Before markets opened today, Dynegy Inc. (DYN) reported a second quarter net loss of 25 cents per share in-line with results for the second quarter of 2009. The Zacks Consensus Estimate was a loss of 41 cents per share for the quarter.
Operational Results
Dynegy on the revenue front witnessed a slide year over year to $239 million from $450 million in the year-ago period, compared with Zacks Consensus Estimate of $494 million. Operating loss was reduced to $229 million compared with an operating loss of $471 million in the year-ago quarter. The net loss in the second quarter of 2010 included $262 million of mark-to-market losses associated with forward power sales. The net loss in the second quarter 2009 was primarily driven by asset impairment charges of $405 million and mark-to-market losses of $103 million associated with forward power sales. The company reported a second-quarter net loss of $191 million compared with a net loss of $345 million for the second quarter 2009.
On the revenue front, Dynegy witnessed a slide to $239 million from $450 million in the year-ago period, compared with the Zacks Consensus Estimate of $494 million. In the reported quarter, operating loss reduced to $229 million from an operating loss of $471 million in the year-ago quarter. Similarly, net loss in the reported quarter reduced to $191 million compared with the net loss of $345 million in the year-ago quarter.
The company digested mark-to-market losses associated with forward power sales of $262 million in the reported quarter. In the year-ago quarter, performance was also affected by asset impairment charges of $405 million and mark-to-market losses associated with forward power sales of $103 million.
Segmental Results
Midwest: Adjusted earnings decreased 33% to $120 million and production volumes decreased 6%. Earnings in the reported quarter benefited from higher power prices and spark spreads. This was more than offset by reduced volumes related to unplanned outages. Dynegy’s coal fleet production volumes decreased 4% year over year primarily due to unplanned outages. Combined-cycle production volumes decreased 10%, also due to unplanned outages.
West: In the reported quarter, adjusted earnings decreased 14% to $37 million and production volumes decreased 62%. Tolling revenues declined due to assets sold in the fourth quarter of 2009. The decrease in production volumes was due to the sale of assets in the fourth quarter of 2009, compressed spark spreads and planned and unplanned outages.
Northeast: Adjusted earnings increased sharply by 185% to $13 million while production volumes dipped 26%. Earnings benefited from higher power prices and spark spreads. Also contributing to the upside in earnings were lower operating and maintenance costs and a year-over-year benefit associated with coal costs due to a coal inventory write-down in 2009. These benefits were partially offset by the absence of energy and capacity revenues from an asset sold in the fourth quarter of 2009.
Financial Condition
At the end of the reported quarter, Dynegy had a total liquidity of $2 billion. This consisted of $500 million in cash on hand, short-term investments and marketable securities and $1.5 billion in unused funds under the company’s credit facility. Dynegy’s net debt and other obligations totaled $4.1 billion at the end of the reported quarter.
Outlook
Dynegy expects GAAP net loss to be in the range of $205 million to $165 million in fiscal 2010. Earlier, the company had expected GAAP net loss in the range of $135 million to $60 million.
We retain a short-term Zacks #3 Rank for the stock, which translates into a Hold rating of the stock.
