Dynegy sells electric energy primarily on a wholesale basis from its power generation coal plants in the Midwest and Massachusetts, and natural gas plants in the Midwest, Northeast and California. The company also serves residential, municipal, commercial and industrial customers in Illinois, Ohio and Pennsylvania.
|Most recent||Growth rate (CAGR)|
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|Book value of equity per share||$13.17||5.1%||-12.1%||—|
|BV including aggregate dividends||5.1%||-12.1%||—|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
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A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
On March 29, 2007, at a special meeting of the shareholders of Dynegy Illinois, the shareholders of Dynegy Illinois (i) adopted the Plan of Merger, Contribution and Sale Agreement, dated as of September 14, 2006, by and among Dynegy, Dynegy Illinois, Falcon Merger Sub Co., an Illinois corporation and a then-wholly owned subsidiary of Dynegy (Merger Sub), LSP Gen Investors, L.P., LS Power Partners, L.P., LS Power Equity Partners PIE I, L.P., LS Power Equity Partners, L.P. and LS Power Associates, L.P. (LS Associates and, collectively, the LS Contributing Entities) and (ii) approved the merger of Merger Sub with and into Dynegy Illinois (the "Merger"). On April 2, 2007, in accordance with the Merger Agreement, (i) the Merger was effected, as a result of which Dynegy Illinois became a wholly owned subsidiary of Dynegy and each share of the Class A common stock and Class B common stock of Dynegy Illinois outstanding immediately prior to the Merger was converted into the right to receive one share of the Class A common stock of Dynegy, and (ii) the LS Contributing Entities transferred all of the interests owned by them in entities that own 11 power generation facilities to Dynegy (the Contributed Entities). As part of the transactions contemplated by the Merger Agreement, LS Associates transferred its interests in certain power generation development projects to DLS Power Holdings, LLC, a newly formed Delaware limited liability company (DLS Power Holdings), and contributed 50% of the membership interests in DLS Power Holdings to Dynegy. In addition, immediately after the completion of the Merger, LS Associates and Dynegy each contributed $5 million to DLS Power Holdings as their initial capital contributions, and also contributed their respective interests in certain additional power generation development projects to DLS Power Holdings. In connection with the formation of DLS Power Holdings, LS Associates formed DLS Power Development Company, LLC, a Delaware limited liability company (DLS Power Development). LS Associates and Dynegy each now own 50% of the membership interests in DLS Power Development. The aggregate purchase price was comprised of (i) $100 million cash, (ii) 340 million shares of the Class B common stock of Dynegy, (iii) the issuance of a promissory note in the aggregate principal amount of $275 million (the Note) (which was simultaneously issued and repaid in full without interest or prepayment penalty), (iv) the issuance of an additional $70 million of project-related debt (the Griffith Debt) (which was simultaneously issued and repaid in full without interest or prepayment penalty) via an indirect wholly owned subsidiary, and (v) transaction costs of approximately $52 million, approximately $8 million of which were paid in 2006. The Class B common stock issued by Dynegy was valued at $5.98 per share, which represents the average closing price of Dynegys common stock on the New York Stock Exchange for the two days prior to, including, and two days subsequent to the September 15, 2006 public announcement of the Merger, or approximately $2,033 million. Dynegy funded the cash payment and the repayment of the Note and the Griffith Debt using cash on hand and borrowings by DHI (and subsequent permitted distributions to Dynegy) of (i) an aggregate $275 million under the Revolving Facility (as defined below) and (ii) an aggregate $70 million under the new Term Loan B (as defined below). Please read Note 6DebtFifth Amended and Restated Credit Facility for further discussion. We paid a premium over the fair value of the net tangible and identified intangible assets acquired due to the (i) scale and diversity of assets acquired in key regions of the United States; (ii) financial stability, and (iii) proven nature of the LS Power asset development platform that were subsequently contributed to DLS Power Holdings and DLS Power Development.
We consummated our transactions (the "LS Power Transactions") with LS Power in two parts, with the issuance of notes by DHI on December 1, 2009, and the remainder of the transactions closing on November 30, 2009. At closing, Dynegy received: (i) $936 million in cash, net of closing costs (consisting, in part, of (a) the release of $175 million of restricted cash on our consolidated balance sheets that was used to support our funding commitment to the Sandy Creek Project and (b) $214 million for the notes issued by DHI), and (ii) 245 million shares of Dynegy's Class B common stock from LS Power. In exchange, Dynegy sold to LS Power five peaking and three combined-cycle generation assets, as well as its remaining interest in the Sandy Creek Project under construction in Texas (the "Sandy Creek Project"), and DHI issued the notes to an affiliate of LS Power. The remaining 95 million shares of Dynegy's Class B common stock held by LS Power were converted into the same number of shares of Dynegy's Class A common stock, representing approximately 15 percent of Dynegy's Class A common stock outstanding.
As previously disclosed, on November 7, 2011, Dynegy Holdings, LLC ("DH") and four of its wholly-owned subsidiaries, Dynegy Northeast Generation, Inc., Hudson Power, L.L.C., Dynegy Danskammer, L.L.C. ("Danskammer") and Dynegy Roseton, L.L.C. ("Roseton") (collectively, the "Debtor Entities"), filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York, Poughkeepsie Division (the "Bankruptcy Court" and such petitions, collectively, the "DH Chapter 11 Cases"). As also previously disclosed, on May 30, 2012, Dynegy Inc. ("Dynegy"), Dynegy Gas Investments, LLC ("DGIN"), Dynegy Coal Holdco, LLC ("Coal Holdco"), the Debtor Entities and certain of the Debtor Entities' creditors representing DH's major creditor constituencies (collectively, the "Settlement Parties") entered into an amended and restated settlement agreement (the "Amended Settlement Agreement") and an amended and restated plan support agreement (the "Amended Plan Support Agreement" and, together with the Amended Settlement Agreement, the "Amended Agreements"), pursuant to which Dynegy and DH each agreed, subject to the terms of the Amended Plan Support Agreement, to amend the DH plan of reorganization to reflect the terms contained in the Amended Plan Support Agreement. Pursuant to the Amended Agreements, on June 8, 2012, the Plan Proponents filed a Third Amended Chapter 11 Plan of Reorganization (the "Third Amended Plan") and a related disclosure statement for DH with the Bankruptcy Court. On June 18, 2012, the Plan Proponents filed a Modified Third Amended Chapter 11 Plan of Reorganization (the "Modified Third Amended Plan" and as further amended and modified, the "Plan") and a related disclosure statement (the "Disclosure Statement") with the Bankruptcy Court reflecting certain amendments to the Third Amended Plan pursuant to agreements reached among the Plan Proponents and DH's major creditor constituencies. In connection with the reorganization of DH and pursuant to the Plan, on July 6, 2012, Dynegy filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Southern District of New York, Poughkeepsie Division (the "Dynegy Chapter 11 Case"). The Dynegy Chapter 11 Cases are primarily a technical step necessary to facilitate the restructuring contemplated by the Plan and the Amended Agreements, including the merger of Dynegy and DH. Also on July 6, 2012, and in connection with the Dynegy Chapter 11 Case, Dynegy submitted a first day motion to the Bankruptcy Court seeking to have the relief entered in the DH Chapter 11 Cases made applicable to Dynegy. This motion, among other things, contemplates that the Plan Proponents will modify the Plan and the Disclosure Statement such that they constitute a plan of reorganization and disclosure statement for both DH and Dynegy, as debtors thereunder, and will modify the Plan solicitation materials such that they reflect the commencement of the Dynegy Chapter 11 Case. Dynegy and the Debtor Entities are the only entities that have filed for Chapter 11 protection. Dynegy Coal Holdco, LLC and Dynegy GasCo Holdings, LLC and their indirect, wholly-owned subsidiaries (including Dynegy Midwest Generation, LLC and Dynegy Power, LLC) are not included in the Dynegy Chapter 11 Case or DH Chapter 11 Cases. The normal day-to-day operations of the coal-fired power generation facilities held by Dynegy Midwest Generation, LLC and the gas-fired generation facilities held by Dynegy Power, LLC will continue without interruption. The commencement of the Dynegy Chapter 11 Case does not constitute a default under the first lien credit facilities at Dynegy Midwest Generation, LLC or at Dynegy Power, LLC. Additionally, Dynegy has requested that it continue to operate its business as "debtor-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
On September 30, 2012, pursuant to the terms of the Joint Chapter 11 Plan of Reorganization (the "Plan") for Dynegy Holdings, LLC ("DH") and Dynegy Inc. ("Dynegy"), DH merged with and into Dynegy, with Dynegy continuing as the surviving legal entity (the "Merger"). In addition to the Merger, the Plan included the following key elements: (i) On the Effective Date, all of Dynegy's Equity Interests, including Dynegy's old common stock, were cancelled. (ii) Each holder of Allowed General Unsecured Claims received its Pro Rata Share of (a) 99 million shares of Dynegy Common Stock and (b) a $200 million cash payment (the "Plan Cash Payment"). (iii) In full satisfaction of the Dynegy Administrative Claim (otherwise referred to herein as the "Administrative Claim"), the beneficial holders thereof (which were the holders of Dynegy's old common stock) received their Pro Rata Share of (a) one million shares of Dynegy Common Stock and (b) warrants to purchase approximately 15.6 million shares of Dynegy Common Stock for an exercise price of $40 per share (subject to adjustment) expiring on October 2, 2017 (the "Warrants").
For financial reporting purposes, close of business on October 1, 2012, represents the date of our emergence from bankruptcy.
On October 14, 2014, we issued 22,500,000 shares, pursuant to a registered public offering, of our common stock at $31.00 per share for gross proceeds of approximately $698 million.
On February 25, 2016, we announced the acquisition of certain power generation facilities from International Power, S.A., a wholly owned subsidiary of ENGIE, through a joint venture with Energy Capital Partners (ECP), for a purchase price of approximately $3.3 billion. The acquisition includes approximately 8,700 MW located in ERCOT, PJM and ISO-NE. Of the 8,700 MW, approximately 8,000 MW are modern, efficient natural gas facilities with the remaining 700 MW being environmentally compliant coal facilities. We expect the transaction to close in the fourth quarter of 2016 after meeting customary conditions, including regulatory approvals from FERC, the Public Utility Commission of Texas, and the expiration of Hart-Scott-Rodino waiting periods.