NGI The Weekly Gas Market Report
Dynegy Inc. CEO Chuck Watson said last week he had “never beenso excited” about his company’s fourth quarter and yearendearnings, because across the board, every business segment of theHouston-based company was up. Referring to California, Watson saidDynegy had taken steps “months ago,” in anticipation of today’sproblems, and now was actively supporting planned changes there.
For 2000, Dynegy reported a 210% increase in its recurring netincome, up to $452 million, or $1.43 a diluted share, compared with1999 recurring net income of $146 million, or $0.63 per share. The2000 results represented a 157% increase over 1999 net income of$176 million, or $0.53 per share. For the year, Dynegy’s commonstock “leads the industry,” said Watson, who reported that it had a218% total shareholder return.
Watson, who called 2000 an “exceptional year,” said Dynegy hadleveraged its assets and that its “core convergence segmentachieved particularly outstanding results, with a 252% increase in2000 recurring net income to $355 million.” The company’scompetitive position was advanced with the Illinova merger and thecompletion of three greenfield power plants totaling 1,055 MW.
“The closing of two acquisitions totaling more than 3,000 MWduring the first half of this year and the development of threeadditional greenfield power projects totaling 1,165 MW by thissummer will ensure that our growth performance will continue into2001 and beyond,” said Watson.
The CEO waxed poetic about the company’s future, saying he hadnever been more enthusiastic about fourth quarter or year endresults than he was with the most recent numbers.
With less than 10% of its generation portfolio in California,Watson said California was “not the focus of Dynegy,” but addedthat his company was “publicly committed” to solving the state’senergy problems. “Dynegy has been and will continue to be a playerin California,” he said. Speaking to analysts during an earningsconference call, Watson said everything that could go wrong withCalifornia had gone wrong, but insisted the state was not in anenergy crisis, but rather a financial one.
Dynegy’s COO Steve Bergstrom, who has led the company’sparticipation in California energy discussions, said, “for manymonths, Dynegy tried to get into a discussion” with state officialsabout price caps, because Dynegy recognized that problems werelooming.
“California’s energy crisis is real and it was not caused byderegulation,” said Bergstrom. However, both he and Watsonacknowledged that there are “solutions to stop the bleeding” ifstate officials recognize the problems are all financial, and arenot related to deregulation. Watson said the California governor(Gray Davis) might not understand “Economics 101” but “heunderstands Black Out.”
Dynegy officials think there are several “must haves” for theCalifornia market to remain viable: credit assurances for goingforward, securitization of past receivables owed, bilateralcontracts, a long-term rate structure and the removal of roadblocksto build new generation.
“All of us in industry are trying to make it happen and we arecommitted to making it happen,” Watson said.
Carolyn Davis, Houston
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