Dynegy Inc. said Thursday that its major shareholder, ChevronTexaco, plans to exercise its pre-emptive right to retain a proportionate 26.5% common stock ownership interest in the Houston-based company. ChevronTexaco said it will purchase 10.4 million shares of Class B common stock, with net proceeds from the sale totaling $205 million to be used for general corporate purposes, including debt reduction.

With Thursday’s announcement, Dynegy also adjusted its recurring 2002 fully diluted earnings per share guidance to include this equity issuance from $2.30 to $2.26.

Under an existing shareholder’s agreement, ChevronTexaco has the right to purchase more shares of Dynegy’s common stock when new stock is issued. As part of Dynegy’s capital restructuring program unveiled in December, Dynegy sold about 28.7 million shares of Class A common stock at $20.75 per share in an underwritten public offering, which included management’s cash purchases and the underwriter’s over-allotment. The net proceeds from the December offering totaled $568 million.

“We view this investment by ChevronTexaco as a further vote of confidence in our company,” said Dynegy CEO Chuck Watson. “This is yet another positive step in our capital restructuring program to strengthen our balance sheet in light of the changing credit standards in the industry.”

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