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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): AUGUST 28, 2001
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RELIANT ENERGY, INCORPORATED
(Exact name of registrant as specified in its charter)
TEXAS 1-3187 74-0694415
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1111 LOUISIANA
HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 207-3000
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information.
99.1 Unaudited Pro Forma Condensed Consolidated Financial Statements
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RELIANT ENERGY, INCORPORATED
Date: September 12, 2001 By: /s/ Mary Ricciardello
---------------------------
Mary P. Ricciardello
Senior Vice President and
Chief Accounting Officer
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EXHIBIT INDEX
Exhibit
Number Exhibit Description
------- -------------------
99.1 Unaudited Pro Forma Condensed Consolidated
Financial Statements
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EXHIBIT 99.1
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements of Reliant Energy, Incorporated (Reliant Energy) and subsidiaries
(collectively, the Company) for each of the three years in the period ended
December 31, 2000, and as of and for the six months ended June 30, 2001, have
been prepared based upon the Company's historical consolidated financial
statements. These pro forma financial statements are being filed under this Form
8-K to facilitate their incorporation by reference into future filings of
Reliant Energy under the Securities Act of 1933, as applicable.
In 2000, Reliant Energy submitted a business separation plan to the Public
Utility Commission of Texas (Texas Utility Commission) which, as amended,
provides that Reliant Energy will restructure its businesses into two separate
publicly traded companies in order to separate its unregulated businesses from
its regulated businesses. The Texas Utility Commission approved the plan in
December 2000 and issued a final order on April 10, 2001.
As part of the separation, Reliant Energy will restructure its corporate
organization to achieve a new holding company structure. The new holding company
will hold Reliant Energy's regulated businesses. To create the holding company,
Reliant Energy will merge with an indirect wholly owned subsidiary (Merger). If
the Merger is approved by Reliant Energy's shareholders, Reliant Energy will
become an indirect wholly owned subsidiary of a newly formed holding company. In
the Merger, each outstanding share of Reliant Energy common stock will be
automatically converted into one share of common stock of the newly formed
holding company. Reliant Energy will be deemed the "accounting predecessor" to
the newly formed holding company, and accordingly there are no pro forma
adjustments in the following unaudited pro forma condensed consolidated
financial statements of Reliant Energy related to the Merger.
In connection with the business separation plan, Reliant Energy formed
Reliant Resources, Inc. (Reliant Resources) which owns and operates a
substantial portion of Reliant Energy's unregulated operations. These operations
consist of the following:
o non-rate regulated power generation assets and related energy trading,
marketing, power origination and risk management operations in North
America and Europe,
o unregulated retail electric operations, and
o other operations, including Reliant Energy's eBusiness, communications,
and venture capital businesses which are referred to as "New Ventures
businesses."
In May 2001, Reliant Resources issued and sold 59.8 million shares of its
common stock to the public in an initial public offering (Offering) at a price
of $30 per share, and received net proceeds from the Offering of $1.7 billion.
Pursuant to a master separation agreement between Reliant Resources and Reliant
Energy, Reliant Resources used $147 million of the net proceeds to repay certain
indebtedness owed to Reliant Energy. Reliant Energy expects to distribute the
remaining common stock of Reliant Resources it owns to Reliant Energy's or its
successor's shareholders within twelve months of the closing of the Reliant
Resources initial public offering (Distribution).
At the time of the Offering and in accordance with the provisions of the
master separation agreement, Reliant Energy converted or contributed an
aggregate of $1.7 billion of the indebtedness owed by Reliant Resources to
Reliant Energy and its subsidiaries to equity without the issuance of any
additional shares of Reliant Resources common stock (Recapitalization). The
Recapitalization was one of the transactions contemplated by the master
separation agreement.
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The following unaudited pro forma condensed consolidated financial
statements have been prepared to reflect the effect of the following:
o Reliant Energy's discontinuance, through the Distribution, of the
non-rate regulated power generation assets and related energy trading,
marketing, power origination and risk management operations in North
America and Europe,
o Reliant Energy's disposition, through the Distribution, of the
unregulated retail electric operations and other unregulated operations,
which includes a pre-tax, non-cash charge of $100 million relating to
the redesign of some of Reliant Energy's benefit plans in anticipation
of Reliant Resources' separation from Reliant Energy during the six
months ended June 30, 2001, and
o the Recapitalization.
Reliant Energy is seeking a ruling from the Internal Revenue Service that
the Distribution will be tax-free to Reliant Energy and its shareholders and
will qualify as a reorganization. Upon receipt of a favorable ruling that the
Distribution is tax-free, we anticipate Reliant Energy's or its successor's
board of directors will approve the Distribution. If Reliant Energy does not
obtain a favorable ruling, it is not likely to make the Distribution in the
expected time frame. There can be no assurances that the Distribution will be
completed.
Upon approval of the Distribution by Reliant Energy's or its successor's
board of directors, Reliant Energy will present its non-rate regulated power
generation assets and related energy trading, marketing, power origination and
risk management operations in North America and Europe as discontinued
operations, in accordance with Accounting Principles Board Opinion No. 30 (APB
No. 30). Accordingly, the following unaudited pro forma condensed consolidated
financial statements of Reliant Energy reflect these operations as discontinued
operations for each of the three years in the period ended December 31, 2000,
and as of and for the six months ended June 30, 2001.
The following unaudited pro forma condensed consolidated financial
statements of Reliant Energy reflect the disposition through the Distribution of
the unregulated retail electric operations and other unregulated operations,
including our eBusiness, communications, and venture capital businesses, as a
disposition of operations during the year ended December 31, 2000, and as of and
for the six months ended June 30, 2001.
The Recapitalization is reflected in the following unaudited pro forma
condensed consolidated financial statements of Reliant Energy as if the
Recapitalization described above had occurred on January 1, 2000.
Under the Texas electric restructuring laws, on January 1, 2002, all retail
customers of the electric utility division of Reliant Energy will be entitled to
purchase their electricity from any of a number of "retail electric providers"
which have been certified by the Texas Utility Commission. Beginning January 1,
2002, Reliant Resources' unregulated retail electric operations will provide
retail electric services to all of the approximately 1.7 million customers of
the electric utility division of Reliant Energy who do not take action to select
another retail electric provider.
The unaudited pro forma condensed consolidated financial statements do not
purport to present the Company's actual results of operations as if the
transactions described above had occurred at the beginning of each period, as
applicable, nor are they necessarily indicative of the Company's financial
position or results of operations that may be achieved in the future.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the Company's consolidated financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in the Annual Report on Form 10-K of Reliant
Energy for the year ended December 31, 2000 and the Quarterly Reports on Form
10-Q of Reliant Energy for the quarters ended March 31, 2001 and June 30, 2001.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2001
DISCONTINUED
OPERATIONS
HISTORICAL AND DISPOSAL OTHER PRO FORMA
BALANCE OF BUSINESSES ADJUSTMENTS BALANCE
---------- ------------- ----------- ----------
(IN MILLIONS)
Cash and cash equivalents ................................... $ 108 $ 85 $ -- $ 23
Investment in AOL Time Warner common stock .................. 1,365 -- -- 1,365
Accounts and notes receivable, net .......................... 2,897 3,488 1,475(a) 884
Inventories ................................................. 589 165 -- 424
Price risk management assets ................................ 2,514 2,514 -- --
Non-trading derivative assets ............................... 2,047 2,035 -- 12
Other current assets ........................................ 467 448 -- 19
------- ------- ------- -------
Total current assets ...................................... 9,987 8,735 1,475 2,727
------- ------- ------- -------
Property, Plant and Equipment, net .......................... 15,826 4,273 -- 11,553
------- ------- ------- -------
Goodwill and intangible assets, net ......................... 2,998 1,232 -- 1,766
Regulatory assets ........................................... 1,688 -- -- 1,688
Price risk management assets ................................ 543 543 -- --
Non-trading derivative assets ............................... 711 707 -- 4
Equity investments in unconsolidated subsidiaries ........... 139 139 -- --
Other assets ................................................ 1,346 782 30(a) 594
------- ------- ------- -------
Total other assets ........................................ 7,425 3,403 30 4,052
------- ------- ------- -------
Total Assets .......................................... $33,238 $16,411 $ 1,505 $18,332
======= ======= ======= =======
Short-term borrowings and current portion of
long-term debt ............................................ $ 3,517 $ 168 $ 1,334(a) $ 4,683
Indexed debt securities derivative .......................... 1,252 -- -- 1,252
Accounts payable ............................................ 2,366 1,984 141(a) 523
Taxes and interest accrued .................................. 454 24 -- 430
Price risk management liabilities ........................... 2,420 2,420 -- --
Non-trading derivative liabilities .......................... 1,809 1,742 -- 67
Other current liabilities ................................... 1,431 743 -- 688
------- ------- ------- -------
Total current liabilities ................................. 13,249 7,081 1,475 7,643
------- ------- ------- -------
Accumulated deferred income taxes ........................... 2,694 163 -- 2,531
Price risk management liabilities ........................... 564 564 -- --
Non-trading derivative liabilities .......................... 677 666 -- 11
Other liabilities ........................................... 1,944 629 -- 1,315
------- ------- ------- -------
Total other liabilities ................................... 5,879 2,022 -- 3,857
------- ------- ------- -------
Long-term Debt .............................................. 5,449 908 30(a) 4,571
------- ------- ------- -------
Minority Interest in Consolidated Subsidiaries .............. 1,221 -- (1,212)(b) 9
------- ------- ------- -------
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Solely Junior
Subordinated Debentures of the Company .................... 705 -- -- 705
------- ------- ------- -------
Stockholders' Equity ........................................ 6,735 6,400 1,212(b) 1,547
------- ------- ------- -------
Total Liabilities and Stockholders' Equity ................ $33,238 $16,411 $ 1,505 $18,332
======= ======= ======= =======
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
DISCONTINUED
OPERATIONS AND
HISTORICAL DISPOSAL OF RECAPITALIZATION OTHER PRO FORMA
BALANCE BUSINESSES ADJUSTMENTS ADJUSTMENTS BALANCE
--------------- ---------------- --------------- --------------- --------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Revenues....................................... $ 25,259 $ 19,552 $ -- $ 592 (a)$ 6,299
Expenses:
Fuel and cost of gas sold.................... 13,056 10,191 -- 561 (a) 3,426
Purchased power.............................. 9,184 8,398 -- -- 786
Operation and maintenance.................... 1,335 530 -- 31 (a) 836
Taxes other than income taxes................ 282 10 -- -- 272
Depreciation and amortization................ 420 107 -- -- 313
--------------- ---------------- --------------- --------------- --------------
Total ..................................... 24,277 19,236 -- 592 5,633
--------------- ---------------- --------------- --------------- --------------
Operating Income............................... 982 316 -- -- 666
--------------- ---------------- --------------- --------------- --------------
Other (Expense) Income:
Unrealized gain on AOL Time Warner common
stock...................................... 468 -- -- -- 468
Unrealized loss on indexed debt securities... (464) -- -- -- (464)
Income from equity investments in
unconsolidated subsidiaries................ 64 64 -- -- --
Interest expense, net........................ (328) (47) (15)(c) -- (296)
Distribution on trust preferred securities... (28) -- -- -- (28)
Minority interest............................ (23) -- -- 24 (b) 1
Other, net................................... 70 37 -- -- 33
--------------- ---------------- --------------- --------------- --------------
Total ..................................... (241) 54 (15) 24 (286)
--------------- ---------------- --------------- --------------- --------------
Income from Continuing Operations before
Income Taxes................................. 741 370 (15) 24 380
Income tax expense (benefit)................. 259 116 (5) -- 138
--------------- ---------------- --------------- --------------- --------------
Income from Continuing Operations.............. $ 482 $ 254 $ (10) $ 24 $ 242
=============== ================ =============== =============== ==============
Basic Earnings per Share....................... $ 1.67 $ 0.84
=============== ==============
Weighted Average Common Shares Outstanding..... 288,546,000 288,546,000
=============== ==============
Diluted Earnings per Share..................... $ 1.66 $ 0.83
=============== ==============
Diluted Weighted Average Common Shares
Outstanding.................................. 291,400,000 291,400,000
=============== ==============
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
DISCONTINUED
OPERATIONS AND
HISTORICAL DISPOSAL OF RECAPITALIZATION OTHER PRO FORMA
BALANCE BUSINESSES ADJUSTMENTS ADJUSTMENTS BALANCE
--------------- -------------- ---------------- --------------- --------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Revenues....................................... $ 29,339 $ 19,792 $ -- $ 740 (a)$ 10,287
Expenses:
Fuel and cost of gas sold.................... 15,072 10,582 -- 735 (a) 5,225
Purchased power.............................. 8,628 7,852 -- -- 776
Operation and maintenance.................... 2,356 717 -- 5 (a) 1,644
Taxes other than income taxes................ 498 11 -- -- 487
Depreciation and amortization................ 906 193 -- -- 713
--------------- ---------------- --------------- --------------- --------------
Total ..................................... 27,460 19,355 -- 740 8,845
--------------- ---------------- --------------- --------------- --------------
Operating Income .............................. 1,879 437 -- -- 1,442
--------------- ---------------- --------------- --------------- --------------
Other (Expense) Income:
Unrealized loss on AOL Time Warner common
stock...................................... (205) -- -- -- (205)
Unrealized gain on indexed debt securities... 102 -- -- -- 102
Income from equity investments in
unconsolidated subsidiaries................ 43 43 -- -- --
Interest expense, net........................ (700) (215) (124)(c) -- (609)
Distribution on trust preferred securities... (54) -- -- -- (54)
Other, net................................... 83 25 -- -- 58
--------------- ---------------- --------------- --------------- --------------
Total ..................................... (731) (147) (124) -- (708)
--------------- ---------------- --------------- --------------- --------------
Income from Continuing Operations before
Income Taxes................................. 1,148 290 (124) -- 734
Income tax expense (benefit)................. 377 82 (43) -- 252
--------------- ---------------- --------------- --------------- --------------
Income from Continuing Operations.............. $ 771 $ 208 $ (81) $ -- $ 482
=============== ================ =============== =============== ==============
Basic Earnings per Share....................... $ 2.71 $ 1.69
=============== ==============
Weighted Average Common Shares Outstanding..... 284,652,000 284,652,000
=============== ==============
Diluted Earnings per Share..................... $ 2.68 $ 1.68
=============== ==============
Diluted Weighted Average Common Shares
Outstanding.................................. 287,273,000 287,273,000
=============== ==============
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
HISTORICAL DISCONTINUED OTHER PRO FORMA
BALANCE OPERATIONS ADJUSTMENTS BALANCE
--------------- --------------- --------------- ---------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Revenues.................................................. $ 15,223 $ 8,018 $ 447 (a) $ 7,652
Expenses:
Fuel and cost of gas sold............................... 6,700 3,994 447 (a) 3,153
Purchased power......................................... 4,138 3,736 -- 402
Operation and maintenance............................... 1,781 183 -- 1,598
Taxes other than income taxes........................... 441 6 -- 435
Depreciation and amortization........................... 905 42 -- 863
--------------- --------------- --------------- ---------------
Total ................................................ 13,965 7,961 447 6,451
--------------- --------------- --------------- ---------------
Operating Income ......................................... 1,258 57 -- 1,201
--------------- --------------- --------------- ---------------
Other (Expense) Income:
Unrealized gain on AOL Time Warner common stock......... 2,452 -- -- 2,452
Unrealized loss on indexed debt securities.............. (630) -- -- (630)
Loss from equity investments in unconsolidated
subsidiaries.......................................... (1) (1) -- --
Interest expense, net................................... (498) (37) -- (461)
Distribution on trust preferred securities.............. (51) -- -- (51)
Other, net.............................................. 60 (3) -- 63
--------------- --------------- --------------- ---------------
Total ................................................ 1,332 (41) -- 1,373
--------------- --------------- --------------- ---------------
Income from Continuing Operations before Income Taxes..... 2,590 16 -- 2,574
Income tax expense...................................... 916 3 -- 913
--------------- --------------- --------------- ---------------
Income from Continuing Operations......................... $ 1,674 $ 13 $ -- $ 1,661
=============== =============== =============== ===============
Basic Earnings per Share.................................. $ 5.87 $ 5.83
=============== ===============
Weighted Average Common Shares Outstanding................ 285,040,000 285,040,000
=============== ===============
Diluted Earnings per Share................................ $ 5.85 $ 5.81
=============== ===============
Diluted Weighted Average Common Shares Outstanding........ 286,021,000 286,021,000
=============== ===============
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
HISTORICAL DISCONTINUED OTHER PRO FORMA
BALANCE OPERATIONS ADJUSTMENTS BALANCE
--------------- --------------- --------------------------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Revenues.................................................. $ 11,230 $ 4,338 $ 333 (a) $ 7,225
Expenses:
Fuel and cost of gas sold............................... 4,816 2,352 333 (a) 2,797
Purchased power......................................... 2,215 1,824 -- 391
Operation and maintenance............................... 1,583 104 -- 1,479
Taxes other than income taxes........................... 470 4 -- 466
Depreciation and amortization........................... 866 14 -- 852
--------------- --------------- --------------- ---------------
Total ................................................ 9,950 4,298 333 5,985
--------------- --------------- --------------- ---------------
Operating Income.......................................... 1,280 40 -- 1,240
--------------- --------------- --------------- ---------------
Other (Expense) Income:
Unrealized loss on indexed debt securities.............. (1,176) -- -- (1,176)
Loss from equity investments in unconsolidated
subsidiaries.......................................... (1) (1) -- --
Interest expense, net................................... (502) (11) -- (491)
Distribution on trust preferred securities.............. (29) -- -- (29)
Other, net.............................................. 67 1 -- 66
--------------- --------------- --------------- ---------------
Total ................................................ (1,641) (11) -- (1,630)
--------------- --------------- --------------- ---------------
Loss from Continuing Operations before Income Taxes....... (361) 29 -- (390)
Income tax (benefit) expense............................ (83) 14 -- (97)
--------------- --------------- --------------- ---------------
Loss from Continuing Operations........................... $ (278) 15 -- $ (293)
=============== =============== =============== ===============
Basic Loss per Share(1)................................... $ (0.98) (1.03)
=============== ===============
Weighted Average Common Shares Outstanding................ 284,095,000 284,095,000
=============== ===============
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(1) Dilutive earnings per share is not presented as the effect is
anti-dilutive.
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) Represents previously eliminated intercompany transactions.
(b) Reflects the elimination of the minority interest in Reliant Resources
upon the Distribution.
(c) Reflects the increase in interest expense as a result of the
Recapitalization.
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