Dynegy Posts Loss, Considers Unit Sale

Energy marketer Dynegy Inc. reported a first-quarter loss Monday on hefty charges associated with the settlement of shareholder litigation and said it was seeking to sell its natural gas processing and liquids business this year. The company’s stock jumped 13%.

The company’s loss totaled $267 million, or 70 cents a share, contrasted with profit of $65 million, or 14 cents, a year earlier. The latest results include a $156-million charge related to last month’s litigation settlement.

Revenue fell 9.6% to $1.5 billion from $1.66 billion last year.

Analysts surveyed by Thomson First Call anticipated a loss of 12 cents a share.

Dynegy said selling its midstream business would allow it to position itself as a power generation company for consolidation with others in the industry.

Bruce Williamson, Dynegy’s chairman and chief executive, said market interest in midstream assets and high commodity prices created a ripe environment for a deal.

“We think it’s something we need to evaluate for our investors,” he said.

Investors apparently liked the idea, as Dynegy shares rose 47 cents, or 13%, to $4.24 on the New York Stock Exchange, where they have traded between $3.21 and $6.09 in the last year.

Moody’s Investors Service and Fitch Ratings both said they would review Dynegy’s junk credit ratings for a possible upgrade because the company aimed to use proceeds of a sale to pay down nearly half of its $5.5 billion in debt.

Last month Dynegy agreed to pay $468 million to settle a class-action shareholder lawsuit, which had been scheduled to go to trial Monday. The suit alleged that Dynegy misled investors in 2001 about a natural gas deal wrongly used to boost cash flow and by hiding an $850-million loan from Citigroup Inc. to preserve its credit rating.

Dynegy also narrowed projected 2005 losses from core businesses to $130 million to $145 million from previous estimates of $183 million to $199 million.