Dynegy Inc. is an electric company based in Houston, Texas. It owns and operates a number of power stations in the U.S., all of which are powered by fossil fuels.See FERC Document Accession No. 20171122-5134, "Joint Application of Dynegy Inc., et al. for Authorization for Merger of Jurisdictional Assets and Purchase of Securities under Sections 203(a)(1) and 203(a)(2) of the Federal Power Act under EC18-23" at page B-2. Accessible at https://elibrary.ferc.gov/eLibrary/search. Dynegy was acquired by Vistra Corp on April 9, 2018. The company is located at 601 Travis Street in Downtown Houston.Heschmeyer, Mark. "Dynegy Bails on 181,000-SF Houston Office Lease." CoStar Group News. July 11, 2012. Accessed 2012-07-12. The company was founded in 1984 as Natural Gas Clearinghouse. It was originally an energy brokerage, buying and selling natural gas supplies. It changed its name to NGC Corporation in 1995 after entering the electrical power generation business.
The company adopted the name Dynegy in 1998. Dynegy maintained a rivalry with the Houston-based Enron energy and trading firm, which it initially agreed to buy in 2001, before withdrawing from the deal as the extent of wrongdoing by Enron emerged.
Dynegy nearly went bankrupt in 2002, and several executives were eventually convicted of financial fraud and mismanagement. Dynegy exited the energy trading business in 2002 and the natural gas supply business in 2005, focusing its efforts on electrical generation. The company has one major subsidiary, Dynegy Holdings. It also has three operating subsidiaries: GasCo, CoalCo, and the "stub group" (for other miscellaneous business enterprises).
Dynegy Inc. was the subject of two unsuccessful takeover efforts in 2010. Its Dynegy Holdings subsidiary went bankrupt in November 2011, and Dynegy Inc. itself filed for bankruptcy protection on July 6, 2012. Its GasCo and CoalCo subsidiaries were unaffected by the bankruptcy filing. Dynegy emerged from bankruptcy on October 2, 2012. On April 9, 2018 Vistra Corp closed its acquisition of Dynegy following a determination by the Federal Energy Regulatory Commission that the $1.7 billion deal raised no competitive concerns.
Corporate predecessors
Natural Gas Clearinghouse Natural Gas Clearinghouse (NGC) was created in 1985 by Charles Watson; a consortium of natural gas pipeline companies that included Transco; investment bank Morgan Stanley; and the legal firm of Akin Gump Strauss Hauer & Feld. A major investor was Kenneth Lay, later the chief executive officer of the energy firm Enron.Fox, Loren. Enron: The Rise and Fall. New York: Wiley, 2003, p. 12. Its first headquarters was on the 40th floor of the Transco Tower in Houston, Texas.Hershey, Jr., Robert D. "Scrambling for Profits in a Gas Glut." New York Times. December 30, 1984. NGC was so successful that in 1985 Morgan Stanley bought out some of the other investors and took a majority stake in the company.
NGC was purchased by Noble Affiliates, Inc. and Apache Corporation, independent oil and gas exploration and production companies, for a reported $50 million in 1989."Noble and Apache to Buy Marketer." New York Times. April 5, 1989. In 1993, LG&E Energy Corporation took a stake in NGC, which by then was the largest independent natural gas marketing firm in the United States and had revenues of more than US$2 billion.Salpukas, Agis. "How a Staid Electric Company Becomes a Renegade." New York Times. December 12, 1993. NGC purchased Trident NGL in 1994 in a deal worth more than $750 million."Trident NGL Agrees to be Acquired in $337 Million Deal." New York Times. August 5, 1994. That same year, it also established a partnership with Nova (also known as Novagas Clearinghouse, a natural gas marketing company based in Canada) and British Gas, which gave both companies a financial stake in NGC.Hoover's Gandbook of American Business 2008. Austin, Tex.: Hoovers, 2007, p. 301.
NGC Corporation Natural Gas Clearinghouse shortened its name to NGC Corporation in 1995 after its merger with Trident NGL closed. It became a publicly traded company on the New York Stock Exchange that same year.Hoover's Guide to the Top Texas Companies. Austin, Tex.: Reference Press, 1995, p. 122. By 1996, it had grown to US$550 million in assets, and carried US$525 million in long-term debt.Standard & Poor's Stock Guide, April 1996. NGC Corporation also established several subsidiaries to enable it to enter the electrical generation, marketing, and sales areas. Electric Clearinghouse sold electricity, and the Energy Store marketed it. In August 1996, it purchased the natural gas gathering, marketing, and processing operations of Chevron Corporation.Salpukas, Agis. "Growing Natural-Gas Seller to Expand Electric Business." New York Times. February 19, 1997. The latter deal gave Chevron a 29 percent stake in NGC. NGC followed that deal by buying Destec Energy for US$1.27 billion. The deal required NGC Corporation to sell Destec's power generation subsidiaries in Australia, Canada, the Dominican Republic, the Netherlands, and the United Kingdom for US$407 million, although NGC Corporation retained Destec's 20 domestic gas-fired power plants.
Dynegy history
Growth In June 1998, NGC Corporation changed its name to Dynegy, Inc. The company's original slogan was "We believe in people."Myerson, Allen R. "Focus on Electric Power — The Commodity." New York Times. August 23, 1998. Nova announced two months later that it was seeking to sell its stake in Dynegy."Nova Plans to Sell Its 26% Stake in Dynegy." New York Times. August 25, 1998. Dynegy bought Illinova Corporation in 1999 in a deal worth US$1.75 billion and the assumption of US$2.25 billion of Illinova Corp. debt. The deal also allowed Nova and British Gas to sell their stake in Dynegy."Two More Deals Further Consolidate the Nation's Utilities." New York Times. June 15, 1999.
Dynegy also began branching into areas outside natural gas and electrical generation. In August 2000, the company announced that it had purchased Extant Inc., a broadband provider building a nationwide fiber optic network, for US$152.5 million."Dynegy Is Acquiring Extant for $152.5 Million." New York Times. August 3, 2000.
Dynegy, along with Enron, El Paso Corporation, Reliant Energy, and several other energy companies, was accused of price manipulation and other fraudulent practices during the California electricity crisis in 2000 and 2001."Duke and Williams Receive Subpoenas." New York Times. November 9, 2002; Oppel, Jr., Richard A. and Broder, John M. "Judge Rejects California Electricity Refund." New York Times. December 13, 2002. The case against Dynegy was dismissed in 2003."Court Cases Against Energy Companies Dismissed." New York Times. March 26, 2003.
In 2001, Dynegy made a white knight US$8 billion takeover bid for Enron, which was saddled with $13 billion in debt and whose stock had plummeted.Oppel, Jr., Richard A. and Sorkin, Andrew Ross. "Dynegy Is Said to Be Near to Acquiring Enron for $8 Billion." New York Times. November 8, 2001. The deal began unraveling two weeks later as Enron revealed even larger financial losses and more debt than previously reported.Oppel, Jr., Richard A. "Enron's Growing Financial Crisis Raises Doubts About Merger Deal." New York Times. November 21, 2001. Dynegy withdrew its merger offer on November 28.Oppel, Jr., and Richard A. and Sorkin, Andrew Ross. "Enron's Collapse: The Overview." New York Times. November 29, 2001; McGeehan, Patrick. "Assessing the Role of the Financiers." New York Times. December 2, 2001. Enron sued Dynegy on December 2, the day after Enron declared bankruptcy.Norris, Floyd. "Looking for Judgment On a Shattered Deal." New York Times. December 3, 2001. (The lawsuit was settled in August 2002 after Dynegy agreed to pay Enron US$25 million for backing out of the deal.)"Dynegy to Pay Enron a $25 Million Settlement." New York Times. August 16, 2002. Enron attempted to sell off assets in an effort to stay afloat. On January 3, 2002, Dynegy successfully acquired Enron's Northern Natural Gas Company pipeline."Dynegy to Get Enron's Natural Gas Pipeline." New York Times. January 4, 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.Glater, Jonathan D. "Enron Agrees to Transfer Prized Pipeline to Dynegy." New York Times. January 5, 2002.
Near-bankruptcy of 2002
Dynegy came close to bankruptcy in 2002. Investor pressure on energy stocks in the wake of the Enron collapse pushed Dynegy's stock price down 42 percent by late April. The company also admitted on April 26 that it made a large accounting error on a fuel contract, which further depressed the stock price 22 percent. Moody's Investors Service announced it was reviewing all US$4 billion of Dynegy debt.Morgenson, Gretchen. "Economy Is Surging, but Wall St. Is Down in the Dumps." New York Times. April 27, 2002. In financial distress, Dynegy successfully applied for a US$900 million line of credit."Dynegy Gets $900 Million Credit Line." New York Times. May 1, 2002. On May 1, the U.S. Securities and Exchange Commission opened a formal investigation into how Dynegy's "Project Alpha", an internal corporate initiative that allegedly inflated income from natural gas transactions and illegally structured business partnerships to avoid income."Dynegy Says S.E.C. Seeks Gas Inquiry." New York Times. May 9, 2002. Two weeks later, the New York Times reported that Dynegy's Illinova subsidiary was part of the investigation. Illinova had formed a joint partnership named Catlin in January 2000 with a little-known investment company named Black Thunder. Catlin took over some of Illinova's electrical generating assets. Although Black Thunder put up almost 90 percent of the money to form Catlin, Dynegy was required to buy out Black Thunder's investment or sell off the assets if Catlin did not earn a specified high rate of return.Atlas, Riva D. "Dynegy Faces New Questions Over 'Debt' of Partnership." New York Times. May 14, 2002. On May 28, Dynegy founder, president, and chief executive officer Charles Watson resigned.Banerjee, Neela. "Dynegy's Chief Quits as Unrest Is Reshaping Energy Industry." New York Times. May 29, 2002. Dynegy Inc. chairman Dan Dienstbier was named interim CEO."Dynegy May Find a Partner to Stabilize Energy Trading." New York Times. July 24, 2002. In mid-June, Dynegy reported that its first quarter income had fallen 80 percent. It also admitted that it had signed long-term power contracts that would not produce revenue for years to come; but it had charged the income to the current year's revenues in an attempt to bolster its bottom line.Banerjee, Neela. "Disclosing Long-Term Contracts, Dynegy Worries Some Investors." New York Times. June 14, 2002. On June 19, Dynegy's chief financial office, Rob Doty, resigned."Dynegy's Chief Financial Officer Quits." New York Times. June 20, 2002. The following day, Dynegy shut down its online energy trading system."Dynegy Shuts Its Online Trading System." New York Times. June 21, 2002.
Dynegy was quickly approaching bankruptcy by late June 2002. On June 25, the company announced it would sell off assets in an attempt to raise US$2 billion in cash. Moody's downgraded the rating of the company's bonds to "junk" status on June 28."Company Briefs." New York Times. June 29, 2002. Dynegy announced it might need a financial partner to help it stabilize. After the July 23 announcement, the company's shares dropped 64 percent. Desperate for cash, Dynegy sold the Northern Natural Gas Company to MidAmerican Energy Holdings for $928 million on July 29 ($572 less than it paid for it).Sorkin, Andrew Ross. "Berkshire to Buy a Gas Pipeline From Dynegy." New York Times. July 30, 2002. The sale saved Dynegy from bankruptcy."Dynegy Staves Off Bankruptcy With Sale of Pipeline." New York Times. August 17, 2002.