AMENDMENT NO. 2

Exhibit 10.5

EXECUTION COPY

AMENDMENT NO. 2

AMENDMENT NO. 2 dated as of July 11, 2006 to the Credit Agreement referred to below, among DYNEGY HOLDINGS INC. (the “Borrower”), DYNEGY INC. (the “Parent Guarantor”), the SUBSIDIARY GUARANTORS party thereto (the “Subsidiary Guarantors”), the Lenders (as defined in the Credit Agreement referred to below) party thereto (the “Lenders”), JPMORGAN CHASE BANK, N.A. and CITICORP USA, INC., as Administrative Agents, CITICORP USA, INC., as Payment Agent, JPMORGAN CHASE BANK, N.A., as Collateral Agent, and each L/C ISSUER party thereto.

PRELIMINARY STATEMENTS

1. The Borrower, the Parent Guarantor, the Subsidiary Guarantors, the Lenders, the Administrative Agents and the Collateral Agent are parties to a Fourth Amended and Restated Credit Agreement dated as of April 19, 2006 (as heretofore modified and supplemented and in effect on the date hereof, the “Credit Agreement”).

2. The Borrower has requested that the Lenders agree to certain amendments to the Credit Agreement.

In consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

Section 1. Defined Terms. Except as otherwise defined in this Amendment No. 2, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

Section 2. Amendments to the Credit Agreement. Subject to the satisfaction of the conditions set forth in Section 4 of this Amendment No. 2, but effective as of the date hereof, the Credit Agreement is hereby amended as follows:

2.01. Definitions. Section 1.01 of the Credit Agreement shall be amended by inserting the following new definition in the appropriate alphabetical location as follows:

“Revolving Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Revolving Credit Lender, (b) an Affiliate of a Revolving Credit Lender or (c) an entity or an Affiliate of an entity that administers or manages a Revolving Credit Lender.

2.02. Successors and Assigns. Section 11.07(b) of the Credit Agreement shall be amended by amending and restating in its entirety clause (A) of clause (ii) of the proviso in the first sentence thereof to read as follows:

“(A) in respect of the Revolving Credit Facility, to a Revolving Credit Lender, an Affiliate of a Revolving Credit Lender or a Revolving Approved Fund;”.

Section 3. Representations and Warranties. Each of the Borrower and the Parent Guarantor represents and warrants to the Lenders and the Agents that (a) the representations and

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warranties of each Loan Party contained in Article V of the Credit Agreement or in any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the date hereof and as if each reference therein to the Credit Agreement or words of like import included reference to this Amendment and the Credit Agreement as amended hereby (except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date) and the consolidated financial statements of the Parent Guarantor and the Borrower as of and for the fiscal quarter and the portion of the fiscal year ended March 31, 2006 furnished pursuant to Sections 6.01(b) and (d), respectively, of the Credit Agreement fairly present in all material respects the consolidated financial condition of the Parent Guarantor or the Borrower, respectively, and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes, (b) no Default shall exist and (c) since December 31, 2005, except as disclosed in any Public Disclosure, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

Section 4. Conditions to Effectiveness. The effectiveness of the amendments to the Credit Agreement set forth in Section 2 of this Amendment No. 2 is subject to the receipt by the Payment Agent of one or more duly executed and delivered counterparts of this Amendment No. 2 from each of the Borrower, the Parent Guarantor, Lenders constituting the Required Lenders, each of the Revolving Credit Lenders and the Administrative Agents.

Section 5. Confirmation of Guarantee and Collateral Documents. Each of the Loan Parties hereby confirms and ratifies all of its respective obligations under the Credit Agreement as amended hereby and the Loan Documents to which it is a party (including, its respective obligations as a guarantor under Article X of the Credit Agreement) and the Liens granted by it under the respective Loan Documents (as amended hereby).

Section 6. Miscellaneous. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 2 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 2 by signing any such counterpart. This Amendment No. 2 shall be governed by, and construed in accordance with, the law of the State of New York.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written.

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