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Dynegy dismisses Enron's lawsuit as 'frivolous'

Dynegy Inc on Monday dismissed shattered energy trader Enron's $10-billion breach of contract suit against it saying it was one more example of Enron's failure to take responsibility for its demise.

"We want to be perfectly clear on this point: Enron's lawsuit against Dynegy has no merit whatsoever in law or in fact, and is one more example of Enron's failure to take

responsibility for its demise," the one-time suitor Dynegy Inc. Chairman and CEO, Chuck Watson, said in a statement in Houston.

Watson said Enron's lawsuit against the company was "frivolous and disingenuous."

Enron had yesterday, along with Chapter 11 bankruptcy protection, filed a 10 billion dollar breach of contract lawsuit for pulling out of a last-ditch rescue merger in federal bankruptcy court in New York.

The suit had also sought to stop Dynegy from exercising its option to obtain Enron's Northern National Gas Pipeline.

The units that own Enron's pipelines were not part of the bankruptcy filing.

"Enron's rapid disintegration is the result of a general loss of public confidence in its credibility, fueled by the startling disclosures on November 19 of new and adverse information," said Watson.

The breach-of-contract suit against Dynegy has at its heart a valuable asset that is a steady cash flow generator and constitutes more than half of Enron's 30,000 miles of pipelines.

Watson said that Enron's charges against Dynegy are false.

The 1.5 billion in cash that Dynegy and its minority owner Chevron Texaco pumped into Enron on the merger's announcement was secured by an option to buy the 16,500-mile pipeline, which Dynegy exercised on Thursday.

Charging Enron of trying to deflect attention from the facts, Watson said "the reality is, Enron invited Dynegy to participate in merger negotiations. Dynegy entered those negotiations in good faith and provided $1.5 billion in cash to Enron.

"Despite assurances that Enron's liquidity situation had stabilised, the cash was gone in less than three weeks, and Enron has had difficulty providing an accounting as to where it went," said Watson.

In its lawsuit against Dynegy, Enron claims Dynegy terminated the takeover agreement "when it had no contractual right to do so." It also claimed Dynegy had no right to exercise an option to acquire Enron's northern natural gas pipeline because it "can only be triggered by a valid termination" of the merger agreement.

"Our $1.5-billion investment was backed by a structure within the merger agreement which provided that, should Dynegy provide notice of termination, Dynegy would have immediate control and ownership of Northern National Gas pipeline," Watson added.

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