Dynegy Swings To Loss In Q3 - Update

(RTTNews) - Electric utility Dynegy Inc. (DYN | Quote | Chart | News | PowerRating) reported a loss for the third quarter, compared to a profit a year ago, reflecting asset impairment charges and the absence of a hefty mark-to-market gain recorded last year. Revenues for the quarter more than halved impacted by the overall weakness in U.S. energy prices. The company also raised and tightened its full year 2009 adjusted EBITDA guidance, while widening the net loss view. Dynegy shares are currently trading up more than 8% on the NYSE.

For the third quarter, net loss attributable to shareholders was $212 million or $0.25 per share compared to a profit of $605 million or $0.72 per share in the prior-year period. Loss from continuing operations for the period was $94 million or $0.10 per share versus a profit of $572 million or $0.68 per share in the 2008-year period.

During the three-month period, the company incurred a loss of $129 million or $0.15 per share from discontinued operations compared to an income of $32 million or $0.04 per share in the previous year.

Dynegy stated that attributable net loss for the period reflects after-tax charges of $238 million with regard to asset impairments and $78 million of after-tax mark-to-market losses compared to an after-tax mark-to-market gain of $542 million last year.

On an average, 10 analysts polled by Thomson Reuters expected Dynegy to earn $0.03 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the period plummeted to $673 million from $1.76 billion in the third quarter of fiscal 2008. Analysts expected the company to generate revenues of $877.54 million during the quarter.

"While Dynegy's third quarter financial results continued to be impacted by the overall weakness in U.S. energy prices, we again demonstrated the benefits of having a diverse, well-operated fleet of power generation assets," said Bruce Williamson, Chairman, President and Chief Executive Officer of Dynegy Inc.

According to the Energy Information Administration or EIA, total U.S. electricity consumption fell 1.6% in the 2008 and is forecast to decline by 3.3% in 2009, and then grow by 1.3% in 2010 as the improving economy leads to slowly recovering industrial sector electricity sales.

Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, for the third quarter was $388 million compared to $269 million in the comparable period prior year. Dynegy attributed the year-over-year increase in adjusted EBITDA to the sale and assignment of a multi-year power sales contract, higher capacity and tolling revenues and higher realized energy prices in the Midwest.

Operating loss for the quarter was $7 million as compared with an operating income of $1.06 billion last year.

Dynegy reports its results under two segments: Power Generation and Other. Operating income from the power generation segments was $40 million compared to $1.1 billion for the third quarter 2008. This segment has three units: the Midwest, with nearly 8,400 megawatts of generation capacity; the West, with about 5,500 megawatts of generation capacity; and the Northeast, with around 3,800 megawatts of generation capacity.

The Midwest unit operating income plunged to $5 million from $757 million, operating income from West unit dropped to $34 million from $153 million, and operating income from the Northeast unit was $1 million compared to $204 million a year ago.

In terms of megawatt hours generated, the Midwest segment generated 6.7 million MWh versus 7.2 million MWh, the West segment generated 4.0 million MWh compared to 4.2 million MWh, while Northeast segment generated 2.6 million MWh versus 2.2 million MWh in the prior year.

Operating loss from the Other segment narrowed to $47 million from $51 million in the same quarter last year.

For the preceding quarter, the company incurred a net loss of $345 million or $0.41 per share, wider than the prior-year's loss of $272 million or $0.32 per share, hurt by asset impairment charges and lower realized power prices. Meanwhile, revenues advanced to $493 million from $322 million in the previous year.

For the nine-month period, attributable net loss was $892 million or $1.06 per share compared with a profit of $181 million or $0.22 per share in the previous year. Dynegy's loss from continuing operations for the year-to-date period was $765 million or $0.89 per share versus an income of $165 million or $0.20 per share in the comparable period prior year. Year-to-date revenues slumped to $2.03 billion from $2.55 billion a year earlier.

Looking ahead, for fiscal 2009, Dynegy raised its adjusted EBITDA forecast, and now expects it to be between $730 million and $760 million. Earlier, on August 10, Dynegy and reaffirmed its earlier announced adjusted EBITDA forecast between $680 million and $740 million.

Dynegy noted that adjusted EBITDA improved due to the sale and assignment of a power sales contract, partially offset by the purchase of additional options that provide downside protection in future periods.

However, the company now sees fiscal 2009 net loss of between $1.2 billion and $1.1 billion. Earlier, the company predicted fiscal 2009 net loss of between $975 million and $935 million.

For full year 2009, analysts currently expect the company to report a loss of $0.01 per share on revenues of $2.88 billion.

The company also reaffirmed its fiscal 2010 adjusted EBITDA guidance of between $425 million and $550 million. For fiscal 2010, the company expects net loss to range between $250 million to $175 million. Analysts presently anticipate Dynegy to report a loss of $0.14 per share on revenues of $2.39 billion for fiscal 2010.

Earlier, in August, the company announced its plan to sell five peaking and three combined-cycle generation assets, as well as its remaining interest in a project under construction in Texas to power-generation company LS Power Associates L.P. As per the terms of the deal, Dynegy will receive $1.025 billion in cash and 245 million of its Class B shares held by LS Power upon completion.

Among Dynegy's rivals, American Electric Power Co. Inc. (AEP | Quote | Chart | News | PowerRating) posted an increase in third-quarter profit that totaled $443 million or $0.93 per share, compared to $374 million or $0.93 per share in the prior-year quarter, helped by rate increases and cost cutting. Revenues dropped to $3.5 billion from $4.2 billion in the same quarter of last year. For fiscal 2009, the company said it currently anticipates ongoing earnings in the range of $2.90 - $3.05 per share, raising its low-end of the prior outlook in the range of $2.75 - $3.05 per share.

Larger rival, Duke Energy Corp. (DUK | Quote | Chart | News | PowerRating) posted lower third-quarter profit totaling $109 million or $0.08 per share, compared to $215 million or $0.17 per share in the prior-year quarter, as it recorded non-cash impairment charges related to the non-regulated generation operations in the Midwest. Operating revenues declined to $3.39 billion from $3.51 billion in the previous year.

Yet another competitor, Edison International (EIX | Quote | Chart | News | PowerRating) is slated to release its third-quarter results on November 6, with analysts forecasting earnings of $1.04 per share on revenues of $3.76 billion.

In Thursday's regular trading session, DYN is currently trading on the New York Stock Exchange at $2.02 per share up $0.15 or 8.02% on a volume of 2.28 million shares. In the past 52-week period, the shares have been trading in a range of $1.00 to $3.42.

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