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HOUSTON, May 10, 2006 /PRNewswire-FirstCall
Reliant Energy, Inc. reported a loss from continuing operations before income taxes of $81 million for the first quarter of 2006, compared to $54 million for the same period of 2005. The reported numbers include net gains from unrealized energy derivatives of $23 million and $124 million, respectively, for 2006 and 2005.
"We are making good progress toward our priorities for 2006, which include completing the transition to a fully competitive retail market in Texas, converting to an open model in our wholesale business, improving the commercial capacity factor of our generating plants and managing our collateral exposure to reduce postings by $1 billion by year end," said Joel Staff, chairman and chief executive officer. "Our commercial capacity factor improved to 89 percent from 81 percent in the first quarter of 2005, collateral postings have declined by nearly $400 million since the beginning of the year, and we had better than expected performance in our retail business. Additionally, in the first quarter, we completed the sale of our New York City assets and repaid $952 million of debt," Staff added.
Open EBITDA (earnings before interest, income taxes, depreciation and amortization) was $45 million for the first quarter of 2006, compared to $52 million for the first quarter of 2005. Improvements in wholesale unit margins and commercial capacity factors of the power plants were more than offset by lower retail gross margin and higher expenses. Retail gross margin was lower due to higher supply costs that were not recovered through the price-to-beat revenue rate.
Adjusted EBITDA was $76 million for the first quarter of 2006, compared to $21 million for the first quarter of 2005. The improvement to adjusted EBITDA was primarily related to net gains from the sales of emission allowances, partially offset by higher losses related to historical wholesale hedges.
During the first quarter of 2006, the company reported a $228 million use of cash in continuing operations from operating activities, compared to $59 million for the same period of 2005. Free cash flow from continuing operations after emission allowances activity was ($27) million for the first quarter of 2006, compared to $141 million for the first quarter of 2005. The decline in free cash flow from continuing operations after emission allowances activity was due to lower earnings, partially offset by proceeds from the sale of emission allowances, and positive changes in working capital, which were included in the 2005 period.
Reliant Energy recorded a $70 million valuation allowance against deferred tax assets during the first quarter of 2006. While the company's net operating loss carryforwards will not expire for twenty years, GAAP prescribes specific procedures in valuing deferred tax assets and, as a result of applying those procedures, a valuation allowance was required. Reliant Energy's forward projections contemplate utilizing the net operating loss carryforwards within the expiration period.
Reliant Energy's loss from continuing operations for the first quarter of 2006 was $139 million compared to $41 million for the first quarter of 2005.
OUTLOOK
Reliant Energy's outlook for open EBITDA is $805 million, $1,137 million and $1,236 million for the years ending December 31, 2006, 2007 and 2008, respectively. Adjusted EBITDA, which includes the impact of historical wholesale hedging activity and gains on the sales of emission allowances is $467 million, $878 million and $1,117 million for the same periods. Free cash flow from continuing operations after emission allowances activity is ($85) million, $205 million and $380 million for the years ending December 31, 2006, 2007 and 2008, respectively.
This outlook is based on forward commodity prices on March 24, 2006 and assumptions and estimates by Reliant Energy.
This press release and the attached financial tables include the following non-GAAP financial measures:
A reconciliation of these financial measures and the most directly comparable GAAP measures is included above or in the attached financial tables. Additional information regarding these measures, including a discussion of their usefulness and purpose, is included in the Form 8-K filed along with this press release.
WEBCAST OF EARNINGS CONFERENCE CALL
Reliant Energy has scheduled its first-quarter 2006 earnings conference call for Wednesday, May 10, 2006, at 10:00 a.m. CT. Interested parties may listen to a live audio broadcast of the conference call at http://www.reliant.com/corporate. A replay of the call can be accessed approximately two hours after the completion of the call. A copy of the presentation accompanying the call is also available at this Website address.
Reliant Energy, Inc. (NYSE: RRI) based in Houston, Texas, provides electricity and energy services to retail and wholesale customers in the United States. In Texas, the company provides service to approximately 1.9 million retail electricity customers, including residential and small business customers and commercial, industrial, governmental and institutional customers. Reliant also serves commercial, industrial, governmental and institutional customers in the PJM (Pennsylvania, New Jersey and Maryland) market.
The company is one of the largest independent power producers in the nation with approximately 16,000 megawatts of power generation capacity in operation across the United States. These strategically located generating assets utilize natural gas, fuel oil and coal. For more information, visit http://www.reliant.com/corporate.
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