DYN » Topics » Other

These excerpts taken from the DYN 8-K filed Nov 5, 2009.
Other.  Dynegy’s other operating loss for the three months ended March 31, 2009 was $37 million, compared to an operating loss of $24 million for the three months ended March 31, 2008.  DHI’s other operating loss for the three months ended March 31, 2009 was $39 million, compared to an operating loss of $24 million for the three months ended March 31, 2008.  Operating losses in both periods were comprised primarily of general and administrative expenses.

Cost of sales for the three months ended March 31, 2008 included the release of a $9 million liability associated with an assignment of a natural gas transportation contract.  Operating and maintenance expense for the three months ended March 31, 2008 included the release of an $8 million of sales and use tax liability.

Consolidated general and administrative expenses were $38 million and $39 million for the three months ended March 31, 2009 and 2008, respectively.

Earnings (Losses) from Unconsolidated Investments

Dynegy’s earnings from unconsolidated investments were $8 million for the three months ended March 31, 2009 of which $7 related to the GEN-WE investment in Sandy Creek.  The $7 million consisted of $10 million mark-to-market gains primarily related to interest rate swap contracts offset by $3 million of financing costs.  Losses from unconsolidated investments were $9 million  for the three months ended March 31, 2008, including a $5 million loss related to the GEN-WE investment in Sandy Creek.  The remaining $4 million loss related to Dynegy’s investment in DLS Power Development, included in Other.

DHI’s earnings from unconsolidated investments of $7 million for the three months ended  March 31, 2009 related to the GEN-WE investment in Sandy Creek.  The $7 million consisted of $10 million mark-to-market gains primarily related to interest rate swap contracts offset by $3 million of financing costs.  Losses from unconsolidated investments for the three months ended March 31, 2008 were $5 million, related to the GEN-WE investment in Sandy Creek.

 
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Other Items, Net

Dynegy’s and DHI’s other items, net, totaled $4 million of income for the three months ended March 31, 2009, compared to $20 million of income for the three months ended March 31, 2008.  The decrease is primarily associated with lower interest income due to lower LIBOR rates in 2009.  In addition, during the first quarter 2008, we recognized income of $6 million related to insurance proceeds received in excess of the book value of damaged assets.

Interest Expense

Dynegy’s and DHI’s interest expense totaled $98 million for the three months ended March 31, 2009, compared to $109 million for the three months ended March 31, 2008.  The decrease was primarily attributable to lower LIBOR rates on our variable-rate debt.

Income Tax (Expense) Benefit

Dynegy reported an income tax expense from continuing operations of $91 million for the three months ended March 31, 2009, compared to an income tax benefit from continuing operations of $89 million for the three months ended March 31, 2008.  The 2009 effective tax rate was (39) percent, compared to 39 percent in 2008.

DHI reported an income tax expense from continuing operations of $88 million for the three months ended March 31, 2009, compared to an income tax benefit of $84 million from continuing operations for the three months ended March 31, 2008.  The 2009 effective tax rate was (37) percent, compared to 37 percent in 2008.

The primary difference between the effective rates of (39) and (37) percent for Dynegy and DHI, respectively, and the statutory rate of 35 percent resulted from the effect of the goodwill impairment charge.  As a result of this charge, which was nondeductible, we reported income tax expense for the period ended March 31, 2009, despite the fact that we reported a loss from continuing operations before income taxes.  Additionally, for the three months ended March 31, 2009, Dynegy and DHI recorded $21 million and $15 million, respectively, of income tax expense related to a change in California state tax law.  For the period ended March 31, 2008, the difference between the effective rates of 39 and 37 percent for Dynegy and DHI, respectively and the statutory rate of 35 percent resulted primarily from the effect of state income taxes in the taxing jurisdictions in which our assets operate.

Discontinued Operations

Loss From Discontinued Operations Before Taxes

During the three months ended March 31, 2009, our pre-tax loss from discontinued operations was $14 million, related to the operation of the Heard County and Arizona  power generation facilities in our GEN-WE segment.  In addition, we recorded a pre-tax loss from discontinued operations of $6 million, related to the operation of the Bluegrass power generation facility in our GEN-MW segment.  This loss included a pre-tax impairment charge of $5 million related to our Bluegrass power generation facility.  During the three months ended March 31, 2008, our pre-tax loss from discontinued operations was $19 million, related to the operation of the Heard County and Arizona power generation facilities in our GEN-WE segment and $1 million, related to a loss on the sale of the Calcasieu power generation facility.  In addition, we recorded a pre-tax loss from discontinued operations of $1 million, related to the operation of the Bluegrass power generation facility in our GEN-MW segment.

Income Tax Benefit From Discontinued Operations

We recorded an income tax benefit from discontinued operations of $6 million and $8 million during the three months ended March 31, 2009 and 2008, respectively.  These amounts reflect effective rates of 30 and 38 percent, respectively.  FIN No. 18, “Accounting for Income Taxes in Interim Periods an interpretation of APB Opinion No. 28” requires a detailed methodology of allocating income taxes between continuing and discontinued operations.  This methodology often results in an effective rate for discontinued operations significantly different from the statutory rate of 35 percent.

 
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Outlook

Our fleet includes a diverse mixture of assets with various fuel, dispatch and merit order characteristics within each of our three regions.  In commercializing our assets, we seek to achieve a balance between providing greater cash flow predictability in the near/intermediate term, while maintaining the ability to capture value longer term as markets tighten.  We expect that a majority of our sales will be achieved by selling energy and capacity through a combination of spot market sales and near-term contracts over a rolling 12–36 month time frame in time periods that we describe as Current, Current +1, and Current +2.  At any given point in time, we will seek to balance predictability of earnings and cash flow with achieving the highest level of earnings and cash flow possible over the Current, Current +1 and Current +2 periods.  In these periods, we understand that short-term market volatility can negatively impact our profitability, and we will seek to reduce those negative impacts through the disciplined use of near- and intermediate-term forward sales.  As a result, our fleet-wide forward sales profile is fluid and subject to change.  We expect to make fewer forward sales beyond the Current+2 period in order to realize the anticipated benefit of improved market prices over time as the supply and demand balance tightens.

We expect that our future financial results will continue to reflect sensitivity to fuel and commodity prices, market structure and prices for electric energy, ancillary services and capacity, transportation and transmission logistics, weather conditions and IMA.  Our commercial team actively manages commodity price risk associated with our unsold power production by trading in the forward markets that are correlated with our assets.  We also participate in various regional auctions and bilateral opportunities.  Our regional commercial strategies are particularly driven by the types of units that we have within a given region and the operating characteristics of those units.

Currently, substantially all of our expected generation for 2009 is contracted.  As we look forward to 2010 and beyond, we are actively hedging and expect to enter 2010 with a substantial portion of the output of our fleet contracted for that year.  Based on specific market conditions, at any point in time we may enter into transactions that will increase or decrease the portion of our output that has been contracted, since we actively manage our near-term market positions of less than three years.  The financial markets continue to be characterized by turmoil and stock prices across industries, including ours, continue to be significantly depressed.  These market conditions have resulted in a decreased willingness on the part of lenders to enter into new loans and a reduction in the number of counterparties participating in, and the volume of transactions available for execution in, the bilateral energy markets.  Thus, it can be more difficult for us to optimize the value of our assets.

To the extent that we choose not to enter into forward sales, the gross margin from our assets is a function of price movements in the coal, natural gas, fuel oil, electric energy and capacity markets.

The following summarizes unique business issues impacting our individual regions’ outlook.

Other.  Dynegy’s and DHI’s other operating loss for the three months ended June 30, 2009 was $50 million, compared to an operating loss of $20 million for the three months ended June 30, 2008.  Operating losses in both periods were comprised primarily of general and administrative expenses.

Operating and maintenance expense for the three months ended June 30, 2008 included a benefit from the release of $8 million of sales and use tax liability.  Gain on sale of assets for the three months ended June 30, 2008 included an approximate $15 million gain related to our sale of our remaining NYMEX shares and both membership seats for approximately $16 million.

Consolidated general and administrative expenses were $45 million and $39 million for the three months ended June 30, 2009 and 2008, respectively.

 
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Earnings (Losses) from Unconsolidated Investments

Dynegy’s earnings from unconsolidated investments were $13 million for the three months ended June 30, 2009, related to the GEN-WE investment in Sandy Creek.  The $13 million consisted of $15 million mark-to-market gains primarily related to interest rate swap contracts partly offset by $2 million of financing costs.  Losses from unconsolidated investments were $3 million for the three months ended June 30, 2008.  GEN-WE recognized $3 million of earnings related to its investment in the Sandy Creek Project.  These earnings were comprised of our $13 million share of the gain on SCEA’s sale of an 11 percent undivided interest in the Sandy Creek Project, partially offset by our share of the partnership’s losses.  Please see Note 8—Variable Interest Entities—Sandy Creek for further discussion.  Equity earnings from the investment in Sandy Creek were more than offset by a $6 million loss related to Dynegy’s investment in DLS Power Development, included in Other.

DHI’s earnings from unconsolidated investments of $13 million for the three months ended June 30, 2009 related to the GEN-WE investment in Sandy Creek.  The $13 million consisted of $15 million mark-to-market gains primarily related to interest rate swap contracts partly offset by $2 million of financing costs.  Earnings from unconsolidated investments for the three months ended June 30, 2008 were $3 million, related to the GEN-WE investment in Sandy Creek.  These earnings were comprised of our $13 million share of the gain on SCEA’s sale of an 11 percent undivided interest in the Sandy Creek Project, partly offset by our share of the partnership’s losses.  Please see Note 8—Variable Interest Entities—Sandy Creek for further discussion.

Other Items, Net

Dynegy’s and DHI’s other items, net, totaled $4 million and $3 million, respectively, of income for the three months ended June 30, 2009, compared to $15 million and $14 million, respectively, of income for the three months ended June 30, 2008.  The decrease is primarily associated with lower interest income due to lower LIBOR rates in 2009.

Interest Expense

Dynegy’s and DHI’s interest expense totaled $98 million for the three months ended June 30, 2009, compared to $108 million for the three months ended June 30, 2008.  The decrease was primarily attributable to lower LIBOR rates on our variable-rate debt in 2009.

Income Tax Benefit

Dynegy reported an income tax benefit from continuing operations of $204 million for the three months ended June 30, 2009, compared to an income tax benefit from continuing operations of $182 million for the three months ended June 30, 2008.  The 2009 effective tax rate was 37 percent, compared to 40 percent in 2008.

DHI reported an income tax benefit from continuing operations of $205 million for the three months ended June 30, 2009, compared to an income tax benefit of $180 million from continuing operations for the three months ended June 30, 2008.  The 2009 effective tax rate was 37 percent, compared to 40 percent in 2008.

As a result of the LS Power transaction, we revised our assumptions around the ability to utilize certain state deferred tax assets, and therefore Dynegy and DHI recorded valuation allowances resulting in additional state tax expense of $10 million and $7 million, respectively for the three months ended June 30, 2009.  For the period ended June 30, 2008, the difference between the effective rate of 40 percent for Dynegy and DHI, respectively and the statutory rate of 35 percent resulted primarily from the effect of state income taxes in the taxing jurisdictions in which our assets operate.

Discontinued Operations

Income (Loss) From Discontinued Operations Before Taxes

During the three months ended June 30, 2009, Dynegy’s and DHI’s pre-tax income from discontinued operations was $1 million.  Our GEN-MW segment included an $18 million impairment charge offset by $1 million of income related to the operations of our Bluegrass power generation facility.  Our GEN-WE segment included $10 million of pre-tax gain on sale of the Heard County power generation facility and $8 million from the operation of the Heard County and Arizona power generation facilities.  During the three months ended June 30, 2008, Dynegy and DHI’s pre-tax loss from discontinued operations was $10 million related to the operation of the Arizona power generation facilities.

 
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Income Tax Benefit From Discontinued Operations

Dynegy recorded an income tax benefit from discontinued operations of $1 million during the three months ended June 30, 2009, compared to an income tax benefit of $4 million during the three months ended June 30, 2008.  These amounts reflect effective rates of 100 percent and 40 percent, respectively.  DHI recorded an income tax benefit from discontinued operations of $11 million during the three months ended June 30, 2009, compared to an income tax benefit of $4 million during the three months ended June 30, 2008.  FIN No. 18, “Accounting for Income Taxes in Interim Periods an interpretation of APB Opinion No. 28” requires a detailed methodology of allocating income taxes between continuing and discontinued operations.  This methodology often results in an effective rate for discontinued operations significantly different from the statutory rate of 35 percent.

Six Months Ended June 30, 2009 and 2008

Other.  DHI paid dividends of $342 million to Dynegy for the year ended December 31, 2007. Additionally, DHI paid a dividend of $175 million to Dynegy in January 2009.

On April 2, 2007, Dynegy contributed to Dynegy Illinois its interest in the Contributed Entities.  Also in April 2007, Dynegy Illinois contributed to DHI all of its interest in New York Holdings, together with its indirect interest in the subsidiaries of New York Holdings.  Please read Note 3—Business Combinations and Acquisitions—LS Power Business Combination for further discussion.  In August 2007, Dynegy contributed to DHI its 50 percent interest in SCH.  Please read Note 13—Variable Interest Entities—Sandy Creek for further information.

During 2006, DHI repaid a $120 million borrowing from Dynegy.  Also during 2006, DHI made a one-time dividend payment of $50 million to Dynegy from the proceeds of the Term Loan.  Please read Note 16—Debt for further discussion.

In the normal course of business, payments are made or cash is received by DHI on behalf of Dynegy, or by Dynegy on behalf of DHI.  As a result of such transactions, DHI has recorded over time a receivable from Dynegy in the aggregate amount of $827 million and $825 million at December 31, 2008 and 2007, respectively.  DHI resolved, effective December 31, 2007, to memorialize and distribute this receivable balance to Dynegy, once all required third-party approvals have been obtained.  As such, this receivable is classified as equity on DHI’s consolidated balance sheet as of December 31, 2008 and 2007.

 
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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
Note 18—Income Taxes

This excerpt taken from the DYN 8-K filed Sep 28, 2009.
Other.  DHI paid dividends of $342 million to Dynegy for the year ended December 31, 2007. Additionally, DHI paid a dividend of $175 million to Dynegy in January 2009.

On April 2, 2007, Dynegy contributed to Dynegy Illinois its interest in the Contributed Entities.  Also in April 2007, Dynegy Illinois contributed to DHI all of its interest in New York Holdings, together with its indirect interest in the subsidiaries of New York Holdings.  Please read Note 3—Business Combinations and Acquisitions—LS Power Business Combination for further discussion.  In August 2007, Dynegy contributed to DHI its 50 percent interest in SCH.  Please read Note 13—Variable Interest Entities—Sandy Creek for further information.

During 2006, DHI repaid a $120 million borrowing from Dynegy.  Also during 2006, DHI made a one-time dividend payment of $50 million to Dynegy from the proceeds of the Term Loan.  Please read Note 16—Debt for further discussion.

In the normal course of business, payments are made or cash is received by DHI on behalf of Dynegy, or by Dynegy on behalf of DHI.  As a result of such transactions, DHI has recorded over time a receivable from Dynegy in the aggregate amount of $827 million and $825 million at December 31, 2008 and 2007, respectively.  DHI resolved, effective December 31, 2007, to memorialize and distribute this receivable balance to Dynegy, once all required third-party approvals have been obtained.  As such, this receivable is classified as equity on DHI’s consolidated balance sheet as of December 31, 2008 and 2007.

 
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DYNEGY INC. AND DYNEGY HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
 
Note 18—Income Taxes

This excerpt taken from the DYN 10-Q filed May 7, 2009.
Other.  Dynegy’s other operating loss for the three months ended March 31, 2009 was $37 million, compared to an operating loss of $24 million for the three months ended March 31, 2008.  DHI’s other operating loss for the three months ended March 31, 2009 was $39 million, compared to an operating loss of $24 million for the three months ended March 31, 2008.  Operating losses in both periods were comprised primarily of general and administrative expenses.

Cost of sales for the three months ended March 31, 2008 included the release of a $9 million liability associated with an assignment of a natural gas transportation contract.  Operating and maintenance expense for the three months ended March 31, 2008 included the release of an $8 million of sales and use tax liability.

Consolidated general and administrative expenses were $38 million and $39 million for the three months ended March 31, 2009 and 2008, respectively.

Earnings (Losses) from Unconsolidated Investments

Dynegy’s earnings from unconsolidated investments were $8 million for the three months ended March 31, 2009 of which $7 related to the GEN-WE investment in Sandy Creek.  The $7 million consisted of $10 million mark-to-market gains primarily related to interest rate swap contracts offset by $3 million of financing costs.  Losses from unconsolidated investments were $9 million  for the three months ended March 31, 2008, including a $5 million loss related to the GEN-WE investment in Sandy Creek.  The remaining $4 million loss related to Dynegy’s investment in DLS Power Development, included in Other.

DHI’s earnings from unconsolidated investments of $7 million for the three months ended  March 31, 2009 related to the GEN-WE investment in Sandy Creek.  The $7 million consisted of $10 million mark-to-market gains primarily related to interest rate swap contracts offset by $3 million of financing costs.  Losses from unconsolidated investments for the three months ended  March 31, 2008 were $5 million, related to the GEN-WE investment in Sandy Creek.

 
Other Items, Net

Dynegy’s and DHI’s other items, net, totaled $4 million of income for the three months ended March 31, 2009, compared to $20 million of income for the three months ended March 31, 2008.  The decrease is primarily associated with lower interest income due to lower LIBOR rates in 2009.  In addition, during the first quarter 2008, we recognized income of $6 million related to insurance proceeds received in excess of the book value of damaged assets.

Interest Expense

Dynegy’s and DHI’s interest expense totaled $98 million for the three months ended March 31, 2009, compared to $109 million for the three months ended March 31, 2008.  The decrease was primarily attributable to lower LIBOR rates on our variable-rate debt.

Income Tax (Expense) Benefit

Dynegy reported an income tax expense from continuing operations of $85 million for the three months ended March 31, 2009, compared to an income tax benefit from continuing operations of $96 million for the three months ended March 31, 2008.  The 2009 effective tax rate was (34) percent, compared to 39 percent in 2008.

DHI reported an income tax expense from continuing operations of $82 million for the three months ended March 31, 2009, compared to an income tax benefit of $91 million from continuing operations for the three months ended March 31, 2008.  The 2009 effective tax rate was (32) percent, compared to 37 percent in 2008.

The primary difference between the effective rates of (34) and (32) percent for Dynegy and DHI, respectively, and the statutory rate of 35 percent resulted from the effect of the goodwill impairment charge.  As a result of this charge, which was nondeductible, we reported income tax expense for the period ended March 31, 2009, despite the fact that we reported a loss from continuing operations before income taxes.  Additionally, for the three months ended March 31, 2009, Dynegy and DHI recorded $21 million and $15 million, respectively, of income tax expense related to a change in California state tax law.  For the period ended March 31, 2008, the difference between the effective rates of 39 and 37 percent for Dynegy and DHI, respectively and the statutory rate of 35 percent resulted primarily from the effect of state income taxes in the taxing jurisdictions in which our assets operate.

Discontinued Operations

Income (Loss) From Discontinued Operations Before Taxes

During the three months ended March 31, 2009, our pre-tax income from discontinued operations was $1 million, related to the operation of the Heard County power generation facility.  During the three months ended March 31, 2008, our pre-tax loss from discontinued operations was $1 million, related to a loss on the sale of the Calcasieu power generation facility.

Income Tax Benefit From Discontinued Operations

We recorded an income tax expense from discontinued operations of less than $1 million during the three months ended March 31, 2009, compared to an income tax benefit of $1 million during the three months ended March 31, 2008.  These amounts reflect effective rates of zero and 100 percent, respectively.  FIN No. 18, “Accounting for Income Taxes in Interim Periods an interpretation of APB Opinion No. 28” requires a detailed methodology of allocating income taxes between continuing and discontinued operations.  This methodology often results in an effective rate for discontinued operations significantly different from the statutory rate of 35 percent.

Outlook

Our fleet includes a diverse mixture of assets with various fuel, dispatch and merit order characteristics within each of our three regions.  In commercializing our assets, we seek to achieve a balance between providing greater cash flow predictability in the near/intermediate term, while maintaining the ability to capture value longer term as markets tighten.  We expect that a majority of our sales will be achieved by selling energy and capacity through a combination of spot market sales and near-term contracts over a rolling 12–36 month time frame in time periods that we describe as Current, Current +1, and Current +2.  At any given point in time, we will seek to balance predictability of earnings and cash flow with achieving the highest level of earnings and cash flow possible over the Current, Current +1 and Current +2 periods.  In these periods, we understand that short-term market volatility can negatively impact our profitability, and we will seek to reduce those negative impacts through the disciplined use of near- and intermediate-term forward sales.  As a result, our fleet-wide forward sales profile is fluid and subject to change.  We expect to make fewer forward sales beyond the Current+2 period in order to realize the anticipated benefit of improved market prices over time as the supply and demand balance tightens.

 
We expect that our future financial results will continue to reflect sensitivity to fuel and commodity prices, market structure and prices for electric energy, ancillary services and capacity, transportation and transmission logistics, weather conditions and IMA.  Our commercial team actively manages commodity price risk associated with our unsold power production by trading in the forward markets that are correlated with our assets.  We also participate in various regional auctions and bilateral opportunities.  Our regional commercial strategies are particularly driven by the types of units that we have within a given region and the operating characteristics of those units.

Currently, substantially all of our expected generation for 2009 is contracted.  As we look forward to 2010 and beyond, we are actively hedging and expect to enter 2010 with a substantial portion of the output of our fleet contracted for that year.  Based on specific market conditions, at any point in time we may enter into transactions that will increase or decrease the portion of our output that has been contracted, since we actively manage our near-term market positions of less than three years.  The financial markets continue to be characterized by turmoil and stock prices across industries, including ours, continue to be significantly depressed.  These market conditions have resulted in a decreased willingness on the part of lenders to enter into new loans and a reduction in the number of counterparties participating in, and the volume of transactions available for execution in, the bilateral energy markets.  Thus, it can be more difficult for us to optimize the value of our assets.

To the extent that we choose not to enter into forward sales, the gross margin from our assets is a function of price movements in the coal, natural gas, fuel oil, electric energy and capacity markets.

The following summarizes unique business issues impacting our individual regions’ outlook.

This excerpt taken from the DYN 8-K filed Feb 26, 2009.
Other

Other primarily consists of results from the company’s former Customer Risk Management business and general and administrative expenses, partially offset by interest income. In Other, the company reported a $116 million Adjusted loss before interest, taxes and depreciation and amortization ($132 million operating loss) during 2008, compared to an Adjusted loss of $119 million ($184 million operating loss) during 2007.

 

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This excerpt taken from the DYN 8-K filed Nov 6, 2008.
Other

Other primarily consists of results from the company’s former Customer Risk Management business and general and administrative expenses, partially offset by interest income. In Other, the company reported a $38 million Adjusted loss before interest, taxes and depreciation and amortization ($51 million operating loss) during the third quarter 2008, compared to an Adjusted loss of $31 million ($63 million operating loss) during the third quarter 2007. The increased Adjusted loss before interest, taxes and depreciation and amortization in the third quarter 2008 was primarily related to a reduction in interest income as a result of lower interest rates. The decrease in operating loss during the third quarter 2008 can be attributed to lower legal and settlement charges in 2008, partially offset by the previously mentioned reduction in interest income during the third quarter 2008.

 

This excerpt taken from the DYN 8-K filed Aug 7, 2008.
Other

Other primarily consists of results from the company’s former Customer Risk Management business and general and administrative expenses, partially offset by interest income. In Other, the company reported a $28 million Adjusted loss before interest, taxes and depreciation and amortization during the second quarter 2008, compared to an Adjusted loss of $40 million during the second quarter 2007. The decreased loss in the second quarter 2008 was primarily related to an $8 million state sales and franchise tax benefit and lower general and administrative costs. The higher general and administrative costs in the second quarter 2007 included accelerated stock compensation expenses related to the LS Power combination.

 

This excerpt taken from the DYN 8-K filed May 8, 2008.

Other

          Other primarily consists of results from the company’s former Customer Risk Management business and general and administrative expenses, partially offset by interest income. In Other, the company reported an $11 million Adjusted loss before interest, taxes and depreciation and amortization during the first quarter 2008, compared to an Adjusted loss of $31 million during the first quarter 2007. The reduced loss in the first quarter 2008 was primarily related to interest income from higher restricted cash balances, a release of a liability associated with a natural gas transportation contract and a release of a sales and use tax liability.

This excerpt taken from the DYN 10-K filed Feb 28, 2008.

Other

 

Equity Investments. We also hold three investments in joint ventures in which LS Power or its affiliates are also investors. Dynegy has a 50 percent ownership interest in DLS Power Holdings and DLS Power Development. DHI has a 50 percent ownership interest in SCEA, which was contributed to it by Dynegy in August 2007. Please read Note 12—Variable Interest Entities for further discussion.

 

We also purchase and sell, or have purchased or sold, natural gas, natural gas liquids, crude oil, emissions and power and, in some instances, earn management fees from certain entities in which we have equity investments. During the years ended December 31, 2007, 2006 and 2005, we recognized net sales to affiliates

 

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DYNEGY INC. and DYNEGY HOLDINGS INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

related to these transactions of zero, zero and $200 million, respectively. In accordance with the net presentation provisions of EITF Issue 02-3, all of these transactions, whether physically or financially settled, have been presented net in the consolidated statements of operations. In addition, during the years ended December 31, 2007, 2006 and 2005, our other businesses recognized aggregate sales to these affiliates of zero, zero and $4 million, respectively, and aggregate purchases of zero, zero and $135 million, respectively, which are reflected gross in the consolidated statements of operations. Revenues were related to the supply of fuel for use at generation facilities, primarily West Coast Power, and the supply of natural gas sold by retail affiliates. Expenses primarily represent the purchase of natural gas liquids that were subsequently sold in our marketing operations.

 

December 2001 Equity Purchases. In December 2001, ten former members of our senior management purchased Class A common stock from Dynegy in a private placement pursuant to Section 4(2) of the Securities Act of 1933. These former officers received loans from Dynegy totaling approximately $25 million to purchase Dynegy’s common stock at a price of $19.75 per share, the same price as the net proceeds per share received by Dynegy from a concurrent public offering. The loans bear interest at 3.25 percent per annum and are full recourse to the borrowers. Such loans are accounted for as subscriptions receivable within Dynegy’s stockholders’ equity on the consolidated balance sheets.

 

Other. During 2007, DHI paid dividends of $342 million to Dynegy.

 

On April 2, 2007, Dynegy contributed to Dynegy Illinois its interest in the Contributed Entities. Also in April 2007, Dynegy Illinois contributed to DHI all of its interest in New York Holdings, together with its indirect interest in the subsidiaries of New York Holdings. Please read Note 3—Business Combinations and Acquisitions—LS Power Business Combination for further discussion. In August 2007, Dynegy contributed to DHI its 50 percent interest in SCH. Please read Note 12—Variable Interest Entities—Sandy Creek for further information.

 

During 2006, DHI repaid a $120 million borrowing from Dynegy. Also during 2006, DHI made a one time dividend payment of $50 million to Dynegy from the proceeds of the Term Loan. Please read Note 15—Debt for further discussion.

 

In the normal course of business, payments are made or cash is received by DHI on behalf of Dynegy, or by Dynegy on behalf of DHI. As a result of such transactions, DHI has recorded over time a receivable from Dynegy in the aggregate amount of $825 million at December 31, 2007. DHI has resolved, effective December 31, 2007, that it will memorialize and distribute this receivable balance to Dynegy, once all required third-party approvals have been obtained. As such, this receivable has been reclassified to equity on DHI’s consolidated balance sheet as of December 31, 2007.

 

This excerpt taken from the DYN 8-K filed Feb 27, 2008.

Other

          Other primarily consists of general and administrative expenses and legal and settlement charges, partially offset by interest income. In Other, the company recorded a $139 million loss before interest expense, taxes and depreciation and amortization during 2007, compared to a loss of $100 million during 2006. During 2007, general and administrative expenses were higher as a result of the increased headcount and related expenses associated with the LS Power transaction. This increase was partially offset by greater interest income earned in 2007 due to higher restricted cash balances. 2007 results also included a charge of $21 million related to legal and settlement charges.

This excerpt taken from the DYN 8-K filed Nov 8, 2007.

Other

Other primarily consists of general and administrative expenses and legal and settlement charges, partially offset by interest income. In Other, the company recorded a $33 million loss before interest, taxes and depreciation and amortization during the third quarter 2007, compared to a loss of $29 million during the third quarter 2006. During the third quarter 2007, general and administrative expenses were higher as a result of the increased headcount and related expenses associated with the LS Power combination. This increase was partially offset by greater interest income earned in 2007 due to higher restricted cash balances.

This excerpt taken from the DYN 8-K filed May 15, 2007.

Other

Other and Eliminations also includes corporate-level expenses such as general and administrative and interest. Significant items impacting future earnings and cash flows include:

 

   

interest expense, which reflects debt with a weighted-average rate of approximately 8%, and will continue to reflect our non-investment grade credit ratings;

 

   

general and administrative costs (G&A), with respect to which we have implemented a number of initiatives that have yielded savings, and which will be impacted by, among other things, (i) any future corporate-level litigation reserves or settlements; (ii) potential funding requirements under our pension plans; and (iii) increased G&A associated with additional resources required for the management and administration of assets acquired through the planned merger with the LS Entities; and

 

   

income taxes, which will be impacted by our ability to realize our significant deferred tax assets, including loss carryforwards.

Discontinued Businesses

Natural Gas Liquids. Our natural gas liquids business, which we sold to Targa in October 2005, was comprised of our natural gas gathering and processing assets and integrated downstream assets used to fractionate, store, terminal, transport, distribute and market natural gas liquids. NGL’s results are reflected in Discontinued Operations in our consolidated statements of operations.

Regulated Energy Delivery. Our regulated energy delivery business was comprised of our Illinois Power subsidiary prior to its sale to Ameren in September 2004. REG’s results are reflected in Continuing operations in our consolidated statements of operations due to our significant continuing involvement with Ameren through power sales agreements.

This excerpt taken from the DYN 8-K filed Feb 27, 2007.

Other

The loss before interest, taxes and depreciation and amortization for the company’s Other results was $100 million during 2006, compared to EBITDA of $986 million in 2005.

Other results in 2006 included approximately $143 million of general and administrative expenses, including costs related to the company’s business segments. 2005 results included pre-tax income from discontinued operations of approximately $1.3 billion, which primarily related to the Midstream business that was sold in the fourth quarter 2005. This income was partially offset by $249 million in pre-tax legal and settlement charges included in general and administrative expenses. In addition, 2005 results included $115 million of general and administrative expenses related to the company’s Other results, which excludes $66 million in expenses associated with the generation business segments. Other results benefited year-over-year from higher interest income resulting from higher cash balances and higher interest rates earned on cash deposits. Additionally, compensation and benefits costs and professional and legal fees were lower in 2006 compared to 2005.

This excerpt taken from the DYN 8-K filed Feb 2, 2007.

Item 8.01 Other Items.

A copy of the press release issued by Dynegy Inc. announcing the above transaction is being furnished as Exhibit 99.1 to this Current Report on Form 8-K. In addition, this Current Report on Form 8-K and the release include statements intended as “forward-looking statements,” which are subject to the cautionary statements about forward-looking statements set forth in the press release.

WHERE YOU CAN FIND MORE INFORMATION

Dynegy has filed a preliminary proxy statement/prospectus, as amended, with the SEC in connection with the previously announced proposed merger with LS Power. Investors and security holders are urged to carefully read the important information contained in the materials regarding the proposed transaction. Investors and security holders may obtain a copy of the preliminary proxy statement/prospectus, as amended, and other relevant documents, free of charge, at the SEC’s web site at www.sec.gov. Copies of the final proxy statement/prospectus, once it has been filed with the SEC, will also be available, free of charge, on the SEC’s web site, and on Dynegy’s web site at www.dynegy.com and may also be obtained by writing Dynegy Inc. Investor Relations, 1000 Louisiana Street, Suite 5800, Houston, Texas 77002 or by calling 713-507-6466.

Dynegy, LS Power and their respective directors, executive officers, partners and other members of management and employees may be deemed to be participants in the solicitation of proxies from Dynegy’s shareholders with respect to the proposed transaction. Information regarding Dynegy’s directors and executive officers is available in the company’s proxy statement for its 2006 Annual Meeting of Shareholders, dated April 3, 2006. Additional information regarding the interests of such potential participants are included in the preliminary proxy statement/prospectus, as amended, and other relevant documents filed with the SEC when they become available.

This excerpt taken from the DYN 8-K filed Jan 25, 2007.

Item 8.01 Other Items.

On January 25, 2007, Dynegy Inc. (“Dynegy”) issued a press release announcing leadership changes related to Dynegy’s proposed combination with LS Power. A copy of the press release issued by Dynegy is attached as Exhibit 99.1 to this Current Report on Form 8-K. The press release includes statements intended as “forward-looking statements,” which are subject to the cautionary statement about forward-looking statements set forth therein.

WHERE YOU CAN FIND MORE INFORMATION

Dynegy has filed a preliminary proxy statement/prospectus, as amended, with the SEC in connection with the previously announced proposed merger with LS Power. Investors and security holders are urged to carefully read the important information contained in the materials regarding the proposed transaction. Investors and security holders may obtain a copy of the preliminary proxy statement/prospectus, as amended, and other relevant documents, free of charge, at the SEC’s web site at www.sec.gov. Copies of the final proxy statement/prospectus, once it has been filed with the SEC, will also be available, free of charge, on the SEC’s web site, and on Dynegy’s web site at www.dynegy.com and may also be obtained by writing Dynegy Inc. Investor Relations, 1000 Louisiana Street, Suite 5800, Houston, Texas 77002 or by calling 713-507-6466.

Dynegy, LS Power and their respective directors, executive officers, partners and other members of management and employees may be deemed to be participants in the solicitation of proxies from Dynegy’s shareholders with respect to the proposed transaction. Information regarding Dynegy’s directors and executive officers is available in the company’s proxy statement for its 2006 Annual Meeting of Shareholders, dated April 3, 2006. Additional information regarding the interests of such potential participants are included in the preliminary proxy statement/prospectus , as amended, and other relevant documents filed with the SEC when they become available.

This excerpt taken from the DYN 8-K filed Jan 23, 2007.

Item 8.01 Other Items.

Dynegy Inc. (“Dynegy”) is participating in the JPMorgan Annual High Yield Conference to be held in Miami Beach, Florida on January 21-24, 2007. Bruce A. Williamson, Chairman and Chief Executive Officer of Dynegy, is scheduled to deliver a presentation on Tuesday, January 23, 2007, beginning at 8:00 a.m. Eastern time/7:00 a.m. Central time.

The slide presentation for use by Dynegy in conjunction with the conference is attached as Exhibit 99.1 to this Current Report on Form 8-K.

The presentation slides include statements intended as “forward-looking statements,” which are subject to the cautionary statement about forward-looking statements set forth therein. Certain of the slides set forth in Exhibit 99.1 also contain non-GAAP financial information. The reconciliation of such non-GAAP financial information to GAAP financial measures is included to the extent available without unreasonable effort.

WHERE YOU CAN FIND MORE INFORMATION

Dynegy has filed a preliminary proxy statement/prospectus, as amended, with the SEC in connection with the previously announced proposed merger with LS Power. Investors and security holders are urged to carefully read the important information contained in the materials regarding the proposed transaction. Investors and security holders may obtain a copy of the preliminary proxy statement/prospectus, as amended, and other relevant documents, free of charge, at the SEC’s web site at www.sec.gov. Copies of the final proxy statement/prospectus, once it has been filed with the SEC, will also be available, free of charge, on the SEC’s web site, and on Dynegy’s web site at www.dynegy.com and may also be obtained by writing Dynegy Inc. Investor Relations, 1000 Louisiana Street, Suite 5800, Houston, Texas 77002 or by calling 713-507-6466.

Dynegy, LS Power and their respective directors, executive officers, partners and other members of management and employees may be deemed to be participants in the solicitation of proxies from Dynegy’s shareholders with respect to the proposed transaction. Information regarding Dynegy’s directors and executive officers is available in the company’s proxy statement for its 2006 Annual Meeting of Shareholders, dated April 3, 2006. Additional information regarding the interests of such potential participants is included in the preliminary proxy statement/prospectus, as amended, and other relevant documents filed with the SEC when they become available.

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