemics and epidemics (including the impacts thereto, or recovery therefrom), natural disasters, wars, sabotage, terrorist acts, embargoes and other catastrophic events;

• changes in law, including judicial decisions, federal, state and local energy, environmental and other regulation and legislation.

Management's Discussion and Analysis of Financial Condition and Results of Operations for additional discussion about the expected impacts of winter storm Uri.

We have retired, announced planned retirements, and may be forced to retire or idle additional underperforming generation units which could result in significant costs and have an adverse effect on our operating results.

See " Economic downturns would likely have a material adverse effect on our businesses" for a discussion of potential risks arising from current U.S.

and global economic and geopolitical conditions.

We have retired, announced planned retirements of, and may be forced to retire or idle additional underperforming generation units which could result in significant costs and have an adverse effect on our operating results.

A sustained decrease in the financial results from, or the value of, our generation units has resulted in the retirement or planned retirement of, and ultimately could result in additional retirements or idling of, generation units.

In recent years, we have generally operated certain of our lignite- and coal-fueled generation assets only during parts of the year that have higher electricity demand and, therefore, higher related wholesale electricity prices.

We have operated certain of our lignite- and coal-fueled generation assets only during parts of the year that have higher electricity demand and, therefore, higher related wholesale electricity prices.

In connection with the closure and remediation of retired generation units, we have spent, and may in the future spend, a significant amount of money, internal resources and time to complete the required closure and reclamation, which could have a material adverse effect on our financial and operating performance.

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If this market dynamic continues, our results of operations and financial condition could be materially and adversely affected if such additional generation capacity results in an over-supply of electricity that causes a reduction in wholesale power prices.

Additionally, new or existing market participants without, or with less, fossil fuel operations may gain additional market share, or reduce our market share, due to evolving expectations and sentiments of key stakeholders, government, and regulatory authorities regarding our operations and activities.

Economic downturns would likely have a material adverse effect on our businesses.

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Increased unemployment of residential customers and decreased demand for products and services by commercial and industrial customers resulting from an economic downturn could lead to declines in the demand for energy and an increase in the number of uncollectible customer balances, which would negatively impact our overall sales and cash flows.

The convergence of current global conditions, including sustained inflation, rising interest rates, and the geopolitical climate, could lead to, or accelerate or exacerbate the occurrence of, a significant economic downturn, leading to changes in consumer and counterparty behavior, higher costs of capital, decreases in the value of our existing long-dated contracts, commodity price increases and volatility, supply chain shortages, and other adverse impacts to our business.

Additionally, prolonged economic downturns that negatively impact our financial condition, results of operations and cash flows could result in future material impairment charges to write down the carrying value of certain assets to their respective fair values.

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• the occurrence of changes in our businesses;

• disruptions, constraints, or inefficiencies in the continued reliable operation of our generation facilities and energy storage systems;

• disruptions, constraints, or inefficiencies in the continued reliable operation of our generation facilities and ESSs;

• changes in or the operation of provisions of tax and regulatory laws.

There are also increasing financial risks for companies that own and operate fossil fuel generation as institutional lenders have become more attentive to sustainable lending practices and some of them may elect not to provide funding for companies who produce or utilize fossil fuel energy or that have higher levels of GHG emissions.

There are also increasing financial risks for companies that own and operate fossil fuel generation as institutional lenders or other sources of capital have become more attentive to sustainable financing practices and some of them may seek commitments on emission reduction targets or expected use or proceeds when providing funding to, or decline to provide funding for companies who produce or utilize fossil fuel energy or that have higher levels of GHG emissions.

Additionally, the lending practices of institutional lenders have been the subject of intensive lobbying efforts in recent years, oftentimes public in nature, by environmental activists and others concerned about climate change not to provide funding for companies in the broader energy sector.

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Future transactions by Vistra or any of its subsidiaries, including the issuance of additional debt, could result in a temporary or permanent downgrade in our credit ratings.

Our indebtedness and the proposed phaseout of LIBOR, or the replacement of LIBOR with a different reference rate, could adversely affect our ability in the future to raise additional capital to fund our operations.

Our indebtedness and the phaseout of LIBOR, or the replacement of LIBOR with a different reference rate, could adversely affect our ability in the future to raise additional capital to fund our operations.

It could also expose us to the risk of increased interest rates and limit our ability to react to changes in the economy, or our industry, as well as impact our cash available for distribution.

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LIBOR is the interest rate benchmark used as a reference rate on a portion of our variable rate debt, including our revolving credit facility and interest rate swaps.

It is unclear if LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.

In November 2020, ICE Benchmark Administration (IBA), the administrator of LIBOR, with the support of the U.S.

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Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021.

In light of these recent announcements, the future of LIBOR at this time is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR's phaseout could cause LIBOR to perform differently than in the past or cease to exist.

Although regulators and IBA have made clear that the recent announcements should not be read to say that LIBOR has ceased or will cease, in the event LIBOR does cease to exist, we may need to amend our credit agreements and other agreements with LIBOR as the referenced rate, which may result in interest rates and/or payments that do not correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.

The Company will also need to consider new contracts and if they should reference an alternative benchmark rate or include suggested fallback language.

In light of these announcements, the future of LIBOR at this time is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR's phaseout could cause LIBOR to perform differently than in the past or cease to exist.

In anticipation of LIBOR ceasing to exist for affected tenors, we have amended certain of our agreements with LIBOR as the referenced rate to include an alternative benchmark rate or suggested fallback language.

Additionally, in light of what we believe to be favorable relationships with lending and financial counterparties, we expect to seek necessary amendments to our remaining debt instruments and other agreements which utilize LIBOR as the referenced rate in the normal course.

Further, certain of our agreements which utilize LIBOR as the referenced rate are governed by New York law, and certain of these contracts do not contain any fallback provisions or otherwise contain fallback provisions that lead to replacement rate based on LIBOR or require polling for interbank rates.

To the extent that we are unsuccessful in our efforts to amend such contracts prior to the LIBOR transition, we anticipate that the applicable New York legislation would apply to such contracts and would provide a replacement rate for inclusion in such contracts.

Notwithstanding our efforts, these changes may result in interest rates and/or payments that do not correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.

Any new contracts would need to reference an alternative benchmark rate or include suggested fallback language.

Accordingly, we could be exposed to increased costs with respect to our variable rate debt, which could have an adverse impact on extensions of our credit and/or we might not be fully hedged on the variable rate exposure on our swapped indebtedness.

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The effectiveness of our strategy may be dependent on the amount of collateral available to enter into or maintain these contracts, and liquidity requirements may be greater than we anticipate or will be able to meet.

Without a sufficient amount of working capital to post as collateral, we may not be able to manage price volatility effectively or to implement our strategy.

An increase in the amount of letters of credit or cash collateral required to be provided to our counterparties may have a material adverse effect on us.

Without a sufficient amount of working capital or other sources of available liquidity to post as collateral, we may not be able to manage price volatility effectively or to implement our strategy.

A material increase in the amount of letters of credit or cash collateral required to be provided to our counterparties may have a material adverse effect on us.

We may not be able to complete future acquisitions on favorable terms or at all, successfully integrate future acquisitions into our business, or effectively identify and invest in value-creating businesses, assets or projects, which could result in unanticipated expenses and losses or otherwise hinder or delay our growth strategy.

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If the Company is unable to identify and consummate future acquisitions, it may impede the Company's ability to execute its growth strategy.

We have a substantial capital allocation plan intended for investments in renewable assets, including solar development projects and energy storage systems.

Our ability to achieve the expected growth of our Vistra Zero portfolio, consisting of our solar generation, ESS, and other renewables development projects, is subject to substantial capital requirements and other significant uncertainties.

We have a substantial capital allocation plan intended for investments in renewable assets, including solar development projects and ESSs.

As part of our business strategy, we plan to continually assess potential strategic acquisitions or investments in renewable assets, emerging technologies and related projects.

Notably, the Company's ability to successfully develop our current renewables projects, or in the future acquire additional renewable assets, may be impacted by the demand for and viability of renewable assets generally, which may vary depending on availability of projects and financing, as well as public policy, financial and tax mechanisms implemented at the state and federal levels to support the development of renewable assets.

Furthermore, various factors could result in increased costs or result in delays or cancellation of these projects, or the loss of, or declines in the value of, our investments in renewable projects.

Risks may include both federal and state regulatory approval processes, new legislation impacting the industry, changes to federal income tax laws, economic events or factors, environmental and community concerns, availability of or requirements for additional funding, and enhanced competition.

Various factors could result in increased costs or result in delays or cancellation of our current or future renewable projects, or the loss of, or declines in the value of, our investments in projects including, but not limited to, risks relating to siting, financing, engineering and construction, permitting, interconnection requests, federal and state regulatory approvals, new legislation or regulatory changes impacting the industry, commissioning delays, import tariffs, changes to federal income tax laws, economic events or factors, environmental and community concerns, availability of or requirements for additional funding, enhanced competition, or the potential for termination of the power sales contract as a result of a failure to meet certain milestones.

Further, the recent proliferation of renewable projects has resulted in a large volume of interconnection requests submitted to grid operators, including the markets in which we operate, resulting in significant delays to the approval process and estimated completion dates for our projects and others.

Additionally, the increased demand for construction of renewables projects, such as ESSs and solar projects, and other labor market and supply chain constraints have resulted, and may continue to result, in limited availability of qualified specialists, contractors, and necessary services or materials, leading to delays in and higher costs for the development and construction of our current and future planned projects.

Should any of these factors occur, our financial position, results of operations, and cash flows could be adversely affected, or our future growth opportunities may not be realized as anticipated.

Our solar generation, energy storage system, and other renewables development projects are subject to substantial uncertainties.

Certain of our subsidiaries are in various stages of developing and constructing solar generation facilities and energy storage systems.

Certain of these projects have signed long-term contracts or made similar arrangements for the sale of electricity.

Successful completion of the development of these projects depends upon overcoming substantial risks, including, but not limited to, risks relating to siting, financing, engineering and construction, permitting, governmental approvals, regulatory changes, commissioning delays, or the potential for termination of the power sales contract as a result of a failure to meet certain milestones.

Additionally, the increased demand for construction of renewables projects, such as energy storage systems and solar projects, may result in limited availability of qualified specialists, contractors, and necessary services and materials, which could lead to delays in and higher costs for the development and construction of our current and future planned projects.

In certain cases, our subsidiaries may enter into obligations in the development process even though the subsidiaries have not yet secured power purchase arrangements or other important elements for a successful project.

While certain of our subsidiaries are in various stages of developing and constructing solar generation facilities and ESSs and certain of these projects have signed long-term contracts or made similar arrangements for the sale of electricity, in other cases, our subsidiaries may enter into obligations in the development process even though the subsidiaries have not yet secured power purchase arrangements or other important elements for a successful project.

If the project does not proceed as planned, our subsidiaries may remain obligated for certain liabilities even though the project will not be completed.

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Factors that may be considered include a decline in future cash flows, slower growth rates in the energy industry, and a sustained decrease in the price of our common stock.

We performed our annual assessment of goodwill and non-amortizing intangibles in the fourth quarter of 2020 and determined that no impairment was required.

We performed our annual assessment of goodwill and non-amortizing intangibles in the fourth quarter of 2021 and determined that no material impairment was required.

However, impairment assessments will be performed in future periods and may result in an impairment loss, which could be material.

Issuances or acquisitions of our common stock, or sales or dispositions of our common stock by stockholders, that result in an ownership change as defined in Internal Revenue Code (IRC) § 382 could further limit our ability to use our federal net operating losses to offset our future taxable income.

Issuances or acquisitions of our common stock, or sales or dispositions of our common stock by stockholders, that result in an ownership change as defined in Internal Revenue Code (IRC) § 382 could further limit our ability to use certain tax attributes and our federal net operating losses to offset our future taxable income.

If an "ownership change," as defined in Section 382 of the IRC (IRC §382) occurs, the amount of NOLs that could be used in any one year following such ownership change could be substantially limited.

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If there is an "ownership change" with respect to Vistra (including by the normal trading activity of greater than 5% stockholders), the utilization of all NOLs existing at that time would be subject to additional annual limitations based upon a formula provided under IRC §382 that is based on the fair market value of the Company and prevailing interest rates at the time of the ownership change.

In addition, any ownership change with respect to Vistra could result in additional limitations on our ability to use certain tax attributes, including depreciation, existing at the time of any such ownership change and have an impact on our tax liabilities and on our obligations under the TRA.

Tax legislation initiatives or challenges to our tax positions, or potential future legislation or the imposition of new or increased taxes or fees, could have a material adverse effect on our financial condition, results of operations and cash flows.

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federal income tax laws or the imposition of new or increased taxes or fees could have a material adverse effect on our financial condition, results of operations and cash flows.

We may be responsible for U.S.

federal and state income tax liabilities that relate to the PrefCo Preferred Stock Sale and Spin-Off.

Pursuant to the Tax Matters Agreement, the parties thereto have agreed to take certain actions and refrain from taking certain actions in order to preserve the intended tax treatment of the Spin-Off and to indemnify the other parties to the extent a breach of such covenant results in additional taxes to the other parties.

If we breach such a covenant (or, in certain circumstances, if our stockholders or creditors of our Predecessor take or took certain actions that result in the intended tax treatment of the Spin-Off not to be preserved), we may be required to make substantial indemnification payments to the other parties to the Tax Matters Agreement.

The Tax Matters Agreement also allocates the responsibility for taxes for periods prior to the Spin-Off between EFH Corp.

For periods prior to the Spin-Off, (i) Vistra is generally required to reimburse EFH Corp.

with respect to any taxes paid by EFH Corp.

that are attributable to us and (ii) EFH Corp.

is generally required to reimburse us with respect to any taxes paid by us that are attributable to EFH Corp.

We are also required to indemnify EFH Corp.

against certain taxes in the event the IRS or another taxing authority successfully challenges the amount of gain relating to the PrefCo Preferred Stock Sale or the amount or allowance of EFH Corp.'s net operating loss deductions.

Our indemnification obligations to EFH Corp.

are not limited by any maximum amount.

If we are required to indemnify EFH Corp.

or such other persons under the circumstances set forth in the Tax Matters Agreement, we may be subject to substantial liabilities.

We are required to pay the holders of TRA Rights for certain tax benefits, which amounts could be substantial.

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The aggregate amount of these accelerated payments could be materially more than our estimated liability for payments made under the TRA set forth in our financial statements, which could have a substantial negative impact on our liquidity.

We are potentially liable for U.S.

income taxes of the entire EFH Corp.

consolidated group for all taxable years in which we were a member of such group.

Prior to the Spin-Off, EFH Corporate Services Company, EFH Properties Company and certain other subsidiary corporations were included in the consolidated U.S.

federal income tax group of which EFH Corp.

was the common parent (EFH Corp.

Consolidated Group).

In addition, pursuant to the private letter ruling from the IRS that we received in connection with the Spin-Off, Vistra will be considered a member of the EFH Corp.

Consolidated Group immediately prior to the Spin-Off.

federal income tax laws, any corporation that is a member of a consolidated group at any time during a taxable year is severally liable for the group's entire federal income tax liability for the entire taxable year.

In addition, entities that are disregarded for U.S.

federal income tax purposes may be liable as successors under common law theories or under certain regulations to the extent corporations transferred assets to such entities or merged or otherwise consolidated into such entities, whether under state law or purely as a matter of federal income tax law.

Thus, notwithstanding any contractual rights to be reimbursed or indemnified by EFH Corp.

pursuant to the Tax Matters Agreement, to the extent EFH Corp.

or other members of the EFH Corp.

Consolidated Group fail to make any U.S.

federal income tax payments required of them by law in respect of taxable years for which the Company or any subsidiary noted above was a member of the EFH Corp.

Consolidated Group, the Company or such subsidiary may be liable for the shortfall.

At such time, we may not have sufficient cash on hand to satisfy such payment obligation.

Our ability to claim a portion of depreciation deductions may be limited for a period of time.

Under the IRC, as amended, a corporation's ability to utilize certain tax attributes, including depreciation, may be limited following an ownership change if the corporation's overall asset tax basis exceeds the overall fair market value of its assets (after making certain adjustments).

The Spin-Off resulted in an ownership change for the Company and it is expected that the overall tax basis of our assets may have exceeded the overall fair market value of our assets at such time.

As a result, there may be a limitation on our ability to claim a portion of our depreciation deductions for a five-year period.

This limitation could have a material impact on our tax liabilities and on our obligations under the TRA Rights.

In addition, any future ownership change of Vistra following Emergence could likewise result in additional limitations on our ability to use certain tax attributes existing at the time of any such ownership change and have an impact on our tax liabilities and on our obligations under the TRA.

Regulatory and Legislative Risks

Our businesses are subject to ongoing complex governmental regulations and legislation that have adversely impacted, and may in the future adversely impact, our businesses, results of operations, liquidity, financial condition and cash flows.

Our businesses operate in changing market environments influenced by various state and federal legislative and regulatory initiatives regarding the restructuring of the energy industry, including competition in power generation and sale of electricity and natural gas.

Although we attempt to comply with changing legislative and regulatory requirements, there is a risk that we will fail to adapt to any such changes successfully or on a timely basis.

Compliance with, or changes to, the requirements under these legal and regulatory regimes, including those proposed or implemented under the Biden administration, may cause the Company may adversely impact our businesses, results of operations, liquidity, financial condition and cash flows.

Our businesses are subject to numerous state and federal laws (including, but not limited to, PURA, the Federal Power Act, the Atomic Energy Act, the Public Utility Regulatory Policies Act of 1978, the Clean Air Act (CAA), the Clean Water Act (CWA), the Resource Conservation and Recovery Act (RCRA), the Energy Policy Act of 2005, the Dodd-Frank Wall Street Reform and the Consumer Protection Act and the Telephone Consumer Protection Act), changing governmental policy and regulatory actions (including those of the FERC, the NERC, the RCT, the MSHA, the EPA, the NRC, the DOJ, the FTC, the CFTC, state public utility commissions and state environmental regulatory agencies), and the rules, guidelines and protocols of ERCOT, CAISO, ISO-NE, MISO, NYISO and PJM with respect to various matters, including, but not limited to, market structure and design, operation of nuclear generation facilities, construction and operation of other generation facilities, development, operation and reclamation of lignite mines, recovery of costs and investments, decommissioning costs, market behavior rules, present or prospective wholesale and retail competition, administrative pricing mechanisms (and adjustments thereto), rates for wholesale sales of electricity, mandatory reliability standards and environmental matters.

We, along with other market participants, are subject to electricity pricing constraints and market behavior and other competition-related rules and regulations under PURA.

Our businesses are subject to numerous state and federal laws (including, but not limited to, PURA, the Federal Power Act, the Natural Gas Policy Act, the Atomic Energy Act, the Public Utility Regulatory Policies Act of 1978, the Clean Air Act (CAA), the Clean Water Act (CWA), the Resource Conservation and Recovery Act (RCRA), the Energy Policy Act of 2005, the Dodd-Frank Wall Street Reform and the Consumer Protection Act and the Telephone Consumer Protection Act), changing governmental policy and regulatory actions (including those of the FERC, the NERC, the RCT, the MSHA, the EPA, the NRC, the DOJ, the FTC, the CFTC, state public utility commissions and state environmental regulatory agencies), and the rules, guidelines and protocols of ERCOT, CAISO, ISO-NE, MISO, NYISO and PJM with respect to various matters, including, but not limited to, market structure and design, operation of nuclear generation facilities, construction and operation of other generation facilities, development, operation and reclamation of lignite mines, recovery of costs and investments, decommissioning costs, market behavior rules, present or prospective wholesale and retail competition, administrative pricing mechanisms (and adjustments thereto), rates for wholesale sales of electricity, mandatory reliability standards and environmental matters.

We, along with other market participants, are subject to electricity pricing constraints and market behavior and other competition-related rules and regulations.

Additionally, Ambit’s direct selling business (i) could be found by federal, state or foreign regulators not to be in compliance with applicable law or regulations, which may lead to our inability to obtain or maintain a license, permit, or similar certification and (ii) may be required to alter its compensation practices in order to comply with applicable federal or state law or regulations.

Changes in, revisions to, or reinterpretations of, existing laws and regulations may have a material adverse effect on our businesses, results of operations, liquidity, financial condition and cash flows.

As a result of the recent weather events in Texas there have been several announced efforts by both federal and state government and regulatory agencies to investigate and determine the causes of this event.

We have received a civil investigative demand from the Attorney General of Texas as well as a request for information from ERCOT related to this event and may receive additional inquiries.

We are cooperating with these entities and are working to respond to these requests.

Those efforts may result in changes in regulations that impact our industry and businesses including, but not limited to, additional requirements for winterization of various facets of the electricity supply chain including generation, transmission, and fuel supply;

Extreme weather events have resulted, and in the future may result, in efforts by both federal and state government and regulatory agencies to investigate and determine the causes of such events.

For example, as a result of Winter Storm Uri, we received a civil investigative demand from the Attorney General of Texas as well as a request for information from ERCOT, NERC, and other regulatory bodies related to this event and may receive additional inquiries.

Such efforts have resulted, and in the future may result, in changes in laws or regulations that impact our industry and businesses including, but not limited to, additional requirements for winterization of various facets of the electricity supply chain including generation, transmission, and fuel supply;

improvements in coordination among the various participants in the electricity supply chain during any future event;

potential changes to the types of plans permitted to be marketed to residential customers;

potential revisions to the way in which the ERCOT market compensates and incentivizes the continued operation of assets that only run periodically, including during this event or other times of scarcity;

and other potential corrective actions that may be taken by the State of Texas, ERCOT, the RCT, or the PUCT to resettle pricing across any portion of the supply chain ( i.e.

, fuel supply and wholesale pricing of generation, or allocating the financial impacts of market-wide load shed ratably across all retail market participants).

Recently announced or future legal proceedings, regulatory actions, investigations, or other administrative proceedings involving market participants may result lead to adverse determinations or other findings of violations of laws, rules or regulations, any of which may impact the ability of market participants to satisfy, in whole or in part, their respective obligations.

restrictions or limitations on the types of plans permitted to be offered to customers;

potential revisions to method or calculation of market compensation and incentives relating to the continued operation of assets that only run periodically, including during extreme weather events or other times of scarcity;

and other potential legislative and regulatory corrective actions that may be taken.

Previously announced or future legal proceedings, regulatory actions, investigations, or other administrative proceedings involving market participants may result lead to adverse determinations or other findings of violations of laws, rules or regulations, any of which may impact the ability of market participants to satisfy, in whole or in part, their respective obligations.

We are continuing to monitor and evaluate the impacts of this developing situation but at this time we cannot estimate the likelihood or impacts of any legislative or regulatory changes or actions (including enforcement actions that may be brought against various market participants) that may occur as a result of the event on our business, financial condition, results of operations, or cash flows.

Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the expected impacts of winter storm Uri.

Finally, the regulatory environment has undergone significant changes in the last several years due to state and federal policies affecting wholesale and retail competition and the creation of incentives for the addition of large amounts of new renewable generation.

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Circuit Court and remanded to the EPA for further consideration in accordance with the court’s ruling.

Circuit’s decision has been appealed to the U.S.

Supreme Court and oral argument is scheduled for February 2022.

The EPA may develop a more stringent and more encompassing rule to replace the ACE rule in its remand proceeding and has been directed by the Biden Administration to review this rule and others promulgated by the EPA during the Trump Administration.

Prior to the vacatur and remand, states where we operate coal plants (Texas, Illinois and Ohio) had begun the development of their state plans to comply with the now-vacated ACE rule.

In January 2021, the ACE rule was invalidated by the D.C.

Circuit Court.

In addition, a number of federal court cases have been filed in recent years asserting damage claims related to GHG emissions, and the results in those proceedings could establish adverse precedent that might apply to companies (including us) that produce GHG emissions.

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Accordingly, we may be required to accelerate or change our targets, incur additional expenses, and/or adjust or cease certain operations as a result of newly implemented federal and/or state regulations to reduce future carbon emissions.

The Capacity Performance product in the PJM market and the Pay-for-Performance mechanism in ISO-NE could lead to substantial changes in capacity income and non-performance penalties, which could have a material adverse effect on our results of operations, financial condition and cash flows.

Both ISO-NE and PJM operate a pay-for-performance model where capacity payments are modified based on real-time generator performance.

Capacity market prices are sensitive to design parameters, as well as additions of new capacity.

We may experience substantial changes in capacity income and non-performance penalties, which could have a material adverse effect on our results of operations, financial condition and cash flows.

Luminant's mining operations are subject to RCT oversight.

We currently own and operate, or are in the process of reclaiming, 12 surface lignite coal mines in Texas to provide fuel for our electricity generation facilities.

We also own or lease, and are in the process of reclaiming, two waste-to-energy surface facilities in Pennsylvania.

The RCT, which exercises broad authority to regulate reclamation activity, reviews on an ongoing basis whether Luminant is compliant with RCT rules and regulations and whether it has met all the requirements of its mining permits.

We currently own and operate, or are in the process of reclaiming, various surface lignite coal mines in Texas to provide fuel for our electricity generation facilities.

We also own or lease, and are in the process of reclaiming, multiple waste-to-energy surface facilities in Pennsylvania.

Any new rules and regulations adopted by the RCT or the Department of Interior Office of Surface Mining, which also regulates mining activity nationwide, or any changes in the interpretation of existing rules and regulations, could result in higher compliance costs or otherwise adversely affect our financial condition or cause a revocation of a mining permit.

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Luminant's lignite mining reclamation activity will require significant resources as existing and retired mining operations are reclaimed over the next several years.

In conjunction with Luminant's announcements in 2017 to retire several power generation assets and related mining operations, along with the continuous reclamation activity at its continuing mining operations for its mines related to the Oak Grove and Martin Lake generation assets, Luminant is expected to spend a significant amount of money, internal resources and time to complete the required reclamation activities.

In conjunction with Luminant's announcements in 2017 to retire several power generation assets and related mining operations, along with the continuous reclamation activity at its continuing mining operations for its mines related to the Oak Grove generation asset, Luminant is expected to spend a significant amount of money, internal resources and time to complete the required reclamation activities.

For the next five years, Vistra is projected to spend approximately $265 million (on a nominal basis) to achieve its reclamation objectives.

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• changes in market heat rate.

The retail businesses' earnings and cash flows could also be adversely affected in any period in which their customers' actual usage of electricity significantly varies from the forecasted usage, which could occur due to, among other factors, weather events, competition and economic conditions.

Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the expected impacts of winter storm Uri.

Our retail operations are subject to significant competition from other REPs, which could result in a loss of existing customers and the inability to attract new customers.

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Any of the foregoing could have a material adverse effect on us.

The operation of our businesses is subject to cyber-based security and integrity risk.

The operation of our businesses is subject to advanced persistent cyber-based security threats and integrity risk.

Numerous functions affecting the efficient operation of our businesses are dependent on the secure and reliable storage, processing and communication of electronic data and the use of sophisticated computer hardware and software systems and much of our information technology infrastructure is connected (directly or indirectly) to the internet.

Our information technology systems and infrastructure, and those of our vendors and suppliers, are susceptible to damage, disruptions, or shutdowns due to power outages, hardware failures, programming errors, defects or other vulnerabilities, cyber-attacks, ransomware attacks, malware attacks, computer viruses, theft, misconduct by employees or other insiders, telecommunications failures, misuse, human errors or other catastrophic events.

While we have controls in place designed to protect our infrastructure, such breaches and threats are becoming increasingly sophisticated, complex, change frequently and may be difficult to detect.

Any such breach, disruption or similar event that impairs our information technology infrastructure could disrupt normal business operations and affect our ability to control our generation assets, access retail customer information and limit communication with third parties, which could have a material adverse effect on us.

Our information technology systems and infrastructure, and those of our vendors and suppliers, are susceptible to threats which could compromise confidentiality, integrity or availability.

While we have controls in place designed to protect our infrastructure, such breaches and threats are becoming increasingly sophisticated and complex, requiring continuing evolution of our program.

Any such breach, disruption or similar event that impairs our information technology infrastructure could disrupt normal business operations and affect our ability to control our generation assets, maintain confidentiality, availability and integrity of our restricted data, access retail customer information and limit communication with third parties, which could have a material adverse effect on us.

As part of the continuing development of new and modified reliability standards, the FERC has approved changes to its Critical Infrastructure Protection reliability standards and has established standards for assets identified as "critical cyber assets." Under the Energy Policy Act of 2005, the FERC can impose penalties (up to $1 million per day, per violation) for failure to comply with mandatory electric reliability standards, including standards to protect the power system against potential disruptions from cyber/data and physical security breaches.

Further, our retail business requires us to access, collect, store and transmit sensitive customer data in the ordinary course of business.

Concerns about data privacy have led to increased regulation and other actions that could impact our businesses.

Examples of sensitive customer data are names, addresses, account information, historical electricity usage, expected patterns of use, payment history, credit bureau data, credit and debit card account numbers, drivers' license numbers, social security numbers and bank account information.

Concerns about data privacy have led to increased regulation and other actions that could impact our businesses and changes in data privacy and data protection laws and regulations or any failure to comply with such laws and regulations could adversely affect our business and financial results.

Our retail business may need to provide sensitive customer data to vendors and service providers who require access to this information in order to provide services, such as call center operations, to the retail business.

Although we take precautions to protect the sensitive customer data that we are required to collect in order to conduct our business, if a significant breach of our information technology systems were to occur, the reputation of our retail business may be adversely affected, customer confidence may be diminished, and our retail business may be subject to substantial legal or regulatory claims, any of which may contribute to the loss of customers and have a material adverse effect on us.

Any loss of customer, confidential, or proprietary data through a breach, unauthorized access, disruption, misuse or disclosure could adversely affect our reputation, expose us to material legal or regulatory claims and impair our ability to execute our business strategy, which could have a material adverse effect on us.

Although we take precautions to protect our infrastructure, we have been, and will likely continue to be, subject to attempts at phishing and other cybersecurity intrusions.

International conflict increases the risk of state-sponsored cyber threats and escalated use of cybercriminal and cyber-espionage activities.

In particular, the current geopolitical climate has further escalated cybersecurity risk, with various government agencies, including the U.S.

Cybersecurity & Infrastructure Security Agency, issuing warnings of increased cyber threats, particularly for U.S.

critical infrastructure.

While the Company has not experienced a cyber/data event causing any material operational, reputational or financial impact, we recognize the growing threat within the general marketplace and our industry, and there is no assurance that we will be able to prevent any such impacts in the future.

If a material breach of our information technology systems were to occur, the critical operational capabilities and reputation of our business may be adversely affected, customer confidence may be diminished, and our business may be subject to substantial legal or regulatory scrutiny and claims, any of which may contribute to potential legal or regulatory actions against the Company, loss of customers and otherwise have a material adverse effect on us.

Any loss or disruption of critical operational capabilities to support our generation, commercial or retail operations, loss of customers, or loss of confidential or proprietary data through a breach, unauthorized access, disruption, misuse or disclosure could adversely affect our reputation, expose us to material legal or regulatory claims and impair our ability to execute our business strategy, which could have a material adverse effect on us.

In addition, we may experience increased capital and operating costs to implement increased security for our information technology infrastructure.

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These risks include:

• unscheduled outages or unexpected costs due to equipment, mechanical, structural, cybersecurity or other problems;

• unscheduled outages or unexpected costs due to equipment, mechanical, structural, cybersecurity, insider threat, third-party compromise or other problems;

• inadequacy or lapses in maintenance protocols;

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Older generating equipment, even if maintained or refurbished in accordance with good engineering practices, may require significant capital expenditures to operate at peak efficiency or reliability.

The risk of increased maintenance and capital expenditures arises from (a) increased starting and stopping of generation equipment due to the volatility of the competitive generation market and the prospect of continuing low wholesale electricity prices that may not justify sustained or year-round operation of all our generation facilities, (b) any unexpected failure to generate power, including failure caused by equipment breakdown or unplanned outage (whether by order of applicable governmental regulatory authorities, the impact of weather events or natural disasters or otherwise), (c) damage to facilities due to storms, natural disasters, wars, terrorist or cyber/data security acts and other catastrophic events and (d) the passage of time and normal wear and tear.

The risk of increased maintenance and capital expenditures arises from (a) increased starting and stopping of generation equipment due to the volatility of the competitive generation market and the prospect of continuing low wholesale electricity prices that may not justify sustained or year-round operation of all our generation facilities, (b) any unexpected failure to generate power, including failure caused by equipment breakdown or unplanned outage (whether by order of applicable governmental regulatory authorities, the impact of weather events or natural disasters or otherwise), (c) damage to facilities due to storms, natural disasters, wars, terrorist or cyber/data security acts, including nation-state attacks or organized cyber and other catastrophic events and (d) the passage of time and normal wear and tear.

Further, our ability to successfully and timely complete routine maintenance or other capital projects at our existing facilities is contingent upon many variables and subject to substantial risks.

Should any such efforts be unsuccessful, we could be subject to additional costs or losses and write downs of our investment in the project.

We cannot be certain of the level of capital expenditures that will be required due to changing environmental and safety laws and regulations (including changes in the interpretation or enforcement thereof), needed facility repairs and unexpected events (such as natural disasters or terrorist or cyber/data security attacks).

We cannot be certain of the level of capital expenditures that will be required due to changing environmental and safety laws and regulations (including changes in the interpretation or enforcement thereof), needed facility repairs and unexpected events (such as environmental impacts, natural disasters or terrorist or cyber/data security attacks).

The unexpected requirement of large capital expenditures could have a material adverse effect on us.

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As the closure and CCR management work progresses and final closure plans and corrective action measures are developed and approved at each site, the scope and complexity of work and the amount of CCR material could be greater than current estimates and could, therefore, materially impact earnings through increased compliance expenditures.

The EPA is reviewing applications submitted by us to extend closure deadlines for many of our CCR impoundments.

The EPA has been directed by the Biden Administration to review a number of environmental rules adopted by the EPA during the Trump Administration, including Coal Combustion Residuals (CCR) rule, the Emissions Limitation Guidelines (ELG) rule, the Affordable Clean Energy (ACE) rule and the PM and Ozone National Ambient Air Quality Standards (NAAQS) rules.

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We may be materially affected by weather conditions and our businesses may fluctuate substantially on a seasonal basis as the weather changes.

In addition, we are subject to the effects of extreme weather conditions, including sustained or extreme cold or hot temperatures, hurricanes, floods, storms, fires, earthquakes or other natural disasters, which could stress our generation facilities and grid reliability, limit our ability to procure adequate fuel supply, or result in outages, damage or destroy our assets and result in casualty losses that are not ultimately offset by insurance proceeds, and could require increased capital expenditures or maintenance costs, including supply chain costs.

In addition, we are subject to the effects of extreme weather conditions, including sustained or extreme cold or hot temperatures, hurricanes, floods, droughts, storms, fires, earthquakes or other natural disasters, which could stress our generation facilities and grid reliability, limit our ability to procure adequate fuel supply, or result in outages, damage or destroy our assets and result in casualty losses that are not ultimately offset by insurance proceeds, and could require increased capital expenditures or maintenance costs, including supply chain costs.

Moreover, an extreme weather event could cause disruption in service to customers due to downed wires and poles or damage to other operating equipment, which could result in us foregoing sales of electricity and lost revenue.

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Additionally, extreme weather has resulted, and may in the future result, in (i) unexpected increases in customer load, requiring our retail operation to procure additional electricity supplies at wholesale prices in excess of customer sales prices for electricity, (ii) the failure of equipment at our generation facilities, (iii) a decrease in the availability of, or increases in the cost of, fuel sources, including natural gas, diesel and coal, or (iv) unpredictable curtailment of customer load by the applicable ISO/RTO in order to maintain grid reliability, resulting in the realization of lower wholesale prices or retail customer sales.

Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the expected impacts of winter storm Uri.

For example, Winter Storm Uri in February 2021 had a material impact on our results of operations.

Additionally, climate change may produce changes in weather or other environmental conditions, including temperature or precipitation levels, and thus may impact consumer demand for electricity.

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We continue to examine the impacts of the pandemic on our workforce, liquidity, reliability, cybersecurity, customers, suppliers, along with other macroeconomic conditions and cannot currently predict whether COVID-19 will have a material impact on our results of operations, financial condition, and cash flows.

Additionally, global recovery and transition from COVID-19 could have a material impact on supply, business and commodity market fundamentals on a national and global scale.

Because we are deemed a critical infrastructure provider that provides a critical service to our customers, we must keep our employees who operate our businesses safe and minimize unnecessary risk of exposure.

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In particular, we have taken extra precautions for our employees who work in the field and for employees who continue to work in our facilities including requiring, for both employees and contractors, social distancing where possible and requiring the use of appropriate personal protective equipment in certain circumstances.

We have implemented work-from-home policies and other safety measures where appropriate, including, but not limited to, temperature testing at all of our locations for employees, contractors, and other essential visitors and closing our facilities to non-essential visitors.

We have implemented work-from-home policies and other safety measures where appropriate, including, but not limited to, encouraging vaccinations and boosters, answering screening questions and temperature testing at all of our locations for unvaccinated employees, contractors, and other essential visitors and closing our facilities to non-essential visitors.

While our systems and operations remain vulnerable to cyber-attacks and other disruptions due in part to the fact that a portion of our workforce continues to work remotely, we have implemented physical and cyber-security measures to ensure that our systems remain functional in order to both serve our operational needs with a remote workforce and keep them running to ensure uninterrupted service to our customers.

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The full scope and extent of the impacts of COVID-19 on our operations are unknown at this time.

However, COVID-19 or another pandemic could have material and adverse effects on our results of operations, financial condition and cash flows due to, among other factors, a protracted slowdown of broad sectors of the economy, changes in demand or supply for commodities, significant changes in legislation or regulatory policy to address the pandemic (including moratoriums or conditions or disconnections and limits or restrictions or late fees), reduced demand for electricity (particularly from commercial and industrial customers), increased late or uncollectible customer payments, negative impacts on the health of our workforce, a deterioration of our ability to ensure business continuity (including increased risk from cybersecurity attacks as a result of a significant portion of our workforce continuing to work from home), and the inability of the Company's contractors, suppliers, and other business partners to fulfill their contractual obligations.

However, COVID-19 or another pandemic could have material and adverse effects on our results of operations, financial condition and cash flows due to, among other factors, a protracted slowdown of broad sectors of the economy, changes in demand or supply for commodities, significant changes in legislation or regulatory policy to address the pandemic (including prohibitions on certain marketing channels, moratoriums or conditions on disconnections or limits or restrictions on late fees), reduced demand for electricity (particularly from commercial and industrial customers), increased late or uncollectible customer payments, negative impacts on the health of our workforce, a deterioration of our ability to ensure business continuity (including increased vulnerability to cyber and other information technology risks as a result of a significant portion of our workforce continuing to work from home), and the inability of the Company's contractors, suppliers, and other business partners to fulfill their contractual obligations.

Despite our efforts to manage these impacts to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of this outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects.

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Additionally, increased governmental and consumer focus on energy sustainability efforts, including desire for, or incentives related to, the development, implementation and usage of low-carbon technology, may result in decreased demand for the traditional generation technologies that we currently own and operate.

We may potentially be affected by emerging technologies that may over time affect change in capacity markets and the energy industry overall with the inclusion of distributed generation and clean technology.

We may potentially be affected by emerging technologies that may over time affect change in capacity markets and the energy industry overall including distributed generation and clean technology.

Some of these emerging technologies are shale gas production, distributed renewable energy technologies, energy efficiency, broad consumer adoption of electric vehicles, distributed generation and energy storage devices.

Such emerging technologies could affect the price of energy, levels of customer-owned generation, customer expectations and current business models and make portions of our electric system power supply and transmission and/or distribution facilities obsolete prior to the end of their useful lives.

Additionally, large-scale cryptocurrency mining is becoming increasingly prevalent in certain markets, including ERCOT, and many of these cryptocurrency mining facilities are "behind-the-meter." Such emerging technologies could affect the price of energy, levels of customer-owned generation, customer expectations and current business models and make portions of our electric system power supply and transmission and/or distribution facilities obsolete prior to the end of their useful lives.

These emerging technologies may also affect the financial viability of utility counterparties and could have significant impacts on wholesale market prices, which could ultimately have a material adverse effect on our financial condition, results of operations and cash flows could be materially adversely affected.

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We may not be successful in retaining current personnel or in hiring or retaining qualified personnel in the future.

Our failure to attract highly qualified new personnel or retain highly qualified existing personnel could have an adverse effect on our ability to successfully operate our businesses.

Further, we are facing an increasingly competitive market for hiring and retaining skilled employees in certain skill areas, which is exacerbated by the effects of the COVID-19 pandemic and increased acceptance of hiring remote working employees by our competitors and other companies.

Difficulties in attracting and retaining highly qualified skilled employees may restrict our ability to adequately support our business needs and/or result in increased personnel costs.

In addition, effective succession planning is important to our long-term success.

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As of December 31, 2021, we had approximately 1,400 employees covered by collective bargaining agreements.

The terms of all current collective bargaining agreements covering represented personnel engaged in lignite mining operations, lignite-, coal- and nuclear-fueled generation operation and some of our natural gas-fueled generation operations expire on various dates between May 2021 and November 2023, but remain effective thereafter unless and until terminated by either party.

We are also presently negotiating the terms of first contracts at two of our natural gas-fueled generation facilities.

The terms of all current collective bargaining agreements covering represented personnel engaged in lignite mining operations, lignite-, coal-, natural gas- and nuclear-fueled generation operation, as well as some battery operations, expire on various dates between March 2022 and May 2024, but remain effective thereafter unless and until terminated by either party.

In the event that our union employees strike, participate in a work stoppage or slowdown or engage in other forms of labor strife or disruption, we would be responsible for procuring replacement labor or we could experience reduced power generation or outages.

Our ability to procure such labor is uncertain.

We have in place strike contingency plans that address the procurement of replacement labor.

Strikes, work stoppages or the inability to negotiate current or future collective bargaining agreements on favorable terms or at all could have a material adverse effect on us.

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The deterioration of income from, or other available assets of, any such subsidiary for any reason could limit or impair its ability to pay dividends or make other distributions to Vistra.

Investor focus on environmental, social, and governance issues, including climate change and sustainability matters, could adversely affect our stock price.

Investor focus on environmental, social, and governance issues, including increasing attention on climate change and sustainability matters, could adversely affect, and increase the potential volatility of, our stock price.

Evolving expectations from stakeholders, including investors, on ESG issues, including climate change and sustainability matters, and erosion of stakeholder trust or confidence could influence actions or decisions about our company and our industry and could adversely affect our business, operations, financial results or stock price.

Companies across all industries are facing evolving expectations or increasing scrutiny from stakeholders related to their approach to ESG matters.

For Vistra, climate change, safety and stakeholder relations remain primary focus areas, and changing expectations of our practices and performance across these and other ESG areas may impose additional costs or create exposure to new or additional risks.

Our operations, projects and growth opportunities require us to have strong relationships with key stakeholders, including local communities and other groups directly impacted by our activities, as well as governments and government agencies, investor advocacy groups, certain institutional investors, investment funds and others which are increasingly focused on ESG practices.

Certain financial institutions have announced policies to presently or in the future cease investing or to divest investments in companies that derive any or a specified portion of their income from, or have any or a specified portion of their operations in, fossil fuels.

To date these represent small fractions of our overall current or potential equity investors, but that group could grow and thus reduce demand for our common stock or otherwise increase volatility in our stock price.

The Company’s plan to transition to clean power generation sources and reduce its carbon footprint may not be completed in the timeframe or achieve the targets as expected.

Negative investor sentiment toward us and our industry — including concerns over environmental or sustainability matters and potential changes in federal and state regulatory actions related thereto — could have a negative impact on our stock price .

While we are strategically focused on successfully adapting to the energy transition and strongly committed to our ESG practices and performance (including transparency and accountability thereof), our plans to transition to clean power generation sources and reduce our carbon footprint may not be completed in the timeframe and we may not achieve our targets as expected, which could impact stakeholder trust and confidence.

Any such erosion of stakeholder trust and confidence, evolving expectations from stakeholders on such ESG issues, and such parties' resulting actions or decisions about our company and our industry could have negative impacts on our business, operations, financial results, and stock price, including:

• negative stakeholder sentiment toward us and our industry, including concerns over environmental or sustainability matters and potential changes in federal and state regulatory actions related thereto;

• loss of business or loss of market share, including to competitors who do not have any, or comparable amounts, of operations involving fossil fuels;

• loss of ability to secure growth opportunities;

• the inability to, or increased difficulties and costs of, obtaining services, materials, or insurance from third parties;

• reductions in our credit ratings or increased costs of, or limited access to, capital;

• delays in project execution;

• legal action;

• inability or limitations on ability to receive applicable government subsidies, or competitors with smaller or no fossil operations receiving subsidies for which we are not eligible, or in larger amounts;

• increased regulatory oversight;

• loss of ability to obtain and maintain necessary approvals and permits from governments and regulatory agencies on a timely basis and on acceptable terms;

• impediments on our ability to acquire or renew rights-of-way or land rights on a timely basis and on acceptable terms;

• changing investor sentiment regarding investment in the power and utilities industry or our company;

• restricted access to and cost of capital;

• loss of ability to hire and retain top talent.

We may not pay any dividends on our common stock in the future.

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There is no assurance that the Board will declare, or that we will pay, any dividends on our common stock in the future.

Holders of our preferred stock may have interests and rights that are different from our common stockholders.

We are permitted under our certificate of incorporation to issue up to 100,000,000 shares of preferred stock.

We can issue shares of our preferred stock in one or more series and can set the terms of the preferred stock without seeking any further approval from our common stockholders.

Any preferred stock that we issue may rank ahead of our common stock in terms of dividend priority or liquidation premiums and may have greater voting rights than our common stock, which could dilute the value of our common stock to current stockholders and could adversely affect the market price of our common stock.

As of December 31, 2021, 1,000,000 shares of Series A Preferred Stock and 1,000,000 shares of Series B Preferred Stock were issued and outstanding.

The Preferred Stock represents a perpetual equity interest in the Company and, unlike our indebtedness, will not give rise to a claim for payment of a principal amount at a particular date;

provided , the Company may redeem the Preferred Stock at the specified times (or upon certain specified events) at the applicable redemption price set forth in the certificate of designation of each of the Series A Preferred Stock and Series B Preferred Stock, respectively (Certificates of Designation).

The Preferred Stock is not convertible into or exchangeable for any other securities of the Company.

Upon the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Company, the holders of Preferred Stock will be entitled to receive, pro rata and in preference to the holders of any other capital stock, an amount per share equal to $1,000 plus accrued and unpaid dividends thereon, if any.

Unless we have received the affirmative vote or consent of the holders of at least two-thirds of the outstanding Series A Preferred Stock and the holders of at least two-thirds of the outstanding Series B Preferred Stock, voting as a separate class, we may not adopt any amendment to our certificate of incorporation (including the applicable Certificates of Designation) that would have a material adverse effect on the powers, preferences, duties, or special rights of such series of Preferred Stock, subject to certain exceptions.

In addition, unless we have received the affirmative vote or consent of the holders of at least two-thirds of the outstanding Series A Preferred Stock and the holders of at least two-thirds of the outstanding Series B Preferred Stock, voting as a class together with the holders of any parity securities upon which like voting rights have been conferred and are exercisable, we may not:

(i) create or issue any senior securities, (ii) create or issue any parity securities (including any additional Preferred Stock) if the cumulative dividends payable on the outstanding Preferred Stock (or parity securities, if applicable) are in arrears;

(iii) create or issue any additional Preferred Stock or any parity securities with an aggregate liquidation preference, together with the issued and outstanding Preferred Stock and any parity securities that are then outstanding, of greater than $2.5 billion, and (iv) engage in any Transaction that results in a Covered Disposition (as such terms are defined in the Certificates of Designation).

In addition, holders of the Preferred Stock are entitled to receive, when, as, and if declared by our Board, semi-annual cash dividends on the Preferred Stock, which are cumulative from the applicable initial issuance date of the Preferred Stock and payable in arrears, and unless full cumulative dividends have been or contemporaneously are being paid or declared on the Preferred Stock, we may not (i) declare or pay any dividends on any junior securities, including our common stock, or (ii) redeem or repurchase any parity securities or junior securities, subject to limited exceptions set forth in the Certificates of Designation.

There is no assurance that the Board will declare, or that we will pay, any dividends on our Preferred Stock in the future.

The holders of Preferred Stock (along with any parity securities then outstanding with similar rights) are entitled to elect two additional directors in the event any dividends on Preferred Stock are in arrears for three or more semi-annual dividend periods (whether or not consecutive), and such directors may have competing and different interests to those elected by our common stockholders.

The dividend rate for the Series A Preferred Stock from and including the initial issuance date of October 15, 2021 until the first reset date of October 15, 2026 will be 8.0% per annum of the $1,000 liquidation preference per share of Series A Preferred Stock.

The dividend rate for the Series B Preferred Stock from and including the initial issuance date of December 10, 2021 until the first reset date of December 15, 2026 will be 7.0% per annum of the $1,000 liquidation preference per share of Series B Preferred Stock.

On and after the first reset date of the Series A Preferred Stock, the dividend rate on the Series A Preferred Stock for each subsequent five-year period (each, a Reset Period) will be adjusted based upon the applicable Treasury rate, plus a spread of 6.93% per annum;

provided that the applicable Treasury rate for each Reset Period will not be lower than 1.07%.

On and after the first reset date of the Series B Preferred Stock, the dividend rate on the Series B Preferred Stock for each Reset Period will be adjusted based upon the applicable Treasury rate, plus a spread of 5.74% per annum;

provided that the applicable Treasury rate for each Reset Period will not be lower than 1.26%.

In the event that the Company does not exercise its option to redeem all the shares of Preferred Stock within 120 days after the first date on which a Change of Control Trigger Event (as defined in the Certificate of Designation) occurs, the then-applicable dividend rate for the Preferred Stock will be increased by 5.00%.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors