Reliant backs off pipes sale
Reliant Energy Inc., Houston, will keep two natural gas distribution companies and natural gas pipeline operations the company previously said it might put up for sale in a move to reposition Reliant as a growth company. Jefferies & Co. downgraded the stock. But Reliant CEO Steve Letbetter said the company's growth strategy remains unchanged.
Reliant Energy Inc., Houston, will keep two natural gas distribution companies and natural gas pipeline operations the company previously said it might put up for sale in a move to reposition Reliant as a growth company.
In March, the company said it had hired an investment banker to evaluate the potential sale of Reliant Energy Arkla, Reliant Energy Minnegasco, and Reliant Energy's interstate pipeline group. The interstate pipelines, Reliant Energy Gas Transmission Co. and Mississippi River Transmission Corp., total 8,200 miles of pipe and together form one of the largest natural gas pipelines in the Midcontinent US. The company�s natural gas gathering operations include 4,000 miles of gathering pipeline.
Monday, Reliant said the evaluation of the sale of the gas assets is complete, and it has no current plans to sell them.
"We believe there are better options to achieve our growth strategy," said CEO R. Steve Letbetter. "We remain committed to our transformation to a growth company and are optimistic about our alternatives to achieve that goal," Letbetter added.
Tuesday, Jefferies & Co. downgraded the Reliant stock to "accumulate" from "buy." However, a Reliant company spokesperson said CS First Boston reiterated its "strong buy" for the stock and that "'accumulate' is not a bad rating."
Bids the company received on various parcels were apparently not high enough to warrant the sale, sources said, in addition to potential negative tax consequences Reliant might have incurred from selling the assets. A spokesperson says that, while the gas distribution companies and pipelines might not be generating the kind of earnings growth the company expects in its other lines, "They are not losing money. They are making money." Moreover, she says, there are other means of generating capital at Reliant's disposal.
She says the company's growth strategy remains unchanged. The focus will continue to be on competitive power generation, trading and marketing, and nonretail energy services when the Texas electric industry opens to competition in 2002, she says. Moreover, the company continues to pursue its previously announced strategy to divest its Latin American interests.