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Gold/Mining/Energy : Dynegy Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Oeconomicus who wrote (83)	6/24/2002 2:31:51 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 208

DYN TO CUT DIVIDEND, STOCK TUMBLES Looks like disaster day for this turkey...... biz.yahoo.com Reuters Business Report Dynegy to Cut Dividend, Take Charge By Patrick Fitzgibbons NEW YORK (Reuters) - Energy trading company Dynegy Inc. (NYSE:DYN - News) on Monday said it would take up to $450 million in charges against second-quarter earnings, halve its dividend and sell more assets among steps to shore up its balance sheet. The news did nothing to dissuade credit agency Fitch Investors, which cut the company's debt rating to junk status, sending Dynegy shares down 15 percent as the company said its previous earnings forecasts no longer apply. Dynegy's announcement comes after the recent loss of more than 1,000 jobs in the energy trading industry and the scaling back of trading operations at rivals Aquila Inc. (NYSE:ILA - News), El Paso Corp. (NYSE:EP - News) and Williams Cos. (NYSE:WMB - News) Among steps announced Monday, Dynegy said beginning in the third quarter it will cut its dividend to 15 cents from 30 cents; will either sell, partially sell, or seek a joint venture for its stake in Northern Natural Gas Co. and Dynegy Storage; will set an initial public offering for its Dynegy Energy Partners unit; and launch a $2 billion capital program. "It's a good sign that they are committed to selling these assets and still carry through with the IPO," said Scott Soler, an analyst at Morgan Stanley. "I'm not sure, though, they will be able to do the IPO while being investigated by the SEC." Dynegy and many industry cohorts are under investigation by the Securities and Exchange Commission and the Federal Electric Regulatory Commission into whether they conducted "wash" trades -- a simultaneous purchase and sale of energy to the same party done to artificially increase revenue and trading volumes. Soler said he is optimistic that Dynegy would be able to attract buyers for these properties and generate about $1 billion by the sale. Interim CEO Dan Dienstbier said in a statement that the steps, along with other recent measures, will ensure sustainable financial stability for Dynegy and improve the company's credit profile substantially into 2003 and beyond. The Houston-based company said it will report in the period ending June 30, "certain nonrecurring pretax charges of up to $450 million." Dynegy also said that "due to market conditions, previous management guidance on earnings no longer applies." Dynegy also said it plans to sell about $200 million more of its assets, and issue between $300 million and $400 million of Illinois Power mortgage bonds to bolster its balance sheet. The company said it has enough liquidity to meet its obligations, even if the credit rating agencies were to further downgrade its debt. It has been a difficult time for Dynegy, which last year aspired to taking over Enron Corp. before it filed for bankruptcy. In May, former Chief Executive Chuck Watson resigned and was followed out the door last week by former Chief Financial Officer Rob Doty. Dynegy shares sank to a three-year low of $6.38, before recouping some losses to trade down 80 cents, or 10.2 percent, to $6.72 in afternoon trade on the New York Stock Exchange. Other energy companies were also being battered on Monday, with Aquila shares down 6.1 percent at $9.26 and Williams shares off 11.2 percent at $6.33. CREDIT CRUNCH In recent months, Dynegy officials have said it would be taking a series of steps to preserve its credit ratings. In mid-May, the ratings agencies placed Dynegy's credit ratings under review for possible downgrade as energy marketing and trading came under increased scrutiny from regulators and investors. Last week, the company said it was shuttering its online trading operations, Dynegydirect, to improve liquidity. Dynegy has also received commitments from its counterparties to permanently remove ratings triggers. These triggers, if enacted by counterparties, could have forced Dynegy to pay back debt early if its ratings were to fall below a previously agreed upon level. "I was very pleased to see the removal of the triggers," said Soler. "That's about $300 million they're not going to have to come up with if the debt drops to junk." The company said it will reduce its capital spending by $100 million from $1.2 billion for the remainder of 2002, arrange other interim financings that it said would generate about $250 million in liquidity, and save about $50 million from job cuts and other cost cutting. Soler said he expects the company to have less than $1 billion in capital spending during 2003. FITCH DOWNGRADE Fitch cut Dynegy to "BB-plus" from "BBB" and said that a number of concerns still exist for Dynegy. "While elements of the plan reduce consolidated debt and improve liquidity, the ratings downgrades are appropriate for Dynegy's expected financial position and are reflective of a moderate degree of execution risk and the continued negative overhang from the SEC's investigation of accounting and trading issues," the ratings agency said in a release. Dynegy said it will also enact several changes to its accounting practices to increase disclosure. The company said it will provide operating cash flow by segment; segregate financial contribution among earnings generated from its diversified units; and move synthetic operating leases for the company's power generation operations onto its balance sheet. Dynegy, which formerly employed Enron-tainted Andersen as its auditor, said its new accountant, PricewaterhouseCoopers, is currently re-auditing its 2001 resultS. """"""""""""""""""""""""""""""""""""""""""""""""""""""""""" Bob, I guess the question has to be: which of us is dealing in reality? The news favors my views that the merchant power sector is imploding. Just desserts for a bunch of criminals. -Ray