Dynegy Inc. DYN recently announced the closure of $119 million sale transaction of its Dighton & Milford energy facilities to Starwood Energy Group Global.
Per the deal, proceeds generated will be used toward debt reduction purposes.
Dynegy’s Effortsto Reduce Debt
Dynegy has been working on reducing its debt burden for quite some time now. The sale of its Dighton & Milford energy assets will aid the company to lower debt level and is in line with the steps taken by the company to strengthen balance sheet and lower the cost of servicing its debt capital.
The company exited the second quarter with total long-term debt of $9.2 billion as of June 30, 2017 compared with nearly $8.8 million at the end of 2016. Even with significant debt reduction steps undertaken by it early on during the year, the company’s debt-to-capital ratio is currently pegged at 79.16%, much higher than the S&P 500 level of 41.80%.
During the month of July, Dynegy had made the announcement of its intention to divest approximately $780 worth of assets and use the sale proceeds for reducing debt burden. (Read more: Dynegy (DYN) to Sell Assets Worth $780M to Lower Debt Burden)
The company has a reputation of being the lowest cost operator in the country. With its current aim of lowering debt burden, the company has directed focus to make the most of its current fleet and utilize outside resources to help bolster current efforts to deliver cost efficient power to customers.
Toward this, the company has been taking steps to exceed expectations with its PRIDE (Producing Results through Innovation by Dynegy Employees) program and looking for opportunities to launch the next phase. The PRIDE program was launched to drive recurring cash flow benefits and improve balance sheet efficiency of the company by optimizing cost structure along with implementing process and operating improvements.
It currently serves approximately 550 communities across Illinois, Massachusetts & Ohio, and is further anticipating to expand generation portfolio and footprint across more states.
Dynegy has lost 25.8% in the last 12 months, significantly lower than the 6.4% gain of its industry.
Such underperformance can be attributed to Dynegy’s existing debt burden. Along with this, the company’s lower energy margins during the beginning of 2017 hurt the company’s performance.
Stocks to Consider
Dynegy currently carries a Zacks Rank #3 (Hold).
Better-ranked players from the same space include the likes of Algonquin Power & Utilities Corp. AQN, NextEra Energy, Inc. NEE and NorthWestern Corporation NWE. All these three stocks carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Algonquin Power delivered an average surprise of 55.89% in the trailing four quarters. Its 2017 estimates have risen by 14% to 49 cents per share in the last 60 days.
NextEra delivered an average surprise of 4.28% in the trailing four quarters. Its 2017 estimates have risen by 0.3% to $6.67 per share in the last 60 days.
NorthWestern delivered an average surprise of 1.71% in the trailing four quarters. Its 2017 estimates have risen by 0.3% to $3.41 per share in the last 60 days.
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