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KROGER ANNOUNCES SETTLEMENT AGREEMENT WITH DYNEGY

CINCINNATI, OH, July 3, 2003 - The Kroger Co. (NYSE: KR) today announced that it has reached an agreement to settle litigation and restructure supply arrangements with Dynegy Inc. (NYSE: DYN) related to four power supply contracts.

Under the terms of the proposed settlement agreement, which must be approved by the Federal Energy Regulatory Commission (FERC), Kroger will pay Dynegy a net amount of $110 million to settle outstanding litigation at FERC related to prior over-payments, terminate two of four power contracts, and restructure the remaining two agreements through which Dynegy indirectly provides electricity to Kroger subsidiary stores in California. The FERC is expected to rule on the proposed settlement within 60 days.

As part of the settlement, Dynegy will continue to provide Kroger subsidiary stores in California with 50 megawatts of electricity through 2006 under the two restructured agreements.

As a result of the settlement, Kroger expects to record an after-tax charge of approximately $41 million, or $.05 per diluted share, in the second quarter of 2003. Kroger also expects that earnings per diluted share will increase by approximately $.01 in 2003 and by approximately $.02 in 2004 as a result of being able to purchase electricity less expensively under the settlement. The net effect for 2003 is a reduction in earnings per diluted share of approximately $.05.

Headquartered in Cincinnati, Ohio, Kroger is one of the nation's largest retail grocery chains. At the end of the first quarter of fiscal 2003, the Company operated (either directly or through its subsidiaries) 2,496 supermarkets and multi-department stores in 32 states under two dozen banners including Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith's, Fry's and Fry's Marketplace, Dillons, QFC and City Market. Kroger also operated (either directly or through its subsidiaries) 792 convenience stores, 445 fine jewelry stores, 395 supermarket fuel centers and 41 food processing plants. The Company contributed $106 million last year to local communities and non-profit organizations. For more information about Kroger, please visit our web site at www.kroger.com.


This press release contains certain forward-looking statements about the future performance of the Company. These statements are based on management's assumptions and beliefs in light of the information currently available to it. The amount and timing of the expected charge primarily will be affected by the date on which the settlement is approved by FERC. Earnings per share will be affected by the number of shares outstanding during the relevant period and the diluted shares outstanding, as impacted by the market price of Kroger shares from time to time. Outstanding shares at any given time are impacted by our share repurchase program, and the number of shares repurchased depends on the market price of Kroger shares. The increase in EPS could be affected if direct access no longer is available to Kroger in California; if the parties to our energy contracts fail to perform their obligations to us; or if the market price of any energy needs in replacement for the contracts being terminated falls outside of the prices that we anticipate.


Kroger Contacts:
Media Contact: Gary Rhodes
(513) 762-1304

Investor Contact: Kathy Kelly
(513) 762-4969

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