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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2026-02-27 compared with 2025-02-28 · 50 added, 13 removed, 45 unchanged (58% of the section changed)

4 unchanged sentences

Measurement techniques include, but are not limited to, position reporting and review, Value at Risk (VaR) methodologies and stress test scenarios.

Risk management regularly reports their analysis to the Company's Risk Committee and Executive Committee, and to the Sustainability and Risk Committee of the Board of Directors.

Risk management regularly reports their analysis to the Company's Risk Committee and Executive Committee, and to the Sustainability and Risk Committee of the Board.

Commodity Price Risk and Oversight

4 unchanged sentences

Similar to other participants in the market, we cannot fully manage the long-term value impact of structural declines or increases in natural gas and power prices.

Beginning in 2024, our nuclear fleet is eligible for the nuclear PTC provided by the IRA which provides increasing levels of support as unit revenues decline below levels established in the IRA and is further adjusted annually for inflation over the duration of the program.

Our nuclear fleet is eligible for the nuclear PTC provided by the IRA which provides increasing levels of support as unit revenues decline below levels established in the IRA and is further adjusted annually for inflation over the duration of the program.

VaR Methodology

6 unchanged sentences

The following table summarizes the VaR for Vistra's commodity portfolio based on a 95% confidence level and an assumed holding period of 60 days.

Average VaRs as of December 31 are the average of each month-end average for the years ended December 31, 2024 and 2023, respectively:

Average VaRs are the average of each month-end average for the years ended December 31, 2025 and 2024, respectively:

Year Ended December 31,

The month-end average VaR risk measure increased in 2024 due to higher volumes following the Energy Harbor Merger.

(in millions)

Average VaR $ 224 $ 236

High VaR $ 316 $ 371

Low VaR $ 138 $ 86

Interest Rate Risk

1 unchanged sentence

We mitigate our exposure to fluctuations in interest rates through entering interest rate swaps.

These interest rate swaps limit the impact of interest rate changes on our results of operations and cash flows and to lower our overall borrowing costs.

These interest rate swaps limit the impact of interest rate changes on our results of operations and cash flows and lower our overall borrowing costs.

Interest rate risk is managed centrally by our treasury function.

As of December 31, 2024, we have approximately $3.5 billion principal amount of variable rate debt consisting of the Vistra Operations Credit Facilities Term Loan B-3 Facility, the BCOP Credit Facilities and the Vistra Zero Term Loan B Facility (see Note 9 to the Financial Statements).

We have entered into net notional interest rate swaps that will hedge $2.3 billion of our exposure to variable rate debt through December 2030 (see Note 11 to Financial Statements).

As of December 31, 2025, we have approximately $4.0 billion principal amount of variable rate debt consisting of the Vistra Operations Term Loan B-3 Facility, the BCOP Credit Facility, and the Vistra Zero Term Loan B Facility (see Note 11 to the Financial Statements for additional information).

We have entered into net notional interest rate swaps that will hedge $2.3 billion of our exposure to Vistra Operations variable rate debt through December 2030 and $416 million of our project-level debt through October 2045 (see Note 13 to Financial Statements for additional information).

As of December 31, 2025, the potential reduction of annual pretax earnings over the next twelve months due to a one percentage-point (100 basis points) increase in floating interest rates on long-term debt totaled approximately $13 million after taking into account the interest rate swaps.

1 unchanged sentence

We minimize our exposure to credit risk by evaluating potential counterparties, monitoring ongoing counterparty risk and assessing overall portfolio risk.

This includes review of counterparty financial condition, current and potential credit exposures, credit rating and other quantitative and qualitative credit criteria.

This includes review of counterparty financial conditions, current and potential credit exposures, credit rating and other quantitative and qualitative credit criteria.

We also employ certain risk mitigation practices, including utilization of standardized master agreements that provide for netting and setoff rights, as well as credit enhancements such as margin deposits and customer deposits, letters of credit, parental guarantees and surety bonds.

See Note 13 to the Financial Statements for additional information.

Our gross credit exposure (excluding collateral impacts) associated with retail and wholesale trade accounts receivable and net derivative assets arising from commodity contracts and hedging and trading activities totaled $2.360 billion at December 31, 2024.

Our gross credit exposure (excluding collateral impacts) associated with retail and wholesale trade accounts receivable and net derivative assets (liabilities) arising from commodity contracts and hedging and trading activities totaled $2.651 billion as of December 31, 2025.

Including collateral posted to us by counterparties, our net exposure was $2.494 billion, as seen in the following table that presents the distribution of credit exposure by counterparty credit quality as of December 31, 2025.

Credit collateral includes cash and letters of credit but excludes other credit enhancements such as guarantees or liens on assets.

December 31, 2025

Exposure Before Credit Collateral

Trade Accounts Receivable

Trade Accounts Receivable Derivatives Gross

Exposure Credit

Collateral Net

2 unchanged sentences

$ 1,831 $ (16) $ 1,815 $ 48 $ 1,767

Texas, East and Asset Closure segments:

Texas, East, West, and Asset Closure segments:

Investment grade $ 189 $ 448 $ 637 $ 5 $ 632

Below investment grade or no rating 133 66 199 104 95

Texas, East and Asset Closure segments

Texas, East, West, and Asset Closure segments

$ 322 $ 514 $ 836 $ 109 $ 727

5 unchanged sentences

, 10% or greater) concentration of credit exposure exists with one counterparty, which represented an aggregate $331 million, or 46%, of our total net exposure as of December 31, 2025.

We view exposure to this counterparty to be within an acceptable level of risk tolerance due to the counterparty's credit ratings, the counterparty's market role and deemed creditworthiness and the importance of our business relationship with the counterparty.

We view exposure to this counterparty to be within an acceptable level of risk tolerance due to the counterparty's credit ratings, market role and deemed creditworthiness and the importance of our business relationship with the counterparty.

Energy-Related Commodity Contracts and Mark-to-Market Activities

The table below summarizes the changes in commodity contract assets and liabilities for the years ended December 31, 2025 and 2024.

Year Ended December 31,

(in millions)

Commodity contract net liability as of January 1 $ (1,460) $ (2,740)

Mark-to-market adjustments:

Settlements/termination of positions (a) 970 1,213

Changes in fair value of positions in the portfolio (b) (1,778) (58)

Net gain (loss) associated with mark-to-market accounting

Acquired commodity contracts (c) (410) (50)

Other activity (d) 102 175

Commodity contract net liability as of December 31

$ (2,576) $ (1,460)

(a) Represents reversals of previously recognized unrealized gains and losses upon settlement/termination (offsets realized gains/(losses) recognized in the settlement period).

Excludes changes in fair value in the month the position settled as well as amounts related to positions entered into, and settled, in the same month.

(b) Represents unrealized net gains/(losses) recognized, reflecting the effect of changes in fair value.

Excludes changes in fair value in the month the position settled as well as amounts related to positions entered into, and settled, in the same month.

(c) Includes fair value of commodity contracts acquired in the Lotus Acquisition in 2025 and the Energy Harbor Merger in 2024 (see Note 2 to the Financial Statements for additional information).

(d) Primarily represents changes in fair value of positions due to receipt or payment of cash not reflected in unrealized gains or losses.

Amounts are generally related to premiums related to options purchased or sold as well as certain margin deposits classified as settlement for certain transactions executed on the CME.

The following maturity table presents the net commodity contract liability arising from recognition of fair values as of December 31, 2025, scheduled by the source of fair value and contractual settlement dates of the underlying positions.

Maturity dates of unrealized commodity contract net liability as of December 31, 2025

Source of Fair Value Less than

1 year 1-3 years 4-5 years Excess of

5 years Total

(in millions)

Prices actively quoted $ (556) $ (332) $ (11) $ 1 $ (898)

Prices provided by other external sources (194) (214) (1) — (409)

Prices based on models (163) (536) (287) (283) (1,269)

Total $ (913) $ (1,082) $ (299) $ (282) $ (2,576)

We have engaged in natural gas hedging activities to mitigate the risk of higher or lower wholesale electricity prices that have corresponded to increases or declines in natural gas prices.

When natural gas prices are elevated or depressed, we continue to seek opportunities to manage our wholesale power price exposure through hedging activities, including forward wholesale and retail electricity sales.

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 7A. Quantitative and Qualitative Disclosures About Market Risk