Accelerating economic growth in China will increase prices for oil, coal and electricity in the U.S., Dynegy Inc. Chief Executive Officer Bruce Williamson said.

¡°You¡¯re going to see rebound in the demand for oil, for coal,¡±

Williamson said in an interview in Houston today. ¡°From there, with coal being higher, gas being higher, derivatively power will be higher.¡±

China, the world¡¯s third-biggest economy, grew 7.9 percent in the second quarter from a year earlier, accelerating from a 6.1 percent expansion in the first three months, which was the weakest in almost a decade. It may slow again next year after the impact of government stimulus policies diminishes, according to the State Council¡¯s Development Research Center.

U.S. gas futures, which traded as high as $13.694 per million British thermal units in 2008, this month dropped below $3 for the first time since 2002. Benchmark power prices in PJM Interconnection LLC, the biggest U.S. wholesale power market, fell 48 percent to an average of $47.90 per megawatt-hour so far this year, according to data compiled by Bloomberg.

Lower natural-gas prices allowed Dynegy to increase output from gas-fired stations over the last two quarters. This led to an increase of about 10 percent in Dynegy¡¯s Midwest production and a 30 percent gain in output at its Northeast plants in the second quarter.

Dynegy agreed to sell about 27 percent of its generation capacity to New York-based power plant developer LS Power Group earlier this month. The company is completing some environmental investments and focusing on paying off some of its $6.1 billion in long-term debt, Williamson said.

Paying Off Debt

Dynegy is not looking at buying or building any plants, according to Williamson.

¡°We¡¯re really not looking at any development at all right now,¡± he said.

The company will use more than $1 billion of proceeds from the LS transaction, to be completed by the end of October, to pay off the debt maturing in 2011 and 2012.

¡°With a balance sheet like that, our net debt would be just slightly below $3 billion at that point, no debt maturities till 2015,¡± Williamson said. ¡°Then, we were in very good position to weather even a continued economic downturn.¡±

Dynegy¡¯s net debt, calculated as total obligations less cash, investments and some lease obligations, was $4.4 billion at the end of June.

Dynegy expects to close the transaction with LS Power by the end of October.