Hello and welcome to the Dynegy Incorporated first quarter 2009 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’d now like to turn the conference 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 first quarter 2009 results. 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 estimates. 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 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 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 our 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 following along. I’ll begin today by discussing first quarter highlights and some key market observations. Holli will then provide first quarter financial results, discuss regional performance drivers for the quarter, and provide an update on our commercial strategy and 2009 estimates. I’ll then wrap up by discussing why we believe Dynegy is well positioned to weather the current economic environment and then we will go to Q&A. Please turn to slide four. 2009 continues to be a difficult year due to the downturn of the global economy and the corresponding impact on commodity prices. In turn, lower commodity prices impact our results. However, to some extent, Dynegy’s diversified portfolio and commercial strategy are helping to mitigate the affect of lower market prices. As the table demonstrates, power prices in all of our key regions declined period-over-period. However, first quarter production volumes in total increased approximately 10%, with stronger production particularly from our natural gas-fired facilities. On peak market heat rates increased in our key regions as well, leading to higher utilization of our gas plants. Additionally, we have significantly increased our contracted percentage of expected generation in 2009 to protect cash flows and increase 2009 earnings predictability. We have also maintained a capital structure that as of May 1 included available liquidity of approximately $2.1 billion, including $829 million in cash. Finally, after the end of the quarter, we closed on the sale of the Heard County peaking facility in Georgia, which brought in $105 million in cash. This sale is consistent with previous divestitures…

Thanks, Bruce. Before starting, I’d like to point out that these materials do contain non-GAAP measures that are reconciled in the appendix of this presentation for your reference. Now let’s turn to slide ten for a look at our first quarter highlights. Adjusted EBITDA decreased by 16% from $237 million in the first quarter of 2008 to $198 million in the first quarter of 2009. This is primarily due to lower realized power prices period-over-period, partially offset by higher volumes. On a GAAP basis, we reported a net loss of $335 million for the first quarter of 2009, which reflects goodwill impairment charges of $433 million. The goodwill impairment charges resulted from the impairment test that compared book values to market values, in light of the significant drop in forward power prices, further deterioration in the economic condition and a sustained decline in the company’s market capitalization. Impairments were recognized reducing the book value of our operating assets. We have more information in our first quarter 2009 Form 10-Q, which will be filed later today. The goodwill impairment charges were partially offset by $105 million in after-tax mark-to-market gains, which reflect the decrease in prices over the quarter. The net loss in ’09 compares to a net loss of $152 million in first quarter 2008, which included $173 million in after-tax mark-to-market losses. Moving on to capital and liquidity, as of March 31, 2009, Dynegy had net debt and other obligations of approximately $5 billion and collateral postings of $1.4 billion. Liquidity was approximately $1.9 billion, with $722 million of cash on hand. Before moving on to regional drivers, I wanted to address a question many of you have asked regarding the calculation of our financial covenants. We have worked with many of you individually to understand the mechanics behind…

Thanks, Holli. Please turn to slide 17. In closing, I want to leave you with some key takeaways. First, Dynegy’s diverse portfolio and current liquidity are important tools in helping to mitigate uncertainties in the low commodity price environment, which we expect to continue in the near-term. While the US power demand has slowed, two of our three regions actually experienced increased production volumes in the first quarter of 2009, which demonstrates the advantage of having a diverse fleet in terms of geography and fuel price. Even in a low commodity price environment, our Midwest coal fleet is not experiencing coal to gas switching. Also, our favorable delivered PRB coal and rail contracts provide a cost advantage for a Midwest coal fleet, helping to mitigate tightening dark spreads. In addition, some additional value can be captured by our well-positioned combined cycle natural gas fleet if or when coal to gas switching does occur. Also we believe our liquidity position now at approximately $2.1 billion is our most significant tool to weather out the current economic downturn. In addition, we don’t have significant debt maturities until 2011. And finally, in our cyclical energy business, we fully expect to see a rebound after this trough. As the energy markets recover, Dynegy’s fleets have the benefit from an increase in both power prices and demand. We believe our significant gas-fired fleet will see increased utilization and our entire fleet will participate in a heat rate expansion. And because our stock has leveraged both power prices and demand, we would expect benefits for investors as financial and energy markets recover. With that, let’s move on to the question-and-answer portion of our presentation. Operator, we will take the first call now.

Thank you. The first call will come from Ameet Thakkar of Deutsche Bank. Your line is open.

Good morning, guys.

Hi.

Just wanted to ask you guys if you could kind of leave or remind us what are the auction rights provisions in your merger agreements with LS Power. Can they effectively put you guys up for sale?

Well, I mean, what LS can do after April, though now we are past that date, is really they are lockup ended. So prior to April, they had limitations on their ability to sell shares other than some very small amount, about 40 million shares or so. Now, post April, they can sell shares if they would like to, but it has to be in a widely dispersed offering where no party buying controls more than 15%. If they want to buy more shares than what they currently own, they have to make an offer for all and not less than all of the outstanding common shares. That offer would have to be received and be evaluated by the independent directors of the Board, much like any company would by a Board, and has to be viewed and judged as a full and fair value for all investors. And then after that, if that offer is rejected, then LS has an additional right, which is they can request the company to hold an auction. And again, any bids that would be received from that party or anyone else has to be judged by the independent directors to be at a full and fair value for all investors.

Okay. And then just turning to MISO capacity pricing, we saw the results of Ameren’s capacity auction. There is not a centralized capacity market in MISO. I know it’s been largely a bilateral market. I mean, what takeaways should we take away from the results of that process?

Let me ask Chuck or Eric [ph] to weigh in on it.

Well, I think in general what we’ve seen is the capacity prices are down a bit. We – you are correct. It is a bilateral market. There are a couple of auction process – prospects underway now. I guess – that’s all I got [ph].

All right. Thanks.

Okay.

Our next question comes from Dan Eggers from Credit Suisse. Sir, your line is open.

Hey, good morning.

Hi, Dan.

Can you just help a little bit – the EBITDA reductions, anyway help quantify how much was Moss Landing timing do you see now this year versus next year? Is that material to gross margin or more just (inaudible) free cash flow side

Dan, it’s about $15 million or $20 million on an adjusted EBITDA basis. When you think about the downtime, obviously it’s not bringing in the energy revenues. And then you add to that the additional – there is always some OpEx in addition to the CapEx when you go around these projects. So the combination of those two is expected to be between $15 million and $20 million.

Okay. I guess just kind of going back to the hedging strategy for 2010, with ’09 basically all full at this point in time, I know you guys are looking at transactions. But is there more in thought that you want to be more hedged even into ’10, or kind of where you think your target should be going into 2010 from a hedge position perspective?

Yes, Dan. I think more than in years past. I mean, given how the economy and the market environment is, I think right now people are putting a premium on predictability over upside. And so much like you saw us increase the amount when we came into 2009 over prior years and then quickly ramp it up into the year, I think we will end this year significantly higher going into ’10 than we would have in prior years.

All right. Holli, Heard County is included in the free cash flow guidance for the year?

It’s not included in free cash flow guidance. We take out things like asset sales.

And that’s the only substantial adjustment we would make to the free cash flow numbers you guys gave?

I think that’s right.

And then I guess last question, you said that basis was trending wider than expected – wider than – it is showing wider than planned recently. Is that in guidance? And how do you see mitigating that if it’s continuing to slip away from you?

The short answer on it is yes, it’s in guidance. And what we wanted to point out is, you always have to look at where the forward is for it as well as where things have settled out at. The first quarter basically settled out about where we would have thought on average, and we were just highlighting for people that the forward is trended up, so that is incorporated.

Okay. So the forward is incorporated at these levels. And I guess just one more on Ameet’s question around LS Power. If LS were to submit a bid, would that be public or would that – how would that come out if they were to look to be transactional?

Really no different than any other company. I mean, a company can receive an offer and then things become public when an agreement is entered into. And that’s when things would become public.

So the (inaudible) conversation could be occurring now, but it wouldn't be public until later. Okay, thank you guys.

Neel Mitra of Simmons International, you may ask your question.

Hi. Do you attribute any of the increase in capacity factors to combined cycle plans from coal to gas switching in the first quarter? The capacity factors were like two to three times higher than last year in the Northeast and Midwest. Do you attribute all of that increase in capacity factor to colder weather in the mid-Atlantic?

I don’t know that we can drill it down and say how much was weather and how much was coal to gas switching. I mean, I think if there was any, I mean, it would have been pretty targeted probably around like Antalani [ph] in PJM or potentially I guess in the New York market. But I don’t know that we really – that we have a quantification for you of this much is weather and this much is coal-to-gas switching. Chuck, anything you want to add?

No. I’d just say that the gas prices being down, (inaudible) being up, that tends to lead to more combined cycle generation, and that’s what we have.

And then it looks like your Northeast and Midwest EBITDA estimates are staying roughly the same for 2009. Are you factoring in any increased combined cycle utilization like what we saw this quarter into those estimates?

I think the way, Neel, to help from a perspective how we prepare our forecast is, we go in and I think – and for this particular update, we used April 7th pricing. And if the curves are implying that there is more run time around that portion of our fleet, that’s going to be built into guidance. If not, then it wouldn’t be in there. So we haven’t made a special adjustment to try to capture additional value in there. If the markets imply, then it’s there.

Okay. And then lastly, how should we think about oil-fired utilization for the rest of the year now that fuel oil is trading at significant premium to natural gas? It’s your estimate of $25 million in adjusted gross margin still good for 2009 from Roseton?

Yes is the short answer. I mean, right now – I mean, Roseton tends to run obviously in either very cold weather in the wintertime or hot weather in the summertime. And again, much like Holli’s explanation of gas, we would be taking a look at the forwards and saying, okay, when does Roseton forecast to be in the money. It had a very good first quarter with low oil prices and cold weather in the Northeast. We would think that – obviously all the first quarter has been incorporated in and then we look forward for the summer, and it’s possible Roseton gets some more run time then in the summertime.

Okay, thanks.

Brian Chin from Citi, you may ask your question.

Hi, good morning.

Good morning.

Quick follow-up question on Moss Landing. Since the maintenance event was pulled into ’09, is that a fourth quarter ’09 event?

Yes, we expect – we had planned on it being in the spring of ’10 and it has been pulled forward to, yes, the fall. So it would be somewhere in the –

October time frame.

Yes.

It was October, Brian.

October, November time frame.

October, November. Great. That’s it.

Okay.

Lasan Johong, RBC Capital Markets, you may ask your question.

Thank you. Good morning. Bruce, although you are not seeing any coal to gas switching in your fleet, I’m assuming your CCGTs are replacing somebody else’s coal output. Is that right?

All we can say is that we obviously experienced increased run time. I mean, as far as who experienced the decreased run time, I mean, that’s in effect a question for somebody else. I don’t know.

Okay. And then –

I think it’s fair to say if you look at our slide seven, what we tried to do is lay out there some map to say, okay, well, if you are someone burning Illinois coal, a gas plant in the area probably has about $5 a megawatt-hour advantage on you. So the gas plant should increase its run time and the Illinois coal would decrease. If you are a Central App scrubbed plant in the area of a similarly situated gas plant, I don’t know that we’re a $1 – what's that, a $1.40 difference, I don’t know that we’re $1.40 smart there on everything. But it’s basically sort of saying that the gas plant and the Central App are kind of at a push with each other and so they are probably going playing tug-of-war back and forth. But it probably comes down at that point to what the Central App burners’ bidding strategy is. If they just want to go ahead and monetize coal on the stack and things like that, they may be running in order to just keep running. So it’s a little bit more of a push there.

So let me tackle it from a slightly different aspect. It looks like at some point in time, your profitability actually increases as gas prices stride. At what point do you see a J curve kicking in on your fleet where gas prices going down actually helps your profitability?

Well, we are still – just when we look at the overall portfolio, we’re going to do better in a higher gas price environment because that’s going to derivatively then increase the price of power. And we are going to make more off of the dark spread, off the PRB burning plants more than we will be making off the gas plants. But I don’t know that we have a scenario that we do better in a low gas price environment. I think the best we can tell people is that the diversity helps to sort of mute the downside if we are just in the low commodity environment, if not just all downside for us, there is an offsetting positive that takes place, but it’s enough that it turns things around and we are sitting here timing for a low gas price environment.

Okay. Now I’d agree you want to have a low gas price environment. Last question, Holli, you said – you mentioned that there was a potential restriction on your revolver availability. How long will that last in your mind? And I’m assuming you have no impact as you have enough cash. But how long would you think that restriction will last and when do you think it will start?

Sure. I think – to just restate what you said, that I agree with you, that it’s not something that given our current liquidity and collateral postings that we were concerned about. But if you look forward, it is a rolling quarterly test. And so I would suspect the first time we expect to see a reduction would be in the summertime. And that’s something that is we estimate it’s plus or minus $250 million. And then it will just depend on how we – I don’t expect it to be – I would expect that to be for the year. I wouldn’t expect it to be any worse than that. And then the balance will be dependent upon when you start to roll into 2010.

So basically roughly at most about six months?

Well –

No, you tell me when the economy is turning and everything is trending sharply higher. I think that is the word of art and I keep hearing on CNBC is we are seeing sprigs of green. So –

Okay. Appreciate the chat. Thank you very much.

Okay.

Angie Storozynski, Macquarie Capital, you may ask your question.

Thank you. Let me just start with a question why we are not seeing any disclosure about your current level of hedges. I mean, we had in the past and I understand that you are working on your additional hedges for 2010. But should we assume then that nothing has changed since the last update, so you are still about 50% hedged for 2010?

Angie, your focus is on ’10 versus ’09?

Yes.

Okay. One of the things that we want to be careful about is that we have been active in 2010 and we have put on more positions since the last time we were on certainly. And that’s – it's a percentage that’s significantly high. I would say it’s 80% on a consolidated basis for the fleet. But what I would also say is that we want to be careful about what people read into that, because that is just for the energy volumes that we have sold forward. And as you know, our earnings are dependent upon several factors, that being one of them. But capacity markets, basis estimates, all those sorts of things will play into that as well. And that’s why we would look to give more information on our typical basis towards the end of the year and a give a full view of 2010 at that time.

But your assumption is that going into the summer months and closer to December when you issue guidance, you’re going to continue adding hedges for 2010?

Well, as we’ve said, we would – if we are at 80% now, we said we would go into 2010, as Bruce mentioned, higher certainly than we have in the past. And we will be opportunistic in looking at opportunities. And if it makes sense, yes, we could put some more on or we could stay where we are at. So we’re not necessarily going to project the future changes in that figure as we sit here today. But again, that’s where we are.

To put it in perspective, I think in past years we’ve – the high going into a year was probably around 65% or so. And we’re telling you we’re basically already at around 80%. So we’re already well up above where we would have been in the past. And so I think you should expect that by the time we get to the end of the year, we’ll be at a pretty well – very high number.

Okay. And also the lowered guidance, the low end of the guidance, did you account for potential basis differential impacts? So the 670 or 680 number that we have now, does it incorporate any wiggle room for basis differential or is it just basically –? I mean, that’s my question.

Basically the forward curve – Chuck, you want to add anything?

Yes. There is not a – we don’t have a forward curve for basis per se, but it reflects our current estimate for basis, which is higher than the number that we use for planning purposes when we put together our original plan and then our guidance estimates that we used in February.

Okay. Thank you.

Gregg Orrill, Barclays Capital, you may ask your question.

Thanks. Two questions. Just a simple one first on ’09, what’s your EBITDA sensitivity now to a dollar change in gas? And then the second topic is just, if you could talk about prospects and timeline for the implementation of climate change legislation. It seems like the calendar has got pushed back. Maybe you can also talk about sort of the type of compromise that would be necessary to get something through the House this year. Thank you.

Maybe I can take the first one. It’s fairly easy. Given that we, again, have plus-95% of our energy volume hedged, the sensitivity of gas, we didn’t run a new one and place it in here. But given that we were a dollar, was $20 million. When we were around 90% hedged, I would say at $15 million or less to a dollar change in gas going forward for the balance of ’09.

And Gregg, on your second question, I mean, I guess I could say, well, thankfully none of us in this room are in the House with the Senate. And so I don’t know that I have a projection or an estimate on what sort of compromise is going to be needed. There were a lot of hearings held in the last couple of weeks. A variety of people commented and provided I think constructive input in some cases. And I think it’s up in many ways to Congress to take a look at the issue, make a decision on whether this is the time to put something in place. I think what we would like to see as a company still would be a Federal program. We have one program to deal with administratively rather than a patchwork quilt of things from a variety of locations around the country. But I think importantly, people need to realize that whatever is put in place, it’s going to be an increase in cost. It’s going to be an increase in cost at the electric switch, the gas pump, jet fuel, plane tickets, FedEx packages, shipping, virtually anything in the US economy. And I think that needs to be thought through by Congress and come up with a plan so that there is a way to migrate the US consumer and the US economy to this rather than to shock the system. I think we’ve got enough shock in the system right now. What we need is to see something put in place that is economically sound at the same time and allows the country to ease into it.

Thanks.

Okay.

Ivanet Ergovich [ph] of Jefferies, you may ask your question.

Hi, good morning. I have two questions. First one, what do you think was the reason for the heat rate improvement, in particular in Midwest?

Well, I mean, I think namely it comes out probably from low gas prices more than anything else. And that in turn – just simply put, gas prices fell faster than power prices and so you ended up with the Midwest combined cycle facilities getting in the money more than they had in years past by a pretty significant amount and their run times increasing.

Do you think this will continue throughout the year or the gas prices are still low (inaudible)?

What we’ve put in our plan is just wherever the forwards are and that’s how we’ve put it in. I think if anything, what it shows is that even with an economic slowdown, the American consumer continues to use electricity. I think there has been a lot of view that as the economy goes down, people don’t consume electricity. And while that may be the case on at the margin, industrial and commercial applications where people can go ahead and shut a factory down for a period of time or things like that, our coal fleet is more down in South Central Illinois where it’s more agricultural. And so we probably didn’t see as much of a decline there, plus as they are positioned from a cost standpoint, like we highlighted on a couple of the slides, in terms of our cost advantage. So we didn’t see the decline there. And then we did see the improvement of the gas plants as gas prices – I don’t know what words you want to use – plummeted this past quarter and power prices fell but didn’t fall nearly as much.

Okay. And another thing, last year, I think second quarter, basis differential was significantly higher than it was a year before. I mean, I know you are saying you expect higher basis differential this year, but would you expect something similar to the second quarter last year or there is something more returning to a normal number? I mean, what would be, like, the best way to look at it?

Well, I think if you look at last year, what really drove things last year was because we had natural gas. I don’t know, it hit $13 or so. And so that spikes the price of power in PJM east and west and had a drag-along effect that impacted us in the PJM and in the CIN Hub. So I think this year I think we would say we would expect more of a return to normal because we certainly don’t expect gas prices to turn 180 degrees and spike up like they were at this time last year.

Okay. Because I think last year when I was looking at numbers like around $8 and a year before in the first quarter was – in the second quarter was like $2. So, what is like normal? Is it like $2?

Our guidance was around $4 or $5. And I think that would be about the place to be.

Okay, thank you.

Okay. Operator, we will do one more question.

Thank you. The last question comes from Terran Miller of Knight Libertas. Your line is open.

Hi, Terran.

Good morning, Bruce. How are you?

Good. How are you? Long time.

Thank you. As we look at your financial flexibility going forward, I know you have a fair amount of cash on hand, but you’re going to have reduced availability for some period under the bank facility. I look at the prospects of continuing to lighten up on your peaking assets. Could you give us some view of what you think – what percentage of those peaking assets were considered core and what percentage were not considered core as we try to view what your financial flexibility is going forward?

Geographically, if we cut the portfolio one way, which we’ve talked a lot about in the past with people, we really view geographically the Northeast, the Midwest, and West as the core regions. So that left assets that were in the Southeast regions. So that led to the sale of Calcasieu, which we did a while ago, Heard that we closed this past quarter. We do have one other peaker that’s in that region, Bluegrass. And then I think people should also remember we’ve told the market that we are out in the market via a Barclays investment bank working with us to explore the potential to sell our interest in Plum Point and Sandy Creek. Plum is in the Southeast region and Sandy is the only asset in ERCOT, both of these being minority stakes. And so if you like at it kind of cutting the portfolio geographically, I think that would be a way to take a look at it and leaving everything else in those three regions. We did sell a peaker I guess a year and a half or so ago, maybe almost two years ago now I guess, that was in the upper Midwest. And we did that strictly because of opportunism at the price level that was achieved. But I guess at this point, I would say cutting the portfolio geographically is probably the easiest way to do.

Is there any update in terms of the process for Plum Point and Sandy Creek or expectation when that process will come to a conclusion?

I would just say that it’s well under way. And we would hopefully be looking to be able to conclude the process and get something out I would hope in the second quarter.

Second to third quarter we would be in a position to disclose more.

Thank you very much.

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