Dynegy Completes Sale of Sherman Natural Gas Processing Plant.

HOUSTON -- Dynegy Inc. (NYSE:DYN) today announced that it has completed the sale of its Sherman Natural Gas Processing Facility in Sherman, Texas to Dallas-based Dornick Hills Midstream, Ltd. The transaction resulted in a pre-tax gain for Dynegy of approximately $17 million.

"Consistent with our self-restructuring approach and goal of delivering value to investors, this sale was based on a decision to focus on regions and segments of our natural gas liquids business where we have a larger physical presence and greater opportunities for growth," said Bruce A. Williamson, Chairman, President and Chief Executive Officer of Dynegy Inc. "In addition, this sale represents one of our last significant divestitures of non-core assets. With anticipated proceeds of $260 million in 2004, our non-core asset sales have played an important role in improving Dynegy's financial profile, further reducing debt and maintaining a strong level of liquidity to support our ongoing natural gas liquids and power generation businesses."

The Sherman plant has a processing capacity of 24 million cubic feet of natural gas per day.

Dynegy's natural gas liquids business is engaged in the gathering and processing of natural gas and the fractionation, storage, transportation and marketing of natural gas liquids. Key business hubs include the high-growth gas exploration and production areas of North Texas and the Louisiana Gulf Coast and the mature Permian Basin of West Texas and Southeast New Mexico. The company's natural gas liquids fractionation and storage assets are located in Mont Belvieu, Texas, and Lake Charles, La.

Dynegy Inc. provides electricity, natural gas and natural gas liquids to customers throughout the United States. Through its energy businesses, the company owns and operates a diverse portfolio of assets, including power plants totaling 11,885 megawatts of net generating capacity and gas processing plants that process approximately 1.8 billion cubic feet of natural gas per day.

Certain statements included in this news release are intended as "forward-looking statements." These statements include assumptions, expectations, predictions, intentions or beliefs about future events, particularly the statements concerning the anticipated aggregate proceeds of $260 million in 2004 from sales of Dynegy's non-core assets. 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 and the periods affected to vary materially from those expected include the ability of the company to consummate pending assets sales in the anticipated timeframes. More information about the risks and uncertainties relating to these forward-looking statements are found in Dynegy's SEC filings, including its Annual Report on Form 10-K for the year ended Dec. 31, 2003, as amended, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, which are available free of charge on the SEC's web site at http://www.sec.gov. Dynegy expressly disclaims any obligation to update any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date of this release, except as otherwise required by applicable law.