Dynegy (NYSE:DYN) is utility located in the Midwest, the Northeast and the West. The company generates power (26 gigawatts of capacity) through natural gas and coal plants and is the third-largest independent power producer after NRG Energy (NYSE:NRG) and Calpine (NYSE:CPN). Dynegy's capacity includes baseload, intermediate, and peak power plants. Several years ago Dynegy entered Chapter 11 after a severe decline in power prices left it unable to service its excessive debt. After exiting from Chapter 11 the company started acquiring assets at value prices and building out its operations again. Most recently it acquired 9.0 GW in PJM and 3.4 GW in New England from Duke Energy (NYSE:DUK) and Energy Capital Partners. Since exiting Chapter 11 total Mw capacity has increased by ~2,5x.
Robert C. Flexon, whose contract was recently extended to 2018 and who bought shares at the end of 2014, and his team did a remarkable job with their PRIDE program to cut costs and increase efficiency. The Ameren acquisition got integrated much more smoothly than I expected. I have been following the company for a couple of years now, and the company tends to beat the long-term guidance. The recent acquisition in New England is likely to yield additional benefits over the next few years and powers management's EBITDA guidance for 2016 of $1.6 billon. With its current Enterprise value of $9.64 billon the company trades at roughly 6x forward EV/Ebitda. That is an attractive valuation by itself, but with management guidance generally being conservative and the company’s $3.5 billon of NOLs this is a great opportunity. It is no surprise Howard Marks (Trades, Portfolio) Oaktree Capital Management LLC is increasing its stake and now holding over 8% of shares. Continue Reading »