QUOTE AND NEWS
Benzinga  1 hr ago  Comment 
Analysts at Barclays initiated coverage on Alkermes Plc (NASDAQ: ALKS) with a Overweight rating. The target price for Alkermes is set to $74. Alkermes' shares closed at $62.10 yesterday. Analysts at Roth Capital initiated coverage on Darling...
Benzinga  2 hrs ago  Comment 
RBC Capital initiated coverage on Dynegy Inc. (NYSE: DYN) with a Outperform rating. The target price for Dynegy is set to $42. Dynegy shares have gained 2.58 percent over the past 52 weeks, while the S&P 500 index has surged 12.33 percent in...
Market Intelligence Center  May 18  Comment 
MarketIntelligenceCenter.com's patented trade-picking algorithms have identified an attractive covered-call trade on Dynegy Inc. (DYN). Look at the Dec. '15 $30.00 covered call for a net debit in the $28.65 area. This trade has a duration of 214...
newratings.com  May 6  Comment 
WASHINGTON (dpa-AFX) - Dynegy Inc. (DYN) reported a first quarter net loss attributable to shareholders of $185 million, compared to a loss of $41 million for the 2014 first quarter. Loss per share was from continuing operations was $1.49,...
Wall Street Journal  May 6  Comment 
Dynegy’s loss widened in the first quarter, as lower prices and margins in the coal and gas segments weight on results.
NPR  May 1  Comment 
The tradition of the annual meeting is gradually changing. Some firms have replaced the face-to-face meeting with a virtual one. But some investors still want to look the CEO in the eye.
Benzinga  Apr 20  Comment 
In a report published Monday, analysts at Morgan Stanley initiated coverage of Dynegy Inc. (NYSE: DYN) with an Overweight rating and a price target of $41. The analysts believe that the company's cash flow yield and growth prospects are...
Market Intelligence Center  Apr 10  Comment 
The patented option trade-picking algorithms behind MarketIntelligenceCenter.com's Artificial Intelligence Center have selected a covered call trade on Dynegy Inc. (DYN) that includes 6.97% downside protection. Sell one contract of the Jun. '15...
Motley Fool  Mar 30  Comment 
Regulators gave this energy stock a big boost today.




 

Dynegy (NYSE: DYN) is a holding company that engages primarily in power generation in the Midwest, Northeast and Southwest. The company operated primarily by producing wholesale energy then packaging and selling it to retail utility companies. With approximately 12,300 Megawatts (MW) of energy capacity and operations in six states, Dynegy is a serious industry player.[1]

Over the past few years, Dynegy has undergone serious restructuring, recovering from a series of bad missteps in the early 2000s. Originally known as Natural Gas Clearinghouse, the company took a turn for the worse when it rebranded itself Dynegy in 1998, in the spirit of the much heralded "New Economy." As part of this shift, Dynegy began to rapidly expanding to areas like energy trading and broadband internet, adopting the strategies of its larger rival Enron. Dynegy would almost follow Enron into bankruptcy after an investigation revealed fraudulent accounting practices in 2001.

Fortunately, Dynegy avoided a trip to bankruptcy court by shedding assets and selling off its haphazard array of business ventures. Since announcing its restructuring plan in 2002, the company has significantly reduced operating expenses and recently illustrated a renewed focus on growth and expansion with its acquisition of LS Power, a privately held energy generation company. Analysts have lauded the acquisition as a leap forward to Dynegy because of the improved geographically diversity and cash flow the deal will provide. In all, the combined company will have over 20,000 MW in generation capacity.

Company History

Dynegy began in 1984 as Natural Gas Clearinghouse, a marketer of natural gas . The company first entered the business of energy production in 1997, when it acquired Destec Energy Inc, a former subsidiary of Dow Chemical with a strong presence in the Midwest energy production market. In 1998, Natural Gas Clearinghouse rebranded itself Dynegy and pushed to cast itself mold of the "New Economy." As part of this aggressive move Dynegy closely mimicked its older peer Enron, launching several business ventures including energy trading platforms and a broadband internet division. In 2001, the company made an unsuccessful bid for then troubled Enron which soon filed for Chapter 11 Bankruptcy. Dynegy nearly followed Enron into bankruptcy; in 2002 the company became ensnared in an accounting scandal. The company avoided a trip to bankruptcy court only by selling off assets, eventually shedding everything but its core merchant power division. Today, Dynegy remains focused on energy production.

Corporate Overview

After several unloading unrelated businesses to avoid bankruptcy in 2002, Dynegy continued to strip assets to pay down debt, shedding its natural gas pipeline operations and regulated utility business in 2004 and 2005. Today the company is focused exclusively on generating and selling energy from its 20 plants located throughout the United States which have a production capacity of 11,739 megawatts (MW). The company is organized as a holding company that conducts its business primarily through its subsidiaries. The company focuses its efforts on the generation and sale of energy from its 20 plants which are located throughout the country and can produce 11,739 MW of energy. Dynegy's plants all burn natural gas, coal or oil.

Business Financials

In 2009, DYN earned total revenues of $2.47 billion. This was a substantial decline from its 2008 revenues of $3.55 billion. Unsurprisingly, this had an adverse effect on its net income. Between 2008 and 2009, DYN had its net income decline from $174 million in 2008 to a net loss of $1.26 billion in 2009.[2]

Business Segments

The company organizes its energy production into three regions.

Midwest

The Midwest region represents the bulk of Dynegy's generation capacity. When examining energy generation portfolios, power plants are usually divided by capacity factor or the typical of percentage of total generation capacity a plant will use during a year. "Baseload" plants constantly produce energy and have high capacity factors whereas "peaking" plants have a low capacity factor because they only approach full generation capacity when baseline plants are strained during high demand periods. In the Midwest, Dynegy maintains a power plant fleet with over 4,200 MW of baseload generation capacity. Importantly, 3000 MW of the total capacity come from plants that use low-cost coal as fuel. Also, because coal dominates Dynegy's production methods in the Midwest, the region benefits when wholesale energy prices increase due to rising oil or natural gas prices. Because of these factors, the Midwest segment contributes the majority of Dynegy's cash flow.

Northeast

Dynegy also has a small presence in the Northeast energy production market. Its Northeast portfolio currently consists of 2,800 MW of capacity. Two of the company's primary Northeast facilities have dual capacity for both coal and oil prices. Because of this dual capacity, the plants benefit when wholesale energy prices increase due to higher natural gas prices.

South

Dynegy also has facilities in the Southern region of the United States with just over 1,520 MW of capacity. Recently, Dynegy's Southern assets have been its worst performers, due to an unfavorable operating environment in the wholesale energy market. Barring an improvement in market conditions in the South, Dynegy's current assets in the South may continue to shed dollars for years to come.

Trends & Forces

Rising Fossil Fuel Prices

Over the past decade the price of natural gas and oil has risen significantly, approximately tripling since the year 2000. These price increases stem from a host of different forces including rising global energy demand, limited refining capacity and geopolitical tensions. These huge price increases translate into much higher operational costs and oil and gas-fired plants. Although there have been dramatic increases in natural gas and oil prices, coal prices have remained relatively stable due to abundant supply in the United States. The rising fossil-fuel prices have made coal, particularly low sulfur coal, the power plant fuel of choice over the past few years. Dynegy's diversified portfolio of gas, oil and coal-fired plants mean that changes in the price of one fuel type i.e. natural gas will have an adverse affect on some operations and a positive effect on others.

‎Wholesale Power Market Prices

Dynegy's profitability is a function of the difference between wholesale market prices for electricity and the cost of production. Most of Dynegy's production capacity is characterized by dispatched market structures where the market price is based on the price required to justify production of the last megawatt needed to balance demand. In this structure market prices are usually determined by natural gas prices because more costly natural gas-fired peaking plants are used to satisfy extra demand. Because of this market structure Dynegy has seen mixed effects from the run-up in oil and natural gas prices. On one hand, Dynegy's large coal-fired baseload facilities in the Midwest have benefited from increased natural gas prices. On the other hand, increased natural gas prices raise operational costs at Dynegy's gas-fired peaking facilities.

Weather

Another important factor that determines market prices in any given market is the weather. Typically, summer and winter weather extremes cause increased electricity consumption due to increased use of cooling and heating devices. On the other hand, milder weather during the spring an fall months tend to result in lower demand and lower market prices.

Global Warming & Environmentalism

Over the past few years, global warming has moved from the fringes to become one of the single greatest challenges facing the world today. A growing body of scientific evidence ties carbon dioxide emissions to rising global temperatures. As a result of growing popular awareness of the risks of global warming, many large corporations have stepped up their efforts to project greener images. Additionally, and more importantly, the US government has been enacting more stringent legislation limiting carbon emissions. Because all of Dynegy's facilities are carbon-fired, tightened emissions standards will raise the cost of operation across most of its facilities and put pressure on profit margins.

Increasing Demand & Consolidation

Two fundamental trends bode well for Dynegy: increasing energy demand, and consolidation in the energy industry. Over the past few years, there has been a steady increase in energy demand in Dynegy's major regions of operation. This increase demand is slowly absorbing the excess generation capacity available in regions such as the Midwest, West and Northeast. Concurrently, local, state and federal governments are loosening regulation of the energy industry after decades of tight control. In response to this, there has been rapid consolidation in the energy industry due to benefits of large scale such as increased pricing power, stronger cash flows, and regional diversity. If demand continues to rise and consolidation proceeds unfettered they will both result in a more favorable pricing environment for Dynegy.

Competition

The wide variation in their operations makes a direct comparison of utility companies difficult. However, Dynegy has a few objective advantages over its peers. First, for its size Dynegy has impressive regional diversity. Regional diversity protects utility companies from local market fluctuations. Additionally, Dynegy has shed most of its prior business ventures including its regulated retail energy business making it more of a pure play on energy generation. Some of Dynegy's top competitors include Entergy (ETR) and American Electric Power Company (AEP).

References

  1. DYN 10-K 2009 Item 1 Pg. 4
  2. DYN 10-K 2009 Item 6 Pg. 37
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki