Please ensure Javascript is enabled for purposes of website accessibility

Shares of Dynegy Inc. Jump 15% After Fourth-Quarter Results and Joint Venture Announcement

By Daniel Miller - Feb 25, 2016 at 3:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A couple of positive developments for Dynegy hit the headlines during Thursday trading.

Dynegy Downtown Houston. Image source: Flickr

What: Shares of Dynegy (NYSE: DYN), a company that operates power generating facilities in eight states across the United States, are trading more than 15% higher late Thursday after two developments hit the newsfeeds.

So what: Dynegy opened the trading day higher after reporting its fourth-quarter and full-year results after the market closed on Wednesday. For the full-year Dynegy reported $850 million in consolidated adjusted EBITDA, which was a $503 million increase over the prior year's results and in the middle to lower end of its $825 million to $925 million guidance range. Much of the full-year increase in adjusted-EBITDA was thanks to newly acquired assets.

On the downside, management lowered its 2016 adjusted-EBITDA guidance to between $1 billion and $1.2 billion, down from $1.1 billion to $1.3 billion. It also lowered its 2016 free cash flow guidance to $200 million to $400 million, down from $300 million to $500 million.

 "While the operating environment remains challenging due to low commodity prices and unseasonably moderate weather in the fourth quarter, we achieved our financial targets benefiting from our fuel and geographic diversity and ended the year with $1.5 billion in liquidity." said Dynegy President and Chief Executive Officer, Robert C. Flexon, in a press release.

Now what: With the fourth-quarter and full-year results only briefly available, investor attention turned to the announcement of Dynegy and Energy Capital Partners forming a joint venture to acquire ENGIE's United States Fossil Portfolio. It's a move that investors liked, sending the stock price roughly 8% higher after the announcement, and management notes that the acquisition will strengthen the company with the right assets, in the right markets, with the right structure, all at the right price.

The price checked in at $3.3 billion, or $378/kW, and the company believes it can generate $90 million in annual synergies. The deal has Dynegy and Energy Capital owning 65% and 35% of the joint venture, respectively, with Dynegy responsible for day-to-day management and operations. 

Daniel Miller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.