This wasn't quite what I had in mind. I was hoping to set up Dynegy
For the fourth quarter, Dynegy reported that revenues rose 90%. However, its operating loss also rose considerably, and the loss from continuing operations was about 73% higher as well.
As with NRG Energy (and many other similar companies in the independent power generation business), earnings can be a little misleading. Unfortunately, EBITDA from continuing operations was nearly twice as bad as last year's numbers, and free cash flow for the year was negative, according to my more straightforward calculation (operating cash flow minus capital expenditures). Then again, if you add back the cash collateral commitment the company had to make, free cash flow would have been positive.
It also didn't help that Dynegy lowered its guidance for both EBITDA and free cash flow. While higher commodity costs may be to blame, when do investors ever really think that lower is better?
That said, I still believe that there are two important longer-term trends starting to play out here. First, overall power pricing seems to be improving (provided that recent declines in natural gas prices don't extend even lower). Second, the company's contracts with Ameren
There's also renewed interest in consolidation in the power business. Even Warren Buffett of Berkshire Hathaway
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
