Vistra (VST) 10-K risk factor changes: FY2018 vs FY2017

Management's Discussion and Analysis of Financial Condition and Results of Operations, that could have a material adverse effect on [removed: the Merger and/or] our business, results of operations, liquidity and financial condition, or could cause results or outcomes to differ materially from those contained in or implied by any forward-looking statement in this Annual Report, are described below.

There may be further risks and uncertainties that are not currently known or that are not currently believed to be material that may adversely affect [removed: the Merger and/or] our business, results of operations, liquidity, financial condition and prospects and the market price of our common stock in the future.

[removed: If such a termination fee is payable, the payment of this fee] [added: Continued subsidies (or increases thereto) to our competitors] could have a material adverse effect on [removed: the] [added: our] financial condition, results of operations and cash [removed: flows of the Company.][added: flows.]

Our revenues, results of operations and operating cash flows generally may be impacted by price fluctuations in the wholesale power [removed: and natural gas, coal and oil markets] [added: market] and other market factors beyond our control.

As a result, our revenues, results of operations and operating cash flows depend in large part upon wholesale market prices for electricity, natural gas, uranium, lignite, coal, fuel and transportation in our regional [removed: market] [added: markets] and other competitive markets and upon prevailing retail electricity rates, which may be impacted by, among other things, actions of regulatory authorities.

Fuel costs (including diesel, natural gas, lignite, coal and nuclear fuel) may be volatile, and the wholesale price for electricity may not change at the same rate as changes in fuel [removed: costs.][added: costs, and disruptions in our fuel supplies may therefore require us to find alternative fuel sources at higher costs, to find other sources of power to deliver to counterparties at a higher cost, or to pay damages to counterparties for failure to deliver power as contracted.]

| • | volatility in [removed: ERCOT] market heat rates; |

| • | changes in the [removed: manner in which] [added: way] we operate our facilities, including curtailed operation due to market pricing, environmental regulations and legislation, safety or other factors; |

| • | changes in generation [added: capacity or] efficiency; |

[removed: We recently announced the retirement of] [added: During 2018, we retired] our Monticello, Sandow 4, Sandow [removed: 5 and] [added: 5,] Big [removed: Brown] [added: Brown, Killen, Stuart and Northeastern] units.

Generally, commodity markets that we participate in to hedge our exposure to [removed: ERCOT] electricity prices and heat rates have limited liquidity after two to three years.

With the tightening of credit markets that began in 2008 and the expansion of regulatory oversight through various financial reforms, there has been a decline in the number of market participants in the wholesale energy commodities markets, resulting in less [removed: liquidity, particularly in the ERCOT electricity market.][added: liquidity.]

[removed: ERCOT market] [added: Market] participants [added: in the RTOs and ISOs in which we operate] are also exposed to risks that another [removed: ERCOT] market participant may default on its obligations to pay [removed: ERCOT] [added: such RTO or ISO] for electricity or services taken, in which case such costs, to the extent not offset by posted security and other protections available to [removed: ERCOT,] [added: such RTO or ISO,] may be allocated to various non-defaulting [removed: ERCOT] [added: RTO or ISO] market participants, including us.

Our results of operations and financial condition could be materially and adversely affected if energy market participants continue to construct additional generation facilities (i.e., new-build) or expand or enhance existing generation facilities [removed: in ERCOT] despite relatively low power prices [removed: in ERCOT] and such additional generation capacity results in a reduction in wholesale power prices.

Given the overall attractiveness of [removed: ERCOT] [added: certain of the markets in which we operate] and certain tax benefits associated with renewable energy, among other matters, energy market participants have continued to construct new generation facilities (i.e., new-build) or invest in enhancements or expansions of existing generation facilities [removed: in ERCOT] despite relatively low wholesale power prices.

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 [removed: in ERCOT] that causes a reduction in wholesale power [removed: prices in ERCOT.][added: prices.]

We attempt to manage this exposure [removed: through enforcement of established risk limits] [added: by entering into commodity hedging transactions] and [added: establishing] risk management policies and procedures.

These risk [removed: limits and risk] management procedures may not work as planned and cannot eliminate all risks associated with these activities.

| • | conditions and economic weakness in the [removed: ERCOT or general] U.S. power markets; |

| • | investor confidence in the industry and in us and the [removed: ERCOT] wholesale electricity [removed: market;] [added: markets in which we operate;] |

As a result, we may not be able to access capital on terms (financial or otherwise) as favorable as companies that maintain [removed: investment grade] [added: investment-grade] credit ratings or we may be unable to access capital at all at times when the credit markets tighten.

A downgrade in long-term debt ratings generally causes borrowing costs to increase and the potential pool of investors to [removed: shrink,] [added: shrink] and could trigger liquidity demands pursuant to contractual arrangements.

Our financial statements reflect a liability of [removed: $357] [added: $420] million as of December 31, [removed: 2017] [added: 2018] related to these future payment obligations (see Note [removed: 9] [added: 10] to the Financial Statements).

Our businesses are subject to numerous state and federal laws (including PURA, the Federal Power Act, the Atomic Energy Act, the Public Utility Regulatory Policies Act of 1978, the Clean Air Act (CAA), the Energy Policy Act of 2005 and the Dodd-Frank Wall Street Reform and Consumer Protection Act), changing governmental policy and regulatory actions (including those of the [removed: PUCT,] [added: FERC,] the NERC, the [removed: TRE, the] RCT, the [removed: TCEQ, the FERC, the] MSHA, the EPA, the [removed: NRC] [added: NRC, CFTC, state public utility commissions] and [removed: CFTC)] [added: state environmental regulatory agencies),] and the rules, guidelines and protocols of [removed: ERCOT] [added: 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 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 [removed: PURA that are administered by the PUCT and ERCOT.][added: PURA.]

In addition, new environmental legislation or regulations, if enacted, or changed interpretations of existing laws, may cause routine maintenance activities at our facilities to need to be changed [removed: in order] to avoid violating applicable laws and regulations or elicit claims that historical routine maintenance activities at our facilities violated applicable laws and regulations.

We are subject to extensive environmental regulation by governmental authorities, including the EPA and [removed: the TCEQ.][added: state environmental agencies and/or attorneys general.]

There is no assurance that the currently installed emissions control equipment at our lignite, coal and/or natural gas-fueled generation facilities will satisfy the requirements under any future EPA or [removed: TCEQ] [added: state environmental] regulations.

If implemented as finalized, the Clean Power Plan would require the closure of a significant number of coal-fueled [removed: electric generating] [added: electricity generation] units nationwide and in Texas.

We are required to maintain, through either allocations or purchases, sufficient emission allowances for [removed: SO2] [added: SO2, CO2] and NOX to support our operations in the ordinary course of operating our power generation facilities.

If we are unable to maintain sufficient emission allowances to match our operational needs, we may have to curtail our operations so as not to exceed our available emission [removed: allowances,] [added: allowances] or install costly new emission controls.

We currently own and operate, or are in the process of reclamation, [removed: through Luminant] 12 surface lignite coal mines in Texas to provide fuel for our electricity generation facilities.

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 [removed: of] the requirements of its mining permits.

In addition, Luminant's mining reclamation obligations are secured by a first lien on its assets which is pari passu with the Vistra Operations Credit Facilities, but which would be paid first, up to $975 million, upon any liquidation of Vistra [removed: Operations Company LLC's] [added: Operations'] assets.

In conjunction with Luminant's [removed: recent] announcements [added: in the third and fourth quarters of 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.

For the next five years, Vistra Energy is projected to spend approximately [removed: $350] [added: $340] million (on a nominal basis) to achieve its reclamation objectives.

[removed: The PUCT] [added: Specifically, the public utility commissions and/or the attorney generals of the various jurisdictions in which the Retail segment operates] may at any time initiate an investigation into whether our retail [removed: operation complies] [added: operations comply] with certain [removed: PUCT] [added: commission] rules [added: or state laws] and whether we have met [removed: all of] the requirements for REP certification, including financial requirements.

Any removal or revocation of a REP certification would mean that we would no longer be allowed to provide electricity service to retail [removed: customers.][added: customers in the applicable jurisdiction, and such decertification could have a material adverse effect on us.]

We believe our TXU [removed: EnergyTM brand is] [added: EnergyTM, Homefield Energy and Dynegy Energy Services brands are] viewed favorably in the retail electricity markets in which we operate, but despite our commitment to providing superior customer service and innovative products, customer sentiment toward our [removed: brand,] [added: brands,] including by comparison to our competitors' brands, depends on certain factors beyond our control.

[removed: Our] [added: With the exception of Electric Energy, Inc. (EEI), which we acquired in the Merger and which owns and controls transmission lines interconnecting our Joppa facility in EEI’s control to MISO, Tennessee Valley Authority and Louisville Gas and Electric Company, our] retail operations depend on transmission and distribution facilities owned and operated by unaffiliated utilities to deliver the electricity that we sell to our customers.

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

As a result, we largely sell electric energy, capacity and ancillary services into the wholesale energy spot market or into other wholesale and retail power markets on a short-term basis and are not guaranteed any rate of return on our capital investments.

Consequently, there can be no assurance that we will be able to sell any or all of the electric energy, capacity or ancillary services from those facilities at commercially attractive rates or that our facilities will be able to operate profitably.

We depend, in large part, upon prevailing market prices for power, capacity and fuel.

Given the volatility of commodity power prices, to the extent we do not secure long-term power sales agreements for the output of our power generation facilities, our revenues and profitability will be subject to volatility, and our financial condition, results of operations and cash flows could be materially adversely affected.

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

We rely on natural gas, coal and oil to fuel 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 rail lines, rail cars, barge facilities, roadways, riverways and natural gas pipelines) available 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 or if a counterparty fails to perform or if there is a disruption in the fuel delivery infrastructure.

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.

In order to hedge our obligations under these forward power sales contracts, we have entered into long-term and short-term contracts for the purchase and delivery of fuel.

Many of the forward power sales contracts do not allow us to pass through changes in fuel costs or discharge the power sale obligations in the case of a disruption in fuel supply due to force majeure events or the default of a fuel supplier or transporter.

Further, any changes in the costs of coal, fuel oil, natural gas or transportation rates and changes in the relationship between such costs and the market prices of power will affect our financial results.

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

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

Prices for all of our fuels fluctuate, sometimes rising or falling significantly over a relatively short period of time.

The price we can obtain for the sale of energy may not rise at the same rate, or may not rise at all, to match a rise in fuel or delivery costs.

This may have a material adverse effect on our financial performance.

| • | demand for energy commodities and general economic conditions; |

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

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

We do not apply hedge accounting to our commodity derivative transactions, which may cause increased volatility in our quarterly and annual financial results.

We engage in economic hedging activities to manage our exposure related to commodity price fluctuations through the use of financial and physical derivative contracts for commodities.

These derivatives are accounted for in accordance with GAAP, which requires that we record all derivatives on the balance sheet at fair value with changes in fair value immediately recognized in earnings as unrealized gains or losses.

GAAP permits an entity to designate qualifying derivative contracts as normal purchases and sales.

If designated, those contracts are not recorded at fair value.

GAAP also permits an entity to designate qualifying derivative contracts in a hedge accounting relationship.

If a hedge accounting relationship is used, a significant portion of the changes in fair value is not immediately recognized in earnings.

We have chosen not to apply hedge accounting to our commodity contracts and we have chosen to elect normal purchase normal sales in only limited cases, such as our retail sales contracts.

As a result, our quarterly and annual financial results in accordance with GAAP are subject to significant fluctuations caused by changes in forward commodity prices.

Competition, change in market structure, and/or state or federal interference in the wholesale and retail power markets, together with subsidized generation, may have a material adverse effect on our financial condition, results of operations and cash flows.

Our generation and competitive retail businesses rely on a competitive wholesale marketplace.

The competitive wholesale marketplace may be undermined by changes in market structure and out-of-market subsidies provided by federal or state entities, including bailouts of uneconomic plants, imports of power from Canada, renewable mandates or subsidies, as well as out-of-market payments to new generators.

Our power generation business competes with other non-utility generators, regulated utilities, unregulated subsidiaries of regulated utilities, other energy service companies and financial institutions in the sale of electric energy, capacity and ancillary services, as well as in the procurement of fuel, transmission and transportation services.

Moreover, aggregate demand for power may be met by generation capacity based on several competing technologies, as well as power generating facilities fueled by alternative or renewable energy sources, including hydroelectric power, synthetic fuels, solar, wind, wood, geothermal, waste heat and solid waste sources.

Regulatory initiatives designed to enhance and/or subsidize renewable generation increases competition from these types of facilities and out-of-market subsidies to existing or new generation can undermine the competitive wholesale marketplace, which can lead to premature retirement of existing facilities, including those owned by us.

We also compete against other energy merchants on the basis of our relative operating skills, financial position and access to credit sources.

Electric energy customers, wholesale energy suppliers and transporters often seek financial guarantees, credit support such as letters of credit and other assurances that their energy contracts will be satisfied.

Companies with which we compete may have greater resources or experience in these areas.

Over time, some of our plants may become unable to compete because of subsidized generation, including public utility commission supported power purchase agreements, and the construction of new plants.

Risks Related to the Merger

The Merger is subject to a number of conditions which, if not satisfied or waived in a timely manner, would delay the Merger or adversely impact our ability to complete the Merger on the terms set forth in the Merger Agreement or at all.

The completion of the Merger is subject to the satisfaction or waiver of a number of conditions.

For example, before the Merger may be completed, both our stockholders and Dynegy stockholders must approve the Merger Proposal.

In addition, various filings must be made with the FERC and certain other regulatory, antitrust and other authorities in the U.S., including the PUCT, the New York Public Service Commission (NYPSC), the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC).

These governmental authorities may impose conditions on the completion, or require changes to the terms of the Merger, including restrictions or conditions on the business, operations or financial performance of the combined company following completion of the Merger.

These conditions or changes, including potential litigation brought in connection with the Merger, could have the effect of delaying completion of the Merger or imposing additional costs on or limiting the revenues of the combined company following the Merger, or could cause the combined company not to realize the anticipated benefits of the Merger, any of which could have a material adverse effect on the financial condition, results of operations and cash flows of the combined company and/or cause either Vistra Energy or Dynegy to abandon the Merger.

These conditions or changes could also have the effect of causing the Merger to be consummated on terms different than those contemplated by the Merger Agreement or causing the Merger to fail to be consummated.

If we are unable to complete the Merger, we still will incur and will remain liable for significant transaction costs, including legal, accounting, filing, printing and other costs relating to the Merger.

Also, depending upon the reasons for not completing the Merger, we may be required to pay Dynegy a termination fee of $100 million or reimburse its expenses up to $22 million.

For more information on the termination fees and/or expenses potentially payable by the Company and Dynegy, see Note 2 to the Financial Statements.

Failure to consummate the Merger as currently contemplated or at all could adversely affect the price of our common stock and our future business and financial results.

The completion of the Merger is subject to the satisfaction or waiver of a number of conditions.

We cannot guarantee when or if these conditions will be satisfied or that the Merger will be successfully completed.

If the Merger is not consummated, or is consummated on different terms than as contemplated by the Merger Agreement, we could be adversely affected and subject to a variety of risks associated with the failure to consummate the Merger, or to consummate the Merger as contemplated by the Merger Agreement, including:

| | |

| --- | --- |

| • | our stockholders may be prevented from realizing the anticipated potential benefits of the Merger; |

| | |

| --- | --- |

| • | the market price of our common stock could decline significantly; |

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| --- | --- |

| • | reputational harm due to the adverse public perception of any failure to successfully complete the Merger; |

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| --- | --- |

| • | under certain circumstances, we may be required to pay Dynegy a termination fee of up to $100 million or reimburse its expenses up to $22 million, and |

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| --- | --- |

| • | the attention of our management and employees may be diverted from their day-to-day business and operational matters and our relationships with our customers and suppliers may be disrupted as a result of efforts relating to attempting to consummate the Merger. |

Any delay in the consummation of the Merger, any uncertainty about the consummation of the Merger on terms other than those contemplated by the Merger Agreement and any failure to consummate the Merger could adversely affect our business, financial results and common stock price.

We will be subject to business uncertainties and contractual restrictions while the Merger is pending that could adversely affect our financial results.

Uncertainty about the effect of the Merger on employees, customers and suppliers may have an adverse effect on our business.

These uncertainties may impair our ability to attract, retain and motivate key personnel until the Merger is completed and for a period of time thereafter, and could cause customers, suppliers and others that deal with us to seek to change existing business relationships.

If, despite our retention and recruiting efforts, key employees depart or prospective employees fail to accept employment with us for any reason, including because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company, our operations and financial results could be affected.

The pursuit of the Merger and the preparation for the integration of Dynegy may place a significant burden on management and internal resources.

The diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could affect our business, and our financial condition, results of operations and cash flows.

In addition, we are restricted under the Merger Agreement, without obtaining Dynegy's consent, from taking other specified actions until the Merger occurs or the Merger Agreement terminates.

These restrictions may prevent us from pursuing otherwise attractive business opportunities and making other changes to our business prior to completion of the Merger or termination of the Merger Agreement.

Because the market prices of shares of common stock of the Company and Dynegy will fluctuate and the Exchange Ratio is fixed, the market value of the merger consideration at the date of the closing may vary significantly from the date the Merger Agreement was executed, the date of the joint proxy statement and prospectus and the dates of our special meeting and Dynegy's special meeting.

The following discussion and analysis of our financial condition and results of operations for the Successor period for the [removed: year] [added: years] ended December 31, [added: 2018 and] 2017 and the period from October 3, 2016 through December 31, 2016 and the Predecessor period from January 1, 2016 through October 2, 2016 [removed: and the year ended December 31, 2015] should be read in conjunction with our consolidated financial statements and the notes to those statements.

Results are impacted by the effects of [added: the Merger,] fresh start reporting, the Bankruptcy Filing and the application of Financial Accounting Standards Board Accounting Standards Codification (ASC) 852, Reorganizations.

[added: Vistra Energy is a holding company operating an integrated power business in markets thorough the U.S.] Through our [removed: Luminant and TXU Energy] subsidiaries, we are [removed: principally] engaged in competitive electricity market activities including [removed: electricity] [added: power] generation, wholesale energy sales and purchases, commodity risk management and retail sales of electricity and related services to end users.

See Note [removed: 20] [added: 22] to the Financial Statements for further information concerning reportable business segments.

[removed: Upon the terms and subject] [added: Pursuant] to the [removed: conditions set forth in the] Merger Agreement, [removed: which has been approved by the boards of directors of Vistra Energy and Dynegy,] Dynegy [removed: will merge] [added: merged] with and into Vistra [removed: Energy (the Merger),] [added: Energy,] with Vistra Energy continuing as the surviving corporation.

[removed: Upon] [added: At] the closing of the Merger, each issued and outstanding share of Dynegy common stock, par value $0.01 per share, other than shares owned by Vistra Energy or its subsidiaries, held in treasury by Dynegy or held by a subsidiary of Dynegy, [removed: will] [added: was] automatically [removed: be] converted into [removed: the right to receive the Exchange Ratio,] [added: 0.652 shares of common stock, par value $0.01 per share, of Vistra Energy,] except that cash [removed: will be] [added: was] paid in lieu of fractional [removed: shares, which we expect will result in Vistra Energy's stockholders and Dynegy's stockholders owning approximately 79% and 21%, respectively, of the combined company.][added: shares.]

See Note 2 to the Financial Statements for a summary of the Merger [removed: Agreement] [added: transaction] and [removed: the related Merger Support Agreements.][added: business combination accounting.]

[removed: Retirement of Generation Plants —] In October 2017, Luminant announced plans to retire three power plants with a total installed nameplate generation capacity of approximately 4,167 MW and two lignite mines.

Luminant decided to retire these units [removed: given] [added: because] they [removed: are] [added: were] projected to be uneconomic based on [added: then] current market conditions and [removed: given the] [added: would have faced] significant environmental costs associated with operating such units.

During the year ended December 31, 2017, we recorded charges of approximately $206 million related to the retirements, including employee related severance costs, noncash charges for writing off materials inventory and a contract intangible asset associated with the Big Brown plant and the acceleration of Luminant's mining reclamation obligations (see Note [removed: 21] [added: 23] to the Financial Statements).

The transactions under the Settlement Agreement [removed: are] [added: were] effective as of October 1, 2017.

CCGT Plant Acquisition — In July 2017, La Frontera Holdings, LLC (La Frontera), an indirect wholly owned subsidiary of Vistra Energy, entered into an asset purchase agreement with Odessa-Ector Power Partners, L.P., an indirect wholly owned subsidiary of Koch Ag & Energy Solutions, LLC (the Odessa Acquisition), to acquire a 1,054 MW CCGT natural [removed: gas fueled] [added: gas-fueled] generation plant (and other related assets and liabilities) located in Odessa, Texas (the Odessa Facility).

Upton [added: 2] Solar Development — In May 2017, we acquired the rights to develop, construct and operate a utility scale solar photovoltaic power generation facility in Upton County, Texas.

See Note [removed: 12] [added: 14] to the Financial Statements for details of the Vistra Operations Credit Facilities.

[removed: Environmental Matters —] See Note [removed: 13] [added: 15] to Financial Statements for a discussion of greenhouse gas emissions, the Cross-State Air Pollution Rule, regional haze, state implementation plan and other recent EPA actions as well as related litigation.

Key [added: Operational] Risks and Challenges

Following is a discussion of key [added: operational] risks and challenges facing management and the initiatives currently underway to manage such challenges.

The price of power [removed: in the ERCOT market] is typically set by natural gas-fueled generation facilities, with wholesale prices generally tracking increases or decreases in the price of natural gas.

[removed: ][added: ]

In contrast to our natural [removed: gas fueled] [added: gas-fueled] generation facilities, changes in natural gas prices have no significant effect on the cost of generating power at our nuclear-, lignite- and coal-fueled facilities, which represent a substantial amount of our generation capacity.

Consequently, all other factors being equal, these nuclear-, lignite- and coal-fueled generation assets increase or decrease in value as natural gas prices and market heat rates rise or fall, respectively, because of the effect on our operating margins from changes in wholesale electricity [removed: prices in ERCOT.][added: prices.]

A persistent decline in the price of natural gas, and the corresponding decline in the price of [removed: power in the ERCOT market,] [added: power,] would likely have a material adverse effect on our results of operations, liquidity and financial condition, predominantly related to the production of power generation volumes in excess of the volumes utilized to service our retail customer load requirements.

Our market heat rate exposure is impacted by changes in the availability of generation resources, such as additions and retirements of generation facilities, and mix of generation [removed: assets in ERCOT.][added: assets.]

As a result of our exposure to the variability of natural gas prices and market heat [removed: rates in ERCOT,] [added: rates,] retail sales and hedging activities are critical to our operating results and maintaining consistent cash flow levels.

Taking together forward wholesale, retail electricity sales and other retail customer considerations and all other hedging [removed: positions,] [added: positions in ERCOT,] at December 31, [removed: 2017,] [added: 2018,] we had effectively hedged an estimated [removed: 90%] [added: 99%] and [removed: 22%] [added: 91%] of the natural gas price exposure related to our overall business for [removed: 2018] [added: 2019] and [removed: 2019,] [added: 2020,] respectively.

Additionally, taking into consideration our overall heat rate exposure and related hedging positions [added: in ERCOT] at December 31, [removed: 2017,] [added: 2018,] we had effectively hedged [removed: 83%] [added: 88%] and 42% of the heat rate exposure to our overall business for [removed: 2018] [added: 2019] and [removed: 2019,] [added: 2020,] respectively.

The estimates related to price sensitivity are based on our expected generation and retail positions, related hedges and forward prices as of December 31, [removed: 2017.][added: 2018.]

| | [removed: Balance 2018 (a)] [added: 2018-2019] | | [removed: 2019] |

| $0.50/MMBtu increase in natural gas price [removed: (b)(c)] [added: (d)] | $ [removed: ~25] [added: ~32] | | $ [removed: ~155] [added: ~93] |

| $0.50/MMBtu decrease in natural gas price [removed: (b)(c)] [added: (d)] | $ [removed: ~(15)] [added: ~(22)] | | $ [removed: ~(155)] [added: ~(72)] |

| 1.0/MMBtu/MWh increase in market heat rate [removed: (d)] [added: (e)] | $ [removed: ~60] [added: ~33] | | $ [removed: ~110] [added: ~71] |

| 1.0/MMBtu/MWh decrease in market heat rate [removed: (d)] [added: (e)] | $ [removed: ~(55)] [added: ~(26)] | | $ [removed: ~(100)] [added: ~(68)] |

[removed: | (b) | Assumes] [added: These percentages assume] conversion of generation positions based on market heat rates and an estimate of natural gas generally being on the margin 70% to 90% of the time in the ERCOT market. [removed: |]

| [removed: (c)] [added: (b)] | Based on Houston Ship Channel natural gas prices at December 31, [removed: 2017.] [added: 2018.] |

| [removed: (d)] [added: (c)] | Based on ERCOT North Hub around-the-clock heat rates at December 31, [removed: 2017.] [added: 2018.] |

Based on numbers of meters, our total retail customer counts increased [added: 2% in 2018, increased] slightly in 2017 and declined approximately 1% in [removed: 2016 and less than 1% in 2015.][added: 2016.]

Based upon December 31, [removed: 2017] [added: 2018] results discussed below in Results of Operations, a 1% decline in retail customers would result in a decline in annual revenues of approximately [removed: $40] [added: $55] million.

As of [removed: February 26,] [added: December 31,] 2018, these units represented approximately [removed: 17%] [added: 6%] of our total generation capacity.

Assuming both nuclear generation units experienced an outage at the same time, the unfavorable impact to pretax earnings is estimated (based upon forward electricity market prices for [removed: 2018] [added: 2019] at December 31, [removed: 2017)] [added: 2018)] to be approximately $1 million per day before consideration of any costs to repair the cause of such outages or receipt of any insurance proceeds.

Also see discussion of nuclear facilities insurance in Note [removed: 13] [added: 15] to the Financial Statements.

Vistra Energy has six reportable segments: (i) Retail, (ii) ERCOT, (iii) PJM, (iv) NY/NE (comprising NYISO and ISO-NE), (v) MISO and (vi) Asset Closure.

The PJM, NY/NE and MISO segments were established on the Merger Date to reflect markets served by businesses acquired in the Merger.

Entry into Purchase Agreement to Acquire Crius Energy Trust

On February 7, 2019, Vistra Energy and Crius Energy Trust (Crius) entered into a definitive agreement, which was subsequently amended on February 19, 2019 (as amended, the Crius Purchase Agreement), as a result of an unsolicited acquisition proposal, pursuant to which Vistra Energy will acquire the equity interest of two wholly owned subsidiaries of Crius that indirectly own the operating business of Crius (Crius Transaction).

Crius is an energy retailer selling both electricity and natural gas products to residential and small business customers in 19 states and the District of Columbia.

The acquisition provides a high degree of overlap with Vistra Energy's generation fleet with approximately 11.6 TWh of annual load, improving Vistra Energy's match of its generation to load profile to approximately 45 percent, reducing risk.

The acquisition also establishes a platform for future growth by leveraging Vistra Energy's existing retail marketing capabilities and Crius's experienced team.

The acquisition enhances the integrated value proposition through collateral and transaction efficiencies, particularly via Crius's largely retail portfolio.

Vistra Energy intends to fund the purchase price of approximately $378 million using cash on hand and assumption of Crius's net debt of approximately $108 million.

Completion of the Crius Transaction is subject to various customary conditions, including, among others, (i) approval by at least two-thirds of the Crius unitholders and (ii) receipt of all requisite regulatory approvals, which include approvals of the FERC and the expiration and termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Pending the receipt of all necessary approvals and the fulfillment of all other customary closing conditions, the parties expect the transaction to close in the second quarter of 2019.

Merger Transaction

On the Merger Date, Vistra Energy and Dynegy completed the transactions contemplated by the Merger Agreement.

Based on the opening price of Vistra Energy common stock on the Merger Date, the purchase price was approximately $2.3 billion.

The purchase price allocation is substantially complete, but is dependent upon final valuation determinations, which may materially change from our current estimates.

The preliminary values for property plant and equipment, identifiable intangible assets and liabilities, goodwill, inventories, asset retirement obligations, contingent liabilities and deferred taxes represent our current best estimates of the fair value at the Merger Date.

We currently expect the final purchase price allocation will be completed no later than the first quarter of 2019 and goodwill will be allocated to the related reporting units at that time.

Acquisition, Development and Disposition of Generation Facilities

Battery Energy Storage Projects — We have completed the construction of our first battery energy storage system.

In October 2018, we were awarded a $1 million grant from the TCEQ for our battery energy storage system at Upton 2 solar facility.

The grant is part of the Texas Emissions Reduction Plan.

The 10 MW lithium-ion energy storage system captures excess solar energy produced during the day and releases the energy in late afternoon and early evening, when demand is highest.

The project became operational on December 31, 2018.

In June 2018, we announced that we would enter into a 20-year resource adequacy contract with Pacific Gas and Electric Company (PG&E) to develop a 300 MW battery energy storage project at our Moss Landing Power Plant site in California.

PG&E filed its application with the California Public Utilities Commission (CPUC) in June 2018 and the CPUC approved the contract in November 2018.

We anticipate the battery storage project will enter commercial operations by the fourth quarter of 2020.

The facility began test operations in March 2018 and commercial operations began in June 2018.

Subsequent to the acquisition, the earn-out provision has been accounted for as a derivative in our consolidated financial statements, and partial buybacks of the earn-out provision were settled in February and May 2018.

Retirement of Generation Plants — In August 2018, we filed a notice of suspension of operation with PJM and other mandatory regulatory notifications related to the retirement of our 51 MW Northeastern waste coal facility in McAddo, Pennsylvania.

We decided to retire the facility due to its uneconomic operations and financial outlook.

Following the receipt of regulatory approvals, the facility was retired in October 2018.

Two of our non-operated, jointly held power plants acquired in the Merger for which our proportional generation capacity was 883 MW, were retired in May 2018.

These units were retired as previously scheduled.

In the case of the Sandow units, the decision also reflected the execution of a contract termination agreement pursuant to which the Company and Alcoa agreed to an early settlement of a long-standing power and mining agreement.

Dividend Program

In November 2018, we announced that the Board had adopted a dividend program pursuant to which we expect to initiate an annual dividend of approximately $0.50 per share, payable quarterly, beginning in the first quarter of 2019.

Each dividend under the program will be subject to declaration by the Board and, thus, may be subject to numerous factors in existence at the time of any such declaration including, but not limited to, prevailing market conditions, our results of operations, financial condition and liquidity and Delaware law.

On February 26, 2019, Vistra Energy announced that the Board had declared a dividend pursuant to which Vistra Energy would pay, to each holder of record as of March 15, 2019, a dividend of $0.125 per share, to be paid March 29, 2019.

Share Repurchase Program

In June 2018, we announced that the Board had authorized a share repurchase program under which up to $500 million of our outstanding common stock may be repurchased.

Vistra Energy is a holding company operating an integrated power business in Texas.

Subsequent to the Effective Date, Vistra Energy has two reportable segments: the Wholesale Generation segment, consisting largely of Luminant, and the Retail Electricity segment, consisting largely of TXU Energy.

Merger Agreement — On October 29, 2017, Vistra Energy and Dynegy Inc., a Delaware corporation (Dynegy), entered into an Agreement and Plan of Merger (the Merger Agreement).

The Merger is subject to numerous uncertainties and risks more fully described in Item 1.

Risk Factors of this Annual Report on Form 10-K.

In the case of the Sandow units, the decision also reflected the execution of a Settlement Agreement discussed below.

In the three months ended December 31, 2017, we recorded a gain related to the impacts of the Settlement Agreement in our consolidated financial statements totaling $11 million, which included the receipt of the cash payment, the acquisition of real property and the incurrence of certain liabilities and asset retirement obligations, along with the elimination of a related electric supply contract intangible asset on our consolidated balance sheet (see Note 7 to the Financial Statements).

For the year ended December 31, 2017, we have spent approximately $190 million related to this project primarily for progress payments under the engineering, procurement and construction agreement and the acquisition of the development rights.

We currently estimate that the facility will begin operations in the summer of 2018.

Repricing of Vistra Operations Credit Facilities — In February, August and December 2017 and February 2018, certain pricing terms for the Vistra Operations Credit Facility were amended.

Any amounts borrowed under the Revolving Credit Facility will bear interest based on applicable LIBOR rates plus 2.25%.

Amounts borrowed under the Initial Term Loan B Facility and the Term Loan C Facility will bear interest based on applicable LIBOR rates, subject to a 0.75% floor, plus 2.50%.

The Incremental Term Loan B Facility will bear interest based on applicable LIBOR rates plus 2.25%.

In connection with a repricing amendment in December 2017, the Revolving Credit Facility letter of credit sub-facility was increased from $600 million to $715 million and the Term Loan C Facility was reduced from $650 million to $500 million.

The underlying hedge positions take into account the effects of the retirements of generation facilities discussed in Note 4 to the Financial Statements.

_________

| (a) | Balance of 2018 is from February 1, 2018 through December 31, 2018 for natural gas price sensitivities and January 1, 2018 through December 31, 2018 for market heat rate sensitivities. |

EFH Corp. is the corporate parent of the EFH Corp. consolidated group, while each of EFIH, Oncor Holdings, EFCH and, prior to the effective date, TCEH was classified as a disregarded entity for United States federal income tax purposes.

Subsequent to the Effective Date, the TCEH Debtor and the Contributed EFH Debtors are no longer included in the EFH Corp. consolidated group and are included in a consolidated group of which Vistra Energy is the corporate parent.

Prior to the Effective Date, EFH Corp. and certain of its subsidiaries (including EFCH, EFIH, and TCEH, but not including Oncor Holdings and Oncor) were parties to a Federal and State Income Tax Allocation Agreement, which provided, among other things, that any corporate member or disregarded entity in the EFH Corp. group was required to make payments to EFH Corp. in an amount calculated to approximate the amount of tax liability such entity would have owed if it filed a separate corporate tax return.

Pursuant to the Plan of Reorganization, the TCEH Debtors and Contributed EFH Debtors rejected this agreement on the Effective Date.

See Notes 5 and 8 to the Financial Statements for a discussion of the Tax Matters Agreement that was entered on the Effective Date between EFH Corp. and Vistra Energy.

Additionally, since the date of the Settlement Agreement, no further cash payments among the Debtors were made in respect of federal income taxes.

EFH Corp. has elected to continue to allocate federal income taxes among the entities that are parties to the Federal and State Income Tax Allocation Agreement.

The Settlement Agreement did not alter the allocation and payment for state income taxes, which continued to be settled prior to the Effective Date.

As a result of the decrease in forecasted wholesale electricity prices, potential effects from environmental regulations and changes to our Predecessor's operating plans in 2015 and 2014, our Predecessor evaluated the recoverability of its generation assets.

Accounting guidance requires goodwill to be allocated to our reporting units, and at December 31, 2017 all goodwill was allocated to our Retail Electricity reporting unit.

| (a) | Vistra Energy consolidated depreciation and amortization expense does not include $136 million of nuclear fuel amortization, reported as fuel costs, and intangible net assets and liabilities amortization, reported in various other line items including operating revenues and fuel and purchased power costs and delivery fees. |

For the year ended December 31, 2017, consolidated operating income totaled $198 million and reflected strong operating performance in our Wholesale Generation and Retail Electricity segments despite an unplanned outage at one of our nuclear generation units and mild weather in both the summer and winter seasons.

In addition, several strategic actions were announced during 2017, including the retirements of our Monticello, Sandow and Big Brown plants, the settlement of the Alcoa contract and the Merger Agreement with Dynegy.

Operating income was reduced by $835 million in depreciation and amortization expense, $206 million in charges related to the plant retirement announcements and $116 million in unrealized mark-to-market losses on commodity risk management activity and interest rate swaps.

| • | Our Wholesale Generation segment had strong operating performance from our generation fleet during the peak summer operating months, which was offset by unrealized mark-to-market losses on commodity risk management activities totaling $317 million for the period (including $154 million of unrealized losses on positions with the Retail Electricity segment), resulting in an operating loss of $186 million for the period. The unrealized losses were driven by the impacts of the reversal of previously recorded unrealized gains on settled positions and an increase in forward power prices, partially offset by unrealized gains due to a decrease in forward natural gas prices during the period. Operating loss also includes a charge of $206 million related to the plant retirement announcements and $320 million in depreciation and amortization expense, including nuclear fuel amortization. Additionally, operating loss includes a $74 million unfavorable impact due to an unplanned outage at one of our nuclear generation units that began in June 2017 ($57 million of lower earnings due to lost generation and $17 million of additional operating costs). The outage required repairs to the plant's steam turbine generator, a standard component in all power stations that is unrelated to Comanche Peak's nuclear reactor, which was not impacted by the outage. The unit returned to service in August 2017. Please see the discussion of Wholesale Generation below for further details. |

| • | Our Retail Electricity segment had operating income of $461 million for the period, which was primarily driven by favorable profit margins and $154 million of unrealized gains in purchased power costs on positions with the Wholesale Generation segment, partially offset by $476 million in depreciation and amortization expense reflecting amortization expense related to retail customer relationship and retail contracts intangible assets. Please see the discussion of Retail Electricity below for further details. |

| • | Net operating expense related to Eliminations and Corporate and Other activities totaled $77 million and primarily reflected amortization of software and other technology-related assets (see Note 7 to the Financial Statements) and rent expense. |

Our total net loss of $254 million reflected the tax effects of the TCJA and the TRA obligation, as well as the items impacting operating income listed above.

| (a) | Vistra Energy consolidated depreciation and amortization expense does not include $69 million of nuclear fuel amortization, reported as fuel costs, and intangible net assets and liabilities amortization, reported in various other line items including operating revenues and fuel and purchased power costs and delivery fees. |

Results were driven by:

| • | Net operating expense related to Eliminations and Corporate and Other activities totaled $17 million and primarily reflected $7 million in amortization of software and other technology-related assets (see Note 7 to the Financial Statements) and $4 million of post-Emergence restructuring fees. |

Interest expense and related charges totaled $60 million and reflected $51 million of interest expense incurred and $11 million of unrealized mark-to-market losses on interest rate swaps (see Note 10 to the Financial Statements).

We evaluate our segment performance using operating income as an earnings metric.

Market risk is the risk that in the normal course of business we may experience a loss in value [removed: as a result of] [added: due to] changes in market conditions that affect economic factors such as commodity prices, interest rates and counterparty credit.

Our exposure to market risk is affected by [removed: a number of] [added: several] factors, including the size, duration and composition of our energy and financial portfolio, as well as the volatility and liquidity of markets.

[removed: A Monte Carlo simulation methodology is] [added: Parametric processes are] used to calculate VaR and [removed: is] [added: are] considered by management to be the most effective way to estimate changes in a portfolio's value based on assumed market conditions for liquid markets.

The use of this method requires a number of key assumptions, such as use of (i) an assumed confidence level; (ii) an assumed holding period (i.e., the time necessary for management action, such as to liquidate [removed: positions);] [added: positions),] and (iii) historical estimates of volatility and correlation data.

The [removed: tables] [added: table] below [removed: detail certain] [added: details a] VaR [removed: measures] [added: measure] related to various portfolios of contracts.

VaR for Underlying Generation Assets and Energy-Related Contracts [removed: Subject to Mark-to-Market (MtM) Accounting] — This measurement estimates the potential loss in [removed: fair] value, due to changes in market conditions, of all underlying generation assets and [removed: contracts marked-to-market in net income (through the end of 2018),] [added: contracts,] based on a 95% confidence level and an assumed holding period of 60 [removed: days.][added: days for a forward period through December 2019.]

| Month-end average [removed: VaR:] [added: VaR] | $ | [removed: 92] [added: 182] | | | $ | [removed: 65] [added: 92] | |

| Month-end high [removed: VaR:] [added: VaR] | $ | [removed: 140] [added: 267] | | | $ | [removed: 119] [added: 140] | |

| Month-end low [removed: VaR:] [added: VaR] | $ | [removed: 62] [added: 65] | | | $ | [removed: 30] [added: 62] | |

The following table provides information concerning our financial instruments at December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] that are sensitive to changes in interest rates.

See Note [removed: 12] [added: 14] to the Financial Statements for further discussion of these financial instruments.

| | [removed: 2018 | | | |] 2019 | | | | 2020 | | | | 2021 | | | | 2022 | | | | [added: 2023 | | | |] There-after | | | | [removed: 2017] [added: 2018] Total Carrying Amount | | | | [removed: 2017] [added: 2018] Total Fair Value | | | | [removed: 2016] [added: 2017] Total Carrying Amount | | | | [removed: 2016] [added: 2017] Total Fair Value | | |

| Variable rate debt amount | $ | [removed: 39] [added: 59] | | | $ | [removed: 39] [added: 59] | | | $ | [removed: 39] [added: 59] | | | $ | [removed: 39] [added: 59] | | | $ | [removed: 39] [added: 3,640] | | | $ | [removed: 4,116] [added: 1,937] | | | $ | [removed: 4,311] [added: 5,813] | | | $ | [removed: 4,334] [added: 5,599] | | | $ | [removed: 4,500] [added: 4,311] | | | $ | [removed: 4,552] [added: 4,334] | |

| Average interest rate (b) | [removed: 3.98] [added: 4.55] | | % | | [removed: 3.98] [added: 4.55] | | % | | [removed: 3.98] [added: 4.55] | | % | | [removed: 3.98] [added: 4.55] | | % | | [removed: 3.98] [added: 4.59] | | % | | [removed: 3.98] [added: 4.47] | | % | | [removed: 3.98] [added: 4.55] | | % | | | | | | [removed: 4.78] [added: 3.98] | | % | | | | |

| Notional amount | $ | [removed: —] [added: 159] | | | $ | [removed: —] [added: 358] | | | $ | — | | | $ | — | | | $ | [removed: —] [added: 3,000] | | | $ | [removed: 3,000] [added: 4,200] | | | $ | [removed: 3,000] [added: 7,717] | | | | | | | $ | 3,000 | | | | | |

| Average receive rate | [removed: 4.11] [added: 4.56] | | % | | [removed: 4.11] [added: 4.57] | | % | | [removed: 4.11] [added: 4.57] | | % | | [removed: 4.11] [added: 4.57] | | % | | [removed: 4.11] [added: 4.53] | | % | | [removed: 4.11] [added: 4.45] | | % | | [removed: 4.11] [added: 4.53] | | % | | | | | | [removed: 4.52] [added: 4.11] | | % | | | | |

| (a) | [removed: Capital leases, mandatorily redeemable preferred stock and the effects of unamortized premiums and] [added: Unamortized premiums,] discounts [added: and debt issuance costs] are excluded from the table. |

| (b) | The weighted average interest rate presented is based on the rates in effect at December 31, [removed: 2017.] [added: 2018.] |

| (c) | Interest rate swaps [removed: became effective in January 2017 and] have maturity dates through July [removed: 2023.] [added: 2026.] |

At December 31, [removed: 2017,] [added: 2018,] the potential reduction of annual pretax earnings over the next [removed: 12] [added: twelve] months due to a one percentage-point (100 basis points) increase in floating interest rates on long-term debt totaled approximately [removed: $13] [added: $14] million, taking into account the interest rate swaps discussed in Note [removed: 12] [added: 14] to Financial Statements.

See Note [removed: 16] [added: 18] to the Financial Statements for further discussion of this exposure.

Credit Exposure — 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 [removed: $611] [added: $975] million at December 31, [removed: 2017.][added: 2018.]

At December 31, [removed: 2017,] [added: 2018,] Retail [removed: Electricity] segment credit exposure totaled [removed: $469] [added: $683] million, including [removed: $451] [added: $676] million of trade accounts receivable and [removed: $18] [added: $7] million related to derivative assets.

Cash deposits and letters of credit held as collateral for these receivables totaled [removed: $44] [added: $38] million, resulting in a net exposure of [removed: $425] [added: $645] million.

At December 31, [removed: 2017, Wholesale Generation segment] [added: 2018, aggregate ERCOT, PJM, NY/NE and MISO segments] credit exposure totaled [removed: $142] [added: $292] million including [removed: $81] [added: $147] million related to derivative assets and [removed: $61] [added: $145] million of trade accounts receivable, after taking into account master netting agreement provisions but excluding collateral impacts.

Including collateral posted to us by counterparties, our net [removed: Wholesale Generation segment] [added: ERCOT, PJM, NY/NE and MISO segments] exposure was [removed: $136] [added: $281] million, substantially all of which is with investment grade customers as seen in the following table that presents the distribution of credit exposure at December 31, [removed: 2017.][added: 2018.]

| Investment grade | $ | [removed: 132] [added: 247] | | | $ | — | | | $ | [removed: 132] [added: 247] | |

| Below investment grade or no rating | [removed: 10] [added: 45] | | | | [removed: 6] [added: 11] | | | | [removed: 4] [added: 34] | | |

Significant (10% or greater) concentration of credit exposure exists with [removed: three] [added: four] counterparties, which represented an aggregate [removed: $102] [added: $195] million, or [removed: 75%,] [added: 70%,] of the total net exposure.

At December 31, [removed: 2017,] [added: 2018,] interest rate swap exposure in the Corporate and Other non-segment totaled [removed: $18] [added: $51] million.

This report and other presentations made by us contain "forward-looking statements." All statements, other than statements of historical facts, that are included in this report, or made in presentations, in response to questions or otherwise, that address activities, events or developments that may occur in the future, including [added: (without limitation)] such matters as activities related to our financial or operational projections, capital allocation, capital expenditures, liquidity, dividend policy, business strategy, competitive strengths, goals, future acquisitions or dispositions, development or operation of power generation assets, market and industry developments and the growth of our businesses and operations (often, but not always, through the use of words or phrases such as "intends," "plans," "will likely," "unlikely," "expected," "anticipated," "estimated," "should," "may," "projection," "target," "goal," "objective" and "outlook"), are forward-looking statements.

[removed: Risk Factors and Item 7.,] Management's Discussion and Analysis of Financial Condition and Results of Operations in this report and the following important factors, among others, that could cause our actual results to differ materially from those projected in or implied by such forward-looking statements:

| • | the actions and decisions of [added: judicial and] regulatory authorities; |

| • | prevailing [added: federal, state and local] governmental policies and regulatory actions, including those of the [removed: Texas Legislature, the Governor] [added: legislatures and other government actions] of [removed: Texas,] [added: states in which we operate,] the U.S. Congress, the FERC, the NERC, the TRE, the [removed: PUCT,] [added: public utility commissions of states and locales in which we operate, CAISO, ERCOT, ISO-NE, MISO, NYISO, PJM,] the RCT, the NRC, the EPA, the [removed: TCEQ] [added: environmental regulatory bodies of states in which we operate,] the MSHA and the CFTC, with respect to, among other things: |

| ◦ | operations of [removed: fossil fueled] [added: fossil-fueled] generation facilities; |

| • | weather conditions, including drought and limitations on access to water, and other natural phenomena, and acts of sabotage, wars or terrorist or [removed: cyber security] [added: cybersecurity] threats or activities; |

| • | changes in market heat rates in the [removed: ERCOT] [added: CAISO, ERCOT, ISO-NE, MISO, NYISO and PJM] electricity [removed: market;] [added: markets;] |

| • | population growth or decline, or changes in market supply or demand and demographic patterns, particularly in [removed: ERCOT;] [added: ERCOT, MISO and PJM;] |

| • | our ability to generate sufficient cash flow to make principal and interest payments in respect of, or refinance, our debt [removed: obligations:] [added: obligations;] |

| • | our ability to successfully [removed: integrate] [added: complete] the [added: integration of the] businesses of Vistra Energy and Dynegy [removed: upon consummation of the Merger] and our ability to successfully capture [removed: any] [added: the full amount of] projected synergies relating to the Merger, and |

| | 2018 | | | | 2017 | | |

The increase in the month-end high VaR risk measure in 2018 reflects operations acquired in the Merger.

| Average pay rate | 4.16 | | % | | 4.10 | | % | | 4.07 | | % | | 4.07 | | % | | 4.34 | | % | | 5.01 | | % | | 4.38 | | % | | | | | | 4.59 | | % | | | | |

Bankruptcies — We are party to (i) certain gas transportation agreements with Pacific Gas and Electric Corporation (PG&E) and (ii) in connection with the Moss Landing battery storage project, we entered into a long-term renewable power purchase agreement with PG&E, which was approved by the California Public Utilities Commission in November 2018.

PG&E filed for Chapter 11 bankruptcy protection in January 2019.

As of December 31, 2018, we had no outstanding accounts receivable from PG&E and accordingly, we have not recorded a reserve related to the pre-petition receivables.

While our assumptions and conclusions may change, we could have future impairment losses, or specifically with respect to the gas transportation agreements, be required to seek alternative, higher-cost fuel transportation methods, if any of the terms of the contracts are not honored by PG&E or the contracts are rejected through the bankruptcy process.

| Totals | $ | 292 | | | $ | 11 | | | $ | 281 | |

Risk Factors and Item 7.

| ◦ | changes in federal, state and local tax laws, rates and policies, including additional regulation, interpretations, amendments, or technical corrections to the TCJA; |

| • | expectations regarding, or impacts of, environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts, and other laws and regulations that we are, or could become, subject to, which could increase our costs, result in an impairment of our assets, cause us to limit or terminate the operation of certain of our facilities, or otherwise have a negative financial effect; |

| • | sufficiency of, access to, and costs associated with coal, fuel oil, and natural gas inventories and transportation and storage thereof; |

| • | beliefs and assumptions about the benefits of state- or federal-based subsidies to our market competition, and the corresponding impacts on us, including if such subsidies are disproportionately available to our competitors; |

| • | the effects of, or changes to, market design and the power and capacity procurement processes in the markets in which we operate; |

| • | our ability to mitigate forced outage risk, including managing risk associated with CP in PJM and performance incentives in ISO-NE; |

| • | efforts to identify opportunities to reduce congestion and improve busbar power prices; |

| • | our ability to implement our growth strategy, including the completion and integration of mergers, acquisitions and/or joint venture activity and identification and completion of sales and divestitures activity; |

| • | counterparties' collateral demands and other factors affecting our liquidity position and financial condition; |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| • | our ability to optimize our assets through targeted investment in cost-effective technology enhancements and operations performance initiatives; |

| | |

| --- | --- |

| • | our ability to effectively and efficiently plan, prepare for and execute expected asset retirements and reclamation obligations and the impacts thereof; |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| | 2017 | | | | 2016 | | |

The increase in the month-end high VaR risk measure in 2017 reflected lower seasonal natural gas to power correlations in early 2017 and increased natural gas volatility.

| Average pay rate | 4.59 | | % | | 4.59 | | % | | 4.59 | | % | | 4.59 | | % | | 4.59 | | % | | 4.59 | | % | | 4.59 | | % | | | | | | 5.82 | | % | | | | |

| Totals | $ | 142 | | | $ | 6 | | | $ | 136 | |

| ◦ | changes in tax laws and policies; |

| • | our ability to successfully complete our solar generation project in a timely and cost-efficient manner or at all; |

| • | expectations regarding the Merger, including beliefs concerning stockholder and regulatory approvals; |

| • | the occurrence of any event that could give rise to the termination of the Merger Agreement, including a termination of the Merger Agreement under circumstances that could require us to pay a termination fee; |

[added: Vistra Energy is a holding company operating an integrated retail and generation business in markets throughout the U.S.] Through our [removed: Luminant and TXU Energy] subsidiaries, we are engaged in competitive electricity market activities including electricity generation, wholesale energy sales and purchases, commodity risk management [removed: activities,] and retail sales of electricity to end [removed: users, all largely in the ERCOT market.][added: users.]

As of December 31, [removed: 2017,] [added: 2018,] we had approximately [removed: 4,150] [added: 5,275] full-time employees, including approximately [removed: 1,630] [added: 2,030] employees under collective bargaining agreements.

| • | Integrated business model. We believe the key factor that distinguishes us from others in [removed: our] [added: the competitive electricity] industry is the integrated nature of our business (i.e., pairing [removed: Luminant's] [added: our] reliable and efficient mining, [removed: generating] [added: diversified generation fleet] and wholesale commodity risk management capabilities with [removed: TXU Energy's] [added: our] retail platform). Our business strategy will be guided by our integrated business model because we believe it is our core competitive advantage and differentiates us from our non-integrated competitors. We believe our integrated business model creates a unique opportunity because, relative to our non-integrated competitors, it reduces the effects of commodity price movements and contributes to earnings [added: and cash flow] stability. Consequently, our integrated business model is at the core of our business strategy. |

| • | Superior customer service. Through TXU [removed: Energy,] [added: Energy and Value Based Brands in Texas, Dynegy Energy Services in Massachusetts, Ohio, Illinois and Pennsylvania and Homefield Energy in Illinois,] we serve the retail electricity needs of end-use residential, small business, commercial and industrial electricity customers through multiple sales and marketing channels. In addition to benefitting from our integrated business model, we leverage our [removed: brand,] [added: brands,] our commitment to a consistent and reliable product offering, the backstop of the electricity generated by our generation fleet, our wholesale commodity risk management operations and our strong customer service to differentiate our products and services from our competitors. We strive to be at the forefront of innovation with new offerings and customer experiences to reinforce our value proposition. We maintain a focus on solutions that give our customers choice, convenience and control over how and when they use electricity and related services, including [added: TXU Energy's] Free Nights and Solar Days residential plans, MyEnergy DashboardSM, TXU [added: Energy's] iThermostat product and mobile solution, the TXU Energy Rewards program, the TXU Energy Green UpSM renewable energy credit program and a diverse set of solar options. Our focus on superior customer service will guide our efforts to acquire new residential and commercial customers, serve and retain existing customers and maintain valuable sales channels for our electricity generation resources. We believe our customer service, products and trusted [added: TXU Energy] brand have resulted in [removed: TXU Energy] maintaining the highest residential customer retention rate of any Texas retail electric provider in its respective core market. |

| • | Excellence in operations while maintaining an efficient cost structure. We believe that operating our facilities in a safe, reliable, environmentally compliant, and cost-effective and efficient manner is a foundation for delivering long-term stakeholder value. We also believe value increases as a function of making disciplined investments that enable our generation facilities to operate not only effectively and efficiently, but also safely, reliably and in an environmentally compliant manner. We believe that an ongoing focus on operational excellence and safety is a key component to success in a highly competitive environment and is part of the unique value proposition of our integrated model. Additionally, we are committed to optimizing our cost [removed: structure] [added: structure, reducing our debt levels] and implementing enterprise-wide process and operating improvements without compromising the safety of our communities, customers and employees. [removed: In connection with Emergence, in addition to significantly reducing our debt levels, we implemented certain cost-reduction actions in order to better align and right-size our cost structure.] We believe we have a highly effective and efficient cost structure and that our cost structure supports excellence in our operations. |

| • | Integrated hedging and commercial management. Our commercial team is focused on managing risk, through opportunistic hedging, and optimizing our assets and business positions. We actively manage our exposure to wholesale electricity prices in [removed: ERCOT,] [added: markets in which we operate,] on an integrated basis, through contracts for physical delivery of electricity, exchange-traded and over-the-counter financial contracts, [removed: ERCOT] term, day-ahead and real-time market transactions, and bilateral contracts with other wholesale market participants, including other power generators and end-user electricity customers. These hedging activities include short-term agreements, long-term electricity sales contracts and forward sales of natural gas through financial instruments. The historically positive correlation between natural gas prices and wholesale electricity prices [removed: in ERCOT] has provided us an opportunity to manage our exposure to the variability of wholesale electricity prices through natural gas hedging activities. We seek to hedge near-term cash flow and optimize long term value through hedging and forward sales contracts. We believe our integrated hedging and commercial management strategy, in combination with a strong balance sheet and strong liquidity profile, will provide a long-term advantage through cycles of higher and lower commodity prices. |

| • | Growth and enhancement. Our growth strategy leverages our core capabilities of multi-channel retail marketing in a large and competitive market, operating large-scale, environmentally sensitive, and diverse assets across a variety of fuel technologies, fuel logistics and management, commodity risk management, cost control, and energy infrastructure investing. We intend to opportunistically evaluate acquisitions of high-quality energy infrastructure assets and businesses that complement these core capabilities and enable us to achieve operational or financial synergies. [added: We are also focused on enhancing our retail platform in markets outside of Texas, including our recently announced entry into a purchase agreement to acquire Crius Energy Trust discussed below.] While we are intent on growing our business and creating value for our stockholders, we are committed to making disciplined investments that are consistent with our focus on maintaining a strong balance sheet and strong liquidity profile. As a result, consistent with our disciplined capital allocation approval process, growth opportunities we pursue will need to have compelling economic value in addition to fitting with our business strategy. |

[removed: The] ERCOT Market

ERCOT is an ISO that manages the flow of electricity from approximately 78,000 MW of installed capacity to approximately [removed: 24] [added: 25] million Texas customers, representing approximately 90% of the state's electric [removed: load and spanning approximately 75% of its geography, as of December 31, 2017.][added: load.]

As an energy-only market, ERCOT's market design is distinct from other competitive electricity markets in the [removed: United States.][added: U.S. Other markets maintain a minimum planning reserve margin through regulated planning, resource adequacy requirements and/or capacity markets.]

In contrast, ERCOT's resource adequacy is predominately dependent on [removed: free-market processes and] energy-market price signals.

[removed: On June 1, 2014,] ERCOT implemented the Operating Reserve Demand Curve (ORDC), pursuant to which wholesale electricity prices in the real-time electricity market increase automatically as available operating reserves decrease below defined threshold levels, creating a price adder.

Because ERCOT has one of the highest concentrations of wind capacity generation among [removed: United States] [added: U.S.] markets, the ERCOT market is more susceptible to fluctuations in wholesale electricity supply due to intermittent wind production, making ERCOT more vulnerable to periods of generation scarcity.

See Note [removed: 20] [added: 22] to the Financial Statements for additional information related to our operating segments.

Our wholesale commodity risk management [removed: business] [added: group] is responsible for dispatching our generation fleet in response to market needs after implementing portfolio optimization strategies, thus linking and integrating the generation fleet production with our retail customer and wholesale sales opportunities.

Market demand, also known as load, faced by [removed: an] electric power [removed: system] [added: systems,] such as [removed: ERCOT] [added: those we operate in,] varies from moment to moment as a result of changes in business and residential demand, which is often driven by weather.

In general, baseload units, intermediate/load following units and peaking units are dispatched into the [removed: ERCOT] [added: RTO/ISO] grid in order from lowest to highest variable cost.

Price formation [removed: in ERCOT, as with other competitive power markets in the U.S.,] is typically based on the highest variable cost unit that clears the market to satisfy system demand at a given point in time.

We are an active participant in the competitive ERCOT [added: retail] market and continue to be a market leader, which we believe is driven by, among other things, having one of the lowest customer complaint rates according to the PUCT and having an integrated power generation and wholesale operation that allows us to efficiently obtain the electricity needed to serve our customers at the lowest cost.

[removed: We] [added: As of December 31, 2018, we] provided electricity to approximately [removed: 24%] [added: 23%] and [removed: 18%] [added: 20%] of the residential and commercial customers in ERCOT, [removed: respectively, as of December 31, 2017.][added: respectively.]

Additionally, our wholesale commodity risk management [removed: business protects] [added: operations protect] our retail business from power price volatility by allowing us to bypass bid-ask spread in the market (particularly for illiquid products and time periods), which results in significantly lower collateral costs for our retail business as compared to other, non-integrated retail electric providers.

[removed: As a result, our operating results may fluctuate on a seasonal basis, and more] [added: More] severe weather conditions such as heat waves or extreme winter weather may make such fluctuations more pronounced.

Competition in [removed: ERCOT, as] [added: the markets] in [removed: other electricity markets,] [added: which we operate] is impacted by electricity and fuel prices, congestion along the power grid, subsidies provided by state and federal governments for new [added: and existing] generation facilities, new market entrants, construction of new generating assets, technological advances in power generation, the actions of environmental and other regulatory authorities, and other factors.

Our TXU [removed: EnergyTM] [added: Energy] brand, which has been used to sell electricity to customers in the competitive retail electricity market in Texas for approximately [removed: 16] [added: 17] years, is registered and protected by trademark law and is the only material intellectual property asset that we own.

As of December 31, [removed: 2017,] [added: 2018,] we have reflected an intangible asset on our balance sheet for the TXU [removed: EnergyTM] [added: Energy] brand of approximately $1.2 billion (see Note [removed: 7] [added: 8] to the Financial Statements).

On [removed: October 29, 2017,] [added: the Merger Date,] Vistra Energy and [removed: Dynegy, entered into] [added: Dynegy completed] the [added: transactions contemplated by the] Merger Agreement.

[removed: Upon the terms and subject] [added: Pursuant] to the [removed: conditions set forth in the] Merger Agreement, [removed: which has been approved by the boards of directors of Vistra Energy and Dynegy,] Dynegy [removed: will merge] [added: merged] with and into Vistra Energy, with Vistra Energy continuing as the surviving corporation.

Completion of the [removed: Merger] [added: Crius Transaction] is subject to various customary conditions, including, among others, [removed: (a)] [added: (i)] approval by [removed: Vistra Energy's stockholders of the issuance of Vistra Energy's common stock in the Merger, (b) adoption] [added: at least two-thirds] of the [removed: Merger Agreement by Vistra Energy's stockholders] [added: Crius unitholders] and [removed: Dynegy's stockholders, (c)] [added: (ii)] receipt of all requisite regulatory approvals, which [removed: includes] [added: include] approvals of the [removed: FERC, the PUCT, the Federal Communications Commission and the New York Public Service Commission,] [added: FERC] and the expiration [removed: or] [added: and] termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of [removed: 1976, (HSR Waiting Period) and (d) the approval of the listing of shares to be issued on the NYSE.][added: 1976.]

We are subject to extensive environmental regulation by governmental authorities, including the EPA and the [removed: TCEQ.][added: environmental regulatory bodies of states in which we operate.]

See Note [removed: 13] [added: 15] to the Financial Statements for a discussion of litigation related to EPA reviews.

In August 2015, the EPA finalized rules to address [removed: greenhouse gas (GHG)] [added: GHG] emissions from new, modified and reconstructed and existing electricity generation units, referred to as the Clean Power [removed: Plan.][added: Plan, including rules for existing facilities that would establish state-specific emissions rate goals to reduce nationwide CO2 emissions.]

[removed: A] [added: In March 2016, Luminant and a] number of [added: other] parties, including [removed: Luminant,] [added: the State of Texas,] filed petitions for review in the U.S. Court of Appeals for the [removed: District of Columbia] [added: Fifth] Circuit [removed: (D.C.] [added: (Fifth] Circuit Court) [removed: for] [added: challenging] the [removed: rule for new, modified and reconstructed plants.][added: FIP's Texas requirements.]

[removed: In] [added: Various parties (including Luminant) filed petitions for review in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court), and subsequently, in] January 2016, a coalition of states, industry (including Luminant) and other parties filed applications with the U.S. Supreme Court (Supreme Court) asking that the Supreme Court stay the rule while the D.C. Circuit Court reviews the legality of the rule for existing plants.

Oral argument on the merits of the legal challenges to the rule was heard in September 2016 before the entire D.C. Circuit [removed: Court.][added: Court, but the D.C. Circuit Court has not issued a decision and the case remains in abeyance due to the EPA's decision to review the Clean Power Plan.]

[removed: In] [added: Before the oral argument was held, in] April 2017, the D.C. Circuit Court [removed: issued orders holding] [added: granted] the [removed: cases] [added: EPA's motion to continue oral argument and ordered that the case be held] in abeyance [removed: for 60 days and directing] [added: with] the EPA to provide status reports [added: to the D.C. Circuit Court on the EPA's review of the action] at [removed: 30-day] [added: 90-day] intervals.

[removed: The] [added: In October 2017, the EPA issued a] proposed [added: rule that would] repeal [removed: focuses] [added: the Clean Power Plan with the proposed repeal focusing] on what the EPA believes to be the unlawful nature of the Clean Power Plan and [removed: asks] [added: asking] for public comment on the EPA's interpretations of its authority under the Clean Air Act.

[removed: We currently plan to submit] [added: Vistra Energy submitted] comments [removed: in response to] [added: on] the proposed repeal [removed: by] [added: in] April 2018.

In July 2011, the EPA issued the CSAPR, compliance with which would have required significant additional reductions of [removed: sulfur dioxide (SO2)] [added: SO2] and [removed: nitrogen oxide (NOx)] [added: NOX] emissions from our [removed: fossil fueled] [added: fossil-fueled] generation units.

[removed: The] [added: After certain EPA revisions to the rule the] CSAPR became effective January 1, 2015.

[removed: The D.C.] [added: In March 2017, the Fifth] Circuit Court remanded [removed: those states' budgets] [added: the rule back] to the EPA for [removed: prompt] reconsideration.

We serve approximately 2.8 million customers in five states.

Our generation fleet totals approximately 40,500 MW of generation capacity with a portfolio of natural gas, nuclear, coal and solar facilities.

Vistra Energy has six reportable segments: (i) Retail, (ii) ERCOT, (iii) PJM, (iv) NY/NE (comprising NYISO and ISO-NE), (v) MISO and (vi) Asset Closure.

The PJM, NY/NE and MISO segments were established on the Merger Date to reflect markets served by businesses acquired in the Merger.

See Note 22 to the Financial Statements for further information concerning reportable business segments.

See Note 2 to the Financial Statements for a summary of the Merger transaction and business combination accounting.

| • | Disciplined capital allocation. Vistra takes a balanced approach to capital allocation, focusing on maintaining a strong balance sheet, investing prudently in the maintenance of our existing assets and potential growth acquisitions, and returning capital to shareholders. Maintaining a strong balance sheet ensures Vistra’s interest expense is manageable in a variety of wholesale power price environments while giving Vistra access to flexible and diverse sources of liquidity. We prudently make necessary capital investments to maintain the safety and reliability of our facilities while also investing in new technologies when economic, including solar assets and battery storage systems, resulting in a continued modernization of Vistra’s generation fleet. Because we believe cost discipline and strong management of our assets and commodity positions are necessary to deliver long-term value to our stakeholders, we generally make capital allocation decisions that we believe will lead to attractive cash returns on investment, including by returning capital to our shareholders. In June and November 2018, our board of directors (Board) authorized a share repurchase program under which up to $500 million and $1.25 billion, respectively, of our outstanding common stock may be repurchased. Through December 31, 2018, 33,495,016 shares of our common stock had been repurchased under the program in the aggregate for $778 million (including related fees and expenses) at an average price per share of common stock of $23.23. In November 2018, our Board adopted a dividend program pursuant to which we expect to initiate an annual dividend of approximately $0.50 per share, payable quarterly, beginning in the first quarter of 2019. |

Entry into Purchase Agreement to Acquire Crius Energy Trust — On February 7, 2019, Vistra Energy and Crius Energy Trust (Crius) entered into a definitive agreement, which was subsequently amended on February 19, 2019 (as amended, the Crius Purchase Agreement), as a result of an unsolicited acquisition proposal, pursuant to which Vistra Energy will acquire the equity interest of two wholly owned subsidiaries of Crius that indirectly own the operating business of Crius (Crius Transaction).

Crius is an energy retailer selling both electricity and natural gas products to residential and small business customers in 19 states and the District of Columbia.

The acquisition provides a high degree of overlap with Vistra Energy's generation fleet and contains approximately 11.6 TWh of annual load, improving Vistra Energy's match of its generation to load profile to approximately 45 percent, reducing risk.

The acquisition also establishes a platform for future growth by leveraging Vistra Energy's existing retail marketing capabilities and Crius's experienced team.

The acquisition enhances the integrated value proposition through collateral and transaction efficiencies, particularly via Crius's largely retail portfolio.

Vistra Energy intends to fund the purchase price of approximately $378 million using cash on hand and assumption of Crius's net debt of approximately $108 million.

Pending the receipt of all necessary approvals and the fulfillment of all other customary closing conditions, the parties expect the transaction to close in the second quarter of 2019.

Dividend Declaration — On February 26, 2019, Vistra Energy announced that the Board had declared a dividend pursuant to which Vistra Energy would pay, to each holder of record as of March 15, 2019, a dividend of $0.125 per share, to be paid March 29, 2019.

Issuance of Vistra Operations 5.625% Senior Notes Due 2027 — In February 2019, Vistra Operations issued and sold $1.3 billion aggregate principal amount of 5.625% senior notes due 2027 in an offering to eligible purchasers under Rule 144A and Regulation S under the Securities Act of 1933, as amended.

The senior notes were sold pursuant to a purchase agreement by and among Vistra Operations, certain direct and indirect subsidiaries of Vistra Operations and J.P. Morgan Securities, LLC, as representative of the several initial purchasers.

Net proceeds from the sale of the senior notes totaling approximately $1.287 billion, together with cash on hand, were used to pay the purchase price and accrued interest (together with fees and expenses) required in connection with (i) the 2019 Tender Offer described below, (ii) the redemption of approximately $35 million aggregate principal amount of our 7.375% senior notes due 2022 and (iii) the redemption of the remaining approximately $25 million aggregate principal amount of our outstanding 8.034% senior notes due 2024.

2019 Tender Offer and Consent Solicitation — In February 2019, Vistra Energy used the net proceeds from the issuance of the Vistra Operations 5.625% senior notes due 2027 to fund a cash tender offer (the 2019 Tender Offer) to purchase for cash approximately $1.193 billion aggregate principal amount of 7.375% senior notes due 2022 assumed in the Merger.

Market Discussion

The operations of Vistra Energy are aligned into six reportable business segments: (i) Retail, (ii) ERCOT, (iii) PJM, (iv) NY/NE, (v) MISO and (vi) Asset Closure.

The Retail segment is engaged in retail sales of electricity and related services to residential, commercial and industrial customers.

The ERCOT, PJM, NY/NE (comprising NYISO and ISO-NE) and MISO segments are engaged in electricity generation, wholesale energy sales and purchases, commodity risk management activities, fuel production and fuel logistics management, all largely within their respective RTO or ISO market.

The Asset Closure segment is engaged in the decommissioning and reclamation of retired plants and mines.

Our CAISO operations are included in the Corporate and Other non-segment as our operations in the CAISO market do not materially affect our financial condition, results of operations and cash flows.

Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs)

Separately, RTOs and ISOs administer the transmission infrastructure and markets across a regional footprint in most of the markets in which we operate.

They are responsible for dispatching all generation facilities in their respective footprints and are responsible for both maximum utilization and reliable and efficient operation of the transmission system.

RTOs and ISOs administer energy and ancillary service markets in the short term, usually day-ahead and real-time markets.

Several RTOs and ISOs also ensure long-term planning reserves through monthly, semiannual, annual and multiyear capacity markets.

The RTOs and ISOs that oversee most of the wholesale power markets in which we operate currently impose, and will likely continue to impose, bid and price limits or other similar mechanisms.

NERC regions and RTOs/ISOs often have different geographic footprints, and while there may be geographic overlap between NERC regions and RTOs/ISOs, their respective roles and responsibilities do not generally overlap.

In RTO and ISO regions with centrally dispatched market structures, all generators selling into the centralized market receive the same price for energy sold based on the bid price associated with the production of the last MWh that is needed to balance supply with demand within a designated zone or at a given location.

Different zones or locations within the same RTO/ISO may produce different prices respective to other zones within the same RTO/ISO due to transmission losses and congestion.

For example, a less efficient and/or less economical natural gas-fueled unit may be needed in some hours to meet demand.

If this unit's production is required to meet demand on the margin, its offer price will set the market clearing price that will be paid for all dispatched generation in the same zone or location (although the price paid at other zones or locations may vary because of transmission losses and congestion), regardless of the price that any other unit may have offered into the market.

In RTO and ISO regions with centrally dispatched market structures and location-based marginal price clearing structures (e.g. PJM, ISO-NE, NYISO, ERCOT, MISO, and CAISO), generators will receive the location-based marginal price for their output.

The location-based marginal price, absent congestion, would be the marginal price of the most expensive unit needed to meet demand.

In regions that are outside the footprint of RTOs/ISOs, prices are determined on a bilateral basis between buyers and sellers.

Retail Markets

Vistra Energy is a holding company operating an integrated power business in Texas.

TXU Energy is the largest retailer of electricity in Texas, with approximately 1.7 million residential, commercial and industrial customers.

Luminant is the largest generator of electricity in ERCOT, operating approximately 13,600 MW of installed capacity in ERCOT.

We have two reportable segments: our Wholesale Generation segment, consisting largely of Luminant, and our Retail Electricity segment, consisting largely of TXU Energy.

On October 29, 2017, Vistra Energy and Dynegy Inc., a Delaware corporation (Dynegy), entered into an Agreement and Plan of Merger (the Merger Agreement) pursuant to which, upon closing (which is expected to occur in the second quarter of 2018), Dynegy will merge with and into Vistra Energy (the Merger), with Vistra Energy surviving the Merger and the shareholders of Vistra Energy and Dynegy receiving 79% and 21%, respectively, of the equity of the combined company.

See Item 1.

Business \- Recent Developments below for a more detailed description of the Merger and the Merger Agreement.

| • | Strong balance sheet and disciplined capital allocation. Like any energy-focused business, we are potentially subject to significant commodity price volatility and capital costs. Accordingly, our strategy has been, and will continue to be, to maintain a strong balance sheet. As a result, we are focused on maintaining prudent financial leverage supported by readily accessible, flexible and diverse sources of liquidity. Our ongoing capital allocation priorities primarily include making necessary capital investments to maintain the safety and reliability of our facilities. Because we believe cost discipline and strong management of our assets and commodity positions are necessary to deliver long-term value to our stakeholders, we generally make capital allocation decisions that we believe will lead to attractive cash returns on investment. |

Population growth in Texas is currently expanding at well above the national average rate, with a growth rate of 12.1% between July 2010 and July 2017, more than double the U.S. population growth rate of 5.3% during the same period, according to the U.S. Census Bureau.

ERCOT accounts for approximately 32% of the competitively served retail load in the U.S., and residential consumers in the ERCOT market consume approximately 30% more electricity than the average U.S. residential consumer according to the U.S. Energy Information Administration (EIA).

Total ERCOT power demand has grown at a compounded annual growth rate of approximately 1.4% from 2006 through 2016, compared to a range of -0.3% to 0.2% in other U.S. markets, according to ERCOT and the EIA, respectively.

Other markets maintain a minimum reserve margin through regulated planning, resource adequacy requirements and/or capacity markets.

Operating Segments

Our operating segments consist of the Wholesale Generation segment, consisting largely of Luminant, and the Retail Electricity segment, consisting largely of TXU Energy.

Wholesale Generation Segment

As described in Item 2.

Properties, our power generation fleet is diverse and flexible in terms of dispatch characteristics as our fleet includes baseload, intermediate/load following and peaking generation.

Retail Electricity Segment

Texas has one of the fastest growing populations of any state in the U.S. and has a diverse economy, which has resulted in a significant and growing competitive retail electricity market.

The following description of the Merger Agreement does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Merger Agreement filed as Exhibit 2.1 to our Current Report on Form 8-K filed on October 31, 2017.

The Merger is intended to qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as amended, so that none of Vistra Energy, Dynegy or any of the Dynegy stockholders will recognize any gain or loss in the transaction, except that Dynegy stockholders could recognize a gain or loss with respect to cash received in lieu of fractional shares of Vistra Energy's common stock.

We expect that Vistra Energy will be the acquirer for both federal tax and accounting purposes.

Upon the closing of the Merger, each issued and outstanding share of Dynegy common stock, par value $0.01 per share, other than shares owned by Vistra Energy or its subsidiaries, held in treasury by Dynegy or held by a subsidiary of Dynegy, will automatically be converted into the right to receive 0.652 shares of common stock, par value $0.01 per share, of Vistra Energy (the Exchange Ratio), except that cash will be paid in lieu of fractional shares, which we expect will result in Vistra Energy's stockholders and Dynegy's stockholders owning approximately 79% and 21%, respectively, of the combined company.

Dynegy stock options and equity-based awards outstanding immediately prior to the Effective Time will generally automatically convert upon completion of the Merger into stock options and equity-based awards, respectively, with respect to Vistra Energy's common stock, after giving effect to the Exchange Ratio.

The Merger Agreement also provides that, upon the closing of the Merger, the board of directors of the combined company will be comprised of 11 members, consisting of (a) the eight current directors of Vistra Energy and (b) three of Dynegy's current directors, of whom one will be a Class I director, one will be a Class II director and one will be a Class III director, unless the closing of the Merger occurs after the date of Vistra Energy's 2018 Annual Meeting of Stockholders, in which case one will be a Class I director and two will be Class II directors.

Each party's obligation to consummate the Merger is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (ii) performance in all material respects by the other party of its obligations under the Merger Agreement and (iii) the receipt by such party of an opinion from its counsel to the effect that the Merger will qualify as a tax-free reorganization within the meaning of the Code.

The HSR Waiting Period expired on February 5, 2018.

The Merger Agreement contains customary representations, warranties and covenants of Vistra Energy and Dynegy, including, among others, covenants (a) to conduct their respective businesses in the ordinary course during the interim period between the execution of the Merger Agreement and completion of the Merger, (b) not to take certain actions during the interim period except with the consent of the other party, (c) that Vistra Energy and Dynegy will convene and hold meetings of their respective stockholders to obtain the required stockholder approvals, and (d) that the parties use their respective reasonable best efforts to take all actions necessary to obtain all governmental and regulatory approvals and consents (except that Vistra Energy shall not be required, and Dynegy shall not be permitted, to take any action that constitutes or would reasonably be expected to have certain specified burdensome effects).

Each of Vistra Energy and Dynegy is also subject to restrictions on its ability to solicit alternative acquisition proposals and to provide information to, and engage in discussion with, third parties regarding such proposals, except under limited circumstances to permit Vistra Energy's and Dynegy's boards of directors to comply with their respective fiduciary duties.

The Merger Agreement contains certain termination rights for both Vistra Energy and Dynegy, including in specified circumstances in connection with an alternative acquisition proposal that has been determined to be a superior offer.

Upon termination of the Merger Agreement, under specified circumstances (a) for a failure by Vistra Energy to obtain certain requisite regulatory approvals, Vistra Energy may be required to pay Dynegy a termination fee of $100 million, (b) in connection with a superior offer, acquisition proposal or unforeseeable material intervening event, Vistra Energy may be required to pay a termination fee to Dynegy of $100 million, and (c) in connection with a superior offer, acquisition proposal or an unforeseeable material intervening event, Dynegy may be required to pay to Vistra Energy a termination fee of $87 million.

In addition, if the Merger Agreement is terminated (i) because Vistra Energy's stockholders do not approve the issuance of Vistra Energy's common stock in the Merger or do not adopt the Merger Agreement, then Vistra Energy will be obligated to reimburse Dynegy for its reasonable out-of-pocket fees and expenses incurred in connection with the Merger Agreement, or (ii) because Dynegy's stockholders do not adopt the Merger Agreement, then Dynegy will reimburse Vistra Energy for its reasonable out-of-pocket fees and expenses incurred in connection with the Merger Agreement, each of which is subject to a cap of $22 million.

Such expense reimbursement may be deducted from the foregoing termination fees, if ultimately payable.

The Merger is subject to certain risks and uncertainties, and there can be no assurance that we will be able to complete the Merger on the expected timeline or at all.

Merger Support Agreements — Concurrently with the execution of the Merger Agreement, certain stockholders of Vistra Energy, including affiliates of Apollo Management Holdings L.P. (collectively, the Apollo Entities), affiliates of Brookfield Asset Management Private Institutional Capital Adviser (Canada), L.P. (collectively, the Brookfield Entities) and certain affiliates of Oaktree Capital Management, L.P. (Oaktree), such agreements representing in the aggregate approximately 34% of the shares of Vistra Energy's common stock that will be entitled to vote on the Merger, and certain stockholders of Dynegy, including Terawatt Holdings, LP, an affiliate of certain affiliated investment funds of Energy Capital Partners III, LLC (Terawatt) and certain affiliates of Oaktree, such agreements representing in the aggregate approximately 21% of the shares of Dynegy's common stock that will be entitled to vote on the Merger, have entered into the Merger Support Agreements, pursuant to which each such stockholder agreed to vote their shares of common stock of Vistra Energy or Dynegy, as applicable, to adopt the Merger Agreement, and in the case of stockholders of Vistra Energy, approve the stock issuance.

The Merger Support Agreements will automatically terminate upon a change of recommendation by the applicable board of directors or the termination of the Merger Agreement in accordance with its terms.

The foregoing description of the Merger Support Agreements does not purport to be complete and is qualified in its entirety by reference to that certain Merger Support Agreement, dated as of October 29, 2017, by and among Dynegy and the Apollo Entities, the Brookfield Entities and certain affiliates of Oaktree (filed as Exhibit 10.1 to Dynegy Inc.'s Current Report on Form 8-K filed on October 30, 2017), the Merger Support Agreement entered into between Vistra Energy and Terawatt (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on October 31, 2017) and the Merger Support Agreement entered into between Vistra Energy and certain affiliates of Oaktree (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on October 31, 2017).

Litigation Related to the Merger — In January 2018, a purported Dynegy stockholder filed a putative class action lawsuit in the U.S. District Court for the Southern Division of Texas, Houston Division, alleging that Dynegy, each member of the Dynegy board of directors and Vistra Energy violated federal securities laws by filing a Form S-4 Registration Statement in connection with the Merger that omits purportedly material information.

The lawsuit seeks to enjoin the Merger and to have Dynegy and Vistra Energy issue an amended Form S-4 or, alternatively, damages if the Merger closes without an amended Form S-4 having been filed.

Two other related lawsuits were also filed but neither of those named Vistra Energy.

See Note [removed: 13] [added: 15] to the Financial Statements for discussion of litigation, including matters related to our generation facilities and EPA reviews.

10-K 1 [removed: vistra-12312017x10k.htm] [added: vistra-20181231x10k.htm] FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, [removed: 2017][added: 2018]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

Large accelerated filer [removed: o] [added: x] Accelerated filer o Non-Accelerated filer [removed: x (Do not check if a smaller] [added: o Smaller] reporting [removed: company)][added: company o Emerging growth company o]

As of June 30, [removed: 2017,] [added: 2018,] the aggregate market value of the Vistra Energy Corp. common stock held by non-affiliates of the registrant was [removed: $5,404,454,926] [added: $8,592,448,694] based on the closing sale price as reported on the New York Stock Exchange.

As of February [removed: 21, 2018,] [added: 25, 2019,] there were [removed: 428,447,631] [added: 485,894,408] shares of common stock, par value $0.01, outstanding of Vistra Energy Corp.

Portions of the proxy statement for the registrant's [removed: 2018] [added: 2019] annual meeting of stockholders are incorporated in Part III of this Annual Report on Form 10‑K.

| [Item [removed: 1.](#s0251d35f5a9546f8930000b6844ec47b)] [added: 1.](#sCF611217C7441071A86B61CC6C2090F2)] | [removed: [BUSINESS](#s0251d35f5a9546f8930000b6844ec47b)] [added: [BUSINESS](#sCF611217C7441071A86B61CC6C2090F2)] | [removed: [1](#s0251d35f5a9546f8930000b6844ec47b)] [added: [1](#sCF611217C7441071A86B61CC6C2090F2)] |

| [Item [removed: 1A.](#s5a424a067359475db871e8f64111aab4)] [added: 1A.](#s8863D70A181FA9F58D9761CC6C516BFC)] | [RISK [removed: FACTORS](#s5a424a067359475db871e8f64111aab4)] [added: FACTORS](#s8863D70A181FA9F58D9761CC6C516BFC)] | [removed: [12](#s5a424a067359475db871e8f64111aab4)] [added: [17](#s8863D70A181FA9F58D9761CC6C516BFC)] |

| [Item [removed: 1B.](#s6a74d93868a442749ce2f7d4370cf450)] [added: 1B.](#s30F7E97700A271D8BCCC61CC6C745B39)] | [UNRESOLVED STAFF [removed: COMMENTS](#s6a74d93868a442749ce2f7d4370cf450)] [added: COMMENTS](#s30F7E97700A271D8BCCC61CC6C745B39)] | [removed: [34](#s6a74d93868a442749ce2f7d4370cf450)] [added: [36](#s30F7E97700A271D8BCCC61CC6C745B39)] |

| [Item [removed: 2.](#sa0295ebfe71c47dca8f8b258cbb5195a)] [added: 2.](#s4C7459AF73751AB4FA4461CC5ECFE232)] | [removed: [PROPERTIES](#sa0295ebfe71c47dca8f8b258cbb5195a)] [added: [PROPERTIES](#s4C7459AF73751AB4FA4461CC5ECFE232)] | [removed: [34](#sa0295ebfe71c47dca8f8b258cbb5195a)] [added: [37](#s4C7459AF73751AB4FA4461CC5ECFE232)] |

| [Item [removed: 3.](#s8d26cbe35e25426580b1e525aab17378)] [added: 3.](#sB28B41C14F9E49DC5E0061CC6CC5261F)] | [LEGAL [removed: PROCEEDINGS](#s8d26cbe35e25426580b1e525aab17378)] [added: PROCEEDINGS](#sB28B41C14F9E49DC5E0061CC6CC5261F)] | [removed: [35](#s8d26cbe35e25426580b1e525aab17378)] [added: [39](#sB28B41C14F9E49DC5E0061CC6CC5261F)] |

| [Item [removed: 4.](#s122a0f7735484c7aa9c212a0d4933636)] [added: 4.](#sC9B7857E30869CBA2C2161CC6CFBD790)] | [MINE SAFETY [removed: DISCLOSURES](#s122a0f7735484c7aa9c212a0d4933636)] [added: DISCLOSURES](#sC9B7857E30869CBA2C2161CC6CFBD790)] | [removed: [35](#s122a0f7735484c7aa9c212a0d4933636)] [added: [39](#sC9B7857E30869CBA2C2161CC6CFBD790)] |

| [PART [removed: II.](#sB52C68291F0ACEDD23A6969128A544D5)] [added: II.](#s9144AB72DA3E890B423461CC6D1A5DCC)] | | |

| [Item [removed: 5.](#sb7fb6f8cf14a44ce8ab02ce08ed73bec)] [added: 5.](#s9C61E119FE6265EF269A61CC6D4D5DC8)] | [MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY [removed: SECURITIES](#sb7fb6f8cf14a44ce8ab02ce08ed73bec)] [added: SECURITIES](#s9C61E119FE6265EF269A61CC6D4D5DC8)] | [removed: [36](#sb7fb6f8cf14a44ce8ab02ce08ed73bec)] [added: [40](#s9C61E119FE6265EF269A61CC6D4D5DC8)] |

| [Item [removed: 6.](#sde77dd70fc6a4ddbbc3263c3087402e3)] [added: 6.](#sDC3A574130DC650BDC7161CC6D6D53EB)] | [SELECTED FINANCIAL [removed: DATA](#sde77dd70fc6a4ddbbc3263c3087402e3)] [added: DATA](#sDC3A574130DC650BDC7161CC6D6D53EB)] | [removed: [38](#sde77dd70fc6a4ddbbc3263c3087402e3)] [added: [42](#sDC3A574130DC650BDC7161CC6D6D53EB)] |

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| [Item [removed: 7A.](#s62C3A8B409C8B9C3DF6A96911F969D36)] [added: 7A.](#s80B9E03A03D572829E0061CC5836AC2C)] | [QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET [removed: RISK](#s62C3A8B409C8B9C3DF6A96911F969D36)] [added: RISK](#s80B9E03A03D572829E0061CC5836AC2C)] | [removed: [65](#s62C3A8B409C8B9C3DF6A96911F969D36)] [added: [79](#s80B9E03A03D572829E0061CC5836AC2C)] |

| [Item [removed: 8.](#s259D1471FF21279C9F3D969128F67EC1)] [added: 8.](#sDFBC776CFCB16340FAAA61CC6F70FC8B)] | [FINANCIAL STATEMENTS AND SUPPLEMENTARY [removed: DATA](#s259D1471FF21279C9F3D969128F67EC1)] [added: DATA](#sDFBC776CFCB16340FAAA61CC6F70FC8B)] | [removed: [70](#s259D1471FF21279C9F3D969128F67EC1)] [added: [85](#sDFBC776CFCB16340FAAA61CC6F70FC8B)] |

| [Item [removed: 9.](#sf38b657e9f774c5199c2ca18db06c37d)] [added: 9.](#sE0D5CFE85E3B5A4A139C61CC770E1CB6)] | [CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL [removed: DISCLOSURE](#sf38b657e9f774c5199c2ca18db06c37d)] [added: DISCLOSURE](#sE0D5CFE85E3B5A4A139C61CC770E1CB6)] | [removed: [145](#sf38b657e9f774c5199c2ca18db06c37d)] [added: [181](#sE0D5CFE85E3B5A4A139C61CC770E1CB6)] |

| [Item [removed: 9A.](#s1205C6042AC3BA44257F96912F9CFDA5)] [added: 9A.](#s8F5BFA40652D203BEC0261CC772F9BE0)] | [CONTROLS AND [removed: PROCEDURES](#s1205C6042AC3BA44257F96912F9CFDA5)] [added: PROCEDURES](#s8F5BFA40652D203BEC0261CC772F9BE0)] | [removed: [145](#s1205C6042AC3BA44257F96912F9CFDA5)] [added: [181](#s8F5BFA40652D203BEC0261CC772F9BE0)] |

| [Item [removed: 9B.](#s85c3b268e2b94318be8df92718942f52)] [added: 9B.](#sDD495F9AF8F044067CDE61CC776A005B)] | [OTHER [removed: INFORMATION](#s85c3b268e2b94318be8df92718942f52)] [added: INFORMATION](#sDD495F9AF8F044067CDE61CC776A005B)] | [removed: [145](#s85c3b268e2b94318be8df92718942f52)] [added: [182](#sDD495F9AF8F044067CDE61CC776A005B)] |

| [PART [removed: III.](#sE92A2B878C5FDD62569596912FACF2D9)] [added: III.](#sB23B6986E077207CFC0561CC77832BE5)] | | |

| [Item [removed: 10.](#sFDF06287C8AB992D29F396912FD16045)] [added: 10.](#s003E14EEDC88B5D4ECF361CC77BD97EE)] | [DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE [removed: GOVERNANCE](#sFDF06287C8AB992D29F396912FD16045)] [added: GOVERNANCE](#s003E14EEDC88B5D4ECF361CC77BD97EE)] | [removed: [146](#sFDF06287C8AB992D29F396912FD16045)] [added: [183](#s003E14EEDC88B5D4ECF361CC77BD97EE)] |

| [Item [removed: 11.](#sBEDC292EE7BBDC8E0B97969130216AAC)] [added: 11.](#s10CF6CAED77EC07E1A8761CC77D76A1C)] | [EXECUTIVE [removed: COMPENSATION](#sBEDC292EE7BBDC8E0B97969130216AAC)] [added: COMPENSATION](#s10CF6CAED77EC07E1A8761CC77D76A1C)] | [removed: [146](#sBEDC292EE7BBDC8E0B97969130216AAC)] [added: [183](#s10CF6CAED77EC07E1A8761CC77D76A1C)] |

| [Item [removed: 12.](#sBE1DF9488029036D683196913023302A)] [added: 12.](#sAED267707405FADBF7A461CC780A7AFE)] | [SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER [removed: MATTERS](#sBE1DF9488029036D683196913023302A)] [added: MATTERS](#sAED267707405FADBF7A461CC780A7AFE)] | [removed: [146](#sBE1DF9488029036D683196913023302A)] [added: [183](#sAED267707405FADBF7A461CC780A7AFE)] |

| [Item [removed: 13.](#s899CA3FD4E07487953BB96913075913A)] [added: 13.](#s0F0766A46D03C08E123961CC782BF9FB)] | [CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR [removed: INDEPENDENCE](#s899CA3FD4E07487953BB96913075913A)] [added: INDEPENDENCE](#s0F0766A46D03C08E123961CC782BF9FB)] | [removed: [146](#s899CA3FD4E07487953BB96913075913A)] [added: [183](#s0F0766A46D03C08E123961CC782BF9FB)] |

| [Item [removed: 14.](#s19EE18F270A969A0C929969130789843)] [added: 14.](#s6908567F0A22EAE2BBD361CC78657F57)] | [PRINCIPAL ACCOUNTING FEES AND [removed: SERVICES](#s19EE18F270A969A0C929969130789843)] [added: SERVICES](#s6908567F0A22EAE2BBD361CC78657F57)] | [removed: [146](#s19EE18F270A969A0C929969130789843)] [added: [183](#s6908567F0A22EAE2BBD361CC78657F57)] |

| [PART [removed: IV.](#sdecd275286a74d08ad4bf6bcc378bea7)] [added: IV.](#s7EF2B27A804F0469969461CC787EC96C)] | | |

| [Item [removed: 15.](#s5C047F046A762D264108969130C616AD)] [added: 15.](#sC5AB1238F2CD997B1F3C61CC514BE9C5)] | [EXHIBITS, FINANCIAL STATEMENT [removed: SCHEDULES](#s5C047F046A762D264108969130C616AD)] [added: SCHEDULES](#sC5AB1238F2CD997B1F3C61CC514BE9C5)] | [removed: [147](#s5C047F046A762D264108969130C616AD)] [added: [184](#s1CB15F2EA66F2490E9B261CC78B9844A)] |

| [Item [removed: 16.](#sb15759d76e5048719ade23f44606497b)] [added: 16.](#sB191F87B4C349A75D76161CC7934C1F4)] | [FORM 10-K [removed: SUMMARY](#sb15759d76e5048719ade23f44606497b)] [added: SUMMARY](#sB191F87B4C349A75D76161CC7934C1F4)] | [removed: [155](#sb15759d76e5048719ade23f44606497b)] [added: [193](#sB191F87B4C349A75D76161CC7934C1F4)] |

Vistra Energy Corp.'s (Vistra Energy) annual reports, quarterly reports, current reports and any amendments to those reports are made available to the public, free of charge, on the Vistra Energy website at http://www.vistraenergy.com, as soon as reasonably practicable after they have been filed with or furnished to the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the [added: Securities] Exchange [removed: Act.][added: Act of 1934, as amended.]

This [removed: Annual Report] [added: annual report] on Form 10-K and other Securities and Exchange Commission filings of Vistra Energy and its subsidiaries occasionally make references to Vistra Energy (or "we," "our," "us" or "the Company"), [added: Luminant,] TXU [added: Energy, Value Based Brands LLC, Dynegy] Energy [added: Services] or [removed: Luminant] [added: Homefield Energy] when describing actions, rights or obligations of their respective subsidiaries.

| DIP Facility | | TCEH's $3.375 billion debtor-in-possession financing facility, which was repaid in August 2016 (see Note [removed: 12] [added: 14] to the Financial Statements) |

| DIP Roll Facilities | | TCEH's $4.250 billion debtor-in-possession and exit financing facilities, which [removed: was] [added: were] converted to the Vistra Operations Credit Facilities on the Effective Date (see Note [removed: 12] [added: 14] to the Financial Statements) |

| Federal and State Income Tax Allocation Agreements | | An agreement, executed in May 2012 but effective as of January 2010 to which prior to the Effective Date, EFH Corp. and certain of its subsidiaries (including EFCH, EFIH and TCEH, but not including Oncor Holdings and Oncor) were parties. The Agreement was rejected by the TCEH Debtors and the Contributed EFH Debtors on the Effective Date (see Note [removed: 8] [added: 9] to the Financial Statements). |

| Luminant | | subsidiaries of Vistra Energy engaged in competitive market activities consisting of electricity generation and wholesale energy sales and purchases as well as commodity risk [removed: management, all largely in Texas] [added: management] |

| market heat rate | | Heat rate is a measure of the efficiency of converting a fuel source to electricity. Market heat rate is the implied relationship between wholesale electricity prices and natural gas prices and is calculated by dividing the wholesale market price of electricity, which is based on the price offer of the marginal supplier [removed: in ERCOT] (generally natural gas plants), by the market price of natural gas. |

| Merger | | the [removed: proposed] merger of Dynegy with and into Vistra Energy, with Vistra Energy as the surviving corporation |

| TRA | | Tax Receivables Agreement, containing certain rights (TRA Rights) to receive payments from Vistra Energy related to certain tax benefits, including those it realized as a result of certain transactions entered into at Emergence (see Note [removed: 9)] [added: 10)] |

| Warrants, exercisable for common stock at an exercise price of $35 per 0.652 share | | New York Stock Exchange |

| 7.00% tangible equity units | | New York Stock Exchange |

| [Glossary](#s3B81E26DEC72F4AF109961CC6BCE16E2) | | [ii](#s3B81E26DEC72F4AF109961CC6BCE16E2) |

| [PART I.](#s2811BAEDD2CAC67715CD61CC6BFFF640) | | |

| [Signatures](#sA3985779DAFA218E4E4161CC795697C9) | | [194](#sA3985779DAFA218E4E4161CC795697C9) |

Additionally, Vistra Energy posts important information, including press releases, investor presentations, sustainability reports, and notices of upcoming events on its website and utilizes its website as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD.

Investors may be notified of posting to the website by signing up for email alerts and RSS feeds on the "Investor Relations" page of Vistra Energy's website.

| 2017 Form 10-K | | Vistra Energy's annual report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 26, 2018, except for Part II, Items 7 and 8, which were amended in Vistra Energy's current report on Form 8-K filed with the SEC on June 15, 2018 |

| ARO | | asset retirement and mining reclamation obligation |

| CAA | | Clean Air Act |

| CAISO | | The California Independent System Operator |

| CT | | combustion turbine |

| Dynegy Energy Services | | Dynegy Energy Services, LLC and Dynegy Energy Services (East), LLC (d/b/a Dynegy and Brighten Energy), indirect, wholly owned subsidiaries of Vistra Energy, that are REPs in certain areas of MISO and PJM, respectively, and are engaged in the retail sale of electricity to residential and business customers. |

| ERCOT | | Electric Reliability Council of Texas, Inc. |

| Fitch | | Fitch Ratings Inc. (a credit rating agency) |

| Homefield Energy | | Illinois Power Marketing Company (d/b/a Homefield Energy), an indirect, wholly owned subsidiary of Vistra Energy, a REP in certain areas of MISO that is engaged in the retail sale of electricity to municipal customers |

| ISO-NE | | Independent System Operator New England |

| kW | | kilowatt |

| LTSA | | long term service agreements for plant maintenance |

| Merger Date | | April 9, 2018, the date Vistra Energy and Dynegy completed the transactions contemplated by the Merger Agreement |

| MISO | | Midcontinent Independent System Operator, Inc. |

| Moody's | | Moody's Investors Service, Inc. (a credit rating agency) |

| NYISO | | New York Independent System Operator |

| PJM | | PJM Interconnection, LLC |

| RTO | | regional transmission organization |

| ST | | steam turbine |

| TCJA | | The Tax Cuts and Jobs Act of 2017, federal income tax legislation enacted in December 2017, which significantly changed the tax laws applicable to business entities |

| Value Based Brands | | Value Based Brands LLC (d/b/a 4Change Energy and Express Energy), an indirect, wholly owned subsidiary of Vistra Energy that is a REP in competitive areas of ERCOT and is engaged in the retail sale of electricity to residential and business customers |

| Vistra Operations | | Vistra Operations Company LLC, an indirect, wholly owned subsidiary of Vistra Energy that is the issuer of certain series of notes (see Note 14 to the Financial Statements) and borrower under the Vistra Operations Credit Facilities |

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Smaller reporting company o Emerging growth company o

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| [Glossary](#s070091513346DD80919E96912883ABF8) | | [ii](#s070091513346DD80919E96912883ABF8) |

| [PART I.](#s94894b90374d4cea90f67ef2b5139cb8) | | |

| [Signatures](#s5BC4A0232EF7814C97DA96913101BAB6) | | [156](#s5BC4A0232EF7814C97DA96913101BAB6) |

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| CSAPR | | Cross-State Air Pollution Rule issued by the EPA in July 2011 |

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| ERCOT | | Electric Reliability Council of Texas, Inc., the independent system operator and the regional coordinator of various electricity systems within Texas |

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Luminant's generation fleet consists of [removed: 49] power generation [removed: units, all of which are wholly owned and operate within the ERCOT electricity market,] [added: units in six RTOs/ISOs,] with the location, [added: RTO/ISO, technology, primary] fuel [removed: types, dispatch characteristics and total installed nameplate generation] [added: type, net] capacity [added: and ownership interest] for each generation facility shown in the table below:

| Forney | | [removed: Kaufman County] [added: Forney, TX] | | [removed: Natural Gas (CCGT)] [added: ERCOT] | | [removed: Intermediate/Load Following] [added: CCGT] | | [added: Natural Gas | |] 1,912 | | | [removed: 8] [added: 100%] |

| Lamar | | [removed: Lamar County] [added: Paris, TX] | | [removed: Natural Gas (CCGT)] [added: ERCOT] | | [removed: Intermediate/Load Following] [added: CCGT] | | [added: Natural Gas | |] 1,076 | | | [removed: 6] [added: 100%] |

| Odessa | | [removed: Ector County] [added: Odessa, TX] | | [removed: Natural Gas (CCGT)] [added: ERCOT] | | [removed: Intermediate/Load Following] [added: CCGT] | | [added: Natural Gas | |] 1,054 | | | [removed: 6] [added: 100%] |

| Morgan Creek | | [removed: Mitchell County] [added: Colorado City, TX] | | [removed: Natural Gas (CT)] [added: ERCOT] | | [removed: Peaking] [added: CT] | | [added: Natural Gas | |] 390 | | | [removed: 6] [added: 100%] |

| Permian Basin | | [removed: Ward County] [added: Monahans, TX] | | [removed: Natural Gas (CT)] [added: ERCOT] | | [removed: Peaking] [added: CT] | | [added: Natural Gas | |] 325 | | | [removed: 5] [added: 100%] |

| DeCordova | | [removed: Hood County] [added: Granbury, TX] | | [removed: Natural Gas (CT)] [added: ERCOT] | | [removed: Peaking] [added: CT] | | [added: Natural Gas | |] 260 | | | [removed: 4] [added: 100%] |

| Lake Hubbard | | [removed: Dallas County] [added: Dallas, TX] | | [removed: Natural Gas (Steam)] [added: ERCOT] | | [removed: Peaking] [added: ST] | | [added: Natural Gas | |] 921 | | | [removed: 2] [added: 100%] |

| Stryker Creek [removed: (a)] | | [removed: Cherokee County] [added: Rusk, TX] | | [removed: Natural Gas (Steam)] [added: ERCOT] | | [removed: Peaking] [added: ST] | | [added: Natural Gas | |] 685 | | | [removed: 2] [added: 100%] |

| Graham [removed: (a)] | | [removed: Young County] [added: Graham, TX] | | [removed: Natural Gas (Steam)] [added: ERCOT] | | [removed: Peaking] [added: ST] | | [added: Natural Gas | |] 630 | | | [removed: 2] [added: 100%] |

| Trinidad [removed: (a)] | | [removed: Henderson County] [added: Trinidad, TX] | | [removed: Natural Gas (Steam)] [added: ERCOT] | | [removed: Peaking] [added: ST] | | [added: Natural Gas | |] 244 | | | [removed: 1] [added: 100%] |

Our wholesale commodity risk management [removed: business] [added: group] also procures renewable energy credits from wind generation [added: in ERCOT] to support our electricity sales to wholesale and retail customers to satisfy the increasing demand for renewable resources from such customers.

As of December 31, [removed: 2017,] [added: 2018,] Vistra Energy had long-term power purchase agreements to [removed: annually] procure approximately [removed: 400] [added: 480] MW of [added: available] renewable [removed: energy.][added: capacity.]

Nuclear — We operate two nuclear generation units at the Comanche Peak plant [removed: site,] [added: site in ERCOT,] each of which is designed for a capacity of 1,150 MW.

The Comanche Peak facility operated at a capacity factor of [removed: 84%, 101%] [added: 101%, 84%] and [removed: 99%] [added: 101%] in [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] respectively.

We have contracts in place for [removed: all] our [added: 2019 and 2020] nuclear fuel [removed: requirements for 2018.][added: requirements.]

Coal/Lignite — Our [removed: lignite/coal fueled] [added: coal/lignite-fueled] generation fleet [removed: capacity totals 3,850 MW.][added: is comprised of 14 generation facilities totaling 13,183 MW of generation capacity.]

We meet our fuel requirements [removed: for the Martin Lake] [added: at our coal-fueled] generation [removed: facility by blending lignite we mine] [added: facilities in PJM and MISO] with coal purchased from multiple suppliers under contracts of various lengths and transported [removed: from the Powder River Basin] to [removed: our generation plants] [added: the facilities] by [removed: railcar.][added: either railcar or barges.]

Additionally, we have near-term natural gas transportation agreements in place [removed: for all of our sites] to ensure reliable fuel supply.

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| Facility | | Location | | RTO/ISO | | Technology | | Primary Fuel | | Net Capacity (MW) (a) | | | Ownership Interest |

| Ennis | | Ennis, TX | | ERCOT | | CCGT | | Natural Gas | | 366 | | | 100% |

| Hays | | San Marcos, TX | | ERCOT | | CCGT | | Natural Gas | | 1,047 | | | 100% |

| Midlothian | | Midlothian, TX | | ERCOT | | CCGT | | Natural Gas | | 1,596 | | | 100% |

| Wise | | Poolville, TX | | ERCOT | | CCGT | | Natural Gas | | 787 | | | 100% |

| Coleto Creek | | Goliad, TX | | ERCOT | | ST | | Coal | | 650 | | | 100% |

| Martin Lake | | Tatum, TX | | ERCOT | | ST | | Coal | | 2,250 | | | 100% |

| Oak Grove | | Franklin, TX | | ERCOT | | ST | | Coal | | 1,600 | | | 100% |

| Wharton | | Boling, TX | | ERCOT | | CT | | Natural Gas | | 83 | | | 100% |

| Comanche Peak | | Glen Rose, TX | | ERCOT | | Nuclear | | Nuclear | | 2,300 | | | 100% |

| Upton 2 | | Upton County, TX | | ERCOT | | Solar | | Solar | | 180 | | | 100% |

| Upton 2 Battery Storage | | Upton County, TX | | ERCOT | | Battery | | Battery | | 10 | | | 100% |

| Total ERCOT Segment | | | | | | | | | | 18,366 | | | |

| Fayette | | Masontown, PA | | PJM | | CCGT | | Natural Gas | | 726 | | | 100% |

| Hanging Rock | | Ironton, OH | | PJM | | CCGT | | Natural Gas | | 1,430 | | | 100% |

| Hopewell | | Hopewell, VA | | PJM | | CCGT | | Natural Gas | | 370 | | | 100% |

| Kendall | | Minooka, IL | | PJM | | CCGT | | Natural Gas | | 1,288 | | | 100% |

| Liberty | | Eddystone, PA | | PJM | | CCGT | | Natural Gas | | 607 | | | 100% |

| Ontelaunee | | Reading, PA | | PJM | | CCGT | | Natural Gas | | 600 | | | 100% |

| Sayreville | | Sayreville, NJ | | PJM | | CCGT | | Natural Gas | | 170 | | | 50% |

| Washington | | Beverly, OH | | PJM | | CCGT | | Natural Gas | | 711 | | | 100% |

| Kincaid | | Kincaid, IL | | PJM | | ST | | Coal | | 1,108 | | | 100% |

| Miami Fort 7 & 8 | | North Bend, OH | | PJM | | ST | | Coal | | 1,020 | | | 100% |

| Zimmer | | Moscow, OH | | PJM | | ST | | Coal | | 1,300 | | | 100% |

| Calumet | | Chicago, IL | | PJM | | CT | | Natural Gas | | 380 | | | 100% |

| Dicks Creek | | Monroe, OH | | PJM | | CT | | Natural Gas | | 155 | | | 100% |

| Miami Fort (CT) | | North Bend, OH | | PJM | | CT | | Oil | | 77 | | | 100% |

| Pleasants | | Saint Marys, WV | | PJM | | CT | | Natural Gas | | 388 | | | 100% |

| Richland | | Defiance, OH | | PJM | | CT | | Natural Gas | | 423 | | | 100% |

| Stryker | | Stryker, OH | | PJM | | CT | | Oil | | 16 | | | 100% |

| Total PJM Segment | | | | | | | | | | 10,769 | | | |

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| Facility | | Location | | RTO/ISO | | Technology | | Primary Fuel | | Net Capacity (MW) (a) | | | Ownership Interest |

| Bellingham | | Bellingham, MA | | ISO-NE | | CCGT | | Natural Gas | | 566 | | | 100% |

| Bellingham NEA | | Bellingham, MA | | ISO-NE | | CCGT | | Natural Gas | | 157 | | | 50% |

The following description excludes three power plants (Monticello, Big Brown and Sandow) with a total installed nameplate generation capacity of approximately 4,167 MW that were retired in the first quarter of 2018.

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| Name | | Location (all in the state of Texas) | | Fuel Type | | Dispatch Type | | Installed Nameplate Generation Capacity (MW) | | | Number of Units |

| Comanche Peak | | Somervell County | | Nuclear | | Baseload | | 2,300 | | | 2 |

| Oak Grove | | Robertson County | | Lignite | | Baseload | | 1,600 | | | 2 |

| Martin Lake | | Rusk County | | Lignite/Coal | | Intermediate/Load Following | | 2,250 | | | 3 |

| Total | | | | | | | | 13,647 | | | 49 |

| (a) | We are currently conducting a competitive sales process for our Stryker Creek, Graham and Trinidad units (see Note 4 to the Financial Statements). |

Over the last three years the refueling outage period per unit has ranged from 30 to 40 days.

We have contracts in place for the majority of our nuclear fuel requirements through 2019.

The nuclear industry has developed ways to store used nuclear fuel on site at nuclear generation facilities, primarily through the use of dry cask storage, since there are no facilities for reprocessing or disposal of used nuclear fuel currently in operation in the U.S. Luminant stores its used nuclear fuel on-site in storage pools or dry cask storage facilities and believes its on-site used nuclear fuel storage capability is sufficient for the foreseeable future.

We satisfy all of our fuel requirements at the Oak Grove generation facility with lignite that we mine.

In 2017, approximately 53% of the fuel used at the Martin Lake generation facility was supplied from surface minable lignite reserves located adjacent to the facility and dedicated to it.

Natural Gas — Our natural gas-fueled generation fleet capacity totals 7,497 MW.

In April 2016, we acquired La Frontera Holdings, LLC the indirect owner of two CCGT natural gas fueled generation facilities located in ERCOT.

The facility in Forney, Texas (8 units) has a capacity of 1,912 MW and the facility in Paris, Texas (6 units) has a capacity of 1,076 MW.

In August 2017, we acquired a facility in Odessa, Texas (6 units) with a capacity of 1,054 MW.

The acquisitions diversified our fuel mix and increased the dispatch flexibility in our fleet.

We also operate combustion turbine (CT) facilities at Morgan Creek (6 units), Permian Basin (5 units), DeCordova (4 units) plant sites and steam facilities at Lake Hubbard (2 units), Stryker Creek (2 units), Graham (2 units) and Trinidad (1 unit) plant sites.

The CT and steam plants are peaking units which provide us the ability to meet increased demand from our retail customers during high market price intervals with available generation capacity and provide other wholesale opportunities.

Vistra Energy currently owns and [removed: operates] [added: operates, or is in the process of reclaiming,] 12 surface lignite coal mines in Texas to provide fuel for its electricity generation facilities.

Disclosure of MSHA citations, orders and proposed assessments are provided in Exhibit [removed: 95(a)] [added: 95.1] to this Annual Report on Form 10-K.

Vistra Energy also owns or leases, and is in the process of reclaiming, two waste-to-energy surface facilities in Pennsylvania.

As of February [removed: 21, 2018,] [added: 25, 2019,] there were [removed: 428,447,631] [added: 485,894,408] shares of common stock issued and outstanding and [removed: 123] [added: 630] shareholders of record.

[removed: Other than] [added: Vistra Energy paid] a one-time dividend in the aggregate amount of approximately $1 billion ($2.32 per share of common stock) to holders of record of our common stock on December 19, [removed: 2016, Vistra Energy has never paid a dividend on our common stock, and the Board has no present intention to declare or pay dividends in the future.][added: 2016.]

Risk Factors and Note [removed: 14] [added: 16] to the Financial Statements

The performance graph below compares Vistra Energy's cumulative total return on common stock for the period from May 10, 2017 through December 31, [removed: 2017] [added: 2018] with the cumulative total returns of the S&P 500 Stock Index (S&P 500) and the S&P Utility Index (S&P Utilities).

[removed: ][added: ]

On April 9, 2018 (Merger Date), pursuant to the Merger Agreement, 94,409,573 shares of Vistra Energy common stock were issued to the former Dynegy stockholders, as well as converting stock options, equity-based awards, tangible equity units and warrants.

In November 2018, we announced that the Board had adopted a dividend program pursuant to which we expect to initiate an annual dividend of approximately $0.50 per share, payable quarterly, beginning in the first quarter of 2019.

Each dividend under the program will be subject to declaration by the Board and, thus, may be subject to numerous factors in existence at the time of any such declaration including, but not limited to, prevailing market conditions, our results of operations, financial condition and liquidity and Delaware law.

Share Repurchase Program

The following table provides information about our repurchase of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the quarter ended December 31, 2018.

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| | | Total Number of Shares Purchased | | | Average Price Paid per Share | | | | Total Number of Shares Purchased as Part of a Publicly Announced Program | | | Maximum Dollar Amount of Shares that may yet be Purchased under the Program (in millions) | | |

| October 1 - October 31, 2018 | | 3,150,820 | | | $ | 24.38 | | | 3,150,820 | | | $ | — | |

| November 1 - November 30, 2018 | | 6,238,950 | | | $ | 22.99 | | | 6,238,950 | | | $ | 1,107 | |

| December 1 - December 31, 2018 | | 5,834,141 | | | $ | 22.99 | | | 5,834,141 | | | $ | 972 | |

| For the quarter ended December 31, 2018 | | 15,223,911 | | | $ | 23.28 | | | 15,223,911 | | | $ | 972 | |

In June 2018, we announced that the Board had authorized a share repurchase program under which up to $500 million of our outstanding common stock could be repurchased.

This share repurchase program was effective as of June 13, 2018, and the program was completed on October 19, 2018.

In November 2018, we announced that the Board had authorized an incremental share repurchase program under which up to $1.25 billion of our outstanding stock may be purchased.

We intend to implement the program opportunistically from time to time over approximately the next 12 months.

Shares of the Company's stock will be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, pursuant to plans complying with Rule 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended, or by other means in accordance with federal securities laws.

The actual timing, number and value of shares repurchased under the share repurchase program will be determined at our discretion and will depend on a number of factors, including the market price of our stock, general market and economic conditions, applicable legal requirements and compliance with the terms of our debt agreements.

The following table sets forth the per share high and low closing prices and per share cash dividends declared per common share for the periods presented.

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| | 2017 | | | | | | | | | | | | | | | | 2016 | | |

| | Fourth Quarter | | | | Third Quarter | | | | Second Quarter | | | | First Quarter | | | | Fourth Quarter | | |

| High price | $ | 20.49 | | | $ | 18.70 | | | $ | 16.86 | | | $ | 17.95 | | | $ | 16.40 | |

| Low price | $ | 17.24 | | | $ | 15.88 | | | $ | 14.59 | | | $ | 15.36 | | | $ | 13.60 | |

| Dividends per common share | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2.32 | |

| VISTRA ENERGY CORP. SELECTED CONSOLIDATED FINANCIAL INFORMATION (Millions of Dollars, Except Per Share Amounts and Ratios | | | | | | | | | | | | | | | | | | | | | | | | [removed: |]

| | Successor | | | | | | | | | [removed: Predecessor] | | | [removed: |] [added: Predecessor] | | | | | | | | | | |

| | Year Ended December 31, [added: 2018 (a) | | | Year Ended December 31,] 2017 | | | | Period from October 3, 2016 through December 31, 2016 | | | | | Period from January 1, 2016 through October 2, 2016 | | | | Year Ended December 31, | | | | | | | [removed: | | | |]

| | | | | | 2015 | | | | 2014 | | | | [removed: 2013] | | | | | | | | | | | [removed: |]

| Operating revenues | $ | [added: 9,144 | | $ |] 5,430 | | | $ | 1,191 | | | | $ | 3,973 | | | $ | 5,370 | | | $ | 5,978 | | [removed: | $ | 5,899 | |]

| Impairment of goodwill | $ | — | | [removed: |] $ | — | | | [removed: |] $ | — | | | [added: |] $ | [removed: (2,200] [added: —] | [removed: )] | | $ | [removed: (1,600] [added: (2,200] | ) | | $ | [removed: (1,000] [added: (1,600] | ) |

| Impairment of long-lived assets | $ | [added: — | | $ |] (25 | ) | | $ | — | | | | $ | — | | | $ | (2,541 | ) | | $ | (4,670 | ) | [removed: | $ | (140 | ) |]

| Operating income (loss) | $ | [added: 491 | | $ |] 198 | | | $ | (161 | ) | | | $ | 568 | | | $ | (4,091 | ) | | $ | (6,015 | ) | [removed: | $ | (1,113 | ) |]

| Net income (loss) [removed: (a)] [added: attributable to Vistra Energy/the Predecessor (b)] | $ | [added: (54 | ) | $ |] (254 | ) | | $ | (163 | ) | | | $ | 22,851 | | | $ | (4,677 | ) | | $ | (6,229 | ) | [removed: | $ | (2,197 | ) |]

| Cash provided by (used in) operating activities | $ | [added: 1,471 | | $ |] 1,386 | | | $ | 81 | | | | $ | (238 | ) | | $ | 237 | | | $ | 444 | | [removed: | $ | (270 | ) |]

| Net loss per weighted average share of common stock outstanding — basic | $ | [removed: (0.59] [added: (0.11] | ) | [removed: |] $ | [removed: (0.38] [added: (0.59] | ) | | [added: $] | [added: (0.38] | [added: )] | | | | | | | | | | | | | |

| Net loss per weighted average share of common stock outstanding — diluted | $ | [removed: (0.59] [added: (0.11] | ) | [removed: |] $ | [removed: (0.38] [added: (0.59] | ) | | [added: $] | [added: (0.38] | [added: )] | | | | | | | | | | | | | |

| Dividend declared per share of common stock | $ | — | | [removed: |] $ | [removed: 2.32] [added: —] | | | [added: $] | [added: 2.32] | | | | | | | | | | | | | | |

| | Successor | | | | | | | | | [removed: Predecessor] | | | | [added: Predecessor] | | | | | | |

| | At December 31, | | | | | | | | | [removed: At December 31,] | | | | [added: At December 31,] | | | | | | |

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [added: 2016] | [removed: 2015] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Total assets [removed: (b)(c)] [added: (c)(d)] | $ | [removed: 14,600] [added: 26,024] | | | $ | [removed: 15,167 |] [added: 14,600] | | | $ | [removed: 15,658] [added: 15,167] | | | [added: |] $ | [removed: 21,343] [added: 15,658] | | | $ | [removed: 28,822] [added: 21,343] | |

| Property, plant and equipment — net [removed: (b)(c)] [added: (c)(d)] | $ | [removed: 4,820] [added: 14,612] | | | $ | [removed: 4,443 |] [added: 4,820] | | | $ | [removed: 9,349] [added: 4,443] | | | [added: |] $ | [removed: 12,288] [added: 9,349] | | | $ | [removed: 17,649] [added: 12,288] | |

| Goodwill and intangible assets [added: (e)] | $ | [removed: 4,437] [added: 4,561] | | | $ | [removed: 5,112 |] [added: 4,437] | | | $ | [removed: 1,331] [added: 5,112] | | | [added: |] $ | [removed: 3,688] [added: 1,331] | | | $ | [removed: 5,669] [added: 3,688] | |

| Long-term debt including current maturities [removed: (d)] [added: (e)] | $ | [removed: 4,423] [added: 11,065] | | | $ | [removed: 4,623 |] [added: 4,423] | | | $ | [removed: 19] [added: 4,623] | | | [added: |] $ | [removed: 73] [added: 19] | | | $ | [removed: 31,758] [added: 73] | |

| Borrowings under debtor-in-possession credit facility | $ | — | | | $ | — | | | [removed: |] $ | [removed: 1,425] [added: —] | | | [added: |] $ | 1,425 | | | $ | [removed: —] [added: 1,425] | |

| Pre-Petition notes, loans and other debt reported as liabilities subject to compromise (e) | $ | — | | | $ | — | | | [removed: |] $ | [removed: 31,668] [added: —] | | | [added: |] $ | [removed: 31,856] [added: 31,668] | | | $ | [removed: —] [added: 31,856] | |

| Total [added: stockholders'] equity/membership interests | $ | [removed: 6,342] [added: 7,863] | | | $ | [removed: 6,597 |] [added: 6,342] | | | $ | [removed: (22,884] [added: 6,597] | [removed: )] | | [added: |] $ | [removed: (18,209] [added: (22,884] | ) | | $ | [removed: (11,982] [added: (18,209] | ) |

| [removed: (a)] [added: (b)] | For the Predecessor period from January 1, 2016 through October 2, 2016, net income includes net gains totaling $22.121 billion related to bankruptcy-related reorganization items including gains on extinguishing claims pursuant to the Plan of Reorganization (see Notes 5 and [removed: 6] [added: 7] to the Financial Statements). |

| [removed: (c)] [added: (d)] | Reflects the impacts of impairment charges related to long-lived assets of $2.541 billion and $4.670 billion in the years ended December 31, 2015 and 2014, respectively (see Note 4 to the Financial Statements). |

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| (a) | For the year ended December 31, 2018, reflects the results of operations acquired in the Merger. |

| (c) | At December 31, 2018, includes assets acquired in the Merger. |

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| --- | --- |

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| --- | --- |

| (b) | At December 31, 2017 and 2016, includes the Lamar and Forney natural gas generation facilities purchased in April 2016, and at December 31, 2017 includes the Odessa-Ector natural gas generation facility purchased in August 2017 (see Note 3 to the Financial Statements). |

| (d) | As of December 31, 2013, includes borrowings under Predecessor's credit facilities of $2.054 billion. |

Quarterly Information (Unaudited)

Results of operations by quarter are summarized below.

In our opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair statement of such amounts have been made.

Quarterly results are not necessarily indicative of a full year's operations because of seasonal and other factors.

All amounts are in millions of dollars, except per share amounts, and may not add to full year amounts due to rounding.

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| | Successor | | | | | | | | | | | | | | |

| | Quarter Ended | | | | | | | | | | | | | | |

| | March 31 | | | | June 30 | | | | September 30 | | | | December 31 (a) | | |

| 2017: | | | | | | | | | | | | | | | |

| Operating revenues | $ | 1,357 | | | $ | 1,296 | | | $ | 1,833 | | | $ | 944 | |

| Operating income (loss) | $ | 155 | | | $ | 53 | | | $ | 452 | | | $ | (462 | ) |

| Net income (loss) | $ | 78 | | | $ | (26 | ) | | $ | 273 | | | $ | (579 | ) |

| Net income (loss) per weighted average share of common stock outstanding — basic | $ | 0.18 | | | $ | (0.06 | ) | | $ | 0.64 | | | $ | (1.35 | ) |

| Net income (loss) per weighted average share of common stock outstanding — diluted | $ | 0.18 | | | $ | (0.06 | ) | | $ | 0.64 | | | $ | (1.35 | ) |

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| | Predecessor | | | | | | | | | | | | | Successor | | |

| | Quarter Ended | | | | | | | | Period from July 1 through October 2 (b) | | | | | Period from October 3 through December 31 | | |

| | March 31 | | | | June 30 | | | | | | | | | | | |

| 2016: | | | | | | | | | | | | | | | | |

| Operating revenues | $ | 1,049 | | | $ | 1,233 | | | $ | 1,690 | | | | $ | 1,191 | |

| Operating income (loss) | $ | 39 | | | $ | (112 | ) | | $ | 640 | | | | $ | (161 | ) |

| Net income (loss) | $ | (343 | ) | | $ | (499 | ) | | $ | 23,693 | | | | $ | (163 | ) |

| Net loss per weighted average share of common stock outstanding — basic | | | | | | | | | | | | | | $ | (0.38 | ) |

| Net loss per weighted average share of common stock outstanding — diluted | | | | | | | | | | | | | | $ | (0.38 | ) |

____________

| (a) | For the Successor quarter ended December 31, 2017, operating loss includes noncash charges of $183 million related to the generation facilities retirement announcements. Net loss reflects the retirements mentioned above as well as a $451 million reduction of deferred tax assets related to the decrease in the corporate tax rate due to the TCJA (see Note 8 to the Financial Statements), partially offset by $117 million of impacts of the TRA. |

| (b) | For the Predecessor period from July 1, 2016 through October 2, 2016, net income includes net gains totaling $22.239 billion related to bankruptcy-related reorganization items including gains on extinguishing claims pursuant to the Plan of Reorganization (see Notes 5 and 6 to the Financial Statements). |

We have audited the accompanying consolidated balance sheets of Vistra Energy Corp. and its subsidiaries (the "Company") as of December 31, [removed: 2017] [added: 2018] and [removed: 2016 (Successor Company balance sheets),] [added: 2017,] and the related statements of consolidated income (loss), consolidated comprehensive income (loss), consolidated cash flows, and consolidated equity, for the [removed: year] [added: years] ended December 31, [removed: 2017] [added: 2018] and [added: 2017,] for the period October 3, 2016 through December 31, 2016 (Successor Company [removed: operations),] [added: operations) and] the period January 1, 2016 through October 2, 2016 [removed: and the year ended December 31, 2015] (Predecessor Company operations), [removed: the related notes,] and the [removed: schedule listed in the Index at Item 15(b)] [added: related notes] (collectively referred to as the "financial statements").