Dynegy Inc. said Wednesday it will re-file 2003 Form 10-K and 1Q2004 and 2Q2004 financial statements related to goodwill impairment charges associated with the pending sale of Illinois Power (IP). The adjustments are not expected to impede the sale, nor does Dynegy expect the refilings to impact current cash and liquidity positions or its 2004 earnings guidance estimate of 3-8 cents/share.

The previously disclosed $242 million goodwill impairment, which was taken by Dynegy to reflect the fair value of IP, was originally recorded in 4Q2003. However, while it was preparing to record the IP sale, Dynegy said it identified a deferred tax asset that was excluded from the 4Q2003 impairment analysis. The decision to restate prior financial statements was made by the Audit and Compliance Committee of Dynegy’s board of directors.

“Dynegy’s exclusion of this asset understated the net book value of the assets and, as a result, understated the impairment that had been recorded in 4Q2003,” the company said in a statement. “The company, in consultation with its independent auditors, PricewaterhouseCoopers, concluded that an additional after-tax impairment charge of $259 million should have been reflected in 4Q2003, and additional after-tax impairments of $4 million and $2 million should have been reflected in 1Q and 2Q2004…”

Dynegy is currently evaluating its tax accounting and reconciliation controls and processes, including an income tax review initiative. Through this initiative, it “also has determined that adjustments related to its deferred income tax accounts in periods prior to 2004 are required.”

Because the analysis is not completed, Dynegy said it could not determine the amount of the adjustments and periods affected. “However, Dynegy does anticipate, based on its ongoing review of these tax items, that these adjustments will reduce the company’s deferred tax liability reflected on the balance sheet. The company is working to complete this review as expeditiously as possible.”

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