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Dynegy Expects to Finalize Midstream Deal Within Six Weeks

Dynegy Inc. CEO Bruce Williamson told shareholders in the annual meeting Thursday that the company hopes to finalize a decision about selling its midstream natural gas assets within four to six weeks. He reiterated that based on current financial performance, the assets likely will be sold for $2.5-3 billion.

The Houston-based company announced earlier this month that it was looking for a buyer or strategic "opportunities" for its midstream business, which is centered on Mont Belvieu, TX, along with the oil and gas exploration and production areas of North Texas, the mature Permian Basin of West Texas and southeast New Mexico, and the Louisiana Gulf Coast (see NGI, May 16).

No potential buyers for the midstream assets were mentioned by Williamson, but he said Dynegy has received interest from private equity groups and master limited partnerships. "We are committed to reaching a decision in a four- to six-week time period," he told a shareholder, in answer to a question during the meeting.

Williamson also discussed the progress that Dynegy has made in the past year, including completion of a multi-year self-restructuring initiative and a renewed focus to grow its power generation businesses. Once the midstream assets are sold, Dynegy will become a pure power-play generator.

By maximizing proceeds from a sale of the midstream assets, Dynegy's power generation business would be "positioned for consolidation and growth opportunities," he said. Dynegy could record tax efficiencies worth $1.8 billion through the midstream business sale, which may be used to pay down debt.

"Going forward, our focus is on evaluating strategic opportunities for our businesses to accelerate their growth and unlock shareholder value," Williamson said.

Also during the meeting, shareholders approved the election of Dynegy's 13 current directors, including 11 Class A common stock directors and two Class B common stock directors, to serve until the 2006 annual meeting of shareholders. Shareholders also approved a management proposal to ratify PricewaterhouseCoopers LLP as independent auditors for 2005.

Management's proposal to change Dynegy's state of incorporation from Illinois to Delaware failed to pass, however. Although more than 90% of the votes cast were in favor of the proposal, it failed to receive enough total votes by the holders of Class A common stock to satisfy the two-thirds super-majority required under Illinois law, the company said.

Also rejected was a shareholder proposal to recoup performance-based compensation for executives following financial restatements. Under revamped Corporate Governance Guidelines, the company noted that its board of directors already has adopted a policy to review compensation in the event of a material restatement of the company's financial results.

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