Reliant Energy (RRI) Slammed On Credit and Commodity Concerns

Shares of Reliant Energy (NYSE: RRI) are under heavy pressure today after revising its 2008 outlook downward to reflect the financial impact of Hurricane Ike and lower commodity prices in its wholesale business. Reliant Energy lowered its retail contribution margin outlook for 2008 by $300-$350 million.

Reliant Energy also said the company and Merrill Lynch have agreed to take steps to end their credit-enhanced retail structure. Reliant Energy cited the current operating environment and Reliant's decision to develop a new retail strategy aimed at lowering collateral requirements and providing more consistent earnings.

Reliant Energy said it obtained commitments for $1 billion in new capital to support its business to facilitate the transition, including a $650 million term loan from GS Loan Partners and an agreement to issue $350 million of convertible preferred stock to the energy private equity firm of First Reserve Corporation.

Wachovia downgraded Reliant Energy to Market Perform today following the news. The firm said, "While shares are trading well below the potential replacement value of its generating fleet, we believe the immediate credit and earning issues overshadow that."

You May Also Be Interested In

• HUT 8 appoints former Merrill Lynch CEO O'Neal as board chair
• Dentsply Sirona names John Fortson as chief financial officer
• Bank of America names Chip McLeod upstate South Carolina president