##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 
 DYNEGY INC.
DYNEGY HOLDINGS INC.
 (Exact name of registrant as specified in its charter)
 Commission
    
    State of
    
    I.R.S. EmployerEntity
    
    File Number
    
    Incorporation
    
    Identification No.Dynegy Inc.
    
    001-33443
    
    Delaware
    
    20-5653152Dynegy Holdings Inc.
    
    000-29311
    
    Delaware
    
    94-32484151000 Louisiana, Suite 5800Houston, Texas(Address of principal
    
    
    
    
    
    77002executive offices)
    
    
    
    
    

    (Zip Code)
 (713) 507-6400
 (Registrants telephone number, including area code)
 
 Securities
registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredDynegys Class A common stock, $0.01 par value
    
    New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
 Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  Dynegy Inc.
    
    Yes þ No oDynegy Holdings Inc.
    
    Yes o No þ
  Dynegy Inc.
    
    Yes o No þDynegy Holdings Inc.
    
    Yes o No þ
  Dynegy Inc.
    
    Yes þ No oDynegy Holdings Inc.
    
    Yes þ No o
  Dynegy Inc.
    
    oDynegy Holdings Inc.
    
    þ
  Large accelerated filer
    
    Accelerated filer
    
    Non-accelerated filer
    
    Smaller reporting companyDynegy Inc.
    
    þ
    
    o
    
    o
    
    oDynegy Holdings Inc.
    
    o
    
    o
    
    þ
    
    o
  Dynegy Inc.
    
    Yes o No þDynegy Holdings Inc.
    
    Yes o No þ
    DOCUMENTS INCORPORATED BY REFERENCE-Dynegy Inc.
 REDUCED DISCLOSURE FORMAT-Dynegy Holdings Inc.




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##### 



DYNEGY INC. and DYNEGY HOLDINGS INC.
 FORM 10-K
 TABLE OF CONTENTS
 PagePART IDefinitions
    
    
    1Item 1. BusinessDynegy Inc. and Dynegy Holdings Inc.
    
    
    1Item 1A. Risk FactorsDynegy Inc. and Dynegy Holdings Inc.
    
    
    19Item 1B. Unresolved Staff CommentsDynegy Inc. and Dynegy Holdings Inc.
    
    
    28Item 2. PropertiesDynegy Inc. and Dynegy Holdings Inc.
    
    
    28Item 3. Legal ProceedingsDynegy Inc. and Dynegy Holdings Inc.
    
    
    29Item 4. Submission of Matters to a Vote of Security HoldersDynegy Inc.
    
    
    29PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity SecuritiesDynegy Inc.
    
    
    30Item 6. Selected Financial DataDynegy Inc. and Dynegy Holdings Inc.
    
    
    34Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsDynegy
Inc. and Dynegy Holdings Inc.
    
    
    36Item 7A. Quantitative and Qualitative Disclosures About Market RiskDynegy Inc. and Dynegy Holdings Inc.
    
    
    80Item 8. Financial Statements and Supplementary DataDynegy Inc. and Dynegy Holdings Inc.
    
    
    82Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureDynegy
Inc. and Dynegy Holdings Inc.
    
    
    82Item 9A. Controls and ProceduresDynegy Inc. and Dynegy Holdings Inc.
    
    
    82Item 9B. Other InformationDynegy Inc. and Dynegy Holdings Inc.
    
    
    83PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceDynegy Inc.
    
    
    84Item 11. Executive CompensationDynegy Inc.
    
    
    84Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
MattersDynegy Inc.
    
    
    85Item 13. Certain Relationships and Related Transactions and Director IndependenceDynegy Inc.
    
    
    85Item 14. Principal Accountant Fees and ServicesDynegy Inc.
    
    
    85PART IVItem 15. Exhibits, Financial Statement SchedulesDynegy Inc. and Dynegy Holdings Inc.
    
    
    86Signatures
    
    
    99Exhibit 10.14Exhibit 10.18Exhibit 10.22Exhibit 10.32Exhibit 10.33Exhibit 10.34Exhibit 10.35Exhibit 10.40Exhibit 10.41Exhibit 10.42Exhibit 10.55Exhibit 10.56Exhibit 10.69Exhibit 10.70Exhibit 10.71Exhibit 10.72Exhibit 10.73Exhibit 10.74Exhibit 10.75Exhibit 10.77Exhibit 10.78Exhibit 10.79Exhibit 10.80Exhibit 10.97Exhibit 10.98Exhibit 10.99Exhibit 10.102Exhibit 10.103Exhibit 10.104Exhibit 10.105Exhibit 10.106Exhibit 10.107Exhibit 21.1Exhibit 23.1Exhibit 23.2Exhibit 23.3Exhibit 23.4Exhibit 31.1Exhibit 31.1(a)Exhibit 31.2Exhibit 31.2(a)Exhibit 32.1Exhibit 32.1(a)Exhibit 32.2Exhibit 32.2(a)
 EXPLANATORY NOTE
     i




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PART I
 
 DEFINITIONS
  
 Item 1. Business
 THE COMPANY
   www.sec.gov www.dynegy.com
    1




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Our Strategy
  
    
    safe and cost-efficient plant operations, with a focus on having our plants available
and in the market when it is economical to do so;
    
    a diverse commercial strategy that includes short-, medium- and long-term sales of
electric energy, capacity and ancillary services, and seeks to strike a balance between
contracting for near/intermediate term stability of earnings and cash flows while
maintaining merchant length to capitalize on expected increases in commodity prices in the
longer term; and
    
    pursuit of plant expansions and growth opportunities that enhance our portfolio with
acceptable rates of return and are accretive to stockholder value.
 Maintain a Diverse Portfolio to Capitalize on Market Opportunities and Mitigate Risk.
    2




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Total NetGenerating Capacity
    
    
    Primary
    
    DispatchFacility
    
    (MW)(1)
    
    
    Fuel Type
    
    Type
    
    Location
    
    RegionBaldwin
    
    
    1,800
    
    
    Coal
    
    Baseload
    
    Baldwin, IL
    
    MISOKendall
    
    
    1,200
    
    
    Gas
    
    Intermediate
    
    Minooka, IL
    
    PJMOntelaunee
    
    
    580
    
    
    Gas
    
    Intermediate
    
    Ontelaunee Township, PA
    
    PJMHavana Units 1-5
    
    
    228
    
    
    Oil
    
    Peaking
    
    Havana, IL
    
    MISOUnit 6
    
    
    441
    
    
    Coal
    
    Baseload
    
    Havana, IL
    
    MISOHennepin
    
    
    293
    
    
    Coal
    
    Baseload
    
    Hennepin, IL
    
    MISOOglesby
    
    
    63
    
    
    Gas
    
    Peaking
    
    Oglesby, IL
    
    MISOStallings
    
    
    89
    
    
    Gas
    
    Peaking
    
    Stallings, IL
    
    MISOTilton
    
    
    188
    
    
    Gas
    
    Peaking
    
    Tilton, IL
    
    MISOVermilion Units 1-2
    
    
    164
    
    
    Coal/Gas
    
    Baseload
    
    Oakwood, IL
    
    MISOUnit 3
    
    
    12
    
    
    Oil
    
    Peaking
    
    Oakwood, IL
    
    MISOWood River Units 1-3
    
    
    119
    
    
    Gas
    
    Peaking
    
    Alton, IL
    
    MISOUnits 4-5
    
    
    446
    
    
    Coal
    
    Baseload
    
    Alton, IL
    
    MISORocky Road (2)
    
    
    330
    
    
    Gas
    
    Peaking
    
    East Dundee, IL
    
    PJMRiverside/Foothills
    
    
    960
    
    
    Gas
    
    Peaking
    
    Louisa, KY
    
    PJMRenaissance
    
    
    776
    
    
    Gas
    
    Peaking
    
    Carson City, MI
    
    MISOBluegrass
    
    
    576
    
    
    Gas
    
    Peaking
    
    Oldham County, KY
    
    SERCTotal Midwest
    
    
    8,265Moss Landing Units 1-2
    
    
    1,020
    
    
    Gas
    
    Intermediate
    
    Monterrey County, CA
    
    CAISOUnits 6-7
    
    
    1,509
    
    
    Gas
    
    Peaking
    
    Monterrey County, CA
    
    CAISOMorro Bay (3)
    
    
    650
    
    
    Gas
    
    Peaking
    
    Morro Bay, CA
    
    CAISOSouth Bay
    
    
    706
    
    
    Gas/Oil
    
    Peaking
    
    Chula Vista, CA
    
    CAISOOakland
    
    
    165
    
    
    Oil
    
    Peaking
    
    Oakland, CA
    
    CAISOArlington Valley
    
    
    585
    
    
    Gas
    
    Intermediate
    
    Arlington, AZ
    
    SouthwestGriffith
    
    
    558
    
    
    Gas
    
    Intermediate
    
    Golden Valley, AZ
    
    WAPAHeard County (4)
    
    
    539
    
    
    Gas
    
    Peaking
    
    Heard County, GA
    
    SERCBlack Mountain (5)
    
    
    43
    
    
    Gas
    
    Baseload
    
    Las Vegas, NV
    
    WECCTotal West
    
    
    5,775Independence
    
    
    1,064
    
    
    Gas
    
    Intermediate
    
    Scriba, NY
    
    NYISORoseton (6)
    
    
    1,185
    
    
    Gas/Oil
    
    Peaking
    
    Newburgh, NY
    
    NYISOBridgeport
    
    
    527
    
    
    Gas
    
    Intermediate
    
    Bridgeport, CT
    
    ISO-NECasco Bay
    
    
    540
    
    
    Gas
    
    Intermediate
    
    Veazie, ME
    
    ISO-NEDanskammer Units1-2
    
    
    123
    
    
    Gas/Oil
    
    Peaking
    
    Newburgh, NY
    
    NYISOUnits 3-4 (6)
    
    
    370
    
    
    Coal/Gas
    
    Baseload
    
    Newburgh, NY
    
    NYISOTotal Northeast
    
    
    3,809Total Fleet Capacity
    
    
    17,849
 
 (1)
    
    Unit capacity values are based on winter capacity.(2)
    
    Does not include 28 MW of capacity for unit 3, which is not available during cold weather
because of winterization requirements.(3)
    
    Represents units 3 and 4 generating capacity. Units 1 and 2, with a combined net generating
capacity of 352 MW, are currently in lay-up status and out of operation.(4)
    
    On February 25, 2009, we entered into an agreement to sell our interest in the Heard County power generation
facility to Oglethorpe Power Corporation. Subject to regulatory approval, the transaction is expected to close in early 2009.
Please read Note 4Dispositions, Contract Terminations and Discontinued OperationsDispositions and Contract TerminationsHeard
County for further discussion.(5)
    
    We own a 50 percent interest in this facility. Total output capacity of this facility is 85
MW.(6)
    
    We lease the Roseton facility and units 3 and 4 of the Danskammer facility pursuant to a
leveraged lease arrangement that is further described in Item 7. Managements Discussion and
Analysis of Financial Condition and Results of OperationsLiquidity and Capital
ResourcesDisclosure of Contractual Obligations and Contingent Financial
CommitmentsOff-Balance Sheet ArrangementsDNE Leveraged Lease.  3




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Operate our Assets Safely and Cost-Efficiently to Maximize Revenue Opportunities and Operating
Margins.
   Employ a Flexible Commercial Strategy to Maintain Long-Term Market Upside Potential While Protecting
Against Downside Risks.
     4




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Maintain a Simple, Flexible Capital Structure that is Integrated with our Operating Strategy.
 SEGMENT DISCUSSION
  NERC Regions, RTOs and ISOs.
    5




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Market Based Rates.
 Power GenerationMidwest Segment
  RTO/ISO Discussion
 MISO.
  PJM.
   6




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Contracted Capacity and Energy
 MISO.
 PJM.
 Regulatory Considerations
   Construction Project
 Plum Point.
  7




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Power GenerationWest Segment
  RTO/ISO Discussion
 CAISO.
 Southwest Region.
 SERC.
 Contracted Capacity and Energy
 CAISO.
 Southwest Region.
 Regulatory Considerations
 CAISO.
   8




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Equity Investment and Construction Project
 Black Mountain.
 Sandy Creek.
 Power GenerationNortheast Segment
  RTO/ISO Discussion
    NYISO.
   9




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ISO-NE.
 Contracted Capacity and Energy
 NYISO.
   ISO-NE.
 Regulatory Considerations
   Other
   10




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ENVIRONMENTAL MATTERS
   Climate Change
 2
 2 2 2
 2 Massachusetts v. EPA Massachusetts v.
EPA
  11




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In re: Deseret Power Electric Cooperative 2  2 2
 2 2 2 2 2
 Midwest .
   West.
  12




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Northeast. 2 2
 2 2 2 2 2
 2 2 2 2
 2 2
 2 2 2
  13




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2 2
  Climate Change Litigation. 2
 Carbon Initiatives. 2
 2
 Multi-Pollutant Air Emission Initiatives
 2 x
 2 x 2 x
  14




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The Clean Air Act
 2 X,
    2009
    
    
    2010
    
    
    2011
    
    
    2012(in millions)$
    245
    
    
    $
    215
    
    
    $
    165
    
    
    $
    45
   15




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Water Issues
        16




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Remedial Laws
    COMPETITION
   17




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OPERATIONAL RISKS AND INSURANCE
    SIGNIFICANT CUSTOMERS
  EMPLOYEES
   18




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Item 1A. Risk Factors
 FORWARD-LOOKING STATEMENTS
  
    
    beliefs about commodity pricing and generation volumes;
 
    
    beliefs regarding the current economic downturn, its trajectory and its impacts;
 
    
    sufficiency of, access to and costs associated with coal, fuel oil and natural gas
inventories and transportation;
 
    
    beliefs and assumptions about market competition, generation capacity and regional
supply and demand characteristics of the wholesale power generation market;
 
    
    beliefs associated with Dynegys market capitalization and its impact on goodwill;
 
    
    strategies to capture opportunities presented by changes in commodity prices and to
manage our exposure to energy price volatility;
 
    
    beliefs and assumptions about weather and general economic conditions;
 
    
    expectations regarding environmental matters, including costs of compliance,
availability and adequacy of emission credits, and the impact of ongoing proceedings and
potential regulations, including those relating to climate change;
 
    
    projected operating or financial results, including anticipated cash flows from
operations, revenues and profitability;
 
    
    beliefs and assumptions regarding the current financial crisis and its impact on our
liquidity needs and on the credit markets generally and our access thereto;
 
    
    beliefs and assumptions relating to liquidity and capital resources generally;
 
    
    beliefs and expectations regarding financing, development and timing of the Sandy
Creek and Plum Point projects;
 
    
    expectations regarding capital expenditures, interest expense and other payments;
 
    
    our focus on safety and our ability to efficiently operate our assets so as to
maximize our revenue generating opportunities and operating margins;
 
    
    beliefs about the outcome of legal, regulatory, administrative and legislative
matters;
 
    
    expectations and estimates regarding capital and maintenance expenditures, including
the Consent Decree and its associated costs; and
 
    
    efforts to position our power generation business for future growth and pursuing and
executing acquisition, disposition or combination opportunities.
   19




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FACTORS THAT MAY AFFECT FUTURE RESULTS
 Risks Related to the Operation of Our Business
 Because many of our power generation facilities operate without long-term power sales agreements
and because wholesale power prices are subject to significant volatility, our revenues and
profitability are subject to wide fluctuations.
   
    
    the current and continuing economic downturn, the existence and effectiveness of
demand-side management and conservation efforts and the extent to which they impact
electricity demand;
 
    
    regulatory constraints on pricing (current or future);
 
    
    fuel price volatility; and
 
    
    increased competition or price pressure driven by generation from renewable sources.
  Our commercial strategy may result in lost opportunities and, in any case, may not be executed as
planned.
  We are exposed to the risk of fuel and fuel transportation cost increases and interruptions in fuel
supplies because some of our facilities do not have long-term coal, natural gas or fuel oil supply
agreements.
   20




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Our costs of compliance with existing environmental requirements are significant, and costs of
compliance with new environmental requirements could adversely affect our financial condition,
results of operations and cash flows.
 2
    21




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Our business is subject to complex government regulation. Changes in these regulations or in their
implementation may affect costs of operating our facilities or our ability to operate our
facilities, or increase competition, any of which would negatively impact our results of
operations.
   Availability and cost of emission allowances could materially impact our costs of operations.
 2
 Competition in wholesale power markets, together with an oversupply of power generation capacity in
certain regional markets, may have a material adverse effect on our financial condition, results of
operations and cash flows.
    22




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We do not own or control transmission facilities required to sell the wholesale power from our
generation facilities. If the transmission service is inadequate, our ability to sell and deliver
wholesale power may be materially adversely affected. Furthermore, these transmission facilities
are operated by RTOs and ISOs , which are subject to changes in structure and operation and impose
various pricing limitations. These changes and pricing limitations may affect our ability to
deliver power to the market that would, in turn, adversely affect the profitability of our
generation facilities.
  Our financial condition, results of operations and cash flows would be adversely impacted by
strikes or work stoppages by our unionized employees.
   23




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Costs of compliance with our Consent Decree may be materially adversely impacted by unforeseen
labor, material and equipment costs.
  Risks Related to Our Financial Structure, Level of Indebtedness and Access to Capital Markets
 An event of loss and certain other events relating to our Dynegy Northeast Generation facilities
could trigger a substantial obligation that would be difficult for us to satisfy.
  We have significant debt that could negatively impact our business.
  
    
    make it difficult to satisfy our financial obligations;
 
    
    limit our ability to obtain additional financing;
 
    
    limit our financial flexibility in planning for and reacting to business and
industry changes;
 
    
    impact the evaluation of our creditworthiness by counterparties to commercial
agreements and affect the level of collateral we are required to post under such
agreements;
 
    
    place us at a competitive disadvantage compared to less leveraged companies;
 
    
    impact our ability to participate in industry consolidation; and
 
    
    increase our vulnerability to general adverse economic and industry conditions.
   24




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Our financing agreements governing our debt obligations require us to meet specific financial
tests. Our failure to comply with those financial covenants could have a material adverse impact
on our business, financial condition, results of operations or cash flows.
   Our access to the capital markets may be limited.
  
    
    general economic and capital market conditions, including the timing and magnitude
of market recovery;
 
    
    covenants in our existing debt and credit agreements;
 
    
    investor confidence in us and the regional wholesale power markets;
 
    
    our financial performance and the financial performance of our subsidiaries;
 
    
    our levels of debt;
 
    
    our requirements for posting collateral under various commercial agreements;
 
    
    our credit ratings;
 
    
    our cash flow; and
 
    
    our long-term business prospects.
   25




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Our non-investment grade status may adversely impact our operations, increase our liquidity
requirements and increase the cost of refinancing opportunities. We may not have adequate
liquidity to post required amounts of additional collateral.
    We conduct a substantial portion of our operations through our subsidiaries and may be limited in
our ability to access funds from these subsidiaries to service our debt.
  Risks Related to Investing
 If our goodwill or amortizable intangible assets become impaired, we may be required to record a
significant charge to earnings.
   26




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The LS Control Groups significant interest in Dynegy could be determinative in matters submitted
to a vote by Dynegys stockholders. In addition, the rights granted to the LS Shareholders (as
defined below) under the Shareholder Agreement (as defined below) and Dynegys amended and restated
bylaws provide them significant influence over Dynegy. Such influence could result in Dynegy
failing to take actions that Dynegys other stockholders support.
   
    
    the ability to nominate up to three directors to Dynegys board of directors based
on its percentage ownership interest in Dynegy; and
 
    
    the requirement that Dynegy not pursue any of the following actions if all
directors nominated by the LS Control Group present at the relevant board meeting vote
against such action:
 
    
    any amendment of Dynegys amended and restated certificate of incorporation
or amended and restated bylaws;
 
    
    any merger or consolidation of Dynegy and certain dispositions of Dynegys
assets or businesses, certain acquisitions, binding capital commitments,
guarantees and investments and certain joint ventures with an aggregate value
in excess of a specified amount;
 
    
    Dynegys payment of dividends or similar distributions;
 
    
    Dynegys engagement in new lines of business;
 
    
    Dynegys liquidation or dissolution, or certain bankruptcy-related events
with respect to Dynegy;
 
    
    Dynegys issuance of any equity securities, with certain exceptions for
issuances of Dynegys Class A common stock;
 
    
    Dynegys incurrence of any indebtedness in excess of a specified amount;
 
    
    the hiring, or termination of the employment of, Dynegys Chief Executive
Officer (other than Bruce A. Williamson);
 
    
    our entry into any agreement or other action that limits the activities of
any holder of Dynegys Class B common stock or any of such holders affiliates;
and
 
    
    our entry into other material transactions with a value in excess of a
specified amount.
   27




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Dynegys stockholders may be adversely affected by the expiration of the Lock-Up Period in the
Shareholder Agreement, which would enable the LS Control Group to transfer a significant percentage
of Dynegys common stock to a third party.
  
    
    April 2, 2009;
 
    
    the date the stockholders party to the Shareholder Agreement cease to own at least
15 percent of the total combined voting power of Dynegys outstanding securities; or
 
    
    if certain conditions are met, the date a third-party offer is made to acquire more
than 25 percent of Dynegys assets or voting securities.
  We may pursue acquisitions or combinations that could fail or present unanticipated problems for
our business in the future, which would adversely affect our ability to realize the anticipated
benefits of those transactions.
  
    
    diversion of our managements attention;
 
    
    the ability to obtain required regulatory and other approvals;
 
    
    the need to integrate acquired or combined operations with our operations;
 
    
    potential loss of key employees;
 
    
    difficulty in evaluating the power assets, operating costs, infrastructure
requirements, environmental and other liabilities and other factors beyond our
control;
 
    
    potential lack of operating experience in new geographic/power markets or with
different fuel sources;
 
    
    an increase in our expenses and working capital requirements; and
 
    
    the possibility that we may be required to issue a substantial amount of additional
equity or debt securities or assume additional debt in connection with any such
transactions.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   28




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
 Dynegy.
 DHI.
  29




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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 Dynegy
    Summary of Dynegys Common Stock Price
 High
    
    
    Low2009:First Quarter (through February 20, 2009)
    
    $
    2.69
    
    
    $
    1.282008:Fourth Quarter
    
    $
    4.06
    
    
    $
    1.51Third Quarter
    
    
    8.76
    
    
    
    3.20Second Quarter
    
    
    9.64
    
    
    
    8.05First Quarter
    
    
    8.26
    
    
    
    6.442007:Fourth Quarter
    
    $
    9.50
    
    
    $
    7.14Third Quarter
    
    
    10.62
    
    
    
    7.86Second Quarter
    
    
    10.65
    
    
    
    9.08First Quarter
    
    
    9.58
    
    
    
    6.52
  Shareholder Agreement.
  30




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LS Registration Rights Agreement.
   31




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Stockholder Return Performance Presentation.
 1.
    
    $100 was invested in Dynegy Class A common stock, the S&P 500, the
Peer Group (as defined below) on December 31, 2003;
 2.
    
    the returns of each component company in the Peer Group are weighed
based on the market capitalization of such company at the beginning of the
measurement period; and3.
    
    dividends are reinvested on the ex-dividend dates.
  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 *
    
    $100 invested on 12/31/03 in stock & index-including
reinvestment of dividends. Fiscal year ending December 31.  12/03
    
    
    12/04
    
    
    12/05
    
    
    12/06
    
    
    12/07
    
    
    12/08Dynegy Inc.
    
    
    100.00
    
    
    
    107.94
    
    
    
    113.08
    
    
    
    169.16
    
    
    
    166.82
    
    
    
    46.73S&P 500
    
    
    100.00
    
    
    
    110.88
    
    
    
    116.33
    
    
    
    134.70
    
    
    
    142.10
    
    
    
    89.53Peer Group
    
    
    100.00
    
    
    
    174.98
    
    
    
    177.55
    
    
    
    241.73
    
    
    
    359.04
    
    
    
    151.50
   32




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##### Table of Contents



The above stock price performance comparison and related discussion is not to be deemed
incorporated by reference by any general statement incorporating by reference this Form 10-K into
any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, or
otherwise, except to the extent that we specifically incorporate this stock price performance
comparison and related discussion by reference, and is not otherwise deemed filed under the Acts.
 Unregistered Sales of Equity Securities and Use of Proceeds.
 (d)Maximum(c)
    
    
    Number ofTotal Number of
    
    
    Shares thatShares Purchased
    
    
    May Yet Be(a)
    
    
    (b)
    
    
    as Part of
    
    
    PurchasedTotal Number
    
    
    Average
    
    
    Publicly
    
    
    Under theof Shares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Plans orPeriod
    
    Purchased
    
    
    per Share
    
    
    or Programs
    
    
    ProgramsOctober
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/ANovember
    
    
    269
    
    
    $
    3.64
    
    
    
    
    
    
    
    N/ADecember
    
    
    6,189
    
    
    $
    2.18
    
    
    
    
    
    
    
    N/ATotal
    
    
    6,458
    
    
    $
    2.24
    
    
    
    
    
    
    
    N/A
  DHI
  Securities Authorized for Issuance Under Equity Compensation Plans
   33




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##### Table of Contents



Item 6. Selected Financial Data
  Dynegys Selected Financial Data
 Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in millions, except per share data)Statement of Operations Data (1):Revenues
    
    $
    3,549
    
    
    $
    3,103
    
    
    $
    1,770
    
    
    $
    2,017
    
    
    $
    2,249Depreciation and amortization expense
    
    
    (371
    )
    
    
    (325
    )
    
    
    (217
    )
    
    
    (208
    )
    
    
    (221
    )Impairment and other charges
    
    
    (47
    )
    
    
    
    
    
    
    (119
    )
    
    
    (46
    )
    
    
    (78
    )General and administrative expenses
    
    
    (157
    )
    
    
    (203
    )
    
    
    (196
    )
    
    
    (468
    )
    
    
    (330
    )Operating income (loss)
    
    
    709
    
    
    
    605
    
    
    
    105
    
    
    
    (832
    )
    
    
    (66
    )Interest expense and debt conversion expense
    
    
    (427
    )
    
    
    (384
    )
    
    
    (631
    )
    
    
    (389
    )
    
    
    (453
    )Income tax (expense) benefit
    
    
    (75
    )
    
    
    (151
    )
    
    
    152
    
    
    
    393
    
    
    
    158Income (loss) from continuing operations
    
    
    171
    
    
    
    116
    
    
    
    (321
    )
    
    
    (800
    )
    
    
    (160
    )Income (loss) from discontinued operations (3)
    
    
    3
    
    
    
    148
    
    
    
    (13
    )
    
    
    895
    
    
    
    145Cumulative effect of change in accounting principles
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    (5
    )
    
    
    Net income (loss)
    
    $
    174
    
    
    $
    264
    
    
    $
    (333
    )
    
    $
    90
    
    
    $
    (15
    )Net income (loss) applicable to common stockholders
    
    
    174
    
    
    
    264
    
    
    
    (342
    )
    
    
    68
    
    
    
    (37
    )Basic earnings (loss) per share from continuing operations
    
    $
    0.20
    
    
    $
    0.15
    
    
    $
    (0.72
    )
    
    $
    (2.12
    )
    
    $
    (0.48
    )Basic net income (loss) per share
    
    
    0.20
    
    
    
    0.35
    
    
    
    (0.75
    )
    
    
    0.18
    
    
    
    (0.10
    )Diluted earnings (loss) per share from continuing operations
    
    $
    0.20
    
    
    $
    0.15
    
    
    $
    (0.72
    )
    
    $
    (2.12
    )
    
    $
    (0.48
    )Diluted net income (loss) per share
    
    
    0.20
    
    
    
    0.35
    
    
    
    (0.75
    )
    
    
    0.18
    
    
    
    (0.10
    )Shares outstanding for basic EPS calculation
    
    
    840
    
    
    
    752
    
    
    
    459
    
    
    
    387
    
    
    
    378Shares outstanding for diluted EPS calculation
    
    
    842
    
    
    
    754
    
    
    
    509
    
    
    
    513
    
    
    
    504Cash dividends per common share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Cash Flow Data:Net cash provided by (used in) operating activities
    
    $
    319
    
    
    $
    341
    
    
    $
    (194
    )
    
    $
    (30
    )
    
    $
    5Net cash provided by (used in) investing activities
    
    
    (102
    )
    
    
    (817
    )
    
    
    358
    
    
    
    1,824
    
    
    
    262Net cash provided by (used in) financing activities
    
    
    148
    
    
    
    433
    
    
    
    (1,342
    )
    
    
    (873
    )
    
    
    (115
    )Cash dividends or distributions to partners, net
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    (22
    )
    
    
    (22
    )Capital expenditures, acquisitions and investments
    
    
    (640
    )
    
    
    (504
    )
    
    
    (163
    )
    
    
    (315
    )
    
    
    (314
    )
 December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in millions)Balance Sheet Data (2):Current assets
    
    $
    2,803
    
    
    $
    1,663
    
    
    $
    1,989
    
    
    $
    3,706
    
    
    $
    2,728Current liabilities
    
    
    1,702
    
    
    
    999
    
    
    
    1,166
    
    
    
    2,116
    
    
    
    1,802Property and equipment, net
    
    
    8,934
    
    
    
    9,017
    
    
    
    4,951
    
    
    
    5,323
    
    
    
    6,130Total assets
    
    
    14,213
    
    
    
    13,221
    
    
    
    7,537
    
    
    
    10,126
    
    
    
    9,843Long-term debt (excluding current portion)
    
    
    6,072
    
    
    
    5,939
    
    
    
    3,190
    
    
    
    4,228
    
    
    
    4,332Notes payable and current portion of long-term debt
    
    
    64
    
    
    
    51
    
    
    
    68
    
    
    
    71
    
    
    
    34Series C convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    400Minority interest
    
    
    (30
    )
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    106Capital leases not already included in long-term debt
    
    
    4
    
    
    
    5
    
    
    
    6
    
    
    
    
    
    
    
    Total equity
    
    
    4,515
    
    
    
    4,506
    
    
    
    2,267
    
    
    
    2,140
    
    
    
    1,956
 
 (1)
    
    The Merger (April 2, 2007) and the Sithe Energies acquisition (February 1, 2005) were each
accounted for in accordance with the purchase method of accounting and the results of
operations attributable to the acquired businesses are included in our financial statements and operating statistics beginning on the
acquisitions effective date for accounting purposes.  34




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##### Table of Contents



(2)
    
    The Merger and the Sithe Energies acquisition were each accounted for under the purchase
method of accounting. Accordingly, the purchase price was allocated to the assets acquired
and liabilities assumed based on their estimated fair values as of the effective dates of each
transaction. Please read note (1) above for respective effective dates.(3)
    
    Discontinued operations include the results of operations from the following businesses: 
    
    DMSLP (sold fourth quarter 2005);
    
    Calcasieu power generating facility (sold first quarter 2008); and
    
    CoGen Lyondell power generating facility (sold third quarter 2007).
 Dynegy Holdings Selected Financial Data
 Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in millions, except per share data)Statement of Operations Data (1):Revenues
    
    $
    3,549
    
    
    $
    3,103
    
    
    $
    1,770
    
    
    $
    2,017
    
    
    $
    1,447Depreciation and amortization expense
    
    
    (371
    )
    
    
    (325
    )
    
    
    (217
    )
    
    
    (208
    )
    
    
    (210
    )Impairment and other charges
    
    
    (47
    )
    
    
    
    
    
    
    (119
    )
    
    
    (40
    )
    
    
    (24
    )General and administrative expenses
    
    
    (157
    )
    
    
    (184
    )
    
    
    (193
    )
    
    
    (375
    )
    
    
    (285
    )Operating income (loss)
    
    
    709
    
    
    
    624
    
    
    
    108
    
    
    
    (733
    )
    
    
    (202
    )Interest expense and debt conversion expense
    
    
    (427
    )
    
    
    (384
    )
    
    
    (579
    )
    
    
    (383
    )
    
    
    (332
    )Income tax (expense) benefit
    
    
    (123
    )
    
    
    (116
    )
    
    
    125
    
    
    
    374
    
    
    
    166Income (loss) from continuing operations
    
    
    205
    
    
    
    176
    
    
    
    (296
    )
    
    
    (727
    )
    
    
    (247
    )Income (loss) from discontinued operations (2)
    
    
    3
    
    
    
    148
    
    
    
    (12
    )
    
    
    813
    
    
    
    143Cumulative effect of change in accounting principles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    Net income (loss)
    
    $
    208
    
    
    $
    324
    
    
    $
    (308
    )
    
    $
    81
    
    
    $
    (104
    )Cash Flow Data:Net cash provided by (used in) operating activities
    
    $
    319
    
    
    $
    368
    
    
    $
    (205
    )
    
    $
    (24
    )
    
    $
    (160
    )Net cash provided by (used in) investing activities
    
    
    (87
    )
    
    
    (688
    )
    
    
    357
    
    
    
    1,839
    
    
    
    (211
    )Net cash provided by (used in) financing activities
    
    
    146
    
    
    
    369
    
    
    
    (1,235
    )
    
    
    (734
    )
    
    
    289Capital expenditures, acquisitions and investments
    
    
    (626
    )
    
    
    (350
    )
    
    
    (155
    )
    
    
    (169
    )
    
    
    (219
    )
 December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in millions)Balance Sheet Data (1):Current assets
    
    $
    2,780
    
    
    $
    1,614
    
    
    $
    1,828
    
    
    $
    3,457
    
    
    $
    2,192Current liabilities
    
    
    1,681
    
    
    
    999
    
    
    
    1,165
    
    
    
    2,212
    
    
    
    1,773Property and equipment, net
    
    
    8,934
    
    
    
    9,017
    
    
    
    4,951
    
    
    
    5,323
    
    
    
    6,130Total assets
    
    
    14,174
    
    
    
    13,107
    
    
    
    8,136
    
    
    
    10,580
    
    
    
    10,129Long-term debt (excluding current portion)
    
    
    6,072
    
    
    
    5,939
    
    
    
    3,190
    
    
    
    4,003
    
    
    
    4,107Notes payable and current portion of long-term debt
    
    
    64
    
    
    
    51
    
    
    
    68
    
    
    
    191
    
    
    
    34Minority interest
    
    
    (30
    )
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    106Capital leases not already included in long-term debt
    
    
    4
    
    
    
    5
    
    
    
    6
    
    
    
    
    
    
    
    Total equity
    
    
    4,613
    
    
    
    4,597
    
    
    
    3,036
    
    
    
    3,331
    
    
    
    3,085
 
 (1)
    
    The Contributed Entities assets were contributed to DHI contemporaneously with the Merger.
This contribution was accounted for as a transaction between entities under common control.
As such, the assets and liabilities were recorded by DHI at Dynegys historical cost on
Dynegys date of acquisition. Please read Note 3Business Combination and AcquisitionsLS
Assets Contribution for further discussion. Additionally, the Sithe Energies assets were
contributed to DHI on April 2, 2007. This contribution was accounted for as a transaction
between entities under common control. As such, the assets and liabilities were recorded by
DHI at Dynegys historical cost on Dynegys date of acquisition, January 31, 2005. In
addition, DHIs historical financial statements have been adjusted in all periods presented to reflect the contribution as
though DHI had owned these assets beginning January 31, 2005. Please read Note 3Business
Combination and AcquisitionsLS Assets Contribution for further discussion.  35




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##### Table of Contents



(2)
    
    Discontinued operations include the results of operations from the following businesses: 
    
    DMSLP (sold fourth quarter 2005);
    
    Calcasieu power generating facility (sold first quarter 2008); and
    
    CoGen Lyondell power generating facility (sold third quarter 2007).
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read together with the audited consolidated financial
statements and the notes thereto included in this report.
 OVERVIEW
    Business Discussion
 Power Generation Business
  
    
    Prices for power, natural gas, coal and fuel oil, which in turn are largely driven by
supply and demand. Demand for power can vary due to weather and general economic
conditions, among other things. For example, a warm summer or a cold winter typically
increases demand for electricity. Power supplies similarly vary by region and are
impacted significantly by available generating capacity, transmission capacity and
federal and state regulation;
 
    
    The relationship between prices for power and natural gas and prices for power and
fuel oil, commonly referred to as the spark spread, which impacts the margin we earn on
the electricity we generate. We believe that our coal-fired generating facilities
provide a certain level of predictability of earnings in the near term since our
delivered cost of coal, particularly in the Midwest region, is relatively stable and
positions us for potential increases in earnings and cash flows in an environment where
power prices increase; and
 
    
    Our ability to enter into commercial transactions to mitigate near term earnings
volatility and our ability to better manage our liquidity requirements resulting from
potential changes in collateral requirements as prices move.
  36




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##### Table of Contents




    
    Transmission constraints, congestion, and other factors that can affect the price
differential between the locations where we deliver generated power and the liquid market
hub;
 
    
    Our ability to control capital expenditures, which primarily include maintenance,
safety, environmental and reliability projects, and to control other costs through
disciplined management;
 
    
    Overall electricity demand patterns;
 
    
    Our ability to optimize our assets by maintaining a high in-market availability,
reliable run-time and safe, efficient operations; and
 
    
    The cost of compliance with existing and future environmental requirements that are
likely to be more stringent and more comprehensive.
   Power GenerationMidwest Segment.
 
    
    Our ability to maintain sufficient coal inventories, which is dependent upon the
continued performance of the railroads for deliveries of coal in a consistent and timely
manner, and its impact on our ability to serve the critical winter and summer on-peak
loads;
 
    
    Our requirement for the next four years to utilize a significant amount of cash for
capital expenditures required to comply with the Consent Decree;
 
    
    Changes in the MISO market design or associated rules; and
 
    
    Changes in the existing PJM RPM capacity markets or in the bilateral MISO capacity
markets and any resulting effect on future capacity revenues.
 Power GenerationWest Segment.
 
    
    Our ability to maintain the necessary permits to continue to operate our Moss Landing
power generation facility with a once-through, seawater cooling system;
 
    
    Our ability to maintain and operate our plants in a manner that ensures we receive
full capacity payments under our various tolling agreements; and
 
    
    The economic life of our facilities, which could be adversely impacted by contractual
obligations, regulatory actions or other factors.
  37




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##### Table of Contents



Power GenerationNortheast Segment.
 
    
    Our ability to maintain sufficient coal and fuel oil inventories, including continued
deliveries of coal in a consistent and timely manner, and maintain access to natural gas,
impacts our ability to serve the critical winter and summer on-peak loads; and
 
    
    State-driven programs aimed at capping mercury and CO2emissions will
impose additional costs on our power generation facilities.
 Other
  
    
    Interest expense, which reflects debt with a weighted-average rate of approximately 7
percent;
 
    
    General and administrative costs, which will be impacted by, among other things, (i)
staffing levels and associated expenses; (ii) funding requirements under our pension
plans; and (iii) any future corporate-level litigation reserves or settlements; and
 
    
    Income taxes, which will be impacted by our ability to realize our significant
alternative minimum tax credits.
  2008 Highlights
 DLS Power Holdings and DLS Power Development Dissolution.
 Rolling Hills.
 Contingent LC Facility.
  38




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##### Table of Contents



Sandy Creek.
 LIQUIDITY AND CAPITAL RESOURCES
 Overview
   Market Conditions
  
    
    Lehman Commercial Paper Inc. (Lehman CP), a lender under our Credit Agreement,
entered bankruptcy proceedings. As a result, our effective availability under the
Credit Agreement may be reduced by $70 million to $1.9 billion;
 
    
    We recorded a reserve of $3 million as a result of the bankruptcy of LBH. This
reserve represents the uncollateralized portion of our $15 million net position arising
from our outstanding commercial transactions with a subsidiary of LBH;
 
    
    A large money market fund in which we invested a portion of our cash balance lowered
its share price below $1, subsequently suspended distributions and commenced liquidation.
As a result, we reclassified our $127 million investment from cash equivalents to
short-term investments and recorded a $2 million impairment. We have received
approximately $100 million of distributions as of December 31, 2008; and
 
    
    A decrease in liquidity in the bilateral markets for forward power sales, resulting in
increased exchange-traded transactions settling through our futures clearing manager that
can potentially result in the need for additional cash collateral postings.
  39




---



##### Table of Contents



Corporate Matters
  
    
    continue to hold their 40 percent investment in Dynegy;
 
    
    make an offer to purchase all of the outstanding shares of Dynegys common stock.
Upon such offer, we may either (i) accept the offer or (ii) if requested by the LS
Entities, conduct an auction of Dynegy in which the LS Entities may elect whether or not
to participate; or
 
    
    freely transfer (i.e. sell) their shares of Dynegys Class B common stock to any
person so long as such transfer would not result in such person owning more than 15
percent of the outstanding shares of Dynegys common stock.
 Current Liquidity.
 February 20,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007(in millions)Revolver capacity (1) (2) (3)
    
    $
    1,080
    
    
    $
    1,080
    
    
    $
    1,150Borrowings against revolver capacity
    
    
    
    
    
    
    
    
    
    
    Term letter of credit capacity, net
of required reserves
    
    
    825
    
    
    
    825
    
    
    
    825Plum Point and Sandy Creek letter of
credit capacity
    
    
    377
    
    
    
    377
    
    
    
    425Available contingent letter of credit
facility capacity (4)
    
    
    
    
    
    
    
    
    
    
    Outstanding letters of credit
    
    
    (1,104
    )
    
    
    (1,135
    )
    
    
    (1,279
    )Unused capacity
    
    
    1,178
    
    
    
    1,147
    
    
    
    1,121CashDHI
    
    

    675
    

    
    
    670
    
    
    
    292Total available liquidityDHI
    
    

    1,853
    

    
    
    1,817
    
    
    
    1,413CashDynegy
    
    
    183
    
    
    
    23
    
    
    
    36Total available liquidityDynegy
    
    $
    2,036
    
    
    $
    1,840
    
    
    $
    1,449
 
 (1)
    
    Lehman CP filed for protection from creditors under the bankruptcy law in
October 2008, thus potentially reducing the available capacity of the revolving
portion of the Credit Agreement by $70 million. Please read Note 15DebtCredit
Agreement for further discussion. We continue to believe that we maintain
sufficient liquidity despite any such reduction in the available capacity under the
revolving portion of our Credit Agreement.(2)
    
    We currently have 15 lenders participating in the revolving portion of
our Credit Agreement with commitments ranging from $10 million to $105 million.
Other than the commitment from Lehman CP, we have not experienced, nor do we
currently anticipate, any difficulties in obtaining funding from any of the
remaining lenders at this time. However, we continue to monitor the environment,
and any lack of or delay in funding by a significant member or multiple members of
our banking group could negatively affect our liquidity position.(3)
    
    Based on managements current forecast of financial performance during 2009, DHIs available liquidity under
the Fifth Amended and Restated Credit Facility may be reduced temporarily in order to remain in compliance with the secured debt
to adjusted EBITDA ratio.(4)
    
    Under the terms of the Contingent LC Facility, up to $300 million of
capacity can become available, contingent on 2009 forward natural gas prices rising
above $13/MMBtu. Over the course of 2009, the ratio of availability per dollar
increase in natural gas prices will be reduced, on a pro rata monthly basis, to zero
by year-end.  40




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##### Table of Contents



Cash on Hand.
  Revolver Capacity .
 Operating Activities
 Historical Operating Cash Flows.
    41




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##### Table of Contents



Future Operating Cash Flows.
 Collateral Postings.
 February 20,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007(in millions)By Business:Generation business
    
    $
    1,128
    
    
    $
    1,064
    
    
    $
    1,130Other
    
    
    189
    
    
    
    189
    
    
    
    202Total
    
    $
    1,317
    
    
    $
    1,253
    
    
    $
    1,332By Type:Cash (1)
    
    $
    213
    
    
    $
    118
    
    
    $
    53Letters of credit
    
    
    1,104
    
    
    
    1,135
    
    
    
    1,279Total
    
    $
    1,317
    
    
    $
    1,253
    
    
    $
    1,332
 
 (1)
    
    Cash collateral postings exclude the effect of cash inflows and
outflows arising from the daily settlements of our exchange-traded or brokered
commodity futures positions held with our futures clearing manager.     42




---



##### Table of Contents



Investing Activities
 Capital Expenditures.
 December 31,2008
    
    
    2007
    
    
    2006(in millions)GEN-MW
    
    $
    530
    
    
    $
    300
    
    
    $
    101GEN-WE
    
    
    29
    
    
    
    17
    
    
    
    24GEN-NE
    
    
    36
    
    
    
    47
    
    
    
    22Other
    
    
    16
    
    
    
    15
    
    
    
    8Total
    
    $
    611
    
    
    $
    379
    
    
    $
    155
    2009
    
    2010
    
    
    2011
    
    
    2012(in millions)$
    245
    
    $
    215
    
    
    $
    165
    
    
    $
    45
    43




---



##### Table of Contents



Asset Dispositions.
   Other Investing Activities.
     44




---



##### Table of Contents



Financing Activities
 Historical Cash Flow from Financing Activities.
      45




---



##### Table of Contents



Summarized Debt and Other Obligations.
 December 31,
    
    
    December 31,2008
    
    
    2007(in millions)First secured obligations
    
    $
    919
    
    
    $
    920Unsecured obligations
    
    
    4,945
    
    
    
    5,015Total corporate obligations
    
    
    5,864
    
    
    
    5,935Secured non-recourse obligations (1)
    
    
    959
    
    
    
    806Total obligations
    
    
    6,823
    
    
    
    6,741Less: DNE lease financing (2)
    
    
    (700
    )
    
    
    (770
    )Other (3)
    
    
    13
    
    
    
    19Total notes payable and long-term debt (4)
    
    $
    6,136
    
    
    $
    5,990
 
 (1)
    
    Includes PPEAs non-recourse project financing of $515 million and tax-exempt bonds of $100 million for its
share of the construction of the Plum Point facility. Although we own a 37 percent
economic interest in PPEA, we consolidate PPEA and its debt, as we are the primary
beneficiary of this VIE. Also includes project financing associated with our
Independence facility. Please read Note 12Variable Interest Entities for further
discussion.(2)
    
    Represents present value of future lease payments discounted at 10 percent.(3)
    
    Consists of net premiums on debt of $13 million and $19 million at December
31, 2008 and 2007, respectively.(4)
    
    Does not include letters of credit.     46




---



##### Table of Contents



Financing Trigger Events.
 Financial Covenants.
  Capital-Raising Transactions.
  Capital Allocation.
  47




---



##### Table of Contents



Dividends on Dynegy Common Stock.
 Credit Ratings
  Disclosure of Contractual Obligations and Contingent Financial Commitments
  Contractual Obligations
  Expiration by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years(in millions)Long-term debt (including current portion)
    
    $
    6,136
    
    
    $
    64
    
    
    $
    643
    
    
    $
    1,586
    
    
    $
    3,843Interest payments on debt
    
    
    3,148
    
    
    
    419
    
    
    
    755
    
    
    
    676
    
    
    
    1,298Operating leases
    
    
    1,196
    
    
    
    171
    
    
    
    258
    
    
    
    355
    
    
    
    412Capital leases
    
    
    12
    
    
    
    2
    
    
    
    4
    
    
    
    4
    
    
    
    2Capacity payments
    
    
    345
    
    
    
    46
    
    
    
    95
    
    
    
    92
    
    
    
    112Transmission obligations
    
    
    193
    
    
    
    6
    
    
    
    12
    
    
    
    12
    
    
    
    163Interconnection obligations
    
    
    19
    
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    14Construction service agreements
    
    
    877
    
    
    
    39
    
    
    
    142
    
    
    
    123
    
    
    
    573Pension funding obligations
    
    
    80
    
    
    
    27
    
    
    
    53
    
    
    
    
    
    
    
    Other obligations
    
    
    41
    
    
    
    14
    
    
    
    10
    
    
    
    6
    
    
    
    11Total contractual obligations
    
    $
    12,047
    
    
    $
    789
    
    
    $
    1,974
    
    
    $
    2,856
    
    
    $
    6,428
 Long-Term Debt (Including Current Portion).
 Interest Payments on Debt.
  48




---



##### Table of Contents



Operating Leases.
  Capital Leases.
 Capacity Payments.
 Transmission Obligations.
 Interconnection Obligations.
 Construction Service Agreements.
 Pension Funding Obligations.
 Other Obligations.
 
    
    A payment of $8.5 million in 2009 related to Illinois rate relief legislation. Please
read Note 19Commitments and ContingenciesIllinois Auction Complaints for further
discussion;
 
    
    Payments associated with a capacity contract between Independence and Con Edison. The
aggregate payments through the 2014 expiration are approximately $13 million as of
December 31, 2008;
 
    
    $6 million of reserves recorded in connection with FIN No. 48, Accounting for
Uncertainty in Income Taxes (FIN No. 48). Please read Note 17Income
TaxesUnrecognized Tax Benefits for further discussion;
  49




---



##### Table of Contents




    
    Amounts related to a long-term coal agreement to assist in the delivery of coal to our
Danskammer plant in Newburgh, New York. The agreement extends until 2010, and the
minimum aggregate payments through expiration total approximately $7 million as of
December 31, 2008; and
 
    
    Agreements for the supply of water to our generating facilities.
 Contingent Financial Obligations
  Expiration by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years(in millions)Letters of credit (1)
    
    $
    1,135
    
    
    $
    835
    
    
    $
    300
    
    
    $
    
    
    
    $
    Surety bonds (2)
    
    
    7
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    Total financial commitments
    
    $
    1,142
    
    
    $
    842
    
    
    $
    300
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Amounts include outstanding letters of credit.(2)
    
    Surety bonds are generally on a rolling 12-month basis. The $7 million of surety bonds
are supported by collateral. Off-Balance Sheet Arrangements
 DNE Leveraged Lease.
   50




---



##### Table of Contents



2008
    
    
    2007
    
    
    2006(in millions)Lease Expense
    
    $
    50
    
    
    $
    50
    
    
    $
    50Lease Payments (Cash Flows)
    
    $
    144
    
    
    $
    107
    
    
    $
    60
  Commitments and Contingencies
  RESULTS OF OPERATIONS
 Overview and Discussion of Comparability of Results.
   51




---



##### Table of Contents



Summary Financial Information.
 Dynegys Results of Operations for the Year Ended December 31, 2008
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    Total(in millions)Revenues
    
    $
    1,623
    
    
    $
    925
    
    
    $
    1,006
    
    
    $
    (5
    )
    
    $
    3,549Cost of sales
    
    
    (584
    )
    
    
    (574
    )
    
    
    (705
    )
    
    
    10
    
    
    
    (1,853
    )Operating and maintenance expense,
exclusive of depreciation and
amortization expense shown separately
below
    
    
    (205
    )
    
    
    (124
    )
    
    
    (180
    )
    
    
    15
    
    
    
    (494
    )Depreciation and amortization expense
    
    
    (206
    )
    
    
    (101
    )
    
    
    (54
    )
    
    
    (10
    )
    
    
    (371
    )Impairment and other charges
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    (47
    )Gain on sale of assets
    
    
    56
    
    
    
    11
    
    
    
    
    
    
    
    15
    
    
    
    82General and administrative expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157
    )
    
    
    (157
    )Operating income (loss)
    
    $
    684
    
    
    $
    90
    
    
    $
    67
    
    
    $
    (132
    )
    
    $
    709Losses from unconsolidated investments
    
    
    
    
    
    
    (40
    )
    
    
    
    
    
    
    (83
    )
    
    
    (123
    )Other items, net
    
    
    3
    
    
    
    5
    
    
    
    6
    
    
    
    73
    
    
    
    87Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (427
    )Income from continuing operations
before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    246Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )Income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171Income from discontinued operations,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    174
  52




---



##### Table of Contents



Dynegys Results of Operations for the Year Ended December 31, 2007
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    Total(in millions)Revenues
    
    $
    1,325
    
    
    $
    689
    
    
    $
    1,076
    
    
    $
    13
    
    
    $
    3,103Cost of sales
    
    
    (482
    )
    
    
    (400
    )
    
    
    (688
    )
    
    
    19
    
    
    
    (1,551
    )Operating and maintenance expense,
exclusive of depreciation and
amortization expense shown
separately below
    
    
    (193
    )
    
    
    (86
    )
    
    
    (179
    )
    
    
    (4
    )
    
    
    (462
    )Depreciation and amortization expense
    
    
    (194
    )
    
    
    (73
    )
    
    
    (45
    )
    
    
    (13
    )
    
    
    (325
    )Gain on sale of assets
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    43General and administrative expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (203
    )
    
    
    (203
    )Operating income (loss)
    
    $
    495
    
    
    $
    130
    
    
    $
    164
    
    
    $
    (184
    )
    
    $
    605Earnings (losses) from
unconsolidated investments
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    (9
    )
    
    
    (3
    )Other items, net
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    49Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (384
    )Income from continuing operations
before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151
    )Income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116Income from discontinued operations,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    264
  53




---



##### Table of Contents



Dynegys Results of Operations for the Year Ended December 31, 2006
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    Total(in millions)Revenues
    
    $
    969
    
    
    $
    87
    
    
    $
    609
    
    
    $
    105
    
    
    $
    1,770Cost of sales
    
    
    (318
    )
    
    
    (66
    )
    
    
    (370
    )
    
    
    (44
    )
    
    
    (798
    )Operating and maintenance expense,
exclusive of depreciation and
amortization expense shown separately
below
    
    
    (165
    )
    
    
    (6
    )
    
    
    (160
    )
    
    
    (7
    )
    
    
    (338
    )Depreciation and amortization expense
    
    
    (168
    )
    
    
    (8
    )
    
    
    (24
    )
    
    
    (17
    )
    
    
    (217
    )Impairment and other charges
    
    
    (110
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (119
    )Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3General and administrative expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (196
    )
    
    
    (196
    )Operating income (loss)
    
    $
    208
    
    
    $
    (2
    )
    
    $
    55
    
    
    $
    (156
    )
    
    $
    105Losses from unconsolidated investments
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Other items, net
    
    
    2
    
    
    
    1
    
    
    
    9
    
    
    
    42
    
    
    
    54Interest expense and debt conversion costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (631
    )Loss from continuing operations before
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (473
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152Loss from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (321
    )Loss from discontinued operations, net of
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )Cumulative effect of change in accounting
principle, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (333
    )
  54




---



##### Table of Contents



DHIs Results of Operations for the Year Ended December 31, 2008
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    Total(in millions)Revenues
    
    $
    1,623
    
    
    $
    925
    
    
    $
    1,006
    
    
    $
    (5
    )
    
    $
    3,549Cost of sales
    
    
    (584
    )
    
    
    (574
    )
    
    
    (705
    )
    
    
    10
    
    
    
    (1,853
    )Operating and maintenance expense,
exclusive of depreciation and
amortization expense shown separately
below
    
    
    (205
    )
    
    
    (124
    )
    
    
    (180
    )
    
    
    15
    
    
    
    (494
    )Depreciation and amortization expense
    
    
    (206
    )
    
    
    (101
    )
    
    
    (54
    )
    
    
    (10
    )
    
    
    (371
    )Impairment and other charges
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    (47
    )Gain on sale of assets
    
    
    56
    
    
    
    11
    
    
    
    
    
    
    
    15
    
    
    
    82General and administrative expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157
    )
    
    
    (157
    )Operating income (loss)
    
    $
    684
    
    
    $
    90
    
    
    $
    67
    
    
    $
    (132
    )
    
    $
    709Losses from unconsolidated investments
    
    
    
    
    
    
    (40
    )
    
    
    
    
    
    
    
    
    
    
    (40
    )Other items, net
    
    
    3
    
    
    
    5
    
    
    
    6
    
    
    
    72
    
    
    
    86Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (427
    )Income from continuing operations
before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    328Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (123
    )Income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205Income from discontinued operations,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    208
  55




---



##### Table of Contents



DHIs Results of Operations for the Year Ended December 31, 2007
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    Total(in millions)Revenues
    
    $
    1,325
    
    
    $
    689
    
    
    $
    1,076
    
    
    $
    13
    
    
    $
    3,103Cost of sales
    
    
    (482
    )
    
    
    (400
    )
    
    
    (688
    )
    
    
    19
    
    
    
    (1,551
    )Operating and maintenance expense,
exclusive of depreciation and
amortization expense shown separately
below
    
    
    (193
    )
    
    
    (86
    )
    
    
    (179
    )
    
    
    (4
    )
    
    
    (462
    )Depreciation and amortization expense
    
    
    (194
    )
    
    
    (73
    )
    
    
    (45
    )
    
    
    (13
    )
    
    
    (325
    )Gain on sale of assets
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    43General and administrative expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (184
    )
    
    
    (184
    )Operating income (loss)
    
    $
    495
    
    
    $
    130
    
    
    $
    164
    
    
    $
    (165
    )
    
    $
    624Earnings from unconsolidated investments
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6Other items, net
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    46Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (384
    )Income from continuing operations
before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116
    )Income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176Income from discontinued operations,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    324
 DHIs Results of Operations for the Year Ended December 31, 2006
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    Total(in millions)Revenues
    
    $
    969
    
    
    $
    87
    
    
    $
    609
    
    
    $
    105
    
    
    $
    1,770Cost of sales
    
    
    (318
    )
    
    
    (66
    )
    
    
    (370
    )
    
    
    (44
    )
    
    
    (798
    )Operating and maintenance expense,
exclusive of depreciation and
amortization expense shown separately
below
    
    
    (165
    )
    
    
    (6
    )
    
    
    (160
    )
    
    
    (7
    )
    
    
    (338
    )Depreciation and amortization expense
    
    
    (168
    )
    
    
    (8
    )
    
    
    (24
    )
    
    
    (17
    )
    
    
    (217
    )Impairment and other charges
    
    
    (110
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (119
    )Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3General and administrative expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (193
    )
    
    
    (193
    )Operating income (loss)
    
    $
    208
    
    
    $
    (2
    )
    
    $
    55
    
    
    $
    (153
    )
    
    $
    108Losses from unconsolidated investments
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Other items, net
    
    
    2
    
    
    
    1
    
    
    
    9
    
    
    
    39
    
    
    
    51Interest expense and debt conversion costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (579
    )Loss from continuing operations before
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (421
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125Loss from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (296
    )Loss from discontinued operations, net of
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (308
    )
  56




---



##### Table of Contents



Year Ended December 31,2008
    
    
    2007
    
    
    2006GEN-MWMillion Megawatt Hours Generated
    
    
    24.5
    
    
    
    25.0
    
    
    
    21.5In Market Availability for Coal Fired Facilities (1)
    
    
    90
    %
    
    
    93
    %
    
    
    89
    %Average Capacity Factor for Combined Cycle Facilities (2)
    
    
    16
    %
    
    
    19
    %
    
    
    Average Quoted On-Peak Market Power Prices ($/MWh) (3):Cinergy (Cin Hub)
    
    $
    67
    
    
    $
    61
    
    
    $
    52Commonwealth Edison (NI Hub)
    
    $
    66
    
    
    $
    59
    
    
    $
    52PJM West
    
    $
    84
    
    
    $
    71
    
    
    $
    62Average On-Peak Market Spark Spreads ($/MWh) (4):PJM West
    
    
    15
    
    
    
    17
    
    
    
    10GEN-WEMillion Megawatt Hours Generated (5) (6)
    
    
    11.2
    
    
    
    11.1
    
    
    
    0.9Average Capacity Factor for Combined Cycle Facilities (2)
    
    
    44
    %
    
    
    59
    %
    
    
    Average Quoted On-Peak Market Power Prices ($/MWh) (3):North Path
15 (NP 15)
    
    $
    80
    
    
    $
    67
    
    
    $
    61Palo Verde
    
    $
    72
    
    
    $
    62
    
    
    $
    58Average On-Peak Market Spark Spreads ($/MWh) (4):North Path
15 (NP 15)
    
    $
    18
    
    
    $
    16
    
    
    $
    14Palo Verde
    
    $
    13
    
    
    $
    13
    
    
    $
    12GEN-NEMillion Megawatt Hours Generated
    
    
    7.9
    
    
    
    9.4
    
    
    
    4.4In Market Availability for Coal Fired Facilities (1)
    
    
    91
    %
    
    
    90
    %
    
    
    86
    %Average Capacity Factor for Combined Cycle Facilities (2)
    
    
    25
    %
    
    
    37
    %
    
    
    17
    %Average Quoted On-Peak Market Power Prices ($/MWh) (3):New YorkZone G
    
    $
    101
    
    
    $
    84
    
    
    $
    76New YorkZone A
    
    $
    68
    
    
    $
    64
    
    
    $
    59Mass Hub
    
    $
    91
    
    
    $
    78
    
    
    $
    70Average On-Peak Market Spark Spreads ($/MWh) (4):New YorkZone A
    
    $
    3
    
    
    $
    12
    
    
    $
    9Mass Hub
    
    $
    23
    
    
    $
    23
    
    
    $
    19Fuel Oil
    
    $
    (37
    )
    
    $
    (16
    )
    
    $
    (10
    )Average natural gas priceHenry Hub ($/MMBtu) (7)
    
    $
    8.85
    
    
    $
    6.95
    
    
    $
    6.74
 
 (1)
    
    Reflects the percentage of generation available during periods when market
prices are such that these units could be profitably dispatched.(2)
    
    Reflects actual production as a percentage of available capacity.(3)
    
    Reflects the average of day-ahead quoted prices for the periods presented and
does not necessarily reflect prices realized by the Company.(4)
    
    Reflects the simple average of the spark spread available to a 7.0 MMBtu/MWh
heat rate generator selling power at day-ahead prices and buying delivered natural gas
or fuel oil at a daily cash market price and does not reflect spark spreads available
to the Company.(5)
    
    Includes our ownership percentage in the MWh generated by our GEN-WE investment
in the Black Mountain power generation facility for the years ended December 31, 2008,
2007 and 2006, respectively.(6)
    
    Excludes approximately 1.8 million MWh and 2.9 million MWh generated by our
CoGen Lyondell power generation facility, which we sold in August 2007, for the years
ended December 31, 2007 and 2006 and less than 0.1 million MWh generated by our
Calcasieu power generation facility, which we sold on March 31, 2008, for the years
ended December 31, 2008, 2007 and 2006.(7)
    
    Reflects the average of daily quoted prices for the periods presented and does
not reflect costs incurred by the Company.  57




---



##### Table of Contents



Year Ended December 31, 2008Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    Total(in millions)Gain on sale of Rolling Hills
    
    $
    56
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    56Asset impairment
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    (47
    )Release of state franchise tax and sales tax liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    16Gain on sale of NYMEX shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15Gain on sale of Oyster Creek ownership
interest
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Gain on sale of Sandy Creek ownership
interest
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    13Gain on liquidation of foreign entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    24Sandy Creek mark-to-market losses (1)
    
    
    
    
    
    
    (40
    )
    
    
    
    
    
    
    
    
    
    
    (40
    )Taxes (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    12TotalDHI
    
    $
    56
    
    
    $
    (63
    )
    
    $
    
    
    
    $
    67
    
    
    $
    60Impairment of equity investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    (24
    )Loss on dissolution of equity investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47
    )
    
    
    (47
    )Taxes (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    6TotalDynegy
    
    $
    56
    
    
    $
    (63
    )
    
    $
    
    
    
    $
    2
    
    
    $
    (5
    )
 
 (1)
    
    These mark-to-market losses represent our 50 percent share.(2)
    
    Represents the benefit of adjustments arising from the measurement of temporary
differences. Year Ended December 31, 2007Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    Total(in millions)Discontinued operations (1)
    
    $
    
    
    
    $
    225
    
    
    $
    
    
    
    $
    14
    
    
    $
    239Legal and settlement charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    (17
    )Illinois rate relief charge
    
    
    (25
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )Change in fair value of
interest rate swaps, net of
minority interest
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    30Gain on sale of Sandy Creek
ownership interest
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Gain on sale of Plum Point
ownership interest
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39Settlement of Kendall toll
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    31Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    30TotalDHI
    
    
    5
    
    
    
    235
    
    
    
    
    
    
    
    97
    
    
    
    337Legal and settlement charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    (19
    )Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    (20
    )TotalDynegy
    
    $
    5
    
    
    $
    235
    
    
    $
    
    
    
    $
    58
    
    
    $
    298
 
 (1)
    
    Discontinued operations for GEN-WE includes a gain of $224 million on the sale
of the CoGen Lyondell power generation facility.  58




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##### Table of Contents



Year Ended December 31, 2006Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    Total(in millions)Debt conversion costs
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (204
    )
    
    $
    (204
    )Asset impairments
    
    
    (110
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (119
    )Legal and settlement charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53
    )
    
    
    (53
    )Sithe Subordinated Debt exchange charge
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    (36
    )Acceleration of financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (34
    )Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29
    )
    
    
    (29
    )Discontinued operations
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    29
    
    
    
    (24
    )TotalDHI
    
    
    (110
    )
    
    
    (62
    )
    
    
    (36
    )
    
    
    (291
    )
    
    
    (499
    )Debt conversion costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    (45
    )Acceleration of financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1TotalDynegy
    
    $
    (110
    )
    
    $
    (62
    )
    
    $
    (36
    )
    
    $
    (337
    )
    
    $
    (545
    )
 Year Ended 2008 Compared to Year Ended 2007
 Operating Income
   Power GenerationMidwest Segment.
  
    
    Mark-to-market gains  GEN-MWs results for the year ended December 31, 2008 included
mark-to-market gains of $191 million, compared to $36 million of mark-to-market losses
for the year ended December 31, 2007. Of the $191 million in 2008 mark-to-market gains,
$5 million related to positions that settled in 2008, and the remaining $186 million
related to positions that will settle in 2009 and 2010;
 
    
    Kendall and Ontelaunee provided results of $109 million for the year ended December
31, 2008 compared to $62 million for the year ended December 31, 2007, exclusive of
mark-to-market amounts
discussed above. The improved results in 2008 are the result of higher energy and
capacity prices in PJM, and twelve months of results in 2008 compared with nine months in
2007, as the assets were acquired April 2, 2007;
  59




---



##### Table of Contents




    
    Increased market prices  The average quoted on-peak prices in the Cin Hub and PJM
West pricing regions (the liquid market hubs where our forward power sales occurred)
increased from $61 and $71 per MWh, respectively, for the year ended December 31, 2007 to
$67 and $84 per MWh, respectively, for the year ended December 31, 2008;
 
    
    Additional capacity sales of approximately $35 million, as a result of improved
capacity prices for 2008 compared with 2007; and
 
    
    In 2007, we recorded a pre-tax charge of $25 million in Cost of sales to support a
rate relief package for Illinois electric consumers.
  
    
    Decreased volumes  In spite of the addition of the Midwest plants acquired through
the Merger on April 2, 2007, generated volumes decreased by 2 percent, from 25 million
MWh for the year ended December 30, 2007, to 24.5 million MWh for the year ended December
31, 2008. The decrease in volumes was primarily driven by forced outages, lower off-peak
volumes due to mild temperatures and transmission congestion as a result of flooding;
 
    
    Increased fuel costs, due largely to higher natural gas prices; and
 
    
    Wider basis differentials  In 2008, the price differential between the locations
where we deliver generated power and the liquid market hubs where our forward power sales
occurred was wider, in part due to congestion and transmission outages and regional
weather differences, as compared to the same period in the prior year. These wider price
differentials had a negative impact on our results as the price we received for delivered
power at our physical delivery locations did not increase to the same extent as that of
the liquid traded hubs.
   Power GenerationWest Segment.
  
    
    Mark-to-market gains  GEN-WEs results for the year ended December 31, 2008 included
mark-to-market gains of $51 million, compared to $44 million of mark-to-market gains for
the year ended December 31, 2007. Of the $51 million in 2008 mark-to-market gains, $3
million of losses related to positions that settled in 2008, and the remaining $54
million related to positions that will settle in 2009 and 2010; and
 
    
    Increased volumes  Generated volumes were 11.2 million MWh for the year ended
December 31, 2008, up from 11.1 million MWh for the year ended December 31, 2007. The
volume increase was primarily driven by the West plants acquired on April 2, 2007, which
provided total results, including operating expense, of $177 million for the year ended
December 31, 2008, compared with $156 million for the
same period in 2007, exclusive of mark-to-market amounts discussed above. Results for
2008 were negatively impacted by a forced outage and increased fuel costs due to higher
natural gas prices.
  60




---



##### Table of Contents



Power GenerationNortheast Segment.
  
    
    Decreased spark spreads  Although on-peak market power prices in New York Zone A
increased by 7 percent, Zone A spark spreads contracted as fuel prices rose at a greater
rate than power prices;
 
    
    Decreased volumes  In spite of the addition of the Northeast plants acquired through
the Merger on April 2, 2007, generated volumes decreased by 16 percent, from 9.4 million
MWh for the year ended December 31, 2007 to 7.9 million MWh for the year ended December
31, 2008. The volumes added by the new Northeast plants were more than offset by
declines due to decreased spark spreads and reduced dispatch opportunities as compared to
the same period in the prior year;
 
    
    Decreased results from the Bridgeport and Casco Bay assets, which provided results of
$42 million for the year ended December 31, 2008, compared with $90 million for the year
ended December 31, 2007, exclusive of mark-to-market amounts discussed below. Although
the Bridgeport and Casco Bay assets provided a full year of results in 2008 compared with
nine months in 2007, volumes were down during the key summer months as a result of
compressed spark spreads and reduced dispatch opportunities;
 
    
    Decreased capacity sales of approximately $15 million, exclusive of the Bridgeport and
Casco Bay results discussed above, as a result of lower capacity prices for 2008 compared
with 2007; and
 
    
    Increased fuel cost, due largely to higher coal prices for our Danskammer facility.
   Other.
  61




---



##### Table of Contents



Earnings (Losses) from Unconsolidated Investments
   Other Items, Net
   62




---



##### Table of Contents



Interest Expense
  Income Tax Expense
   Discontinued Operations
 Income From Discontinued Operations Before Taxes.
    63




---



##### Table of Contents



Income Tax Expense From Discontinued Operations
  Year Ended 2007 Compared to Year Ended 2006
 Operating Income
  Power GenerationMidwest Segment.
  
    
    Higher volumes  Generated volumes increased by 16 percent, up from 21.5 million MWh
for the year ended December 31, 2006 to 25 million MWh for the year ended December 31,
2007;
 
    
    Increased market prices  The average quoted on-peak prices in Cin Hub pricing region
increased from $52 per MWh for the year ended December 31, 2006 to $61 per MWh for the
year ended December 31, 2007;
 
    
    Improved pricing as a result of the Illinois reverse power procurement auction 
Beginning January 1, 2007, we began operating under two new energy product supply
agreements with subsidiaries of Ameren Corporation through our participation in the
Illinois reverse power procurement auction in 2006. Under these new agreements, we
provide up to 1,400 MWh around the clock for prices of approximately $64.77 per
megawatt-hour; and
 
    
    The addition of the new Midwest plants acquired through the Merger  The Kendall and
Ontelaunee plants acquired on April 2, 2007 contributed to the increase in generated
volumes and provided results of $62 million for the year ended December 31, 2007,
exclusive of mark-to-market losses discussed below.
  
    
    Mark-to-market losses  GEN-MWs results for the year ended December 31, 2007
included mark-to-market losses of $36 million related to forward sales, compared to $15
million of mark-to-market gains for the year ended December 31, 2006. Of the $36 million
in 2007 mark-to-market losses, $13 million related to previously recognized
mark-to-market gains that settled in 2007, and the remaining $23 million related to
positions that will settle in 2008 and beyond. Please read Note 6Risk Management
Activities, Derivatives and Financial InstrumentsAccounting for Derivative Instruments
and Hedging ActivitiesCash Flow Hedges for a discussion of our decision to no longer
designate derivative transactions as cash flow hedges beginning with the second quarter
2007; and
 
    
    A $25 million charge related to the Illinois rate relief package  In July 2007, we
entered into agreements with various parties to make payments of up to $25 million in
connection with legislation providing for rate relief for Illinois electric consumers.
During September 2007, we made an initial payment of $7.5 million. During 2007, we
recorded a pre-tax charge of $25 million, included as a cost of sales on our consolidated
statements of operations.
  64




---



##### Table of Contents



Power GenerationWest Segment.
  
    
    The addition of the new West plants acquired through the Merger  Generated volumes
were 11.1 million MWh for the year ended December 31, 2007, up from 0.9 million MWh for
the year ended December 31, 2006. The volume increase was primarily driven by the new
West plants, which provided total results of $156 million for the year ended December 31,
2007, exclusive of mark-to-market gains discussed below. The volume increase from the
new West plants was slightly offset by a reduction due to the sale of the Rockingham
generation facility in late 2006; and
 
    
    Mark-to-market gains  GEN-WEs results for the year ended December 31, 2007 included
mark-to-market gains of $44 million related to heat rate call-options and forward sales
agreements, compared to zero for the year ended December 31, 2006. Of the $44 million in
2007 mark-to-market gains, $15 million related to risk management liabilities acquired in
the Merger that settled in 2007, and the remaining $29 million related to positions that
will settle in 2008 and beyond. Please read Note 6Risk Management Activities,
Derivatives and Financial InstrumentsAccounting for Derivative Instruments and Hedging
ActivitiesCash Flow Hedges for a discussion of our decision to no longer designate
derivative transactions as cash flow hedges beginning with the second quarter 2007.
  Power GenerationNortheast Segment.
  
    
    Increased market prices and spark spreads  On peak market prices in New York Zone G
and Zone A increased by 11 percent and 8 percent, respectively. Spark spreads widened
due to higher power prices. Average market spark spreads increased 33 percent and 21
percent for New York Zone A and Mass Hub, respectively;
 
    
    Higher volumes, partially driven by the addition of the new Northeast plants acquired
through the Merger  Generated volumes increased by 114 percent, up from 4.4 million MWh
for the year ended December 31, 2006 to 9.4 million MWh for the year ended December 31,
2007. The volume increase was partially driven by the new Northeast plants. The
Bridgeport and Casco Bay plants provided total results of $90 million for the year ended
December 31, 2007, exclusive of mark-to-market losses discussed below. The volume
increase was also a result of higher spark spreads and cooler weather in the first
quarter 2007, which led to greater run times than in 2006; and
 
    
    A fuel oil inventory write-down of approximately $6 million was recorded in the year
ended December 31, 2006.
  65




---



##### Table of Contents




    
    Mark-to-market losses  GEN-NEs results for the year ended December 31, 2007
included mark-to-market losses of $40 million related to forward sales, compared to
losses of $26 million for the year ended December 31, 2006. Of the $40 million in 2007
mark-to-market losses, $32 million related to risk management assets acquired in the
Merger that settled in 2007. The remaining $8 million related to positions that will
settle in 2008 and beyond. Please read Note 6Risk Management Activities, Derivatives
and Financial InstrumentsAccounting for Derivative Instruments and Hedging
ActivitiesCash Flow Hedges for a discussion of our decision to no longer designate
derivative transactions as cash flow hedges beginning with the second quarter 2007; and
 
    
    Results were favorably impacted in 2006 by $12 million due to an opportunistic sale of
emissions credits that were not required for near-term operations of our facilities.
Similar sales of $10 million occurred in 2007.
  Other.
    66




---



##### Table of Contents



Earnings (Losses) from Unconsolidated Investments
   Other Items, Net
   Interest Expense
    67




---



##### Table of Contents



Income Tax (Expense) Benefit
   Discontinued Operations
 Income From Discontinued Operations Before Taxes.
     Income Tax (Expense) Benefit From Discontinued Operations.
  68




---



##### Table of Contents



Cumulative Effect of Change in Accounting Principles
  Outlook
      69




---



##### Table of Contents



GEN-MW.
 2009
    
    2010
    
    
    2011
    
    
    2012(in millions)$
    245
    
    $
    215
    
    
    $
    165
    
    
    $
    45
    Weighted AveragePlanning Year
    
    Net Capacity
    
    
    Capacity Price(in MWs)
    
    
    ($ per MW-day)2008-2009
    
    
    885
    
    
    
    1122009-2010
    
    
    2,240
    
    
    
    123
    (1)2010-2011
    
    
    2,057
    
    
    
    1742011-2012
    
    
    2,061
    
    
    
    110
 
 (1)
    
    Calculated as the weighted average of 1,723 MWs at $102 per MW-day for RTO and 517 MWs at $191 per MW-day for MAAC+APS. GEN-WE.
 GEN-NE.
   70




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##### Table of Contents



SEASONALITY
  CRITICAL ACCOUNTING POLICIES
   
    
    Revenue Recognition and Valuation of Risk Management Assets and Liabilities;
 
    
    Valuation of Tangible and Intangible Assets;
 
    
    Accounting for Contingencies, Guarantees and Indemnifications;
 
    
    Accounting for Asset Retirement Obligations;
 
    
    Accounting for Variable Interest Entities;
 
    
    Accounting for Income Taxes; and
 
    
    Valuation of Pension and Other Post-Retirement Plans Assets and Liabilities.
 Revenue Recognition and Valuation of Risk Management Assets and Liabilities
  Derivative InstrumentsGeneration.
  71




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##### Table of Contents



Derivative InstrumentsFinancing Activities.
  Fair Value Measurements.
 
    
    Level 1  Quoted prices are available in active markets for identical assets or
liabilities as of the reporting date. Active markets are those in which transactions for
the asset or liability occur in sufficient frequency and volume to provide pricing
information on an ongoing basis. Level 1 primarily consists of financial instruments
such as listed equities.
  72




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##### Table of Contents




    
    Level 2  Pricing inputs are other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the reporting date.
Level 2 includes those financial instruments that are valued using models or other
valuation methodologies. These models are primarily industry-standard models that
consider various assumptions, including quoted forward prices for commodities, time
value, volatility factors, and current market and contractual prices for the underlying
instruments, as well as other relevant economic measures. Substantially all of these
assumptions are observable in the marketplace throughout the full term of the instrument,
can be derived from observable data or are supported by observable levels at which
transactions are executed in the marketplace. Instruments in this category include
non-exchange-traded derivatives such as over the counter forwards, options and repurchase
agreements.
 
    
    Level 3  Pricing inputs include significant inputs that are generally less
observable from objective sources. These inputs may be used with internally developed
methodologies that result in managements best estimate of fair value. Level 3
instruments include those that may be more structured or otherwise tailored to our needs.
At each balance sheet date, we perform an analysis of all instruments subject to SFAS
No. 157 and include in Level 3 all of those whose fair value is based on significant
unobservable inputs.
   Valuation of Tangible and Intangible Assets
  
    
    significant underperformance relative to historical or projected future operating
results;
 
    
    significant changes in the manner of our use of the assets or the strategy for our
overall business;
 
    
    significant negative industry or economic trends; and
 
    
    significant declines in stock value for a sustained period.
  73




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##### Table of Contents



(i)
    
    Our market capitalization has been below book value for a relatively short
period of time, which coincides with unprecedented volatility in the broader financial
markets, as well as significant volatility in our industry.
   74




---



##### Table of Contents



(ii)
    
    Our share price was negatively impacted in the third and fourth quarters of
2008 by the sale of shares by hedge funds and lack of buying by institutional
investors.
  (iii)
    
    Lastly, our share price does not reflect a control premium.
   Accounting for Contingencies, Guarantees and Indemnifications
    75




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##### Table of Contents



Accounting for Asset Retirement Obligations
   Accounting for Variable Interest Entities
    Accounting for Income Taxes
    76




---



##### Table of Contents



Valuation of Pension and Other Post-Retirement Plans Assets and Liabilities
     77




---



##### Table of Contents



Impact on PBO,
    
    
    ImpactDecember 31,
    
    
    on 20092008
    
    
    Expense(in millions)Increase in Discount Rate50 basis points
    
    $
    (14
    )
    
    $
    (2
    )Decrease in Discount Rate50 basis points
    
    
    15
    
    
    
    2Increase in Expected Long-term Rate of Return50 basis points
    
    
    
    
    
    
    (1
    )Decrease in Expected Long-term Rate of Return50 basis points
    
    
    
    
    
    
    1
   RECENT ACCOUNTING PRONOUNCEMENTS
  RISK-MANAGEMENT DISCLOSURES
  As of and for theYear EndedDecember 31, 2008(in millions)Balance Sheet Risk-Management AccountsFair value of portfolio at January 1, 2008
    
    $
    (100
    )Risk-management gains recognized through the income statement in the period, net
    
    
    145Cash paid related to risk-management contracts settled in the period, net
    
    
    135Changes in fair value as a result of a change in valuation technique (1)
    
    
    Non-cash adjustments and other (2)
    
    
    (210
    )Fair value of portfolio at December 31, 2008
    
    $
    (30
    )
 
 (1)
    
    Our modeling methodology has been consistently applied.(2)
    
    This amount consists of changes in value associated with fair value and cash flow
hedges on debt.  78




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##### Table of Contents



Risk-Management Asset and Liability Disclosures
  Net Risk-Management Asset and Liability Disclosures
 Total
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter(in millions)Mark-to-Market (1)
    
    $
    (30
    )
    
    $
    144
    
    
    $
    19
    
    
    $
    (15
    )
    
    $
    (12
    )
    
    $
    (13
    )
    
    $
    (153
    )Cash Flow (2)
    
    
    (113
    )
    
    
    158
    
    
    
    23
    
    
    
    (19
    )
    
    
    (16
    )
    
    
    (16
    )
    
    
    (243
    )
 
 (1)
    
    Mark-to-market reflects the fair value of our net risk-management position, which considers
time value, credit, price and other reserves necessary to determine fair value. Cash flows
have been segregated between periods based on the delivery date required in the individual
contracts.(2)
    
    Cash flow reflects undiscounted cash inflows and outflows by contract based on the tenor of
individual contract position for the remaining periods. These anticipated undiscounted cash
flows have not been adjusted for counterparty credit or other reserves. These amounts exclude
the cash flows associated with certain derivative instruments designated as hedges.  Net Fair Value of Risk-Management Portfolio
 Total
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter(in millions)Market Quotations (1)(2)
    
    $
    (90
    )
    
    $
    104
    
    
    $
    5
    
    
    $
    (16
    )
    
    $
    (13
    )
    
    $
    (14
    )
    
    $
    (156
    )Value Based on Models (2)
    
    
    60
    
    
    
    40
    
    
    
    14
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    3Total
    
    $
    (30
    )
    
    $
    144
    
    
    $
    19
    
    
    $
    (15
    )
    
    $
    (12
    )
    
    $
    (13
    )
    
    $
    (153
    )
 
 (1)
    
    Price inputs obtained from actively traded, liquid markets for commodities.(2)
    
    The market quotations and prices based on models categorization differs from the SFAS No. 157
categories of Level 1, Level 2 and Level 3 due to the application of the different
methodologies. Please read Note 6Risk Management Activities, Derivatives and Financial
InstrumentsFair Value Measurements for further discussion.  79




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##### Table of Contents



Derivative Contracts
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  
    
    manage and hedge our fixed-price purchase and sales commitments;
 
    
    reduce our exposure to the volatility of cash market prices; and
 
    
    hedge our fuel requirements for our generating facilities.
  
    
    commodity price risks result from exposures to changes in spot prices, forward prices
and volatilities in commodities, such as electricity, natural gas, coal, fuel oil,
emissions and other similar products; and
 
    
    interest rate risks primarily result from exposures to changes in the level, slope and
curvature of the yield curve and the volatility of interest rates.
  VaR.
 
  
    80




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##### Table of Contents



Daily and Average VaR for Mark-to-Market Portfolios
 December 31,
    
    
    December 31,2008
    
    
    2007(in millions)One day VaR95 percent confidence level
    
    $
    21
    
    
    $
    24One day VaR99 percent confidence level
    
    $
    29
    
    
    $
    35Average VaR for the year-to-date period95 percent confidence level
    
    $
    42
    
    
    $
    20
 Credit Risk.
   Credit Exposure Summary
 Non-Investment
    
    
    InvestmentGrade
    
    
    GradeQuality
    
    
    Quality
    
    
    Total(in millions)Type of Business:Financial Institutions
    
    $
    198
    
    
    $
    
    
    
    $
    198Utility and Power Generators
    
    
    4
    
    
    
    2
    
    
    
    6Total
    
    $
    202
    
    
    $
    2
    
    
    $
    204
   81




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##### Table of Contents



Interest Rate Risk .
  Derivative Contracts.
 Absolute Notional Contract Amounts
 December 31,
    
    
    December 31,2008
    
    
    2007Cash flow hedge interest rate swaps (in millions of U.S. dollars) (1)
    
    $
    471
    
    
    $
    310Fixed interest rate paid on swaps (percent)
    
    
    5.32
    
    
    
    5.32Fair value hedge interest rate swaps (in millions of U.S. dollars)
    
    $
    25
    
    
    $
    25Fixed interest rate received on swaps (percent)
    
    
    5.70
    
    
    
    5.70Interest rate risk-management contracts (in millions of U.S. dollars)
    
    $
    231
    
    
    $
    231Fixed interest rate paid (percent)
    
    
    5.35
    
    
    
    5.35Interest rate risk-management contracts (in millions of U.S. dollars)
    
    $
    206
    
    
    $
    206Fixed interest rate received (percent)
    
    
    5.28
    
    
    
    5.28
 
 (1)
    
    Interest rate swap contracts related to our investment in the Plum Point Project. 
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   82




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##### Table of Contents



Managements Report on Internal Control over Financial Reporting
  (i)
    
    pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets;(ii)
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and that receipts and
expenditures of our company are being made only in accordance with authorizations of our
management and directors; and(iii)
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material
effect on the financial statements.
 Internal Control-Integrated Framework
  Changes in Internal Controls Over Financial Reporting
  
 Item 9B. Other Information
   83




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
 Dynegy
 Executive Officers.
 Code of Ethics.
 Other Information .
 DHI
  
 Item 11. Executive Compensation
 Dynegy.
 DHI.
  84




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##### Table of Contents



Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
 Dynegy.
 Securities Authorized for Issuance Under Equity Compensation Plans
 Number of securitiesremaining available forNumber of securities
    
    
    Weighted-average
    
    
    future issuance underto be issued upon
    
    
    exercise price of
    
    
    equity compensationexercise of outstanding
    
    
    outstanding options,
    
    
    plans (excludingoptions, warrants and
    
    
    warrants and rights
    
    
    securities reflected inPlan Category
    
    rights (a)
    
    
    (b)
    
    
    column (a)) (c)Equity compensation
plans approved by
security holders
    
    
    5,963,988
    
    
    $
    12.20
    
    
    
    10,949,552Equity compensation
plans not approved
by security holders
(1)
    
    
    2,852,574
    
    
    $
    11.38
    
    
    
    1,931,762Total
    
    
    8,816,562
    
    
    $
    11.93
    
    
    
    12,881,314
 
 (1)
    
    The plans that were not approved by Dynegys security holders are as follows:
Extant Inc. 401(K) Plan, Dynegy 2001 Non-Executive Stock Incentive Plan and Dynegy UK
Plan. Please read Note 20Capital StockStock Award Plans for a brief description of
Dynegys equity compensation plans, including these plans.  DHI.
 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
 Dynegy.
 DHI.
 
 Item 14. Principal Accountant Fees and Services
 Dynegy.
 DHI.
  85




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
  1.
    
    Financial StatementsOur consolidated financial statements are incorporated
under Item 8. of this report.2.
    
    Financial Statement SchedulesFinancial Statement Schedules are incorporated
under Item 8. of this report.3.
    
    ExhibitsThe following instruments and documents are included as exhibits to
this report. All management contracts or compensation plans or arrangements set forth
in such list are marked with a .
 ExhibitNumber
    
    
    
    Description2.1
    
    
    
    
    Plan of Merger, Contribution and Sale Agreement, dated September 14, 2006 by and
among Dynegy Inc., LSP Gen Investors, LP, LS Power Partners, LP, LS Power Equity
Partners PIE I, L.P., LS Power Equity Partners, L.P., LS Power Associates, L.P.,
Falcon Merger Sub Co. and Dynegy Acquisition, Inc. (incorporated by reference to
Exhibit 2.1 to the Current Report on Form 8-K of Dynegy Inc. filed on September 19,
2006, File No. 1-15659).2.2
    
    
    
    
    Limited Liability Company Membership Interests and Stock Purchase Agreement, dated as
of September 14, 2006, among LS Power Associates, L.P., LS Power Equity Partners,
L.P., LS Power Equity Partners PIE I, L.P., LS Power Partners, L.P. and Kendall Power
LLC (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K of
Dynegy Inc. filed on September 19, 2006, File No. 1-15659).3.1
    
    
    
    
    Amended and Restated Certificate of Incorporation of Dynegy Inc. (formerly named
Dynegy Acquisitions, Inc.) (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-8 of Dynegy Inc. filed on April 2, 2007, File No.
333-141810).3.2
    
    
    
    
    Amended and Restated Bylaws of Dynegy Inc. (formerly named Dynegy Acquisitions, Inc.)
(incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-8 of
Dynegy Inc. filed on April 2, 2007, File No. 333-141810).3.3
    
    
    
    
    Restated Certificate of Incorporation of Dynegy Holdings Inc. (incorporated by
reference to Exhibit 3.1 to the Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1999 of Dynegy Holdings Inc., File No. 000-29311).3.4
    
    
    
    
    Amended and Restated Bylaws of Dynegy Holdings Inc. (incorporated by reference to
Exhibit 3.2 to the Annual Report on Form 10-K for the Fiscal Year Ended December 31,
1999 of Dynegy Holdings Inc., File No. 000-29311).4.1
    
    
    
    
    Subordinated Debenture Indenture between NGC Corporation and The First National Bank
of Chicago, as Debenture Trustee, dated as of May 28, 1997 (incorporated by reference
to Exhibit 4.5 to the Quarterly Report on Form 10-Q for the Quarterly Period Ended
June 30, 1997 of NGC Corporation, File No. 1-11156).
  86




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##### Table of Contents



ExhibitNumber
    
    
    
    Description4.2
    
    
    
    
    Amended and Restated Declaration of Trust among NGC Corporation, Wilmington Trust
Company, as Property Trustee and Delaware Trustee, and the Administrative Trustees
named therein, dated as of May 28, 1997 (incorporated by reference to Exhibit 4.6 to
the Quarterly Report on Form 10-Q for the Quarterly Period Ended June 30, 1997 of NGC
Corporation, File No. 1-11156).4.3
    
    
    
    
    Series A Capital Securities Guarantee Agreement executed by NGC Corporation and The
First National Bank of Chicago, as Guarantee Trustee, dated as of May 28, 1997
(incorporated by reference to Exhibit 4.9 to the Quarterly Report on Form 10-Q for the
Quarterly Period Ended June 30, 1997 of NGC Corporation, File No. 1-11156).4.4
    
    
    
    
    Common Securities Guarantee Agreement of NGC Corporation, dated as of May 28, 1997
(incorporated by reference to Exhibit 4.10 to the Quarterly Report on Form 10-Q for
the Quarterly Period Ended June 30, 1997 of NGC Corporation, File No. 1-11156).4.5
    
    
    
    
    Registration Rights Agreement, dated as of May 28, 1997, among NGC Corporation, NGC
Corporation Capital Trust I, Lehman Brothers, Salomon Brothers Inc. and Smith Barney
Inc. (incorporated by reference to Exhibit 4.11 to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended June 30, 1997 of NGC Corporation, File No. 1-11156).4.6
    
    
    
    
    Indenture, dated as of September 26, 1996, restated as of March 23, 1998, and amended
and restated as of March 14, 2001, between Dynegy Holdings Inc. and Bank One Trust
Company, National Association, as Trustee (incorporated by reference to Exhibit 4.17
to the Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2000 of
Dynegy Holdings Inc., File No. 000-29311).4.7
    
    
    
    
    First Supplemental Indenture, dated July 25, 2003 to that certain Indenture, dated as
of September 26, 1996, between Dynegy Holdings Inc. and Wilmington Trust Company, as
trustee (incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K
of Dynegy Inc. filed on July 28, 2003, File No. 1-15659).4.8
    
    
    
    
    Second Supplemental Indenture, dated as of April 12, 2006, to that certain Indenture,
originally dated as of September 26, 1996, as amended and restated as of March 23,
1998 and again as of March 14, 2001, by and between Dynegy Holdings Inc. and
Wilmington Trust Company (as successor to JPMorgan Chase Bank, N.A.), as trustee, as
supplemented by that certain First Supplemental Indenture, dated as of July 25, 2003
(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Dynegy
Inc. filed on April 12, 2006, File No. 1-15659).4.9
    
    
    
    
    Third Supplemental Indenture, dated as of May 24, 2007, to that certain Indenture,
originally dated as of September 26, 1996, as amended and restated as of March 23,
1998 and again as of March 14, 2001, by and between Dynegy Holdings Inc. and
Wilmington Trust Company (as successor to JPMorgan Chase Bank, N.A.), as trustee, as
supplemented by that certain First Supplemental Indenture, dated as of July 25, 2003,
and that certain Second Supplemental Indenture, dated as of April 12, 2006
(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Dynegy
Holdings Inc. filed on May 25, 2007, File No. 000-29311).
  87




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##### Table of Contents



ExhibitNumber
    
    
    
    Description4.10
    
    
    
    
    Fourth Supplemental Indenture, dated as of May 24, 2007, to that certain Indenture,
originally dated as of September 26, 1996, as amended and restated as of March 23,
1998 and again as of March 14, 2001, by and between Dynegy Holdings Inc. and
Wilmington Trust Company (as successor to JPMorgan Chase Bank, N.A.), as trustee, as
supplemented by that certain First Supplemental Indenture, dated as of July 25, 2003,
that certain Second Supplemental Indenture, dated as of April 12, 2006, and that
certain Third Supplemental Indenture, dated as of May 24, 2007 (incorporated by
reference to Exhibit 4.2 to the Current Report on Form 8-K of Dynegy Holdings Inc.
filed on May 25, 2007, File No. 000-29311).4.11
    
    
    
    
    Registration Rights Agreement, effective as of July 21, 2006, by and among Dynegy
Holdings Inc. RCP Debt, LLC and RCMF Debt, LLC (incorporated by reference to Exhibit
4.1 to the Current Report on Form 8-K of Dynegy Inc. filed on July 24, 2006, File No.
1-15659).4.12
    
    
    
    
    Registration Rights Agreement, dated as of May 24, 2007, by and among Dynegy Holdings
Inc. and the several initial purchasers party thereto (incorporated by reference to
Exhibit 4.3 to the Current Report on Form 8-K of Dynegy Holdings Inc. filed on May 25,
2007, File No. 000-29311).4.13
    
    
    
    
    Trust Indenture, dated as of January 1, 1993, among Sithe/Independence Funding
Corporation, Sithe/Independence Power Partners, L.P. and IBJ Schroder Bank & Trust
Company, as Trustee (incorporated by reference to Exhibit 4.22 to the Annual Report on
Form 10-K for the Fiscal Year Ended December 31, 2004 of Dynegy Inc, File No.
1-15659).4.14
    
    
    
    
    First Supplemental Indenture, dated as of January 1, 1993, to the Trust Indenture
dated as of January 1, 1993, among Sithe/Independence Funding Corporation,
Sithe/Independence Power Partners, L.P. and IBJ Schroder Bank & Trust Company, as
Trustee (incorporated by reference to Exhibit 4.23 to the Annual Report on Form 10-K
for the Fiscal Year Ended December 31, 2004 of Dynegy Inc, File No. 1-15659).4.15
    
    
    
    
    Second Supplemental Indenture, dated as of October 23, 2001, to the Trust Indenture
dated as of January 1, 1993, among Sithe/Independence Funding Corporation,
Sithe/Independence Power Partners, L.P. and The Bank of New York, as Trustee
(incorporated by reference to Exhibit 4.24 to the Annual Report on Form 10-K for the
Fiscal Year Ended December 31, 2004 of Dynegy Inc, File No. 1-15659).4.16
    
    
    
    
    Global Note representing the 9.00 percent Secured Bonds due 2013 of
Sithe/Independence Power Partners, L.P. (incorporated by reference to Exhibit 4.5 to
the Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 2005 of
Dynegy Inc., File No. 1-15659).4.17
    
    
    
    
    Shareholder Agreement, dated as of September 14, 2006, among Dynegy Acquisition, Inc.
and LS Power Partners, L.P., LS Power Associates, L.P., LS Power Equity Partners,
L.P., LS Power Equity Partners PIE I, L.P. and LSP Gen Investors, L.P. (incorporated
by reference to Exhibit 4.1 to the Current Report on Form 8-K of Dynegy Inc. filed on
September 19, 2006, File No. 1-15659).4.18
    
    
    
    
    Registration Rights Agreement, dated as of September 14, 2006, among Dynegy
Acquisition, Inc., LS Power Partners, L.P., LS Power Associates, L.P., LS Power Equity
Partners, L.P., LS Power Equity Partners PIE I, L.P. and LSP Gen Investors, L.P.
(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Dynegy
Inc. filed on September 19, 2006, File No. 1-15659).
  88




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ExhibitNumber
    
    
    
    Description4.19
    
    
    
    
    Lock-Up Agreement, dated as of September 14, 2006, by and among LSP Gen Investors,
LP, LS Power Partners, LP, LS Power Associates, L.P., LS Power Equity Partners PIE I,
LP, LS Power Equity Partners, L.P. and Chevron U.S.A. Inc. (incorporated by reference
to Exhibit 4.5 to the Current Report on Form 8-K of Dynegy Inc. filed on September 19,
2006, File No. 1-15659).10.1
    
    
    
    
    Purchase Agreement, dated August 1, 2003, among Dynegy Inc., Dynegy Holdings Inc. and
the initial purchasers named therein (incorporated by reference to Exhibit 10.9 to the
Quarterly Report on Form 10-Q for the Quarterly Period Ended June 30, 2003 of Dynegy
Inc., File No. 1-15659).10.2
    
    
    
    
    Purchase Agreement, dated August 1, 2003, among Dynegy Holdings Inc., the guarantors
named therein and the initial purchasers named therein (incorporated by reference to
Exhibit 10.10 to the Quarterly Report on Form 10-Q for the Quarterly Period Ended
June 30, 2003 of Dynegy Inc., File No. 1-15659).10.3
    
    
    
    
    Purchase Agreement, dated September 30, 2003, among Dynegy Holdings Inc., the
guarantors named therein and the initial purchasers named therein (incorporated by
reference to Exhibit 99.2 to the Current Report on Form 8-K of Dynegy Inc. filed on
October 15, 2003, File No. 1-15659).10.4
    
    
    
    
    Purchase Agreement, dated as of March 29, 2006, for the sale of $750,000,000
aggregate principal amount of the 8.375 percent Senior Unsecured Notes due 2016 of
Dynegy Holdings Inc. among Dynegy Holdings Inc. and the several initial purchasers
named therein (incorporated by reference to Exhibit 10.11 to the Quarterly Report on
Form 10-Q for the Quarter Ended March 31, 2006 of Dynegy Inc., File No. 1-15659).10.5
    
    
    
    
    Purchase Agreement, dated as of May 17, 2007, by and between Dynegy Holdings Inc. and
J.P. Morgan Securities Inc. (incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q for Quarterly Period Ended June 30, 2007 of Dynegy
Holdings Inc., File No. 000-29311).10.6
    
    
    
    
    Stock Purchase Agreement, dated as of November 1, 2004, among Dynegy New York
Holdings Inc., Exelon SHC, Inc., Exelon New England Power Marketing, L.P. and ExRes
SHC, Inc. (incorporated by reference to Exhibit 10.48 to the Annual Report on Form
10-K for the Fiscal Year Ended December 31, 2004 of Dynegy Inc. File No. 1-15659).10.7
    
    
    
    
    Amendment to Stock Purchase Agreement (Special Payroll Payment), dated as of
January 28, 2005, among Dynegy New York Holdings Inc., Exelon SHC, Inc., Exelon New
England Power Marketing, L.P. and ExRes SHC, Inc. (incorporated by reference to
Exhibit 10.49 to the Annual Report on Form 10-K for the Fiscal Year Ended December 31,
2004 of Dynegy Inc. File No. 1-15659).10.8
    
    
    
    
    Amendment to Stock Purchase Agreement, dated as of January 31, 2005, among Dynegy New
York Holdings Inc., Exelon SHC, Inc., Exelon New England Power Marketing, L.P. and
ExRes SHC, Inc. (incorporated by reference to Exhibit 10.50 to the Annual Report on
Form 10-K for the Fiscal Year Ended December 31, 2004 of Dynegy Inc, File No.
1-15659).10.9
    
    
    
    
    Amendment to Stock Purchase Agreement (Luz Sale), dated as of January 31, 2005, among
Dynegy New York Holdings Inc., Exelon SHC, Inc., Exelon New England Power Marketing,
L.P. and ExRes SHC, Inc. (incorporated by reference to Exhibit 10.51 to the Annual
Report on Form 10-K for the Fiscal Year Ended December 31, 2004 of Dynegy Inc, File
No. 1-15659).
  89




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##### Table of Contents



ExhibitNumber
    
    
    
    Description10.10
    
    
    
    
    Exchange Agreement, dated as of July 21, 2006, by and among Dynegy Holdings Inc., RCP
Debt, LLC and RCMF Debt, LLC (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K of Dynegy Inc. filed on July 24, 2006, File No. 1-15659).10.11
    
    
    
    
    Corporate Opportunity Agreement, dated as of September 14, 2006, between Dynegy
Acquisition, Inc. and LS Power Development, LLC (incorporated by reference to Exhibit
10.3 to the Current Report on Form 8-K of Dynegy Inc. filed on September 19, 2006,
File No. 1-15659).10.12
    
    
    
    
    Limited Liability Company Agreement of DLS Power Development Company, LLC, dated
April 2, 2007, by and between LS Power Associates, L.P. and Dynegy Inc. (formerly
named Dynegy Acquisition, Inc.) (incorporated by reference to Exhibit 10.15 to the
Current Report on Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No.
000-29311).10.13
    
    
    
    
    Amended and Restated Limited Liability Company Agreement of DLS Power Holdings, LLC,
dated April 2, 2007, by and between LS Power Associates, L.P. and Dynegy Inc.
(formerly named Dynegy Acquisition, Inc.) (incorporated by reference to Exhibit 10.14
to the Current Report on Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File
No. 000-29311).**10.14
    
    
    
    
    Dissolution Agreement by and between Dynegy Inc. and LS Power Associates, L.P.,
effective January 1, 2009.10.15
    
    
    
    
    Fifth Amended and Restated Credit Agreement, dated as of April 2, 2007, by and among
Dynegy Holdings Inc., as borrower, Dynegy Inc. (formerly named Dynegy Acquisition,
Inc.) and Dynegy Inc., as parent guarantors, the other guarantors party thereto, the
lenders party thereto and various other parties thereto (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K of Dynegy Holdings Inc. filed on
April 6, 2007, File No. 000-29311).10.16
    
    
    
    
    Amendment No. 1, dated as of May 24, 2007, to the Fifth Amended and Restated Credit
Agreement, dated as of April 2, 2007, by and among Dynegy Holdings Inc., as borrower,
Dynegy Inc. and Dynegy Illinois Inc., as parent guarantors, the other guarantors party
thereto, the lenders party thereto and various other parties thereto (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K of Dynegy Holdings Inc.
filed on May 25, 2007, File No. 000-29311).10.17
    
    
    
    
    Amendment No. 2, dated as of September 30, 2008, to the Fifth Amended and Restated
Credit Agreement, dated as of April 2, 2007, by and among Dynegy Holdings Inc., as
borrower, Dynegy Inc. and Dynegy Illinois Inc., as parent guarantors, the other
guarantors party thereto, the lenders party thereto and various other parties thereto
(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of
Dynegy Holdings Inc. filed on December 6, 2008, File No. 000-29311).**10.18
    
    
    
    
    Amendment No. 3, dated as of February 13, 2009, to the Fifth Amended and Restated
Credit Agreement, dated as of April 2, 2007 , by and among Dynegy Holdings Inc., as
borrower, Dynegy Inc. and Dynegy Illinois Inc., as parent guarantors, the other
guarantors party thereto, the lenders party thereto and various other parties thereto.
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##### Table of Contents



ExhibitNumber
    
    
    
    Description10.19
    
    
    
    
    Second Amended and Restated Security Agreement, dated April 2, 2007, by and among
Dynegy Holdings Inc., as Borrower, the initial grantors party thereto, Wilmington
Trust Company, as corporate trustee, and John M. Beeson, Jr., as individual trustee
(incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Dynegy
Holdings Inc. filed on April 6, 2007, File No. 000-29311).10.20
    
    
    
    
    Facility and Security Agreement, dated June 17, 2008, by and among Dynegy Holdings
Inc., Morgan Stanley Capital Group Inc., as lender and as issuing bank and as
collateral agent (as incorporated by reference to Exhibit 10.1 to the Current Report
on Form 8-K of Dynegy Inc. filed on June 18, 2008, File No. 001-33443).10.21
    
    
    
    
    Credit Agreement, dated as of March 29, 2007, by and among Plum Point Energy
Associates, LLC, as borrower, and the lenders and other parties thereto (incorporated
by reference to Exhibit 10.10 to the Current Report on Form 8-K of Dynegy Holdings
Inc. filed on April 6, 2007, File No. 000-29311).**10.22
    
    
    
    
    First Amendment to Credit Agreement by and among Plum Point Energy Associates, LLC,
as borrower, and the lenders and other parties thereto, effective December 13, 2007.10.23
    
    
    
    
    Collateral Agency and Intercreditor Agreement, dated as of March 29, 2007, by and
among Plum Point Energy Associates, LLC, as borrower, PPEA Holding Company, LLC, as
Pledgor, The Bank of New York, as collateral agent, The Royal Bank of Scotland, as
Administrative Agent, AMBAC Assurance Corporation, as Loan Insurer, and the other
parties thereto (incorporated by reference to Exhibit 10.11 to the Current Report on
Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).10.24
    
    
    
    
    Loan Agreement, dated as of April 1, 2006, by and between the City of Osceola,
Arkansas and Plum Point Energy Associates, LLC (incorporated by reference to Exhibit
10.12 to the Current Report on Form 8-K of Dynegy Holdings Inc. filed on April 6,
2007, File No. 000-29311).10.25
    
    
    
    
    Trust Indenture, dated as of April 1, 2006, by and between the City of Osceola,
Arkansas and Regions Bank, as trustee (incorporated by reference to Exhibit 10.13 to
the Current Report on Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File
No. 000-29311).10.26
    
    
    
    
    First Supplemental Trust Indenture dated as of April 24, 2007, by and between the
City of Osceola, Arkansas and Regions Bank, as trustee (incorporated by reference to
Exhibit 10.28 to the Annual Report on Form 10-K of Dynegy Holdings Inc. filed on
February 28, 2008, File No. 000-29311).10.27
    
    
    
    
    Dynegy Inc. Executive Severance Pay Plan, as amended and restated effective as of
January 1, 2008 (incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K of Dynegy Inc. filed on January 4, 2008, File No. 001-33443). 10.28
    
    
    
    
    Dynegy Inc. Executive Change in Control Severance Pay Plan effective April 3, 2008
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Dynegy
Inc. filed on April 8, 1008, File No. 001-33443). 10.29
    
    
    
    
    Dynegy Inc. Change In Control Severance Pay Plan effective April 3, 2008
(incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of
Dynegy Inc. filed on May 8, 2008, File No. 001-33443).
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##### Table of Contents



ExhibitNumber
    
    
    
    Description10.30
    
    
    
    
    Dynegy Inc. Severance Pay Plan, as amended and restated effective as of January 30,
2008 (incorporated by reference to Exhibit 10.37 to the Annual Report of Dynegy Inc.
on Form 10-K filed on February 28, 2008, File No. 001-33443). 10.31
    
    
    
    
    Dynegy Inc. Excise Tax Reimbursement Policy, effective January 1, 2008 (incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K of Dynegy Inc. filed on
January 4, 2008, File No. 001-33443). **10.32
    
    
    
    
    Dynegy Northeast Generation, Inc. Savings Incentive Plan, as amended and restated,
effective January 1, 2009. **10.33
    
    
    
    
    Dynegy Inc. 401(k) Savings Plan, as amended and restated effective January 1, 2009. **10.34
    
    
    
    
    Dynegy Midwest Generation, Inc. 401(k) Savings Plan, as amended and restated,
effective as January 1, 2009.**10.35
    
    
    
    
    Dynegy Midwest Generation, Inc. 401(k) Savings Plan for Employees Covered under a
Collective Bargaining Agreement, as amended and restated, effective January 1, 2009.10.36
    
    
    
    
    Dynegy Inc. Restoration 401(k) Savings Plan, effective June 1, 2008 (incorporated by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Dynegy Inc. filed on
August 7, 2008, File No. 001-33443).10.37
    
    
    
    
    First Amendment to the Dynegy Inc. Restoration 401(k) Savings Plan, effective June 1,
2008 (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q
of Dynegy Inc. filed on August 7, 2008, File No. 001-33443). 10.38
    
    
    
    
    Dynegy Inc. Restoration Pension Plan, effective June 1, 2008 (incorporated by
reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Dynegy Inc. filed on
August 7, 2008, File No. 001-33443). 10.39
    
    
    
    
    First Amendment to the Dynegy Inc. Restoration Pension Plan, effective June 1, 2008
(incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q of
Dynegy Inc. filed on August 7, 2008, File No. 001-33443). **10.40
    
    
    
    
    Sithe Pension Account Plan, amended and restated, effective January 1, 2007.**10.41
    
    
    
    
    Seventh [First] Amendment to the Sithe Pension Account Plan, as amended, effective
January 1, 2008.**10.42
    
    
    
    
    Second Amendment to the Sithe Pension Account Plan, as amended, effective January 1,
2008.10.43
    
    
    
    
    Form of Non-Qualified Stock Option Award Agreement between Dynegy Inc., all of its
affiliates and Bruce A. Williamson (incorporated by reference to Exhibit 10.5 to the
Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 2008 of Dynegy
Inc. filed on May 8, 2008, File No. 1-33443). 10.44
    
    
    
    
    Form of Non-Qualified Stock Option Award Agreement between Dynegy Inc., all of its
affiliates and Jason Hochberg (incorporated by reference to Exhibit 10.6 to the
Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 2008 of Dynegy
Inc. filed on May 8, 2008, File No. 1-33443). 
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ExhibitNumber
    
    
    
    Description10.45
    
    
    
    
    Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to
Exhibit 10.11 to the Quarterly Report on Form 10-Q for the Quarterly Period Ended
March 31, 2008 of Dynegy Inc. filed on May 8, 2008, File No. 1-33443). 10.46
    
    
    
    
    Form of Restricted Stock Award Agreement between Dynegy Inc., all of its affiliates
and Bruce A. Williamson (incorporated by reference to Exhibit 10.7 to the Quarterly
Report on Form 10-Q for the Quarterly Period Ended March 31, 2008 of Dynegy Inc. filed
on May 8, 2008, File No. 1-33443). 10.47
    
    
    
    
    Form of Restricted Stock Award Agreement between Dynegy Inc., all of its affiliates
and Jason Hochberg (incorporated by reference to Exhibit 10.8 to the Quarterly Report
on Form 10-Q for the Quarterly Period Ended March 31, 2008 of Dynegy Inc. filed on May
8, 2008, File No. 1-33443). 10.48
    
    
    
    
    Form of Restricted Stock Award Agreement (Managing Directors and Above) (incorporated
by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q for the Quarterly
Period Ended March 31, 2008 of Dynegy Inc. filed on May 8, 2008, File No. 1-33443).
10.49
    
    
    
    
    Form of Restricted Stock Award Agreement (Directors and Below) (incorporated by
reference to Exhibit 10.13 to the Quarterly Report on Form 10-Q for the Quarterly
Period Ended March 31, 2008 of Dynegy Inc. filed on May 8, 2008, File No. 1-33443).10.50
    
    
    
    
    Form of Performance Award Agreement between Dynegy Inc., all of its affiliates and
Bruce A. Williamson (incorporated by reference to Exhibit 10.9 to the Quarterly Report
on Form 10-Q for the Quarterly Period Ended March 31, 2008 of Dynegy Inc. filed on May
8, 2008, File No. 1-33443). 10.51
    
    
    
    
    Form of Performance Award Agreement between Dynegy Inc., all of its affiliates and
Jason Hochberg (incorporated by reference to Exhibit 10.10 to the Quarterly Report on
Form 10-Q for the Quarterly Period Ended March 31, 2008 of Dynegy Inc. filed on May 8,
2008, File No. 1-33443). 10.52
    
    
    
    
    Form of Performance Award Agreement (incorporated by reference to Exhibit 10.14 to
the Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 2008 of
Dynegy Inc. filed on May 8, 2008, File No. 1-33443). 10.53
    
    
    
    
    Dynegy Inc. Deferred Compensation Plan, amended and restated, effective January 1,
2002(incorporated by reference to Exhibit 4.6 to the Registration Statement on Form
S-8 of Dynegy Inc., Registration No. 333-76080). 10.54
    
    
    
    
    Amendment to the Dynegy Inc. Deferred Compensation Plan, dated as of April 2, 2007
(incorporated by reference to Exhibit 10.38 to the Current Report on Form 8-K of
Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311). **10.55
    
    
    
    
    Dynegy Inc. Deferred Compensation Plan for Certain Directors, as amended and
restated, effective January 1, 2008. **10.56
    
    
    
    
    Trust under Dynegy Inc. Deferred Compensation Plan for Certain Directors, effective
January 1, 2009. 
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ExhibitNumber
    
    
    
    Description10.57
    
    
    
    
    Dynegy Inc. Incentive Compensation Plan, as amended and restated effective January 1,
2006 (incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 2005 of Dynegy Inc. File No. 1-15659). 10.58
    
    
    
    
    First Amendment to the Dynegy Inc. Incentive Compensation Plan, dated as of April 2,
2007 (incorporated by reference to Exhibit 10.32 to the Current Report on Form 8-K of
Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311). 10.59
    
    
    
    
    Dynegy Inc. 1999 Long Term Incentive Plan (incorporated by reference to Exhibit 10.6
to the Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1999 of
Dynegy Inc., File No. 1-11156). 10.60
    
    
    
    
    First Amendment to the Dynegy Inc. 1999 Long Term Incentive Plan, dated as of
April 2, 2007 (incorporated by reference to Exhibit 10.33 to the Current Report on
Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311). 10.61
    
    
    
    
    Dynegy Inc. 2000 Long Term Incentive Plan (incorporated by reference to Exhibit 10.7
to the Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1999 of
Dynegy Inc., File No. 1-11156). 10.62
    
    
    
    
    Amendment to the Dynegy Inc. 2000 Long Term Incentive Plan effective January 1, 2006
(incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of Dynegy
Inc. filed on March 17, 2006, File No. 1-15659). 10.63
    
    
    
    
    Second Amendment to the Dynegy Inc. 2000 Long Term Incentive Plan, dated as of
April 2, 2007 (incorporated by reference to Exhibit 10.34 to the Current Report on
Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311). 10.64
    
    
    
    
    Dynegy Inc. 2002 Long Term Incentive Plan (incorporated by reference to Appendix A to
the Definitive Proxy Statement on Schedule 14A of Dynegy Inc., File No. 1-15659, filed
with the SEC on April 9, 2002). 10.65
    
    
    
    
    Amendment to the Dynegy Inc. 2002 Long Term Incentive Plan, effective January 1, 2006
(incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K of Dynegy
Inc. filed on March 17, 2006, File No. 1-15659). 10.66
    
    
    
    
    Second Amendment to the Dynegy Inc. 2002 Long Term Incentive Plan, dated as of
April 2, 2007 (incorporated by reference to Exhibit 10.36 to the Current Report on
Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311). 10.67
    
    
    
    
    Dynegy Inc. 2001 Non-Executive Stock Incentive Plan (incorporated by reference to
Exhibit 4.5 to the Registration Statement on Form S-8 of Dynegy Inc., Registration No.
333-76080).10.68
    
    
    
    
    First Amendment to the Dynegy Inc. 2001 Non-Executive Stock Incentive Plan, dated as
of April 2, 2007 (incorporated by reference to Exhibit 10.35 to the Current Report on
Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).**10.69
    
    
    
    
    Dynegy Inc. Retirement Plan, as amended and restated, effective January 1, 2009.**10.70
    
    
    
    
    Dynegy Inc. Comprehensive Welfare Benefits Plan, effective January 1, 2002.
  94




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ExhibitNumber
    
    
    
    Description**10.71
    
    
    
    
    First Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated
September 29, 2004.**10.72
    
    
    
    
    Second Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated
January 1, 2005.**10.73
    
    
    
    
    Third Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated January
28, 2005.**10.74
    
    
    
    
    Fourth Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated April
20, 2005.**10.75
    
    
    
    
    Fifth Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated January
1, 2006.10.76
    
    
    
    
    Sixth Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated as of
April 2, 2007 (incorporated by reference to Exhibit 10.31 to the Current Report on
Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).**10.77
    
    
    
    
    Dynegy Northeast Generation, Inc. Comprehensive Welfare Benefits Plan, dated as of
January 1, 2002.**10.78
    
    
    
    
    Amendment One to the Dynegy Northeast Generation, Inc. Comprehensive Welfare Benefits
Plan, dated as of April 20, 2005.**10.79
    
    
    
    
    Amendment Two to the Dynegy Northeast Generation, Inc. Comprehensive Welfare Benefits
Plan, dated as of January 1, 2006.**10.80
    
    
    
    
    Dynegy Northeast Generation, Inc. Retirement Income Plan, as amended and restated,
effective January 1, 2009.10.81
    
    
    
    
    Master Trust Agreement, dated as of January 1, 2002 (Vanguard) (incorporated by
reference to Exhibit 10.45 to the Current Report on Form 8-K of Dynegy Holdings Inc.
filed on April 6, 2007, File No. 000-29311).10.82
    
    
    
    
    Agreement and Amendment to Master Trust Agreement, dated as of December 31, 2003
(Vanguard) (incorporated by reference to Exhibit 10.46 to the Current Report on Form
8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).10.83
    
    
    
    
    Amendment No. 2 to The Master Trust Agreement, dated as of September 29, 2004
(Vanguard) (incorporated by reference to Exhibit 10.47 to the Current Report on Form
8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).10.84
    
    
    
    
    Amendment to Master Trust Agreement, dated as of January 1, 2006 (Vanguard)
(incorporated by reference to Exhibit 10.48 to the Current Report on Form 8-K of
Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).10.85
    
    
    
    
    Amendment to Master Trust Agreement (Vanguard Fiduciary Trust Company), dated as of
April 2, 2007 (incorporated by reference to Exhibit 10.55 to the Current Report on
Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).
  95




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ExhibitNumber
    
    
    
    Description10.86
    
    
    
    
    Trust AgreementDMG 401(k) Savings Plan for Employees Covered under a Collective
Bargaining Agreement (Vanguard), dated as of January 1, 2002 (incorporated by
reference to Exhibit 10.5 to Form S-4 of Dynegy Illinois Inc., filed on January 11,
2002, File No. 333-76570).10.87
    
    
    
    
    Amendment to Trust AgreementDMG 401(k) Savings Plan for Employees Covered under a
Collective Bargaining Agreement (Vanguard), dated as of September 29, 2004
(incorporated by reference to Exhibit 10.49 to the Current Report on Form 8-K of
Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).10.88
    
    
    
    
    Amendment to Trust AgreementDMG 401(k) Savings Plan for Employees Covered under a
Collective Bargaining Agreement (Vanguard), dated as of January 1, 2006 (incorporated
by reference to Exhibit 10.50 to the Current Report on Form 8-K of Dynegy Holdings
Inc. filed on April 6, 2007, File No. 000-29311).10.89
    
    
    
    
    Amendment to Trust AgreementDMG 401(k) Savings Plan for Employees Covered under a
Collective Bargaining Agreement (Vanguard), dated as of April 2, 2007 (incorporated by
reference to Exhibit 10.52 to the Current Report on Form 8-K of Dynegy Holdings Inc.
filed on April 6, 2007, File No. 000-29311).10.90
    
    
    
    
    Trust AgreementDMG 401(k) Savings Plan (Vanguard), dated as of September 29, 2004
(incorporated by reference to Exhibit 10.4 to Form S-4 of Dynegy Illinois Inc., filed
on January 11, 2002, File No. 333-76570).10.91
    
    
    
    
    Amendment to Trust AgreementDMG 401(k) Savings Plan (Vanguard), dated as of
September 29, 2004 (incorporated by reference to Exhibit 10.49 to the Current Report
on Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).10.92
    
    
    
    
    Amendment to Trust AgreementDMG 401(k) Savings Plan (Vanguard), dated as of January
1, 2006 (incorporated by reference to Exhibit 10.50 to the Current Report on Form 8-K
of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).10.93
    
    
    
    
    Amendment to Trust AgreementDMG 401(k) Savings Plan (Vanguard), dated as of April 2,
2007 (incorporated by reference to Exhibit 10.51 to the Current Report on Form 8-K of
Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).10.94
    
    
    
    
    Dynegy Inc. 401(k) Savings Plan Trust Agreement, effective January 1, 2002
(incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-8
of Dynegy Inc., Registration No. 333-76570). 10.95
    
    
    
    
    Amendment to Trust AgreementDynegy Inc. 401(k) Savings Plan (Vanguard), dated as of
January 1, 2006 (incorporated by reference to Exhibit 10.52 to the Current Report on
Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).10.96
    
    
    
    
    Amendment to Trust AgreementDynegy Inc. 401(k) Savings Plan (Vanguard), dated as of
April 2, 2007 (incorporated by reference to Exhibit 10.53 to the Current Report on
Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311).**10.97
    
    
    
    
    Trust AgreementDynegy Northeast Generation Inc. Savings Incentive Plan, dated as of
December 31, 2003 (incorporated by reference to Exhibit.
  96




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ExhibitNumber
    
    
    
    Description**10.98
    
    
    
    
    Amendment to Trust AgreementDynegy Northeast Generation Inc. Savings Incentive Plan,
dated as of January 1, 2006.**10.99
    
    
    
    
    Amendment to Trust AgreementDynegy Northeast Generation Inc. Savings Incentive Plan,
dated as of April 2, 2007.10.100
    
    
    
    
    Dynegy Inc. Deferred Compensation Plan Trust Agreement (incorporated by reference to
Exhibit 4.7 to the Registration Statement on Form S-8 of Dynegy Inc., Registration No.
333-76080). 10.101
    
    
    
    
    Amendment to Dynegy Inc. Deferred Compensation Plan Trust Agreement (Vanguard), dated
as of April 2, 2007 (incorporated by reference to Exhibit 10.54 to the Current Report
on Form 8-K of Dynegy Holdings Inc. filed on April 6, 2007, File No. 000-29311). **10.102
    
    
    
    
    Dynegy Inc. Master Retirement Trust, dated as of December 13, 2001.**10.103
    
    
    
    
    Amendment No. One to The Dynegy Inc. Master Retirement Trust, dated as of August 5,
2002.**10.104
    
    
    
    
    Amendment No. Two to The Dynegy Inc. Master Retirement Trust, dated as of September
30, 2004.**10.105
    
    
    
    
    Amendment No. Three to The Dynegy Inc. Master Retirement Trust, dated as of December
1, 2005.**10.106
    
    
    
    
    Amendment No. Four to The Dynegy Inc. Master Retirement Trust, dated as of September
25, 2006.**10.107
    
    
    
    
    Amendment No. Five to The Dynegy Inc. Master Retirement Trust, dated as of April 2,
2007.10.108
    
    
    
    
    Purchase Agreement, dated as of May 17, 2007, by and between Dynegy Holdings Inc. and
J.P. Morgan Securities Inc. (incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q for Quarterly Period Ended June 30, 2007 of Dynegy
Holdings Inc., File No. 000-29311).10.109
    
    
    
    
    Equity Commitment Agreement among Sandy Creek Energy Associates, L.P., Dynegy Sandy
Creek Holdings, LLC and Credit Suisse dated August 29, 2007 (incorporated by reference
to Exhibit 10.1 to the Current Report on Form 8-K of Dynegy Holdings Inc. filed on
September 5, 2007, File No. 000-29311).10.110
    
    
    
    
    Equity Commitment Agreement among Sandy Creek Energy Associates, L.P., Sandy Creek
Holdings, LLC and Credit Suisse dated August 29, 2007 (incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K of Dynegy Holdings Inc. filed on
September 5, 2007, File No. 000-29311).10.111
    
    
    
    
    Baldwin Consent Decree, approved May 27, 2005 (incorporated by reference to Exhibit
99.1 to the Current Report on Form 8-K of Dynegy Inc. filed on May 31, 2005, File No.
1-15659).14.1
    
    
    
    
    Dynegy Inc. Code of Ethics for Senior Financial Professionals (incorporated by
reference to Exhibit 14.1 to the Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 2003 of Dynegy Inc., File No. 1- 15659).
  97




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ExhibitNumber
    
    
    
    Description16.1
    
    
    
    
    Letter of PricewaterhouseCoopers LLP, as amended, dated May 15, 2007 (incorporated by
reference to Exhibit 16.1A to the Current Report on Form 8-K/A of Dynegy Holdings Inc.
filed on May 15, 2007, File No. 001-33443).**21.1
    
    
    
    
    Subsidiaries of the Registrant (Dynegy Inc.).21.2
    
    
    
    
    Subsidiaries of the Registrant (Dynegy Holdings Inc.)  Omitted pursuant to General
Instruction (1)(2)(c) of Form 10-K.**23.1
    
    
    
    
    Consent of Ernst & Young LLP (Dynegy Inc.).**23.2
    
    
    
    
    Consent of PricewaterhouseCoopers LLP (Dynegy Inc.).**23.3
    
    
    
    
    Consent of Ernst & Young LLP (Dynegy Holdings Inc.).**23.4
    
    
    
    
    Consent of PricewaterhouseCoopers LLP (Dynegy Holdings Inc.).**31.1
    
    
    
    
    Chief Executive Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**31.1
    (a)
    
    
    
    Chief Executive Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**31.2
    
    
    
    
    Chief Financial Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**31.2
    (a)
    
    
    
    Chief Financial Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    
    
    Chief Executive Officer Certification Pursuant to 18 United States Code Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.1
    (a)
    
    
    
    Chief Executive Officer Certification Pursuant to 18 United States Code Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    
    
    Chief Financial Officer Certification Pursuant to 18 United States Code Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    (a)
    
    
    
    Chief Financial Officer Certification Pursuant to 18 United States Code Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 **
    
    Filed herewith
    
    Pursuant to Securities and Exchange Commission Release No. 33-8238, this
certification will be treated as accompanying this report and not filed as part of
such report for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, or otherwise subject to the liability of Section 18 of the
Exchange Act, and this certification will not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
    
    Management contract or compensation plan.  98




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##### Table of Contents



SIGNATURES
  DYNEGY INC.Date:      February 26, 2009
    By:
    /s/ Bruce A. WilliamsonBruce A. WilliamsonChairman of the Board, President and
Chief Executive Officer  /s/ Bruce A. Williamson

Bruce A. Williamson
    
    Chairman of the Board,
President and Chief
Executive Officer
(Principal Executive
Officer)
    
    February 26, 2009/s/ Holli C. Nichols

Holli C. Nichols
    
    Executive Vice
President, Chief
Financial Officer and
Treasurer (Principal
Financial Officer)
    
    February 26, 2009/s/ Carolyn J. Stone

Carolyn J. Stone
    
    Senior Vice President
and Controller
(Principal Accounting
Officer)
    
    February 26, 2009/s/ James T. Bartlett
    
    Director
    
    February 26, 2009James T. Bartlett/s/ David W. Biegler
    
    Director
    
    February 26, 2009David W. Biegler/s/ Thomas D. Clark, JR.
    
    Director
    
    February 26, 2009Thomas D. Clark, Jr./s/ Victor E. Grijalva
    
    Director
    
    February 26, 2009Victor E. Grijalva/s/ Patricia A. Hammick
    
    Director
    
    February 26, 2009Patricia A. Hammick/s/ Frank E. Hardenbergh
    
    Director
    
    February 26, 2009Frank E. Hardenbergh/s/ George L. Mazanec
    
    Director
    
    February 26, 2009George L. Mazanec/s/ Mikhail Segal
    
    Director
    
    February 26, 2009Mikhail Segal/s/ Howard B. Sheppard
    
    Director
    
    February 26, 2009Howard B. Sheppard/s/ William L. Trubeck
    
    Director
    
    February 26, 2009William L. Trubeck
  99




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##### Table of Contents



DYNEGY HOLDINGS INC.Date:      February 26, 2009
    By:
    /s/ Bruce A. WilliamsonBruce A. WilliamsonPresident and Chief Executive Officer  /s/ Bruce A. Williamson

Bruce A. Williamson
    
    President and Chief
Executive Officer
(Principal Executive
Officer)
    
    February 26, 2009/s/ Holli C. Nichols

Holli C. Nichols
    
    Executive Vice
President, Chief
Financial Officer,
Treasurer and Director
(Principal Financial
Officer)
    
    February 26, 2009/s/ Carolyn J. Stone

Carolyn J. Stone
    
    Senior Vice President
and Controller
(Principal Accounting
Officer)
    
    February 26, 2009/s/ J. Kevin Blodgett
    
    Director
    
    February 26, 2009J. Kevin Blodgett/s/ Lynn A. Lednicky
    
    Director
    
    February 26, 2009Lynn A. Lednicky
  100




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##### Table of Contents



DYNEGY INC. AND DYNGEGY HOLDINGS INC.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageConsolidated Financial StatementsReports of Independent Registered Public Accounting FirmsDynegy Inc.
    
    
    F-2Reports of Independent Registered Public Accounting FirmsDynegy Holdings Inc.
    
    
    F-5Consolidated Balance SheetsDynegy Inc.:
December 31, 2008 and 2007
    
    
    F-7Consolidated Statements of OperationsDynegy Inc.:
For the years ended December 31, 2008, 2007 and 2006
    
    
    F-8Consolidated Statements of Cash FlowsDynegy Inc.:
For the years ended December 31, 2008, 2007 and 2006
    
    
    F-9Consolidated Statements of Changes in Stockholders EquityDynegy Inc.:
For the years ended December 31, 2008, 2007 and 2006
    
    
    F-10Consolidated Statements of Comprehensive Income (Loss)Dynegy Inc.:
For the years ended December 31, 2008, 2007 and 2006
    
    
    F-11Consolidated Balance SheetsDynegy Holdings Inc.:
December 31, 2008 and 2007
    
    
    F-12Consolidated Statements of OperationsDynegy Holdings Inc.:
For the years ended December 31, 2008, 2007 and 2006
    
    
    F-13Consolidated Statements of Cash FlowsDynegy Holdings Inc.:
For the years ended December 31, 2008, 2007 and 2006
    
    
    F-14Consolidated Statements of Changes in Stockholders EquityDynegy Holdings Inc.:
For the years ended December 31, 2008, 2007 and 2006
    
    
    F-15Consolidated Statements of Comprehensive Income (Loss)Dynegy Holdings Inc.:
For the years ended December 31, 2008, 2007 and 2006
    
    
    F-16Notes to Consolidated Financial Statements
    
    
    F-17Financial Statement SchedulesSchedule IParent Company Financial StatementsDynegy Inc.
    
    
    F-88Schedule IIValuation and Qualifying AccountsDynegy Inc.
    
    
    F-92Schedule IIValuation and Qualifying AccountsDynegy Holdings Inc.
    
    
    F-93
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Accounting for Uncertainty in Income Taxes
   
  F-2




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
        
  F-3




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
    
  F-4




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Accounting for Uncertainty in Income Taxes
  
  F-5




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
     
  F-6




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##### Table of Contents



DYNEGY INC.
 
 CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
 December 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    693
    
    
    $
    328Restricted cash and investments
    
    
    87
    
    
    
    104Short-term investments
    
    
    25
    
    
    
    Accounts receivable, net of allowance for doubtful accounts of $22 and $20, respectively
    
    
    340
    
    
    
    426Accounts receivable, affiliates
    
    
    1
    
    
    
    1Inventory
    
    
    184
    
    
    
    199Assets from risk-management activities
    
    
    1,263
    
    
    
    358Deferred income taxes
    
    
    6
    
    
    
    45Prepayments and other current assets
    
    
    204
    
    
    
    145Assets held for sale (Note 4)
    
    
    
    
    
    
    57Total Current Assets
    
    
    2,803
    
    
    
    1,663Property, Plant and Equipment
    
    
    10,869
    
    
    
    10,689Accumulated depreciation
    
    
    (1,935
    )
    
    
    (1,672
    )Property, Plant and Equipment, Net
    
    
    8,934
    
    
    
    9,017Other AssetsUnconsolidated investments
    
    
    15
    
    
    
    79Restricted cash and investments
    
    
    1,158
    
    
    
    1,221Assets from risk-management activities
    
    
    114
    
    
    
    55Goodwill
    
    
    433
    
    
    
    438Intangible assets
    
    
    437
    
    
    
    497Deferred income taxes
    
    
    
    
    
    
    6Accounts receivable, affiliates
    
    
    4
    
    
    
    Other long-term assets
    
    
    315
    
    
    
    245Total Assets
    
    $
    14,213
    
    
    $
    13,221LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    303
    
    
    $
    292Accrued interest
    
    
    56
    
    
    
    56Accrued liabilities and other current liabilities
    
    
    160
    
    
    
    201Liabilities from risk-management activities
    
    
    1,119
    
    
    
    397Notes payable and current portion of long-term debt
    
    
    64
    
    
    
    51Liabilities held for sale (Note 4)
    
    
    
    
    
    
    2Total Current Liabilities
    
    
    1,702
    
    
    
    999Long-term debt
    
    
    5,872
    
    
    
    5,739Long-term debt to affiliates
    
    
    200
    
    
    
    200Long-Term Debt
    
    
    6,072
    
    
    
    5,939Other LiabilitiesLiabilities from risk-management activities
    
    
    288
    
    
    
    116Deferred income taxes
    
    
    1,166
    
    
    
    1,250Other long-term liabilities
    
    
    500
    
    
    
    388Total Liabilities
    
    
    9,728
    
    
    
    8,692Minority Interest
    
    
    (30
    )
    
    
    23Commitments and Contingencies (Note 19)Stockholders EquityClass A Common Stock, $0.01 par value, 2,100,000,000 shares authorized at December 31, 2008 and December 31, 2007;
505,821,277 shares and 502,819,794 shares issued and outstanding at December 31, 2008 and December 31, 2007,
respectively
    
    
    5
    
    
    
    5Class B Common Stock, $0.01 par value, 850,000,000 shares authorized at December 31, 2008 and December 31, 2007;
340,000,000 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    6,485
    
    
    
    6,463Subscriptions receivable
    
    
    (2
    )
    
    
    (5
    )Accumulated other comprehensive loss, net of tax
    
    
    (215
    )
    
    
    (25
    )Accumulated deficit
    
    
    (1,690
    )
    
    
    (1,864
    )Treasury stock, at cost, 2,568,286 shares and 2,449,259 shares at December 31, 2008 and December 31, 2007, respectively
    
    
    (71
    )
    
    
    (71
    )Total Stockholders Equity
    
    
    4,515
    
    
    
    4,506Total Liabilities and Stockholders Equity
    
    $
    14,213
    
    
    $
    13,221
   F-7




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##### Table of Contents



DYNEGY INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Revenues
    
    $
    3,549
    
    
    $
    3,103
    
    
    $
    1,770Cost of sales
    
    
    (1,853
    )
    
    
    (1,551
    )
    
    
    (798
    )Operating and maintenance expense, exclusive of depreciation shown separately below
    
    
    (494
    )
    
    
    (462
    )
    
    
    (338
    )Depreciation and amortization expense
    
    
    (371
    )
    
    
    (325
    )
    
    
    (217
    )Impairment and other charges
    
    
    (47
    )
    
    
    
    
    
    
    (119
    )Gain on sale of assets, net
    
    
    82
    
    
    
    43
    
    
    
    3General and administrative expenses
    
    
    (157
    )
    
    
    (203
    )
    
    
    (196
    )Operating income
    
    
    709
    
    
    
    605
    
    
    
    105Losses from unconsolidated investments
    
    
    (123
    )
    
    
    (3
    )
    
    
    (1
    )Interest expense
    
    
    (427
    )
    
    
    (384
    )
    
    
    (382
    )Debt conversion costs
    
    
    
    
    
    
    
    
    
    
    (249
    )Other income and expense, net
    
    
    84
    
    
    
    56
    
    
    
    54Minority interest income (expense)
    
    
    3
    
    
    
    (7
    )
    
    
    Income (loss) from continuing operations before income taxes
    
    
    246
    
    
    
    267
    
    
    
    (473
    )Income tax (expense) benefit
    
    
    (75
    )
    
    
    (151
    )
    
    
    152Income (loss) from continuing operations
    
    
    171
    
    
    
    116
    
    
    
    (321
    )Income (loss) from discontinued operations, net of tax (expense) benefit of $(1),
$(91) and $10, respectively (Note 4)
    
    
    3
    
    
    
    148
    
    
    
    (13
    )Income (loss) before cumulative effect of change in accounting principles
    
    
    174
    
    
    
    264
    
    
    
    (334
    )Cumulative effect of change in accounting principles, net of tax benefit (expense)
of zero, zero and zero, respectively (Note 2)
    
    
    
    
    
    
    
    
    
    
    1Net income (loss)
    
    
    174
    
    
    
    264
    
    
    
    (333
    )Less: preferred stock dividends (Note 16)
    
    
    
    
    
    
    
    
    
    
    9Net income (loss) applicable to common stockholders
    
    $
    174
    
    
    $
    264
    
    
    $
    (342
    )Earnings (Loss) Per Share (Note 18):Basic earnings (loss) per share:Earnings (loss) from continuing operations
    
    $
    0.20
    
    
    $
    0.15
    
    
    $
    (0.72
    )Income (loss) from discontinued operations
    
    
    
    
    
    
    0.20
    
    
    
    (0.03
    )Cumulative effect of change in accounting principles
    
    
    
    
    
    
    
    
    
    
    Basic earnings (loss) per share
    
    $
    0.20
    
    
    $
    0.35
    
    
    $
    (0.75
    )Diluted earnings (loss) per share:Earnings (loss) from continuing operations
    
    $
    0.20
    
    
    $
    0.15
    
    
    $
    (0.72
    )Income (loss) from discontinued operations
    
    
    
    
    
    
    0.20
    
    
    
    (0.03
    )Cumulative effect of change in accounting principles
    
    
    
    
    
    
    
    
    
    
    Diluted earnings (loss) per share
    
    $
    0.20
    
    
    $
    0.35
    
    
    $
    (0.75
    )Basic shares outstanding
    
    
    840
    
    
    
    752
    
    
    
    459Diluted shares outstanding
    
    
    842
    
    
    
    754
    
    
    
    509
   F-8




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##### Table of Contents



DYNEGY INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    174
    
    
    $
    264
    
    
    $
    (333
    )Adjustments to reconcile income (loss) to net cash flows from operating activities:Depreciation and amortization
    
    
    376
    
    
    
    333
    
    
    
    265Impairment and other charges
    
    
    47
    
    
    
    
    
    
    
    155Losses from unconsolidated investments, net of cash distributions
    
    
    124
    
    
    
    3
    
    
    
    1Risk-management activities
    
    
    (255
    )
    
    
    (50
    )
    
    
    (87
    )Gain on sale of assets, net
    
    
    (82
    )
    
    
    (267
    )
    
    
    (5
    )Deferred taxes
    
    
    73
    
    
    
    215
    
    
    
    (162
    )Cumulative effect of change in accounting principles (Note 2)
    
    
    
    
    
    
    
    
    
    
    (1
    )Reserve for doubtful accounts
    
    
    
    
    
    
    
    
    
    
    (35
    )Legal and settlement charges
    
    
    6
    
    
    
    26
    
    
    
    (2
    )Sithe Subordinated Debt exchange charge (Note 12)
    
    
    
    
    
    
    
    
    
    
    36Debt conversion costs
    
    
    
    
    
    
    
    
    
    
    249Other
    
    
    33
    
    
    
    42
    
    
    
    71Changes in working capital:Accounts receivable
    
    
    68
    
    
    
    (114
    )
    
    
    391Inventory
    
    
    3
    
    
    
    (13
    )
    
    
    8Prepayments and other assets
    
    
    (51
    )
    
    
    (37
    )
    
    
    126Accounts payable and accrued liabilities
    
    
    (71
    )
    
    
    (15
    )
    
    
    (885
    )Changes in non-current assets
    
    
    (113
    )
    
    
    (57
    )
    
    
    11Changes in non-current liabilities
    
    
    (13
    )
    
    
    11
    
    
    
    3Net cash provided by (used in) operating activities
    
    
    319
    
    
    
    341
    
    
    
    (194
    )CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (611
    )
    
    
    (379
    )
    
    
    (155
    )Unconsolidated investments
    
    
    (6
    )
    
    
    3
    
    
    
    Proceeds from asset sales, net
    
    
    451
    
    
    
    558
    
    
    
    227Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (128
    )
    
    
    (8
    )Proceeds from exchange of unconsolidated investments, net of cash acquired (Note 3
and Note 4)
    
    
    
    
    
    
    
    
    
    
    165Increase in short-term investments
    
    
    (27
    )
    
    
    
    
    
    
    (Increase) decrease in restricted cash
    
    
    80
    
    
    
    (871
    )
    
    
    121Other investing, net
    
    
    11
    
    
    
    
    
    
    
    8Net cash provided by (used in) investing activities
    
    
    (102
    )
    
    
    (817
    )
    
    
    358CASH FLOWS FROM FINANCING ACTIVITIES:Net proceeds from long-term borrowings
    
    
    192
    
    
    
    2,758
    
    
    
    1,071Repayments of borrowings
    
    
    (45
    )
    
    
    (2,320
    )
    
    
    (1,930
    )Debt conversion costs
    
    
    
    
    
    
    
    
    
    
    (249
    )Redemption of Series C Preferred (Note 16)
    
    
    
    
    
    
    
    
    
    
    (400
    )Net proceeds from issuance of capital stock
    
    
    2
    
    
    
    4
    
    
    
    183Dividends and other distributions, net
    
    
    
    
    
    
    
    
    
    
    (17
    )Other financing, net
    
    
    (1
    )
    
    
    (9
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    148
    
    
    
    433
    
    
    
    (1,342
    )Net increase (decrease) in cash and cash equivalents
    
    
    365
    
    
    
    (43
    )
    
    
    (1,178
    )Cash and cash equivalents, beginning of period
    
    
    328
    
    
    
    371
    
    
    
    1,549Cash and cash equivalents, end of period
    
    $
    693
    
    
    $
    328
    
    
    $
    371
   F-9




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##### Table of Contents



DYNEGY INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(in millions)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon
    
    
    Paid-In
    
    
    Subscriptions
    
    
    Comprehensive
    
    
    Accumulated
    
    
    TreasuryStock
    
    
    Capital
    
    
    Receivable
    
    
    Income (Loss)
    
    
    Deficit
    
    
    Stock
    
    
    TotalDecember 31, 2005
    
    $
    3,955
    
    
    $
    51
    
    
    $
    (8
    )
    
    $
    4
    
    
    $
    (1,793
    )
    
    $
    (69
    )
    
    $
    2,140Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (333
    )
    
    
    
    
    
    
    (333
    )Other comprehensive income, net of
tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    98Adjustment to initially apply SFAS
No. 158, net of tax benefit of $21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    
    
    
    
    (35
    )Options exercised
    
    
    5
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends and other distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )401(k) plan and profit sharing stock
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Options and restricted stock granted
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Equity issuance (Note 20)
    
    
    185
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    178Equity conversion (Note 20)
    
    
    225
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    217December 31, 2006
    
    $
    4,373
    
    
    $
    39
    
    
    $
    (8
    )
    
    $
    67
    
    
    $
    (2,135
    )
    
    $
    (69
    )
    
    $
    2,267Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264
    
    
    
    
    
    
    
    264Other comprehensive loss, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    
    
    
    
    (92
    )Adjustment to initially apply FIN
No. 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Subscriptions receivable
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Options exercised
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    1401(k) plan and profit sharing stock
    
    
    1
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Options and restricted stock granted
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19Equity issuance-LS Power (Note 3)
    
    
    3
    
    
    
    2,030
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,033Conversion from Illinois entity to
Delaware entity (Note 20)
    
    
    (4,370
    )
    
    
    4,370
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    December 31, 2007
    
    $
    8
    
    
    $
    6,463
    
    
    $
    (5
    )
    
    $
    (25
    )
    
    $
    (1,864
    )
    
    $
    (71
    )
    
    $
    4,506Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    174Other comprehensive loss, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (190
    )
    
    
    
    
    
    
    
    
    
    
    (190
    )Subscriptions receivable
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Options exercised
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2401(k) plan and profit sharing stock
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Options and restricted stock granted
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15December 31, 2008
    
    $
    8
    
    
    $
    6,485
    
    
    $
    (2
    )
    
    $
    (215
    )
    
    $
    (1,690
    )
    
    $
    (71
    )
    
    $
    4,515
   F-10




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##### Table of Contents



DYNEGY INC.
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Net income (loss)
    
    $
    174
    
    
    $
    264
    
    
    $
    (333
    )Cash flow hedging activities, net:Unrealized mark-to-market gains (losses) arising during period, net
    
    
    (142
    )
    
    
    (95
    )
    
    
    95Reclassification of mark-to-market (gains) losses to earnings, net
    
    
    10
    
    
    
    (25
    )
    
    
    (17
    )Deferred losses on cash flow hedges, net
    
    
    (4
    )
    
    
    
    
    
    
    Changes in cash flow hedging activities, net (net of tax benefit (expense) of
$60, $69 and $(46), respectively)
    
    
    (136
    )
    
    
    (120
    )
    
    
    78Allocation to minority interest
    
    
    50
    
    
    
    5
    
    
    
    Total cash flow hedging activities
    
    
    (86
    )
    
    
    (115
    )
    
    
    78Foreign currency translation adjustments
    
    
    (27
    )
    
    
    4
    
    
    
    (1
    )Minimum pension liability (net of tax expense $5)
    
    
    
    
    
    
    
    
    
    
    10Actuarial gain (loss) and amortization of unrecognized prior service cost (net of tax
benefit (expense) of $29 and $(9), respectively)
    
    
    (41
    )
    
    
    18
    
    
    
    Unrealized gain (loss) on securities, net:Unrealized gain (loss) on securities
    
    
    (3
    )
    
    
    6
    
    
    
    11Reclassification adjustments for gains realized in net income (loss)
    
    
    (9
    )
    
    
    (5
    )
    
    
    Unrealized gains (losses) on securities, net (net of tax benefit (expense) of
$8, $(1), and $(7), respectively)
    
    
    (12
    )
    
    
    1
    
    
    
    11Unconsolidated investment other comprehensive loss, net (net of tax benefit of $17)
    
    
    (24
    )
    
    
    
    
    
    
    Other comprehensive income (loss), net of tax
    
    
    (190
    )
    
    
    (92
    )
    
    
    98Comprehensive income (loss)
    
    $
    (16
    )
    
    $
    172
    
    
    $
    (235
    )
   F-11




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##### Table of Contents



DYNEGY HOLDINGS INC.
 
 CONSOLIDATED BALANCE SHEETS
(in millions)
 December 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    670
    
    
    $
    292Restricted cash and investments
    
    
    87
    
    
    
    104Short-term investments
    
    
    24
    
    
    
    Accounts receivable, net of allowance for doubtful accounts of $20 and $15, respectively
    
    
    343
    
    
    
    428Accounts receivable, affiliates
    
    
    1
    
    
    
    1Inventory
    
    
    184
    
    
    
    199Assets from risk-management activities
    
    
    1,263
    
    
    
    358Deferred income taxes
    
    
    4
    
    
    
    30Prepayments and other current assets
    
    
    204
    
    
    
    145Assets held for sale (Note 4)
    
    
    
    
    
    
    57Total Current Assets
    
    
    2,780
    
    
    
    1,614Property, Plant and Equipment
    
    
    10,869
    
    
    
    10,689Accumulated depreciation
    
    
    (1,935
    )
    
    
    (1,672
    )Property, Plant and Equipment, Net
    
    
    8,934
    
    
    
    9,017Other AssetsUnconsolidated investments
    
    
    
    
    
    
    18Restricted cash and investments
    
    
    1,158
    
    
    
    1,221Assets from risk-management activities
    
    
    114
    
    
    
    55Goodwill
    
    
    433
    
    
    
    438Intangible assets
    
    
    437
    
    
    
    497Deferred income taxes
    
    
    
    
    
    
    6Accounts receivable, affiliates
    
    
    4
    
    
    
    Other long-term assets
    
    
    314
    
    
    
    241Total Assets
    
    $
    14,174
    
    
    $
    13,107LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    284
    
    
    $
    291Accrued interest
    
    
    56
    
    
    
    56Accrued liabilities and other current liabilities
    
    
    157
    
    
    
    202Liabilities from risk-management activities
    
    
    1,119
    
    
    
    397Notes payable and current portion of long-term debt
    
    
    64
    
    
    
    51Deferred income taxes
    
    
    1
    
    
    
    Liabilities held for sale (Note 4)
    
    
    
    
    
    
    2Total Current Liabilities
    
    
    1,681
    
    
    
    999Long-term debt
    
    
    5,872
    
    
    
    5,739Long-term debt to affiliates
    
    
    200
    
    
    
    200Long-Term Debt
    
    
    6,072
    
    
    
    5,939Other LiabilitiesLiabilities from risk-management activities
    
    
    288
    
    
    
    116Deferred income taxes
    
    
    1,052
    
    
    
    1,052Other long-term liabilities
    
    
    498
    
    
    
    381Total Liabilities
    
    
    9,591
    
    
    
    8,487Minority Interest
    
    
    (30
    )
    
    
    23Commitments and Contingencies (Note 19)Stockholders EquityCapital Stock, $1 par value, 1,000 shares authorized at December 31, 2008 and December 31, 2007, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    5,684
    
    
    
    5,684Affiliate receivable
    
    
    (827
    )
    
    
    (825
    )Accumulated other comprehensive loss, net of tax
    
    
    (215
    )
    
    
    (25
    )Accumulated deficit
    
    
    (29
    )
    
    
    (237
    )Total Stockholders Equity
    
    
    4,613
    
    
    
    4,597Total Liabilities and Stockholders Equity
    
    $
    14,174
    
    
    $
    13,107
   F-12




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##### Table of Contents



DYNEGY HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Revenues
    
    $
    3,549
    
    
    $
    3,103
    
    
    $
    1,770Cost of sales
    
    
    (1,853
    )
    
    
    (1,551
    )
    
    
    (798
    )Operating and maintenance expense, exclusive of depreciation shown separately below
    
    
    (494
    )
    
    
    (462
    )
    
    
    (338
    )Depreciation and amortization expense
    
    
    (371
    )
    
    
    (325
    )
    
    
    (217
    )Impairment and other charges
    
    
    (47
    )
    
    
    
    
    
    
    (119
    )Gain on sale of assets
    
    
    82
    
    
    
    43
    
    
    
    3General and administrative expenses
    
    
    (157
    )
    
    
    (184
    )
    
    
    (193
    )Operating income
    
    
    709
    
    
    
    624
    
    
    
    108Earnings (losses) from unconsolidated investments
    
    
    (40
    )
    
    
    6
    
    
    
    (1
    )Interest expense
    
    
    (427
    )
    
    
    (384
    )
    
    
    (375
    )Debt conversion costs
    
    
    
    
    
    
    
    
    
    
    (204
    )Other income and expense, net
    
    
    83
    
    
    
    53
    
    
    
    51Minority interest income (expense)
    
    
    3
    
    
    
    (7
    )
    
    
    Income (loss) from continuing operations before income taxes
    
    
    328
    
    
    
    292
    
    
    
    (421
    )Income tax (expense) benefit
    
    
    (123
    )
    
    
    (116
    )
    
    
    125Income (loss) from continuing operations
    
    
    205
    
    
    
    176
    
    
    
    (296
    )Income (loss) from discontinued operations, net of tax (expense) benefit of $(1),
$(92) and $12, respectively (Note 4)
    
    
    3
    
    
    
    148
    
    
    
    (12
    )Net income (loss)
    
    $
    208
    
    
    $
    324
    
    
    $
    (308
    )
   F-13




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##### Table of Contents



DYNEGY HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    208
    
    
    $
    324
    
    
    $
    (308
    )Adjustments to reconcile income (loss) to net cash flows from operating activities:Depreciation and amortization
    
    
    376
    
    
    
    333
    
    
    
    263Impairment and other charges
    
    
    47
    
    
    
    
    
    
    
    155(Earnings) losses from unconsolidated investments, net of cash distributions
    
    
    41
    
    
    
    (6
    )
    
    
    1Risk-management activities
    
    
    (255
    )
    
    
    (50
    )
    
    
    (87
    )Gain on sale of assets, net
    
    
    (82
    )
    
    
    (267
    )
    
    
    (5
    )Deferred taxes
    
    
    119
    
    
    
    179
    
    
    
    (138
    )Reserve for doubtful accounts
    
    
    
    
    
    
    
    
    
    
    (35
    )Legal and settlement charges
    
    
    6
    
    
    
    26
    
    
    
    (2
    )Sithe Subordinated Debt exchange charge (Note 15)
    
    
    
    
    
    
    
    
    
    
    36Debt conversion costs
    
    
    
    
    
    
    
    
    
    
    204Other
    
    
    29
    
    
    
    39
    
    
    
    69Changes in working capital:Accounts receivable
    
    
    67
    
    
    
    (114
    )
    
    
    391Inventory
    
    
    3
    
    
    
    (13
    )
    
    
    8Prepayments and other assets
    
    
    (51
    )
    
    
    (37
    )
    
    
    102Accounts payable and accrued liabilities
    
    
    (67
    )
    
    
    (1
    )
    
    
    (873
    )Changes in non-current assets
    
    
    (108
    )
    
    
    (56
    )
    
    
    11Changes in non-current liabilities
    
    
    (14
    )
    
    
    11
    
    
    
    3Net cash provided by (used in) operating activities
    
    
    319
    
    
    
    368
    
    
    
    (205
    )CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (611
    )
    
    
    (379
    )
    
    
    (155
    )Proceeds from asset sales, net
    
    
    451
    
    
    
    558
    
    
    
    224Unconsolidated investments
    
    
    10
    
    
    
    13
    
    
    
    Business acquisitions, net of cash acquired
    
    
    
    
    
    
    16
    
    
    
    Proceeds from exchange of unconsolidated investments, net of cash acquired (Note 3
and Note 4)
    
    
    
    
    
    
    
    
    
    
    165Increase in short-term investments
    
    
    (25
    )
    
    
    
    
    
    
    (Increase) decrease in restricted cash
    
    
    80
    
    
    
    (871
    )
    
    
    121Affiliate transactions
    
    
    1
    
    
    
    (24
    )
    
    
    (6
    )Other investing, net
    
    
    7
    
    
    
    (1
    )
    
    
    8Net cash provided by (used in) investing activities
    
    
    (87
    )
    
    
    (688
    )
    
    
    357CASH FLOWS FROM FINANCING ACTIVITIES:Net proceeds from long-term borrowings
    
    
    192
    
    
    
    2,758
    
    
    
    1,071Repayments of borrowings
    
    
    (45
    )
    
    
    (2,045
    )
    
    
    (1,930
    )Borrowings from (repayments to) affiliate, net
    
    
    
    
    
    
    
    
    
    
    (120
    )Debt conversion costs
    
    
    
    
    
    
    
    
    
    
    (204
    )Dividends to affiliates
    
    
    
    
    
    
    (342
    )
    
    
    (50
    )Other financing, net
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )Net cash provided by (used in) financing activities
    
    
    146
    
    
    
    369
    
    
    
    (1,235
    )Net increase (decrease) in cash and cash equivalents
    
    
    378
    
    
    
    49
    
    
    
    (1,083
    )Cash and cash equivalents, beginning of period
    
    
    292
    
    
    
    243
    
    
    
    1,326Cash and cash equivalents, end of period
    
    $
    670
    
    
    $
    292
    
    
    $
    243
   F-14




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##### Table of Contents



DYNEGY HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(in millions)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherPaid-In
    
    
    Affiliate
    
    
    Comprehensive
    
    
    AccumulatedCapital
    
    
    Receivable
    
    
    Income (Loss)
    
    
    Deficit
    
    
    TotalDecember 31, 2005
    
    $
    3,593
    
    
    $
    
    
    
    $
    4
    
    
    $
    (266
    )
    
    $
    3,331Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (308
    )
    
    
    (308
    )Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    98
    
    
    
    
    
    
    
    98Adjustment to initially apply SFAS No.
158, net of tax benefit of $21
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    (35
    )Dividends to affiliates
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50
    )December 31, 2006
    
    $
    3,543
    
    
    $
    
    
    
    $
    67
    
    
    $
    (574
    )
    
    $
    3,036Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    324
    
    
    
    324Other comprehensive loss, net of tax
    
    
    
    
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    (92
    )Adjustment to initially apply FIN No. 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    13Contribution of Contributed Entities
and Sandy Creek to DHI
    
    
    2,483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,483Reclassification of affiliate receivable
    
    
    
    
    
    
    (825
    )
    
    
    
    
    
    
    
    
    
    
    (825
    )Dividends to affiliates
    
    
    (342
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (342
    )December 31, 2007
    
    $
    5,684
    
    
    $
    (825
    )
    
    $
    (25
    )
    
    $
    (237
    )
    
    $
    4,597Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    208
    
    
    
    208Other comprehensive loss, net of tax
    
    
    
    
    
    
    
    
    
    
    (190
    )
    
    
    
    
    
    
    (190
    )Affiliate activity
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    (2
    )December 31, 2008
    
    $
    5,684
    
    
    $
    (827
    )
    
    $
    (215
    )
    
    $
    (29
    )
    
    $
    4,613
   F-15




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##### Table of Contents



DYNEGY HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Net income (loss)
    
    $
    208
    
    
    $
    324
    
    
    $
    (308
    )Cash flow hedging activities, net:Unrealized mark-to-market gains (losses) arising during period, net
    
    
    (142
    )
    
    
    (95
    )
    
    
    95Reclassification of mark-to-market (gains) losses to earnings, net
    
    
    10
    
    
    
    (25
    )
    
    
    (17
    )Deferred losses on cash flow hedges, net
    
    
    (4
    )
    
    
    
    
    
    
    Changes in cash flow hedging activities, net (net of tax benefit (expense) of
$60, $69 and $(46), respectively)
    
    
    (136
    )
    
    
    (120
    )
    
    
    78Allocation to minority interest
    
    
    50
    
    
    
    5
    
    
    
    Total cash flow hedging activities
    
    
    (86
    )
    
    
    (115
    )
    
    
    78Foreign currency translation adjustments
    
    
    (27
    )
    
    
    4
    
    
    
    (1
    )Minimum pension liability (net of tax expense of $5)
    
    
    
    
    
    
    
    
    
    
    10Actuarial gain (loss) and amortization of unrecognized prior service cost (net of tax
benefit (expense) of $29 and $(9), respectively)
    
    
    (41
    )
    
    
    18
    
    
    
    Unrealized gain (loss) on securities, net:Unrealized gain (loss) on securities
    
    
    (3
    )
    
    
    6
    
    
    
    11Reclassification adjustments for gains realized in net income (loss)
    
    
    (9
    )
    
    
    (5
    )
    
    
    Unrealized losses on securities, net (net of tax benefit (expense) of $8,
$(1), and $(7), respectively)
    
    
    (12
    )
    
    
    1
    
    
    
    11Unconsolidated investment other comprehensive loss, net (net of tax benefit of $17)
    
    
    (24
    )
    
    
    
    
    
    
    Other comprehensive income (loss), net of tax
    
    
    (190
    )
    
    
    (92
    )
    
    
    98Comprehensive income (loss)
    
    $
    18
    
    
    $
    232
    
    
    $
    (210
    )
   F-16




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1Organization and Operations
   Note 2Summary of Significant Accounting Policies
 Use of Estimates.
 Principles of Consolidation .
 Cash and Cash Equivalents .
 Restricted Cash and Investments .
 Allowance for Doubtful Accounts .
  F-17




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Unconsolidated Investments .
  Available-for-Sale Securities.
 Inventory .
   Property, Plant and Equipment.
 Range ofAsset Group
    
    YearsPower generation facilities
    
    
    20 to 40Buildings and improvements
    
    
    10 to 39Office and miscellaneous equipment
    
    
    3 to 20
  F-18




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   Goodwill and Other Intangible Assets.
    F-19




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Asset Retirement Obligations.
 Year Ended December 31,2008
    
    
    2007
    
    
    2006(in millions)Beginning of year
    
    $
    107
    
    
    $
    56
    
    
    $
    56New AROs (1)
    
    
    
    
    
    
    
    
    
    
    6Accretion expense
    
    
    10
    
    
    
    8
    
    
    
    6Acquisition of the Contributed Entities
    
    
    
    
    
    
    43
    
    
    
    Revision of previous estimate (2)
    
    
    10
    
    
    
    
    
    
    
    (12
    )End of year
    
    $
    127
    
    
    $
    107
    
    
    $
    56
 
 (1)
    
    During 2006, we recorded additional AROs in the amount of $6 million related to
our obligation to remediate a landfill located at our Danskammer generating facility.
There were no additional AROs, other than those acquired from LS Contributed Entities,
recorded or settled during 2008, 2007 or 2006.(2)
    
    During 2008, we revised our ARO obligation upward by $10 million based on
revised estimates of the cost to dismantle the South Bay facility. During 2006, we
revised our ARO obligation downward by $12 million based on revised estimates of the
costs to remediate ash ponds at certain of our coal fired generating facilities.  Contingencies, Commitments, Guarantees and Indemnifications.
   F-20




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Revenue Recognition .
 Derivative Instruments-Generation.
   Derivative Instruments-Financing Activities.
   F-21




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Fair Value Measurements.
    
    
    Level 1  Quoted prices are available in active markets for identical assets or
liabilities as of the reporting date. Active markets are those in which transactions for
the asset or liability occur in sufficient frequency and volume to provide pricing
information on an ongoing basis. Level 1 primarily consists of financial instruments
such as exchange-traded derivatives, listed equities and U.S. government treasury
securities.
 
    
    Level 2  Pricing inputs are other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the reporting date.
Level 2 includes those financial instruments that are valued using models or other
valuation methodologies. These models are primarily industry-standard models that
consider various assumptions, including quoted forward prices for commodities, time
value, volatility factors, and current market and contractual prices for the underlying
instruments, as well as other relevant economic measures. Substantially all of these
assumptions are observable in the marketplace throughout the full term of the instrument,
can be derived from observable data or are supported by observable levels at which
transactions are executed in the marketplace. Instruments in this category include
non-exchange-traded derivatives such as over the counter forwards, options and repurchase
agreements.
 
    
    Level 3  Pricing inputs include significant inputs that are generally less observable
from objective sources. These inputs may be used with internally developed methodologies
that result in managements best estimate of fair value. Level 3 instruments include
those that may be more structured or otherwise tailored to our needs as well as financial
transmission rights. At each balance sheet date, we perform an analysis of all
instruments subject to SFAS No. 157 and include in Level 3 all of those whose fair value
is based on significant unobservable inputs.
  F-22




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   Income Taxes .
       F-23




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Earnings Per Share.
 Foreign Currency.
 Employee Stock Options.
    Minority Interest.
   F-24




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Accounting Principles Adopted
 SFAS No. 157.
 SFAS No. 159.
 SFAS No. 162.
 Accounting Principles Not Yet Adopted
 SFAS No. 141(R).
 SFAS No. 160.
  F-25




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 SFAS No. 161.
 EITF 08-5.
 Note 3Business Combinations and Acquisitions
 LS Power Business Combination.
    F-26




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
    Cash
    
    $
    16Restricted cash and investments (including $37 million current)
    
    
    91Accounts receivable
    
    
    52Inventory
    
    
    37Assets from risk management activities (including $11 million current)
    
    
    37Prepaids and other current assets
    
    
    12Property, plant and equipment
    
    
    4,223Intangible assets (including $9 million current)
    
    
    224Goodwill
    
    
    486Unconsolidated investments
    
    
    83Other
    
    
    35Total assets acquired
    
    $
    5,296Current liabilities and accrued liabilities
    
    $
    (92
    )Liabilities from risk management activities (including $14 million current)
    
    
    (75
    )Long-term debt (including $32 million current)
    
    
    (1,898
    )Deferred income taxes
    
    
    (627
    )Other
    
    
    (96
    )Minority interest
    
    
    22Total liabilities and minority interest assumed
    
    $
    (2,766
    )Net assets acquired
    
    $
    2,530
    F-27




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
    Twelve Months Ended
    
    
    Twelve Months EndedDecember 31, 2007
    
    
    December 31, 2006Pro Forma
    
    
    
    
    
    
    Pro FormaActual
    
    
    (Unaudited)
    
    
    Actual
    
    
    (Unaudited)(in millions)Revenue
    
    $
    3,103
    
    
    $
    3,392
    
    
    $
    1,770
    
    
    $
    2,739Income (loss) before cumulative
effect of change in accounting
principal
    
    
    264
    
    
    
    216
    
    
    
    (334
    )
    
    
    (354
    )Net income (loss) applicable to
common stockholders
    
    
    264
    
    
    
    216
    
    
    
    (342
    )
    
    
    (362
    )Basic earnings (loss) per share
before cumulative effect of
accounting change
    
    $
    0.35
    
    
    $
    0.29
    
    
    $
    (0.75
    )
    
    $
    (0.45
    )Diluted earnings (loss) per
share before cumulative effect
of accounting change
    
    
    0.35
    
    
    
    0.29
    
    
    
    (0.75
    )
    
    
    (0.45
    )Basic earnings (loss) per share
    
    
    0.35
    
    
    
    0.29
    
    
    
    (0.75
    )
    
    
    (0.45
    )Diluted earnings (loss) per share
    
    
    0.35
    
    
    
    0.29
    
    
    
    (0.75
    )
    
    
    (0.45
    )
    F-28




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 LS Assets Contribution.
  Twelve Months Ended
    
    
    Twelve Months EndedDecember 31, 2007
    
    
    December 31, 2006Pro Forma
    
    
    
    
    
    
    Pro FormActual
    
    
    (Unaudited)
    
    
    Actual
    
    
    (Unaudited)(in millions)Revenue
    
    $
    3,103
    
    
    $
    3,392
    
    
    $
    1,770
    
    
    $
    2,739Net income (loss)
    
    
    324
    
    
    
    279
    
    
    
    (308
    )
    
    
    (319
    )
  Sithe Assets Contribution.
 Rocky Road.
 Note 4Dispositions, Contract Terminations and Discontinued Operations
 Dispositions and Contract Terminations
 Heard County.
 Rolling Hills.
   F-29




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  NYMEX Securities.
 Oyster Creek.
 PPEA Holding Company LLC.
 Rockingham.
  West Coast Power.
  F-30




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 GEN-WE Discontinued Operations
 Calcasieu.
  CoGen Lyondell.
   Other Discontinued Operations
   GEN-WE
    
    
    CRM
    
    
    DGC
    
    
    NGL
    
    
    Total(in millions)2008Income from operations before taxes
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4
    
    
    $
    4Income from operations after taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    32007Revenues
    
    $
    307
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    307Income from operations before taxes
    
    
    1
    
    
    
    15
    
    
    
    (1
    )
    
    
    
    
    
    
    15Income (loss) from operations after taxes
    
    
    1
    
    
    
    15
    
    
    
    
    
    
    
    11
    
    
    
    27Gain on sale before taxes
    
    
    224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    224Gain on sale after taxes
    
    
    121
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1212006Revenues
    
    $
    247
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    247Income (loss) from operations before taxes
    
    
    (53
    )
    
    
    23
    
    
    
    1
    
    
    
    6
    
    
    
    (23
    )Income (loss) from operations after taxes
    
    
    (37
    )
    
    
    19
    
    
    
    1
    
    
    
    4
    
    
    
    (13
    )
  F-31




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  GEN-WE
    
    
    CRM
    
    
    NGL
    
    
    Total(in millions)2008Income from operations before taxes
    
    $
    
    
    
    $
    
    
    
    $
    4
    
    
    $
    4Income from operations after taxes
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    32007Revenues
    
    $
    307
    
    
    $
    
    
    
    $
    
    
    
    $
    307Income from operations before taxes
    
    
    1
    
    
    
    15
    
    
    
    
    
    
    
    16Income (loss) from operations after taxes
    
    
    1
    
    
    
    15
    
    
    
    11
    
    
    
    27Gain on sale before taxes
    
    
    224
    
    
    
    
    
    
    
    
    
    
    
    224Gain on sale after taxes
    
    
    121
    
    
    
    
    
    
    
    
    
    
    
    1212006Revenues
    
    $
    247
    
    
    $
    
    
    
    $
    
    
    
    $
    247Income (loss) from operations before taxes
    
    
    (53
    )
    
    
    23
    
    
    
    6
    
    
    
    (24
    )Income (loss) from operations after taxes
    
    
    (37
    )
    
    
    21
    
    
    
    4
    
    
    
    (12
    )
 Note 5Impairment Charges
 Asset Impairments.
      F-32




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Note 6Risk Management Activities, Derivatives and Financial Instruments
    December 31,2008
    
    
    2007Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(in millions)Interest rate derivatives designated as cash flow
accounting hedges
    
    $
    (238
    )
    
    $
    (238
    )
    
    $
    (34
    )
    
    $
    (34
    )Interest rate derivatives designated as fair value
accounting hedges
    
    
    3
    
    
    
    3
    
    
    
    2
    
    
    
    2Interest rate derivatives not designated as
accounting hedges
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Commodity-based derivative contracts not
designated as accounting hedges
    
    
    207
    
    
    
    207
    
    
    
    (66
    )
    
    
    (66
    )Net liabilities from risk management activities (1)
    
    $
    (30
    )
    
    $
    (30
    )
    
    $
    (100
    )
    
    $
    (100
    )
 
 (1)
    
    Included in both current and non-current assets and liabilities on the
consolidated balance sheets.    F-33




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Cash Flow Hedges.
   Fair Value Hedges.
 Fair Value Measurements.
 Fair Value as of December 31, 2008Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(in millions)Assets:Assets from commodity risk
management activities
    
    $
    
    
    
    $
    1,282
    
    
    $
    73
    
    
    $
    1,355Assets from interest rate swaps
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22OtherDHI (1)
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    24TotalDHI
    
    
    
    
    
    
    1,328
    
    
    
    73
    
    
    
    1,401OtherDynegy (1)
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1TotalDynegy
    
    $
    
    
    
    $
    1,329
    
    
    $
    73
    
    
    $
    1,402Liabilities:Liabilities from commodity risk
management activities
    
    $
    
    
    
    $
    1,134
    
    
    $
    13
    
    
    $
    1,147Liabilities from interest rate swaps
    
    
    
    
    
    
    260
    
    
    
    
    
    
    
    260TotalDynegy and DHI
    
    $
    
    
    
    $
    1,394
    
    
    $
    13
    
    
    $
    1,407
 
 (1)
    
    Other represents available for sale securities.  F-34




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Twelve Months EndedDecember 31, 2008(in millions)Balance at December 31, 2007
    
    $
    (16
    )Realized and unrealized gains, net
    
    
    105Purchases, issuances and settlements
    
    
    (28
    )Transfers out of Level 3
    
    
    (1
    )Balance at December 31, 2008
    
    $
    60Change in unrealized gains, net, relating to
instruments still held as of December 31, 2008
    
    $
    85
   Fair Value of Financial Instruments .
  Concentration of Credit Risk .
     F-35




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Note 7Accumulated Other Comprehensive Loss
  Year Ended December 31,2008
    
    
    2007(in millions)Cash flow hedging activities, net
    
    $
    (125
    )
    
    $
    (39
    )Foreign currency translation adjustment (1)
    
    
    
    
    
    
    27Unrecognized prior service cost and actuarial loss
    
    
    (66
    )
    
    
    (25
    )Available for sale securities
    
    
    
    
    
    
    12Accumulated other comprehensive lossunconsolidated investments
    
    
    (24
    )
    
    
    Accumulated other comprehensive loss, net of tax
    
    $
    (215
    )
    
    $
    (25
    )
 
 (1)
    
    In 2008, upon substantial liquidation of a foreign entity, we recognized $24
million of pre-tax income related to translation gains that had accumulated in
stockholders equity. This income is included in Other income (expense), net in our
consolidated statements of operations. Note 8Cash Flow Information
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(in millions)Interest paid (net of amount capitalized)
    
    $
    413
    
    
    $
    393
    
    
    $
    405Taxes paid, net
    
    $
    23
    
    
    $
    48
    
    
    $
    9Detail of businesses acquired:Current assets and other
    
    $
    
    
    
    $
    174
    
    
    $
    14Fair value of non-current assets
    
    
    
    
    
    
    5,122
    
    
    
    13Liabilities assumed, including deferred taxes
    
    
    
    
    
    
    (2,766
    )
    
    
    18Non-cash consideration (1)
    
    
    
    
    
    
    (2,378
    )
    
    
    Cash balance acquired
    
    
    
    
    
    
    (16
    )
    
    
    (5
    )Cash paid, net of cash acquired (2)
    
    $
    
    
    
    $
    136
    
    
    $
    40Other non-cash investing and financing activity:Non-cash capital expenditures (3)
    
    $
    57
    
    
    $
    13
    
    
    $
    Conversion of Convertible Subordinated Debentures
due 2023 (Note 15) (4)
    
    
    
    
    
    
    
    
    
    
    225Sithe Subordinated Debt exchange, net (Note 15) (5)
    
    
    
    
    
    
    
    
    
    
    122Addition of a capital lease (6)
    
    
    
    
    
    
    
    
    
    
    6Marketable securities (7)
    
    
    
    
    
    
    
    
    
    
    18
 (1)
    
    Includes (i) 340 million shares of the Class B common stock of Dynegy valued at
$5.98 per share; (ii) a promissory note in the aggregate principal amount of $275
million, and (iii) an additional $70 million of the Griffith Debt. Please read Note 3
Business Combinations and AcquisitionsLS Power Business Combination for further
information.  F-36




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (2)
    
    Includes transaction costs associated with the Merger of approximately $44
million and $8 million for the years ended December 31, 2007 and 2006, respectively.(3)
    
    For the years ended December 31, 2008 and 2007, we had non-cash capital
expenditures of approximately $57 million and $13 million, respectively. These
expenditures related primarily to our interest in the Plum Point power generation
facility and capital expenditures related to the Consent Decree. Please read Note
12Variable Interest EntitiesPPEA Holding Company LLC for further discussion of Plum
Point and Note 19Commitment and Contingencies for further discussion of the Consent
Decree.(4)
    
    In May 2006, Dynegy converted all $225 million of its outstanding 4.75 percent
Convertible Subordinated Debentures due 2023 into shares of its Class A common stock
(the Convertible Debenture Exchange). In this transaction, Dynegy issued an aggregate
of 54,598,369 shares of our Class A common stock and paid the debenture holders an
aggregate of approximately $47 million in premiums and accrued and unpaid interest using
cash on hand. Please read Note 15DebtConvertible Subordinated Debentures due 2023 for
further information.(5)
    
    In July 2006, we executed an exchange of approximately $419 million principal
amount of the subordinated debt of Independence, together with all claims for accrued
and unpaid interest thereon, for approximately $297 million principal amount of our
8.375 percent Senior Unsecured Notes due 2016. Please read Note 15DebtSithe Senior
Notes for further information.(6)
    
    In January 2006, we entered into an obligation under a capital lease related to a
coal loading facility, which is used in the transportation of coal to our Vermilion
generating facility. Pursuant to our agreement with the lessor, we are obligated for
minimum payments in the aggregate amount of $14 million over the ten-year term of the
lease.(7)
    
    In November 2006, the New York Mercantile Exchange completed its initial public
offering. We had two membership seats on the NYMEX, and therefore, we received 90,000
NYMEX shares for each membership seat.  Year Ended December 31,2008
    
    
    2007
    
    
    2006(in millions)Interest paid (net of amount capitalized)
    
    $
    413
    
    
    $
    393
    
    
    $
    402Taxes paid, net
    
    $
    18
    
    
    $
    35
    
    
    $
    Detail of businesses acquired:Current assets and other
    
    $
    
    
    
    $
    
    
    
    $
    14Fair value of non-current assets
    
    
    
    
    
    
    
    
    
    
    13Liabilities assumed, including deferred taxes
    
    
    
    
    
    
    
    
    
    
    18Cash balance acquired
    
    
    
    
    
    
    
    
    
    
    (5
    )Cash paid, net of cash acquired
    
    $
    
    
    
    $
    
    
    
    $
    40Other non-cash investing and financing activity:Non-cash capital expenditures (1)
    
    $
    57
    
    
    $
    13
    
    
    $
    Contribution of the Contributed Entities from
Dynegy to DHI (2)
    
    
    
    
    
    
    2,467
    
    
    
    Contribution of Sithe from Dynegy to DHI (3)
    
    
    
    
    
    
    
    
    
    
    Contribution of Sandy Creek from Dynegy to DHI (4)
    
    
    
    
    
    
    16
    
    
    
    Sithe Subordinated Debt exchange, net (Note 15) (5)
    
    
    
    
    
    
    
    
    
    
    122Addition of a capital lease (6)
    
    
    
    
    
    
    
    
    
    
    6Marketable securities (7)
    
    
    
    
    
    
    
    
    
    
    18
 
 (1)
    
    For the years ended December 31, 2008 and 2007, we had non-cash capital
expenditures of approximately $57 million and $13 million, respectively. These
expenditures related primarily to our interest in the Plum Point power generation
facility and capital expenditures related to the Consent Decree. Please read Note
12Variable Interest EntitiesPPEA Holding Company LLC for further discussion of Plum
Point and Note 19Commitment and Contingencies for further discussion of the Consent
Decree.  F-37




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (2)
    
    In April 2007, Dynegy contributed to DHI its interest in the Contributed
Entities. The contribution was accounted for as a transaction between entities under
common control in a manner similar to a pooling of interests whereby the assets and
liabilities were transferred at historical cost. Please read Note 3 Business
Combinations and AcquisitionsLS Assets Contribution for further information.(3)
    
    In April 2007, Dynegy contributed to DHI its interest in New York Holdings. This
contribution was accounted for as a transaction between entities under common control in
a manner similar to a pooling of interests whereby the assets and liabilities were
transferred at historical cost. Please read Note 3 Business Combinations and
AcquisitionsSithe Assets Contribution for further information.(4)
    
    In August 2007, Dynegy contributed to DHI its interest in SCH. This contribution
was accounted for as a transaction between entities under common control in a manner
similar to a pooling of interests whereby the assets and liabilities were transferred at
historical cost. Please read Note 12Variable Interest EntitiesSandy Creek for further
information.(5)
    
    In July 2006, DHI executed an exchange of approximately $419 million principal
amount of the subordinated debt of Independence, together with all claims for accrued
and unpaid interest thereon, for approximately $297 million principal amount of DHIs
8.375 percent Senior Unsecured Notes due 2016. Please read Note 15DebtSithe Senior
Notes for further information.(6)
    
    In January 2006, we entered into an obligation under a capital lease related to a
coal loading facility, which is used in the transportation of coal to our Vermilion
generating facility. Pursuant to our agreement with the lessor, we are obligated for
minimum payments in the aggregate amount of $14 million over the ten-year term of the
lease.(7)
    
    In November 2006, the New York Mercantile Exchange completed its initial public
offering. We had two membership seats on the NYMEX, and therefore, we received 90,000
NYMEX shares for each membership seat. Note 9Inventory
  December 31,2008
    
    
    2007(in millions)Materials and supplies
    
    $
    76
    
    
    $
    72Coal
    
    
    57
    
    
    
    70Fuel oil
    
    
    29
    
    
    
    40Emissions allowances
    
    
    18
    
    
    
    11Natural gas storage
    
    
    4
    
    
    
    6$
    184
    
    
    $
    199
  F-38




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Note 10Property, Plant and Equipment
  December 31,2008
    
    
    2007(in millions)Generation assets:GEN-MW
    
    $
    6,825
    
    
    $
    6,642GEN-WE
    
    
    2,390
    
    
    
    2,393GEN-NE
    
    
    1,501
    
    
    
    1,464IT systems and other
    
    
    153
    
    
    
    19010,869
    
    
    
    10,689Accumulated depreciation
    
    
    (1,935
    )
    
    
    (1,672
    )$
    8,934
    
    
    $
    9,017
  Note 11Unconsolidated Investments
 Equity Method Investments.
  December 31,2008
    
    
    2007(in millions)Equity affiliates:Sandy Creek Services
    
    $
    
    
    
    $
    Sandy Creek Holdings LLC
    
    
    (75)
    (1)
    
    
    18Black Mountain
    
    
    
    
    
    
    Total unconsolidated investmentsDHI
    
    
    (75
    )
    
    
    18DLS Power Holdings and DLS Power Development
    
    
    15
    
    
    
    61Total unconsolidated investmentsDynegy
    
    $
    (60
    )
    
    $
    79
 
 (1)
    
    Included in Other long-term liabilities on the consolidated balance sheets.     F-39




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Summarized Information.
 December 31,2008
    
    
    2007Total
    
    
    Equity Share
    
    
    Total
    
    
    Equity Share(in millions)Current assets
    
    $
    6
    
    
    $
    3
    
    
    $
    6
    
    
    $
    3Non-current assets
    
    
    384
    
    
    
    192
    
    
    
    262
    
    
    
    131Current liabilities
    
    
    32
    
    
    
    16
    
    
    
    14
    
    
    
    7Non-current liabilities
    
    
    536
    
    
    
    268
    
    
    
    280
    
    
    
    140Revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income
    
    
    36
    
    
    
    18
    
    
    
    26
    
    
    
    13Net income (loss)
    
    
    (80
    )
    
    
    (40
    )
    
    
    16
    
    
    
    8
  December 31,2008
    
    
    2007Total
    
    
    Equity Share
    
    
    Total
    
    
    Equity Share(in millions)Current assets
    
    $
    4
    
    
    $
    2
    
    
    $
    2
    
    
    $
    1Non-current assets
    
    
    10
    
    
    
    5
    
    
    
    4
    
    
    
    2Current liabilities
    
    
    4
    
    
    
    2
    
    
    
    4
    
    
    
    2Non-current liabilities
    
    
    2
    
    
    
    1
    
    
    
    2
    
    
    
    1Revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating loss
    
    
    (23
    )
    
    
    (12
    )
    
    
    (19
    )
    
    
    (9
    )Net loss
    
    
    (23
    )
    
    
    (12
    )
    
    
    (19
    )
    
    
    (9
    )
    F-40




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Available-for-Sale Securities.
  Note 12Variable Interest Entities
 Hydroelectric Generation Facilities.
   F-41




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 PPEA Holding Company LLC.
      F-42




---



##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  As of and For the YearEnded2008
    
    
    2007(in millions)Current assets
    
    $
    1
    
    
    $
    16Property, plant and equipment, net
    
    
    507
    
    
    
    308Intangible asset
    
    
    193
    
    
    
    193Other non-current asset
    
    
    29
    
    
    
    40Total assets
    
    
    730
    
    
    
    557Current liabilities
    
    
    19
    
    
    
    20Long-term debt
    
    
    615
    
    
    
    418Non-current liabilities
    
    
    244
    
    
    
    42Minority interest
    
    
    (30
    )
    
    
    23Operating loss
    
    
    (1
    )
    
    
    (1
    )Net loss
    
    
    (3
    )
    
    
    (1
    )
 DLS Power Holdings and DLS Power Development.
     F-43




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Sandy Creek.
         F-44




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
     Note 13Goodwill
  GEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Total(in millions)December 31, 2006
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Acquisition of the Contributed Entities
    
    
    81
    
    
    
    308
    
    
    
    97
    
    
    
    486Sale of CoGen Lyondell
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    (48
    )December 31, 2007
    
    $
    81
    
    
    $
    260
    
    
    $
    97
    
    
    $
    438Sale of Rolling Hills
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )December 31, 2008
    
    $
    76
    
    
    $
    260
    
    
    $
    97
    
    
    $
    433
   F-45




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
    Note 14Intangible Assets
  LS Power
    
    
    Sithe
    
    
    Rocky Road
    
    
    Total(in millions)December 31, 2005
    
    $
    
    
    
    $
    442
    
    
    $
    
    
    
    $
    442Acquisition of Rocky Road
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    29Amortization expense
    
    
    
    
    
    
    (59
    )
    
    
    (7
    )
    
    
    (66
    )December 31, 2006
    
    $
    
    
    
    $
    383
    
    
    $
    22
    
    
    $
    405Acquisition of the Contributed Entities
    
    
    224
    
    
    
    
    
    
    
    
    
    
    
    224Amortization expense
    
    
    (8
    )
    
    
    (50
    )
    
    
    (9
    )
    
    
    (67
    )December 31, 2007
    
    $
    216
    
    
    $
    333
    
    
    $
    13
    
    
    $
    562Amortization expense
    
    
    (7
    )
    
    
    (49
    )
    
    
    (9
    )
    
    
    (65
    )December 31, 2008
    
    $
    209
    
    
    $
    284
    
    
    $
    4
    
    
    $
    497
 LS Power.
  F-46




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Sithe.
 Rocky Road.
 Note 15Debt
  December 31,2008
    
    
    2007Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(in millions)Term Loan B, due 2013
    
    $
    69
    
    
    $
    52
    
    
    $
    70
    
    
    $
    70Term Facility, floating rate due 2013
    
    
    850
    
    
    
    639
    
    
    
    850
    
    
    
    850Senior Notes and Debentures:6.875 percent due 2011
    
    
    502
    
    
    
    427
    
    
    
    502
    
    
    
    4838.75 percent due 2012
    
    
    501
    
    
    
    426
    
    
    
    501
    
    
    
    5067.5 percent due 2015
    
    
    550
    
    
    
    388
    
    
    
    550
    
    
    
    5148.375 percent due 2016
    
    
    1,047
    
    
    
    742
    
    
    
    1,047
    
    
    
    1,0227.125 percent due 2018
    
    
    173
    
    
    
    110
    
    
    
    173
    
    
    
    1557.75 percent due 2019
    
    
    1,100
    
    
    
    762
    
    
    
    1,100
    
    
    
    1,0117.625 percent due 2026
    
    
    172
    
    
    
    93
    
    
    
    172
    
    
    
    149Subordinated Debentures payable to affiliates, 8.316 percent, due 2027
    
    
    200
    
    
    
    83
    
    
    
    200
    
    
    
    173Sithe Senior Notes, 9.0 percent due 2013
    
    
    344
    
    
    
    328
    
    
    
    388
    
    
    
    416Plum Point Credit Agreement Facility, floating rate due 2010
    
    
    515
    
    
    
    365
    
    
    
    318
    
    
    
    318Plum Point Tax Exempt Bonds, floating rate due 2036
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    1006,123
    
    
    
    
    
    
    
    5,971Unamortized premium on debt, net
    
    
    13
    
    
    
    
    
    
    
    196,136
    
    
    
    
    
    
    
    5,990Less: Amounts due within one year, including non-cash amortization of
basis adjustments
    
    
    64
    
    
    
    
    
    
    
    51Total Long-Term Debt
    
    $
    6,072
    
    
    
    
    
    
    $
    5,939
   F-47




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Fifth Amended and Restated Credit Facility.
         F-48




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
      Senior Notes.
  F-49




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   Face
    
    
    Premium
    
    
    FairValue
    
    
    Discount
    
    
    Value(in millions)Generation Facilities First Lien Term Loans due 2013
    
    $
    919
    
    
    $
    1
    
    
    $
    920Generation Facilities Second Lien Term Loans due 2014
    
    
    150
    
    
    
    1
    
    
    
    151Kendall First Lien Term Loan due 2013
    
    
    396
    
    
    
    (5
    )
    
    
    391Ontelaunee First Lien Term Loan due 2009
    
    
    100
    
    
    
    (1
    )
    
    
    99Ontelaunee Second Lien Credit Agreement due 2009
    
    
    50
    
    
    
    1
    
    
    
    51Total debt repaid with proceeds from unsecured offering
    
    $
    1,615
    
    
    $
    (3
    )
    
    $
    1,612
  Second Priority Senior Secured Notes.
     F-50




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Subordinated Debentures.
 Contingent LC Facility.
   Sithe Senior Notes.
  Face
    
    
    PremiumValue
    
    
    (Discount)
    
    
    Fair Value(in millions)Subordinated Debt, 7.0 percent due 2034
    
    $
    419
    
    
    $
    (167
    )
    
    $
    252Senior Notes, 8.5 percent due 2007
    
    
    91
    
    
    
    3
    
    
    
    94Senior Notes, 9.0 percent due 2013
    
    
    409
    
    
    
    42
    
    
    
    451Total Independence Debt
    
    $
    919
    
    
    $
    (122
    )
    
    $
    797
   F-51




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   Plum Point Credit Agreement Facility. 1 2
   F-52




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Plum Point Tax Exempt Bonds.
 Convertible Subordinated Debentures due 2023.
 Restricted Cash and Investments.
 December 31,
    
    
    December 31,2008
    
    
    2007(in millions)Credit facility (1)
    
    $
    850
    
    
    $
    850Sithe Energy (2)
    
    
    41
    
    
    
    41Plum Point (3)
    
    
    29
    
    
    
    54GEN Finance (4)
    
    
    50
    
    
    
    57Sandy Creek (5)
    
    
    275
    
    
    
    323Total restricted cash and investments
    
    $
    1,245
    
    
    $
    1,325
 
 (1)
    
    Includes cash posted to support the letter of credit component of our credit
facility. We are required to post cash collateral in an amount equal to 103 percent of
outstanding letters of credit.(2)
    
    Includes amounts related to the terms of the indenture governing the Sithe Senior
Debt, which among other things, prohibit cash distributions by Independence to its
affiliates, including us, unless certain project reserve accounts are funded to
specified levels and the required debt service coverage ratio is met.(3)
    
    Includes proceeds from the Tax Exempt Bonds. These funds are used to finance
PPEAs undivided interest in various sewage and solid waste collection and disposal
facilities which are under construction. Funds will be drawn from the restricted
accounts as necessary for the construction of these facilities.(4)
    
    Includes amounts restricted under the terms of a security and deposit agreement
associated with a collateral agreement and commodity hedges entered into by GEN Finance.(5)
    
    Includes amounts related to our funding commitment related to the Sandy Creek
Project. Please read Note 12Variable Interest EntitiesSandy Creek.  F-53




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Note 16Related Party Transactions
 Transactions with Chevron
   Series C Convertible Preferred Stock.
 Equity Investments.
 Other
 Equity Investments.
 December 2001 Equity Purchases.
 Other.
    F-54




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Note 17Income Taxes
 Income Tax (Expense) Benefit-Dynegy.
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(in millions)Income (loss) from
continuing operations
before income taxes:Domestic
    
    $
    218
    
    
    $
    273
    
    
    $
    (478
    )Foreign
    
    
    28
    
    
    
    (6
    )
    
    
    5$
    246
    
    
    $
    267
    
    
    $
    (473
    )
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(in millions)Current tax expense:Domestic
    
    $
    (5
    )
    
    $
    (22
    )
    
    $
    (3
    )Foreign
    
    
    
    
    
    
    
    
    
    
    (2
    )Deferred tax benefit (expense):Domestic
    
    
    (66
    )
    
    
    (132
    )
    
    
    148Foreign
    
    
    (4
    )
    
    
    3
    
    
    
    9Income tax (expense) benefit
    
    $
    (75
    )
    
    $
    (151
    )
    
    $
    152
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(in millions)Expected tax (expense) benefit at U.S. statutory rate (35%)
    
    $
    (86
    )
    
    $
    (94
    )
    
    $
    166State taxes (1)
    
    
    
    
    
    
    (55
    )
    
    
    32Foreign taxes
    
    
    
    
    
    
    5
    
    
    
    (12
    )Permanent differences
    
    
    7
    
    
    
    (2
    )
    
    
    3Valuation allowance
    
    
    (6
    )
    
    
    
    
    
    
    (4
    )IRS and state audits and settlements
    
    
    
    
    
    
    (3
    )
    
    
    (38
    )Other (2)
    
    
    10
    
    
    
    (2
    )
    
    
    5Income tax (expense) benefit
    
    $
    (75
    )
    
    $
    (151
    )
    
    $
    152
 
 (1)
    
    Includes a benefit of $18 million and expense of $21 million for the years
ended December 31, 2008 and 2007, respectively, related to adjustments arising from
measurement of temporary differences.(2)
    
    Includes a benefit of $8 million for the year ended December 31, 2008 arising from the conversion of a foreign
tax credit to a deduction.  F-55




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Income Tax (Expense) Benefit-DHI.
 Year Ended December 31,2008
    
    
    2007
    
    
    2006(in millions)Income (loss) from
continuing operations
before income taxes:Domestic
    
    $
    300
    
    
    $
    298
    
    
    $
    (426
    )Foreign
    
    
    28
    
    
    
    (6
    )
    
    
    5$
    328
    
    
    $
    292
    
    
    $
    (421
    )
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(in millions)Current tax benefit (expense):Domestic
    
    $
    (3
    )
    
    $
    (11
    )
    
    $
    (1
    )Foreign
    
    
    
    
    
    
    
    
    
    
    (2
    )Deferred tax benefit (expense):Domestic
    
    
    (116
    )
    
    
    (108
    )
    
    
    119Foreign
    
    
    (4
    )
    
    
    3
    
    
    
    9Income tax (expense) benefit
    
    $
    (123
    )
    
    $
    (116
    )
    
    $
    125
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(in millions)Expected tax benefit at U.S. statutory rate (35%)
    
    $
    (115
    )
    
    $
    (102
    )
    
    $
    147State taxes (1)
    
    
    (14
    )
    
    
    (21
    )
    
    
    17Foreign taxes
    
    
    
    
    
    
    5
    
    
    
    (12
    )Permanent Differences
    
    
    7
    
    
    
    (2
    )
    
    
    5Valuation allowance
    
    
    (6
    )
    
    
    
    
    
    
    (4
    )IRS and state audits and settlements
    
    
    
    
    
    
    8
    
    
    
    (38
    )Other (2)
    
    
    5
    
    
    
    (4
    )
    
    
    10Income tax (expense) benefit
    
    $
    (123
    )
    
    $
    (116
    )
    
    $
    125
 
 (1)
    
    Includes a benefit of $12 million and expense of $19 million for the years
ended December 31, 2008 and 2007, respectively, related to adjustments arising from
measurement of temporary differences.(2)
    
    Includes a benefit of $8 million for the year ended December 31, 2008 arising from the conversion of a foreign
tax credit to a deduction.
  F-56




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Deferred Tax Liabilities and Assets.
 Dynegy
    
    
    DHIYear ended December 31,
    
    
    Year ended December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(in millions)Deferred tax assets:Current:Reserves (legal, environmental and other)
    
    $
    
    
    
    $
    28
    
    
    $
    
    
    
    $
    28NOL carryforwards
    
    
    13
    
    
    
    58
    
    
    
    12
    
    
    
    48Miscellaneous book/tax recognition differences
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    Subtotal
    
    
    17
    
    
    
    86
    
    
    
    16
    
    
    
    76Less: valuation allowance
    
    
    (5
    )
    
    
    (18
    )
    
    
    (5
    )
    
    
    (16
    )Total current deferred tax assets
    
    
    12
    
    
    
    68
    
    
    
    11
    
    
    
    60Non-current:NOL carryforwards
    
    
    35
    
    
    
    97
    
    
    
    35
    
    
    
    86AMT credit carryforwards
    
    
    271
    
    
    
    262
    
    
    
    
    
    
    
    Capital loss carryforward
    
    
    10
    
    
    
    17
    
    
    
    10
    
    
    
    17Foreign tax credits
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    21Reserves (legal, environmental and other)
    
    
    42
    
    
    
    53
    
    
    
    42
    
    
    
    53Other comprehensive income
    
    
    146
    
    
    
    30
    
    
    
    146
    
    
    
    30Miscellaneous book/tax recognition
differences
    
    
    71
    
    
    
    30
    
    
    
    47
    
    
    
    26Subtotal
    
    
    575
    
    
    
    513
    
    
    
    280
    
    
    
    233Less: valuation allowance
    
    
    (32
    )
    
    
    (44
    )
    
    
    (32
    )
    
    
    (43
    )Total non-current deferred tax assets
    
    
    543
    
    
    
    469
    
    
    
    248
    
    
    
    190Deferred tax liabilities:Current:Reserves (legal, environmental and other)
    
    
    6
    
    
    
    
    
    
    
    8
    
    
    
    Miscellaneous book/tax recognition
differences
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    30Total current deferred tax liabilities
    
    
    6
    
    
    
    23
    
    
    
    8
    
    
    
    30Non-current:Depreciation and other property differences
    
    
    1,620
    
    
    
    1,640
    
    
    
    1,207
    
    
    
    1,184Power contract
    
    
    89
    
    
    
    75
    
    
    
    93
    
    
    
    54Total non-current deferred tax
liabilities
    
    
    1,709
    
    
    
    1,715
    
    
    
    1,300
    
    
    
    1,238Net deferred tax liability
    
    $
    1,160
    
    
    $
    1,201
    
    
    $
    1,049
    
    
    $
    1,018
 NOL Carryforwards-Dynegy.
  F-57




---



##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  NOL Carryforwards-DHI.
  AMT Credit Carryforwards.
 Capital Loss Carryforwards.
 Foreign Tax Credits.
  Residual U.S. Income Tax on Foreign Earnings.
 Change in Valuation Allowance.
  F-58




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Foreign NOLCarryforwardsCapital Loss
    
    
    Foreign Tax
    
    
    State NOL
    
    
    and DeferredCarryforwards
    
    
    Credits
    
    
    Carryforwards
    
    
    Tax Assets
    
    
    Total(in millions)Balance as of December 31, 2005
    
    $
    (17
    )
    
    $
    (23
    )
    
    $
    (17
    )
    
    $
    (13
    )
    
    $
    (70
    )Changes in valuation allowanceSithe
subordinated debt exchange
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Changes in valuation
allowancecontinuing operations
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    13
    
    
    
    3Changes in valuation
allowancediscontinued operations
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Balance as of December 31, 2006
    
    
    (17
    )
    
    
    (23
    )
    
    
    (29
    )
    
    
    
    
    
    
    (69
    )Changes in valuation
allowancecontinuing operations
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Changes in valuation
allowancediscontinued operations
    
    
    
    
    
    
    (1
    )
    
    
    2
    
    
    
    
    
    
    
    1Balance as of December 31, 2007
    
    
    (17
    )
    
    
    (24
    )
    
    
    (21
    )
    
    
    
    
    
    
    (62
    )Changes in valuation
allowancecontinuing operations
    
    
    
    
    
    
    8
    
    
    
    (2
    )
    
    
    (4
    )
    
    
    2Other release
    
    
    7
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    23Balance as of December 31, 2008
    
    $
    (10
    )
    
    $
    
    
    
    $
    (23
    )
    
    $
    (4
    )
    
    $
    (37
    )
  Foreign NOLCarryforwardsCapital Loss
    
    
    Foreign Tax
    
    
    State NOL
    
    
    and DeferredCarryforwards
    
    
    Credits
    
    
    Carryforwards
    
    
    Tax Assets
    
    
    Total(in millions)Balance as of December 31, 2005
    
    $
    (17
    )
    
    $
    (5
    )
    
    $
    (17
    )
    
    $
    (13
    )
    
    $
    (52
    )Changes in valuation allowanceSithe
subordinated debt exchange
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Changes in valuation
allowancecontinuing operations
    
    
    
    
    
    
    (15
    )
    
    
    (10
    )
    
    
    13
    
    
    
    (12
    )Changes in valuation
allowancediscontinued operations
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Balance as of December 31, 2006
    
    
    (17
    )
    
    
    (20
    )
    
    
    (29
    )
    
    
    
    
    
    
    (66
    )Changes in valuation
allowancecontinuing operations
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Changes in valuation
allowancediscontinued operations
    
    
    
    
    
    
    (1
    )
    
    
    2
    
    
    
    
    
    
    
    1Balance as of December 31, 2007
    
    
    (17
    )
    
    
    (21
    )
    
    
    (21
    )
    
    
    
    
    
    
    (59
    )Changes in valuation
allowancecontinuing operations
    
    
    
    
    
    
    8
    
    
    
    (2
    )
    
    
    (4
    )
    
    
    2Other release
    
    
    7
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    20Balance as of December 31, 2008
    
    $
    (10
    )
    
    $
    
    
    
    $
    (23
    )
    
    $
    (4
    )
    
    $
    (37
    )
  F-59




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Acquisition of LS Power.
 Unrecognized Tax Benefits.
   Dynegy
    
    
    DHI(in millions)Balance at January 1, 2007
    
    $
    111
    
    
    $
    77Additions based on tax positions related to the current year
    
    
    1
    
    
    
    1Additions based on tax positions related to the prior year
    
    
    11
    
    
    
    1Reductions based on tax positions related to the prior year
    
    
    (47
    )
    
    
    (46
    )Settlements
    
    
    (43
    )
    
    
    (25
    )Balance at December 31, 2007
    
    $
    33
    
    
    $
    8Additions based on tax positions related to the prior year
    
    
    2
    
    
    
    2Reductions based on tax positions related to the prior year
    
    
    (3
    )
    
    
    (3
    )Balance at December 31, 2008
    
    $
    32
    
    
    $
    7
     F-60




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   Note 18Dynegys Earnings (Loss) Per Share
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(in millions, except per share amounts)Income (loss) from continuing operations
    
    $
    171
    
    
    $
    116
    
    
    $
    (321
    )Convertible preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    (9
    )Income (loss) from continuing operations for basic
earnings (loss) per share
    
    
    171
    
    
    
    116
    
    
    
    (330
    )Effect of dilutive securities:Interest on convertible subordinated debentures
    
    
    
    
    
    
    
    
    
    
    3Dividends on Series C convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    9Income (loss) from continuing operations for diluted
earnings (loss) per share
    
    $
    171
    
    
    $
    116
    
    
    $
    (318
    )Basic weighted-average shares
    
    
    840
    
    
    
    752
    
    
    
    459Effect of dilutive securities:Stock options
    
    
    2
    
    
    
    2
    
    
    
    2Convertible subordinated debentures
    
    
    
    
    
    
    
    
    
    
    20Series C convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    28Diluted weighted-average shares
    
    
    842
    
    
    
    754
    
    
    
    509Earnings (loss) per share from continuing operations:Basic
    
    $
    0.20
    
    
    $
    0.15
    
    
    $
    (0.72
    )Diluted (1)
    
    $
    0.20
    
    
    $
    0.15
    
    
    $
    (0.72
    )
 
 (1)
    
    When an entity has a net loss from continuing operations adjusted for preferred
dividends, SFAS No. 128, Earnings per Share, prohibits the inclusion of potential
common shares in the computation of diluted per-share amounts. Accordingly, we have
utilized the basic shares outstanding amount to calculate both basic and diluted loss
per share for the year ended December 31, 2006.  F-61




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
 Note 19Commitments and Contingencies
 Legal Proceedings
  Gas Index Pricing Litigation.
 
    
    In February 2007, the Tennessee state court dismissed a class action on defendants
motion. Plaintiffs appealed and in November 2007, the case was argued to the appellate
court. In October 2008, the appellate court reversed the dismissal and remanded the case
for further proceedings. In December 2008, the defendants applied for leave to appeal
the appellate court decision to the Tennessee Supreme Court.
    
    In February 2008, the United States District Court in Las Vegas, Nevada granted
defendants motion for summary judgment in a Colorado class action, which had been
transferred to Nevada through the multi-district litigation management process, thereby
dismissing the case and all of plaintiffs claims. Plaintiffs moved for reconsideration
and the court ordered additional briefing on plaintiffs declaratory judgment claims. In
January 2009, the court dismissed plaintiffs remaining declaratory judgment claims. The
decision is subject to appeal.
    
    The remaining six cases, three of which seek class certification, are also pending in
Nevada federal court. Five of the cases were transferred through the multi-district
litigation management process from other states, including Kansas, Wisconsin, Missouri
and Illinois. All of the cases contain similar claims that individually and in
conjunction with other energy companies, we engaged in an illegal scheme to inflate
natural gas prices by providing false information to natural gas index publications. The
complaints rely heavily on prior FERC and CFTC investigations into and reports concerning
index manipulation in the energy industry. The lawsuits seek actual and punitive
damages, restitution and/or expenses, and are currently in the discovery phase.
  Nevada Power Arbitration.
   F-62




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 New York Attorney General Subpoena.
 Cooling Water Intake Permits.
 Riverkeeper, Inc. v. EPA
  
    
    Danskammer SPDES Permit  In January 2005, the New York State Department of
Environmental Conservation (NYSDEC) issued a Draft SPDES Permit renewal for the
Danskammer plant. Three environmental groups sought to impose a permit requirement that
the Danskammer plant install a closed cycle cooling system. A formal evidentiary hearing
was held and the revised Danskammer SPDES Permit was issued on June 1, 2006 with
conditions generally favorable to us. While the revised Danskammer SPDES Permit does not
require installation of a closed cycle cooling system, it does require aquatic organism
mortality reductions resulting from NYSDECs determination of BTA requirements under its
regulations. The petitioners appealed and on September 19, 2008, the Appellate Division
issued its Memorandum and Judgment confirming the determination of NYSDEC in issuing the
revised Danskammer SPDES Permit and dismissed the appeal. Both the Third Department and
the New York Court of Appeals have denied petitions for leave to appeal.
    
    Roseton SPDES Permit  In April 2005, the NYSDEC issued a Draft SPDES Permit renewal
for the Roseton plant. The Draft Roseton SPDES Permit would require the facility to
actively manage its water intake to substantially reduce mortality of aquatic organisms.
In July 2005, a public hearing was held to receive comments on the Draft Roseton SPDES
Permit. Three environmental organizations filed petitions for party status in the permit
renewal proceeding. The petitioners are seeking to impose a permit requirement that the
Roseton plant install a closed cycle cooling system. In September 2006, the
administrative law judge issued a ruling admitting the petitioners to party status and
setting forth the issues to be adjudicated in the permit renewal hearing. Various
holdings in the ruling have been appealed to the Commissioner of NYSDEC by the
petitioners, NYSDEC staff and us. We expect that the adjudicatory hearing on the Draft
Roseton SPDES Permit will begin in 2009. We believe that the petitioners claims lack
merit and we plan to oppose those claims vigorously.
  F-63




---



##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 
    
    Moss Landing NPDES Permit  The California Regional Water Quality Control Board
(Water Board) issued an NPDES permit for the Moss Landing Power Plant in 2000 in
connection with modernization of the plant. A local environmental group sought review of
the permit contending that the once through seawater-cooling system at Moss Landing
should be replaced with a closed cycle cooling system to meet the BTA requirements.
Following an initial remand from the courts, the Water Board affirmed its BTA finding.
The Water Boards decision was affirmed by the Superior Court in 2004 and by the Court of
Appeals in 2007. The petitioners filed a Petition for Review by the Supreme Court of
California, which was granted in March 2008, with further action deferred pending
disposition of petitions for certiorari in the U.S. Supreme Court regarding the Phase II
Rule. We believe that petitioners claims lack merit and we plan to oppose those claims
vigorously.
  Native Village of Kivalina and City of Kivalina v. ExxonMobil Corporation, et al. 2
 Ordinary Course Litigation.
 Other Commitments and Contingencies
  Purchase Obligations .
 Transmission Obligation.
 Interconnection Obligations.
  F-64




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Consent Decree.
 Other Minimum Commitments.
     Guarantees and Indemnifications
   F-65




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 West Coast Power Indemnities.
 Targa Indemnities.
 Illinois Power Indemnities.
 Other Indemnities.
  F-66




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Note 20Capital Stock
   Preferred Stock.
 Common Stock.
  
    
    the holders of Class B common stock vote as a separate class for the election of up to
three of Dynegys directors, while the holders of Class A common stock vote as a separate
class for the remaining directors;
 
    
    any amendment to the provisions of Dynegys Amended and Restated Certificate of
Incorporation addressing the voting rights of holders of Class A and Class B common stock
or to Section 7 of Article III or Article X of its Bylaws requires the affirmative vote
of a majority of the outstanding shares of Class B common stock voting as a separate
class, and the affirmative vote of a majority of the shares of common stock, voting
together as a single class, except that no such stockholder approval is required with
respect to an amendment to Section 7 of Article III or Article X of Dynegys Amended and
Restated Bylaws if such amendment is approved by a majority of the Class B Directors
present at a meeting where such amendment is considered and by a majority of all Dynegy
directors; and
 
    
    any agreement of merger or consolidation if a party to such agreement is a member of
the LS Control Group or an affiliate of such group requires the affirmative vote of a
majority of the shares of Class A common stock outstanding, voting as a separate class,
and the affirmative vote of a majority of all shares of common stock outstanding, voting
together as a single class.
      F-67




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Class B Common Stock
    
    
    Class B Common StockClass A Common Stock
    
    
    held by CUSA
    
    
    held by LS PowerShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount(in millions)December 31, 2005
    
    
    305
    
    
    $
    2,949
    
    
    
    97
    
    
    $
    1,006
    
    
    
    
    
    
    $
    Options exercised
    
    
    3
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    401(k) plan and profit sharing
    
    
    1
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity issuance
    
    
    40
    
    
    
    185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity conversion
    
    
    54
    
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    December 31, 2006
    
    
    403
    
    
    $
    3,367
    
    
    
    97
    
    
    $
    1,006
    
    
    
    
    
    
    $
    Options exercised
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    401(k) plan and profit sharing
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    LS Power Business Combination:Conversion of Chevron Class B
shares to Class A shares
    
    
    97
    
    
    
    1,006
    
    
    
    (97
    )
    
    
    (1,006
    )
    
    
    
    
    
    
    Conversion from Illinois entity to
Delaware entity
    
    
    
    
    
    
    (4,370
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of LS Power Class B shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    340
    
    
    
    3December 31, 2007
    
    
    503
    
    
    $
    5
    
    
    
    
    
    
    $
    
    
    
    
    340
    
    
    $
    3Options exercised
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    401(k) plan and profit sharing
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    December 31, 2008
    
    
    506
    
    
    $
    5
    
    
    
    
    
    
    $
    
    
    
    
    340
    
    
    $
    3
 Treasury Stock .
 Stock Award Plans.
 
    
    NGC Plan.Created early in Dynegys history and revised prior to Dynegy becoming a
publicly traded company in 1996, this plan provided for the issuance of 13,651,802
authorized shares, had a 10-year term, and expired in May 2006. All option grants are
vested.
 
    
    Employee Equity Plan.This plan is the only plan under which Dynegy granted options
below the fair market value of its Class A common stock on the date of grant. This plan
provided for the issuance of 20,358,802 authorized shares and expired in May 2002.
Grants under this plan vested on the fifth anniversary from the date of the grant. All
option grants are vested.
 
    
    Illinova Plan.Adopted by Illinova prior to the merger with Dynegy, this plan
provided for the issuance of 3,000,000 authorized shares and expired upon the merger date
in February 2000. All option grants are vested.
 
    
    Extant Plan.Adopted by Extant prior to its acquisition by Dynegy, this plan provided
for the issuance of 202,577 authorized shares and expired in September 2000. Grants from
this plan vested at 25 percent per year. All option grants are vested.
 
    
    UK Plan.This plan provided for the issuance of 276,000 authorized shares and has
been terminated. All option grants are vested.
  F-68




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 
    
    Dynegy 1999 Long-Term Incentive Plan (LTIP).This annual compensation plan provides
for the issuance of 6,900,000 authorized shares, has a 10-year term and expires in 2009.
All option grants are vested.
 
    
    Dynegy 2000 LTIP.This annual compensation plan, created for all employees upon
Illinovas merger with us, provides for the issuance of 10,000,000 authorized shares, has
a 10-year term and expires in June 2009. Grants from this plan vest in equal annual
installments over a three-year period.
 
    
    Dynegy 2001 Non-Executive LTIP.This plan is a broad-based plan and provides for the
issuance of 10,000,000 authorized shares, has a ten-year term and expires in September
2011. Grants from this plan vest in equal annual installments over a three-year period.
 
    
    Dynegy 2002 LTIP.This annual compensation plan provides for the issuance of
10,000,000 authorized shares, has a 10-year term and expires in May 2012. Grants from
this plan vest in equal annual installments over a three-year period.
       F-69




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   Year Ended December 31,2008
    
    
    2007
    
    
    2006Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    Price(options in thousands)Outstanding at beginning of period
    
    
    8,420
    
    
    $
    12.60
    
    
    
    7,361
    
    
    $
    12.63
    
    
    
    9,314
    
    
    $
    12.66Granted
    
    
    1,565
    
    
    $
    7.48
    
    
    
    2,136
    
    
    $
    9.67
    
    
    
    3,268
    
    
    $
    4.88Exercised
    
    
    (555
    )
    
    $
    4.03
    
    
    
    (872
    )
    
    $
    4.29
    
    
    
    (1,560
    )
    
    $
    3.46Cancelled or expired
    
    
    (614
    )
    
    $
    16.88
    
    
    
    (205
    )
    
    $
    18.60
    
    
    
    (3,661
    )
    
    $
    9.68Outstanding at end of period
    
    
    8,816
    
    
    $
    11.93
    
    
    
    8,420
    
    
    $
    12.60
    
    
    
    7,361
    
    
    $
    12.63Vested and unvested expected to vest
    
    
    8,702
    
    
    $
    11.98
    
    
    
    8,137
    
    
    $
    12.70
    
    
    
    6,898
    
    
    $
    13.16Exercisable at end of period
    
    
    5,878
    
    
    $
    13.64
    
    
    
    6,305
    
    
    $
    13.59
    
    
    
    3,774
    
    
    $
    20.07
 Year Ended December 31, 2008Weighted Average Remaining
    
    
    Aggregate IntrinsicContractual Life
    
    
    Value(in years)
    
    
    (in millions)Outstanding at end of period
    
    
    6.22
    
    
    $
    0.04Vested and unvested expected to vest
    
    
    6.18
    
    
    $
    0.04Exercisable at end of period
    
    
    5.03
    
    
    $
    0.04
   F-70




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Options Outstanding
    
    
    Options ExercisableNumber of
    
    
    Weighted
    
    
    
    
    
    
    Number ofOptions
    
    
    Average
    
    
    
    
    
    
    OptionsOutstanding at
    
    
    Remaining
    
    
    Weighted
    
    
    Exercisable at
    
    
    WeightedDecember 31,
    
    
    Contractual
    
    
    Average
    
    
    December 31,
    
    
    AverageRange of Exercise Prices
    
    2008
    
    
    Life (Years)
    
    
    Exercise Price
    
    
    2008
    
    
    Exercise Price(options in thousands)$1.77$4.48
    
    
    658
    
    
    
    4.75
    
    
    $
    3.68
    
    
    
    658
    
    
    $
    3.68$4.88
    
    
    2,402
    
    
    
    7.21
    
    
    $
    4.88
    
    
    
    2,402
    
    
    $
    4.88$7.02
    
    
    12
    
    
    
    0.38
    
    
    $
    7.02
    
    
    
    12
    
    
    $
    7.02$7.48
    
    
    1,552
    
    
    
    9.18
    
    
    $
    7.48
    
    
    
    
    
    
    $
    $8.70
    
    
    9
    
    
    
    8.70
    
    
    $
    8.70
    
    
    
    3
    
    
    $
    8.70$9.67
    
    
    2,070
    
    
    
    7.87
    
    
    $
    9.67
    
    
    
    695
    
    
    $
    9.67$10.17$23.85
    
    
    1,476
    
    
    
    1.68
    
    
    $
    20.64
    
    
    
    1,471
    
    
    $
    20.68$28.47$50.63
    
    
    620
    
    
    
    1.96
    
    
    $
    44.90
    
    
    
    620
    
    
    $
    44.90$52.50
    
    
    5
    
    
    
    1.70
    
    
    $
    52.50
    
    
    
    5
    
    
    $
    52.50$56.98
    
    
    12
    
    
    
    0.38
    
    
    $
    56.98
    
    
    
    12
    
    
    $
    56.988,816
    
    
    
    
    
    
    
    
    
    
    
    5,878
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Dividends
    
    
    
    
    
    
    
    
    
    
    Expected volatility (historical)
    
    
    45.07
    %
    
    
    45.60
    %
    
    
    48.8
    %Risk-free interest rate
    
    
    3.80
    %
    
    
    4.9
    %
    
    
    5.1
    %Expected option life
    
    6 Years
    
    
    6 Years
    
    
    6 Years
    F-71




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Year Ended December 31,2008WeightedAverageGrant Date2008
    
    
    Fair Value
    
    
    2007
    
    
    2006(restricted stock shares in thousands)Outstanding at beginning of period
    
    
    1,552
    
    
    $
    9.67
    
    
    
    2,114
    
    
    
    1,239Granted
    
    
    1,445
    (1)
    
    $
    7.48
    
    
    
    1,643
    (2)
    
    
    1,311
    (3)Vested
    
    
    (367
    )
    
    $
    9.53
    
    
    
    (2,113
    )
    
    
    (251
    )Cancelled or expired
    
    
    (85
    )
    
    $
    8.69
    
    
    
    (92
    )
    
    
    (185
    )Outstanding at end of period
    
    
    2,545
    
    
    $
    8.48
    
    
    
    1,552
    
    
    
    2,114
 
 (1)
    
    We awarded 1,445,061 shares of restricted stock in March 2008. The closing stock price
was $7.48 on the date of the award.(2)
    
    We awarded 1,639,088 shares, 1,967 shares and 2,299 shares of restricted stock in April
2007, May 2007 and September 2007, respectively. The closing stock prices were $9.67,
$10.17 and $8.70, respectively, on the dates of the awards.(3)
    
    We awarded 1,311,149 shares of restricted stock in March 2006. The closing stock price
was $4.88 on the date of the award.  Note 21Employee Compensation, Savings and Pension Plans
  Short-Term Incentive Plan.
 4 01(k) Savings Plans.
 
    
    Dynegy Inc.401(k)Savings Plan.This plan and the related trust fund are established
and maintained for the exclusive benefit of participating employees in the United States.
Generally, all employees of designated Dynegy subsidiaries are eligible to participate
in the plan. Employee pre-tax and Roth contributions to the plan are matched by the
company at 100 percent, up to a maximum of five percent of base pay, subject to IRS
limitations. Vesting in company contributions is based on years of service at 25 percent
per full year of service. However, effective January 1, 2009, generally, vesting in
company contributions is based on years of service at 50 percent per full year of
service. The Plan also allows for a discretionary contribution to eligible employee
accounts for each plan year, subject to the sole discretion of the Compensation and Human
Resources Committee of the Board of Directors. Matching and discretionary contributions,
if any, are allocated in the form of units in the Dynegy common stock fund. During the
years ended December 31, 2008, 2007 and 2006, we issued approximately 0.8 million, 0.3
million and 0.3 million shares, respectively, of Dynegys Class A common stock in the
form of matching contributions to fund the plan. No discretionary contributions were made for any of the
years in the three-year period ended December 31, 2008.
  F-72




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 
    
    Dynegy Midwest Generation, Inc. 401(K) Savings Plan (formerly the Illinois Power
Company Incentive Savings Plan)and Dynegy Midwest Generation, Inc. 401(K) Savings Plan
for Employees Covered Under a Collective Bargaining Agreement (formerly the Illinois
Power Company Incentive Savings Plan for Employees Covered Under A Collective Bargaining
Agreement).We match 50 percent of employee pre-tax and Roth contributions to the plans,
up to a maximum of 6 percent of compensation, subject to IRS limitations. Employees are
immediately 100 percent vested in all contributions. The Plan also provides for an annual
discretionary contribution to eligible employee accounts for a plan year, subject to the
sole discretion of the Compensation and Human Resources Committee of the Board of
Directors. Matching contributions and discretionary contributions, if any, to the plans
are initially allocated in the form of units in the Dynegy common stock fund. During the
years ended December 31, 2008, 2007 and 2006, we issued 0.3 million, 0.1 million and 0.2
million shares, respectively, of Dynegys Class A common stock in the form of matching
contributions to the plans. No discretionary contributions were made for any of the years
in the three-year period ended December 31, 2008.
 
    
    Dynegy Northeast Generation, Inc. Savings Incentive Plan.Under this plan we match 50
percent of employee pre-tax contributions up to six percent of base salary for union
employees and 50 percent of employee contributions up to eight percent of base salary for
non-union employees, in each case subject to IRS limitations. Employees are immediately
100 percent vested in our contributions. Matching contributions to this plan are made in
cash and invested according to the employees investment discretion.
  Pension and Other Post-Retirement Benefits
  Restoration Plans.
  F-73




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Obligations and Funded Status.
 Pension Benefits
    
    
    Other Benefits2008
    
    
    2007
    
    
    2008
    
    
    2007(in millions)Projected benefit obligation, beginning of the year
    
    $
    182
    
    
    $
    182
    
    
    $
    58
    
    
    $
    61Service cost
    
    
    11
    
    
    
    10
    
    
    
    3
    
    
    
    3Interest cost
    
    
    11
    
    
    
    10
    
    
    
    4
    
    
    
    4Actuarial (gain) loss
    
    
    17
    
    
    
    (15
    )
    
    
    (2
    )
    
    
    (9
    )Benefits paid
    
    
    (4
    )
    
    
    (5
    )
    
    
    (1
    )
    
    
    (1
    )Plan amendments
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    Projected benefit obligation, end of the year
    
    $
    217
    
    
    $
    182
    
    
    $
    61
    
    
    $
    58Fair value of plan assets, beginning of the year
    
    $
    154
    
    
    $
    135
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    (44
    )
    
    
    10
    
    
    
    
    
    
    
    Employer contributions
    
    
    29
    
    
    
    14
    
    
    
    1
    
    
    
    1Benefits paid
    
    
    (4
    )
    
    
    (5
    )
    
    
    (1
    )
    
    
    (1
    )Fair value of plan assets, end of the year
    
    $
    135
    
    
    $
    154
    
    
    $
    
    
    
    $
    Funded status
    
    $
    (82
    )
    
    $
    (28
    )
    
    $
    (61
    )
    
    $
    (58
    )
  December 31,2008
    
    
    2007(in millions)Projected benefit obligation
    
    $
    217
    
    
    $
    143Accumulated benefit obligation
    
    
    187
    
    
    
    125Fair value of plan assets
    
    
    135
    
    
    
    120
   2008
    
    
    2007
    
    
    2006(in millions)Change in minimum liability included in other
comprehensive income (loss) (net of tax
benefit (expense) of zero, zero million and
($5) million, respectively)
    
    $
    
    
    
    $
    
    
    
    $
    10
  F-74




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Year Ended December 31,2008
    
    
    2007Pension
    
    
    Other
    
    
    Pension
    
    
    OtherBenefits
    
    
    Benefits
    
    
    Benefits
    
    
    Benefits(in millions)Prior service cost
    
    $
    5
    
    
    $
    (1
    )
    
    $
    6
    
    
    $
    Actuarial loss
    
    
    95
    
    
    
    11
    
    
    
    22
    
    
    
    13Net amount recognized
    
    $
    100
    
    
    $
    10
    
    
    $
    28
    
    
    $
    13
  Year Ended December 31,2008
    
    
    2007Pension
    
    
    Other
    
    
    Pension
    
    
    OtherBenefits
    
    
    Benefits
    
    
    Benefits
    
    
    Benefits(in millions)Current liabilities
    
    $
    
    
    
    $
    (1
    )
    
    $
    
    
    
    $
    (1
    )Noncurrent liabilities
    
    
    (82
    )
    
    
    (60
    )
    
    
    (28
    )
    
    
    (57
    )Net amount recognized
    
    $
    (82
    )
    
    $
    (61
    )
    
    $
    (28
    )
    
    $
    (58
    )
  Components of Net Periodic Benefit Cost.
 Pension Benefits
    
    
    Other Benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006(in millions)Service cost benefits earned during period
    
    $
    11
    
    
    $
    10
    
    
    $
    9
    
    
    $
    3
    
    
    $
    3
    
    
    $
    3Interest cost on projected benefit obligation
    
    
    11
    
    
    
    10
    
    
    
    10
    
    
    
    3
    
    
    
    4
    
    
    
    3Expected return on plan assets
    
    
    (13
    )
    
    
    (11
    )
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service costs
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Recognized net actuarial loss
    
    
    
    
    
    
    1
    
    
    
    3
    
    
    
    1
    
    
    
    1
    
    
    
    1Net periodic benefit cost
    
    $
    10
    
    
    $
    11
    
    
    $
    13
    
    
    $
    7
    
    
    $
    8
    
    
    $
    7Additional cost due to curtailment
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Total net periodic benefit cost
    
    $
    10
    
    
    $
    11
    
    
    $
    16
    
    
    $
    7
    
    
    $
    8
    
    
    $
    7
  F-75




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Assumptions.
 Pension Benefits
    
    
    Other BenefitsDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Discount rate (1)
    
    
    6.12
    %
    
    
    6.46
    %
    
    
    5.93
    %
    
    
    6.48
    %Rate of compensation increase
    
    
    4.50
    %
    
    
    4.50
    %
    
    
    4.50
    %
    
    
    4.50
    %
 
 (1)
    
    We utilized a yield curve approach to determine the discount. Projected
benefit payments for the plans were matched against the discount rates in the yield
curve.  Pension Benefits
    
    
    Other BenefitsYear Ended December 31,
    
    
    Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Discount rate
    
    
    6.46
    %
    
    
    5.87
    %
    
    
    5.52
    %
    
    
    6.48
    %
    
    
    5.90
    %
    
    
    5.53
    %Expected return on plan assets
    
    
    8.25
    %
    
    
    8.25
    %
    
    
    8.25
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ARate of compensation increase
    
    
    4.50
    %
    
    
    4.50
    %
    
    
    4.50
    %
    
    
    4.50
    %
    
    
    4.50
    %
    
    
    4.50
    %
   December 31,2008
    
    
    2007Health care cost trend rate assumed for next year
    
    
    7.83
    %
    
    
    8.99
    %Ultimate trend rate
    
    
    4.90
    %
    
    
    5.00
    %Year that the rate reaches the ultimate trend rate
    
    
    2060
    
    
    
    2016
  Increase
    
    
    Decrease(in millions)Aggregate impact on service cost and interest cost
    
    $
    1
    
    
    $
    (1
    )Impact on accumulated post-retirement benefit obligation
    
    $
    11
    
    
    $
    (9
    )
 Plan Assets.
   F-76




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  December 31,2008
    
    
    2007Equity securities
    
    
    65
    %
    
    
    64
    %Debt securities
    
    
    35
    %
    
    
    36
    %Total
    
    
    100
    %
    
    
    100
    %
  Contributions and Payments.
  Pension Benefits
    
    
    Other Benefits(in millions)2009
    
    $
    10
    
    
    $
    12010
    
    
    10
    
    
    
    22011
    
    
    10
    
    
    
    22012
    
    
    10
    
    
    
    22013
    
    
    11
    
    
    
    32014  2018
    
    
    78
    
    
    
    19
 Note 22Segment Information
     F-77




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Dynegys Segment Data as of and for the Year Ended December 31, 2008
(in millions)
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    TotalUnaffiliated revenues:Domestic
    
    $
    1,623
    
    
    $
    925
    
    
    $
    890
    
    
    $
    (5
    )
    
    $
    3,433Other
    
    
    
    
    
    
    
    
    
    
    116
    
    
    
    
    
    
    
    116Total revenues
    
    $
    1,623
    
    
    $
    925
    
    
    $
    1,006
    
    
    $
    (5
    )
    
    $
    3,549Depreciation and amortization
    
    $
    (206
    )
    
    $
    (101
    )
    
    $
    (54
    )
    
    $
    (10
    )
    
    $
    (371
    )Impairment and other charges
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    (47
    )Operating income (loss)
    
    $
    684
    
    
    $
    90
    
    
    $
    67
    
    
    $
    (132
    )
    
    $
    709Losses from unconsolidated
investments
    
    
    
    
    
    
    (40
    )
    
    
    
    
    
    
    (83
    )
    
    
    (123
    )Other items, net
    
    
    3
    
    
    
    5
    
    
    
    6
    
    
    
    73
    
    
    
    87Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (427
    )Income from continuing
operations before taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    246Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )Income from continuing
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171Income from discontinued
operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    174Identifiable assets:Domestic
    
    $
    6,763
    
    
    $
    3,410
    
    
    $
    2,534
    
    
    $
    1,494
    
    
    $
    14,201Other
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    7
    
    
    
    12Total
    
    $
    6,763
    
    
    $
    3,410
    
    
    $
    2,539
    
    
    $
    1,501
    
    
    $
    14,213Unconsolidated investments
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    15
    
    
    $
    15Capital expenditures and
investments in unconsolidated
affiliates
    
    $
    (530
    )
    
    $
    (29
    )
    
    $
    (36
    )
    
    $
    (32
    )
    
    $
    (627
    )
  F-78




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Dynegys Segment Data as of and for the Year Ended December 31, 2007
(in millions)
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    TotalUnaffiliated revenues:Domestic
    
    $
    1,325
    
    
    $
    689
    
    
    $
    920
    
    
    $
    12
    
    
    $
    2,946Other
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    1
    
    
    
    157Total revenues
    
    $
    1,325
    
    
    $
    689
    
    
    $
    1,076
    
    
    $
    13
    
    
    $
    3,103Depreciation and amortization
    
    $
    (194
    )
    
    $
    (73
    )
    
    $
    (45
    )
    
    $
    (13
    )
    
    $
    (325
    )Operating income (loss)
    
    $
    495
    
    
    $
    130
    
    
    $
    164
    
    
    $
    (184
    )
    
    $
    605Earnings (losses) from
unconsolidated investments
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    (9
    )
    
    
    (3
    )Other items, net
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    49Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (384
    )Income from continuingoperations before taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151
    )Income from continuing
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116Income from discontinued
operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    264Identifiable assets:Domestic
    
    $
    6,507
    
    
    $
    3,251
    
    
    $
    2,352
    
    
    $
    1,075
    
    
    $
    13,185Other
    
    
    
    
    
    
    5
    
    
    
    12
    
    
    
    19
    
    
    
    36Total
    
    $
    6,507
    
    
    $
    3,256
    
    
    $
    2,364
    
    
    $
    1,094
    
    
    $
    13,221Unconsolidated investments
    
    $
    
    
    
    $
    18
    
    
    $
    
    
    
    $
    61
    
    
    $
    79Capital expenditures and
investments in unconsolidated
affiliate
    
    $
    (300
    )
    
    $
    (17
    )
    
    $
    (47
    )
    
    $
    (25
    )
    
    $
    (389
    )
  F-79




---



##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Dynegys Segment Data as of and for the Year Ended December 31, 2006
(in millions)
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    TotalUnaffiliated revenues:Domestic
    
    $
    969
    
    
    $
    87
    
    
    $
    501
    
    
    $
    66
    
    
    $
    1,623Other
    
    
    
    
    
    
    
    
    
    
    129
    
    
    
    18
    
    
    
    147969
    
    
    
    87
    
    
    
    630
    
    
    
    84
    
    
    
    1,770Intersegment revenues
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    21
    
    
    
    Total revenues
    
    $
    969
    
    
    $
    87
    
    
    $
    609
    
    
    $
    105
    
    
    $
    1,770Depreciation and amortization
    
    $
    (168
    )
    
    $
    (8
    )
    
    $
    (24
    )
    
    $
    (17
    )
    
    $
    (217
    )Impairment and other charges
    
    
    (110
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (119
    )Operating income (loss)
    
    $
    208
    
    
    $
    (2
    )
    
    $
    55
    
    
    $
    (156
    )
    
    $
    105Losses from unconsolidated
investments
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Other items, net
    
    
    2
    
    
    
    1
    
    
    
    9
    
    
    
    42
    
    
    
    54Interest expense and debt
conversion costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (631
    )Loss from continuing
operations before taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (473
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152Loss from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (321
    )Loss from discontinued
operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )Cumulative effect of change in
accounting principle, net of
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (333
    )Identifiable assets:Domestic
    
    $
    5,036
    
    
    $
    440
    
    
    $
    1,373
    
    
    $
    490
    
    
    $
    7,339Other
    
    
    
    
    
    
    5
    
    
    
    13
    
    
    
    180
    
    
    
    198Total
    
    $
    5,036
    
    
    $
    445
    
    
    $
    1,386
    
    
    $
    670
    
    
    $
    7,537Capital expenditures
    
    $
    (101
    )
    
    $
    (24
    )
    
    $
    (22
    )
    
    $
    (8
    )
    
    $
    (155
    )
  F-80




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  DHIs Segment Data as of and for the Year Ended December 31, 2008
(in millions)
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    TotalUnaffiliated revenues:Domestic
    
    $
    1,623
    
    
    $
    925
    
    
    $
    890
    
    
    $
    (5
    )
    
    $
    3,433Other
    
    
    
    
    
    
    
    
    
    
    116
    
    
    
    
    
    
    
    116Total revenues
    
    $
    1,623
    
    
    $
    925
    
    
    $
    1,006
    
    
    $
    (5
    )
    
    $
    3,549Depreciation and amortization
    
    $
    (206
    )
    
    $
    (101
    )
    
    $
    (54
    )
    
    $
    (10
    )
    
    $
    (371
    )Impairment and other charges
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    (47
    )Operating income (loss)
    
    $
    684
    
    
    $
    90
    
    
    $
    67
    
    
    $
    (132
    )
    
    $
    709Losses from unconsolidated
investments
    
    
    
    
    
    
    (40
    )
    
    
    
    
    
    
    
    
    
    
    (40
    )Other items, net
    
    
    3
    
    
    
    5
    
    
    
    6
    
    
    
    72
    
    
    
    86Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (427
    )Income from continuing
operations before taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    328Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (123
    )Income from continuing
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205Income from discontinued
operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    208Identifiable assets:Domestic
    
    $
    6,763
    
    
    $
    3,410
    
    
    $
    2,534
    
    
    $
    1,455
    
    
    $
    14,162Other
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    7
    
    
    
    12Total
    
    $
    6,763
    
    
    $
    3,410
    
    
    $
    2,539
    
    
    $
    1,462
    
    
    $
    14,174Capital expenditures
    
    $
    (530
    )
    
    $
    (29
    )
    
    $
    (36
    )
    
    $
    (16
    )
    
    $
    (611
    )
  F-81




---



##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 DHIs Segment Data as of and for the Year Ended December 31, 2007
(in millions)
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    TotalUnaffiliated revenues:Domestic
    
    $
    1,325
    
    
    $
    689
    
    
    $
    920
    
    
    $
    12
    
    
    $
    2,946Other
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    1
    
    
    
    157Total revenues
    
    $
    1,325
    
    
    $
    689
    
    
    $
    1,076
    
    
    $
    13
    
    
    $
    3,103Depreciation and amortization
    
    $
    (194
    )
    
    $
    (73
    )
    
    $
    (45
    )
    
    $
    (13
    )
    
    $
    (325
    )Operating income (loss)
    
    $
    495
    
    
    $
    130
    
    
    $
    164
    
    
    $
    (165
    )
    
    $
    624Earnings from unconsolidated
investments
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6Other items, net
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    46Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (384
    )Income from continuing
operations before taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116
    )Income from continuing
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176Income from discontinued
operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    324Identifiable assets:Domestic
    
    $
    6,507
    
    
    $
    3,256
    
    
    $
    2,352
    
    
    $
    973
    
    
    $
    13,088Other
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    7
    
    
    
    19Total
    
    $
    6,507
    
    
    $
    3,256
    
    
    $
    2,364
    
    
    $
    980
    
    
    $
    13,107Unconsolidated investments
    
    $
    
    
    
    $
    18
    
    
    $
    
    
    
    $
    
    
    
    $
    18Capital expenditures
    
    $
    (300
    )
    
    $
    (17
    )
    
    $
    (47
    )
    
    $
    (15
    )
    
    $
    (379
    )
  F-82




---



##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 DHIs Segment Data as of and for the Year Ended December 31, 2006
(in millions)
 Power GenerationGEN-MW
    
    
    GEN-WE
    
    
    GEN-NE
    
    
    Other
    
    
    TotalUnaffiliated revenues:Domestic
    
    $
    969
    
    
    $
    87
    
    
    $
    501
    
    
    $
    66
    
    
    $
    1,623Other
    
    
    
    
    
    
    
    
    
    
    129
    
    
    
    18
    
    
    
    147969
    
    
    
    87
    
    
    
    630
    
    
    
    84
    
    
    
    1,770Intersegment revenues
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    21
    
    
    
    Total revenues
    
    $
    969
    
    
    $
    87
    
    
    $
    609
    
    
    $
    105
    
    
    $
    1,770Depreciation and amortization
    
    $
    (168
    )
    
    $
    (8
    )
    
    $
    (24
    )
    
    $
    (17
    )
    
    $
    (217
    )Impairment and other charges
    
    
    (110
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (119
    )Operating income (loss)
    
    $
    208
    
    
    $
    (2
    )
    
    $
    55
    
    
    $
    (153
    )
    
    $
    108Losses from unconsolidated
investments
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Other items, net
    
    
    2
    
    
    
    1
    
    
    
    9
    
    
    
    39
    
    
    
    51Interest expense and debt
conversion costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (579
    )Loss from continuing
operations before taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (421
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125Loss from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (296
    )Loss from discontinued
operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (308
    )Identifiable assets:Domestic
    
    $
    5,038
    
    
    $
    440
    
    
    $
    1,373
    
    
    $
    1,215
    
    
    $
    8,066Other
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    57
    
    
    
    70Total
    
    $
    5,038
    
    
    $
    440
    
    
    $
    1,386
    
    
    $
    1,272
    
    
    $
    8,136Capital expenditures
    
    $
    (101
    )
    
    $
    (24
    )
    
    $
    (22
    )
    
    $
    (8
    )
    
    $
    (155
    )
  F-83




---



##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Note 23Quarterly Financial Information (Unaudited)
  Quarter EndedMarch
    
    
    June
    
    
    September
    
    
    December2008
    
    
    2008
    
    
    2008
    
    
    2008(in millions, except per share data)Revenues
    
    $
    545
    
    
    $
    323
    
    
    $
    1,886
    
    
    $
    795Operating income (loss)
    
    
    (150
    )
    
    
    (364
    )
    
    
    1,116
    
    
    
    107Net income (loss) before
cumulative effect of
change in accounting
principles
    
    
    (152
    )
    
    
    (272
    )
    
    
    605
    (1)
    
    
    (7
    )(2)Net income (loss)
    
    
    (152
    )
    
    
    (272
    )
    
    
    605
    (1)
    
    
    (7
    )(2)Net income (loss) per share
    
    $
    (0.18
    )
    
    $
    (0.32
    )
    
    $
    0.72
    (1)
    
    $
    (0.01
    )(2)
 
 (1)
    
    Includes a gain on the sale of the Rolling Hills power generation facility of $56
million. Please read Note 4Dispositions, Contract Terminations and Discontinued
OperationsDispositions and Contract TerminationsRolling Hills for further information.(2)
    
    Includes an impairment of our Heard County power generation facility of $47 million.
Please read Note 5Impairment ChargesAsset Impairments for further
information. Includes a loss on the dissolution of DLS Power Development of $47 million
and an impairment of our investment in DLS Power Development of $24 million. Please read
Note 12Variable Interest EntitiesDLS Power Holdings and DLS Power Development for further
information. Also includes translation gains related to the substantial liquidation of a
foreign entity of $24 million. Quarter EndedMarch
    
    
    June
    
    
    September
    
    
    December2007
    
    
    2007
    
    
    2007
    
    
    2007(in millions, except per share data)Revenues
    
    $
    505
    
    
    $
    828
    
    
    $
    1,046
    
    
    $
    724Operating income
    
    
    81
    
    
    
    182
    
    
    
    247
    
    
    
    95Net income (loss) before
cumulative effect of
change in accounting
principles
    
    
    14
    
    
    
    76
    (1)
    
    
    220
    (2)
    
    
    (46
    )Net income (loss)
    
    
    14
    
    
    
    76
    (1)
    
    
    220
    (2)
    
    
    (46
    )(3)Net income (loss) per
share before cumulative
effect of change in
accounting principles
    
    $
    0.03
    
    
    $
    0.09
    (1)
    
    $
    0.26
    (2)
    
    $
    (0.06
    )(3)Net income (loss) per share
    
    $
    0.03
    
    
    $
    0.09
    (1)
    
    $
    0.26
    (2)
    
    $
    (0.06
    )(3)
 
 (1)
    
    Includes a gain related to a change in the fair value of interest rate swaps, net of
minority interest of $30 million and a gain related to the settlement of the Kendall
tolling arrangement of $31 million.(2)
    
    Includes a gain on the sale of the CoGen Lyondell power generation facility of $210
million. Please read Note 4Dispositions, Contract Terminations and Discontinued
OperationsGEN-WE Discontinued OperationsCoGen Lyondell for further information.(3)
    
    Includes tax expense resulting from an increase in Dynegys estimated state tax rate
of approximately $50 million. Also includes a gain related to the sale of a portion of
our interest in the Plum Point Project of $39 million.  F-84




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Quarter EndedMarch
    
    
    June
    
    
    September
    
    
    December2008
    
    
    2008
    
    
    2008
    
    
    2008(in millions, except per share data)Revenues
    
    $
    545
    
    
    $
    323
    
    
    $
    1,886
    
    
    $
    795Operating income (loss)
    
    
    (150
    )
    
    
    (364
    )
    
    
    1,116
    
    
    
    107Net income (loss)
before cumulative
effect of change in
accounting principles
    
    
    (153
    )
    
    
    (269
    )
    
    
    606
    (1)
    
    
    24
    (2)Net income (loss)
    
    
    (153
    )
    
    
    (269
    )
    
    
    606
    (1)
    
    
    24
    (2)
 
 (1)
    
    Includes a gain on the sale of the Rolling Hills power generation facility of $56
million. Please read Note 4Dispositions, Contract Terminations and Discontinued
OperationsDispositions and Contract TerminationsRolling Hills for further
information.(2)
    
    Includes an impairment of our Heard County power generation facility of $47
million. Please read Note 5Impairment ChargesAsset Impairments for
further information. Includes translation gains related to the substantial
liquidation of a foreign entity of $24 million.
 Quarter EndedMarch
    
    
    June
    
    
    September
    
    
    December2007
    
    
    2007
    
    
    2007
    
    
    2007(in millions, except per share data)Revenues
    
    $
    505
    
    
    $
    828
    
    
    $
    1,046
    
    
    $
    724Operating income
    
    
    98
    
    
    
    184
    
    
    
    247
    
    
    
    95Net income (loss)
before cumulative
effect of change in
accounting
principles
    
    
    22
    
    
    
    90
    (1)
    
    
    222
    (2)
    
    
    (10
    )(3)Net income (loss)
    
    
    22
    
    
    
    90
    (1)
    
    
    222
    (2)
    
    
    (10
    )(3)
 
 (1)
    
    Includes a gain related to a change in the fair value of interest rate swaps, net
of minority interest of $30 million and a gain related to the settlement of the Kendall
tolling arrangement of $31 million.(2)
    
    Includes a gain on the sale of the CoGen Lyondell power generation facility of $210
million. Please read Note 4Dispositions, Contract Terminations and Discontinued
OperationsGEN-WE Discontinued OperationsCoGen Lyondell for further information.(3)
    
    Includes tax expense resulting from an increase in DHIs estimated state tax rate
of approximately $25 million. Also includes a gain related to the sale of a portion of
our interest in the Plum Point Project of $39 million. Note 24Subsequent Events
     F-85




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 DEFINITIONS
  ANPR
    
    Advanced Notice of proposed rulemakingAPB
    
    Accounting Principles BoardAPIC
    
    Additional paid-in-capitalARB
    
    Accounting Research BulletinARO
    
    Asset retirement obligationBACT
    
    Best Available Control Technology (air)BART
    
    Best Available Retrofit TechnologyBTA
    
    Best technology available (water intake)CAA
    
    Clean Air ActCAIR
    
    Clean Air Interstate RuleCAMR
    
    Clean Air Mercury RuleCAISO
    
    The California Independent System OperatorCAVR
    
    The Clean Air Visibility RuleCERCLA
    
    The Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amendedCO2
    
    Carbon dioxideCOSO
    
    Committee of Sponsoring Organizations of the Treadway CommissionCRA
    
    Canada Revenue AuthorityCRM
    
    Our customer risk management business segmentDHI
    
    Dynegy Holdings Inc., Dynegys primary financing subsidiaryDMG
    
    Dynegy Midwest GenerationDMSLP
    
    Dynegy Midstream Services L.P.DMT
    
    Dynegy Marketing and TradeDNE
    
    Dynegy Northeast GenerationDPM
    
    Dynegy Power Marketing IncEAB
    
    The Environmental Appeals Board of the U.S. Environmental Protection AgencyEBITDA
    
    Earnings before interest, taxes, depreciation and amortizationEITF
    
    Emerging Issues Task ForceERISA
    
    The Employee Retirement Income Security Act of 1974, as amendedEWG
    
    Exempt Wholesale GeneratorFASB
    
    Financial Accounting Standards BoardFCM
    
    Forward Capacity MarketFERC
    
    Federal Energy Regulatory CommissionFIN
    
    FASB InterpretationFIP
    
    Federal Implementation PlanFSP
    
    FASB Staff PositionFTC
    
    U.S. Federal Trade CommissionFTR
    
    Financial Transmission RightsGAAP
    
    Generally Accepted Accounting Principles of the United States of AmericaGEN
    
    Our power generation businessGEN-MW
    
    Our power generation businessMidwest segmentGEN-NE
    
    Our power generation businessNortheast segmentGEN-SO
    
    Our power generation businessSouth segment, which was renamed GEN-WEGEN-WE
    
    Our power generation businessWest segmentGHG
    
    Greenhouse gasICAP
    
    Installed capacityICC
    
    Illinois Commerce CommissionIMA
    
    In-Market AvailabilityIRS
    
    Internal Revenue ServiceISO
    
    Independent System OperatorISO-NE
    
    Independent System OperatorNew EnglandLBH
    
    Lehman Brothers Holdings Inc.
  F-86




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##### Table of Contents



DYNEGY INC. and DYNEGY HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 LMP
    
    Locational Marginal PricingLNG
    
    Liquefied natural gasLPG
    
    Liquefied petroleum gasMACT
    
    Maximum Available Control TechnologyMISO
    
    Midwest Independent Transmission System OperatorMGGA
    
    Midwest Greenhouse Gas AccordMGGRP
    
    Midwestern Greenhouse Reduction ProgramMMBtu
    
    Millions of British thermal unitsMRTU
    
    Market Redesign and Technology UpgradeMW
    
    MegawattsMWh
    
    Megawatt hourNERC
    
    North American Electric Reliability CouncilNGL
    
    Our natural gas liquids business segmentNOL
    
    Net operating lossNOx
    
    Nitrogen oxideNYISO
    
    New York Independent System OperatorNYDEC
    
    New York Department of Environmental ConservationOCI
    
    Other Comprehensive IncomeOTC
    
    Over-the-counterPCAOB
    
    Public Company Accounting Oversight Board (United States)PJM
    
    PJM Interconnection, LLCPPA
    
    Power purchase agreementPPEA
    
    Plum Point Energy AssociatesPRB
    
    Powder River Basin coalPSD
    
    Prevention of Significant DeteriorationPURPA
    
    The Public Utility Regulatory Policies Act of 1978QF
    
    Qualifying FacilityRCRA
    
    The Resource Conservation and Recovery Act of 1976, as amendedRGGI
    
    Regional Greenhouse Gas InitiativeRMR
    
    Reliability Must RunRPM
    
    Reliability Pricing ModelRTO
    
    Regional Transmission OrganizationSAB
    
    SEC Staff Accounting BulletinSCEA
    
    Sandy Creek Energy Associates, LPSCH
    
    Sandy Creek Holdings, LLCSEC
    
    U.S. Securities and Exchange CommissionSERC
    
    Southeastern Electric Reliability CouncilSFAS
    
    Statement of Financial Accounting StandardsSIP
    
    State Implementation PlanSO2
    
    Sulfur dioxideSPE
    
    Special Purpose EntitySPDES
    
    State Pollutant Discharge Elimination SystemSPN
    
    Second Priority Senior Secured NotesTARP
    
    Troubled Assets Relief ProgramTCEQ
    
    Texas Commission on Environmental QualityU.S. EPA
    
    United States Environmental Protection AgencyVaR
    
    Value at RiskVIE
    
    Variable Interest EntityVLGC
    
    Very large gas carrierWAPA
    
    Western Area Power AdministrationWCI
    
    Western Climate InitiativeWECC
    
    Western Electricity Coordinating Council
  F-87




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##### Table of Contents



Schedule I
 DYNEGY INC.
 CONDENSED BALANCE SHEETS OF THE REGISTRANT
(in millions)
 December
    
    
    December31, 2008
    
    
    31, 2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    22
    
    
    $
    35Intercompany accounts receivable
    
    
    534
    
    
    
    1,756Short term investments
    
    
    1
    
    
    
    Deferred income taxes
    
    
    6
    
    
    
    45Total Current Assets
    
    
    563
    
    
    
    1,836Other AssetsInvestments in affiliates
    
    
    7,369
    
    
    
    6,101Unconsolidated investments
    
    
    15
    
    
    
    61Deferred income taxes
    
    
    
    
    
    
    6Total Assets
    
    $
    7,947
    
    
    $
    8,004LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    19
    
    
    $
    5Intercompany accounts payable
    
    
    2
    
    
    
    Other current liabilities
    
    
    1
    
    
    
    Total Current Liabilities
    
    
    22
    
    
    
    5Intercompany long-term debt
    
    
    2,244
    
    
    
    2,243Deferred income taxes
    
    
    1,166
    
    
    
    1,250Total Liabilities
    
    
    3,432
    
    
    
    3,498Commitments and Contingencies (Note 3)Stockholders EquityClass A Common Stock, $0.01 par value, 2,100,000,000 shares
authorized at December 31, 2008 and December 31, 2007;505,821,277
shares and 502,819,794 shares issued and outstanding at December
31, 2008 and December 31, 2007, respectively
    
    
    5
    
    
    
    5Class B Common Stock, $0.01 par value, 850,000,000 shares
authorized at December 31, 2008 and December 31, 2007; 340,000,000
shares issued and outstanding at December 31, 2008 and December
31, 2007, respectively
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    6,485
    
    
    
    6,463Subscriptions receivable
    
    
    (2
    )
    
    
    (5
    )Accumulated other comprehensive income (loss), net of tax
    
    
    (215
    )
    
    
    (25
    )Accumulated deficit
    
    
    (1,690
    )
    
    
    (1,864
    )Treasury stock, at cost, 2,568,286 shares and 2,449,259 shares at
December 31, 2008 and December 31, 2007, respectively
    
    
    (71
    )
    
    
    (71
    )Total Stockholders Equity
    
    
    4,515
    
    
    
    4,506Total Liabilities and Stockholders Equity
    
    $
    7,947
    
    
    $
    8,004
   F-88




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##### Table of Contents



Schedule I
 DYNEGY INC.
 CONDENSED STATEMENTS OF OPERATIONS OF THE REGISTRANT
(in millions)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Operating loss
    
    $
    
    
    
    $
    
    
    
    $
    Earnings (losses) from unconsolidated investments
    
    
    249
    
    
    
    503
    
    
    
    (452
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (6
    )Debt conversion costs
    
    
    
    
    
    
    
    
    
    
    (46
    )Other income and expense, net
    
    
    1
    
    
    
    3
    
    
    
    9Income (loss) before income taxes
    
    
    250
    
    
    
    506
    
    
    
    (495
    )Income tax (expense) benefit
    
    
    (76
    )
    
    
    (242
    )
    
    
    162Net income (loss)
    
    
    174
    
    
    
    264
    
    
    
    (333
    )Less: preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    9Net income (loss) applicable to common stockholders
    
    $
    174
    
    
    $
    264
    
    
    $
    (342
    )
   F-89




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##### Table of Contents



Schedule I
 DYNEGY INC.
 CONDENSED STATEMENTS OF CASH FLOWS OF THE REGISTRANT
(in millions)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Operating cash flow, exclusive of intercompany transactions
    
    $
    
    
    
    $
    8
    
    
    $
    14Intercompany transactions
    
    
    3
    
    
    
    46
    
    
    
    59Net cash provided by operating activities
    
    
    3
    
    
    
    54
    
    
    
    73CASH FLOWS FROM INVESTING ACTIVITIES:Unconsolidated investments
    
    
    (16
    )
    
    
    (10
    )
    
    
    Loans to DHI
    
    
    
    
    
    
    
    
    
    
    120Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (128
    )
    
    
    (8
    )Short term investments
    
    
    (2
    )
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    (18
    )
    
    
    (138
    )
    
    
    112CASH FLOWS FROM FINANCING ACTIVITIES:Debt conversion costs
    
    
    
    
    
    
    
    
    
    
    (46
    )Redemption of Series C Preferred
    
    
    
    
    
    
    
    
    
    
    (400
    )Proceeds from issuance of capital stock
    
    
    2
    
    
    
    4
    
    
    
    183Dividends and other distributions, net
    
    
    
    
    
    
    
    
    
    
    (17
    )Other financing, net
    
    
    
    
    
    
    (6
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    2
    
    
    
    (2
    )
    
    
    (280
    )Net decrease in cash and cash equivalents
    
    
    (13
    )
    
    
    (86
    )
    
    
    (95
    )Cash and cash equivalents, beginning of period
    
    
    35
    
    
    
    121
    
    
    
    216Cash and cash equivalents, end of period
    
    $
    22
    
    
    $
    35
    
    
    $
    121SUPPLEMENTAL CASH FLOW INFORMATIONInterest paid (net of amount capitalized)
    
    
    
    
    
    
    
    
    
    
    5Taxes paid (net of refunds)
    
    
    23
    
    
    
    48
    
    
    
    9SUPPLEMENTAL NONCASH FLOW INFORMATIONConversion of Convertible Subordinated Debentures due 2023
    
    
    
    
    
    
    
    
    
    
    225Contribution of Sandy Creek to DHI
    
    
    
    
    
    
    (16
    )
    
    
    
   F-90




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##### Table of Contents



Schedule I
 DYNEGY INC.
 NOTES TO REGISTRANTS FINANCIAL STATEMENTS
 Note 1Background and Basis of Presentation
   Note 2Commitments and Contingencies
    F-91




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##### Table of Contents



Schedule II
 DYNEGY INC.
 VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2008, 2007 and 2006
 Balance at
    
    
    Charged toBeginning of
    
    
    Costs and
    
    
    Charged to
    
    
    
    
    
    
    Balance at EndPeriod
    
    
    Expenses
    
    
    Other Accounts
    
    
    Deductions
    
    
    of Period(in millions)2008Allowance for doubtful accounts
    
    $
    20
    
    
    $
    4
    
    
    $
    (2
    )
    
    $
    
    
    
    $
    22Allowance for risk-management assets (1)
    
    
    11
    
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    Deferred tax asset valuation allowance
    
    
    62
    
    
    
    (2
    )
    
    
    
    
    
    
    (23
    )(6)
    
    
    372007Allowance for doubtful accounts
    
    $
    48
    
    
    $
    (3
    )
    
    $
    (21
    )(5)
    
    $
    (4
    )
    
    $
    20Allowance for risk-management assets (1)
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Deferred tax asset valuation allowance
    
    
    69
    
    
    
    (6
    )
    
    
    (1
    )
    
    
    
    
    
    
    622006Allowance for doubtful accounts
    
    $
    103
    
    
    $
    (35
    )(2)
    
    $
    43
    (3)
    
    $
    (63
    )(4)
    
    $
    48Allowance for risk-management assets (1)
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    Deferred tax asset valuation allowance
    
    
    70
    
    
    
    17
    
    
    
    
    
    
    
    (18
    )
    
    
    69
 
 (1)
    
    Changes in price and credit reserves related to risk-management assets are offset in the net
mark-to-market income accounts reported in revenues. In connection with adopting SFAS No. 157, Fair Value Measurement on January 1, 2008,
our price and credit reserves related to risk management assets were no longer considered allowances as they are included in the fair value measurement of our
derivative contracts.(2)
    
    Primarily represents the reversal of previously reserved receivables associated with a
foreign entity. Dynegy revised its estimate of the uncollectible portion of these
receivables. The charges are included in bad debt expense or discontinued operations,
depending on the nature of the underlying receivable, and are reflected on our consolidated
statements of operations.(3)
    
    Primarily represents the establishment of an allowance for doubtful accounts on a foreign
entity.(4)
    
    Primarily represents the write-off off an uncollectible receivable associated with a foreign
entity, which was previously reserved, as a result of a bankruptcy settlement. As a result,
Dynegy reduced its allowance for doubtful accounts and reduced the corresponding accounts
receivable.(5)
    
    Primarily represents a partial reversal of the allowance for doubtful accounts on a foreign
entity as a result of a bankruptcy settlement, as such amount will be collected.(6)
    
    Primarily represents the release of valuation allowance associated with foreign tax credits, which were previously reserved.  F-92




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##### Table of Contents



Schedule II
 DYNEGY HOLDINGS INC.
 VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2008, 2007 and 2006
 Balance at
    
    
    Charged to
    
    
    Charged toBeginning of
    
    
    Costs and
    
    
    Other
    
    
    
    
    
    
    Balance at EndPeriod
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions
    
    
    of Period(in millions)2008Allowance for doubtful accounts
    
    $
    15
    
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    20Allowance for risk-management assets (1)
    
    
    11
    
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    Deferred tax asset valuation allowance
    
    
    59
    
    
    
    (2
    )
    
    
    
    
    
    
    (20
    )(6)
    
    
    372007Allowance for doubtful accounts
    
    $
    48
    
    
    $
    (3
    )
    
    $
    (21
    )(5)
    
    $
    (9
    )
    
    $
    15Allowance for risk-management assets (1)
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Deferred tax asset valuation allowance
    
    
    66
    
    
    
    (6
    )
    
    
    (1
    )
    
    
    
    
    
    
    592006Allowance for doubtful accounts
    
    $
    103
    
    
    $
    (35
    )(2)
    
    $
    43
    (3)
    
    $
    (63
    )(4)
    
    $
    48Allowance for risk-management assets (1)
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    Deferred tax asset valuation allowance
    
    
    52
    
    
    
    4
    
    
    
    15
    
    
    
    (5
    )
    
    
    66
 
 (1)
    
    Changes in price and credit reserves related to risk-management assets are offset in the net
mark-to-market income accounts reported in revenues. In connection with adopting SFAS No. 157, Fair Value Measurements on January 1, 2008,
our price and credit reserves related to risk management assets were no longer considered allowances as they are included in the
fair value measurement of our derivative contracts.(2)
    
    Primarily represents the reversal of previously reserved receivables associated with a
foreign entity. DHI revised its estimate of the uncollectible portion of these receivables.
The charges are included in bad debt expense or discontinued operations, depending on the
nature of the underlying receivable, and are reflected on our consolidated statements of
operations.(3)
    
    Primarily represents the establishment of an allowance for doubtful accounts on a foreign
entity.(4)
    
    Primarily represents the write-off off an uncollectible receivable associated with a foreign
entity, which was previously reserved, as a result of a bankruptcy settlement. As a result,
DHI reduced its allowance for doubtful accounts and reduced the corresponding accounts
receivable.(5)
    
    Primarily represents a partial reversal of the allowance for doubtful accounts on a foreign
entity as a result of a bankruptcy settlement, as such amount will be collected.(6)
    
    Primarily represents the release of valuation allowance associated with foreign tax credits, which were previously reserved.  F-93




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    
    
    Description**10.14
    
    
    
    Dissolution Agreement by and between Dynegy Inc. and LS Power Associates, L.P.,
effective January 1, 2009.**10.18
    
    
    
    Amendment No. 3, dated as of February 13, 2009, to the Fifth Amended and Restated
Credit Agreement, dated as of April 2, 2007 , by and among Dynegy Holdings Inc., as
borrower, Dynegy Inc. and Dynegy Illinois Inc., as parent guarantors, the other
guarantors party thereto, the lenders party thereto and various other parties thereto.**10.22
    
    
    
    First Amendment to Credit Agreement by and among Plum Point Energy Associates, LLC,
as borrower, and the lenders and other parties thereto, effective December 13, 2007.**10.32
    
    
    
    Dynegy Northeast Generation, Inc. Savings Incentive Plan, as amended and restated,
effective January 1, 2009. **10.33
    
    
    
    Dynegy Inc. 401(k) Savings Plan, as amended and restated effective January 1, 2009. **10.34
    
    
    
    Dynegy Midwest Generation, Inc. 401(k) Savings Plan, as amended and restated,
effective as January 1, 2009.**10.35
    
    
    
    Dynegy Midwest Generation, Inc. 401(k) Savings Plan for Employees Covered under a
Collective Bargaining Agreement, as amended and restated, effective January 1, 2009.**10.40
    
    
    
    Sithe Pension Account Plan, amended and restated, effective January 1, 2007.**10.41
    
    
    
    Seventh [First] Amendment to the Sithe Pension Account Plan, as amended, effective
January 1, 2008.**10.42
    
    
    
    Second Amendment to the Sithe Pension Account Plan, as amended, effective January 1,
2008.**10.55
    
    
    
    Dynegy Inc. Deferred Compensation Plan for Certain Directors, as amended and
restated, effective January 1, 2008. **10.56
    
    
    
    Trust under Dynegy Inc. Deferred Compensation Plan for Certain Directors, effective
January 1, 2009. **10.69
    
    
    
    Dynegy Inc. Retirement Plan, as amended and restated, effective January 1, 2009.**10.70
    
    
    
    Dynegy Inc. Comprehensive Welfare Benefits Plan, effective January 1, 2002.**10.71
    
    
    
    First Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated
September 29, 2004.




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##### Table of Contents



ExhibitNumber
    
    
    
    Description**10.72
    
    
    
    Second Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated
January 1, 2005.**10.73
    
    
    
    Third Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated January
28, 2005.**10.74
    
    
    
    Fourth Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated April
20, 2005.**10.75
    
    
    
    Fifth Amendment to the Dynegy Inc. Comprehensive Welfare Benefits Plan, dated January
1, 2006.**10.77
    
    
    
    Dynegy Northeast Generation, Inc. Comprehensive Welfare Benefits Plan, dated as of
January 1, 2002.**10.78
    
    
    
    Amendment One to the Dynegy Northeast Generation, Inc. Comprehensive Welfare Benefits
Plan, dated as of April 20, 2005.**10.79
    
    
    
    Amendment Two to the Dynegy Northeast Generation, Inc. Comprehensive Welfare Benefits
Plan, dated as of January 1, 2006.**10.80
    
    
    
    Dynegy Northeast Generation, Inc. Retirement Income Plan, as amended and restated,
effective January 1, 2009.**10.97
    
    
    
    Trust AgreementDynegy Northeast Generation Inc. Savings Incentive Plan, dated as of
December 31, 2003 (incorporated by reference to Exhibit.**10.98
    
    
    
    Amendment to Trust AgreementDynegy Northeast Generation Inc. Savings Incentive Plan,
dated as of January 1, 2006.**10.99
    
    
    
    Amendment to Trust AgreementDynegy Northeast Generation Inc. Savings Incentive Plan,
dated as of April 2, 2007.**10.102
    
    
    
    Dynegy Inc. Master Retirement Trust, dated as of December 13, 2001.**10.103
    
    
    
    Amendment No. One to The Dynegy Inc. Master Retirement Trust, dated as of August 5,
2002.**10.104
    
    
    
    Amendment No. Two to The Dynegy Inc. Master Retirement Trust, dated as of September
30, 2004.**10.105
    
    
    
    Amendment No. Three to The Dynegy Inc. Master Retirement Trust, dated as of December
1, 2005.**10.106
    
    
    
    Amendment No. Four to The Dynegy Inc. Master Retirement Trust, dated as of September
25, 2006.




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##### Table of Contents



ExhibitNumber
    
    
    
    Description**10.107
    
    
    
    Amendment No. Five to The Dynegy Inc. Master Retirement Trust, dated as of April 2,
2007.**21.1
    
    
    
    Subsidiaries of the Registrant (Dynegy Inc.).**23.1
    
    
    
    Consent of Ernst & Young LLP (Dynegy Inc.).**23.2
    
    
    
    Consent of PricewaterhouseCoopers LLP (Dynegy Inc.).**23.3
    
    
    
    Consent of Ernst & Young LLP (Dynegy Holdings Inc.).**23.4
    
    
    
    Consent of PricewaterhouseCoopers LLP (Dynegy Holdings Inc.).**31.1
    
    
    
    Chief Executive Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**31.1(a)
    
    
    
    Chief Executive Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**31.2
    
    
    
    Chief Financial Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**31.2(a)
    
    
    
    Chief Financial Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    
    Chief Executive Officer Certification Pursuant to 18 United States Code Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.1(a)
    
    
    
    Chief Executive Officer Certification Pursuant to 18 United States Code Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    
    Chief Financial Officer Certification Pursuant to 18 United States Code Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2(a)
    
    
    
    Chief Financial Officer Certification Pursuant to 18 United States Code Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 **
    
    Filed herewith
    
    Pursuant to Securities and Exchange Commission Release No. 33-8238, this
certification will be treated as accompanying this report and not filed as part of
such report for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, or otherwise subject to the liability of Section 18 of the
Exchange Act, and this certification will not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
    
    Management contract or compensation plan.