879215--2/27/2007--DYNEGY_INC

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{competitive, industry, competition}

{capital, credit, financial}

{cost, regulation, environmental}

{cost, operation, labor}

{stock, price, share}

{acquisition, growth, future}

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Factors That May Affect Future Results Risks Related to Our Business Our growth strategy may include acquisitions or combinations that could fail or present unanticipated problems for our business in the future, which could adversely affect our ability to realize anticipated benefits of those transactions. Because many of our power generation facilities operate mostly without term power sales agreements and because wholesale power prices are subject to significant volatility, our revenues and profitability are subject to significant fluctuations. Our hedging activities will not fully protect us from exposure to commodity price risks, and we are vulnerable to decreases in power prices and increases in the price of natural gas, coal and oil. To the extent we do engage in hedging activities, our models representing the market may be inaccurate. Unauthorized hedging and related activities by our employees could result in significant losses. 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 liquid fuel supply agreements. Availability and cost of emission credits could materially impact our costs of operations. 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. The regional concentration of our business in the Midwest may increase the effects of adverse trends in that market. We depend on transmission facilities operated by RTOs and ISOs, which could result in an inability to sell and deliver power to the market that may, in turn, adversely affect the profitability of our generation facilities. We do not own, control or set the rates for the transmission facilities we use to deliver energy, capacity and ancillary services to our customers. In addition, transmission capacity may not be available to us, the total costs of transmission may exceed our projections or cause us to forego transactions, and changes in the transmission grid could reduce our revenues. 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. 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 may negatively impact our results of operations. Our costs for compliance with existing environmental laws are significant, and costs for compliance with new environmental laws could adversely affect our financial condition, results of operations and cash flows. Different regional power markets in which we compete or may compete in the future have changing transmission regulatory structures, which could materially adversely affect our performance in these regions. Our financial condition, results of operations and cash flows could be adversely impacted by strikes or work stoppages by our unionized employees. In the past, we have reported material weaknesses in our internal control over financial reporting and may identify material weaknesses in the future that could adversely affect investor confidence and impair the value of our common stock. The ultimate outcome of unresolved legal proceedings and investigations relating to our past activities cannot be predicted. Any adverse determination could have a material adverse effect on our financial condition, results of operations and cash flows. Risks Related to Investing in Our Common Stock If we issue a material amount of our common stock in the future or certain of our stockholders sell a material amount of our common stock, our ability to use our federal net operating losses to offset our future taxable income may be limited under Section 382 of the Internal Revenue Code. The payment of dividends on our common stock is restricted and, moreover, subject to the discretion of our Board of Directors. We have significant debt that could negatively impact our business, and our credit ratings are less than investment grade. Our access to the capital markets may be limited. The interests of Chevron may conflict with your interests.

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879215--2/27/2007--DYNEGY_INC_/IL/