Reliant Resources Repays Large Sum Of Debt

HOUSTON -- - Reliant Resources, making progress on its financial rebuilding efforts, said recently it has repaid $917 million in debt early and canceled a never-used $300 million credit line.

Joel Staff, Reliant's chairman and chief executive officer, called the steps "very tangible signs of the progress we have made in beginning to rebuild the financial strength of the company."

Reliant, which sells electricity to consumers through its Reliant Energy Retail Services subsidiary and owns deregulated power plants across the country, will see reduced interest expenses as a result.

Of the debt that was "prepaid," $784 million went to reduce a bank loan, while $133 million went to pay down a revolving credit line that can still be borrowed from again. Some of the money came from the recent sale of Reliant's Dutch power business.

The loan repayment is also significant because it means Reliant has met certain voluntary early repayment targets included in a $6.2 billion bank financing package it received in March.

If Reliant hadn't been able to reach an agreement with its banks in March, the company may have had to file for bankruptcy protection.

Reliant has now paid more than $2 billion against the $3.8 billion bank loan in the package, which also included $2.4 billion in credit lines. By doing so, Reliant avoids extra fees.

Under the original terms of the loan, one payment was due in May 2006 and the rest in 2007.

Reliant had previously made an early payment to cover the amount that was due in 2006. Including the repayment announced recently, $1.75 billion remains on that loan and it's all due in 2007.

Canceling the $300 million credit line, which would have matured in December 2004, will eliminate costs associated with maintaining it.

Since Reliant received the credit line in March 2003, it said it made changes to reduce its need for cash or easy access to it.

Reliant also said Monday it had amended its bank financing agreements to allow it to buy up to $1 billion worth of power plants in Texas.

Several analysts who follow Reliant said the moves were positive for the company. Shares in the company ended Monday up 21 cents at $7.03.

"It's a significant step in the right direction in terms of improving the balance sheet," said Michael Worms, an analyst at Harris Nesbitt Gerard in New York.

Added Jeff Dietert, of Simmons & Company International in Houston: "It just shows that the financial condition is improving at Reliant Resources."

The amendment regarding the power plant purchases shows Reliant is trying to maximize its flexibility when it comes to buying power plants in Texas to support its retail consumer business, he said.

Earlier this month, Reliant said it wasn't likely to exercise its option to buy a majority stake in the Texas power plant subsidiary of CenterPoint Energy. Houston-based CenterPoint holds 81 percent of Texas Genco Holdings, with the rest owned by public shareholders.

Reliant has an option exercisable between Jan. 10 and Jan. 24 to buy CenterPoint's Texas Genco stake.

Its bank agreements already gave it the ability to exercise the option.

The bank amendment also gives Reliant the ability to buy individual generating assets in Texas from Texas Genco or from power plant owners.