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Dynegy CEO resigns
Former Enron suitor is the latest energy trader to undergo management shake-up.
May 28, 2002: 2:07 PM EDT

NEW YORK (CNN/Money) - Dynegy Inc.'s stock jumped 5 percent Tuesday after its CEO resigned and the energy marketer named an executive of ChevronTexaco to replace him temporarily as chairman.

Investors seemed to cheer the resignation of former chairman and CEO Charles Watson and the appointment of ChevronTexaco Corp. (CVX: Research, Estimates) Vice Chairman Glenn Tilton, a Dynegy director, to serve as interim chairman for the troubled company. ChevronTexaco owns 26.5 percent of Dynegy.

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Board member Daniel Dienstbier, who is also president of Northern Natural Gas, will serve as interim CEO while the Houston-based company looks for a permanent replacement for Watson. Dynegy said in a conference call Tuesday that President and Chief Operating Officer Steve Bergstrom is a candidate to replace Watson as both chairman and CEO.

Watson's resignation comes just four days after William McCormick Jr. resigned as chairman and CEO of CMS Energy Corp. (CMS: Research, Estimates). Federal regulators are investigating allegations that both companies made "round trip" energy trades, in which transactions are made between energy traders simply to generate the appearance of robust business and, in some cases, to boost revenue.

Dynegy has denied that "round-trip" trades boosted revenue, however, and said the trades being investigated by the Securities and Exchange Commission -- which were made with CMS Energy -- were merely to test its online trading platform, DynegyDirect.

The SEC is also investigating a Dynegy natural-gas deal, dubbed "Project Alpha," in which the company allegedly used complex accounting moves to help cut its tax bill and raise its reported earnings before taxes, interest and other items -- or cash flow -- for 2001.

"Events of the past year have hurt the credibility of this sector and eroded investor confidence," interim Chairman Tilton said, and Dynegy director Otis Winters said the company's future objectives included restoring its credibility.

During the conference call, however, Tilton downplayed the importance of the SEC investigations -- and ChevronTexaco's ownership interest in Dynegy -- in Watson's resignation.

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"ChevronTexaco played no role in Chuck's resignation," Tilton said. "This is not about project Alpha ... The board decided a new management focus was needed."

Wall Street was not so convinced that ChevronTexaco was not involved, but saw the move as a good one nonetheless.

"We believe that this step should be viewed positively by the Street as a proactive step by an engaged board to restore management credibility; and more importantly, increasing visibility of support by ChevronTexaco," Merrill Lynch analyst Carl Kirst said in a research note.

Still, Kirst said Merrill was keeping a "neutral" rating on Dynegy shares, at least until the SEC issues are resolved.

Dynegy (DYN: up $0.84 to $10.14, Research, Estimates) had agreed to buy Enron Corp. before questions about Enron's accounting practices scuttled the deal and forced Enron to file the biggest bankruptcy in U.S. corporate history.  Top of page






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