The default configuration ( is built to work with the Principled BSDF shader.
In the material properties you will find options for the VTF format and VMT properties. The supported VTF formats are: bgr888, abgr888, dxt1 & dxt5.

NOTE: Normal maps must be in OpenGL (correct[1]) format.

Live Recompile: You can recompile the material from the properties panel, and to update it in-game you can run in the console:
exec convexer
These configuration files are generated for you.

   [1]correct: OpenGL's coordinate space follows real world physics observations.

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