Dynegy Sees "Tremendous Growth" Opportunity for Retail Biz, Touts Cost Advantage from Generation

Discussing its retail energy business last week during an investor day, Sheree Petrone, Vice President of Retail for Dynegy, said, "We see this as a tremendous opportunity to grow."

"This winter was actually a rude awakening for many of the suppliers without generation backing them, and it may result in participants exiting, or at the very least we would expect risk premiums and margins to be expanding," Petrone said.

Executives reported seeing a "pullback" from suppliers not owning generation, providing an opportunity for Dynegy to win additional retail load.

Dynegy sees the retail growth opportunities largely in Southern Illinois, as well as Ohio and Pennsylvania in PJM.

In Southern Illinois (MISO), Dynegy is targeting 22 million MWh of new load, based on its existing generation fleet.

In PJM, Dynegy plans to grow retail more "opportunistically," noting in particular the opportunity from municipal aggregation in Ohio.

Executives noted that purchasing additional generation in PJM, particularly from "hybrid" utilities, would be "logical".

Dynegy said that sourcing power from its own generation provides a $0.75/MWh cost advantage, with $0.50 of the savings from the bid/ask spread, and $0.25 from elimination of third party credit charges.

Dynegy is also working to launch a demand-side management product for its C&I customers under the Homefield Energy brand, and expects to roll out the product to select customers later this year.

Dynegy currently serves about 500,000 commercial, industrial and residential customers in Illinois; all of the residential customers are served under municipal aggregation. Homefield Energy had 13 TWh of volume in 2013

Dynegy said that its retail market share is 30% of Ameren load, which makes it the largest LSE in the market. Ameren default service is 25% of load, while the two next largest retail suppliers have 7% and 6% of load, respectively. Other retail suppliers collectively make up 32% of load.

Dynegy listed target retail margins of $1.00-$4.00 per MWh, depending on customer type and market

Dynegy sees retail contributing an anticipated normalized $10-$20 million in annual Adjusted EBITDA