Dynegy Beats Estimates – Analyst Blog

Dynegy Inc. (DYN) posted its first quarter 2010, adjusted earnings of 24 cents per share, far exceeding the Zacks Consensus Estimate of a 10-cent loss and last year’s loss of a cent per share. On a reported basis the company clocked earnings of 24 cents per share compared with a loss of 40 cents per share. The surge in earnings was fueled by higher operating margins.

 

 

Dynegy on the revenue front witnessed a 5.1% slide year over year to $858 million. Operating income rose to $331 million compared with an operating loss of $146 million in the year-ago quarter. Adjusted earnings were $152 million in the reported quarter compared with $199 million in the year-ago quarter. Net income was $145 million compared with a net loss of $335 million in the year-ago quarter.

 

The variance in year over year performance was due to impairment charges incurred by the company in the year-ago quarter. This was partially offset by lower mark-to-market gains clocked in the reported quarter.

 

 

Midwest – In the reported quarter adjusted earnings decreased 24% and production volumes decreased 2%. Energy margin from coal-fired facilities was primarily impacted by the reduced contribution from hedging activities. Energy margin from combined-cycle facilities was primarily impacted by compressed spark spreads.

 

These decreases were partially offset by the receipt of a termination payment as well as higher capacity revenues. The company’s coal fleet production volumes increased 10%, primarily due to improved unit availability from fewer outages. This was offset by a 49% decrease in combined-cycle production volumes that primarily resulted from compressed spark spreads.

 

West – Adjusted earnings increased 77% and production volumes decreased 4%. Energy margin was primarily impacted by reduced contribution from hedging activities. This decrease was offset by a net benefit from selling options. In addition, adjusted earnings benefited from reduced operating expenses associated with two combined-cycle facilities that were sold in the fourth quarter of 2009.

 

Northeast – Adjusted earnings decreased 55% and production volumes decreased 52%. Energy margin was primarily impacted by lower difference between the price of electricity and cost of fuel year over year. Adjusted earnings were also impacted by lower emission sales. These decreases were partially offset by a net benefit resulting from the sale of options.

 

 

Dynegy at the end of the reported quarter had a total liquidity of $2.3 billion. This consisted of $802 million in cash on hand and marketable securities and $1.5 billion in unused availability under the company’s credit facility. Dynegy’s net debt and other obligations totaled $3.8 billion at the end of the reported quarter.

 

 

Dynegy reaffirmed its fiscal 2010 guidance estimates. The company expects to earn adjusted earnings in the range of $425 million – $550 million. The Zacks Consensus Estimates currently stand at a loss per share of 26 cents and 18 cents for fiscal years 2010 and 2011, respectively.