Reliant Energy Inc. Thursday reported it will file with the Texas Public Utility Commission (PUC) a plan to divide into two publicly traded companies, separating its unregulated businesses from its regulated ones.
Subject to regulatory approvals, Reliant says it plans an initial public offering (IPO) of approximately 20% of the common stock of its unregulated operations late this year or early in 2001.
The company expects the IPO to be followed by a distribution to shareholders of the remaining stock of the unregulated company within 12 months. The remaining businesses, which are predominately regulated, will be structured as a holding company.
Reliant said the initiative is intended to satisfy regulatory requirements under Texas restructuring legislation, to enhance shareholder value, to highlight the specific investment appeals of each resulting entity, and to permit the individual units to focus on their respective business and market opportunities.
The unregulated company will own Reliant Energy's unregulated power generation and related energy trading and marketing operations; its unregulated retail businesses, which currently include energy, telecommunications, and internet services; and the company's European electric generating and trading and marketing operations.
Reliant said the plan will also propose that in 2004 the unregulated company will receive from the regulated company cash equal to the market value of the regulated company's interest in its Texas regulated generation operations. In addition, the unregulated company will have an option to purchase the regulated company's generation capacity.
The regulated company will include Reliant Energy's electricity and natural gas companies, which serve about 4 million US customers and include Reliant Energy HL&P/Entex, Reliant Energy Arkla, Reliant Energy Entex, and Reliant Energy Minnegasco. Other operations will include its US interstate pipelines, its Latin American interests, and, initially, its Texas regulated generation.
"Our growth businesses appeal to a different set of investors than do our regulated activities," said Steve Letbetter, Reliant chairman and CEO. "We expect the regulated company to be very similar to the company we have been for most of our history, and it should appeal to our traditional type of investor. ''
He said the new unregulated entity will be able to capitalize on existing and future investment opportunities more effectively and should appeal to investors who are more growth-oriented and risk tolerant.
Letbetter added that Reliant Energy is committed to maintaining its current annual dividend of $1.50/share until the companies are separated. The new structure is part of a plan which Reliant Energy HL&P will file in August with the PUC in preparation for competition in January 2002, the company said.
