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The Honolulu Advertiser
Posted on: Thursday, October 31, 2002

Former Enron rival reports $1.8 billion loss

By Nancy Rivera Brooks
Los Angeles Times

Dynegy Inc. yesterday reported a $1.8 billion loss for the third quarter, largely reflecting non-cash charges related to the disintegrating energy trading business.

Houston-based Dynegy Inc., once a crosstown rival of Enron Corp., yesterday reported a $1.8 billion quarterly loss. Many analysts speculate that Dynegy also will end up in bankruptcy court.

Bloomberg News Service library photo

The loss for the Houston energy company also highlighted how few healthy businesses Dynegy still operates. Analysts speculated that Dynegy soon may join its former cross-town rival and one-time acquisition target, Enron Corp., in U.S. Bankruptcy Court.

"I don't see what Dynegy can do to right the ship," said Gordon Howald, an energy analyst with Credit Lyonnais. "These guys are in a vortex and I don't see how they get out of it."

Dynegy Chief Executive Bruce Williamson, who joined the company last week, said the third quarter was difficult but added that Dynegy's $1.75 billion in after-tax 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."

Dynegy posted a net loss of $1.8 billion, or $4.92 a share, for the quarter ending Sept. 30., compared with net income of $286 million, or 85 cents, in the same quarter last year.

Third-quarter revenue was $1.7 billion, down from $2.3 billion. Both numbers reflect an industrywide accounting change that requires traders to book only the net profit from trades rather than the gross value. Without the change, third-quarter revenue would have been 82 percent higher.

Charges for the quarter included $908 million for impairment of goodwill at Dynegy's wholesale energy business, reflecting a loss of value in the business because of low power prices and Dynegy's decision to exit trading.

Among the other major charges were $566 million for the loss on the sale of its biggest pipeline, Northern Natural Gas, and $145 million in reserves taken on the company's power portfolio to reflect reduced market liquidity.

More charges were expected in the fourth quarter. Dynegy is firing 14 percent of its staff, restructuring its business and re-auditing its financial results back to 1999.