Dynegy
Encyclopedia
Dynegy Inc. based in Houston, Texas
, United States
, is a large owner and operator of power plants and a player in the natural gas
liquids and coal
business. The corporate headquarters are in Suite 5800 in the Wells Fargo Plaza at 1000 Louisiana Street in Downtown Houston
.
Once known as "The Natural Gas Clearinghouse," Dynegy adopted the "New Economy
" branding in 1998, after which the company structured itself in a manner similar to Enron
, launching several business ventures, including an online trading platform and broadband
communications services, which could be misconstrued of those of its larger rival.
The company was dubbed the "king of coal" by the National Environmental Trust.
to shareholders each year since 1994. By 1996, it had grown to US$550 million in assets, and carried US$525 million in long-term debt.
In June 1998, Dynegy Inc. was created from the merger of its predecessor, NGC Corp., with Chevron Corporation
's natural gas and natural gas liquids businesses.
Dynegy adopted the more vibrant "New Economy
" branding in 1998, and it became eerily similar to Enron
, launching several business ventures that closely duplicated those of its larger rival, including an online trading platform and broadband
communications services.
In a merger completed February 1, 2000, Illinova Corporation became a wholly owned subsidiary of Dynegy Inc., a deal in which Chevron Corporation also took a 28% stake. Illinova, the utility holding company of Illinois Power Company, had grown to over US$415 million in assets and US$1.8 billion long-term debt. As of the late 1980s, the IP utility company had operated almost entirely from coal plants, with less than 1% fueled from oil and gas.
Dynegy, along with Enron, El Paso, Reliant
and several other energy companies, was accused of price manipulation
and other fraudulent practices during the California electricity crisis
in 2000.
In 2001, the company made a white knight
takeover bid for crosstown rival Enron, which was saddled with massive debts and whose stock had plummeted as investor confidence eroded. Dynegy pulled out at the last minute after Enron underwent an unexpected restatement of earnings, which was later revealed to be a massive accounting fraud. Shortly after the pull-out, Enron filed for Chapter 11 bankruptcy and sued Dynegy, unsuccessfully. One aspect of the takeover deal that did survive, however, was Dynegy's acquisition of the Northern Natural Gas Company pipeline, that was awarded to them in bankruptcy court in early 2002. NNGC was Enron's most lucrative pipeline asset and had been put up as collateral in return for Dynegy providing financing to Enron during merger talks.
Dynegy's energy trading and broadband businesses, similar to those that doomed Enron, caused Dynergy to lapse close to bankruptcy in late 2002. Amid accusations of accounting fraud
and other misdoings, founder Charles Watson resigned. Dynegy was forced to sell the Northern Natural Gas pipeline to a consortium of investors led by noted billionaire Warren Buffett
in return for a bailout.
Following these incidents, the company hired Bruce Williamson
, a former Duke Energy
executive, who began a program of cost cutting, elimination of unprofitable businesses and financial restructuring
, which was successful in averting a bankruptcy
filing. Williamson spent his first year leading successful bank refinancing
s and a capital restructuring plan that postponed major repayments of the company's debt. The company disposed of all of its businesses with the exception of its core merchant power and natural gas liquids businesses. Refocused on these core businesses, and managed with a strong emphasis on efficiency and cost control, Dynegy was able to stabilize its financial position. While Williamson had helped the company's bottom line, his embrace of dirty coal
has brought the company significant negative publicity.
In 2004, Dynegy sold the Illinois Power Company to Ameren
Corporation , the successor company of the IP Company's original partners from the 1952 Midwest Power Pool system.
In late 2005, Dynegy continued its restructuring by selling its natural gas liquids business to Targa Resources
, a company owned by private equity firm Warburg Pincus
.
In the first quarter of 2008, Dynegy lost $152 million (18 cents per share). In the second quarter of 2008 the company lost $272 million which contributed to a steep decline in its stock price.
On August 13, 2010, the Blackstone Group
announced plans to purchase Dynegy for $4.7 Billion dollars. As part of the deal, NRG Energy
would acquire 4 natural gas plants operating in California and Maine for $1.36 Billion.
On November 7, 2011 Dynegy Holdings, which is a subsidiary of Dynegy Inc., and four of Dynegy Holding's subsidiaries filed for Chapter 11 bankruptcy protection.
Texas
Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...
, United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, is a large owner and operator of power plants and a player in the natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
liquids and coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
business. The corporate headquarters are in Suite 5800 in the Wells Fargo Plaza at 1000 Louisiana Street in Downtown Houston
Downtown Houston
Downtown Houston is the largest business district of Houston, Texas, United States. Downtown Houston, the city's central business district, contains the headquarters of many prominent companies. There is an extensive network of pedestrian tunnels and skywalks connecting the buildings of the district...
.
Once known as "The Natural Gas Clearinghouse," Dynegy adopted the "New Economy
New Economy
The New Economy is a term to describe the result of the transition from a manufacturing-based economy to a service-based economy. This particular use of the term was popular during the Dot-com bubble of the late 1990s...
" branding in 1998, after which the company structured itself in a manner similar to Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
, launching several business ventures, including an online trading platform and broadband
Broadband
The term broadband refers to a telecommunications signal or device of greater bandwidth, in some sense, than another standard or usual signal or device . Different criteria for "broad" have been applied in different contexts and at different times...
communications services, which could be misconstrued of those of its larger rival.
The company was dubbed the "king of coal" by the National Environmental Trust.
History
The Natural Gas Clearinghouse became better known by its later shortened name, NGC Corporation in the early 1990s, when it became a publicly traded company listed on the New York Stock Exchange. NGC was an integrated natural gas services company, paying a cash dividendDividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
to shareholders each year since 1994. By 1996, it had grown to US$550 million in assets, and carried US$525 million in long-term debt.
In June 1998, Dynegy Inc. was created from the merger of its predecessor, NGC Corp., with Chevron Corporation
Chevron Corporation
Chevron Corporation is an American multinational energy corporation headquartered in San Ramon, California, United States and active in more than 180 countries. It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining,...
's natural gas and natural gas liquids businesses.
Dynegy adopted the more vibrant "New Economy
New Economy
The New Economy is a term to describe the result of the transition from a manufacturing-based economy to a service-based economy. This particular use of the term was popular during the Dot-com bubble of the late 1990s...
" branding in 1998, and it became eerily similar to Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
, launching several business ventures that closely duplicated those of its larger rival, including an online trading platform and broadband
Broadband
The term broadband refers to a telecommunications signal or device of greater bandwidth, in some sense, than another standard or usual signal or device . Different criteria for "broad" have been applied in different contexts and at different times...
communications services.
In a merger completed February 1, 2000, Illinova Corporation became a wholly owned subsidiary of Dynegy Inc., a deal in which Chevron Corporation also took a 28% stake. Illinova, the utility holding company of Illinois Power Company, had grown to over US$415 million in assets and US$1.8 billion long-term debt. As of the late 1980s, the IP utility company had operated almost entirely from coal plants, with less than 1% fueled from oil and gas.
Dynegy, along with Enron, El Paso, Reliant
Reliant Energy
RRI Energy, Inc. , based in Houston, Texas, United States, was an energy company that provided electricity to wholesale customers in the United States. The company was one of the largest independent power producers in the nation with more than 14,000 megawatts of power generation capacity across...
and several other energy companies, was accused of price manipulation
Price fixing
Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
and other fraudulent practices during the California electricity crisis
California electricity crisis
The California electricity crisis, also known as the Western U.S. Energy Crisis of 2000 and 2001 was a situation in which California had a shortage of electricity caused by market manipulations and illegal shutdowns of pipelines by Texas energy consortiums...
in 2000.
In 2001, the company made a white knight
White knight (business)
In business, a white knight, or "friendly investor," may be a corporation or a person that intends to help another firm. There are many types of white knights...
takeover bid for crosstown rival Enron, which was saddled with massive debts and whose stock had plummeted as investor confidence eroded. Dynegy pulled out at the last minute after Enron underwent an unexpected restatement of earnings, which was later revealed to be a massive accounting fraud. Shortly after the pull-out, Enron filed for Chapter 11 bankruptcy and sued Dynegy, unsuccessfully. One aspect of the takeover deal that did survive, however, was Dynegy's acquisition of the Northern Natural Gas Company pipeline, that was awarded to them in bankruptcy court in early 2002. NNGC was Enron's most lucrative pipeline asset and had been put up as collateral in return for Dynegy providing financing to Enron during merger talks.
Dynegy's energy trading and broadband businesses, similar to those that doomed Enron, caused Dynergy to lapse close to bankruptcy in late 2002. Amid accusations of accounting fraud
Accounting scandals
Accounting scandals, or corporate accounting scandals, are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations...
and other misdoings, founder Charles Watson resigned. Dynegy was forced to sell the Northern Natural Gas pipeline to a consortium of investors led by noted billionaire Warren Buffett
Warren Buffett
Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world. Often introduced as "legendary investor, Warren Buffett", he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is...
in return for a bailout.
Following these incidents, the company hired Bruce Williamson
Bruce Williamson
Bruce Williamson is the CEO of Dynegy, a Houston-based energy company.Williamson was born in Great Falls, Montana to George and June Williamson. Williamson graduated from Great Falls High School in 1977, spent his freshman year of college at the University of Idaho, transferred to the University of...
, a former Duke Energy
Duke Energy
Duke Energy , headquartered in Charlotte, North Carolina, is an energy company with assets in the United States, Canada and Latin America.-Overview:...
executive, who began a program of cost cutting, elimination of unprofitable businesses and financial restructuring
Restructuring
Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs...
, which was successful in averting a bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
filing. Williamson spent his first year leading successful bank refinancing
Refinancing
Refinancing may refer to the replacement of an existing debt obligation with a debt obligation under different terms. The terms and conditions of refinancing may vary widely by country, province, or state, based on several economic factors such as, inherent risk, projected risk, political...
s and a capital restructuring plan that postponed major repayments of the company's debt. The company disposed of all of its businesses with the exception of its core merchant power and natural gas liquids businesses. Refocused on these core businesses, and managed with a strong emphasis on efficiency and cost control, Dynegy was able to stabilize its financial position. While Williamson had helped the company's bottom line, his embrace of dirty coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
has brought the company significant negative publicity.
In 2004, Dynegy sold the Illinois Power Company to Ameren
Ameren
Ameren Corporation was created December 31, 1997 by the merger of Missouri's Union Electric Company and the neighboring Central Illinois Public Service Company . It is now a holding company for several power companies and energy companies. The company is based in St...
Corporation , the successor company of the IP Company's original partners from the 1952 Midwest Power Pool system.
In late 2005, Dynegy continued its restructuring by selling its natural gas liquids business to Targa Resources
Targa Resources
Targa Resources is a Fortune 1000 company based in Houston, Texas. Targa, a midstream energy corporation, is one of the largest providers of natural gas in the United States. Their operations are based largely, though not entirely, on the Gulf Coast, particularly in Texas and Louisiana . Rene R....
, a company owned by private equity firm Warburg Pincus
Warburg Pincus
Warburg Pincus, LLC is an American private equity firm with offices in the United States, Europe, Brazil and Asia. It has been a private equity investor since 1966...
.
In the first quarter of 2008, Dynegy lost $152 million (18 cents per share). In the second quarter of 2008 the company lost $272 million which contributed to a steep decline in its stock price.
On August 13, 2010, the Blackstone Group
Blackstone Group
The Blackstone Group L.P. is an American-based alternative asset management and financial services company that specializes in private equity, real estate, and credit and marketable alternative investment strategies, as well as financial advisory services, such as mergers and acquisitions ,...
announced plans to purchase Dynegy for $4.7 Billion dollars. As part of the deal, NRG Energy
NRG Energy
NRG Energy, Inc. is an American energy company headquartered in West Windsor Township, New Jersey, near Princeton.-Electrical Power Generation Operations:...
would acquire 4 natural gas plants operating in California and Maine for $1.36 Billion.
On November 7, 2011 Dynegy Holdings, which is a subsidiary of Dynegy Inc., and four of Dynegy Holding's subsidiaries filed for Chapter 11 bankruptcy protection.
External links
- Dynegy corporate website
- "Dynegy / LS Power," SourceWatch
- "Dynegy Stock Bleeds On Bankruptcy Talk." ForbesForbesForbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...
. March 9, 2011. - "Judge: Reduce CO2 Or Don't Build Coal Plan." The Daily Green. June 30, 2008
- "Community Fights New Coal Plant." The Daily Green. March 12, 2008
- "Dynegy's Coal Plant Plans Attacked." The Daily Green. February 21, 2008.