Bloomberg News

Dynegy Reports Third-Quarter Net Loss of $69 Million

November 08, 2006

Dynegy Inc., owner of power plants in 10 U.S. states, reported a third-quarter loss of $69 million after writing down the value of a Kentucky power plant and recording costs for a debt exchange.

The net loss was equivalent to 14 cents a share and compared with net income of $29 million, or 6 cents a share after payment of dividends on preferred stock, a year earlier, Houston-based Dynegy said today in a statement. The per-share profit of 6 cents excluding one-time items fell short of analysts' estimates.

``It's a little bit less than we anticipated,'' said Daniele Seitz, an analyst at Dahlman Rose & Co. in New York who expected Dynegy to earn 8 cents a share. The average estimate from seven analysts surveyed by Thomson Financial was 9 cents.

Shares of Dynegy fell 20 cents, or 3.2 percent, to $6.02 in New York Stock Exchange composite trading. The stock, which has three buy ratings from analysts and seven holds, still is up 24 percent for the year. Seitz rates the stock a buy and owns none.

The third-quarter results included a $61 million impairment for the reduced value of the 576-megawatt Bluegrass peaking plant in Kentucky because of changes in the market, the company said. Peaking plants are used during periods of strongest power demand.

Dynegy also recorded costs of $23 million for the exchange of subordinated debt held by Sithe Energies Inc., which it acquired in November 2004, and $14 million in litigation costs.

LS Power

Chief Executive Officer Bruce Williamson, 47, sold assets and unwound a failed energy trading business to avoid bankruptcy after the collapse of Enron Corp. in 2001. In September, he agreed to buy plants from LS Power Group for $2.3 billion to expand Dynegy's generating capacity by 69 percent and make the it the third-largest U.S. power producer that doesn't own utilities.

Overall sales fell 25 percent to $581 million, the company said. At Dynegy's power-generation business, third-quarter earnings before interest, taxes, depreciation and amortization, or EBITDA, fell to $92 million from $177 million a year earlier because of the plant writedown. The division also was hurt by lower prices, the company said.

Midwest

Excluding the asset impairment, EBIDTA from power generation in the U.S. Midwest rose 25 percent as the business benefited from financial transactions used to lock in prices, the company said.

Dynegy said it will issue its forecast for 2007 earnings on Dec. 13.

The acquisition of the LS Power plants will extend Dynegy's operations to 15 states and give it more than 20,000 megawatts of generation, enough to supply 16 million U.S. homes. The transaction is expected to close early next year.

Closely held LS Power, based in East Brunswick, New Jersey, will get 40 percent of Dynegy's stock and $375 million in cash and notes for the plants. The companies will create a joint venture to build new plants and expand existing ones.

Calpine Corp., which is reorganizing in bankruptcy, is the largest so called independent power producer and NRG Energy Inc. is second largest.

(Dynegy held an earnings conference call for investors and analysts at 9 a.m. New York time. A replay is available on the company's Web site at http://www.dynegy.com.)

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

To contact the editor responsible for this story: Robert Dieterich at rdieterich@bloomberg.net.


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