Dynegy and ChevronTexaco agree to change natural gas purchase and sale agreements

HOUSTON, Jan. 17, 2003 — Dynegy Inc. announced that it has reached agreement with ChevronTexaco to end their existing natural gas purchase and sale contracts related to ChevronTexaco’s North American production and consumption, effective Feb. 1, 2003.

Dynegy Marketing and Trade had purchased substantially all of ChevronTexaco’s lower-48 U.S. natural gas and supplied the natural gas requirements of ChevronTexaco’s corporate facilities through agreements that were to run until August 2006.

Dynegy has paid ChevronTexaco approximately $11 million in connection with ending the contracts and the transfer to ChevronTexaco of certain third-party contracts. To ensure a seamless transition, Dynegy will provide ChevronTexaco with services that include agency arrangements, scheduling, invoicing and accounting, through March 31, 2003.

“This transition in our business is consistent with Dynegy’s strategy of exiting our third-party marketing and trading activities and thereby reducing collateral requirements,” said Dynegy President and Chief Executive Officer Bruce Williamson.

“By the time the transition is complete, overall collateral postings will be lowered by approximately $180 million, providing yet another significant boost to liquidity as we work to improve the company’s financial position and rebuild Dynegy around our core power generation, natural gas liquids and regulated energy delivery assets.”

The agreement announced Thursday does not involve the natural gas processing and liquids agreements between Dynegy Midstream Services and ChevronTexaco, which will continue in their current forms. Dynegy Midstream Services is the company’s natural gas liquids business unit involved in gathering, processing, fractionation, transportation, marketing and feedstock supply.

Dynegy Inc. owns operating divisions engaged in power generation, natural gas liquids and regulated energy delivery. Through these business units, the company serves customers by delivering value-added solutions to meet their energy needs.

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