The pipeline is only one asset...Dynegy has other assets, including the gas storage facility in the UK, which is the largest in Europe, I believe. Also consider the fact that Dynegy's non-trading operations make up 70-80% of its overall revenue.
Consensus earning projections are about $1.75 per annum, so Dynegy currently has a PE of about 6. The stock price is depressed because of fear about numerous contingencies, including a possible Moody's downgrade, the FERC investigation, the SEC probe, the California refund litigation, the shareholder suits, the Enron litigation...I can understand investors shying away due to these contingencies, but not asset valuation, where Dynegy's breakup value is about $12 per share.
I predict a rise back to the mid-teens, as one or more of these issues is resolved--starting with the expiration of Enron's right to buy back the NNG pipeline on June 30. This will enable Dynegy to sell part of its interest in the pipeline to any number of willing buyers, and use the cash to improve its balance sheet, retire some of its debt, etc., and thereby stave off a Moody's downgrade, which will bring in more buying.
Good luck all
Otter |
