Dynegy, Other Energy Traders See Business Eroding (Update2)

Fuente: Bloomberg

Houston, July 23 (Bloomberg) -- Shares of Dynegy Inc. and Williams Cos. plunged as a collapse in electricity and natural-gas trading heightened investor concern that some U.S. energy companies may not be able to pay their bills.

Trading has shriveled because ``there's just huge counter- party risk, with perhaps several companies facing bankruptcy,'' said analyst Mark Demos of Fifth Third Investment Advisors, which manages $34 billion, including 825,000 Duke Energy Corp. shares.

Dynegy, whose credit was reduced to junk yesterday by Standard & Poor's, canceled a $325 million bond offering by its Illinois utility and said cash flow fell 20 percent in the past week. Standard & Poor's cut Williams debt rating to junk citing the company's ``deteriorating liquidity'' as it seeks secured loans to replace $2.2 billion in credit that expires today.

The Standard & Poor's 500 Electric Utilities Index, which tracks 24 stocks, fell 8.77 points, or 8 percent, to 101.69 and has dropped by a third in the past year.

S&P's Multi-Utilities Index, which includes Williams, Dynegy and rivals Mirant Corp., Calpine Corp., Duke and AES Corp., fell 11 percent to 10.40 and has plunged 90 percent in a year. Mirant stock lost almost than a third of its value today, and Calpine dropped 24 percent.

Cash Flow

Companies that invested billions to build new power plants and expand energy trading in the late 1990s have canceled projects, sold assets and fired workers since the collapse of Enron Corp. in December. Regulators are probing sham trades and accounting, and lenders have tightened credit.

Dynegy's cash flow this year will be as much as 40 percent less than expected, between $600 million and $700 million, instead of the previous forecast of $1 billion, the company said.

``I have serious doubts about their ability to survive,'' said Dorothea Matthews, an analyst for the research firm CreditSights Inc. ``Dynegy is a trading company, and if you can't trade, how can you make money?''

ChevronTexaco Corp., which owns 27 percent of Dynegy and is its biggest shareholder, may have to provide cash or back the company's trades to preserve its investment, Mathews said.

Shares of Houston-based Dynegy fell $2.15, or 64 percent, to $1.23 and are down 97 percent in the past year. Williams dropped 82 cents to $1.19 and is down 96 percent from a year ago.

``Our liquidity position -- $800 million to $850 million -- remains adequate to meet our current obligations and commitments,'' Dynegy spokesman John Sousa said.

Debt Levels

The 49 largest power and gas companies had more than $391 billion in combined debt at the end of the first quarter, according to a Bloomberg search of company filings. Debt levels at 13 of the top 20 U.S. electricity traders exceed a 50 percent benchmark suggested by Moody's Investors Service in December.

``The industry as a whole is under a lot of pressure,'' said Jake Dollarhide, chief operating officer at Frederic E. Russell Investment Management Co., which owns 192,000 shares of Williams. ``As these companies get downgraded, they will have to pay a lot more money with a lot less available cash.''

Deregulation of U.S. gas and electricity markets over the past two decades led to a surge in wholesale trading between regions that used to be controlled by local monopolies. Enron, which later admitted to bogus accounting, reported more than $100 billion in revenue in 2000. Its collapse contributed to the decline in trading this year.

Charlotte-based Duke, the second-largest utility company, will see its profit drop this year to between $2.45 and $2.55 a share from $2.65 last year because of low energy prices and reduced demand, Chief Executive Richard B. Priory said on a conference call with analysts.

```Duke isn't the first company to change its outlook,'' Priory said. ``We certainly won't be the last.''

`History'

Williams spokesman Jim Gipson said the company is ``working very hard to address the issues surrounding improving our financial condition.'' He wouldn't comment further.

Tulsa, Oklahoma-based Williams, the No. 2 U.S. pipeline owner, yesterday slashed its quarterly dividend by 95 percent to 1 cent a share after a loss in the second quarter because of a drop in energy trading. The stock fell to a 20-year low.

Williams's corporate credit rating was cut two levels to BB+, the highest junk rating, because of ``the deteriorating liquidity position,'' Standard & Poor's said.

The company has $450 million in cash and a $700 million loan that expires in three years. It also has $450 million in debt due in July and another $350 million due in August.

``Williams is history,'' said Skip Aylesworth, who helps manage $160 million at FBR American Gas Index Fund Inc. He sold the last of the fund's shares in the company today when he saw banks wouldn't extend credit. ``Williams will probably have to file'' for bankruptcy protection within a week, he said.