Lower power prices mean larger losses for Dynergy
As with other companies in the current soft economy, the company took a large hit in goodwill impairment charges, striking $433 million off the books in order to bring the company's assets in line with current market values.
The loss comes in spite of increased production volume. Dynegy produced approximately 10.2 million megawatt-hours (MWh) in 1Q08 and 11.1 million MWh in 1Q09, an increase of 8.8%.
Dynegy operates in three regions: the Midwest, which has a production capacity of approximately 8,400 megawatts (MW); the West, with approximately 5,500 MW of capacity; and the Northeast, with a capacity of about 3,800 MW. In a conference call regarding the company's earnings, Chairman, President and CEO Bruce Williamson spoke of the company's production across each region.
"In the Midwest, our overall production volumes increased by about 10% due to warmer winter temperatures. This was primarily driven by increased production from our natural gas units," he said. "In the Northeast, cooler-than-normal weather and lower fuel prices drove a 60% increase in our production volumes.... In the West, warmer temperatures led to a 40% decline in our production volumes period over period."
However, in spite of this overall increase in production, lower power prices significantly reduced earnings. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $198 million, compared to $237 million in 1Q08. This earnings decrease combined with the goodwill impairment charge led to a sizeable loss for Dynegy.
Industrial Info is currently tracking slightly less than $3.2 billion of Dynegy's current and future projects in the U.S. Approximately $2 billion of these projects are occurring at the company's Plum Point Power Plant in Osceola, Arkansas.
Initial construction of the 600-MW grassroot, coal-fired power plant began in March of 2006. Completion of the project is expected in August of 2010. A 665-MW Unit 2 addition to the plant has also been proposed and is still in the permitting stages. Construction of this second unit would probably not begin until mid-2011.
Related News

Disruptions in the U.S. coal, nuclear power industries strain the economy and invite brownouts
WASHINGTON - Is anyone paying any attention to the crisis that is going on in our electric power markets?
Over the past six months at least four major nuclear power plants have been slated for shutdown, including the last one in operation in California. Meanwhile, dozens of coal plants have been shuttered as well — despite low prices and cleaner coal. Some of our major coal companies may go into bankruptcy.
This is a dangerous game we are playing here with our most valuable resource — outside of clean air and water. Traditionally, we've received almost half our electric power nationwide from…