Welcome to the Dynegy Incorporated Third Quarter 2008 Financial Results Teleconference. At the request of Dynegy, this conference is being recorded for instant replay purposes. Please note that all lines will be in a listen-only mode until the question-and-answer portion of today's call. [Operator Instructions]. I would like to turn the conference over to Ms. Norelle Lundy, Vice President of Investor and Public Relations. Ma'am, you may begin.

Good morning, everyone, and welcome to Dynegy's investor conference call and webcast, covering the company's third quarter 2008 results. As it is our customary practice before we begin this morning, I would like to remind you that our call will include statements reflecting assumptions, expectations, projections, intentions, or beliefs about future events, especially with respect to our growth strategy and 2008 estimates. These and other statements not relating strictly to historical or current facts are intended as forward-looking statements. Actual results that may vary materially from those expressed or implied in any forward-looking statements. For a description of the factors that may cause such a variance, I would direct you to the forward-looking statements legend contained in today's news release and in our SEC filings, which are available free of charge through our website at dynegy.com. With that, I will now turn it over to our Chairman, President and CEO, Bruce Williamson.

Good morning, and thank you for joining us. Here with me this morning is Holli Nichols, our Chief Financial Officer along with several other members of our management team. Let's now turn to the agenda for our call, which is highlighted on slide 3 for those of you following along via the webcast. I will begin this morning by providing some highlights for the third quarter which was weak in terms of having mild weather that reduced margins and volumes in several regions. Then I'll discuss some of Dynegy's advantages relative to the IPP sector and how we are positioned for the longer term. Given the extreme market turmoil over the past several months this sector as a whole has experienced a significant reduction in equity value. I will discuss how investors should parse the sector so to speak and look at our differences. We believe that Dynegy has a number of key competitive advantages that should not be over looked or lumped in with others in the sector that have financial challenges and operating cost disadvantages. Holli will then provide our third quarter financial results, discuss the regional factors that impacted the quarter and update our 2008 guidance. She'll also provide some insight into 2009 regional performance drivers. However, we will provide more detail on our 2009 outlook in December. I'll then wrap up by discussing our key differentiating factors and then we'll go to Q&A. Please turn to slide 4 where I will cover our third quarter highlights. To start with adjusted EBITDA of $268 million which was down 23% period-over-period. This was largely due to mild or summer weather in two of our key operating regions, the Midwest and the Northeast. Let me touch on the weather issue, according to the National Climatic Data Center as demonstrated…

Thanks Bruce. Before starting I'd like to point out that these materials do contain non-GAAP measures that are reconciled in the appendix to this presentation for your reference. Now, let's turn to slide 9 for a look at our third quarter highlights. Adjusted EBITDA decreased from $348 million in the third quarter of '07 to $268 million in the third quarter of 2008, this is primarily due to much milder weather which led to lower prices in the Midwest, compressed spot spreads in the Northeast and lower volume. Adjusted cash flows from operations increased period-over-period, primarily due to favorable changes in working capital. Year-to-date free cash flow includes environmental capital expenditures of $171 million which reflects our continuing investment in environmental upgrade to further reduce emissions of our Illinois fleet. On a GAAP basis, we reported net income of $605 million for the third quarter of '08 which included mark-to-market gains of $542 million net of taxes. These gains reflect the decrease in forward market prices for power during the third quarter. During the third quarter of '07, net income was $220 million which included mark-to-market gains of $12 million net of taxes. '07 also included $124 million from discontinued operations related primarily to the gain on the sale of CoGen Lyondell facility. Earlier Bruce touched on our strong capital and liquidity measures. As of November 3rd, liquidity was approximately $2 billion, with $855 million of cash on hand. Please turn to slide 10 for discussion of our performance drivers for the quarter by segment. Adjusted EBITDA was down 23% from the prior year on lower volume. This was primarily due to milder weather and compressed spot spreads as Bruce and I have both mentioned. In the Midwest, we achieved an impressive 95% in market availability for the base load…

Thank you, Holli. Please turn to slide 14. In closing, I would reiterate the key factors that we believe differentiate Dynegy in the IPP sector and help us weather the current market volatility. As Holli and I have both covered is the strong liquidity first of $2 billion in addition to no significant debt maturities until 2011 and a bank facility that goes through 2012. Dynegy also has a number of operational advantages as well, starting with our PRB fuel which we utilized to generate electricity. Approximately 90% of our total coal fleet burns low cost PRB and a 100% of the Midwest does. And we principally operate in a region in the Midwest where coal sets the marginal price 50% to 65% of the time. The bottom line is that participants in the IPP sector are not all created equal. This redemption driven market over the past quarter as hedge funds were hit with redemptions and a loss on that leverage lines, has brought tremendous selling pressure. I hope that this redemption driven market is coming to an end in 2008. Certainly, when we have over $1 a share, 30% or 40% of our equity value in cash and no financing needs, this is not anywhere close to the last cyclical downturn in our equity. Investors now have, in my opinion, an opportunity to differentiate amongst the sector and evaluate our financial progress and our operating fundamentals and how we're set up for the future. With that, let's move on to the question-and-answer portion of the presentation. Operator we'll take the first call now. Question And Answer

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. First question comes from John Kiani, Deutsche Bank.

Good morning.

Hi.

Bruce, on the second quarter call you all talked about being... I think you were substantially hedged for 2008. Can you give us some more insights into what you mean by substantially, does that mean 90% to 95% or closer to 100%, what does that mean in the more specifically for the Midwestern base load coal fleet, please?

Well, John substantially probably meant for the year being up around the 80% or so mark, somewhere around in there. We never want to take things up to a 100% of the expected run time, because then if you have an unplanned outage or something like that, that's going to lead to just an overall net short position. So we take it up towards statistically, we think we would be comfortable with it. The third quarter traditionally is also the warm weather portion of the year. And so that's the time of the year that if you are going to keep a little bit of open length that would in a normal summer be a very prudent thing to do, because that's a little bit of remaining upside potential there. The way this summer came out with a very, very mild weather, as how we covered in particular reducing some run times in the off-peak hours, those volumes didn't materialize and the results are therefore driven down by the weather. I guess, I should ask Lynn or Jason if there's anything either to review or add.

Well actually that's somewhat helpful, Bruce I have a follow-up on that regard. And then so the way to think about that you all said, you are substantially hedged and that really means closer to 80% and that in fact for the third quarter, you had positioned yourself to be even net longer so maybe in the third quarter is even less than 80%? And then if I could take that a step further, can I assume that when you are saying 80% or if say it was even less than that in the third quarter, let's say that was 75%, but that's actually perhaps in the on-peak higher and the off-peak lower and that therefore you were even more open in the off-peak, and with the collapse in off-peak prices. Therefore, you are more exposed to, is that what is going on?

I'll defer to Lynn and Jason on that one.

Yes, John. I mean, in the off-peak, we tend to be more sold to make sure that we have that commitment taken care of because we do not expect to see a lot of volatility in off-peak prices. So our focus would be more on the on-peak prices, and having some exposure to the market in that period.

Okay. So then the way to think about it is that, even though you said you were substantially hedged for 2008, really for the third quarter, you might have been as much as 25% open.

Yes.

Okay. And then from a basis... for the basis perspective, you all mentioned that there was some basis margin erosion and basis hit in the third quarter again. Was any of that related to PJM West?

There would have been some, although we began managing that position earlier in the year. And again, the basis exposure that we have exist both at Synergy and at PJM. We have better ability to manage what exposure we had at PJM than at Synergy.

And we also add that, it settled out some in the third quarter and some in the fourth quarter as well, even if you are managing the position. I mean ultimately goes into your realized price at the end of the day.

So. Okay. So then going back to the second quarter call, when you all said and kind of disclosed that you had taken a pretty substantial basis hit. In the second quarter, it was my understanding based on your comments that there was not going to be... there will no longer be any additional hedges to the PJM West region and that you are going to focus solely on Synergy hub unless you bought from transmission rights. So I am a little bit perplexed as to why there was a basis hit in the third quarter with PJM West hedges?

I'm not sure that we said that we had no exposure there, we said that we had reduced that, and that going forward, particularly as we go out further in time, that we would manage that differently. So I am not sure if there were some different understanding on your end. But, I mean that was what we were trying to convey. And then the larger part of the basis is related to Synergy, relative or rather than the PJM.

Two basis there is, there's PJM to Synergy and then there's Synergy to basically our plants at Illinois. And at the end of the day, there are basis pieces that you just can't control. And so we had provided estimates of what we thought that would be, and I don't think there was anything terribly dramatic at the end of the day different, but it did have some impact, and I don't have the exact numbers.

That would be a very small amount relative to the weather driven impact.

Okay. That's helpful. And I guess, going back to the substantially hedged comment. I mean it's my opinion that when a company says they are substantially hedged, that means probably 90% or above in that... it doesn't indicate that they are speculating and being open 25% going into the third quarter. I mean that's the way I read something like that and it becomes a little bit more of a surprise when there's that exposure there.

Okay we'll try to refine that.

Thank you.

Okay.

I think that would be good.

Okay.

The next question comes from Andy Smith, JPMorgan Chase.

Hi, good morning guys. Can you hear me okay?

Yes. Hi, Andy.

Good. Hopefully I managed to hang-up on a call here with my fine phone skills. So hopefully I don't repeat a question here. Had a couple of things I wanted to talk about, just following on to the hedging and the volume issue. Is it right to think in the Midwest that the bulk of the volume weakness came from, for example like at Kindle on Altalani [ph] in the off-peak or was it actually some of the bigger base load coal plants that were impacted.

Well it wouldn't have been bald one but Lynn.

I mean look it was both. I mean we saw the drivers around Kindle and on Altalani a little bit different, those are more spreads.

Yes.

And as we did talk about previously when you saw gas prices moving up sharply, you didn't see power prices move this much and so that spread compression effect to the combined cycled units. In the coal fleet we did tend to see more min gem situations in the Midwest than we have historically seen. So they were volume impacts there on the coal fleet as well.

Did that surprise you guys. Because I think I have heard you guys say in the past, there are kind of two things you worry about in Midwest one is volume and one is price and you said that we don't really worry about volume because we are so low down in the stock. Back to your point on slide 7, you told me about dispatch cost is pretty cheap, was that a shock to you guys?

I think it was a surprise, yes.

Okay.

And again I think its back to weather. We had a very relatively mild summer and that manifests itself in volume I mean it is not like volumes were down just across the board but when you get into the min gem situation and that's where we get affected.

Okay. Got you. So then I guess back to John's question as well about how you think about what a substantially hedge mean. I guess the rub is, you say your biggest volume risk comes to probably like the Kindle but then that's also your upside driver in a hot summer. Is that sort of a fair way to think about it? So you said that you won't necessarily protect that volume?

Well, it's harder to protect that volume on the combined cycles. You are more likely to enter into some type of tolling arrangement, which means that you are not as sensitive to volume.

But coaling in the Midwest has not been something--

Yes, we've done that. We have some troubles on Kindle, but we do still have several units that are exposed to the market around that.

Okay, got you. All right, that's helpful. And then on the price majeure that you mentioned on the South American coal. I'm thinking that to me price majeure in the Texas sense, is that your supplier just decayed you on the contract so they could sell it better somewhere else. Or was it fairly a price reopen or something in that contract?

You got it.

The former.

Okay. And then looking at '09, I mean what did you guys done to sort of protect that in '09? Or have you done anything with that yet?

Yes. Percentages that are taken care of for '09 Jason or Lynn?

It's around the 30% of the volume right now. We try to diversify our supply options as best we can.

I have a little more up-to-date news on that. I mean it's more, it's going to be more, it's more in the 50% to 60% zone in terms of supply that we've locked in. And what I'd say is that we are aware of that risk but there are obviously different levels of contracts that you have in place and while some of the price majeure that we experience weren't being... were based more on the term key stage if you will versus signed sealed contracts. So we've advanced a lot of that supply to the executed firm contract level versus more of the term sheet level.

Okay, got you, all right that's helpful. And then one last question, when we think about... and as you guys are going to give guidance here in a few weeks. When we think about '09 you guys have made comments in the past about when you go out and commercialize the book and you look to hedge forward, are you sort of look at this 15% growth hurdle, although it might be lumpy year-to-year. You look at that as sort of trajectory turn line out to mid cycle of keys if you will. We've seen heat wave on the margin compress in third quarter. I mean, how do we think about those various inputs in terms of what base do we start with when we start thinking about '09? Do we rewind back to the $1.40 billion that you guys had out there earlier this year, do we start with this quarter, if you can give us some color around that, that would be really helpful.

I think that the 15% was a guideline for people to look out over about say about a five year period of time as markets tighten. Clearly, within that we were not forecasting an economic slowdown like we have going on. And so, I think Holli gave some pretty good phrases for people to triangulate on. And I would say that you should take this year and start basing it off of his year adjusting for things that Holli covered on her slide which everyone noticed that was the last slide she covered. In terms of adjustments for coal cost in the Northeast which are going to be up, tolling contracts in PJM which are going to be higher and things like that. At slide 12 and I would think you are going to delta off of this year. I'd like to think then, Andy with still over the longer term with the relative lack of any new builds going on, power demand, growth being still pretty consistent year-over-year, although we may see a flattening or slow in this year. If you get back into that upper trajectory, as we see market recovery come in.

Okay. Great. I appreciate the effort and the comments. I'll see you guys, Sunday night.

Okay.

Next question comes from Gregg Orrill, Barclays Capital.

Thanks very much. I was wondering if you could comment on the... or quantify the impact of the increased hydro volumes in the West. And also maybe looking forward to 2009, just kind of the general outlook on a normalized basis for the West I know you talked about a new capacity agreement from Morrow Bay. What are some of the uplifts we can look for there?

Gregg, the West... because it's such a hydro driven environment, that's why we have tended to commercialize that out longer term than just a current year plus one, that's why we have got things like tolling agreements that go out 10 years, in some cases. And so I would say you have to... again sort of start with this year, look to next year the incremental amount of the Morrow Bay toll I don't think we have come out with that will be in December guidance. But, I don't think you'll see relative to the other two regions, you wouldn't see very much movement year-over-year in the West in particular, I mean you can look at like in the appendix on slide 20, you see the West last year was $76 million, this year $82 million. So it just doesn't move around in a big manner like the Midwest and the Northeast.

And it's also because of the substantial amount of tolling arrangements and some RMR contracts and hedges that came from the LS acquisition, it's our most hedged region if you will and our most hedged region certainly for '09 and ballpark we went into the year, I believe 75% to 80% hedged and I wouldn't be... I think that's where we look to be in that same region in for next year. So, the hydro and some less run times in the West has less of an impact than some other factors in the other regions because of the hedge nature. It impacted that open position.

Got it. Thank you.

Okay.

Next question from Neil Mitra [ph], Simmons & Company.

Hi. Thanks. I know that the primary reason you've put a lot of fixed price power hedges on in PJM rather than at Synergy and Northern Illinois it was due to a lack of liquidity in those markets. Now that you have decided to bring those hedges back into MISO area for 2009. How do you see that even bigger problem of liquidity in the floor markets due to the lack of counterparties affecting your ability to effectively implement your current plus line hedging strategy going forward for, let's say 2010?

I would say that, obviously liquidity is an issue, there are less players in the market. So, it's somewhat forced us to be pretty disciplined about implementing the hedges and that's why we began working on the hedging for next year, early in the year. And so it's not the type of situation where you can go out and say, I want to sell 1,500 megawatts tomorrow, it's more of the type of thing that, overtime you layer into it 100 megawatts, 200 megawatts at a time. Conversely the ability to trade, if you will around the position I would say that's where it's impacted. Once you put the positions on, you're going to have to largely live with it. So I would say the practical effect is that A; I don't think... I think two things, I think one the ability to kind of move in and out of positions is reduced greatly. The second thing, is that it takes more time to put positions on. And then I'd also add a third observation which is that, the lack of liquidity I think, sometimes the price discovery or the upside if you will, is in the marketplace or the premiums from the forward marketplace. I think you're seeing that come in a bit. And I think when you look at a forward curve today, it doesn't really... for Synergy which is in $58, $59 on-peak, when the days are coming in the 50s in October. There's not hell of a lot of premium in that market, today and when you've got a winter and a summer. So, you got to think about whether fixed price hedging at this point in time with the forward curve that's out there, and a lot of that being driven by liquidity is necessarily a great market to be in today.

So can we expect a more exposure in the day ahead markets or less hedging if the current situation persists?

I think right now, Neil [ph]. What to amplify with what Jason said; I think it puts more emphasis on the team getting out there and working things and maybe at 50 megawatts at a time at 75 megawatts or 100 megawatts. And so it's still doing the same thing, but its basically putting those in much finer and smaller layers, rather than watching things and moving in 300, 400, 500 megawatts at a shot. So, I think it just means there's going to be a lot more than just general consistent activity hitting smaller layers all through the year.

Yes,And then, Neil [ph] I'll just add to that and you've got to make judgments about whether... because financial hedges with the issues that are involved basis and operation risks and the like, you've got to make a judgment, whether the premium that is or is not in the market is worth it. So I would say that, at various times, it might be attractive and then other times it might want have a little more exposure to the day ahead, real time market, depending on what that market is doing. And I think that the liquidity, I'd say it is more like it a haven flow. At times, strong and now there are people that are interested. And then it might have a weaker sale, and no ones that interested. So you got to pick your spots when you think you like that risk or what.

Okay. And from what I understand, utilized fixed price power hedges at your Midwest coal plant since coal and gas interchangeably set the price of power, but the user have you considered using gas swaps or more liquid hedging instruments, [indiscernible] had given the fact that gas is more often sets the price of power around the clock in that region?

We have thought about it. Jason?

Yes, I'd say, I think I look at it more as like a tool in your tool belt, and you've got to do something... you got to think about to use and it does provide the benefit to liquidity, but like a lot of things... and I think you've probably seen that in some other companies in the sector, there are issues associated with it which is that if the key rates come in or the market is not as liquid on the power side, you might get disconnected from your fundamentals. So the way I think about is that something we've got to use and at various times we might want to use it and deploy it in our portfolio. But I would never see a scenario under the current set of circumstances where we'd say, we're going to hedge the entire plant there using natural gas or some Midwest. I think it's something you think about when you like the risk reward and other avenues aren't open, but it's certainly applaudable in a strategy that we think about from time-to-time.

But in many ways Neil, it's just like in hedging Midwest out to PJM where that's the location base is different this is just the power versus gas basis. It's not something that's going to be taken lightly and its going to... if the team looks to that sees that, something they want to do, it's also going to take some additional approvals to do it.

Okay great. Thank you very much.

Okay.

Next question from Elizabeth Parrella, Merrill Lynch.

Thank you. Bruce you mentioned that with regards to coal hedging, you have got significant amount of hedges even beyond 2010 for 2012 and something new on the PRB side. Can you quantify for us sort of what you mentioned and how much do you have hedged for '11 and '12. Is the pricing similar to the pattern for 2010 when you get these modest escalators or is there something closer to market or something of a step up in price beyond 2010?

It's in the range of 30% to 40% and now I would say that same sort of trajectory or the same trend is intact.

Okay. Also can you hollow your comments with regards to the drivers of the lower guidance for 2008? Is it possible to quantify some of those factors and also to talk about how much of this has already been effectively realized versus the things that happened before?

To some extent we can, I mean I would say that the milder weather that we saw in the third quarter and how we've seen the '08 gas pricing and therefore the power pricing come down, has... is that majority of the driver of this decrease. And so there's a regional portion of this that has already occurred as of the third quarter. And then what I would say when you think about the exposure for the remainder of the year, you are going to find that based off those curves that were at the beginning of October 7th, I believe, yes. So that was already a fairly weak I want to say that the remainder of the year for gas was 710 at that point. So there is quite a lot baked in. Now, that's not to say obviously that there couldn't be further downside but we feel like we've taken into account and especially as we sit here in the November that there should not be a tremendous amount of volatility associated with what's left.

What about the South American forced majeure when do that happen and how much of that hurt?

I think it's in the $10 million to $15 million range for 2008.

Was that all in the third quarter?

Well, it runs for the balance of the year.

Okay.

As being required to re-price it.

Okay. So the $10 million to $15 million impact is basically from the date of the forced majeure which I guess was sometime in the third quarter?

Yes, Elizabeth, the forced majeure probably happened a little bit sooner than that but only a portion of the coal was subject to that and that has all been priced now. And in fact we are getting close to the last deliveries of the year. I mean it's only a few more weeks left. So that should be pretty well done. We don't feel like we have any additional exposure on that or for the balance of this year. And as Jason said earlier we still have some coals that's not been priced for next year but we are making good progress on that.

Yes, that was the other question I wanted to ask about with regard to the South American coal for [indiscernible]. I think in 2008 the average delivered price is like in a low... 320 - 330 something like that. How should we thinking about the number for next year given that you got, I think as Jason said maybe 50% to 60% pretty well locked-in at this time for next year?

Obviously, we will be giving a full guidance in just a few weeks Elizabeth. But I think directionally certainly you would expect that number to be higher. So I think we prefer to just to lay all this out at one-time.

And we put in the presentation in the graph what the market looks like and I think some of our, we're laying in overtime to the hedges. So we've given you kind of a spot view. I would expect that to be below where the market is trading today. But how we said, there will be an increase, an increase in cost.

Okay. Thank you.

Okay.

Next question comes from Brian Taddeo, Broadpoint Capital.

Good morning.

Good morning.

Just quickly, going back to the hedging. I know you have... a lot of talk about the words and what it means. And we talk about '09 you're having a significant portion hedge for '09 or commercialize. I mean treating about that being 50% or something less than that at this point, and just kind of curious to see if there were hedges layered in throughout the third quarter if that was pretty static from if we are looking at second quarter?

We came into this year, I'll give you a guideline of that. We came into this year at around I think we said 50% to 65%, the year before was around 50% I would say on any given year, we start at 50% and with prices, if they were attractive during the year, we probably would move up from there. I think overall this year, you could plan on benchmarking '09 at a level equal to where we came into '08 at or maybe a little bit higher.

Okay. And then with regards to guidance as far as my numbers are correct. I mean it looks like... we should expect a fourth quarter, that's down probably $100 million year-over-year in terms of EBITDA. I mean is that mainly driven by the lower commodity prices now or is there something else back there in any other outages or I think that's, they weren't originally planned for?

No, I mean I think our outage schedule year-over-year is probably pretty comparable, Rich?

Yes, year-over-year it was pretty comparable, some issue that have caused a little bit of concern there.

Okay.I would say it's really just driven by prices lower year-over-year for the fourth quarter.

The higher coal prices and the lower coal prices?

Yes, higher coal prices in the Northeast and then lower prices. Yes.

If there were any... have you noticed any gas coming down and switching from coal to gas in any of the regions?

The big region that we're in and myself know, what we try to layout one of the slide was that clearly, I think that we're getting to the point and PJM where that's liable to be something that's going to be impacting, some people will be watching our run times but are not aligning pretty closely because that's the big asset we've got in PJM, we don't have a big position over there.

And have you seen anything in PJM yet or no?

No, I would say no. and if anything... some of the combined cycle volumes are actually little bit lower. So I think there is a lot of people in the market have their whole spoken for and people have various probably bidding strategies and the like. So I think those are... the effects you are not going to see those immediately if something that you should keep an eye on for 2009 and 2010. As the higher pricing, higher coal pricing really starts to kick in and people offer their bidding strategies.

Got it. And one last thing, in the Northeast you talked about one of the issues this quarter being transmission congestion. But given your lack of whether... less volumes going to system seems like congestion, less like other being congestion. I mean is there something different that's driving that? Just sort of an ongoing issue?

No, I think it was really mainly driven by weather and the lack of heat for demand down in... let's say in the Boston area.

Okay. Thank you very much.

Next questions comes from Brian Chin, Citigroup

Hi, Brian

Hi, Bruce. When you guys received coal that has been contracted, do you have the ability to turnaround and resell that in the open coal market or are you locked-in and you now have to burn that coal?

Effectively no. Lynn is telling me we can do a very, very small amount of it, but its not, that's not an active part of our business.

Do you think other coal fire generators in MISO and in PJM have a similar set up where they don't have the ability to resell the coal back out?

I really don't know.

Look, the only thing I would add there Brian, is remember, with the weather events in the Midwest this summer, coal deliveries were somewhat impacted and we drew down on our inventories. And so we have actually been focused on getting our inventories where we would like them to be. We didn't have an operational problem with that, but we try to balance our coal supply pretty close to what our needs are.

Okay. That's great. Thanks a lot.

Yes.

Question comes from Raymond Leung, Goldman Sachs.

Hi, everyone. Just a couple of questions, given the changing dynamics with counterparty risk and cost of credit. How should we think... you've provided a pretty big buffer on liquidity, how should we think about what's the appropriate level of liquidity in cash that you should keep. And how should we think about your capital structure going forward with respect to leverage, is that going to... what are you guys thinking about on that context?

Well, with regard to capital... I'll take the back half first, with regard to capital structure you look at our debt maturity profile and with no debt of material amount due till 2011 there's not going to be a lot of change that takes in place there. Simply because we do not have debt coming to maturity. In terms of the cash and liquidity that we have on hand, in this environment we've been spending most of this year watching that liquidity build up and the cash build up. We said we would evaluate things after we saw how 2008 is shaping up and how 2009, and have a kind of a clear line sight at 2010. When we said that back last December, I don't think we were anticipating this type of economic slowdown and clearly a credit market kind of freeze up. So it feels very good right now from a running the company stand point to have this amount of cash and liquidity. So you do not need access any credit market. I guess I would say in a normal time moving forward, clearly the company doesn't need to have almost a billion dollars of cash. Sort of around in order to make working capital needs. But these are not normal times.

And I would add is that, what we... the way we think about our liquidity is to obviously anticipate manage for the future. Commodity prices are extremely low right now which means our collateral needs are quite low. When you see a spike in prices which might be hard to imagine we see here today. It's obviously very possible in the next year that we see commodity prices run again and as an example when you think back to June 30th. Obviously, we've had some other improvements on liquidity since then but we were less than a billion dollars of liquidity compared to where we are today. And that is because of the very high pricing and what we want to make sure that we allow ourselves the opportunity to do it. When we see the ability in the market become a little more liquid, our current year plus 1 hedging strategy requires us to maintain a reasonable amount of collateral to manage through the fluctuations in the commodity cycle. So I absolutely would reiterate and agree with Bruce. It's almost a $1 billion of cash sitting around may not be the most effective manner in achieving that but you will see it's always carry a very sufficient amount of liquidity because of the collateral needs of this business.

Okay. Thank you.

Okay. Operator, we'll do one more question.

Your last question comes from Walter Brenson with Lincoln Capitol.

Thank you. Just wanted to get back a little bit on your hedging strategy. So if I understand correctly, you typically enter a quarter something like 80% hedged for that quarter and through forward contract set influences you from volume risk as well as fixed price. So correct me if I am wrong. But if that's the case I guess I am not clear why you are putting such a big emphasis on weather potentially impacting volumes on a quarter-to-quarter basis with the impact typically only be on that 20% that you leave open?

First of we haven't said that we just come into a quarter at 80%. We've come into different years, this year we came in at 50% to 65% hedge and as we went through the year we've layered more forward sales and as went through the year. However, the third quarter being the quarter when you normally have some warm weather and it's kind of a big volume in run time quarter we kept a little more open in that quarter. And then the weather clearly didn't materialized. And then actually had some reduction, so given the soft weather that's reduced the run times and then that back to them obviously we'll produce the result that you see. It's not a simple thing of just saying that we know we'll have a guaranteed sale amount and you sell 8-tence of it and keep 2-tence open, and then you know you're going to sell that remaining 2-tence, because you can have the overall volume drop off as well as the price drop off.

Okay. But I just want to make sure, I didn't miss understand to the extent that you are hedge whether 80% or something are lower, you don't have volume risk on that piece right?

On the portions that are sold?

Yes.

In effect, that's more or less right. I mean you didn't have operational risk to the extent that you have an averaging you have to go fill that volume. So it's the opposite risk. Yes.

I understand that.

We do have that. Just to be clear so you can understand that, but yes you do have that, but otherwise no, if you made a forward sale, you have made a forward sale.

Right. And then on the... you said that typically you would commercialize more of the off-peak. Yet for the third quarter you actually pointed to lower run times off-peak in the Midwest. So did you commercialize less than you might typically off-peak in the third quarter?

No, probably not, typical.

Okay. All right, thank you.

Okay. Before ending this morning's call, we do have some upcoming events for various members of the management team that they'll be participating in later this year. On November 9th and 10th the team will be at the Edison Electric Institute Financial Conference in Phoenix and I will see a number of you there. On December 10th and 11th, we'll be in New York City to present 2009 guidance estimates and meet with many of you as we've done in the past. At this meeting we'll provide some insights into our view of the future, cover our forecast earnings, cash flow, and capital expenditures and sensitivities for 2009. Thank you for your time again this morning and we look forward to seeing some of you in Phoenix next week.

This does conclude today's conference. You may disconnect at this time. .