Dynegy Reports $1.8 Billion Loss in Third Quarter 2002.Business/Energy Editors HOUSTON--(BUSINESS WIRE)--Oct. 30, 2002 Dynegy Dynegy Inc. (NYSE: DYN), headquartered in Houston, Texas, provides wholesale power, capacity and ancillary services to utilities, cooperatives, municipalities and other energy companies in 15 states in three key U.S. Inc. (NYSE NYSE See: New York Stock Exchange :DYN dyn abbr. dyne ) today reported a net loss of $1.8 billion in the third quarter 2002, or $4.92 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share outstanding. Dynegy's quarterly results included after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. charges of $1.75 billion, which consisted of the following: -- Previously reported operating cash flow for the year ended December 31, 2001 will be reduced by approximately $300 million with a corresponding increase to financing cash flow; -- Previously reported operating cash flow for the nine-month period ended September 30, 2001 will be reduced from $634 million to approximately $426 million, with a corresponding increase in financing cash flow from $366 million to approximately $574 million; -- Retained earnings at December 31, 2001 will be reduced by approximately $79 million in relation to the balances previously reported by the Company; -- Previously reported net income for the three-month period ended September 30, 2001 of $286 million, or $0.85 per diluted share, will be reduced to approximately $250 million and $0.74 per diluted share, respectively; -- Previously reported net income for the nine-month period ended September 30, 2001 of $571 million, or $1.69 per diluted share, will be reduced to approximately $508 million and $1.50 per diluted share, respectively; -- Reported balance sheets for each quarterly period in 2001 (beginning with June 30, 2001) will reflect a reclassification of approximately $300 million from either Minority Interest or Liabilities from Risk-Management Activities (or a combination of the two) to debt, depending on the specific period; and -- Reported balance sheets for each quarterly period in 2002 will reflect a reclassification of approximately $300 million from Liabilities from Risk-Management Activities to debt. "This was a difficult quarter for Dynegy, as it was for other companies in our sector, but one that was expected as Dynegy executed executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. its capital and liquidity plan, experienced unprecedented industry and market conditions and began its organizational restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). initiatives," said Bruce Williamson Bruce Williamson is the current CEO of Dynegy, a major Houston-based energy company. He is credited with successfully restructuring Dynegy from a floundering clone of Enron into a viable and sustainable provider of electricity generation and natural gas liquids. , the company's newly named president and chief executive officer. "Dynegy's results can be attributed to a number of primarily non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. and the loss on the sale of Northern Natural Gas. These charges did not and will not affect the company's liquidity position, which remains at a level that is sufficient to operate our businesses and meet our customer commitments," he said. "The energy merchant sector continues to experience a downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by lower liquidity levels, reduced power prices and credit concerns," said Williamson Wil·liam·son , Mount A peak, 4,382.9 m (14,370 ft) high, in the Sierra Nevada of east-central California. . "Dynegy's strategy to manage these challenges is to restructure the company around our generation, natural gas liquids and regulated reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. energy delivery businesses and to exit aspects of the marketing and trading business unrelated to our physical assets. By executing the elements of this restructuring plan, the company will significantly reduce collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although requirements and expenses and, in the process, rebuild itself." Wholesale Energy Network The Wholesale Energy Network segment consists of power generation, storage and customer and risk management activities. Customer and risk management activities are centered on the physical delivery of and risk management activities around wholesale natural gas, power and coal. As previously announced, the company will exit certain aspects of the marketing and trading business in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and
Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . The generation business will continue to manage commodity price
risk associated with fuel procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. and to market and trade around its
owned and controlled assets.As a result of the company's plans to sell its natural gas storage and gas processing facilities in the United Kingdom, earnings associated with these assets are now reported as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . Reported net loss for this segment was $1.26 billion in the third quarter 2002, which included after-tax charges of $1.18 billion. During the period, this segment recognized a $908 million charge associated with the write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of goodwill resulting from the reduction in near-term near-term adj. Of, for, or involving a short period of time in the near future. power prices, an increase in the rate of return required for investors to enter the merchant energy sector and the company's decision to exit the marketing and trading business. Other after-tax charges recognized during the period included: $145 million for reserves in the risk management portfolio due to reduced market liquidity primarily in the U.S. power markets; $90 million for the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of certain investments in unconsolidated generation projects; $19 million for the write-down of Dynegydirect; $11 million for the corporate allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of the Enron Enron A U.S. energy-trading and utilities company that housed one of the biggest accounting frauds in history. Enron's executives employed accounting practices that falsely inflated the company's revenues, which, at the height of the scandal, made the firm become the seventh lawsuit lawsuit: see procedure; tort. settlement; and $7 million for the impairment of certain technology investments. The Asset Businesses' (owned generation) reported operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , after the impact of general and administrative expenses and depreciation and amortization, was $44 million in the third quarter 2002, compared to operating income of $187 million in the third quarter 2001. These results reflect a decrease in generation earnings due to lower power prices. Customer and Risk Management activities (controlled assets, marketing and trading) reported an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. , following the deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. of general and administrative expenses and depreciation and amortization, of $346 million in the third quarter 2002, compared to $125 million of operating income in the third quarter 2001. Results were impacted by an increase in risk management reserves of $223 million due to reduced liquidity in power markets. Results also reflect a decrease in wholesale origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real activities and energy trading related to the company's credit ratings and industry conditions. Other factors affecting earnings in the Wholesale Energy Network segment included a decrease in equity earnings from unconsolidated investments due to lower prices and an overall decline in demand, primarily in Dynegy's West Coast Power joint venture, and an increase in interest expense due to higher debt outstanding. Revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. were made recently to generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting requiring all energy trading revenues to be reported to be spoken of; to be mentioned, whether favorably or unfavorably. See also: Report on a net basis beginning third quarter 2002 and for all comparative periods. As a result, revenues for the third quarter 2002 and third quarter year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. are 82 and 83 percent less, respectively, than what would have been reported on a gross basis prior to this change in accounting principle. Dynegy Midstream mid·stream n. 1. The middle part of a stream. 2. The part of a course that is neither at the beginning nor at the end: the midstream of life. Noun 1. Services Dynegy Midstream Services consists of Dynegy's North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. natural gas liquids processing, liquids fractionation fractionation /frac·tion·a·tion/ (frak?shun-a´shun) 1. in radiology, division of the total dose of radiation into small doses administered at intervals. 2. , distribution and marketing. This segment will continue to manage commodity price risk associated with its operations and market and trade around its network of physical assets to deliver products and services to its customers. Reported net income from this segment was $4 million in the third quarter 2002, including after-tax charges of $4 million, compared to reported net income of $12 million in the third quarter 2001. Results were impacted by lower realized natural gas liquids prices and market liquidity, moderately offset by an increase in straddle In the stock and commodity markets, a strategy in options contracts consisting of an equal number of put options and call options on the same underlying share, index, or commodity future. plant processing volumes. Transmission and Distribution Dynegy's transmission and distribution segment includes Illinois Illinois, river, United States Illinois, river, 273 mi (439 km) long, formed by the confluence of the Des Plaines and Kankakee rivers, NE Ill., and flowing SW to the Mississippi at Grafton, Ill. It is an important commercial and recreational waterway. Power, a regulated electric and gas energy delivery company. In August 2002, Dynegy sold its interest in NNG NNG Nederlands Nieuw - Guinea NNG Nanning, China (Airport Code) NNG National Number Group (UK) NNG Net Nuclear Grain , which resulted in an after-tax loss of $566 million recorded in this segment. Earnings from NNG are included in discontinued operations. Reported net income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for this segment totaled $36 million in the third quarter 2002, compared to $26 million in the third quarter 2001. Illinois Power's performance benefited from seasonal weather, resulting in greater residential and commercial electricity usage. The increase in usage more than offset the five percent May 2002 rate reduction for Illinois residential electric consumers, as provided by the 1997 Electric Customer Choice Law. Dynegy Global Communications The company's communications segment, Dynegy Global Communications, has a high capacity broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). network that reaches more than 75 major cities in the United States. Reported net loss for this segment was $30 million in the third quarter 2002, compared to a net loss of $15 million in the prior year quarter. The increase in costs was due to the recognition of a charge associated with the accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of a lease obligation. The loss is being amortized evenly over the remaining lease term, which resulted in an after-tax charge of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $14 million for the quarter. During the year, the communications segment has taken measures to reduce losses by limiting capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. and reducing operating and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. through the renegotiation of long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. contractual commitments. Dynegy continues to pursue partnership and sale opportunities for this business. Other factors affecting earnings Other factors affecting earnings for the third quarter 2002 earnings, as compared to third quarter 2001, included an increase in depreciation expense, a decrease in general and administrative costs, an increase in interest costs and a decrease in the effective tax rate. Depreciation expense increased due to the addition of generation assets and the accrual of the lease obligation in the communications business. These increases were partially offset by the absence of goodwill amortization. General and administrative expenses decreased in the third quarter 2002 due to lower variable costs partially offset by higher legal and audit fees. Interest costs increased due to a higher average outstanding balance and an increase in fees associated with recent financings, which were partially offset by lower interest rates. The company experienced a lower effective tax rate of 11 percent in the third quarter 2002, compared to 28 percent in the prior period due in part to the minimal tax benefit recognized for the capital loss on the sale of NNG. In addition, there was no tax benefit recognized on the $908 million write-down of goodwill and the $90 million impairment of unconsolidated generation investments. Liquidity and capital resources The company made significant progress on its previously announced capital and liquidity plan during the period, including the sale of NNG for $928 million (before working capital adjustments) and the sale of the Hornsea Coordinates: Hornsea is a small seaside resort town and civil parish in the East Riding of Yorkshire, England at the eastern end of the Trans Pennine Trail. It is well known for its pottery factory, Hornsea Pottery. storage facilities in the United Kingdom for $189 million (net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). ). Additional milestones included the announced sale of Illinois Power transmission assets for $239 million, which is expected to close in second quarter 2003, subject to regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals, and the sale of NNG bonds for $96 million. As of September September: see month. 30, 2002, the company had approximately $1 billion of cash-on-hand, including $189 million in net proceeds from the Hornsea sale. The company also had $286 million of availability under its bank facilities and approximately $300 million of highly liquid inventory. The proceeds from the Hornsea sale were subsequently used to pay down part of the bridge financing Bridge Financing A method of financing, used by companies before their IPO, to obtain necessary cash for the maintenance of operations. Notes: These funds are usually supplied by the investment bank underwriting the new issue. in October October: see month. . Total posted collateral, including cash and letters of credit as of September 30, 2002, was approximately $1.3 billion. Earnings guidance and cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses Due to industry conditions and pending asset sales, previous earnings and cash flow guidance no longer applies. The company is currently assessing potential fourth quarter charges, which may include, but are not limited to, charges associated with the recently announced reduction in workforce and organizational restructuring, the cumulative effect related to the recently announced change in accounting principle impacting the energy trading business, and charges associated with exiting certain aspects of the marketing and trading business. Reported net cash flow from operations for the nine months ended 2002 totaled approximately $300 million after working capital use of approximately $400 million. The use of working capital was impacted by an increase in cash collateral and pre-payments of approximately $270 million posted during the period. Previous operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. guidance of $600 to $700 million assumed posting letters of credit for all collateral needs and did not factor cash collateral, which is reported as a use of working capital. Dynegy-ChevronTexaco commercial agreements The company is in discussions with ChevronTexaco Corp. to negotiate an early termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of the contracts under which Dynegy Marketing and Trade purchases substantially all of ChevronTexaco's lower-48 U.S. natural gas and supplies the natural gas requirements of ChevronTexaco refineries and other corporate facilities. These discussions do not involve the natural gas processing Natural gas processing plants, or fractionators, are used to purify the raw natural gas extracted from underground gas fields and brought up to the surface by gas wells. The processed natural gas, used as fuel by residential, commercial and industial consumers, is almost pure and liquids agreements between Dynegy Midstream Services and ChevronTexaco. Dynegy will continue to meet all its contractual obligations to ChevronTexaco unless and until other arrangements have been agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy and made. A key part of the discussions is to ensure that any agreement reached would have no adverse effect on customers. About Dynegy Inc. Dynegy Inc. owns operating divisions engaged in power generation, natural gas liquids, regulated energy delivery and communications. Through these business units, the company serves customers by delivering value-added val·ue-add·ed adj. Of or relating to the estimated value that is added to a product or material at each stage of its manufacture or distribution: solutions to meet their energy and communications needs. The company's website is www.dynegy.com Certain statements included in this news release are intended as "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. in any forward-looking statements. Some of the key factors that could cause actual results to vary materially from those expected include changes in commodity prices for power, natural gas or natural gas liquids; Dynegy's ability to successfully execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution the remaining elements of its capital and liquidity plan and its exit from the marketing and trading business; the effect of Dynegy's recently announced organizational changes and management's ability to operate its remaining assets and businesses in a decentralized de·cen·tral·ize v. de·cen·tral·ized, de·cen·tral·iz·ing, de·cen·tral·iz·es v.tr. 1. To distribute the administrative functions or powers of (a central authority) among several local authorities. structure and with a reduced work force; operational factors affecting Dynegy's assets; the availability and increased costs of credit and borrowing resulting from Dynegy's weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. financial condition and non-investment grade credit ratings; the results
of the re-audit of Dynegy's 1999-2001 financial statements, which
could cause material changes to Dynegy's reported financial results
for the applicable periods; the demand for and pricing of services
offered by Dynegy's telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. business; and uncertainties
regarding environmental regulations or litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.When a person begins a civil lawsuit, the person enters into a process called litigation. and other legal or regulatory developments affecting Dynegy's business, including litigation relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). power market and shareholder claims, as well as the ongoing regulatory investigations primarily relating to Project Alpha
Project Alpha was a hoax orchestrated by the stage magician and skeptic James Randi. It involved planting two fake psychics, Steve Shaw and Michael Edwards, into a paranormal research project. and trading practices. 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 See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. .
INTRODUCTORY NOTE
Dynegy has previously announced that its historical financial statements will require restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. for matters relating to the Alpha structured gas transaction and the $124 million second quarter 2002 charge associated with the company's gas marketing business. Dynegy also has previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). that it has engaged PricewaterhouseCoopers LLP LLP - Lower Layer Protocol to re-audit its 1999 through 2001 consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . PricewaterhouseCoopers LLP will conduct a review of Dynegy's interim financial statements for 2002 following completion of the re-audits. As a result of these matters, there may be revisions to Dynegy's financial statements, including those summarized in this press release, which are in addition to the known revisions described below, some of which could be material. Dynegy expects that the re-audit of its 1999 through 2001 consolidated financial statements will take at least the remainder of the year to complete. Please note that the restatements summarized below have not been reflected in the 2001 information included in this press release for comparative purposes, pending completion of the financial statement revisions and re-audits described herein. Please consider the information summarized below in any review of Dynegy's prior and current period financial information. Dynegy's known restatements for 2001 relating to the Alpha transaction are summarized in Note 1 to Dynegy's financial statements in the Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended June June: see month. 30, 2002 and include reporting the cash flow associated with the related gas supply contract as a financing activity rather than an operating activity and eliminating the recognition of the income tax benefit for the transaction from results of operations. Dynegy has also determined that it will include in its restatement of its 2001 and 2002 financial statements the consolidation of ABG ABG abbr. arterial blood gas ABG 1. Arterial blood gas 2. Axiobuccogingival–dentistry Gas Supply LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , one of the entities formed in connection with the transaction. The consolidation will result in a reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of certain minority interest and risk management liability amounts to debt as described below. Dynegy will reflect the additional effects of consolidating this entity upon obtaining completed financial statements for the entity from its owners. The impact of Project Alpha restatement items on Dynegy's financial statements (subject to further effects from the consolidation of ABG Gas Supply LLC) is expected to be as follows: -- Previously reported operating cash flow for the year ended December 31, 2001 will be reduced by approximately $300 million with a corresponding increase to financing cash flow; -- Previously reported operating cash flow for the nine-month period ended September 30, 2001 will be reduced from $634 million to approximately $426 million, with a corresponding increase in financing cash flow from $366 million to approximately $574 million; -- Retained earnings at December 31, 2001 will be reduced by approximately $79 million in relation to the balances previously reported by the Company; -- Previously reported net income for the three-month period ended September 30, 2001 of $286 million, or $0.85 per diluted share, will be reduced to approximately $250 million and $0.74 per diluted share, respectively; -- Previously reported net income for the nine-month period ended September 30, 2001 of $571 million, or $1.69 per diluted share, will be reduced to approximately $508 million and $1.50 per diluted share, respectively; -- Reported balance sheets for each quarterly period in 2001 (beginning with June 30, 2001) will reflect a reclassification of approximately $300 million from either Minority Interest or Liabilities from Risk-Management Activities (or a combination of the two) to debt, depending on the specific period; and -- Reported balance sheets for each quarterly period in 2002 will reflect a reclassification of approximately $300 million from Liabilities from Risk-Management Activities to debt. In addition, Dynegy recognized a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge in Other Expenses of approximately $124 million ($80 million after-tax) in the second quarter 2002 related principally to a balance sheet reconciliation project undertaken at the beginning of 2002. The charge largely relates to Dynegy's natural gas marketing business. This balance sheet reconciliation process remains ongoing. This process may result in changes to the 2001 financial information included in this press release. Dynegy will correct prior period financial statements based on the results of this reconciliation activity, as necessary. As part of the re-audit process, Dynegy is addressing the criteria criteria (krītēr´ē  ),n. for and interpretation of hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). under Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. and Hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. Activities," as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. ("Statement No. 133"). During the six-quarter period ended June 30, 2002, Dynegy accounted for certain derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. transactions as hedges of its generation facilities. Dynegy's accounting treatment relating to Statement No. 133 may change as a result of the re-audit which would result in the income recognized over the six quarters being re-allocated within the period or to future periods. Cash flow for the six-quarter period would remain unaffected by any change in the timing of income statement recognition. Dynegy also believes that it may have inadvertently overstated o·ver·state tr.v. o·ver·stat·ed, o·ver·stat·ing, o·ver·states To state in exaggerated terms. See Synonyms at exaggerate. o the valuation used in its 2000 acquisition of Extant ex·tant adj. 1. Still in existence; not destroyed, lost, or extinct: extant manuscripts. 2. Archaic Standing out; projecting. Inc., which resulted in a $22 million overstatement o·ver·state tr.v. o·ver·stat·ed, o·ver·stat·ing, o·ver·states To state in exaggerated terms. See Synonyms at exaggerate. o of the Cumulative Effect of Change in Accounting Principle recorded in the first quarter 2002. In addition to the restatements described above, Dynegy intends to amend its historical financial statements to reflect the overstated valuation related to the Extant acquisition and to provide for any changes that might be required with respect to Statement No. 133 as a result of the re-audit.
DYNEGY INC.
REPORTED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------- ----------------
2002 2001 2002 2001
-------- ------- -------- -------
Revenues (2) $1,713 $2,297 $4,746 $7,355
Cost of sales (2) 1,711 1,664 4,079 5,808
Depreciation and amortization expense 139 113 355 333
Goodwill impairment 908 - 908 -
Impairment and other charges - - 319 -
General and administrative expense 115 142 353 383
-------- ------- -------- -------
Operating income (loss) (1,160) 378 (1,268) 831
Earnings (losses) from unconsolidated
investments (68) 104 (86) 214
Interest expense (96) (62) (229) (192)
Accumulated distributions associated
with trust preferred securities (4) (6) (13) (18)
Other income and expense, net (70) (16) (199) (20)
-------- ------- -------- -------
Income (loss) from continuing
operations before income taxes (1,398) 398 (1,795) 815
Income tax provision (benefit) (152) 112 (299) 246
-------- ------- -------- -------
Income (loss) from continuing
operations (1,246) 286 (1,496) 569
Discontinued operations:
Loss from discontinued operations
(including loss on disposal of
Northern Natural of $586 million) (569) - (511) -
Income tax provision (benefit) (14) - 6 -
-------- ------- -------- -------
Loss on discontinued operations (555) - (517) -
Cumulative effect of change in
accounting principle - - (256) 2
-------- ------- -------- -------
Net income (loss) $(1,801) $286 $(2,269) $571
======== ======= ======== =======
Less: Preferred stock dividends 8 - 24 -
-------- ------- -------- -------
Net income (loss) applicable to
common stockholders $(1,809) $286 $(2,293) $571
======== ======= ======== =======
Earnings (loss) before interest and
taxes ("EBIT") $(1,302) $460 $(1,566) $1,007
Basic earnings (loss) per share:
Income (loss) from continuing
operations $(3.41) $0.88 $(4.16) $1.76
Loss from discontinued operations (1.51) - (1.42) -
Cumulative effect of change in
accounting principle, net - - (0.70) -
-------- ------- -------- -------
Basic earnings (loss) per share $(4.92) $0.88 $(6.28) $1.76
======== ======= ======== =======
Diluted earnings (loss) per share:
Income (loss) from continuing
operations $(3.41) $0.85 $(4.16) $1.69
Loss from discontinued operations (1.51) - (1.42) -
Cumulative effect of change in
accounting principle, net - - (0.70) -
-------- ------- -------- -------
Diluted earnings (loss) per share $(4.92) $0.85 $(6.28) $1.69
======== ======= ======== =======
Basic shares outstanding 368 326 365 325
Diluted shares outstanding 416 337 416 338
(1) Alpha and Other Restatements: See Introductory Note.
(2) Change in Accounting Principle: In the quarter ended September 30,
2002, Dynegy adopted Emerging Issues Task Force Issue 02-3.
Accordingly, all mark-to-market gains and losses on energy trading
contracts (whether realized or unrealized) are now shown net in
the income statement, irrespective of whether the contract is
physically settled. Previously, unrealized gains and losses were
reflected net and realized gains and losses were reflected gross.
Additionally, in accordance with the transition provisions in this
consensus, comparative financial statements have been conformed to
meet the requirements mandated by the Task Force. This change in
accounting classification had no impact on operating income
(loss), net income (loss), earnings (loss) per share or cash flow
from operations.
DYNEGY INC.
REPORTED SEGMENTED RESULTS OF OPERATIONS
(In Millions)
Three Months Ended
September 30, 2002
---------------------------------
WEN DMS T&D DGC Total
---------------------------------
Wholesale Energy Network:
Customer and risk-management
activities (1) $(346) $- $- $- $(346)
Asset businesses (1) 44 - - - 44
Goodwill Impairment (2) (908) - - - (908)
Dynegy Midstream Services:
Upstream - 10 - - 10
Downstream - 13 - - 13
Illinois Power - - 71 - 71
Communications - - - (44) (44)
---------------------------------
Operating income (loss) (1,210) 23 71 (44) (1,160)
Earnings (losses) from unconsolidated
investments (1) (71) 4 - (1) (68)
Other items, net (1) (50) (6) (2) (16) (74)
---------------------------------
Earnings (loss) before interest and
taxes (1,331) 21 69 (61) (1,302)
Interest expense (57) (13) (25) (1) (96)
---------------------------------
Pretax earnings (loss) (1,388) 8 44 (62) (1,398)
Income tax provision (benefit) (132) 4 8 (32) (152)
---------------------------------
Net income (loss) from continuing
operations $(1,256) $4 $36 $(30) $(1,246)
=================================
(1) Includes the financial effects of the items impacting the 2002
quarter described in footnotes (2) through (7) on the Significant
Net Income Items For the Three Months Ended September 30, 2002
schedule.
(2) The Company recognized an after-tax charge of $908 million
associated with the impairment of goodwill on the WEN segment.
There was no tax basis in this asset resulting in a pre-tax charge
equal to the after-tax amount.
Three Months Ended
September 30, 2001 (1)
---------------------------
WEN DMS T&D DGC Total
---------------------------
Wholesale Energy Network:
Customer and risk-management activities $125 $- $- $- $125
Asset businesses 187 - - - 187
Dynegy Midstream Services:
Upstream - 16 - - 16
Downstream - 11 - - 11
Illinois Power - - 68 - 68
Communications - - - (29) (29)
---------------------------
Operating income (loss) 312 27 68 (29) 378
Earnings from unconsolidated investments 96 3 - 5 104
Other items, net (25) 1 (1) 3 (22)
---------------------------
Earnings (loss) before interest and
taxes 383 31 67 (21) 460
Interest expense (21) (12) (27) (2) (62)
---------------------------
Pretax earnings (loss) 362 19 40 (23) 398
Income tax provision (benefit) 99 7 14 (8) 112
---------------------------
Net income (loss) from continuing
operations $263 $12 $26 $(15) $286
===========================
(1) Alpha and Other Restatements: See Introductory Note.
DYNEGY INC.
REPORTED SEGMENTED RESULTS OF OPERATIONS
(In Millions)
Nine Months Ended
September 30, 2002 (1)
----------------------------------
WEN DMS T&D DGC Total
----------------------------------
Wholesale Energy Network:
Customer and risk-management
activities (2) $(306) $- $- $- $(306)
Asset businesses (2) 136 - - - 136
Goodwill Impairment (3) (908) - - - (908)
Dynegy Midstream Services:
Upstream (2) - 21 - - 21
Downstream (2) - 44 - - 44
Illinois Power (2) - - 157 - 157
Communications (2) - - - (412) (412)
----------------------------------
Operating income (loss) (1,078) 65 157 (412) (1,268)
Earnings (losses) from
unconsolidated investments (2) (47) 12 (2) (49) (86)
Other items, net (2) (171) (17) 2 (26) (212)
----------------------------------
Earnings (loss) before interest and
taxes (1,296) 60 157 (487) (1,566)
Interest expense (112) (36) (77) (4) (229)
----------------------------------
Pretax earnings (loss) (1,408) 24 80 (491) (1,795)
Income tax provision (benefit) (155) 11 22 (177) (299)
----------------------------------
Net income (loss) from continuing
operations $(1,253) $13 $58 $(314) $(1,496)
==================================
(1) Alpha and Other Restatements: See Introductory Note.
(2) Includes the financial effects of the items impacting the 2002
period described in footnotes (2) through (4) and (6) through (11)
on the Significant Net Income Items For the Nine Months Ended
September 30, 2002 schedule.
(3) The Company recognized an after-tax charge of $908 million
associated with the impairment of goodwill on the WEN segment.
There was no tax basis in this asset resulting in a pre-tax charge
equal to the after-tax amount.
Nine Months Ended
September 30, 2001 (1)
----------------------------------
WEN DMS T&D DGC Total
----------------------------------
Wholesale Energy Network:
Customer and risk-management
activities $318 $- $- $- $318
Asset businesses 333 - - - 333
Dynegy Midstream Services:
Upstream - 73 - - 73
Downstream - 38 - - 38
Illinois Power - - 160 - 160
Communications - - - (91) (91)
----------------------------------
Operating income (loss) 651 111 160 (91) 831
Earnings from unconsolidated
investments 186 9 - 19 214
Other items, net (49) (10) 18 3 (38)
----------------------------------
Earnings (loss) before interest and
taxes 788 110 178 (69) 1,007
Interest expense (61) (39) (87) (5) (192)
----------------------------------
Pretax earnings (loss) 727 71 91 (74) 815
Income tax provision (benefit) 214 26 34 (28) 246
----------------------------------
Net income (loss) from continuing
operations $513 $45 $57 $(46) $569
==================================
(1) Alpha and Other Restatements: See Introductory Note.
DYNEGY INC.
Significant Net Income Items
For the Three Months Ended September 30, 2002
(In Millions, after tax)
Three Months Ended
September 30, 2002
-----------------------------
WEN DMS T&D DGC Total
------- --- ---- ---- -------
Discontinued operations (1) $- $- $566 $- $566
Impairment of goodwill (2) 908 - - - 908
Liquidity reserve (3) 145 - - - 145
Impairment of unconsolidated generation
investments (4) 90 - - - 90
Impairment of technology investments (5) 7 1 - - 8
Enron settlement (6) 11 3 1 1 16
Other (7) 19 - - - 19
------- --- ---- ---- -------
Total $1,180 $4 $567 $1 $1,752
======= === ==== ==== =======
(1) On August 16, 2002, Dynegy sold Northern Natural to MidAmerican
for $928 million in cash subject to adjustment for working capital
changes. MidAmerican acquired all of the common and preferred
stock of Northern Natural and assumed all of Northern Natural's
$950 million of debt with a fair value of approximately $890
million. Dynegy incurred an after-tax loss of $566 million ($586
million pre-tax) associated with the sale.
(2) The Company recognized an after-tax charge of $908 million
associated with the impairment of goodwill associated with the WEN
segment. There was no tax basis in this asset resulting in a
pre-tax charge equal to the after-tax amount. This charge is
included in Goodwill impairment.
(3) The Company recognized an after-tax charge of $145 million ($223
million pre-tax) associated with recognition of a liquidity
reserve in third quarter 2002 that impairs the mark-to-market
value of the Company's marketing and trading portfolio. This
impairment reflects a substantial reduction during the quarter in
market transaction volumes, principally in the U.S. power
marketing and trading business and recognizes the negative
estimated impact on the realizability of the net asset value of
the portfolio resulting from Management's intent to exit aspects
of the marketing and trading business. This charge is included in
Revenues.
(4) The Company recognized an after-tax charge of approximately $90
million for the impairment of certain investments in generation
assets. There was no tax basis in this asset resulting in a
pre-tax charge equal to the after-tax amount. This charge is
included in Earnings (Losses) of Unconsolidated Investments.
(5) The Company recognized an after-tax charge of approximately $8
million ($12 million pre-tax) for the impairment of certain
technology investments. This charge is included in Earnings
(Losses) of Unconsolidated Investments.
(6) The Company recognized an after-tax charge of approximately $16
million ($25 million pre-tax) associated with the settlement of
the Enron litigation. This charge is included in Other Income and
Expense, net.
(7) As a result of its decision to exit aspects of the marketing and
trading business, the Company recognized an after-tax charge of
$19 million ($29 million pre-tax) associated with the write-off of
Dynegydirect. This charge is included in Other Income and Expense,
net.
DYNEGY INC.
Significant Net Income Items
For the Nine Months Ended September 30, 2002
(In Millions, after-tax)
Nine Months Ended September 30, 2002
--------------------------------------
WEN DMS T&D DGC Total
------- ------- ------ ------- -------
Discontinued operations (1) $- $- $566 $- $566
Impairment of goodwill (2) 908 - - - 908
Liquidity reserve (3) 145 - - - 145
Impairment of communications
assets (4) - - - 200 200
Cumulative effect of change in
accounting principle (5) - - - 256 256
Natural gas marketing charge (6) 80 - - - 80
Impairment of unconsolidated
generation investments (7) 90 - - - 90
Impairment of technology
investments (8) 27 3 2 32 64
Severance (9) 17 2 2 - 21
Enron settlement (10) 11 3 1 1 16
Other (11) 26 - 1 - 27
------- ------- ------ ------- -------
Total $1,304 $8 $572 $489 $2,373
======= ======= ====== ======= =======
Nine Months Ended September 30, 2001
--------------------------------------
WEN DMS T&D DGC Total
------- ------- ------ ------- -------
Cumulative effect of change in
accounting principle (5) (2) - - - (2)
(1) On August 16, 2002, Dynegy sold Northern Natural to MidAmerican
for $928 million in cash subject to adjustment for working capital
changes. MidAmerican acquired all of the common and preferred
stock of Northern Natural and assumed all of Northern Natural's
$950 million of debt with a fair value of approximately $890
million. Dynegy incurred an after-tax loss of $566 million ($586
million pre-tax) associated with the sale.
(2) The Company recognized an after-tax charge of $908 million
associated with the impairment of goodwill associated with the WEN
segment. There was no tax basis in this asset resulting in a
pre-tax charge equal to the after-tax amount. This charge is
included in Goodwill impairment.
(3) The Company recognized an after-tax charge of $145 million ($223
million pre-tax) associated with recognition of a liquidity
reserve in third quarter 2002 that impairs the mark-to-market
value of the Company's marketing and trading portfolio. This
impairment reflects a substantial reduction during the quarter in
market transaction volumes, principally in the U.S. power
marketing and trading business and recognizes the negative
estimated impact on the realizability of the net asset value of
the portfolio resulting from Management's intent to exit aspects
of the marketing and trading business. This charge is included in
Revenues.
(4) The Company recognized an after-tax charge of $200 million ($307
million pre-tax) associated with the write-down of certain
communications assets and technology investments for the nine
months ended September 30, 2002. The pre-tax charge is included in
Cost of Sales, Impairment and Other Charges, Earnings (Losses) of
Unconsolidated Investments and Other Expenses.
(5) Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," realizing an after-tax cumulative effect loss
of approximately $256 million. Effective January 1, 2001, the
Company adopted Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, realizing an after-tax cumulative effect
gain of approximately $2 million. This net loss is included in
Cumulative Effect of Change in Accounting Principle. Dynegy
believes it may have overstated the valuation of the 2000 Extant
Acquisition resulting in a $22 million overstatement of the
Cumulative Effect of Change in Accounting Principle in the first
quarter 2002. As such, the Company will amend its March 31, 2002
condensed consolidated financial statements.
(6) Dynegy recognized an after-tax charge of $80 million ($124 million
pre-tax) related to its natural gas marketing business. The charge
is included in Other Income and Expenses, Net. As a result of this
charge and the current inability of the Company to allocate this
charge to specific accounting periods, the Company has decided to
undergo re-audits of each of the three years in the period ended
December 31, 2001. If necessary, the Company will correct prior
period financial statements based on its continuing review process
to determine the periods affected. In addition to engaging
PricewaterhouseCoopers to re-audit its 2001 consolidated financial
statements, Dynegy has also engaged PricewaterhouseCoopers to
re-audit the 1999 and 2000 periods. The Company expects that this
re-audit of its 1999-2001 financial statements will take the
remainder of the year to complete.
(7) The Company recognized an after-tax charge of approximately $90
million for the impairment of certain investments in generation
assets. There was no tax basis in this asset resulting in a
pre-tax charge equal to the after-tax amount. This charge is
included in Earnings (Losses) of Unconsolidated Investments.
(8) The Company recognized an after-tax charge of approximately $8
million ($12 million pre-tax) for the impairment of certain
technology investments in the third quarter 2002 in addition to
the after-tax charge of $56 million ($85 million pre-tax)
recognized during the six months ended June 30, 2002. These
charges are included in Earnings (Losses) of Unconsolidated
Investments.
(9) The Company recognized an after-tax charge of approximately $21
million ($33 million pre-tax) for severance benefits for
approximately 325 employees, including the Company's former Chief
Executive Officer and Chief Financial Officer. The charge is
included in Impairment and Other Charges. An additional severance
charge of $3 million after-tax ($4 million pre-tax) was allocated
to discontinued operations. See (1) above.
(10) The Company recognized an after-tax charge of approximately $16
million ($25 million pre-tax) associated with the settlement of
the Enron litigation. This amount is included in Other Income and
Expense, Net.
(11) The amount represents $4 million after-tax ($6 million pre-tax)
fees related to a voluntary action that the Company took that
altered the accounting for certain lease obligations.
Additionally, the Company had $4 million ($6 million pre-tax) of
write-offs related to information technology equipment in the
second quarter 2002. Additionally, in the third quarter 2002, the
Company wrote-off Dynegydirect which resulted in an after-tax
charge of $19 million ($29 million pre-tax). These amounts are
included in Other Income and Expense, Net.
DYNEGY INC.
Pro Forma Three and Nine Months Ended September 30, 2001 (1)
Without Goodwill Amortization
(In Millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
------------------ -----------------
Reported net income (loss) $(1,801) $286 $(2,269) $571
Add back: Goodwill amortization - 12 - 36
--------- -------- -------- --------
Adjusted net income (loss) $(1,801) $298 $(2,269) $607
Less: preferred stock dividends 8 - 24 -
--------- -------- -------- --------
Net income (loss) available to
common stockholders $(1,809) $298 $(2,293) $607
========= ======== ======== ========
Basic EPS:
Reported net income (loss) $(4.92) $0.88 $(6.28) $1.76
Goodwill amortization - 0.03 - 0.11
--------- -------- -------- --------
Adjusted net income (loss) $(4.92) $0.91 $(6.28) $1.87
========= ======== ======== ========
Diluted EPS: (2)
Reported net income (loss) $(4.92) $0.85 $(6.28) $1.69
Goodwill amortization - 0.03 - 0.11
--------- -------- -------- --------
Adjusted net income (loss) $(4.92) $0.88 $(6.28) $1.80
========= ======== ======== ========
Basic shares outstanding 368 326 365 325
========= ======== ======== ========
Diluted shares outstanding 416 337 416 338
========= ======== ======== ========
(1) Alpha and Other Restatements: See Introductory Note.
(2) When an entity has a net loss from continuing operations,
Statement of Financial Accounting Standards No. 128, "Earnings per
Share," prohibits the inclusion of potential common shares in the
computation of diluted per-share amounts. Accordingly, the Company
has utilized the basic shares outstanding amount to calculate both
basic and diluted loss per share for the three and nine months
ended September 30, 2002.
DYNEGY INC.
OPERATING DATA
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -------------------
2002 2001 2002 2001
---------- --------- --------- ---------
Wholesale Energy Network:
Domestic Gas Marketing
Volumes (Bcf/d) 6.4 8.1 8.2 7.8
Canadian Gas Marketing
Volumes (Bcf/d) 2.1 2.9 2.7 2.9
European Gas Marketing
Volumes (Bcf/d) 2.5 1.6 2.3 1.7
---------- --------- --------- ---------
Total Physical Gas
Marketing Volumes 11.0 12.6 13.2 12.4
========== ========= ========= =========
Million Megawatt Hours
Generated - Gross 13.0 11.5 32.5 31.7
Million Megawatt Hours
Generated - Net 11.8 10.1 29.4 26.9
North American Physical
Million Megawatt Hours Sold 31.1 90.5 263.0 212.6
European Physical Million
Megawatt Hours Sold 21.2 - 116.7 -
---------- --------- --------- ---------
Total Physical Million
Megawatt Hours Sold 52.3 90.5 379.7 212.6
========== ========= ========= =========
North American Physical
Million Megawatt Hours
Delivered in the Period 96.9 59.5 246.8 121.7
European Physical Million
Megawatt Hours
Delivered in the Period 32.2 21 98.3 73.1
---------- --------- --------- ---------
Total Physical Million
Megawatt Hours
Delivered in the Period 129.1 80.5 345.1 194.8
========== ========= ========= =========
Coal Marketing Volumes
(Millions of Tons) 10.5 11.2 27.8 29.7
Average Natural Gas Price -
Henry Hub ($/Mmbtu) $3.16 $2.92 $2.96 $4.87
Average On-Peak Market Power
Prices:
Cinergy $33.47 $37.02 $27.48 $39.24
TVA 32.69 35.72 27.67 38.99
PJM 46.04 48.82 35.77 45.23
Platts SP15 35.73 45.02 32.25 147.26
New York - Zone G 55.57 57.04 44.90 58.05
Dynegy Midstream Services:
Natural Gas Field Plant
Processing Volumes
(MBbls/d) 56.3 56.3 55.0 56.0
Natural Gas Straddle Plant
Processing Volumes
(MBbls/d) 35.3 26.1 36.5 25.5
---------- --------- --------- ---------
Total Natural Gas
Processing Volumes 91.6 82.4 91.5 81.5
========== ========= ========= =========
Fractionation Volumes
(MBbls/d) 224.8 241.6 223.7 230.4
Natural Gas Liquids Sold
(MBbls/d) 481.9 550.4 519.6 562.0
Average Commodity Prices:
Crude Oil - Cushing ($/Bbl) $28.40 $26.64 $24.78 $27.85
Natural Gas Liquids ($/Gal) 0.41 0.39 0.37 0.50
Fractionation Spread
($/MMBtu) 1.40 1.51 1.24 0.80
Illinois Power
Electric Sales in KWH
(Millions):
Residential 1,832 1,681 4,342 4,160
Commercial 1,232 1,199 3,336 3,347
Industrial 2,288 2,322 6,640 6,691
Other 98 97 283 287
---------- --------- --------- ---------
Total Electric Sales 5,450 5,299 14,601 14,485
========== ========= ========= =========
Gas Sales in Therms
(Millions):
Residential 18 20 214 225
Commercial 11 12 90 99
Industrial 24 24 61 52
Transportation of
customer-owned gas 47 49 180 202
---------- --------- --------- ---------
Total Gas Delivered 100 105 545 578
========== ========= ========= =========
Heating Degree Days 29 89 3,024 3,146
Cooling Degree Days 1,006 847 1,432 1,291
DYNEGY INC.
CAPITAL RESOURCES AND OTHER STATISTICAL DATA
(IN THOUSANDS, EXCEPT RATIOS)
September 30, December 31,
2002 2001
------------- ------------
Capitalization
Long-Term Debt $4,290 $3,608
Plus:
Transitional Funding Notes 452 516
Mezzanine Preferred Securities 1,738 1,749
Project Alpha Gas Purchase
Obligation 222 258
Current Portion of Project Alpha Gas
Purchase Obligation 73 59
Notes Payable and Current Portion of
Long-Term Debt 1,454 402
Operating Lease Commitments (1) 1,199 1,609
Less:
ChevronTexaco Mezzanine Preferred
Securities 1,527 1,503
Transitional Funding Trust Notes 538 602
-------------- -------------
Adjusted Debt 7,363 6,096
Less:
Cash on Hand 1,070 218
-------------- -------------
Adjusted Net Debt 6,293 5,878
Adjusted Capitalization:
Adjusted Debt per above 6,293 5,878
Plus:
Minority Interest 142 1,010
Stockholders' Equity 2,673 4,719
-------------- -------------
Adjusted Net Capitalization 9,108 11,607
Adjusted Net Debt to Adjusted Net
Capitalization Ratio (2) 69.09% 50.64%
September 30, December 31,
2002 2001
------------- ------------
Value At Risk Disclosures:
One Day VaR - 95% Confidence Level $10 $18
One Day VaR - 99% Confidence Level $14 $26
Average VaR for Three Months - 95%
Confidence Level $17 $12
September 30, December 31,
2002 2001
------------- ------------
Risk-Management Assets and Liabilities
MtM Value (3):
2002 $(52) $460
2003 98 33
2004 15 20
2005 (8) (18)
2006 44 29
Beyond 291 154
(1) Credit equivalent of operating lease obligations.
(2) Adjusted Net Debt equals Adjusted Debt less Cash on Hand
(3) The table reflects the net fair value of Dynegy Inc.'s
risk-management asset position after deductions for time value,
credit, price and other reserves necessary to determine fair
value. These amounts are classified by year as to anticipated cash
inflows and outflows by contract based on tenor of individual
contract position. This disclosure excludes the fair value
associated with certain derivative instruments designated as
hedges, which are included in other comprehensive income (a
component of Stockholders' Equity), and other non-trading amounts.
The September 30, 2002 amount reflects the estimated net
risk-management asset value for the period by October 1, 2002 to
December 31, 2002. Variances in the table from year end to the
September 30, 2002 estimates are primarily attributed to:
a) A net deferral of the anticipated timing of cash inflows
totaling $95 million from the 2002 through 2004 time periods
to beyond 2006 related to fully hedged long-term natural gas
storage transactions. The change in the timing of cash inflows
on these transactions results from the decision to extend the
contract through 2007;
b) The realization of approximately $331 million of cash related
to contracts settled during the first three quarters of 2002;
c) The execution in the first quarter 2002 of a large power
origination transaction, which increased anticipated cash
inflows beyond 2006 by $114 million;
d) The recognition of a $223 million liquidity reserve in third
quarter 2002 that impairs the mark-to-market value of the
Company's marketing and trading portfolio. This impairment
reflects a substantial reduction during the quarter in market
transaction volumes, principally in the U.S. power marketing
and trading business and recognizes the negative estimated
impact on the realizability of the net asset value of the
portfolio.
e) The impact of the recognition of other net mark-to-market
gains, changes in reserves, changes in interest rates and
changes in foreign exchange rates and their related impact on
the discounted value of the portfolio and related annual cash
flow amounts.
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