Dynegy to receive over $1 billion in cash and 245 million of its Class B shares held by LS Power upon closing of transaction, which enables Dynegy to:

Significantly increase liquidity and financial strength, enabling Dynegy to address near-term debt maturities

Eliminate dual-class stock structure and associated Class B rights and restrictions

Dynegy to maintain diversified 13,000 MW power generation portfolio with significant upside potential to economic and power market recovery following closing of the sale of select natural gas-fired assets to LS Power

Separate from the agreement with LS Power, Dynegy initiates $400 million to $450 million in aggregate cost reduction program over the next four years associated with the 13,000 MW it will maintain that includes reduced capital, operating and general and administrative expenses

Dynegy Inc. (NYSE:DYN) today announced that it has entered into definitive agreements with LS Power that will enable Dynegy to significantly enhance its strategic and financial flexibility as well as transform its shareholder structure into a 100 percent publicly held company. The transaction is expected to:

Increase Dynegy's liquidity and financial strength, and enable it to address near-term debt maturities;

Preserve a strong, diversified asset base of 13,000 megawatts (MW) of core operating assets with significant upside potential to economic and power market recovery;

Enable Dynegy to repurchase its Class B shares at an attractive price and increase the relative ownership of its public Class A shareholders; and

Eliminate Dynegy's dual-class stock structure, thereby achieving a more simplified corporate governance structure and significantly enhancing strategic flexibility.

Bruce A. Williamson, Chairman, President and Chief Executive Officer of Dynegy Inc., said, "Today's strategic agreements accomplish a number of significant objectives for Dynegy. The transaction, which is immediately accretive to Adjusted EBITDA per share, will significantly enhance liquidity and position us to reduce upcoming near-term debt maturities. We will also maintain a strong foundation to continue executing our strategy with a diversified asset portfolio that is leveraged to both prices and demand as the U.S. economy and power markets recover. By eliminating the Class B shares and associated rights and restrictions, Dynegy will have a streamlined share ownership structure owned entirely by public shareholders for the first time in its history and providing greater strategic and financial flexibility to capitalize on opportunities to enhance stockholder value."

"Finally, the repurchase of our Class B shares allows us to redeem a substantial block of our privately held common stock at a very attractive value relative to the implied price of the traded assets, and to concentrate future ownership for the benefit of Class A shareholders without reducing the public float," Williamson added.

New Cost Savings Program

Separate from the strategic agreements with LS Power, Dynegy announced an extensive, multi-year program to eliminate costs throughout the company. Cumulative savings, relative to Dynegy's original plan, are expected to be $400 million to $450 million over a four-year period beginning in 2010. Annual savings are expected to be generated through the following means:

Reduced capital expenditures, with a targeted range of $25 million to $30 million in savings per year;

Reduced operational expenditures, with a targeted range of $30 million to $40 million in savings per year; and

Reduced general and administrative expenditures, with a targeted range of $40 million to $45 million in savings per year.

"This extensive cost savings program reflects our focus on operational excellence and driving value, even in a low commodity price environment. As we execute on this program, we are committed to maintaining strong levels of performance and reliability," Williamson added.

Details of the Transaction with LS Power

Under the terms of the agreements with LS Power, Dynegy will receive $1.025 billion in cash and 245 million of its Class B shares from LS Power. In exchange, Dynegy will sell to LS Power five peaking and three combined-cycle generation assets, as well as Dynegy's remaining interest in a project under construction in Texas. LS Power will also receive $235 million principal amount of 7.5 percent senior unsecured notes due 2015. The transaction is expected to close in the second half of 2009 following satisfaction of customary closing conditions and receipt of required regulatory approvals.

Following the close of the transaction, the remaining 95 million Class B shares held by LS Power will be converted into the equivalent number of Class A shares, representing approximately 15 percent of Dynegy's Class A common stock outstanding.