Hello and welcome to the Dynegy Incorporated 2008 annual and fourth quarter financial results teleconference. At the request of Dynegy, this conference is being recorded for instant replay purposes. Please note that all lines will be in a listen-only mode until the question-and-answer portion of today’s call. (Operator Instructions) I now like to turn the call over to Ms. Norelle Lundy, Vice President of Investor and Public Relations. Ma’am you may begin.

Good morning everyone and welcome to Dynegy’s Investor conference call and webcast, highlighting the company’s 2008 annual and fourth quarter results and our business strategy going forward. As is our customary practice before we begin this morning, I would like to remind you that our call will include statements reflecting assumptions, expectations, projections, intentions or beliefs about future events with respect to our business strategy and 2009 estimate. These and other statements not relating strictly to historical or current facts are intended as forward-looking statements. Actual results though may vary materially from those expressed or implied in any forward-looking statements. For a description of the factors that may cause such a variance, I would direct you to the forward-looking statements legend contained in today’s news release and in our SEC filings, which are available free of charge through our website at www.dynegy.com. With that, I will now turn it over to our Chairman, President and CEO, Bruce Williamson.

Good morning and thank you for joining us. With me this morning are several members of Dynegy’s management team including Holli Nichols, our Chief Financial Officer. Let’s now turn to the agenda for our call which is highlighted on slide three for those of you who are following along via the webcast. I’ll begin today with the review of 2008 focusing on our challenges and successes and I’ll also cover a recent event involving the sale of one of our non-core assets. Then Holli will provide our full year 2008 financial results and discuss annual performance drivers for each of our key regions. I’ll then discuss our outlook for 2009, including market trends and how we intend to provide greater predictability in our near term adjusted EBITDA. I’ll also provide an update on 2009 sensitivities and financial estimates. Finally, my management team will join me in answering your questions. Please turn to slide four. While 2008 was a difficult year for most U.S. businesses, the power generation sector faced its own unique set of challenges. We saw extreme volatility in natural gas prices with a steep rise for about the first half of the year followed by an abrupt drop in the second half. A number of weather related events also affected sales volumes for some power generators. With that as a backdrop I now want to touch on some of the challenges we faced as a company in 2008. Besides volatile energy prices, we also have reduced sales volumes caused by mild summer weather and forced outages at some of our plants in early 2008. Relating to the weather in both the Midwest and the Northeast, we experienced fewer cooling degree days in the third quarter of 2008 compared to the third quarter of 2007. In the Midwest, a…

Thanks Bruce. Please turn to slide seven. Before I begin I’d like to point out that this presentation does contain non-GAAP measures that are reconciled later in the presentation. Also fourth quarter results are current in the appendix of this presentation. Now, turning to full year financial results; annual adjusted EBITDA decreased from $998 million in 2007 to $814 million in 2008. This is primarily due to lower realized power prices, compressed realized spark spreads, mild summer weather, transmission congestion and forced outages that included two key baseload units. All of these factors contributed to lower sales volume and lower adjusted EBITDA year-over-year. Adjusted cash flow from operations also decreased from $370 million in 2007 to $349 million in 2008, primarily due to the decline in adjusted EBITDA, which was partially offset by favorable changes in working capital due to lower prices year-over-year. Adjusted free cash flow changed from an inflow of $155 million in 2007 to an outflow of $25 million in 2008. In addition to the EBITDA and working capital changes, our investment in environmental upgrades was $146 million higher in 2008. It’s worth noting that we made significant progress in 2008 on our Midwest environmental investments to further reduce emissions. The entire project which will run through 2012 includes baghouse and scrubber projects at eight of our Midwest units. Our Midwest coal fleet already has reduced emissions of sulfur dioxide and nitrogen oxide by approximately 90% in the last ten years, largely through our conversion to PRB coal. The baghouses and scrubbers are designed to further reduce mercury, particular in sulfur dioxide emission. Now, turning to net income, Dynegy reported $174 million for 2008, compared to $264 million for 2007. In both years there were a number of items to be noted, which are listed on this…

Thanks Holli. Please turn to slide 10. We are in a period of extreme market volatility and low commodity prices as demonstrated by the top chart on the right hand side of the slide that shows substantial declines of Henry Hub natural gas and Cin Hub on-peak pricing. We believe near term demand is influenced by both weather and the current economic downturn. Weather tends to influence residential and commercial demand, whereas recessionary periods may have a greater impact on industrial demand. During previous recessionary periods the U.S. has seen a short term drop in demand increases and that may again be the case in the current recession. However, we believe that demand growth will continue over the longer term and that’s because the long term power generation market fundamentals remain essentially unchanged. Electricity remains as an essential commodity that cannot be stored. Demand may erode temporarily, but as we’ve seen in previous recessions, recovery historically appears as a series of weather and commodity price driven peaks and valleys trending upward. In addition barriers to entry remain high in a capital intensive industry. With the credit markets essentially closed, very few if any developments projects are actually being built. This reduction will further constraint supply when markets do recover providing support for higher electricity prices. The chart on the bottom right demonstrates that electricity generation in 2008 generally trended with around a five year average, which points out that usage patterns remain consistent despite the economic conditions. You will see that 2008 generation did pull below to five year average towards the end of the third quarter, which was a quarter marked by very mild summer weather. Also consider the red 2009 year-to-date line on the far left of this chart. Until recently 2009 generation was near the top of…

Thank you. (Operator Instructions) Lasan Johong of RBC Capital Markets, you may ask your question.

Thank you. Good morning. Bruce it sounds like there’s a little bit of a change in how you view the world. It used to be that Dynegy hedged on a current + 1 basis, and now it sounds like it’s more like current + 2. I’m not criticizing that strategy; I think that’s probably a good one and it sounds like you’re trying to bridge to “the better times” so to speak. Is that a correct perception or am I kind of missing something here.

No, I think that’s actually a pretty good way of putting it. Right now in this environment I think investors are more concerned about protecting against the downside and what we’re trying to do is sort of strike the balance here between, adding greater near term predictability, protecting against any further fall in commodity prices. When we look longer term we see fundamentals are still there, largely no ones really building new power generation in the country. The economy will come back, consumers will consume energy, they do consume electricity and we’ll see supply and demand tighten and probably tighten pretty rapidly. So, I think that’s a pretty good way of putting it. Chuck you’re on the commercial group now, anything you want to add to that?

No, I think that’s a fair assessment of the goal and strategy.

Excellent. There’s been a lot of chit-chat about what the current congress and President Obama wants to do on the energy front, particularly there’s been some noise on CO2. Do you have any kind of opinion what you think might happen?

No. I think the main thing for investors that look at that issue is, when something is implemented whether it’s a cap and trade or carbon tax, if you have to buy your credits it’s effectively the same thing. I just want to point out again that our coal fleet is in a market where coal is at the margin of most of the time and so we would expect to get full cost recovery of any cost of carbon credits or carbon charges that we would incur most of the year, and then as we move to that world, in the periods of time when gas is setting the marginal price you’d expect greater gas usage in the country, so you should see a rise in natural gas. We went through that with the financial community last year and tried to layout a rather complicated graph, but it basically shows the amount of any impact on our earnings and cash flow of carbon legislation should be modest. Mainly Americans need to understand that any carbon regime is going to be an increase in the cost of power, gasoline, jet fuel, plane tickets, virtually everything in the economy.

Right. On the Sandy Creek and Plum Point situation, I think I’m misunderstanding what you’re saying. I’m assuming that in addition to the $275 million of equity commitment that gets freed up, you would also receive some proceeds in addition, would you not?

We’ll get you on the bid list. Yes, we would anticipate we would get proceeds. The part that we mentioned there on the 275, that’s our equity commitment that has been posted through a letter of credit and obviously that would be released and then yes, we would anticipate proceeds on top of that. We’re not projecting a sales price though.

Okay. One last question on the hedging that you’ve additionally placed in ‘09 and 2010, are these mostly bilateral contracts or is it to a financial hub. It sounds like it’s mostly to Cin Hub and if so are you exposed to basis differentials.

Yes, those are mostly placed through financial swaps and we are as we mentioned before not focusing on PJM as a hub for that activity. So we are not trying to take CIN hub to PJM with respect to that.

That’s it, great. Thank you very much.

Thanks Lasan.

Brian Chin with Citi, you may ask your question.

Hi, on the additional hedges you are throwing on, are you taking the volumetric risk on those hedges and you’re just hedging up the pricing risk; I’m just trying to clarify that.

I’m not sure I understand the question.

Let’s say for example you hedged out a 100 megawatt hour or $100 per megawatt hour on one of your coal plants and then let’s say economic demand drops off, whether demand ends up not being favorable; you would simply have a locked in price, but the volumetric risk would be yours and that will be something we have to be cautious about right, there’s no locked in actual dollar amount that you’ve sold.

Yes, I think really the risk that we take is with respect to our plants operation. So, when we try to determine our expected generation, we assume some factors for end market availability and to the extent that we are better or worse than that, that’s a volume number that can impact us, but otherwise no.

Okay, great, thanks a lot.

Neel Mitra of Simmons & Company; you may ask you question.

Hi, Neal.

Hi, I had a couple more questions on hedging. When you locked in the majority of your open position post December 10, was the hedge exposure spread out over the last two and a half months or were they concentrated during a certain timeframe, since gas prices are trending down during the entire period; and since you’re evocating more of a current plus two position at this point, can you describe your progress or strategy towards commercializing 2010 at this point?

Neel, they would have been done. I can’t pinpoint days or specific times. I would say it’s probably throughout the time period from December through February, a lot of it in January. That’s probably the closest I can narrow it down to and then with regard to 2010, Chuck?

Yes, I think the graph speaks for itself. We’re beginning to initializes a position and we will look to add additional contracted volumes as we’d inappropriate, but I think the trend is pretty self evident.

Right now that’s about 50% of the volume.

Okay, that’s helpful and then can you provide a little bit more information regarding how the transmission congestion affected your 2008 operations at Bridgeport and Casco Bay and how you view that going into 2009?

Yes, for the transmission in the Northeast, there wasn’t a tremendous impact to Bridgeport. Bridgeport has been a load pocket and so it normally responds to the demand in that particular area. Casco is of course a little more remote and the liquid sales point is at Mass Hub and we do see transmission constraints along that line. So, it’s a little difficult for us to project exactly what those were going to be on a go forward basis and so for 2008 it turned out that our realized congestion costs were a little bit higher than what we had projected in the plan.

Okay great, thank you.

Andy Smith of J.P. Morgan, you may ask your question.

Hi, good morning guys.

Hi, Andy.

A quick question for you guys, and looking at the hedge book, it had some stats I think out of the bank facilities and obviously there’s some tests, but it looks like the last disclosure I think, had you guys have been needing to maintain a $700 million EBITDA level. I believe that was in the unsecured facility. It’s kind of a two part question; one, is that right; is that number still good? Then the second part is based on the sensitivities you guys laid out, would your significantly increased hedge book. It still looks like you got about $30 million, $40 million bucks of sensitivity, that kind of maybe it’s a disaster scenario, that $3 gas, but you could blow through that $700 million level. So, is that level still a good level and if so, how do you guys think about worrying about that little bit of gap that appears to still be exposed?

Andy let me maybe make sure I can clarify your point on the 700. When I think about it and I think about our credit agreement, primarily there are two tests or two covenants that we look to, one being our interest coverage ratio and the other being our secured debt-to-EBITDA ratio. The secured debt-to-EBITDA ratio is one where it just will sort of put a governor on the amount of capacity you have related to your revolver and that number and then what will happen is if you aren’t meeting that ratio, then the LC and capacity and drawing capacity you have under that facility will go down. For every dollar you’re below the ratio you will lose $2.5 of capacity. So that’s something that we would expect to have some impact on that this summer, but it’s the type of thing that as soon as your EBITDA then improves or turns back around, then you regain that capacity. So it’s not a trigger you have lost it indefinitely and it will fluctuate, but given the level of liquidity we have that’s not something we’re worried about. Now the other is interest coverage ratio and that maybe what you were thinking about. The way that ratio works is it began the year about 1.5 times and it gross over the course of the year to 1.75 and at the same time though our interest is actually fallings over the course of the year, primarily through the SIF amortization of that debt and so I think the number that I would use is more around a 650 number and so, at this point as you said we do have some sensitivity around gas prices, power prices, basis, those sorts of things. One thing I wouldn’t double up obviously the gas and power sensitive that we gave you, but a dollar in gas is about 20 million and two points, so could that be 40 million in a $3 case from the time we ran these sensitive. I guess that’s possible but I would also say the team is continuing to work towards commercializing that last 10% of the portfolio and would certainly hope to have that done before you would see a $3 gas price.

Okay, got you. In the interest coverage ratio, it sounds like you said the SIF amortization would cause that ratio to actually kick the EBITDA closer to 650, is that the way to think about that.

Yes, that’s right the interest is coming down over the course of the year.

Okay, that’s very helpful color there. I mean just to switch over a little bit to the hedge book, and Holli maybe you can speak to this too, it sounds like I think Chuck mentioned primarily financial swaps in terms of setting up ledge. How do you guys think about it? Are the counterparties primarily trading houses; is some of that done through exchanges how do we think about the potential risk of an industrial going away from a credit quality perspective, how have you guys managed that?

Those are all generally cleared transactions, so we use brokers for that activity and requirements as far as the clearing process are that we aren’t exposed to credit risk with respect to that.

Okay, perfect. I appreciate the time guys, thank you.

Brian Russo of Ladenburg Thalmann, you may ask your question.

Good morning

Hi, Brian.

Could you give us an idea of what the heard plant 2008 EBITDA contribution was?

$3 million give or take.

Okay, great and then how much is the SIF amortization per year.

When you say the amortization are you talking about the difference between the cash and actual earnings that show up in our financial statements?

Right, and then what would drive the interest expense lower.

Sure, the SIF amortization is around $50 million, between what’s in the P&L and the cash that we receive, that’s amortizing debt facility that we have there. So as we pay down the debt, its $50 million, $60 million a year, that’s what’s bringing the interest down.

Okay and then just to be clear on the financial covenants on the credit facilities, are there any crossover defaults to any other part of your capital structure.

Really if you think about it, the credit agreement is the primary and the interest coverage ratio will be the one that we’d be most concerned around there, but no there aren’t other cross defaults.

Okay and also to be clear what if you were to fall below $650 million EBITDA, what happens to those facilities.

Well, we would be in default of our credit agreement facility for the interest coverage ratio itself. So I think we would be in a position we’d be working with our banks at that point, but again as I said that’s not something that we’re terribly concerned about based on the numbers we have giving you and I think we’ve been fairly broad in our range of estimates, in considering the types of things that can impact earnings during the year. But there’s not necessarily a built in cure for that covenant.

Okay and then how much is drawn on the revolver in the term loan?

We don’t have any drawn. We will post some level of LCs against that. Obviously the $850 million term LC facility, we try to maximize our usage of that since we cash collateralize it, but right now we have a fairly small amount I believe if any, of LC posted against the revolver itself, but certainly nothing drawn.

Thank you very much.

Daniel Eggers of Credit Suisse, you may ask your question.

Good morning. I guess just on the fact that you guys were able to sell into that short-dated auction event in the first quarter to help the ‘09 hedges, how do you guys think about 2010, 2011 willingness to hedge more than you have now as a regional auction occurs later this year?

I think we will pursue regional auctions as they occur. I mean the success of the one in the first quarter I think we liked quite a lot. To the extent we can do that some more and replicate that on a bilateral basis, I think we’re fine with it.

So you would be willing to let that 50% move to 70% or presumably higher if the auction was an attractive price?

Yes.

Okay. From a collateral perspective you had to put up $85 million of collateral for the 2010 hedges, anything we should be thinking about as far as sensitivity to future postings on what you guys have now?

Dan, on that I’ll let Holli address that.

Dan, that was actually initial margining and so that would have related to ‘09 and ‘10 positions that we’re entering into. I think the way to think about that is it’s like a working capital investment. As we’ve increased the level of commercial activity it’s just required that additional investment. So if we continue to increase the amounts outstanding at a rate greater than things rolling off, we could have some more initial margining, but I think we’ve made the largest move at this point and so I look at that as being like a working capital investment and it’s not really a mark-to-market concept that you would think about.

So these new hedges do not have a mark-to-market component from a collateral posting perspective?

Some will.

As Chuck mentioned too though, we settle on those essentially through a clearing house and so I would say to your question, yes, we still have exposure as we said all along. There is a cost to increasing the level of commercial activity and so we’ve entered into this with a view on being very aware of the sensitivities around that and we’re very comfortable with our abilities to meet any of the collateral needs that we would have going forward, based on the future changes in prices. If prices scream up, which we’d certainly be happy enough with at this point, we’re still comfortable that we have the liquidity to cover that.

Okay and then with the Heard sale, is that $105 million or thereabouts going to be in your free cash flow forecast for 2009? I might not have understood. Then also along those lines, are there any NOLs or losses that you’re going to get from a tax benefit perspective with the sale?

For Heard, we don’t typically include asset sale proceeds in our adjusted free cash flow numbers, so that would not be included in there. It would obviously be in our cash flows, but not in what we would project, because we try to limit that to things that we view as more recurring operational-type items. On the tax side we will have a small tax gain associated with that sale, because the basis was lower than $105 million, but as you’ve probably tracked, our NOLs are down to fairly small numbers, $25 million or so and what we’re left with now is more AMT credits that we would look to utilize over the course of the next few years.

Okay. Do you have the end quarter NOLs and AMTs by chance?

I want to say its $28 million for the NOL and the AMT credits are about $270 million. Now I’m getting a nod from Norelle so that must be right.

Perfect, thank you.

The K will be filed later today Dan.

Thanks.

(Inaudible) of Goldman Sachs, you may ask your question.

Hey guys, a couple of things. Back to the bank line, I think you recently just renegotiated some sort of waiver on the covenant, can you talk a little bit about that and were there discussions to try to get additional covenant relief with respect to the financial metrics and also what did you have to give up or consent fee or any other additional assets as collateral?

What we did there, we had a waiver that we needed to do because there was a test called an incurrence test, and really what it dealt with ultimately was our ability to sell Plum Point, because that was not a carved out asset and so we wanted to basically correct that, so that we were able to free that up in order to do that. So it was really just pushing out the incurrence test one year from when it was originally set on a ratchet up. I’m not going to get into the amount of consent fee other than to say it was immaterial.

Okay, did you have to post additional assets or you took something that wasn’t restricted?

Something we chose to do as part of the process and we’ve been trying to move a little bit more to simplification anyway, was the SIF assets and that in fee had been an unrestricted sub in the past, that’s not a restricted sub, but we did that along with this more again to clean up and simplify the capital structure.

Okay and just a second question with respect to liability management, I know you talked about it last call or you made a mention of it, of debt repurchase. Have you guys thought about anything yet on that front given that you’ve executed on the Heard sale here and you may look at other asset sales. Does it sort of make sense at some point to look at repurchasing any debt?

Yes, we’ve talked about it, looked at it a lot and I guess I would say for the last year, year-and-a-half, maintaining the cash and liquidity that we’ve had turned out to be a pretty good game plan for right now, just given how the economy has turned out. It’s nice to have your bank facility be basically undrawn, have the amount of cash that we have on hand, but all options are on the table ultimately to make decisions like that and we’ve got a tremendous amount of flexibility to do that.

Okay, just one last thing back to the bank lines. Would you start talking to the bank lenders now given there might be some tail risks with respect to even though you’ve laid on hedges to essentially piercing covenants to just get some freedom now? Would that make sense or are you just going to wait and see?

I think if we become concerned that there’s going to be an issue, we would reach out to our banks, but we’re not at that point yet.

Okay, fair enough. Thank you.

Charles Sharett of Credit Suisse, you may ask your question.

Hi, good morning. Just on a broader picture here, a lot of people are talking about natural gas going lower in the short term. I mean what does this business look like in 2010, 2011 if you assume natural gas stays at around $4 and what’s your view on managing the business?

Well, I think that’s where as Lasan put it on the first question, it’s kind of bridging out with the current + 1, current + 2, I think those are the things that we’re doing to protect that sort of downside. We’ve got costs that we can manage and in addition, if you go out a couple years like that, this is really our peak year in terms of the consent decree environmental spending, so you’d see that coming down. There’s a potential that we’ve got some gas combined cycle maintenance, but that’s all tied to run time, so I guess in the world you’re projecting that run time is down. I think at that point the best management that you’ve got is probably the balance sheet and the liquidity that we have and the flexibility around our covenants, which I know we’ve talked quite a bit around covenants and the bank agreement, but as Holli said those are down at a level that we’re not concerned about at this point in time and there really are none in our term debt or in our permanent debt. So if that’s your concern I don’t know that I’m going to come up with a scenario that’s going to have a rosy upside picture for you if you’re projecting a depression/recession of the lasts three years.

Okay, thank you very much.

Operator we’ll take one more question.

Thank you. Ivan Urkevich [Ph] of Jefferies, you may ask your question.

Hi, good morning.

Hey Ivan.

Hi. I noticed that the market heat rates in your parts of Illinois basically decreased in February versus January. I’m just wondering; would that be due to demand destruction or is it due to weather and would you expect this phenomenon to continue?

I’m sorry, it was very quiet there. Your question dealt with Illinois what?

It’s the Illinois market heat rates, it basically decreased significantly in February versus January and I was just wondering is that due to demand destruction and would you expect this to continue?

Ivan, I would think that it’s mainly weather. We had a pretty cold January and we’ve had a mild, relatively speaking other than thunderstorms, pretty mild from a temperature standpoint February. So, as much as I think right now a lot of people are wanting to look to changes in volumes and try to immediately pin it on demand destruction or something like that, I think predominantly it’s going to be weather and that may sound simplistic, but that’s what we continue to see as the major driver in our regions.

Okay, thank you.

Okay. That concludes today’s call. I’d like to thank all of you again for your time this morning and your interest in Dynegy.