DYNEGY HOLDINGS INC (Form: 10-Q, Received: 08/08/2011 15:42:49)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

DYNEGY INC.

DYNEGY HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Entity	Commission File Number	State of Incorporation	I.R.S. Employer Identification No.
Dynegy Inc.	001-33443	Delaware	20-5653152
Dynegy Holdings Inc.	000-29311	Delaware	94-3248415

1000 Louisiana, Suite 5800
Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

(713) 507-6400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Dynegy Inc.			Yes x No o
Dynegy Holdings Inc.			Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Dynegy Inc.			Yes x No o
Dynegy Holdings Inc.			Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated
filer

Accelerated filer

Non-accelerated filer

(Do not check if a
smaller reporting company)

Smaller reporting company

Dynegy Inc.

Dynegy Holdings Inc.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Dynegy Inc.			Yes o No x
Dynegy Holdings Inc.			Yes o No x

Indicate the number of shares outstanding of Dynegy Inc.’s classes of common stock, as of the latest practicable date: Common stock, $0.01 par value per share, 122,435,022 shares outstanding as of August 1, 2011. All of Dynegy Holdings Inc.’s outstanding common stock is owned by Dynegy Inc.

This combined Form 10-Q is separately filed by Dynegy Inc. and Dynegy Holdings Inc. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to a registrant other than itself.

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

TABLE OF CONTENT S

		Page
PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS — DYNEGY INC. AND DYNEGY HOLDINGS INC:

Condensed Consolidated Balance Sheets—Dynegy Inc.:
June 30, 2011 and December 31, 2010		4
Condensed Consolidated Statements of Operations—Dynegy Inc.:
For the three and six months ended June 30, 2011 and 2010		5
Condensed Consolidated Statements of Cash Flows—Dynegy Inc.:
For the three and six months ended June 30, 2011 and 2010		6
Condensed Consolidated Statements of Comprehensive Income (Loss)—Dynegy Inc.:
For the three and six months ended June 30, 2011 and 2010		7
Condensed Consolidated Balance Sheets—Dynegy Holdings Inc.:
June 30, 2011 and December 31, 2010		8
Condensed Consolidated Statements of Operations—Dynegy Holdings Inc.:
For the three and six months ended June 30, 2011 and 2010		9
Condensed Consolidated Statements of Cash Flows—Dynegy Holdings Inc.:
For the three and six months ended June 30, 2011 and 2010		10
Condensed Consolidated Statements of Comprehensive Income (Loss)—Dynegy Holdings Inc.:
For the three and six months ended June 30, 2011 and 2010		11
Notes to Condensed Consolidated Financial Statements		12

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — DYNEGY INC. AND DYNEGY HOLDINGS INC.	48
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK — DYNEGY INC. AND DYNEGY HOLDINGS INC.	76
Item 4.	CONTROLS AND PROCEDURES — DYNEGY INC. AND DYNEGY HOLDINGS INC.	77

PART II. OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS — DYNEGY INC. AND DYNEGY HOLDINGS INC.	79
Item 1A.	RISK FACTORS — DYNEGY INC. AND DYNEGY HOLDINGS INC.	79
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS — DYNEGY INC.	81
Item 5.	OTHER INFORMATION — DYNEGY INC.	81
Item 6.	EXHIBITS — DYNEGY INC. AND DYNEGY HOLDINGS INC.	82

EXPLANATORY NOTE

This report includes the combined filing of Dynegy Inc. (“Dynegy”) and Dynegy Holdings Inc. (“DHI”). DHI is the principal subsidiary of Dynegy, providing nearly 100 percent of Dynegy’s total consolidated revenue for the six-month period ended June 30, 2011 and constituting nearly 100 percent of Dynegy’s total consolidated asset base as of June 30, 2011. Unless the context indicates otherwise, throughout this report, the terms “the Company”, “we”, “us”, “our” and “ours” are used to refer to both Dynegy and DHI and their direct and indirect subsidiaries. Discussions or areas of this report that apply only to Dynegy, DHI or specific subsidiaries are clearly noted in such section.

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DEFINITIONS

As used in this Form 10-Q, the abbreviations contained herein have the meanings set forth below.

ASU		Accounting Standards Update
BACT		Best available control technology
BART		Best available retrofit technology
BTA		Best technology available
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CAISO		The California Independent System Operator
CAMR		Clean Air Mercury Rule
CARB		California Air Resources Board
CAVR		The Clean Air Visibility Rule
CCR		Coal Combustion Residuals
CEQA		California Environmental Quality Act
CERCLA		The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
CO 2		Carbon Dioxide
CSAPR		Cross-State Air Pollution Rule
CWA		Clean Water Act
DHI		Dynegy Holdings Inc.
DMSLP		Dynegy Midstream Services L.P.
EBITDA		Earnings before interest, taxes, depreciation and amortization
EPA		Environmental Protection Agency
FERC		Federal Energy Regulatory Commission
GAAP		Generally Accepted Accounting Principles of the United States of America
GEN		Our power generation business
GEN-MW		Our power generation business - Midwest segment
GEN-NE		Our power generation business - Northeast segment
GEN-WE		Our power generation business - West segment
GHG		Greenhouse Gas
HAPs		Hazardous air pollutants, as defined by the Clean Air Act
ICC		Illinois Commerce Commission
IMA		In-market asset availability
ISO		Independent System Operator
ISO-NE		Independent System Operator New England
MACT		Maximum achievable control technology
MGGA		Midwest Greenhouse Gas Accord
MGGRP		Midwestern Greenhouse Gas Reduction Program
MISO		Midwest Independent Transmission System Operator, Inc.
MMBtu		One million British thermal units
MW		Megawatts
MWh		Megawatt hour
NOL		Net operating loss
NO x		Nitrogen oxide
NPDES		National Pollutant Discharge Elimination System
NRG		NRG Energy, Inc.
NSPS		New Source Performance Standard
NYISO		New York Independent System Operator
NYSDEC		New York State Department of Environmental Conservation
OAL		Office of Administrative Law
OTC		Over-the-counter
PJM		PJM Interconnection, LLC
PPEA		Plum Point Energy Associates, LLC
PPEA Holding		Plum Point Energy Associates Holding Company, LLC
PSD		Prevention of significant deterioration
RACT		Reasonably available control technology
RCRA		Resource Conservation and Recovery Act
RGGI		Regional Greenhouse Gas Initiative
RMR		Reliability Must Run
SEC		U.S. Securities and Exchange Commission
SIP		State Implementation Plan
SO 2		Sulfur dioxide
SPDES		State Pollutant Discharge Elimination System
VaR		Value at Risk
VIE		Variable Interest Entity
WCI		Western Climate Initiative

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PART I. FINANCIAL INFORMATION

Item 1—FINANCIAL STATEMENTS—DYNEGY INC. AND DYNEGY HOLDINGS INC.

DYNEGY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited) (in millions, except share data)

	June 30, 2011			December 31, 2010
ASSETS
Current Assets
Cash and cash equivalents	$	399		$	291
Restricted cash and investments	878			81
Short-term investments	106			106
Accounts receivable, net of allowance for doubtful accounts of $31 and $32, respectively	169			230
Accounts receivable, affiliates	—			1
Inventory	125			121
Assets from risk-management activities	989			1,199
Deferred income taxes	12			12
Broker margin account	202			80
Prepayments and other current assets	137			123
Total Current Assets	3,017			2,244
Property, Plant and Equipment	8,700			8,593
Accumulated depreciation	(2,499		)	(2,320		)
Property, Plant and Equipment, Net	6,201			6,273
Other Assets
Restricted cash and investments	9			859
Assets from risk-management activities	84			72
Intangible assets	116			141
Other long-term assets	436			424
Total Assets	$	9,863		$	10,013

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	111		$	134
Accrued interest	51			36
Accrued liabilities and other current liabilities	86			109
Liabilities from risk-management activities	1,043			1,138
Notes payable and current portion of long-term debt	1,008			148
Total Current Liabilities	2,299			1,565
Long-term debt	3,852			4,426
Long-term debt, affiliates	200			200
Long-Term Debt	4,052			4,626
Other Liabilities
Liabilities from risk-management activities	123			99
Deferred income taxes	509			641
Other long-term liabilities	321			336
Total Liabilities	7,304			7,267
Commitments and Contingencies (Note 7)
Stockholders’ Equity
Common Stock, $0.01 par value, 420,000,000 shares authorized at June 30, 2011 and December 31, 2010; 123,009,079 and 121,687,198 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively	1			1
Additional paid-in capital	6,071			6,067
Subscriptions receivable	(2		)	(2		)
Accumulated other comprehensive loss, net of tax	(51		)	(53		)
Accumulated deficit	(3,389		)	(3,196		)
Treasury stock, at cost, 728,408 and 628,014 shares at June 30, 2011 and December 31, 2010, respectively	(71		)	(71		)
Total Stockholders’ Equity	2,559			2,746
Total Liabilities and Stockholders’ Equity	$	9,863		$	10,013

See the notes to condensed consolidated financial statements.

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DYNEGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited) (in millions, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenues	$	326		$	239		$	831		$	1,097
Cost of sales	(225		)	(231		)	(503		)	(539		)
Operating and maintenance expense, exclusive of depreciation shown separately below	(106		)	(118		)	(216		)	(231		)
Depreciation and amortization expense	(75		)	(90		)	(201		)	(165		)
Impairment and other charges	(1		)	(1		)	(1		)	(1		)
General and administrative expenses	(25		)	(28		)	(65		)	(59		)

Operating income (loss)	(106		)	(229		)	(155		)	102
Losses from unconsolidated investments	—			—			—			(34		)
Interest expense	(89		)	(91		)	(178		)	(180		)
Other income and expense, net	3			1			4			2

Loss from continuing operations before income taxes	(192		)	(319		)	(329		)	(110		)
Income tax benefit (Note 10)	76			128			136			63

Loss from continuing operations	(116		)	(191		)	(193		)	(47		)
Income from discontinued operations, net of taxes	—			—			—			1

Net loss	$	(116	)	$	(191	)	$	(193	)	$	(46	)

Loss Per Share (Note 11):
Basic loss per share:
Loss from continuing operations	$	(0.95	)	$	(1.59	)	$	(1.58	)	$	(0.39	)
Income from discontinued operations	—			—			—			0.01

Basic loss per share	$	(0.95	)	$	(1.59	)	$	(1.58	)	$	(0.38	)

Diluted loss per share:
Loss from continuing operations	$	(0.95	)	$	(1.59	)	$	(1.58	)	$	(0.39	)
Income from discontinued operations	—			—			—			0.01

Diluted loss per share	$	(0.95	)	$	(1.59	)	$	(1.58	)	$	(0.38	)

Basic shares outstanding	122			120			122			120
Diluted shares outstanding	122			121			122			121

See the notes to condensed consolidated financial statements.

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DYNEGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) (in millions)

	Six Months Ended June 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(193	)	$	(46	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization	209			172
Impairment and other charges	1			1
Losses from unconsolidated investments, net of cash distributions	—			34
Risk-management activities	127			8
Deferred income taxes	(135		)	(62		)
Other	24			30
Changes in working capital:
Accounts receivable	60			14
Inventory	(4		)	3
Broker margin account	(92		)	255
Prepayments and other assets	1			8
Accounts payable and accrued liabilities	(55		)	(36		)
Changes in non-current assets	(33		)	(17		)
Changes in non-current liabilities	4			4

Net cash provided by (used in) operating activities	(86		)	368

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(128		)	(201		)
Unconsolidated investments	—			(15		)
Maturities of short-term investments	217			27
Purchases of short-term investments	(247		)	(331		)
Decrease (increase) in restricted cash and investments	53			(10		)
Other investing	10			9

Net cash used in investing activities	(95		)	(521		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings, net of financing costs	399			(5		)
Repayments of borrowings	(113		)	(31		)
Net proceeds from issuance of capital stock	3			—

Net cash provided by (used in) financing activities	289			(36		)

Net increase (decrease) in cash and cash equivalents	108			(189		)
Cash and cash equivalents, beginning of period	291			471

Cash and cash equivalents, end of period	$	399		$	282

Other non-cash investing activity:
Non-cash capital expenditures	$	(7	)	$	6

Other non-cash financing activity:
Deferred financing fees	$	(4	)		—

See the notes to condensed consolidated financial statements.

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DYNEGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited) (in millions)

	Three Months Ended June 30,
	2011			2010

Net loss	$	(116	)	$	(191	)
Amortization of unrecognized prior service cost and actuarial gain (net of tax expense of $1 and $1)	1			—

Other comprehensive income, net of tax	1			—

Comprehensive loss	$	(115	)	$	(191	)

	Six Months Ended June 30,
	2011			2010

Net loss	$	(193	)	$	(46	)
Amortization of unrecognized prior service cost and actuarial gain (net of tax expense of $1 and $1)	2			2

Other comprehensive income, net of tax	2			2

Comprehensive loss	$	(191	)	$	(44	)

See the notes to condensed consolidated financial statements.

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DYNEGY HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited) (in millions)

	June 30, 2011			December 31, 2010
ASSETS
Current Assets
Cash and cash equivalents	$	354		$	253
Restricted cash and investments	878			81
Short-term investments	94			90
Accounts receivable, net of allowance for doubtful accounts of $12 and $13, respectively	168			229
Accounts receivable, affiliates	—			1
Inventory	125			121
Assets from risk-management activities	989			1,199
Deferred income taxes	4			3
Broker margin account	202			80
Prepayments and other current assets	136			123
Total Current Assets	2,950			2,180
Property, Plant and Equipment	8,700			8,593
Accumulated depreciation	(2,499		)	(2,320		)
Property, Plant and Equipment, Net	6,201			6,273
Other Assets
Restricted cash and investments	9			859
Assets from risk-management activities	84			72
Intangible assets	116			141
Other long-term assets	436			424
Total Assets	$	9,796		$	9,949

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	111		$	134
Accrued interest	51			36
Accrued liabilities and other current liabilities	85			106
Liabilities from risk-management activities	1,043			1,138
Notes payable and current portion of long-term debt	1,008			148
Total Current Liabilities	2,298			1,562
Long-term debt	3,852			4,426
Long-term debt, affiliates	200			200
Long-Term Debt	4,052			4,626
Other Liabilities
Liabilities from risk-management activities	123			99
Deferred income taxes	474			606
Other long-term liabilities	321			337
Total Liabilities	7,268			7,230
Commitments and Contingencies (Note 7)
Stockholder’s Equity
Capital Stock, $1 par value, 1,000 shares authorized at June 30, 2011 and December 31, 2010	—			—
Additional paid-in capital	5,135			5,135
Affiliate receivable	(812		)	(814		)
Accumulated other comprehensive loss, net of tax	(51		)	(53		)
Accumulated deficit	(1,744		)	(1,549		)
Total Stockholder’s Equity	2,528			2,719
Total Liabilities and Stockholder’s Equity	$	9,796		$	9,949

See the notes to condensed consolidated financial statements.

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DYNEGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited) (in millions)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenues	$	326		$	239		$	831		$	1,097
Cost of sales	(225		)	(231		)	(503		)	(539		)
Operating and maintenance expense, exclusive of depreciation shown separately below	(106		)	(118		)	(216		)	(231		)
Depreciation and amortization expense	(75		)	(90		)	(201		)	(165		)
Impairment and other charges	(1		)	(1		)	(1		)	(1		)
General and administrative expenses	(23		)	(28		)	(64		)	(59		)

Operating income (loss)	(104		)	(229		)	(154		)	102
Losses from unconsolidated investments	—			—			—			(34		)
Interest expense	(89		)	(91		)	(178		)	(180		)
Other income and expense, net	3			1			4			2

Loss from continuing operations before income taxes	(190		)	(319		)	(328		)	(110		)
Income tax benefit (Note 10)	75			128			133			56

Loss from continuing operations	(115		)	(191		)	(195		)	(54		)
Income from discontinued operations, net of taxes	—			—			—			1

Net loss	$	(115	)	$	(191	)	$	(195	)	$	(53	)

See the notes to condensed consolidated financial statements.

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DYNEGY HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) (in millions)

	Six Months Ended June 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(195	)	$	(53	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization	209			172
Impairment and other charges	1			1
Losses from unconsolidated investments, net of cash distributions	—			34
Risk-management activities	127			8
Deferred income taxes	(132		)	(55		)
Other	22			27
Changes in working capital:
Accounts receivable	60			19
Inventory	(4		)	3
Broker margin account	(92		)	255
Prepayments and other assets	1			8
Accounts payable and accrued liabilities	(54		)	(37		)
Changes in non-current assets	(33		)	(17		)
Changes in non-current liabilities	4			4

Net cash provided by (used in) operating activities	(86		)	369

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(128		)	(201		)
Unconsolidated investments	—			(15		)
Maturities of short-term investments	201			28
Purchases of short-term investments	(235		)	(316		)
Decrease (increase) in restricted cash and investments	53			(10		)
Affiliate transactions	—			(2		)
Other investing	10			8

Net cash used in investing activities	(99		)	(508		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings, net of financing costs	399			(5		)
Repayments of borrowings	(113		)	(31		)

Net cash provided by (used in) financing activities	286			(36		)

Net increase (decrease) in cash and cash equivalents	101			(175		)
Cash and cash equivalents, beginning of period	253			419

Cash and cash equivalents, end of period	$	354		$	244

Other non-cash investing activity:
Non-cash capital expenditures	$	(7	)	$	6

Other non-cash financing activity:
Deferred financing fees	$	(4	)		—

See the notes to condensed consolidated financial statements.

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DYNEGY HOLDINGS INC.

CONDENSED CONSOLIDATED OF COMPREHENSIVE INCOME (LOSS)

(unaudited) (in millions)

	Three Months Ended June 30,
	2011			2010

Net loss	$	(115	)	$	(191	)
Amortization of unrecognized prior service cost and actuarial gain (net of tax expense of $1 and $1)	1			—

Other comprehensive income, net of tax	1			—
Comprehensive loss	$	(114	)	$	(191	)

	Six Months Ended June 30,
	2011			2010

Net loss	$	(195	)	$	(53	)
Amortization of unrecognized prior service cost and actuarial gain (net of tax expense of $1 and $1)	2			2

Other comprehensive income, net of tax	2			2
Comprehensive loss	$	(193	)	$	(51	)

See the notes to condensed consolidated financial statements.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Note 1—Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to interim financial reporting as prescribed by the SEC. The year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. These interim financial statements should be read together with the consolidated financial statements and notes thereto included in Dynegy’s and DHI’s annual report on Form 10-K for the year ended December 31, 2010, filed on March 8, 2011, which we refer to as each registrant’s “Form 10-K”.

The unaudited condensed consolidated financial statements contained in this report include all material adjustments of a normal and recurring nature that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results of operations for the interim periods presented in this Form 10-Q are not necessarily indicative of the results to be expected for the full year or any other interim period due to seasonal fluctuations in demand for our energy products and services, changes in commodity prices, timing of maintenance and other expenditures and other factors. The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make informed estimates and judgments that affect our reported financial position and results of operations based on currently available information. We review significant estimates and judgments affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments. Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements. Estimates and judgments are used in, among other things, (i) developing fair value assumptions, including estimates of future cash flows and discount rates, (ii) analyzing tangible and intangible assets for possible impairment, (iii) estimating the useful lives of our assets, (iv) assessing future tax exposure and the realization of deferred tax assets, (v) determining amounts to accrue for contingencies, guarantees and indemnifications, (vi) estimating various factors used to value our pension assets and liabilities and (vii) determining the primary beneficiary of variable interest entities (“VIEs”). Actual results could differ materially from our estimates.

Going Concern. Our accompanying unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these unaudited condensed consolidated financial statements. However, continued low power prices over the past two years have had a significant adverse impact on our business and continue to negatively impact our projected future liquidity.

We recently completed a reorganization of our subsidiaries and in connection therewith, certain of our subsidiaries (GasCo and CoalCo, as defined in Note 13—Subsequent Events) entered into two new credit facilities on August 5, 2011 which resulted in the repayment in full and termination of commitments under DHI’s Fifth Amended and Restated Credit Agreement. However, these new credit facilities contain certain restrictions related to distributions to their respective parent companies, including Dynegy and DHI (please read Note 13—Subsequent Events for further discussion). Although these new credit facilities are designed to provide sufficient operating liquidity for GasCo and CoalCo for the foreseeable future, there still remain significant debt service requirements for the unsecured notes and debentures at DHI as well as the operating lease payment obligations related to the Danskammer and Roseton operating leases at a wholly-owned subsidiary of DHI. We currently project that we will have minimal liquidity at DHI subsequent to funding of the debt service requirements and operating lease payment obligations beyond the next eighteen months absent a significant positive change in the forecasted operating results of the Roseton and Danskammer facilities.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

The August 2011 reorganization represents our first step in addressing our liquidity concerns. Over the next eighteen months, under the strategic direction of the Finance and Restructuring Committee of Dynegy’s Board of Directors, we may participate in additional debt restructuring activities, which may include direct or indirect transfers of our subsidiaries’ equity interests, refinancing of existing debt and lease obligations, and/or further reorganizations of our subsidiaries as well as other similar initiatives. However, we cannot provide any assurances that we will be successful in accomplishing any such activities.

Our ability to continue as a going concern is dependent on many factors, including, among other things, GasCo and CoalCo generating sufficient positive operating results to enable GasCo and CoalCo to make certain restricted distributions to their parents (as described in Note 13—Subsequent Events), Roseton and Danskammer producing positive operating results, successfully executing any further restructuring strategies, and continuing to execute the company-wide cost reduction initiatives that are ongoing. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of the foregoing uncertainties.

Accounting Principles Not Yet Adopted

Fair Value Measurement Disclosures. In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04—Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU No. 2011-04”). This authoritative guidance changes the wording used to describe the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. ASU No. 2011-04 is effective for interim and annual periods beginning after December 15, 2011. We do not expect the implementation of this guidance to have a significant impact on our financial condition, results of operations or cash flows.

Presentation of Comprehensive Income. In June 2011, the FASB issued ASU 2011-05—Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU No. 2011-05”). The FASB’s objective in issuing this guidance is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. ASU No. 2011-05 eliminates the option of presenting components of other comprehensive income as part of the statement of changes in stockholders’ equity. The standard requires that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We do not expect the implementation of this guidance to have a significant impact on our financial condition, results of operations or cash flows.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Note 2—Investments

The amortized cost basis, unrealized gains and losses and fair values of investments in available for sale investments is shown in the tables below:

	Investments as of June 30, 2011
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in millions)
Available for Sale investments:
Commercial Paper	$	45	$	—	$	—	$	45
Certificates of Deposit	13		—		—		13
U.S. Treasury and Government Securities (1)	151		—		—		151

Total—DHI	$	209	$	—	$	—	$	209
Commercial Paper	2		—		—		2
Certificates of Deposit	8		—		—		8
Corporate Securities	2		—		—		2

Total—Dynegy	$	221	$	—	$	—	$	221

(1) Includes $115 million in Broker margin account on our unaudited condensed consolidated balance sheets in support of transactions with our futures clearing manager.

	Investments as of December 31, 2010
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in millions)
Available for Sale investments:
Commercial Paper	$	41	$	—	$	—	$	41
Certificates of Deposit	12		—		—		12
Corporate Securities	2		—		—		2
U.S. Treasury and Government Securities (1)	120		—		—		120

Total—DHI	$	175	$	—	$	—	$	175
Commercial Paper	4		—		—		4
Certificates of Deposit	8		—		—		8
Corporate Securities	4		—		—		4

Total—Dynegy	$	191	$	—	$	—	$	191

(1) Includes $85 million in Broker margin account on our consolidated balance sheets in support of transactions with our futures clearing manager.

During the three and six months ended June 30, 2011 , we received proceeds of $36 million from the sale of available for sale securities for which we realized less than $1 million of gains for the three and six months ended June 30, 2011.

Note 3—Risk Management Activities, Derivatives and Financial Instruments

The nature of our business necessarily involves market and financial risks. Specifically, we are exposed to commodity price variability related to our power generation business. Our commercial team manages these commodity price risks with financially settled and other types of contracts consistent with our commodity risk management policy. Our commercial team also uses financial instruments in an attempt to capture the benefit of fluctuations in market prices in the geographic regions where our assets operate. Our treasury team manages our financial risks and exposures associated with interest expense variability.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Our commodity risk management strategy gives us the flexibility to sell energy and capacity through a combination of spot market sales and near-term contractual arrangements (generally over a rolling 1 to 3 year time frame). Our commodity risk management goal is to protect cash flow in the near-term while keeping the ability to capture value longer-term. Increasing collateral requirements and our liquidity position could impact our ability to effectively employ our risk management strategy. Many of our contractual arrangements are derivative instruments and must be accounted for at fair value. We also manage commodity price risk by entering into capacity forward sales arrangements, tolling arrangements, RMR contracts, fixed price coal purchases and other arrangements that do not receive fair value accounting treatment because these arrangements do not meet the definition of a derivative or are designated as “normal purchase normal sales”. As a result, the gains and losses with respect to these arrangements are not reflected in the unaudited condensed consolidated statements of operations until the settlement dates.

Quantitative Disclosures Related to Financial Instruments and Derivatives

The following disclosures and tables present information concerning the impact of derivative instruments on our unaudited condensed consolidated balance sheets and statements of operations. In the table below, commodity contracts primarily consist of derivative contracts related to our power generation business that we have not designated as accounting hedges, that are entered into for purposes of economically hedging future fuel requirements and sales commitments and securing commodity prices. As of June 30, 2011, our commodity derivatives were comprised of both long and short positions; a long position is a contract to purchase a commodity, while a short position is a contract to sell a commodity. As of June 30, 2011, we had net long/(short) commodity derivative contracts outstanding in the following quantities:

Contract Type	Hedge Designation	Quantity		Unit of Measure	Net Fair Value
		(in millions)			(in millions)
Commodity contracts:
Electric energy (1)	Not designated	(39	)	MW	$	109
Natural gas (1)	Not designated	227		MMBtu	$	(187	)
Heat rate derivatives	Not designated	(4)/39		MW/MMBtu	$	(22	)
Other (2)	Not designated	3		Misc.	$	7

(1) Mainly comprised of swaps, options and physical forwards.

(2) Comprised of emissions, coal, crude oil and fuel oil options, swaps and physical forwards.

Derivatives on the Balance Sheet. We execute a significant volume of transactions through a futures clearing manager. Our daily cash payments (receipts) to (from) our futures clearing manager consist of three parts: (i) fair value of open positions (exclusive of options) (“Daily Cash Settlements”); (ii) initial margin requirements related to open positions (exclusive of options) (“Initial Margin”); and (iii) fair value and margin requirements related to options (“Options”, and collectively with Initial Margin, “Collateral”). We do not offset fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting agreement and we do not elect to offset the fair value amounts recognized for the Daily Cash Settlements paid or received against the fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting agreement.

As a result, our unaudited condensed consolidated balance sheets present derivative assets and liabilities, as well as related Daily Cash Settlements and Collateral, as applicable, on a gross basis. As of June 30, 2011, of the approximately $202 million included in the Broker margin account on our unaudited condensed consolidated balance sheets, approximately $137 million represents Collateral and approximately $61 million represents Daily Cash Settlements. As of December 31, 2010, of the approximately $80 million included in the Broker margin account on our unaudited condensed consolidated balance sheets, approximately $75 million represented Collateral offset by approximately $5 million of Daily Cash Settlements. We use short-term investments to collateralize a portion of our collateral requirements. The broker requires that we post approximately 103 percent of any collateral requirement collateralized with short-term investments. Accordingly, our Broker margin account includes approximately $3 million related to this requirement at June 30, 2011 and December 31, 2010. Additionally, we posted $1 million and $7 million of short-term investments which were not utilized as collateral at June 30, 2011 and December 31, 2010, respectively.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

The following table presents the fair value and balance sheet classification of derivatives in the unaudited condensed consolidated balance sheet as of June 30, 2011, and December 31, 2010 segregated between designated, qualifying hedging instruments and those that are not, and by type of contract segregated by assets and liabilities.

Contract Type	Balance Sheet Location	June 30, 2011			December 31, 2010
		(in millions)
Derivatives designated as hedging instruments:
Derivative Assets:
Interest rate contracts	Assets from risk management activities	$	—		$	1

Total derivatives designated as hedging instruments		—			1

Derivatives not designated as hedging instruments:
Derivative Assets:
Commodity contracts	Assets from risk management activities	1,073			1,265
Interest rate contracts	Assets from risk management activities	—			5
Derivative Liabilities:
Commodity contracts	Liabilities from risk management activities	(1,166		)	(1,231		)
Interest rate contracts	Liabilities from risk management activities	—			(6		)

Total derivatives not designated as hedging instruments		(93		)	33

Total derivatives, net		$	(93	)	$	34

Impact of Derivatives on the Consolidated Statements of Operations

The following discussion and tables present the disclosure of the location and amount of gains and losses on derivative instruments in our unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 segregated between designated, qualifying hedging instruments and those that are not, by type of contract.

Cash Flow Hedges. We may enter into financial derivative instruments that qualify, and that we may elect to designate, as cash flow hedges. Interest rate swaps have been used to convert floating interest rate obligations to fixed interest rate obligations. We had no cash flow hedges in place during the three and six months ended June 30, 2011 and 2010.

Fair Value Hedges. We also enter into derivative instruments that qualify, and that we may elect to designate, as fair value hedges. We use interest rate swaps to convert a portion of our non-prepayable fixed-rate debt into floating-rate debt. These derivatives and the corresponding hedged debt matured April 1, 2011. During the three and six months ended June 30, 2011 and 2010, there was no ineffectiveness from changes in the fair value of hedge positions and no amounts were excluded from the assessment of hedge effectiveness. During the three and six months ended June 30, 2011 and 2010, there were no gains or losses related to the recognition of firm commitments that no longer qualified as fair value hedges.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

The impact of interest rate swap contracts designated as fair value hedges and the related hedged item on our unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2011 and 2010 was immaterial.

Financial Instruments Not Designated as Hedges. We elect not to designate derivatives related to our power generation business and certain interest rate instruments as cash flow or fair value hedges. Thus, we account for changes in the fair value of these derivatives within the consolidated statements of operations (herein referred to as “mark-to-market accounting treatment”). As a result, these mark-to-market gains and losses are not reflected in the unaudited condensed consolidated statements of operations in the same period as the underlying activity for which the derivative instruments serve as economic hedges.

For the three-month period ended June 30, 2011, our revenues included approximately $129 million of mark-to-market losses related to this activity compared to $258 million of mark-to-market losses in the same period in the prior year. For the six months ended June 30, 2011, our revenues included approximately $127 million of mark-to-market losses related to this activity compared to $5 million of mark-to-market losses in the same period in the prior year.

The impact of derivative financial instruments that have not been designated as hedges on our unaudited condensed consolidated statement of operations for the three months ended June 30, 2011 and 2010 is presented below. Note that this presentation does not reflect the expected gains or losses arising from the underlying physical transactions associated with these financial instruments. Therefore, this presentation is not indicative of the economic gross margin we expect to realize when the underlying physical transactions settle.

Derivatives Not Designated as	Location of Loss Recognized in Income on	Amount of Loss Recognized in Income on Derivatives for the Three Months Ended June 30,
Hedging Instruments	Derivatives	2011			2010
		(in millions)
Commodity contracts	Revenues	$	(89	)	$	(185	)

The impact of derivative financial instruments that have not been designated as hedges on our unaudited condensed consolidated statement of operations for the six months ended June 30, 2011 and 2010 is presented below. Note that this presentation does not reflect the expected gains or losses arising from the underlying physical transactions associated with these financial instruments. Therefore, this presentation is not indicative of the economic gross margin we expect to realize when the underlying physical transactions settle.

Derivatives Not Designated as Hedging	Location of Gain (Loss) Recognized in Income on	Amount of Gain (Loss) Recognized in Income on Derivatives for the Six Months Ended June 30,
Instruments	Derivatives	2011			2010
		(in millions)
Commodity contracts	Revenues	$	(70	)	$	140

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Note 4—Fair Value Measurements

The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2011 and December 31, 2010. These financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

	Fair Value as of June 30, 2011
	Level 1		Level 2			Level 3			Total
	(in millions)
Assets:
Assets from commodity risk management activities:
Electricity derivatives	$	—	$	325		$	48		$	373
Natural gas derivatives	—		658			—			658
Other derivatives	—		42			—			42

Total assets from commodity risk management activities		—		1,025			48			1,073
DHI Short-term investments:
Commercial paper	—		45			—			45
Certificates of deposit	—		13			—			13
U.S. Treasury and government securities (1)	—		151			—			151

Total—DHI short-term investments	—		209			—			209

Total—DHI	—		1,234			48			1,282

Dynegy Short-term investments:
Commercial paper	—		2			—			2
Corporate Securities	—		2			—			2
Certificates of deposit	—		8			—			8

Total—Dynegy	$	—	$	1,246		$	48		$	1,294

Liabilities:
Liabilities from commodity risk management activities:
Electricity derivatives	$	—	$	(250	)	$	(13	)	$	(263	)
Natural gas derivatives	—		(845		)	—			(845		)
Heat rate derivatives	—		—			(23		)	(23		)
Other derivatives	—		(35		)	—			(35		)

Total—Dynegy and DHI	$	—	$	(1,130	)	$	(36	)	$	(1,166	)

(1) Includes $115 million in Broker margin account on our consolidated balance sheets in support of transactions with our futures clearing manager.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

	Fair Value as of December 31, 2010
	Level 1		Level 2			Level 3			Total
	(in millions)
Assets:
Assets from commodity risk management activities:
Electricity derivatives	$	—	$	526		$	77		$	603
Natural gas derivatives	—		613			5			618
Other derivatives	—		44			—			44

Total assets from commodity risk management activities		—		1,183			82			1,265
Assets from interest rate swaps	—		6			—			6
DHI Short-term investments:
Commercial paper	—		41			—			41
Certificates of deposit	—		12			—			12
Corporate securities	—		2			—			2
U.S. Treasury and government securities (1)	—		120			—			120

Total DHI short-term investments	—		175			—			175

Total—DHI	—		1,364			82			1,446

Dynegy Short-term investments:
Commercial paper	—		4			—			4
Certificates of deposit	—		8			—			8
Corporate securities	—		4			—			4
Total—Dynegy	$	—	$	1,380		$	82		$	1,462

Liabilities:
Liabilities from commodity risk management activities:
Electricity derivatives	$	—	$	(311	)	$	(28	)	$	(339	)
Natural gas derivatives	—		(825		)	—			(825		)
Heat rate derivatives	—		—			(31		)	(31		)
Other derivatives	—		(36		)	—			(36		)

Total liabilities from commodity risk management activities	$	—	$	(1,172	)	$	(59	)	$	(1,231	)
Liabilities from interest rate swaps	—		(6		)	—			(6		)

Total—Dynegy and DHI	$	—	$	(1,178	)	$	(59	)	$	(1,237	)

(1) Includes $85 million in Broker margin account on our consolidated balance sheets in support of transactions with our futures clearing manager.

We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. For example, assets and liabilities from risk management activities may include exchange-traded derivative contracts and OTC derivative contracts. Some exchange-traded derivatives are valued using broker or dealer quotations, or market transactions in either the listed or OTC markets. In such cases, these exchange-traded derivatives are classified within Level 2. OTC derivative trading instruments include swaps, forwards, options and complex structures that are valued at fair value. In certain instances, these instruments may utilize models to measure fair value. Generally, we use a similar model to value similar instruments. Valuation models utilize various inputs that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs for the asset or liability, and market-corroborated inputs. Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2. Certain OTC derivatives trade in less active markets with a lower availability of pricing information. In addition, complex or structured transactions, such as heat-rate call options, can introduce the need for internally-developed model inputs that might not be observable in or corroborated by the market. When such inputs have a significant impact on the measurement of fair value, the instrument is categorized in Level 3. We have consistently used this valuation technique for all periods presented. Please read Note 2—Summary of Significant Accounting Policies—Fair Value Measurements in our Form 10-K for further discussion.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

The following tables set forth a reconciliation of changes in the fair value of financial instruments classified as Level 3 in the fair value hierarchy:

	Three Months Ended June 30, 2011
	Electricity Derivatives			Natural Gas Derivatives			Heat Rate Derivatives			Total
	(in millions)
Balance at March 31, 2011	$	48		$	5		$	(26	)	$	27
Total losses included in earnings	(12		)	(5		)	(1		)	(18		)
Settlements	(1		)	—			4			3

Balance at June 30, 2011	$	35		$	—		$	(23	)	$	12

Unrealized losses relating to instruments held as of June 30, 2011	$	(5	)	$	(4	)	$	(2	)	$	(11	)

	Six Months Ended June 30, 2011
	Electricity Derivatives			Natural Gas Derivatives			Heat Rate Derivatives			Total
	(in millions)
Balance at December 31, 2010	$	49		$	5		$	(31	)	$	23
Total losses included in earnings	(8		)	(5		)	—			(13		)
Settlements	(6		)	—			8			2

Balance at June 30, 2011	$	35		$	—		$	(23	)	$	12

Unrealized gains (losses) relating to instruments held as of June 30, 2011	$	2		$	(3	)	$	—		$	(1	)

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

	Three Months Ended June 30, 2010
	Electricity Derivatives			Natural Gas Derivatives		Heat Rate Derivatives			Total
	(in millions)
Balance at March 31, 2010	$	70		$	5	$	20		$	95
Total losses included in earnings	(35		)	—		(7		)	(42		)
Sales and settlements:
Sales	(3		)	—		(20		)	(23		)
Settlements	(9		)	—		(16		)	(25		)

Balance at June 30, 2010	$	23		$	5	$	(23	)	$	5

Unrealized losses relating to instruments still held as of June 30, 2010	$	(40	)	$	—	$	(11	)	$	(51	)

	Six Months Ended June 30, 2010
	Electricity Derivatives			Natural Gas Derivatives		Heat Rate Derivatives			Interest Rate Swaps			Total
	(in millions)
Balance at December 31, 2009	$	6		$	5	$	17		$	(50	)	$	(22	)
Deconsolidation of Plum Point	—			—		—			50			50
Total gains included in earnings	43			—		11			—			54
Purchases, sales and settlements:
Purchases	1			—		1			—			2
Sales	(13		)	—		(21		)	—			(34		)
Settlements	(14		)	—		(31		)	—			(45		)

Balance at June 30, 2010	$	23		$	5	$	(23	)	$	—		$	5

Unrealized gains relating to instruments still held as of June 30, 2010	$	33		$	—	$	2		$	—		$	35

Gains and losses (realized and unrealized) for Level 3 recurring items are included in Revenues on the unaudited condensed consolidated statements of operations. We believe an analysis of instruments classified as Level 3 should be undertaken with the understanding that these items generally serve as economic hedges of our power generation portfolio. We did not have any transfers between Level 1, Level 2 and Level 3 for the three and six months ended June 30, 2011 and 2010.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Nonfinancial Assets and Liabilities. The following table sets forth by level within the fair value hierarchy our fair value measurements with respect to nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis. These assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

	Fair Value Measurements as of June 30, 2010
	Level 1		Level 2		Level 3		Total		Total Losses
	(in millions)

Equity method investment	$	—	$	—	$	—	$	—	$	(37	)

Total	$	—	$	—	$	—	$	—	$	(37	)

On January 1, 2010, we recorded an impairment of our investment in PPEA Holding as part of our cumulative effect of a change in accounting principle. We determined the fair value of our investment using assumptions that reflected our best estimate of third party market participants’ considerations based on the facts and circumstances related to our investment at that time. The fair value of our investment on January 1, 2010 was considered a Level 3 measurement because the fair value was determined based on probability weighted cash flows resulting from various alternative scenarios including no change in the financing structure, a restructuring of the project debt and insolvency. These scenarios and the related probability weighting were consistent with the scenarios used at December 31, 2009 in our long-lived asset impairment analysis. At March 31, 2010, we fully impaired our investment in PPEA Holding due to the uncertainty and risk surrounding PPEA’s financing structure. Please read Note 7—Impairment and Restructuring Charges—2010 Impairment Charges—Other in our Form 10-K.

Fair Value of Financial Instruments. We have determined the estimated fair-value amounts using available market information and selected valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions or valuation methodologies could have a material effect on the estimated fair-value amounts.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

The carrying values of financial assets and liabilities (cash, accounts receivable, restricted cash, investments, and accounts payable) not presented in the table below approximate fair values due to the short-term maturities of these instruments. The fair value of debt as reflected in the table has been calculated based on the average of certain available broker quotes for the periods ending June 30, 2011 and December 31, 2010, respectively.

	June 30, 2011						December 31, 2010
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	(in millions)
Interest rate derivatives designated as fair value accounting hedges (1)	$	—		$	—		$	1		$	1
Interest rate derivatives not designated as accounting hedges (1)	—			—			(1		)	(1		)
Commodity-based derivative contracts not designated as accounting hedges (1)	(93		)	(93		)	34			34
Term Loan B, due 2013	(68		)	(66		)	(68		)	(67		)
Term Facility, floating rate due 2013	(850		)	(832		)	(850		)	(845		)
Revolver Facility	(400		)	(392		)	—			—
Senior Notes and Debentures:
6.875 percent due 2011 (2)	—			—			(80		)	(79		)
8.75 percent due 2012	(89		)	(88		)	(89		)	(87		)
7.5 percent due 2015 (3)	(770		)	(633		)	(768		)	(592		)
8.375 percent due 2016 (4)	(1,043		)	(835		)	(1,043		)	(777		)
7.125 percent due 2018	(173		)	(120		)	(172		)	(116		)
7.75 percent due 2019	(1,100		)	(799		)	(1,100		)	(728		)
7.625 percent due 2026	(171		)	(112		)	(171		)	(107		)
Subordinated Debentures payable to affiliates, 8.316 percent, due 2027	(200		)	(101		)	(200		)	(83		)
Sithe Senior Notes, 9.0 percent due 2013 (5)	(197		)	(195		)	(233		)	(233		)
Other—DHI (6)	209			209			175			175
Other—Dynegy (7)	12			12			16			16

(1) Included in both current and non-current assets and liabilities on the unaudited condensed consolidated balance sheets.

(2) Payment in full was made on April 1, 2011, which was the maturity date of this debt.

(3) Includes unamortized discounts of $15 million and $17 million at June 30, 2011 and December 31, 2010, respectively.

(4) Includes unamortized discounts of $3 million and $4 million at June 30, 2011 and December 31, 2010, respectively.

(5) Includes unamortized premiums of $6 million and $8 million at June 30, 2011 and December 31, 2010, respectively.

(6) Other represents short-term investments, including $115 million and $85 million of short-term investments included in the Broker margin account at June 30, 2011 and December 31, 2010, respectively.

(7) Other represents short-term investments at June 30, 2011 and December 31, 2010.

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For the Interim Periods Ended June 30, 2011 and 2010

Note 5—Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, net of tax, is included in stockholders’ equity on our unaudited condensed consolidated balance sheets as follows:

	June 30, 2011			December 31, 2010
	(in millions)
Cash flow hedging activities, net	$	3		$	3
Unrecognized prior service cost and actuarial loss, net	(54		)	(56		)

Accumulated other comprehensive loss, net of tax	$	(51	)	$	(53	)

Note 6—Variable Interest Entities

PPEA Holding Company, LLC. Until the sale of our interest on November 10, 2010, we owned an approximate 37 percent interest in PPEA Holding, which through PPEA, its wholly-owned subsidiary, owns an approximate 57 percent undivided interest in the Plum Point Project. On November 10, 2010, we completed the sale of our interest in PPEA Holding to one of the other investors in PPEA Holding. Please read Note 7—Impairment and Restructuring Charges—2010 Impairment Charges—Other in our Form 10-K.

Due to the uncertainty and risk surrounding PPEA’s financing structure as a result of events that occurred in 2010, we concluded that there was an other-than-temporary impairment of our investment in PPEA Holding and fully impaired our equity investment at March 31, 2010. As a result, we recorded an impairment charge of approximately $37 million for the three months ended March 31, 2010, which is included in Losses from unconsolidated investments in our unaudited condensed consolidated statements of operations. The impairment is a Level 3 non-recurring fair value measurement and reflected our best estimate of third party market participants’ considerations including probabilities related to restructuring of the project debt and potential insolvency. Please read Note 4—Fair Value Measurements for further discussion.

Summarized aggregate financial information for unconsolidated equity investments and our equity share thereof was:

	Three Months Ended June 30, 2010
	Total			Equity Share
	(in millions)
Revenues	$	—		$	—
Operating loss	(1		)	—
Net loss	(42		)	—

	Six Months Ended June 30, 2010
	Total			Equity Share
	(in millions)
Revenues	$	—		$	—
Operating loss	(2		)	—
Net income (loss)	(33		)	3

During the second quarter of 2010, we did not recognize our share of losses from our investment in PPEA Holding as our investment in PPEA Holding was valued at zero at June 30, 2010, and we did not have an obligation to provide further financial support.

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For the Interim Periods Ended June 30, 2011 and 2010

Losses from unconsolidated investments for the six months ended June 30, 2010 were $34 million, which includes an impairment loss of $37 million, discussed above. This impairment was partially offset by equity earnings of $3 million, comprised primarily of mark-to-market gains related to PPEA’s interest rate swaps, partly offset by financing expenses.

Note 7—Commitments and Contingencies

Legal Proceedings

Set forth below is a summary of our material ongoing legal proceedings. We record reserves for contingencies when information available indicates that a loss is probable and the amount of the loss is reasonably estimable. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. In all instances, management has assessed the matters below based on current information and made a judgment concerning their potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate and such judgment is made subject to the known uncertainty of litigation.

Restructuring Litigation. On July 21, 2011, certain holders of obligations with potential recourse rights to DHI initiated legal proceedings seeking to enjoin Dynegy Inc.’s restructuring efforts previously disclosed on July 10, 2011. The lawsuits, Libertyview Credit Opportunities Fund, L.P. et al v. Dynegy Holdings, Inc., (Index No. 651998/11) in the Supreme Court of the State of New York (the “New York Action”) and Roseton OL, LLC and Danskammer OL, LLC v. Dynegy Holdings, Inc ., (C.A. No. 6689-VCP) in the Court of Chancery of the State of Delaware (the “Delaware Action”), seek to enjoin the proposed reorganization based on purported breaches of guarantees issued by DHI in connection with two sale lease back transactions in which DHI’s subsidiaries, Dynegy Roseton, L.L.C. and Dynegy Danskammer, L.L.C., leased certain power-generating facilities located in Newburgh, New York. Shortly after filing, the New York Action was stayed pending resolution of the Delaware Action. The plaintiffs in the Delaware Action filed a motion for a temporary restraining order (“TRO”) to enjoin the Reorganization on July 21, 2011. DHI opposed the motion by arguing, among other things, that the unambiguous language of the Guaranties expressly permits the reorganization. On July 29, 2011, the Delaware court denied the TRO in the Delaware Action, finding that plaintiffs had failed to show a likelihood of success on the merits, irreparable harm or that the balancing of the equities weighed in their favor. Thereafter, plaintiffs sought certification of an interlocutory appeal, which was denied by the Delaware Chancery Court on August 4, 2011 and subsequently denied by the Delaware Supreme Court on August 5, 2011. Absent any injunction, the Company closed its restructuring and refinancing on August 5, 2011. We believe plaintiffs’ claims in the New York Action and Delaware Action are without merit and we will continue to oppose any further efforts to challenge the restructuring.

Stockholder Litigation Relating to the Blackstone and Icahn Merger Agreements. In connection with the merger agreement with an affiliate of The Blackstone Group L.P. (as amended, the “Blackstone Merger Agreement”) and the merger agreement with an affiliate of Icahn Enterprises L.P. (as amended, the “Icahn Merger Agreement” and, together with the Blackstone Merger Agreement, the “Merger Agreements”), numerous stockholder lawsuits were filed in the District Courts of Harris County, Texas, the Southern District of Texas, and the Court of Chancery of the State of Delaware. The cases in these three jurisdictions were ultimately consolidated into one action in each jurisdiction (the “Consolidated Texas State Court Action,” the “Consolidated Texas Federal Action,” and the “Consolidated Delaware Chancery Court Action”). One stockholder derivative lawsuit was filed in a District Court in Harris County, Texas.

On November 7, 2010, during the pendency of the Blackstone transaction, the parties entered into a memorandum of understanding providing for the full and final settlement of the Texas state stockholder class actions and the Delaware actions. The memorandum of understanding and settlement were expressly subject to and conditioned upon the consummation of the transactions contemplated by the Blackstone Merger Agreement. Accordingly, when the Blackstone Merger Agreement was terminated, the settlement became null and void. Thereafter, the motion by the plaintiff in the stockholder derivative action to nonsuit all defendants without prejudice was granted on December 14, 2010.

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Following the termination of the Icahn Merger Agreement and upon Dynegy’s insistence, the plaintiffs in the Consolidated Texas Federal Action and Consolidated Delaware Chancery Court Action moved to dismiss their claims without prejudice. The courts dismissed the cases on March 1, 2011, and March 16, 2011, respectively. On March 28, 2011, plaintiff’s counsel in the Consolidated Texas State Court Action filed a motion seeking attorneys’ fees and expenses. In July 2011, the Court granted the motion and awarded approximately $1.6 million in fees and expenses. Dynegy intends to appeal the decision.

Gas Index Pricing Litigation . We, several of our affiliates, our former joint venture affiliate and other energy companies were named as defendants in numerous lawsuits in state and federal court claiming damages resulting from alleged price manipulation and false reporting of natural gas prices to various index publications in the 2000-2002 timeframe. Many of the cases have been resolved and those which remain are pending in Nevada federal district court. All of the pending cases contain similar claims that individually, and in conjunction with other energy companies, we engaged in an illegal scheme to inflate natural gas prices in four states by providing false information to natural gas index publications. In November 2009, following defendants’ motion for reconsideration, the court invited defendants to renew their motions for summary judgment on preemption of plaintiffs’ state law claims, which were filed shortly thereafter. Plaintiffs concurrently moved to amend their complaints to add federal claims. In October 2010, the court denied plaintiffs’ motion to amend.

On July 18, 2011, the Court granted defendants’ motions for summary judgment, thereby dismissing all of plaintiffs’ state law claims. Plaintiffs recently filed notices of appeal.

Plaintiff in one of the pending actions, Multiut Corporation v. Dynegy, Inc. et al , had previously filed similar claims under federal law, which are not subject to the Court’s July 18, 2011 order. Multiut Corporation is presently proceeding before the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division having petitioned for Chapter 11 in May 2009. In April 2011, the bankruptcy court denied confirmation of Multiut’s proposed plan of reorganization and entered an order converting the case under Chapter 7 of the bankruptcy code and appointed a Trustee to oversee the liquidation of Mulitut’s assets, one of which is Multiut’s claim against Dynegy in the gas index litigation. Dynegy is the largest creditor in that proceeding and intends to discuss the Nevada court’s July 18 order with the Trustee. We believe Multiut’s remaining federal claims lack merit and we will continue to oppose plaintiff’s claims vigorously.

Cooling Water Intake Permits. The cooling water intake structures at several of our power generation facilities are regulated under Section 316(b) of the Clean Water Act. This provision generally provides that standards set for power generation facilities require that the location, design, construction and capacity of cooling water intake structures reflect the BTA for minimizing adverse environmental impact. These standards are developed and implemented for power generating facilities through the NPDES permits or individual SPDES permits on a case-by-case basis.

The environmental groups that participate in our NPDES and SPDES permit proceedings generally argue that only closed cycle cooling meets the BTA requirement. The issuance and renewal of NPDES or SPDES permits for three of our power generation facilities (Danskammer, Roseton and Moss Landing) have been challenged on this basis. The Danskammer SPDES permit, which was renewed and issued in June 2006, does not require installation of a closed cycle cooling system; however, it does require aquatic organism mortality reductions resulting from NYSDEC’s determination of BTA requirements under its regulations. All appeals of this permit have been exhausted. Two permit challenges are still pending.

· Roseton SPDES Permit — In April 2005, the NYSDEC issued a Draft SPDES Permit renewal for the Roseton plant. The permit is opposed by environmental groups challenging the BTA determination. In October 2006, various holdings in the administrative law judge’s ruling admitting the environmental group petitioners to party status and setting forth the issues to be adjudicated in the permit renewal hearing were appealed to the Commissioner of NYSDEC by the petitioners, NYSDEC staff and us. The permit renewal hearing will be scheduled after the Commissioner rules on those appeals. We believe that the petitioners’ claims lack merit and we plan to oppose those claims vigorously.

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· Moss Landing NPDES Permit — The California Regional Water Quality Control Board (“Water Board”) issued an NPDES permit for the Moss Landing power generating facility in 2000 that did not require closed cycle cooling. A local environmental group challenged the BTA determination of the permit. The Water Board’s decision was affirmed by the Superior Court in 2004 and by the Court of Appeals in 2007. The Supreme Court of California granted review in March 2008. The petitioner’s brief was filed in December 2009. We filed a motion to dismiss and our responsive brief in March 2010. The petitioner’s reply brief was filed in May 2010. Our motion to dismiss was denied in June 2010. In July 2010, the California Energy Commission filed an application for leave to file a brief in support of our argument challenging the jurisdiction of the Superior Court. In September 2010, four air quality control districts filed an application for leave to file a brief in support of jurisdiction of the Superior Court. The Supreme Court of California held oral argument in this case on May 24, 2011, and we await a ruling from the court. We believe that petitioner’s claims lack merit and we plan to continue to oppose those claims vigorously.

Due to the nature of these claims, an adverse result in either of these proceedings could have a material effect on our financial condition, results of operations and cash flows; however, given the numerous variables and factors involved in calculating the potential costs associated with installing a closed cycle cooling system, any decision to install such a system at any of our facilities would be made on a case-by-case basis considering all relevant factors at such time. If capital expenditures related to cooling water systems become great enough to render the operation of the plant uneconomical, we could, at our option, and subject to any applicable financing agreements or other obligations, reduce operations or cease to operate that facility and forego the capital expenditures.

Native Village of Kivalina and City of Kivalina v. ExxonMobil Corporation, et al. In February 2008, the Native Village of Kivalina and the City of Kivalina, Alaska initiated an action in federal court in the Northern District of California against DHI and 23 other companies in the energy industry. Plaintiffs claim that defendants’ emissions of GHG including CO 2 contribute to climate change and have caused significant damage to a native Alaskan Eskimo village through increased vulnerability to waves, storm surges and erosion. In September 2009, the court dismissed all of the plaintiffs’ claims based on lack of subject matter jurisdiction and because plaintiffs lacked standing to bring the suit. Shortly thereafter, plaintiffs appealed to the Ninth Circuit. The appeal is fully briefed and in February 2011, the Ninth Circuit issued an order staying the scheduling of oral argument until the United States Supreme Court’s ruling in Connecticut v. AEP . On June 20, 2011, the Supreme Court issued its decision in Connecticut v. AEP. The Court was equally divided by a vote of 4-4 on the question of whether the plaintiffs had standing to bring the suit and, therefore, affirmed the court’s exercise of jurisdiction. On the merits the Court ruled by a vote of 8-0 that the CAA and EPA action authorized by the Act displace any federal common law right to seek abatement of carbon dioxide emissions from fossil fuel-fired power plants. In response to the Supreme Court’s decision, a motion has been filed in Kivalina to allow supplemental briefing addressing the effect of the Connecticut v. AEP decision. We believe the plaintiffs’ suit lacks merit and we will continue to oppose their claims vigorously.

Illinova Generating Company Arbitration. In May 2007, Dynegy’s subsidiary Illinova Generating Company (“IGC”) received an adverse award in an arbitration brought by Ponderosa Pine Energy, LLC (“PPE”). The award required IGC to pay PPE $17 million, which IGC paid in June 2007 under protest while simultaneously seeking to vacate the award in the District Court of Dallas County, Texas. In March 2010, the Dallas District Court vacated the award, finding that one of the arbitrators had exhibited evident partiality. PPE is appealing that decision to the Fifth District Court of Appeals in Dallas, Texas. Coinciding with the appeal, IGC filed a claim against PPE seeking recovery of the $17 million plus interest. In September 2010, the Dallas District Court ordered PPE to deposit the $17 million principal in an interest-bearing escrow account jointly owned by IGC and PPE pending the Dallas Court of Appeals decision, which has not yet been issued. As a result of the uncertainty surrounding the outcome of PPE’s appeal, our receivable from PPE is fully reserved at June 30, 2011.

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(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Ordinary Course Litigation. In addition to the matters discussed above, we are party to numerous legal proceedings arising in the ordinary course of business or related to discontinued business operations. In management’s judgment, which may prove to be materially inaccurate as indicated above, the disposition of these matters will not materially affect our financial condition, results of operations or cash flows.

Guarantees and Indemnifications

In the ordinary course of business, we routinely enter into contractual agreements that contain various representations, warranties, indemnifications and guarantees. Examples of such agreements include, but are not limited to, service agreements, equipment purchase agreements, engineering and technical service agreements, asset sales and procurement and construction contracts. Some agreements contain indemnities that cover the other party’s negligence or limit the other party’s liability with respect to third party claims, in which event we will effectively be indemnifying the other party. Virtually all such agreements contain representations or warranties that are covered by indemnifications against the losses incurred by the other parties in the event such representations and warranties are false. While there is always the possibility of a loss related to such representations, warranties, indemnifications and guarantees in our contractual agreements, and such loss could be significant, in most cases management considers the probability of loss to be remote. Related to the indemnifications discussed below, we have accrued approximately $1 million as of June 30, 2011.

LS Power Indemnities. In connection with the LS Power Transactions we agreed in the purchase and sale agreement to indemnify LS Power against claims regarding any breaches in our representations and warranties and certain other potential liabilities. Claims for indemnification shall survive until twelve months subsequent to closing with exceptions for tax claims, which shall survive for the applicable statute of limitations plus 30 days, and certain other representations and potential liabilities, which shall survive indefinitely. The indemnifications provided to LS Power are limited to $1.3 billion in total; however, several categories of indemnifications are not available to LS Power until the liabilities incurred in the aggregate are equal to or exceed $15 million and are capped at a maximum of $100 million. Further, the purchase and sale agreement provides in part that we may not reduce or avoid liability for a valid claim based on a claim of contribution. In addition to the above indemnities related to the LS Power Transactions, we have agreed to indemnify LS Power against claims related to the Riverside/Foothills Project for certain aspects of the project. Namely, LS Power has been indemnified for any disputes that arise as to ownership, transfer of bonds related to the project, and any failure by us to obtain approval for the transfer of the payment in-lieu of taxes program already in place. The indemnities related solely to the Riverside/Foothills Project are capped at a maximum of $180 million and extend until the earlier of the expiration of the tax agreement or December 26, 2026. At this time, we have incurred no significant expenses under these indemnities. Please read Note 4—Dispositions, Contract Terminations and Discontinued Operations—Dispositions and Contract Terminations—LS Power Transactions in our Form 10-K for further discussion.

West Coast Power Indemnities. In connection with the sale of our 50 percent interest in West Coast Power to NRG on March 31, 2006, an agreement was executed to allocate responsibility for managing certain litigation and provide for certain indemnities with respect to such litigation. The indemnification agreement in relevant part provides that NRG assumes responsibility for all defense costs and any risk of loss, subject to certain conditions and limitations, arising from a February 2002 complaint filed at FERC by the California Public Utilities Commission alleging that several parties, including West Cost Power subsidiaries, overcharged the State of California for wholesale power. FERC found the rates charged by wholesale suppliers to be just and reasonable; however, this matter was appealed and ultimately remanded back to FERC for further review. On May 24, 2011 and May 26, 2011, FERC issued two orders in these dockets. The first order denied the request of the California Parties for consolidation of various dockets and denied their request for summary disposition on market manipulation issues. The second order addressed treatment of settled parties and the scope of hearing issues in the ongoing proceedings.

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For the Interim Periods Ended June 30, 2011 and 2010

Targa Indemnities. During 2005, as part of our sale of our midstream business (“DMSLP”), we agreed to indemnify Targa Resources, Inc. (“Targa”) against losses it may incur under indemnifications DMSLP provided to purchasers of certain assets, properties and businesses disposed of by DMSLP prior to our sale of DMSLP. We have incurred no material expense under these prior indemnities. We have recorded an accrual of less than $1 million for remediation of groundwater contamination at the Breckenridge Gas Processing Plant sold by DMSLP in 2001. The indemnification provided by DMSLP to the purchaser of the plant has a limit of $5 million.

Illinois Power Indemnities. Dynegy has indemnified third parties against losses resulting from possible adverse regulatory actions taken by the ICC that could prevent Illinois Power from recovering costs incurred in connection with purchased natural gas and investments in specified items. Although there is no absolute limitation on Dynegy’s liability under this indemnity, the amount of the indemnity is limited to 50 percent of any such losses. Dynegy has made certain payments in respect of these indemnities following regulatory action by the ICC, and has established reserves for further potential indemnity claims. Further events, which fall within the scope of the indemnity, may still occur. However, Dynegy is not required to accrue a liability in connection with these indemnifications, as management cannot reasonably estimate a range of outcomes or at this time considers the probability of an adverse outcome as only reasonably possible. Dynegy intends to contest any proposed regulatory actions.

Black Mountain Guarantee. Through one of our subsidiaries, we hold a 50 percent ownership interest in Black Mountain (Nevada Cogeneration) (“Black Mountain”), in which our partner is a Chevron subsidiary. Black Mountain owns the Black Mountain power generation facility and has a power purchase agreement with a third party that extends through April 2023. In connection with the power purchase agreement, pursuant to which Black Mountain receives payments which decrease in amount over time, we agreed to guarantee 50 percent of certain payments that may be due to the power purchaser under a mechanism designed to protect it from early termination of the agreement. At June 30, 2011, if an event of default due to early termination had occurred under the terms of the mortgage on the facility entered into in connection with the power purchase agreement, we could have been required to pay the power purchaser approximately $54 million under the guarantee.

Other Indemnities. We entered into indemnifications regarding environmental, tax, employee and other representations when completing asset sales such as, but not limited, to the Rolling Hills, Calcasieu, CoGen Lyondell and Heard County power generating facilities. As of June 30, 2011, no claims have been made against these indemnities. There is no limitation on our liability under certain of these indemnities. However, management is unaware of any existing claims.

Note 8—Debt

DHI’s Credit Facility

During the second quarter 2011, we borrowed $400 million under DHI’s Fifth Amended and Restated Credit Agreement. This borrowing was repaid on August 5, 2011 in connection with the closing of the two new credit facilities entered into as part of the August 2011 Reorganization as defined in Note 13—Subsequent Events. In addition, DHI’s term facility of $850 million was repaid with current restricted cash and the term loan of $68 million was repaid using proceeds from the GasCo Term Loan Facility. The $400 million and $68 million were classified as long-term debt on our unaudited condensed consolidated balance sheets as these amounts were refinanced on a long-term basis. Please read Note 13—Subsequent Events for further discussion.

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(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Senior Notes and Debentures

We made scheduled repayments of $80 million during the second quarter 2011.

Subordinated Debentures

As permitted under the indenture, we have deferred our $8 million June 2011 payment of interest on the Subordinated Debentures.

Sithe Senior Notes

We made scheduled repayments of $33 million during the second quarter 2011.

Note 9—Employee Compensation, Savings and Pension Plans

We have various defined benefit pension plans and post-retirement benefit plans in which our past and present employees participate, which are more fully described in Note 24—Employee Compensation, Savings and Pension Plans in our Form 10-K.

Components of Net Periodic Benefit Cost. The components of net periodic benefit cost were:

	Pension Benefits						Other Benefits
	Three Months Ended June 30,
	2011			2010			2011		2010
	(in millions)
Service cost benefits earned during period	$	3		$	3		$	—	$	—
Interest cost on projected benefit obligation	3			4			1		1
Expected return on plan assets	(4		)	(4		)	—		—
Recognized net actuarial loss	2			1			—		—

Net periodic benefit cost	$	4		$	4		$	1	$	1

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(Unaudited)

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	Pension Benefits						Other Benefits
	Six Months Ended June 30,
	2011			2010			2011		2010
	(in millions)
Service cost benefits earned during period	$	6		$	6		$	1	$	1
Interest cost on projected benefit obligation	7			7			2		2
Expected return on plan assets	(8		)	(8		)	—		—
Recognized net actuarial loss	3			2			—		—

Net periodic benefit cost	$	8		$	7		$	3	$	3

Contributions. During the six months ended June 30, 2011 and 2010, we made $6 million in contributions to our pension plans or other postretirement benefit plans. We expect to make contributions of approximately $12 million to our pension plans and $2 million to other benefit plans during 2011.

Note 10—Income Taxes

Effective Tax Rate. We compute our quarterly taxes under the effective tax rate method based on applying an anticipated annual effective rate to our year-to-date income or loss, except for significant unusual or extraordinary transactions. Income taxes for significant unusual or extraordinary transactions are computed and recorded in the period that the specific transaction occurs. Dynegy’s income taxes included in continuing operations were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(in millions, except rates)
Income tax benefit	$	76		$	128		$	136		$	63

Effective tax rate	40		%	40		%	41		%	57		%

For the three months ended June 30, 2011 and 2010, Dynegy’s overall effective tax rate on continuing operations was different than the statutory rate of 35 percent due primarily to the impact of state taxes.

For the six months ended June 30, 2011, Dynegy’s overall effective tax rate on continuing operations was different than the statutory rate of 35 percent due primarily to the impact of state taxes which included a benefit of $9 million related to an increase in state NOLs due to the acceptance of amended returns, partially offset by an expense of $3 million related to an increase in the Illinois statutory rate. For the six months ended June 30, 2010, the overall effective tax rate on continuing operations was different than the statutory rate of 35 percent due primarily to a benefit of $18 million related to the release of reserves for uncertain tax positions, partially offset by the impact of state taxes.

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For the Interim Periods Ended June 30, 2011 and 2010

DHI’s income taxes included in continuing operations were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(in millions, except rates)
Income tax benefit	$	75		$	128		$	133		$	56

Effective tax rate	39		%	40		%	41		%	51		%

For the three months ended June 30, 2011 and 2010, DHI’s overall effective tax rate on continuing operations was different than the statutory rate of 35 percent due primarily to the impact of state taxes.

For the six months ended June 30, 2011, DHI’s overall effective tax rate on continuing operations was different than the statutory rate of 35 percent due primarily to the impact of state taxes which included a benefit of $6 million related to an increase in state NOLs due to the acceptance of amended returns, partially offset by an expense of $2 million related to an increase in the Illinois statutory rate. For the six months ended June 30, 2010, DHI’s overall effective tax rate on continuing operations was different than the statutory rate of 35 percent due primarily to a benefit of $12 million related to the release of reserves for uncertain tax positions, partly offset by the impact of state taxes.

Note 11—Dynegy’s Loss Per Share

Basic loss per share represents the amount of losses for the period available to each share of our common stock outstanding during the period. Diluted loss per share represents the amount of losses for the period available to each share of our common stock outstanding during the period plus each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the period. Basic and diluted shares outstanding for all periods presented have been calculated to reflect the 1-for-5 reverse stock split effected May 25, 2010. Please read Note 23—Capital Stock in our Form 10-K for further discussion.

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(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

The reconciliation of basic loss per share from continuing operations to diluted loss per share from continuing operations is shown in the following table:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(in millions, except per share amounts)
Loss from continuing operations for basic and diluted loss per share	$	(116	)	$	(191	)	$	(193	)	$	(47	)

Basic weighted-average shares	122			120			122			120
Effect of dilutive securities:
Stock options and restricted stock	—			1			—			1
Diluted weighted-average shares	122			121			122			121

Loss per share from continuing operations:

Basic	$	(0.95	)	$	(1.59	)	$	(1.58	)	$	(0.39	)
Diluted (1)	$	(0.95	)	$	(1.59	)	$	(1.58	)	$	(0.39	)

(1) Entities with a net loss from continuing operations are prohibited from including potential common shares in the computation of diluted per-share amounts. Accordingly, we have utilized the basic shares outstanding amount to calculate both basic and diluted loss per share for the three and six months ended June 30, 2011 and 2010.

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For the Interim Periods Ended June 30, 2011 and 2010

Note 12—Segment Information

We reported results for the following segments: (i) GEN-MW, (ii) GEN-WE and (iii) GEN-NE. Our unaudited condensed consolidated financial results also reflect corporate-level expenses such as general and administrative, interest and depreciation and amortization.

Reportable segment information for Dynegy, including intercompany transactions accounted for at prevailing market rates, for the three and six months ended June 30, 2011 and 2010 is presented below:

Dynegy’s Segment Data as of and for the Three Months Ended June 30, 2011

(in millions)

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
Unaffiliated revenues:
Domestic	$	195		$	19		$	112		$	—		$	326
Total revenues	$	195		$	19		$	112		$	—		$	326
Depreciation and amortization	$	(50	)	$	(16	)	$	(7	)	$	(2	)	$	(75	)
Impairment and other charges	—			—			(1		)	—			(1		)
Operating loss	$	(37	)	$	(19	)	$	(21	)	$	(29	)	$	(106	)
Other items, net	2			1			—			—			3
Interest expense													(89		)
Loss from continuing operations before income taxes													(192		)
Income tax benefit													76
Net loss													$	(116	)
Identifiable assets:
Domestic	$	5,026		$	1,803		$	1,575		$	1,459		$	9,863
Total	$	5,026		$	1,803		$	1,575		$	1,459		$	9,863
Capital expenditures	$	(49	)	$	(9	)	$	(4	)	$	—		$	(62	)

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Dynegy’s Segment Data as of and for the Three Months Ended June 30, 2010

(in millions)

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
Unaffiliated revenues:
Domestic	$	63		$	71		$	105		$	—		$	239

Total revenues	$	63		$	71		$	105		$	—		$	239

Depreciation and amortization	$	(63	)	$	(17	)	$	(8	)	$	(2	)	$	(90	)
Impairment and other charges	—			—			(1		)	—			(1		)

Operating loss	$	(165	)	$	(9	)	$	(26	)	$	(29	)	$	(229	)

Other items, net	—			—			—			1			1
Interest expense													(91		)

Loss from continuing operations before income taxes													(319		)
Income tax benefit													128

Net loss													$	(191	)

Identifiable assets:
Domestic	$	5,282		$	2,112		$	1,768		$	1,410		$	10,572
Other	—			—			—			24			24

Total	$	5,282		$	2,112		$	1,768		$	1,434		$	10,596

Capital expenditures and investments in unconsolidated affiliates	$	(108	)	$	(2	)	$	(2	)	$	(3	)	$	(115	)

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Dynegy’s Segment Data as of and for the Six Months Ended June 30, 2011

(in millions)

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
Unaffiliated revenues:
Domestic	$	475		$	81		$	275		$	—		$	831
Total revenues	$	475		$	81		$	275		$	—		$	831
Depreciation and amortization	$	(150	)	$	(33	)	$	(14	)	$	(4	)	$	(201	)
Impairment and other charges	—			—			(1		)	—			(1		)
Operating loss	$	(40	)	$	(18	)	$	(26	)	$	(71	)	$	(155	)
Other items, net	2			1			—			1			4
Interest expense													(178		)
Loss from continuing operations before income taxes													(329		)
Income tax benefit													136
Net loss													$	(193	)
Identifiable assets:
Domestic	$	5,026		$	1,803		$	1,575		$	1,459		$	9,863
Total	$	5,026		$	1,803		$	1,575		$	1,459		$	9,863
Capital expenditures	$	(93	)	$	(14	)	$	(21	)	$	—		$	(128	)

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Dynegy’s Segment Data as of and for the Six Months Ended June 30, 2010

(in millions)

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
Unaffiliated revenues:
Domestic	$	549		$	214		$	334		$	—		$	1,097

Total revenues	$	549		$	214		$	334		$	—		$	1,097

Depreciation and amortization	$	(113	)	$	(33	)	$	(16	)	$	(3	)	$	(165	)
Impairment and other charges	—			—			(1		)	—			(1		)

Operating income (loss)	$	95		$	36		$	34		$	(63	)	$	102

Losses from unconsolidated investments	(34		)	—			—			—			(34		)
Other items, net	—			—			1			1			2
Interest expense													(180		)

Loss from continuing operations before income taxes													(110		)
Income tax benefit													63

Loss from continuing operations													(47		)
Income from discontinued operations, net of taxes													1

Net loss													$	(46	)

Identifiable assets:
Domestic	$	5,282		$	2,112		$	1,768		$	1,410		$	10,572
Other	—			—			—			24			24

Total	$	5,282		$	2,112		$	1,768		$	1,434		$	10,596

Capital expenditures and investments in unconsolidated affiliates	$	(197	)	$	(10	)	$	(5	)	$	(4	)	$	(216	)

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Reportable segment information for DHI, including intercompany transactions accounted for at prevailing market rates, for the three and six months ended June 30, 2011 and 2010 is presented below:

DHI’s Segment Data as of and for the Three Months Ended June 30, 2011

(in millions)

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
Unaffiliated revenues:
Domestic	$	195		$	19		$	112		$	—		$	326

Total revenues	$	195		$	19		$	112		$	—		$	326

Depreciation and amortization	$	(50	)	$	(16	)	$	(7	)	$	(2	)	$	(75	)
Impairment and other charges	$	—		$	—		$	(1	)	$	—		$	(1	)

Operating loss	$	(37	)	$	(19	)	$	(21	)	$	(27	)	$	(104	)

Other items, net	2			1			—			—			3
Interest expense													(89		)

Loss from continuing operations before income taxes													(190		)
Income tax benefit													75
Net loss													$	(115	)

Identifiable assets:
Domestic	$	5,026		$	1,803		$	1,575		$	1,392		$	9,796

Total	$	5,026		$	1,803		$	1,575		$	1,392		$	9,796

Capital expenditures	$	(49	)	$	(9	)	$	(4	)	$	—		$	(62	)

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

DHI’s Segment Data as of and for the Three Months Ended June 30, 2010

(in millions)

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
Unaffiliated revenues:
Domestic	$	63		$	71		$	105		$	—		$	239

Total revenues	$	63		$	71		$	105		$	—		$	239

Depreciation and amortization	$	(63	)	$	(17	)	$	(8	)	$	(2	)	$	(90	)
Impairment and other charges	—			—			(1		)	—			(1		)

Operating loss	$	(165	)	$	(9	)	$	(26	)	$	(29	)	$	(229	)

Other items, net	—			—			—			1			1
Interest expense													(91		)

Loss from continuing operations before income taxes													(319		)
Income tax benefit													128

Net loss													$	(191	)

Identifiable assets:
Domestic	$	5,282		$	2,112		$	1,768		$	1,353		$	10,515
Other	—			—			—			24			24

Total	$	5,282		$	2,112		$	1,768		$	1,377		$	10,539

Capital expenditures and investments in unconsolidated affiliates	$	(108	)	$	(2	)	$	(2	)	$	(3	)	$	(115	)

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

DHI’s Segment Data as of and for the Six Months Ended June 30, 2011

(in millions)

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
Unaffiliated revenues:
Domestic	$	475		$	81		$	275		$	—		$	831

Total revenues	$	475		$	81		$	275		$	—		$	831

Depreciation and amortization	$	(150	)	$	(33	)	$	(14	)	$	(4	)	$	(201	)
Impairment and other charges	$	—		$	—		$	(1	)	$	—		$	(1	)

Operating loss	$	(40	)	$	(18	)	$	(26	)	$	(70	)	$	(154	)

Other items, net	2			1			—			1			4
Interest expense													(178		)

Loss from continuing operations before income taxes													(328		)
Income tax benefit													133
Net loss													$	(195	)

Identifiable assets:
Domestic	$	5,026		$	1,803		$	1,575		$	1,392		$	9,796

Total	$	5,026		$	1,803		$	1,575		$	1,392		$	9,796

Capital expenditures	$	(93	)	$	(14	)	$	(21	)	$	—		$	(128	)

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

DHI’s Segment Data as of and for the Six Months Ended June 30, 2010

(in millions)

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
Unaffiliated revenues:
Domestic	$	549		$	214		$	334		$	—		$	1,097

Total revenues	$	549		$	214		$	334		$	—		$	1,097

Depreciation and amortization	$	(113	)	$	(33	)	$	(16	)	$	(3	)	$	(165	)
Impairment and other charges	—			—			(1		)	—			(1		)

Operating income (loss)	$	95		$	36		$	34		$	(63	)	$	102

Losses from unconsolidated investments	(34		)	—			—			—			(34		)
Other items, net	—			—			1			1			2
Interest expense													(180		)

Loss from continuing operations before income taxes													(110		)
Income tax benefit													56

Loss from continuing operations													(54		)
Income from discontinued operations, net of taxes													1

Net loss													$	(53	)

Identifiable assets:
Domestic	$	5,282		$	2,112		$	1,768		$	1,353		$	10,515
Other	—			—			—			24			24

Total	$	5,282		$	2,112		$	1,768		$	1,377		$	10,539

Capital expenditures and investments in unconsolidated affiliates	$	(197	)	$	(10	)	$	(5	)	$	(4	)	$	(216	)

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Note 13—Subsequent Events

Reorganization

In August 2011, we completed a reorganization of our subsidiaries (the “Reorganization”), whereby, (i) substantially all of our coal-fired power generation facilities are held by Dynegy Midwest Generation, LLC (“DMG” or “CoalCo”), (ii) substantially all of our natural gas-fired power generation facilities are held by Dynegy Power, LLC (“DPC” or “GasCo”) and (iii) 100 percent of the ownership interests of Dynegy Northeast Generation (“DNE”), the entity that indirectly holds the equity interest in the subsidiaries that operate the Roseton and Danskammer power generation facilities, are held by DHI. As a result of the Reorganization, GasCo owns a portfolio of eight primarily natural gas-fired intermediate (combined cycle) and peaking (combustion and steam turbines) power generation facilities diversified across the West, Midwest and Northeast regions of the United States, totaling 6,771 MW of generating capacity. CoalCo owns a portfolio of six primarily coal-fired baseload power generation facilities located in the Midwest, totaling 3,132 MW of generating capacity. GasCo and CoalCo are indirect wholly owned subsidiaries of DHI and were designed to be separately financeable. GasCo and CoalCo are bankruptcy remote in order to accommodate the financings reflected by the credit facilities (as described below) and to provide us with greater flexibility in our efforts to address leverage and liquidity issues and to realize value of our assets. Our remaining assets (including our leasehold interests in the Danskammer and Roseton facilities) are not a part of either GasCo or CoalCo.

New Credit Facilities

We completed the Reorganization of our legal entity structures, as noted above, to facilitate the execution of two new credit facilities. The new credit facilities, which were entered into on August 5, 2011, consist of a $1,100 million, five year senior secured term loan facility available to GasCo and a $600 million, five year senior secured term loan facility available to CoalCo.

GasCo Term Loan Facility. On August 5, 2011, Dynegy Power, LLC, (defined above as DPC or GasCo), entered into a $1,100 million senior secured term loan facility (the “GasCo Term Loan Facility”) with Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and as Collateral Trustee, Credit Suisse Securities (USA) LLC and Goldman Sachs Lending Partners LLC, as Joint Bookrunners and Joint Lead Arrangers, Barclays Capital, the investment banking division of Barclays Bank PLC, as Co-Manager, other agents named therein and other financial institutions party thereto as lenders.

The GasCo Term Loan Facility is a senior secured term loan facility with an aggregate principal amount of $1,100 million, which was available in a single drawing on the closing date. Amounts borrowed under the GasCo Term Loan Facility that are repaid or prepaid may not be re-borrowed. The GasCo Term Loan Facility will mature on August 5, 2016 and will amortize in equal quarterly installments in aggregate annual amounts equal to 1.00 percent of the original principal amount of the GasCo Term Loan Facility with the balance payable on the fifth anniversary of the closing date.

The proceeds of borrowings under the GasCo Term Loan Facility were or will be used by GasCo to (i) repay an intercompany obligation of a GasCo subsidiary to DHI and ultimately to repay certain outstanding indebtedness under DHI’s Fifth Amended and Restated Credit Agreement, (ii) fund cash collateralized letters of credit and provide cash collateral for existing and future collateral requirements, (iii) at the option of GasCo, repay up to approximately $192 million of debt relating to Sithe Energies, Inc. (the intermediate project holding company that indirectly holds the Independence facility in New York), (iv) make a $200 million restricted payment to a parent holding company of GasCo, (v) pay related transaction fees and expenses and (vi) fund additional cash to the balance sheet to provide the GasCo portfolio with liquidity for general working capital and liquidity purposes. Proceeds of borrowings under the GasCo Term Loan Facility, to the extent in excess of the immediate needs described in the preceding sentence, may be held as cash or cash equivalents until used by GasCo for the purposes described above (including cash collateralizing letters of credit, the payment of dividends or other restricted payments in accordance with, and subject to the limitations in the terms of, the GasCo Term Loan Facility or other general corporate purposes of GasCo).

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

All obligations of GasCo under (i) the GasCo Term Loan Facility (the “GasCo Borrower Obligations”) and (ii) at the election of GasCo, (x) cash management arrangements and (y) interest rate protection, commodity trading or hedging or other permitted hedging or swap arrangements (the “Hedging/Cash Management Arrangements”) will be unconditionally guaranteed jointly and severally on a senior secured basis (the “GasCo Guarantees”) by each existing and subsequently acquired or organized direct or indirect material domestic subsidiary of GasCo (the “GasCo Guarantors”), in each case, as otherwise permitted by applicable law, regulation and contractual provision and to the extent such guarantee would not result in adverse tax consequences as reasonably determined by GasCo. None of GasCo’s parent companies is obligated to repay the GasCo Borrower Obligations.

The GasCo Borrower Obligations, the GasCo Guarantees and any Hedging/Cash Management Arrangements will be secured by first priority liens on and security interests in 100 percent of the capital stock of GasCo (as discussed below) and substantially all of the present and after-acquired assets of GasCo and each GasCo Guarantor (collectively, the “GasCo Collateral”). Accordingly, such assets are only available for the creditors of GasCo Intermediate Holdings and its subsidiaries. The GasCo Collateral excludes certain assets, including, so long as any Sithe debt remains outstanding, the equity and assets of Sithe/Independence Power Partners, L.P. and Sithe/Independence Funding Corp. (such equity and assets to be subject to the lien in favor of GasCo secured parties as soon as the Sithe debt is repaid and any necessary consents are obtained).

The GasCo Term Loan Facility bears interest, at GasCo’s option, at either (a) 7.75 percent per annum plus LIBOR, subject to a LIBOR floor of 1.50 percent, with respect to any Eurodollar Term Loan or (b) 6.75 percent per annum plus the alternate base rate with respect to any ABR Term Loan. GasCo may elect from time to time to convert all or a portion of the Term Loan from any ABR Borrowing into a Eurodollar Borrowing or vice versa. With some exceptions, the GasCo Term Loan Facility is non-callable for the first two years and is subject to a prepayment premium.

The GasCo Term Loan Facility contains mandatory prepayment provisions. The GasCo Term Loan Facility shall be prepaid (a) with 100 percent of the net cash proceeds of all asset sales by GasCo and its subsidiaries and subject to the right of GasCo to reinvest such proceeds if such proceeds are reinvested (or committed to be reinvested) within 12 months and, if so committed to reinvestment, reinvested within six months after such initial 12 month period, (b) 50 percent of the net cash proceeds of issuance of equity securities of GasCo and its subsidiaries (except to the extent used for permitted capital expenditures), (c) commencing with the first full fiscal year of GasCo to occur after the closing date, 100 percent of the excess cash flow; provided that (i) excess cash flow shall be determined after reduction for amounts used for capital expenditures and restricted payments and (ii) any voluntary prepayments of the term loans shall be credited against excess cash flow prepayment obligations, (d) 100 percent of the net cash proceeds of issuances, offerings or placements of debt obligations of GasCo and its subsidiaries (other than all permitted debt), and (e) 100 percent of the principal amount of Sithe Debt which remains outstanding on the six-month anniversary of the closing date. Notwithstanding the above, the proceeds of the sale of 20 percent of the membership interests in GasCo are not required to be used to prepay the GasCo Term Loan Facility.

The GasCo Term Loan Facility contains customary events of default and affirmative and negative covenants including, subject to certain specified exceptions, limitations on amendments to constitutive documents, liens, capital expenditures, acquisitions, subsidiaries and joint ventures, investments, the incurrence of debt, fundamental changes, asset sales, sale-leaseback transactions, hedging arrangements, restricted payments, changes in nature of business, transactions with affiliates, burdensome agreements, amendments of debt and other material agreements, accounting changes and prepayment of indebtedness or repurchases of equity interests.

The GasCo Term Loan Facility limits distributions to $135 million per year provided the distributing entity maintains at least $50 million of liquidity immediately after giving effect to the distribution.

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

CoalCo Term Loan Facility. Also, on August 5, 2011, Dynegy Midwest Generation, LLC, (defined above as DMG or CoalCo), entered into a $600 million senior secured term loan facility (the “CoalCo Term Loan Facility”) with Credit Suisse AG, Cayman Islands Branch as Administrative Agent and as Collateral Trustee, Credit Suisse Securities (USA) LLC and Goldman Sachs Lending Partners LLC, as Joint Bookrunners and Joint Lead Arrangers, Barclays Capital, the investment banking division of Barclays Bank PLC, as Co-Manager, other agents named therein and other financial institutions party thereto as lenders.

The CoalCo Term Loan Facility is a senior secured term loan facility with an aggregate principal amount of $600 million, which was available in a single drawing on the closing date. Amounts borrowed under the CoalCo Term Loan Facility that are repaid or prepaid may not be re-borrowed. The CoalCo Term Loan Facility will mature on August 5, 2016 and will amortize in equal quarterly installments in aggregate annual amounts equal to 1.00 percent of the original principal amount of the CoalCo Term Loan Facility with the balance payable on the fifth anniversary of the closing date.

The proceeds of borrowings under the CoalCo Term Loan Facility were or will be used by CoalCo, to (i) fund cash collateralized letters of credit and provide cash collateral for existing and future collateral requirements, (ii) make a $200 million restricted payment to a parent holding company of CoalCo, (iii) pay related transaction fees and expenses and (iv) fund additional cash to the balance sheet to provide the CoalCo portfolio with cash to be used for general working capital and general corporate purposes. Proceeds of borrowings under the CoalCo Term Loan Facility, to the extent in excess of the immediate needs described in the preceding sentence, may be held as cash or cash equivalents until used by CoalCo for the purposes described above (including cash collateralizing letters of credit, the payment of dividends in amounts to be agreed or other restricted payments in accordance with, and subject to the limitations in the terms of, the CoalCo Term Loan Facility or other general corporate purposes for CoalCo).

All obligations of CoalCo under (i) the CoalCo Term Loan Facility (the “CoalCo Borrower Obligations”) and (ii) at the election of CoalCo, Hedging/Cash Management Arrangements will be unconditionally guaranteed jointly and severally on a senior secured basis (the “CoalCo Guarantees”) by each existing and subsequently acquired or organized direct or indirect material domestic subsidiary of CoalCo (the “CoalCo Guarantors”), in each case, as otherwise permitted by applicable law, regulation and contractual provision and to the extent such guarantee would not result in adverse tax consequences as reasonably determined by CoalCo. None of CoalCo’s parent companies is obligated to repay the CoalCo Borrower Obligations.

The CoalCo Borrower Obligations, the CoalCo Guarantees and any Hedging/Cash Management Arrangements will be secured by first priority liens on and security interests in 100 percent of the capital stock of CoalCo and substantially all of the present and after-acquired assets of CoalCo and each CoalCo Guarantor. Accordingly, such assets are only available for the creditors of CoalCo Intermediate Holdings and its subsidiaries.

The CoalCo Term Loan Facility bears interest, at CoalCo’s option, at either (a) 7.75 percent per annum plus LIBOR, subject to a LIBOR floor of 1.50 percent, with respect to any Eurodollar Term Loan or (b) 6.75 percent per annum plus the alternate base rate with respect to any ABR Term Loan. CoalCo may elect from time to time to convert all or a portion of the Term Loan from any ABR Borrowing into a Eurodollar Borrowing or vice versa. With some exceptions, the CoalCo Term Loan Facility is non-callable for the first two years and is subject to a prepayment premium.

The CoalCo Term Loan Facility contains mandatory prepayment provisions. The Term Loans shall be prepaid (a) with 100 percent of the net cash proceeds of all asset sales by CoalCo and its subsidiaries and subject to the right of CoalCo to reinvest such proceeds if such proceeds are reinvested (or committed to be reinvested) within 12 months and, if so committed to reinvestment, reinvested within six months after such initial 12 month period, (b) 50 percent of the net cash proceeds of issuance of equity securities of CoalCo and its subsidiaries (except to the extent used (x) to prepay the Loans, (y) for capital expenditures and (z) for permitted acquisitions), (c) commencing with the first full fiscal year of CoalCo to occur after the closing date, 100 percent of the excess cash flow; provided that (i) excess cash flow shall be determined after reduction for amounts used for capital expenditures, and restricted payments made and (ii) any voluntary prepayments of the term loans shall be credited against excess cash flow prepayment obligations and (d) 100 percent of the net cash proceeds of issuances, offerings or placements of debt obligations of CoalCo and its subsidiaries (other than all permitted debt).

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

The CoalCo Term Loan Facility contains customary events of default and affirmative and negative covenants including, subject to certain specified exceptions, limitations on amendments to constitutive documents, liens, capital expenditures, acquisitions, subsidiaries and joint ventures, investments, the incurrence of debt, fundamental changes, asset sales, sale-leaseback transactions, hedging arrangements, restricted payments, changes in nature of business, transactions with affiliates, burdensome agreements, amendments of debt and other material agreements, accounting changes and prepayment of indebtedness or repurchases of equity interests.

The CoalCo Term Loan Facility limits distributions to $90 million per year provided the distributing entity maintains at least $50 million of liquidity immediately after giving effect to the distribution.

LC Facilities . GasCo entered into a fully cash collateralized Letter of Credit Reimbursement and Collateral Agreement with Barclays Bank PLC (“Barclays”) pursuant to which Barclays agrees to issue letters of credit at GasCo’s request provided that GasCo deposits in an account controlled by Barclays an amount of cash sufficient to cover the face value of such requested letter of credit plus an additional percentage thereon.

GasCo also entered into a fully cash collateralized Letter of Credit Reimbursement and Collateral Agreement with Credit Suisse AG, Cayman Islands Branch (“CS”) pursuant to which CS agreed to issue letters of credit at GasCo’s request provided that GasCo deposits in an account controlled by CS an amount of cash sufficient to cover the face value of such requested letter of credit plus an additional percentage thereon.

CoalCo entered into a fully cash collateralized Letter of Credit Reimbursement and Collateral Agreement with CS pursuant to which CS agreed to issue letters of credit at CoalCo’s request provided that CoalCo deposits in an account controlled by CS an amount of cash sufficient to cover the face value of such requested letter of credit plus an additional percentage thereon.

DHI entered into a fully cash collateralized Letter of Credit Reimbursement and Collateral Agreement with CS pursuant to which CS agreed to issue letters of credit at DHI's request provided that DHI deposits in an account controlled by CS an amount of cash sufficient to cover the face value of such requested letter of credit plus an additional percentage thereon.

Overview of Bankruptcy Remote and Ring-Fencing Measures

Pursuant to the Reorganization, we have created, directly or indirectly, special-purpose bankruptcy remote entities. These bankruptcy remote entities will have at least one independent manager and shall have certain “separateness” provisions, including without limitation, separately appointed boards of managers, separate books and records, separately appointed officers, separate bank accounts, holding themselves out as separate legal entities and not divisions of Dynegy, payment of liabilities from their own funds, conducting business in their own names (other than any business relating to the trading activities of Dynegy and its subsidiaries), observing entity level formalities, and not pledging their assets for the benefit of certain other persons. In addition, GasCo has the option to sell a 20 percent ownership interest to a third party.

Further, these bankruptcy remote entities each have at least one independent manager. Unanimous consent of the board of managers, including the independent manager, is required for filing any bankruptcy proceeding, seeking or consenting to the appointment of any receiver, making or consenting to any assignment for the benefit of creditors, admitting in writing the inability to pay the applicable bankruptcy remote entity’s debts, consenting to substantive consolidation, dissolving or liquidating, engaging in any business beyond those set forth in the applicable bankruptcy remote entity’s organizational documents, amending the bankruptcy remoteness provisions in such entity’s organizational documents and, at any time following execution of the applicable credit agreement, amending, terminating or entering material intercompany relationships with other entities.

Relationships with Third Parties

Each ringfenced entity will bill its customers on invoices clearly referencing solely such ringfenced entity. Other than in the limited context of Services (defined and described below), when transacting business with third parties, including vendors and customers, employees of the ringfenced entities will not hold themselves out as agents or representatives of non-ringfenced entities. Similarly, other than in the limited context of Services, when transacting business with third parties, employees of non-ringfenced entities will not hold themselves out as agents or representatives of ringfenced entities.

Intercompany Transactions

Service Agreements. Service Agreements between Dynegy, and each of GasCo Intermediate Holdings, CoalCo Intermediate Holdings, DNE and certain other subsidiaries of Dynegy, govern the terms under which identified services (the “Services”) are provided. Under the Service Agreements, Dynegy and certain of its subsidiaries (the “Providers”) provide Services to GasCo Intermediate Holdings, CoalCo Intermediate Holdings, DNE, their respective subsidiaries and certain of the subsidiaries of Dynegy (the “Recipients”).

Table of Contents

DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

The Providers act as agents for the Recipients for the limited purpose of providing the Services set forth in the Service Agreement. The Providers may perform additional services at the request of the Recipients, and will be reimbursed for all costs and expenses related to such additional services. Prior to the beginning of each fiscal year in which Services are to be provided pursuant to the Service Agreement, the Providers and the Recipients must agree on a budget for the Services, outlining, among other items, the contemplated scope of the Services to be provided in the following fiscal year and the cost of providing each Service. The Recipients will pay the Providers an annual management fee as agreed in the budget, which shall include, reimbursement of out-of pocket costs and expenses related to the provision of the Services and will provide reasonable assistance, such as information, services and materials, to the Providers.

Energy Management Agreements. Each subsidiary owning one or more power plants (each a “Customer”) has entered into an Energy Management Agency Services Agreement (an “EMA”) with Dynegy Power Marketing, LLC (“DPM”). Pursuant to each EMA, DPM will provide power management services to the Customers, consisting of marketing power and capacity, capturing pricing arbitrage, scheduling dispatch of power, communicating with ISOs or RTOs, purchasing replacement power, and reconciling and settling ISO or RTO invoices. In addition, through Dynegy Marketing and Trade, LLC, DPM will provide fuel management services, consisting of procuring the requisite quantities of fuel, assisting with storage and transportation, scheduling delivery of fuel, assisting Customers with development and implementation of fuel procurement strategies, marketing and selling excess fuel and assisting with the evaluation of present and long-term fuel purchase and transportation options. Through Dynegy Coal Trading & Transportation, LLC, DPM will also provide fuel management services to one or more Customers that require services related to coal. DPM will also assist the Customer with risk management by entering into one or more risk management transactions, the purpose of which is to fix the price or value any commodity or to mitigate or offset any change in the price or value of any commodity. DPM may from time to time provide other services as the parties may agree.

Tax Sharing Agreement. Under the U.S. federal income tax law, Dynegy is responsible for the tax liabilities of its entities, because Dynegy will file consolidated income tax returns, which will necessarily include the income and business activities of the ringfenced entities and Dynegy’s other affiliates. To properly allocate taxes among Dynegy and each of its entities, Dynegy and certain of its entities have entered into a Tax Sharing Agreement under which Dynegy agrees to prepare consolidated returns on behalf of itself and its entities and make all required payments to relevant revenue collection authorities as required by law. Additionally, GasCo and CoalCo agree to make payments to Dynegy of the tax amounts for which GasCo or CoalCo and their respective entities would have been liable if each group of such entities began business on the restructuring date and were eligible to, and elected to, file a consolidated return on a stand-alone basis beginning on the restructuring date. Further, each of Dynegy GasCo Holdings, LLC, Dynegy Gas Holdco, LLC, GasCo Intermediate Holdings, Dynegy Coal Holdco, LLC, and CoalCo Intermediate Holdings agrees to make payments to Dynegy of amounts representing the tax that each such entity would have paid if each began business on the restructuring date and filed a separate corporate income tax return (excluding from income any subsidiary distributions) on a stand-alone basis beginning on the restructuring date.

Cash Management. Dynegy’s ringfenced entities maintain cash accounts separate from those of Dynegy’s non-ringfenced entities. As such, cash collected by a ringfenced entity is not swept into accounts held in the name of any non-ringfenced entity and cash collected by a non-ringfenced entity is not swept into accounts held in the name of any ringfenced entity. The cash in deposit accounts owned by a ringfenced entity is not used to pay the debts and/or operating expenses of any non-ringfenced Entity, and the cash in deposit accounts owned by a non-ringfenced entity is not used to pay the debts and/or operating expenses of any ringfenced entity.

Reportable Segments

In conjunction with the Reorganization, we have reevaluated our reportable segments and expect to report results in the following segments: (i) Gas, (ii) Coal and (iii) Other commencing with the quarter ended September 30, 2011. Accordingly, we will recast the corresponding items for all periods presented concurrent with the filing of our third quarter Form 10-Q.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For the Interim Periods Ended June 30, 2011 and 2010

Litigation

Reorganization Litigation. On July 21, 2011, certain holders of obligations with potential recourse rights to DHI initiated legal proceedings seeking to enjoin Dynegy’s restructuring efforts previously disclosed on July 10, 2011. On July 29, 2011, the Delaware court denied the plaintiff motion. On July 31, 2011, the plaintiffs filed an appeal which was denied on August 4, 2011 and subsequently denied by the Delaware Supreme Court on August 5, 2011. Please read Note 7—Commitments and Contingencies—Reorganization Litigation for further discussion.

Stockholder Litigation. On July 19, 2011, the Court granted plaintiff’s counsel’s motion seeking the award of fees and expenses of approximately $1.6 million. The impact of this decision has been reflected in Dynegy’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2011. Please read Note 7—Commitments and Contingencies—Stockholder Litigation Relating to the Blackstone and Icahn Merger Agreements for further discussion.

Gas Index Pricing Litigation. On July 18, 2011, the Court granted defendants’ motions for summary judgment, thereby dismissing all of plaintiffs’ state law claims. The impact of this decision has been reflected in our unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2011. Please read Note 7—Commitments and Contingencies—Gas Index Pricing Litigation for further discussion.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

For the Interim Periods Ended June 30, 2011 and 2010

Item 2—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS —DYNEGY INC. AND DYNEGY HOLDINGS INC.

The following discussion should be read together with the unaudited condensed consolidated financial statements and the notes thereto included in this report and with the audited consolidated financial statements and the notes thereto included in our Form 10-K.

We are holding companies and conduct substantially all of our business operations through our subsidiaries. Our current business operations are focused primarily on the power generation sector of the energy industry. We report the results of our power generation business as three separate segments in our consolidated financial statements: (i) the Midwest segment (“GEN-MW”); (ii) the West segment (“GEN-WE”); and (iii) the Northeast segment (“GEN-NE”). Our unaudited condensed consolidated financial results also reflect corporate-level expenses such as general and administrative, interest and depreciation and amortization.

New Management Team. On July 11, 2011, Robert C. Flexon, a director of Dynegy, was appointed as our President and Chief Executive Officer. Mr. Flexon replaced E. Hunter Harrison, who served as interim President and Chief Executive Officer since April 2011. Mr. Harrison resumed his role as an independent director and serves as non-executive Chairman of our Board of Directors. Additionally, on July 5, 2011, Clint C. Freeland was appointed as our Executive Vice President and Chief Financial Officer and Kevin T. Howell was appointed as our Executive Vice President and Chief Operating Officer. In July 2011, we announced the appointment of Carolyn J. Burke as Executive Vice President and Chief Administrative Officer, effective August 30, 2011.

Reorganization Activity. In August 2011, we completed the Reorganization of our subsidiaries, whereby (i) substantially all of our coal-fired power generation facilities are held by DMG, (ii) substantially all of our natural gas-fired power generation facilities are held by DPC and (iii) 100 percent of the ownership interests of DNE, the entity that indirectly holds the equity interests in the subsidiaries that operate the Roseton and Danskammer power generation facilities, are held by DHI. We completed the Reorganization of our legal entity structure to facilitate the execution of two new credit facilities. The new credit facilities, which were entered into August 5, 2011, consist of the GasCo Term Loan Facility, a $1,100 million, five year senior secured term loan facility available to GasCo, and the CoalCo Term Loan Facility, a $600 million, five year senior secured term loan facility available to CoalCo. Please read Note 13—Subsequent Events for further discussion.

The proceeds of borrowings under the CoalCo Term Loan Facility were or will be used by CoalCo, to (i) fund cash collateralized letters of credit and cash collateral for existing and future collateral requirements, (ii) make a $200 million restricted payment to a parent holding company of CoalCo, (iii) pay related transaction fees and expenses and (iv) fund additional cash to the balance sheet to provide the CoalCo portfolio with cash to be used for general working capital and general corporate purposes.

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We recently completed a reorganization of our subsidiaries and in connection therewith, certain of our subsidiaries (GasCo and CoalCo, as defined in Note 13—Subsequent Events) entered into two new credit facilities on August 5, 2011 which resulted in the repayment in full and termination of commitments under DHI’s Fifth Amended and Restated Credit Agreement. However, these new credit facilities contain certain restrictions related to distributions to their respective parent companies, including Dynegy and DHI (please read Note 13—Subsequent Events for further discussion). Although these new credit facilities are designed to provide sufficient operating liquidity for GasCo and CoalCo for the foreseeable future, there still remain significant debt service requirements for the unsecured notes and debentures at DHI as well as the operating lease payment obligations related to the Danskammer and Roseton operating leases at a wholly-owned subsidiary of DHI. We currently project that we will have minimal liquidity at DHI subsequent funding of the debt service requirements and operating lease payment obligations beyond the next eighteen months absent a significant positive change in the forecasted operating results of the Roseton and Danskammer facilities.

LIQUIDITY AND CAPITAL RESOURCES

Overview

In this section, we describe our liquidity and capital requirements including our sources and uses of liquidity and capital resources. Our liquidity and capital requirements are primarily a function of our debt maturities and debt service requirements, collateral requirements, fixed capacity payments and contractual obligations, capital expenditures (including required environmental expenditures) and working capital needs. Examples of working capital needs include purchases and sales of commodities and associated margin and collateral requirements, facility maintenance costs and other costs such as payroll.

Upon the completion of the Reorganization, our primary sources of internal liquidity are cash flows from operations, cash on hand and short-term investments. Please read Note 13—Subsequent Events for further information. Cash on hand includes cash proceeds from the GasCo Term Loan Facility and the CoalCo Term Loan Facility.

Our primary sources of external liquidity are proceeds from capital market transactions to the extent we engage in such transactions. Please read Capital-Structuring Transactions and Asset Dispositions below for more detail.

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Current Liquidity. The following table summarizes our consolidated revolver capacity and liquidity position at August 5, 2011, June 30, 2011 and December 31, 2010:

	August 5, 2011 (1)			June 30, 2011			December 31, 2010
	(in millions)
DHI Revolver capacity (2)	$	—		$	589		$	954
Borrowings against revolver capacity (3)	—			(400		)	—
Term letter of credit capacity, net of required reserves	—			825			825
Available contingent letter of credit facility capacity (4)	—			—			—
LC Facilities (5)	641			—			—
Outstanding letters of credit (5)	(608		)	(595		)	(375		)

Unused capacity	33			419			1,404

Cash—DHI (6)	956			354			253
Short-term investments—DHI (7)	—			94			90

Total available liquidity—DHI consolidated	$	989		$	867		$	1,747
Cash—Dynegy	58			45			38
Short-term investments—Dynegy (7)	—			12			16

Total available liquidity—Dynegy consolidated	$	1,047		$	924		$	1,801

(1) On August 5, 2011, we entered into the GasCo Term Loan Facility and the CoalCo Term Loan Facility, which replaced DHI’s Fifth Amended and Restated Credit Agreement. Please read Note13—Subsequent Events—Reorganization for further discussion.

(2) As of June 30, 2011 and December 31, 2010, our available liquidity under the Fifth Amended and Restated Credit Agreement was reduced by $491 million and $126 million, respectively, as a result of borrowing limitations under a financial covenant. On August 5, 2011, we repaid the Fifth Amended and Restated Credit Agreement. Please read Note13—Subsequent Events for further discussion.

(3) During the second quarter 2011, we borrowed $400 million under DHI’s Fifth Amended and Restated Credit Agreement. This borrowing was repaid on August 5, 20 11 in connection with closing the two new credit facilities entered into as part of the August 2011 Reorganization. Please read Note13—Subsequent Events for further discussion.

(4) Under the terms of the Contingent LC Facility, up to $150 million of capacity can become available, contingent on changes in forward spark spreads and power prices for 2012.

(5) GasCo and CoalCo had $9 million and $24 million of letter of credit capacity, respectively, at August 5, 2011.

(6) On August 5, 2011, we entered into the GasCo Term Loan Facility for $1,100 million and the CoalCo Term Loan Facility for $600 million resulting in the repayment and termination of DHI’s Fifth Amended and Restated Credit Agreement. A portion of the proceeds from the GasCo Term Loan Facility were used to make a $200 million restricted payment to a parent holding company of GasCo and a portion of the proceeds from the CoalCo Term Loan Facility were used to make a $200 million restricted payment to a parent holding company of CoalCo. After giving effect to the $400 million, in the aggregate, of proceeds from the GasCo Term Loan Facility and the CoalCo Term Loan Facility that was distributed, the GasCo Term Loan Facility and the CoalCo Term Loan Facility limit distributions by GasCo and CoalCo to their parents to $135 million and $90 million per year, respectively, provided the distributing entity maintains at least $50 million of liquidity immediately after giving effect to the distribution. Please read Note13—Subsequent Events for further discussion.

(7) We invest our available cash balances in certain investments permitted by our internal policies and external financing agreements. Please read Note 2—Inve stments for further discussion.

Cash on Hand. At August 5, 2011 and June 30, 2011, Dynegy had cash on hand of $1,014 million and $399 million, as compared to $291 million at December 31, 2010. At August 5, 2011 and June 30, 2011, DHI had cash on hand of $956 million and $354 million, as compared to $253 million at December 31, 2010. The increase in cash on hand at August 5, 2011 as compared to June 30, 2011 is due to the completion of the Reorganization. GasCo and CoalCo had $283 million and $268 million of cash on hand, respectively, at August 5, 2011, which is included in Dynegy’s and DHI’s consolidated cash on hand. Please read Note 13—Subsequent Events for further discussion. The increase in cash on hand at June 30, 2011 as compared to the end of 2010 is primarily due to the $400 million borrowed under the revolver capacity and the expiration of a security and deposit agreement and the subsequent release of $50 million of restricted cash, partially offset by net purchases of short-term investments, collateral posted with our clearing manager, capital expenditures and debt repayments.

Revolver Capacity . Our available liquidity under the Fifth Amended and Restated Credit Agreement was reduced by $491 million and $126 million as of June 30, 2011 and December 31, 2010, respectively, as a result of borrowing limitations under the covenant regarding the ratio of Secured Debt to EBITDA (as defined in our Fifth Amended and Restated Credit Agreement). The effect of reduced availability was less available liquidity to us. In the second quarter 2011, we borrowed $400 million under the Fifth Amended and Restated Credit Agreement. On August 5, 2011, the Fifth Amended and Restated Credit Agreement, including the $400 million borrowing, was repaid and terminated. Please read Note 8—Debt and Note 13—Subsequent Events for further discussion.

Capital-Structuring Transactions . We believe the Reorganization facilitated by the new credit facilities aligned our asset base and increased our flexibility to address additional potential debt restructuring activities. On August 5, 2011, we completed the Reorganization, repaid the Fifth Amended and Restated Credit Agreement and completed the GasCo Term Loan Facility and the CoalCo Term Loan Facility. We may participate in additional debt restructuring activities, which may include direct or indirect transfers of our subsidiaries’ equity interests, and/or further reorganizations of our subsidiaries. We will continue to focus on a capital structure that is closely aligned with the cash-generating potential of our assets, which is subject to cyclical changes in commodity prices. In addition to the above, we may explore additional sources of external liquidity, which could include public or private issuances of debt, equity or equity-linked securities, debt for equity swaps, or any combination of these. Matters to be considered include interest payments, restrictions imposed by the bankruptcy remote structure, the GasCo Term Loan Facility and CoalCo Term Loan Facility, and debt maturity profile, all to be balanced with the need to maintain adequate liquidity. The receptiveness of the capital markets to an offering of debt or equity securities cannot be assured and may be negatively impacted by, among other things, the going concern emphasis paragraph in our most recent audit report, our non-investment grade credit ratings, significant debt maturities, business prospects and other factors beyond our control, including current and projected market conditions.

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GasCo and CoalCo Restricted Payments. After giving effect to the $400 million, in the aggregate, of proceeds from the GasCo Term Loan Facility and the CoalCo Term Loan Facility that was distributed to Dynegy Gas Holdco, LLC and Dynegy Coal Holdco, LLC, respectively, the GasCo Term Loan Facility and the CoalCo Term Loan Facility limit distributions by GasCo and CoalCo to their parents to $135 million and $90 million per year, respectively, provided the distributing entity maintains at least $50 million of liquidity immediately after giving effect to the distribution. Please read Note 13—Subsequent Events—Reorganization for further discussion.

Operating Activities

Historical Operating Cash Flows. Dynegy’s and DHI’s cash flow used in operations totaled $86 million for the six months ended June 30, 2011. During the period, our power generation business provided positive cash flow from operations of $178 million from the operation of our power generation facilities after $92 million of cash outflows to our clearing manager. Corporate and other operations used approximately $264 million of cash primarily for interest payments to service debt and general and administrative expenses.

Dynegy’s cash flow provided by operations totaled $368 million for the six months ended June 30, 2010. DHI’s cash flow provided by operations totaled $369 million for the six months ended June 30, 2010. During the period, our power generation business provided positive cash flow from operations of $635 million from the operation of our power generation facilities, primarily reflecting positive earnings for the period and approximately $255 million of cash returned from our futures clearing manager. The return of this cash is partly the result of a $126 million decrease in our collateral requirements for the period; the remaining cash was returned as a result of the posting of short-term investments and a letter of credit in substitute of cash. Corporate and other operations included a use of approximately $267 million and $266 million in cash by Dynegy and DHI, respectively, primarily for interest payments to service debt and general and administrative expenses.

Future Operating Cash Flows. Our future operating cash flows will vary based on a number of factors, many of which are beyond our control, including the price of power, the price of natural gas and its correlation to power prices, the cost of coal and fuel oil, collateral requirements, the value of capacity and ancillary services, the run time of our generating facilities, the effectiveness of our commercial strategy, legal, environmental and regulatory requirements, our ability to achieve the cost savings contemplated in our cost reduction programs and our ability to capture value associated with commodity price volatility.

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Collateral Postings. We use a significant portion of our capital resources in the form of cash, short-term investments and letters of credit to satisfy counterparty collateral demands. These counterparty collateral demands reflect our non-investment grade credit ratings and counterparties’ views of our financial condition and ability to satisfy our performance obligations, as well as commodity prices and other factors. At June 30, 2011, we had approximately $137 million of cash collateral postings and $101 million of letter of credit collateral postings related to our hedging activities. The following table summarizes our consolidated collateral postings to third parties by line of business at August 5, 2011, June 30, 2011 and December 31, 2010:

	August 5, 2011		June 30, 2011		December 31, 2010
	(in millions)
By Business :
Generation business	$	654	$	640	$	377
Other	97		97		85

Total	$	751	$	737	$	462
By Type :
Cash and marketable securities (1)	$	143	$	142	$	87
Letters of credit	608		595		375

Total	$	751	$	737	$	462

(1) Includes Broker margin account on our consolidated balance sheets as well as other collateral postings included in Prepayments and other current assets on our consolidated balance sheets.

The change in letters of credit postings from December 31, 2010 to June 30, 2011 is primarily due to higher initial margin posting requirements, reduced use of bilateral first lien collateral arrangements and contractual obligations under certain operational agreements. Collateral postings increased from June 30, 2011 to August 5, 2011 primarily due to contractual obligations under certain operational agreements.

We expect counterparties’ future collateral demands to continue to reflect changes in commodity prices, including seasonal changes in weather-related demand, as well as their views of our creditworthiness. Our ability to use forward economic hedging instruments could be limited, due to the collateral requirements the use of such instruments entails.

Investing Activities

Capital Expenditures. We had approximately $128 million and $201 million in capital expenditures during the six months ended June 30, 2011 and 2010, respectively. Our capital spending by reportable segment was as follows:

	For the Six Months Ended
	June 30,
	2011		2010
	(in millions)
GEN-MW	$	93	$	182
GEN-WE	14		10
GEN-NE	21		5
Other	—		4

Total	$	128	$	201

Capital spending in our GEN-MW segment primarily consisted of environmental and maintenance capital projects and in our GEN-WE and GEN-NE segments primarily consisted of maintenance projects.

Other Investing Activities . Cash outflow for purchases of short-term investments during the six months ended June 30, 2011 totaled $247 million and $235 million for Dynegy and DHI, respectively. Cash inflow related to maturities of short-term investments for the six months ended June 30, 2011 were $217 million and $201 million for Dynegy and DHI, respectively. There was a $53 million cash inflow related to restricted cash balances during the six months ended June 30, 2011 from the release of $50 million related to the expiration of a security and deposit agreement and a decrease of $3 million in the restricted cash balance related to the Sithe senior notes. Other included $10 million of property insurance claim proceeds.

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Cash outflow related to purchases of short-term investments during the six months ended June 30, 2010 totaled $331 million and $316 million for Dynegy and DHI, respectively, and cash inflow related to distributions from short-term investments for the six months ended June 30, 2010 was $27 million and $28 million for Dynegy and DHI, respectively. There was a $10 million cash outflow related to restricted cash balances during the six months ended June 30, 2010 due to an increase in the Independence restricted cash balance and a $15 million cash outflow related to our funding commitment obligation under the PPEA Sponsor Support Agreement. Other included $9 million and $8 million related to distribution of an investment for Dynegy and DHI, respectively.

Financing Activities

Historical Cash Flow from Financing Activities. Cash flow provided by financing activities totaled $289 million and $286 million for Dynegy and DHI, respectively, for the six months ended June 30, 2011 due to $400 million in proceeds from long-term borrowing against the revolver capacity. This was offset by an $80 million repayment of our 6.875 percent senior notes, $33 million of repayments of borrowings on Sithe senior debt and $1 million in fees associated with the GasCo Term Loan Facility and the CoalCo Term Loan Facility. Dynegy’s financing activities also included $3 million from proceeds of stock option exercises.

Cash flow used in financing activities totaled $36 million for Dynegy and DHI, for six months ended June 30, 2010 related to $31 million of repayments of borrowings on Sithe senior debt and $5 million of financing fees.

Financing Trigger Events. Our debt instruments and other financial obligations include provisions which, if not met, could require early payment, additional collateral support or similar actions. These trigger events include the violation of covenants, defaults on scheduled principal or interest payments, including any indebtedness to the extent linked to it by reason of cross-default or cross-acceleration provisions insolvency events, acceleration of other financial obligations and change of control provisions. We do not have any trigger events tied to specified credit ratings or stock price in our debt instruments and are not party to any contracts that require us to issue equity based on credit ratings or other trigger events.

Financial Covenants. Following the termination of the Fifth Amended and Restated Credit Agreement on August xx, 2011, we are not subject to any financial covenants.

Dividends on Common Stock. Dividend payments on our common stock are authorized at the discretion of our Board of Directors and applicable law. We did not declare or pay a cash dividend on common stock during the quarter ended June 30, 2011.

Credit Ratings

Our credit rating status is currently “non-investment grade” and our current ratings are as follows:

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	Standard & Poor	Moody’s	Fitch

Dyengy Inc.:
Corporate Family Rating	CC	Caa3	CC
Senior Unsecured Shelf	—	C	—
Subordinated Shelf	—	C	—
Preferred Shelf	—	C	—

DHI:
Secured Bank Credit Facility	CCC	B2	B
Senior Unsecured	CC	Ca	CC
Senior Unsecured Shelf	CC	Ca	—
Subordinated Shelf	—	C	—
Preferred Shelf	C	—	—

Dynegy Power LLC:
Corporate Credit Rating	CCC+	—	—
GasCo Term Loan	B	B2	—

Sithe Independence:
Senior Secured	CC	B2	B

Additional downgrades could occur in the future based on the ratings agencies’ views of near-term risk of bankruptcy and our ability to continue operating as a going concern. The downgrades did not trigger any obligations under our financing arrangements; however, as of result of the downgrades, we have received demands to post additional collateral in support of certain of our operational agreements.

Disclosure of Contractual Obligations and Contingent Financial Commitments

We have incurred various contractual obligations and financial commitments in the normal course of our operations and financing activities. Contractual obligations include future cash payments required under existing contractual arrangements, such as debt and lease agreements. These obligations may result from both general financing activities and from commercial arrangements that are directly supported by related revenue-producing activities. Contingent financial commitments represent obligations that become payable only if certain pre-defined events occur, such as financial guarantees.

Please read “Uncertainty of Forward-Looking Statements and Information” for additional factors that could impact our future operating results and financial condition.

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RESULTS OF OPERATIONS—DYNEGY INC. and DYNEGY HOLDINGS INC.

Overview. In this section, we discuss our results of operations, both on a consolidated basis and, where appropriate, by segment, for the three and six month periods ended June 30, 2011 and 2010. We have included our outlook for each segment at the end of this section.

We report the results of our power generation business as three separate geographical segments in our unaudited condensed consolidated financial statements. Our unaudited condensed consolidated financial results also reflect corporate-level expenses such as general and administrative, interest and depreciation and amortization.

Summary Financial Information. The following tables provide summary financial data regarding Dynegy’s consolidated and segmented results of operations for the three month periods ended June 30, 2011 and 2010, respectively:

Dynegy’s Results of Operations for the Three Months Ended June 30, 2011

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total

Revenues	$	195		$	19		$	112		$	—		$	326
Cost of sales	(137		)	(2		)	(86		)	—			(225		)
Operating and maintenance expense, exclusive of depreciation and amortization expense shown separately below	(45		)	(20		)	(39		)	(2		)	(106		)
Depreciation and amortization expense	(50		)	(16		)	(7		)	(2		)	(75		)
Impairment and other charges	—			—			(1		)	—			(1		)
General and administrative expense	—			—			—			(25		)	(25		)
Operating loss	$	(37	)	$	(19	)	$	(21	)	$	(29	)	$	(106	)
Other items, net	2			1			—			—			3
Interest expense													(89		)

Loss from continuing operations before income taxes													(192		)
Income tax benefit													76

Net loss													$	(116	)

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Dynegy’s Results of Operations for the Three Months Ended June 30, 2010

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total

Revenues	$	63		$	71		$	105		$	—		$	239
Cost of sales	(110		)	(37		)	(84		)	—			(231		)
Operating and maintenance expense, exclusive of depreciation and amortization expense shown separately below	(55		)	(26		)	(38		)	1			(118		)
Depreciation and amortization expense	(63		)	(17		)	(8		)	(2		)	(90		)
Impairment and other charges	—			—			(1		)	—			(1		)
General and administrative expense	—			—			—			(28		)	(28		)
Operating loss	$	(165	)	$	(9	)	$	(26	)	$	(29	)	$	(229	)
Other items, net	—			—			—			1			1
Interest expense													(91		)

Loss from continuing operations before income taxes													(319		)
Income tax benefit													128

Net loss													$	(191	)

EBITDA and Adjusted EBITDA-Dynegy. We define EBITDA as earnings (loss) before interest expense, income tax expense (benefit), and depreciation and amortization expense. We define Adjusted EBITDA as EBITDA adjusted for certain items described below and presented in the accompanying reconciliation. Adjusted EBITDA is not a measure calculated in accordance with GAAP (a non-GAAP measure), and should be viewed as a supplement to and not a substitute for our results of operations presented in accordance with GAAP.

We believe that Adjusted EBITDA provides a meaningful representation of our operating performance. Adjusted EBITDA is meant to reflect the true operating performance of our power generation fleet; consequently, it excludes the impact of mark-to-market accounting and other items that could be considered “non-operating” or “non-core” in nature, and includes the contributions of those plants classified as discontinued operations. Because Adjusted EBITDA is a financial measure that management uses to allocate resources, determine our ability to fund capital expenditures, assess performance against our peers and evaluate overall financial performance, we believe it provides useful information for our investors. In addition, many analysts, fund managers and other stakeholders that communicate with us typically request our financial results in an Adjusted EBITDA format.

We believe that Adjusted EBITDA is only useful as an additional tool to help management and investors make informed decisions about our financial and operating performance. By definition, non-GAAP measures do not give a full understanding of Dynegy’s financial results; therefore, to be truly valuable, they must be used in conjunction with the GAAP measures. Non-GAAP financial measures are not standardized; therefore, it may not be possible to compare Adjusted EBITDA with other companies’ financial measures having the same or similar names. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

We use these non-GAAP financial measures in addition to, and in conjunction with, results presented in accordance with GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures included in our results of operations, may provide a more complete understanding of factors and trends affecting our business. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures and by definition provide an incomplete understanding of Dynegy’s financial results and must be considered in conjunction with GAAP measures.

In summary, our management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations, and in communications with our Board of Directors, stockholders, creditors, analysts and investors concerning our financial performance.

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As prescribed by the SEC, when Adjusted EBITDA is discussed in reference to performance on a consolidated basis, the most directly comparable GAAP financial measure to Adjusted EBITDA is net income (loss). Because management does not allocate interest expense and income taxes on a segment level, the most directly comparable GAAP financial measure to Adjusted EBITDA when performance is discussed on a segment level or plant level is Operating income (loss).

The tables below provide a reconciliation of Adjusted EBITDA to our operating loss on a segment basis and to net loss on a consolidated basis for the three month periods ended June 30, 2011 and 2010, respectively.

Dynegy’s Adjusted EBITDA for Three Months Ended June 30, 2011

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
	(in millions)
Net loss													$	(116	)
Income tax benefit													(76		)
Interest expense													89
Other items, net													(3		)

Operating loss	$	(37	)	$	(19	)	$	(21	)	$	(29	)	$	(106	)
Depreciation and amortization expense	50			16			7			2			75
Other items, net	2			1			—			—			3

EBITDA	15			(2		)	(14		)	(27		)	(28		)

Mark-to-market losses, net	83			24			23			—			130

Adjusted EBITDA	$	98		$	22		$	9		$	(27	)	$	102

Dynegy’s Adjusted EBITDA for the Three Months Ended June 30, 2010

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
	(in millions)
Net loss													$	(191	)
Income tax benefit													(128		)
Interest expense													91
Other items, net													(1		)

Operating loss	$	(165	)	$	(9	)	$	(26	)	$	(29	)	$	(229	)
Other items, net	—			—			—			1			1
Depreciation and amortization expense	63			17			8			2			90

EBITDA	(102		)	8			(18		)	(26		)	(138		)
Mark-to-market losses, net	183			24			55			—			262

Adjusted EBITDA	$	81		$	32		$	37		$	(26	)	$	124

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The following tables provide summary financial data regarding DHI’s consolidated and segmented results of operations for the three month periods ended June 30, 2011 and 2010, respectively:

DHI’s Results of Operations for the Three Months Ended June 30, 2011

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total

Revenues	$	195		$	19		$	112		$	—		$	326
Cost of sales	(137		)	(2		)	(86		)	—			(225		)
Operating and maintenance expense, exclusive of depreciation and amortization expense shown separately below	(45		)	(20		)	(39		)	(2		)	(106		)
Depreciation and amortization expense	(50		)	(16		)	(7		)	(2		)	(75		)
Impairment and other charges	—			—			(1		)	—			(1		)
General and administrative expense	—			—			—			(23		)	(23		)
Operating loss	$	(37	)	$	(19	)	$	(21	)	$	(27	)	$	(104	)
Other items, net	2			1			—			—			3
Interest expense													(89		)

Loss from continuing operations before income taxes													(190		)
Income tax benefit													75

Net loss													$	(115	)

DHI’s Results of Operations for the Three Months Ended June 30, 2010

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total

Revenues	$	63		$	71		$	105		$	—		$	239
Cost of sales	(110		)	(37		)	(84		)	—			(231		)
Operating and maintenance expense, exclusive of depreciation and amortization expense shown separately below	(55		)	(26		)	(38		)	1			(118		)
Depreciation and amortization expense	(63		)	(17		)	(8		)	(2		)	(90		)
Impairment and other charges	—			—			(1		)	—			(1		)
General and administrative expense	—			—			—			(28		)	(28		)
Operating loss	$	(165	)	$	(9	)	$	(26	)	$	(29	)	$	(229	)
Other items, net	—			—			—			1			1
Interest expense													(91		)

Loss from continuing operations before income taxes													(319		)
Income tax benefit													128

Net loss													$	(191	)

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The following table provides summary segmented operating statistics for the three months ended June 30, 2011 and 2010, respectively:

	Three Months Ended June 30,
	2011			2010
GEN-MW
Million Megawatt Hours Generated	7.2			5.6
In Market Availability for Coal Fired Facilities (1)	94		%	83		%
Average Capacity Factor for Combined Cycle Facilities (2)	39		%	25		%
Average Quoted On-Peak Market Power Prices ($/MWh) (3):
Cinergy (Cin Hub)	$	44		$	41
Commonwealth Edison (NI Hub)	$	44		$	40
PJM West	$	56		$	52
Average Market Spark Spreads ($/MWh) (4):
PJM West	$	24		$	19

GEN-WE
Million Megawatt Hours Generated (5)	0.2			0.5
Average Capacity Factor for Combined Cycle Facilities (2)	2		%	17		%
Average Quoted On-Peak Market Power Prices ($/MWh) (3):
North Path 15 (NP 15)	$	34		$	36
Average Market Spark Spreads ($/MWh) (4):
North Path 15 (NP 15)	$	—		$	2

GEN-NE
Million Megawatt Hours Generated	1.2			1.6
In Market Availability for Coal Fired Facilities (1)	97		%	96		%
Average Capacity Factor for Combined Cycle Facilities (2)	31		%	38		%
Average Quoted On-Peak Market Power Prices ($/MWh) (3):
New York—Zone G	$	56		$	53
New York—Zone A	$	42		$	41
Mass Hub	$	49		$	49
Average Market Spark Spreads ($/MWh) (4):
New York—Zone A	$	7		$	7
Mass Hub	$	16		$	17
Fuel Oil	$	(131	)	$	(77	)

Average natural gas price—Henry Hub ($/MMBtu) (6)	$	4.35		$	4.30

(1) Reflects the percentage of generation available during periods when market prices are such that these units could be profitably dispatched.

(2) Reflects actual production as a percentage of available capacity.

(3) Reflects the average of day-ahead quoted prices for the periods presented and does not necessarily reflect prices we realized.

(4) Reflects the simple average of the spark spread available to a 7.0 MMBtu/MWh heat rate generator or an 11.0 MMBtu/MWh heat rate fuel oil-fired generator selling power at day-ahead prices and buying delivered natural gas or fuel oil at a daily cash market price and does not reflect spark spreads available to us.

(5) Includes our ownership percentage in the MWh generated by our GEN-WE investment in the Black Mountain power generation facility for the three months ended June 30, 2011 and 2010, respectively.

(6) Reflects the average of daily quoted prices for the periods presented and does not reflect costs incurred by us.

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Operating Loss

Operating loss for Dynegy was $106 million for the three months ended June 30, 2011, compared to operating loss of $229 million for the three months ended June 30, 2010. Operating loss for DHI was $104 million for the three months ended June 30, 2011, compared to operating loss of $229 million for the three months ended June 30, 2010.

Mark-to market losses on forward sales of power and other derivatives associated with our generating assets are included in Revenues in the unaudited condensed consolidated statements of operations. Such losses totaled $129 million for the three months ended June 30, 2011, compared to $258 million of mark-to-market losses for the three months ended June 30, 2010. The losses in both periods were primarily the result of decreases in the forward value of open positions and losses related to the expiration of certain risk management positions for which the mark-to-market gains were recognized in previous periods.

We do not designate our commodity derivative instruments as cash flow hedges for accounting purposes. Please read Note 3—Risk Management Activities, Derivatives and Financial Instruments for further discussion. This mark-to-market accounting treatment results in the immediate recognition of gains and losses within Revenues in the unaudited condensed consolidated statements of operations due to changes in the fair value of the derivative instruments. As a result, these mark-to-market gains and losses are not reflected in the unaudited condensed consolidated statements of operations in the same periods as the underlying power sales from generation activity for which the derivative instruments serve as economic hedges. For the majority of our commodity derivative instruments, we cash settle the change in value of the instrument on a daily basis through our broker margin account, resulting in working capital changes related to our mark-to-market gains and losses. Our overall mark-to-market position and the related mark-to-market value will change as we buy or sell volumes within the forward market and as forward commodity prices fluctuate.

Power Generation—Midwest Segment. Operating loss for GEN-MW was $37 million for the three months ended June 30, 2011, compared to operating loss of $165 million for the three months ended June 30, 2010.

Revenues for the three months ended June 30, 2011 increased by $132 million compared to the three months ended June 30, 2010, cost of sales increased by $27 million and operating and maintenance expense decreased by $10 million, resulting in a net increase of $115 million. The increase was primarily driven by the following:

· Mark-to-market losses — GEN-MW’s results for the three months ended June 30, 2011 included mark-to-market losses of $82 million related to forward sales and other derivative contracts, compared to $183 million of mark-to-market losses for the three months ended June 30, 2010. Of the $82 million in 2011 mark-to-market losses, $46 million of losses related to positions that settled or will settle in 2011, and $36 million of losses related to positions that will settle in 2012 and beyond;

· Energy sales — GEN-MW’s results from energy sales, including both physical and financial transactions, increased from $109 million for the three months ended June 30, 2010 to $117 million for the three months ended June 30, 2011. The contribution from physical transactions increased primarily as a result of fewer outages, higher prices at our coal-fired facilities and improved spark spreads for our combined-cycle facilities. The increase from physical transactions was partially offset by reduced contributions from financial transactions; and

· Operating expense — Operating expense decreased $10 million primarily as a result of lower planned outage expenses and the mothballing of our Vermilion facility.

These items were partly offset by tolling and capacity revenues, which decreased due to lower capacity prices in MISO partially offset by higher PJM capacity prices.

Depreciation expense decreased from $63 million for the second quarter 2010 to $50 million for the second quarter 2011, as a result of fully depreciating the value of our Wood River Units 1-3 and Havana Units 1-5 in June 2010, as well as the Havana 6 Precipitator Rebuild retirement. The Vermilion facility was mothballed during the first quarter 2011.

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Power Generation—West Segment. Operating loss for GEN-WE was $19 million for three months ended June 30, 2011, compared to operating loss of $9 million for the three months ended June 30, 2010.

Revenues for the three months ended June 30, 2011 decreased by $52 million compared to the three months ended June 30, 2010, cost of sales decreased by $35 million and operating and maintenance expense decreased by $6 million, resulting in a net decrease of $11 million. The decrease was primarily driven by:

· Energy sales — GEN-WE’s results from energy sales, including both physical and financial transactions, decreased from $26 million for the three months ended June 30, 2010 to $17 million for the three months ended June 30, 2011 largely as a result of reduced contributions from financial transactions; and

· Decreased tolling/RMR revenues — Tolling/RMR decreased $10 million due to the retirement of South Bay at the end of 2010 and change in the timing of earnings under the new tolling agreement for Moss Landing compared to the timing of earnings under the previous agreement.

· Operating expense — Operating expense decreased $6 million primarily due to the retirement of South Bay at the end of 2010.

These items were partly offset by mark-to-market losses of $22 million related to forward sales and other derivative contracts for the three months ended June 30, 2011, compared to $27 million of mark-to-market losses for the three months ended June 30, 2010. Of the $22 million in 2011 mark-to-market losses, $16 million related to positions that settled or will settle in 2011, and the remaining $6 million related to positions that will settle in 2012 and beyond.

Depreciation expense decreased from $17 million for the second quarter 2010 to $16 million for the second quarter 2011.

Power Generation—Northeast Segment. Operating loss for GEN-NE was $21 million for the three months ended June 30, 2011, compared to an operating loss of $26 million for the three months ended June 30, 2010.

Revenues for the three months ended June 30, 2011 increased by $7 million compared to the three months ended June 30, 2010, cost of sales increased by $2 million and operating and maintenance expenses increased by $1 million resulting in a net increase of $4 million. The increase was primarily driven by the following:

· Mark-to-market losses — GEN-NE’s results for the three months ended June 30, 2011 included mark-to-market losses of $25 million for forward sales and other derivative contracts, compared to losses of $48 million for the three months ended June 30, 2010. Of the $25 million in 2011 mark-to-market losses, $13 million related to positions that settled or will settle in 2011, and the remaining $12 million related to positions that will settle in 2012 and beyond.

This item was partly offset by the following:

· Energy sales — GEN-NE’s results from energy sales, including both physical and financial transactions, decreased from $25 million for the three months ended June 30, 2010 to $16 million for the three months ended June 30, 2011. The contribution from physical transactions decreased primarily as a result of reduced market spark spreads. The contribution from financial transactions also decreased due to compressed spreads and reduced option sales in future years; and

· Capacity revenues — Capacity revenues decreased $9 million primarily due to lower pricing.

Depreciation expense decreased from $8 million for the second quarter 2010 to $7 million for the second quarter 2011.

Other. Dynegy’s o ther operating loss for the three months ended June 30, 2011 was $29 million, compared to an operating loss of $29 million for the three months ended June 30, 2010. DHI’s other operating loss for the three months ended June 30, 2011 was $27 million, compared to an operating loss of $29 million for the three months ended June 30, 2010. Operating losses in both periods were comprised primarily of general and administrative expenses.

Dynegy’s consolidated general and administrative expenses decreased from $28 million for the three months ended June 30, 2010 to $25 million for the three months ended June 30, 2011. DHI’s consolidated general and administrative expenses decreased from $28 million for the three months ended June 30, 2010 to $23 million for the three months ended June 30, 2011. The decreases were primarily driven by lower salary and benefits costs as a result of ongoing cost savings initiatives.

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Other Items, Net

Other items, net, were $3 million and $1 million for the three months ended June 30, 2011 and 2010, respectively.

Interest Expense

Interest expense totaled $89 million and $91 million for the three months ended June 30, 2011 and 2010, respectively.

Income Tax Benefit

Dynegy reported an income tax benefit from continuing operations of $76 million for the three month period ended June 30, 2011, compared to an income tax benefit from continuing operations of $128 million for the three months ended June 30, 2010. The effective tax rate in both periods was 40 percent.

DHI reported an income tax benefit from continuing operations of $75 million for the three month period ended June 30, 2011, compared to an income tax benefit from continuing operations of $128 million for the three months ended June 30, 2010. The 2011 effective tax rate was 39 percent compared to 40 percent in 2010.

For the period ended June 30, 2011, the difference between the effective rates of 40 percent and 39 percent for Dynegy and DHI, respectively, and the statutory rate of 35 percent resulted primarily from the impact of state taxes. For the period ended June 30, 2010, the difference between the effective rates of 40 percent and the statutory rate of 35 percent resulted primarily from the impact of state taxes.

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Six Months Ended June 30, 2011 and 2010

Summary Financial Information. The following tables provide summary financial data regarding Dynegy’s consolidated and segmented results of operations for the six month periods ended June 30, 2011 and 2010, respectively:

Dynegy’s Results of Operations for the Six Months Ended June 30, 2011

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total

Revenues	$	475		$	81		$	275		$	—		$	831
Cost of sales	(273		)	(22		)	(208		)	—			(503		)
Operating and maintenance expense, exclusive of depreciation and amortization expense shown separately below	(92		)	(44		)	(78		)	(2		)	(216		)
Depreciation and amortization expense	(150		)	(33		)	(14		)	(4		)	(201		)
Impairment and other charges	—			—			(1		)	—			(1		)
General and administrative expense	—			—			—			(65		)	(65		)
Operating loss	$	(40	)	$	(18	)	$	(26	)	$	(71	)	$	(155	)
Other items, net	2			1			—			1			4
Interest expense													(178		)

Loss from continuing operations before income taxes													(329		)
Income tax benefit													136

Net loss													$	(193	)

Dynegy’s Results of Operations for the Six Months Ended June 30, 2010

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total

Revenues	$	549		$	214		$	334		$	—		$	1,097
Cost of sales	(237		)	(96		)	(206		)	—			(539		)
Operating and maintenance expense, exclusive of depreciation and amortization expense shown separately below	(104		)	(49		)	(77		)	(1		)	(231		)
Depreciation and amortization expense	(113		)	(33		)	(16		)	(3		)	(165		)
Impairment and other charges	—			—			(1		)	—			(1		)
General and administrative expense	—			—			—			(59		)	(59		)
Operating income (loss)	$	95		$	36		$	34		$	(63	)	$	102
Losses from unconsolidated investments	(34		)	—			—			—			(34		)
Other items, net	—			—			1			1			2
Interest expense													(180		)

Loss from continuing operations before income taxes													(110		)
Income tax benefit													63

Loss from continuing operations													(47		)
Income from discontinued operations, net of taxes													1

Net loss													$	(46	)

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EBITDA and Adjusted EBITDA-Dynegy. Please read EBITDA and Adjusted EBITDA-Dynegy above for definitions for EBITDA and Adjusted EBITDA.

The tables below provide a reconciliation of Adjusted EBITDA to our operating income (loss) on a segment basis and to net loss on a consolidated basis for the six month periods ended June 30, 2011 and 2010, respectively.

Dynegy’s Adjusted EBITDA for Six Months Ended June 30, 2011

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total
	(in millions)
Net loss													$	(193	)
Income tax benefit													(136		)
Interest expense													178
Other items, net													(4		)

Operating loss	$	(40	)	$	(18	)	$	(26	)	$	(71	)	$	(155	)
Depreciation and amortization expense	150			33			14			4			201
Other items, net	2			1			—			1			4

EBITDA	112			16			(12		)	(66		)	50

Merger agreement termination fee and other legal expenses	—			—			—			9			9
Executive separation agreement expenses	—			—			—			3			3
Mark-to-market losses, net	82			9			36			—			127

Adjusted EBITDA	$	194		$	25		$	24		$	(54	)	$	189

Dynegy’s Adjusted EBITDA for the Six Months Ended June 30, 2010

	Power Generation
	GEN-MW			GEN-WE		GEN-NE		Other			Total
	(in millions)
Net loss											$	(46	)
Income tax benefit											(63		)
Interest expense											180
Losses from unconsolidated investments											34
Income from discontinued operations, net of taxes											(1		)
Other items, net											(2		)

Operating income (loss)	$	95		$	36	$	34	$	(63	)	$	102
Other items, net	—			—		1		1			2
Depreciation and amortization expense	113			33		16		3			165
Losses from unconsolidated investments	(34		)	—		—		—			(34		)

EBITDA from continuing operations	174			69		51		(59		)	235
EBITDA from discontinued operations	—			1		—		—			1

EBITDA	174			70		51		(59		)	236
Asset impairment	37			—		—		—			37
Plum Point mark-to-market gains	(6		)	—		—		—			(6		)
Mark-to-market losses, net	4			1		4		—			9

Adjusted EBITDA	$	209		$	71	$	55	$	(59	)	$	276

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The following tables provide summary financial data regarding DHI’s consolidated and segmented results of operations for the six month periods ended June 30, 2011 and 2010, respectively:

DHI’s Results of Operations for the Six Months Ended June 30, 2011

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total

Revenues	$	475		$	81		$	275		$	—		$	831
Cost of sales	(273		)	(22		)	(208		)	—			(503		)
Operating and maintenance expense, exclusive of depreciation and amortization expense shown separately below	(92		)	(44		)	(78		)	(2		)	(216		)
Depreciation and amortization expense	(150		)	(33		)	(14		)	(4		)	(201		)
Impairment and other charges	—			—			(1		)	—			(1		)
General and administrative expense	—			—			—			(64		)	(64		)
Operating loss	$	(40	)	$	(18	)	$	(26	)	$	(70	)	$	(154	)
Other items, net	2			1			—			1			4
Interest expense													(178		)

Loss from continuing operations before income taxes													(328		)
Income tax benefit													133

Net loss													$	(195	)

DHI’s Results of Operations for the Six Months Ended June 30, 2010

	Power Generation
	GEN-MW			GEN-WE			GEN-NE			Other			Total

Revenues	$	549		$	214		$	334		$	—		$	1,097
Cost of sales	(237		)	(96		)	(206		)	—			(539		)
Operating and maintenance expense, exclusive of depreciation and amortization expense shown separately below	(104		)	(49		)	(77		)	(1		)	(231		)
Depreciation and amortization expense	(113		)	(33		)	(16		)	(3		)	(165		)
Impairment and other charges	—			—			(1		)	—			(1		)
General and administrative expense	—			—			—			(59		)	(59		)
Operating income (loss)	$	95		$	36		$	34		$	(63	)	$	102
Losses from unconsolidated investments	(34		)	—			—			—			(34		)
Other items, net	—			—			1			1			2
Interest expense													(180		)

Loss from continuing operations before income taxes													(110		)
Income tax benefit													56

Loss from continuing operations													(54		)
Income from discontinued operations, net of taxes													1

Net loss													$	(53	)

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The following table provides summary segmented operating statistics for the six months ended June 30, 2011 and 2010, respectively:

	Six Months Ended June 30,
	2011			2010
GEN-MW
Million Megawatt Hours Generated	14.4			12.0
In Market Availability for Coal Fired Facilities (1)	93		%	89		%
Average Capacity Factor for Combined Cycle Facilities (2)	34		%	20		%
Average Quoted On-Peak Market Power Prices ($/MWh) (3)
Cinergy (CIN Hub)	$	42		$	42
Commonwealth Edison (NI Hub)	$	42		$	41
PJM West	$	54		$	52
Average Market Spark Spreads ($/MWh) (4)
PJM West	$	18		$	14

GEN-WE
Million Megawatt Hours Generated (5)	0.6			1.9
Average Capacity Factor for Combined Cycle Facilities (2)	8		%	38		%
Average Quoted On-Peak Market Power Prices ($/MWh) (3)
North Path 15 (NP 15)	$	35		$	41
Average Market Spark Spreads ($/MWh) (4)
North Path 15 (NP 15)	$	2		$	5

GEN-NE
Million Megawatt Hours Generated	2.7			3.1
In Market Availability for Coal Fired Facilities (1)	95		%	94		%
Average Capacity Factor for Combined Cycle Facilities (2)	31		%	33		%
Average Quoted On-Peak Market Power Prices ($/MWh) (3)
New York—Zone G	$	60		$	55
New York—Zone A	$	42		$	40
Mass Hub	$	57		$	52
Average Market Spark Spreads ($/MWh) (4)
New York—Zone A	$	7		$	3
Mass Hub	$	16		$	13
Fuel Oil	$	(115	)	$	(74	)

Average natural gas price—Henry Hub ($/MMBtu) (6)	$	4.26		$	4.73

(1) Reflects the percentage of generation available during periods when market prices are such that these units could be profitably dispatched.

(2) Reflects actual production as a percentage of available capacity.

(3) Reflects the average of day-ahead quoted prices for the periods presented and does not necessarily reflect prices we realized.

(4) Reflects the simple average of the spark spread available to a 7.0 MMBtu/MWh heat rate generator selling power at day-ahead prices and buying delivered natural gas or fuel oil at a daily cash market price and does not reflect spark spreads available to us.

(5) Includes our ownership percentage in the MWh generated by our GEN-WE investment in the Black Mountain power generation facility for the six months ended June 30, 2011 and 2010, respectively.

(6) Reflects the average of daily quoted prices for the periods presented and does not reflect costs incurred by us.

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The following table summarizes significant items on a pre-tax basis, with the exception of the tax items, affecting net loss for the period presented:

	Six Months Ended June 30, 2010
	Power Generation
	GEN-MW			GEN-WE		GEN-NE		Other		Total
	(in millions)
Asset impairment	$	(37	)	$	—	$	—	$	—	$	(37	)
Taxes	—			—		—		11		11

Total—DHI	$	(37	)	$	—	$	—	$	11	$	(26	)
Taxes	—			—		—		5		5

Total—Dynegy	$	(37	)	$	—	$	—	$	16	$	(21	)

There were no such items reported for the six months ended June 30, 2011.

Operating Income (Loss)

Operating loss for Dynegy was $155 million for the six months ended June 30, 2011, compared to operating income of $102 million for the six months ended June 30, 2010. Operating loss for DHI was $154 million for the six months ended June 30, 2011, compared to operating income of $102 million for the six months ended June 30, 2010.

Mark-to-market losses on derivatives associated with our generating assets are included in Revenues in the unaudited condensed consolidated statements of operations. Such losses totaled $127 million for the six months ended June 30, 2011 compared to $4 million of mark-to-market losses for the six months ended June 30, 2010. The losses in the six months ended June 30, 2011 were primarily the result of a decrease in the forward value of open positions and losses related to the expiration of certain risk management positions for which mark to market gains were recognized in previous periods. The losses for the six months ended June 30, 2010 were primarily from the expiration of certain risk management positions for which mark-to-market gains were already recognized in previous periods, largely offset by an increase in the value of open positions.

Power Generation—Midwest Segment. Operating loss for GEN-MW was $40 million for the six months ended June 30, 2011, compared to operating income of $95 million for the six months ended June 30, 2010.

Revenues for the six months ended June 30, 2011 decreased by $74 million compared to the six months ended June 30, 2010, cost of sales increased by $36 million and operating and maintenance expense decreased by $12 million, resulting in a net decrease of $98 million. The decrease was primarily driven by the following:

· Energy sales — GEN-MW’s results from energy sales, including both physical and financial transactions, decreased from $241 million for the six months ended June 30, 2010 to $234 million for the six months ended June 30, 2011. The contribution from physical transactions increased primarily as a result of higher power prices at our coal fired facilities and improved spark spreads at our combined cycle facilities, partially offset by more unplanned outages; however, these increases were more than offset by reduced contribution from financial transactions;

· Mark-to-market losses — GEN-MW’s results for the six months ended June 30, 2011 included mark-to-market losses of $82 million related to forward sales and other derivative contracts, compared to mark-to-market losses of $4 million for the six months ended June 30, 2010. Of the $82 million in 2011 mark-to-market losses, $51 million of losses related to positions that settled or will settle in 2011 and $31 million of losses related to positions that will settle in 2012 and beyond; and

· Decreased tolling/capacity revenues — Tolling and capacity revenues decreased by $23 million primarily as a result of the monetization and replacement, at a lower volume, of a tolling agreement on the Kendall facility in 2010 and another $8 million due to lower capacity prices in MISO. These decreases were partially offset by a $7 million increase attributable to higher PJM capacity prices and the additional capacity made available by the termination of the previous Kendall tolling agreement.

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These items were partly offset by operating and maintenance expenses, which decreased from $104 million for the six months ended June 30, 2010 to $92 million for the six months ended June 30, 2011, primarily as a result of lower planned outage expenses and the mothballing of our Vermilion facility in the first quarter 2011.

Depreciation expense increased from $113 million for the six months ended June 30, 2010 to $150 million for the six months ended June 30, 2011, primarily as a result of fully depreciating the value of our Vermilion facility, which was mothballed during the first quarter 2011, partially offset by fully depreciating the value of Wood River Units 1-3 and Havana Units 1-5 in June 2010.

Power Generation—West Segment. Operating loss for GEN-WE was $18 million for six months ended June 30, 2011, compared to operating income of $36 million for the six months ended June 30, 2010.

Revenues for the six months ended June 30, 2011 decreased by $133 million compared to the six months ended June 30, 2010, cost of sales decreased by $74 million and operating and maintenance expense decreased by $5 million, resulting in a net decrease of $54 million. The decrease was primarily driven by the following:

· Energy sales — GEN-WE’s results from energy sales, including both physical and financial transactions, decreased from $55 million for the six months ended June 30, 2010 to $23 million for the six months ended June 30, 2011. The contribution from physical transactions decreased primarily as a result of reduced spark spreads. The contribution from financial transactions also decreased;

· RMR revenues decreased $16 million due to the retirement of South Bay at the end of 2010;

· Tolling revenues — Tolling revenues decreased by $7 million primarily as a result of the timing of earnings under our new tolling agreement for the Moss Landing facility compared to the previous agreement partially offset by fewer forced outages in 2011;

· Mark-to-market losses — GEN-WE’s results for the six months ended June 30, 2011 included mark-to-market losses of $6 million related to forward sales and other derivative contracts, compared to $4 million of mark-to-market losses for the six months ended June 30, 2010. Of the $6 million in 2011 mark-to-market losses, $4 million in losses related to positions that settled or will settle in 2011, and $2 million in losses related to positions that will settle in 2012 and beyond; and

· Operating expense — Operating expense decreased $5 million primarily due to the retirement of South Bay at the end of 2010 partially offset by an outage at our Moss Landing facility in 2011.

Depreciation expense remained flat at $33 million for both the six months ended June 30, 2010 and the six months ended June 30, 2011.

Power Generation—Northeast Segment. Operating loss for GEN-NE was $26 million for the six months ended June 30, 2011, compared to operating income of $34 million for the six months ended June 30, 2010.

Revenues for the six months ended June 30, 2011 decreased by $59 million compared to the six months ended June 30, 2010, cost of sales increased by $2 million and operating and maintenance expense increased by $1 million, resulting in a net decrease of $62 million. The decrease was primarily driven by the following:

· Mark-to-market losses — GEN-NE’s results for the six months ended June 30, 2011 included mark-to-market losses of $39 million related to forward sales and other derivative contracts, compared to gains of $3 million for the six months ended June 30, 2010. Of the $39 million in 2011 mark-to-market losses, $19 million in losses related to positions that settled or will settle in 2011, and $20 million in losses related to positions that will settle in 2012 and beyond;

· Energy sales — GEN-NE’s results from energy sales, including both physical and financial transactions, decreased from $41 million for the six months ended June 30, 2010 to $35 million for the six months ended June 30, 2011. The contribution from physical transactions increased primarily as a result of improved market spark spreads in the first quarter of the year and cycling units during low load, off-peak periods which were partially offset by an extended outage at our Casco Bay facility in the first quarter 2011. The increase from physical transactions was more than offset by reduced contributions from financial transactions; and

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· Capacity revenues — Capacity revenues decreased by $16 million primarily due to lower pricing from surplus demand.

Depreciation expense decreased from $16 million for the six months ended June 30, 2010 to $14 million for the six months ended June 30, 2011.

Other. Dynegy’s o ther operating loss for the six months ended June 30, 2011 was $71 million, compared to $63 million for the six months ended June 30, 2010. DHI’s other operating loss for the six months ended June 30, 2011 was $70 million, compared to $63 million for the six months ended June 30, 2010. Operating losses in both periods were comprised primarily of general and administrative expenses.

Dynegy’s consolidated general and administrative expenses increased from $59 million from the six months ended June 30, 2010 to $65 million for the six months ended June 30, 2011. DHI’s consolidated general and administrative expenses increased from $59 million from the six months ended June 30, 2010 to $64 million for the six months ended June 30, 2011. General and administrative expenses for the six months ending June 30, 2011 are higher when compared to the six months ended June 30, 2010 due to $9 million of merger related expenses and $3 million of severance expenses, partially offset by lower salary and benefit costs resulting from ongoing cost savings initiatives.

Losses from Unconsolidated Investments

Losses from unconsolidated investments of $34 million for the six months ended June 30, 2010 related to the GEN-MW investment in PPEA Holding. The losses consisted of an impairment charge of approximately $37 million partially offset by $3 million in equity earnings primarily related to mark-to-market gains on interest rate swaps offset by financing expenses. Due to the uncertainty regarding PPEA’s financing structure, our investment in PPEA Holding was fully impaired at March 31, 2010. We sold our investment in PPEA Holding during the fourth quarter 2010. Please see Note 6—Variable Interest Entities—PPEA Holding Company LLC for further discussion.

Other Items, Net

Other items, net, totaled $4 million of income for the six months ended June 30, 2011, compared to $2 million of income for the six months ended June 30, 2010.

Interest Expense

Interest expense totaled $178 million for the six months ended June 30, 2011, compared to $180 million for the six months ended June 30, 2010.

Income Tax Benefit

Dynegy reported an income tax benefit from continuing operations of $136 million for the six months ended June 30, 2011, compared to $63 million for the six months ended June 30, 2010. The 2011 effective tax rate was 41 percent, compared to 57 percent in 2010.

DHI reported an income tax benefit from continuing operations of $133 million for the six months ended June 30, 2011, compared to $56 million for the six months ended June 30, 2010. The 2011 effective tax rate was 41 percent, compared to 51 percent in 2010.

For the six months ended June 30, 2011, the primary difference between the effective rates of 41 percent for Dynegy and DHI and the statutory rate of 35 percent resulted primarily from the impact of state taxes including the benefit of $9 million and $6 million for Dynegy and DHI, respectively, related to an increase in state NOLs due to the acceptance of amended returns. This was partially offset by an expense of $3 million and $2 million for Dynegy and DHI, respectively, related to an increase in the Illinois statutory rate. For the six months ended June 30, 2010, the primary difference between the effective rates of 57 and 51 percent for Dynegy and DHI, respectively, and the statutory rate of 35 percent resulted primarily from the benefit of $18 million and $12 million for Dynegy and DHI, respectively, related to the release of reserves for uncertain tax positions, partly offset by the impact of state taxes.

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Outlook

In August 2011, we completed the Reorganization. As a result, GasCo owns a portfolio of eight primarily natural gas-fired intermediate (combined cycle) and peaking (combustion and steam turbines) power generation facilities diversified across the West, Midwest and Northeast regions of the United States, totaling 6,771 MW of generating capacity. CoalCo owns a portfolio of six primarily coal-fired baseload power generation facilities located in the Midwest, totaling 3,132 MW of generating capacity. GasCo and CoalCo are bankruptcy remote. Our remaining assets (including leasehold interests in the Danskammer and Roseton facilities) are not a part of either GasCo or CoalCo. We completed the Reorganization of our legal entity structure to facilitate the execution of two new credit facilities, the GasCo Term Loan Facility and the CoalCo Term Loan Facility. Please read Note 13—Subsequent Events for further discussion.

As described above, we implemented a modification of our asset ownership structure which eliminated the regional organizational structure. We are focused on reducing and consolidating non-plant support activities and focused on cost efficiencies at both operating facilities and corporate support functions. Going forward, we have an operating fleet supported by Dynegy service contracts, which has resulted in adjusting corporate functions to support the new operational model. As a result of the Reorganization, we have reevaluated our reportable segments and expect to report results in the following segments: (i) Gas, (ii) Coal and (iii) Other commencing with the quarter ended September 30, 2011.

Over the next eighteen months, under the strategic direction of the Finance and Restructuring Committee of Dynegy’s Board of Directors, we may participate in additional debt restructuring activities, which may include direct or indirect transfers of our subsidiaries’ equity interests, refinancing of existing debt and lease obligations, and/or further reorganizations of our subsidiaries as well as other similar initiatives. However, we cannot provide any assurances that we will be successful in accomplishing any such activities.

We expect that our future financial results will continue to be sensitive to fuel and commodity prices, especially gas prices and the impact on such prices of shale gas production. Other factors to which our future financial results will remain sensitive include market structure and prices for electric energy, capacity and ancillary services, including pricing at our plant locations relative to pricing at their respective trading hubs, the volatility of fuel and electricity prices, transportation and transmission logistics, weather conditions and IMA. Further, there is a trend toward greater environmental regulation of all aspects of our business. As this trend continues, it is likely that we will experience additional costs and limitations.

Coal. The newly formed CoalCo will consist of six plants, all located in the MISO region, and totaling 3,132 MW. Consistent with our announcement on December 28, 2010, we mothballed the 176-megawatt Vermilion power generation facility in Oakwood, Illinois, near the end of the first quarter 2011, and the facility is not included among the six CoalCo units. The Vermilion plant ceased generating electricity in the second half of March and now has reduced staffing.

Our Midwest Consent Decree requires substantial emission reductions from our Illinois coal-fired power plants and the completion of several supplemental environmental projects in the Midwest. We have achieved all emission reductions scheduled to date under the Midwest Consent Decree and are in the process of installing additional emission control equipment to meet future Midwest Consent Decree emission limits. We expect our costs associated with the remaining Midwest Consent Decree projects, which we have planned to incur through 2013, to be approximately $157 million. This estimate includes a number of assumptions about uncertainties beyond our control, such as costs associated with labor and materials.

Our Midwest coal requirements are approximately 99 percent contracted in 2011 and 97 percent contracted in 2012. All of our forecast coal requirements are 99 percent priced through 2011 and 67 percent are priced through 2012. Committed volumes that are currently unpriced are subject to a price collar structure. Our Midwest coal transportation requirements are 100 percent contracted and priced through 2013. We continue to explore various alternative contractual commitments and financial options, as well as facility modifications, to ensure ourselves stable and competitive fuel supplies and to mitigate further supply risks for near- and long-term coal supplies. Our CoalCo expected generation volumes are volumetrically 86 percent hedged through 2011 and approximately 20 percent hedged for 2012.

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Recent moves by various market participants expressing their intentions to either join or exit the MISO could impact system reserve margins in the future. The Midwest ISO filed proposed Resource Adequacy Enhancements with FERC on July 20, 2011. The proposed tariff revisions require capacity to be procured on a zonal basis for full planning year (June 1 — May 31) versus the current monthly requirement, with procurement occurring two months ahead of the planning year. If approved, the new construct would be in place for the 2013-14 Planning Year. While the proposed new construct is an incremental improvement over the status quo it is unlikely to have an influence on capacity prices in the near future due to excess capacity in the MISO market. In addition, increased market participation by demand response resources offset by potential retirement of marginal MISO coal capacity due to expected environmental mandates could also affect MISO capacity and energy markets in the future.

Currently, CoalCo is significantly hedged volumetrically for 2011. Beyond that, the portfolio is positioned for CoalCo to benefit from possible future power market pricing improvements.

Gas. The newly formed GasCo will consist of eight plants, geographically diverse in five markets, totaling 6,771 MW. Approximately 70 percent of our power plant capacity associated in the CAISO is contracted through 2011 under tolling agreements with load-serving entities and an RMR agreement. A significant portion of the remaining capacity is sold as a resource adequacy product in the CAISO market, and much of our remaining expected production in the CAISO market has been financially hedged.

South Bay’s RMR designation was terminated at the end of 2010, and as a result, the South Bay power generation facility has been decommissioned. We have a contractual obligation to demolish the facility and remediate specific parcels of the property. Our cost estimates for the demolition of the facility have not been finalized, but our obligation is expected to be approximately $40 million, exclusive of certain rental payments that will be due the Port of San Diego. We expect to begin the demolition in 2012.

The estimated useful lives of our generation facilities consider environmental regulations currently in place. With respect to units 6 and 7 at our Moss Landing facility, we are continuing to review the potential impact of the California Water Intake Policy. We are currently depreciating these units through 2024; however, depending on the ultimate impact of the California Water Intake Policy, we may determine that we will be required to install cooling systems that would render operation of the units uneconomical. If such a determination were to be made, we could decide to reduce operations or cease to operate the units as early as December 31, 2017. A decision to cease operations at the end of 2017 would result in the acceleration of depreciation on the remaining net book values of the units, which was $349 million at June 30, 2011.

In New England, five forward capacity auctions have been held since the ISO-NE transitioned to a forward capacity auction market in June 2010. Capacity clearing prices have ranged from a high of $4.50 per kW-month for the 2010-2011 market period to a low of $2.95 per kW-month for the 2013-2014 market period. During the most recent forward capacity market auction for the 2014-2015 market period, held in June of 2011, capacity cleared at $3.21 per kW-month. These capacity clearing prices represent the floor price, although the actual rate paid to Casco Bay (and other facilities) can be reduced due to oversupply conditions and/or regional export limits. Efforts to implement prospective improvements in the forward capacity market design are currently underway in active proceedings at FERC and in discussions by the ISO and its stakeholders.

In PJM, where the Kendall and Ontelaunee combined-cycle plants are located, eight forward capacity auctions (known as RPM or Reliability Pricing Model) have been held since the transition from a daily capacity market in June 2007. RPM clearing prices have ranged from $0.50/kW-month (Kendall, PY2012-13) and $1.24/kW-month (Ontelaunee, PY2007-8) to $5.30/kW-month (Kendall, PY2010-11) and $6.88/kW-month (Ontelaunee, PY2013-14). The latest RPM auction was for the 2014-2015 Planning Year, which cleared $3.83/kW-month (Kendall) and $4.15/kW-month (Ontelaunee).

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In New York, capacity prices continue to trend downward due to surplus capacity and lower demand, however, approximately 70 percent of the capacity revenue for our Independence facility has been contracted at a favorable premium compared to current market prices.

In early 2011, we were advised by one of our equipment manufacturers that several of the turbine blades at our steam turbine units at our combined cycle facilities may be defective and require replacement. During the 2011 spring maintenance overhaul of the Moss Landing facility, the steam turbine blades on units one and two were inspected and it was determined that the blades did not require replacement; however, repairs by the original equipment manufacturer were required. The repairs were completed and the units were returned to full service. The initial inspections at Kendall in the Spring of 2011 did not identify any issues with the steam turbine blades. The affected steam turbine blades at the Casco Bay facility were removed and replaced with temporary repairs pending receipt of new blades. The facility has been returned to service and has not experienced any concerns with the temporary repairs. Permanent repairs will be scheduled in the near future.

Our GasCo expected generation volumes are volumetrically 92 percent hedged through 2011 and approximately 55 percent hedged for 2012.

We plan to continue our hedging program for GasCo over a rolling 12-36 month period using various forward sale instruments. Beyond 2013, the portfolio is largely open, positioning GasCo to benefit from possible future power market pricing improvements.

Other. Other consists of the leased Roseton and Danskammer facilities in New York totaling 1,693 MW. A substantial portion of our physical coal supply and delivery requirements for 2011 are fully contracted and priced with the balance financially hedged. Having both marine and rail unloading capability at the Danskammer facility has afforded us the opportunity to further explore domestic supply and delivery options as costs of international coal supplies have increased. In the near term, lower natural gas prices are expected to continue to compress dark spreads and alter the dispatch stack favoring natural gas-fired assets over coal-fired assets during off-peak shoulder months in much of the Northeast. The promulgation of the CSAPR is expected to further strain margins in the Northeast beginning in 2012 as more stringent pollution control requirements go into effect.

We continue to maximize revenue opportunities from our merchant plant operations in New York through active participation in the NYISO capacity auctions and ancillary services markets. However, capacity prices continue to trend lower in New York due to surplus capacity and lower demand.

Our expected generation volumes are volumetrically 91 percent hedged through 2011 and approximately 40 percent hedged for 2012.

Other also includes traditional corporate support functions, including intercompany transactions and those services contemplated in the various service agreements, including the Service Agreement, Energy Management Agreements, Tax Sharing Agreement and the Cash Management Agreement, which were entered into in conjunction with the Reorganization. We have also initiated actions to further reduce costs and to improve operating performance by implementing a comprehensive improvement effort. This cost and performance improvement initiative, to be known as Dynegy PRIDE (“Producing Results through Innovation by Dynegy Employees”), will drive bottom line benefits by reducing cost structure, implementing operating improvements and increasing cash flow through balance sheet efficiencies. As we enter the balance of this year and going forward, we will review plant-level margin for additional opportunities to improve cost and performance. By year end, we expect general and administrative expense annual run rate to be below $105 million and operating expense run rate to be approximately $420 million. This compares to $163 million and $450 million respectively in 2010. We anticipate a further improvement of approximately $50 million through 2012. Please read Note 13—Subsequent Events for further discussion.

Environmental and Regulatory Matters

Please read Item 1. Business—Environmental Matters in our Form 10-K and Outlook—Environmental and Regulatory Matters in our Form 10-Q for the quarter ended March 31, 2011 for a more detailed discussion.

State Regulation of Greenhouse Gases. Our assets in California are subject to the California Global Warming Solutions Act (“AB 32”), which became effective in January 2007. AB 32 requires the CARB to develop a GHG emission control program that will reduce emissions of GHG in the state to their 1990 levels by 2020 with a fully effective regulatory program to be in place by January 2012. On March 17, 2011, the San Francisco County Superior Court held that the CARB failed to comply with certain obligations under the California Environmental Quality Act (“CEQA”) and enjoined further implementation of the AB 32 cap-and-trade program until the Board achieves compliance. In response to the court’s decision, on June 13, 2011, the CARB released for public comment a supplement to its CEQA analysis. In late June 2011, the California Court of Appeal stayed the trial court’s injunction, clearing the way for the CARB to proceed with cap-and-trade program rulemaking activities while it appeals the trial court’s ruling. On July 25, 2011, the CARB released proposed revisions to certain elements of the cap-and-trade program, including a delay in the start of the cap-and-trade rule’s compliance obligations until 2013. We will continue to monitor the CARB’s cap-and-trade program rulemaking activities, including its response to the court’s decision, and evaluate any potential impacts on our operations.

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On January 1, 2009, our assets in New York and Maine became subject to a state-driven GHG emission control program known as RGGI. In June 2011, RGGI held its twelfth auction, in which approximately 12.5 million allowances for the current control period, and 943,000 allowances for future control periods, were sold at clearing prices of $1.89 per allowance. We have participated in each of the quarterly RGGI auctions (or in secondary markets, as appropriate) to secure some allowances for our affected assets. We expect that the increased operating costs resulting from purchase of CO 2 allowances will be at least partially reflected in market prices. The RGGI states plan to continue to conduct quarterly auctions in 2011.

Cross-State Air Pollution Rule. On July 6, 2011, the EPA issued its final rule on Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone (the “Cross-State Air Pollution Rule”, formerly known as the Transport Rule). The CSAPR, which in response to a court decision replaces EPA’s 2005 CAIR, is intended to reduce emissions of SO 2 and NO x from large electric generating units in 27 states in the eastern half of the United States. The rule imposes cap and trade programs within each affected state that cap emissions of SO 2 and NO x at levels predicted to eliminate that state’s contribution to nonattainment in, or interference with maintenance of attainment status by, down-wind areas with respect to the National Ambient Air Quality Standards for particulate matter (PM 2.5 ) and ozone. The rule will be implemented initially through federal implementation plans that are effective in each affected state 60 days after the rule is published in the Federal Register. Our generating facilities in Illinois, New York and Pennsylvania will be subject to the rule.

Under the CSAPR, Illinois, New York and Pennsylvania will be subject to new cap and trade programs capping emissions of NO x from May 1 through September 30 and capping emissions of SO 2 and NO x , respectively, on an annual basis. Requirements applicable to NO x emissions require compliance with the annual NO x reductions beginning January 1, 2012 and ozone season NO x reductions beginning May 1, 2012. The requirements applicable to SO 2 emissions from electric generating units in Illinois, New York and Pennsylvania will be implemented in two stages with compliance dates of January 1, 2012 and January 1, 2014. The SO 2 emission budgets will be reduced in 2014, and existing electric generating units in these states will be allocated fewer SO 2 emission allowances beginning in 2014. The EPA will initially allocate NO x and SO 2 emission allowances to existing electric generating units based on historic heat input (i.e., the highest three-year average in the period 2006-2010), subject to a maximum allocation limit to any individual unit based on that unit’s maximum historic baseline emissions during the period 2003-2010. States submitting a SIP to achieve the required reductions in place of the federal implementation plan would be allowed to use different allowance allocation methodologies beginning with vintage year 2013.

Electric generating units are required to hold one emission allowance for every ton of SO 2 and/or NO x emitted during the applicable compliance period. Electric generating units can comply with the required emission reductions by any combination of (i) installing emission control technologies, (ii) operating existing controls more often, (iii) switching fuels, or (iv) curtailing or ceasing operation. Allowance trading is generally allowed under the CSAPR among sources within the same state with limited interstate allowance trading.

Based on the allowance allocations in the final rule and our current projections of emissions in 2012, we anticipate that our coal facilities located in the Midwest will have an adequate number of allowances in 2012 under each of the three applicable CSAPR cap-and-trade programs (SO 2 , NO x annual, and NO x ozone season). For our Danskammer and Roseton facilities, we anticipate a shortfall of allocated allowances in 2012 under each of the three programs. We continue to review the CSAPR and to evaluate any potential impacts it might have on our operations.

New York Water Intake Policy. On July 10, 2011, the NYSDEC issued its final policy on “Best Technology Available (BTA) for Cooling Water Intake Structures” (the “NYSDEC Policy”). The NYSDEC Policy establishes wet closed-cycle cooling or its equivalent (i.e., reductions in impingement mortality and entrainment from calculation baseline that are 90 percent or greater of that which would be achieved by wet closed-cycle cooling) as the performance goal for existing power plants. The NYSDEC Policy exempts existing power generation facilities operated at less than 15 percent of capacity over a current five-year averaging period from the entrainment performance goal, provided that the facility is operated in a manner that minimizes the potential for entrainment. For these low capacity facilities, NYSDEC will determine site-specific performance goals for entrainment on a best professional judgment basis. For facilities for which a BTA determination was issued prior to adoption of the policy and which are in compliance with an existing BTA compliance schedule and verification monitoring, the NYSDEC Policy does not apply unless and until the results of verification monitoring demonstrate the necessity of more stringent BTA requirements. At this time we do not believe that the NYSDEC Policy will have a material impact on operations of our subject power generation facilities given the prior BTA determination for Danskammer and the entrainment exemption for low capacity facilities.

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Coal Combustion Residuals. The combustion of coal to generate electric power creates large quantities of ash that are managed at power generation facilities in dry form in landfills and in liquid or slurry form in surface impoundments. Each of our coal-fired plants has at least one CCR management unit. Certain environmental organizations have advocated designation of CCR as a hazardous waste; however, many state environmental agencies have expressed strong opposition to such designation. The EPA is expected to issue final regulations governing CCR management in 2012 or later. Federal legislation to address CCR also has been introduced in Congress. On July 13, 2011, the House Energy and Commerce Committee approved H.R. 2273, the Coal Residuals Reuse and Management Act, which would authorize the states to implement a subtitle D permit program for CCR disposal units. The permit requirements would include structural integrity standards and certain elements of the subtitle D criteria for municipal solid waste landfills, including location restrictions, design standards, ground water monitoring, financial assurance, corrective action, closure and post-closure care. The EPA would be authorized to administer and enforce the subtitle D criteria for CCR disposal units only if a state chooses not to do so or if the EPA finds that the state program is deficient.

The nature and scope of potential future requirements for CCR cannot be predicted with confidence at this time, but could have a material adverse effect on our financial condition, results of operations and cash flows. Further, public perceptions of new regulations regarding the reuse of coal ash may limit or eliminate the market that currently exists for coal ash reuse, which could have material adverse effects on our financial condition, results of operations and cash flows.

RISK-MANAGEMENT DISCLOSURES

The following table provides a reconciliation of the risk-management data on the unaudited condensed consolidated balance sheets:

	As of and for the Six Months Ended June 30, 2011
	(in millions)
Balance Sheet Risk-Management Accounts
Fair value of portfolio at December 31, 2010	$	34
Risk-management losses recognized through the income statement in the period, net	(78		)
Cash received related to risk-management contracts settled in the period, net	(48		)
Changes in fair value as a result of a change in valuation technique (1)	—
Non-cash adjustments and other	(1		)

Fair value of portfolio at June 30, 2011	$	(93	)

(1) Our modeling methodology has been consistently applied.

The net risk management liability of $93 million is the aggregate of the following line items on our unaudited condensed consolidated balance sheets: Current Assets—Assets from risk-management activities, Other Assets—Assets from risk-management activities, Current Liabilities—Liabilities from risk-management activities and Other Liabilities—Liabilities from risk-management activities.

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Risk-Management Asset and Liability Disclosures. The following table provides an assessment of net contract values by year as of June 30, 2011, based on our valuation methodology:

Net Fair Value of Risk-Management Portfolio

	Total			2011			2012			2013		2014		2015		Thereafter
	(in millions)
Market quotations (1)	$	(105	)	$	(14	)	$	(91	)	$	—	$	—	$	—	$	—
Prices based on models	12			4			(5		)	13		—		—		—

Total	$	(93	)	$	(10	)	$	(96	)	$	13	$	—	$	—	$	—

(1) Prices obtained from actively traded, liquid markets for commodities.

UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION

This Form 10-Q includes statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements”. All statements included or incorporated by reference in this quarterly report, other than statements of historical fact, that address activities, events or developments that we or our management expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate”, “estimate”, “project”, “forecast”, “plan”, “may”, “will”, “should”, “expect” and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:

· beliefs and assumptions regarding our ability to continue as a going concern;

· beliefs and assumptions relating to our liquidity, available borrowing capacity and capital resources generally, including the extent to which such liquidity could be affected by poor economic and financial market conditions or new regulations and any resulting impacts on financial institutions and other current and potential counterparties;

· the anticipated effectiveness of the overall restructuring activities and any additional strategies to address our liquidity and our capital resources including accessing the capital markets;

· limitations on our ability to utilize previously incurred federal net operating losses or alternative minimum tax credits;

· the timing and anticipated benefits to be achieved through our company-wide cost savings programs;

· expectations regarding environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts, and other laws and regulations to which we are, or could become, subject;

· beliefs, assumptions and projections regarding the demand for power, generation volumes and commodity pricing, including natural gas prices and the impact on such prices from shale gas proliferation and the timing of a recovery in natural gas prices, if any;

· sufficiency of, access to and costs associated with coal, fuel oil and natural gas inventories and transportation thereof;

· beliefs and assumptions about market competition, generation capacity and regional supply and demand characteristics of the wholesale power generation market, including the anticipation of higher market pricing over the longer term;

· the possibility of further consolidation in the power generation industry and the impact of any such activity on Dynegy;

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· beliefs and assumptions regarding our ability to enhance or protect long-term value for stockholders;

· the effectiveness of our strategies to capture opportunities presented by changes in commodity prices and to manage our exposure to energy price volatility;

· beliefs and assumptions about weather and general economic conditions;

· projected operating or financial results, including anticipated cash flows from operations, revenues and profitability;

· expectations regarding our credit facility compliance, collateral demands, capital expenditures, interest expense and other payments;

· our focus on safety and our ability to efficiently operate our assets so as to capture revenue generating opportunities and operating margins;

· beliefs about the outcome of legal, regulatory, administrative and legislative matters; and

· expectations regarding performance standards and estimates regarding capital and maintenance expenditures, including the Midwest Consent Decree and its associated costs and performance standards.

Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, many of which are beyond our control, including those set forth under Part II—Other Information, Item 1A-Risk Factors and Item 1A-Risk Factors of our Form 10-K.

CRITICAL ACCOUNTING POLICIES

Please read “Critical Accounting Policies” in our Form 10-K for a complete description of our critical accounting policies, with respect to which there have been no material changes since the filing of such Form 10-K.

Item 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK—DYNEGY INC. AND DYNEGY HOLDINGS INC.

Please read Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Form 10-K for a discussion of our exposure to commodity price variability and other market risks related to our net non-trading derivative assets and liabilities, including foreign currency exchange rate risk. Following is a discussion of the more material of these risks and our relative exposures as of June 30, 2011.

Value at Risk (“VaR”). The following table sets forth the aggregate daily VaR of the mark-to-market portion of our risk-management portfolio primarily associated with the GEN segments and the remaining legacy customer risk management business. The VaR calculation does not include market risks associated with the accrual portion of the risk-management portfolio that is designated as a cash flow hedge or a “normal purchase normal sale”, nor does it include expected future production from our generating assets. Please read “Value at Risk” in our Form 10-K for a complete description of our valuation methodology. The decrease in the June 30, 2011 VaR was primarily due to decreased forward sales as compared to December 31, 2010.

Daily and Average VaR for Risk-Management Portfolios

	June 30, 2011		December 31, 2010
	(in millions)
One day VaR—95 percent confidence level	$	10	$	14
One day VaR—99 percent confidence level	$	15	$	20
Average VaR for the year-to-date period—95 percent confidence level	$	11	$	22

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Credit Risk. The following table represents our credit exposure at June 30, 2011 associated with the mark-to-market portion of our risk-management portfolio, on a net basis.

Credit Exposure Summary

	Investment Grade Quality		Non-Investment Grade Quality		Total
	(in millions)
Type of Business:
Financial institutions	$	10	$	—	$	10
Oil and gas producers	6		—		6
Utility and power generators	37		—		37
Commercial / Industrial /End Users	4		1		5
Other	1		—		1

Total	$	58	$	1	$	59

Interest Rate Risk. We are exposed to fluctuating interest rates related to variable rate financial obligations. As of June 30, 2011, the amount owed under our fixed rate debt instruments, as a percentage of the total amount owed under all of our debt instruments, was 74 percent. Adjusted for interest rate swaps, net notional fixed rate debt, as a percentage of total debt, was approximately 74 percent. Based on sensitivity analysis of the variable rate financial obligations in our debt portfolio as of June 30, 2011, it is estimated that a one percentage point interest rate movement in the average market interest rates (either higher or lower) over the twelve months ended June 30, 2012 would either decrease or increase interest expense by approximately $13 million. This exposure would have been partially offset by an approximate $9 million increase or decrease in interest income related to the restricted cash balance of $850 million posted as collateral to support DHI’s former term letter of credit facility. On August 5, 2011, we entered into the GasCo Term Loan Facility and the CoalCo Term Loan Facility which replaced DHI’s term letter of credit facility. Please read Note13—Subsequent Events for further discussion. Over time, we may seek to adjust the variable rate exposure in our debt portfolio through the use of swaps or other financial instruments.

The absolute notional financial contract amounts associated with our interest rate contracts were as follows at June 30, 2011 and December 31, 2010, respectively:

	June 30, 2011		December 31, 2010
Fair value hedge interest rate swaps (in millions of U.S. dollars)	$	—	$	25
Fixed interest rate received on swaps (percent)	—		5.70
Interest rate risk-management contracts (in millions of U.S. dollars)	$	—	$	231
Fixed interest rate paid (percent)	—		5.35
Interest rate risk-management contracts (in millions of U.S. dollars)	$	—	$	206
Fixed interest rate received (percent)	—		5.28

Item 4—CONTROLS AND PROCEDURES—DYNEGY INC. AND DYNEGY HOLDINGS INC.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of Dynegy’s and DHI’s management, including their Chief Executive Officer and their Chief Financial Officer, of the effectiveness of the design and operation of Dynegy’s and DHI’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). This evaluation included consideration of the various processes carried out under the direction of Dynegy’s and DHI’s disclosure committee. This evaluation also considered the work completed relating to Dynegy’s and DHI’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Based on this evaluation, Dynegy’s and DHI’s CEO and CFO concluded that Dynegy’s and DHI’s disclosure controls and procedures were effective as of June 30, 2011.

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Changes in Internal Controls Over Financial Reporting

There were no changes in Dynegy’s and DHI’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect Dynegy’s and DHI’s internal control over financial reporting during the quarter ended June 30, 2011.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

PART II. OTHER INFORMATION

Item 1—LEGAL PROCEEDINGS—DYNEGY INC. AND DYNEGY HOLDINGS INC.

See Note 7—Commitments and Contingencies—Legal Proceedings to the accompanying unaudited condensed consolidated financial statements for a discussion of the legal proceedings that we believe could be material to us.

Item 1A—RISK FACTORS—DYNEGY INC. AND DYNEGY HOLDINGS INC.

In addition to the risk factors below, please read Item 1A—Risk Factors, of our Form 10-K for factors, risks and uncertainties that may affect future results.

In the absence of successful debt restructuring and/or refinancing, there can be no assurance that DHI or its subsidiaries responsible for the Roseton and Danskammer lease obligations will have sufficient resources to pay existing indebtedness.

DHI remains highly leveraged following the closing of the GasCo Term Loan Facility and CoalCo Term Loan Facility (together, the “New Credit Facilities”) as the issuer of $3.5 billion of senior unsecured notes and as a guarantor of the lease obligations associated with the Roseton and Danskammer facilities. In the absence of successful debt restructuring and/or refinancing, there can be no assurance that DHI or its subsidiaries responsible for the Roseton and Danskammer lease obligations (i.e., Dynegy Roseton, LLC and Dynegy Danskammer, LLC) will have sufficient resources to pay existing indebtedness. The New Credit Facilities will restrict the ability of GasCo and CoalCo to pay dividends or make other restricted payments after giving effect to the distributions for the repayment of the existing DHI senior secured credit facilities and the payment by each of GasCo and CoalCo of an additional dividend of up to $200 million each at closing. Further, the secured assets are only available for GasCo Intermediate Holdings or CoalCo Intermediate Holdings and their subsidiaries’ respective creditors (not to Dynegy or any of its other subsidiaries).

A plaintiff’s successful challenge to the Reorganization could adversely affect the Company’s future restructuring efforts.

While the Reorganization has been completed and the two New Credit Facilities have closed, post-closing challenges to the Reorganization may come from creditors who believe they have been disadvantaged by the Reorganization or from creditors otherwise seeking to enhance their negotiating leverage through legal process in any of Dynegy’s future restructuring efforts. While we cannot predict the exact effects of any successful challenge to the Reorganization, a successful challenge to the Reorganization could have a material adverse effect on the Company’s ability in the future to restructure its outstanding indebtedness.

The outcome of ongoing and future legal proceedings may have a material adverse effect on our business operations, financial condition, results of operations and cash flows.

We are subject to certain ongoing legal proceedings for which management believes a material loss is at least reasonably possible. These legal proceedings include the matters set forth in Note 7—Commitments and Contingencies to our unaudited condensed consolidated financial statements for the interim period ended June 30, 2011.

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In addition, on July 21, 2011, complaints were filed in New York state court and the Court of Chancery for the State of Delaware (“Delaware Court”), including one by the owner/lessor of the Danskammer and Roseton facilities. The plaintiffs allege breach of contract and violation of prohibitions on fraudulent transfers and sought permanent injunctive relief seeking to prevent our Restructuring announced on July 10, 2011, a declaratory judgment and damages. The Delaware plaintiffs also sought to temporarily enjoin the consummation of the debt restructuring (the “TRO Motion”). The proceedings in New York were stayed pending the disposition of the proceedings in Delaware. The Delaware Court denied the TRO Motion and a preliminary injunction, and the Supreme Court of Delaware denied plaintiffs’ request for an interlocutory appeal and an injunction pending appeal.

We believe the allegations made by the plaintiffs in both of these recent lawsuits lack merit and intend to defend vigorously our position in these and any other proceedings that may arise as a result of any proceedings involving the Reorganization and the New Credit Facilities or any future restructuring activities. It might be alleged that the Reorganization and the New Credit Facilities, together with any future restructuring activity, constitutes an integrated scheme involving fraudulent transfers, and seek in some manner to unwind all of the transactions in an effort to return the various transferred property to its original owners. Any such extraordinary remedy may have a material adverse effect on our business operation, financial condition, results of operations and cash flows.

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See Item 1A—Risk Factors, of our Form 10-K for factors, risks and uncertainties that may affect future results.

Item 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS—DYNEGY INC.

Upon vesting of restricted stock awarded to employees, shares are withheld to cover the employees’ withholding taxes. Information on our purchases of equity securities during the quarter follows:

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1-30	662	$	5.72	—	N/A
May 1-31	—	$	—	—	N/A
June 1-30	—	$	—	—	N/A

Total	662	$	5.72	—	N/A

These were the only purchases of equity securities made by us during the three months ended June 30, 2011. We do not have a stock repurchase program.

Item 5—OTHER INFORMATION—DYNEGY INC.

On June 15, 2011, Dynegy held its 2011 Annual Meeting of Stockholders. A majority of the votes present in person or represented by proxy and entitled to vote at the annual meeting voted, on an advisory basis, to hold an advisory vote to approve executive compensation annually. In line with this recommendation by our stockholders, Dynegy will include an advisory stockholder vote on executive compensation in its proxy materials every year until the next required advisory vote on the frequency of stockholder votes on executive compensation, which will occur no later than our annual meeting of stockholders in 2017.

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Item 6—EXHIBITS—DYNEGY INC. AND DYNEGY HOLDINGS INC.

The following documents are included as exhibits to this Form 10-Q:

Exhibit Number		Description

**10.1		Phantom Stock Unit Award Agreement between Dynegy Inc. and E. Hunter Harrison dated June 30, 2011.

**10.2		First Amendment to the Dynegy Inc. 2009 Phantom Stock Plan, dated as of July 8, 2011.

**10.3		Employment Agreement between Dynegy Inc. and Robert Flexon dated June 22, 2011.

**10.4		Employment Agreement between Dynegy Inc. and Kevin Howell dated June 22, 2011.

**10.5		Employment Agreement between Dynegy Inc. and Clint C. Freeland dated June 23, 2011.

**10.6		Employment Agreement between Dynegy Inc. and Carolyn J. Burke dated July 5, 2011.

**10.7		Non-Qualified Stock Option Award Agreement between Dynegy Inc. and Robert C. Flexon date July 11, 2011.

**10.8		Stock Appreciation Right Award Agreement between Dynegy Inc. and Robert C. Flexon dated July 11, 2011.

**10.9		Non-Qualified Stock Option Award Agreement between Dynegy Inc. and Kevin T. Howell date July 5, 2011.

**10.10		Non-Qualified Stock Option Award Agreement between Dynegy Inc. and Clint C. Freeland date July 5, 2011.

**10.11		Transition Services Agreement between Dynegy Inc. and Lynn Lednicky dated June 28, 2011.

10.12		Credit Agreement, dated as of August 5, 2011, among Dynegy Midwest Generation, LLC, as borrower and the guarantors, lenders and other parties thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Dynegy Inc and Dynegy Holdings Inc. filed on August 8, 2011, File No. 001-33443).

10.13		Credit Agreement dated as of August 5, 2011 among Dynegy Power, LLC and the guarantors, lenders and other parties thereto (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Dynegy Inc and Dynegy Holdings Inc. filed on August 8, 2011, File No. 001-33443).

10.14		Guarantee and Collateral Agreement, dated as of August 5, 2011 among Dynegy Midwest Generation, LLC, the subsidiaries of the borrower from time to time party thereto and other parties thereto (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of Dynegy Inc and Dynegy Holdings Inc. filed on August 8, 2011, File No. 001-33443).

10.15		Guarantee and Collateral Agreement, dated as of August 5, 2011 among Dynegy Power, LLC, the subsidiaries of the borrower from time to time party thereto and other parties thereto (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of Dynegy Inc and Dynegy Holdings Inc. filed on August 8, 2011, File No. 001-33443).

10.16		Letter of Credit Reimbursement and Collateral Agreement, dated as of August 5, 2011 among Dynegy Midwest Generation, LLC and Credit Suisse AG, Cayman Islands Branch (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of Dynegy Inc and Dynegy Holdings Inc. filed on August 8, 2011, File No. 001-33443).

10.17		Collateral Trust and Intercreditor Agreement, dated as of August 5, 2011 among Dynegy Coal Investments Holdings, LLC, Dynegy Midwest Generation, LLC, the guarantors and the other parties thereto (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K of Dynegy Inc and Dynegy Holdings Inc. filed on August 8, 2011, File No. 001-33443).

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Exhibit Number		Description

10.18		Collateral Trust and Intercreditor Agreement, dated as of August 5, 2011 among Dynegy Gas Investment Holdings, LLC, Dynegy Power LLC, the guarantors and the other parties thereto (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K of Dynegy Inc and Dynegy Holdings Inc. filed on August 8, 2011, File No. 001-33443).

10.19		Letter of Credit Reimbursement and Collateral Agreement, dated as of August 5, 2011 between Dynegy Power LLC and Credit Suisse AG, Cayman Islands Branch (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K of Dynegy Inc and Dynegy Holdings Inc. filed on August 8, 2011, File No. 001-33443).

10.20		Letter of Credit Reimbursement and Collateral Agreement, dated as of August 5, 2011 between Dynegy Holdings Inc. and Credit Suisse AG, Cayman Islands Branch (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K of Dynegy Inc and Dynegy Holdings Inc. filed on August 8, 2011, File No. 001-33443).

**10.21		Letter of Credit Reimbursement and Collateral Agreement, dated as of August 5, 2011 among Dynegy Power LLC and Barclays Bank PLC

**31.1		Chief Executive Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

**31.1(a)		Chief Executive Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

**31.2		Chief Financial Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

**31.2(a)		Chief Financial Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Exhibit Number		Description

†32.1		Chief Executive Officer Certification Pursuant to 18 United States Code Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†32.1(a)		Chief Executive Officer Certification Pursuant to 18 United States Code Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†32.2		Chief Financial Officer Certification Pursuant to 18 United States Code Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†32.2(a)		Chief Financial Officer Certification Pursuant to 18 United States Code Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

**101.INS		Dynegy and Dynegy Holdings XBRL Instance Document

**101.SCH		Dynegy and Dynegy Holdings XBRL Taxonomy Extension Schema Document

**101.CAL		Dynegy and Dynegy Holdings XBRL Taxonomy Extension Calculation Linkbase Document

**101.DEF		Dynegy and Dynegy Holdings XBRL Taxonomy Extension Definition Linkbase Document

**101.LAB		Dynegy and Dynegy Holdings XBRL Taxonomy Extension Label Linkbase Document

**101.PRE		Dynegy and Dynegy Holdings XBRL Taxonomy Extension Presentation Linkbase Document

** Filed herewith.

† Pursuant to Securities and Exchange Commission Release No. 33-8238, this certification will be treated as “accompanying” this report and not “filed” as part of such report for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Act, and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

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DYNEGY INC. and DYNEGY HOLDINGS INC.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		DYNEGY INC.

Date: August 8, 2011	By:	/s/ CLINT C. FREELAND
		Clint C. Freeland Executive Vice President and Chief Financial Officer


		DYNEGY HOLDINGS INC.

Date: August 8, 2011	By:	/s/ CLINT C. FREELAND
		Clint C. Freeland Executive Vice President and Chief Financial Officer

Exhibit 10.1

PHANTOM STOCK UNIT AWARD AGREEMENT

THIS PHANTOM STOCK UNIT AWARD AGREEMENT (this “Agreement”) is made as of the 30th day of June, 2011, (the “Grant Date”) between DYNEGY INC., a Delaware corporation (“Dynegy”), and the applicable employing Affiliate (collectively, the “Company”), and E. Hunter Harrison (the “Employee”). A copy of the Dynegy Inc. 2009 Phantom Stock Plan (the “Plan”) is annexed to this Agreement and shall be deemed a part hereof as if fully set forth herein. Unless the context otherwise requires, all terms that are not defined in this Agreement but which are defined in the Plan shall have the same meaning given to them in the Plan when used herein.

1. The Grant . On June 15, 2011, the Compensation and Human Resources Committee of the Board of Directors (the “Committee”) approved granting to the Employee, on the last day of each calendar quarter prior to the Employee’s Separation from Service in his capacity as an employee of the Company, a number of phantom stock units determined by dividing the “Phantom Stock Amount” (as such term is defined in the Directors’ Plan) by the Trading Day value of one share of Dynegy’s common stock, $0.01 par value per share (the “Common Stock”), on such last day of the calendar quarter (or the Trading Day immediately preceding the last day of the calendar quarter if such last day is not a Trading Day). Therefore, the Employee is hereby granted on the Grant Date two thousand eight hundred twenty seven (2827) phantom stock units (determined in accordance with the preceding) (the “Phantom Stock Units”), which shall be granted as a matter of separate inducement and not in lieu of any salary or other compensation for the Employee’s services, subject to the acceptance by the Employee of the terms and conditions of this Agreement. The Employee acknowledges receipt of a copy of the Plan, and agrees that this award of Phantom Stock Units shall be subject to all of the terms and provisions of the Plan, including future amendments thereto, if any, pursuant to the terms thereof, and to all of the terms and conditions of this Agreement.

2. Phantom Stock Units . The Employee hereby accepts the Phantom Stock Units and agrees with respect thereto as follows:

(a) Payment and Determination of Value . Dynegy shall pay to the Employee the value of a Phantom Stock Unit in cash not later than thirty (30) days immediately following the date the Employee incurs a Separation from Service in his capacity as an employee of the Company, and such Phantom Stock Unit shall thereafter be treated as redeemed for purposes of this Agreement. Notwithstanding the foregoing, however, payment of the Phantom Stock Units shall be subject to any mandatory payment delay requirements under Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”), as set forth in more detail in Section 4 below. Each Phantom Stock Unit shall have a value equal to one share of Common Stock, determined based on the closing price of a share of such Common Stock on the date of the Employee’s Separation from Service in his capacity as an employee of the Company (or the Trading Day immediately preceding the date of such Separation from Service if such Separation from Service date is not a Trading Day).

(b) Vesting . The Employee’s Phantom Stock Units shall be vested as of the Grant Date. Notwithstanding the foregoing or anything to the contrary, however, if the Employee’s employment with the Company terminates by reason of dismissal by the Company for Cause, then the Employee’s Phantom Stock Units shall be forfeited to the Company for no consideration as of the date of the termination of the Employee’s employment with the Company.

(c) Transfer Restrictions . The Phantom Stock Units may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or otherwise disposed of by the Employee.

(d) Definitions . For purposes of this Agreement, the following terms shall have the meanings indicated below:

(i) “Cause” shall mean, and hence arise where, as determined by the Committee in its sole discretion, the Employee (A) has been convicted of a misdemeanor involving moral turpitude or a felony; (B) has failed to substantially perform the duties of such Employee to the Company (other than such failure resulting from the Employee’s incapacity due to physical or mental condition) which results in a materially adverse effect upon the Company, financial or otherwise; (C) has refused without proper legal reason to perform the Employee’s duties and responsibilities to the Company; or (D) has breached any material corporate policy maintained and established by the Company that is applicable to the Employee, provided such breach results in a materially adverse effect upon the Company, financial or otherwise.

(ii) “Directors’ Plan” shall mean the Dynegy Inc. Deferred Compensation Plan for Certain Directors.

(iii) “Separation from Service” shall have the meaning set forth in Treasury Regulation Section 1.409A-1(h).

(iv) “Trading Day” means a day during which trading in securities generally occurs in the principal securities market in which Dynegy’s Common Stock is traded.

(e) Shareholder Rights . The Employee shall not have any of the rights of a shareholder of the Company with respect to the Phantom Stock Units.

(f) Corporate Acts . The existence of the Phantom Stock Units shall not affect in any way the right or power of the Board of Directors of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.

3. Withholding of Tax . The Company is authorized and directed to withhold from any cash payment made to the Employee under this Agreement any tax required to be withheld by reason of such resulting compensation income. To the extent that any portion of the Phantom Stock Units is treated as includible in the Employee’s income prior to the date a cash payment is made to the Employee under this Agreement, the Company is hereby authorized and directed to either (i) require the Employee to make payment of such taxes to the Company through delivery of cash or a cashier’s check within five (5) calendar days after the Company is required to remit such taxes to the Internal Revenue Service, or (ii) withhold from the Employee’s regular wages or bonus payments, if any, the amount of any tax required to be withheld.

4. Code Section 409A . If and to the extent any portion of any payment provided to the Employee under this Agreement in connection with the Employee’s Separation from Service is determined to constitute “nonqualified deferred compensation” within the meaning of Code Section 409A and the Employee is a specified employee as defined in Code Section 409A(a)(2)(B)(i), as determined by the Company in accordance with the procedures separately adopted by the Company for this purpose, by which determination the Employee, as a condition to accepting benefits under this Agreement and the Plan, agrees that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the earlier of (i) the day that is six (6) months plus one (1) day after the date of Separation from Service (as determined under Code Section 409A) or (ii) the tenth (10 th ) day after the date of the Employee’s death (as applicable, the “New Payment Date”). The aggregate of any payments that otherwise would have been paid to the Employee during the period between the date of Separation from Service and the New Payment Date shall be paid to the Employee in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule. Neither the Company nor the Employee shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Code Section 409A. This Agreement is intended to comply with the provisions of Code Section 409A and this Agreement and the Plan shall, to the extent practicable, be construed in accordance therewith. Terms defined in this Agreement and the Plan shall have the meanings given such terms under Code Section 409A if and to the extent required to comply with Code Section 409A. In any event, the Company makes no representations or warranty and shall have no liability to the Employee or any other person if any provisions of or payments under this Agreement are determined to constitute deferred compensation subject to Code Section 409A but not to satisfy the conditions of that section.

5. Employment Relationship . For purposes of this Agreement, the Employee shall be considered to be in the employment of the Company as long as the Employee remains an employee of either the Company or an Affiliate (as such term is defined in the Plan). Nothing in the adoption of the Plan or the award of the Phantom Stock Units thereunder pursuant to this Agreement shall confer upon the Employee the right to continued employment by the Company or any Affiliate or affect in any way the right of the Company or any Affiliate to terminate such employment at any time. Unless otherwise provided in a written employment agreement or by applicable law, the Employee’s employment by the Company (or any Affiliate) shall be on an at-will basis, and the employment relationship may be terminated at any time by either the Employee or the Company (or any Affiliate) for any reason whatsoever, with or without Cause. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee, and its determination shall be final.

6. Notices . Any notices or other communications provided for in this Agreement shall be sufficient if in writing. In the case of the Employee, such notices or communications shall be effectively delivered when hand delivered to the Employee at his or her principal place of employment or when sent by registered or certified mail to the Employee at the last address the Employee has filed with the Company. In the case of the Company, such notices or communications shall be effectively delivered when sent by registered or certified mail to the Company at its principal executive offices.

7. Entire Agreement; Amendment . This Agreement replaces and merges all previous agreements and discussions relating to the same or similar subject matters between the Employee and the Company and constitutes the entire agreement between the Employee and the Company with respect to the subject matter of this Agreement. This Agreement may not be modified in any respect by any verbal statement, representation or agreement made by any employee, officer, or representative of the Company or by any written agreement unless signed by an officer of the Company who is expressly authorized by the Company to execute such document. In addition, if it is subsequently determined by the Committee, in its sole discretion, that the terms and conditions of this Agreement and/or the Plan are not compliant with Code Section 409A, or any Treasury regulations or Internal Revenue Service guidance promulgated thereunder, this Agreement and/or the Plan may be amended by the Company accordingly.

8. Binding Effect . This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under the Employee.

9. Miscellaneous . In the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall be controlling, except with respect to the terms set forth under Sections 2(a) and (b) above.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF , the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Employee has agreed to and accepted the terms of this Agreement, all as of the date first above written.

DYNEGY INC.


By:	/s/ Lynn Lednicky


Name:		Lynn Lednicky

Title:		EVP, Operations


EMPLOYEE


By:	/s/ E. Hunter Harrison


Name:		E. Hunter Harrison

Title:		President and Chief Executive Officer

Exhibit 10.2

First Amendment to the

Dynegy Inc. 2009 Phantom Stock Plan

R E C I T A L S:

WHEREAS , Dynegy Inc. (the “Company”) previously adopted the Dynegy Inc. 2009 Phantom Stock Plan (the “Plan”) for the benefit of the eligible employees of its participating employers; and

WHEREAS , the Company desires to amend the Plan to permit grants of cash-settled stock appreciation rights; and

WHEREAS , Article VIII of the Plan allows the Company, through action by the Board of Directors of the Company (the “Board”) or the Compensation and Human Resources Committee of the Board, to amend the Plan at any time;

NOW, THEREFORE , the Company hereby amends the Plan as follows, effective as of July 8, 2011:

1. Article II is hereby amended by revising Section II(b), as underlined, to be and to read as follows:

“(b) “ Award ” means a grant of Phantom Stock Units or Stock Appreciation Rights issued under this Plan.”

2. Article II is hereby further amended by adding the new Section II(s) to the end thereof, to be and to read as follows:

“(s) “ Stock Appreciation Right ” means an Award granted under Article VII of the Plan.”

3. Article V is hereby amended, as underlined, to be and to read as follows:

“Subject to adjustment as provided in Article VIII , the aggregate number of Phantom Stock Units and Stock Appreciation Rights that may be issued under the Plan shall not exceed 25,000,000. Phantom Stock Units and Stock Appreciation Rights shall be deemed to have been issued on the date an Award is granted under the terms of an Award Agreement and, when vested, are settled in cash. To the extent that an Award lapses or the rights of its holder terminate, any Phantom Stock Units or Stock Appreciation Rights subject to such Award shall not be available for the grant of additional Awards under the Plan. Notwithstanding any provision of this Plan, no shares of Common Stock will be issued upon settlement of an Award.”

4. The Plan is hereby amended by adding the following new Article VII after Article VI of the Plan, to be and to read as follows, renumbering all subsequent Articles accordingly, and replacing the reference to “Article VII” in Section II(g) of the Plan with a reference to “Article VIII”:

“ VII. STOCK APPRECIATION RIGHTS

(a) Stock Appreciation Rights . A Stock Appreciation Right is an Award that entitles the holder to receive an amount equal to the difference between the Fair Market Value of a share of Common Stock at the time of exercise of the Stock Appreciation Right and the “Exercise Price,” subject to the applicable terms and conditions of the Award Agreement and the following provisions of this Article VII. The “Exercise Price” shall be designated by the Committee and shall be not less than the Fair Market Value of a share of Common Stock on the date the Stock Appreciation Right is issued.

(b) Stock Appreciation Right Period . The term of each Stock Appreciation Right shall be as specified by the Committee at the date of grant, but in no event shall a Stock Appreciation Right be exercisable after the expiration of ten (10) years from the date of grant.

(c) Exercise . A Stock Appreciation Right shall entitle the holder to receive, upon the exercise of the Stock Appreciation Right, a payment of cash in an amount equal in value to the excess of the Fair Market Value of the shares of Common Stock subject to the Stock Appreciation Right as of the date of such exercise over the Exercise Price.

(d) Expiration Date . The “expiration date” with respect to a Stock Appreciation Right shall be determined by the Committee. If the right is not exercised before the end of the day on which the right ceases to be exercisable, such right shall be deemed exercised as of such date and payment shall be made to the holder in cash.

(e) Stock Appreciation Right Award Agreements . At the time any Award is made under this Article VII, the Company and the Participant shall enter into a Stock Appreciation Right Award Agreement setting forth each of the matters contemplated hereby, and such additional matters as the Committee may determine to be appropriate. The terms and provisions of the respective Stock Appreciation Right Award Agreements need not be identical.”

5. Article VIII (as renumbered pursuant to this amendment) is hereby amended by revising the final paragraph of Section VIII(c) as underlined, to be and to read as follows:

“Unless otherwise provided in an Award Agreement, and notwithstanding the foregoing, upon the occurrence of a Corporate Change, the Committee, acting in its sole discretion without the consent or approval of any Participant, may require the mandatory surrender to the Company by selected Participants of some or all of the outstanding Phantom Stock Units or Stock Appreciation Rights as of a designated date, before or after such Corporate Change, specified by the Committee, in which event the Committee shall thereupon cancel such Phantom Stock Units or Stock Appreciation Rights and the Company shall pay (or cause to be paid) to each Participant an amount of cash equal to the maximum value of such Phantom Stock Units or Stock Appreciation Rights which, in the event the applicable vesting period set forth in the Award Agreement has not been completed, shall be multiplied by a fraction, the numerator of which is the number of days during the period beginning on the first day of the applicable vesting period and ending on the date of the surrender, and the denominator of which is the aggregate number of days in the applicable vesting period.”

6. Article VIII (as renumbered pursuant to this amendment) is hereby amended by revising Section VIII(e) as underlined, to be and to read as follows:

“(e) Other Changes in the Common Stock . In the event of changes in the outstanding Common Stock by reason of recapitalizations, reorganizations, mergers, consolidations, combinations, split-ups, split-offs, spin-offs, exchanges or other relevant changes in capitalization or distributions to the holders of Common Stock occurring after the date of the grant of any Award and not otherwise provided for by this Article VIII , such Award and any agreement evidencing such Award shall be subject to adjustment by the Committee at its sole discretion as to the number shares of Common Stock used to determine the value of the Award. In the event of any such change in the outstanding Common Stock or distribution to the holders of Common Stock, or upon the occurrence of any other event described in this Article VIII , the aggregate number of Phantom Stock Units and/or Stock Appreciation Rights available for grant under the Plan shall be appropriately adjusted as determined by the Committee, whose determination shall be conclusive.”

IN WITNESS WHEREOF , the Company has caused the Plan to be amended by this Amendment One on this 8 th day of July, 2011, to be effective as stated herein.

	DYNEGY INC.


	By:	/s/ Kent R. Stephenson

	Name:	Kent R. Stephenson

	Title:	Executive Vice President General Counsel

Exhibit 10.3

EXECUTION VERSION

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of June 22, 2011, by and between DYNEGY, INC., a Delaware corporation (the “ Company ”), and ROBERT FLEXON (the “ Executive ”).

W I T N E S S E T H :

WHEREAS, the Company desires to retain the services and employment of the Executive, upon the terms and conditions hereinafter set forth; and

WHEREAS, the Executive desires to enter into such employment with the Company, upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, each intending to be legally bound hereby, agree as follows:

1. Employment . On the terms and subject to the conditions set forth herein, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to accept such employment, for the Employment Term (as defined below). During the Employment Term, the Executive shall serve as Chief Executive Officer of the Company and shall report to the Board of Directors of the Company (the “ Board ”), performing such duties and responsibilities as are customarily attendant to such position with respect to the business of the Company and such other duties and responsibilities as may from time to time be assigned to the Executive by the Board. During the Employment Term, to the extent approved by the stockholders of the Company, the Executive shall also serve as a director of the Company and, to the extent requested by the Board, the Executive shall also serve as a director or officer of any of the direct or indirect subsidiaries of the Company, in each case without additional compensation.

2. Performance . The Executive shall serve the Company and its subsidiaries and affiliates faithfully and to the best of his ability and shall devote his full business time, energy, experience and talents to the business of the Company and its subsidiaries and affiliates, as applicable, and will not engage in any other employment activities for any direct or indirect remuneration or otherwise, without the written approval of the Board; provided , however , that it shall not be a violation of this Agreement for the Executive to manage his personal investments or to engage in or serve such civic, community, charitable, educational, or religious organizations as he may select, so long as such service does not create a conflict of interest with, or interfere with the performance of, the Executive’s duties hereunder or conflict with the Executive’s covenants under Section 6 of this Agreement, in each case as determined in the sole judgment of the Board.

3. Employment Term . Subject to earlier termination pursuant to Section 7, the term of employment of the Executive hereunder shall begin on July 11, 2011 (the “ Commencement Date ”), and shall continue through December 31, 2014 (the “ Initial Term ”); provided , however , that beginning on the first day immediately following the expiration date of the Initial Term, and on each subsequent anniversary of such day, such term shall be automatically extended by an additional one (1)-year period (each such period, an “ Additional Term ”, unless, at least ninety (90) days before the end of the Initial Term or the applicable Additional Term, the Company or the Executive shall have given notice to the other party that it or he does not desire to extend the term of this Agreement, in which case, the term of employment hereunder shall terminate as of the end of the Initial Term or any Additional Term, as applicable, (collectively, the “ Employment Term ”).

4. Principal Location . The Executive’s principal place of employment shall be the Company’s offices located in Houston, Texas, or within fifty (50) miles thereof, or such other location or locations as the Board may from time to time designate, subject to required travel.

5. Compensation and Benefits .

(a) Base Salary . As compensation for his services hereunder and in consideration of the Executive’s other agreements hereunder, during the Employment Term, the Company shall pay the Executive a base salary, payable in equal installments in accordance with Company payroll procedures, at an annual rate of EIGHT HUNDRED AND SEVENTY FIVE THOUSAND DOLLARS ($875,000) (the “ Base Salary ”), subject to review by the Board from time to time for increase but not decrease; provided , however , such Base Salary may be reduced in connection with a broad-based reduction for employees of the Company.

(b) Sign-on Bonus. Upon the Commencement Date, the Executive shall be entitled to receive a (i) one time, lump-sum cash payment in the amount of seven hundred fifty thousand dollars ($750,000) and (ii) shares of Company common stock with an aggregate fair market value (as determined by the closing price of such stock on the date hereof) equal to two hundred fifty thousand dollars ($250,000) (the “ Shares ”), and such payment and the Shares shall be earned in full upon receipt.

(c) Incentive Compensation Plan . The Executive shall be eligible to participate in the Dynegy Inc. Incentive Compensation Plan (the “ Incentive Compensation Plan ”); provided , however , that the maximum Award (as defined in the Incentive Compensation Plan) that the Executive may earn thereunder during each Performance Period (as defined in the Incentive Compensation Plan) shall be 200% of his Base Salary (if 125% of the performance goals are attained), the target Award is 100% of Base Salary (if 100% of the performance goals are attained), and the minimum Award is 25% of Base Salary (if 80% of the performance goals are attained). For performance between any of such levels, the Award will be determined by linear interpolation. If the performance goals are not attained at least at the 80% level, no Award is payable.

(d) Long Term Incentive Plan .

(i) Initial Stock Option/SAR Grant . On the Commencement Date, in consideration of the Executive’s entering into this Agreement and as an inducement to join the Company, the Executive shall be granted, (A) under the Dynegy Inc. 2010 Long Term Incentive Plan, as amended or modified from time to time (the “ LTIP ”), a non-qualified stock option with respect to the following number of shares of the Company’s common stock (the “ Option ”), subject to the approval of the Board or committee thereof, at the following corresponding per share exercise prices: 500,000 shares at fair market value (as determined in accordance with the LTIP) on the Option grant date; 625,000 shares at $6.50 per share; 750,000 shares at $8.00 per share; and 125,000 shares at $10.00 per share; provided that in no event will the exercise price be less than the fair market value of the Company’s common stock on the Option grant date; and (B) under the Dynegy Inc. 2009 Phantom Stock Plan, as amended or modified from time to time (the “ Phantom Stock Plan ”), stock appreciation rights with respect to the following number of shares of the Company’s common stock (the “ SARs ”), subject to the approval of the Board or committee thereof, at the following corresponding per share exercise price: 875,000 shares at $10.00 per share; provided that in no event will the exercise price be less than the fair market value (as determined in accordance with the Phantom Stock Plan) of the Company’s common stock on the SAR grant date. Such award shall be governed by the LTIP or the Phantom Stock Plan, as applicable, and award agreements between the Executive and the Company. Subject to the terms of the LTIP and the Phantom Stock Plan, as applicable, and the award agreements, and provided the Executive remains in active working status at such time, the Option and SARs shall become exercisable in equal installments on each of the first four (4) anniversaries of the Commencement Date; provided , however , that if the Executive’s employment is terminated for any reason other than by the Company for Cause or by the Executive without Good Reason (each as defined in the Dynegy Inc. Executive Severance Pay Plan (the “ Severance Plan ”)), the Option and SARs shall immediately vest in full and thereafter be exercisable in accordance with the terms of the Option and SARs award agreements.

(ii) Participation in LTIP. During the Employment Term, the Executive shall be eligible to receive an additional annual equity award grant pursuant to the LTIP, as determined by the Board or a committee thereof, in consultation with the Executive.

(e) Benefits . During the Employment Term, the Executive shall, subject to and in accordance with the terms and conditions of the applicable plan documents and all applicable laws, be eligible to participate in all of the employee benefit, fringe and perquisite plans, practices, policies and arrangements the Company makes available from time to time to its similarly situated executive officers generally.

(f) Vacation . The Executive shall be entitled to paid vacation in accordance with the Company’s policies and practices with respect to its employees generally.

(g) Business Expenses . The Executive shall be reimbursed by the Company for all reasonable and necessary business expenses actually incurred by him in performing his duties hereunder. All payments under this paragraph (g) of this Section 5 will be made in accordance with policies established by the Company from time to time and subject to receipt by the Company of appropriate documentation.

(h) Relocation Expenses . The Executive shall be reimbursed by the Company for reasonable direct out-of-pocket moving and relocation expenses actually incurred by the Executive to relocate his principal residence from Pennsylvania to the Houston, Texas area, including but not limited to (i) closing costs actually incurred by the Executive in connection with the sale and purchase of the Executive’s previous principal residence in Pennsylvania and his new principal residence in Texas, excluding points or other costs related to financing, and (ii) the excess, if any, of the Executive’s purchase price for his principal residence in Pennsylvania over the sale price of such residence, up to a maximum reimbursement amount of $100,000 with respect to any such excess, provided that such expenses are not reimbursed by another party, in accordance with the policies established by the Company from time to time and upon receipt by the Company of appropriate documentation.

(i) Financial Planning and Tax Advice. During the Employment Term, the Company shall reimburse the Executive annually for the reasonable costs actually incurred by the Executive for individual tax and financial planning advice in an amount not to exceed $10,000 per year.

(j) Indemnification; Directors’ and Officers’ Liability Insurance . The Company shall indemnify the Executive for actions taken by the Executive as an officer or director of the Company pursuant to the governing documents of the Company; provided , however , that the Company shall not indemnify the Executive for any losses incurred by the Executive as a result of acts or omissions that shall constitute Cause, or pursuant to a cause of action by Executive against the Company or its directors, officers, agents, representatives or employees. The Company will promptly advance to the Executive expenses incurred or to be incurred by him, including reasonable attorneys’ fees, to defend any indemnification-eligible proceeding prior to its final disposition, after receipt by the Company of a written request from the Executive for such advance, together with documentation reasonably acceptable to the Board, subject to an undertaking by the Executive to pay back any advanced amounts for which it is determined that the Executive was not entitled to indemnification; provided , however , that the Company may decline to advance expenses to the Executive in connection with any claim or proceeding between the Executive and the Company or its subsidiaries or affiliates. If the Executive has any knowledge of any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as to which the Executive may request indemnity under this provision, the Executive shall give the Company prompt written notice thereof. The Company shall be entitled to assume the defense of any such proceeding, and the Executive shall cooperate with such defense. During the Employment Term and thereafter, the Company shall cover the Executive under its directors’ and officers’ liability insurance policy to the extent it covers its other officers and directors.

6. Covenants of the Executive . The Executive acknowledges and the Company promises that in the course of his employment with the Company, Executive will become familiar with the Company’s and its subsidiaries’ and affiliates’ trade secrets and with other confidential and proprietary information concerning the Company and its subsidiaries and affiliates, and that his services are of special, unique and extraordinary value to the Company and its subsidiaries and affiliates. Therefore, the Company and the Executive mutually agree that it is in the interest of both parties for the Executive to enter into the restrictive covenants set forth in this Section 6 to, among other things, protect the legitimate business interests of the Company and those of its subsidiaries and affiliates, including the protection of the Company’s and its subsidiaries’ and affiliates’ trade secrets and other confidential and proprietary information, and that such restrictions and covenants contained in this Section 6 are reasonable in geographic and temporal scope and in all other respects given the nature and scope of the Executive’s duties, his access to the Company’s trade secrets and other confidential and proprietary information, and the nature and scope of the Company’s and its subsidiaries’ and affiliates’ businesses and that such restrictions and covenants do not and will not unduly impair the Executive’s ability to earn a living after termination of his employment with the Company. The Executive further acknowledges and agrees that (i) the Company would not have entered into this Agreement but for the restrictive covenants of the Executive set forth in this Section 6, and (ii) such restrictive covenants have been made by the Executive in order to induce the Company to enter into this Agreement. Therefore, and in further consideration of, (A) the Company’s agreement to provide the Executive with access to the Company’s confidential and proprietary information, (B) the mutual covenants and promises contained in this Agreement and/or (C) the compensation and benefits to be paid or provided hereunder, and to protect the Company’s and its subsidiaries and affiliates’ business interest, confidential and proprietary information and goodwill:

(a) Noncompetition . During the term of the Executive’s employment with the Company and for the two (2)-year period following termination of such employment under any circumstances (the “ Restricted Period ”), the Executive shall not, within any jurisdiction or marketing area in which the Company or any of its subsidiaries or affiliates is engaged in business or marketing activities, directly or indirectly, own, manage, operate, control, or provide executive or management level consulting, employment or management services to, any business competitive with the business conducted by the Company or any of its affiliates. The scope of businesses and the jurisdictions and marketing areas within which the Executive has agreed not to compete pursuant to this Section 6(a) shall, for any challenged activity of the Executive, be determined as of the date of any such activity.

Notwithstanding the foregoing, the Executive’s ownership solely as an investor of two percent (2%) or less of the outstanding securities of any class of any publicly-traded securities of any company shall not, by itself, be considered to be competition with the Company or any of its subsidiaries or affiliates.

(b) Nonsolicitation . During the term of the Executive’s employment with the Company and for the Restricted Period following termination of such employment under any circumstances, the Executive shall not, directly or indirectly, (i) employ, cause to be employed or hired, recruit, solicit for employment or otherwise contract for the services of, or establish a business relationship with (or assist any other person in engaging in any such activities), any person who is, or within twelve (12) months before any date of determination was (and, following the termination of the Executive’s employment with the Company, within twelve (12) months before or after such termination, was) an employee, agent or consultant of the Company or any of its subsidiaries or affiliates (collectively, the “ Company Entities ”); or (ii) otherwise induce or attempt to induce (or assist any other person in engaging in any such activities) any employee, agent or contractor of any Company Entity to terminate such person’s employment or other relationship with the Company Entities, or in any way interfere with the relationship between any Company Entity and any such employee, agent or contractor; (iv) solicit or attempt to solicit (otherwise than on behalf of any Company Entity) any person that is, or within twelve (12) months before any date of determination was (and, following the termination of the Executive’s employment with the Company, within twelve (12) months before or after such termination, was) a client, customer, supplier, licensee or business relation of any Company Entity with whom Executive had a material relationship or about whom Executive had access to material trade secret or confidential information, or who any Company Entity solicited to be a client, lender, investor, customer, supplier or licensee during either such twelve (12)-month period and with whom Executive had a material relationship or about whom Executive had access to material trade secret or confidential information, or induce or attempt to induce any such person to cease, reduce or not commence doing business with any Company Entity (or assist any other person in engaging in any such activities); or (v) interfere in any way with the relationship between any Company Entity and any person that is or was a client, lender, investor, customer, supplier, licensee or other business relation of such Company Entity (or assist any other person in engaging in any such activities) if Executive had a material relationship or had access to material trade secret or confidential information about such person or entity.

(c) Confidential Information . (i) The Executive acknowledges that all customer lists and information, vendor or supplier lists and information, inventions, trade secrets, know-how or other non-public, confidential or proprietary knowledge, information or data with respect to the products, services, operations, finances, business or affairs of the Company or its subsidiaries and affiliates or with respect to confidential, proprietary or secret processes, methods, inventions, services, techniques, customers (including, without limitation, the identity of the customers of the Company or its subsidiaries and affiliates and the specific nature of the services provided by the Company or its subsidiaries and affiliates), employees (including, without limitation, the matters subject to this Agreement) or plans of or with respect to the Company or its subsidiaries and affiliates or the terms of this Agreement (all of the foregoing collectively hereinafter referred to as, “ Confidential Information ”) are property of the Company or its applicable subsidiaries or affiliates. The Executive further acknowledges that the Company and its subsidiaries and affiliates intend, and make reasonable good faith efforts, to protect the Confidential Information from public disclosure. Therefore, the Executive agrees that, except as required by law or regulation or as legally compelled by court order ( provided that in such case, the Executive shall promptly notify the Company of such order, shall cooperate with the Company in attempting to obtain a protective order or to otherwise restrict such disclosure, and shall only disclose Confidential Information to the minimum extent necessary to comply with any such law, regulation or order), during the Employment Term and at all times thereafter, the Executive shall not, directly or indirectly, divulge, transmit, publish, copy, distribute, furnish or otherwise disclose or make accessible any Confidential Information, or use any Confidential Information for the benefit of anyone other than the Company and its subsidiaries and affiliates, unless and to the extent that the Confidential Information becomes generally known to and available for use by the general public other than as a result of the Executive’s acts or omissions or such disclosure is necessary in the course of the Executive’s proper performance of his duties under this Agreement.

(ii) The Company Entities do not wish to incorporate any unlicensed or unauthorized material into their products or services. Therefore, the Executive agrees that he will not disclose to the Company, use in the Company’s business, or cause the Company to use, any information or material which is a trade secret, or confidential or proprietary information, of any third party, including, but not limited to, any former employer, competitor or client, unless the Company has a right to receive and use such information or material. The Executive will not incorporate into his work any material or information which is subject to the copyrights of any third party unless the Company has a written agreement with such third party or otherwise has the right to receive and use such material or information.

(d) Company Intellectual Property. The Executive agrees to promptly disclose to the Company any and all work product, inventions, artistic works, works of authorship, designs, methods, processes, technology, patterns, techniques, data, Confidential Information, patents, trade secrets, trademarks, domain names, copyrights, and the like, and all other intellectual property relating to the business of the Company and any of its affiliates which are created, authored, composed, invented, discovered, performed, perfected, or learned by the Executive (either solely or jointly with others) during the Employment Term (collectively, together with such intellectual property as may be owned or acquired by the Company, the “ Company Intellectual Property ”). The Company Intellectual Property shall be the sole and absolute property of the Company and its affiliates. All work performed by the Executive in authoring, composing, inventing, creating, developing or modifying Company Intellectual Property and/or other work product to which copyright protection may attach during the course of the Executive’s employment with the Company shall be considered “works made for hire” to the extent permitted under applicable copyright law and will be considered the sole property of the Company. To the extent such works, work product or Company Intellectual Property are not considered “works made for hire,” all right, title, and interest to such works, work product and Company Intellectual Property, including, but not limited to, all copyrights, patents, trademarks, rights of publicity, and trade secrets, is hereby assigned to the Company and the Executive agrees, at the Company’s expense, to execute any documents requested by the Company or any of its affiliates at any time in relation to such assignment. The Executive acknowledges and agrees that the Company is and will be the sole and absolute owner of all trademarks, service marks, domain names, patents, copyrights, trade dress, trade secrets, business names, rights of publicity, inventions, proprietary know-how and information of any type, whether or not in writing, and all other intellectual property used by the Company or held for use in the business of the Company, including all Company Intellectual Property. The Executive further acknowledges and agrees that any and all derivative works, developments, or improvements based on intellectual property, materials and assets subject to this Section 6 created during the Employment Term (including, without limitation, Company Intellectual Property) shall be exclusively owned by the Company. The Executive will cooperate with the Company and any of its affiliates, at no additional cost to such parties (whether during or after the Employment Term), in the confirmation, registration, protection and enforcement of the rights and property of the Company and its affiliates in such intellectual property, materials and assets, including, without limitation, the Company Intellectual Property.

(e) Company Property . All Confidential Information, Company Intellectual Property, files, records, correspondence, memoranda, notes or other documents (including, without limitation, those in computer-readable form) or property relating or belonging to the Company and its subsidiaries and affiliates, whether prepared by the Executive or otherwise coming into his possession or control in the course of the performance of his services under this Agreement, shall be the exclusive property of the Company and shall be delivered to the Company, and not retained by the Executive (including, without limitation, any copies thereof), promptly upon request by the Company and, in any event, promptly upon termination of the Employment Term. The Executive acknowledges and agrees that he has no expectation of privacy with respect to the Company’s telecommunications, networking or information processing systems (including, without limitation, stored computer files, email messages and voice messages), and that the Executive’s activity and any files or messages on or using any of those systems may be monitored at any time without notice.

(f) Securities Law Matters . The Executive is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). The Executive has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of acquiring the Shares. The Executive understands that the shares have not been registered pursuant to the Securities Act or any applicable state securities laws, that the Shares will be characterized as “restricted securities” as that term is defined in Rule 144 promulgated under the Securities Act, and that the Shares cannot be sold or otherwise disposed of without registration under the Securities Act or an exemption therefrom.

(g) Enforcement . The Executive acknowledges that a breach of his covenants and agreements contained in this Section 6 would cause irreparable damage to the Company and its subsidiaries and affiliates, the exact amount of which would be difficult to ascertain, and that the remedies at law for any such breach or threatened breach would be inadequate. Accordingly, the Executive agrees that if he breaches or threatens to breach any of the covenants or agreements contained in this Section 6, in addition to any other remedy which may be available at law or in equity, the Company and its subsidiaries and affiliates shall be entitled to: (i) cease or withhold payment to the Executive of any severance payments described in Section 7, for which he otherwise qualifies under such Section 7, in excess of such payments in the amount of $2,500 payable in consideration for the Executive’s release of claims described in Section 7(d), (ii) institute and prosecute proceedings in any court of competent jurisdiction for specific performance and injunctive and other equitable relief to prevent the breach or any threatened breach thereof without bond or other security or a showing of irreparable harm or lack of an adequate remedy at law, and (iii) an equitable accounting by any court of competent jurisdiction of all profits or benefits arising out of such violation. Additionally, upon a breach by the Executive of this Section 6, the Option (and any other stock-based awards held by the Executive) shall be automatically canceled and forfeited without any further action.

(h) Scope of Covenants . The Company and the Executive further acknowledge that the time, scope, geographic area and other provisions of this Section 6 have been specifically negotiated by sophisticated commercial parties and agree that they consider the restrictions and covenants contained in this Section 6 to be reasonable and necessary for the protection of the interests of the Company and its subsidiaries and affiliates, but if any such restriction or covenant shall be held by any court of competent jurisdiction to be void but would be valid if deleted in part or reduced in application, such restriction or covenant shall apply in such jurisdiction with such deletion or modification as may be necessary to make it valid and enforceable. The restrictions and covenants contained in each paragraph of this Section 6 shall be construed as separate and individual restrictions and covenants and shall each be capable of being reduced in application or severed without prejudice to the other restrictions and covenants or to the remaining provisions of this Agreement.

(h) Enforceability . If any court holds any of the restrictions or covenants contained in this Section 6 to be unenforceable by reason of their breadth or scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the right of the Company and its subsidiaries and affiliates to the relief provided in this Section 6 in the courts of any other jurisdiction within the geographic scope of such restrictions and covenants.

(i) Disclosure of Restrictive Covenants . The Executive agrees to disclose in advance the existence and terms of the restrictions and covenants contained in this Section 6 to any employer or other service recipient by whom the Executive may be employed or retained during the Restricted Period.

(j) Extension of Restricted Period . If the Executive breaches this Section 6 in any respect, the restrictions contained in this Section will be extended for a period equal to the period that the Executive was in breach.

7. Termination .

(a) Termination of Employment . The employment of the Executive hereunder and the Employment Term may be terminated at any time (i) by the Company with Cause on written notice to the Executive, (ii) by the Company without Cause on ninety (90) days written notice to the Executive ( provided that during such notice period the Company shall not be required to provide work for the Executive and may require that the Executive not report to the Company’s offices), (iii) by the Company due to the Executive’s Disability (as defined in the Severance Plan) on written notice to the Executive, (iv) by the Executive with Good Reason, (v) by the Executive without Good Reason on sixty (60) days written notice to the Company (which notice period may be waived by the Company in its discretion, in which case, such termination shall be effective immediately upon the Company’s receipt of notice thereof from the Executive), (vi) without action by the Company, the Executive or any other person or entity, immediately upon the Executive’s death, (vii) in connection with a Change in Control (within the meaning as set forth in the Dynegy Inc. Executive Change in Control Severance Pay Plan (the “ Change in Control Plan ”)) or (viii) due to the expiration of the Employment Term pursuant to Section 3. If the Executive’s employment is terminated for any reason under this Section 7, the Company shall be obligated to pay or provide to the Executive (or his estate, as applicable) in a lump sum within thirty (30) days following such termination, or at such other time prescribed by any applicable plan: (A) any Base Salary payable to the Executive pursuant to this Agreement, accrued up to and including the date on which the Executive’s employment terminates, (B) any employee benefits to which the Executive is entitled upon termination of his employment with the Company in accordance with the terms and conditions of the applicable plans of the Company, (C) reimbursement for any unreimbursed business expenses incurred by the Executive prior to his date of termination pursuant to Section 5(e), and (D) payment for accrued but unused vacation time as of the date of his termination, in accordance with Company policy.

(b) Severance Plan and Change in Control Plan . The Executive shall be entitled to participate in the Severance Plan and the Change in Control Plan; provided , however , that to the extent the Executive is eligible to receive severance payable under Section IV.A of the Severance Plan, the amount payable to the Executive thereunder shall be increased by an amount equal to two (2) times the current target Award (as described in Section 5(c)), as in effect immediately prior to the date of the Executive’s termination of employment. For the avoidance of doubt, delivery by the Company of notice of non-renewal of the Initial Term or an Additional Term pursuant to Section 3, shall be deemed to be a termination without Cause for purposes of the Severance Plan ( provided , however , that no circumstance constituting Cause exists at such time of the delivery of such notice of non-renewal). Notwithstanding the foregoing, the Executive hereby waives his participation in the Third Amendment to the Severance Plan.

(c) No Additional Rights . The Executive acknowledges and agrees that, except as specifically described in this Section 7 or Section 5(d)(i), all of the Executive’s rights to any compensation, benefits, bonuses or severance from the Company and its subsidiaries and affiliates after termination of the Employment Term shall cease upon such termination.

(d) Resignation as Officer or Director . Upon a termination of employment, unless requested otherwise by the Company, the Executive shall resign each position (if any) that the Executive then holds as a director or officer of the Company or of any affiliates of the Company. The Executive’s execution of this Agreement shall be deemed the grant by the Executive to the officers of the Company of a limited power of attorney to sign in the Executive’s name and on the Executive’s behalf any such documentation as may be required to be executed solely for the limited purposes of effectuating such resignations.

8. Excise Tax Reimbursement Policy . The Executive shall be a Covered Employee within the meaning of the Dynegy Excise Tax Reimbursement Policy (the “ Excise Tax Reimbursement Policy ”), as in effect from time to time. For the avoidance of doubt, the Executive’s excise tax gross-up calculation shall take into account the applicable federal, state and local tax rates to which the Executive is subject at the time the Executive pays the excise tax.

9. Notices . All notices, requests, demands, claims, consents and other communications which are required, permitted or otherwise delivered hereunder shall in every case be in writing and shall be deemed properly served if: (a) delivered personally, (b) sent by registered or certified mail, in all such cases with first class postage prepaid, return receipt requested, or (c) delivered by a recognized overnight courier service, to the parties at the addresses as set forth below:

If to the Company:	Dynegy, Inc.
	1000 Louisiana Street, Suite 5800
	Houston, Texas 77002
	Attention: General Counsel

If to the Executive:
	At the Executive’s residence address as maintained by the Company in the regular course of its business for payroll purposes.

or to such other address as shall be furnished in writing by either party to the other party; provided that such notice or change in address shall be effective only when actually received by the other party. Date of service of any such notices or other communications shall be: (a) the date such notice is personally delivered, (b) three days after the date of mailing if sent by certified or registered mail, or (c) one business day after date of delivery to the overnight courier if sent by overnight courier.

10. Jurisdiction; Venue . Except as otherwise provided in Section 6(g) in connection with equitable remedies, each of the parties hereto hereby irrevocably submits to the exclusive jurisdiction of any federal or state court located in the State of Texas, County of Harris over any suit, action, dispute or proceeding arising out of or relating to this Agreement and each of the parties agrees that any action relating in any way to this Agreement must be commenced only in the courts of the State of Texas, federal or state. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted or not prohibited by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. Each of the parties hereto hereby irrevocably consents to the service of process in any suit, action or proceeding by sending the same by certified mail, return receipt requested, or by recognized overnight courier service, to the address of such party set forth in Section 9.

11. Waiver of Jury Trial . THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

12. Section 409A .

(a) The intent of the parties is that payments and benefits under this Agreement comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “ Code Section 409A ”), and the Company shall have complete discretion to interpret and construe this Agreement and any associated documents in any manner that establishes an exemption from (or compliance with) the requirements of Code Section 409A. Any terms of this Agreement that are undefined or ambiguous shall be interpreted by the Company in its discretion in a manner that complies with Code Section 409A to the extent necessary to comply with Code Section 409A. If for any reason, such as imprecision in drafting, any provision of this Agreement (or of any award of compensation, including, without limitation, equity compensation or benefits) does not accurately reflect its intended establishment of an exemption from (or compliance with) Code Section 409A, as demonstrated by consistent interpretations or other evidence of intent, such provision shall be considered ambiguous as to its exemption from (or compliance with) Code Section 409A and shall be interpreted by the Company in a manner consistent with such intent, as determined in the discretion of the Company. If, notwithstanding the foregoing provisions of this Section 12(a), any provision of this Agreement would cause the Executive to incur any additional tax or interest under Code Section 409A, the Company shall, after consulting with the Executive, reform such provision in a manner intended to avoid the incurrence by the Executive of any such additional tax or interest; provided that the Company agrees to maintain, to the maximum extent practicable, the original intent and economic benefit to the Executive of the applicable provision without violating the provisions of Code Section 409A.

(b) Any reimbursements and in-kind benefits provided under this Agreement that constitute deferred compensation within the meaning of Code Section 409A shall be made or provided in accordance with the requirements of Code Section 409A, including, without limitation, that (i) in no event shall any fees, expenses or other amounts eligible to be reimbursed by the Company under this Agreement be paid later than the last day of the calendar year next following the calendar year in which the applicable fees, expenses or other amounts were incurred; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits that the Company is obligated to pay or provide, in any given calendar year shall not affect the expenses that the Company is obligated to reimburse, or the in-kind benefits that the Company is obligated to pay or provide, in any other calendar year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect; (iii) the Executive’s right to have the Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in no event shall the Company’s obligations to make such reimbursements or to provide such in-kind benefits apply later than the Executive’s remaining lifetime (or if longer, through the sixth (6th) anniversary of the Commencement Date).

(c) The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Code Section 409A but do not satisfy an exemption from, or the conditions of, Code Section 409A.

13. General .

(a) Governing Law . This Agreement and the legal relations thus created between the parties hereto shall be governed by, and construed in accordance with, the internal laws of the State of Texas, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Texas. The parties hereto acknowledge and agree that this Agreement was executed and delivered in the State of Texas.

(b) Construction and Severability . Whenever possible, each provision of this Agreement shall be construed and interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by, or invalid, illegal or unenforceable in any respect under, any applicable law or rule in any jurisdiction, such prohibition, invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other jurisdiction, and the parties undertake to implement all efforts which are necessary, desirable and sufficient to amend, supplement or substitute all and any such prohibited, invalid, illegal or unenforceable provisions with enforceable and valid provisions in such jurisdiction which would produce as nearly as may be possible the result previously intended by the parties without renegotiation of any material terms and conditions stipulated herein.

(c) Cooperation . During the Employment Term and thereafter, the Executive shall cooperate with the Company and be reasonably available to the Company with respect to continuing and/or future matters related to the Executive’s employment period with the Company and/or its subsidiaries or affiliates, whether such matters are business-related, legal, regulatory or otherwise (including, without limitation, the Executive appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are or may come into the Executive’s possession). Following the Employment Term, the Company shall reimburse the Executive for all reasonable out of pocket expenses incurred by the Executive in rendering such services that are approved by the Company. In addition, if more than an incidental cooperation is required at any time after the termination of the Executive’s employment, the Executive shall be paid (other than for the time of actual testimony) a per day fee based on his base salary described in Section 5(a) at the time of such termination divided by 225.

(d) Successors and Assigns . This Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Executive and the Executive’s heirs, executors, administrators, and successors; provided that the services provided by the Executive under this Agreement are of a personal nature, and rights and obligations of the Executive under this Agreement shall not be assignable or delegable, except for any death payments otherwise due the Executive, which shall be payable to the estate of the Executive; provided further the Company may assign this Agreement to, and all rights hereunder shall inure to the benefit of, any subsidiary or affiliate of the Company or any person, firm or corporation resulting from the reorganization of the Company or succeeding to the business or assets of the Company by purchase, merger, consolidation or otherwise; and provided further that in the event of the Executive’s death, any unpaid amount due to the Executive under this Agreement shall be paid to his estate.

(e) Executive’s Representations . The Executive hereby represents and warrants to the Company that: (i) the execution, delivery and performance of this Agreement by the Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Executive is a party or by which the Executive is bound; (ii) the Executive is not a party to or bound by any employment agreement, noncompetition or nonsolicitation agreement or confidentiality agreement with any other person or entity besides the Company and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Executive, enforceable in accordance with its terms. THE EXECUTIVE HEREBY ACKNOWLEDGES AND REPRESENTS THAT THE EXECUTIVE HAS CONSULTED WITH INDEPENDENT LEGAL COUNSEL REGARDING THE EXECUTIVE’S RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT, TO THE EXTENT DETERMINED NECESSARY OR APPROPRIATE BY THE EXECUTIVE, AND THAT THE EXECUTIVE FULLY UNDERSTANDS THE TERMS AND CONDITIONS CONTAINED HEREIN .

(f) Compliance with Rules and Policies . The Executive shall perform all services in accordance with the policies, procedures and rules established by the Company and the Board. In addition, the Executive shall comply with all laws, rules and regulations that are generally applicable to the Company or it subsidiaries or affiliates and their respective employees, directors and officers.

(g) Forfeiture. Notwithstanding any other provision of this Agreement to the contrary, any payments or benefits under this Agreement shall be subject to any forfeiture, repayment or recoupment policy of the Company, as in effect from time to time, or any forfeiture, repayment or recoupment otherwise required by applicable law.

(h) Withholding Taxes . All amounts payable hereunder shall be subject to the withholding of all applicable taxes and deductions required by any applicable law.

(i) Entire Agreement . This Agreement, together with the Change in Control Plan, Excise Tax Reimbursement Policy, Incentive Compensation Plan, LTIP, Phantom Stock Plan and Severance Plan, constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and terminates and supersedes any and all prior agreements, understandings and representations, whether written or oral, by or between the parties hereto or their affiliates which may have related to the subject matter hereof in any way. In the event of a conflict or ambiguity between this Agreement and the Change in Control Plan, Excise Tax Reimbursement Policy, Incentive Compensation Plan, LTIP, Phantom Stock Plan or Severance Plan, the terms and conditions of the Agreement shall govern.

(j) Duration . Notwithstanding the Employment Term hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement.

(k) Survival . The covenants set forth in Sections 6 and 13(c) of this Agreement shall survive and shall continue to be binding upon the Executive notwithstanding the termination of this Agreement for any reason whatsoever.

(l) Amendment and Waiver . The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and the Executive, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement (including, without limitation, the Company’s right to terminate the Employment Term for Cause) shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be an implied waiver of any similar or dissimilar requirement, provision or condition of this Agreement at the same or any prior or subsequent time. Pursuit by either party of any available remedy, either in law or equity, or any action of any kind, does not constitute waiver of any other remedy or action. Such remedies and actions are cumulative and not exclusive.

(m) Counterparts . This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument.

(n) Section References . Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. The words Section and paragraph herein shall refer to provisions of this Agreement unless expressly indicated otherwise.

(o) No Strict Construction . The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring either party hereto by virtue of the authorship of any of the provisions of this Agreement.

(p) Time of the Essence; Computation of Time . Time is of the essence for each and every provision of this Agreement. Whenever the last day for the exercise of any privilege or the discharge or any duty hereunder shall fall upon a Saturday, Sunday, or any date on which banks in Houston, Texas are authorized to be closed, the party having such privilege or duty may exercise such privilege or discharge such duty on the next succeeding day which is a regular business day.

(q) No Third Party Beneficiaries . Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement and their respective heirs, executors, administrators, successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement as of the day and year first written above.

		DYNEGY, INC.


Date:	25 June 2011	By:	/s/ Kent R. Stephenson
			Name:	Kent R. Stephenson
			Title:	EVP & General Counsel


		ROBERT FLEXON


Date:	25 June 2011	/s/ Robert Flexon

Exhibit 10.4

EXECUTION VERSION

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of June 22, 2011, by and between DYNEGY, INC., a Delaware corporation (the “ Company ”), and KEVIN HOWELL (the “ Executive ”).

W I T N E S S E T H :

WHEREAS, the Company desires to retain the services and employment of the Executive, upon the terms and conditions hereinafter set forth; and

WHEREAS, the Executive desires to enter into such employment with the Company, upon the terms and conditions hereinafter set forth.

1. Employment . On the terms and subject to the conditions set forth herein, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to accept such employment, for the Employment Term (as defined below). During the Employment Term, the Executive shall serve as Chief Operating Officer of the Company and shall report to the Chief Executive Officer (the “ CEO ”), performing such duties and responsibilities as are customarily attendant to such position with respect to the business of the Company and such other duties and responsibilities as may from time to time be assigned to the Executive by the CEO and the Board of Directors of the Company (the “ Board ”). During the Employment Term, to the extent requested by the Board, the Executive shall also serve as a director or officer of any of the direct or indirect subsidiaries of the Company, in each case without additional compensation.

3. Employment Term . Subject to earlier termination pursuant to Section 7, the term of employment of the Executive hereunder shall begin on July 5, 2011 (the “ Commencement Date ”), and shall continue through December 31, 2014 (the “ Initial Term ”); provided , however , that beginning on the first day immediately following the expiration date of the Initial Term, and on each subsequent anniversary of such day, such term shall be automatically extended by an additional one (1)-year period (each such period, an “ Additional Term ”, unless, at least ninety (90) days before the end of the Initial Term or the applicable Additional Term, the Company or the Executive shall have given notice to the other party that it or he does not desire to extend the term of this Agreement, in which case, the term of employment hereunder shall terminate as of the end of the Initial Term or any Additional Term, as applicable, (collectively, the “ Employment Term ”).

5. Compensation and Benefits .

(a) Base Salary . As compensation for his services hereunder and in consideration of the Executive’s other agreements hereunder, during the Employment Term, the Company shall pay the Executive a base salary, payable in equal installments in accordance with Company payroll procedures, at an annual rate of FIVE HUNDRED TWENTY FIVE THOUSAND DOLLARS ($525,000) (the “ Base Salary ”), subject to review by the Board from time to time for increase but not decrease; provided , however , such Base Salary may be reduced in connection with a broad-based reduction for employees of the Company.

(b) Sign-on Bonus. Upon the Commencement Date, the Executive shall be entitled to receive a (i) one time, lump-sum cash payment in the amount of two hundred twenty five thousand dollars ($225,000) and (ii) shares of Company common stock with an aggregate fair market value (as determined by the closing price of such stock on the date hereof) equal to seventy five thousand dollars ($75,000) (the “ Shares ”), and such payment and shares shall be earned in full upon receipt.

(c) Incentive Compensation Plan . The Executive shall be eligible to participate in the Dynegy Inc. Incentive Compensation Plan (the “ Incentive Compensation Plan ”); provided , however , that the maximum Award (as defined in the Incentive Compensation Plan) that the Executive may earn thereunder during each Performance Period (as defined in the Incentive Compensation Plan) shall be 150% of his Base Salary (if 125% of the performance goals are attained), the target Award is 75% of Base Salary (if 100% of the performance goals are attained), and the minimum Award is 25% of Base Salary (if 80% of the performance goals are attained). For performance between any of such levels, the Award will be determined by linear interpolation. If the performance goals are not attained at least at the 80% level, no Award is payable.

(d) Long Term Incentive Plan .

(i) Initial Stock Option Grant . On the Commencement Date, in consideration of the Executive’s entering into this Agreement and as an inducement to join the Company, the Executive shall be granted, under the Dynegy Inc. 2010 Long Term Incentive Plan, as amended or modified from time to time (the “ LTIP ”), a non-qualified stock option to purchase the following number of shares of the Company’s common stock (the “ Option ”), subject to the approval of the Board or committee thereof, at the following corresponding per share exercise prices: 60,000 shares at fair market value (as determined in accordance with the LTIP) on the Option grant date; 75,000 shares at $6.50 per share; 90,000 shares at $8.00 per share; and 120,000 shares at $10.00 per share; provided that in no event will the exercise price be less than the fair market value of the Company’s common stock on the Option grant date. Such award shall be governed by the LTIP and a stock option award agreement between the Executive and the Company. Subject to the terms of the LTIP and the Option award agreement, and provided the Executive remains in active working status at such time, the Option shall become exercisable in equal installments on each of the first four (4) anniversaries of the Commencement Date; provided , however , that if the Executive’s employment is terminated for any reason other than by the Company for Cause or by the Executive without Good Reason (each as defined in the Dynegy Inc. Executive Severance Pay Plan (the “ Severance Plan ”)), the Option shall immediately vest in full and thereafter be exercisable in accordance with the terms of the Option award agreement.

(f) Vacation . The Executive shall be entitled to paid vacation in accordance with the Company’s policies and practices with respect to its employees generally.

(h) Financial Planning and Tax Advice. During the Employment Term, the Company shall reimburse the Executive annually for the reasonable costs actually incurred by the Executive for individual tax and financial planning advice in an amount not to exceed $10,000 per year.

(i) Indemnification; Directors’ and Officers’ Liability Insurance . The Company shall indemnify the Executive for actions taken by the Executive as an officer or director of the Company pursuant to the governing documents of the Company; provided , however , that the Company shall not indemnify the Executive for any losses incurred by the Executive as a result of acts or omissions that shall constitute Cause, or pursuant to a cause of action by Executive against the Company or its directors, officers, agents, representatives or employees. The Company will promptly advance to the Executive expenses incurred or to be incurred by him, including reasonable attorneys’ fees, to defend any indemnification-eligible proceeding prior to its final disposition, after receipt by the Company of a written request from the Executive for such advance, together with documentation reasonably acceptable to the Board, subject to an undertaking by the Executive to pay back any advanced amounts for which it is determined that the Executive was not entitled to indemnification; provided , however , that the Company may decline to advance expenses to the Executive in connection with any claim or proceeding between the Executive and the Company or its subsidiaries or affiliates. If the Executive has any knowledge of any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as to which the Executive may request indemnity under this provision, the Executive shall give the Company prompt written notice thereof. The Company shall be entitled to assume the defense of any such proceeding, and the Executive shall cooperate with such defense. During the Employment Term and thereafter, the Company shall cover the Executive under its directors’ and officers’ liability insurance policy to the extent it covers its other officers and directors.

7. Termination .

(b) Severance Plan and Change in Control Plan . The Executive shall be entitled to participate in the Severance Plan and the Change in Control Plan; provided , however , that to the extent the Executive is eligible to receive severance payable under Section IV.A of the Severance Plan, the amount payable to the Executive thereunder shall be increased by an amount equal to two (2) times the current target Award (as described in Section 5(c) hereof), as in effect immediately prior to the date of the Executive’s termination of employment. For the avoidance of doubt, delivery by the Company of notice of non-renewal of the Initial Term or an Additional Term pursuant to Section 3, shall be deemed to be a termination without Cause for purposes of the Severance Plan ( provided , however , that no circumstance constituting Cause exists at such time of the delivery of such notice of non-renewal). Notwithstanding the foregoing, the Executive hereby waives his participation in the Third Amendment to the Severance Plan.

If to the Company:	Dynegy, Inc.
	1000 Louisiana Street, Suite 5800
	Houston, Texas 77002
	Attention: General Counsel

If to the Executive:
	At the Executive’s residence address as maintained by the Company in the regular course of its business for payroll purposes.

12. Section 409A .

13. General .

(h) Withholding Taxes . All amounts payable hereunder shall be subject to the withholding of all applicable taxes and deductions required by any applicable law.

(i) Entire Agreement . This Agreement, together with the Change in Control Plan, Excise Tax Reimbursement Policy, Incentive Compensation Plan, LTIP and Severance Plan, constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and terminates and supersedes any and all prior agreements, understandings and representations, whether written or oral, by or between the parties hereto or their affiliates which may have related to the subject matter hereof in any way. In the event of a conflict or ambiguity between this Agreement and the Change in Control Plan, Excise Tax Reimbursement Policy, Incentive Compensation Plan, LTIP or Severance Plan, the terms and conditions of the Agreement shall govern.

(j) Duration . Notwithstanding the Employment Term hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement.

(m) Counterparts . This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument.

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement as of the day and year first written above.

		DYNEGY, INC.


Date:	6/23/11	By:	/s/ Kent R. Stephenson
			Name:	Kent R. Stephenson
			Title:	EVP & General Counsel


		KEVIN HOWELL


Date:	6/23/11	/s/ Kevin Howell

Exhibit 10.5

EXECUTION VERSION

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of June 23, 2011, by and between DYNEGY, INC., a Delaware corporation (the “ Company ”), and CLINT C. FREELAND (the “ Executive ”).

W I T N E S S E T H :

WHEREAS, the Company desires to retain the services and employment of the Executive, upon the terms and conditions hereinafter set forth; and

WHEREAS, the Executive desires to enter into such employment with the Company, upon the terms and conditions hereinafter set forth.

1. Employment . On the terms and subject to the conditions set forth herein, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to accept such employment, for the Employment Term (as defined below). During the Employment Term, the Executive shall serve as Chief Financial Officer of the Company and shall report to the Chief Executive Officer (the “ CEO ”), performing such duties and responsibilities as are customarily attendant to such position with respect to the business of the Company and such other duties and responsibilities as may from time to time be assigned to the Executive by the CEO and the Board of Directors of the Company (the “ Board ”). During the Employment Term, to the extent requested by the Board, the Executive shall also serve as a director or officer of any of the direct or indirect subsidiaries of the Company, in each case without additional compensation.

5. Compensation and Benefits .

(a) Base Salary . As compensation for his services hereunder and in consideration of the Executive’s other agreements hereunder, during the Employment Term, the Company shall pay the Executive a base salary, payable in equal installments in accordance with Company payroll procedures, at an annual rate of FOUR HUNDRED FIFTY THOUSAND DOLLARS ($450,000) (the “ Base Salary ”), subject to review by the Board from time to time for increase but not decrease; provided , however , such Base Salary may be reduced in connection with a broad-based reduction for employees of the Company.

(b) Sign-on Bonus. Upon the Commencement Date, the Executive shall be entitled to receive a (i) one time, lump-sum cash payment in the amount of one hundred fifty thousand dollars ($150,000) and (ii) shares of Company common stock with an aggregate fair market value (as determined by the closing price of such stock on the date hereof) equal to fifty thousand dollars ($50,000) (the “ Shares ”), and such payment and shares shall be earned in full upon receipt.

(c) Incentive Compensation Plan . The Executive shall be eligible to participate in the Dynegy Inc. Incentive Compensation Plan (the “ Incentive Compensation Plan ”); provided , however , that the maximum Award (as defined in the Incentive Compensation Plan) that the Executive may earn thereunder during each Performance Period (as defined in the Incentive Compensation Plan) shall be 150% of his Base Salary (if 125% of the performance goals are attained), the target Award is 75% of Base Salary (if 100% of the performance goals are attained), and the minimum Award is 25% of Base Salary (if 80% of the performance goals are attained). For performance between any of such levels, the Award will be determined by linear interpolation. If the performance goals are not attained at least at the 80% level, no Award is payable.

(d) Long Term Incentive Plan .

(i) Initial Stock Option Grant. On the Commencement Date, in consideration of the Executive’s entering into this Agreement and as an inducement to join the Company, the Executive shall be granted, under the Dynegy Inc. 2010 Long Term Incentive Plan, as amended or modified from time to time (the “ LTIP ”), a non-qualified stock option to purchase the following number of shares of the Company’s common stock (the “ Option ”), subject to the approval of the Board or committee thereof, at the following corresponding per share exercise prices: 50,000 shares at fair market value (as determined in accordance with the LTIP) on the Option grant date; 62,500 shares at $6.50 per share; 75,000 shares at $8.00 per share; and 100,000 shares at $10.00 per share; provided that in no event will the exercise price be less than the fair market value of the Company’s common stock on the Option grant date. Such award shall be governed by the LTIP and a stock option award agreement between the Executive and the Company. Subject to the terms of the LTIP and the Option award agreement, and provided the Executive remains in active working status at such time, the Option shall become exercisable in equal installments on each of the first four (4) anniversaries of the Commencement Date; provided , however , that if the Executive’s employment is terminated for any reason other than by the Company for Cause or by the Executive without Good Reason (each as defined in the Dynegy Inc. Executive Severance Pay Plan (the “ Severance Plan ”)), the Option shall immediately vest in full and thereafter be exercisable in accordance with the terms of the Option award agreement.

(f) Vacation . The Executive shall be entitled to paid vacation in accordance with the Company’s policies and practices with respect to its employees generally.

(h) Relocation Expenses . The Executive shall be reimbursed by the Company for reasonable direct out-of-pocket moving and relocation expenses actually incurred by the Executive to relocate his principal residence from the New York, New York metropolitan area to the Houston, Texas area, including but not limited to (i) closing costs actually incurred by the Executive in connection with the sale and purchase of the Executive’s previous principal residence in New York and his new principal residence in Texas, excluding points or other costs related to financing, and (ii) the excess, if any, of the Executive’s purchase price for his principal residence in New York over the sale price of such residence, up to a maximum reimbursement amount of $100,000, provided that such expenses are not reimbursed by another party, in accordance with the policies established by the Company from time to time and upon receipt by the Company of appropriate documentation.

(b) Nonsolicitation . During the term of the Executive’s employment with the Company and for the Restricted Period following termination of such employment under any circumstances, the Executive shall not, directly or indirectly, (i) employ, cause to be employed or hired, recruit, solicit for employment or otherwise contract for the services of, or establish a business relationship with (or assist any other person in engaging in any such activities), any person who is, or within twelve (12) months before any date of determination was (and, following the termination of the Executive’s employment with the Company, within twelve (12) months before or after such termination, was) an employee, agent or consultant of the Company or any of its subsidiaries or affiliates (collectively, the “ Company Entities ”); or (ii) otherwise induce or attempt to induce (or assist any other person in engaging in any such activities) any employee, agent or contractor of any Company Entity to terminate such person’s employment or other relationship with the Company Entities, or in any way interfere with the relationship between any Company Entity and any such employee, agent or contractor; (iv) solicit or attempt to solicit (otherwise than on behalf of any Company Entity) any person that is, or within twelve (12) months before any date of determination was (and, following the termination of the Executive’s employment with the Company, within twelve (12) months before or after such termination, was) a client, lender, investor, customer, supplier, licensee or business relation of any Company Entity with whom Executive had a material relationship or about whom Executive had access to material trade secret or confidential information, or who any Company Entity solicited to be a client, customer, supplier or licensee during either such twelve (12)-month period and with whom Executive had a material relationship or about whom Executive had access to material trade secret or confidential information, or induce or attempt to induce any such person to cease, reduce or not commence doing business with any Company Entity (or assist any other person in engaging in any such activities); or (v) interfere in any way with the relationship between any Company Entity and any person that is or was a client, lender, investor, customer, supplier, licensee or other business relation of such Company Entity (or assist any other person in engaging in any such activities) if Executive had a material relationship or had access to material trade secret or confidential information about such person or entity.

(f) Securities Law Matters . The Executive is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act of 1933, as amended (the “ Securities Act ”). The Executive has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of acquiring the Shares. The Executive understands that the shares have not been registered pursuant to the Securities Act or any applicable state securities laws, that the Shares will be characterized as “restricted securities” as that term is defined in Rule 144 promulgated under the Securities Act, and that the Shares cannot be sold or otherwise disposed of without registration under the Securities Act or an exemption therefrom.

7. Termination .

(b) Severance Plan and Change in Control Plan . The Executive shall be entitled to participate in the Severance Plan and the Change in Control Plan; provided , however , that to the extent the Executive is eligible to receive severance payable under Section IV.A of the Severance Plan, the amount payable to the Executive thereunder shall be increased by an amount equal to two (2) times the current target Award (as described in Section 5(c) hereof), as in effect immediately prior to the date of the Executive’s termination of employment. For the avoidance of doubt and for purposes of the Severance Plan only, the Executive is hereby deemed to hold a comparable position to the CEO and Chief Operating Officer and will therefore be entitled to twenty-four (24) Months of Base Pay (as defined in the Severance Plan) as severance pay, subject to the other terms and conditions of the Severance Plan. For the avoidance of doubt, delivery by the Company of notice of non-renewal of the Initial Term or an Additional Term pursuant to Section 3, shall be deemed to be a termination without Cause for purposes of the Severance Plan ( provided , however , that no circumstance constituting Cause exists at such time of the delivery of such notice of non-renewal). Notwithstanding the foregoing, the Executive hereby waives his participation in the Third Amendment to the Severance Plan.

If to the Company:	Dynegy, Inc.
	1000 Louisiana Street, Suite 5800
	Houston, Texas 77002
	Attention: General Counsel

If to the Executive:
	At the Executive’s residence address as maintained by the Company in the regular course of its business for payroll purposes.

12. Section 409A .

13. General .

(h) Withholding Taxes . All amounts payable hereunder shall be subject to the withholding of all applicable taxes and deductions required by any applicable law.

(j) Duration . Notwithstanding the Employment Term hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement.

(m) Counterparts . This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument.

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement as of the day and year first written above.

		DYNEGY, INC.


Date:	6/23/11	By:	/s/ Kent R. Stephenson
			Name:	Kent R. Stephenson
			Title:	EVP & General Counsel


		CLINT C. FREELAND


Date:	6/23/11	/s/ Clint C. Freeland

Exhibit 10.6

EXECUTION VERSION

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of July 5, 2011, by and between DYNEGY, INC., a Delaware corporation (the “ Company ”), and CAROLYN J. BURKE (the “ Executive ”).

W I T N E S S E T H :

WHEREAS, the Company desires to retain the services and employment of the Executive, upon the terms and conditions hereinafter set forth; and

WHEREAS, the Executive desires to enter into such employment with the Company, upon the terms and conditions hereinafter set forth.

1. Employment . On the terms and subject to the conditions set forth herein, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to accept such employment, for the Employment Term (as defined below). During the Employment Term, the Executive shall serve as Chief Administrative Officer of the Company and shall report to the Chief Executive Officer (the “ CEO ”), performing such duties and responsibilities as are customarily attendant to such position with respect to the business of the Company and such other duties and responsibilities as may from time to time be assigned to the Executive by the CEO and the Board of Directors of the Company (the “ Board ”). During the Employment Term, to the extent requested by the Board, the Executive shall also serve as a director or officer of any of the direct or indirect subsidiaries of the Company, in each case without additional compensation.

2. Performance . The Executive shall serve the Company and its subsidiaries and affiliates faithfully and to the best of her ability and shall devote her full business time, energy, experience and talents to the business of the Company and its subsidiaries and affiliates, as applicable, and will not engage in any other employment activities for any direct or indirect remuneration or otherwise, without the written approval of the Board; provided , however , that it shall not be a violation of this Agreement for the Executive to manage her personal investments or to engage in or serve such civic, community, charitable, educational, or religious organizations as she may select, so long as such service does not create a conflict of interest with, or interfere with the performance of, the Executive’s duties hereunder or conflict with the Executive’s covenants under Section 6 of this Agreement, in each case as determined in the sole judgment of the Board.

3. Employment Term . Subject to earlier termination pursuant to Section 7, the term of employment of the Executive hereunder shall begin on August 30, 2011 (the “ Commencement Date ”), and shall continue through December 31, 2014 (the “ Initial Term ”); provided , however , that beginning on the first day immediately following the expiration date of the Initial Term, and on each subsequent anniversary of such day, such term shall be automatically extended by an additional one (1)-year period (each such period, an “ Additional Term ”, unless, at least ninety (90) days before the end of the Initial Term or the applicable Additional Term, the Company or the Executive shall have given notice to the other party that it or she does not desire to extend the term of this Agreement, in which case, the term of employment hereunder shall terminate as of the end of the Initial Term or any Additional Term, as applicable, (collectively, the “ Employment Term ”).

5. Compensation and Benefits .

(a) Base Salary . As compensation for her services hereunder and in consideration of the Executive’s other agreements hereunder, during the Employment Term, the Company shall pay the Executive a base salary, payable in equal installments in accordance with Company payroll procedures, at an annual rate of FOUR HUNDRED FIFTY THOUSAND DOLLARS ($450,000) (the “ Base Salary ”), subject to review by the Board from time to time for increase but not decrease; provided , however , such Base Salary may be reduced in connection with a broad-based reduction for employees of the Company.

(c) Incentive Compensation Plan . The Executive shall be eligible to participate in the Dynegy Inc. Incentive Compensation Plan (the “ Incentive Compensation Plan ”); provided , however , that the maximum Award (as defined in the Incentive Compensation Plan) that the Executive may earn thereunder during each Performance Period (as defined in the Incentive Compensation Plan) shall be 150% of her Base Salary (if 125% of the performance goals are attained), the target Award is 75% of Base Salary (if 100% of the performance goals are attained), and the minimum Award is 25% of Base Salary (if 80% of the performance goals are attained). For performance between any of such levels, the Award will be determined by linear interpolation. If the performance goals are not attained at least at the 80% level, no Award is payable.

(d) Long Term Incentive Plan .

(i) Initial Stock Option Grant. On the Commencement Date, in consideration of the Executive’s entering into this Agreement and as an inducement to join the Company, the Executive shall be granted, under the Dynegy Inc. 2010 Long Term Incentive Plan, as amended or modified from time to time (the “ LTIP ”), a non-qualified stock option to purchase the following number of shares of the Company’s common stock (the “ Option ”), subject to the approval of the Board or committee thereof, at the following corresponding per share exercise prices: 50,000 shares at fair market value (as determined in accordance with the LTIP) on the Option grant date; 62,500 shares at $6.50 per share; 75,000 shares at $8.00 per share; and 100,000 shares at $10.00 per share; provided that in no event will the exercise price be less than the fair market value of the Company’s common stock on the Option grant date. Such award shall be governed by the LTIP and a stock option award agreement between the Executive and the Company. Subject to the terms of the LTIP and the Option award agreement, and provided the Executive remains in active working status at such time, the Option shall become exercisable in equal installments on each of the first four (4) anniversaries of the Commencement Date; provided , however , that if the Executive’s employment is terminated for any reason other than by the Company for Cause or by the Executive without Good Reason (each as defined in the Dynegy Inc. Executive Severance Pay Plan (the “ Severance Plan ”)), the Option shall immediately vest in full and thereafter be exercisable in accordance with the terms of the Option award agreement.

(f) Vacation . The Executive shall be entitled to paid vacation in accordance with the Company’s policies and practices with respect to its employees generally.

(g) Business Expenses . The Executive shall be reimbursed by the Company for all reasonable and necessary business expenses actually incurred by him in performing her duties hereunder. All payments under this paragraph (g) of this Section 5 will be made in accordance with policies established by the Company from time to time and subject to receipt by the Company of appropriate documentation.

(h) Relocation Expenses . The Executive shall be reimbursed by the Company for reasonable direct out-of-pocket moving and relocation expenses actually incurred by the Executive to relocate her principal residence from the New York, New York metropolitan area to the Houston, Texas area, including but not limited to (i) closing costs actually incurred by the Executive in connection with the sale and purchase of the Executive’s previous principal residence in New York and her new principal residence in Texas, excluding points or other costs related to financing, and (ii) the excess, if any, of the Executive’s purchase price for her principal residence in New York over the sale price of such residence, up to a maximum reimbursement amount of $100,000, provided that such expenses are not reimbursed by another party, in accordance with the policies established by the Company from time to time and upon receipt by the Company of appropriate documentation.

6. Covenants of the Executive . The Executive acknowledges and the Company promises that in the course of her employment with the Company, Executive will become familiar with the Company’s and its subsidiaries’ and affiliates’ trade secrets and with other confidential and proprietary information concerning the Company and its subsidiaries and affiliates, and that her services are of special, unique and extraordinary value to the Company and its subsidiaries and affiliates. Therefore, the Company and the Executive mutually agree that it is in the interest of both parties for the Executive to enter into the restrictive covenants set forth in this Section 6 to, among other things, protect the legitimate business interests of the Company and those of its subsidiaries and affiliates, including the protection of the Company’s and its subsidiaries’ and affiliates’ trade secrets and other confidential and proprietary information, and that such restrictions and covenants contained in this Section 6 are reasonable in geographic and temporal scope and in all other respects given the nature and scope of the Executive’s duties, her access to the Company’s trade secrets and other confidential and proprietary information, and the nature and scope of the Company’s and its subsidiaries’ and affiliates’ businesses and that such restrictions and covenants do not and will not unduly impair the Executive’s ability to earn a living after termination of her employment with the Company. The Executive further acknowledges and agrees that (i) the Company would not have entered into this Agreement but for the restrictive covenants of the Executive set forth in this Section 6, and (ii) such restrictive covenants have been made by the Executive in order to induce the Company to enter into this Agreement. Therefore, and in further consideration of, (A) the Company’s agreement to provide the Executive with access to the Company’s confidential and proprietary information, (B) the mutual covenants and promises contained in this Agreement and/or (C) the compensation and benefits to be paid or provided hereunder, and to protect the Company’s and its subsidiaries and affiliates’ business interest, confidential and proprietary information and goodwill:

(b) Nonsolicitation . During the term of the Executive’s employment with the Company and for the Restricted Period following termination of such employment under any circumstances, the Executive shall not, directly or indirectly, (i) employ, cause to be employed or hired, recruit, solicit for employment or otherwise contract for the services of, or establish a business relationship with (or assist any other person in engaging in any such activities), any person who is, or within twelve (12) months before any date of determination was (and, following the termination of the Executive’s employment with the Company, within twelve (12) months before or after such termination, was) an employee, agent or consultant of the Company or any of its subsidiaries or affiliates (collectively, the “ Company Entities ”); or (ii) otherwise induce or attempt to induce (or assist any other person in engaging in any such activities) any employee, agent or contractor of any Company Entity to terminate such person’s employment or other relationship with the Company Entities, or in any way interfere with the relationship between any Company Entity and any such employee, agent or contractor; (iv) solicit or attempt to solicit (otherwise than on behalf of any Company Entity) any person that is, or within twelve (12) months before any date of determination was (and, following the termination of the Executive’s employment with the Company, within twelve (12) months before or after such termination, was) a client, lender, investor, customer, supplier, licensee or business relation of any Company Entity with whom Executive had a material relationship or about whom Executive had access to material trade secret or confidential information, or who any Company Entity solicited to be a client, customer, supplier or licensee during either such twelve (12)-month period and with whom Executive had a material relationship or about whom Executive had access to material trade secret or confidential information, or induce or attempt to induce any such person to cease, reduce or not commence doing business with any Company Entity (or assist any other person in engaging in any such activities); or (v) interfere in any way with the relationship between any Company Entity and any person that is or was a client, lender, investor, customer, supplier, licensee or other business relation of such Company Entity (or assist any other person in engaging in any such activities) if Executive had a material relationship or had access to material trade secret or confidential information about such person or entity.

(ii) The Company Entities do not wish to incorporate any unlicensed or unauthorized material into their products or services. Therefore, the Executive agrees that she will not disclose to the Company, use in the Company’s business, or cause the Company to use, any information or material which is a trade secret, or confidential or proprietary information, of any third party, including, but not limited to, any former employer, competitor or client, unless the Company has a right to receive and use such information or material. The Executive will not incorporate into her work any material or information which is subject to the copyrights of any third party unless the Company has a written agreement with such third party or otherwise has the right to receive and use such material or information.

(e) Company Property . All Confidential Information, Company Intellectual Property, files, records, correspondence, memoranda, notes or other documents (including, without limitation, those in computer-readable form) or property relating or belonging to the Company and its subsidiaries and affiliates, whether prepared by the Executive or otherwise coming into her possession or control in the course of the performance of her services under this Agreement, shall be the exclusive property of the Company and shall be delivered to the Company, and not retained by the Executive (including, without limitation, any copies thereof), promptly upon request by the Company and, in any event, promptly upon termination of the Employment Term. The Executive acknowledges and agrees that she has no expectation of privacy with respect to the Company’s telecommunications, networking or information processing systems (including, without limitation, stored computer files, email messages and voice messages), and that the Executive’s activity and any files or messages on or using any of those systems may be monitored at any time without notice.

(f) Securities Law Matters . The Executive is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act of 1933, as amended (the “ Securities Act ”). The Executive has such knowledge and experience in financial and business matters that she is capable of evaluating the merits and risks of acquiring the Shares. The Executive understands that the shares have not been registered pursuant to the Securities Act or any applicable state securities laws, that the Shares will be characterized as “restricted securities” as that term is defined in Rule 144 promulgated under the Securities Act, and that the Shares cannot be sold or otherwise disposed of without registration under the Securities Act or an exemption therefrom.

(g) Enforcement . The Executive acknowledges that a breach of her covenants and agreements contained in this Section 6 would cause irreparable damage to the Company and its subsidiaries and affiliates, the exact amount of which would be difficult to ascertain, and that the remedies at law for any such breach or threatened breach would be inadequate. Accordingly, the Executive agrees that if she breaches or threatens to breach any of the covenants or agreements contained in this Section 6, in addition to any other remedy which may be available at law or in equity, the Company and its subsidiaries and affiliates shall be entitled to: (i) cease or withhold payment to the Executive of any severance payments described in Section 7, for which she otherwise qualifies under such Section 7, in excess of such payments in the amount of $2,500 payable in consideration for the Executive’s release of claims described in Section 7(d), (ii) institute and prosecute proceedings in any court of competent jurisdiction for specific performance and injunctive and other equitable relief to prevent the breach or any threatened breach thereof without bond or other security or a showing of irreparable harm or lack of an adequate remedy at law, and (iii) an equitable accounting by any court of competent jurisdiction of all profits or benefits arising out of such violation. Additionally, upon a breach by the Executive of this Section 6, the Option (and any other stock-based awards held by the Executive) shall be automatically canceled and forfeited without any further action.

7. Termination .

(a) Termination of Employment . The employment of the Executive hereunder and the Employment Term may be terminated at any time (i) by the Company with Cause on written notice to the Executive, (ii) by the Company without Cause on ninety (90) days written notice to the Executive ( provided that during such notice period the Company shall not be required to provide work for the Executive and may require that the Executive not report to the Company’s offices), (iii) by the Company due to the Executive’s Disability (as defined in the Severance Plan) on written notice to the Executive, (iv) by the Executive with Good Reason, (v) by the Executive without Good Reason on sixty (60) days written notice to the Company (which notice period may be waived by the Company in its discretion, in which case, such termination shall be effective immediately upon the Company’s receipt of notice thereof from the Executive), (vi) without action by the Company, the Executive or any other person or entity, immediately upon the Executive’s death, (vii) in connection with a Change in Control (within the meaning as set forth in the Dynegy Inc. Executive Change in Control Severance Pay Plan (the “ Change in Control Plan ”)) or (viii) due to the expiration of the Employment Term pursuant to Section 3. If the Executive’s employment is terminated for any reason under this Section 7, the Company shall be obligated to pay or provide to the Executive (or her estate, as applicable) in a lump sum within thirty (30) days following such termination, or at such other time prescribed by any applicable plan: (A) any Base Salary payable to the Executive pursuant to this Agreement, accrued up to and including the date on which the Executive’s employment terminates, (B) any employee benefits to which the Executive is entitled upon termination of her employment with the Company in accordance with the terms and conditions of the applicable plans of the Company, (C) reimbursement for any unreimbursed business expenses incurred by the Executive prior to her date of termination pursuant to Section 5(e), and (D) payment for accrued but unused vacation time as of the date of her termination, in accordance with Company policy.

(b) Severance Plan and Change in Control Plan . The Executive shall be entitled to participate in the Severance Plan and the Change in Control Plan; provided , however , that to the extent the Executive is eligible to receive severance payable under Section IV.A of the Severance Plan, the amount payable to the Executive thereunder shall be increased by an amount equal to two (2) times the current target Award (as described in Section 5(c) hereof), as in effect immediately prior to the date of the Executive’s termination of employment. For the avoidance of doubt and for purposes of the Severance Plan only, the Executive is hereby deemed to hold a comparable position to the CEO and Chief Operating Officer and will therefore be entitled to twenty-four (24) Months of Base Pay (as defined in the Severance Plan) as severance pay, subject to the other terms and conditions of the Severance Plan. For the avoidance of doubt, delivery by the Company of notice of non-renewal of the Initial Term or an Additional Term pursuant to Section 3, shall be deemed to be a termination without Cause for purposes of the Severance Plan ( provided , however , that no circumstance constituting Cause exists at such time of the delivery of such notice of non-renewal). Notwithstanding the foregoing, the Executive hereby waives her participation in the Third Amendment to the Severance Plan.

If to the Company:	Dynegy, Inc.
	1000 Louisiana Street, Suite 5800
	Houston, Texas 77002
	Attention: General Counsel

If to the Executive:
	At the Executive’s residence address as maintained by the Company in the regular course of its business for payroll purposes.

12. Section 409A .

13. General .

(c) Cooperation . During the Employment Term and thereafter, the Executive shall cooperate with the Company and be reasonably available to the Company with respect to continuing and/or future matters related to the Executive’s employment period with the Company and/or its subsidiaries or affiliates, whether such matters are business-related, legal, regulatory or otherwise (including, without limitation, the Executive appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are or may come into the Executive’s possession). Following the Employment Term, the Company shall reimburse the Executive for all reasonable out of pocket expenses incurred by the Executive in rendering such services that are approved by the Company. In addition, if more than an incidental cooperation is required at any time after the termination of the Executive’s employment, the Executive shall be paid (other than for the time of actual testimony) a per day fee based on her base salary described in Section 5(a) at the time of such termination divided by 225.

(h) Withholding Taxes . All amounts payable hereunder shall be subject to the withholding of all applicable taxes and deductions required by any applicable law.

(j) Duration . Notwithstanding the Employment Term hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement.

(m) Counterparts . This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument.

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement as of the day and year first written above.

		DYNEGY, INC.


Date:	7 / 5 / 11	By:	/s/ Kent R. Stephenson
			Name:	Kent R. Stephenson
			Title:	EVP & General Counsel


		CAROLYN J. BURKE


Date:	7 / 5 / 11	/s/ Carolyn J. Burke

Exhibit 10.7

NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”) is made as of the 11th day of July, 2011, between DYNEGY INC., a Delaware corporation (“Dynegy”), and all of its Affiliates (collectively, the “Company”), and ROBERT C. FLEXON (“Employee”). A copy of the Dynegy Inc. 2010 Long Term Incentive Plan (the “Plan”) is annexed to this Agreement and shall be deemed a part of this Agreement as if fully set forth herein. Unless the context otherwise requires, all terms that are not defined herein but which are defined in the Plan shall have the same meaning given to them in the Plan when used herein.

1. The Grant . The Compensation and Human Resources Committee of the Board of Directors (the “Committee”) granted to Employee pursuant to his Employment Agreement on July 11, 2011 (“Effective Date”), as a matter of separate inducement and not in lieu of any salary or other compensation for Employee’s services, the right and option to purchase (the “Option”), in accordance with the terms and conditions set forth in the Plan and in this Agreement the following shares of common stock of Dynegy, $0.01 par value per share (the “Common Stock”), at the following exercise prices (collectively, the “Exercise Prices”): (a) 500,000 shares of Common Stock, at an Exercise Price of $6.25 per share (“Option A”), (b) 625,000 shares of Common Stock at an Exercise Price of $6.50 per share (“Option B”), (c) 750,000 shares of Common Stock at an Exercise Price of $8.00 per share (“Option C”), and (d) 125,000 shares of Common Stock at an Exercise Price of $10.00 per share (“Option D”). Employee acknowledges receipt of a copy of the Plan, and agrees that the Option shall be subject to all of the terms and provisions of the Plan, including future amendments thereto, if any, pursuant to the terms thereof, and to all of the terms and conditions of this Agreement. The Option shall not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Exercise Prices are, in the judgment of the Committee, not less than one hundred percent (100%) of the Fair Market Value of a share of the Common Stock on the Effective Date.

2. Exercise . Subject to the provisions, limitations and other relevant provisions of the Plan and of this Agreement, and the earlier expiration of the Option as herein provided, Employee may exercise the Option to purchase some or all of the Shares as follows:

(a) The Option shall become exercisable in four cumulative equal annual installments as follows:

(i) on and after the first anniversary of the Effective Date, the right to purchase one-fourth of each of the Option A, B, C, and D Shares shall be exercisable without further action by the Committee;

(ii) on and after the second anniversary of the Effective Date, the right to purchase an additional one-fourth of each of the Option A, B, C, and D Shares shall be exercisable without further action by the Committee;

(iii) on and after the third anniversary of the Effective Date, the right to purchase an additional one-fourth of each of the Option A, B, C, and D Shares shall be exercisable without further action by the Committee; and

(iv) on and after the fourth anniversary of the Effective Date, the right to purchase the remaining one-fourth of each of the Option A, B, C, and D Shares shall be exercisable without further action by the Committee.

(b) Notwithstanding any other provision of this Agreement, the unexercised portion of the Option, if any, will automatically and without notice terminate and become null and void upon the expiration of ten (10) years from the Effective Date of the Option.

(c) Any exercise by Employee of the Option, or portion thereof, shall be conducted by delivery of an irrevocable notice of exercise to the Company or its designee as provided in the Plan. In no event shall Employee be entitled to exercise the Option for less than a whole Share.

(d) Notwithstanding any other provision of this Agreement, upon the occurrence of a Corporate Change, the Option, if it has not theretofore terminated, shall become fully vested and immediately exercisable in full on the date of the Corporate Change.

3. Termination of Employment . The Option may be exercised only while Employee remains an employee of the Company and will terminate and cease to be exercisable upon Employee’s termination of employment with the Company, except that:

(a) if Employee shall die while in the employ of the Company, the Option awarded hereunder shall immediately fully vest with respect to all of the remaining Shares and become fully exercisable without further action by the Committee, and Employee’s legal representative, or the person, if any, who acquired the Option by bequest or inheritance or by reason of the death of Employee, may exercise the Option, to the extent not previously exercised, in respect of any or all such Shares at any time up to and including the date three (3) years after the date of death, or the end of the option term, whichever is less, after which date the Option will automatically and without notice terminate and become null and void; and

(b) if Employee is determined to have a Disability, the Option awarded hereunder shall immediately fully vest with respect to all of the remaining Shares and become fully exercisable without further action by the Committee, and Employee may exercise the Option, to the extent not previously exercised, in respect of any or all such Shares at any time up to and including the date three (3) years after the date of such determination, or the end of the option term, whichever is less, after which date the Option will automatically and without notice terminate and become null and void; and

(c) if Employee’s employment with the Company terminates by reason of dismissal by the Company for Cause, then the Option, to the extent not previously exercised, will immediately, automatically and without notice or further action by the Committee, terminate and become null and void; and

(d) if Employee’s employment with the Company terminates by reason of resignation by the Employee (except as otherwise provided in Section 3(e) or (f) below) and at a time when Employee was entitled to exercise the Option, Employee may exercise the Option, to the extent not previously exercised, with respect to any or all such number of Shares as to which the Option was exercisable as of the date of Employee’s termination of employment, at any time up to and including the date ninety (90) days after the date of termination by reason of such resignation, or the end of the option term, whichever is less, after which date the Option will automatically and without notice terminate and become null and void; and

(e) if Employee’s employment with the Company terminates by reason of Involuntary Termination, as such term is defined below, the Option awarded hereunder shall immediately fully vest with respect to all of the remaining Shares but shall continue to become exercisable in accordance with Section 2(a) of this Agreement, and Employee may exercise such Option, to the extent not previously exercised, at any time once exercisable up to and including the date that is ninety (90) days after the date the relevant Shares become exercisable in accordance with Section 2(a) of this Agreement, or the end of the option term, whichever is less, after which date the Option will automatically and without notice terminate and become null and void; and

(f) notwithstanding Section 3(e) or anything herein to the contrary, if Employee’s employment with the Company is terminated as a result of a Change in Control Termination, as such term is defined below, occurring (i) in connection with, but in no event earlier than sixty (60) days prior to, a Corporate Change or (ii) on or within two years after the effective date upon which a Corporate Change occurs, the Option shall become fully vested and immediately exercisable in full on the effective date of the Corporate Change, and such Option shall remain exercisable from such date for the lesser of: (A) five (5) years from the date of such Corporate Change; (B) the remaining period of time for exercise of the Option hereunder (irrespective of any mandatory exercise period specified herein that would otherwise be triggered by the termination of employment of such Employee); or (C) such period of time (which period of time may end as early as the consummation of a Corporate Change) as the Committee may determine in connection with or in contemplation of a Corporate Change in the exercise of its discretion under the Plan, with respect to which the Committee has the discretion to, among other things, require the surrender of stock options (which surrender may be in exchange for a cash payment, if applicable) and to cancel such stock options upon the consummation of a Corporate Change as further described in the Plan.

(g) For purposes of this Agreement:

“Base Salary” shall mean the regular base salary of Employee but excluding all bonuses, expense reimbursements, benefits paid under any plan maintained by the Company and all equity awards of any type.

“Cause” shall mean, and hence arise where, as determined by the Committee in its sole discretion, Employee has (A) refused to implement or adhere to lawful policies or lawful directives of the Board; (B) engaged in conduct which is materially injurious (monetarily or otherwise) to the Company (including, without limitation, misuse of the Company’s funds or other property); (C) engaged in misconduct or dishonesty directly related to the performance of Employee’s duties for the Company or gross negligence in the performance of Employee’s duties for the Company; (D) been convicted (or entered into a plea bargain admitting criminal guilt) in any criminal proceeding involving a felony or a crime of moral turpitude; (E) engaged in drug or alcohol abuse; or (F) failed to perform Employee’s duties which such failure is not cured within ten (10) days after written notice is provided to Employee by Dynegy.

“Change in Control Termination” shall mean Employee’s employment is terminated by the Company (or a successor thereto) without Cause, or by Employee following: (i) a significant diminution in Employee’s responsibilities, authority or duties; (ii) a material reduction in Employee’s Base Salary; or (iii) relocation of Employee’s principal place of employment by fifty (50) miles or more, all as determined by the Committee in its sole discretion.

“Good Reason” shall have the same meaning as specified in the Dynegy Inc. Executive Severance Pay Plan (as amended and restated effective January 1, 2008).

“Involuntary Termination” shall mean (a) a termination of employment by the Company for reasons other than death, Disability or Cause or (b) a termination of employment for Good Reason by Employee.

4. Registration . The Company intends to register the Shares for issuance under the Securities Act of 1933, as amended (the “Act”), and to keep such registration effective throughout the period the Option is exercisable. In the absence of such effective registration or an available exemption from registration under the Act, issuance of the Shares will be delayed until registration of such shares is effective or an exemption from registration under the Act is available. The Company intends to use its best efforts to ensure that no such delay will occur. In the event exemption from registration under the Act is available upon an exercise of the Option, Employee (or the person permitted to exercise the Option in the event of Employee’s death or incapacity), if requested by the Company to do so, will execute and deliver to the Company, in writing, such agreements and other documents containing such provisions as the Company may require to assure compliance with applicable securities laws.

Employee agrees that the Shares will not be sold or otherwise disposed of in any manner which would constitute a violation of any applicable federal or state securities laws. Employee also agrees that (a) the certificates representing the Shares may bear such legend or legends as the Committee in its sole discretion deems appropriate in order to assure compliance with applicable securities laws and (b) the Company may refuse to register transfer of the Shares on the stock transfer records of the Company, and may give related instructions to its transfer agent, if any, to stop registration of such transfer, if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law.

5. Employment Relationship . For purposes of this Agreement, Employee shall be considered to be in the employment of the Company as long as Employee remains an employee of (a) the Company, (b) an Affiliate (as such term is defined in the Plan) or (c) a corporation (or a parent or subsidiary of such corporation) assuming or substituting a new option for the Option. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee in its sole discretion, and its determination shall be final and binding on all parties.

6. Withholding Taxes . By Employee’s acceptance hereof, Employee hereby (a) agrees to reimburse the Company or any Affiliate by which Employee is employed for any federal, state or local taxes required by any government to be withheld or otherwise deducted by such corporation in respect of Employee’s exercise of the Option, (b) authorize the Company or any Affiliate by which Employee is employed to withhold from any cash compensation paid to Employee or in Employee’s behalf, an amount sufficient to discharge any federal, state and local taxes imposed on the Company, or the Affiliate by which Employee is employed, and which otherwise has not been reimbursed by Employee, in respect of Employee’s exercise of the Option and (c) agrees that the corporation by which Employee is employed, may, in its discretion, hold the stock certificates to which Employee is entitled upon exercise of the Option, as security for the payment of the aforementioned withholding tax liability, until cash sufficient to pay that liability has been accumulated, and may, in its discretion, effect such withholding by retaining Shares issuable upon the exercise of the Option having a Fair Market Value on the date of exercise which is equal to the amount to be withheld.

7. Miscellaneous .

(a) This grant is subject to all the terms, conditions, limitations and restrictions contained in the Plan. In the event of any conflict or inconsistency between the terms hereof and the terms of the Plan, the terms of the Plan shall be controlling. In the event of any conflict or inconsistency between the terms hereof and the terms of the Dynegy Inc. Executive Severance Pay Plan, including any amendments or supplements thereto, the terms hereof shall be controlling.

(b) This grant is not a contract of employment and the terms of Employee’s employment shall not be affected hereby or by any agreement referred to herein except to the extent specifically so provided herein or therein. Nothing herein shall be construed to impose any obligation on the Company or on any Affiliate to continue Employee’s employment, and it shall not impose any obligation on Employee’s part to remain in the employ of the Company or of any Affiliate.

(c) All references in this Agreement to any “corporation” shall include a corporation, a general partnership, a joint venture, a limited partnership, a business trust or any other lawful business entity.

(d) Any notices or other communications provided for in this Agreement shall be sufficient if in writing. In the case of Employee, such notices or communications shall be effectively delivered when hand delivered to Employee at his or her principal place of employment or when sent by registered or certified mail to Employee at the last address Employee has filed with the Company. In the case of the Company, such notices or communications shall be effectively delivered when sent by registered or certified mail to the Company at its principal executive offices.

8. Amendment . This Agreement may not be amended except by an agreement in writing signed by each of the Company and Employee consenting to such amendment. Notwithstanding the preceding, if it is subsequently determined by the Committee, in its sole discretion, that the terms and conditions of this Agreement and/or the Plan are not compliant with Code Section 409A, or any Treasury regulations or Internal Revenue Service guidance promulgated thereunder, this Agreement and/or the Plan may be amended by the Company accordingly.

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IN WITNESS WHEREOF , the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and Employee has agreed to and accepted the terms of this Agreement, all as of the date first above written.

	DYNEGY INC.


	By:	/s/ Kent R. Stephenson


	Name:	Kent R. Stephenson

	Title:	EVP and General Counsel


	EMPLOYEE


	By:	/s/ Robert C. Flexon


	Name:	Robert C. Flexon

	Title:	President and Chief Executive Officer

Exhibit 10.8

STOCK APPRECIATION RIGHT AWARD AGREEMENT

THIS STOCK APPRECIATION RIGHT AWARD AGREEMENT (this “Agreement”) is made as of the 11th day of July, 2011, between DYNEGY INC., a Delaware corporation (“Dynegy”), and all of its Affiliates (collectively, the “Company”), and ROBERT C. FLEXON (“Employee”). A copy of the Dynegy Inc. 2009 Phantom Stock Plan (the “Plan”) is annexed to this Agreement and shall be deemed a part of this Agreement as if fully set forth herein. Unless the context otherwise requires, all terms that are not defined herein but which are defined in the Plan shall have the same meaning given to them in the Plan when used herein.

2. Payment Amount . The amount paid by the Company for each of Employee’s SARs shall be equal to (x) the Fair Market Value of a share of Common Stock on the SAR’s exercise date minus (y) the SAR’s Exercise Price. All payments under this Agreement shall be made in cash.

3. Exercise . Subject to the provisions, limitations and other relevant provisions of the Plan and of this Agreement, and the earlier expiration of the SAR as herein provided, Employee may exercise the SARs as follows:

(a) The SARs shall become exercisable in four cumulative equal annual installments as follows:

(i) on and after the first anniversary of the Effective Date, one-fourth of the SARs shall be exercisable without further action by the Committee;

(ii) on and after the second anniversary of the Effective Date, an additional one-fourth of the SARs shall be exercisable without further action by the Committee;

(iii) on and after the third anniversary of the Effective Date, an additional one-fourth of the SARs shall be exercisable without further action by the Committee; and

(iv) on and after the fourth anniversary of the Effective Date, the remaining one-fourth of the SARs shall be exercisable without further action by the Committee.

(b) Notwithstanding any other provision of this Agreement, the unexercised portion of the SARs, if any, will automatically and without notice exercise on the tenth (10 th ) anniversary of the Effective Date (the “Expiration Date”).

(c) Any exercise by Employee of the SARs, or portion thereof, shall be conducted by delivery of an irrevocable notice of exercise to the Company or its designee as provided in the Plan. In no event shall Employee be entitled to exercise a fraction of a SAR.

(d) Notwithstanding any other provision of this Agreement, upon the occurrence of a Change in Control, as such term is defined below, the SAR, if it has not theretofore terminated, shall become fully vested and immediately exercisable in full on the date of the Change in Control.

4. Termination of Employment . The SAR may be exercised only while Employee remains an employee of the Company and will terminate and cease to be exercisable upon Employee’s termination of employment with the Company, except that:

(a) if Employee shall die while in the employ of the Company, the SARs awarded hereunder shall immediately fully vest and become fully exercisable without further action by the Committee, and Employee’s legal representative, or the person, if any, who acquired the SAR by bequest or inheritance or by reason of the death of Employee, may exercise the SARs, to the extent not previously exercised, at any time up to and including the date three (3) years after the date of death, or the Expiration Date, whichever is less, after which date the SARs will automatically and without notice terminate and become null and void; and

(b) if Employee is determined to have a Disability, the SARs awarded hereunder shall immediately fully vest and become fully exercisable without further action by the Committee, and Employee may exercise the SARs, to the extent not previously exercised, at any time up to and including the date three (3) years after the date of such determination, or the Expiration Date, whichever is less, after which date the SARs will automatically and without notice terminate and become null and void; and

(c) if Employee’s employment with the Company terminates by reason of dismissal by the Company for Cause, then the SARs, to the extent not previously exercised, will immediately, automatically and without notice or further action by the Committee, terminate and become null and void; and

(d) if Employee’s employment with the Company terminates by reason of resignation by the Employee (except as otherwise provided in Section 3(e) or (f) below) and at a time when Employee was entitled to exercise the SARs, Employee may exercise the SARs, to the extent not previously exercised, with respect to any or all such number of SARs that were exercisable as of the date of Employee’s termination of employment, at any time up to and including the date ninety (90) days after the date of termination by reason of such resignation, or the Expiration Date, whichever is less, after which date the SARs will automatically and without notice terminate and become null and void; and

(e) if Employee’s employment with the Company terminates by reason of Involuntary Termination, as such term is defined below, the SARs awarded hereunder shall immediately fully vest and become fully exercisable without further action by the Committee, and Employee may exercise the SARs, to the extent not previously exercised, at any time once exercisable up to and including the date that is ninety (90) days after the Employee’s termination of employment, or the Expiration Date, whichever is less, after which date the SARs will automatically and without notice terminate and become null and void; and

(f) notwithstanding Section 3(e) or anything herein to the contrary, if Employee’s employment with the Company is terminated as a result of a Change in Control Termination, as such term is defined below, occurring (i) in connection with, but in no event earlier than sixty (60) days prior to, a Change in Control or (ii) on or within two years after the effective date upon which a Change in Control occurs, the SARs shall become fully vested and immediately exercisable in full on the effective date of the Change in Control, and such SARs shall remain exercisable from such date for the lesser of: (A) five (5) years from the date of such Change in Control; (B) until the Expiration Date (irrespective of any mandatory exercise period specified herein that would otherwise be triggered by the termination of employment of such Employee); or (C) such period of time (which period of time may end as early as the consummation of a “Corporate Change,” as such term is defined in the Plan) as the Committee may determine in connection with or in contemplation of a Corporate Change in the exercise of its discretion under the Plan, with respect to which the Committee has the discretion to, among other things, require the surrender of stock options (which surrender may be in exchange for a cash payment, if applicable) and to cancel such SARs upon the consummation of a Corporate Change as further described in the Plan.

(g) For purposes of this Agreement:

“Change in Control” shall mean the occurrence of any of the following events: (A) a merger of Dynegy with another entity, a consolidation involving Dynegy, or the sale of all or substantially all of the assets or equity interests of Dynegy to another entity if, in any such case, (I) the holders of equity securities of Dynegy immediately prior to such event do not beneficially own immediately after such event equity securities of the resulting entity entitled to fifty-one percent (51%) or more of the votes then eligible to be cast in the election of directors (or comparable governing body) of the resulting entity in substantially the same proportions that they owned the equity securities of Dynegy immediately prior to such event or (II) the persons who were members of the Board immediately prior to such event do not constitute at least a majority of the board of directors of the resulting entity immediately after such event; (B) a circumstance where any person or entity, including a “group” as contemplated by Section 13(d)(3) of the 1934 Act, acquires or gains ownership or control (including, without limitation, power to vote) of fifty percent (50%) or more of the combined voting power of the outstanding securities of, (I) if Dynegy has not engaged in a merger or consolidation, Dynegy, or (II) if Dynegy has engaged in a merger or consolidation, the resulting entity; or (C) circumstances where, as a result of or in connection with, a contested election of directors, the persons who were members of the Board immediately before such election shall cease to constitute a majority of the Board. For purposes of the “Change in Control” definition, (1) “resulting entity” in the context of a transaction or an event that is a merger, consolidation or sale of all or substantially all of the subject assets or equity interests shall mean the surviving entity (or acquiring entity in the case of an asset or equity interest sale), unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common stock of Dynegy receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, and (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term “Dynegy” shall refer to the resulting entity and the term “Board” shall refer to the board of directors (or comparable governing body) of the resulting entity.

“Good Reason” shall have the same meaning as specified in the Dynegy Inc. Executive Severance Pay Plan (as amended and restated effective January 1, 2008).

5. Transfer Restrictions . The SARs may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or otherwise disposed of by Employee.

6. Shareholder Rights . Employee shall not have any of the rights of a shareholder of the Company with respect to the SARs.

7. Employment Relationship . For purposes of this Agreement, Employee shall be considered to be in the employment of the Company as long as Employee remains an employee of (a) the Company, (b) an Affiliate (as such term is defined in the Plan) or (c) a corporation (or a parent or subsidiary of such corporation) assuming or substituting a new option or stock appreciation right for the SAR. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee in its sole discretion, and its determination shall be final and binding on all parties.

8. Withholding Taxes . By Employee’s acceptance hereof, Employee hereby authorizes the Company or any Affiliate by which Employee is employed to withhold from any amount payable to Employee under this Agreement an amount sufficient to discharge any federal, state and local taxes imposed on the Company, or the Affiliate by which Employee is employed, and which otherwise has not been reimbursed by Employee, in respect of Employee’s exercise of the SARs.

9. Miscellaneous .

10. Amendment . This Agreement may not be amended except by an agreement in writing signed by each of the Company and Employee consenting to such amendment. Notwithstanding the preceding, if it is subsequently determined by the Committee, in its sole discretion, that the terms and conditions of this Agreement and/or the Plan are not compliant with Code Section 409A, or any Treasury regulations or Internal Revenue Service guidance promulgated thereunder, this Agreement and/or the Plan may be amended by the Company accordingly.

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	DYNEGY INC.


	By:	/s/ Kent R. Stephenson


	Name:	Kent R. Stephenson

	Title:	EVP and General Counsel


	EMPLOYEE


	By:	/s/ Robert C. Flexon


	Name:	Robert C. Flexon

	Title:	President and Chief Executive Officer

Exhibit 10.9

NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”) is made as of the 5th day of July, 2011, between DYNEGY INC., a Delaware corporation (“Dynegy”), and all of its Affiliates (collectively, the “Company”), and KEVIN T. HOWELL (“Employee”). A copy of the Dynegy Inc. 2010 Long Term Incentive Plan (the “Plan”) is annexed to this Agreement and shall be deemed a part of this Agreement as if fully set forth herein. Unless the context otherwise requires, all terms that are not defined herein but which are defined in the Plan shall have the same meaning given to them in the Plan when used herein.

1. The Grant . The Compensation and Human Resources Committee of the Board of Directors (the “Committee”) granted to Employee pursuant to his Employment Agreement on July 5, 2011 (“Effective Date”), as a matter of separate inducement and not in lieu of any salary or other compensation for Employee’s services, the right and option to purchase (the “Option”), in accordance with the terms and conditions set forth in the Plan and in this Agreement the following shares of common stock of Dynegy, $0.01 par value per share (the “Common Stock”), at the following exercise prices (collectively, the “Exercise Prices”): (a) 60,000 shares of Common Stock, at an Exercise Price of $6.25 per share (“Option A”), (b) 75,000 shares of Common Stock at an Exercise Price of $6.50 per share (“Option B”), (c) 90,000 shares of Common Stock at an Exercise Price of $8.00 per share (“Option C”), and (d) 120,000 shares of Common Stock at an Exercise Price of $10.00 per share (“Option D”). Employee acknowledges receipt of a copy of the Plan, and agrees that the Option shall be subject to all of the terms and provisions of the Plan, including future amendments thereto, if any, pursuant to the terms thereof, and to all of the terms and conditions of this Agreement. The Option shall not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Exercise Prices are, in the judgment of the Committee, not less than one hundred percent (100%) of the Fair Market Value of a share of the Common Stock on the Effective Date.

(a) The Option shall become exercisable in four cumulative equal annual installments as follows:

(g) For purposes of this Agreement:

“Cause” shall mean, and hence arise where, as determined by the Committee in its sole discretion, Employee has (A) been convicted of a misdemeanor involving moral turpitude or a felony, (B) engaged in conduct which is materially injurious (monetarily or otherwise) to the Company (including, without limitation, misuse of the Company’s funds or other property), (C) engaged in misconduct in the performance of Employee’s duties, (D) refused without proper legal reason to perform Employee’s duties, (E) breached any provision of any agreement between the Company and Employee, (F) breached any corporate policy maintained and established by the Company that is of general applicability to its employees; or (G) otherwise failed to meet satisfactorily the standards of his position.

“Good Reason” shall have the same meaning as specified in the Dynegy Inc. Executive Severance Pay Plan (as amended and restated effective January 1, 2008).

7. Miscellaneous .

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	DYNEGY INC.


	By:	/s/ Kent R. Stephenson


	Name:	Kent R. Stephenson

	Title:	EVP and General Counsel


	EMPLOYEE


	By:	/s/ Kevin T. Howell


	Name:	Kevin T. Howell

	Title:	Chief Operating Officer

Exhibit 10.10

NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”) is made as of the 5th day of July, 2011, between DYNEGY INC., a Delaware corporation (“Dynegy”), and all of its Affiliates (collectively, the “Company”), and CLINT C. FREELAND (“Employee”). A copy of the Dynegy Inc. 2010 Long Term Incentive Plan (the “Plan”) is annexed to this Agreement and shall be deemed a part of this Agreement as if fully set forth herein. Unless the context otherwise requires, all terms that are not defined herein but which are defined in the Plan shall have the same meaning given to them in the Plan when used herein.

1. The Grant . The Compensation and Human Resources Committee of the Board of Directors (the “Committee”) granted to Employee pursuant to his Employment Agreement on July 5, 2011 (“Effective Date”), as a matter of separate inducement and not in lieu of any salary or other compensation for Employee’s services, the right and option to purchase (the “Option”), in accordance with the terms and conditions set forth in the Plan and in this Agreement the following shares of common stock of Dynegy, $0.01 par value per share (the “Common Stock”), at the following exercise prices (collectively, the “Exercise Prices”): (a) 50,000 shares of Common Stock, at an Exercise Price of $6.25 per share (“Option A”), (b) 62,500 shares of Common Stock at an Exercise Price of $6.50 per share (“Option B”), (c) 75,000 shares of Common Stock at an Exercise Price of $8.00 per share (“Option C”), and (d) 100,000 shares of Common Stock at an Exercise Price of $10.00 per share (“Option D”). Employee acknowledges receipt of a copy of the Plan, and agrees that the Option shall be subject to all of the terms and provisions of the Plan, including future amendments thereto, if any, pursuant to the terms thereof, and to all of the terms and conditions of this Agreement. The Option shall not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Exercise Prices are, in the judgment of the Committee, not less than one hundred percent (100%) of the Fair Market Value of a share of the Common Stock on the Effective Date.

(a) The Option shall become exercisable in four cumulative equal annual installments as follows:

(g) For purposes of this Agreement:

“Good Reason” shall have the same meaning as specified in the Dynegy Inc. Executive Severance Pay Plan (as amended and restated effective January 1, 2008).

7. Miscellaneous .

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	DYNEGY INC.


	By:	/s/ Kent R. Stephenson


	Name:	Kent R. Stephenson

	Title:	EVP and General Counsel


	EMPLOYEE


	By:	/s/ Clint C. Freeland


	Name:	Clint C. Freeland

	Title:	Chief Financial Officer

Exhibit 10.11

Kent R. Stephenson

Executive Vice President and General Counsel

Dynegy Inc.

1000 Louisiana Street, Suite 5800

Houston, TX 77002

713.507.0386

Kent.R.Stephenson@dynegy.com

June 28, 2011

Lynn Lednicky		*Via Hand Delivery*
Dynegy Inc.
1000 Louisiana Street, Suite 5800
Houston, TX 77002

Re: Transition Services Agreement

Dear Mr. Lednicky:

As you are aware, the Board of Directors of Dynegy Inc. (“ Dynegy ”) has taken steps during the past several weeks to reorganize Dynegy’s executive leadership team. In connection with those changes, and in recognition of your past efforts for Dynegy and its affiliates (collectively, the “ Company ”), we are offering you the ability to receive certain retention bonus payments if you continue to provide services to the Company through the earlier of (i) December 30, 2011, or (ii) the date you experience an Involuntary Termination (as such term is defined in the Dynegy Inc. Executive Severance Pay Plan (the “ Severance Plan ”) or the Dynegy Inc. Executive Change in Control Severance Pay Plan (the “ Change in Control Plan ”), as applicable) of your employment with the Company or a termination of your employment due to death or Disability (as such term is defined in the Severance Plan or the Change in Control Plan, as applicable). The terms of your continued employment with the Company, and the terms of your retention bonus payments are outlined in this letter agreement (the “ Agreement ”).

1. Role and Reporting Relationship . During the period between the date hereof and December 30, 2011 (the “ Term ”), you will report to Dynegy’s Chief Executive Officer, and you will be responsible for (i) providing transition services to the Company in connection with the implementation of the new executive management team at the direction of Dynegy’s Chief Executive Officer, and (ii) assisting Dynegy’s Chief Executive Officer and other officers in connection with its ongoing financing and restructuring activities. You will continue to be an Executive Vice President of Dynegy during the Term.

2. Compensation . Your base compensation and eligibility to receive bonus payments under the Dynegy Inc. Incentive Compensation Plan (the “ STI Plan ”) will remain unchanged during the Term (i.e., you will continue to have an incentive compensation target of 100% of base compensation). You also will continue to receive all other Company benefits that you currently receive, including, but not limited to, continued participation in the STI Plan.

3. Retention Bonus Payments . You will be eligible to receive three separate retention bonus payments for services during the Term. These are as follows:

(a) Financing Bonus . You will receive a payment of $100,000 upon the closing of any replacement financing or full or partial refinancing of Dynegy’s existing first lien credit facility. This payment will be made in cash, subject to all applicable tax withholding, no later than the next available payroll cycle following the closing date for the financing or refinancing transaction.

(b) Exchange Offer Bonus . You will receive a payment of $50,000 in connection with the performance of services related to Dynegy’s efforts to execute a tender offer or exchange offer related to any series of its publicly-held, unsecured debt. If a tender offer or exchange offer is initiated prior to December 31, 2011, then the amount of this payment will be increased to $100,000. This payment will be made in cash, subject to all applicable tax withholding, no later than the next available payroll cycle following the earlier of (i) the initiation of the tender offer or exchange offer, as applicable, or (ii) December 30, 2011.

(c) Service Bonus . You will receive a payment of $100,000 if you continue to provide services to the Company through December 30, 2011. This payment will be made in cash, subject to all applicable tax withholding, no later than the next available payroll cycle following December 30, 2011.

Notwithstanding the preceding, if you experience an Involuntary Termination of your employment with the Company prior to December 30, 2011, to the extent not previously paid, you will receive the payment described in Section 3(a) and Section 3(c), and you will receive $100,000 pursuant to Section 3(b) unless the tender offer or exchange offer has not been initiated for any reason, in which case you will receive $50,000 pursuant to Section 3(b). If your employment is terminated due to your death or Disability after the achievement of any of the bonus criteria in this Section 3 but prior to the actual payment of such bonus, you (or your estate, if applicable) will receive such payment as if you remained employed by the Company. In such event, any such payment will be made in cash, subject to all applicable tax withholding. Any such payment will be made to you (or your estate, if applicable) at the same time that any cash payments under the Severance Plan or Change in Control Plan, as applicable, are made to you (or your estate, if applicable), and you will be required to timely execute a copy of a Severance Agreement and Release to receive all such payments (except in the event of your death). The payment of amounts pursuant to this Section 3 are in addition to any amounts to which you are otherwise entitled pursuant to the Severance Plan or the Change in Control Plan.

4. Severance Benefits and Equity Awards .

You will continue to be covered by the Severance Plan and the Change in Control Plan (collectively, the “ Executive Severance Plans ”) during the Term. If you continue to provide services to the Company through December 30, 2011, your employment will be terminated by the Company on that date, and such termination will be treated as an Involuntary Termination under the terms of the Executive Severance Plans and any grant agreements for outstanding equity or equity-based awards, and you will receive all applicable payments under the terms of such plans and agreements. In the event you cease to directly report to Dynegy’s Chief Executive Officer, you will promptly resign your employment with the Company and such resignation will be treated as an Involuntary Termination for purposes of the Executive Severance Plans, any grant agreements for outstanding equity or equity-based awards, and Section 3 of this Agreement. As provided by the Executive Severance Plans, you will be required to timely execute a copy of a Severance Agreement and Release to receive any payments under such plans. Further, if you experience an Involuntary Termination of your employment with the Company prior to December 30, 2011, you will receive (i) a cash payment, subject to all applicable tax withholding, equal to the base compensation that you would have been paid if you had been employed through December 30, 2011, and not yet paid as of the date of your Involuntary Termination of employment (the “ Base Compensation Payment ”), and (ii) all applicable payments under the terms of the Executive Severance Plans and any grant agreements for outstanding equity or equity-based awards; provided, however, that for purposes of calculating the short-term incentive based payments under the Executive Severance Plans, you will be deemed to have been employed and received base compensation through December 30, 2011. The Executive Severance Plans will be deemed to be amended to the extent necessary to accomplish the foregoing. Any such Base Compensation Payment will be made to you at the same time that any cash payments under the Severance Plan or Change in Control Plan, as applicable, are made to you, and you will be required to timely execute a copy of a Severance Agreement and Release to receive all such payments. Any previously received outstanding equity or equity-based awards will be treated in accordance with the terms of the applicable grant agreements for such awards.

For the avoidance of doubt, if you experience an Involuntary Termination at anytime, you will be entitled to receive, under the terms of the Severance Plan or Change in Control Plan, as applicable, in addition to any amounts payable pursuant to Section 3 and any amounts related to equity or equity-based awards, an amount equal to (i) your base salary, which is $435,000/yr plus (ii) your STI Target amount, which is $435,000, subject to your timely execution of a Severance Agreement and Release. If such Involuntary Termination occurs prior to December 30, 2011, you will also receive the lump sum payment described in Section 4(i), subject to your timely execution of a Severance Agreement and Release.

5. Amendment . This Agreement may be amended at any time only by written action of both parties hereto; provided however, if it is subsequently determined that it is necessary to amend the Agreement to comply with any applicable law, it may be so amended unilaterally by the Company.

If you are willing to abide by the terms of this Agreement, please sign your name and date of signing as provided below.

	Sincerely,

	/s/ Kent R. Stephenson
	Kent R. Stephenson
	Executive Vice President and General Counsel

cc: Julius Cox, Vice President Human Resources

Agreed to on this 28 th day of June, 2011, by

/s/ Lynn Lednicky
Lynn Lednicky

Exhibit 10.21

Execution Version

LETTER OF CREDIT REIMBURSEMENT AND COLLATERAL AGREEMENT, dated as of August 5, 2011, between DYNEGY POWER, LLC, as account party (the “ Account Party ”) and BARCLAYS BANK PLC, (“ Barclays ”) as issuing lender (in such capacity, together with its successors and assigns in such capacity, the “ Issuing Lender ”).

STATEMENT OF PURPOSE:

WHEREAS, the Account Party has requested that (i) the Issuing Lender extend new credit to backstop or replace the letters of credit referred to on Schedule A hereto (the “ Existing Letters of Credit ”) under this Agreement and (ii) the Issuing Lender provide a letter of credit facility to the Account Party, and the Issuing Lender is willing to extend new credit to backstop or replace the Existing Letters of Credit under this Agreement and provide the letter of credit facility to the extent that the obligations of the Account Party with respect to the Existing Letters of Credit and any other letter of credit issued hereunder are secured and cash collateralized by the Account Party upon the terms and subject to the conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and to induce the Issuing Lender to enter into this Agreement, the Account Party hereby agrees with the Issuing Lender as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1. Defined Terms . (a) The following terms shall have the following meanings:

“ Account Balance ”: shall mean, at any time, the aggregate Dollar amount of Collateral on deposit in the Collateral Account.

“ Account Collateral ”: the collective reference to the Collateral and the Collateral Account.

“ Account Control Agreement ”: as defined in Section 5.2(e).

“ Account Party ”: as defined in the preamble to this Agreement.

“ Affiliate ”: with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified means any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. For the purposes of this definition, “Control” (including, with correlative meanings, the terms “Controlling”, “Controlled by” and “under common Control with”), means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

“ Agreement ”: this Letter of Credit Reimbursement and Collateral Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

“ Applicable Margin ”: 7.75% per annum; provided that all past due amounts shall bear interest at 9.75% per annum.

“ Application ”: an application, in such form as the Issuing Lender may specify as the form customarily used by the Issuing Lender for Letters of Credit from time to time, requesting the Issuing Lender to issue, extend or amend a Letter of Credit.

“ Bankruptcy Code ”: the Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, and codified as 11 U.S.C. §§101 et seq.

“ Base Rate ”: for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If the Issuing Lender shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Issuing Lender to obtain sufficient quotations in accordance with the terms of the definition thereof, the Base Rate shall be determined without regard to clause (ii) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, as the case may be.

“ Business Day ”: a day other than a Saturday, Sunday or other day on which the commercial banks in New York City are authorized or required by law to close.

“ Change in Law ”: as defined in Section 3.8(a).

“ Code ”: means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests in any Account Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.

“ Collateral ”: the collective reference to all cash and funds deposited from time to time in the Collateral Account and all interest and other property received in respect of, or as proceeds of, or in substitution or exchange for, any of the foregoing.

“ Collateral Account ”: Dynegy Power, LLC (Cash Collateral Account) - Account No: 050705156 established with Barclays Bank PLC and any substitute or successor account.

“ Commitment Period ”: the period from and including the Effective Date to August 5, 2014.

“ Credit Agreement ”: the Credit Agreement, dated as of the Effective Date, among the Account Party, as borrower, Intermediate Holdings, the lenders party thereto, Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Trustee, Credit Suisse Securities (USA) LLC and Goldman Sachs Lending Partners LLC, as Joint Syndication Agents, and Credit Suisse Securities (USA) LLC and Goldman Sachs Lending Partners LLC, as Co-Documentation Agents.

“ Credit Documents ”: this Agreement, all Applications relating to the Letters of Credit, any Letter of Credit and the Account Control Agreement.

“ Debtor Relief Laws ” shall mean the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.

“ Default ”: any of the events specified in Section 4.4 whether or not any requirement set forth therein for the giving of notice, the lapse of time, or both, has been satisfied.

“ Dollars ”, “ $ ” and “ US$ ”: dollars in lawful currency of the United States of America.

“ Effective Date ”: the date of satisfaction of the conditions set forth in Section 5.2, which date is August 5, 2011.

“ Equity Interests ”: shares of capital stock, partnership interest, membership interest in a limited liability company, beneficial interests in a trust or other equity interest in any Person, and any option, warrant or other right entitling the holder thereof to purchase or otherwise acquire any such equity interests.

“ Event of Default ”: as defined in Section 4.4.

“ Excluded Taxes ”: with respect to the Issuing Lender or any other recipient of any payment to be made by or on account of any obligation of the Account Party hereunder or pursuant to any Credit Document, (a) income or franchise taxes imposed on or measured by its net income or net profits, however denominated, by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Issuing Lender, in which its applicable lending office is located, or that are imposed by reason of any connection between the Issuing Lender or other recipient and any taxing jurisdiction other than a connection arising solely by executing or entering into any Credit Document, receiving payments thereunder or having been a party to, performed its obligations under, or enforced, any Credit Documents, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above, (c) in the case of a Foreign Issuing Lender, any U.S. federal withholding tax or backup withholding that is imposed pursuant to laws in effect at the time such Foreign Issuing Lender or other recipient becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Issuing Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding tax pursuant to Section 3.10(a), (d) in the case of a Foreign Issuing Lender, any U.S. federal withholding tax or backup withholding that is attributable to such Foreign Issuing Lender’s failure to comply with Section 3.10(e), (e) any U.S. federal withholding tax imposed pursuant to FATCA and (f) all penalties and interest on the foregoing amounts.

“ Existing Credit Agreement ”: the Fifth Amended and Restated Credit Agreement dated as of April 2, 2007, among Dynegy Holdings Inc., as the borrower, Dynegy Inc., a Delaware corporation, as the parent, Dynegy Inc., an Illinois corporation, as the intermediate parent, the other guarantors party thereto, the lenders party thereto, Citicorp USA, Inc. and JPMorgan Chase Bank, N.A., as administrative agents, Citicorp USA, Inc., as payment agent, JPMorgan Chase Bank, N.A., as collateral agent, and each letter of credit issuer party thereto.

“ Existing Letters of Credit ”: as defined in the Statement of Purpose.

“ FATCA ”: Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended from time to time (as of the date hereof or any amended or successor provision that is substantively comparable and not materially more onerous to comply with) and any regulations or the official interpretations thereof.

“ Federal Funds Effective Rate ”: for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Issuing Lender from three Federal funds brokers of recognized standing selected by it.

“ Financial Institution ”: Barclays Bank PLC, or its permitted successor or assigns, as party to the Account Control Agreement.

“ Foreign Issuing Lender ”: an Issuing Lender that is not a “United States person” within the meaning of Section 7701(a)(30) of the U.S. Internal Revenue Code of 1986, as amended.

“ GAAP ”: those generally accepted accounting principals in the United States as in effect from time to time.

“ Governing Documents ”: collectively, as to any Person, the articles or certificate of incorporation and bylaws, any shareholders agreement, certificate of formation, limited liability company agreement, partnership agreement, trust indenture or other formation or constituent documents of such Person.

“ Governmental Authority ”: the government of the United States of America or any other nation, or any political subdivision thereof, whether state or local, and any agency authority, instrumentality, regulatory board, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of, or pertaining to, government (including any supra-national bodies such as the European Union or the European Central Bank).

“ Immaterial Subsidiary ”: any Subsidiary that has assets with a book value not in excess of $50,000,000 in the aggregate for all Immaterial Subsidiaries.

“ Indemnified Taxes ”: (a) Taxes other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Account Party hereunder or under any other Credit Document and (b) to the extent not otherwise described in (a), Other Taxes.

“ Intermediate Holdings ”: Dynegy Gas Investments Holdings, LLC.

“ Issuing Lender ”: as defined in the preamble to this Agreement.

“ L/C Disbursement ”: a payment or disbursement made by the Issuing Lender pursuant to a Letter of Credit.

“ L/C Fee Payment Date ”: the last Business Day of each March, June, September and December and the Termination Date.

“ L/C Obligation ”: as defined in Section 3.3(a).

“ Letters of Credit ”: any standby letter of credit issued pursuant to Section 3.1 (which in any event shall include the Existing Letters of Credit), as any such letter of credit may be amended, renewed or extended from time to time in accordance with the terms hereof.

“ Letter of Credit Commitment ”: as of the Effective Date, $300,000,000, as the same may be decreased in accordance with Section 3.1.

“ Lien ” ,with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.

“ Material Adverse Effect ”: (a) materially adverse effect on the business, assets, liabilities, operations, condition (financial or otherwise) or operating results of the Account Party and its Subsidiaries, taken as a whole, (b) a material impairment of the ability of the Account Party or its Subsidiaries to perform any of their material obligations under any Credit Document or (c) a material impairment of the rights and remedies of or benefits available to the Issuing Lender under any Credit Document.

“ Material Indebtedness ”: as defined in Section 4.4(e).

“ Obligations ”: (a) the L/C Obligations and (b) all other reasonable and document out of pocket expenses (including reasonable attorney’s fees, disbursements and other charges of the Issuing Lender), charges, obligations, covenants and duties owing by the Account Party to the Issuing Lender which may arise under, out of, or in connection with this Agreement, the Letters of Credit, any of the other Credit Documents or any other document made, delivered or given in connection herewith or therewith or in any way relating to the Account Collateral, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, liquidated or unliquidated.

“ Other Taxes ”: any and all present or future stamp or documentary Taxes or any other excise or property Taxes, charges or similar levies arising from any payment made under any Credit Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Credit Document (except any such Taxes imposed with respect to an assignment, other than an assignment made at the Account Party’s request).

“ Outside Date ”: the earlier of (x) the last day of the Commitment Period and (y) the date upon which the Letter of Credit Commitment shall have been terminated by the Account Party pursuant to either Section 3.1(c) or by the Issuing Lender following the exercise of remedies pursuant to Section 4.4.

“ Outstanding Amount ”: shall mean, at any time, the sum of, without duplication, (a) the Dollar amount of the aggregate Stated Amount of all outstanding Letters of Credit at such time plus (b) the Dollar amount of the aggregate principal amount of all L/C Disbursements at such time for which the Issuing Lender has not been reimbursed.

“ Participant ”: as defined in Section 7.9.

“ Participant Register ”: as defined in Section 7.15(b).

“ Person ”: any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“ Prime Rate ”: the rate of interest per annum determined from time to time by Barclays as its prime rate in effect at its principal office in New York City and notified to the Account Party. The prime rate is a rate set by Barclays based upon various factors including Barclays’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such rate.

“ Property ”: of any Person means, any right or interest in or to any type of real, personal, tangible, intangible or mixed property or asset of any kind whether or not included in the most recent consolidated balance sheet of such Person and its Subsidiaries under GAAP, including Equity Interests.

“ Register ”: as defined in Section 7.15(a).

“ Related Person ”: each of the Issuing Lender’s Affiliates, Issuing Lender’s successors and assigns and the partners, directors, officers, employees, agents, members, Controlling Persons, trustees, administrators, managers and representatives of Issuing Lender and of Issuing Lender’s Affiliates.

“ Requirement of Law ”: as to any Person, the Governing Documents of such Person, and any law, statute, treaty, rule, regulation, official directive, order, decree, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

“ Responsible Officer ”: of any Person shall mean any executive officer or chief financial officer of such Person and any other officer or similar official thereof responsible for the administration of the obligations of such Person in respect of this Agreement. Any document delivered hereunder that is signed by a Responsible Officer of the Account Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of the Account Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Account Party.

“ Stated Amount ”: of any Letter of Credit shall mean the maximum Dollar amount from time to time available to be drawn thereunder, determined without regard to whether any conditions to drawing could then be met.

“ Subsidiary ”: with respect to any Person, with respect to any Person (herein referred to as the “ parent ”), any corporation, partnership, limited liability company, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, owned or held (directly or indirectly through one or more subsidiaries) or (b) which is a partnership with respect to which such parent is the sole general partner of and Controls such partnership. Unless otherwise qualified all reference to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Account Party.

“ Taxes ”: any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“ Termination Date ”: the later of (x) the Outside Date and (y) the date upon which the Obligations have been indefeasibly paid in full in cash and the Outstanding Amount is $0.

(b) Rules of Interpretation .

(i) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section and paragraph references are to this Agreement unless otherwise specified.

(ii) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

ARTICLE II

COLLATERAL ACCOUNT

SECTION 2.1. Establishment of Collateral Account . (a) The Account Party agrees that, as a condition to issuing Letters of Credit hereunder (including backstopping or replacing the Existing Letters of Credit) and as security for the payments of its obligations under this Agreement, it shall, on the Effective Date (i) establish the Collateral Account for the purpose of holding the Collateral to be deposited into the Collateral Account by or on behalf of the Account Party and (ii) deposit into the Collateral Account, Dollars in immediately available funds, in an amount equal to $309,000,000. After the Effective Date, the Account Party agrees that at all times thereafter that it shall promptly cause additional funds to be deposited and held in the Collateral Account from time to time in order that the Account Balance shall at least equal 103% of the Outstanding Amount.

(b) The Collateral Account shall be maintained until the Termination Date.

(c) The Account Collateral shall be subject to the exclusive dominion and control of the Issuing Lender, which shall hold the Collateral and administer the Collateral Account subject to the terms and conditions of the Account Control Agreement. Except as expressly set forth in Section 2.5(b), the Account Party shall have no right of withdrawal from the Collateral Account nor any other right or power with respect to the Account Collateral, nor any right to convey or encumber any of the Account Collateral, except as expressly provided therein.

(d) All funds on deposit in the Collateral Account will be maintained in cash and will bear interest at the rate from time to time applicable to “The Barclays Bank PLC Overnight Rate”. Funds on deposit therein shall not be invested in any investments. Any interest received in respect of the Collateral Account shall accrue for the benefit of the Account Party and shall be deposited into the Collateral Account.

(e) The Issuing Lender shall have no responsibility for any loss of funds or liability arising out of the Collateral Account, except to the extent such losses are found by a court of competent jurisdiction in a final non-appealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of the Issuing Lender

SECTION 2.2. Grant of Security Interest . As collateral security for the prompt and complete payment and performance when due (whether by acceleration or otherwise) of the Obligations, the Account Party hereby grants to the Issuing Lender, a continuing security interest in and to all of the Account Party’s right, title and interest in and to the Account Collateral and all proceeds of the foregoing.

SECTION 2.3. Covenants as to Account Collateral . The Account Party covenants and agrees with the Issuing Lender that:

(a) The Account Party will not (i) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Account Collateral (except as otherwise permitted hereunder), or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Account Collateral, or any interest therein, except for the Lien created by this Agreement, the Lien in favor of the Collateral Agent in connection with the Credit Agreement and the banker’s lien and right of setoff of Barclays Bank PLC in the Collateral Account.

(b) The Account Party will maintain the Lien created by this Agreement as a first priority, perfected security interest and defend the right, title and interest of the Issuing Lender in and to the Account Collateral against the claims and demands of all Persons whomsoever. At any time and from time to time, upon the written request of the Issuing Lender, and at the sole expense of the Account Party, the Account Party will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Issuing Lender may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including without limitation, the filing of financing statements under the Code.

(c) If at any time the Issuing Lender determines that the Account Balance is less than 103% of the Outstanding Amount, the Account Party will cause to be deposited into the Collateral Account, as additional funds to be held in the Collateral Account, an amount, in Dollars and in funds immediately available to the Issuing Lender, equal to the Dollar amount of any such deficiency and shall do so not later than the Business Day immediately following the day that the Account Party receives such notice.

SECTION 2.4. Remedies; Application of Collateral . (a) In addition to the rights of the Issuing Lender provided in Section 3.3(b) with respect to reimbursements of L/C Disbursements and the provisions of Section 4.4, during the continuance of an Event of Default, the Issuing Lender shall without notice of any kind, except for notices required by law which may not be waived, apply or allocate the Account Collateral, for the payment in whole or in part of the Obligations then due and payable, and any other amount required by a provision of law, including, without limitation, Section 9-608(a)(1)(C) of the UCC. The Issuing Lender agrees to notify the Account Party promptly after such application or allocation of the Account Collateral.

(b) In addition to the rights, powers and remedies granted to it under this Agreement and in any other Credit Document, the Issuing Lender shall have all the rights, powers and remedies available at law, including, without limitation, the rights and remedies of a secured party under the Code. To the extent permitted by law, the Account Party waives presentment, demand, protest and all notices of any kind, except for notices referred to in this Section, and all claims, damages and demands it may acquire against the Issuing Lender arising out of the exercise by either of them of any rights hereunder on or after the Effective Date.

(c) The Account Party shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Account Collateral are insufficient to pay the Obligations.

SECTION 2.5. Release of Collateral . (a) This Agreement shall remain in effect from the Effective Date through and including the Termination Date until all of the unexpired, issued letters of credit have been cancelled or returned. Upon the Termination Date, (i) the Liens granted on the Account Collateral hereby shall terminate and all rights to the Account Collateral shall revert to the Account Party, (ii) the Issuing Lender shall promptly assign, release, transfer and deliver to the Account Party the Account Collateral held by it hereunder, all instruments of assignment executed in connection therewith, together with all monies held by the Issuing Lender hereunder, free and clear of the Liens hereof and (iii) the Issuing Lender will promptly execute and deliver to the Account Party such documents and instruments (including but not limited to appropriate Code termination statements) as the Account Party shall reasonably request to evidence such termination in each such case at the sole expense of the Account Party.

(b) In addition, so long as no Event of Default shall have occurred and be continuing, upon at least three Business Days’ prior written notice to the Issuing Lender, the Account Party may request the release of and payment to the Account Party (and the Issuing Lender agrees to release and pay to the Account Party) any Collateral on deposit in the Collateral Account so long as after giving effect to any such release the Account Balance shall equal or exceed 103% of the Outstanding Amount. Upon any such release, the Issuing Lender shall promptly assign, release, transfer and deliver to the Account Party the Account Collateral so released and all instruments of assignment executed in connection therewith, free and clear of the Liens hereof.

(c) All payments to the Account Party under paragraphs (a) and (b) of this Section 2.5 shall be paid to the account specified in writing to the Issuing Lender by the Account Party.

(d) The Account Party agrees that it will not request or be entitled to a release of Collateral, except as expressly provided for herein.

SECTION 2.6. Issuing Lender’s Appointment as Attorney-in-Fact . (a) After the occurrence and during the continuance of an Event of Default under this Agreement, to permit the Issuing Lender to exercise it rights and remedies under this Agreement, the Account Party hereby irrevocably constitutes and appoints the Issuing Lender and any officer of the Issuing Lender, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Account Party and in the name of the Account Party or in the Issuing Lender’s own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or reasonably desirable to accomplish the purposes of this Agreement, including without limitation, any financing statements, endorsements, assignments or other instruments of transfer; provided that in no event shall any such appointment extend beyond the Termination Date.

(b) The Account Party hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in Section 2.6(a). All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until the Termination Date.

SECTION 2.7. Duty of Issuing Lender . The Issuing Lender’s sole duty with respect to the custody, safekeeping and physical preservation of the Account Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to comply with the specific duties and responsibilities set forth herein. The powers conferred on the Issuing Lender in this Agreement are solely for the protection of the Issuing Lender’s interests in the Account Collateral and shall not impose any duty upon the Issuing Lender to exercise any such powers. Neither the Issuing Lender nor any of its Related Persons shall be liable for any action lawfully taken or omitted to be taken by any of them on or after the Effective Date under or in connection with the Account Collateral or this Agreement, except to the extent of losses to the Account Party found by a court of competent jurisdiction in a final non-appealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of the Issuing Lender.

SECTION 2.8. Authorization of Financing Statements . Pursuant to the Code, the Account Party authorizes the Issuing Lender to file financing statements without the signature of the Account Party in such form and in such filing offices as the Issuing Lender reasonably determines appropriate to perfect the Liens in the Collateral of the Issuing Lender under this Agreement.

ARTICLE III

LETTERS OF CREDIT

SECTION 3.1. Letters of Credit . (a) Subject to the terms and conditions hereof, the Issuing Lender agrees to issue, amend, renew or extend Letters of Credit denominated in Dollars during the Commitment Period (i) in a minimum amount of $10,000 on the date of such issuance, amendment, renewal or extension and (ii) for the account of the Account Party on any Business Day during the Commitment Period in such forms as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall not issue, amend, renew or extend any Letter of Credit if, after giving effect to such issuance, amendment, renewal or extension, (i) the Stated Amount of which, when added to the Outstanding Amount at such time, would exceed the Letter of Credit Commitment at such time or (ii) the Account Balance would be less than 103% of the Outstanding Amount at such time. Each Letter of Credit shall (i) be denominated in Dollars, and (ii) expire on the earlier of (x) one year after the date of issuance and (y) the last day of the Commitment Period; provided that any Letter of Credit with a one year term may provide for the renewal thereof for additional one year periods (which shall in no event extend beyond the date referred to in clause (y) above).

(b) Any Letter of Credit, which by its terms is automatically renewable for a given period of time will provide that notice from the Issuing Lender may be given to the beneficiary thereof that such Letter of Credit will not be renewed at its maturity upon 30 days prior written notice. On the Outside Date, the Account Party shall pay in cash all Obligations that are then due and payable and, if any obligations under any Letter of Credit, whether or not then due and payable, are outstanding on such date, the Account Party will cause all such Letters of Credit to either be (i) cancelled and returned on or prior to the Outside Date or (ii) cash collateralized or otherwise backstopped in a manner satisfactory to the Issuing Lender in its reasonable discretion.

(c) The Account Party shall have the right, upon not less than three Business Days’ notice to the Issuing Lender, to terminate the Letter of Credit Commitment or, from time to time, to reduce the aggregate amount of the Letter of Credit Commitment; provided that no such termination or reduction of the Letter of Credit Commitment shall be permitted if, after giving effect thereto, (i) the Account Balance would be less than 103% of the Outstanding Amount at such time or (ii) the Stated Amount would exceed the Letter of Credit Commitment. Any such reduction shall be in a minimum amount equal to $500,000, or any whole multiple of $1,000,000 in excess thereof, and shall reduce permanently the Letter of Credit Commitment then in effect.

(d) Letters of Credit shall be used solely to fund the working capital needs and general corporate purposes of the Account Party and its Subsidiaries (including, without limitation, to support any interest rate, currency, commodity or other hedging agreements or other derivative obligations of such Persons); but may not, in any event, be issued in respect of any antecedent debt, as such phrase is used in the Bankruptcy Code, that is not secured.

(e) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender to exceed any limits imposed by, any applicable Requirement of Law.

SECTION 3.2. Procedure for Issuance of Letter of Credit . (a) The Account Party may from time to time request that the Issuing Lender issue, amend, renew or extend a Letter of Credit on behalf of the Account Party or its Subsidiaries by delivering to the Issuing Lender at its address for notices specified herein an Application therefor, completed to the reasonable satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue, amend, extend or renew the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue, amend, extend or renew any Letter of Credit earlier than two Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto unless the Issuing Lender agrees in its sole discretion) by issuing, amending, renewing, or extending the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the Issuing Lender and the Account Party. The Issuing Lender shall furnish a copy of such Letter of Credit to the Account Party promptly following the issuance thereof.

(b) This Section shall not be construed to impose an obligation upon the Issuing Lender to issue, amend, extend or renew any Letter of Credit that is inconsistent with the terms and conditions of this Agreement.

SECTION 3.3. L/C Obligations of the Account Party . (a) The Account Party agrees to reimburse the Issuing Lender no later than 1:00 p.m. (New York City time) on the next Business Day after which the Issuing Lender notifies the Account Party of the date and amount of an L/C Disbursement for the amount of (x) the draft so paid and (y) any documented taxes, fees, charges or other reasonable costs or expenses incurred by the Issuing Lender in connection with such L/C Disbursement (the amounts described in the foregoing clauses (x) and (y) in respect of any L/C Disbursement, collectively, the “ L/C Obligation ”); provided that any failure to give or delay in giving such notice shall not relieve the Account Party of its obligation to reimburse the Issuing Lender with respect to such L/C Obligations. Each such payment shall be made to the Issuing Lender either (i) at its address for notices specified herein (or via wire transfer instructions provided by the Issuing Lender as set forth on Schedule B, as such Schedule may be updated from time to time by the Issuing Lender) in Dollars and in immediately available funds or (ii) so long as after giving effect to the withdrawal the Account Balance equals or exceeds 103% of the Outstanding Amount, by instructing the Account Party to withdraw from the Collateral Account the Dollar Amount of L/C Disbursement for the period from the date such L/C Disbursement is made until the date of withdrawal. Until an L/C Obligation shall have been reimbursed in full, interest shall be payable on such unreimbursed L/C Obligation at the rate per annum equal to the Base Rate plus the Applicable Margin. All such interest shall be payable on demand.

(b) If the Issuing Lender makes any L/C Disbursement in respect of a Letter of Credit, then, unless the Account Party shall reimburse all L/C Obligations in full on the date reimbursement thereof is required in accordance with paragraph (a) above, the Issuing Lender, without prior notice to the Account Party (with any such prior notice being expressly waived by the Account Party) shall be entitled to withdraw from the Collateral Account the Dollar amount of the L/C Obligation plus any interest payable on such L/C Disbursement for the period from the date such L/C Disbursement is made until the date of withdrawal. The Issuing Lender agrees to notify the Account Party promptly after such withdrawal.

(c) The responsibility of the Issuing Lender to the Account Party in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit.

SECTION 3.4. Obligations Absolute . The Account Party’s obligations under Section 3.3 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Account Party may have or may have had against the Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Account Party also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, in the absence of its willful misconduct, bad faith or gross negligence (as determined by a final, non-appealable decision of a court of competent jurisdiction), and the Account Party’s L/C Obligations under Section 3.3 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Account Party and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Account Party against any beneficiary of such Letter of Credit or any such transferee. The Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final, non-appealable decision of a court of competent jurisdiction to have resulted from the Issuing Lender’s willful misconduct, bad faith or gross negligence.

SECTION 3.5. Applications . To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply.

SECTION 3.6. Records . The Issuing Lender shall maintain records evidencing the Stated Amount of each unexpired Letter of Credit issued, amended, extended or renewed by the Issuing Lender outstanding hereunder and evidencing for each Letter of Credit issued or renewed hereunder:

(a) the dates of issuance, amendment, extension or renewal and expiration thereof;

(b) the Stated Amount thereof; and

The Issuing Lender shall make copies of such records available to the Account Party upon its reasonable request.

SECTION 3.7. No Liability . The Account Party agrees that, except as expressly set forth in Section 3.3(c), neither Issuing Lender nor any of its respective Related Persons will assume liability for, or be responsible for:

(a) the use which may be made of any Letter of Credit;

(b) any acts or omissions of the beneficiary of any Letter of Credit, including the application of any payment made to such beneficiary;

(c) the validity, correctness, genuineness or legal effect of any document or instrument relating to any Letter of Credit, even if such document or instrument should in fact prove to be in any respect invalid, insufficient, inaccurate, fraudulent or forged;

(d) payment by the Issuing lender of any draft which does not comply with the terms of any Letter of Credit, unless such payment results from the gross negligence, bad faith or willful misconduct of the Issuing lender

(e) the failure of any document or instrument to bear any reference or adequate reference to any Letter of Credit;

(f) any failure to note the amount of any draft on any Letter of Credit or on any related document or instrument, except to the extent such failure results from the gross negligence, bad faith or willful misconduct of the Issuing Lender;

(g) any failure of the beneficiary of any Letter of Credit to meet the obligations of such beneficiary to either the Account Party or any other Person; or

(h) any failure by the Issuing Lender to make payment under any Letter of Credit as a result of any Requirement of Law, control or restriction rightfully or wrongfully exercised or imposed by any Governmental Authority.

SECTION 3.8. Reserve Requirements: Change in Circumstances . (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law, rule, regulation or treaty or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) (a “ Change in Law ”) shall (i) result in the imposition, modification or applicability of any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by the Issuing Lender (ii) subject any Issuing Lender to any Tax of any kind whatsoever with respect to this Agreement, or change the basis of taxation of payments in respect thereof (except for Indemnified Taxes or Other Taxes indemnified pursuant to Section 3.10 and the imposition of any Excluded Tax payable by such Issuing Lender), or (iii) result in the imposition on the Issuing Lender of any other condition affecting this Agreement, the Letter of Credit Commitment or any Letter of Credit, and the result of any of the foregoing shall be to increase the cost to the Issuing Lender of issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by the Issuing Lender hereunder (whether of reimbursement, interest or otherwise) by an amount reasonably determined by the Issuing Lender to be material, then such additional amount or amounts as will compensate the Issuing Lender for such additional costs or reduction shall be paid by the Account Party to the Issuing Lender upon demand. “Change in Law” shall include all requests, rules, guidelines or directives concerning capital adequacy issued in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives concerning capital adequacy promulgated by the Bank for International Settlements, the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or the United States financial regulatory authorities, in each case pursuant to Basel III, regardless of the date adopted, issued, promulgated or implemented.

(b) If the Issuing Lender determines that the adoption after the date hereof of any Change in Law regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Issuing Lender (or any lending office of the Issuing Lender) or the Issuing Lender’s holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the Issuing Lender’s capital or on the capital of the Issuing Lender’s holding company, if any, as a consequence of this Agreement, the Letters of Credit to a level below that which the Issuing Lender or the Issuing Lender’s holding company could have achieved but for such adoption, change, compliance or other Change in Law (taking into consideration the Issuing Lender’s policies and the policies of the Issuing Lender’s holding company with respect to capital adequacy) by an amount reasonably determined by the Issuing Lender to be material, then from time to time such additional amount or amounts as will compensate the Issuing Lender for such reduction will be paid by the Account Party to the Issuing Lender upon demand.

(c) A certificate of the Issuing Lender setting forth such amount or amounts as shall be necessary to compensate the Issuing Lender or its holding company, as applicable, as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Account Party and shall be conclusive absent manifest error. The Account Party shall pay the Issuing Lender the amount shown as due on any such certificate delivered by the Issuing Lender within 10 days after its receipt of the same.

(d) Failure on the part of the Issuing Lender to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of the Issuing Lender’s right to demand compensation with respect to such period or any other period; provided , however , that the Issuing Lender shall not be entitled to compensation under this Section 3.8 for any costs incurred or reductions suffered with respect to any date unless the Issuing Lender shall have notified the Account Party in writing that it will demand compensation for such costs or reductions under paragraph (c) above and such notice shall have been provided not more than 90 days after the later of (i) such date and (ii) the date on which it shall have become aware of such costs or reductions.

(e) Fees . The Account Party will pay an issuing fee to the Issuing Lender equal to 0.125% per annum of the average daily Stated Amount of each Letter of Credit (including each Letter of Credit issued to replace or backstop any Existing Letter of Credit) issued or extended pursuant to this Agreement, which shall be payable quarterly in arrears on each L/C Fee Payment Date after the issuance date. In addition, customary administrative, issuance, amendment, payment and negotiation charges shall be payable to the Issuing Lender. All fees shall be paid on the dates due, in immediately available funds to the Issuing Lender. Once paid, none of the fees shall be refundable under any circumstances.

SECTION 3.9. Applicability of ISP98 . Unless otherwise expressly agreed by the Issuing Lender and the Account Party, when a Letter of Credit is issued, the rules of the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each standby Letter of Credit.

SECTION 3.10. Taxes .

(a) Any and all payments by or on account of any obligation of the Account Party hereunder or under any other Credit Document shall be made free and clear of and without deduction or withholding for any Taxes; provided , that, if any Indemnified Taxes (including any Other Taxes) shall be required to be deducted or withheld from such payments, then (i) the sum payable by the Account Party shall be increased as necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional sums payable under this Section) each Issuing Lender or other recipient of such payment, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) the Account Party shall make such deductions or withholdings and (iii) the Account Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) Without limiting the provisions of paragraph (a) above, the Account Party shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) The Account Party shall indemnify each Issuing Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes by or on account of any obligation of the Account Party hereunder or under any other Credit Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by such Issuing Lender and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Account Party by the Issuing Lender shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Account Party to a Governmental Authority, the Account Party shall deliver to the Issuing Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Issuing Lender.

(e) Any Foreign Issuing Lender or other recipient that is entitled to an exemption from or reduction of withholding tax or backup withholding with respect to payments under any Credit Document shall deliver to the Account Party, at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law and reasonably requested by the Account Party as will permit such payments to be made without or at a reduced rate of withholding or backup withholding. In addition, any Foreign Issuing Lender or other recipient, if reasonably requested by the Account Party, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Account Party as will enable the Account Party to determine whether or not such Issuing Lender or other recipient is subject to backup withholding or information reporting requirements. Without limiting the generality of the foregoing, any Foreign Issuing Lender or other recipient shall deliver to the Account Party (in such number of copies as shall be requested by the Account Party) on or prior to the date on which such Foreign Issuing Lender or other recipient becomes an Issuing Lender or other recipient under this Agreement (and from time to time thereafter promptly upon the expiration, obsolescence or invalidity of any previously delivered form or information or upon the request of the Account Party, but in each case only if such Foreign Issuing Lender or other recipient is legally entitled to do so), whichever of the following is applicable:

(i) duly completed copies of IRS Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party and such W-8BEN shall establish (x) with respect to payments of interest under any Credit Document an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Credit Document, an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty,

(ii) duly completed copies of IRS Form W-8ECI,

(iii) duly completed copies of IRS Form W-8EXP,

(iv) duly completed copies of IRS Form W-8IMY, together with any required attachments,

(v) in the case of a Foreign Issuing Lender claiming the benefits of the exemption for portfolio interest under section 871(h) or 881(c) of the Internal Revenue Code of 1986, as amended from time to time, (x) a certificate substantially in the form of Exhibit D-1 to the effect that such Foreign Issuing Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, a “10-percent shareholder” of the Account Party within the meaning of Section 881(c)(3)(B) of the Internal Revenue Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Internal Revenue Code (a “ U.S. Tax Compliance Certificate ”), and (y) duly completed copies of IRS Form W-8BEN,

(vi) to the extent an Issuing Lender or other recipient is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit D-2 or Exhibit D-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit D-4 on behalf of each such direct or indirect partner, or

(vii) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation or information necessary to permit the Account Party to determine the withholding or deduction required to be made.

(f) Any Issuing Lender that is not a Foreign Issuing Lender shall deliver to the Account Party (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Issuing Lender becomes an Issuing Lender under this Agreement (and from time to time thereafter promptly upon the expiration, obsolescence or invalidity of any previously delivered form or information or upon the request of the Account Party, but in each case only if such Issuing Lender is legally entitled to do so) duly completed copies of IRS Form W-9 or other forms or information establishing an exemption from U.S. backup withholding.

(g) If a payment made to an Issuing Lender or other recipient under any Credit Document hereunder may be subject to U.S. federal withholding tax under FATCA, such Issuing Lender or other recipient shall deliver to the Account Party, at the time or times prescribed by law and at such time or times reasonably requested by Account Party, such documentation prescribed by applicable law and such additional documentation reasonably requested by the Account Party to comply with its withholding obligations, to determine that such Issuing Lender or other recipient has complied with such Issuing Lender’s or other recipient’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 3.10(g), the term “FATCA” shall include any amendments to FATCA after the date hereof.

(h) If an Issuing Lender determines, in its sole discretion, that it has received a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by the Account Party or with respect to which the Account Party has paid additional amounts pursuant to this Section 3.10, it shall pay to the Account Party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Account Party under this Section with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Issuing Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided , that the Account Party, upon the request of such Issuing Lender, agrees to repay the amount paid over to the Account Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Issuing Lender in the event such Issuing Lender is required to repay such refund to such Governmental Authority. This paragraph shall not be construed to require any Issuing Lender to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the Account Party or any other Person.

ARTICLE IV

COVENANTS AND EVENTS OF DEFAULT

SECTION 4.1. Incorporation of Covenants from Credit Agreement . (a) The Account Party hereby covenants and agrees with the Issuing Lender, the Account Party shall provide to the Issuing Lender any notice, report or financial or operating information required to be delivered by it, directly or indirectly to the Lenders, under Sections 5.04(a) and (b), and 5.05 the Credit Agreement.

(b) In the event that the Credit Agreement is prepaid, repaid or refinanced or terminates for any other reason but the Termination Date has not yet occurred, the agreements and covenants incorporated herein by reference shall be those in effect on the date of such termination.

SECTION 4.2. Other Covenants . The Account Party agrees that, until the Termination Date, it shall:

(a) (i) (A) preserve, renew and keep in full force and effect its organizational existence and (B) take all reasonable actions to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect on the business, operations or financial condition of the Account Party and its Subsidiaries taken as a whole; and (ii) comply with all with the requirements of all applicable laws, rules, regulations and orders of any governmental authority except to the extent that failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect on the business, operations or financial condition of the Account Party and its Subsidiaries taken as a whole;

(b) furnish to the Issuing Bank prompt notice of the occurrence of any Default or Event of Default promptly after any Responsible Officer of the Account Party obtains knowledge thereof; and

(c) upon the exercise by the Issuing Bank of any remedy pursuant to this Agreement or the other Credit Documents which requires any consent, approval, recording qualification or authorization of any Governmental Authority, the Account Party will execute and deliver, or will cause the execution and delivery by its Subsidiaries of, all applications, certifications, instruments and other documents and papers that the Issuing Bank may be required to obtain from the Account Party or any of its Subsidiaries for such governmental consent, approval, recording, qualification or authorization.

SECTION 4.3. Use of Facility . The Letters of Credit shall be used solely for the working capital needs and general corporate purposes of the Account Party and its Subsidiaries (including, without limitation, to fund or support any interest rate, currency, commodity or other hedging arrangements or other derivative obligations of such Persons).

SECTION 4.4. Events of Default . In case of the happening of any of the following events (each an “ Event of Default ”):

(a) The Account Party shall fail to make any deposit as required by Section 2.3(c) or fail to pay any amounts as required by Section 3.1(b) or Section 3.3(a), in each case when due in accordance with the terms hereof;

(b) Any representation or warranty made or deemed made by the Account Party herein or in any other Credit Document or that is contained in any certificate, document or other statement furnished by it at any time under or in connection with this Agreement or any such other Credit Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made;

(c) The Account Party shall fail to make any payment of any other amount hereunder (other than an amount referred to in paragraph (a) above or payments required by Section 3.3(a)), when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days;

(d) The Account Party shall default in the observance or performance of any other covenant or agreement contained in this Agreement or any other Credit Document (other than as provided in paragraphs (a) through (c) above), and such default shall continue unremedied for a period of 30 days after notice thereof from the Issuing Lender;

(e) (i) Intermediate Holdings, the Account Party or any Subsidiary shall fail to pay any principal, interest or any other amount, regardless of amount (beyond the period of grace, if any, provided therein), due in respect of any indebtedness with an aggregate principal amount in excess of $50,000,000 (such indebtedness, “ Material Indebtedness ”), when and as the same shall become due and payable, or (ii) any other event or condition occurs, in any such case, that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, but after giving effect to any required lapse of time) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted under the documents providing for such Indebtedness;

(f) (i) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Intermediate Holdings, the Account Party or any Subsidiary (other than an Immaterial Subsidiary), or of a substantial part of the property or assets of Intermediate Holdings, the Account Party or a Subsidiary (other than an Immaterial Subsidiary), under any Debtor Relief Law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Intermediate Holdings, the Account Party or any Subsidiary (other than an Immaterial Subsidiary) or for a substantial part of the property or assets of Intermediate Holdings, the Account Party or a Subsidiary or (iii) the winding-up or liquidation of Intermediate Holdings, the Account Party or any Subsidiary (other than an Immaterial Subsidiary); and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or

(ii) Intermediate Holdings, the Account Party or any Subsidiary (other than an Immaterial Subsidiary) shall (i) voluntarily commence any proceeding or file any petition seeking relief under any Debtor Relief Law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Intermediate Holdings, the Account Party or any Subsidiary (other than an Immaterial Subsidiary) or for a substantial part of the property or assets of Intermediate Holdings, the Account Party or any Subsidiary (other than an Immaterial Subsidiary), (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing;

(g) Any of the Credit Documents shall cease, for any reason (other than pursuant to the terms thereof), to be in full force and effect, or the Account Party shall so assert, or any Lien on the Account Collateral created hereunder shall cease to be enforceable and of the same effect and priority purported to be created thereby; or

(h) The Account Control Agreement shall cease to be in full force or effect or the Account Party shall deny or disaffirm its obligations under the Account Control Agreement;

then, and in every such event and at any time thereafter during the continuance of such event, the Issuing Lender may, by notice to the Account Party, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Letter of Credit Commitment, (ii) withdraw from the Collateral Account the Dollar amount of any outstanding Obligations and apply such amount to the Obligations in such order as the Issuing Lender may direct, (iii) avail itself of all the rights and remedies of a secured party under the Uniform Commercial Code in effect in the State of New York or (iv) declare all Obligations outstanding under the Credit Documents to be forthwith due and payable in whole or in part, whereupon such Obligations so declared to be due and payable, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Account Party accrued hereunder, shall be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding. It is understood that if any such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above, the actions specified above shall occur automatically and without any requirement of notice or otherwise.

ARTICLE V

CONDITIONS

SECTION 5.1. All Letters of Credit . The obligations of the Issuing Lender to issue Letters of Credit (including backstopping or replacing the Existing Letters of Credit) on the Effective Date, and the obligations to issue, amend, renew or extend Letters of Credit (other than an extension of the expiry date of any Letter of Credit (without increasing the amount thereof), or the renewal of any Letter of Credit (without increasing the amount thereof)) after the Effective Date are subject to the following conditions precedent:

(a) Each of the representations and warranties contained in Article VI shall be true and correct in all material respects on and as of the date of such issuance, amendment, renewal or extension with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date; provided that to the extent such representation and warranty is qualified as to materiality, such representation and warranty shall be true and correct in all respects.

(b) On the Effective Date and at the time of and immediately after any such issuance, amendment, renewal or extension, no Default or Event of Default under or pursuant to this Agreement shall have occurred and be continuing.

(c) Since December 31, 2010, there has been no event or circumstance, either individually or in the aggregate, that has had or would reasonably be expected to have a Material Adverse Effect;

(d) The Account Party represents and warrants that each Letter of Credit shall be issued in the ordinary course of business.

(e) After giving effect to such issuance, amendment, renewal or extension, the Outstanding Amount will not exceed the Letter of Credit Commitment and the balance in the Collateral Account will at least be equal to 103% of the Outstanding Amount.

(f) The Account Party shall have delivered to the Issuing Lender the information contemplated by Section 3.2.

(g) The Account Party shall not have requested the Issuing Party to issue any Letter of Credit in respect of any antecedent debt, as such phrase is used in the Bankruptcy Code, that is not secured.

Each issuance, amendment, renewal or extension of a Letter of Credit (other than an extension of the expiry date of any Letter of Credit (without increasing the amount thereof), or the renewal of any Letter of Credit (without increasing the amount thereof)) shall be deemed to constitute a representation and warranty by the Account Party on the date of such issuance amendment, renewal or extension as to the matters specified in paragraphs (a), (b), (c), (d), (e) and (f) of this Section 5.1. The Issuing Lender shall have received a certificate signed by a Responsible Officer of the Account Party, dated the date of such issuance, amendment, renewal or extension stating that such statements are true (and which shall be deemed to be included as part of the Application).

SECTION 5.2. Effective Date . This Agreement shall become effective upon the satisfaction of the conditions set forth in Section 5.1 and the following conditions precedent (the “ Effective Date ”):

(a) The Issuing Lender shall have received this Agreement, executed and delivered by a duly authorized officer of the Account Party.

(b) The Account Party shall have deposited, and the Issuing Lender shall have received evidence of such deposit, in the Collateral Account immediately available funds in the amount of $309,000,000. Funds that are deposited in the Collateral Account shall be proceeds from borrowings under the Credit Agreement made on the Effective Date.

(c) The Issuing Lender shall have received opinions, addressed to the Issuing Lender dated the Effective Date, from White & Case LLP, special New York counsel to the Account Party in substantially the form of Exhibit A-1 and Exhibit A-2 hereto.

(d) The Issuing Lender shall have received from the Account Party, a closing certificate, dated the Effective Date, in substantially the form of Exhibit B hereto.

(e) The Account Party shall have entered into a blocked account control agreement the “ Account Control Agreement ”), dated the Effective Date, which Account Control Agreement shall have been executed and delivered by a duly authorized officer of the Account Party, the Financial Institution and the Issuing Lender and shall be in substantially the form of Exhibit C hereto. The Issuing Lender shall have as fully perfected first priority security interest in the Account Collateral.

(f) The Issuing Lender shall have received, for its own account, a non-refundable structuring fee equal to 0.375% of the maximum aggregate principal amount of the Letter of Credit Commitment on the Effective Date.

(g) The Issuing Lender shall have received reimbursement of all reasonable and documented out-of-pocket expenses (including the reasonable fees, disbursements and other charges of Latham & Watkins LLP as outside counsel to the Issuing Lender) to the extent invoiced no later than one Business Day prior to the Effective Date and payable by the Account Party in connection with the transactions contemplated by this Agreement.

(h) The Issuing Lender shall have received, sufficiently in advance of the Effective Date, all documentation and other information reasonably required by the Issuing Lender as required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the United States PATRIOT Act.

(i) The Issuing Lender shall have received (i) a copy of the certificate or articles of incorporation or organization, including all amendments thereto, of the Account Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of the Account Party as of a recent date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of the Account Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the operating agreement of the Account Party as in effect on the Effective Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of the Account Party authorizing the execution, delivery and performance of this Agreement and the Credit Documents to which such Person is a party and the issuances hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation or organization of the Account Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing this Agreement or any Credit Document or any other document delivered in connection herewith on behalf of the Account Party; (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above; and (iv) such other documents as the Issuing Lender may reasonably request.

(j) The Issuing Lender shall have received a fully-executed copy of the Credit Agreement and such Credit Agreement shall be effective in accordance with its terms.

(k) Each of the representations and warranties set forth in the Credit Agreement shall be true and correct in all material respects on and as of the Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date; provided that to the extent such representation and warranty is qualified as to materiality, such representation and warranty shall be true and correct in all respects.

(l) The Issuing Lender shall have receipt a copy of a certificate from the Secretary of State of the State of Delaware certifying the name change of Dynegy Power Inc. to Dynegy Power LLC.

(m) The Issuing Lender shall have received evidence that on or prior to the Effective Date, the all indebtedness under the Existing Credit Agreement shall have been prepaid, repaid, or refinanced in full (other than in respect of the Existing Letters of Credit and certain other letters of credit that, on the Effective Date, shall be deemed backstopped or otherwise cash collateralized) and all commitments thereunder shall have been terminated, and all liens in respect thereof have been released.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

The Account Party represents and warrants to the Issuing Lender on the date hereof:

(a) It is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware and has all necessary organizational powers and all government licenses, authorizations, consents and approvals required to carry on its business as now conducted, except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect on the business, operations or financial condition of the Account Party and its Subsidiaries taken as a whole.

(b) The execution, delivery and performance by it of this Agreement and the other Credit Documents to which it is a party, including without limitation, the granting of the security interests contemplated by Section 2.2. hereof, are within its organizational powers, have been duly authorized by all necessary corporate action, require no approval, consent, exemption, authorization or other action by or in respect of, or filing with, any governmental body, agency or official and do not (i) contravene the terms of constituent documents of the Account Party, (ii) contravene, violate, or otherwise constitute a default under, any provision of applicable law or regulation or of constituent documents of the Account Party, or of any agreement (other than the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement)), judgment, injunction, order, decree or other instrument binding upon the Account Party, in each case under this clause (ii) in a manner that would reasonably be expected to have a Material Adverse Effect on the business, operations or financial condition of the Account Party and its Subsidiaries taken as a whole, or (iii) result in the creation or imposition of any Lien on any asset of the Account Party or any of its Subsidiaries, except the Lien created by Section 2.2 hereof. The execution, delivery and performance of this Agreement and the Credit Documents, and the issuance of any Letters of Credit hereunder and the security interests granted in favor of the Issuing Lender pursuant to Section 2.2 hereof, do not, and will not, contravene, or constitute a default under, the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement).

(c) This Agreement and each Credit Document to which it is a party constitutes a legal, valid and binding agreement of the Account Party, enforceable against it in accordance with its terms, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws generally affecting creditor’s rights and by equitable principles (regardless of whether enforcement is sought in equity or at law).

(d) No Event of Default (as defined in the Credit Agreement), or Default or Event of Default hereunder has occurred and is continuing or would result from the consummation of the transactions contemplated hereby.

(e) This Agreement, together with the Account Control Agreement, is effective to create in favor of the Issuing Lender a legal, valid and enforceable perfected first priority security interest in the Collateral Account and the other Account Collateral described herein and proceeds and products thereof, which Lien shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the Account Party in such Collateral Account and the other Account Collateral and the proceeds and products thereof, as security for the obligations of the Account Party under this Agreement, prior and superior in right to any other Person, except as otherwise provided in Section 2.3(a). The Account Party shall own the monies to be placed in the Collateral Account and such monies, together with the other Account Collateral, are free and clear of any Liens or other ownership interest of any other Person, except as otherwise provided in Section 2.3(a).

(f) As of the Effective Date, Schedule A attached to this Agreement accurately and correctly sets forth all Existing Letters of Credit that which are to be backstopped or replaced under this Agreement.

(g) That (i) the fair value of the property of the Account Party and its Subsidiaries, taken as a whole, on a consolidated basis is greater than the total amount of its liabilities, including, without limitation, contingent liabilities that are probable and estimatable, of the Account Party and its Subsidiaries, taken as a whole, on a consolidated basis, (ii) the present fair salable value of the assets of the Account Party and its Subsidiaries, taken as a whole, on a consolidated basis is not less than the amount that will be required to pay the probably liability of the Account Party and its Subsidiaries, taken as a whole, on a consolidated basis on their debts as they become absolute and matured taking into account the possibility of refinancing such obligations and selling assets, (iii) the Account Party and its Subsidiaries, taken as a whole, on a consolidated basis do not intend to, and do not believe that they will, incur debts or liabilities beyond their ability to pay such debts and liabilities as they mature, taking into account the possibility of refinancing such obligations and selling assets and (iv) the Account Party and its Subsidiaries are not engaged in business or a transaction, and is not about to engage in business or a transaction, for which their property would constitute an unreasonably small capital.

(h) It has not requested and will not request the Issuing Lender to issue any Letter of Credit in respect of any antecedent debt, as such phrase is used in the Bankruptcy Code, that is not secured.

(i) Letters of Credit shall be used solely to fund the working capital needs and general corporate purposes of the Account Party and its Subsidiaries (including, without limitation, to support any interest rate, currency, commodity or other hedging agreements or other derivative obligations of such Persons).

ARTICLE VII

MISCELLANEOUS

SECTION 7.1. Method of Communication . Except as otherwise provided in this Agreement, all notices and communications hereunder shall be in writing, or by telephone subsequently confirmed in writing. Any notice shall be effective if delivered by hand delivery or sent via telecopy (including a .pdf copy), recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (a) on the date of delivery if delivered by hand or sent by telecopy (including a .pdf copy), (b) on the second Business Day if sent by recognized overnight courier service and (c) on the third Business Day following the date sent by certified mail, return receipt requested. A telephonic notice to the Issuing Lender as understood by the Issuing Lender will be deemed to be the controlling and proper notice in the event of a discrepancy with or failure to receive a confirming written notice.

SECTION 7.2. Notices . Notices to any party, including electronic mail, shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing.

If to the Account Party:

Dynegy Power, LLC.

1000 Louisiana Street, Suite 5800

Houston, Texas 77002-5050

Attn: Clint Freeland, CFO

Telecopy: (713) 356-2200

Telephone: (713) 767-8648

If to the Issuing Lender:

Barclays Bank PLC

Letter of Credit Department

200 Park Avenue

New York, NY 10166

Attn: Dawn Townsend

Phone: (201) 499-2081

Fax: (212) 412-5011

Email: Dawn.Townsend@barcap.com/

XraLetterofCredit@barclayscapital.com

with a copy to:

Barclays Bank PLC

745 Seventh Avenue

New York, NY 10019

Attn: Vanessa Kurbatskiy/Annie Rogosky

Phone: (212) 526 2799/ (212)-526-1075

Fax: (212) 526-5115

Email: Vanessa.kurbatskiy@barcap.com/

ltmny@barcap.com

SECTION 7.3. Amendments and Waivers . None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Account Party and the Issuing Lender.

SECTION 7.4. Severability . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 7.5. Integration . This Agreement represents the complete agreement of the Account Party and the Issuing Lender with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Issuing Lender or the Account Party relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail.

SECTION 7.6. No Waiver; Cumulative Remedies . Except as otherwise expressly set forth herein, no failure to exercise and no delay in exercising, on the part of the Issuing Lender, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

SECTION 7.7. Payment of Expenses; Indemnity . The Account Party will (a) pay all reasonable and documented out-of-pocket expenses (including without limitation, reasonable and documented fees and disbursements of one primary counsel, and special or local counsel to the extent reasonably necessary) incurred by the Issuing Lender on or after the Effective Date in connection with (i) the negotiation, preparation, execution and delivery of this Agreement and the other Credit Documents and any waiver, amendment or consent by the Issuing Lender relating to this Agreement or any other Credit Document and (ii) the administration and enforcement of any rights and remedies of the Issuing Lender under this Agreement or any other Credit Document, and (b) defend, indemnify and hold harmless the Issuing Lender and each of its Related Persons, from and against any losses, penalties, fines, liabilities, judgments, settlements, damages, costs and expenses, suffered on or after the Effective Date by any such Person in connection with any claim, investigation, litigation or other proceeding (whether or not any such Person is a party thereto) and the prosecution and defense thereof, arising out of or in any way connected with this Agreement, the Letters of Credit or any other Credit Document, including without limitation, reasonable and documented fees and disbursements of one primary counsel, and special or local counsel to the extent reasonably necessary, to the Issuing Lender, except to the extent that any of the foregoing are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of the party seeking indemnification therefor.

SECTION 7.8. Waiver of Consequential Damages, Etc . To the extent permitted by applicable law, each party hereto shall not assert, and hereby waives, any claim against each other party hereto and any of its Related Persons, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Letters of Credit or the use of the proceeds thereof. The foregoing does not in any way limit the indemnification obligations of the Account Party set forth in Section 7.7 hereof.

SECTION 7.9. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Account Party and the Issuing Lender and their respective successors and assigns, except that the Account Party may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Issuing Lender and the Issuing Lender may not assign or transfer any of its rights under this Agreement without the prior written consent of the Account Party; provided that no consent of the Account Party shall be required for an assignment to an Affiliate of the Issuing Lender or the sale of participations to any Person (each, a “ Participant ”) in all or a portion of the Issuing Lender’s rights and/or obligations under this Agreement (including all or a portion of the Issuing Lender’s Letter of Credit Commitment or Outstanding Amount).

SECTION 7.10. Waivers of Jury Trial . THE ACCOUNT PARTY AND THE ISSUING LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY LETTER OF CREDIT OR OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM HEREIN OR THEREIN.

SECTION 7.11. Set-off . In addition to any rights and remedies of the Issuing Lender provided by law, upon the occurrence and during the continuance of an Event of Default, the Issuing Lender shall have the right, without prior notice to the Account Party (any such notice being expressly waived by the Account Party to the extent permitted by applicable law), upon any amount becoming due and payable (after all applicable grace periods have expired) by the Account Party hereunder (whether by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (including, but not limited to, the Collateral Account, general or special, time or demand, provisional or final, but excluding fiduciary accounts), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Issuing Lender or any branch or agency thereof to or for the credit or the account of the Account Party. The Issuing Lender agrees to notify promptly the Account Party after any such setoff and application made by it; provided that the failure to give such notice shall not affect the validity of such setoff and application.

SECTION 7.12. No Fiduciary Duty . The Account Party acknowledges that Issuing Lender and its affiliates may from time to time effect transactions, for their own account or the account of customers, and may hold positions in loans or options on loans of the Account Party and other companies that may be the subject of the transactions contemplated hereby. In addition, the Issuing Lender and its affiliates are a full service securities firm and as such may from time to time effect transactions, for their own account or the account of customers, and may hold long or short positions in securities or options on securities of the Account Party and other companies that may be the subject of the transactions contemplated hereby. Issuing Lender and its affiliates may have economic interests that are different from or conflict with those of Account Party regarding the transactions contemplated hereby. The Account Party acknowledges that the Issuing Lender has no obligation to disclose such interests and transactions to the Account Party by virtue of any fiduciary, advisory or agency relationship and the Account Party waives, to the fullest extent permitted by law, any claims the Account Party may have against the Issuing Lender or any of its affiliates for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that neither Issuing Lender nor its affiliates will have no liability (whether direct or indirect) to the Account Party in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on the Account Party’s behalf, including the Account Party’s equity holders, employees or creditors. The Account Party acknowledges that the transactions contemplated hereby (including the exercise of rights and remedies hereunder) are arms’-length commercial transactions and that Issuing Lender is acting as principal and in its own best interests. The Account Party agrees that the Issuing Lender will act under this Agreement as an independent contractor and that nothing in this Agreement, the nature of our services or in any prior relationship will be deemed to create an advisory, fiduciary or agency relationship between us, on the one hand, and the Account Party, its equity holders or its affiliates, on the other hand.

SECTION 7.13. Counterparts .

This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or PDF (or similar file) by electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 7.14. Section Headings . The section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

SECTION 7.15. Register; Participant Register .

(a) The Account Party shall maintain a register for the recordation of the names and addresses of the Issuing Lender(s), and the amounts of and interest on the L/C Obligations owing to, each Issuing Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive absent manifest error, and the Account Party and the Issuing Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as an Issuing Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Issuing Lender, at any reasonable time and from time to time upon reasonable prior notice.

(b) Each Issuing Lender that sells a participation shall, acting solely for this purpose as an agent of the Account Party, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the L/C Obligations or other rights or obligations under the Credit Documents (each such register, a “ Participant Register ”); provided that no Issuing Lender shall have any obligation to disclose all or any portion of any Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any L/C Obligations or other rights or obligations under any Credit Document) except to the extent that such disclosure is necessary to establish that such L/C Obligations or other right or obligation is in registered form under Section 5f.103-1(c) of the U.S. Treasury Regulations. The entries in a Participant Register shall be conclusive absent manifest error, and such Issuing Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

SECTION 7.16. Submission to Jurisdiction . Each of the parties hereto hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding relating to this Agreement or any of the other Credit Documents, or for recognition and enforcement of any judgment in respect thereof, to the exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address referred to in Section 7.2; and

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right of Issuing Lender to bring any action or proceeding relating to this Agreement or the Credit Documents in the courts of any other jurisdiction.

SECTION 7.17. Governing Law . Both this Agreement and the Account Collateral shall be governed by the law of the State of New York. Regardless of any provision in any other agreement, for purposes of the Code, the Account Collateral (as well as the securities entitlements related thereto) shall be governed by the laws of the State of New York.

SECTION 7.18. USA PATRIOT Act . The Issuing Lender hereby notifies the Account Party that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “PATRIOT Act”), it is required to obtain, verify and record information that identifies the Account Party, which information includes the name and address of the Account Party and other information that will allow such Persons to identify the Account Party in accordance with the PATRIOT Act.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.

	DYNEGY POWER, LLC, as Account Party

	By:	/s/ Clint C. Freeland
	Name:	Clint C. Freeland
	Title:	Executive Vice President and Chief Financial
	Officer

[LOC Agreement]

	BARCLAYS BANK PLC, as Issuing Lender

	By:	/s/ Ann E. Sutton
	Name:	Ann E. Sutton
	Title:	Director

Schedule A

Existing Letters of Credit

Counterparties	LC #s	GasCo	Issue Date	Expiry Date
GENERAL ELECTRIC INTERNATIONAL, INC.	CPCS-484100	31,421,000.00	04/13/11	04/11/12
GENERAL ELECTRIC INTERNATIONAL, INC.	CPCS-484101	54,700,000.00	04/13/11	04/11/12
PACIFIC GAS AND ELECTRIC COMPANY	CPCS-576578	3,934,500.00	05/15/07	02/24/12
PACIFIC GAS AND ELECTRIC COMPANY	CPCS-523358	20,000,000.00	12/09/09	12/08/11
SOUTHERN CALIFORNIA EDISON COMPANY	CPCS-576763	8,275,000.00	06/12/07	03/16/12
SOUTHERN CALIFORNIA EDISON COMPANY	CPCS-577583	35,500,000.00	10/22/07	11/30/11
THE BANK OF NEW YORK	CPCS-576278	83,000,000.00	04/02/07	02/28/12
DUKE ENERGY CORPORATION (fka Spectra)	TS-07003498	60,000,000.00	05/24/07	04/06/12

Schedule B

Wiring Instructions

Bank Name:

Address (City, State):

ABA#:

Account Name:

Account Number:

Ref:

Exhibit A-1

Form of W&C Legal Opinion - Corporate

Exhibit A-2

Form of W&C Legal Opinion – Non-Consolidation

Exhibit B

DYNEGY POWER, LLC.

CLOSING CERTIFICATE

, 2011

Reference is hereby made to that certain Letter of Credit Reimbursement and Collateral Agreement, dated as of the date hereof (the “ Security Agreement ”), among Dynegy Power, LLC (the “ Account Party ”) and Barclays Bank PLC as the issuing lender (in such capacity, together with its successors and assigns in such capacity, the “ Issuing Lender ”). Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Security Agreement.

Pursuant to Section 5.2(d) of the Security Agreement, the undersigned [Chief Financial Officer] of the Account Party hereby certifies to the Issuing Lender as follows:

1. I have reviewed the terms of the Security Agreement and Credit Documents and the definitions and provisions contained therein relating thereto and hereto, and, in my opinion, have made, or have caused to be made under my supervision, such examination or investigation as necessary to enable me to express an informed opinion as to the matters referred to herein.

2. The representations and warranties of the Account Party set forth in Article VI of the Security Agreement, the Credit Documents, the Credit Agreement and each of the other Loan Documents (as defined in the Credit Agreement) to which it is a party or which are contained in any certificate furnished by or on behalf of the Account Party pursuant to the Credit Documents and Credit Agreement are true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct in all material respects as of such earlier date; provided that to the extent such representation and warranty is qualified as to materiality, such representation and warranty shall be true and correct in all respects.

3. No Default or Event of Default (as defined in the Security Agreement and the Credit Agreement) has occurred and is continuing as of the date hereof or would result from the transactions contemplated in the Security Agreement, including without limitation the security interests granted thereunder.

4. Since December 31, 2010, there has been no event or circumstance, either individually or in the aggregate, that has had or would reasonably be expected to have a Material Adverse Effect.

5. Based upon my review and examination described in paragraph 1 above, I certify that on the date hereof, both before after giving effect to the consummation of the transactions contemplated by the Credit Documents, (i) the fair value of the property of the Account Party and its Subsidiaries, taken as a whole, on a consolidated basis is greater than the total amount of its liabilities, including, without limitation, contingent liabilities that are probable and estimable, of the Account Party and its Subsidiaries, taken as a whole, on a consolidated basis, (ii) the present fair salable value of the assets of the Account Party and its Subsidiaries, taken as a whole, on a consolidated basis is not less than the amount that will be required to pay the probably liability of the Account Party and its Subsidiaries, taken as a whole, on a consolidated basis on their debts as they become absolute and matured taking into account the possibility of refinancing such obligations and selling assets, (iii) the Account Party and its Subsidiaries, taken as a whole, on a consolidated basis do not intend to, and do not believe that they will, incur debts or liabilities beyond their ability to pay such debts and liabilities as they mature, taking into account the possibility of refinancing such obligations and selling assets, and does not currently have debts or liabilities beyond their ability to pay such debts and liabilities as they mature, taking into account the possibility of refinancing such obligations and selling assets and (iv) the Account Party and its Subsidiaries are not engaged in business or a transaction, and is not about to engage in business or a transaction, for which their property would constitute an unreasonably small capital.

IN WITNESS WHEREOF, the undersigned have executed this Closing Certificate for and on behalf of the Account Party as of the date set forth above.

	By:
		Name:
		Title: [Chief Financial Officer]

Exhibit C

DEPOSIT ACCOUNT CONTROL AGREEMENT

CONTROL AGREEMENT (this “ Agreement ”) dated as of August 5, 2011, among Dynegy Power, LLC (the “ Grantor ”), Barclays Bank PLC as Issuing Lender (the “ Secured Party ”), and Barclays Bank PLC, New York Branch, as depository bank (the “ Account Bank ”, and together with the Grantor and the Secured Party, the “ Parties ” and each individually, a “ Party ”) .

RECITALS

(1) Grantor is the customer of the Account Bank with respect to one or more demand deposit accounts identified by the account numbers specified on Schedule 1 hereto (individually and collectively, as may be re-numbered from time to time, and including any funds in or standing to the credit of such account or accounts, each an “ Account ” and collectively, the “ Accounts ”).

(2) Pursuant to that certain Letter of Credit Reimbursement and Collateral Agreement dated as of August 5, 2011 made by the Grantor to the Secured Party (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Security Agreement ”), the Grantor has granted the Secured Party a security interest (the “ Security Interest ”) in the Accounts;

(3) Grantor desires that the Account Bank enter into this Agreement and the Account Bank is willing to do so upon the terms contained herein.

NOW, THEREFORE, the Parties hereby agree as follows:

SECTION 1. Definitions and Construction . Except as otherwise expressly provided herein, capitalized terms used in this Agreement shall have the respective meanings assigned to such terms in Exhibit A attached hereto, and the rules of construction set forth in Exhibit A shall apply to this Agreement. Capitalized terms used herein but not otherwise defined in Exhibit A shall have the meanings given to such terms in the Security Agreement.

SECTION 2. The Accounts . The Account Bank confirms that:

(a) The Account Bank maintains each Account for the Grantor.

(b) Each Account is a deposit account (as such term is defined in Section 9-102(29) of the UCC). The Account Bank is the bank with which each Account is maintained, and is a “bank” (as such term is defined in Section 9-102(8) of the UCC). Each Grantor is the Account Bank’s sole customer with respect to the Account or Accounts listed on Schedule 1 hereto. The “bank’s jurisdiction” (within the meaning of Section 9-304 of the UCC) of the Account Bank in respect of the Accounts is the State of New York.

(c) The Account Bank has not entered into any other agreement with the Grantor purporting to limit or condition its obligation to comply with any instructions as agreed in Section 3 and 4.

SECTION 3. Control by Secured Party . This Agreement evidences the Secured Party’s “control” over the Accounts within the meaning of Section 9-104 of the UCC. The Parties agree that the Account Bank shall comply with all instructions directing disposition of the funds in the Accounts and all other directions concerning the Accounts (any such instruction, notification or direction being an “ Account Direction ”), in each case originated by the Secured Party without further consent by the Grantor.

SECTION 4. Grantor’s Rights in Accounts . (a) Until (i) the Account Bank receives a notice from the Secured Party in the form of Exhibit B hereto, (a “ Notice of Exclusive Control ”) which has not been withdrawn in accordance with Section 4(d), and (ii) the Outside Time has occurred, the Account Bank may comply with Account Directions and other directions concerning each Account originated by the Grantor including distributing to the Grantor all interest and other amounts standing to the credit of such Account.

(b) If the Account Bank receives from the Secured Party a Notice of Exclusive Control with respect to any Account and the Outside Time has occurred, until such Notice of Exclusive Control has been withdrawn by the Secured Party in accordance with Section 4(d), the Account Bank will comply only with Account Directions originated by the Secured Party without further consent by the Grantor and shall cease:

(i) complying with Account Directions or other directions concerning such Account originated at any time by the Grantor (including where ceasing to comply with such Account Directions or other directions may result in the dishonoring by the Account Bank of items presented for payment from any of the Accounts), and

(ii) distributing to the Grantor interest or other amounts standing to the credit of such Account.

(c) With the prior written consent of the Account Bank (such consent not to be unreasonably withheld, conditioned or delayed), and upon three (3) Business Days’ advance written notice, the Secured Party shall have the right to withdraw its Notice of Exclusive Control.

(d) Notwithstanding anything to the contrary herein, the Grantor and Secured Party agree that the Secured Party shall deliver to the Account Bank, on the date hereof, a Notice of Exclusive Control dated as of the date hereof.

SECTION 5. Priority of Secured Party’s Security Interest . (a) The Account Bank (i) subordinates to the Security Interest and in favor of the Secured Party any security interest, lien, or right of recoupment or setoff that the Account Bank may have, now or in the future, against any Account or funds credited to any Account, and (ii) agrees that it will not exercise any right in respect of any such Security Interest or lien or any such right of recoupment or setoff until the Security Interest is terminated, except that the Account Bank (A) will retain its prior Security Interest and lien on funds credited to any Account, (B) may exercise any right in respect of such Security Interest or lien, and (C) may exercise any right of recoupment or setoff against any Account, in the case of Clauses (A), (B) and (C) above, to secure or to satisfy payment (x) for its customary fees and expenses for the routine maintenance and operation of such Account and (y) for the face amount of any items that have been credited to such Account but are subsequently returned unpaid because of uncollected or insufficient funds.

(b) The Account Bank shall not enter into any other agreement with any Person relating to Account Directions or other directions with respect to any Account.

SECTION 6. Statements, Confirmations, and Notices of Adverse Claims . The Account Bank shall send copies of all statements and confirmations for each Account simultaneously to the Secured Party and the Grantor.

SECTION 7. Exculpation of the Account Bank . (a) The Account Bank will not be liable to the Secured Party for complying with Account Directions or other directions concerning any Account from the Grantor that are received prior to the Outside Time.

(b) The Account Bank shall not be liable to the Grantor or the Secured Party for complying with a Notice of Exclusive Control or with an Account Direction or other direction concerning any Account originated by the Secured Party, even if the Grantor notifies the Account Bank that the Secured Party is not legally entitled to issue the Notice of Exclusive Control or Account Direction or such other direction unless the Account Bank takes the action after it is served with an Order or Process enjoining it from doing so, issued by a court of competent jurisdiction, and after it had a reasonable opportunity to act on the Order or Process.

(c) The Account Bank shall not be liable to the Grantor or the Secured Party for failing to follow any Account Directions:

(i) which would result in the Account Bank’s failing to comply with any applicable laws, statutes, rules or regulations, or an Order or Process, binding upon the Account Bank;

(ii) which requires the disposition of funds that are not immediately available in the relevant Account; or

(iii) for which the Account Bank has not received evidence reasonably required by the Account Bank as to the authority of the Person giving the Account Direction to act for the Secured Party or the Grantor, as applicable.

(d) The Account Bank shall not be liable to the Grantor or the Secured Party for:

(i) complying with any Account Directions from the Grantor, or otherwise completing a transaction involving the Account, that the Account Bank or an Affiliate had started to process before the Outside Time;

(ii) after the Account Bank becomes aware that the Secured Party has sent the Notice of Exclusive Control, but before the Outside Time, complying with the Notice of Exclusive Control or an Account Direction originated by the Secured Party, notwithstanding any fact or circumstance and even if the Notice of Exclusive Control, (A) has not been actually received at the address specified in Exhibit B hereto, (B) fails to have attached to such Notice of Exclusive Control a copy of this Agreement as fully executed, or (C) is not completed or otherwise fails to be in the form set forth in Exhibit B hereto;

(iii) wrongful dishonor of any item as a result of the Account Bank following the Notice of Exclusive Control or an Account Direction originated by the Secured Party,

(iv) failing to comply or delaying in complying with the Notice of Exclusive Control, or an Account Direction, or any provision of this Agreement due to a computer malfunction, interruption of communication facilities, labor difficulties, act of God, war, terrorist attack, or other cause, in each case beyond the Account Bank’s reasonable control;

(v) any other Claim, except to the extent directly caused by the Account Bank’s gross negligence, bad faith or willful misconduct (as found by a court of competent jurisdiction in a final, non-appealable judgment); or

(vi) any indirect, special, consequential or punitive damages.

(e) This Agreement does not create any obligation of the Account Bank except for those expressly set forth in this Agreement and in Article 4 of the UCC. In particular, the Account Bank need not investigate whether the Secured Party is entitled under the Secured Party’s agreements with the Grantor to give an Account Direction or other direction concerning any Account or a Notice of Exclusive Control. The Account Bank may rely on notices and communications it believes given by the appropriate Party.

SECTION 8. Indemnity . (a) The Grantor hereby indemnify and hold the Account Bank, its Affiliates and their respective officers, directors, employees, representatives and agents (each, an “ Indemnified Party ” and collectively, the “ Indemnified Parties ”) harmless against any Claim incurred, sustained or payable by any Indemnified Party as a consequence of any action taken or omitted to be taken by any Indemnified Party in the performance of the obligations of such Indemnified Party hereunder, including any action taken or omitted to be taken by such Indemnified Party in connection with any Account Direction), except to the extent any such Claim is directly caused by the gross negligence, bad faith or willful misconduct of such Indemnified Party (as found by a court of competent jurisdiction in a final, non-appealable judgment), and shall reimburse the Account Bank in accordance with Section 8(c) below.

(b) The Secured Party hereby indemnifies and holds each Indemnified Party harmless against any Claim incurred, sustained or payable by any Indemnified Party arising from such Indemnified Party following the Notice of Exclusive Control or an Account Direction originated by the Secured Party, except to the extent any such Claim is directly caused by the gross negligence, bad faith or willful misconduct of such Indemnified Party (as found by a court of competent jurisdiction in a final, non-appealable judgment), and shall reimburse the Account Bank in accordance with Section 8(c) below.

(c) The Grantor and the Secured Party shall promptly reimburse the Account Bank upon demand for any reasonable and documented legal or other expenses reasonably incurred by any Indemnified Party in connection with investigating or preparing to defend or defending against or appearing as a third party witness in connection with any Claim against which the Indemnified Parties are indemnified and held harmless pursuant to Sections 8(a) and 8(b) above.

SECTION 9. Termination; Survival . (a) This Agreement may be terminated (i) by the Secured Party, at any time by notice to the other Parties; and (ii) by the Account Bank, (A) upon notice to the other Parties, if the Account Bank becomes obligated to terminate this Agreement or to close the Deposit Account under any applicable laws binding upon the Account Bank, (B) upon five (5) Business Days’ advance notice to the other Parties if any other Party is in material breach of any of the Security Agreement or this Agreement, and (C) otherwise upon thirty (30) days’ advance notice to the other Parties.

(b) If the Account Bank terminates this Agreement pursuant to clause (A) of Section 9(a)(ii), the Account Bank will remit any funds in the Deposit Account on the date of termination (i) at the direction of the Secured Party if the direction is received by the Account Bank prior to the date of termination of this Agreement, or (ii) if no such direction is received by the Account Bank prior to such date, by wiring payment to the Secured Party using instructions provided in the notice section of this Agreement. If the Account Bank terminates this Agreement pursuant to clause (B) or (C) of Section 9(a)(ii), the Account Bank will remit any funds in the Deposit Account on the date of termination at the direction of the Secured Party only if the direction is received by the Account Bank prior to the date of termination of this Agreement. Any obligation of the Account Bank to remit any funds to or at the direction of the Secured Party under this subsection is subject to Section 7(c)(i).

(c) If the Secured Party notifies the Account Bank that the Security Interest has terminated, this Agreement shall immediately terminate.

(d) Sections 7 and 8 shall survive termination of this Agreement.

SECTION 10. Miscellaneous .

(a) This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, without regard to the conflict of law rules thereof (other than Section 5-1401 of the New York General Obligations Law). The state of New York shall be the Account Bank’s jurisdiction for purposes of the UCC. Any legal action or proceeding with respect to this Agreement may be brought in the Supreme Court of the State of New York, New York County or in the United States District Court for the Southern District of New York and the parties hereby submit to the exclusive jurisdiction of such courts and waive any claim that any such action or proceeding is brought in an inconvenient forum. EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION OR PROCEEDING.

(b) This Agreement is the entire agreement, and supersedes any prior agreements, and contemporaneous oral agreements, of the Parties concerning its subject matter.

(c) Except as provided in Section 10(d) with respect to changes of a Party’s notice address, no amendment of, or waiver of a right under, this Agreement will be binding unless it is in writing and signed by each Party.

(d) A notice or other communication to a Party under this Agreement will be in writing and will be sent to the Party’s address set forth under its name below or to such other address or Person or Persons as the Party may notify the other Parties by U.S. Mail, receipted delivery service or via telecopier facsimile transmission. Any notice or other communication sent by one Party shall also be sent simultaneously by copy to each of the other Parties hereto.

Grantor :

Dynegy Power, LLC.

1000 Louisiana Street, Suite 5800

Houston, Texas 77002-5050

Telephone: 713-356-2200

Fax: 713-767-8648

Attention: Clint Freeland, CFO

Secured Party :

Barclays Bank PLC

745 Seventh Avenue

New York, NY 10019

Telephone: (212) 526 2799/ (212)-526-1075

Fax: (212) 538-4044526-5115

Email: Vanessa.kurbatskiy@barcap.com/ltmny@barcap.com

Attn: Vanessa Kurbatskiy/Annie Rogosky

Secured Party Wiring Instructions :

Bank Name:

Address (City, State):

ABA#:

Account Name:

Account Number:

Ref:

Account Bank :

Barclays Bank PLC, New York Branch

200 Park Avenue

New York, New York 10166

Fax: (212) 412-7342

Attn:

Email:

Telephone:

(i) Any notice or other communication shall become effective when delivered by (x) U.S. Mail, on the date that such notice or other communication shall be received by the Party to which such notice or other communication is addressed, (y) receipted delivery service, on the date and at the time that such notice or other communication shall have been received by the Party to which such notice or other communication is addressed and receipted by the delivery service, or (z) by telecopier facsimile transmission, on the date and at the time that such notice or other communication shall have been received by the Party to which such notice or other communication is addressed and receipt of such delivery shall have been acknowledged by the addressee’s telecopier equipment.

(ii) A Notice of Exclusive Control or an Account Direction shall not be effective unless it is on the letterhead of the Secured Party or a Grantor, as applicable, and receipt does not occur until it is received by the Person or Persons specified on the attention line in Exhibit B (or as provided above in Section 10(d). If more than one Person is specified, receipt occurs when the document is received by one of the Persons.

(e) This Agreement shall become effective when it shall have been executed by the Grantor, the Secured Party and the Account Bank, and thereafter shall be binding upon and inure to the benefit of the Grantor, the Secured Party and the Account Bank and their respective permitted successors and assigns.

(f) This Agreement may be executed in any number of counterparts and by different Parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier, or electronic transmission in “.pdf” format, shall be as effective as delivery of an original executed counterpart of this Agreement.

[ remainder of page intentionally left blank ]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

		DYNEGY POWER, LLC, as Grantor

		By:
			Name:
			Title:

		BARCLAYS BANK PLC, as Secured Party

		By:
			Name:
			Title:

		BARCLAYS BANK PLC, NEW YORK BRANCH, as Account Bank

		By:
			Name:
			Title:

Schedule 1

To Deposit Account Control Agreement

Accounts

Bank Name:

Address:

ABA Routing No:

Account Name:

Account No:

Exhibit A

to Account Control Agreement

Definitions and Construction

1. Definitions .

“ Account ” has the meaning set forth in the recitals to this Agreement.

“ Account Bank ” has the meaning set forth in the preamble to this Agreement.

“ Account Direction ” has the meaning set forth in Section 3.

“ Affiliate ” means, in relation to any specified Person, any other Person controlled, directly or indirectly, by the specified Person, any other Person that controls, directly or indirectly, the specified Person or any other Person directly or indirectly under common control with the specified Person. For purposes of this definition “control” of any Person means ownership of a majority of the voting power of the Person.

“ Business Day ” means any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close.

“ Claim ” means any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, charges, expenses or disbursements (including attorney costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against a specified Person.

“ Grantor ” has the meaning set forth in the preamble to this Agreement.

“ Indemnified Party ” has the meaning set forth in Section 8.

“ Notice of Exclusive Control ” has the meaning set forth in Section 4(b).

“ Order or Process ” means any order, judgment, decree or injunction, or a garnishment, restraining notice or other legal process, directing, or prohibiting or otherwise restricting, the disposition of the funds in one or more of the Accounts.

“ Outside Time ” means the opening of business on the second Business Day after the Business Day on which an instruction is actually received at the address for the Account Bank specified in Section 9(vii) of the Agreement. If the instruction is actually received at that address after 12:00 noon, local time at that address, then in determining the Outside Time, the instruction will be considered to have been actually received on the following Business Day.

“ Parties ” has the meaning set forth in the preamble to this Agreement.

“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, unincorporated organization, government (or any agency, instrumentality or political subdivision thereof) or any other entity.

“ Security Interest ” has the meaning set forth in the recitals to this Agreement.

“ Secured Party ” has the meaning set forth in the preamble to this Agreement.

“ Security Agreement ” has the meaning set forth in the recitals to this Agreement.

“ Transaction Lien ” has the meaning set forth in the recitals to this Agreement.

“ UCC ” means the Uniform Commercial Code as in effect from time to time in the State of New York.

2. Construction . Unless the context otherwise clearly requires, in this Agreement:

(a) the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined;

(b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(d) the word “will” shall be construed to have the same meaning and effect as the word “shall”;

(e) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

(f) any reference herein to any Person shall be construed to include such Person’s successors and assigns;

(g) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; and

(h) all references herein to Sections, Exhibits and Schedules shall be construed to refer to Sections of, and Exhibits and Schedules to, this Agreement.

Exhibit B

to Account Control Agreement

Form of Notice of Exclusive Control

[Letterhead of Secured Party]

Barclays Bank PLC, New York Branch

200 Park Avenue

New York, New York 10166

Attn: [ insert name, title and department of primary contact ]

Attn: [ insert name, title and department of secondary contact ]

Re: Notice of Exclusive Control — Account No. [ ] (the “ Account ”)

Ladies and Gentlemen:

We refer to the Deposit Account Control Agreement, dated as of [ ] (the “ DACA ”), between Dynegy Power, LLC (the “ Grantor ”), Barclays Bank PLC, as Secured Party and Barclays Bank PLC, New York Branch as Account Bank, relating to the Account. Capitalized terms used in this notice that are not defined herein have the meanings assigned in the DACA. A copy of the DACA, as fully executed by the parties thereto, is attached to this notice.

This is a Notice of Exclusive Control referred to in the DACA.

Pursuant to Section 4 of the DACA, after the Outside Time, you are no longer to comply with any instructions of the Grantor with respect to the Account, including, without limitation, instructions directing disposition of funds standing to the credit of the Account, and you are only to comply with instructions originated by the undersigned.

Very truly yours,

BARCLAYS BANK PLC

By:
	Name:
	Title:

Attachment

to Notice of Exclusive Control

Deposit Account Control Agreement

[copy of DACA to be attached hereto]

Exhibit D

EXHIBIT D-1

to Letter of Credit Reimbursement and Collateral Agreement

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Issuing Lenders That Are Not Partnerships for U.S. Federal Income Tax Purposes)

[Letterhead of Foreign Issuing Lender]

Date: [ , ]

	Dynegy Power, LLC





Email:

Re: Dynegy Power, LLC — Foreign Issuing Lender Certificate

Ladies and Gentlemen:

This U.S. Tax Compliance Certificate is delivered to you pursuant to Section 3.10(e) of the Letter of Credit Reimbursement and Collateral Agreement, dated as of [ ], 2011 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Agreement ”), by and among Dynegy Power, LLC, a Delaware limited liability company (the “ Account Party ”), Credit Suisse AG, Cayman Islands Branch (an “ Issuing Lender ”), and the other Issuing Lenders party thereto from time to time. Unless otherwise defined herein, capitalized terms used herein have the meanings provided in the Agreement.

[ Insert name of applicable Foreign Issuing Lender ] (the “ Foreign Issuing Lender ”) is providing this U.S. Tax Compliance Certificate pursuant to Section 3.10(e) of the Agreement. Foreign Issuing Lender hereby represents and warrants that:

1. The Foreign Issuing Lender is the sole record and beneficial owner of the Obligations in respect of which it is providing this U.S. Tax Compliance Certificate. The Foreign Issuing Lender is not a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”);

2. The Foreign Issuing Lender is not a 10-percent shareholder of the Account Party within the meaning of Section 871(h)(3)(B) or 881(c)(3)(B) of the Code; and

3. The Foreign Issuing Lender is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Account Party with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Account Party, and (2) the undersigned shall have at all times furnished the Account Party with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

IN WITNESS WHEREOF, the undersigned has duly executed this U.S. Tax Compliance Certificate as of the date first written above.

	[INSERT NAME OF FOREIGN ISSUING LENDER]

	By:
	Name:
	Title:

EXHIBIT D-2

to Letter of Credit Reimbursement and Collateral Agreement

U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Participants That Are Not Partnerships for U.S. Federal Income Tax Purposes)

[Letterhead of Non-U.S. Participant]

Date: [ , ]

	Dynegy Power, LLC





Email:

Re: Dynegy Power, LLC — Foreign Issuing Lender Certificate

Ladies and Gentlemen:

[ Insert name of applicable Participant ] (the “ Non-U.S. Participant ”) is providing this U.S. Tax Compliance Certificate pursuant to Section 3.10(e) of the Agreement. The Non-U.S. Participant hereby represents and warrants that:

1. The Non-U.S. Participant is the sole record and beneficial owner of the participation in respect of which it is providing this U.S. Tax Compliance Certificate. The Non-U.S. Participant is not a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”);

2. The Non-U.S. Participant is not a 10-percent shareholder of the Account Party within the meaning of Section 871(h)(3)(B) or 881(c)(3)(B) of the Code; and

3. The Non-U.S. Participant is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Issuing Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Account Party, and (2) the undersigned shall have at all times furnished the Account Party with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

IN WITNESS WHEREOF, the undersigned has duly executed this U.S. Tax Compliance Certificate as of the date first written above.

	[INSERT NAME OF NON-U.S. PARTICIPANT]

	By:
	Name:
	Title:

EXHIBIT D-3

to Letter of Credit Reimbursement and Collateral Agreement

U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Participants That Are Partnerships for U.S. Federal Income Tax Purposes)

[Letterhead of Non-U.S. Participant]

Date: [ , ]

	Dynegy Power, LLC





Email:

Re: Dynegy Power, LLC — Foreign Issuing Lender Certificate

Ladies and Gentlemen:

[ Insert name of applicable Participant ] (“ Non-U.S. Participant ”) is providing this U.S. Tax Compliance Certificate pursuant to Section 3.10(e) of the Agreement. Non-U.S. Participant hereby represents and warrants that:

1. Non-U.S. Participant is the sole record owner of the participation in respect of which it is providing this U.S. Tax Compliance Certificate and its partners/members are the sole beneficial owners of such participation. Neither Non-U.S. Participant nor any of its partners/members is a “bank” for purposes of Section 871(h) or 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”);

2. None of the partners/members of Non-U.S. Participant is a 10-percent shareholder of the Account Party within the meaning of Section 871(h)(3)(B) or 881(c)(3)(B) of the Code; and

3. None of the partners/members of Non-U.S. Participant is a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Issuing Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

IN WITNESS WHEREOF, the undersigned has duly executed this U.S. Tax Compliance Certificate as of the date first written above.

	[INSERT NAME OF NON-U.S. PARTICIPANT]

	By:
	Name:
	Title:

EXHIBIT D-4

to Letter of Credit Reimbursement and Collateral Agreement

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Issuing Lenders That Are Partnerships for U.S. Federal Income Tax Purposes)

[Letterhead of Foreign Issuing Lender]

Date: [ , ]

	Dynegy Power, LLC





Email:

Re: Dynegy Power, LLC — Foreign Issuing Lender Certificate

Ladies and Gentlemen:

[ Insert name of applicable Foreign Issuing Lender ] (the “ Foreign Issuing Lender ”) is providing this U.S. Tax Compliance Certificate pursuant to Section 3.10(e) of the Agreement. The Foreign Issuing Lender hereby represents and warrants that:

1. The Foreign Issuing Lender is the sole record owner of the Obligations in respect of which it is providing this U.S. Tax Compliance Certificate and its partners/members are the sole beneficial owners of such Obligations. Neither the Foreign Issuing Lender nor any of its partners/members is a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”);

2. None of the partners/members of the Foreign Issuing Lender is a 10-percent shareholder of the Account Party within the meaning of Section 871(h)(3)(B) or 881(c)(3)(B) of the Code; and

3. None of the partners/members of the Foreign Issuing Lender is a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Account Party with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Account Party, and (2) the undersigned shall have at all times furnished the Account Party with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

IN WITNESS WHEREOF, the undersigned has duly executed this U.S. Tax Compliance Certificate as of the date first written above.

	[INSERT NAME OF FOREIGN ISSUING LENDER]

	By:
	Name:
	Title:

EXHIBIT 31.1

SECTION 302 CERTIFICATION

I, Robert C. Flexon, certify that:

1. I have reviewed this report on Form 10-Q of Dynegy Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2011	By:	/s/ ROBERT C. FLEXON
		Robert C. Flexon President and Chief Executive Officer

EXHIBIT 31.1(a)

SECTION 302 CERTIFICATION

I, Robert C. Flexon, certify that:

1. I have reviewed this report on Form 10-Q of Dynegy Holdings Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2011	By:	/s/ ROBERT C. FLEXON
		Robert C. Flexon President and Chief Executive Officer

EXHIBIT 31.2

SECTION 302 CERTIFICATION

I, Clint C. Freeland, certify that:

1. I have reviewed this report on Form 10-Q of Dynegy Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2011	By:	/s/ CLINT C. FREELAND
		Clint C. Freeland Executive Vice President and Chief Financial Officer

EXHIBIT 31.2(a)

SECTION 302 CERTIFICATION

I, Clint C. Freeland, certify that:

1. I have reviewed this report on Form 10-Q of Dynegy Holdings Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2011	By:	/s/ CLINT C. FREELAND
		Clint C. Freeland Executive Vice President and Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

(ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the periodic report of Dynegy Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert C. Flexon, President and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: August 8, 2011	By:	/s/ ROBERT C. FLEXON
		Robert C. Flexon President and Chief Executive Officer

EXHIBIT 32.1(a)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

(ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the periodic report of Dynegy Holdings Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert C. Flexon, President and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: August 8, 2011	By:	/s/ ROBERT C. FLEXON
		Robert C. Flexon President and Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

(ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the periodic report of Dynegy Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Clint C. Freeland, Executive Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: August 8, 2011	By:	/s/ CLINT C. FREELAND
		Clint C. Freeland Executive Vice President and Chief Financial Officer

EXHIBIT 32.2(a)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

(ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the periodic report of Dynegy Holdings Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Clint C. Freeland, Executive Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: August 8, 2011	By:	/s/ CLINT C. FREELAND
		Clint C. Freeland Executive Vice President and Chief Financial Officer