Dynegy Net More Than Doubles on Gains From Contracts
Dynegy Inc. (DYN:US), the owner of power generators in 11 U.S. states, said third-quarter profit more than doubled on gains from energy contracts. The company lowered its forecast for 2008 earnings after mild weather cut demand.
Net income climbed to $605 million, or 72 cents a share, from $220 million, or 26 cents, a year earlier, Houston-based Dynegy said today in a statement. Revenue rose 80 percent to $1.89 billion.
Dynegy records costs and gains to reflect the value of power-sales contracts relative to market prices. As power fell in the third quarter, Dynegy's contracts locking in prices led to gains of $542 million, up from $12 million a year earlier. Earnings before interest, taxes, depreciation and amortization, or EBITDA, fell 23 percent to $268 million, excluding items such as the contracts.
``Weather's been weak and power prices have come down,'' said Gordon Howald, an analyst with Calyon Securities in New York who has a ``neutral'' rating on Dynegy shares and doesn't own any.
Dynegy said the amount of megawatt-hours generated fell 31 percent in the Northeast and 4 percent in the Midwest as mild summer weather reduced demand for air conditioning.
Excluding items such as the contracts, Dynegy earned about 3 cents a share, Howald said. He had expected earnings of 5 cents. The average estimate (DYN:US) from 11 analysts surveyed by Bloomberg was 12 cents, excluding one-time items.
Dynegy fell 33 cents, or 11 percent, to $2.72 in New York Stock Exchange composite trading. The stock, which has nine buy and five hold ratings from analysts, has dropped 62 percent this year.
Dynegy also said its 2008 EBITDA excluding items such as contracts will be about $840 million. The company previously forecast $955 million on that basis. Dynegy said its liquidity as of Nov. 3 was about $2.02 billion.
``I don't see a liquidity crisis here,'' Howald said.
The third quarter of 2007 included $124 million for discontinued operations, including a gain of $110 million related to the sale of a Texas power plant to a joint venture of PNM Resources Inc. and Cascade Investment LLC.
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 firstname.lastname@example.org.
To contact the editor responsible for this story: Tony Cox at email@example.com.