Reliant Energy Inc., owner of power plants in 12 U.S. states, posted a third-quarter net loss of $270.3 million after settling allegations of manipulating prices during the California energy crisis. The company's shares fell amid concern Reliant will lose money on 2006 Texas power sales.
The loss was 89 cents a share, compared with profit of $345 million, or $1.04, a year earlier, Houston-based Reliant said today in a statement. Sales rose 16 percent to $2.96 billion.
Reliant, owner of five power plants in California, said the legal settlement cut net income by $217 million. The company, which committed through March 15 to providing power in its home market at prices reflecting an average fuel cost of $10.78 per million British thermal units of natural gas, said it signed contracts to buy gas at $14.40 to $14.50 per million Btus.
``They have locked in a $100 million hedging loss,'' said Lasan Johong, an analyst at RBC Capital Markets in New York who rates Reliant shares at ``outperform'' and doesn't own any. ``That's completely unacceptable from a shareholder's view.''
Shares of Reliant plunged $3.19, or 25 percent, to $9.51 in New York Stock Exchange composite trading. The drop was Reliant's biggest since July 2002. The shares have fallen 30 percent this year.
Reliant agreed to pay $460 million to settle claims in California, Washington and Oregon over the energy crisis of 2000 and 2001. Reliant still faces U.S. criminal charges for allegedly shutting down power plants and submitting false bids during the crisis, which led to rolling blackouts and bankrupted California's largest utility.
New York Sale
Reliant on Oct. 3 said it would have a pretax loss of about $160 million on the sale of three New York City power plants for $975 million. The sale was done to cut debt.
Excluding such items as the settlement and changes in the valuation of energy contracts, profit from businesses Reliant is keeping was 56 cents a share, up from 31 cents a year ago. On that basis, Reliant was expected to earn 54 cents a share, the average estimate from 12 analysts surveyed by Thomson Financial.
Reliant's quarterly adjustment to the valuation of energy contracts relative to market prices reduced net income by $219 million.
Because of the loss of profit from the New York plants and other assets that are being sold, Reliant cut its full-year forecast for earnings before interest, taxes and depreciation of assets by $250 million. The company said it sees 2005 earnings on that basis, excluding one-time items, to be toward the bottom end of a newly projected range of $650 million to $850 million.
Reliant, Duke Energy Corp., Dynegy Inc., Mirant Corp., Williams Cos., El Paso Corp. and Enron Corp. have agreed to $5.15 billion in settlements with western U.S. states. California power prices surged as much as 100-fold during the energy crisis.
Reliant is the second-largest power retailer in Texas, ranking behind Dallas-based TXU Corp.
Power sales to residential and small businesses customers in Texas rose 14 percent to $1.4 billion as Reliant sold more electricity to consumers outside its traditional Houston service territory. Sales to Texas industrial customers rose 7.1 percent to $574 million.
Retail sales to customers outside Texas rose 91 percent to $136 million.
Wholesale power sales by volume from plants the company is keeping rose 15 percent in the quarter, led by increased generation in the U.S. mid-Atlantic states.
The U.S. had its 10th-hottest June through August on record, according to government data. The Midwest and Northeast saw warmer-than-normal weather, including record heat in New Jersey.
To contact the reporter on this story: Eileen O'Grady in Houston at Eogrady1@bloomberg.net.
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