Dynegy Expects 50% Increase in 1Q Earnings

Dynegy Inc. reported last week that it expects to release first-quarter earnings per share of $0.40, a 50% increase over last year's first quarter level of $0.26 per share and a 25% increase over the company's previous expectations for the quarter of $0.30-$0.32 per share. Dynegy said it captured significant value from strong industry fundamentals in both gas and power by leveraging its national position as a physical supplier of energy commodities, while mitigating the risk from commodity volatility.

Increased utilization of power generation assets contributed to the strong performance, as did Dynegy's electronic commerce portal, Dynegydirect, which went live November 2000, recording more than $9 billion in notional transactions since its start. Due to higher price realization and strong wholesale marketing operations, the company's midstream liquids unit also is expected to report improved results. Dynegy said its transmission, distribution and communications segments are expected to stay in-line with the company's previous expectations for the first quarter 2001.

Based on the revised first-quarter expectations, Dynegy also reported that it is raising its full-year 2001 earnings forecast to a range of $1.92 to $1.97 per share from its previous estimate of $1.80 to $1.87 per share. The company said the new estimate will represent an increase in EPS of more than 35% compared to 2000's $1.43 per share.

Upon Dynegy's announcement, UBS Warburg reported that it is now more comfortable loosening up its conservative estimates for the company. UBS raised its 2001 EPS estimate for Dynegy from $1.80 to $1.95, and its preliminary 2002 EPS from $2.15 to $2.35. The firm said the upward revisions are based on its expectation's for a "continued robust pricing/volatility gas and power environment for at least the next 12-18 months."

UBS expressed some reservations about the continuation of strong industry fundamentals. "This outlook continues to be clouded by the ongoing mess in California as well as growing concerns that this 'party' is going to come to an end sooner, rather than later," UBS Warburg said in a research note Monday. The company rated Dynegy a "buy."

Dynegy said it will release its complete first quarter 2001 earnings on April 17.

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