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Dynegy 10-Q 2008



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

 

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended June 30, 2008

 

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________


DYNEGY INC.
DYNEGY HOLDINGS INC.
(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

Entity

 

Commission
File Number

 

State of
Incorporation

 

I.R.S. Employer
Identification No.


 


 


 


Dynegy Inc.

 

001-33443

 

Delaware

 

20-5653152

Dynegy Holdings Inc.

 

000-29311

 

Delaware

 

94-3248415

 

 

 

 

 

 

 

1000 Louisiana, Suite 5800

 

 

 

 

 

 

Houston, Texas

 

 

 

 

 

77002

(Address of principal executive offices)

 

 

 

 

 

(Zip Code)

(713) 507-6400
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

 

Dynegy Inc.

Yes x No o

Dynegy Holdings Inc.

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

Large accelerated
filer

Accelerated
filer

Non-accelerated filer
(Do not check if a
smaller
reporting company)

Smaller reporting
company

 

 

 

 

 

 

 

Dynegy Inc.

x

o

o

o

 

Dynegy Holdings Inc.

o

o

x

o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

 

Dynegy Inc.

Yes o No x

Dynegy Holdings Inc.

Yes o No x

Indicate the number of shares outstanding of Dynegy Inc.’s classes of common stock, as of the latest practicable date: Class A common stock, $0.01 par value per share, 502,580,360 shares outstanding as of August 1, 2008; Class B common stock, $0.01 par value per share, 340,000,000 shares outstanding as of August 1, 2008. All of Dynegy Holdings Inc.’s outstanding common stock is owned indirectly by Dynegy Inc.

This combined Form 10-Q is separately filed by Dynegy Inc. and Dynegy Holdings Inc. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to a registrant other than itself.




DYNEGY INC. and DYNEGY HOLDINGS INC.

TABLE OF CONTENTS

 

 

 

 

 

Page

 


PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

FINANCIAL STATEMENTS—DYNEGY INC. AND DYNEGY HOLDINGS INC.:

 

 

 

 

 

 

Condensed Consolidated Balance Sheets—Dynegy Inc.:
June 30, 2008 and December 31, 2007

4

 

Condensed Consolidated Statements of Operations—Dynegy Inc.:
For the three and six months ended June 30, 2008 and 2007

5

 

Condensed Consolidated Statements of Cash Flows—Dynegy Inc.:
For the six months ended June 30, 2008 and 2007

6

 

Condensed Consolidated Statements of Comprehensive Income (Loss)—Dynegy Inc.:
For the three and six months ended June 30, 2008 and 2007

7

 

Condensed Consolidated Balance Sheets—Dynegy Holdings Inc.:
June 30, 2008 and December 31, 2007

8

 

Condensed Consolidated Statements of Operations—Dynegy Holdings Inc.:
For the three and six months ended June 30, 2008 and 2007

9

 

Condensed Consolidated Statements of Cash Flows—Dynegy Holdings Inc.:
For the six months ended June 30, 2008 and 2007

10

 

Condensed Consolidated Statements of Comprehensive Income (Loss)—Dynegy Holdings Inc.:
For the three and six months ended June 30, 2008 and 2007

11

 

Notes to Condensed Consolidated Financial Statements

12

 

 

 

 

 

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—DYNEGY INC. AND DYNEGY HOLDINGS INC.

41

 

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK—DYNEGY INC. AND DYNEGY HOLDINGS INC.

70

 

Item 4.

CONTROLS AND PROCEDURES—DYNEGY INC. AND DYNEGY HOLDINGS INC.

71

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

Item 1.

LEGAL PROCEEDINGS—DYNEGY INC. AND DYNEGY HOLDINGS INC.

73

 

Item 1A.

RISK FACTORS—DYNEGY INC. AND DYNEGY HOLDINGS INC.

73

 

Item 2.

UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS—DYNEGY INC.

75

 

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS—DYNEGY INC.

75

 

Item 6.

EXHIBITS—DYNEGY INC. AND DYNEGY HOLDINGS INC.

76

EXPLANATORY NOTE

          This report includes the combined filing of Dynegy Inc. (“Dynegy”) and Dynegy Holdings Inc. (“DHI”). DHI is the principal subsidiary of Dynegy, providing approximately 100 percent of Dynegy’s total consolidated revenue for the six month period ended June 30, 2008 and constituting approximately 100 percent of Dynegy’s total consolidated asset base as of June 30, 2008 except for Dynegy’s 50 percent interest in DLS Power Holdings, LLC and DLS Power Development Company, LLC. Unless the context indicates otherwise, throughout this report, the terms “the Company,” “we,” “us,” “our” and “ours” are used to refer to both Dynegy and DHI and their direct and indirect subsidiaries, including Dynegy Illinois Inc. (“Dynegy Illinois”) before it became a wholly owned subsidiary of Dynegy by way of the merger of Merger Sub Co., then Dynegy’s wholly owned subsidiary, with and into Dynegy Illinois. Discussions or areas of this report that apply only to Dynegy or DHI will clearly be noted in such section.

2



DEFINITIONS

          As used in this Form 10-Q, the abbreviations contained herein have the meanings set forth below.

 

 

APB

Accounting Principles Board

 

 

ASM

Ancillary Services Market

 

 

BTA

Best technology available

 

 

CAIR

Clean Air Interstate Rule

 

 

CFTC

Commodity Futures Trading Commission

 

 

CO2

Carbon Dioxide

 

 

CRM

Our former customer risk management business segment

 

 

CUSA

Chevron U.S.A. Inc., a wholly owned subsidiary of Chevron Corporation

 

 

DHI

Dynegy Holdings Inc., Dynegy’s primary financing subsidiary

 

 

DMG

Dynegy Midwest Generation, Inc.

 

 

DMSLP

Dynegy Midstream Services L.P.

 

 

EITF

Emerging Issues Task Force

 

 

EPA

Environmental Protection Agency

 

 

FASB

Financial Accounting Standards Board

 

 

FERC

Federal Energy Regulatory Commission

 

 

FIN

FASB Interpretation

 

 

GAAP

Generally Accepted Accounting Principles of the United States of America

 

 

GEN

Our power generation business

 

 

GEN-MW

Our power generation business - Midwest segment

 

 

GEN-NE

Our power generation business - Northeast segment

 

 

GEN-WE

Our power generation business - West segment

 

 

ICC

Illinois Commerce Commission

 

 

IMA

In-market asset availability

 

 

ISO

Independent System Operator

 

 

ISO-NE

Independent System Operator – New England

 

 

MISO

Midwest Independent Transmission Operator, Inc.

 

 

MMBtu

One million British thermal units

 

 

MW

Megawatts

 

 

MWh

Megawatt hour

 

 

NOx

Nitrogen Oxide

 

 

NPDES

National Pollutant Discharge Elimination System

 

 

NRG

NRG Energy, Inc.

 

 

NYSDEC

New York State Department of Environmental Conservation

 

 

OTC

Over the Counter

 

 

PJM

PJM Interconnection, LLC

 

 

PPEA

PPEA Holding Company LLC

 

 

RGGI

Regional Greenhouse Gas Initiative

 

 

SCEA

Sandy Creek Energy Associates, LP

 

 

SCH

Sandy Creek Holdings LLC

 

 

SEC

U.S. Securities and Exchange Commission

 

 

SFAS

Statement of Financial Accounting Standards

 

 

SO2

Sulfur Dioxide

 

 

SPDES

State Pollutant Discharge Elimination System

 

 

VaR

Value at Risk

 

 

VIE

Variable Interest Entity

3



PART I. FINANCIAL INFORMATION

Item 1—FINANCIAL STATEMENTS—DYNEGY INC. AND DYNEGY HOLDINGS INC.

DYNEGY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (in millions, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,
2008

 

December 31,
2007

 

 

 


 


 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

271

 

 

 

$

328

 

 

Restricted cash

 

 

 

123

 

 

 

 

104

 

 

Accounts receivable, net of allowance for doubtful accounts of $18 and $20, respectively

 

 

 

478

 

 

 

 

426

 

 

Accounts receivable, affiliates

 

 

 

1

 

 

 

 

1

 

 

Inventory

 

 

 

172

 

 

 

 

199

 

 

Assets from risk-management activities

 

 

 

3,363

 

 

 

 

358

 

 

Deferred income taxes

 

 

 

1

 

 

 

 

45

 

 

Prepayments and other current assets

 

 

 

342

 

 

 

 

145

 

 

Assets held for sale (Note 3)

 

 

 

304

 

 

 

 

57

 

 

 

 

 



 

 

 



 

 

Total Current Assets

 

 

 

5,055

 

 

 

 

1,663

 

 

 

 

 



 

 

 



 

 

Property, Plant and Equipment

 

 

 

10,560

 

 

 

 

10,689

 

 

Accumulated depreciation

 

 

 

(1,707

)

 

 

 

(1,672

)

 

 

 

 



 

 

 



 

 

Property, Plant and Equipment, Net

 

 

 

8,853

 

 

 

 

9,017

 

 

Other Assets

 

 

 

 

 

 

 

 

 

 

 

Unconsolidated investments

 

 

 

62

 

 

 

 

79

 

 

Restricted cash and investments

 

 

 

1,173

 

 

 

 

1,221

 

 

Assets from risk-management activities

 

 

 

220

 

 

 

 

55

 

 

Goodwill

 

 

 

438

 

 

 

 

438

 

 

Intangible assets

 

 

 

465

 

 

 

 

497

 

 

Deferred income taxes

 

 

 

5

 

 

 

 

6

 

 

Accounts receivable, affiliates

 

 

 

2

 

 

 

 

 

 

Other long-term assets

 

 

 

255

 

 

 

 

245

 

 

 

 

 



 

 

 



 

 

Total Assets

 

 

$

16,528

 

 

 

$

13,221

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

$

412

 

 

 

$

292

 

 

Accrued interest

 

 

 

55

 

 

 

 

56

 

 

Accrued liabilities and other current liabilities

 

 

 

132

 

 

 

 

201

 

 

Liabilities from risk-management activities

 

 

 

3,951

 

 

 

 

397

 

 

Notes payable and current portion of long-term debt

 

 

 

57

 

 

 

 

51

 

 

Liabilities held for sale

 

 

 

 

 

 

 

2

 

 

 

 

 



 

 

 



 

 

Total Current Liabilities

 

 

 

4,607

 

 

 

 

999

 

 

 

 

 



 

 

 



 

 

Long-term debt

 

 

 

5,819

 

 

 

 

5,739

 

 

Long-term debt, affiliates

 

 

 

200

 

 

 

 

200

 

 

 

 

 



 

 

 



 

 

Long-Term Debt

 

 

 

6,019

 

 

 

 

5,939

 

 

Other Liabilities

 

 

 

 

 

 

 

 

 

 

 

Liabilities from risk-management activities

 

 

 

489

 

 

 

 

116

 

 

Deferred income taxes

 

 

 

919

 

 

 

 

1,250

 

 

Other long-term liabilities

 

 

 

396

 

 

 

 

388

 

 

 

 

 



 

 

 



 

 

Total Liabilities

 

 

 

12,430

 

 

 

 

8,692

 

 

 

 

 



 

 

 



 

 

Minority Interest

 

 

 

18

 

 

 

 

23

 

 

Commitments and Contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Class A Common Stock, $0.01 par value, 2,100,000,000 shares authorized at June 30, 2008 and December 31, 2007; 505,087,481 and 502,819,794 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively

 

 

 

5

 

 

 

 

5

 

 

Class B Common Stock, $0.01 par value, 850,000,000 shares authorized at June 30, 2008 and December 31, 2007; 340,000,000 shares issued and outstanding at June 30, 2008 and December 31, 2007

 

 

 

3

 

 

 

 

3

 

 

Additional paid-in capital

 

 

 

6,476

 

 

 

 

6,463

 

 

Subscriptions receivable

 

 

 

(3

)

 

 

 

(5

)

 

Accumulated other comprehensive loss, net of tax

 

 

 

(42

)

 

 

 

(25

)

 

Accumulated deficit

 

 

 

(2,288

)

 

 

 

(1,864

)

 

Treasury stock, at cost, 2,560,727 and 2,449,259 shares at June 30, 2008 and December 31, 2007, respectively

 

 

 

(71

)

 

 

 

(71

)

 

 

 

 



 

 

 



 

 

Total Stockholders’ Equity

 

 

 

4,080

 

 

 

 

4,506

 

 

 

 

 



 

 

 



 

 

Total Liabilities and Stockholders’ Equity

 

 

$

16,528

 

 

 

$

13,221

 

 

 

 

 



 

 

 



 

 

See the notes to condensed consolidated financial statements.

4



DYNEGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 


 


 

 

 

2008

 

2007

 

2008

 

2007

 

 

 


 


 


 


 

Revenues

 

 

$

323

 

 

 

$

828

 

 

 

$

868

 

 

 

$

1,333

 

 

Cost of sales

 

 

 

(456

)

 

 

 

(369

)

 

 

 

(907

)

 

 

 

(609

)

 

Operating and maintenance expense, exclusive of depreciation shown separately below

 

 

 

(125

)

 

 

 

(141

)

 

 

 

(237

)

 

 

 

(220

)

 

Depreciation and amortization expense

 

 

 

(93

)

 

 

 

(88

)

 

 

 

(186

)

 

 

 

(140

)

 

Gain on sale of assets

 

 

 

26

 

 

 

 

 

 

 

 

26

 

 

 

 

 

 

General and administrative expenses

 

 

 

(39

)

 

 

 

(48

)

 

 

 

(78

)

 

 

 

(101

)

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

Operating income (loss)

 

 

 

(364

)

 

 

 

182

 

 

 

 

(514

)

 

 

 

263

 

 

Losses from unconsolidated investments

 

 

 

(3

)

 

 

 

(2

)

 

 

 

(12

)

 

 

 

(2

)

 

Interest expense

 

 

 

(108

)

 

 

 

(84

)

 

 

 

(217

)

 

 

 

(151

)

 

Minority interest income (expense)

 

 

 

2

 

 

 

 

(9

)

 

 

 

2

 

 

 

 

(9

)

 

Other income and expense, net

 

 

 

15

 

 

 

 

10

 

 

 

 

35

 

 

 

 

18

 

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

Income (loss) from continuing operations before income taxes

 

 

 

(458

)

 

 

 

97

 

 

 

 

(706

)

 

 

 

119

 

 

Income tax benefit (expense) (Note 12)

 

 

 

186

 

 

 

 

(30

)

 

 

 

282

 

 

 

 

(36

)

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

Income (loss) from continuing operations

 

 

 

(272

)

 

 

 

67

 

 

 

 

(424

)

 

 

 

83

 

 

Income from discontinued operations, net of tax benefit (expense) of zero, $(5), $1 and $(4), respectively (Notes 3 and 12)

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

7

 

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

Net income (loss)

 

 

$

(272

)

 

 

$

76

 

 

 

$

(424

)

 

 

$

90

 

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

Earnings (Loss) Per Share (Note 9):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

 

$

(0.32

)

 

 

$

0.08

 

 

 

$

(0.51

)

 

 

$

0.13

 

 

Income from discontinued operations

 

 

 

 

 

 

 

0.01

 

 

 

 

 

 

 

 

0.01

 

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

 

$

(0.32

)

 

 

$

0.09

 

 

 

$

(0.51

)

 

 

$

0.14

 

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

 

$

(0.32

)

 

 

$

0.08

 

 

 

$

(0.51

)

 

 

$

0.12

 

 

Income from discontinued operations

 

 

 

 

 

 

 

0.01

 

 

 

 

 

 

 

 

0.01

 

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share

 

 

$

(0.32

)

 

 

$

0.09

 

 

 

$

(0.51

)

 

 

$

0.13

 

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic shares outstanding

 

 

 

837

 

 

 

 

828

 

 

 

 

837

 

 

 

 

663

 

 

Diluted shares outstanding

 

 

 

839

 

 

 

 

830

 

 

 

 

839

 

 

 

 

665

 

 

See the notes to condensed consolidated financial statements.

5



DYNEGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

 

 

 


 

 

 

2008

 

2007

 

 

 


 


 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income (loss)

 

 

$

(424

)

 

 

$

90

 

 

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

188

 

 

 

 

146

 

 

Losses from unconsolidated investments, net of cash distributions

 

 

 

12

 

 

 

 

2

 

 

Risk-management activities

 

 

 

760

 

 

 

 

(97

)

 

Gain on sale of assets

 

 

 

(26

)

 

 

 

 

 

Deferred income taxes

 

 

 

(281

)

 

 

 

41

 

 

Legal and settlement charges

 

 

 

 

 

 

 

11

 

 

Other

 

 

 

 

 

 

 

10

 

 

Changes in working capital:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

(77

)

 

 

 

(130

)

 

Inventory

 

 

 

23

 

 

 

 

(3

)

 

Prepayments and other assets

 

 

 

(178

)

 

 

 

(18

)

 

Accounts payable and accrued liabilities

 

 

 

61

 

 

 

 

119

 

 

Changes in non-current assets

 

 

 

(35

)

 

 

 

(17

)

 

Changes in non-current liabilities

 

 

 

9

 

 

 

 

3

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

 

32

 

 

 

 

157

 

 

 

 

 



 

 

 



 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

(299

)

 

 

 

(153

)

 

Unconsolidated investments

 

 

 

(1

)

 

 

 

(5

)

 

Proceeds from asset sales, net

 

 

 

84

 

 

 

 

 

 

Business acquisitions, net of cash acquired

 

 

 

 

 

 

 

(126

)

 

Decrease (increase) in restricted cash and restricted investments

 

 

 

28

 

 

 

 

(589

)

 

Other investing

 

 

 

11

 

 

 

 

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

 

(177

)

 

 

 

(873

)

 

 

 

 



 

 

 



 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

Proceeds from long-term borrowings, net

 

 

 

111

 

 

 

 

2,663

 

 

Repayments of long-term borrowings

 

 

 

(21

)

 

 

 

(1,994

)

 

Proceeds from issuance of capital stock

 

 

 

2

 

 

 

 

1

 

 

Other financing, net

 

 

 

(4

)

 

 

 

(2

)

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

 

88

 

 

 

 

668

 

 

 

 

 



 

 

 



 

 

Net decrease in cash and cash equivalents

 

 

 

(57

)

 

 

 

(48

)

 

Cash and cash equivalents, beginning of period

 

 

 

328

 

 

 

 

371

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

 

$

271

 

 

 

$

323

 

 

 

 

 



 

 

 



 

 

Other non-cash investing activity:

 

 

 

 

 

 

 

 

 

 

 

Noncash construction expenditures

 

 

$

34

 

 

 

$

 

 

See the notes to condensed consolidated financial statements.

6



DYNEGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited) (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

 

 


 

 

 

2008

 

2007

 

 

 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

$

(272

)

 

 

$

76

 

 

Cash flow hedging activities, net:

 

 

 

 

 

 

 

 

 

 

 

Unrealized mark-to-market gains arising during period, net

 

 

 

20

 

 

 

 

 

 

Reclassification of mark-to-market losses to earnings, net

 

 

 

(1

)

 

 

 

(13

)

 

Deferred losses on cash flow hedges, net

 

 

 

(2

)

 

 

 

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in cash flow hedging activities, net (net of tax benefit (expense) of ($5) and $8, respectively)

 

 

 

17

 

 

 

 

(13

)

 

Allocation to minority interest

 

 

 

(9

)

 

 

 

 

 

 

 

 



 

 

 



 

 

Total cash flow hedging activities

 

 

 

8

 

 

 

 

(13

)

 

Recognized prior service cost and actuarial loss

 

 

 

1

 

 

 

 

1

 

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

2

 

 

Unrealized gain (loss) on securities, net:

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on securities

 

 

 

1

 

 

 

 

(2

)

 

Less: Reclassification adjustments for gain realized in net loss

 

 

 

(9

)

 

 

 

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized losses (net of tax benefit of $5 and $1, respectively)

 

 

 

(8

)

 

 

 

(2

)

 

Unconsolidated investment other comprehensive loss, net (net of tax benefit of $4)

 

 

 

(7

)

 

 

 

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax

 

 

 

(6

)

 

 

 

(12

)

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 

$

(278

)

 

 

$

64

 

 

 

 

 



 

 

 



 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

 

 

 


 

 

 

2008

 

2007

 

 

 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

$

(424

)

 

 

$

90

 

 

Cash flow hedging activities, net:

 

 

 

 

 

 

 

 

 

 

 

Unrealized mark-to-market losses arising during period, net

 

 

 

(6

)

 

 

 

(59

)

 

Reclassification of mark-to-market gains (losses) to earnings, net

 

 

 

7

 

 

 

 

(28

)

 

Deferred losses on cash flow hedges, net

 

 

 

(2

)

 

 

 

 

 

 

 

 



 

 

 



 

 

Changes in cash flow hedging activities, net (net of tax benefit (expense) of zero and $51, respectively)

 

 

 

(1

)

 

 

 

(87

)

 

Allocation to minority interest

 

 

 

2

 

 

 

 

 

 

 

 

 



 

 

 



 

 

Total cash flow hedging activities

 

 

 

1

 

 

 

 

(87

)

 

Recognized prior service cost and actuarial loss

 

 

 

1

 

 

 

 

2

 

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

2

 

 

Unrealized loss on securities, net:

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on securities

 

 

 

(3

)

 

 

 

(2

)

 

Less: Reclassification adjustments for gain realized in net loss

 

 

 

(9

)

 

 

 

 

 

 

 

 



 

 

 



 

 

Net unrealized losses (net of tax benefit of $8 and $1, respectively)

 

 

 

(12

)

 

 

 

(2

)

 

Unconsolidated investment other comprehensive loss, net (net of tax benefit of $4)

 

 

 

(7

)

 

 

 

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax

 

 

 

(17

)

 

 

 

(85

)

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 

$

(441

)

 

 

$

5

 

 

 

 

 



 

 

 



 

 

See the notes to condensed consolidated financial statements.

7



DYNEGY HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,
2008

 

December 31,
2007

 

 

 


 


 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

238

 

 

 

$

292

 

 

Restricted cash

 

 

 

123

 

 

 

 

104

 

 

Accounts receivable, net of allowance for doubtful accounts of $15 and $15 respectively

 

 

 

481

 

 

 

 

428

 

 

Accounts receivable, affiliates

 

 

 

1

 

 

 

 

1

 

 

Inventory

 

 

 

172

 

 

 

 

199

 

 

Assets from risk-management activities

 

 

 

3,363

 

 

 

 

358

 

 

Deferred income taxes

 

 

 

 

 

 

 

30

 

 

Prepayments and other current assets

 

 

 

342

 

 

 

 

145

 

 

Assets held for sale (Note 3)

 

 

 

304

 

 

 

 

57

 

 

 

 

 



 

 

 



 

 

Total Current Assets

 

 

 

5,024

 

 

 

 

1,614

 

 

 

 

 



 

 

 



 

 

Property, Plant and Equipment

 

 

 

10,560

 

 

 

 

10,689

 

 

Accumulated depreciation

 

 

 

(1,707

)

 

 

 

(1,672

)

 

 

 

 



 

 

 



 

 

Property, Plant and Equipment, Net

 

 

 

8,853

 

 

 

 

9,017

 

 

Other Assets

 

 

 

 

 

 

 

 

 

 

 

Unconsolidated investments

 

 

 

 

 

 

 

18

 

 

Restricted cash and investments

 

 

 

1,173

 

 

 

 

1,221

 

 

Assets from risk-management activities

 

 

 

220

 

 

 

 

55

 

 

Goodwill

 

 

 

438

 

 

 

 

438

 

 

Intangible assets

 

 

 

465

 

 

 

 

497

 

 

Deferred income taxes

 

 

 

5

 

 

 

 

6

 

 

Accounts receivable, affiliates

 

 

 

2

 

 

 

 

 

 

Other long-term assets

 

 

 

256

 

 

 

 

241

 

 

 

 

 



 

 

 



 

 

Total Assets

 

 

$

16,436

 

 

 

$

13,107

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDER’S EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

$

412

 

 

 

$

291

 

 

Accrued interest

 

 

 

55

 

 

 

 

56

 

 

Accrued liabilities and other current liabilities

 

 

 

133

 

 

 

 

202

 

 

Deferred income taxes

 

 

 

7

 

 

 

 

 

 

Liabilities from risk-management activities

 

 

 

3,951

 

 

 

 

397

 

 

Notes payable and current portion of long-term debt

 

 

 

57

 

 

 

 

51

 

 

Liabilities held for sale

 

 

 

 

 

 

 

2

 

 

 

 

 



 

 

 



 

 

Total Current Liabilities

 

 

 

4,615

 

 

 

 

999

 

 

 

 

 



 

 

 



 

 

Long-term debt

 

 

 

5,819

 

 

 

 

5,739

 

 

Long-term debt to affiliates

 

 

 

200

 

 

 

 

200

 

 

 

 

 



 

 

 



 

 

Long-Term Debt

 

 

 

6,019

 

 

 

 

5,939

 

 

Other Liabilities

 

 

 

 

 

 

 

 

 

 

 

Liabilities from risk-management activities

 

 

 

489

 

 

 

 

116

 

 

Deferred income taxes

 

 

 

733

 

 

 

 

1,052

 

 

Other long-term liabilities

 

 

 

394

 

 

 

 

381

 

 

 

 

 



 

 

 



 

 

Total Liabilities

 

 

 

12,250

 

 

 

 

8,487

 

 

 

 

 



 

 

 



 

 

Minority Interest

 

 

 

18

 

 

 

 

23

 

 

Commitments and Contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

Stockholder’s Equity

 

 

 

 

 

 

 

 

 

 

 

Capital Stock, $1 par value, 1,000 shares authorized at June 30, 2008 and December 31, 2007, respectively

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

 

5,684

 

 

 

 

5,684

 

 

Affiliate receivable

 

 

 

(815

)

 

 

 

(825

)

 

Accumulated other comprehensive loss, net of tax

 

 

 

(42

)

 

 

 

(25

)

 

Accumulated deficit

 

 

 

(659

)

 

 

 

(237

)

 

 

 

 



 

 

 



 

 

Total Stockholder’s Equity

 

 

 

4,168

 

 

 

 

4,597

 

 

 

 

 



 

 

 



 

 

Total Liabilities and Stockholder’s Equity

 

 

$

16,436

 

 

 

$

13,107

 

 

 

 

 



 

 

 



 

 

See the notes to condensed consolidated financial statements.

8



DYNEGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 


 


 

 

 

2008

 

2007

 

2008

 

2007

 

 

 


 


 


 


 

Revenues

 

 

$

323

 

 

 

$

828

 

 

 

$

868

 

 

 

$

1,333

 

 

Cost of sales

 

 

 

(456

)

 

 

 

(369

)

 

 

 

(907

)

 

 

 

(609

)

 

Operating and maintenance expense, exclusive of depreciation shown separately below

 

 

 

(125

)

 

 

 

(141

)

 

 

 

(237

)

 

 

 

(220

)

 

Depreciation and amortization expense

 

 

 

(93

)

 

 

 

(88

)

 

 

 

(186

)

 

 

 

(140

)

 

Gain on sale of assets

 

 

 

26

 

 

 

 

 

 

 

 

26

 

 

 

 

 

 

General and administrative expenses

 

 

 

(39

)

 

 

 

(46

)

 

 

 

(78

)

 

 

 

(82

)

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

Operating income (loss)

 

 

 

(364

)

 

 

 

184

 

 

 

 

(514

)

 

 

 

282

 

 

Earnings (losses) from unconsolidated investments

 

 

 

3

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

Interest expense

 

 

 

(108

)

 

 

 

(84

)

 

 

 

(217

)

 

 

 

(151

)

 

Minority interest income (expense)

 

 

 

2

 

 

 

 

(9

)

 

 

 

2

 

 

 

 

(9

)

 

Other income and expense, net

 

 

 

14

 

 

 

 

12

 

 

 

 

34

 

 

 

 

16

 

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

Income (loss) from continuing operations before income taxes

 

 

 

(453

)

 

 

 

103

 

 

 

 

(697

)

 

 

 

138

 

 

Income tax benefit (expense) (Note 12)

 

 

 

184

 

 

 

 

(21

)

 

 

 

275

 

 

 

 

(32

)

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

Income (loss) from continuing operations

 

 

 

(269

)

 

 

 

82

 

 

 

 

(422

)

 

 

 

106

 

 

Income from discontinued operations, net of tax benefit (expense) of zero, $(6), $1 and $(5), respectively (Notes 3 and 12)

 

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

6

 

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

Net income (loss)

 

 

$

(269

)

 

 

$

90

 

 

 

$

(422

)

 

 

$

112

 

 

 

 

 



 

 

 



 

 

 



 

 

 



 

 

See the notes to condensed consolidated financial statements.

9



DYNEGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

 

 

 


 

 

 

2008

 

2007

 

 

 


 


 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income (loss)

 

 

$

(422

)

 

 

$

112

 

 

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

188

 

 

 

 

146

 

 

Losses from unconsolidated investments, net of cash distributions

 

 

 

2

 

 

 

 

 

 

Risk-management activities

 

 

 

760

 

 

 

 

(97

)

 

Gain on sale of assets, net

 

 

 

(26

)

 

 

 

 

 

Deferred income taxes

 

 

 

(273

)

 

 

 

32

 

 

Legal and settlement charges

 

 

 

 

 

 

 

11

 

 

Other

 

 

 

(2

)

 

 

 

10

 

 

Changes in working capital:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

(78

)

 

 

 

(130

)

 

Inventory

 

 

 

23

 

 

 

 

(3

)

 

Prepayments and other assets

 

 

 

(178

)

 

 

 

(18

)

 

Accounts payable and accrued liabilities

 

 

 

61

 

 

 

 

122

 

 

Changes in non-current assets

 

 

 

(35

)

 

 

 

(17

)

 

Changes in non-current liabilities

 

 

 

9

 

 

 

 

3

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

 

29

 

 

 

 

171

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

(299

)

 

 

 

(153

)

 

Unconsolidated investments

10

Proceeds from asset sales, net

 

 

 

84

 

 

 

 

 

 

Business acquisitions, net of cash acquired

 

 

 

 

 

 

 

17

 

 

Decrease (increase) in restricted cash and restricted investments

 

 

 

28

 

 

 

 

(589

)

 

Affiliate transactions

 

 

 

1

 

 

 

 

(12

)

 

Other investing

 

 

 

7

 

 

 

 

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

 

(169

)

 

 

 

(737

)

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

Proceeds from long-term borrowings, net

 

 

 

111

 

 

 

 

2,663

 

 

Repayments of long-term borrowings

 

 

 

(21

)

 

 

 

(1,719

)

 

Dividend to affiliate

 

 

 

 

 

 

 

(342

)

 

Other financing, net

 

 

 

(4

)

 

 

 

1

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

 

86

 

 

 

 

603

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

 

(54

)

 

 

 

37

 

 

Cash and cash equivalents, beginning of period

 

 

 

292

 

 

 

 

243

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

 

$

238

 

 

 

$

280

 

 

 

 

 



 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other non-cash investing activity:

 

 

 

 

 

 

 

 

 

 

 

Noncash construction expenditures

 

 

$

34

 

 

 

$

 

 

See the notes to condensed consolidated financial statements.

10



DYNEGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited) (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

 

 


 

 

 

2008

 

2007

 

 

 


 


 

 

 

 

 

Net income (loss)

 

 

$

(269

)

 

 

$

90

 

 

Cash flow hedging activities, net:

 

 

 

 

 

 

 

 

 

 

 

Unrealized mark-to-market gains arising during period, net

 

 

 

20

 

 

 

 

 

 

Reclassification of mark-to-market gains to earnings, net

 

 

 

(1

)

 

 

 

(13

)

 

Deferred losses on cash flow hedges, net

 

 

 

(2

)

 

 

 

 

 

 

 

 



 

 

 



 

 

Changes in cash flow hedging activities, net (net of tax benefit (expense) of ($5) and $8, respectively)

 

 

 

17

 

 

 

 

(13

)

 

Allocation to minority interest

 

 

 

(9

)

 

 

 

 

 

 

 

 



 

 

 



 

 

Total cash flow hedging activities

 

 

 

8

 

 

 

 

(13

)

 

Recognized prior service cost and actuarial loss

 

 

 

1

 

 

 

 

1

 

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

2

 

 

Unrealized gain (loss) on securities, net:

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on securities

 

 

 

1

 

 

 

 

(2

)

 

Less: Reclassification adjustments for gain realized in net loss

 

 

 

(9

)

 

 

 

 

 

 

 

 



 

 

 



 

 

 

 

 

 

Net unrealized losses (net of tax benefit of $5 and $1, respectively)

 

 

 

(8

)

 

 

 

(2

)

 

Unconsolidated investment other comprehensive loss, net (net of tax benefit of $4)

 

 

 

(7

)

 

 

 

 

 

 

 

 



 

 

 



 

 

 

 

 

 

Other comprehensive loss, net of tax

 

 

 

(6

)

 

 

 

(12

)

 

 

 

 



 

 

 



 

 

 

 

 

 

Comprehensive income (loss)

 

 

$

(275

)

 

 

$

78

 

 

 

 

 



 

 

 



 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

 

 

 


 

 

 

2008

 

2007

 

 

 


 


 

 

 

 

 

Net income (loss)

 

 

$

(422

)

 

 

$

112

 

 

Cash flow hedging activities, net:

 

 

 

 

 

 

 

 

 

 

 

Unrealized mark-to-market losses arising during period, net

 

 

 

(6

)

 

 

 

(59

)

 

Reclassification of mark-to-market gains (losses) to earnings, net

 

 

 

7

 

 

 

 

(28

)

 

Deferred losses on cash flow hedges, net

 

 

 

(2

)

 

 

 

 

 

 

 

 



 

 

 



 

 

Changes in cash flow hedging activities, net (net of tax benefit (expense) of zero and $51, respectively)

 

 

 

(1

)

 

 

 

(87

)

 

Allocation to minority interest

 

 

 

2

 

 

 

 

 

 

 

 

 



 

 

 



 

 

Total cash flow hedging activities