Dynegy Spark Spread Blues

Dynegy (DYN) issued some wording that makes an investor stop and think. Under liquidity and debt in the last earnings release they announced this snippet “During the second quarter, the company added a $150 million contingent letter of credit facility that, while currently unavailable, will provide additional liquidity for 2012 commercial activity in the event of widened spark spreads.”

OK so you look up “spark spread” you get “The spark spread is the theoretical gross margin of a gas-fired power plant from selling a unit of electricity, having bought the fuel required to produce this unit of electricity.”

So if the spreads are increasing that should be good. But Dynegy needs to post letters of credit to back itself up. Definitely needs more explaining. Was this backdoor 2012 guidance?

Disclosure: No position in any stocks mentioned in this post.