Closing Engie Deal Seen as High Priority for Dynegy (DYN), Co. Issues Formal Response to FERC - Deutsche Bank

Dynegy (NYSE: DYN) filed its formal response to FERC's conditional approval of its acquisition of assets from Engie. Deutsche Bank analyst Abe Azar highlighted that this comes just 6 calendar days (most of which were holidays) after FERC's order, confirming to them that closing the transaction as expeditiously as possible is of the highest priority at DYN.

Azar commented, "As a reminder, FERC argued that DYN would be a pivotal supplier in key capacity zones ComEd for PJM and SENE for New England and needs to propose mitigation to address FERC’s concerns. As we highlighted in our note last week, FERC’s assessment of DYN’s market power in ComEd was somewhat curious with their assumption that EXC’s Quad Cities closes (despite acknowledging the IL legislation targeted at saving challenged nuclear plants), and failing to give credit for DYN’s divestiture of its 50% interest in Ellwood. In its response, DYN argues to FERC that once those 2 errors are corrected DYN is no longer a pivotal supplier in ComEd and no additional mitigation should be required. That said, DYN agreed to divest 327 MW in ComEd, equal to the amount of capacity it is acquiring from Engie, should FERC find its arguments unconvincing. In the SENE zone, DYN and ECP agreed to divest 224 MW representing capacity owned by DYN and ECP prior to acquiring Engie, such that the Engie portfolio’s SENE market power is unchanged. While a forced accelerated divestiture process is never the optimal outcome, in this case it is not all bad as DYN has indicated a desire to sell several assets to bring down its debt ratios."

The firm maintained a Hold rating and price target of $8 on DYN.

For an analyst ratings summary and ratings history on Dynegy click here. For more ratings news on Dynegy click here.

Shares of Dynegy closed at $8.60 yesterday.

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