Dynegy Inc. CEO Bruce Williamson told shareholders Thursday that even though the company had a successful first quarter, it has to focus on restructuring before considering any growth opportunities. First, he said, will be refinancing debt due in 2005, which will be completed before anything else is considered.

“We’re not going to wait for 2005,” he said, before the company refinances its 2005 maturities. Dynegy’s debt, revising the terms of the preferred stock deal with ChevronTexaco and resolving legal problems in California are at the top of the company’s to-do list, Williamson said. Dynegy also is working to improve its corporate governance, controls and compliance and wants to continue to be efficient and improve its processes.

After teetering on the brink of bankruptcy last year, the annual shareholder meeting held in Houston Thursday was upbeat, with many of the shareholders taking time to thank the current management team for its continuing success since late last year. However, Williamson said there is still a long way to go.

“We had a great first quarter of 2003,” he said. “We delivered more than many thought we could.” However, he said one quarter does not a full year make. “We have to remain focused and on course in our self restructuring and serve the market.” Williamson called the restructuring process a “journey,” and said “the key to success is dedication to protecting the value and doing the right thing in the right order of preference.”

However, Williamson added that “the banks are looking for continued performance and it is not an unrealistic thing for them to ask for collateral…We have to continue to deliver and restore our relationships.”

Williamson noted that “one of the lessons learned from the Enron era is that people [then] did not price credit. We are now in a situation where the pendulum has swung to the other side and everyone is collateralizing everyone on everything. Other things being equal, it’s not unreasonable to ask for collateral from someone in our credit strata.”

Pointing to the employees and executive team as the reason the company had managed to overcome its problems, Williamson said, “I am extremely pleased with how our employees have addressed the issues of the past and, importantly, are now focusing on the future and delivering value to our stakeholders. Today, we’re demonstrating to our stakeholders and the market that we’re not only capable of strong results — we’re achieving them.”

During the annual meeting, shareholders approved the election of 12 directors to serve for the next 12 months. All of Dynegy’s current directors were elected to serve for another year except for J. Otis Winters, retired chairman of PWS Group Inc., who declined to stand for re-election as a result of his retirement from the board.

Also, as it keeps its ties with ChevronTexaco in check, the company elected Raymond I. Wilcox, vice president of ChevronTexaco and president of company’s Exploration & Production Co., to replace Darald W. Callahan, executive vice president of Power, Chemicals and Technology for ChevronTexaco, who stepped down from the board. Williamson noted during the meeting that its relationship with its largest shareholder continues to be “strong,” and remains one of Dynegy’s most important business ties.

Shareholders also approved the ratification of PricewaterhouseCoopers LLP as Dynegy’s independent auditors for 2003. Two shareholder proposals, one regarding auditor conflicts and the other relating to stock option indexing, failed to pass.

Within its generation business, Williamson said Dynegy has completed scheduled maintenance on 14 power generation units at facilities in five states, preparing the company’s 13,000 MW fleet for the summer cooling season. Included in the scheduled maintenance are six units deferred to the second quarter 2003 from the first quarter. The power plants were kept on line during the first quarter to meet customer needs during colder-than-normal winter weather.

Dynegy also has begun commercial operation at the Rolling Hills Generation Project, an 838 MW natural gas-fired peaking facility in Vinton County, OH, 90 miles southeast of Columbus. Electricity generated by the power plant will be sold in the wholesale market to investor-owned utilities, electric cooperatives and municipalities throughout the East Central Area Reliability Council region and other areas of the country during peak demand periods. The facility was completed on schedule and under budget.

Dynegy, which expects to keep its generation concentrated in the Midwest, has been running fuel oil for much of 2003, according to Williamson. He said it was important to note the fuel switch, which helped the company when natural gas prices were higher.

“We’re not a ‘spark-spread’ play,” Williamson said. “Spark-spread play companies are sometimes fully dependent on natural gas as a fuel source, so when natural gas prices rise without a corresponding rise in the price of power, their profits are squeezed.”

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