Dynegy CEO Chuck Watson resigns

NEW YORK (CNN/Money) - Dynegy Inc. Chairman and CEO Chuck Watson resigned Tuesday, and the troubled energy trader said it has appointed an executive of ChevronTexaco to replace him temporarily as chairman.

Dynegy directors accept CEO's resignation

By LAURA GOLDBERG
Copyright 2002 Houston Chronicle

Chuck Watson, the chairman and chief executive officer of Houston-based Dynegy, resigned this morning as the company sought to rebuild investor confidence amid deepening federal investigations.

Dynegy's board of directors appointed Glenn Tilton as interim chairman. Tilton, a Dynegy board member, also serves as vice chairman and a board member of ChevronTexaco Corp., which owns 26.5 percent of Dynegy.

Watson, who served as Dynegy's chairman and chief executive officer since its creation in 1985, made only a brief, written public statement:

"For 17 years, I have endeavored to build value for all of our stakeholders," he said. "Dynegy combines strategic assets, solid management and proven strategies to navigate through the immediate challenges and meet the opportunities ahead."

Watson's resignation comes amid investigations by the Securities and Exchange Commission on two fronts: for Dynegy's accounting related to a natural gas deal known as Project Alpha and for its involvement in so-called wash trades, which involve the buying and selling of the same amount of electricity or other commodities at the same time.

Wash trades can be used to inflate a company's revenues or trading volumes but don't contribute to profits. Late Friday, Dynegy said the U.S. Attorney 's Office in Houston subpoenaed documents related to its wash trades with CMS Energy Corp. as well as Project Alpha.

As a result of such investigations, lawsuits and worries about profits, at Friday's close Dynegy's shares were down more than 80 percent from a year before. Today, however, investor reaction to the Watson resignation was positive. Dynegy stock was up 67 cents at $9.97 a share.

Investors had been waiting for some signal that ChevronTexaco would take steps to ensure Dynegy's survival. They likely saw today's moves as a sign in that direction.

ChevronTexaco issued a statement this morning. Notably, the company had no comment concerning Watson.

It did offer praise for Tilton and note its support for the remaining Dynegy management team, which includes Steve Bergstrom who is staying as president and chief operating officer.

"As a major stockholder with strong commercial relationships with Dynegy, ChevronTexaco has a vested interest in supporting a strategy that will restore investor confidence in the company," the company said.

The Dynegy board also named Daniel Dienstbier, also a Dynegy board member, as interim chief executive officer. Dienstbier is also president of Northern Natural Gas, the former Enron Corp. pipeline.

A search will be conducted for a new chairman and chief executive officer.

In many ways, Watson's troubles at Dynegy began last year after he tried to save Enron by crafting a deal to buy the failing company.

But Watson walked away from the deal after he said that Enron executives hide the company's true financial condition from him. Enron, which filed for Chapter 11 bankruptcy, sued Dynegy for breaking the merger deal.

After Enron's collapse, Wall Street started taking a closer look at other companies that trade and market energy. Dynegy, like others, was forced to take steps to shore up its balance sheet.

In recent days, Watson has said he wouldn't stand by and let his company be trashed. He has been quick to hold conference calls with analysts to try to keep them informed on matters related to Dynegy.

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