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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Earliest Event Reported: July 27, 1999
DYNEGY INC.
(Exact Name of Registrant As Specified In Its Charter)
Delaware 1-11156 94-3248415
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification Number)
1000 Louisiana, Suite 5800
Houston, Texas 77002
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(713) 507-6400
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ITEM 5: OTHER EVENTS
On July 27, 1999, Dynegy Inc. ("Dynegy") issued a press release
announcing its 1999 second-quarter results. A copy of Dynegy's press
release is annexed hereto as Exhibit 99.1 and incorporated herein by
reference.
ITEM 7: FINANCIAL STATEMENTS, PRO-FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS - Not applicable.
(b) PRO-FORMA FINANCIAL INFORMATION - Not applicable.
(c) EXHIBITS -
99.1 Press Release dated July 27, 1999.
2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DYNEGY INC.
By: /s/ Lisa Q. Metts
-----------------------------------
Lisa Q. Metts
Assistant General Counsel
DATE: July 27, 1999
3
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EXHIBIT INDEX
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
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99.1 Press Release dated July 27, 1999 5
4
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EXHIBIT 99.1
DYNEGY REPORTS SECOND QUARTER EARNINGS OF $0.17 PER SHARE; LED BY STRONG POWER
PERFORMANCE AND LIQUIDS RECOVERY
HOUSTON, July 27 /PRNewswire/ -- Dynegy Inc. (NYSE: DYN) today reported a
19% increase in second quarter 1999 net income to $28.0 million, or $0.17 per
diluted share, compared to second quarter 1998 net income of $23.4 million, or
$0.14 per diluted share.
The 1999 second quarter results were led by strong performance from
Dynegy's wholesale gas and power segment, representing 73 percent of the
company's earnings before interest and taxes (EBIT).
"We are pleased with our second quarter results which demonstrate solid
earnings even during this off-peak quarter," said Chuck Watson, Dynegy
chairman and chief executive officer. "We continue to see strong financial
results from the determined execution of our strategic plan, which is focused
primarily on maximizing the value of our power generation assets through our
marketing and trading capabilities," added Watson. "Dynegy's liquids segment
experienced a recovery resulting from improved crude oil and natural gas
liquids prices, supplemented by targeted cost reductions and revenue
enhancements. These improvements resulted despite the fact that industry
volumes have not yet returned to historic levels of production, due to reduced
drilling, delayed maintenance and normal field depletion.
"The company's previously announced merger with Illinova Corp. (NYSE: ILN)
continues to gain momentum," said Watson. "During the quarter, Illinova
announced that it had entered into a definitive agreement to sell its Clinton
nuclear generating unit to AmerGen Energy Co., which is a first step towards
satisfying an important condition of closing the merger transaction.
"Illinova also obtained unanimous approval by the Illinois Commerce
Commission to effect the spin out of its fossil generation assets from its
regulated Illinois Power subsidiary to a non-regulated affiliate," added
Watson. "This is an important step to achieving the synergies expected to
come from the combined companies.
"The merger represents a transformational event for Illinova and an
acceleration of Dynegy's drive to own or control strategic power generation
assets across the country," said Watson. "This merger will allow both
companies to compete more effectively in the deregulation of the $300 billion
natural gas and electric markets. The transaction is expected to close in the
first quarter 2000."
Wholesale Gas and Power Segment
Dynegy's wholesale gas and power segment is composed of worldwide power
and natural gas marketing and trading, and power generation. This segment is
focused on energy convergence, or the marketing, trading and arbitrage
opportunities that exist among natural gas, power and coal, which can be
enhanced by the control and optimization of related physical assets.
Operating margin and equity earnings from unconsolidated affiliates for
the energy convergence segment were $80.7 million in the second quarter 1999,
which matched 1998's second quarter of $79.9 million which benefited
substantially from the increased power prices in the Midwest last summer.
Power marketing and generation earnings, including operating margin and
equity earnings from Dynegy's joint venture power projects, increased
28 percent to $56.8 million during the 1999 second quarter, from $44.3 million
in 1998. These results were achieved primarily as a result of new long-term
marketing arrangements and improved results from Dynegy's owned and controlled
generation capacity.
Natural gas marketing reported operating margin and equity earnings from
joint ventures and alliance investments of $23.9 million for the second
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quarter compared to $35.6 million in 1998. The decrease is primarily the result
of a loss from Dynegy's European operations attributable to weak market
conditions at quarter end. These conditions are expected to recover later in the
year. Global natural gas volumes increased 12 percent during the quarter to 9.2
billion cubic feet per day (Bcf/d), from 8.2 Bcf/d in the second quarter 1998,
with increased sales to Dynegy's retail alliances and power generation
facilities. Costs associated with the start up of retail alliances negatively
impacted the current quarter by $2.4 million compared with $600,000 last year,
due primarily to the expansion of marketing activities in the Southeast region
of the U.S. through Dynegy's SouthStar alliance. EBIT from the wholesale gas and
power segment for the quarter was $46.4 million, compared to EBIT of $49.1
million in the 1998 quarter.
Liquids Segment
The liquids segment is composed of Dynegy's North American midstream
liquids operations, global natural gas liquids transportation and marketing
operations located throughout North America and the U.K., and North American
crude oil marketing operations.
Operating margin and equity earnings from joint ventures increased
35 percent to $58.3 million in the 1999 second quarter from $43.1 million in
the 1998 quarter. The earnings recovery resulted from improved processing
margins, stronger international demand, additional fractionation volumes and
further realization of targeted cost savings and revenue enhancements. Total
processing volumes were 120 thousand barrels per day (MBbls/d) in the second
quarter 1999, compared to 117.1 MBbls/d in the 1998 quarter.
The liquids segment reported a 113 percent increase in EBIT during the
second quarter 1999 to $17.5 million, compared to $8.2 million EBIT in the
second quarter 1998.
Other Factors Affecting Earnings
Dynegy's consolidated EBIT increased 12 percent to $63.9 million in the
second quarter of 1999, compared to $57.3 million in 1998. The increase is
principally a result of significantly higher earnings from the liquids segment
and sustained earnings from the wholesale gas and power segment, partially
offset by higher depreciation and general and administrative expenses.
Depreciation increased quarter-over-quarter principally as a result of an
expanded portfolio of power generation assets.
Dynegy Inc. is one of the country's leading marketers of energy products
and services. Through its leadership position in gathering, processing,
transportation, independent power generation, and marketing of energy, the
company provides energy solutions to its customers primarily in North America
and the United Kingdom. Dynegy's primary business segments are wholesale gas
and power and natural gas liquids. Dynegy Marketing and Trade, the company's
power generation and natural gas and power marketing and trading subsidiary,
focuses on energy convergence -- the marketing, trading and arbitrage
opportunities that exist among natural gas, power and coal that can be
enhanced by the control and optimization of related physical assets. Dynegy's
natural gas liquids subsidiary, Dynegy Midstream Services, Limited
Partnership, includes North American midstream liquids operations, global
natural gas liquids transportation and marketing operations, as well as North
American crude oil marketing operations.
This press release includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although Dynegy believes that its expectations are
reasonable, it can give no assurance that these expectations will prove to
have been correct. Important factors that could cause actual results to
differ materially from those in the forward-looking statements herein include
fluctuations in commodity prices for natural gas, electricity, natural gas
liquids, crude oil, or coal; competitive practices in the industries in which
Dynegy competes; operations and systems risks; environmental liabilities,
which are not covered by indemnity or insurance; software, hardware or third-
party failures resulting from Year 2000 issues; general economic and capital
market conditions, including fluctuations in interest rates; and the impact of
current and future laws and governmental regulations (particularly
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environmental regulations) affecting the energy industry in general, and
Dynegy's operations in particular.
DYNEGY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating Revenues $3,160,757 $3,278,214 $6,205,730 $6,593,783
Cost of Sales 3,035,010 3,170,299 5,959,906 6,388,879
Operating Margin 125,747 107,915 245,824 204,904
Depreciation 31,750 26,984 63,038 52,516
Severance Charge --- --- --- 9,644
General and Administrative
Expenses 47,091 44,377 96,633 86,983
Operating Income 46,906 36,554 86,153 55,761
Equity in Earnings of
Unconsolidated
Subsidiaries 13,224 15,101 28,287 30,856
Interest Expense (18,186) (18,091) (37,420) (34,096)
Minority Interest in
Income of a Subsidiary (4,158) (4,158) (8,316) (8,316)
Other Income and Expenses,
Net 3,724 5,637 13,489 7,249
Income Before Income
Taxes 41,510 35,043 82,193 51,454
Income Tax Provision 13,534 11,602 26,146 15,674
Net Income $ 27,976 $ 23,441 $ 56,047 $ 35,780
Earnings Before Interest
and Taxes $ 63,854 $ 57,292 $ 127,929 $ 93,866
Normalized Earnings Before
Interest and Taxes $ 63,854 $ 57,292 $ 119,060 $ 103,510
Basic Earnings Per Share
of Common Stock $0.18 $0.15 $0.36 $0.23
Diluted Earnings Per Share
of Common Stock $0.17 $0.14 $0.34 $0.21
Basic Shares Outstanding 153,544 152,491 153,150 152,219
Diluted Shares
Outstanding 167,275 166,705 165,229 166,880
</TABLE>
DYNEGY INC.
WHOLESALE GAS AND POWER SEGMENT
EARNINGS BEFORE INTEREST AND TAXES
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating Margin:
Power Marketing and Generation $48,979 $37,278 $ 86,411 $ 44,358
Natural Gas Marketing (A) 21,829 31,701 54,503 63,846
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Total Wholesale Gas and
Power Margin 70,808 68,979 140,914 108,204
Equity Investments:
Power Marketing and Generation 7,811 6,973 16,598 14,127
Accord Energy Limited 4,500 4,500 9,000 9,000
Retail Gas Marketing Investments (2,439) (572) (3,088) (1,626)
Total Wholesale Gas and Power
Equity Earnings 9,872 10,901 22,510 21,501
Subtotal 80,680 79,880 163,424 129,705
Depreciation 8,823 7,048 17,384 12,776
General and Administrative
Expenses 30,386 25,126 61,925 52,432
Other Items 4,897 1,351 18,176 3,227
Earnings Before Interest and
Taxes $46,368 $49,057 $102,291 $ 67,724
Normalized Earnings Before
Interest and Taxes (B) $46,368 $49,057 $ 93,422 $ 70,447
Natural Gas Sales (Bcf/d):
Domestic (C) 6.1 5.3 6.5 5.9
Canadian (D) 2.2 2.3 2.3 2.2
United Kingdom (E) 0.9 0.6 1.3 0.6
9.2 8.2 10.1 8.7
Power Marketing and Generation:
Million Megawatt Hours Generated
- Gross 4.2 3.5 7.8 6.8
Million Megawatt Hours Generated
- Net 2.7 2.3 5.1 4.4
Million Megawatt Hours Sold 14.7 26.6 27.8 51.5
Total Produced and Sold 17.4 28.9 32.9 55.9
</TABLE>
(A) Includes Canadian and UK gas marketing operations.
(B) Adjusted for the segment's share of the $8.9 million pre-tax gain on
the sale of an investment effective January 1, 1999, and the
$9.6 million pre-tax severance charge recognized in the first quarter
of 1998.
(C) Includes immaterial amounts of inter-affiliate gas sales.
(D) Represents volumes sold by Dynegy Inc.'s Canadian subsidiary.
(E) Represents volumes sold by Dynegy Inc.'s United Kingdom subsidiary.
DYNEGY INC.
LIQUIDS SEGMENT
EARNINGS BEFORE INTEREST AND TAXES
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating Margin
Upstream:
Natural Gas Processing:
Field Plants $24,978 $15,821 $ 40,688 $ 38,437
Straddle Plants 4,743 1,471 5,940 6,651
Natural Gas Gathering
and Transmission (A) 1,543 2,357 2,976 6,413
Downstream:
Fractionation 10,752 5,994 21,592 13,246
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Natural Gas Liquids
Marketing 8,455 8,966 26,611 22,684
LPG Sales (B) 1,496 1,561 (513) 3,794
Crude Oil Marketing (C) 2,972 2,766 7,616 5,475
Total Liquids Businesses
Margin 54,939 38,936 104,910 96,700
Equity Investments:
Gulf Coast Fractionators 254 891 1,124 2,080
West Texas Pipeline 1,269 1,859 2,141 3,576
Venice Energy Services 1,275 1,163 1,569 2,926
Other 554 287 943 773
Total Liquids Businesses
Equity Earnings 3,352 4,200 5,777 9,355
Subtotal 58,291 43,136 110,687 106,055
Depreciation 22,927 19,936 45,654 39,740
General and Administrative
Expenses 16,705 19,251 34,708 44,195
Other Items (1,173) 4,286 (4,687) 4,022
Earnings Before Interest
and Taxes $17,486 $ 8,235 $ 25,638 $ 26,142
Normalized Earnings
Before Interest and
Taxes (D) $17,486 $ 8,235 $ 25,638 $ 33,063
Natural Gas Processing (MBbls/d):
Field Plants 86.6 85.2 87.6 86.0
Straddle Plants 33.5 31.9 31.1 36.3
120.1 117.1 118.7 122.3
Fractionation Volumes
(MBbls/d) 225.7 182.6 193.5 192.5
Natural Gas Liquids Sold
(MBbls/d) 418.5 378.6 440.3 405.0
LPG Sales by Global
Operations (MBbls/d) 74.9 48.7 76.2 54.1
Crude Oil Sold (MBbls/d) 228.0 297.4 197.0 254.1
Natural Gas Gathering and
Transmission (Bcf/d) 0.2 0.4 0.2 0.4
Average Commodity Prices:
Henry Hub Natural Gas
(First of the Month) $ 2.16 $ 2.21 $ 1.95 $ 2.20
Crude Oil - Cushing 15.10 12.24 12.75 13.00
Natural Gas Liquids 0.29 0.26 0.25 0.27
</TABLE>
(A) Sale of Ozark Gas Transmission completed August 8, 1998.
(B) Includes marketing activities directed from Dynegy Inc.'s office in
the United Kingdom.
(C) Includes Canadian crude oil marketing operations.
(D) Adjusted for the segment's share of the $8.9 million pre-tax gain on
the sale of an investment effective January 1, 1999, and the
$9.6 million pre-tax severance charge recognized in the first quarter
of 1998.
For more information about Dynegy, please visit its web site at
HTTP://WWW.DYNEGY.COM.
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