Directed by strong gas, power and liquids operations, DynegyInc. reported yesterday a 56% increase in 4Q99 net income to $45.1million and a 50% increase in 1999 recurring net income to $146.1million. In addition to that good news, the Houston-based companyalso said its merger with Illinova Corp., should be complete byearly February.

The company sold 8.8 Bcf/d of gas during 1999, up 600 MMcf/dfrom 1998, and averaged 9.2 Bcf/d in the fourth quarter. Thecompany produced and sold 19.3 million megawatt hours (MM Mwh)during the 1999 fourth quarter and 79.3 MM Mwh for the year. Powerproduction slipped from 1998’s level of 121 MM Mwh “principally asa result of our focus on higher margin business,” the company said.

In a conference call after the announcement, Chuck Watson,Dynegy’s CEO, called the energy convergence operations “the maingrowth driver” of the company. Dynegy’s energy convergence segmentconsists of the wholesale and retail gas and power businesses. In1999, normalized EBIT grew to $199.6 million, excluding the $8.9million pre-tax gain on the sale of an investment in the firstquarter 1999, compared to $176.1 million, excluding a $2.7 millionpre-tax severance charge.

The segment experienced great success during 4Q99, when EBIT was$50.4 million in the 1999 fourth quarter, up 13% from $44.8 million inthe 1998 quarter. One of the upcoming events that Dynegy said willbolster this segment even more is the Illinova merger completion. Themerger was first announced last June (see Daily GPI, June, 15). “Dynegy’s merger with Illinova,expected to close Feb. 1, will add nearly 3,800 MW of unregulated coaland gas-fired generation, further advancing Dynegy’s energyconvergence strategy,” he said. The combined company is expected toown more than 15,000 gross MW of domestic generating capacity. Watsonsaid the company’s goal is to own or manage 70,000 MW by 2004. Of thattotal, he said the company would likely own 20,000 to 25,000 MW, andmanage the rest through third parties.

The liquids segment, composed of Dynegy’s North Americanmidstream liquids operations, global natural gas liquidstransportation and marketing operations, and North American crudeoil marketing operations also did its share by nearly doubling itsEBIT in 1999 to $112.9 million from $57.5 million in 1998. EBITfrom the liquids segment increased 83% during 4Q99 to $41.3million, compared to normalized EBIT of $22.5 million in the 1998quarter. “To say that this business has undergone a remarkableturnaround is sort of an understatement,” Watson said.

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