| FOR IMMEDIATE RELEASE | NR10-07 |
DYNEGY ANNOUNCES FIRST QUARTER 2010 FINANCIAL RESULTS
| · | First quarter 2010 Adjusted EBITDA of $152 million down 24 percent period-over-period primarily due to reduced contributions from hedging activities and reduced spark spreads |
| · | First quarter 2010 net income attributable to Dynegy Inc. of $145 million increased from a net loss of $335 million in the first quarter 2009 primarily due to 2009 impairment charges partially offset by larger mark-to-market gains in 2010 |
| · | Capital structure includes liquidity of approximately $2.3 billion |
| · | Reaffirming 2010 guidance estimates |
HOUSTON (May 10, 2010) – Dynegy Inc. (NYSE: DYN) today announced that Adjusted EBITDA for the first quarter 2010 was $152 million, compared to $199 million for the first quarter 2009. The company also reported net income attributable to Dynegy Inc. of $145 million or $0.24 per diluted share for the first quarter 2010, compared to a net loss of $335 million or $(0.40) per diluted share for the first quarter 2009. Net income in the first quarter 2010 primarily included mark-to-market gains of $253 million ($152 million after tax). The net loss in the first quarter 2009 was primarily driven by impairment charges of $438 million ($436 million after tax), which were partially offset by mark-to-market gains of $169 million ($105 million after tax).
A comparison of the company’s first quarter results period-over-period, including items that affected the GAAP measures of net income and net loss, is provided in more detail in the table below and the schedules that accompany this news release.
“While our first quarter results continued to be impacted by lower demand, we view the emerging economic recovery as a precursor to demand growth and potentially more favorable power pricing in the future,” said Bruce A. Williamson, Chairman, President and Chief Executive Officer of Dynegy Inc. “In the current market environment, certain factors are beyond our control. We nevertheless demonstrated our commitment to operating and commercializing well during the first quarter, with our diverse natural gas- and coal-fired power plants maintaining strong reliability levels during the quarter.”
First Quarter Comparative Results
A comparison of the company’s first quarter results period-over-period is set forth in the table below (in millions of dollars, except per share amounts). The non-GAAP financial measures of EBITDA, Adjusted EBITDA, Adjusted Cash Flow from Operations and Adjusted Free Cash Flow are used by management to evaluate Dynegy’s business on an ongoing basis. Definitions, purposes and uses of such non-GAAP measures are included in Item 2.02 to our Current Report on Form 8-K filed with the SEC on May 10, 2010, which is available on the company’s website free of charge at www.dynegy.com. Reconciliations of these measures to the most directly comparable GAAP measures are included in the accompanying schedules to this news release.
| | | 3 Months Ended 3/31/2010 | | | 3 Months Ended 3/31/2009 | |
| Basic Earnings (Loss) Per Share Attributable to Dynegy Inc. | | $ | 0.24 | | | $ | (0.40 | ) |
| Diluted Earnings (Loss) Per Share Attributable to Dynegy Inc. | | $ | 0.24 | | | $ | (0.40 | ) |
| | | | | | | | | |
| Net Income (Loss) Attributable to Dynegy Inc. | | $ | 145 | | | $ | (335 | ) |
| Add Back: | | | | | | | | |
| Income Tax Expense | | | 65 | | | | 85 | |
| Interest Expense | | | 89 | | | | 98 | |
| Depreciation and Amortization Expense | | | 75 | | | | 92 | |
| EBITDA | | | 374 | | | | (60 | ) |
| Plus / (Less): | | | | | | | | |
| Impairment charges | | | 37 | | | | 438 | |
| Plum Point Mark-to-Market Gains | | | (6 | ) | | | - | |
| Sandy Creek Mark-to-Market Gains | | | - | | | | (10 | ) |
| Mark-to-Market Gains, Net | | | (253 | ) | | | (169 | ) |
| Adjusted EBITDA | | $ | 152 | | | $ | 199 | |
Power Generation
Dynegy’s diversified power generation business includes three business segments: the Midwest, with approximately 5,400 megawatts of generation capacity; the West, with approximately 3,700 megawatts of generation capacity; and the Northeast, with approximately 3,300 megawatts of generation capacity.
Adjusted EBITDA from the power generation segments was $185 million for the first quarter 2010, compared to $230 million for the first quarter 2009.
Management does not allocate interest expense and income taxes on a segment level and therefore uses operating income as the most directly comparable GAAP measure. Operating income from the power generation segments was $365 million for the first quarter 2010, which included mark-to-market gains. This compares to an operating loss of $109 million for the first quarter 2009, which included impairment charges partially offset by mark-to-market gains.
The following operational and commercial factors influenced the company’s first quarter 2010 Adjusted EBITDA as compared to the first quarter 2009.
| | · | Midwest – Adjusted EBITDA decreased 24 percent and production volumes decreased 2 percent. 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 associated with the early exit from the Kendall tolling contract, as well as higher capacity revenues and a net benefit resulting from the sale of options. The company’s coal fleet production volumes increased 10 percent primarily due to improved unit availability due to fewer outages. This was offset by a 49 percent decrease in combined-cycle production volumes that primarily resulted from compressed spark spreads. |
| | · | West – Adjusted EBITDA increased 77 percent and production volumes decreased 4 percent. Energy margin was primarily impacted by the reduced contribution from hedging activities. This decrease was offset by a net benefit from selling options. In addition, Adjusted EBITDA benefited from reduced operating expenses associated with two combined-cycle facilities that were sold in the fourth quarter 2009. |
| | · | Northeast – Adjusted EBITDA decreased 55 percent and production volumes decreased 52 percent. Energy margin was primarily impacted by compressed spark spreads. Adjusted EBITDA was also impacted by lower emission sales and the absence of earnings from the Bridgeport combined-cycle facility, which was sold in the fourth quarter 2009. These decreases were partially offset by a net benefit resulting from the sale of options. |
Adjusted Cash Flow from Operations for generation was $537 million for the three months ended March 31, 2010, while maintenance and environmental capital expenditures were $30 million and $69 million, respectively. Adjusted Cash Flow from Operations for generation was $258 million for the three months ended March 31, 2009, while maintenance and environmental capital expenditures were $28 million and $82 million, respectively. The period-over-period increase in Adjusted Cash Flow from Operations for generation reflects increased 2010 cash inflows from the company’s collateral clearing agent primarily due to changes in the value of financial positions, which were significantly impacted in 2010 by lower power prices. Adjusted Free Cash Flow from the power generation business was $438 million for the th ree months ended March 31, 2010, compared to $148 million for the three months ended March 31, 2009.
On a GAAP basis, Cash Flow from Operations for generation was $537 million for the three months ended March 31, 2010, and $255 million for the three months ended March 31, 2009. Net cash used in investing activities was $241 million for the three months ended March 31, 2010. Net cash used in investing activities was $161 million for the three months ended March 31, 2009. Net cash provided by financing activities was zero for the three months ended March 31, 2010. Net cash provided by financing activities was $25 million for the three months ended March 31, 2009.
Other
Other primarily consists of general and administrative expenses, partially offset by interest income. General and administrative expenses were $31 million in the first quarter 2010, compared to $38 million in the first quarter 2009. The period-over-period decrease in general and administrative expenses primarily resulted from the company’s cost reduction program, which was initiated in 2009. Interest income was less than $1 million in the first quarter 2010, compared to $2 million in the first quarter 2009. In Other, the company reported a $33 million Adjusted loss before interest, taxes and depreciation and amortization ($34 million operating loss) during the first quarter 2010, compared to an Adjusted loss of $31 million ($37 million operating loss) during the first quarter 2009.
Consolidated Interest Expense and Taxes
The company’s interest expense totaled $89 million for the first quarter 2010, compared to an interest expense of $98 million for the first quarter 2009. The lower interest expense in the first quarter 2010 was primarily driven by lower outstanding debt balances associated with the paydown of 2011 and 2012 bond maturities and the deconsolidation of PPEA Holding Company, LLC as provided by new accounting standards, effective January 1, 2010. This was partially offset by the issuance of $235 million of senior unsecured notes in connection with a strategic transaction, as well as higher LIBOR rates on the company’s variable-rate debt. The income tax expense from continuing operations was $65 million for the first quarter 2010, compared to an income tax expense from continuing operations of $91 mi llion for the first quarter 2009.
Liquidity and Debt
As of March 31, 2010, Dynegy’s liquidity was $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.
As of May 3, 2010, liquidity remained at approximately $2.3 billion, which consisted of $746 million in cash on hand and marketable securities and $1.5 billion in unused availability under the company’s credit facility.
As of March 31, 2010, Dynegy’s net debt and other obligations totaled $3.8 billion. This included net cash on hand and marketable securities of $802 million and restricted cash of $850 million. Net debt and other obligations now exclude $744 million of project debt as a result of the deconsolidation of PPEA Holding Company, LLC.
Consolidated Cash Flow
Adjusted Cash Flow from Operations totaled an inflow of $458 million for the three months ended March 31, 2010. There was a cash inflow of $537 million from the power generation business, offset by outflows of $79 million in Other resulting primarily from general and administrative expenses and interest payments, net of interest income.
For the three months ended March 31, 2010, Dynegy’s Adjusted Free Cash Flow was an inflow of $358 million. Capital expenditures included maintenance and environmental capital expenditures of $31 million and $69 million, respectively, the latter of which reflects the company’s continuing investment in environmental upgrades.
For the three months ended March 31, 2009, Dynegy’s Adjusted Free Cash Flow was an inflow of $76 million. This consisted of Adjusted Cash Flow from Operations of $188 million, offset by maintenance and environmental capital expenditures of $30 million and $82 million, respectively.
On a GAAP basis, Cash Flow from Operations for the three months ended March 31, 2010, and March 31, 2009, was $458 million and $165 million, respectively. Net cash used in investing activities was $241 million for the three months ended March 31, 2010. Net cash used in investing activities was $161 million for the three months ended March 31, 2009. Net cash provided by financing activities was zero for the three months ended March 31, 2010. Net cash provided by financing activities was $25 million for the three months ended March 31, 2009.
2010 Guidance Estimates
On February 25, 2010, the company provided Adjusted EBITDA, Adjusted Cash Flow from Operations and Adjusted Free Cash Flow ranges for 2010. In today’s news release, the company is reaffirming those ranges, which are:
| | · | A range of Adjusted EBITDA of $425 million to $550 million; |
| | · | A range of Adjusted Cash Flow from Operations of $(15) million to $110 million; and |
| | · | A range of Adjusted Free Cash Flow of $(360) million to $(235) million. This primarily reflects the significant investment in environmental capital expenditures to reduce emissions. |
The guidance estimates for the most directly comparable measures on a GAAP basis include:
| | · | A range of Net Loss of $(135) million to $(60) million; |
| | · | A range of Cash Flow from Operations of $(15) million to $110 million; |
| | · | Net Cash used in Investing Activities of $(400) million; and |
| | · | Net Cash provided by Financing Activities of $15 million. |
These estimates reflect quoted forward commodity price curves as of April 5, 2010. These estimates also reflect assumptions regarding, among other things, sales volumes, fuel costs and other operational and commercial activities.
Investor Conference Call/Web Cast
Dynegy will discuss its first quarter 2010 financial results during an investor conference call and web cast today, May 10, 2010, at 9 a.m. ET/8 a.m. CT. Participants may access the web cast and the related presentation materials in the “Investor Relations” section of www.dynegy.com.
About Dynegy Inc.
Through its subsidiaries, Dynegy Inc. produces and sells electric energy, capacity and ancillary services in key U.S. markets. The power generation portfolio consists of approximately 12,500 megawatts of baseload, intermediate and peaking power plants fueled by a mix of natural gas, coal and fuel oil. DYNC
Certain statements included in this news release are intended as “forward-looking statements.” These statements include assumptions, expectations, predictions, intentions or beliefs about future events, particularly the statements concerning financial guidance estimates and anticipated earnings or cash flows. Historically, Dynegy’s performance has deviated, in some cases materially, from its cash flow and earnings estimates, and Dynegy cautions that actual future results may vary materially from those expressed or implied in any forward-looking statements. While Dynegy would expect to update these estimates on a quarterly basis, it does not intend to update these estimates during any quarter because definitive information regarding its quarterly financial results is not available until after t he books for the quarter have been closed. Accordingly, Dynegy expects to provide updates only after it has closed the books and reported the results for a particular quarter, except as otherwise required by applicable law.
Dynegy cautions that actual future results may vary materially from those expressed or implied in any forward-looking statements. Specifically, Dynegy cautions that: market fundamentals and trends may not be to Dynegy’s benefit or as Dynegy anticipates; Dynegy’s capital resources and available liquidity may be negatively impacted by market forces beyond its control, reducing capital available for discretionary or other purposes; Dynegy’s asset base may not perform at the level anticipated; changes in commodity prices for fuel and power may negatively impact Dynegy and impact its ability to continue to satisfy its credit agreement financial covenants; longer-term power market improvements may not occur, and even if they do Dynegy may not be in a position to capitalize on them; and uncertainties exist regarding envir onmental regulations, litigation and other legal, legislative or regulatory developments and their potential impacts on Dynegy’s businesses. More information about the risks and uncertainties relating to these forward-looking statements is found in Dynegy’s SEC filings, including its Annual Report on Form 10-K for the year ended December 31, 2009, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, and its Current Reports, all of which are available free of charge on Dynegy’s website at www.dynegy.com. Dynegy expressly disclaims any obligation to update any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date of this release, except as otherwise required by applicable law.
