Dynegy loses big in 2011 as it works to restructure

Independent power producer Dynegy Inc. (NYSE:DYN), which is in flux right now, on March 8 announced a $236m operating loss for 2011 compared to an operating loss of $11m for 2010.

These results include pre-tax, unrealized, net mark-to-market losses of $175m ($107m after-tax) and mark-to-market gains of $18m ($11m after-tax) during the years ended Dec. 31, 2011 and 2010, respectively. The 2011 adjusted EBITDA was $281m compared to $539m for 2010.

The reduced operating results can be attributed to a $31m decrease in energy margins, $50m in lower capacity revenues in all markets, a $123m decrease in premium revenue due to fewer options sold, and a $34m loss related to natural gas during the fourth quarter. These results were partially offset by $58m in lower fixed operating costs. Primarily as a result of the $1,657m non-cash loss on deconsolidation, the net loss for the full year 2011 totaled $1,645m compared to a net loss of $234m for 2010.

Dynegy Holdings LLC, which is in bankruptcy and due for a disclosure statement hearing, and its wholly owned subsidiaries have been deconsolidated for accounting purposes as of Nov. 7, 2011, the day the Chapter 11 bankruptcy filings were made. As a result, parent Dynegy Inc. recorded a $1,657m non-cash loss on deconsolidation.

“While the fourth quarter and full-year results for 2011 were severely impacted by the difficult market environment, the company is making substantial progress in its financial and operational restructuring activities,” said Robert Flexon, Dynegy President and CEO. “The next milestone for the financial restructuring is the hearing to approve the disclosure statement, currently scheduled for March 12, 2012. Operationally, our focus on safety, reliability, and efficiency led to the achievement of no employee injuries during the fourth quarter and year-over-year recurring fixed cost improvements of $58 million. As power markets strengthen, we’ll be well positioned to benefit from the hard work our employees continue to put forth.”

In August 2011, Dynegy reorganized its operations into three segments: coal, which is a 3,132-MW fleet of primarily coal-fired power plants located in Illinois; gas, a 6,771-MW fleet of natural gas-fired plants located primarily in California and the Northeast; and DNE, 1,570 MW of leased natural gas- and coal-fired facilities and 123 MW of owned gas and oil peaking facilities.

In the coal segment, the 2011 operating loss was $101m compared to a 2010 operating loss of $6m. Adjusted EBITDA totaled $204m in 2011 compared to $233m during 2010. The $29m decrease can be attributed, in part, to lower average realized prices and capacity payments which were partially offset by a $20m decrease in fixed operating costs.

The fourth quarter 2011 operating loss for the coal segment was $28m compared to a fourth quarter 2010 operating loss of $143M. Adjusted EBITDA totaled $29M during the fourth quarter 2011 compared to $55m during the same period in 2010. Lower realized energy prices in the Midwest together with lower generation volumes due to a planned outage at Baldwin Unit 1 in Illinois negatively affected fourth quarter 2011 results. The planned outage at Baldwin, together with other unplanned outages at the facility during the quarter, accounted for $15m of the decrease in adjusted EBITDA. Also, option premium revenues were $7m lower during the fourth quarter 2011 compared to the same period in 2010.

Court ready to hear latest reorganization plan

On Nov. 7, 2011, Dynegy Holdings (DH) and four of its wholly-owned subsidiaries – Dynegy Northeast Generation Inc., Hudson Power LLC, Dynegy Danskammer LLC and Dynegy Roseton LLC – filed voluntary petitions for relief under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York. On Jan. 19, the companies filed an amended Chapter 11 plan of reorganization and a related disclosure statement for DH with the bankruptcy court. On March 6, they filed a second amended Chapter 11 plan of reorganization and a related disclosure statement, which will be the subject of the March 12 court hearing.

Dynegy Inc. filed copies of the latest plan and disclosure statement on March 7 at the SEC in a Form 8-K statement. In simple terms, the plan calls for various compensation to creditors and/or claim holders and would transfer Dynegy Holdings assets to a new entity controlled by a trust.

Dynegy Danskammer owns units 1, 2, 5, and 6 at the Danskammer power plant.  Units 1 and 2 are “peakers” with a net capacity of 129.7 MW. They use natural gas and fuel oil as their primary fuels. Units 5 and 6 are emergency diesel generators with net capacities of 2.5 MW each and are currently are not in operation, the amended disclosure statement said. Dynegy Danskammer leases units 3 and 4, which are “baseload” facilities with a net capacity of 373.4 MW. They use coal and natural gas as their primary fuels.

Dynegy Roseton leases both units at the Roseton power plant. These units are “peakers” with a net capacity of 1,200 MW and they use natural gas and fuel oil as primary fuels.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.