Reliant Resources lowers 2002 estimate; delays fourth quarter report

By the OGJ Online Staff

HOUSTON, Feb. 5 -- Reliant Resources Inc. Tuesday said accounting mistakes for the second and third quarter of 2001 will require a restatement of earnings, delay the release of fourth quarter earnings, and result in lower estimates for 2002 earnings.

Earnings for the restated quarters will increase from $100 million to $130 million. Cash flow will not be affected, the company said. The company lowered its estimate of 2002 earnings to $1.80-$2/share from $2.05-2.15/share.

Shares of Reliant Resources were trading down 13.17% to $12 on the New York Stock Exchange at mid-day. More than 2 million shares had traded, compared to an average volume of 622,590 shares.

Reliant Resources, an 80%-owned affiliate of Reliant Energy Inc., Houston, blamed the restatement on transactions that were originally accounted for as cash flow hedges under conventional accrual accounting. In the course of preparing the year-end financial statement Reliant reported finding the transactions did not meet the criteria for hedge accounting and should be "marked to market."

It said the errors were reported to the company's outside auditors and audit committees of the board of directors. The audit committees are directing the review of the accounting of these transactions, Reliant said.

Separately, Reliant said it would retain its Dutch utility NV UNA, which has 3,476 Mw of generating capacity. In September, Reliant put the Dutch power company up for sale. Reliant said it did not receive "acceptable offers" for its European business.

Further, Reliant said that with the collapse of Enron, industry conditions have changed in Europe and slowed the pace of privatization of the Dutch power distribution companies. Reliant said it now expects expand its trading and origination activities in Northwest Europe.