Reliant Resources Swings to Surprise Loss
Reliant Resources (RRI) swung to a loss in the second quarter as a steep rise in natural gas prices and the cost of a debt overhaul offset higher revenue.
The company also completed a plan to carve $140 million from its annual expenses and named former National Oilwell (NOI) executive Joel Staff chief executive, replacing the recently resigned Steve Letbetter.
Shares were recently down 42 cents, or 8.4%, to $4.56 on the Instinet premarket session.
The Houston energy company lost $5.9 million, or 2 cents a share, in the latest quarter, compared with earnings of $175.8 million, or 60 cents a share, last year. On a continuing operations basis the company lost 9 cents a share in the latest quarter, a wide miss of the 19-cent profit analysts were forecasting. Revenue was $2.83 billion, up from $2.19 billion last year despite a steep decline in trading margins, to $7.6 million from $114.9 million a year ago.The company's expense for purchased power rose to $1.97 billion from $1.26 billion last year. Amortization costs rose to $8.2 million from $4.7 million, while interest expense rose to $114.5 million from $57.3 million, reflecting a recently completed debt restructuring. "While our retail results in the second quarter were negatively impacted by rising natural gas prices, we expect to see an offset in the second half of the year from the recently approved increase in our price-to-beat and the hedges we have put in place," Reliant said. The company also dropped its full-year earnings guidance to 10 cents a share from continuing operations, reflecting weak wholesale market conditions and higher amortization and interest expenses. Analysts surveyed by Thomson First Call were forecasting earnings of 58 cents a share. Among Reliant's segments, retail energy had earnings before interest and taxes of $101 million in the latest quarter, down from $202 million last year, while wholesale energy lost $20 million before interest and taxes in the latest quarter compared with earnings of $31 million last year. The wholesale segment's loss reflected lower trading margins, which in turn are the result of Reliant's scaling back trading operations, plus the expiration of favorable contracts and continued weak markets.
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