The following factors influenced the quarter’s results as compared to the second quarter 2007:
Please read the accompanying schedules to this news release for additional information.
Other primarily consists of results from the company’s former Customer Risk Management business and general and administrative expenses, partially offset by interest income. In Other, the company reported a $28 million Adjusted loss before interest, taxes and depreciation and amortization during the second quarter 2008, compared to an Adjusted loss of $40 million during the second quarter 2007. The decreased loss in the second quarter 2008 was primarily related to an $8 million state sales and franchise tax benefit and lower general and administrative costs. The higher general and administrative costs in the second quarter 2007 included accelerated stock compensation expenses related to the LS Power combination.
The company’s interest expense totaled $108 million for the second quarter 2008, compared to $84 million for the second quarter 2007. The lower interest expense in the second quarter 2007 reflected $27 million of mark-to-market income related to interest rate swap agreements and a $12 million gain related to the termination of interest rate hedges upon completing the LS Power combination. After giving effect to those items, the interest expense in 2008 was lower primarily due to lower interest rates.
Dynegy Announces Second Quarter 2008 Financial Results
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The second quarter 2008 income tax benefit from continuing operations was $186 million, compared to an income tax expense from continuing operations of $30 million for the second quarter 2007.
Liquidity
As of June 30, 2008, Dynegy’s liquidity was approximately $890 million. This consisted of $271 million in cash on hand and approximately $619 million in unused availability under the company’s credit facility.
On June 17, Dynegy Holdings Inc. entered into a new $300 million, unsecured bilateral contingent letter of credit facility. Capacity under the new facility will be available if 2009 natural gas prices exceed certain thresholds. Currently, no letters of credit have been issued under the facility.
Cash Flow
Adjusted Cash Flow from Operations totaled an inflow of $53 million for the six months ended June 30, 2008. This consisted of a cash inflow of $328 million from the power generation business, which was net of increased cash collateral postings. The cash inflow from the power generation business was offset by outflows of $275 million in Other resulting primarily from interest payments and general and administrative expenses. The GAAP measure of Cash Flow from Operations for the six months ended June 30, 2008, was $32 million, which gives effect to legal and regulatory payments of $21 million.
For the six months ended June 30, 2008, Dynegy’s Adjusted Free Cash Flow (Adjusted Cash Flow from Operations less outflow from maintenance and environmental capital expenditures) was an outflow of $104 million. Capital expenditures included maintenance and environmental capital expenditures of $63 million and $94 million, respectively, the latter of which reflects the company’s continued investment in environmental upgrades.
For the six months ended June 30, 2007, Dynegy’s Adjusted Free Cash Flow was an inflow of $41 million. This consisted of Adjusted Cash Flow from Operations of $139 million, offset by maintenance and environmental capital expenditures of $60 million and $38 million, respectively.
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Dynegy Announces Second Quarter 2008 Financial Results
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2008 Guidance Estimates
Guidance estimates have been reduced from the previous guidance presented on February 27, 2008, largely to reflect the power price basis differentials, leading to lower earnings from the Midwest segment. Additionally, maintenance and environment capital expenditures were reduced primarily due to projects that were no longer required, or were delayed to future years. The new estimates are:
• | $955 million of Adjusted EBITDA | |
• | $510 million of Adjusted Cash Flow from Operations |
• | $140 million of Adjusted Free Cash Flow | |
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Today’s 2008 estimates reflect quoted forward commodity price curves as of July 08, 2008. These estimates also reflect assumptions regarding, among other things, sales volumes, fuel costs and other operational activities.
Investor Conference Call/Web Cast
Dynegy will discuss its first quarter 2008 financial results during an investor conference call and web cast today, August 7, 2008, 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 more than 18,000 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: Market trends; basis differentials and the causes of them; the timing of any projects and their impacts on Dynegy’s earnings; and Dynegy’s estimated financial results for 2008. 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 the 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, or otherwise as may be required by applicable law.
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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 and may result in further mark-to-market losses, narrowing spark spreads and further challenges related to basis differentials; the market fundamentals and regulatory construct may change such that Dynegy’s business prospects and financial results are further negatively impacted; the slowing economy or an increase in available power may result in supply being higher than demand; Dynegy’s asset base may not perform at the level anticipated; changes in commodity prices for fuel and power may negatively impact Dynegy; our commercial strategy may worsen the mark-to-market impacts and result in a less efficient deployment of our resources; and uncertainties exist regarding environmental 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 are found in Dynegy’s SEC filings, including its Annual Report on Form 10-K for the year ended December 31, 2007, its amended Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2008, its Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and its Current Reports, all of which are available free of charge on the SEC’s web site at http://www.sec.gov. 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.
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