Dynegy Terminates Merger with Enron
Dynegy Inc. reported that it has terminated its previously announced merger agreement with Enron Corp. The company cited Enron's breaches of representations, warranties, covenants and agreements in the merger agreement, including the material adverse change provision.
"While it is regrettable to see a leading industry player in difficulties, this does not reflect a failure of the energy merchant business, said Dynegy Chairman and CEO Chuck Watson. "Dynegy's customer-based, asset-backed energy delivery network has been the driver of our 45 percent compounded annual growth rate for the past 16 years and will continue to provide us with earnings sustainability and future growth.
ChevronTexaco, which owns 26 percent of Dynegy's outstanding common shares, had contributed $1.5 billion to Dynegy as a participant in the transaction. Dynegy used the $1.5 billion to purchase 100 percent of the preferred stock of Enron subsidiary, Northern Natural Gas pipeline (NNG). Dynegy has exercised its option to purchase all the membership interests in the entity which indirectly owns all of the common stock of NNG, subject to satisfaction of closing conditions. Northern Natural, headquartered in Omaha, Nebraska, owns and operates 16,500 miles of interstate natural gas pipeline spanning from the Permian Basin of Texas to the Great Lakes. It has historically been a strong earnings contributor, and will be a positive addition to Dynegy's energy delivery network, said the company.
"The industry has reacted and adjusted well to the potential loss of a market participant over the past several weeks," said Dynegy President and Chief Operating Officer Steve Bergstrom. "With our superior systems, technology infrastructure and people, Dynegy and its industry peers are ready to absorb any added volatility in the energy markets."