HOUSTON Aug 7, 2015 (Thomson StreetEvents) -- Edited Transcript of Dynegy Inc earnings conference call or presentation Friday, August 7, 2015 at 1:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Rodney McMahan Dynegy Inc. - Managing Director, IR * Bob Flexon Dynegy Inc. - President & CEO * Hank Jones Dynegy Inc. - EVP & CCO * Clint Freeland Dynegy Inc. - EVP & CFO ================================================================================ Conference Call Participants ================================================================================ * Greg Gordon Evercore ISI - Analyst * Julien Dumoulin-Smith UBS - Analyst * Michael Lapides Goldman Sachs - Analyst * Steve Fleishman Wolfe Research - Analyst * Andy Bischof Morningstar Equity Research - Analyst * Jonathan Arnold Deutsche Bank - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Hello, and welcome to the Dynegy Incorporated second-quarter 2015 financial results teleconference. (Operator Instructions). I'd now like to turn the conference over to Mr. Rodney McMahan, Managing Director, Investor Relations. Sir, you may begin. -------------------------------------------------------------------------------- Rodney McMahan, Dynegy Inc. - Managing Director, IR [2] -------------------------------------------------------------------------------- Thank you, Keno. Good morning, everyone and welcome to Dynegy's investor conference call and webcast covering the Company's second-quarter 2015 results. As is our customary practice, before we begin this morning, I would like to remind you that our call will include statements reflecting assumptions, expectations, projections, intentions or beliefs about future events and views of market dynamics. These and other statements not relating strictly to historical or current facts are intended as forward-looking statements. Actual results though may vary materially from those expressed or implied in any forward-looking statements. For a description of the factors that may cause such a variance, I would direct you to the forward-looking statements legend contained in last night's news release and in our SEC filings, which are available free of charge through our website at Dynegy.com. With that, I will now turn it over to our President and CEO, Bob Flexon. -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [3] -------------------------------------------------------------------------------- Good morning and thank you for joining us today. With me today are Clint Freeland, our Chief Financial Officer; Hank Jones, our Chief Commercial Officer; Catherine Callaway, our Executive Vice President and General Counsel; Sheree Petrone, our Executive Vice President of Retail; Dean Ellis, our Vice President of Regulatory Affairs; and Carolyn Burke, Executive Vice President of Business Operations and Systems. We posted our earnings release presentation and management's prepared remarks on our website last night. Following a few opening remarks, we will devote the bulk of our scheduled time to your questions. Our safety performance improved during the first six months of 2015 and for the first time includes the workforce associated with our acquisitions that closed at the beginning of April. Following a successful winter preparedness program in which no weather-related injuries occurred, the entire fleet completed the equivalent summer preparedness activities with the goal of duplicating the success of the winter program. Adjusted EBITDA for the second quarter was $193 million versus $38 million during the same period last year. In highlighting just how important these recent acquisitions are and will be to Dynegy, the second-quarter adjusted EBITDA contribution from the newly acquired businesses was $157 million. The location of the acquired combined cycle plants provide highly advantageous access to lower-cost natural gas supplies that result in strong spark spreads even in periods of low demand and low commodity prices. Power demand during the second quarter was adversely impacted by weather trends throughout our core markets. As can be found in the presentation slides, June temperatures were below average and precipitation was much higher throughout our core markets with Illinois and Ohio recording the wettest June in over 120 years. Three PJM capacity auctions are scheduled to occur over the next few weeks. Dynegy is differentially positioned to benefit from these auctions given the size, the location and the diversification of our PJM fleet. The 2016/2017 transitional auction provides a particularly unique opportunity as approximately 9000 megawatts of the Company's fleet is in PJM West with a prior capacity price cleared at $59 a megawatt day and about 1400 megawatts are in the East with a prior capacity price cleared at prices of up to $119 a megawatt day. In order for PJM to reach their 60% target of transitioning capacity to its capacity performance product, the clearing price will likely be set in the East above the previously cleared $120 a megawatt day. This would result in a substantial uplift to the Company's capacity revenues. For the past couple of months, the sector has experienced a broad equity selloff, which has also impacted Dynegy's equity price. With the Company's investment thesis well intact, the potential catalyst of the upcoming PJM capacity auctions and the continuing rationalization of supply in our core markets, this presents a compelling investment opportunity in our own equity. Previously, at Investor Day, we indicated that in November of this year we would be announcing our capital allocation plans. However, in light of these current market conditions and this compelling opportunity, we have accelerated our plans and have announced today the launching of a $250 million share repurchase program. This, combined with $100 million of capital utilized to reduce the equity issuance to fund the EquiPower and Brayton Point acquisitions in April, brings total capital allocated to share repurchases this year to $350 million. At this point, Keno, I'd like to open up the session for questions and answers. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions). Greg Gordon. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [2] -------------------------------------------------------------------------------- Thanks. Great quarter and thank you for the capital allocation decision. I'm looking through your slides really quickly here and I don't know if you've -- I don't see that you've tried to calculate it, but given that you are confident that a MAAC unit is a unit that must clear the 2016/2017 transitional auction, do you have a rule of thumb on what the EBITDA would be on an annualized basis if all your CP-eligible units just cleared at the last MAAC price? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [3] -------------------------------------------------------------------------------- What we did, Greg, for that -- and first of all, under the current design of the transitional auction, in our math, we do see that the price -- they're going to need megawatts from the East to reach their target of 60% of transitioning to the capacity product and as a result, you're going to need the megawatts in the West, then a good portion of the megawatts in the East to actually get there. So we do believe that's where the price will be set. What we did indicate on page 17 is a footnote that said so for every $10 per megawatt day increase above the prior zonal clear equals $40 million of EBITDA times the percentage of your megawatts, which you clear, so you just have to make an assumption on how many of our call it nearly 11,000 megawatts gets transitioned as the percentage that you'd have to apply to that. And I would say that certainly we expect the vast majority of our megawatts to clear, but not all. There's some peaking units that probably won't be in that clearing, so you have to put that bit of a sensitivity around there. But our average all-in price in the 2016/2017 auction was, Hank, I think it was around $70 or so, so (multiple speakers). It's in the footnote, so to the extent that you clear above that, that's the math that you would do. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [4] -------------------------------------------------------------------------------- Okay. So MAAC cleared at just around $120 in that auction and your average price was $70, so we're talking about, at a minimum, a $50.01 uplift on whatever percentage of your megawatts re-clear at --? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [5] -------------------------------------------------------------------------------- That's right. If that was the math, that would be a $200 million uplift times the percentage of the megawatts we clear. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [6] -------------------------------------------------------------------------------- Right. Annualized. So you get half of that in essentially Q3 and Q4 of 2017? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [7] -------------------------------------------------------------------------------- That's right. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [8] -------------------------------------------------------------------------------- Perfect. Thank you very much. Have a good morning. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS. -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS - Analyst [10] -------------------------------------------------------------------------------- So just a clarification on the adjusted EBITDA outlook that you gave at the time of the Analyst Day, where do you stand mark-to-market on the $1.3 billion base case? I imagine that hasn't moved much, but I just wanted to confirm that given your guidance. -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [11] -------------------------------------------------------------------------------- The only thing I would say to that, Julien, the only I'd say the most material movement would have been in the MISO coal fleet we've seen at the very far end of that range in terms of time -- the 2018 timeframe. We've seen some reduction in energy price there offset by lower coal costs. So that's really where the only movement has been. That's the majority of any movement that's occurred. -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS - Analyst [12] -------------------------------------------------------------------------------- Got it. And then just if you'll take that a little bit -- you obviously talked about having some assumptions later in there around PJM and MISO at the time of your Analyst Day. Just wanted to circle back to that if you would, make sure we're all very clear about -- as a proportion of MISO versus PJM in terms of the assumptions you were making, you kind of alluded to a couple hundred million. I imagine the bulk of that is MISO rather than necessarily PJM, but I just wanted to get a sense if you could break it down like percentagewise of the couple hundred million? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [13] -------------------------------------------------------------------------------- Well, I won't put necessarily a fine quantitative number on it, but let me just provide some further explanation of that. At the time of the Investor Day where the rules of capacity performance were still being developed, we, at that point, had not made the assumption that it would be just one clearing price. It could be zonal. Since that point in time, the rules have obviously been finalized and it is going to be one clearing price across the entire RTO -- across the entire PJM network. So then what we had in our numbers around a PJM uplift was a fairly minor number. So now going back to the discussion with Greg, just assumed that it cleared where Eastern MAAC cleared last time at $120, it's going to be a significant portion of that unpriced capacity and then any difference, which was the unpriced capacity for MISO, would be what you would need to achieve to fill the bucket or pretty modest amounts at prices that are less than capacity that we already have sold in MISO. So I think since Analyst Day, I think what's different is that we had very little in there for the transitional uplift that appears under the existing design that it's going to be substantially -- you would expect it to be substantially more than what we thought, which very much narrows the amount that you need to get from MISO to fill that unpriced capacity bucket that we talked about at Investor Day and again, at prices that are in the range or below what we've been selling capacity at. -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS - Analyst [14] -------------------------------------------------------------------------------- And just to clarify, in terms of the MISO uplift, are the latest Joppa peakers -- I'll call them repowering MISOs -- are those eligible for capacity as well as energy margins? Just setting expectations there. -------------------------------------------------------------------------------- Hank Jones, Dynegy Inc. - EVP & CCO [15] -------------------------------------------------------------------------------- Yes, the Joppa CTs are actually an external resource to MISO, but they can be offered in as capacity and energy into MISO. -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS - Analyst [16] -------------------------------------------------------------------------------- Okay. So we can make an assumption that they receive at least some revenues from both sides? -------------------------------------------------------------------------------- Hank Jones, Dynegy Inc. - EVP & CCO [17] -------------------------------------------------------------------------------- Capacity and energy. -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS - Analyst [18] -------------------------------------------------------------------------------- Yes. And then, Bob, a last quick one here in terms of the share repurchase. Is there any ability to clean up large shareholders potentially? I would be curious from a corporate governance (inaudible), any restrictions around cleaning anyone up who might be wanting to get out. -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [19] -------------------------------------------------------------------------------- Julien, there's not any restrictions. I would think the only thing -- we've checked this internally as well -- if you were to transact with an affiliate, in this case Franklin, that any agreement that would reach would be need to be made public at some point in time, but there's no restrictions. We can do private transactions, block trades and the like. -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS - Analyst [20] -------------------------------------------------------------------------------- Excellent. Thank you very much. Congrats on the repurchase and talk to you soon. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs. -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs - Analyst [22] -------------------------------------------------------------------------------- Just a bigger PJM question, not really a CP one, but broader market. There seems to be -- we all know there's been a lot of coal plant retirements, but there seems to be, I don't know, virtually every week or so another announcement of a financing for a new combined cycle. Just curious for your view over the next three or four years, four or five years how much capacity of combined cycle you see coming online and how you think that impacts both energy and capacity markets? -------------------------------------------------------------------------------- Hank Jones, Dynegy Inc. - EVP & CCO [23] -------------------------------------------------------------------------------- History tells us that only about 20% of the announced newbuilds in PJM ever get built and over the last 5, 10 years, the average -- it's 4 to 5 gigs is what gets installed in PJM. So we would expect it's a normal response given the bullish outlook on capacity performance that newbuild projects would start lining up and going through their exercise. Again, we expect only a portion of those to be built. Concurrent with that, we expect a part of the purpose of the PJM capacity performance product is to weed out unreliable units. So as we discussed at Investor Day, it's our view that concurrent with newbuild arriving on the scene that there will be retirements of assets that are not up to performance -- up to CP standards. -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs - Analyst [24] -------------------------------------------------------------------------------- Got it. Okay. The other thing -- and this is a separate topic. Can you give an update just on your thoughts on the California portfolio? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [25] -------------------------------------------------------------------------------- Michael, not much has changed on the California portfolio. We are still waiting to get work through the gas delivery rate case that is up in the air. That's kind of a big pivot point on value of the facility and still the timing around that, assuming that there's no settlement is the fourth quarter of this year. And once we have got clarity on the rates for transporting gas to the facility, it will really clear up the value of what Moss Landing is worth because right now, again, if you make assumptions, minor movements in the assumption has a significant impact on the value. So we've got to get through that before there's much different about California. -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs - Analyst [26] -------------------------------------------------------------------------------- Much appreciate it, guys. Thank you for taking my questions. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research. -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research - Analyst [28] -------------------------------------------------------------------------------- Could you talk maybe a little bit about the timing of buybacks relative to cash availability and how much can you do sooner than later within this target by year-end 2016? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [29] -------------------------------------------------------------------------------- Sure. As an overall premise, we would never make a move on repurchasing shares if we felt it put our liquidity at a point that we are not comfortable with. So anything we do is always in the context of never sacrificing the balance sheet. Now that said, when we look at our cash position now, and our liquidity, we view that we can get, I would say, in the first half -- I mean for the balance of this year, we'll put a pretty good dent into it. I think this year we could get maybe upwards to half of it done in a base case scenario, but in times like this when the equity value across the sector has done what it has done, this is when you take a step back as a management team and say we have to double down our efforts on our PRIDE initiatives, particularly as they are around the balance sheet and find ways to get more efficient cash out of the balance sheet and deploy it for things like this. So if you noticed on our PRIDE slides, on our balance sheet, it says 29 plus. That plus we are targeting to be a big plus and Clint's team's working on repositioning some collateral that's out there to free up some cash and if we are successful in doing the things that we think we can get done in the very near term around collateral and some other things, we can free up additional liquidity that would really allow us to hit the repurchases fast and in pretty good size. So that's the question, but I think the slowest we would do it is getting roughly half of it done this year, but I'm confident with the efforts that we're going to do through PRIDE that we are going to be able to do more than that, but that'll work itself out in the next few days or few weeks or so, but we will be starting the buyback into the markets as soon as we get into open periods given where our equity price is. -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research - Analyst [30] -------------------------------------------------------------------------------- Okay. And then secondly just on the year, the guidance for the lower half of the range, maybe could you just give us a little bit more -- I think you said based on the forwards as of July 21 and the like and just what you have seen kind of even over the last month since then or three or four weeks since then just how you are feeling that within that range? -------------------------------------------------------------------------------- Clint Freeland, Dynegy Inc. - EVP & CFO [31] -------------------------------------------------------------------------------- So as you noted, the updated guidance view is as of July 21 curves. Since then, we've seen some level of volatility in the curves, but no meaningful move. And I think when we look at the balance of the year compared to our previous expectations, really what you are seeing is a relatively balanced impact across the fleet. I think given the hedge levels on our coal assets in MISO, you are not seeing much movement there, but between PJM and New England, there's a relatively balanced impact of the recent curves on those fleets. So I'd say there are a couple of plants, particularly Kendall and Brayton and a couple of others that are kind of the lion's share of that, but again more of a broad-based move given what we've seen in the curves, really mostly through PJM and New England, but again since we've rerun our forecasts, we haven't seen a meaningful difference in our expectations to bringing it forward to today. -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research - Analyst [32] -------------------------------------------------------------------------------- Okay. Then, lastly, you seem to kind of hint at in the remarks, published remarks, at opportunities eventually come up on the coal side. Could you maybe give a little more color on what are some things that you might be able to do on coal procurement? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [33] -------------------------------------------------------------------------------- Yes, you're talking for the existing fleet? I think around on the coal side, first of all, there's a number of things happening. Certainly, the coal commodity price itself is really coming down. You're seeing now you can go and buy PRB. I think the producers are pretty much selling it pretty flat at their cost, roughly about $11 per ton. So you've seen a pretty steep decline in that. Another benefit that's offsetting kind of the inflator in your rail transportation contracts is what has happened with price of diesel and the price of diesel -- Hank, do you know the sensitivity off the top of your head on that? -------------------------------------------------------------------------------- Hank Jones, Dynegy Inc. - EVP & CCO [34] -------------------------------------------------------------------------------- Sure. Every $0.10 move in low sulfur diesel is worth about $5 million to us and it's come off about $1 per gallon since last year. -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [35] -------------------------------------------------------------------------------- I would say though, Steve, the biggest opportunity that we have, and this is similar to what we experienced when we purchased IPH, the reliability around the coal generation facilities that we purchased from Duke offers a substantial opportunity and we had lower than expected capacity factors at those plants in the second quarter because you think of some of the big plants -- Stuart, Conesville, Zimmer -- they had forced outages in high teens into the 20% range. And the Ameren fleet was kind of like that at the same time. The Ameren fleet this quarter had a weighted average forced outage rate of like 4% and part of our PRIDE effort is to drive reliability and we're full speed ahead on doing those things for the Duke fleet. And when you look at for the Duke coal fleet, the uneconomic hours of those fleets are very, very low. They're basically always in the money and these are big plants that just run and we've got -- one of the big synergies here is driving this reliability where to take those forced outage rates in the 20% range and bring them down to where they should be like we've been able to do with IPH where you have a quarter where the average is 4%, that offers substantial opportunity. Now the lost opportunity cost in the quarter was about $25 million or so. So given -- for the whole fleet. So given the low commodity prices, it didn't really penalize us a lot, but it's a significant opportunity going forward, particularly as you see power prices rise or you get into the high demand periods and then obviously the capacity performance construct, it's important to have the reliability. So we're making a lot of investment and operating practice to do what we can to bring the reliability rates in line with where they should be. And I think that offers us probably the biggest opportunity on the coal fleet. -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research - Analyst [36] -------------------------------------------------------------------------------- Great. Thank you. -------------------------------------------------------------------------------- Operator [37] -------------------------------------------------------------------------------- (Operator Instructions). Andy Bischof, Morningstar Equity Research. -------------------------------------------------------------------------------- Andy Bischof, Morningstar Equity Research - Analyst [38] -------------------------------------------------------------------------------- In your regards to your prepared remarks about the Clean Power Plan, particularly in Ohio and Illinois, can you provide additional color on the measures you expect regulators to undertake to meet your average reduction goals that give you comfort that your coal plants will not be retired? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [39] -------------------------------------------------------------------------------- The states need to come up with their plans and there isn't really any state that's going to go down the path of saying here's the rate performance that a unit has to do. You're going to have to utilize, whether it's the renewables or energy efficiency or whatever the case may be, to work down towards that average. And if you look at our fleet outside of Illinois and Ohio, the emissions rates of our fleet versus the targets that those states have to get to, we're essentially a net -- we generate less submission than what their rates are. So you are a beneficiary or providing beneficial services to that particular state in terms of bringing the average down. In Illinois and Ohio, where we have the coal plants, we are above the targeted rates to get to. So for there, it's going to be working with state agencies, state implementation plans on kind of the all of the above to get the blended rate to that level. Or what a state may do is rather than thinking about rates that go to the [mass] requirement, which is probably the more likely circumstance, which then it's a situation of using credits to help bring it down, and in a market like Illinois where you have so much coal generation and particularly coal generation that's on the margin, if you get into a credit type of scheme, then it's largely going to be a passthrough because it's going to be coal setting the price. In Ohio, that might be a little bit different because you've got more gas resources there. So it really is going to come down to we wanted to include something on the Clean Power Plan because it's obviously in the news this week and has an impact on us going forward. So that's just really some high-level thoughts. Our efforts need to be around Ohio and Illinois to make sure that the state implementation plan is a rational one that gets it to the point where the economics are right and even -- I was at a session that Gina McCarthy was at and she even said that, by 2030, she still expects 30% of the generation in this country to be coming from coal. So working through programs like this, controlling on the mass level, our plants are positioned to be fine through that and particularly since in Illinois you have coal on coal at times, it's a pass-through if it's based upon a credit. -------------------------------------------------------------------------------- Andy Bischof, Morningstar Equity Research - Analyst [40] -------------------------------------------------------------------------------- Great. Thanks. And then the outages you mentioned relating to the MISO transmission expansion plan, is that a quarter-only affect or should we continue to see outages in the remainder of the year for your coal fleet? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [41] -------------------------------------------------------------------------------- Well, I think if you look back over the past few years that certainly I've been here, it always seems that the expansion plans are frequent and forever. So they continue to be investment around transmission. I think certainly they continue to try to build out the network. And I think the positive side of it is when you look at some of the biggest congestion points that the expansion plan is meant to deal with should benefit our facilities in the South. But you're going to continue to have -- it's what they do. Those buildouts continue to happen and -- but I think it can be a benefit to us to reduce some congestion long term. And even an example of that, when we looked at all of our congestion points in Illinois, the one that was highest on the list that MTEP wasn't going to address was around Baldwin and we did the Baldwin transformer project. It's now operational and time will tell how successful it is in reducing congestion, but we would say and Hank, you can verify this, but when MISO puts out its highest congestion points in the system, Baldwin typically was always in the top 10 and we haven't seen it there since we have completed that project. -------------------------------------------------------------------------------- Hank Jones, Dynegy Inc. - EVP & CCO [42] -------------------------------------------------------------------------------- That's right. -------------------------------------------------------------------------------- Andy Bischof, Morningstar Equity Research - Analyst [43] -------------------------------------------------------------------------------- Great. Thanks so much. -------------------------------------------------------------------------------- Operator [44] -------------------------------------------------------------------------------- Jonathan Arnold, Deutsche Bank. -------------------------------------------------------------------------------- Jonathan Arnold, Deutsche Bank - Analyst [45] -------------------------------------------------------------------------------- Just on the buyback and the sizing of it and the fact that you haven't yet had the result you anticipated in the 2016/2017 auction, I know you anticipate completing this by the end of 2016, but how are you thinking about future capital allocation decisions? You were going to have an announcement in November. Is this sort of a preview of what might be a more holistic discussion in November, or will we be talking about this sometime early next year? Can you just give us a sense of how to think about (inaudible) the plan? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [46] -------------------------------------------------------------------------------- Well, I would say internally capital allocation is an evergreen discussion. We're always talking about it. We are always looking at it. Clint is tracking liquidity, cash flow and everything, so we continually will evaluate what's the best thing to do. I wouldn't expect right now any additional big announcements in November. I think what we'll be focusing on is certainly completing this repurchase as fast as we can, but there's no question that there's more to come and it's going to be more around timing. We'll have more clarity on capacity auctions whether that be the PJM ones or the MISO ones and you go through the winter and with 120 million megawatt hours generated, power price doesn't have to move much to create a lot of cash flow for us. So we will continually evaluate it and when we feel comfortable, we will follow on. So this is definitely second step. The first step is we allocated $100 million at the closing of the EquiPower deal to reduce the equity being issued at that time, which was a 3.5 million share essential buyback. So this is the second step, another $250 million and I would think that when you look at our investment opportunities, and the question came up earlier about investing in PJM and combined cycle units, we've got a fully permanent site that you could build a new combined cycle unit rate at our Ontelaunee location. But when you look at our investment opportunities, the things that climb to the top of the list when I look back are PRIDE projects, uprates and share repurchases and share repurchases are the filter that everything needs to go through and where the equity now is from my perspective, from the Company's perspective and we are in complete uniform agreement here, the opportunity to buy our shares at this price is the most compelling investment that we have right now. And we've got uprates that we can be doing at $300 a KW and we will do that, but the priority is going to be always let the capital flow where the best opportunity is and again $23 or so for our share price is a very compelling price for us to move quickly, which is why we've accelerated. -------------------------------------------------------------------------------- Jonathan Arnold, Deutsche Bank - Analyst [47] -------------------------------------------------------------------------------- Okay. So we shouldn't be thinking of the $250 million as the 2016 capital allocation? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [48] -------------------------------------------------------------------------------- That's correct. We will certainly provide updates, and I think as you get towards the end of this one, whenever that is, that we would always provide clarity on what we are seeing in the market and expectations on what's next. So you remember at Investor Day, we generate a lot of free cash flow, so we'll be very open with the market on our plans on how we think it should be allocated. -------------------------------------------------------------------------------- Jonathan Arnold, Deutsche Bank - Analyst [49] -------------------------------------------------------------------------------- Okay. And then I was going to ask about the performance of the Duke fleet given the comments in the prepared remarks and you just gave that number of $20 million to $25 million opportunity costs. Was that for just those acquired PJM assets that you cited that have the forced outages, or was that more an across-the-fleet number? -------------------------------------------------------------------------------- Clint Freeland, Dynegy Inc. - EVP & CFO [50] -------------------------------------------------------------------------------- Yes, the $20 million to $25 million is for the coal fleet both in Illinois and in Ohio and then as we look at the forced outages in the Ohio fleet, we -- or in the PJM fleet, what you saw was that Kincaid performed very well. And then when you look at the Ohio plants, that's where really most of your forced outages were really kind of across the board in that fleet. -------------------------------------------------------------------------------- Jonathan Arnold, Deutsche Bank - Analyst [51] -------------------------------------------------------------------------------- Okay. That's clear. Thank you. -------------------------------------------------------------------------------- Operator [52] -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs. -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs - Analyst [53] -------------------------------------------------------------------------------- Just one quick Clean Power Plan-related question. I know they revised the heat rate improvement or the efficiency improvement for coal plants expected. Just curious how achievable is that when you look at the fleets, when you look at your own units, when you look at the market? -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [54] -------------------------------------------------------------------------------- Well, I would say, Michael, that's what the PRIDE program does. So we've been doing this all the time and I would say it's -- I think most generators do this all the time. So I think this is the government that thinks that no one worries about efficiency because they don't. We do this every single day and if there's anything we can do in our PRIDE program to find where we're losing heat rate, whether it's heat lost through piping or variable speed fans or whatever the case may be, we do this all the time. And I would say to think that we're going to suddenly find 4%, which I think is what the Eastern interconnect target is, is -- again, that's just the government thinking that no one worries about efficiency. But, again, unlike them, we do and we do this every day. -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs - Analyst [55] -------------------------------------------------------------------------------- Got it. Thanks. Much appreciated. -------------------------------------------------------------------------------- Operator [56] -------------------------------------------------------------------------------- At this time, speakers, there are no questions. (Operator Instructions). -------------------------------------------------------------------------------- Bob Flexon, Dynegy Inc. - President & CEO [57] -------------------------------------------------------------------------------- Okay. I guess that's the conclusion of the call. I appreciate everybody calling in, asking questions and following us with great interest. Thank you very much. -------------------------------------------------------------------------------- Operator [58] -------------------------------------------------------------------------------- Thank you, speakers. That concludes today's conference. Thank you for participating. You may now disconnect.
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