VSTVistra Corp.

In May 2023, the EPA released a proposal regulating power plant GHG emissions, while also proposing to repeal the Affordable Clean Energy (ACE) rule that had been finalized by the EPA in July 2019. In May 2024, the EPA published a final GHG rule that repealed the ACE rule and sets limits for (a) new natural gas-fired combustion turbines and (b) existing coal-, oil- and natural gas-fired steam generation units. The standards are based on technologies such as carbon capture and sequestration/storage (CCS) and natural gas co-firing. Starting in 2030, the rule would begin to require more CO2 emissions control at certain existing fossil fuel-fired steam generating units, with more stringent standards beginning in 2032 for coal-fired units that plan to operate for a longer period of time. For new natural gas combustion turbines that operate more frequently, the rule would phase in increasingly stringent CO2 requirements over time. Under the rule, states would be required to submit plans to the EPA within 24 months of the rule's publication in the Federal Register that provide for the establishment, implementation, and enforcement of standards of performance for existing sources. These state plans must generally establish standards that are at least as stringent as the EPA's emission guidelines. Under the rule, existing coal-fired steam generation units that will operate on or after January 1, 2039 must start complying with their standards of performance (based on application of CCS with 90 percent capture) by January 1, 2032. Units that are permanently retiring before January 1, 2039, but after December 31, 2031, must start complying with their standards of performance (based on co-firing with 40 percent natural gas on a heat input basis) beginning on January 1, 2030. Units permanently retiring by January 1, 2032 are exempt from the rule. Given our previously announced coal unit retirement commitments, our Martin Lake and Oak Grove plants are the only coal units that are subject to this rule. Our Graham, Lake Hubbard, Stryker Creek and Trinidad oil/natural gas facilities are also regulated under this rule. None of our existing large or small combustion turbines are subject to this rule. The rule also regulates any new gas units. For new combustion turbine units, the rule establishes three different categories depending on how intensively those units are operated, with immediate compliance obligations for all three categories but more stringent standards beginning in 2032 only for the category of units operating the most intensively. Following finalization of the rule in May 2024, 17 petitions for review from various states, industry groups, and companies were filed in the D.C. Circuit Court along with multiple motions to stay the rule. We are participating in an industry coalition challenging the rule. In July 2024, the D.C. Circuit Court denied the motions to stay and a number of parties subsequently filed an emergency request with the U.S. Supreme Court to stay the rule which was denied in October 2024. Oral argument on the merits of the legal challenges to the rule was held in December 2024 before the D.C. Circuit Court. The D.C. Circuit Court has granted the EPA's motion for an abeyance of the case and status reports are due at 90-day intervals. In June 2025, the EPA published a proposed repeal of GHG emission standards for fossil fuel-fired electric generation units, which could moot this case if the proposal is finalized and would result in no further federal regulation of GHGs at electric generating units. Additionally, in February 2025, 2026, the EPA issued a rule that repeals the agency's prior 2009 endangerment finding for all GHG emission standards for light-, medium-, and heavy-duty vehicles. The rescission of the endangerment finding does not impact power plants, however, the EPA has also stated that, for other rules that have relied on the endangerment finding, it intends to initiate other rulemakings to address any overlapping issues. Several environmental groups have filed a challenge to the EPA's repeal of the endangerment finding in the D.C. Circuit granted the unopposed motion filed by the Department of Justice on behalf of the EPA, holding the litigation in abeyance for a period of 60 days while the new leadership at the EPA evaluates the rule and determines how it wishes to proceed. Court.

Nuclear In August 2022, the U.S. enacted the IRA, which, among other things, implements substantial new and modified energy tax credits, including recognizing the value of existing carbon-free nuclear power by providing for a nuclear PTC, a solar PTC, new technology-neutral ITCs and PTCs that apply to various different clean energy technologies, and a first-time stand-alone battery storage ITC. The IRA also implements a 15% corporate alternative minimum tax (CAMT) on book income of certain large corporations, and a 1% excise tax on net stock repurchases. The section 45U nuclear PTC revenues is available to existing nuclear facilities from 2024 through 2032 and provides a federal tax credit of up to $15 per MWh, subject to phase out when annual gross receipts are accounted between $25.00 per MWh and 43.75 per MWh and $26.00 per MWh and $44.75 per MWh for 2024 and 2025, respectively (each subject to annual inflation adjustments). The Company accounts for transferable ITCs and PTCs we expect to receive by analogy to the grant model within International ASC 832, Government Grants as amended by Accounting Standards 20, Accounting for Government Grants and Disclosures of Government Assistance. Nuclear Update 2025-10 (ASC 832). As discussed in Note 5, we recognized transferable nuclear PTC revenues are based on annual gross receipts generated from qualifying nuclear production of $220 million and $545 million in the calendar year. years ended December 31, 2025 and 2024, respectively. U.S. Treasury regulations are expected to further provide define the scope of the legislation in many important respects, including interpretive guidance on the definition of gross receipts over for the next year. Given the lack of guidance to date, we recognized 2024 nuclear PTC revenues based on our best estimate and interpretation of gross receipts which includes settled spot energy revenues and capacity revenues at each nuclear unit, and excludes any hedges. PTC. Any interpretive guidance on the definition of gross receipts which that differs from the interpretation used in our estimate estimates could result in a material change to PTC revenues attributable to recorded in 2024 and 2025 and would be reflected as a change in estimate in the period in which the guidance is received.

There is continuing emphasis nationally and internationally on global climate change and how GHG emissions, such as CO2, contribute to global climate change. Over the last several years, the U.S. Congress has considered and debated several proposals intended to address climate change using different approaches, including a cap on carbon emissions with emitters allowed to trade unused emission allowances (cap-and-trade), a tax on carbon or GHG emissions, incentives for the development of low-carbon technology and federal renewable portfolio standards. In July 2019, the EPA finalized the ACE rule that developed emissions guidelines that states must use when developing plans to regulate GHG emissions from existing coal-fueled electric generation units. In January 2021, the ACE rule was vacated by the D.C. Circuit Court and remanded to the EPA for further consideration in accordance with the court's ruling. The D.C. Circuit Court's decision was appealed to the U.S. Supreme Court. In June 2022, the U.S. Supreme Court issued its decision in West Virginia v. EPA, in which it held that the EPA does not have the authority to apply generation shifting in the regulation of GHG emissions. The judgment reversed the D.C. Circuit Court's decision and remanded the case for further proceedings consistent with the U.S. Supreme Court's opinion. In May 2024, the EPA issued a more stringent and more encompassing rule to replace the ACE rule. The In June 2025, the EPA proposed to repeal the GHG rule issued in May 2024 is currently being challenged 2024, and the rule remains subject to ongoing legal challenges in the D.C. Circuit after the U.S. Supreme Court declined to issue a stay of that rule. We expect rule, but that litigation is currently abated. As a result, the Trump Administration scope, timing and ultimate requirements of any federal regulation of GHG emissions from existing power generation facilities remains uncertain. Additionally, in February 2026, the EPA issued a rule that repeals the agency's prior 2009 endangerment finding for all GHG emission standards for light-, medium-, and heavy-duty vehicles. The rescission of the endangerment finding does not impact power plants, however, the EPA has also stated that, for other rules that have relied on the endangerment finding, it intends to review the May 2024 GHG rule. Additionally, pursuant initiate other rulemakings to address any overlapping issues. Several environmental groups have filed a challenge to the Order, the Administrator EPA's repeal of the EPA, endangerment finding in collaboration with the heads of any other relevant agencies, will submit joint recommendations to the Director of the Office of Management D.C. Circuit Court. Regulatory uncertainty resulting from changes in administration priorities, judicial review and Budget on the legality enforcement approaches may complicate long-term capital planning, asset retirement decisions and continuing applicability of the December 2009 Endangerment Finding. investments in new technologies, even if regulatory requirements are delayed, modified or repealed. In addition, a number of federal court cases have been filed in recent years asserting damage claims related to GHG emissions, and the results in those proceedings could establish adverse precedent that might apply to companies (including us) that produce GHG emissions. We could be materially and adversely affected if federal and/or state legislation or regulations that address global climate change require efforts that exceed or are more expensive than our currently planned initiatives initiatives, or if regulatory uncertainty itself results in increased costs or inefficiencies, or if we are subject to lawsuits for alleged damage to persons or property resulting from GHG emissions.

In December 2023, 2025, the FASB Financial Accounting Standards Board (FASB) issued ASU No. 2023-09 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities (ASU 2023-09), Income Taxes (Topic 740): Improvements to Income Tax Disclosures to enhance the transparency 2025-10), which provides guidance on recognition, measurement, and decision usefulness presentation of income tax disclosures. government grants. ASU 2023-09 2025-10 is effective for annual periods beginning after December 15, 2024 on a prospective basis. 2028, including interim periods within those fiscal years. Early adoption is permitted. As The Company adopted the amendments apply to income tax disclosures only, the Company does in this ASU for its fiscal year ended December 31, 2025. The adoption did not expect adoption to have a material impact on the consolidated financial statements. statements as we previously accounted for ITCs and PTCs by analogy to International Accounting Standards 20, Accounting for Government Grants and Disclosures of Government Assistance, which the FASB largely leveraged in developing the ASU.