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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: Big Dog who started this subject5/9/2003 5:36:08 AM
From: quehubo  Read Replies (1) of 206097
 
Failure to Hedge Fuel Costs
Widens Losses at Reliant

By REBECCA SMITH
Staff Reporter of THE WALL STREET JOURNAL

Reliant Resources Inc. reported a wider-than-expected first-quarter loss as it adjusted to tougher new accounting standards and failed to protect itself against fluctuating fuel costs.

The Houston-based energy company said its loss widened to $462.4 million, or $1.59 a share, in the first quarter from a loss of $137.4 million, or 48 cents a share, a year earlier. Revenue jumped 53% to $2.54 billion in the period from $1.66 billion a year earlier.

Reliant officials, most of whom are new to their positions, said earnings were hurt by a loss from energy trading, as well as by accounting-rule changes that make it report income from some energy-sales contracts on an "accrual" basis, rather than the more liberal mark-to-market methods that have traditionally been used. Such mark-to-market accounting for energy trades has come under strong criticism in recent months.

Reliant surprised analysts by losing money on energy sales in New York state, despite rising electricity prices. Reliant sells electricity under fixed-price contracts, but was caught in a squeeze when fuel prices rose, increasing its generating expenses. Reliant also said it has suffered from a lack of trading partners willing to enter into hedges in California and suggested its business there no longer is "sustainable."
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