Dynegy Illinois 8-K Executing our Growth and Value Vision

Executing our Growth and Value Vision

Merrill Lynch Global Power & Gas Leaders Conference

September 27, 2006

New York City

Exhibit 99.1

Filed by Dynegy Acquisition, Inc.

Pursuant to Rule 425 of the Securities Act of 1933, as amended, and

deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934, as amended

Subject Company: Dynegy Inc.

Commission File No: 001-15659.

2

Growth

•

Value

•

Vision

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS

This

presentation

includes

statements

that

do

not

directly

or

exclusively

relate

to

historical

facts.

Such

statements

are

“forward-looking

statements”

within

the

meaning

of

Section

27A

of

the

Securities

Act

of

1933

and

Section

21E

of

the

Securities

Exchange

Act

of

1934.

These

forward-looking

statements

include

statements

regarding

benefits

of

the

proposed

transaction,

expected

synergies

and

anticipated

future

financial

operating

performance

and

results,

including

estimates

of

growth.

These

statements

are

based

on

the

current

expectations

of

Dynegy’s

management.

There

are

a

number

of

risks

and

uncertainties

that

could

cause

actual

results

to

differ

materially

from

the

forward-looking

statements

included

in

this

document.

For

example:

The

company

may

be

unable

to

obtain

shareholder

approval

required

for

the

transaction;

the

company

may

be

unable

to

obtain

regulatory

approvals

required

for

the

transaction,

or

required

regulatory

approvals

may

delay

the

transaction

or

result

in

the

imposition

of

conditions

that

could

have

a

material

adverse

effect

on

the

company

or

cause

the

companies

to

abandon

the

transaction;

conditions

to

the

closing

of

the

transaction

may

not

be

satisfied;

problems

may

arise

in

successfully

integrating

the

operations

of

the

companies,

which

may

result

in

Dynegy

not

operating

as

effectively

and

efficiently

as

expected;

Dynegy

may

be

unable

to

achieve

expected

synergies

or

it

may

take

longer

than

expected

to

achieve

the

synergies;

the

transaction

may

involve

unexpected

costs

or

unexpected

liabilities,

or

the

effects

of

purchase

accounting

may

be

different

from

the

companies’

expectations;

the

businesses

of

the

companies

may

suffer

as

a

result

of

uncertainty

surrounding

the

transaction;

the

industry

may

be

subject

to

future

regulatory

or

legislative

actions

that

could

adversely

affect

the

companies;

and

the

companies

may

be

adversely

affected

by

other

economic,

business,

and/or

competitive

factors.

Additional

factors

that

may

affect

the

future

results

of

Dynegy

are

set

forth

in

its

filings

with

the

Securities

and

Exchange

Commission,

which

are

available

free

of

charge

on

the

SEC's

web

site

at

www.sec.gov.

In

connection

with

the

LS

Power

transaction

announced

on

September

15,

2006,

Dynegy

will

file

a

proxy

statement/prospectus

with

the

SEC. 

INVESTORS

AND

SECURITY

HOLDERS

ARE

URGED

TO

CAREFULLY

READ

THE

IMPORTANT

INFORMATION

CONTAINED

IN

THE

MATERIALS

REGARDING

THE

PROPOSED

TRANSACTION

WHEN

IT

BECOMES

AVAILABLE.

IT

WILL

CONTAIN

IMPORTANT

INFORMATION

ABOUT

DYNEGY,

LS

POWER,

THE

NEW

COMPANY

AND

THE

PROPOSED

TRANSACTION.

Investors

and

security

holders

will

be

able

to

obtain

a

copy

of

the

proxy

statement/prospectus

and

other

documents

containing

information

about

Dynegy

and

LS

Power,

free

of

charge,

at

the

SEC’s

web

site

at

www.sec.gov

and

at

Dynegy’s

web

site

at

www.dynegy.com.

Copies

of

the

proxy

statement/prospectus

may

also

be

obtained

by

writing

Dynegy

Inc.

Investor

Relations,

1000

Louisiana

Street,

Houston,

Texas

77002

or

by

calling

713-507-6466.

Dynegy,

LS

Power

and

their

respective

directors

and

executive

officers

and

other

members

of

management

and

employees

may

be

deemed

to

be

participants

in

the

solicitation

of

proxies

from

Dynegy’s

shareholders

in

respect

of

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

will

be

included

in

the

forthcoming

proxy

statement/prospectus

and

other

relevant

documents

filed

with

the

SEC

when

they

become

available.

Non-GAAP

Financial

Measures:

We

use

the

non-GAAP

financial

measures

“EBITDA”

and

“free

cash

flow”

in

these

materials.

EBITDA

is

a

non-GAAP

financial

measure.

Consolidated

EBITDA

can

be

reconciled

to

Net

income

(loss)

using

the

following

calculation:

Net

income

(loss)

less

Income

tax

benefit

(expense),

plus

Interest

expense

and

Depreciation

and

amortization

expense

equals

EBITDA.

Management

and

some

members

of

the

investment

community

utilize

EBITDA

to

measure

financial

performance

on

an

ongoing

basis.

However,

EBITDA

should

not

be

used

in

lieu

of

GAAP

measures

such

as

net

income

and

cash

flow

from

operations.

Free

cash

flow

is

a

non-GAAP

financial

measure.

Free

cash

flow

can

be

reconciled

to

operating

cash

flow

using

the

following

calculation:

Operating

cash

flow

plus

investing

cash

flow

(consisting

of

asset

sale

proceeds

less

business

acquisition

costs,

capital

expenditures

and

changes

in

restricted

cash)

equals

free

cash

flow.

We

use

free

cash

flow

to

measure

the

cash

generating

ability

of

our

operating

asset-based

energy

business

relative

to

our

capital

expenditure

obligations.

Free

cash

flow

should

not

be

used

in

lieu

of

GAAP

measures

with

respect

to

cash

flows

and

should

not

be

interpreted

as

available

for

discretionary

expenditures,

as

mandatory

expenditures

such

as

debt

obligations

are

not

deducted

from

the

measure.

3

Growth

•

Value

•

Vision

AGENDA

AGENDA

Transaction Overview and Valuation

Enhanced Scale, Diversity and Market Position

Development and Repowering Pipeline

Capital Structure Overview

Value Proposition and Next Steps

4

Growth

•

Value

•

Vision

TRANSACTION OVERVIEW

TRANSACTION OVERVIEW

Dynegy and LS Power have agreed to combine:

100% of Dynegy’s power generation portfolio

100% of LS Power Group’s power generation portfolio

Dynegy to acquire 50% ownership interest in LS Power’s generation development

business

Increased organic growth prospects through existing repowering opportunities

Assets

Development

Repowering

Pro forma 20,000+ MW

concentrated in Midwest,

Northeast, and Western

regions

Enhanced fuel and

dispatch diversity

New strategic position in

California

Pro forma 20,000+ MW

concentrated in Midwest,

Northeast, and Western

regions

Enhanced fuel and

dispatch diversity

New strategic position in

California

Approximately 7,600 MW of

predominantly coal generation

in various stages of

development

Approximately 30% of

development projects in

advanced stages

Approximately 7,600 MW of

predominantly coal generation

in various stages of

development

Approximately 30% of

development projects in

advanced stages

Creates leading merchant power generator with

proven asset development capabilities and multiple value drivers

Approximately 2,270 MW of

predominantly CCGT

repowering opportunities at

existing LS Power sites

Experienced LS Power

personnel to lead development

joint venture

Approximately 2,270 MW of

predominantly CCGT

repowering opportunities at

existing LS Power sites

Experienced LS Power

personnel to lead development

joint venture

5

Growth

•

Value

•

Vision

KEY VALUATION METRICS

KEY VALUATION METRICS

Transaction consideration: $2.0 B equity value; $4.1 B enterprise value

LS operating assets 2007 expected EBITDA: $360 MM –

$400 MM

LS Power 2007 expected free cash flow: $205 MM –

$245 MM

Significantly accretive to 2007 expected free cash flow

(1)

Amount

related

to

Plum

Point

1,

which

is

under

construction.

(2)

Assumes utilization of Dynegy NOLs.

Note:

$2.0

B

equity

value

calculated

using

340,000,000

newly

issued

shares

at

$5.76

per

share

(Dynegy

closing

price

on

9/14/06.)

Enterprise

value

calculated

using

$2.0

B

equity

value

plus

$1.8

B

in

project

debt

assumed

and

$375

MM

other

consideration.

Financial

expectations

for

LS

Power

are

preliminary

and

based

on

indicative

measures

and

various

assumptions

and

other

factors

beyond

our

control,

including

commodity

prices

in

applicable

regions.

Actual

future

performance

may

differ

materially

from

these

preliminary

expectations,

which

will

be

impacted

by

purchase

accounting

adjustments

and

may

not

be

updated

to

reflect

future

changes.

Transaction Consideration (Enterprise)

4,141

$    

2007 Expected EBITDA (Mid-Point)

380

$      

Less: Consideration for Non-Operating Assets

(350)

Less: Interest Expense

(125)

Less: Net Debt of Non-Operating Assets

(1)

(106)

Less: Capital Expenditures

(30)

Consideration for Operating Assets (Enterprise)

3,685

Free Cash Flow (Mid-Point)

225

$      

Less: Operating Asset Debt Assumed

(1,702)

Operating Assets Consideration (Equity)

1,983

$    

2007 Operating Asset EBITDA Multiple (Mid-Point)

9.7x

2007 Operating Asset Free Cash Flow Yield

11.3%

Transaction Consideration

2007 Expected

Operating Asset EBITDA/Free Cash Flow

(2)

6

Growth

•

Value

•

Vision

TRANSACTION VALUATION

TRANSACTION VALUATION

Free Cash Flow

Accretion

Enhanced

Financial Stability

Valuation and  

Financial Metrics

Immediately and

increasingly accretive

to free cash flow

LS operating assets’

contracted sales

provide stable free

cash flow even in low

commodity price

environment

Immediately and

increasingly accretive

to free cash flow

LS operating assets’

contracted sales

provide stable free

cash flow even in low

commodity price

environment

LS operating assets

provide a highly

predictable cash flow

stream to rapidly

deleverage and shift value

to common stock

Dynegy’s baseload-

oriented cash flow stream

provides significant upside

potential for common stock

Dynegy’s peaking assets

create upside with future

power market recovery

LS operating assets

provide a highly

predictable cash flow

stream to rapidly

deleverage and shift value

to common stock

Dynegy’s baseload-

oriented cash flow stream

provides significant upside

potential for common stock

Dynegy’s peaking assets

create upside with future

power market recovery

Transaction is accretive to free cash flow

and improves multiple financial metrics

Free cash flow yield of  

LS operating assets

expected to be

approximately

11%

(1)

Approximately

$470/kW

(2)

for operating portfolio

with strong long-term

contracts

Net debt-to-capital ratio

initially expected to be

56%

(3)

pro forma, and

rapidly deleveraging

Free cash flow yield of  

LS operating assets

expected to be

approximately

11%

(1)

Approximately

$470/kW

(2)

for operating portfolio

with strong long-term

contracts

Net debt-to-capital ratio

initially expected to be

56%

(3)

pro forma, and

rapidly deleveraging

(1)

See page 5 for more details.

(2)

Based on 7,919 MW of operating assets, excluding Plum Point.

(3)

Excludes Plum Point.

7

Growth

•

Value

•

Vision

More sources of earnings

More sources of earnings

and value without

and value without

substantial cost increases

substantial cost increases

A TOP TIER MERCHANT GENERATOR

A TOP TIER MERCHANT GENERATOR

Pro Forma

(1)

(4)

U.S. Unregulated Generation (Net MW)

43,911

26,675

22,584

21,960

20,104

18,300

15,934

11,920

10,567

9,749

7,664

Note: Excludes announced development programs.

(1)

Pro forma for divestiture of mitigation assets.

(2)

Pro forma for announced asset sales.

(3)

Pro forma for the expected 4Q 2006 sale of Rockingham, a 900-MW dual-fuel facility in North Carolina.

(4)

Includes 10,228 MW capacity from natural gas fired plants for which TXU has announced intentions to explore strategic alternatives, including a potential sale.

Increased scale and scope significantly enhances

competitive position of our power generation business

(3)

(2)

(2)

(3)

8

Growth

•

Value

•

Vision

NEW DYNEGY PORTFOLIO

NEW DYNEGY PORTFOLIO

Strategically concentrated portfolio in key regions

with strong new position in California

Note: Plum Point 1 currently under construction.     

MW totals exclude development and repowerings.

Primary Fuel Type

Nameplate Capacity (MW)

More than 900 MW

500 MW to 900 MW

150 MW to 500 MW

Less than 150 MW

LS Power -

Operating

Coal

Gas

Gas/Oil

Wind

LS Power -

Development

Dynegy Inc.

West

5,232 MW

Midwest

8,976 MW

Northeast

4,373 MW

Transmission

9

Growth

•

Value

•

Vision

DIVERSIFIED AND BALANCED PORTFOLIO

DIVERSIFIED AND BALANCED PORTFOLIO

Dynegy

LS Power

Combined

Geographic

Diversity

Dispatch

Diversity

A complementary mix of geographic locations

with baseload, intermediate and peaking capabilities

Note: Includes Plum Point, which is under construction.

Fuel

Diversity

Coal/Oil

21.2%

Dual Fuel

6.7%

Gas -

CCGT

32.8%

Gas -

Simple Cycle

39.3%

Northeast

23.5%

Midwest

63.3%

South 

12.8%

West

0.4%

Midwest

17.4%

Northeast

19.2%

West

63.4%

Intermediate

19.3%

Peaking

45.2%

Baseload

35.5%

Intermediate

43.6%

Peaking

28.4%

Baseload

28.0%

Intermediate

29.2%

Peaking

38.3%

Baseload

32.5%

Midwest

44.6%

Northeast

21.8%

West

26.0%

South 

7.6%

10

Growth

•

Value

•

Vision

GREENFIELD DEVELOPMENT

GREENFIELD DEVELOPMENT

More than 7,600 MW in various stages of power generation development, 

with approximately 30% in advanced stages

Sandy

Creek

Long Leaf

White Pine/

Egan

Elk Run

Plum Point

Unit 2

High Plains

Five Forks

West

Deptford

West Texas

Texas

Georgia

Nevada

Iowa

Arkansas

Colorado

Virginia

New Jersey

Texas

Coal/800

Coal/1,200

Coal/Wind

1,600/200

Coal/750

Coal/665

Coal/600

Coal/800

Coal/500

Natural

Gas/500

Application Filed

Permit Issued

Application Filed

Draft Permit Issued

Application Filed

Permit Issued

Water Supply Secured/Available

Fuel/MW

Site Secured

Zoning Approved/Not Required

Location

Solid

Waste

Permit

Water

Discharge

Permit

Air

Permit

N/A

N/A

11

Growth

•

Value

•

Vision

SIGNIFICANT REPOWERING OPPORTUNITIES

SIGNIFICANT REPOWERING OPPORTUNITIES

Bridgeport (Connecticut)

Addition of up to 320-MW peaking capacity on existing site

Ability to capture energy, capacity and ancillary revenues

South Bay (California)

Pursuing replacement of current plant with 500-MW CCGT on adjacent site

Would

provide

much

needed

power

and

grid

stability

in

major

load

pocket

with

reduced

emissions profile

Have requisite emission reduction credits on hand

Morro

Bay (California)

Pursuing 1,200-MW CCGT development on adjacent parcel; design based on recent

Moss Landing 1,000 MW development

All permitting complete except NPDES permit

Eligible for energy, capacity and ancillary revenues

Oakland (California)

Repowering of existing site to 250-MW combined cycle project on adjacent site

Significant interest from regional load-serving entities

12

Growth

•

Value

•

Vision

DEBT AND OTHER OBLIGATIONS

PRO FORMA AS OF 12/31/06

DEBT AND OTHER OBLIGATIONS

PRO FORMA AS OF 12/31/06

Dynegy Power Corp.

Central Hudson

(4)

$801

Dynegy Holdings Inc.

$470 Million Revolver

(1)

$0

Synthetic LC Facility

(2)

$200

Term Loan

(3)

$0

Second Secured Notes              $11

Sr. Unsec. Notes/Deb.           $2,397

Subordinated Debentures       $200

Secured

Key

Secured Non-Recourse

Unsecured

Note: Represents pro forma debt balances as of 12/31/06, except for Plum Point, which reflects net debt as of 6/30/06.

(1)

Represents drawn amounts under the revolver as of 9/13/06; assumed to be undrawn as of 12/31/06.

(2)

Proceeds from this facility have been drawn and fully collateralize the issuance of letters of credit.

(3)

Assumed

to

be

repaid

with

the

proceeds

from

the

expected

closing

of

the

Rockingham

asset

sale

in

4Q

2006.

(4)

Central

Hudson

lease

payments

are

unsecured

obligations

of

Dynegy

Inc.,

but

are

a

secured

obligation

of

an

unrelated

third

party

(“lessor”)

under

the

lease.

DHI has guaranteed the lease payments on a senior unsecured basis.  Amount reflects PV (10%) of future lease payments as of 12/31/06.

(5)

See the Appendix for more details about the LS Power debt portfolio.

(6)

See the Appendix for more details about the Plum Point debt.

LS Holdco

($ in millions)

Dynegy Inc..

Synthetic LC Facility

$185

Jr. Sub. Note to LSP

$275

Sithe Energies

Senior Debentures      $428

LS Power Portfolio

(5)

1st Lien

$1,502

2nd

Lien

$200

Operating Assets

$1,702

Plum Point, Net

(6)

$106

Total

$1,808

13

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•

Value

•

Vision

MULTIPLE VALUE OPTIONS FOR INVESTORS

MULTIPLE VALUE OPTIONS FOR INVESTORS

Immediate free cash flow

per share accretion

Predictable cash flow

stream

Rapid deleveraging of

balance sheet

Creates value for common

shareholders

Enhanced fuel, dispatch

and geographic diversity

Track record of strong

operational performance

and opportunistic

commercial approach

Significant presence in

key regions as power

recovery continues

Established vehicle for

future growth

Ability to increase

portfolio without

substantial impact to cost

structure

Better positioned to

participate in future

sector consolidation

Financial Stability

and Rapid

Deleveraging

Financial Stability

and Rapid

Deleveraging

Enhanced Scale,

Diversity and  Market

Position

Enhanced Scale,

Diversity and  Market

Position

Long-Term

Investment Outlook

and Proven

Development

Platform

Long-Term

Investment Outlook

and Proven

Development

Platform

Near-Term

Value

Near-Term

Value

Medium-Term

Value

Medium-Term

Value

Long-Term

Value

Long-Term

Value

Unique platform to deliver shareholder value

14

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•

Vision

DYNEGY’S NEW TO-DO LIST

DYNEGY’S NEW TO-DO LIST

1.

Integrate portfolios

Continued focus on cost reduction while combining assets, accounting

systems, HR functions, etc.

Evaluate outsourcing arrangements relative to Dynegy’s ability to absorb

with little incremental costs

2.

Streamline “right-hand”

side of balance sheet

Simplify/streamline debt structure to reduce fees and maximize capital

availability for shareholders

3.

Optimize “left-hand”

side of balance sheet

Rationalize asset portfolios to create maximum efficiency and focus while

releasing excess capital for shareholders

Majority of key consolidation execution steps

expected to be completed by closing

15

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Value

•

Vision

UPCOMING EVENTS

UPCOMING EVENTS

West Coast Marketing Trip: Week of October 2 with JP Morgan Energy

Group

Third Quarter 2006 Results Announcement: Week of November 6

Third Quarter 2006 Form 10-Q Filing Deadline: November 9

Introduction of 2007 Cash Flow and Earnings Estimates: Early December

Segment results by contract type, merchant and pricing

Cash-based results

Income-based estimates allowing for purchase accounting