879215--3/15/2006--DYNEGY_INC

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{operation, natural, condition}

{gas, price, oil}

{debt, indebtedness, cash}

{competitive, industry, competition}

{cost, regulation, environmental}

{capital, credit, financial}

{condition, economic, financial}

{cost, operation, labor}

{stock, price, operating}

{control, financial, internal}

{loss, insurance, financial}

{financial, litigation, operation}

{personnel, key, retain}

{stock, price, share}

{acquisition, growth, future}

Factors That May Affect Future Results Risks Related to Our Business Future changes in commodity prices may materially adversely impact our financial condition, results of operations and cash flows. Because our power generation facilities operate mostly without long-term power sales agreements and because wholesale power prices are subject to significant volatility, our revenues and profitability are subject to significant fluctuations. Because we generally do not hedge our long-term exposure to commodity price risks, we are vulnerable to decreases in power prices and increases in the price of natural gas, coal and fuel 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, may have a material adverse effect on our financial condition, results of operations and cash flows. If we fail to implement our business strategy, our financial condition, results of operations and cash flows could be materially adversely affected. The regional concentration of our business in the Midwest may increase the effects of adverse trends in that market. 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. 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. Our results of operations fluctuate on a seasonal and quarterly basis due to weather conditions. 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. Refurbishment and operation of power generation facilities involve significant risks that cannot always be covered by insurance or contractual protections and could have a material adverse effect on our financial condition, results of operations and cash flows. Our operations are subject to hazards customary to the power generation industry. We may not have adequate insurance or adequate contractual indemnities to cover all of these hazards. 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, which may negatively impact our results of operations. Our costs for compliance with 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. Acts of terrorism could have a material adverse effect on our financial condition, results of operations and cash flows. Our financial condition, results of operations and cash flows could be adversely impacted by strikes or work stoppages by our unionized employees. We reported a material weakness in our internal control over financial reporting that, if not remedied, could adversely affect our internal controls. Risks Related to Investing in Our Common Stock We have significant debt that could negatively impact our business. We expect that our non-investment grade status will continue to adversely affect our financial condition, results of operations and cash flows. The terms of our debt may severely limit our ability to plan for or respond to changes in our businesses. Our access to the capital markets may be limited. We may not have adequate liquidity to post required amounts of additional collateral. 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. The interests of Chevron may conflict with your interests. Many of our senior officers have been promoted recently and have only worked together as a management team for a short period of time. In addition, a number of our senior officers have limited experience in management positions.

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879215--3/15/2006--DYNEGY_INC_/IL/