Dynegy, Inc. Q4 2009 Earnings Call Transcript

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Dynegy, Inc. (DYN)

Q4 2009 Earnings Call Transcript

February 25, 2010 10:00 am ET

Executives

Norelle Lundy – VP, Investor and Public Relations

Bruce Williamson – Chairman, President and CEO

Holli Nichols – EVP and CFO

Chuck Cook – EVP, Commercial and Market Analytics

Analysts

Neel Mitra – Simmons & Company International

Lasan Johong – RBC Capital Markets

Dan Eggers – Credit Suisse

Gregg Orrill – Barclays Capital

Ameet Thakkar – Bank of America/Merrill Lynch

Andy Smith – J.P. Morgan

Brandon Blossman – Tudor Pickering

Julien Dumoulin-Smith – UBS

Brian Russo – Ladenburg Thalmann

Brian Chin – Citigroup

Craig Shere – Tuohy Brothers Investment Research

Ivana Ergovic – Jefferies

Presentation

Operator

Welcome to the Dynegy 2009 annual and fourth quarter financial results teleconference. At the request of Dynegy, this conference is being recorded for instant replay purposes. Please note that all lines will be in a listen-only mode until the question and answer portion of today's call. (Operator Instructions)

I'd now like to turn the conference over to Ms. Norelle Lundy, Vice President of Investor and Public Relations. Ma'am, you may begin.

Norelle Lundy

Good morning, everyone and welcome to Dynegy's investor conference call and webcast highlighting the company's 2009 annual and fourth quarter results. As is our customary practice before we begin this morning, I would like to remind you that our call will include statements reflecting assumptions, expectations, projections, intentions or beliefs about future events with respect to our business strategy and 2010 estimates.

These and other statements not relating strictly to historical or current facts are intended as forward-looking statements. Actual results though may vary materially from those expressed or implied in any forward-looking statement. For a description of the factors that may cause such a variance I will direct you to the forward-looking statements legend contained in today's news release and in our SEC filings which are available free of charge through our website at Dynegy.com.

With that I will now turn it over to our Chairman, President and CEO, Bruce Williamson.

Bruce Williamson

Thanks, Norelle. Good morning and thank you for joining us. With me this morning are several members of Dynegy's management team including Holli Nichols, our Chief Financial Officer.

Let's now turn to the agenda for the call which is highlighted on slide three for those of you who are following along online via the Webcast. I'll begin today with our accomplishments in 2009, a year in which Dynegy continued to operate and commercialize well in the face of some very tough economic conditions. I'll touch on our strategic achievements during the year that position us for the future.

Next, Holli will provide full year 2009 financial results, discuss annual performance drivers for each of the key regions and turn to our 2010 estimate. I'll then provide my perspective on the industry, discuss why we believe – and discuss why we believe Dynegy is a long term value play. Finally our Management team will join me in answering your questions.

Please turn to slide four. Significantly lower commodity prices reduced demand and made 2009 a very challenging year for the company and the electricity sector as a whole. Despite a tough economic landscape, Dynegy continues to execute well by staying focused on three key objectives, operating and commercializing well, prudent financial management and strategic positioning.

Here I'd like to spend a few minutes discussing our significant accomplishments in each of these areas for 2009. Starting with our operations, our base load coal fleet continued its reliable track record achieving end market availability above 90%.

Of U.S. electricity demand dropped by about 4% in 2009, our production volumes were essentially flat. This can be attributed to the diversity of our fleet and our constant focus on reliability.

On the commercial side, our strategy has helped us increase near term earnings predictability. In fact, our commercial activities more than offset lower commodity prices in 2009. We also significantly exceeded our 2009 guidance estimates and today we're reaffirming our 2010 guidance estimates. Holli will provide more details in a few minutes.

Another key accomplishment last year was our successful execution of our strategic transaction that substantially increased our liquidity and preserved a strong diversified asset base, 30% of our outstanding shares were redeemed in this transaction eliminating the dual class stock structure and associated rights and restrictions.

The transaction created 100% publicly held company for the first time in our corporate history. With cash proceeds from the transaction we then repurchased approximately 830 million of 2011 and 2012 debt obligations and we initiated a cost savings program expected to save 400 million to 450 million over the next four years. So we're now able to center our focus on the operational and commercial aspects of our business while being in a position to capitalize on expected longer term power market improvements.

With that, I'll turn the call over to Holli to discuss 2009 financial results.

Holli Nichols

Thanks, Bruce. Please turn to slide six. Before I begin I'd like to point out that this presentation does contain non-GAAP measures that are reconciled later in the presentation and fourth quarter results are also covered in the appendix of this presentation.

Now turning to full year financial results, annual adjusted EBITDA decreased only 2% from 818 million in 2008 to 803 million in 2009, despite the significant decline in market power prices and spark spreads which negatively impacted our results from generation.

The decline in market prices and spreads was more than offset by the impact of contracting 2009 volumes at higher energy prices, actively managing swap and option positions and other commercial activities.

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