Dynegy 1Q99

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Onshore Property Program London Underwriter
Meetings February 2005 Confidential
2
Katie Pipkin Kevin Blodgett
Confidential Information
The information set forth herein is highly
confidential, and it is provided by Dynegy Inc.
(Dynegy or the Company) with the
understanding that it shall not be traded upon or
used other than for the purposes of an evaluation
of insurance needs and pricing, and the placing
of such insurance/reinsurance. Furthermore, in
providing the information set forth herein, it is
understood that this presentation and these
documents (and in any supplementary documents or
additional information, or imparted in any
conversation of discussion) is strictly of a
confidential nature and is supplied on the
condition that it shall not be disclosed to any
person, other than your Directors, Officers and
Employees who need to know such information for
the above purpose, without prior permission being
granted by Dynegy.

• Safe Harbor Statement
• This presentation contains statements reflecting
  assumptions, expectations, projections,
  intentions or beliefs about future events that
  are intended as forward-looking statements.
  You can identify these statements, including
  those relating to Dynegys 2004 and 2005
  financial estimates, by the fact that they do not
  relate strictly to historical or current facts.
  Management cautions that any or all of Dynegys
  forward-looking statements may turn out to be
  wrong. Please read Dynegys annual, quarterly
  and current reports under the Securities Exchange
  Act of 1934, as amended, including its 2003 Form
  10-K, as amended, and third quarter 2004 Form
  10-Q, as amended, for additional information
  about the risks, uncertainties and other factors
  affecting these forward-looking statements and
  Dynegy generally. Dynegys actual future results
  may vary materially from those expressed or
  implied in any forward-looking statements. All
  of Dynegys forward-looking statements, whether
  written or oral, are expressly qualified by these
  cautionary statements and any other cautionary
  statements that may accompany such
  forward-looking statements. In addition, Dynegy
  disclaims any obligation to update any
  forward-looking statements to reflect events or
  circumstances after the date hereof.
• Non-GAAP Financial Measures
• We use the non-GAAP financial measures EBITDA,
  free cash flow and Operating Margin/Deficit
  in these materials. We have defined these terms
  in the Appendix. For our 2005 guidance, we have
  provided reconciliations of non-GAAP measures to
  the most directly comparable GAAP measures,
  namely net income and operating cash flow,
  respectively.

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Agenda

• Introduction
• Financial Overview
• Business Unit Overview
• Technical Matters
• In Summary
• Appendix

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Introduction
5
The To Do List Moving On
Completed Objectives

• Appointed new executive leadership team
• Simplified capital structure
• Deferred significant debt maturities through 2010
• Maintained strong liquidity
• Closed new bank credit facilities
• Exited non-core, domestic and international lines
  of business
• Exited five of nine long-term tolls
• Completed acquisition of Sithe
• Restructured Kendall toll
• Exited legacy gas and power contracts
• Exited four gas transportation agreements
• Restructured Natural Gas Liquids contracts
• Discontinued Trading Marketing
• Significantly reduced cost structure
• Continued to reduce GA and other ongoing costs
• Addressed certain legacy litigation and
  regulatory issues
• Divested certain minority interests in non-core
  Power Generation and Natural Gas Liquids assets

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Achievements Since December 2002

• Exited all non-core businesses (IP, speculative
  Trading, Telecommunications)
• Decrease in debt and other obligations of 6 B
  (43 reduction) since December 31, 2002
• Debt reduction of 3.3 B, including restructuring
  of CVX 1.5B security for 850MM
• Tolling, turbines, and other obligations reduced
  by 2.7 B
• Decrease in debt maturing within 5 years by 4.7
  B (to less than 500 MM)
• Eliminated uncertainties surrounding FERC, CFTC
  and SEC investigations
• Enhanced corporate governance (11 new Board
  members and new corporate leadership)
• Proven access to public and bank debt markets
  through series of re-financings
• Extended 1.3 B facility (700MM maturing 2007
  600MM term loan maturing 2010)
• 2.0 billion public debt issuances
• Market confidence reflected in securities pricing
• Stock price increase from 1.18 to 4.50/4.75
  range
• Unsecured bond trading range improvement from low
  30s to high 80s and 90s

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Financial Accomplishments Since December 2002
Debt reduced 3.3 B (37) while maintaining
strong liquidity

• Total debt reflects balance sheet debt, off
  balance sheet leases and preferred stock.

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Financial Overview
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Funded Debt and Other Obligations Maturity Profile
( in millions)
Current Maturity Profile
1,641
Sithe
1,289
1,088
Option Horizon
705
624
345
266
137
138
115
50
44
2012
2005
2006
2007
2008
2009
2010
2011
2013
2014
2015
2016
Note Debt includes preferred stock, par value
debt obligations and obligations for Central
Hudson shown annually as a change in present
value of the obligation using a discount factor
of 10. Holders of Dynegy convertible
subordinated debentures have a put right in 2013,
but are shown above maturing at the due date in
2023. Includes obligations of Sithe Energies.
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Liquidity
in billions
1.5
1.4
1.4
1.3
1.2
Proforma 12/31/04
12/31/03
3/31/04
6/30/04
9/30/04
Cash
Availability

• Current liquidity levels are well in excess of
• what is required to sustain the business

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Dynegy Bond Activity Returning Value to Investors
DHI 10.125 Senior Secured Notes Due 7/15/13
DHI 8.750 Senior Notes Due 2/15/12
Closing Stock Price
Source Advantage Data Inc. / CSFB
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Industry Consolidation
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Business Unit Overview
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Dynegys Business Structure
FORMER
CURRENT
Wholesale Energy Network
Power Generation
Natural Gas Liquids
Natural Gas Liquids
Transmission Distribution
U.S. and Global Communications
Strengthening focus on core operations simplifies
business structure and provides clarity
International Gas, Power and Trading
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Dynegys New Structure
Power Generation
U.S. portfolio of 13,005 net MWs Substantially
contracted/hedged Geographically advantaged in
New York, Midwest and California Scaleable
systems Well-positioned to benefit in power
recovery
Natural Gas Liquids
Integrated upstream and downstream
businesses Most processing contracts structured
as percentage of proceeds/percentage of liquids
or fee-based Provides upside in todays high oil
and gas price environment
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Power Generation Portfolio

• Diversified portfolio
• 32 baseload, 24 intermediate, 44 peaking
• 28 coal/oil, 18 dual fuel, 54 gas
• Coal and dual fuel plants perform in current high
  gas price environment
• Gas plants present upside for future
• Low maintenance capital
• Scaleable systems with multi-fuel logistical
  expertise
• Originally built for significantly larger
  portfolio

Note Map above includes Independence in the
Northeast (1,021 MW) and other plants acquired in
Sithe transaction (334 MW), but excludes Long
Beach in the West (235 MW) due to retirement.
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Power Generation 3Q 2004 Financial Performance
( in millions)

• QTD and YTD 2004 volumes essentially on plan
• Net YTD volumes up 2
• Net QTD volumes down 10 due to reduced
  generation at the Havana station in anticipation
  of its PRB fuel switch
• Northeast volumes improved 18 YTD
• YTD 2004 operating cash flow 351 MM, capex 78
  MM and proceeds from asset sales 245 MM
• Free cash flow 518 MM for YTD 2004
• YTD 2004 OCF/ICF 5.32

EBITDA
CapEx
555E
538A
500
491
YTD
YTD
151A
145E
117
78
2004
2003
2004
2003
Average Actual On-Peak Market Power Prices
(/MWh) 3Q 2003 3Q
2004 Cinergy 39 43 NI Hub/ComEd 39 41 Southern
44 50 NY Zone G 61 57 ERCOT 43
50 SP-15 54 57
Volume change calculated excluding non-core
assets either sold or targeted for sale.
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Power Generation Longer-term Generation
Earnings Potential

• Power market recovery and stable cost structure
  allows for significant uplift in baseload coal
  fleet performance
• DNE dual-fuel capability provides an expanding
  dark spread advantage
• Significant margin from gas-fired plants occurs
  in market recovery

• Represents an average mid-point for expected
  generation earnings. Actual results may differ.
• DNE is financed at the project level and
  includes annual lease expense of 50 MM for GAAP
  purposes. Operating margin and EBITDA are shown
  without the DNE lease expense to negate the
  impact from financing.

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Power Market Recovery Timeline
Southeast (SERC-Entergy)
Southeast (SERC-Southern)
Texas (ERCOT)
Southeast (SERC-VACAR)
Midwest (ECAR)
Midwest (MAIN)
Northeast (NYISO)
California (WECC)
Target Estimated Reserve Margin
Estimated 2004 Reserve Margin
Dynegys Estimated Time Horizon
NERC Region
Northeast (NYISO) Midwest (MAIN) Midwest
(ECAR) Southeast (SERC-VACAR) Southeast
(SERC-Southern) Southeast (SERC-Entergy) Texas
(ERCOT)
3 5 years 4 6 years 4 6 years 5 7 years 9
11 years 10 years 6 9 years
18 15-17 15-17 15-17 15-17 15-17 12.5
21 30 27 33 43 77 26
Note Estimated and targeted reserve margins
derived from NERC 2004 Summer Assessment and
regional NERC and ISO documents. Dynegys
estimated time horizon for market recovery
reflects our projections as to when reserve
margins are likely to return to target levels
based on Dynegys demand growth and plant
retirement assumptions.
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Power Market Recovery Timeline
Southeast (SERC-Entergy)
Southeast (SERC-Southern)
Texas (ERCOT)
Southeast (SERC-VACAR)
Midwest (ECAR)
Midwest (MAIN)
Northeast (NYISO)
California (WECC)
2012
2005
2006
2007
2008
2009
2010
2011
2013
2014
2015
2016
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Power Generation Capital Expenditures

• Long-term maintenance capital expenditures should
  approximate 130 MM - 160 MM annually
• Resolution of Baldwin litigation or new Clean Air
  environmental regulations may require an
  aggregate of approximately 350 MM of compliance
  capital expenditures by 2010, primarily at
  baseload coal plants
• Federal mercury proposals, if enacted, could
  result in incremental capital expenditures

• 2005E capital expenditures for DNE include
  Independence.

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Natural Gas Liquids

• Upstream assets are strategically located
• High growth areas of North Texas and Gulf Coast
• Mature Permian Basin
• Fractionation and storage assets optimally
  located in Mont Belvieu NGL hub and Louisiana
• Major producer customers include ChevronTexaco,
  Burlington, BP, Kerr-McGee, Forest Oil and Devon
• Major NGL and end-use customers include
  ChevronPhillips Chemical, ChevronTexaco,
  AmeriGas, Dow, Eastman, Heritage, Suburban,
  Tesoro and Valero

Field 99 POP/Fee, 1 Other Straddle 53
Hybrid, 22 Fee, 19 POL, 6 Keep Whole
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Natural Gas Liquids 3Q 2004 Financial
Performance
( in millions)

• Upstream financial results continued to benefit
  from high commodity prices and strong asset
  availability
• Downstream financial results favorable due to NGL
  price impacts and 38 increase in fractionation
  volumes
• Full-year 2004 capex increase over 2003 primarily
  due to Chico (14 MM) and Monument (7 MM)
  development projects
• YTD 2004 operating cash flow 194 MM, capex 41
  MM and proceeds from asset sales 65 MM
• Free cash flow 218 MM for YTD 2004
• YTD 2004 OCF/ICF 7.46

EBITDA
CapEx
385E
273
230A
YTD
173
YTD
60E
51A
41
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2004
2003
2004
2003
Average Actual Quarterly Data
3Q 2003 3Q 2004 Nat. Gas
(/MMbtu) 4.97 5.76 Crude (/Bbl) 30.45 42.22
Frac Spr. (/MMbtu) 0.95 2.93 NGL
(/gal) 0.51 .75
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Natural Gas Liquids Longer-term Midstream
Earnings Potential
Depending on commodity pricing, spreads and
volumes, operating margin can be a combination of
low and high ranges for each business component.
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Natural Gas Liquids - Capital Expenditures

• Annual maintenance expected to be 40 MM-60 MM,
  with 50 MM as a mid-point
• New well connect capex ranges from 12 MM - 14 MM

• Approximately 20 MM in 2004 development capex
• Monument compression
• North Texas expansion
• 2005 Development capex includes notional
  allocation of 28 MM for high-return new business
  opportunities under evaluation

Maintenance and well connect capex is assumed to
be relatively flat going forward
Includes 100 of capex spent on partnerships.
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In Summary
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From Self-Restructuring to Future Growth
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Technical Matters Risk Mitigation and Sparing
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Generation Fleet Accomplishments and Major Unit
Upgrades

• 2004 Accomplishments
• Implemented Operations Information Systems (OIS)
  Program
• Virtual Diagnostic Center
• Standardized Predictive Maintenance Practices
• 2004 Major Unit Upgrades
• Wood River Major Enhancements - 24MM
• Powder River Basin Coal Conversions
• Havana Conversion to Powder River Basin Coal -
  36MM
• Vermillion to convert in 2005 - 18MM
• Baldwin Units Major Upgrades
• Unit 2 - 22MM
• Unit 1 - overhaul in 2005 - 35MM
• Roseton/Danskammer Units Major Upgrades
• Roseton - 6MM
• Danskammer - 9MM (includes 2.8MM for new
  conveyer system)

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Generation Fleet Maintenance

• Siemens W501F Fleet (Total 2004 Fired Hours on
  Dynegy Fleet 1,281)
• LTPSA w/Siemens Westinghouse
• Event Failure Analysis
• Total Maintenance Service (TMS) Process
• Mechanical Equipment Integrity Program
• In-House Siemens Westinghouse Engineer
• DMG/DNE Fleet
• Updated Distributed Control Systems (DCS)
• Boiler Tube Failure/Cycle Chemistry / Boiler
  Maintenance Workstation

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Generation Fleet - Sparing Practices2004 Update

• 501F Fleet (Total 2004 Fired Hours 1,284)
• Exceeds Siemens Westinghouse Recommendations
• Multiple Sets
• Combustion Hardware
• Hot Gas Path Hardware
• Opening / Closure Hardware
• Spare Generator Rotor Available Turbine Rotor
  under repair at Siemens Ontario shop
• Spare W501FD2 Package in Storage Available
• gt33MM in Spares Inventory Available
• DMG/DNE Fleet
• Spare Exciter Assemblies for Baldwin and Roseton
  Stations (gt2MM)
• Second spare Induced Draft Fan motor purchased
  for Roseton (400K)

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Generation Fleet Loss Risk Mitigation Efforts

• Transformer Losses
• Renaissance Power
• Roseton Central Hudson Breaker Failure Damage
  to Main Step-up Transformer
• Ongoing Risk Engineering Surveys
• GE Insurance Solutions Fire Protection Annual
  Surveys
• CNA Boiler Machinery / Jurisdictionals

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Generation Fleet Sithe Acquisition

• Independence Power 1020 MW Combined-Cycle Cogen
  Built 1994
• MRA / Hydro Facilities May be Decommissioned
• Facility 2004 Percentage Run Hours by Location
• Independence 20
• Ogdensburg MRA 10-15
• Massena/Batavia/Sterling MRAs - lt 5
• Long-Term Service Agreement with General Electric
• Major capital spares on-hand
• Generator Field
• Gas Turbine Rotor (to be installed in 2005)
• Planned Expenditures
• 2005 CapEx Budget
• 2005 OM Budget
• Risk Engineering Surveys
• GE Insurance Solutions Fire Protection Annual
  Surveys
• HSB to Continue BM Surveys / Jurisdictionals

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Questions
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Appendix
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Portfolio Primarily Located in Favorable Markets
Note Favorable markets are based on our
assumptions regarding the timing of market
recovery and the potential for development of
competitive markets.
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