Optimists might think that independent utility Dynegy's (NYSE:DYN) share price has only way to go -- up.

But don't bet on it.

Enormous debt makes Dynegy a high-risk play. Sure, asset sales buy Dynegy a bit of recovery time, but only a little. Investors in the over-leveraged power merchant could get a nasty shock.

Even with a newly inked $2.3 billion deal to sell its Illinois Power subsidiary, Dynegy is still weighed down by more than $6 billion of debt. Valuing operations at seven times 2004 EBITDA of $750 million, Dynegy's net asset value stands at less than 0. Yes, zero. That leaves nothing to support Dynegy's $4.20 share price.

More asset sales will undoubtedly lighten the debt load. But selling off operating companies will only thin Dynegy's already anemic cash flows. Even worse, cash burn could force Dynegy to seek an equity issue that dilutes share value.

Not to mention, the power industry faces rough times ahead. Stretched markets in New York and California may get a lot of media and political attention, but overall, the U.S. market is essentially oversupplied. According to Standard & Poor's, it could take years before the industry grows out of its excess supply.

Bulls say that the stock could reach $7.00 over four years. This is on the promise that power markets will eventually tighten, and Dynegy pays down its debt.

But is that kind of return worth the risk? Hardly. Investors ought to pull the plug on Dynegy while they can.

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Motley Fool contributor Ben McClure hails from the Great White North. Ben doesn't own any shares mentioned here.