Vistra Corp. has struck a deal in order to majorly expand its U.S. generation footprint by way of agreeing to acquire the portfolio from Cogentrix Energy in a transaction that is valued at almost $4 billion, which also includes an assumed debt along with tax benefits.
The acquisition goes on to bring almost 5,500 megawatts of modern natural gas-fired capacity within Vistra’s fleet, thereby strengthening its position across three of the most strategically important power markets of North America – PJM, ISO New England, and ERCOT. The assets are getting acquired from Cogentrix Energy, which is a portfolio company that is indirectly owned by the funds that are managed by Quantum Capital Group.
With the expansion of its U.S. generation footprint, Vistra remarked that the deal values the portfolio at around $730 per kilowatt of capacity, which is net of the expected tax benefits, therefore implying an enterprise multiple of almost 7.25 times expected 2027 adjusted EBITDA.
The company anticipates the transaction to be accretive to the ongoing operations’ free cash flow per share beginning in 2027, having a mid-single-digit accretion at the start and a high single-digit accretion on average through to 2029.
The portfolio has ten gas-fired facilities, which include seven combined-cycle plants, a couple of combustion turbine facilities, and also one cogeneration plant. Many of the assets are comparatively new, with some entering the service in 2016 and also featuring heat rates that are below 7,000 Btu per kilowatt-hour. Put together, the fleet has an average heat rate of almost 7,800 Btu/kWh, highlighting its efficiency compared with much of the present U.S. gas generation base.
Interestingly, geographically, this deal deepens the exposure of Vistra across constrained and fast-growing power markets. In PJM, the company is going ahead and adding over 3,100 MW throughout the states of Pennsylvania, New Jersey, and Maryland. In ISO New England, the transaction is adding around 1,750 MW of capacity at a time wherein the region continues to face certain dependability concerns that are tied to fuel supply as well as aging infrastructure. The acquisition also goes on to include a 583 MW cogeneration facility based out of ERCOT, thereby reinforcing the already substantial Texas footprint of Vistra.
According to Vistra, it will pay almost $2.3 billion in cash and also issue around $0.9 billion in stock to Quantum Capital Group, while at the same time assuming almost $1.5 billion in the existing Cogentrix debt. The net purchase price goes on to reflect almost $700 million in terms of anticipated tax benefits that are generated through the transaction.
Management went on to frame the deal as a continuation of the disciplined capital allocation strategy by Vistra, emphasizing that the acquisition syncs with its long-term leverage target of below 3x and does not adjust any plans to return the capital to shareholders by way of dividends and also share repurchases. The company has gone on to reiterate its intention to pay almost $300 million per year in dividends and also repurchase a minimum of $1 billion of shares every year.
It is well to be noted that this transaction comes at a time when rising electricity demand is driven by data centers, electrification, and population growth, especially across regions like Texas and the U.S. Northeast.
Natural gas generation has increasingly been viewed by utilities as well as power producers as a very critical complement to the intermittent renewable capacity, offering dispatchable power along with grid stability.
Over the last year, Vistra has been pretty actively repositioning its portfolio in order to capitalize on such trends, widening its gas as well as nuclear base while simultaneously maintaining the exposure to competitive wholesale markets. Once the Cogentrix assets get integrated, the total generation capacity from Vistra is anticipated to approach 50,000 MW across the country.
It goes without saying that the deal remains subject to certain regulatory approvals, which include the likes of clearance from the Federal Energy Regulatory Commission as well as antitrust review under the Hart-Scott-Rodino Act, along with certain other state-level approvals. Vistra anticipates the transaction to close in H2 of 2026.
