HOUSTON — Dynegy Inc. will raise at least $2 billion and expand its financial reporting, elements of a restructuring it says will shore up its finances and improve its image on Wall Street.

        The plan, unveiled Monday, includes a 50 percent dividend cut, the spinoff of a unit and the partial sale of a 16,500-mile natural gas pipeline that it acquired from bankrupt Enron Corp. earlier this year.

        The financially distressed energy company, which laid off 340 workers last week, will also take a $450 million pretax charge in the second quarter of 2002 because of severance expenses to the furloughed workers, consulting fees and trouble at its communications unit.

        “The measures we plan to implement, combined with the steps we have successfully executed in recent weeks, will ensure sustainable financial stability for Dynegy and are intended to improve the company's credit profile substantially into 2003 and beyond,” said Dynegy interim chief executive Dan Dienstbier.

        The plan is the company's second in six months. In December, it announced a $1.25 billion restructuring program in response to financial concerns of credit rating companies and trading partners.

        Fitch Ratings downgraded Dynegy's credit to a step below investment grade after the company's announcement Monday and said additional downgrades were possible if the plan does not work.

        Fitch analyst Ralph Pellecchia said the downgrade stemmed in part from the Securities and Exchange Commission's ongoing investigation of Dynegy's accounting and trading practices and inquiries from the Federal Energy Regulatory Commission. Pellecchia said the rating was “likely” to remain until key elements of the plan are executed.

        Shares of Dynegy on the New York Stock Exchange closed Monday at $7.40, down 12 cents, or 1.6 percent.

        The plan is Dynegy's latest effort to restore investor confidence, which has withered greatly since Enron's collapse last year. Enron rivals, including Dynegy, El Paso Corp., CMS Energy and Williams Cos., have come under scrutiny because of their own questionable accounting and trading activities.

        Former Dynegy CEO and co-founder Chuck Watson resigned last month. Then the Houston-based company's chief financial officer, Rob Doty, stepped down last week.

        Doty's replacement, Louis Dorey, said during a conference call with analysts Monday the company has adequate cash to meet its current obligations even if one or more credit agencies downgrade it to below investment grade. The company's cash levels have ranged from $900 million to more than $1 billion since late May.

        Dorey said the plan will bring in cash to pay debt and reduce reliance on lines of credit from banks while maintaining at least $1.5 billion.

        “The bottom line is that adequate is not good enough,” Dorey said. “We're not looking for adequate — we're looking for something that will be superior.”

        The company also plans to enhance disclosure of finances and accounting to provide more clarity for investors and complete the restatement of Dynegy's 2001 earnings as announced last month.

        “Because Arthur Andersen can no longer perform services for the company, Dynegy's new independent auditor, PricewaterhouseCoopers, will conduct a re-audit of 2001 results as part of the restatement process,” the company said.

        Dynegy was one of hundreds of public companies to fire Andersen earlier this year. Andersen was convicted June 15 of obstruction of justice for shredding and doctoring Enron-related documents last October as the SEC began investigating the energy company's accounting.

        Initiatives in Dynegy's capital plan to raise at least $2 billion include:

        —Reduction of common stock dividends by 50 percent starting in the third quarter of 2002.

        —Partial sale of Dynegy's ownership interest in or a joint venture transaction for Dynegy Storage in the United Kingdom.

        —An initial public offering of Dynegy Energy Partners L.P., a new partnership that will own and run part of the company's liquids business.

        —Incremental reductions of capital expenditures by $100 million through 2002 and limited such spending in 2003.

        —Annual savings of $50 million based on last week's layoffs.

        —Partial sale of Dynegy's ownership interest in or a joint venture transaction for Northern Natural Gas Co., a 16,500-mile- long pipeline extending from West Texas to the Great Lakes.

        Dynegy acquired the pipeline in late January from Enron as payback for a $1.5 billion investment in Enron last November before Dynegy's plan to buy its former larger rival crumbled. Steve Bergstrom, Dynegy's president and chief operating officer, said Monday Dynegy will pursue interest already expressed by potential partners after Enron's buyback option expires June 30.

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