Advertisement
YOU ARE HERE: LAT HomeCollections

Dynegy to Cut Dividend, Sell Assets

June 25, 2002|From Bloomberg News

HOUSTON — Dynegy Inc. will cut its dividend by half and sell stakes in a pipeline acquired from Enron Corp., a British natural-gas terminal and other assets to raise as much as $2 billion to preserve an investment-grade credit rating.

Second-quarter profit will fall to about break-even, partly because of a slump in energy trading, Chief Operating Officer Steve Bergstrom said in a conference call with investors. Dynegy expects $300 million in costs from its communications unit and $150 million in severance payments and other expenses.

Fitch Inc. cut Dynegy's debt to a BB-plus "junk" rating, and other services are considering downgrades. Shares of Dynegy and its rivals have fallen with energy prices and as Enron's collapse eroded investor confidence. Dynegy's chief executive quit last month as regulators probed its energy trading and accounting.

Houston-based Dynegy reaffirmed that it has enough cash to meet its obligations even if it were to lose its investment-grade rating from one or more services. The company said its 2002 profit forecast "no longer applies," and it will provide a revised projection late next month.

Dynegy was expected to earn 21 cents a share in the second quarter and $1.35 this year, the average estimates of analysts polled by Thomson First Call. Dynegy's second-quarter earnings last year rose 60% to $146 million, or 43 cents a share, as sales of power and gas surged in North America. Trading profit more than doubled to $150 million.

Dynegy Holdings, which has most of Dynegy's debt, is rated Baa3, the lowest investment grade, by Moody's Investors Service. The Standard & Poor's ranking is BBB, the second-lowest investment grade.

Dynegy's stock has plunged 83% in the last year. The shares fell 12 cents, or 1.6%, to $7.40 on the New York Stock Exchange. Chief Financial Officer Louis Dorey, who took over as CFO on Wednesday, helped improve investor sentiment, said John Olson, an energy analyst with Sanders Morris Harris Inc.

"They wanted their hands held, and he did that," Olson said.

Dynegy plans to sell half of Northern Natural Gas, the 16,600-mile pipeline that runs to the Great Lakes from Texas, Dorey said during the conference call.

The company got the line as compensation for $1.5 billion spent on Enron before an agreement to buy the insolvent energy trader collapsed in November.

Advertisement
Los Angeles Times Articles
|
|
|