Energy merchants keep finding new ways to get themselves in trouble.
announced late Friday that it plans to exit the proprietary trading business following a disastrous natural gas trade in late February. The Houston-based company lost $80 million over a single weekend last month, when natural gas prices spiked by more than $2.50 per unit. Reliant was caught with a large short position for natural gas deliveries in March, which it closed at a significant loss.
"While this loss resulted from unprecedented market volatility," said Reliant CEO Steve Letbetter, "its magnitude is inconsistent with our desired risk profile and led to our decision to exit the proprietary trading business."
In rolling out a plan to exit the once-hot trading business, Reliant follows in the footsteps of rivals like
, which soared to record highs a few years ago before plunging into the single digits over the last year as the sector came unglued.
Reliant said high natural gas prices have actually helped, rather than hurt, some aspects of its business. Particularly, the company expects to generate higher profits from coal-fired plants that enjoy lower fuel costs. But even after calculating these gains, the company admitted that full-year profits could be as low as 80 cents a share.
Reliant had previously offered 2003 earnings guidance of 90 cents to $1 a share. The company's stock sank 5.9% to $3.86 on the company's disappointing news.
( AYE) took an even bigger hit after warning that both its annual report and its shareholder meeting will be delayed. The Maryland-based utility said it needs additional time to correct accounting mistakes in last year's financial results. It gave no reason for postponing its annual meeting, originally scheduled for May 8, although it delayed a crucial shareholder vote last week. The company had asked shareholders to waive a pre-emptive rights provision that protects them from dilution, but abruptly adjourned last week's meeting so that divided shareholders could have more time to weigh their decision.
Allegheny provided no update on those deliberations, which were expected to end with a vote this week. The company's stock plunged 8.1% to $5.20 during the Monday morning session.