Dynegy Announces Full-Year 2012 Results

Dynegy Announces Full-Year 2012 Results

Full-year 2012 summary:

• $57 million in Enterprise-wide Adjusted EBITDA, a decrease of $224 million compared to 2011

• $(81) million in combined Cash Flow from Operations, $215 million in Free Cash Flow

• $592 million in liquidity at March 8, 2013, including $370 million in cash on hand and $153 million in revolver and letter of credit availability

• PRIDE results exceeded targets with $44 million in operating margin and cost improvements and $148 million in incremental liquidity from balance sheet improvements

Fourth quarter 2012 summary:

• $(42) million in Enterprise-wide Adjusted EBITDA, a decrease of $28 million compared to the fourth quarter 2011

• Repaid $325 million of the Dynegy Power, LLC (GasCo) and Dynegy Midwest Generation, LLC (CoalCo) term loans

• Completed the Baldwin Unit 2 planned outage marking the Company's completion of the environmental compliance capital obligations under our Consent Decree

• Completed the Chapter 11 process and emerged from bankruptcy on October 1, 2012

Recent Developments and Capital Allocation:

• Today, Dynegy announced, in a separate news release, that it has entered into a definitive agreement to acquire Ameren Energy Resources (AER), comprised of 4,119 MW of generating capacity and the associated retail and marketing businesses

• On January 16, 2013, GasCo entered into a new $150 million revolving credit agreement, improving our corporate liquidity profile. The revolver is available for working capital requirements and general corporate purposes within GasCo.

HOUSTON--(BUSINESS WIRE)-- Dynegy Inc. (NYS: DYN) reported full-year 2012 Enterprise-wide Adjusted EBITDA of $57 million compared to $281 million for the same period in 2011. Lower realized prices for the Coal segment, lower revenues from the termination of certain California contracts, and the settlement of legacy financial positions reduced Adjusted EBITDA for the Coal and Gas segments by $305 million. Partially offsetting these items were an $18 million improvement in Coal and Gas segments operating and maintenance expenses, a $27 million improvement in spark spreads, net of hedges and basis, in the Gas segment, and a $38 million positive adjustment for non-cash amortization related to the Gas segment's Independence contract. The Company's operating loss was $99 million for the full-year 2012 compared to an operating loss of $189 million for the same period in 2011.

"2012 was a transformative year for Dynegy. We completed the majority of our financial and organizational restructuring during the year and now have one of the strongest balance sheets in the merchant generation sector. Both our coal and gas fleets had strong operational performance in 2012 despite pressure on power prices from low natural gas prices," said Robert C. Flexon, Dynegy President and Chief Executive Officer. "Our work in 2012 allows us to further focus on executing daily operations, strategic priorities including capital allocation, successfully closing the AER acquisition and completing a corporate-level refinancing. We are committed to maintaining and building upon our financial strength and affirm the 2013 Adjusted EBITDA and cash flow guidance that we provided during our January 2013 investor meeting."

Fourth quarter 2012 Enterprise-wide Adjusted EBITDA was $(42) million compared to $(14) million for the same period in 2011. The weaker financial results were primarily driven by lower realized power prices for the Coal segment, due to lower hedge prices and increased basis differentials, which decreased energy margins by $62 million. Unfavorable financial settlements of $29 million related to legacy financial positions for the Gas segment were more than offset by a $34 million increase in operating margin due to improved spark spreads, net of hedges and basis, and the absence of a $34 million loss on commercial activities which occurred in 2011. The 2012 fourth quarter operating loss was $104 million compared to an operating loss of $105 million for the same period in 2011.

Full-Year Comparative Results

The non-GAAP financial measures of EBITDA and Adjusted EBITDA are used by management to evaluate Dynegy's business on an ongoing basis. For comparative purposes, the Adjusted EBITDA results below include the results of Dynegy Inc. for the full-years 2012 and 2011 and the three months ending December 31, 2012 and 2011. As a result of the application of fresh-start accounting as of the Plan Effective Date, the financial statements on or prior to October 1, 2012 are not comparable with the financial statements after October 1, 2012. Please refer to our 2012 Form 10-K (when filed) for greater discussion of the accounting impacts of the Dynegy Inc. and DH merger, our emergence from Chapter 11 and fresh-start accounting on our GAAP financial statements. The following table presents a reconciliation of operating income (loss) to Adjusted EBITDA and combines the results of the period from January 1, 2012 through October 1, 2012 (the 2012 Predecessor Period) and the period from October 2, 2012 through December 31, 2012 (the Successor Period). We believe a combined presentation provides a more meaningful comparison to 2011 results. For convenience purposes, the Successor Period is referred to as the three months ended December 31, 2012 throughout. General and administrative expenses are not allocated to each segment. Management does not analyze interest expense and income taxes on a segment level and therefore uses operating income (loss) as the most directly comparable GAAP measure to Adjusted EBITDA when performance is evaluated on a segment level.

Segment Review of Results Year-Over-Year

Coal - The full-year 2012 operating loss was $112 million, compared to a full-year 2011 operating loss of $38 million. Adjusted EBITDA, before the allocation of corporate general and administrative expense, totaled $20 million during 2012 compared to $243 million in 2011. Lower energy margins due to lower realized power prices partially from higher basis differentials were responsible for $191 million of the negative variance. An increase in year-over-year outages and lower off-peak generation volumes in response to market pricing resulted in an additional $29 million decrease in Coal segment results.

Gas - Full-year 2012 operating income was $97 million, compared to a full-year 2011 operating loss of $37 million. Adjusted EBITDA, before the allocation of corporate general and administrative expense, totaled $122 million during 2012 compared to $155 million in 2011. While Gas segment generation increased 71% primarily due to improved spark spreads, the $27 million in higher energy margins, net of hedges and basis, was more than offset by $37 million in lower tolling and capacity revenues due to the early cancellation of agreements in California. Further, the settlement of $77 million in legacy put options together with a $20 million reduction in option premium revenue led to lower 2012 Adjusted EBITDA despite a $38 million positive adjustment for non-cash amortization related to the Independence contract and the absence of a $34 million commercial loss incurred in 2011.