Dynegy Inc. got rid of the last asset it held in Northern Natural Gas Co., announcing Wednesday it had sold $90 million in 6.875% senior notes due May 2005 for $96 million in cash.

Dynegy Holdings Inc. acquired the notes, which represented the company’s remaining investment in the former Enron Corp. pipeline, at par value in April 2002 under a tender offer. The proceeds will be used pay down debt and improve Dynegy’s liquidity, the company said.

The pipeline, which Dynegy obtained after a merger attempt with Enron, was sold last summer to MidAmerican Energy Holdings Co. for $928 million in cash and the assumption of $950 million in outstanding debt, including the notes sold (see Daily GPI, July 30).

Dynegy has been selling off many of what it considers non-core assets. On Monday, the company announced it had sold the Hornsea Ltd. natural gas storage facility in the United Kingdom for $200 million (see Daily GPI, Oct. 1). It also has said it wants to sell the other UK storage asset, Rough, which it also bought last year.

After Dynegy sold the Hornsea asset, observers noted that the positive news did nothing to help the company’s pathetic stock price, which has hovered around $1.10 for days. However, Christopher R. Ellinghaus, an analyst with Williams Capital, said he thought investors may have been confused abut the sale.

“The confusion arises from the $600 million purchase price paid to British Gas [BG Storage] in late 2001 for the UK gas storage assets,” Ellinghaus noted on Wednesday. “Some observers have noted the wide disparity between the sale price for Hornsea and the original price for the UK gas storage assets, suggesting that this…represents a significant loss for Dynegy. In actuality, Dynegy paid $600 million for two UK properties, Hornsea, which is an onshore asset, and Rough, which is an offshore natural gas storage asset.

“As far as we are aware, no discreet price was ever established for either the Rough or Hornsea assets,” Ellinghaus said. “Therefore, until Rough is sold, it will be difficult to determine the net effect of Dynegy’s asset sales. However, thus far, we understand that interest has been strong for both assets and the more highly prized Rough asset is expected to produce a very attractive valuation.”

Williams Capital has a “hold” rating on Dynegy, and its current earnings per share estimate for 2003 is 40 cents.

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