Electric utility Dynegy Inc. (DYN) on Thursday reported a loss for the fourth quarter that narrowed from last year, when results were negatively impacted by a loss on deconsolidation of Dynegy Holdings LLC.
Separately, Dynegy said it agreed to acquire Ameren Corp.'s (AEE) merchant generation business, Energy Resources or AER. The company added that it will not pay any cash consideration for the acquisition.
Upon closing of the deal, Dynegy will own more than 8,000 megawatts or MW of generating capacity in Illinois, and nearly 14,000 MW nationally. Meanwhile, Ameren estimates total value benefits associated with the divestiture to be about $900 million for the company.
Houston, Texas-based Dynegy, which emerged from bankruptcy in October 2012, reported fourth-quarter net loss of $107 million or $1.07 per share, narrower than loss of $616 million in the year-ago period. The prior-year quarter's results include loss from discontinued operations of $468 million on the deconsolidation of Dynegy Holdings LLC or DH.
Loss from continuing operations narrowed to $113 million or $1.13 per share from $148 million in the same period last year. On average, five analysts polled by Thomson Reuters expected the company to report loss per share of $0.45 for the quarter. Analysts' estimates typically exclude special items.
The results reflect an increase in operating margin for the company's gas segment due to improved spark spreads and the absence of a loss on commercial activities that occurred in the prior-year period. This helped offset lower realized power prices for the coal segment.
However, revenue for the quarter more than doubled to $312 million from $130 million in the prior-year period. Analysts had a consensus revenue estimate for the quarter of $677.31 million.
For fiscal 2012, Dynegy's net loss narrowed to $139 million or $1.07 per share from $940 million in the prior year. Revenues for the year declined to $1.29 billion from $1.33 billion last year. Analysts expected the company to report loss of $1.97 per share for the year on revenues of $1.35 billion.
Separately, Dynegy said its subsidiary Illinois Power Holdings, LLC or IPH will acquire Ameren Energy Resources. AER consists primarily of Ameren Energy Generating Company or Genco, including Genco's 80 percent ownership interest in Electric Energy, Inc.; AmerenEnergy Resources Generating Co. and Ameren Energy Marketing Co.
The AER retail and marketing businesses and the following plants are included in the transaction - Duck Creek, Coffeen, E.D. Edwards, Newton, and Joppa.
The companies expect the transaction to close in the fourth quarter of 2013. IPH will maintain corporate separateness from current Dynegy entities.
Dynegy expects AER to be accretive to its adjusted EBITDA in 2014 and to free cash flow by 2015. Further, the company expects annual synergies of more than $60 million by 2015.
St. Louis, Missouri-based Ameren expects the divestiture of the merchant generation business to enable it to focus exclusively on its rate-regulated electric, natural gas and transmission operations. The divestiture will not impact the electric and natural gas utility service provided by Ameren's rate-regulated businesses, Ameren Illinois and Ameren Missouri.
Ameren noted that the total expected value benefits associated with the divestiture of $900 million, including removal of $825 million of debt from its consolidated balance sheet and estimated tax benefits of $180 million.
As a result of the planned divestiture, Ameren expects AER to be classified as held for sale and reported as discontinued operations in its consolidated financial statements beginning in the first quarter of 2013. Further, Ameren expects to record an after-tax charge to earnings in a range of $300 million to write down the carrying value of the divested business and expense transaction-related costs.
In Thursday's regular session, DYN is trading at $21.00, up $0.82 or 4.06 percent on a volume of 23,460 shares.
AEE is trading at $34.54, up $0.54 or 1.59 percent on a volume of 37,138 shares.
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