Citi Downgrades Reliant Energy (RRI) to Hold, Speculative Risk
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Citi downgrades Reliant Energy Inc (NYSE: RRI) from Buy to Hold. Risk rating raised from High to Speculative. Price target slashed from $23 to $10.
Citi analyst says, "On 9/29/08 Reliant reduced 2008E margin contribution guidance by ~$800 million on lower commodity prices ($480 million) and the impact of Hurricane Ike on the retail segment ($320 million). The impact from both was larger than we expected...Reliant previously used a credit sleeve with Merrill Lynch to reduce its trading collateral volatility for its Retail business. Due to impaired credit markets, Reliant and Merrill are terminating the sleeve relationship. Reliant has arranged for $650 million of debt and $350 of convertible preferreds to improve its liquidity...Improvement in credit markets in addition to commodity price fluctuations could boost the outlook. Rapid changes in either of these could dramatically swing the investment thesis."
Reliant Energy, Inc. provides electricity and energy services to retail and wholesale customers through two business segments.
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