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Investors applaud Dynegy plan
Williamson says company has "ample" liquidity
By Lisa Sanders, CBS.MarketWatch.com
Last Update: 12:52 PM ET Nov. 19, 2002
HOUSTON (CBS.MW) -- Investors bid up shares of Dynegy by more than 50 percent Tuesday after the company's new chief executive told investors that there are no plans to file for bankruptcy and promised clear financial results.
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In a conference call Tuesday, Dynegy Chief Executive Bruce Williamson said the company was committed to rebuilding under the plan announced last month. It splits the company into three units: power generation, natural gas processing and gathering, and Illinois Power -- an electric utility.
He added that the firm's $1.5 billion of liquidity -- the position increased from the second quarter to the end of the third -- is sufficient to run the business.
"The key driver is to continue to deliver on the results we promise," he said, in reference to a question about restoring investor confidence.
Shares of Dynegy (DYN: news, chart, profile) leaped 33 cents, or 43 percent, to $1.10 in recent trading. Volume of 15.6 million made it the most actively traded issue in the energy sector and the second most active on the New York Stock Exchange.
Williamson said that in addition to boosting liquidity, Dynegy continues to negotiate with its lenders, continues to meet its debt and credit maturities and is working to extend or renew lines of credit due in 2003. Dynegy has almost $2 billion of debt or credit coming due or expiring next year.
"We are confident that we can work with the banks to establish new lines of credit and replace the ones maturing in April and May 2003," Williamson said.
Dynegy has been speeding downhill since its proposed merger with Enron (ENRNQ: news, chart, profile) blew up a year ago. It has been the target of several federal investigations for its trading practices and accounting, including one by the Securities and Exchange Commission that was settled last month. CEO Chuck Watson and President Steve Bergstrom left the company, while Chief Financial Officer Rob Doty was fired.
On Oct. 30, the company reported a $1.8 billion loss, the majority of which stemmed from its energy marketing and trading unit. Earlier in the month, Dynegy said it would cut 780 jobs and exit the energy marketing and trading business. Dynegy named Williamson, a former senior executive at Duke Energy (DUK: news, chart, profile), as CEO and president on Oct. 23. Read interview with Williamson.
Last Thursday, Dynegy announced that it had been warned by the NYSE that it wasn't meeting standard listing requirements. The last time the stock traded above $1 was Oct. 15. See story.
The same day, Dynegy said it would restate results for 1999 to 2001 to account for its Project Alpha natural gas transaction as a financing activity rather than cash flow. The move was made at the behest of the SEC.
Dynegy plans to file a final re-audit by the end of the year, Williamson said. It filed an un-audited 8-K and 10-Q with the SEC on Friday. Though bankruptcy isn't planned, Williamson said the company was obligated to inform shareholders of "the substantial risk in our position" through the 10-Q.
As for its relationship with ChevronTexaco (CVX: news, chart, profile), Williamson said that the oil and gas giant remains one of Dynegy's largest customers and that it continues to perform on its natural gas processing and liquids sales obligations.
ChevronTexaco, which owns a 26.5 percent stake in Dynegy, took a $904 million loss in the third quarter to write down its investment in the company.