Dynegy Inc. said Wednesday that it has agreed to exit four long-term natural gas transportation contracts as part of its plan to wind down its third-party marketing and trading business. The move will eliminate nearly $300 million of future fixed payment obligations, according to CEO Bruce Williamson.

The Houston-based company entered into the four contracts in June 2001 to secure firm pipeline capacity through 2014 in support of its third-party marketing and trading business. In exchange for exiting its obligations under these contracts from April 1, 2005 forward, Dynegy paid a total of $20 million in June 2004 and will pay $42 million in the first quarter 2005. These payments eliminate $295 million in aggregate fixed capacity payments through 2014.

Williamson said the exit from the contracts “improves our financial profile, while sharpening our focus on our unregulated asset-based businesses.”

In connection with the contract exit, Dynegy will reverse an aggregate liability of $148 million associated with the transportation contracts that was originally established in 2001. As a result, Dynegy’s customer risk management business will realize a net pre-tax gain related to these transactions of approximately $88 million in the second quarter 2004. The company expects to consider this gain, together with its overall financial results for the second quarter, when addressing its 2004 earnings guidance estimate upon the release of its second quarter financial results.

Dynegy’s customer risk management business, which is reported as a separate business segment, is now largely comprised of Dynegy’s four remaining power tolling arrangements, as well as gas transportation agreements and the company’s remaining gas and power trading positions.

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