Dynegy Announces Second Quarter 2006 Results

-- Net loss of $211 million includes $190 million in after-tax charges primarily related to comprehensive liability management plan, the benefits of which include:

-- Significantly reduced debt and other obligations

-- Simplified capital structure and eliminated dilutive securities

-- Lower interest expense going forward

-- Company captured higher earnings in Midwest and Northeast regions quarter-over-quarter through near-term commercial strategy and continued strong operational performance

-- Cash flow and earnings estimates for 2006 updated to reflect liability management activities and commercial outlook

Dynegy Inc. (NYSE:DYN) today reported a net loss applicable tocommon stockholders of $211 million, or $0.48 per diluted share, forthe second quarter 2006. This compares to net income applicable tocommon shareholders of $19 million, or $0.05 per diluted share, forthe second quarter 2005.

Financial results for the second quarter 2006 were impacted by$190 million in after-tax charges primarily related to the company'sliability management activities. Financial results for the secondquarter 2005 included a $112 million tax benefit associated with thesale of the company's Midstream natural gas business, which wascompleted in the fourth quarter 2005.

"During the second quarter 2006, we executed a number ofadditional liability management plan activities that have reduced ourdebt and other obligations by more than $2 billion since the beginningof 2006, while reducing our ongoing interest expense, extendingmaturities, removing restrictive covenants, and further simplifyingour capital structure," said Bruce A. Williamson, Chairman and ChiefExecutive Officer of Dynegy Inc. "Importantly, these efforts havesignificantly strengthened our financial flexibility and, as a result,position us to actively pursue opportunities that expand the scale andscope of our business.

"Our commercial strategy and operational approach enabled us tocapture higher earnings during the second quarter in our core businessregions," Williamson added. "In the Midwest, improved earnings were aresult of higher prices realized, while in the Northeast we realizedhigher prices and improved capacity sales. The success of ourcommercial approach was directly tied to our proven track record ofoutstanding operational performance and continued focus on safe,reliable and efficient operations to meet demand where and when it isneeded."

Year-Over-Year Comparison

A comparison of the company's second quarter 2006 and secondquarter 2005 results is set forth below (in millions of dollars,except per share amounts):
2Q 2006 2Q 2005
-------- --------
Loss from continuing operations before income taxes $(325) $(150)
Income tax benefit from continuing operations 118 41
Income from discontinued operations, net of tax - 134
-------- --------
Net income (loss) (207) 25
Less: Preferred stock dividends 4 6
-------- --------
Net income (loss) applicable to common stockholders $(211) $19
Basic earnings (loss) per share $(0.48) $0.05
Diluted earnings (loss) per share $(0.48) $0.05

Power Generation Business

Earnings before interest, taxes and depreciation and amortization(EBITDA) from the power generation business was $119 million for thesecond quarter 2006, compared to $75 million for the second quarter2005.

Cash flow from operations was $271 million for the six monthsended June 30, 2006. Net proceeds from asset sales and acquisitionstotaled $168 million and increases in restricted cash and other were$27 million, offset by capital expenditures of $55 million. Free cashflow from the power generation business was an inflow of approximately$411 million.

In addition, major scheduled maintenance work involving eightpower generation units at facilities located in three states wascompleted in a safe and cost-efficient manner during the secondquarter 2006. These activities help prepare the company's powergeneration fleet to meet increased demand during the summer coolingseason.

Following are power generation results for the Midwest, Northeastand South segments.

Midwest segment

Midwest segment EBITDA was $114 million in the second quarter2006, compared to EBITDA of $85 million in the second quarter 2005.This increase in the second quarter 2006 was related to higher pricesrealized.

Second quarter 2005 results in the Midwest were impacted by theAmeren power supply contract. During certain peak periods in 2005,Ameren took higher volumes than expected, resulting in a need topurchase power at market prices in order to satisfy the company'sobligations for forward sales previously made to other third parties.In addition, second quarter 2005 results in the Midwest included $9million of general and administrative expenses, which are reported inthe Other segment beginning in 2006 and are no longer allocated to thecompany's business segments.

Average on-peak market power prices in NI Hub/Com Ed and CinHub/Cinergy were essentially flat during the second quarter 2006 ascompared to the second quarter 2005.

Sales volumes generated by Midwest facilities decreased to 4.9million megawatt hours in the second quarter 2006 compared to 5.5million megawatt hours in the second quarter 2005, with lower volumesattributed to the timing of outages.

Northeast segment

EBITDA for Dynegy's Northeast segment was $8 million in the secondquarter 2006, compared to a loss of $8 million in the second quarter2005. Increased EBITDA primarily resulted from the company's near-termcommercial strategy, which captured both higher prices and improvedcapacity sales during the quarter.

Second quarter 2005 results included $5 million of general andadministrative expenses, which are reported in the Other segmentbeginning in 2006.

Average on-peak market prices in New York Zone G (Roseton andDanskammer facilities) and New York Zone A (Independence facility)were each 6 percent lower during the second quarter 2006 as comparedto the second quarter 2005.

Sales volumes generated by Northeast facilities decreased to .9million megawatt hours during the second quarter 2006 compared to 1.4million megawatt hours during the second quarter 2005. The mostsignificant factor behind lower Northeast volumes was the reducedoperation of the Roseton facility, which resulted from higher fuel oilcosts and compressed spark spreads.

South segment

The loss before interest, taxes and depreciation and amortizationfor the South segment was $3 million during the second quarter 2006,compared to a loss of $2 million during the second quarter 2005.Financial results for the second quarter 2006 include a $9 millionpre-tax impairment related to the Rockingham facility, which thecompany has agreed to sell. Second quarter 2005 results included $3million of general and administrative expenses, which are reported inthe Other segment beginning in 2006.

Average on-peak market prices in the Electric Reliability Councilof Texas (ERCOT) were 3 percent higher than during the second quarter2005.

Net sales volumes generated by South segment facilities decreasedfrom 1.4 million megawatt hours during the second quarter 2005 to .8million megawatt hours during the second quarter 2006, with lowervolumes attributed to asset sales completed in early 2006.

Customer Risk Management Business

The loss before interest, taxes and depreciation and amortizationfor the Customer Risk Management segment totaled $12 million duringthe second quarter 2006, compared to a loss of $15 million during thesecond quarter 2005. Second quarter 2006 results included $16 millionin pre-tax legal and settlement charges, which were more than offsetby benefits from the elimination of tolling payments as a result ofthe company's prior settlement of the Sterlington tolling arrangementand the expiration of the Gregory tolling arrangement. Second quarter2005 results included a $13 million benefit related to an adjustmentof the Independence tolling arrangement settlement charge.

Other

In the Other segment, which consists primarily of general andadministrative expenses and legal and settlement charges, the companyrecorded a $23 million loss before interest, taxes and depreciationand amortization for the second quarter 2006, compared to a $59million loss for the second quarter 2005. As of the first quarter2006, general and administrative expenses are no longer allocated tothe individual business segments (with the exception of $31 million ofaggregate pre-tax legal and settlement charges related to legacymatters that were recorded in the Customer Risk Management segment inthe first and second quarters 2006). Included in the Other segment inthe second quarter 2005 were $31 million of pre-tax legal andsettlement charges.

Consolidated Interest and Taxes

Interest expense totaled $107 million for the quarter ended June30, 2006, compared to $96 million for the quarter ended June 30, 2005.The increase in interest includes accelerated deferred financing costsof $33 million associated with the execution of the company'sliability management plan, partially offset by the effects of lowerprincipal balances. Additionally, debt conversion and transactioncosts of $247 million were recorded in the second quarter 2006 inconnection with liability management activities.

The second quarter 2006 income tax benefit from continuingoperations was $118 million, compared to an income tax benefit fromcontinuing operations of $41 million for the second quarter 2005.

Liquidity

As of June 30, 2006, Dynegy's liquidity was approximately $846million. This consisted of $358 million in cash on hand and $488million in unused availability under the company's revolving bankcredit facility and term letter of credit bank facility.

Cash Flow

Cash flow from operations, including working capital changes,totaled an outflow of $368 million for the six months ended June 30,2006. This consisted of a cash inflow of $271 million from the powergeneration business, which was offset by outflows of $247 million inthe Other segment resulting primarily from interest payments andgeneral and administrative expenses. In addition, the Customer RiskManagement business had cash outflows of $392 million primarilyrelated to the payment to exit the Sterlington tolling arrangement.

Cash flow from investing activities for the six months ended June30, 2006 totaled $271 million. This consisted of net proceeds fromasset sales and acquisitions of $171 million and increases inrestricted cash and other of $159 million, partially offset by capitalexpenditures of $59 million.

For the six months ended June 30, 2006, Dynegy's free cash flow(cash outflow from operations plus cash flow from investingactivities) was an outflow of $97 million.

2006 Cash Flow and Earnings Estimates

On May 9, 2006, Dynegy provided updated cash flow and earningsestimates for 2006. Those estimates were developed using quotedforward commodity price curves as of approximately four weeks earlieron April 11, 2006. In connection with today's announcement, Dynegy isupdating its 2006 estimates to reflect quoted forward commodity pricecurves as of July 11, 2006. These commodity price curves were derivedfrom standard market quotes and are not necessarily indicative ofmanagement's expectations for commodity price movements during therest of 2006; rather, they represent commodity price estimates as ofJuly 11, 2006 and are intended to provide a basis on which the effectsof future commodity price movements can be assessed by investors andanalysts.

Dynegy's updated estimate ranges reflect current assumptionsregarding the variability in, among other things, sales volumes, fueland commodity prices and operational activities, as well as the impactof the company's liability management activities.

Taking these factors into consideration, the company's estimatedfree cash flow for 2006 is now expected to be between zero andpositive $75 million, compared to the previous estimate of an outflowbetween $65 million and $175 million. The most significant change fromthe previous cash flow estimate relates to the expected receipt ofproceeds from the Rockingham asset sale, offset by an increase inlegal settlements and interest payments.

Estimated EBITDA for the company's power generation business hasbeen revised from the previous estimate of $565 million to $660million, to a new range of $570 million to $630 million. The majorchanges from the previous earnings estimate relate to the impact oflower average commodity prices on the Midwest segment, while Northeastearnings are expected to improve primarily due to higher capacityprices being realized.

The current 2006 estimated net loss applicable to commonstockholders is now a range of $215 million to $260 million, comparedto the previously estimated net loss of $175 million to $240 million.This change primarily relates to a $35 million pre-tax charge relatedto the Sithe debt exchange to be recorded in the third quarter 2006.

Investor Conference Call/Web Cast

Dynegy will discuss its second quarter 2006 financial resultsduring an investor conference call and web cast today at 10 a.m. ET/9a.m. CT. Participants may access the web cast and the relatedpresentation materials on the "News & Financials" section ofwww.dynegy.com.

About Dynegy Inc.

Dynegy Inc. produces and sells electric energy, capacity andancillary services in key U.S. markets. The company's power generationportfolio consists of more than 12,800 megawatts of baseload,intermediate and peaking power plants fueled by a mix of coal, fueloil and natural gas. DYNC

Certain statements included in this news release are intended as"forward-looking statements." These statements include assumptions,expectations, predictions, intentions or beliefs about future events,particularly the statements concerning the possibility of growthopportunities, future benefits of our liability management activities,and Dynegy's estimated financial results for 2006. Historically,Dynegy's performance has deviated, in some cases materially, from itscash flow and earnings estimates, and Dynegy cautions that actualfuture results may vary materially from those expressed or implied inany forward-looking statements. While Dynegy would expect to updatethese estimates on a quarterly basis, it does not intend to updatethese estimates during any quarter because definitive informationregarding its quarterly financial results is not available until afterthe books for the quarter have been closed. Accordingly, Dynegyexpects to provide updates only after it has closed the books andreported the results for a particular quarter, or otherwise as may berequired by applicable law.

Some of the key factors that could cause actual results to varymaterially from those estimated, expected or implied include: changesin commodity prices, particularly for power and natural gas; theeffects of competition and weather on the demand for Dynegy's productsand services; the impact of Dynegy's short-term commercial strategy;the availability, ability to consummate, and effects of growthopportunities for Dynegy's power generation business; the condition ofthe capital markets generally and Dynegy's ability to access thecapital markets as and when needed; operational factors affectingDynegy's assets, including safety efforts, scheduled maintenance andblackouts or other unscheduled outages; Dynegy's ability to transportand maintain fuel inventories, including coal and fuel oil; Dynegy'sremediation efforts regarding its existing material weaknesses;Dynegy's ability to fund the projects mandated by the Baldwin consentdecree; uncertainties regarding environmental regulations, litigationand other legal or regulatory developments affecting Dynegy'sbusinesses, including litigation relating to the western power andnatural gas markets and master netting agreement matters; and Dynegy'sability to successfully complete its exit from the Customer RiskManagement business and fund the costs associated with this exit. Moreinformation about the risks and uncertainties relating to theseforward-looking statements are found in Dynegy's SEC filings,including its Annual Report on Form 10-K for the year ended Dec. 31,2005, as amended, its Quarterly Report on Form 10-Q for the quarterended March 31, 2006 and its Current Reports, which are available freeof charge on the SEC's web site at http://www.sec.gov. Dynegyexpressly disclaims any obligation to update any forward-lookingstatements contained in this news release to reflect events orcircumstances that may arise after the date of this release, except asotherwise required by applicable law.
DYNEGY INC.
REPORTED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)

Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------

Revenues $439 $459 $1,039 $921
Cost of sales, exclusive of
depreciation and amortization
shown separately below (307) (380) (716) (910)
Depreciation and amortization
expense (57) (54) (117) (109)
Impairment and other charges (9) (7) (11) (6)
Gain on sale of assets, net 3 - 3 -
General and administrative
expenses (50) (82) (101) (345)
--------- --------- --------- ---------
Operating income (loss) 19 (64) 97 (449)

Earnings from unconsolidated
investments - 4 2 7
Interest expense (107) (96) (205) (185)
Debt Conversion Costs (247) - (247) -
Other income and expense, net 10 6 30 9
--------- --------- --------- ---------
Loss from continuing
operations before income
taxes (325) (150) (323) (618)

Income tax benefit 118 41 115 215
--------- --------- --------- ---------
Loss from continuing
operations (207) (109) (208) (403)

Income from discontinued
operations, net of tax - 134 1 166
Cumulative effect of change in
accounting principle, net of
tax - - 1 -
--------- --------- --------- ---------
Net income (loss) $(207) $25 $(206) $(237)
--------- --------- --------- ---------

Less: Preferred stock
dividends 4 6 9 11
--------- --------- --------- ---------
Net income (loss)
applicable to common
stockholders $(211) $19 $(215) $(248)
========= ========= ========= =========

Earnings (loss) before
interest, taxes, and
depreciation and amortization
(EBITDA) (1) $84 $65 $247 $(178)

Basic earnings (loss) per
share:
Loss from continuing
operations (2) $(0.48) $(0.30) $(0.51) $(1.09)
Income from discontinued
operations - 0.35 - 0.44
Cumulative effect of change
in accounting principle - - - -
--------- --------- --------- ---------
Basic earnings (loss) per
share $(0.48) $0.05 $(0.51) $(0.65)
========= ========= ========= =========

Diluted earnings (loss) per
share:
Loss from continuing
operations (2) $(0.48) $(0.30) $(0.51) $(1.09)
Income from discontinued
operations - 0.35 - 0.44
Cumulative effect of change
in accounting principle - - - -
--------- --------- --------- ---------
Diluted earnings (loss) per
share $(0.48) $0.05 $(0.51) $(0.65)
========= ========= ========= =========

Basic shares outstanding 442 380 421 379
Diluted shares outstanding 513 506 519 505

(1) EBITDA is a non-GAAP financial measure. Consolidated EBITDA can be
reconciled to Net income (loss) using the following calculation:
Net income (loss) less Income tax benefit, plus Interest expense
and Depreciation and amortization expense. Management and some
members of the investment community utilize EBITDA to measure
financial performance on an ongoing basis. However, EBITDA should
not be used in lieu of GAAP measures such as net income and cash
flow from operations. A reconciliation of EBITDA to Operating
income (loss) and Net income (loss) for the periods presented is
included below.

Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------

Operating income (loss) $19 $(64) $97 $(449)

Add: Depreciation and
amortization expense, a
component of operating
income (loss) 57 54 117 109
Earnings from unconsolidated
investments - 4 2 7
Other income and expense,
net 10 6 30 9
EBITDA from discontinued
operations (3) (2) 65 - 146
Cumulative effect of change
in accounting principle,
pre-tax - - 1 -
--------- --------- --------- ---------
Earnings (loss) before
interest, taxes, and
depreciation and amortization
(EBITDA) 84 65 247 (178)

Depreciation and
amortization expense, a
component of operating
income (loss) (57) (54) (117) (109)
Depreciation and
amortization expense from
discontinued operations - (15) - (35)
Interest expense from
continuing operations (354) (96) (452) (185)
Interest expense from
discontinued operations - (14) - (25)
Income tax benefit from
continuing operations 118 41 115 215
Income tax benefit from
discontinued operations 2 98 1 80
Income tax benefit on
cumulative effect of change
in accounting principle - - - -
--------- --------- --------- ---------
Net income (loss) $(207) $25 $(206) $(237)
========= ========= ========= =========

(2) See "Reported Unaudited Basic and Diluted Loss Per Share From
Continuing Operations" for a reconciliation of basic loss per
share from continuing operations to diluted loss per share from
continuing operations.

(3) A reconciliation of EBITDA from discontinued operations to Income
from discontinued operations, net of tax for the periods presented
is included below.

Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------

EBITDA from discontinued
operations $(2) $65 $- $146

Depreciation and
amortization expense from
discontinued operations - (15) - (35)
Interest expense from
discontinued operations - (14) - (25)
Income tax benefit from
discontinued operations 2 98 1 80
--------- --------- --------- ---------
Income from discontinued
operations, net of tax $- $134 $1 $166
========= ========= ========= =========


DYNEGY INC.
REPORTED UNAUDITED BASIC AND DILUTED LOSS PER SHARE
FROM CONTINUING OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)

Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------

Loss from continuing
operations $(207) $(109) $(208) $(403)
Less: convertible preferred
stock dividends 4 6 9 11
--------- --------- --------- ---------
Loss from continuing
operations for basic loss per
share (211) (115) (217) (414)
Effect of dilutive securities:
Interest on convertible
subordinated debentures 1 2 3 3
Dividends on Series C
convertible preferred stock 4 6 9 11
--------- --------- --------- ---------
Loss from continuing
operations for diluted loss
per share $(206) $(107) $(205) $(400)
========= ========= ========= =========

Basic weighted-average shares 442 380 421 379

Effect of dilutive securities:
Stock options and restricted
stock 1 2 1 2
Convertible subordinated
debentures 28 55 41 55
Series C convertible
preferred stock 42 69 56 69
--------- --------- --------- ---------
Diluted weighted-average
shares 513 506 519 505
========= ========= ========= =========


Loss per share from continuing
operations:
Basic $(0.48) $(0.30) $(0.51) $(1.09)
========= ========= ========= =========

Diluted (1) $(0.48) $(0.30) $(0.51) $(1.09)
========= ========= ========= =========

(1) When an entity has a net loss from continuing operations, SFAS No.
128, "Earnings per Share," prohibits the inclusion of potential
common shares in the computation of diluted per-share amounts.
Accordingly, we have utilized the basic shares outstanding amount
to calculate both basic and diluted loss per share for the three
and six months ended June 30, 2006 and 2005.


DYNEGY INC.
REPORTED SEGMENTED RESULTS
OF OPERATIONS
(UNAUDITED) (IN MILLIONS)

Three Months Ended June 30, 2006
------------------------------------------------
Power Generation
--------------------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ------ ------ ------

Generation $71 $- $(10) $61
Customer Risk
Management $(8) (8)
Other $(34) (34)
------ ------ ------ ------ ------ ------ ------
Operating income
(loss) 71 - (10) (8) $- (34) $19
Earnings from
unconsolidated
investments - - - - - - -
Other items, net - 2 1 (2) - 9 10
Cumulative effect of
change in accounting
principle, pre-tax - - - - - - -
Add: Depreciation and
amortization expense,
a component of
operating income
(loss) 43 6 6 - - 2 57
------ ------ ------ ------ ------ ------ ------
EBITDA from
continuing
operations (1) 114 8 (3) (10) - (23) 86
EBITDA from
discontinued
operations, pre-tax
(2) - - - (2) - - (2)
------ ------ ------ ------ ------ ------ ------
EBITDA (1) $114 $8 $(3) $(12) $- $(23) $84
Depreciation and
amortization expense (57)
Interest expense (354)
------
Pre-tax loss (327)
Income tax benefit 120
------
Net loss $(207)
======


Three Months Ended June 30, 2005
------------------------------------------------
Power Generation
--------------------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ------ ------ ------

Generation $45 $(15) $(11) $19
Customer Risk
Management $(15) (15)
Other $(68) (68)
------ ------ ------ ------ ------ ------ ------
Operating income
(loss) 45 (15) (11) (15) $- (68) $(64)
Earnings from
unconsolidated
investments 1 - 3 - - - 4
Other items, net (1) 2 1 (1) - 5 6
Add: Depreciation and
amortization expense,
a component of
operating income
(loss) 40 5 5 - - 4 54
------ ------ ------ ------ ------ ------ ------
EBITDA from
continuing
operations (1) 85 (8) (2) (16) - (59) -
EBITDA from
discontinued
operations, pre-tax
(2) - - - 1 64 - 65
------ ------ ------ ------ ------ ------ ------
EBITDA (1) $85 $(8) $(2) $(15) $64 $(59) $65
Depreciation and
amortization expense (69)
Interest expense (110)
------
Pre-tax loss (114)
Income tax benefit 139
------
Net income $25
======

(1) See Note (1) to "Reported Unaudited Condensed Consolidated
Statements of Operations." EBITDA is a non-GAAP financial measure.
Consolidated EBITDA can be reconciled to Net income (loss) using
the following calculation: Net income (loss) less Income tax
benefit, plus Interest expense and Depreciation and amortization
expense. Management and some members of the investment community
utilize EBITDA to measure financial performance on an ongoing
basis. However, EBITDA should not be used in lieu of GAAP measures
such as net income and cash flow from operations.

(2) See Note (3) to "Reported Unaudited Condensed Consolidated
Statements of Operations."


DYNEGY INC.
REPORTED SEGMENTED RESULTS OF OPERATIONS
(UNAUDITED) (IN MILLIONS)

Six Months Ended June 30, 2006
------------------------------------------------
Power Generation
--------------------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ------ ------ ------

Generation $169 $26 $(23) $172
Customer Risk
Management $6 6
Other $(81) (81)
------ ------ ------ ------ ------ ------ ------
Operating income
(loss) 169 26 (23) 6 $- (81) $97
Earnings (losses) from
unconsolidated
investments - - 2 - - - 2
Other items, net - 4 1 (1) - 26 30
Cumulative effect of
change in accounting
principle, pre-tax - - - - - 1 1
Add: Depreciation and
amortization expense,
a component of
operating income
(loss) 83 12 12 - - 10 117
------ ------ ------ ------ ------ ------ ------
EBITDA from
continuing
operations (1) 252 42 (8) 5 - (44) 247
EBITDA from
discontinued
operations, pre-tax
(2) - - - (1) 1 - -
------ ------ ------ ------ ------ ------ ------
EBITDA (1) $252 $42 $(8) $4 $1 $(44) $247
Depreciation and
amortization expense (117)
Interest expense (452)
------
Pre-tax loss (322)
Income tax benefit 116
------
Net loss $(206)
======


Six Months Ended June 30, 2005
------------------------------------------------
Power Generation
--------------------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ------ ------ ------

Generation $106 $(4) $(23) $79
Customer Risk
Management $(207) (207)
Other $(321) (321)
------ ------ ------ ------ ------ ------ ------
Operating income
(loss) 106 (4) (23) (207) $- (321) $(449)
Earnings from
unconsolidated
investments 1 - 6 - - - 7
Other items, net (1) 2 1 - - 7 9
Add: Depreciation and
amortization expense,
a component of
operating income
(loss) 77 10 10 1 - 11 109
------ ------ ------ ------ ------ ------ ------
EBITDA from
continuing
operations (1) 183 8 (6) (206) - (303) (324)
EBITDA from
discontinued
operations, pre-tax
(2) - - - 5 141 - 146
------ ------ ------ ------ ------ ------ ------
EBITDA (1) $183 $8 $(6) $(201) $141 $(303) $(178)
Depreciation and
amortization expense (144)
Interest expense (210)
------
Pre-tax loss (532)
Income tax benefit 295
------
Net loss $(237)
======

(1) See Note (1) to "Reported Unaudited Condensed Consolidated
Statements of Operations." EBITDA is a non-GAAP financial measure.
Consolidated EBITDA can be reconciled to Net income (loss) using
the following calculation: Net income (loss) less Income tax
benefit, plus Interest expense and Depreciation and amortization
expense. Management and some members of the investment community
utilize EBITDA to measure financial performance on an ongoing
basis. However, EBITDA should not be used in lieu of GAAP measures
such as net income and cash flow from operations.

(2) See Note (3) to "Reported Unaudited Condensed Consolidated
Statements of Operations."


DYNEGY INC.
SIGNIFICANT ITEMS
(UNAUDITED) (IN MILLIONS)

Three Months Ended June 30, 2006
------------------------------------------------
Power Generation
--------------------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ------ ------ ------

Debt Conversion
Costs (1) $- $- $- $- $- $(247) $(247)
Acceleration of
financing costs (2) - - - - - (33) (33)
Legal and settlement
charges (3) - - - (16) - (2) (18)
------ ------ ------ ------ ------ ------ ------
Total $- $- $- $(16) $- $(282) $(298)
====== ====== ====== ====== ====== ====== ======


Three Months Ended June 30, 2005
------------------------------------------------
Power Generation
--------------------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ------ ------ ------

Legal and settlement
charges (4) $- $- $- $- $- $(31) $(31)
Independence toll
settlement
adjustment (5) - - - 13 - - 13
Discontinued
operations (6) - - - 1 35 - 36
Taxes (7) - - - - - 99 99
------ ------ ------ ------ ------ ------ ------
Total $- $- $- $14 $35 $68 $117
====== ====== ====== ====== ====== ====== ======

(1) We recognized a pre-tax charge of approximately $247 million ($158
million after-tax) related to the premiums and transaction costs
associated with our purchase of substantially all our $1.7 billion
Second Priority Senior Secured Notes (SPN Tender Offer),
conversion of our $225 million 4.75% Convertible Subordinated
Debentures (Convertible Debenture Exchange), and redemption of our
$400 million Series C Convertible Preferred Stock (Series C
Preferred). This charge is included in Debt Conversion Costs.

(2) We recognized a pre-tax charge of approximately $33 million ($21
million after-tax) related to the acceleration of debt issuance
costs associated with our purchase of substantially all our $1.7
billion Second Priority Senior Secured Notes (SPN Tender Offer)
and redemption of our $400 million Series C Convertible Preferred
Stock (Series C Preferred). This charge is included in Interest
expense.

(3) We recognized a pre-tax loss of approximately $18 million ($11
million after-tax) related to legal and settlement charges. This
loss is included in General and administrative expenses.

(4) We recognized a pre-tax loss of approximately $31 million ($20
million after-tax) related to the settlement of our class action
shareholder lawsuit and other legal and settlement charges. This
loss is included in General and administrative expenses.

(5) We recognized a pre-tax gain of approximately $13 million ($9
million after-tax) related to an adjustment to the Independence
toll settlement charge following our acquisition of ExRes SHC,
Inc., the parent company of Sithe Energies, Inc. and Sithe /
Independence Power Partners, L.P. This gain is included in Cost of
sales.

(6) We recognized pre-tax income of approximately $36 million ($134
million after-tax) related to discontinued operations. The income
consists primarily of $35 million associated with our NGL segment.

(7) We recognized an income tax benefit of approximately $99 million
for the reversal of a deferred tax capital loss valuation
allowance primarily related to gains on the anticipated sale of
DMSLP. A benefit of $112 million is included in the $134 million
after-tax Income from discontinued operations, offset by a $13
million expense in Income tax benefit.


DYNEGY INC.
SIGNIFICANT ITEMS
(UNAUDITED) (IN MILLIONS)

Six Months Ended June 30, 2006
-----------------------------------------------
Power Generation
--------------------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ----- ------ ------

Debt Conversion
Costs (1) $- $- $- $- $- $(247) $(247)
Acceleration of
financing costs (2) - - - - - (34) (34)
Legal and settlement
charges (3) - - - (31) - (2) (33)
------ ------ ------ ------ ----- ------ ------
Total $- $- $- $(31) $- $(283) $(314)
====== ====== ====== ====== ===== ====== ======


Six Months Ended June 30, 2005
-----------------------------------------------
Power Generation
--------------------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ----- ------ ------

Legal and settlement
charges (4) $- $- $- $- $- $(253) $(253)
Independence
toll settlement
charge (5) - - - (170) - - (170)
Discontinued
operations (6) - - - 5 81 - 86
Taxes (7) - - - - - 112 112
------ ------ ------ ------ ----- ------ ------
Total $- $- $- $(165) $81 $(141) $(225)
====== ====== ====== ====== ===== ====== ======

(1) We recognized a pre-tax charge of approximately $247 million ($158
million after-tax) related to the premiums and transaction costs
associated with our purchase of substantially all our $1.7 billion
Second Priority Senior Secured Notes (SPN Tender Offer),
conversion of our $225 million 4.75% Convertible Subordinated
Debentures (Convertible Debenture Exchange), and redemption of our
$400 million Series C Convertible Preferred Stock (Series C
Preferred). This charge is included in Debt Conversion Costs.

(2) We recognized a pre-tax charge of approximately $34 million ($22
million after-tax) related to the acceleration of debt issuance
costs associated with our purchase of substantially all our $1.7
billion Second Priority Senior Secured Notes (SPN Tender Offer),
redemption of our $400 million Series C Convertible Preferred
Stock (Series C Preferred), and our former $1 billion facility
comprised of (i) $400 million letter of credit facility and (ii)
$600 million revolving credit facility that were replaced in March
2006 and amended in April 2006 with a $470 million revolving
credit facility and $200 million term facility. This charge is
included in Interest expense.

(3) We recognized a pre-tax loss of approximately $33 million ($21
million after-tax) related to legal and settlement charges. This
loss is included in General and administrative expenses.

(4) We recognized a pre-tax loss of approximately $253 million ($176
million after-tax) related to the settlement of our class action
shareholder lawsuit and other legal and settlement charges. This
loss is included in General and administrative expenses.

(5) We recognized a pre-tax loss of approximately $170 million ($109
million after-tax) related to the Independence toll settlement
charge following our acquisition of ExRes SHC, Inc., the parent
company of Sithe Energies, Inc. and Sithe / Independence Power
Partners, L.P. This loss is included in Cost of sales.

(6) We recognized pre-tax income of approximately $86 million ($166
million after-tax) related to discontinued operations. The income
consists of $81 million associated with our NGL segment and $5
million associated with our UK CRM business.

(7) We recognized an income tax benefit of approximately $112 million
for the reversal of a deferred tax capital loss valuation
allowance primarily related to gains on the anticipated sale of
DMSLP. The benefit is included in the $166 million after-tax
Income from discontinued operations.


DYNEGY INC.
SUMMARY CASH FLOW INFORMATION
(UNAUDITED) (IN MILLIONS)

Six Months Ended June 30, 2006
-----------------------------------------------
GEN(1) CRM NGL REG OTHER Total
------- ------- ------- ------- ------- -------

Cash Flow from
Operations $271 $(392) $- $- $(247) $(368)

Capital Expenditures (55) - - - (4) (59)

Business Acquisition
Costs (40) - - - - (40)

Proceeds from Asset
Sales (2) 208 - - - 3 211

Restricted Cash and
Other (3) 27 - - - 132 159
------- ------- ------- ------- ------- -------

Free Cash Flow (4) $411 $(392) $- $- $(116) $(97)
======= ======= ======= ======= ======= =======


Six Months Ended June 30, 2005
-----------------------------------------------
GEN(1) CRM NGL REG OTHER Total
------- ------- ------- ------- ------- -------

Cash Flow from
Operations $194 $41 $178 $- $(422) $(9)

Capital Expenditures (65) - (23) - (5) (93)

Business Acquisition
Costs (120) - - - - (120)

Proceeds from Asset
Sales (5) - - - (5) - (5)
------- ------- ------- ------- ------- -------

Free Cash Flow (4) $9 $41 $155 $(5) $(427) $(227)
======= ======= ======= ======= ======= =======

(1) Beginning in the fourth quarter 2005, we report the results of
our power generation business as three separate segments in our
consolidated financial statements: (1) the Midwest segment (GEN-
MW); (2) the Northeast segment (GEN-NE); and (3) the South
segment (GEN-SO). For the purpose of this schedule, GEN
includes the three combined segments.

(2) During the first quarter 2006, we received proceeds of
approximately $205 million from the sale of West Coast Power.

(3) Restricted cash and other primarily relates to the $335 million
return of cash collateral posted for October 2005 LC facility,
offset by $200 million LC facility posted in Q206.

(4) Free cash flow is a non-GAAP financial measure. Free cash flow
can be reconciled to operating cash flow using the following
calculation: Operating cash flow plus investing cash flow
(consisting of asset sale proceeds less business acquisition
costs, capital expenditures and changes in restricted cash)
equals free cash flow. We use free cash flow to measure the
cash generating ability of our operating asset-based energy
business relative to our capital expenditure obligations. Free
cash flow should not be used in lieu of GAAP measures with
respect to cash flows and should not be interpreted as available
for discretionary expenditures, as mandatory expenditures such
as debt obligations are not deducted from the measure. A
reconciliation of free cash flow to cash flow from operations by
segment for the periods presented is included above.

(5) During the first quarter 2005, we paid approximately $5 million
to Ameren related to the working capital adjustment for our sale
of Illinois Power.


DYNEGY INC.
OPERATING DATA

Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
GEN - MW
Million Megawatt Hours
Generated - Gross and Net 4.9 5.5 10.3 10.5
Average Actual On-Peak Market
Power Prices ($/MWh)(1):
Cinergy (Cin Hub) $53 $54 $51 $52
Commonwealth Edison
(NI Hub) $53 $52 $52 $50


GEN - NE
Million Megawatt Hours
Generated - Gross and Net 0.9 1.4 1.9 3.5
Average Actual On-Peak Market
Power Prices ($/MWh)(1):
New York - Zone G $73 $78 $74 $74
New York - Zone A $58 $62 $59 $60


GEN - SO
Million Megawatt Hours
Generated - Gross 0.9 1.7 2.2 3.5
Million Megawatt Hours
Generated - Net 0.8 1.4 2.2 2.7
Average Actual On-Peak Market
Power Prices ($/MWh)(1):
Southern $57 $57 $56 $53
ERCOT $70 $68 $63 $60


Average Natural Gas Price -
Henry Hub ($/MMBtu) (2) $6.53 $6.94 $7.14 $6.67


(1) Reflects the average of day-ahead quoted prices for the periods
presented and does not necessarily reflect prices realized by the
company.

(2) Reflects the average of daily quoted prices for the periods
presented and does not necessarily reflect prices realized by the
company.


DYNEGY INC.
2006 EARNINGS ESTIMATES (1)
(IN MILLIONS)

GEN - MW GEN - NE GEN - SO Total GEN CRM
----------- ---------- --------- ----------- ---

EBITDA (2) $480 - 510 $95 - 115 $(5) - 5 $570 - 630 $5

Depreciation and
Amortization (175) (25) (25) (225) -

Interest Expense

Income Tax Benefit

Preferred Stock
Dividends

Net Income (Loss)

Less:
Non-
Core Total Core
OTHER Total (5) Business
------------ ------------ ------ -----------

EBITDA (2) $(110 - 100) $465 - 535 $(30) $495 - 565

Depreciation and
Amortization (10) (235) - (235)

Interest Expense (630) (315) (315)

Income Tax Benefit 149 -124 130 19 - (6)

Preferred Stock Dividends (9) - (9)
------------ ------ -----------
Net Income (Loss) $(260 - 215) $(215) $(45) - 0
============ ====== ===========


2006 CASH FLOW ESTIMATES (1)
(IN MILLIONS)


GEN (4) CRM OTHER
----------- ------ ------------

Cash Flow from Operations $520 - 585 $(420) $(430 - 420)

Capital Expenditures (170) - (5)

Proceeds from Asset Sales 370 - -

Changes in Restricted Cash - - 135
----------- ------ ------------
Free Cash Flow (3) $720 - 785 $(420) $(300 - 290)
=========== ====== ============

Less:
Non-
Core Total Core
Total (6) Business
------------ ------ -----------

Cash Flow from Operations $(330 - 255) $(385) $55 - 130

Capital Expenditures (175) (5) (170)

Proceeds from Asset Sales 370 370 -

Changes in Restricted Cash 135 135 -
------------ ------ -----------
Free Cash Flow (3) $0 - 75 $115 $(115 - 40)
============ ====== ===========

(1) 2006 estimates are presented on a GAAP basis and are based on
quoted forward commodity price curves as of April 11, 2006. Actual
results may vary materially from these estimates based on changes
in commodity prices, among other things, including operational
activities, legal settlements, financing or investing activities
and other uncertain or unplanned items. Core business represents
continuing results, excluding significant items.

(2) EBITDA is a non-GAAP financial measure. Consolidated EBITDA can be
reconciled to Net income (loss) using the following calculation:
Net income (loss) less Income tax benefit, plus Interest expense
and Depreciation and amortization expense. Management and some
members of the investment community utilize EBITDA to measure
financial performance on an ongoing basis. However, EBITDA should
not be used in lieu of GAAP measures such as net income (loss) and
cash flow from operations.

(3) Free cash flow is a non-GAAP financial measure. Free cash flow can
be reconciled to operating cash flow using the following
calculation: Operating cash flow plus investing cash flow
(consisting of asset sale proceeds less business acquisition
costs, capital expenditures and changes in restricted cash) equals
free cash flow. We use free cash flow to measure the cash
generating ability of our operating asset-based energy business
relative to our capital expenditure obligations. Free cash flow
should not be used in lieu of GAAP measures with respect to cash
flows and should not be interpreted as available for discretionary
expenditures, as mandatory expenditures such as debt obligations
are not deducted from the measure. A reconciliation of free cash
flow to cash flow from operations by segment for the periods
presented is included above.

(4) Beginning in the fourth quarter 2005, we report the results of our
power generation business as three separate segments in our
consolidated financial statements: (1) the Midwest segment
(GEN-MW); (2) the Northeast segment (GEN-NE); and (3) the South
segment (GEN-SO). For the purpose of this schedule, GEN includes
the three combined segments.

(5) The following summarizes the items included in Non-core business
in our earnings guidance estimate.



Depreciation Income Tax Net
and Interest Benefit Income
EBITDA Amortization Expense (Expense) (Loss)
------- ------------- -------- ---------- -------
Legal and settlement
charges (CRM
segment) $(30) $- $- $10 $(20)
CORP operating
results (CORP
segment) - - (315) 120 (195)
------- ------------- -------- ---------- -------
Total $(30) $- $(315) $130 $(215)
======= ============= ======== ========== =======

(6) The following summarizes the items included in Non-core business
in our cash flow estimate.

Proceeds
Cash Flow from Changes in Free
from Capital Asset Restricted Cash
Operations Expenditures Sales Cash Flows
----------- ------------- -------- ----------- ------
Sterlington toll
settlement
payment (CRM) $(370) $- $- $- $(370)
Development
Capital
Expenditures
(GEN) - (5) - - (5)
Net proceeds from
sale of West
Coast Power and
acquisition of
Rocky Road (GEN) - - 160 - 160
Proceeds from
sale of
Rockingham
facility - - 210 - 210
Return of Cash
Collateral from
October 2005 LC
Facility (OTHER) - - - 335 335
Cash Collateral
Posted for April
2006 LC Facility
(OTHER) - - - (200) (200)
Legal and
settlement
charges (CRM) (35) - - - (35)
Favorable legal
litigation
settlement
(OTHER) 20 - - - 20
----------- ------------- -------- ----------- ------
Total $(385) $(5) $370 $135 $115
=========== ============= ======== =========== ======