Why Shares of Dynegy Inc. Plunged 35% Today

By Markets Fool.com

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What happened

Shares of utility Dynegy Inc. (NYSE: DYN) fell as much as 34.6% on Wednesday after reporting third-quarter earnings. At 1:10 p.m. EDT shares were still down 32.4%.

So what

Revenue fell 3.9% to $1.18 billion in the quarter and net loss ballooned from $29 million to $254 million, or $1.81 per share. Management did say that it will hit expected adjusted EBITDA of $1 billion to $1.1 billion and says 2017 adjusted EBITDA will be $1.2 billion to $1.4 billion.

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The loss was mostly attributed to non-cash asset write downs and losses on hedging contracts. And the bigger concern is the $9.5 billion debt load that's currently hanging over the company.

Now what

Dynegy is invested heavily in coal, which is becoming a major problem for the company. Coal plants are becoming increasingly costly and non-competitive with coal and renewable energy, and Dynegy hasn't made the transition to cleaner energy sources as quickly as competitors. Given the massive debt load and the fact that Dynegy hasn't adjusted its business model toward more renewables I don't see a reason to buy the dip in shares.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.