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Dynegy warns, restructures
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December 17, 2001: 11:31 a.m. ET
Enron's former merger partner guides lower for 2002 and will issue stock.
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NEW YORK (CNN/Money) - Investors sold off shares of Dynegy Inc. Monday after the company that backed out of its planned acquisition of Enron Corp. lowered its earnings guidance for 2002 and said it will issue additional stock to raise capital.
Dynegy (DYN: down $1.79 to $23.15, Research, Estimates) shares fell more than 8 percent after the company said it now expects to earn $2.30 to $2.35 per share in 2002, down from its previous guidance of $2.50 to $2.60 per share.
Analysts see the company earning $2.56 per share in 2002, according to First Call.
The company cited the slowing economy and lower natural gas and crude oil prices. Dynegy also said it will take a $125 million charge in the fourth quarter due to its exposure to Enron, costs associated with pulling out of the Enron agreement, and restructuring at its Illinois Power unit.
Analysts expect Dynegy to earn 41 cents per share in the fourth quarter, according to First Call.
The Houston-based company said it plans to sell non-core assets and reduce capital expenses totaling $750 million, as it moves to strengthen its balance sheet after Enron's collapse.
Dynegy also said it expects to raise $500 million by issuing additional stock by the third quarter of 2002.
"Enron's financial collapse was an unprecedented event, and as such it is appropriate for participants in the merchant energy sector to examine ways to strengthen their balance sheets," said Dynegy's chairman and chief executive officer, Chuck Watson. "More than 70 percent of Dynegy's earnings are form our extensive network and owned assets and do not require significant incremental working capital."
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Dynergy said ChevronTexaco, which owns 35 percent of the company including convertible shares, approved the restructuring and is considering taking part in the stock offering.
In addition, Dynergy said its legal advisors are confident it will soon own Enron's Northern Natural Gas pipeline, which has been contested since it backed out of its $9 billion proposed acquisition of Enron. 
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