Liquidity not a problem, Dynegy reassures market

Energy marketer Dynegy Inc. Thursday said it has sufficient liquidity to fund operations following its purchase of gas storage assets in the UK. Rob Doty, chief financial officer, said the Houston company has more than $900 million in cash and existing credit agreements.

by the OGJ Online Staff

HOUSTON, Dec. 5 -- Energy marketer Dynegy Inc. Thursday said it has sufficient liquidity to fund operations following its purchase of gas storage assets in the UK.

Dynegy said it funded the $600 million purchase of BFG Storage Ltd. by borrowing $400 million under existing bank credit lines and issuing $200 million under its commercial paper program. The Houston company completed the acquisition last week. Rob Doty, chief financial officer, said Dynegy plans to refinance these borrowings under long-term arrangements in the future.

"Dynegy has sufficient liquidity and capital resources available to fund its operations. Availability under existing credit agreements and cash on hand total approximately $900 million," Doty said.

Doty said Dynegy rolled over $575 million in commercial paper Wednesday. Prior to funding BG Storage, he said, Dynegy's commercial paper balances primarily supported the company's generation development program.

Dynegy's share price closed at $29.25 today up 25¢/share. Dynegy's shares had been trading in the mid $40 range in the 2 weeks before a proposed acquisition of its embattled rival Enron Corp. was announced. The shares started sliding after the deal broke up Nov. 28.

The company's corporate long-term debt and commercial paper were placed by Standard & Poor's on credit watch with negative implications immediately after the Nov. 9 announcement of the proposed acquisition of Enron.

Even though the merger agreement with Enron broke up Nov. 28, S&P has kept Dynegy's ratings on watch with negative implications. S&P is analyzing its own procedures for rating the debt of all the merchant and trading energy companies, said Todd Shipman, analyst with S&P.

"We want to see if we are missing something. Enron melted down so fast that it took everyone aback," Shipman said.

Dynegy's acquisition of the two UK storage facilities with 111 bcf/d storage capacity will form the backbone of Dynegy's asset-backed strategy in Europe. As part of the transaction, Dynegy is also getting a natural gas processsing terminal that processes and delivers gas into the UK pipeline network.

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