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Updated from 12:19 a.m. EDT



) --



confirmed Monday it was selling five peaking and three combined-cycle generation assets, as well as its interest in a project under construction in Texas to

LS Power Associates

, its one-time development partner.

Under the terms of the deal, Dynegy will receive $1.025 billion in cash and 245 million of its Class B shares from LS Power. LS Power also will receive $235 million principal amount of 7.5% senior unsecured notes due 2015. The transaction is expected to close in the second half of 2009.

News of the deal was first reported by the

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Wall Street Journal

on Monday. The deal unwinds a joint venture formed in 2006 that was supposed to create the country's largest new developer of coal-fired power plants, the



Dynegy also said it would begin next year a program to cut $400 million to $450 milion over four years, through reduced capital expenditures and other cost cuts.

Based on these moves, Dynegy said in a statement Monday it expects pro forma 2010 adjusted earnings before interest, taxes, depreciation and amortization of $425 million to $550 million, and operating income ranging from a loss of $55 million to a gain of $70 million.

The energy company separately reported a second-quarter loss of $345 million, or 41 cents a share, compared with a year-earlier loss of $272 million, or 32 cents a share.

The wider loss in the second quarter was "primarily driven by asset impairment charges and lower realized power prices period-over-period, partially offset by lower mark-to-market losses," Dynegy said.

Revenue in the quarter rose 53% to $493 million.

-- Reported by Joseph Woelfel in New York