Dynegy Gives Watson Expensive Send-Off

Dynegy Inc. Chief Executive Charles L. Watson, who agreed this week to leave the troubled energy firm, is set to receive at least $33million more in severance payments than he would have made had he served out his contract.

Dynegy declined to comment on Watson’s severance package, which was described in public documents about two years ago.

The contract requires that if Watson were forced out that he be paid three times the amount of his average compensation in his three best years, including the projected value of stock options he would have received over the next three years.

Under the contract that he signed in early 2000, Watson, 52, has been compensated more than $11million a year, including the projected value of his stock options, according to company filings with the Securities and Exchange Commission.

Watson also would get compensation he would have earned over the next eight months, before his contract expires Feb. 1, which could be an additional $7million. His annual base salary was set in 2000 at $1.5million, a raise from $1million. He received bonuses of $4.3million to $5million in the same three years.

Watson’s severance package also would include the projected value of stock options, as much as 3.75 times his base salary, according to a March 2000 Dynegy filing.

The company declined to say whether Watson, who also served as chairman, quit or was fired, but directors said his departure, announced Tuesday, was unrelated to Dynegy’s recent problems.

Watson was a co-founder who became chief executive of Dynegy’s predecessor in 1989 and built Dynegy into one of the largest 100 U.S. corporations, with $42billion in revenue last year.

But Dynegy began to unravel about the time that Watson made an aborted bid to buy troubled rival Enron Corp. last fall. Dynegy’s stock tumbled further amid questions about possible phony trades designed to puff up the Houston-based company’s revenue.

A Dynegy spokesman declined to say whether the board knew about the severance package when it agreed to replace Watson this week.

“The compensation is a matter between Chuck and the board,” spokesman John Sousa said. Dynegy has named board member Daniel L. Dienstbier as interim chief executive and Glenn Tilton, vice chairman of ChevronTexaco Corp., as interim chairman. ChevronTexaco owns 26.5% of Dynegy.

Dynegy shares rose 33 cents to $8.75 on the New York Stock Exchange. They have declined more than 80% in the last year.