Dynegy Inc. (DYN) reported a fourth quarter adjusted loss of 48 cents per share in line with the Zacks Consensus Estimate. Results also came below the year-ago quarterly earnings of 5 cents per share.
Fiscal 2010 adjusted earnings came in at 29 cents per share in line with the Zacks Consensus Estimate. However, fiscal 2010 earnings came way below fiscal 2009 adjusted earnings of $1.15 per share.
Operational Results
In the reported quarter, Dynegy on the revenue front witnessed a rise year over year to $451 million from $441 million in the year-ago period, compared with the Zacks Consensus Estimate of $370 million. Adjusted quarterly earnings were $103 million, compared with $105 million for the fourth quarter 2009. The company also reported a net loss of $164 million for the fourth quarter 2010, compared to a net loss of $355 million for the fourth quarter 2009.
Dynegy’s fiscal 2010 revenues fell to $2.3 billion versus $2.5 billion in fiscal 2009. However, revenues for fiscal 2010 comfortably surpassed the Zacks Consensus Estimate of $2.1 billion. Adjusted earnings for 2010 were $539 million, compared to $803 million for 2009. The company also reported a net loss of $234 million for 2010, compared to a net loss of $1.2 billion for 2009.
Fiscal 2010 Segment Results
Midwest: Adjusted earnings decreased 35% to $418 million and production volumes increased 6%. Earnings in the reported quarter were affected by unfavorable hedging activity. This was partially offset by a reduced premium expense due to the purchase of fewer options. Production volumes in 2010 benefited from increased prices and spark spreads. During 2010, the company’s coal fleet achieved in-market availability of 91%.
West: Adjusted earnings decreased 15% to $153 million and production volumes decreased 51%. Earnings in the reported quarter were affected by unfavorable hedging activity. The decrease in production volumes is primarily attributable to the sale of two combined-cycle facilities in the fourth quarter of 2009.
Northeast: Adjusted earnings decreased by 19% to $105 million while production volumes decreased 19%. Earnings in the reported quarter were affected by unfavorable hedging activity. The decrease in production volumes is attributed to an asset sale in the fourth quarter of 2009. This was partially offset by increased volumes at combined-cycle facilities due to improved spark spreads.
Financial Condition
As of December 31, 2010, Dynegy had a total liquidity of $1.8 billion. This consisted of approximately $397 million in cash on hand and $1.4 billion of unused funds under the company’s credit facility. In fiscal 2010, the company generated $455 million from operating activities compared to $170 million in fiscal 2009.
Outlook
Dynegy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term ‘Neutral’ rating on the stock. The near-term cautious stance is shared by its peers like American Electric Power Company Inc. (AEP) and Dominion Resources Inc. (D).
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