Exhibit 99.5
Nick Caruso
Financial Update
Dynegy Inc.
Dynegy’s Steps to Success
Rating Agency Concerns
“BB” Target
Uncertainties related to near-term debt maturities Lack of investor confidence
Lack of customer confidence
Corporate governance and internal controls
Maintaining adequate liquidity
Uncertainty surrounding investigations and litigation
Concerns over level of operating cash flows related to leverage
Positive Outlook (Caa2)
Neutral
Negative Watch (Caa2)
Dynegy’s Actions
Extended debt maturities past expected market recovery period Market confidence reflected by significant improvements in stock and bond prices Continued growth demonstrated by strong operating performance New Corporate leadership team; implementation of Sarbanes-Oxley 404 Maintained adequate liquidity while reducing debt and other obligations $5.2 B as of pro forma 12/31/04 Settled numerous claims and litigation; shareholder class action and ENE trade litigation pending Continuing to address; positioned debt maturities for market recovery
Dynegy Inc. 2
Dynegy’s Capital Structure
Former (1)
Dynegy Inc
Mand. Red. Preferred Stock
Dynegy Global Communications
Polaris Credit Facility
Dynegy Storage Limited
UK Bridge Loan
Dynegy Holdings Inc.
Revolving Credit Facilities
Canadian Revolving Credit Facility
Senior Notes/Debentures Subordinated Debentures
Illinova
Senior Notes/MTM
DMT Holdings
ABG Gas Supply Credit Agreement
Dynegy Midwest Generation
Black Thunder Credit Facility
Dynegy Power Corp.
Riverside Central Hudson Ren./Rolling Hills Credit Facility CoGen Lyondell Credit Facility Heard Credit Facility
Illinois Power
Mortgage Notes Transitional Funding Notes Pollution Control Bonds Revolving Credit Facility Tilton Lease Credit Facility
Preferred Stock
Key
Secured Unsecured
Current (2)
Dynegy Inc
Convertible Debentures $225
Convertible Preferred $400
Dynegy Holdings Inc.
Revolving Credit Facility (3) $0
Term Loan $597
Second Secured Notes $1,750
Senior Notes/Debentures $1,391
Subordinated Debentures $200
Dynegy Power Corp.
Riverside $188
Central Hudson (4) $782
(1) As of 9/30/02.
(2) As of 12/31/04, pro forma
(3) Represents drawn amounts and does not include approximately $110 MM of letters of credit posted under the revolver as of 11/30/04.
(4) Represents future lease payments using a present value discount factor of 10%.
Dynegy Inc. 3
Financial Profile Since December 2002
Pro Forma
($ in millions) 12/31/2002 12/31/2003 9/30/2004 12/31/2004
Debt
Debt maturing within 5 years $5,206 $1,319 $609 $483
Debt maturing > 5 years 2,872 5,309 4,269 4,268
Capital lease obligation 746 758 782 771
TOTAL DEBT $8,824 $7,386 $5,660 $5,522
Liquidity $1,315 $1,389 $1,508 $1,200
Moody’s Rating Caa2 Caa2 Caa2
Outlook Negative Developing Positive
Debt reduced $3.3 B (37%) while maintaining strong liquidity
(1) Total debt reflects balance sheet debt, off balance sheet leases and preferred stock.
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Tolls… Counting Down
Annual plus future requirements(1):
Project 2002+ 2003+ 2004+ 2005+
Monroe 42 - - -
Dahlberg 43 3 - -
Daniel 200 5 - -
Goat Rock 1,535 - - -
Batesville 76 10 - -
Sithe 960 892 824 -
Gregory (2) 81 59 36 13
Kendall (3) 617 589 551 347
Sterlington 931 924 868 810
Total 4,484 2,482 2,279 1,170
Represents 74% Reduction
(1) Excludes termination
(2) Expires by its term July 2005.
(3) Tolling obligations shown in the 2005+ column are due 2009-2017. Operating margin in 2009 and beyond is expected to offset capacity payments.
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Sithe Acquisition Update
Adds more than 1,000 MWs to Northeast operations
Acquire 750-MW capacity sales agreement with a subsidiary of Consolidated Edison
Receive annual cash payments of approximately $100 MM through 2014 ‘A’ rated credit counterparty
Sales agreement substantially funds project debt through 2014 Transaction expected to close February, 2005
Independence Sources/Uses
($MM)
200 100 0
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
250 200 150 100 50 0
Sources: Net Dynegy Market Con Ed Uses: Opex/Capex(1) Debt Service Equity Return
(1) Includes fuel transportation expense.
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Collateral Posted
($ in millions) $1,200 $1,000 $800 $600 $400 $200 $0
Jan. ‘03 Mar. ‘03 June. ‘03 Sept. ‘03 Jan. ‘04 Mar. ‘04 June. ‘04 Sept. ‘04 Dec ‘04
Peaking Season
Peaking Season
Forecasted 2005
12/31/03 12/31/04 Average
CRM $121 $115-120 $9 0-95
GEN 136 230-240 200-205
NGL 179 165-170 160-165
REG 38 10 0
Other 8 5-10 5-10
Total $482 $525-550 $455-475
Cash $294 $430-440
LCs 188 95-110
Total $482 $525-550
Sensitivity to commodity prices can cause changes in collateral 2005 expectations:
REG requirement is eliminated
CRM should decline due to continued maturities from legacy business GEN to be driven by commodity prices NGL to be driven by propane prices
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Liquidity
$ in billions $1.5 $1.4 $1.3 $1.4 $1.2
Capital that can be put to work for common shareholders
12/31/03 3/31/04 6/30/04 9/30/04
Forecasted 12/31/04
Cash
Availability
Current liquidity levels are in excess of what is required to sustain the business
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Shifting Our Emphasis to the Common Stock: 2005 Debt Liability Management Options
A number of financing options are available to:
Reduce debt
Reduce interest expense
Provide an acceleration of return to our common shareholders
Sources of Cash
Cash and liquidity on hand Refinancings Equity issuance
Uses of Cash
Tenders/Exchanges Open market repurchases
Equity “clawback” of high coupon debt
Reducing interest expense significantly improves earnings and cash flow and shifts economic benefit to our common shareholders
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2005 Operating Plan General Assumptions
Business unit specifics as previously presented Acquisition of Sithe equity in February, 2005
Baldwin litigation resolved, accompanied by release of $100 MM escrow $42 MM payment for 2004 remaining settlement of ANR/Middleton gas transportation agreements in Q1 2005 Adequate liquidity maintained to run business and address pending legacy litigation and remaining toll Normal weather Effective tax rate is 38% with no significant cash taxes paid due to excess tax loss carryforwards
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2005 Base Commodity Price Assumptions
2005E
Hydrocarbon Pricing:
WTI ($/Bbl) $40.00
Henry Hub ($/MMBtu) $7.00
Frac Spread ($/MMBtu) $1.37
Weighted Average NGL ($/Gal) $0.74
Propane Correlation to Crude 77%
Power Prices ($/MWh):
Midwest $50.00
Northeast $68.00
Southeast $52.00
Ercot $61.00
SP 15—California $66.00
2005E
Capacity Prices ($/KW-yr):
Midwest $6.00
Northeast $12.00
Southeast $6.00
Delivered Coal ($/MMBtu):
PRB Delivered to Baldwin $1.00
Colombian Delivered to Northeast $3.00
Fuel Oil #6 Delivered to Northeast ($/MMBtu) $5.48
LIBOR 2.8%
Inflation 2.7%
Corresponds to business unit earnings and assumptions previously presented
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2005 Cash Flow Guidance Estimates
($ in millions) GEN NGL CRM OTHER 2005 Total
OCF $315-320 $325-330 $(40) $(375-370) $225-240
Capex—Maintenance (160) (50) - (6) (216)
Free Cash Flow—Core Business $155-160 $275-280 $(40) $(381-376) $9-24
Significant Items:
ANR/Middleton Gas Payment - - (42) - (42)
Sithe Energies Acquisition (110) - - - (110)
Baldwin Escrow Release/Asset Sal - - - 110 110
Capex—Development (30) (28) - (5) (63)
Free Cash Flow—GAAP $15-20 $247-252 $(82) $(276-271) $(96-81)
Gas transportation payment of $42 MM to exit four long-term gas transportation contracts Sithe Energies acquisition cost of $110 MM comprised of purchase price of $135 MM less working capital adjustments. Dynegy also receives $93 MM of restricted cash that is not shown in cash flow. Resolution of Baldwin litigation and $100 MM escrow released Includes asset sales proceeds of $10 MM, no gain or loss expected Development capex primarily related to PRB coal conversions in GEN and notional allocation for new business opportunities in NGL
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2005 Earnings Guidance Estimates –GAAP Basis
($ in millions) GEN NGL CRM OTHER 2005 Total
EBITDA $340-350 $285-295 ($80) $(95-90) $450-475
Depreciation (210) (85) - (15) (310)
Interest (380)
Tax Benefit 91-82
Preferred Dividend (22)
Net Income Available to Common Shareholders - Core Business $(171-155)
Independence Toll Settlement Charge, pre -tax (220) (220)
Early Retirement Debt/Other Interest, pre -tax (135)
Tax Benefit, tax impact – on items above 135
Net Income Available to Common Shareholders - GAAP $(39 1-375)
CRM loss of $80 MM primarily includes tolling payments related to Gregory and Sterlington and G&A expenses Independence toll settlement charge to be recorded upon closing of this transaction related to resolution of the tolling obligation Early retirement of debt reflects premiums on extinguishment of debt, costs associated with the exchange of the convertible debentures and acceleration of deferred financing costs Tax benefit calculated using 38% tax rate effective rate
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Commodity Price Sensitivities –2005 OCF Ranges
Low Hydrocarbon High Hydrocarbon
OCF Impact + $10 MM + $40MM
FCF—Core Business $19-34 MM $49-64MM
Hydrocarbon Pricing:
WTI ($/BBl) $35.00 $45.00
Henry Hub ($/MMBtu) $6.20 $7.50
Weighted Average NGL ($/Gal) $0.62 $0.81
DNE No. 6 Oil ($/MMBtu) $5.08 $6.26
Power Pricing:
Cinergy—DMW $46.00 $54.50
Zone G—DNE $66.00 $71.50
ERCOT (Houston) $56.00 $64.25
SP 15—California $65.00 $69.75
Lower hydrocarbon scenario reduces NGL’s Upstream OCF (lower NGL pricing) but increases GEN’s OCF at DNE (lower No. 6 fuel costs) and ERCOT (natural gas on margin) Higher hydrocarbon scenario increases NGL’s Upstream OCF (higher NGL pricing) but reduces GEN’s OCF at DNE and ERCOT; DMG benefits from increased “dark” spread
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To Summarize Our Financial Journey…
Improved relationship and credibility
Rating agencies, financial institutions and investors
Simplified our debt structure
Significantly reduced debt and other obligations Maintained strong liquidity Cleared maturity runway Extended credit facilities…twice Provided 2005 cash flow and earnings guidance Provided modeling data for your use Did the right thing for all of our investors
… Driving toward cash flow positive in 2005
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