Just three months after Houston-based Dynegy announced it wouldenter the North American wholesale broadband communicationsbusiness, it now is storming into Europe with a deal to buyLondon-based iaxis Ltd., a cash poor fiber optic network operator.Dynegy also told analysts yesterday that it expects earnings tojump 20% to 25% per year over the next three years spurred by itsasset-based growth plan.

In a full-day financial analyst conference Tuesday, Dynegysenior executives laid out their strategies for the high-flyingcompany. Announcing its target range for 2001 recurring earningsforecast, the company expects earnings per diluted share of $1.65to $1.75, an increase of 25% to 30% from forecasts for 2000. Thecompany also said that its recurring EPS growth rate through 2003would average 20% to 25%.

The announcement of Dynegy’s push into Europe was not unexpected,as CEO Chuck Watson has indicated over the past few months that hesees Dynegy’s global growth as key to the company’s continued growth(see Daily GPI, Sept. 15). The iaxisdeal calls for Dynegy to pay a nominal amount for shares of thecompany and then provide $40 million in payments to iaxis creditorswho will receive 40% of their claims against the company. Dynegy alsowill invest another $160 million to extend iaxis’ network.

What the deal brings to Dynegy, though, is a major presence in thebroadband market, which it only entered in August (see Daily GPI, Aug. 3). Leveraging its merchant talentsinto broadband communications, Dynegy said it would purchaseColorado-based Extant Inc. for $60 million in cash and 1.25 millionshares of Dynegy common stock. Extant already was operating in 28U.S. cities.

The iaxis purchase, expected to close in early 2001, will fallinto Dynegy’s newest division, Dynegy Global Communications, adivision to include Extant that will own 80% of a limitedpartnership to be called Dynegy Connect. Telstrat Corp. Ltd., anAustralian telecommunications and information services company,owns a 17% interest in Extant and has signed a memorandum ofunderstanding to own a 20% interest in Dynegy Connect.

With the newest acquisition, Dynegy intends to establish DynegyEurope Communications Ltd., which will be headquartered in Vienna,Austria, with offices in London, Berlin, Paris, Milan andAmsterdam.

“Initially, Dynegy’s focus will be to capitalize on thenear-term revenue opportunities utilizing iaxis Ltd.’s assets,which will provide immediate connectivity to our U.S. network,”said Matt Epling, who will become managing director of DynegyEurope.

The London company is owned by iaxis NV, a Dutch venture capitalholding company that owns and operates an 8,750-mile(14,000-kilometer), 10-gigabit fiber optic network throughoutEurope. The network has 40 hub sites.

“This acquisition firmly establishes the platform for theexpansion of Dynegy’s network connectivity and broadbandcommunications strategy into Europe and is an ideal complement toDynegy’s U.S. operations,” Watson said. “For a cost of less thanU.S. $200 million, Dynegy will have a significant presence in theEuropean communications marketplace.”

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