Press Release

11/09/01
ChevronTexaco to Invest $2.5 Billion in Dynegy

SAN FRANCISCO, Nov. 9 /PRNewswire/ -- ChevronTexaco Corp. (NYSE: CVX) today announced that it has committed $2.5 billion of new equity in Dynegy Inc. (NYSE: DYN) in support of Dynegy's planned merger with Enron (NYSE: ENE).

ChevronTexaco, which currently owns approximately 26 percent of Dynegy's outstanding common stock, immediately will invest $1.5 billion in convertible preferred shares in Dynegy in order to fund Dynegy's equity infusion into Enron. The $1 billion balance of ChevronTexaco's equity purchase of Dynegy common stock would be made upon the closing of the Dynegy-Enron merger. These investments will be made at a significant discount to Dynegy's closing price today.

Following the closing of the merger, which is subject to regulatory reviews and Enron and Dynegy shareholder approval, ChevronTexaco would hold approximately 26 percent of Dynegy's outstanding common stock, and would maintain its three seats on the Dynegy Board of Directors.

Under terms of its agreement with Dynegy, ChevronTexaco will be granted warrants to purchase an additional $1.5 billion of Dynegy common stock over a period of up to three years from the completion of the merger.

"Our equity interest in Dynegy is highly complementary to our larger portfolio of assets and activities, and reflects our strategy to participate in the growing energy convergence marketplace, including wholesale and retail marketing, and trading of energy products and services," said David J. O'Reilly, chairman and chief executive officer of ChevronTexaco. "Our relationship with Dynegy has proven to be highly beneficial for both companies, and we are optimistic we will continue to see comparable or better performance in the future.

"This additional investment in Dynegy, which is expected to be immediately accretive to ChevronTexaco, underscores our belief in the long-term value potential of this sector. We have additional upside through our warrants. We have confidence in the Dynegy leadership team, headed by Chuck Watson, to bring a disciplined management approach to this complex business and to build a larger and more profitable company through this merger. We are also hopeful that the combination of Dynegy and Enron will restore market and credit confidence in this important energy sector," O'Reilly continued.

In the event that the merger between Dynegy and Enron is not completed, ChevronTexaco can redeem its convertible preferred shares for $1.5 billion in cash or convert to common shares. In the latter event, ChevronTexaco would own an approximate 36 percent equity interest in Dynegy.

"We believe this expanded investment offers us an opportunity to create greater value and provide significant upside potential for ChevronTexaco shareholders as Dynegy strengthens its leadership position in this sector," O'Reilly said. "Through our membership on the Dynegy board, we will continue our active role in the strategic direction of the company."

Private Securities Litigation Reform Act Safe Harbor Statement

Except for the historical and present factual information contained herein, the matters set forth in this press release, including statements as to the creation of greater value for stockholders, expected benefits of the merger of Dynegy and Enron, and other statements identified by words such as "anticipates," "expects," "projects," "plans," and similar expressions are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees and are subject to risks and uncertainties that may cause actual results to differ materially, including the possibility that the anticipated benefits from the merger and ChevronTexaco's investment in Dynegy cannot be fully realized, the possibility that costs or difficulties related to the merger will be greater than expected, and the impact of competition and other risk factors relating to our industry as detailed from time to time in ChevronTexaco's periodic reports filed with the SEC.