Reliant reports increased second quarter income

Wholesale trading helped boost Reliant Energy Inc.'s second quarter income to $247 million, or 84¢/share, up from $236 million, or 82¢/share, for last year's comparable quarter. The earnings increase occurred despite a large but expected decline in income from the company's European operations.


By the OGJ Online Staff

HOUSTON, July 27 -- Wholesale trading helped boost Reliant Energy Inc.'s second quarter income to $247 million, or 84¢/share, up from $236 million, or 82¢/share, for last year's comparable quarter.

Revenue was $11.9 billion, compared to $5.7 billion in the year earlier period. The earnings increase occurred despite a large but expected decline in income from the company's European operations.

Higher earnings were driven by higher volumes and higher margins in Reliant's trading and marketing activities. The wholesale group produced operating income of $205 million, compared to $173 million for the comparable 2000 quarter.

The wholesale group's gross margins or revenues less fuel, costs of gas sold, and purchased power, increased $113 million over last year's second quarter. But other expenses, including increased operation and maintenance, and increased legal expenses because of the problems in California, cut significantly into the wholesale group's results.

Reliant expects to learn in the next few weeks how much in refunds it will owe California for alleged overcharges. The company is waiting for the outcome of hearings at the Federal Regulatory Energy Commission. Earlier, an administrative law judge concluded generators and marketers selling power in that state owed refunds, but he didn't set an amount. The commission will determine the exact amount of refunds owed by each company, including Reliant.

Industry observers don't expect Reliant to incur cash expenses for the refunds. It claims about $318 million in electricity receivables in California. "It's kind of hard to speculate now on what that refund number will be," said Reliant spokesman Richard Wheatley.

Reliant's income from its regulated Houston area utility increased to $342 million, up from $325 million in the second quarter of last year. The increase resulted from a decrease in operation and maintenance expenses and lower amortization expense.

Reliant's other utility in Holland earned significantly less income in this year's second quarter than last. Operating income for the company's European operations fell to $9 million, down from $24 million for the same period last year.

"They went from a regulated tariff price to market prices," said Andre Meade, analyst with Commerzbank Securities in New York. "It [the fall in prices] was expected all along. It was no surprise." The electricity industry was deregulated in Holland this year. The excess capacity drove market prices down, analysts said.

Reliant's shares remained mostly unchanged at $32.06 down 24¢/share in Friday morning trading.

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