Dynegy Fourth-Quarter Net Loss Narrows on Contracts

Dynegy Inc. (DYN), the owner of power plants in 11 U.S. states, said its fourth-quarter net loss narrowed as energy contracts gained in value. The company’s shares rose in New York after earnings topped estimates and Dynegy reported $2 billion in liquidity.

The loss narrowed to $7 million, or 1 cent a share, from $46 million, or 6 cents, a year earlier, Houston-based Dynegy said today in a statement. Revenue rose 9.8 percent to $795 million.

Dynegy records costs and gains to reflect the value of power-sales contracts relative to market prices. The company said it had so-called mark-to-market gains of $129 million in the quarter as prices fell, compared with costs of $86 million a year earlier. Fourth-quarter earnings before interest, taxes, depreciation and amortization, or EBITDA, fell 48 percent to $129 million, excluding items such as contract gains.

“Obviously, it is preparing itself for a difficult year,” said Daniele Seitz, a consultant with Seitz Research in New York. “People have a tendency to look at the fourth quarter as a bit of a sign of the things to come in 2009 in terms of prices.”

Dynegy’s loss was about 1 cent per share excluding items such as the energy contracts, according to Gordon Howald, an analyst with Calyon Securities USA Inc. in New York. That was 2 cents higher than the average estimate from 11 analyst estimates compiled by Bloomberg.

No Chapter 11

The company said its liquidity was about $2 billion as of Feb. 20, including $858 million in cash on hand. Dynegy’s report suggests bankruptcy isn’t imminent after an 82 percent plunge in stock price since June 30, Howald said in an interview.

“It doesn’t look like there’s a Chapter 11 filing anytime soon,” said Howald, who has a “sell” rating on Dynegy shares and owns none. “You’re always going to have people bottom- fishing.”

Dynegy rose 21 cents, or 16 percent, to $1.51 in composite trading on the New York Stock Exchange. The stock has six buy ratings, six hold recommendations and one sell rating from analysts.

The company has the liquidity to weather the current economic decline, Chief Executive Officer Bruce Williamson said today on a conference call with analysts and investors.

Forecast Cut

Dynegy cut its 2009 EBITDA forecast, excluding one-time costs and gains, to $700 million to $825 million. The company previously forecast profit on that basis of $825 million to $1 billion. The company said its net loss for the year may be $65 million to $140 million. In December, Dynegy’s forecast for 2009 was a net loss of $20 million to a profit of $85 million.

The benchmark power price in PJM Interconnection LLC, the biggest U.S. wholesale power market, fell 13 percent from a year earlier to a fourth-quarter average of $61.16 per megawatt-hour, according to data compiled by Bloomberg.

Dynegy has the capacity to produce almost 18,000 megawatts of electricity. That’s enough for more than 14 million average U.S. homes, based on an estimate by the Energy Department in Washington.

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.

To contact the editor responsible for this story: Tony Cox at acox3@bloomberg.net.

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