Dynegy Announces Full Year 2013 Results; Initiates 2014 Guidance

Dynegy Inc. (NYSE: DYN) reported 2013 total Adjusted EBITDA of $227 million, compared to $57 million for 2012. A $180 million improvement in Gas segment results and the addition of the IPH segment in December 2013 more than offset a $24 million decline in Coal segment Adjusted EBITDA. The Company’s operating loss was $318 million for the full year 2013. In 2012, the operating income for the Predecessor from January 1 to October 1 was $5 million and the operating loss for the Successor period October 2 to December 31 was $104 million. The 2013 net loss was $356 million. In 2012, the net loss for the Predecessor from January 1 to October 1 was $32 million and the net loss for the Successor period October 2 to December 31 was $107 million.

Fourth quarter 2013 total Adjusted EBITDA was $63 million compared to $(42) million for the same period in 2012. A $27 million increase in Adjusted EBITDA at the Coal segment, together with a $69 million improvement in Gas segment Adjusted EBITDA and the addition of the new IPH segment in December 2013, resulted in higher consolidated results. The 2013 fourth quarter operating loss was $107 million compared to an operating loss of $104 million for the same period in 2012. Net loss for the fourth quarter 2013 was $91 million, compared to $107 million for the same period in 2012.

“Dynegy completed 2013 with strong financial and operational performance. Total Adjusted EBITDA during the fourth quarter improved by more than $100 million versus the same period last year as power prices improved with colder than normal temperatures. Our 2013 safety results were the best in Company history. The fourth quarter closing of the AER acquisition nearly doubled our operations in the Midwest and will lead to synergies of approximately $95 million, far surpassing the initial $60 million expectation,” said Dynegy President and Chief Executive Officer Robert C. Flexon. “Looking forward to 2014, we expect volatility in near-term natural gas and power prices to continue as a result of demand and the steep decline in natural gas inventories.”

Segment Review of Results Year-Over-Year

Coal – The full-year 2013 operating loss was $207 million. In 2012, the operating loss for the Predecessor from January 1 to October 1 was $63 million and the operating loss for the Successor period October 2 to December 31 was $49 million. Adjusted EBITDA totaled $(4) million during 2013 compared to $20 million in 2012. The year-over-year decrease in Adjusted EBITDA is due to $24 million in lower realized prices on hedged generation.

Gas – Full-year 2013 operating income was $7 million. In 2012, the operating income for the Predecessor from January 1 to October 1 was $128 million and the operating loss for the Successor period October 2 to December 31 was $31 million. Adjusted EBITDA totaled $302 million during 2013 compared to $122 million in 2012. Adjusted EBITDA improved due to a $170 million reduction in negative settlements associated with legacy commercial positions, $13 million in higher capacity revenues and resource adequacy payments primarily at Ontelaunee and Morro Bay.

Segment Review of Results Quarter-Over-Quarter

Coal – The fourth quarter 2013 operating loss was $44 million compared to a fourth quarter 2012 operating loss of $49 million. Fourth quarter Adjusted EBITDA totaled $10 million, compared to $(17) million for the same period in 2012. The $27 million improvement resulted primarily from higher realized prices and generation volumes, which led to an additional $18 million in Adjusted EBITDA, while a reduction in the delivered cost of coal contributed an additional $6 million to segment results.

Gas – The fourth quarter 2013 operating loss was $23 million, compared to an operating loss of $31 million in the same period last year. Adjusted EBITDA totaled $67 million during the fourth quarter of 2013, compared to $(2) million during the same period in 2012. Higher pricing and generation levels, particularly at our Independence and Moss Landing facilities, led to a $15 million improvement in energy margin, while capacity revenues, primarily from our Ontelaunee facility, rose by $6 million. This, together with a $6 million reduction in operating and maintenance expense and the reduction of $40 million in legacy commercial settlements, which negatively impacted the fourth quarter last year, led to the improvement in segment results.

Liquidity

As of December 31, 2013, Dynegy’s available liquidity was $1,161 million which included $843 million in cash and cash equivalents and $318 million of revolver availability under the Company’s revolving credit facility. The liquidity at Dynegy Inc. was $946 million, which included $628 million in cash and cash equivalents and $318 million in revolver capacity. Cash and cash equivalents at IPH totaled $215 million.

Consolidated Cash Flow

Cash flow provided by operations for the full year of 2013 was $175 million. For 2013, the generation business provided cash of $199 million, partially offset by interest payments to service debt related to the Gas and Coal segments credit agreements. Corporate and other operations used cash of approximately $80 million, primarily for interest payments and other general and administrative expenses. This was partially offset by $56 million in positive changes in working capital, including $34 million for the return of collateral.

Cash flow provided by investing activities totaled $474 million for the full year of 2013. Capital expenditures totaled $98 million for 2013, including $91 million in maintenance capital expenditures and $7 million in environmental capital expenditures. During 2013, there was a $335 million cash inflow related to restricted cash balances due to the release of cash collateral associated with letter of credit facilities for the Gas and Coal segments. Through the AER acquisition, which closed on December 2, 2013, the Company acquired $234 million in cash.

Cash flow used in financing activities in 2013 was $154 million. During 2013, proceeds related to refinancing, net of financing costs, of $1,751 million were more than offset by repayments of borrowings, including debt extinguishment costs, of $1,917 million.

PRIDE Reloaded

Dynegy is relaunching its successful PRIDE initiative – a cost and margin improvement and balance sheet efficiency program – to the expanded fleet of power generation facilities. Over the next three years, the Company is targeting $135 million in operating improvements and $165 million in balance sheet efficiencies. Nearly fifty specific initiatives have been identified that will reduce the Company’s annual fixed cash operating costs. Gross margin improvements are anticipated to come from improved fuel sourcing and transportation and fleet availability. Dynegy is continuing to use the PRIDE initiative to improve operating performance, cost structure and the balance sheet to drive recurring cash flow benefits.

2014 Guidance

Dynegy 2014 total Adjusted EBITDA guidance is forecasted to be between $300 million and $350 million. The 2014 Free Cash Flow guidance has been set at $10 million to $60 million. The guidance ranges are based on February 10, 2014 commodity curves.

Investor Conference Call/Webcast

Dynegy will discuss its fourth quarter and full year 2013 financial results during an investor conference call and webcast today, February 27, 2014 at 9 a.m. ET/8 a.m. CT. Participants may access the webcast and the related presentation materials in the “Investor Relations” section of www.dynegy.com.

ABOUT DYNEGY

Dynegy's subsidiaries produce and sell electric energy, capacity and ancillary services in key U.S. markets. The Dynegy Power, LLC power generation portfolio consists of approximately 6,121 megawatts of primarily natural gas-fired intermediate and peaking power generation facilities. The Dynegy Midwest Generation, LLC portfolio consists of approximately 2,980 megawatts of primarily coal-fired baseload power plants. The Illinois Power Holdings, LLC portfolio consists of approximately 4,062 megawatts of primarily coal-fired baseload power plants. Homefield Energy is a retail electricity provider serving businesses and residents in Illinois.

This press release contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements,” particularly those statements concerning volatility in near term natural gas and power prices; execution of its PRIDE reloaded target in balance sheet and earnings improvements for 2014-2016, including improving operating performance, cost structure and the balance sheet to drive cash flow benefits; anticipated earnings and cash flows and 2014 Adjusted EBITDA and Free Cash Flow guidance. Historically, Dynegy’s performance has deviated, in some cases materially, from its cash flow and earnings guidance. Discussion of risks and uncertainties that could cause actual results to differ materially from current projections, forecasts, estimates and expectations of Dynegy is contained in Dynegy’s filings with the Securities and Exchange Commission (the “SEC”). Specifically, Dynegy makes reference to, and incorporates herein by reference, the section entitled “Risk Factors” in its 2013 Form 10-K (when filed). In addition to the risks and uncertainties set forth in Dynegy’s SEC filings, the forward-looking statements described in this press release could be affected by, among other things, (i) Dynegy’s anticipated benefits and expected synergies resulting from the AER acquisition and beliefs associated with the integration of operations; (ii) lack of comparable financial data due to the application of fresh-start accounting; (iii) limitations on Dynegy’s ability to utilize previously incurred federal net operating losses or alternative minimum tax credits; (iv) expectations regarding Dynegy’s compliance with its Credit Agreement, including collateral demands, interest expense, any applicable financial ratios and other payments; (v) efforts to secure retail sales and the timing of such sales; (vi) the timing and anticipated benefits to be achieved through Dynegy’s company-wide savings improvement programs, including its PRIDE initiative; (vii) efforts to identify opportunities to reduce congestion and improve busbar power prices; (viii) expectations regarding environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts and other laws and regulations to which Dynegy is, or could become, subject; (ix) beliefs, assumptions and projections regarding the demand for power, generation volumes and commodity pricing, including natural gas prices and the timing of a recovery in natural gas prices, if any; (x) sufficiency of, access to and costs associated with coal, fuel oil and natural gas inventories and transportation thereof; (xi) beliefs and assumptions about market competition, generation capacity and regional supply and demand characteristics of the wholesale and retail power generation market, including the anticipation of higher market pricing over the longer term; (xii) the effectiveness of Dynegy’s strategies to capture opportunities presented by changes in commodity prices and to manage Dynegy’s exposure to energy price volatility; (xiii) beliefs and assumptions about weather and general economic conditions; (xiv) projected operating or financial results, including anticipated cash flows from operations, revenues and profitability; (xv) Dynegy’s focus on safety and its ability to efficiently operate its assets so as to capture revenue generating opportunities and operating margins; (xvi) beliefs about the costs and scope of the ongoing demolition and site remediation efforts at the South Bay and Vermilion facilities; (xvii) beliefs regarding successful renegotiation of the IBEW Local 1245 collective bargaining agreement; (xviii) beliefs regarding redevelopment efforts for the Morro Bay facility; (xix) beliefs and assumptions regarding approval by the CPUC of the SCE 2016 transaction for Moss Landing Units 6 & 7; (xx) ability to mitigate impacts associated with expiring RMR and/or capacity contracts; (xxi) beliefs about the outcome of legal, administrative, legislative and regulatory matters; and (xxii) expectations regarding performance standards and capital and maintenance expenditures. Any or all of Dynegy’s forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, many of which are beyond Dynegy’s control.