EXHIBIT 99.1
PRESS RELEASE
SOURCE: Dynegy Inc.
DYNEGY EXPECTS TO MEET FIRST QUARTER 2002 EARNINGS GUIDANCE OF 41 CENTS
HOUSTON--(BUSINESS WIRE)--April 25, 2002--Dynegy Inc. (NYSE:DYN - news)
. First quarter 2002 recurring net income expected to increase $36 million,
or 26 percent, over first quarter 2001
. Highlights to include continued solid energy results, strong cash flow
. Global Communications segment expected to report $300 million goodwill and
other non-recurring charges
. 2002 annual earnings guidance revised to $2.00 to $2.05 to reflect telecom
and non-energy adjustments
. Dynegy files additional disclosure relating to physical natural gas supply
transaction
Dynegy Inc. (NYSE:DYN - news) today announced that it expects to meet first
quarter 2002 recurring earnings per diluted share guidance of $0.41. The company
expects to report recurring net income of $173 million, an increase of $36
million, or 26 percent, over first quarter 2001. These recurring results compare
to $0.41 recurring earnings per diluted share, or $137 million recurring net
income, in the first quarter of 2001. Reported loss per share of $0.41, or $140
million reported net loss in the first quarter 2002, compares to $0.41 reported
earnings per diluted share, or $139 million reported net income, in the first
quarter 2001.
Reported 2002 results include total after-tax non-recurring charges of $313
million, or $0.74 per diluted share, which include after-tax non-recurring
charges of $300 million, or $0.71 per diluted share, in Dynegy Global
Communications (DGC). Significantly all of these charges are non-cash. In
addition, the company expects to incur an after-tax non-recurring charge of
approximately $13 million, or $0.03 per diluted share, in Northern Natural Gas
Company (NNG).
Net income available to shareholders is expected to be reduced by approximately
$8 million for the amortization of a special dividend associated with the
issuance discount on the $1.5 billion ChevronTexaco convertible preferred
securities issued late last year, or $0.02 per diluted share.
First quarter 2002 results were impacted by the addition of NNG, the acquisition
of Dynegy Storage Limited in the United Kingdom, incremental power generation
assets and 81 million additional diluted shares outstanding.
The company's expected first quarter 2002 results reflect several key drivers:
-- Successful execution of Dynegy's core energy business
strategy, focusing on reliable physical delivery of energy
commodities through its diversified asset-backed network and
mitigating the risk from commodity volatility for the company
and its customers;
-- Optimization of Dynegy's expanding portfolio of physical
assets, including storage and generation facilities,
capacity and contracts is expected to contribute to solid
results in the Wholesale Energy Network segment.
-- Significant wholesale and commercial and industrial
origination and risk management activities.
-- Increased market share in physical gas and power. Global
gas volumes are expected to increase as a result of
incremental ChevronTexaco natural gas volumes associated
with former Texaco's equity production.
- -- As anticipated, Dynegy's Midstream Services segment is
expected to report lower results, primarily due to the decline
in realized contract and spot commodity prices period over
period, partially offset by improved NGL marketing results and
increased utilization of straddle plants resulting from more
favorable processing economics;
- -- The company's Transmission and Distribution segment is
expected to benefit from earnings generated from full
ownership of NNG during the second and third months of the
first quarter. These results were partially offset by a lack
of weather-driven demand in Illinois Power's service territory
and an $18 million pre-tax non-recurring charge ($13 million
after-tax) associated with gas delivery commitments assumed in
the NNG acquisition; and
- -- DGC earnings are expected to be lower than anticipated due to
temporary start-up network difficulties and lower sales
experienced during the first quarter. Issues with network
equipment vendors required the company to secure off-net
capacity to fulfill its customer obligations.
-- Dynegy adopted "Statement of Financial Accounting Standard
No. 142, Goodwill and Other Intangible Assets," which
necessitated a reduction of the carrying value of goodwill
associated with DGC's operations. DGC expects to report an
after-tax non-recurring charge of approximately $300
million. This charge will encompass all of the goodwill
associated with this segment (approximately $256 million)
and impairment of certain telecommunications assets,
including investments in unconsolidated affiliates,
equipment and other charges.
During the first quarter, Dynegy made significant progress on its capital
restructuring program, which was announced in late December 2001. In January
2002, Dynegy raised $205 million of common equity from ChevronTexaco, bringing
the total common equity raised pursuant to the capital restructuring program to
about $750 million. In addition, Dynegy issued $500 million in long-term debt in
February 2002, reducing reliance on short-term bank credit facilities. For the
quarter, cash flow from operations is expected to be approximately $300 million
or about $450
million before working capital changes. Liquidity (cash on hand plus
availability under bank credit facilities) increased to approximately $1.7
billion at quarter end.
Revised 2002 Earnings Guidance
Dynegy's management is revising the company's 2002 recurring earnings per share
guidance to a range of $2.00 to $2.05 from the previous guidance of $2.26. The
new guidance is based primarily on expectations of continued weakness in the
telecommunications and technology markets, a one-time differential in seasonal
earnings resulting from the delayed timing of the NNG acquisition and
incremental interest expense. Dynegy's wholesale energy businesses performed
well in the quarter and are still expected to meet expectations for the year.
Physical Natural Gas Supply Transaction
Dynegy will file a Current Report on SEC Form 8-K to disclose a change in the
presentation of cash flow associated with a natural gas supply transaction. The
company's consolidated balance sheet, consolidated statement of operations and
consolidated statement of changes in stockholders' equity are unaffected by the
cash flow statement change.
Originally entered into in April 2001 by DMT Supply L.P., a Dynegy subsidiary,
the transaction consists of a five-year physical gas supply contract with ABG
Gas Supply LLC, an unrelated third-party. The transaction provided Dynegy with
access to a significant long-term supply of physical gas, cash funding and a
permanent tax benefit. Under the terms of the contract, DMT Supply bought gas at
a discount to market prices over the first nine months of the contract. For the
remaining 51 months of the contract, DMT Supply will purchase gas at a premium
to market prices. ABG Gas Supply acquires the gas through standard NYMEX
contracts to fulfill its sales commitments to DMT Supply, which takes title to
the gas at Henry Hub in Louisiana and markets it to customers.
The transaction resulted in a significant tax benefit of approximately $80
million and $35 million in costs on a pre-tax basis in 2001. Dynegy classified
the net cash in flow from the gas supply contract as operating cash flow in its
quarterly and year-end financial statements for 2001. Activity under the
contract resulted in net cash in flow of approximately $300 million during 2001.
Dynegy has decided, after consultation with staff of the SEC, to present the
cash flow associated with the gas supply contract as a financing activity in its
consolidated statement of cash flows. As such, Dynegy will file amended Exchange
Act reports reflecting the change in cash flow presentation. Management believes
that the change in cash flow presentation will not alter the tax benefit
recognized in 2001, but will continue to assess this conclusion in connection
with the amendment of its Exchange Act reports.
Dynegy has been advised that the staff of the SEC is conducting an informal
inquiry of the facts and circumstances surrounding the transaction. The company
will cooperate fully with the inquiry. Dynegy has received the concurrence of
the SEC Office of the Chief Accountant staff regarding the presentation of cash
flows relating to this transaction.
Expected Earnings Conference Call Simulcast
Dynegy will simulcast an analyst conference call to review first quarter 2002
earnings expectations and other topics via the Internet today, April 25, at
10:00 a.m. ET, 9:00 a.m. CT. The web cast can be accessed via www.dynegy.com
(click on "Investor Relations").
First Quarter Earnings Announcement
Dynegy expects to release first quarter 2002 earnings on Tuesday, April 30, 2002
prior to the opening of the New York Stock Exchange. The company will host an
analyst conference call to review first quarter results during the morning of
April 30.
About Dynegy Inc.
Dynegy Inc. is one of the world's premier energy merchants. Through its global
energy delivery network and marketing, logistics and risk management
capabilities, Dynegy provides innovative solutions to customers in North
America, the United Kingdom and Continental Europe. The company's website is
www.dynegy.com.
Certain statements included in this news release are intended as "forward-
looking statements" under the Private Securities Litigation Reform Act of 1995.
These statements include assumptions, expectations, predictions, intentions or
beliefs about future events. Dynegy cautions that actual future results may vary
materially from those expressed or implied in any forward-looking statements.
Some of the key factors that could cause actual results to vary from those
Dynegy expects include changes in energy commodity prices; the timing and extent
of deregulation of energy markets in North America and Europe; the effectiveness
of Dynegy's risk management policies and procedures and the creditworthiness of
customers and counterparties; the liquidity and competitiveness of wholesale
trading markets for energy commodities; operational factors affecting Dynegy's
power generation or midstream natural gas facilities; the cost of borrowing,
availability of trade credit and other factors affecting Dynegy's financing
activities; the demand for and pricing of services offered by Dynegy's
telecommunications segment and the effect of general market conditions in the
telecommunications segment on customers or prospective customers and equipment
and service providers; uncertainties regarding environmental regulations or
litigation and other legal or regulatory developments affecting Dynegy's
business, including litigation relating to the terminated merger with Enron and
the California power market; general political, economic and financial market
conditions; and any extended period of war or conflict involving North America
or Europe. More information about the risks and uncertainties relating to these
forward-looking statements are found in Dynegy's SEC filings, which are
available free of charge on the SEC's web site at http://www.sec.gov.
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Contact:
Dynegy Inc., Houston
Analysts:
Margaret Nollen, Arthur Shannon or Katie Pipkin
713/507-6466
or
Media:
John Sousa or Steve Stengel, 713/767-5800