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Luminant Says Texas PUC Staff’s Sought Conditions For Vistra-Dynegy Not Needed

February 12,2018

Luminant has filed a response with the Texas PUC arguing that conditions proposed by PUC Staff on the proposed acquisition of Dynegy by Luminant's parent, Vistra Energy, are not appropriate, and the transaction will not result in Luminant exceeding the 20% cap, either due to interpretation of various contested issues, or due to the potential for pre-closing unit sales

Luminant's various interpretations supporting its argument that it will not exceed 20% post-merger, and/or potential sales processes, as well as Staff's proposed conditions for the merger, including the divestiture of at least 1,281 MW of installed generation capacity in ERCOT, have been previously detailed by and in the stories below

Vistra-Dynegy Confirm Texas Units Subject To Sale Process; Proposes Mitigation Alternative If Sale Not Consummated

Luminant Justifies Reliance On Statutory Exemption In Determining MW Used For Market Share Calc.

Texas PUC Staff Recommends Conditions For Vistra Acquisition of Dynegy

In its response to Staff's proposed conditions, Luminant said as follows:

"Staff would calculate the relevant market share differently than Luminant would and thus recommends approval with imposition of six conditions. If market share is calculated in the way that Luminant asserts is correct (or, if not, if Luminant makes certain pre-closing unit sales it has voluntarily committed to make), then the Combined Entity will own and control less than 20 percent of the installed generation capacity in ERCOT. Therefore, as further explained in this Response, post-closing conditions are inappropriate," Luminant said

"While some of those scenarios contemplate pre-closing sales of one or more specified gas steam plants (i.e., Graham, Stryker, and/or Trinidad), Luminant's primary position is that the market share of the Combined Entity will not exceed the 20 percent cap in PURA § 39.154 (the Cap), and thus that the Transaction would meet the statutory standard for approval, even if none of the potential pre-closing sales are consummated. Under that primary position, the market share of the Combined Entity would be 19.69 percent, based on: (1) excluding the capacity of Luminant Generation's Lake Hubbard power plant (915 MW) from the numerator due to the grandfathering exception in PURA § 39.154(e) and also from the denominator due to Luminant's predecessor's commitment in the original rulemaking record for 16 Tex. Admin. Code (TAC) § 25.4015 (hereafter, the Grandfathering Issue); and (2) excluding the 820 MW import capability over the North and East direct current (DC) interconnections (Ties) from the Combined Entity's numerator due to the Combined Entity's current inability to use the DC Ties and Applicants commitment not to import power in the future over the DC Ties (hereafter, the DC Ties Issue and, together with the Grandfathering Issue, the Contested Issues)," Luminant said

Luminant said that even if the Commission adopts Staff's view of the two Contested Issues, "this Application still must be approved, without condition, upon Luminant's confirmation that it has made sufficient pre-closing sales so that the Combined Entity's market share will not exceed 20 percent."

"The imposition of conditions is not necessary or appropriate, however, for two reasons: first, because if the Contested Issues are decided in accordance with Luminant's position, then the Combined Entity will not own and control installed generation capacity that exceeds the Cap (so no conditional approval is necessary); and second, because even if the Commission decides against Luminant's position on either or both the Contested Issues, Luminant has in the Application already committed to sell sufficient generation capacity, prior to closing the Transaction, to ensure that the Combined Entity's post-closing market share will not exceed the Cap and to make compliance filings confirming that such sales have occurred. In other words, the Transaction as proposed in the Application includes Luminant's commitment to sell capacity as necessary before closing to comply with the Commission's calculation of market share and thus, the last sentence of PURA § 39.158(a) would not come into play, because it applies only if 'the transaction as proposed would violate Section 39.154,'" Luminant said

"Accordingly, Luminant requests Commission approval of the Transaction without ordering any of the six conditions suggested by Staff in its Recommendation, either because the Commission agrees with Luminant on the Contested Issues or because the Commission accepts Luminant's voluntary commitment to sell sufficient capacity (and make compliance filings confirming such sales) prior to closing the Transaction to ensure that the Combined Entity's post-closing market share will comply with the Cap. As an alternative, the Commission could accept Luminant's DC Ties commitment, by itself, as reasonable mitigation if the Commission disagrees with Luminant on the DC Ties issue and also decides the Transaction could close without Luminant consummating any of the pre-closing unit sales. To be clear, that option would be available only in the circumstance just described, because that would be the only circumstance in which the Combined Entity's post-closing market share would exceed the Cap," Luminant said

Texas   Vistra Energy   Luminant   M&A   Dynegy  

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