UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ¨ Filed by a Party other than the Registrant x
Check the appropriate box:
| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ¨ | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| x | Soliciting Material Pursuant to § 240.14a-12 |
Dynegy Inc.
(Name of Registrant as Specified in its Charter)
Seneca Capital International Master Fund, L.P.
Seneca Capital, L.P.
Seneca Capital Investments, L.P.
Seneca Capital Investments, LLC
Seneca Capital International GP, LLC
Seneca Capital Advisors, LLC
Douglas A. Hirsch
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. |
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| ¨ | Fee paid previously with preliminary materials. |
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
 SAVING DYNEGY:
THE NEXT CHAPTER
Seneca Capital
NOVEMBER 2010 |
 2
DISCLAIMER
This presentation contains forward-looking statements about future events and sets forth a
presentation of our beliefs. The forward-looking statements are not guarantees of
future performance, and we caution you not to rely unduly on them. We have based many of these
forward-looking statements on our beliefs, expectations and assumptions about future events
that may prove to be inaccurate. While we consider these beliefs, expectations and assumptions to be reasonable, they are inherently subject to significant
business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of
which are difficult to predict and many of which are beyond our control. We caution you
that the forward-looking statements are inherently uncertain and necessarily involve risks that may affect Dynegy Inc.’s (“Dynegy”) business prospects and
performance, causing actual results to differ from those discussed or presented in this
presentation. This presentation is based on, and contains references to third-party sources of information, and
we make no representation or warranty as to the accuracy or completeness thereof. The
inclusion of such information is not an indication of any participation in or endorsement of the views expressed herein by any such third party.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Seneca Capital International Master Fund, L.P., Seneca Capital, L.P., Seneca Capital Investments,
L.P., Seneca Capital Investments, LLC, Seneca Capital International GP, LLC, Seneca Capital
Advisors, LLC and Douglas A. Hirsch (together with each of the foregoing, “Seneca”) have jointly made a preliminary filing with the Securities and Exchange
Commission (“SEC”) of a proxy statement and an accompanying proxy card to be used to solicit
votes in connection with the solicitation of proxies against a proposed acquisition of Dynegy
by Denali Parent Inc. and Denali Merger Sub Inc., which will be voted on at a meeting of Dynegy’s stockholders.
SENECA ADVISES ALL STOCKHOLDERS OF DYNEGY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS
WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEBSITE AT HTTP://WWW.SEC.GOV. IN ADDITION,
ONCE AVAILABLE, SENECA MAY PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE UPON REQUEST.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR, GEORGESON, INC., BY
CALLING (888) 877-5373. Each of Seneca Capital International Master Fund, L.P., Seneca Capital, L.P., Seneca Capital
Investments, L.P., Seneca Capital Investments, LLC, Seneca Capital International GP, LLC,
Seneca Capital Advisors, LLC and Douglas A. Hirsch is a participant in this solicitation. Douglas A. Hirsch is the managing member of each of Seneca Capital
Investments, LLC, Seneca Capital International GP, LLC and Seneca Capital Advisors, LLC. The principal
occupation of Mr. Hirsch is investment management. Seneca Capital Investments, LLC is the
general partner of Seneca Capital Investments, L.P. Seneca Capital International GP, LLC is the general partner of Seneca Capital International Master
Fund, L.P., and Seneca Capital Advisors, LLC is the general partner of Seneca Capital, L.P. The
principal business address of Mr. Hirsch, Seneca Capital Investments, LLC, Seneca Capital
Investments, L.P., Seneca Capital International GP, LLC, Seneca Capital International Master Fund, L.P., Seneca Capital Advisors, LLC and Seneca Capital, L.P.
is c/o Seneca Capital Investments, LP, 590 Madison Avenue, 28th Floor, New York, New York 10022.
As of November 12, 2010, Seneca Capital International Master Fund, L.P. beneficially owned 7,712,100
shares of Dynegy’s common stock, par value $0.01 per share (“Shares”),
representing beneficial ownership of approximately 6.4% of the Shares. As of November 12, 2010, Seneca
Capital, L.P. beneficially owned 3,514,400 Shares, representing beneficial ownership of
approximately 2.9% of the Shares. Each of Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, and Mr. Hirsch may be deemed to
beneficially own 11,226,500 Shares, representing beneficial ownership of approximately 9.3% of the
Shares, held in the aggregate by Seneca Capital International Master Fund, L.P. and Seneca
Capital, L.P. Seneca Capital International GP, LLC may be deemed to beneficially own 7,712,100 Shares, representing beneficial ownership of approximately
6.4% of the Shares, held by Seneca Capital International Master Fund, L.P. Seneca Capital Advisors,
LLC may be deemed to beneficially own 3,514,400 Shares, representing beneficial ownership of
approximately 2.9% of the Shares, held by Seneca Capital, L.P. Each of Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, Seneca
Capital International GP, LLC, Seneca Capital Advisors, LLC and Douglas A. Hirsch disclaims beneficial
ownership of the Shares except to the extent of its or his pecuniary interest therein, and this
filing shall not be deemed an admission of beneficial ownership of such Shares for any purpose.
As of November 12, 2010, Seneca Capital International Master Fund, L.P. and Seneca Capital, L.P. held
European-style call options, providing the right to purchase 1,986,900 and 904,100 shares,
respectively at an exercise price of $0.01 per share by delivery of notice of exercise as of April 15, 2011.
|
 VOTE NO TO THE PROPOSED
MERGER
3
WRONG PRICE
AT THE WRONG TIME FOR THE WRONG REASONS
We believe worth $6/sh+ today rising to $16-18 per as power prices recover,
stock is trading near its all time low, management $38 million
change-of-control creates misalignment with shareholders
PLAN FOR CHANGE
Highly regarded director candidates (Hunter Harrison / Jeff Hunter) nominated,
additional high quality candidates (Steve Weyel, Jeffrey S. Stein) willing
to serve - mandate to review business, costs, financing, management,
reverse split LIQUIDITY IS NOT
AN ISSUE –
ISSUING EQUITY IS THE WRONG DECISION FOR
SHAREHOLDERS
Un-drawn revolver does NOT create a liquidity crisis, there is NO need to
issue equity, no major bond maturities until 2015, substantial cash and
unencumbered assets to support secured financing
DARK/SPARK SPREAD RISING DESPITE GAS PRICES DECREASING
Despite decline in gas prices, forward gross margins have improved by ~$135mm
since the day the proposed merger was announced
SUBSTANTIAL SUPPORT FOR STOCK UPON DEFEAT OF MERGER
Fundamentals
have
improved
dramatically
since
day
before
the
deal
–
cost
cuts,
NRG sale price, commodity margins contribute an incremental $3.50+ / share
Substantial incremental demand for Dynegy stock |
 THE POWER OF CHANGE
Seneca is filing a consent solicitation to elect E. Hunter Harrison and Jeff
Hunter to the Board
4
E. HUNTER HARRISON
Pioneering Rail
Executive
Former CEO
Canadian National
Railway
JEFF HUNTER
Successful Power
Industry Veteran
Co-Founder and Chief
Financial Officer
US Power Gen
STEVE WEYEL
Energy Veteran
Former President,
Director
Energy XXI
JEFFREY S. STEIN
Experienced Power
Investor
Director / Former
Director
Granite Ridge / KGen
PROPOSED
DIRECTORS
READY TO
SERVE
We believe some of the existing non-dissenting directors may step down
based on their endorsement of management’s scorched earth approach
Steve Weyel and Jeffrey S. Stein are ready to serve on the Board
|
 PLAN TO UNLOCK VALUE
•
Assuming 3:1 ratio, $1.50 per share post-split stock price would
likely require certain shorts to cover positions
5)
Unwind Stock Split
•
Employ top management that buys into the value proposition,
properly aligned through stock ownership
4)
Review Top Management
•
Thorough evaluation of corporate costs and support functions to
right-size the cost base
•
Lean cost structure should drive further financial improvement
3)
Evaluate Cost Cutting
Opportunities
Action
Result
Elect Hunter Harrison &
Jeff Hunter to Board,
Steve Weyel and Jeffrey
S. Stein ready to serve
•
Top quality Directors aligned with shareholders through direct
stock ownership
•
Revise director compensation to ensure alignment
1)
Strategic Review
•
Explore sale of company and/or assets
•
Proceeds could be used for liquidity, debt optimization or other
means of creating shareholder value
2)
Optimize Capital Structure
•
Revolver refinanced to align with business needs
•
Evaluation of additional financings / debt exchanges to extend
maturities and/or reduce costs
•
Evaluation of hedge monetization to enhance liquidity
5 |
 DYNEGY’S “LIQUIDITY
ISSUE”
IS A SCARE TACTIC
6
Unfunded
revolvers
do
not
cause
bankruptcy
The Company could retain flexibility to cancel the revolver or negotiate with its
relationship banks
Range of Liquidity Options at Dynegy’s Disposal:
Dynegy
has
ample
liquidity
~$675mm of cash on the balance sheet as of September 30, 2010
Portion of ~$550mm collateral can be returned when hedges roll off over next 2
years and/or through utilization of more efficient collateral
structure Secured
debt
markets
are
open
for
Dynegy
Project level debt can be raised against specific assets
Current management has assumed in its own merger proxy the Company can raise
$1.6bn of new secured debt
Industry peers TXU, GenOn (RRI/MIR), NRG and Calpine have all raised new debt in
the past several months in addition to numerous asset-based project
financings Several
assets
we
believe
can
easily
be
sold
at
attractive
valuations
in
today’s
market
Seneca has been approached by multiple industry players with interest in
Dynegy’s assets Director
candidate
Jeff
Hunter
believes
Dynegy
has
sufficient
liquidity,
Hunter
Harrison
already
purchased
500,000
shares
Issuing
Equity
is
the
Wrong
Decision
for
Shareholders |
 ISSUING EQUITY IS THE WRONG
DECISION FOR SHAREHOLDERS
7
August 6:
No Equity Needed
•
Management assured financial community about financial condition
August 12:
No Equity Needed
•
Dissenting director and remainder of Board does not cite a need for
equity if deal is turned down; Proxy assumes debt market access
October 20:
Equity Needed?!?
•
Only after Seneca files to oppose transaction does this supposed
need
for equity arise
$1,080mm Revolver
$0 Drawn
Refinanced in
Advance of
Potential
Covenant Issue
in Q2 11
Negotiate / Resize
~$750mm Revolver
DYN Proxy Assumption
$850mm L/C Facility
~$450mm Posted
Collateral needs
decline as hedges roll
off in 2011
Lien-Based Facility,
Right Way Risk
Used by All Other IPPs
$68mm Secured
Corporate Debt
~$4bn
(1)
of
unencumbered
collateral
$600mm Term Loan /
$250mm Second Lien
DYN Proxy Assumption
$675mm of Cash
Can be used to
temporarily fund
collateral
No restrictions
Balance as of 9/30/10
TODAY
PRO FORMA
Asset Sales
~$4bn Unencumbered
Plants
(1)
Strong Market for CCGTs
STRATEGY
Additional
Secured Debt
Available
Equity?!?
NOT NEEDED
ABSOLUTELY NOT
Proceeds Applied to:
Refinancing
Capex
Debt Optimization
Other Shareholder
Value Creating
Options
(1)
Based on Sum-of-the-Parts value (page 16) of Seneca Capital
presentation filed with the SEC on November 5, 2010. |
 Year
2010
2011
2012
2013
2014
2015
Total
Total Cash Need per Proxy (Incl. Debt Repayment)
($437)
($489)
($107)
($83)
$4
($1,112)
Ending Cash Balance
$1,282
$845
$356
$249
$166
$170
Revolver Availability
$750
$750
$750
$750
$750
$750
Total Liquidity
$2,032
$1,595
$1,106
$999
$916
$920
Total Funded Debt 9/30/10
$3,975
Term Loan and Second Lien Bond
$850
Repayment of Existing Credit Facilities
($68)
Total Funded Debt at Year End
$4,757
$4,609
$4,446
$4,364
$4,364
$4,364
NPV of Lease
$578
$524
$398
$295
$182
$57
Cash Balance
($1,282)
($845)
($356)
($249)
($166)
($170)
Net Debt plus Lease
$4,053
$4,288
$4,488
$4,410
$4,380
$4,251
DYNEGY’S OWN PROXY ASSUMES
READY ACCESS TO FINANCING
8
Current management has assumed in its merger proxy that it believes the Company
can raise $1.6bn of new secured debt
Forecast provided to Blackstone and advisors assumes a $750mm revolver (~6%),
$600mm term loan (~6%) and $250mm second lien debt (~10%)
Management
forecasts
already
include
incremental
interest
expense
for
credit
facility refinancing –
suffer negative carry on excess cash
(1)
Assumes Dynegy’s Operating Cash Flow less Total Capital Expenditures and a
pro forma cash balance based on that forecast as estimated by Seneca.
(2)
Year end 2010 cash balance assumes $500mm cash on hand at year-end 2010 (per
page 22 of 10/27/10 Dynegy presentation) plus $850mm proceeds from term
loan and second lien bond minus $68mm repayment of existing term loan.
(3)
Excludes collateral postings as they can be addressed through the use of more
efficient hedging strategies. Dynegy’s
Own
Proxy
Forecast
Shows
Ample
Liquidity
(1)
(2)
(3)
Liquidity
Is
NOT
an
Issue
More than $900mm of excess liquidity with
management’s own forecast… |
 2011-2015 Liquidity
Sources and Uses Dynegy
Seneca
Assumed cash on hand at year-end 2010
$500
$500
Return of cash posted as collateral
–
$116
Asset sale proceeds
$1,363
$1,363
Liquidity sources
$1,863
$1,979
Assumed collateral
($450)
–
Cash outflow (2011-2015)
($1,112)
($1,112)
Liquidity cushion
($300)
–
Lost cash flow on assets sold (2011-2015), net
($365)
($365)
Liquidity uses
($2,227)
($1,477)
Net sources greater than uses
($364)
$502
ASSET SALES ARE POTENTIAL
SOURCE OF LIQUIDITY
9
The NRG asset sale by itself would be enough to support Dynegy’s liquidity
needs through the forecast period (Seneca is not necessarily endorsing the
NRG sale)
Management argues that the NRG transaction would not bridge the cash shortfall
– Seneca calculates substantial cushion
Why does Dynegy need a cash cushion as large as $300mm?
Why doesn’t Dynegy receive return of its ~$100mm of cash posted for
collateral? Why not utilize the same collateral efficient strategies as all
other industry peers? Why assume repayment of lowest cost debt at par with
no discount captured?
$450mm of collateral is NOT a
permanent use of cash
$116mm of cash posted as collateral
as of 6/30/10 could be returned with a
more efficient collateral structure
Why does Dynegy need a
$300mm liquidity cushion?
Seneca calculates $500mm
effective liquidity cushion |
 POWER PRICES INCREASED WHILE
GAS PRICES HAVE DECREASED
10
Source: Bloomberg.
85%
90%
95%
100%
105%
$ 2.50
$ 3.50
$ 4.50
$ 5.50
$ 6.50
$ 7.50
$ 8.50
2012 CIN On-Peak is HIGHER
2012 NYMEX Gas Forwards are Lower
2012 7.0 Heat Rate On-
peak Spark Spreads
Are HIGHER |
 GROSS MARGINS HAVE INCREASED
WHILE GAS HAS DECREASED
The announcement of the proposed merger is the relevant date
Natural gas forward prices have declined since August 12…
…
But Midwest forward power prices in 2012 –
2014 are actually higher
Since
August
12,
Dynegy’s
expected
gross
margin
should
have
increased
by
~$135mm
due to increasing profitability of Dynegy’s CCGTs and stable Midwest power
prices (see appendix for plant by plant detail)
11
While Gas Has Declined, Profits Have Expanded
Cinergy ATC Power Price ($ / MWh)
8/12/2010
$32.05
$34.21
$36.97
$40.37
$44.09
11/11/2010
$31.44
$34.83
$38.33
$41.02
$43.98
Change
($0.62)
$0.62
$1.36
$0.66
($0.10)
2011
2012
2013
2014
2015
NYMEX Gas Prices ($/MMBtu)
8/12/2010
$4.96
$5.37
$5.56
$5.69
$5.81
11/11/2010
$4.29
$4.96
$5.33
$5.56
$5.73
Change
($0.67)
($0.41)
($0.23)
($0.13)
($0.08)
(1)
Accounts for Dynegy’s hedge profile.
Change in Gross Margin due to Power/Gas Curve Shifts (8/12/10 vs. 11/11/10)
($ in millions)
2011
2012
2013
2014
2015
Coal Plants
$0
$6
$18
$1
($17)
Combined Cycle Gas Plants
0
30
38
28
33
Total
0
35
56
29
16
Total Impact (2011 - 2015)
$136
(1)
(1) |
 DYNEGY’S NATURAL GAS SENSITIVITY
IS A MISLEADING ILLUSTRATION
12
Management Notes Midwest Power Markets Are Set By Coal
Management Admits Sensitivity is “Illustrative”
MISO power is set by coal ~80-85% of the
time and set by gas ~15-20% of the time
“Illustrative”
gas
sensitivity of $165mm
incorrectly assumes MISO
power is set by gas 100%
of the time!
Source: Dynegy’s February 2, 2010 presentation from the
2010 Credit Suisse Energy Summit |
 WHERE WILL DYNEGY TRADE?
WE THINK HIGHER!
13
The Lights Have Been Turned On:
Several materially positive developments since the stock was
trading
near
its
all
time
lows
of
$2.78
on
August
12
Major
cost
cut
potential
announced
with
the
deal,
NRG
asset
sale
price
in
excess
of
expectations,
improved
2010
free
cash
flow
guidance
and
improved
CCGT
spark
spreads
$50mm cost cuts
disclosed in
merger proxy x 6 -
$25mm costs to
achieve & 25%
discount
2010 FCF
guidance improved
$38mm from 8/6 to
11/8
NPV of change
gross margin for
the 2011-15 period
from 8/12/10
through 11/11/10
Assumes $25mm
costs related to
deal expenses,
and severance
Based on Citi
Investment
Research
valuation
(1)
with 25
-50% discount
Substantial Incremental Buying Interest After Defeat of Deal
(1)
Citi Investment Research valuation of Dynegy dated February 25, 2010. Total
plants sold to NRG valued at $1,157mm and corresponded to a full Dynegy
valuation of $8.25/share ($1.65 pre-split).
th
$6.29 -
$6.71
$0.85 -
$1.28
$0.84
$0.31
$1.71
$2.78
–
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Pre-Deal Stock Price
New Cost Cut
Disclosure Presented
in Merger Proxy
Increase in Free Cash
Flow Guidance Since
Deal Announcement
Improvement in
Commodity Prices
Since Deal
Announcement
Friction Costs
Associated With
Failed Transaction
Uplift in Wall Street
View of Asset Value
from NRG Bid
Total of Quantifiable
Factors
$7.43/SH if Dynegy had traded in line with merchant peers since 3/12
$0.21 |
 DYNEGY IS A RARE COMMODITY
14
Dynegy is one of ONLY 14 companies (>$200mm market cap) IN THE ENTIRE US MARKET trading at a
discount to its cash on the balance sheet
Dynegy is the only power generation / industrial company
Over 95% of Dynegy’s funded debt is comprised of unsecured bonds
Dynegy’s bonds provide unusual flexibility given no limitations on liens/asset sales/restricted
payments ONE OF ONLY A HANDFUL OF STOCKS TRADING AT A DISCOUNT TO CASH
ALL US STOCKS TRADING AT A DISCOUNT TO CASH ON BALANCE SHEET
(1)
BELOW $200MM IN MARKET CAPITALIZATION
Ticker
Name
Industry
Stock Price
B/S Cash
Per Share
Discount
to Cash
1
CCMO
CC MEDIA-A
RADIO/OUTDOOR ADVERTISING
$8.00
$20.84
(62%)
2
AMR
AMR CORP
AIRLINE
$8.52
$13.67
(38%)
3
CMVT
COMVERSE TECH
TELECOM EQUIPMENT
$7.63
$11.69
(35%)
4
BZH
BEAZER HOMES USA
HOMEBUILDER
$4.64
$6.24
(26%)
5
HOV
HOVNANIAN ENT-A
HOMEBUILDER
$3.96
$5.28
(25%)
6
LSTZA
LIBERTY STARZ A
MEDIA
$62.73
$80.08
(22%)
7
MDC
MDC HOLDINGS INC
HOMEBUILDER
$27.66
$35.19
(21%)
8
DYN
DYNEGY
POWER GENERATION
$4.50
$5.63
(20%)
9
EK
EASTMAN KODAK
PHOTO EQUIPMENT
$4.63
$5.19
(11%)
10
LCC
US AIRWAYS GROUP
AIRLINE
$10.63
$12.01
(11%)
11
ZRAN
ZORAN CORP
TECHNOLOGY
$6.98
$7.47
(7%)
12
RYL
RYLAND GROUP INC
HOMEBUILDER
$15.91
$16.70
(5%)
13
ADPT
ADPT CORP
TECHNOLOGY
$3.00
$3.09
(3%)
14
HUM
HUMANA INC
HEALTH CARE
$59.20
$59.80
(1%)
SOURCE: BLOOMBERG
(1) Proforma
for mergers |
 DYNEGY IS MORE OF A CAPACITY
PLAY THAN A GAS PLAY
15
Although we endorse unlevered free cash flow as the best metric to value Dynegy,
when considering EV/EBITDA we believe it is appropriate to include the
market price of Dynegy’s debt Dynegy multiples can benefit dramatically
from improving capacity values and when accounting for discount implied in
trading levels of its debt ($ in millions)
(1)
Net debt includes cash posted for collateral in broker margin account and excludes NPV of lease and
includes $50mm annual rent expense in EBITDA. (2)
Debt market prices as of 11/10/10.
(3)
“EV@Market Price” is Enterprise Value adjusting for debt at market prices
(4)
Note 11 of Dynegy 2006 10-K.
(5)
Dynegy Presentation to Proxy Advisory Firms dated October 27, 2010 page 19 states “If
asset retirements do not materialize, EBITDA would be reduced by an average of $85
million each year from 2013 – 2015” (6)
Based on 2,241mw of scrubbed coal and 1,200mw Kendall CCGT.
2011
2012
2013
Stock Price
$4.50
$4.50
$4.50
Shares
121
121
121
Equity Value
$543
$543
$543
Net Debt as of 6/30/10
(1)
$3,371
$3,371
$3,371
Enterprise Value
$3,914
$3,914
$3,914
Market Price vs. Book Value of Debt
(2)
($912)
($912)
($912)
EV @ Market Price
(3)
$3,001
$3,001
$3,001
Adj EBITDA in Merger Proxy
$405
$348
$538
Sithe Purchase Accounting Adjustment
(4)
$50
$50
$50
Removal of Market Recovery Assumption
(5)
–
–
($85)
Adj Cash EBITDA Without Market Recovery
$455
$398
$503
Benefit of $150/MWd Increase in MISO/RTO
(6)
$188
$188
$188
Cash EBITDA with Capacity Uplift
$643
$586
$691
Enterprise Value / Cash EBITDA
8.6x
9.8x
7.8x
Enterprise Value / Cash EBITDA with Capacity Uplift
6.1x
6.7x
5.7x
EV @ Market Price / Cash EBITDA
6.6x
7.5x
6.0x
EV @ Market Price / Cash EBITDA with Capacity Uplift
4.7x
5.1x
4.3x |
 DYNEGY RECENTLY DISCLOSED 2016
FORECAST –
THE FUTURE IS BRIGHT
16
2016 Unlevered Free Cash Flow Yield
2016 EBITDA
$654
Lease Expense
$50
Maintenance Capex
($87)
Unlevered Free Cash Flow
$617
Enterprise Value As of 6/30/10
$4,547
2011 - 2015 Cash Outflow
$1,112
Debt Maturities Paid in Cash
($393)
Change in NPV of Lease
($576)
Change in Net Debt from 2011-2015
$143
Enterprise Value As of 12/31/15
$4,690
Unlevered Free Cash Flow Yield
13.2%
On
November
8,
2010
Dynegy
disclosed
(pursuant
to
the
settlement
of
certain
shareholder lawsuits) the 2016 EBITDA projection that had been previously provided
to its financial advisors in conjunction with the proposed merger
Why was this 2016 projection not included in Dynegy’s original proxy
statement or in their financial advisors’
analysis?
Management’s own 2016 forecast implies substantial uplift over prior
years Implies 2016 Unlevered
Free Cash Flow Yield of 13.2%
Management’s 2016 Forecast Confirms Seneca’s Investment Thesis
IRRs to 2015
Low
Mid
High
2016 Unlevered Free Cash Flow
$617
$617
$617
Yield
9.5%
8.5%
7.5%
Enterprise Value
$6,495
$7,259
$8,227
Net Debt plus lease 12/31/15
($4,147)
($4,147)
($4,147)
Equity Value
$2,348
$3,112
$4,080
Shares Outstanding
120.6
120.6
120.6
Equity Value per Share
$19
$26
$34
IRR vs. $4.50 Investment Today
34.0%
41.8%
49.7% |
 ADDITIONAL DISCLOSURE FILLS
IN THE PICTURE
17
Supplemental disclosure on November 8, 2010 as a result of shareholder litigation
settlement:
Increased EBITDA:
Disclosed 2016 EBITDA of $654mm vs. $557mm in 2015
Management Not Capable of Capturing Discount?:
Board determined that
Dynegy unlikely to be able to purchase debt at market prices because Dynegy
paid above par in a debt repurchase in 2009
Extensive Process?:
In June/July, management determined not to pursue
transaction discussions with two interested private equity firms, and only
included them after the proposed merger was announced and substantial
barriers to entry were erected
Considered Alternatives?:
In late July, Company decided not to contact buyers
to gauge interest in asset sales
Retention Plan?:
In late July Blackstone noted they expect to put a retention
program
in
place
given
the
“substantial
change-in-control
payments”
potentially
available to management
Actions Speak Louder Than Words |
 MANAGEMENT
INCENTIVE IS TO SELL
Management would receive only $6 million, (nearly $32 million less than the
change-of-control severance package) in a stand-alone scenario at
$6.50 per share:
Stock equivalents includes 817,305 shares of restricted stock and phantom
stock combined
Management has options on 653,410 shares with a strike price of $5.65
Management has additional options on 346,543 shares with a strike price of
$7.20, which are out of the money at $6.50
Performance
units
are
deemed
worthless
as
a
$6.50
stock
price
is
below
the minimum threshold ($12.50 per share) and current EBITDA forecasts
are below the threshold levels
18
($ in millions)
Change of
No Change of
Control @ $4.50
Control @ $6.50
Increase /
per Share
per Share
(Decrease)
Stock Equivalents
$3.7
$5.3
$1.6
Performance Units
9.8
-
(9.8)
Severance
24.1
-
(24.1)
Stock Options (in-the-money value)
-
0.6
0.6
Total
$37.6
$5.9
($31.7) |
 HIGHLY RESPECTED BOARD
CANDIDATES
Seneca will conduct a Consent Solicitation to Add Two New Directors to the Dynegy
Board Seeking
to
replace
only
two
of
six
directors
at
this
juncture
in
order
to
avoid
triggering
change-
of-control in Dynegy’s credit facility and executive compensation
agreements Seneca is proposing to replace Bruce Williamson and David
Biegler E. Hunter Harrison –
Leading Railroad CEO
Former Chief Executive Officer, Canadian National Railway
Proven
Shareholder
Value
Creator:
Total
shareholder
return
of
more
than
500%
at
CN
and
substantial
multiples
of
invested
capital
realized
during
tenure
at
Illinois
Central
Drives
cost
efficiencies:
developed
the
concept
of
“precision
railroading”
increasing
CN’s
operating
margins by 50% and by multiples at IC
Add
value
to
coal
transportation
-
significant
value
driver
for
Dynegy
Currently an owner of 500,000 shares of Dynegy stock
Jeff Hunter –
Experienced Power Generation Executive
Co-Founder/Chief Financial Officer US Power Generation Company
Proven
Shareholder
Value
Creator:
Generated
a
two-to-three
times
return
for
USPG
investors
since
2005, based on market estimates
Drives
cost
efficiencies:
successfully
reduced
SG&A
expenses
by
33%
and
led
the
reduction
of
collateral requirements by more than 50% at USPG
Expert in energy risk management (El Paso Energy / PA Consulting)
Experienced in managing complicated capital structures / liquidity
Commits to owning 300,000 shares
Mr. Hunter and Seneca believe that US Power Gen and Dynegy are not actual or
potential competitors 19 |
 AND READY TO SERVE…
We believe that non-dissenting directors who have endorsed management’s
scorched-earth approach
in
defending
the
sale
of
the
company
at
$4.50
per
share
($0.90
per
share
adjusted
for reverse split) and endorsed the buyback of 30% of Dynegy in August 2009 at $9.65
per share could likely step down once the proposed merger is defeated
Seneca stands ready to propose additional highly-qualified directors in the
event existing directors step down
Steve Weyel –
Experienced Power / Energy Company Executive
Co-Founder and Former President/COO, Director of Energy XXI
Built EXXI from start-up into leading Gulf of Mexico shelf operator
Former
President
and
COO
of
Intergen
(Shell/Bechtel
power
venture)
Director experience includes Particle Drilling, Energy XXI
Former Executive of Dynegy (1994-1999)
Jeffrey S. Stein –
Experienced Investor With Deep Industry Knowledge
Co-Founder, Principal, Durham Asset Management
Director
of
Granite
Ridge
Holdings,
LLC
–
752MW
CCGT
in
New
Hampshire
Former
Director
of
KGen
Power
Corporation
–
2,300MW
gas
portfolio
in
SERC
Experienced investor in complicated, credit-focused situations
Will take whatever steps he is able to resolve any unlikely conflicts
20 |
 CONCLUSION
21
PLAN IN PLACE TO UNLOCK VALUE AFTER REJECTION OF THE DEAL
Two
high
quality
directors,
Hunter
Harrison
and
Jeff
Hunter–
buy
into
Dynegy
value proposition
with significant stock ownership/commitment to create alignment
Additional
directors,
Steve
Weyel
and
Jeffrey
S.
Stein
are
ready
to
serve
Go forward plan –
1) strategic review of business/assets, 2) optimize capital structure, 3) evaluate
costs cuts, 4) review top management, 5) explore reverse split unwind
DYNEGY’S LIQUIDITY IS NOT AN ISSUE
Un-drawn
revolver
CANNOT
create
a
liquidity
issue
–
Dynegy
proxy
forecast
already assumes
$1.6bn of new secured debt
NO EQUITY NEED -
~$675mm cash on hand and ~$4billion of unencumbered assets
NOT A BET ON RISING NATURAL GAS
At
low
gas
prices,
improved
margins
on
gas
plants
offset
decline
in
coal
margins
Management’s
gas
sensitivity
overstates
gas
exposure,
coal
plants
on
margin
80-85%
SUPPORT
FOR
STOCK
AFTER
PROPOSED
MERGER
IS
DEFEATED
–
SENECA
FULLY
ALIGNED
Since deal announced, new fundamental factors add up to $3.50/sh+ in value
$50 mm incremental cost cuts, NRG Asset sale price in excess of Street estimates
and increased gross margins, despite decline in gas prices
One of few stocks in market trading at a discount to cash, 2016 EBITDA of
$654MM Substantial incremental buying power upon defeat of proposed
merger Seneca Is Fully Aligned with Shareholders
|
 APPENDIX
22 |
 DIRECTOR NOMINEE:
E. HUNTER HARRISON
Canadian
National
Railway
Company
(“CN”)
(1998
-
2009):
Joined
as
EVP
and
COO
in 1998, becoming a director in 1999 and President and CEO in 2003.
Total shareholder return of more than 500%
during his tenure with the Company
compared to the S&P 500 return of 24% and the average total shareholder return
of the other North American Class I Railroads of 153%
(1)
Improved the company’s operating margin from ~22% in 1997 to more than 33% in
2009
Illinois
Central
Railroad
(1989
–
1998):
Joined
in
1989
as
Vice
President
and
COO
and rose through the ranks to become President and CEO in 1993. CN acquired
Illinois Central in 1998.
Sponsors
realized
unlevered
returns
that
were
multiples
of
their
initial
investment
Improved the company’s operating margins from single digits to in excess of
37% in 1996, three years after he was named Illinois Central’s
CEO Widely recognized as a world class business leader
2009
International
Business
Leader
of
the
Year,
Canadian
Chamber
of
Commerce
2007
CEO
of
the
Year,
the
Globe
and
Mail’s
Report
on
Business
magazine
Railroader
of
the
Year,
Railway
Age
magazine
Current and past directorships include American Association of Railroads, Belt
Railway, Terminal Railway, Wabash National Corp, Illinois Central Railroad
and TTX Company 23
(1) Comparable company group includes BNI, CSX, NSC and UNP.
|
 DIRECTOR NOMINEE:
JEFF HUNTER
US
Power
Generating
Company
(2003
-
Present):
Co-founder
and
CFO
of
US
Power Generating Company, an owner and operator of fifty-eight generating
units at six facilities with a total capacity of over 5,000 megawatts
(MW) Total
shareholder
return
of
two-to-three
times
since
initial
equity
investment
in 2005, based on market estimates
Lead a successful effort to reduce overhead costs by 33% and collateral
requirements by more than 50%
Raised more than $1.2bn in debt and equity financings
PA
Consulting
Group
(1998
-
2003):
Mr.
Hunter
was
a
Partner
with
PA
Consulting Group and global practice head of Energy Strategy & Risk
Management where he built a global practice focused on opportunities
presented in liberalizing markets, privatization, market restructuring,
acquisitions and
management/operations
improvement
in
the
power
&
natural
gas
sector.
El
Paso
Energy
(1992
-
1998):
Vice
President
Trading
for
El
Paso
Energy
where he integrated several trading and marketing organizations during El
Paso’s acquisitive period in the mid to late 1990s.
Led a team of 40 trading professionals in managing a 2 BCF per day physical
gas trading operation.
24 |
 READY TO SERVE:
STEVE WEYEL
Energy
XXI
Ltd.
(2005
-
2010):
Formerly
Co-founder,
President
and
Chief
Operating
Officer of Energy XXI, a Gulf of Mexico-based oil and gas producer with more
than 75 million barrels of oil equivalent (BOE) of proved reserves and
about 26,000 BOE per day of production.
EnerVen,
LLC
(2002
–
2005):
Principal
and
President/COO
of
EnerVen,
a
company
developing and supporting strategic ventures in the emerging energy
industry. InterGen
North
America
(1999
–
2002):
President
and
COO
of
InterGen
North
America, a Shell-Bechtel joint venture in the merchant gas and power
business. Dynegy
Corporation
(NGC
Corporation)
(1994-1999):
Served
in
various
executive
leadership positions, including Executive Vice President, Integrated Energy and
Senior Vice President, Power Development.
Resource
Technology
Corporation
(1983
–
1994):
Owned
Resource
Technology
Corporation, a company that identified a new market opportunity based on evolving
technology, and created the global engineering leader in onsite energy
commodity reserves evaluation
Baker-Hughes
(Baker
Eastern)
(1976
–
1983):
Worked
in
numerous
strategic
growth
roles including Managing Director for the Western Hemisphere.
25 |
 READY TO SERVE:
JEFFREY S. STEIN
Durham
Asset
Management
(2003
–
2009):
Co-founder
and
Principal
of
$1.5bn asset management firm focused on distressed debt and special
situations asset class.
Responsible for managing Durham’s substantial investments in the merchant
power, electric utility and energy industries
Formerly a member of the Board of Directors of KGen Power Corporation, an
independent power producer that owns more than 2,300MW of power generation
capacity in the Southeast US
Member of the Board of Directors of Granite Ridge Holdings, LLC,
an
independent power producing entity that owns the Granite Ridge Generation
facility, a 752MW CCGT in the Northeastern US.
The Delaware Bay Company, Inc.
(1997 –
2003): Director at boutique research
and investment banking firm focused on the distressed debt and special
situations asset classes, where he was responsible for identifying and evaluating
distressed investment opportunities in the energy, financial services,
merchant power, retail, real estate and utility industries.
Shearson
Lehman
Brothers
(1991
–
1995):
Responsible
for
providing
fundamental research and investment recommendations for public and private
real estate limited partnerships in the Capital Preservation & Restructuring
Group.
26 |
 NATURAL GAS SENSITIVITY:
MIDWEST COAL (11/11 vs. 8/12)
27
(1)
Assumes
that
Vermillion
(164
MW)
is
shut
down
at
the
end
of
2011
and
Hennepin
(293
MW)
is
shut
down
at
the
end
of
2013,
consistent with management forecast assumptions (see Merger Proxy, page 56).
2011
2012
2013
2014
2015
Capacity (MW)
(1)
3,144
2,980
2,980
2,687
2,687
Capacity factor
85.0%
85.0%
85.0%
85.0%
85.0%
Generation (millions of MWh)
23.4
22.2
22.2
20.0
20.0
Cinergy Around-the clock power price ($ / MWh)
8/12/2010
$32.05
$34.21
$36.97
$40.37
$44.09
11/11/2010
31.44
34.83
38.33
41.02
43.98
Change - $ / MWh
(0.62)
0.62
1.36
0.66
(0.10)
Unhedged revenue impact ($ mm)
($14)
$14
$30
$13
($2)
% Hedged
100%
15%
0%
0%
0%
Net revenue impact to Dynegy ($ mm)
$0
$12
$30
$13
($2) |
 NATURAL GAS SENSITIVITY:
DANSKAMMER (11/11 vs. 8/12)
28
2011
2012
2013
2014
2015
Generation (MWh @ 85% capacity factor)
2.8
2.8
2.8
2.8
2.8
New York Zone G Around-the clock power price ($ / MWh)
8/12/2010
$50.30
$53.16
$56.40
$58.68
$62.01
11/11/2010
46.52
49.42
51.86
$54.20
$56.52
Change - $ / MWh
(3.78)
(3.74)
(4.55)
(4.48)
(5.48)
Unhedged revenue impact ($ mm)
($10)
($10)
($13)
($12)
($15)
% Hedged
100%
40%
0%
0%
0%
Net revenue impact to Dynegy ($ mm)
$0
($6)
($13)
($12)
($15) |
 NATURAL GAS SENSITIVITY:
ONTELAUNEE (11/11 vs. 8/12)
29
2011
2012
2013
2014
2015
Capacity (MW)
580
580
580
580
580
Capacity factor
48%
48%
48%
48%
48%
Generation (millions of MWh)
2.4
2.4
2.4
2.4
2.4
8/12/2010
PJM East on-peak power price ($ / MWh)
57.08
59.08
61.41
63.84
67.45
TETCO M3 gas price ($ / MMBtu)
5.45
5.81
5.97
6.10
6.22
Plus: Basis ($ / MMBtu)
0.05
0.05
0.05
0.05
0.05
Delivered gas price ($ / MMBtu)
5.50
5.86
6.02
6.15
6.27
Spark Spread ($ / MWh
@ 7,100 heat rate)
18.03
17.47
18.65
20.17
22.90
11/11/2010
PJM East on-peak power price ($ / MWh)
55.27
58.64
62.13
64.78
68.02
TETCO M3 gas price ($ / MMBtu)
4.79
5.38
5.72
5.95
6.12
Plus: Basis ($ / MMBtu)
0.05
0.05
0.05
0.05
0.05
Delivered gas price ($ / MMBtu)
4.84
5.43
5.77
6.00
6.17
Spark Spread ($ / MWh
@ 7,100 heat rate)
20.90
20.07
21.18
22.20
24.22
Change -
$ / MWh
2.87
2.60
2.53
2.03
1.33
Unhedged
revenue impact ($ mm)
$7
$6
$6
$5
$3
% Hedged
100%
15%
0%
0%
0%
Net revenue impact to Dynegy ($ mm)
$0
$5
$6
$5
$3 |
 NATURAL GAS SENSITIVITY:
KENDALL (11/11 vs. 8/12)
30
2011
2012
2013
2014
2015
Capacity (MW)
1,200
1,200
1,200
1,200
1,200
Capacity factor
48%
48%
48%
48%
48%
Generation (millions of MWh)
5.0
5.0
5.0
5.0
5.0
8/12/2010
PJM West (COMED) on-peak power price ($ / MWh)
38.98
40.63
42.26
44.33
47.84
Chicago City Gate gas price ($ / MMBtu)
4.95
5.34
5.54
5.67
5.83
Plus: Basis ($ / MMBtu)
0.10
0.10
0.10
0.10
0.10
Delivered gas price ($ / MMBtu)
5.05
5.44
5.64
5.77
5.93
Spark Spread ($ / MWh
@ 7,400 heat rate)
1.57
0.39
0.56
1.65
3.94
11/11/2010
PJM West (COMED) on-peak power price ($ / MWh)
38.17
42.06
45.46
47.41
49.07
Chicago City Gate gas price ($ / MMBtu)
4.34
4.96
5.32
5.54
5.71
Plus: Basis ($ / MMBtu)
0.10
0.10
0.10
0.10
0.10
Delivered gas price ($ / MMBtu)
4.44
5.06
5.42
5.64
5.81
Spark Spread ($ / MWh
@ 7,400 heat rate)
5.28
4.59
5.33
5.66
6.07
Change -
$ / MWh
3.71
4.20
4.77
4.01
2.13
Unhedged
revenue impact ($ mm)
$19
$21
$24
$20
$11
% Hedged
100%
23%
23%
23%
23%
Net revenue impact to Dynegy ($ mm)
$0
$16
$18
$15
$8 |
 NATURAL GAS SENSITIVITY:
CASCO BAY (11/11 vs. 8/12)
31
2011
2012
2013
2014
2015
Capacity (MW)
540
540
540
540
540
Capacity factor
48%
48%
48%
48%
48%
Generation (millions of MWh)
2.3
2.3
2.3
2.3
2.3
8/12/2010
NEPOOL on-peak power price ($ / MWh)
53.43
56.26
58.73
61.50
65.01
Less: Basis ($ / MWh)
(4.50)
(4.50)
(4.50)
(4.50)
(4.50)
Est. Casco Bay on-peak power price ($ / MWh)
48.93
51.76
54.23
57.00
60.51
Dawn, ON gas price ($ / MMBtu)
5.23
5.55
5.70
5.79
5.93
Plus: Basis ($ / MMBtu)
0.25
0.25
0.25
0.25
0.25
Delivered gas price ($ / MMBtu)
5.48
5.80
5.95
6.04
6.18
Spark Spread ($ / MWh @ 7,400 heat rate)
8.37
8.80
10.18
12.28
14.75
11/11/2010
NEPOOL on-peak power price ($ / MWh)
50.93
54.50
57.69
59.94
62.61
Less: Basis ($ / MWh)
(4.50)
(4.50)
(4.50)
(4.50)
(4.50)
Est. Casco Bay on-peak power price ($ / MWh)
46.43
50.00
53.19
55.44
58.11
Dawn, ON gas price ($ / MMBtu)
4.63
5.21
5.49
5.72
5.89
Plus: Basis ($ / MMBtu)
0.25
0.25
0.25
0.25
0.25
Delivered gas price ($ / MMBtu)
4.88
5.46
5.74
5.97
6.14
Spark Spread ($ / MWh @ 7,400 heat rate)
10.32
9.60
10.69
11.30
12.69
Change - $ / MWh
1.95
0.79
0.51
(0.98)
(2.05)
Unhedged revenue impact ($ mm)
$4
$2
$1
($2)
($5)
% Hedged
100%
40%
0%
0%
0%
Net revenue impact to Dynegy ($ mm)
$0
$1
$1
($2)
($5) |
 NATURAL GAS SENSITIVITY:
INDEPENDENCE
(11/11 vs. 8/12)
32
2011
2012
2013
2014
2015
Capacity (MW)
1,064
1,064
1,064
1,064
1,064
Capacity factor
48%
48%
48%
48%
48%
Generation (millions of MWh)
4.4
4.4
4.4
4.4
4.4
8/12/2010
NY Zone A on-peak power price ($ / MWh)
40.04
40.90
42.07
41.79
44.31
Transco Zone 6 gas price ($ / MMBtu)
5.52
5.88
6.01
6.17
6.30
Spark Spread ($ / MWh @ 7,300 heat rate)
(0.26)
(2.02)
(1.84)
(3.25)
(1.69)
11/11/2010
NY Zone A on-peak power price ($ / MWh)
39.66
42.14
45.22
47.13
48.54
Transco Zone 6 gas price ($ / MMBtu)
4.82
5.44
5.76
5.99
6.17
Spark Spread ($ / MWh @ 7,300 heat rate)
4.47
2.41
3.20
3.37
3.53
Change - $ / MWh
4.74
4.44
5.04
6.61
5.22
Unhedged revenue impact ($ mm)
$21
$20
$22
$29
$23
% Hedged
100%
70%
70%
64%
0%
Net revenue impact to Dynegy ($ mm)
$0
$6
$7
$11
$23 |
 NATURAL GAS SENSITIVITY:
MOSS LANDING 1&2 (11/11 vs. 8/12)
33
2011
2012
2013
2014
2015
Capacity (MW)
1,020
1,020
1,020
1,020
1,020
Capacity factor
57%
57%
57%
57%
57%
Generation (millions of MWh)
5.1
5.1
5.1
5.1
5.1
8/12/2010
NP-15 on-peak power price ($ / MWh)
44.55
49.61
52.94
57.58
59.55
PG&E South gas price ($ / MMBtu)
4.70
5.12
5.35
5.50
5.64
Plus: Basis ($ / MMBtu)
0.30
0.30
0.30
0.30
0.30
Delivered gas price ($ / MMBtu
5.00
5.42
5.65
5.80
5.94
Spark Spread ($ / MWh
@ 7,300 heat rate)
8.03
10.01
11.68
15.21
16.20
11/11/2010
NP-15 on-peak power price
40.91
47.87
52.70
56.53
59.50
PG&E South gas price ($ / MMBtu)
4.19
4.82
5.17
5.37
5.54
Plus: Basis ($ / MMBtu)
0.30
0.30
0.30
0.30
0.30
Delivered gas price ($ / MMBtu
4.49
5.12
5.47
5.67
5.84
Spark Spread ($ / MWh
@ 7,300 heat rate)
8.16
10.50
12.79
15.12
16.90
Change -
$ / MWh
0.13
0.49
1.11
(0.09)
0.70
Unhedged
revenue impact ($ mm)
$1
$3
$6
($0)
$4
% Hedged
100%
50%
0%
0%
0%
Net revenue impact to Dynegy ($ mm)
$0
$1
$6
($0)
$4 |
 VALUATION SUPPORTS SIGNIFICANT
UPSIDE IN DYNEGY STOCK
34
Seneca’s sum-of-the-parts analysis indicates Dynegy is worth
greater than $6 per share today and up to $16-18 in a recovery
scenario Environmental capital expenditures are already included in the
DCF-based value of scrubbed coal on an NPV basis, along with associated
contracts Full SG&A and corporate overhead costs are already
included Seneca ties its sum-of-the-parts to management’s
EBITDA guidance Management claims of additional overhead costs appear
misguided |
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Seneca Capital International Master Fund, L.P., Seneca Capital, L.P., Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, Seneca Capital International GP, LLC, Seneca Capital Advisors, LLC and Douglas A. Hirsch (together with each of the foregoing, “Seneca Capital”) have jointly made a preliminary filing with the Securities and Exchange Commission (“SEC”) of a proxy statement and an accompanying proxy card to be used to solicit votes in connection with the solicitation of proxies against a proposed acquisition of Dynegy Inc. (“Dynegy”) by Denali Parent Inc. and Denali Merger Sub Inc., which will be voted on at a meeting of Dynegy’s stockholders.
SENECA CAPITAL ADVISES ALL STOCKHOLDERS OF DYNEGY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEBSITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THE PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR, GEORGESON, INC., BY CALLING (888) 877-5373.
Each of Seneca Capital International Master Fund, L.P., Seneca Capital, L.P., Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, Seneca Capital International GP, LLC, Seneca Capital Advisors, LLC and Douglas A. Hirsch (the “Participants”) is a participant in this solicitation. Douglas A. Hirsch is the managing member of each of Seneca Capital Investments, LLC, Seneca Capital International GP, LLC and Seneca Capital Advisors, LLC. The principal occupation of Mr. Hirsch is investment management. Seneca Capital Investments, LLC is the general partner of Seneca Capital Investments, L.P. Seneca Capital International GP, LLC is the general partner of Seneca Capital International Master Fund, L.P., and Seneca Capital Advisors, LLC is the general partner of Seneca Capital, L.P. The principal business address of Mr. Hirsch, Seneca Capital Investments, LLC, Seneca Capital Investments, L.P., Seneca Capital International GP, LLC, Seneca Capital International Master Fund, L.P., Seneca Capital Advisors, LLC and Seneca Capital, L.P. is c/o Seneca Capital Investments, LP, 590 Madison Avenue, 28th Floor, New York, New York 10022.
As of November 12, 2010, Seneca Capital International Master Fund, L.P. beneficially owned 7,712,100 shares of Dynegy’s common stock, par value $0.01 per share (“Shares”), representing beneficial ownership of approximately 6.4% of the Shares. As of November 12, 2010, Seneca Capital, L.P. beneficially owned 3,514,400 Shares, representing beneficial ownership of approximately 2.9% of the Shares. Each of Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, and Mr. Hirsch may be deemed to beneficially own 11,226,500 Shares, representing beneficial ownership of approximately 9.3% of the Shares, held in the aggregate by Seneca Capital International Master Fund, L.P. and Seneca Capital, L.P. Seneca Capital International GP, LLC may be deemed to beneficially own 7,712,100 Shares, representing beneficial ownership of approximately 6.4% of the Shares, held by Seneca Capital International Master Fund, L.P. Seneca Capital Advisors, LLC may be deemed to beneficially own 3,514,400 Shares, representing beneficial ownership of approximately 2.9% of the Shares, held by Seneca Capital, L.P. Each of Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, Seneca Capital International GP, LLC, Seneca Capital Advisors, LLC and Douglas A. Hirsch disclaims beneficial ownership of the Shares except to the extent of its or his pecuniary interest therein, and this filing shall not be deemed an admission of beneficial ownership of such Shares for any purpose.
As of November 12, 2010, Seneca Capital International Master Fund, L.P. and Seneca Capital, L.P. held European-style call options, providing the right to purchase 1,986,900 and 904,100 shares, respectively at an exercise price of $0.01 per share by delivery of notice of exercise as of April 15, 2011.