Dynegy’s takeover of Illinova took a big step toward completion as shareholders for each company last week voted in favor of the transaction. Illinova’s vote of approval was announced during a special meeting at company headquarters in Decatur, IL, while Dynegy’s was held during a special shareholder meeting in Houston.

While it’s not yet a done deal, the merger represents yet another step in the ongoing evolution of Dynegy, formerly NGC Corp. “I’ve actually heard a lot of people describe Dynegy in different ways over the past several years,” CEO Chuck Watson told reporters in Houston last week. “I’ve been told I was a pipeline company. I’ve also been told I was an independent power producer, and I think I have the distinction of being the only company in the Fortune 500 over the last four years to be in different categories each year. I’ve also been a midstream player, a pipe-liner, and this year I understand that we’re now a utility. I’m not exactly sure if one is necessarily better than the other.”

These days, Watson prefers to describe Dynegy as “a national energy merchant.”

Watson said he expects energy convergence to continue to drive Dynegy’s growth over the next several years. More near-term, he noted commodity prices affecting Dynegy’s natural gas liquids business have come around from their depressed state of the last 18 months. While prices have come back, volumes have yet to recover. Watson said producers have yet to ramp up their drilling and capital budgets.

The Dynegy-Illinova merger, which was announced in mid-June (see NGI June 21), still needs FERC, Nuclear Regulatory Commission, and Illinois Commerce Commission approval. Along with those approvals, completion of the Clinton Power Station sale, and other closing conditions are expected to be satisfied during the first quarter of 2000. The Federal Trade Commission has already granted early termination of Hart-Scott-Rodino waiting periods and the Securities and Exchange Commission has allowed the registration statement for the combined company to take effect.

The combined company will be named Dynegy Inc. and will be headquartered in Houston. It will have a $7.5 billion book value, own an interest in plants which total more than 14,000 MW of gross domestic generating capacity, average North American natural gas sales of 9.1 Bcf/d and serve more than 950,000 retail customers. Illinova’s regulated utility, Illinois Power, will be a subsidiary of Dynegy Inc.

Joe Fisher, Houston

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