Dynegy ponders future of trading business

Dynegy, the Houston-based energy company that has seen its share price plunge by 98% over the past year, yesterday said it is considering “strategic options” for its risk management business, including the creation of an independently rated joint venture with a strong investment grade credit-rated company.

Although Dynegy would not elaborate on what other options it is considering, it appears the company is taking a similar approach to Missouri-based rival, Aquila, which is also looking for a partner to buy into its risk management business. Both companies are feeling the post-Enron credit crunch, and are re-evaluating the future of their trading businesses. An Aquila spokesman would not comment on rumours that French commodities trader, Louis Dreyfus, has been short-listed as a potential partner for its trading business.

In June, Dynegy halted trading on Dynergy Direct, its online trading platform, attributing the move to market conditions and the current credit environment in the energy sector. At the time, Dynegy said it intended to remain in the energy derivatives business, conducting transactions by phone. Dynegy Direct offered 750 energy products and had more than 2,000 users.

Dynegy reported a second-quarter loss of $328 million, compared with reported income of $146 million in Q2 2001. "The results for this quarter are consistent with our previously announced goal to 'manage-for-cash' as we execute our capital and liquidity plan," said Dan Dienstbier, Dynegy’s interim chief executive. "In addition, our results were affected substantially by the decline in realised commodity prices quarter-over-quarter and lower liquidity levels in the energy business."He added that Dynegy is focused on running its businesses efficiently, managing costs and generating cash. "That commitment is advancing our pursuit of three important objectives: improving customer service, stabilising the company's marketing and trading business, and preserving our financial viability,” Dienstbier said.