Dynegy Reports 47 Percent Increase in 2001 Recurring Earnings Per Share to $2.10.
Business/Energy Editors
HOUSTON--(BUSINESS WIRE)--Jan. 23, 2002
Dynegy Inc. (NYSE:DYN)
-- Annual recurring net income up 58 percent to $713 million -- 70 percent of recurring financial contribution from owned assets -- Fourth quarter recurring net income of $144million, or $0.41 per diluted share -- 86 percent increase in wholesale energy network segment annual recurring net income -- Diversification strategy, physical asset ownership and strong balance sheet drive growth
Dynegy Inc. today reported a 47 percent increase in 2001 recurring earnings per diluted share to $2.10, compared to 2000 recurring earnings per diluted share of $1.43. Recurring net income increased 58 percent in 2001 to $713 million, compared to 2000 recurring net income of $452 million.
Dynegy's 2001 reported earnings per diluted share of $1.90 included after-tax non-recurring charges aggregating $67 million from the company's previously disclosed exposure to Enron Corp.'s bankruptcy, costs related to the company's terminated merger with Enron and a severance charge associated with a subsidiary's restructuring. The reported earnings per diluted share also include a $3 million non-recurring dividend associated with the mandatorily convertible redeemable preferred stock issued to ChevronTexaco Corp. in November 2001.
Dynegy's 2000 reported earnings per share included an after-tax non-recurring gain of $58 million from the sale of its equity interest in Accord Energy Limited, a U.K. gas marketing joint venture in which Dynegy held a non-operating interest, a $34 million gain on the sale of certain generation facilities and $44 million of charges related to the sale and impairment of certain crude oil and natural gas liquids assets.
"2001 was a year in which Dynegy successfully executed across all business segments in the face of unprecedented industry challenges and market conditions. Our ability to achieve our financial and operational objectives during a year of significant industry events validates our focus on customer marketing, origination, risk management and delivery logistics around our network of physical energy assets," said Chuck Watson, chairman and chief executive officer of Dynegy Inc. "I am particularly proud of how our company performed during the fourth quarter, when Dynegy and the entire merchant energy industry came under scrutiny following the financial collapse of Enron. We reassessed our financial position, communicated a definitive course of action to enhance our credit strength and began executing on a plan that was designed to restore market confidence and bolster our balance sheet," Watson added.
"The strategy we pursued in 2001, coupled with the manner in which we delivered value to our stakeholders, set the stage for solid performance in 2002 and beyond," Watson said. "Overall, 70 percent of the company's recurring financial contribution was from assets we own. Our wholesale energy network segment continues to perform extremely well and results are consistent with our expectations. Earnings in this segment benefited from the addition of nearly 3,000 megawatts of both new and acquired power generation facilities, greater market origination, increased sales to commercial and industrial customers, and the expansion of product and service offerings through our online sales and trading portal, Dynegydirect. In addition, Dynegy's acquisition of BG Storage Limited and its natural gas storage facilities in the United Kingdom was a significant step toward expanding our energy marketing presence throughout Europe, and our pending acquisition of Northern Natural Gas will be a source of predictable and sustainable earnings and cash flow."
Watson added that, "Despite a difficult pricing environment, our natural gas liquids segment continued to grow as a result of our strategy to minimize commodity exposure in our upstream processing activities, control costs and focus on specific geographic regions. Our transmission and distribution segment, Illinois Power, has made significant progress on a restructuring program that will further elevate its position as a leading competitive energy delivery company. Additionally, we have reassessed the costs in our global communications segment in order to accelerate our timing for positive earnings when the market recovers."
Wholesale Energy Network
Dynegy's wholesale energy network segment, which the company previously referred to as Dynegy Marketing and Trade, is focused on optimizing the company's and its customers' energy networks consisting of assets, capacity and contracts, as well as direct commercial and industrial sales and retail marketing alliances. It is engaged in a broad array of energy businesses, including the physical supply of, and risk management activities around, wholesale natural gas, power and coal.
Recurring net income for this segment increased 86 percent to $660 million in 2001, compared to $354 million in 2000. The segment benefited from strong earnings and cash flow in both its Customer and Risk Management activities (marketing), as well as its Asset Businesses (generation and storage).
The Asset Businesses generated 55 percent of the recurring financial contribution for the segment in 2001. Recurring financial contribution from the Asset Businesses was up 38 percent, compared to 2000, primarily due to incremental earnings from existing, developed and acquired assets, including 1,700 megawatts of generation facilities in New York, nearly 1,200 megawatts of new merchant generation facilities in the south and the newly acquired BG Storage in the United Kingdom.
Customer and Risk Management activities generated 45 percent of the recurring financial contribution of the segment in 2001. North American gas marketing sales volumes increased 16 percent to 11.3 billion cubic feet per day (Bcf/d) in 2001, up from 9.7 Bcf/d in 2000. Total physical power sold increased 130 percent to 317 million megawatt hours in 2001, compared to 138 million megawatt hours in 2000. The higher volumes in gas and power were the result of greater market origination, including sales to commercial and industrial customers, increased sales volumes on Dynegydirect and increased gas marketing in Canada.
Further growth of the Dynegydirect platform is reducing the variable cost of serving customers, while increasing Dynegy's competitive reach and market share. Dynegydirect offers more than 750 products and services online, including hourly power and coal. It recorded nearly $43 billion in notional transactions in 2001, $13 billion of which was recorded in the fourth quarter. Dynegy recently expanded Dynegydirect into U.K. energy markets. Customers have self-service access to Dynegy's bid and offer pricing for power in the English and Welsh electricity market and U.K. natural gas at the National Balancing Point.
Dynegy Midstream Services
Dynegy Midstream Services consists of Dynegy's North American midstream liquids processing and marketing business and worldwide natural gas liquids marketing and transportation operations.
Recurring net income from this segment increased 7 percent to $59 million in 2001, compared to recurring net income of $55 million in 2000. This segment's annual results reflect higher price realization resulting from an active forward sales program and contract restructuring activities, which were realized despite a depressed pricing environment resulting from larger inventories.
Processing volumes declined 13 percent to 84 thousand barrels per day (MBbls/d) in 2001, compared to 97 MBbls/d in 2000. This decrease was primarily due to the timing of certain asset sales in 2000 and reduced straddle volumes resulting from lower fractionation spreads than in 2000. Natural gas liquids sold were almost flat in 2001 at 557 MBbls/d, compared to 565 MBbls/d in 2000.
Transmission and Distribution
Dynegy's regulated transmission and distribution segment currently includes Illinois Power (IP). Beginning with the first quarter 2002, this segment will include results from Northern Natural Gas (NNG), an acquisition that Dynegy expects to complete later this month.
IP is an energy delivery company engaged in the transmission, distribution and sale of electricity and natural gas to customers across a 15,000-square-mile area of Illinois. NNG's 16,600 miles of pipeline extend from the Permian Basin in Texas to the Upper Midwest, providing natural gas transportation and storage services to major utilities and industrial customers.
IP reported recurring net income of $55 million in both 2001 and 2000. Segment results reflect lower weather-driven demand offset by reduced operating costs. During the fourth quarter 2001, IP announced a restructuring program aimed at reducing costs and improving customer service. IP recognized a $15 million pre-tax severance charge related to this program.
Dynegy Global Communications
Dynegy's communication segment, Dynegy Global Communications (DGC), was established during the fourth quarter 2000 to pursue and capture opportunities in the converging energy and communications marketplace through opportunistic asset acquisitions and strategic partnerships. Dynegy expanded its delivery capabilities through the completion of its U.S. core network, one of the first optically switched mesh networks in the world, in October 2001. The network spans more than 16,000 route miles and reaches 44 of the largest cities in the United States.
Segment results reflect a $61 million loss for 2001. Revenues fell short of company expectations due to extreme weakness in technology and telecommunications markets. Dynegy is implementing cost-savings initiatives in this business, reducing operating expenses and capital expenditures, and positioning the business for future earnings contribution.
Other Factors Affecting Earnings
Dynegy's increase in recurring net income in 2001 is primarily attributable to higher operating margin, which was partially offset by increased general and administrative expenses due to continued expansion of the company's operations, primarily in the communications segment and in Europe. Higher variable compensation expense also contributed to increased general and administrative expenses. Depreciation and amortization also increased in 2001, reflecting the company's expanded ownership in operating and technology assets.
Fourth Quarter 2001 Results
Dynegy reported an increase of 36 percent in fourth quarter 2001 recurring net income to $144 million, or a 28 percent increase to $0.41 per diluted share. This compares to fourth quarter 2000 recurring net income of $106 million, or $0.32 per diluted share. Reported fourth quarter 2001 net income of $77 million, or $0.21 per diluted share, includes the previously discussed non-recurring charges and special dividend.
The quarter benefited from strong earnings and cash flow from the company's wholesale energy network segment, which, on a recurring net income basis, was up 58 percent compared to the 2000 period. This improvement was led by increased origination in North American and European gas and power. North American gas volumes increased 14 percent to 11.8 Bcf/d in the fourth quarter 2001, up from 10.4 Bcf/d in the fourth quarter 2000. Total physical power sold increased 150 percent to 104.5 million megawatt hours in the fourth quarter 2001, compared to 41.8 million megawatt hours in the fourth quarter 2000. Dynegy's strong gas and power marketing operations were the result of increased Customer and Risk Management activities throughout the United States, Europe and Canada. Dynegy's liquids and transmission and distribution segments were negatively impacted by mild weather and the economy.
Capital Management
On December 17, 2001, in an effort to improve its balance sheet and adapt to the changing credit standards in the merchant energy industry, Dynegy announced a $1.25 billion capital restructuring program. The program was designed to raise $500 million in common equity and to reduce capital spending and asset sales in the combined amount of $750 million.
Dynegy has executed on its restructuring plan by issuing $748 million of common equity ($543 million in a public offering in December 2001 and $205 million to ChevronTexaco in January 2002) and by reducing its 2002 capital spending budget to $1.2 billion from $1.7 billion. Dynegy continues to pursue strategies to improve its balance sheet and is in the process of designating certain assets for sale.
Dynegy manages its liquidity and capital resources through a combination of cash on hand, operating cash flow, borrowing arrangements and access to the debt and equity markets. As of December 31, 2001, Dynegy had available liquidity resources, including cash on hand and availability under borrowing arrangements, of approximately $1.2 billion. Dynegy believes that this level of liquidity is sufficient to operate its business under any conceivable circumstance.
Earnings Estimate
With this announcement, management reiterates its 2002 earnings guidance of $2.26 per diluted share and establishes guidance for first quarter 2002 diluted earnings per share at $0.41.
Earnings Conference Call Simulcast
Dynegy will simulcast its fourth quarter and year-end 2001 earnings conference call live via the Internet on Wednesday, January 23, 2002 at 9:00 a.m. CT, 10:00 a.m. ET. The web cast can be accessed via www.dynegy.com (click on "Investor Relations").
About Dynegy Inc.
Dynegy Inc. is one of the world's premier energy merchants. Through its global energy delivery network and marketing, logistics and risk management capabilities, Dynegy provides innovative solutions to customers in North America, the United Kingdom and Continental Europe. The company's website is www.dynegy.com.
Certain statements included in this news release are intended as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. These statements include assumptions, expectations, predictions, intentions or beliefs about future events. Dynegy cautions that actual future results may vary materially from those expressed or implied in any forward-looking statements. Some of the key factors that could cause actual results to vary from those Dynegy expects include changes in commodity prices for energy or communications products or services; the timing and extent of deregulation of energy markets in the U.S. and Europe; the effectiveness of Dynegy's risk management policies and procedures and the creditworthiness of customers and counterparties; the liquidity and competitiveness of wholesale trading markets for energy commodities, including the impact of electronic or online trading in these markets; operational factors affecting Dynegy's power generation or Dynegy's midstream natural gas facilities; uncertainties regarding the development of, and competition within, the market for broadband services in the U.S. and Europe; uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting Dynegy's business, including litigation relating to the terminated merger with Enron; general political, economic and financial market conditions; and any extended period of war or conflict involving the United States or Europe. Moreover, statements regarding the expected NNG acquisition are subject to the risk that the closing conditions will not be satisfied and that the acquisition will not be consummated. More information about the risks and uncertainties relating to these forward-looking statements are found in Dynegy's SEC filings, which are available free of charge on the SEC's web site at http://www.sec.gov.
NOTE TO EDITORS: The "direct" in "Dynegydirect" is in italics.
DYNEGY INC.
REPORTED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
Operating revenues $8,743 $10,011 $42,242 $29,445
Cost of sales (1) 8,353 9,623 40,305 27,986
-------- -------- -------- --------
Operating margin 390 388 1,937 1,459
Depreciation and
amortization
expense (2) 121 98 454 389
General and
administrative
expense (3) 130 94 513 329
-------- -------- -------- --------
Operating income 139 196 970 741
Earnings from
unconsolidated
investments (4) 28 22 242 205
Interest expense (67) (56) (259) (251)
Minority interest
in income of a
subsidiary (4) (6) (22) (29)
Other income and
expense, net (4)(5) 4 2 (16) 96
-------- -------- -------- --------
Income before
income taxes 100 158 915 762
Income tax
provision 23 52 269 261
-------- -------- -------- --------
Income from
operations 77 106 646 501
Effect of change
in accounting principle -- -- 2 --
-------- -------- -------- --------
Net Income $77 $106 $648 $501
======== ======== ======== ========
Recurring net
income (6) $144 $106 $713 $452
Earnings before
interest and
taxes ("EBIT") $167 $214 $1,174 $1,013
Recurring EBIT (6) $270 $214 $1,277 $946
Recurring basic
earnings per
share (6)(7)(8) $0.44 $0.33 $2.19 $1.49
Recurring diluted
earnings per share
(6)(7)(8) $0.41 $0.32 $2.10 $1.43
Basic earnings
per share $0.22 $0.33 $1.98 $1.54
Diluted earnings
per share $0.21 $0.32 $1.90 $1.48
Basic shares
outstanding 329 322 326 302
Diluted shares
outstanding 354 335 340 315
1) Includes a one-time charge related to exposure to Enron of $78
million in the three- and twelve-month periods ended 2001.
2) Includes a $25 million charge for impairment of an asset in the
twelve-month period ended 2000.
3) Includes severance charges of $15 million related to a
restructuring at Illinois Power, in the three- and twelve-month
periods ended 2001. Includes $15 million related to
non-capitalizable merger-related costs associated with the
Illinova acquisition in the twelve-month period ended 2000.
4) Certain reclassifications of prior period results have been made
to conform with current period presentation.
5) The three- and twelve-month periods ended 2001 include a $10
million charge related to costs associated with the termination of
the Enron merger. The twelve-month period ended 2000 includes the
financial effects of gains on sales of power generation facilities
and the Accord Energy Limited investment and losses related to the
sale of certain liquids assets.
6) Recurring net income, EBIT and basic and diluted EPS exclude the
financial effects of the items described in footnotes (1), (2),
(3) and (5) above, for the periods impacted.
7) Recurring basic and diluted EPS for the three- and twelve-month
periods ended 2001 exclude the impact of $3 million of a
non-recurring special dividend associated with a mandatorily
redeemable convertible preferred stock issued to ChevronTexaco.
8) Recurring basic and diluted EPS for the twelve-month period ended
2000 excludes the effect of a non-recurring special dividend
payment associated with the Company's April 2000 stock offering.
DYNEGY INC.
REPORTED SEGMENTED RESULTS OF OPERATIONS
(IN MILLIONS)
Three Months Ended December 31, 2001
-----------------------------------------
WEN DMS T&D DGC Total
----- ----- ----- ----- -----
Wholesale
Energy Network:
Customer and
risk-management
activities (1) $128 $-- $-- $-- $128
Asset businesses 119 -- -- -- 119
Dynegy Midstream Services:
Upstream -- 32 -- -- 32
Downstream (1) -- 29 -- -- 29
Transmission &
Distribution -- -- 86 -- 86
Communications -- -- -- (4) (4)
Equity Earnings 17 4 -- 7 28
----- ----- ----- ----- -----
Financial
contribution 264 65 86 3 418
Depreciation and
amortization expense (49) (21) (44) (7) (121)
General and
administrative
expense (1) (63) (14) (37) (16) (130)
Other items, net (1) (1) -- 2 (1) --
----- ----- ----- ----- -----
Earnings (loss)
before interest
and taxes 151 30 7 (21) 167
Interest expense (25) (13) (27) (2) (67)
----- ----- ----- ----- -----
Pretax earnings
(loss) 126 17 (20) (23) 100
Income tax
provision
(benefits) 32 6 (8) (7) 23
----- ----- ----- ----- -----
Net income (loss)
from operations $94 $11 $(12) $(16) $77
===== ===== ===== ===== =====
Three Months Ended December 31, 2000
-----------------------------------------
WEN DMS T&D DGC Total
----- ----- ----- ----- -----
Wholesale
Energy Network:
Customer and
risk-management
activities $85 $-- $-- $-- $85
Asset businesses 131 -- -- -- 131
Dynegy Midstream
Services:
Upstream -- 30 -- -- 30
Downstream -- 38 -- -- 38
Transmission &
Distribution -- -- 104 -- 104
Communications -- -- -- -- --
Equity Earnings 16 6 -- -- 22
----- ----- ----- ----- -----
Financial
contribution 232 74 104 -- 410
Depreciation and
amortization expense (34) (21) (40) (3) (98)
General and
administrative
expense (56) (16) (6) (16) (94)
Other items, net (2) 6 (15) 1 4 (4)
----- ----- ----- ----- -----
Earnings (loss)
before interest
and taxes 148 22 59 (15) 214
Interest expense (2) (10) (12) (31) (3) (56)
----- ----- ----- ----- -----
Pretax earnings
(loss) 138 10 28 (18) 158
Income tax provision
(benefit) 45 4 9 (6) 52
----- ----- ----- ----- -----
Net income (loss)
from operations $93 $6 $19 $(12) $106
===== ===== ===== ===== =====
1) Includes the financial effects of the items impacting the 2001
quarter described in footnotes (1), (3) and (5) on the Reported
Unaudited Condensed Consolidated Statements of Operations
schedule.
2) Certain reclassifications of prior period results have been made
to conform with current period presentation.
DYNEGY INC.
REPORTED SEGMENTED RESULTS OF OPERATIONS
(IN MILLIONS)
Twelve Months Ended December 31, 2001
-----------------------------------------------
WEN DMS T&D DGC Total
------- ------- ------- ------- -------
Wholesale
Energy Network:
Customer and
risk-management
activities (1) $619 $-- $-- $-- $619
Asset businesses 645 -- -- -- 645
Dynegy Midstream
Services:
Upstream -- 160 -- -- 160
Downstream (1) -- 118 -- -- 118
Transmission &
Distribution -- -- 417 -- 417
Communications -- -- -- (22) (22)
Equity Earnings 203 13 -- 26 242
------- ------- ------- ------- -------
Financial
contribution 1,467 291 417 4 2,179
Depreciation and
amortization
expense (182) (82) (168) (22) (454)
General and
administrative
expense (1) (296) (59) (84) (74) (513)
Other items,
net (1) (50) (10) 20 2 (38)
------- ------- ------- ------- -------
Earnings
(loss) before
interest
and taxes 939 140 185 (90) 1,174
Interest expense (86) (52) (114) (7) (259)
------- ------- ------- ------- -------
Pretax earnings
(loss) 853 88 71 (97) 915
Income tax
provision
(benefit) 246 32 26 (35) 269
------- ------- ------- ------- -------
Net income
(loss) from
operations $607 $56 $45 $(62) $646
======= ======= ======= ======= =======
Twelve Months Ended December 31, 2000
------------------------------------------------
WEN DMS T&D DGC Total
------- ------- ------- ------- -------
Wholesale
Energy Network:
Customer and
risk-management
activities $338 $-- $-- $-- $338
Asset businesses 432 -- -- -- 432
Dynegy Midstream
Services:
Upstream -- 116 -- -- 116
Downstream -- 140 -- -- 140
Transmission &
Distribution -- -- 433 -- 433
Communications -- -- -- -- --
Equity Earnings 181 24 -- -- 205
------- ------- ------- ------- -------
Financial
contribution 951 280 433 -- 1,664
Depreciation and
amortization
expense (2) (125) (105) (156) (3) (389)
General and
administrative
expense (2) (190) (61) (62) (16) (329)
Other items,
net (2)(3) 127 (55) (9) 4 67
------- ------- ------- ------- -------
Earnings (loss)
before interest
and taxes 763 59 206 (15) 1,013
Interest expense (3) (89) (30) (129) (3) (251)
------- ------- ------- ------- -------
Pretax earnings
(loss) 674 29 77 (18) 762
Income tax provision
(benefit) 233 10 24 (6) 261
------- ------- ------- ------- -------
Net income (loss)
from operations $441 $19 $53 $(12) $501
======= ======= ======= ======= =======
1) Includes the financial effects of the items impacting the 2001
period described in footnotes (1), (3) and (5) on the Reported
Unaudited Condensed Consolidated Statements of Operations
schedule.
2) Includes the financial effects of the items impacting the 2000
period described in footnotes (2), (3) and (5) on the Reported
Unaudited Condensed Consolidated Statements of Operations
schedule.
3) Certain reclassifications of prior period results have been made
to conform with current period presentation.
DYNEGY INC.
COMPONENTS OF RECURRING NET INCOME
Three Months Ended December 31,
------------------------------------
2001 2000
----------------- ----------------
Income EPS Income EPS
------ ------- ------ -----
(In Millions, Except Per Share Data)
Net Income and EPS,
as Reported $77 $0.21 $106 $0.32
Enron bankruptcy
exposure (1) 51 0.14 -- --
Terminated merger
related costs (2) 7 0.02 -- --
Illinois Power
severance
costs (3) 9 0.03 -- --
Special
Dividend (4) -- 0.01 -- --
------ ------- ------ -----
Recurring Net
Income and EPS $144 $0.41 $106 $0.32
====== ======= ====== =====
Twelve Months Ended December 31,
------------------------------------
2001 2000
----------------- ----------------
Income EPS Income EPS
------ ------- ------ -----
(In Millions, Except Per Share Data)
Net Income and EPS,
as Reported $648 $1.90 $501 $1.48
Enron bankruptcy
exposure (1) 51 0.14 -- --
Terminated merger
related costs (2) 7 0.02 -- --
Illinois Power
severance costs (3) 9 0.03 -- --
Cumulative effect of
an accounting
change (5) (2) (0.00) -- --
Gain on sale - Accord
Energy Limited (6) -- -- (58) (0.18)
Gain on sale -
QFs (7) -- -- (34) (0.11)
Loss on sale - Crude
Business (8) -- -- 9 0.03
Loss on sale -
Mid-continent
Assets (9) -- -- 8 0.03
Impairment of a
Liquids asset (10) -- -- 16 0.05
Illinova acquisition
costs (11) -- -- 10 0.03
Special Dividend
(4)(12) -- 0.01 -- 0.10
------ ------- ------ ------
Recurring Net
Income and EPS $713 $2.10 $452 $1.43
====== ======= ====== ======
1) The Company recognized an after-tax charge of $51 million ($78
million pre-tax) related to its net exposure to Enron Corp. as a
result of that company's bankruptcy filing. The pre-tax charge is
included in "Cost of Sales" in the accompanying Reported Unaudited
Condensed Consolidated Statements of Operations ("Statements").
2) The Company terminated its proposed merger with Enron Corporation
on November 29, 2001. Transaction costs associated with this
terminated merger approximated $7 million after-tax ($10 million
pre-tax). The pre-tax charge is included in "Other income and
expense, net" in the accompanying Statements.
3) The Company incurred approximately $9 million of severance costs
($15 million pre-tax) related to a restructuring at Illinois
Power. The pre-tax charge is included in "General and
administrative expense" in the accompanying Statements.
4) The special dividend relates to the conversion price imbedded in
the ChevronTexaco mandatorily redeemable convertible preferred
stock issuance.
5) Effective January 1, 2001, the Company adopted Financial
Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, realizing an
after-tax cumulative effect gain of approximately $2 million.
6) The Company sold its 25% participating preferred interest in
Accord Energy Limited in the third quarter of 2000. The after-tax
gain of approximately $58 million ($83 million pre-tax) is
included in "Other income and expense, net" in the accompanying
Statements.
7) The Company sold interests in certain Qualifying Facilities,
pursuant to statutory requirements related to the Illinova
acquisition. The after-tax gain of approximately $34 million ($52
million pre-tax) is included in "Other income and expense, net" in
the accompanying Statements.
8) The Company sold its non-strategic domestic crude oil marketing
and trade business in the first quarter of 2000. The charge of
approximately $9 million after-tax ($14.5 million pre-tax) is
included in "Other income and expense, net" in the accompanying
Statements.
9) The Company sold its Mid-continent liquids processing assets in
the first quarter of 2000. The after-tax charge of approximately
$8 million ($13 million pre-tax) is included in "Other income and
expense, net" in the accompanying Statements.
10) The impairment reserve is associated with a Canadian gas
processing asset. The after-tax charge of approximately $16
million ($25 million pre-tax) is included in "Depreciation and
amortization expense" in the accompanying Statements.
11) Amounts relate to non-capitalizable merger related costs
associated with the Illinova acquisition. The after-tax charge of
approximately $10 million ($15 million pre-tax) is included in
"General and administrative expense" in the accompanying
Statements.
12) The special dividend in 2000 relates to amounts paid to certain
shareholders pursuant to the execution of the Illinova
acquisition.
DYNEGY INC.
RECURRING UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
Operating revenues $8,743 $10,011 $42,242 $29,445
Cost of sales (1) 8,275 9,623 40,227 27,986
-------- -------- -------- --------
Operating margin 468 388 2,015 1,459
Depreciation and
amortization
expense (2) 121 98 454 364
General and
administrative
expense (3) 115 94 498 314
-------- -------- -------- --------
Operating income 232 196 1,063 781
Earnings from
unconsolidated
investments (4) 28 22 242 205
Interest expense (67) (56) (259) (251)
Minority interest in
income of a
subsidiary (4) (6) (22) (29)
Other income and
expense, net (4)(5) 14 2 (6) (11)
-------- -------- -------- --------
Recurring income
before income
taxes 203 158 1,018 695
Income tax
provision 59 52 305 243
-------- -------- -------- --------
Recurring income
from operations 144 106 713 452
Effect of change in
accounting principle -- -- 2 --
-------- -------- -------- --------
Recurring Net
Income (6) $144 $106 $715 $452
======== ======== ======== ========
Recurring EBIT (6) $270 $214 $1,277 $946
Recurring basic
earnings per
share (6)(7)(8) $0.44 $0.33 $2.19 $1.49
Recurring diluted
earnings per
share (6)(7)(8) $0.41 $0.32 $2.10 $1.43
Basic shares
outstanding 329 322 326 302
Diluted shares
outstanding 354 335 340 315
1) Excludes a one-time charge related to exposure to Enron of $78
million in the three- and twelve-month periods ended 2001.
2) Excludes a $25 million charge for impairment of an asset in the
twelve-month period ended 2000.
3) Excludes severance charges of $15 million related to a
restructuring at Illinois Power, in the three- and twelve-month
periods ended 2001. Excludes $15 million related to
non-capitalizable merger-related costs associated with the
Illinova acquisition in the twelve-month period ended 2000.
4) Certain reclassifications of prior period results have been made
to conform with current period presentation.
5) The three- and twelve-month periods ended 2001 exclude a $10
million charge related to costs associated with the termination of
the Enron merger. The twelve-month period ended 2000 excludes the
financial effects of gains on sales of power generation facilities
and the Accord Energy Limited investment and losses related to the
sale of certain liquids assets.
6) Recurring net income, EBIT and basic and diluted EPS exclude the
financial effects of the items described in footnotes (1), (2),
(3) and (5) above, for the periods impacted.
7) Recurring basic and diluted EPS for the three- and twelve-month
periods ended 2001 exclude the impact of a non-recurring special
dividend associated with mandatorily redeemable convertible
preferred stock issued to ChevronTexaco.
8) Recurring basic and diluted EPS for the twelve-month period ended
2000 excludes the effect of a non-recurring special dividend
payment associated with the Company's April 2000 stock offering.
DYNEGY INC.
RECURRING SEGMENTED RESULTS OF OPERATIONS
(IN MILLIONS)
Three Months Ended December 31, 2001
------------------------------------------
WEN DMS T&D DGC Total
------ ------ ------ ------ ------
Wholesale Energy
Network:
Customer and risk-
management activities (1) $203 $ -- $ -- $ -- $203
Asset businesses 119 -- -- -- 119
Dynegy Midstream Services:
Upstream -- 32 -- -- 32
Downstream (1) -- 32 -- -- 32
Transmission &
Distribution -- -- 86 -- 86
Communications -- -- -- (4) (4)
Equity Earnings 17 4 -- 7 28
------ ------ ------ ------ ------
Financial contribution 339 68 86 3 496
Depreciation and
amortization expense (49) (21) (44) (7) (121)
General and
administrative
expense (1) (63) (14) (22) (16) (115)
Other items, net (1) 5 2 3 -- 10
------ ------ ------ ------ ------
Recurring earnings
(loss) before interest
and taxes 232 35 23 (20) 270
Interest expense (25) (13) (27) (2) (67)
------ ------ ------ ------ ------
Pretax earnings (loss) 207 22 (4) (22) 203
Income tax provision
(benefits) 60 8 (2) (7) 59
------ ------ ------ ------ ------
Recurring net income
(loss) from operations $147 $14 $(2) $(15) $144
====== ====== ====== ====== ======
Three Months Ended December 31, 2000
------------------------------------------
WEN DMS T&D DGC Total
------ ------ ------ ------ ------
Wholesale Energy
Network:
Customer and risk-
management activities $85 $ -- $ -- $ -- $85
Asset businesses 131 -- -- -- 131
Dynegy Midstream Services:
Upstream -- 30 -- -- 30
Downstream -- 38 -- -- 38
Transmission &
Distribution -- -- 104 -- 104
Communications -- -- -- -- --
Equity Earnings 16 6 -- -- 22
------ ------ ------ ------ ------
Financial contribution 232 74 104 -- 410
Depreciation and
amortization expense (34) (21) (40) (3) (98)
General and
administrative expense (56) (16) (6) (16) (94)
Other items, net (2) 6 (15) 1 4 (4)
------ ------ ------ ------ ------
Recurring earnings
(loss) before interest
and taxes 148 22 59 (15) 214
Interest expense (2) (10) (12) (31) (3) (56)
------ ------ ------ ------ ------
Pretax earnings (loss) 138 10 28 (18) 158
Income tax provision
(benefit) 45 4 9 (6) 52
------ ------ ------ ------ ------
Recurring net income
(loss) from operations $93 $6 $19 $(12) $106
====== ====== ====== ====== ======
1) Excludes the financial effects of the items impacting the 2001
quarter described in footnotes (1), (3) and (5) on the Reported
Unaudited Condensed Consolidated Statements of Operations
schedule.
2) Certain reclassifications of prior period results have been made
to conform with current period presentation.
DYNEGY INC.
RECURRING SEGMENTED RESULTS OF OPERATIONS
(IN MILLIONS)
Twelve Months Ended December 31, 2001
------------------------------------------
WEN DMS T&D DGC Total
------ ------ ------ ------ ------
Wholesale Energy
Network:
Customer and risk-
management activities (1) $694 $ -- $ -- $ -- $694
Asset businesses 645 -- -- -- 645
Dynegy Midstream Services:
Upstream -- 160 -- -- 160
Downstream (1) -- 121 -- -- 121
Transmission &
Distribution -- -- 417 -- 417
Communications -- -- -- (22) (22)
Equity Earnings 203 13 -- 26 242
------ ------ ------ ------ ------
Financial contribution 1,542 294 417 4 2,257
Depreciation and
amortization expense (182) (82) (168) (22) (454)
General and administrative
expense (1) (296) (59) (69) (74) (498)
Other items, net (1) (44) (8) 21 3 (28)
------ ------ ------ ------ ------
Recurring earnings
(loss) before interest
and taxes 1,020 145 201 (89) 1,277
Interest expense (86) (52) (114) (7) (259)
------ ------ ------ ------ ------
Pretax earnings (loss) 934 93 87 (96) 1,018
Income tax provision
(benefit) 274 34 32 (35) 305
------ ------ ------ ------ ------
Recurring net income
(loss) from operations $660 $59 $55 $(61) $713
====== ====== ====== ====== ======
Twelve Months Ended December 31, 2000
------------------------------------------
WEN DMS T&D DGC Total
------ ------ ------ ------ ------
Wholesale Energy
Network:
Customer and risk-
management activities $338 $ -- $ -- $ -- $338
Asset businesses 432 -- -- -- 432
Dynegy Midstream Services:
Upstream -- 116 -- -- 116
Downstream -- 140 -- -- 140
Transmission &
Distribution -- -- 433 -- 433
Communications -- -- -- -- --
Equity Earnings 181 24 -- -- 205
------ ------ ------ ------ ------
Financial contribution 951 280 433 -- 1,664
Depreciation and
amortization expense (1) (125) (80) (156) (3) (364)
General and administrative
expense (1) (179) (60) (59) (16) (314)
Other items, net (1)(2) (8) (27) (9) 4 (40)
------ ------ ------ ------ ------
Recurring earnings
(loss) before interest
and taxes 639 113 209 (15) 946
Interest expense (2) (89) (30) (129) (3) (251)
------ ------ ------ ------ ------
Pretax earnings (loss) 550 83 80 (18) 695
Income tax provision
(benefit) 196 28 25 (6) 243
------ ------ ------ ------ ------
Recurring net income
(loss) from operations $354 $55 $55 $(12) $452
====== ====== ====== ====== ======
1) Excludes the financial effects of the items described in footnotes
(1), (2), (3) and (5) on the Reported Unaudited Condensed
Consolidated Statements of Operations schedule.
2) Certain reclassifications of prior period results have been made
to conform with current period presentation.
DYNEGY INC.
OPERATING DATA
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------- -----------------
2001 2000 2001 2000
------- ------- ------- -------
Wholesale Energy Network:
Domestic Gas Marketing
Volumes (Bcf/d) 8.3 8.2 8.2 7.5
Canadian Gas Marketing
Volumes (Bcf/d) 3.5 2.2 3.1 2.2
European Gas Marketing
Volumes (Bcf/d) 1.2 0.7 1.3 1.2
------- ------- ------- -------
Total Physical Gas
Marketing Volumes 13.0 11.1 12.6 10.9
======= ======= ======= =======
Million Megawatt Hours
Generated - Gross 8.5 8.8 40.3 36.8
Million Megawatt Hours
Generated - Net 7.6 7.4 34.5 30.3
Total Physical Million
Megawatt Hours Sold 104.5 41.8 317.1 137.7
Coal Marketing Volumes
(Millions of Tons) 13.3 3.6 43.0 10.4
Average Natural Gas Price -
Henry Hub ($/Mmbtu) $2.43 $5.32 $4.26 $3.89
Average On-Peak Market
Power Prices:
Cinergy $20.63 $48.21 $35.19 $36.43
TVA 20.57 49.16 34.87 39.73
PJM 24.53 49.33 40.76 39.96
CALPX SP15 26.50 167.73 121.04 113.51
Dynegy Midstream Services:
Natural Gas Field Plant
Processing Volumes (MBbls/d) 56.0 57.6 56.1 61.2
Natural Gas Straddle Plant
Processing Volumes (MBbls/d) 31.0 29.9 27.7 35.6
------- ------- ------- -------
Total Natural Gas
Processing Volumes 87.0 87.5 83.8 96.8
======= ======= ======= =======
Fractionation Volumes
(MBbls/d) 213.9 176.1 226.2 224.3
Natural Gas Liquids Sold
(MBbls/d) 545.0 571.5 557.4 564.6
Average Commodity Prices:
Crude Oil - Cushing ($/Bbl) $22.02 $34.01 $26.39 $28.97
Natural Gas Liquids ($/Gal) 0.36 0.63 0.45 0.55
Fractionation Spread ($/MMBtu) 1.31 1.92 0.89 2.40
Transmission and Distribution:
Electric Sales in
KWH (Millions):
Residential 1,042 1,176 5,202 5,046
Commercial 1,030 1,015 4,377 4,272
Industrial 2,267 2,427 8,958 9,271
Other 86 87 373 412
------- ------- ------- -------
Total Electric Sales 4,425 4,705 18,910 19,001
======= ======= ======= =======
Gas Sales in
Therms (Millions):
Residential 90 133 315 337
Commercial 37 53 136 141
Industrial 18 23 70 77
Transportation of customer-
owned gas and other 62 65 264 278
------- ------- ------- -------
Total Gas Delivered 207 274 785 833
======= ======= ======= =======
DYNEGY INC.
CAPITAL RESOURCES AND OTHER STATISTICAL DATA
(IN MILLIONS, EXCEPT RATIOS)
At December 31,
----------------------
2001 2000
-------- --------
Capitalization:
Long-Term Debt $3,589 $2,828
Transitional Funding Notes 516 605
Mezzanine Preferred Securities 1,746 346
Minority Interest 1,011 1,018
Stockholders' Equity 4,689 3,598
-------- --------
Total Capitalization $11,551 $8,395
======== ========
Notes Payable and Current Portion
of Long-Term Debt $402 $116
======== ========
Operating Lease Commitments (1) $1,609 $958
======== ========
Debt to Capitalization Ratio
(Adjusted) (2) 50% 47%
======== ========
Value At Risk Disclosures:
One Day VaR - 95% Confidence Level $18.0 $9.6
One Day VaR - 99% Confidence Level $25.5 $13.6
Average VaR for Quarter $12.9 $8.8
Average VaR for past Twelve Months $12.2 $10.8
At December 31, 2001
----------------------
MtM Value Cash Flow
--------- ---------
Risk-Management Assets and
Liabilities (3):
2002 $460.3 $496.2
2003 32.6 55.3
2004 20.2 39.8
2005 (17.5) (1.8)
Beyond 183.5 382.4
1) Credit equivalent of operating lease obligations.
2) For the Debt to Capitalization Ratio (Adjusted), Debt is
calculated as: Long-Term Debt plus Mezzanine Preferred Securities,
Notes Payable and Current Portion of Long-Term Debt and Operating
Lease Commitments; less, ChevronTexaco Mezzanine Preferred
Securities ($1.5 billion in 2001 only) and the amount of
Transitional Funding Notes included in Notes Payable and Current
Portion of Long-Term Debt ($86 million for each 2001 and 2000).
Capitalization in the Capitalization Ratio (Adjusted) is
calculated as Debt (calculated as described above) plus Minority
Interests and Stockholders' Equity.
3) Table reflects the net fair value of Dynegy Inc.'s risk-management
asset position after deduction of time value, credit, price and
other reserves. The cash flow value reflects anticipated
undiscounted cash inflows and outflows by contract based on tenor
of individual contract position. These amounts exclude the fair
value and cash flows associated with certain derivative
instruments designated as hedges, which are included in other
comprehensive income (a component of Stockholders' Equity).
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