Clauses within some energy trading contracts that were executed before Enron Corp. filed for bankruptcy last December are at the heart of another legal dispute with Dynegy Inc., but in this case, determining which one will be required to pay the other most likely will be decided in court. Dynegy earlier had paid Enron $25 million in August to settle a lawsuit over their cancelled merger (see Daily GPI, Aug. 16).

According to filing first by Dynegy and then by Enron in the U.S. Bankruptcy Court for the Southern District of New York, where Enron’s case is being heard, Dynegy has asked the court to settle its master netting agreements with Enron that were executed before last December. Dynegy has proposed using arbitration to settle the agreements. However, last Friday, Enron requested that U.S. Bankruptcy Judge Arthur Gonzalez instead treat Dynegy like other Enron creditors and settle the dispute in bankruptcy court.

Dynegy claims that Enron owes its counterparties about $93 million for energy trading transactions involving wholesale electricity, retail electricity, natural gas, coal, liquids and broadband communications capacity. Enron claims the agreements are null and void, and in return, Dynegy owes Enron and some of its bankrupt subsidiaries $230 million.

So far, Enron has declined public comments about the lawsuit. Dynegy spokesman John Sousa said that Dynegy believes that the arbitration clause in the master netting agreement is enforceable.

After Dynegy withdrew its merger offer last November, Enron filed a $10 billion lawsuit claiming that Dynegy had abandoned the merger to force Enron into bankruptcy. Meanwhile, Dynegy will hold a teleconference Tuesday at 9 a.m. EST regarding its third-quarter earnings and 10-Q and 8-K filings with the Securities and Exchange Commission. At that time, Dynegy also is expected to answer questions about its 10-Q, in which it claims that bankruptcy may be an option if it cannot renegotiate its bank credit facilities as they come due in 2003. The teleconference may be accessed at www.dynegy.com.

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