Bloomberg News

Reliant's Jacobs Says Channelview Agreement Is `Win-Win-Win'

May 20, 2008

Reliant Energy Inc. Chief Executive Officer Mark Jacobs comments on the company's plan to sell the Channelview power plant in Texas as part of a bankruptcy proceeding.

Jacobs made his comments to reporters today after the company's annual meeting in Houston. Reliant, based in Houston, is the owner of power plants in nine U.S. states. Channelview is expected to be sold to Global Infrastructure Management LLC, which made the high bid of $500 million at auction. Reliant is not itself in bankruptcy.

On the attempt to sell the Channelview plant:

``It's not the type of asset that we're trying to focus on today, which are of more of the merchant variety as opposed to ones that have long-term contracts. It was built in an era where the prevailing thinking was: use lots of project financing, finance it mainly with debt and a little bit of equity.''

``The bankruptcy proceeding we went through was really a means to develop a long-term, sustainable operating model for the plant.''

Channelview will have a ``more sustainable long-term operating model with less debt. I think the second point is that all of the employees at the plant will receive offers of employment with the new owner, so it's going to be good for the folks at the plant. And it's going to be good for Reliant shareholders because we'll get meaningful value for our equity.''

``I look at that situation really as a win-win-win.''

On the planned sale of the Bighorn plant in Nevada to a unit of Sierra Pacific Resources for about $500 million:

``Bighorn is a situation where Sierra Pacific Resources approached us with a value proposition that we felt exceeded what our value proposition was to continue to own the plant.''

On choosing in the future how to use cash, including the possibility of dividends:

``We're not predisposed to any one alternative, but we'll look to deploy capital in the alternative that we think has the highest return on invested capital.''

``In the type of financial markets that we have today, we're going to be a little bit more conservative.''

``Our commitment is to make sure that we are prepared and have the balance sheet and credit capacity to act'' on opportunities.

On the effects of wind on Texas's electricity market:

``I think there's a meaningful role that wind resources can play in the grid.''

``Any time you add any type of new resources into the grid it changes the transmission characteristics.''

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.

To contact the editor responsible for this story: Tony Cox at acox3@bloomberg.net.


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