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Strategies & Market Trends : IPPs and Merchant Energy Co.s
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To: jim_p who wrote (3112)2/25/2004 9:57:50 AM
From: jim_p  Read Replies (1) of 3358
 
"Well, if you add back just the $80MM for the gas trading loss and the $50MM loss for cooler weather to the actual earnings of $0.42/sh, you end up at $0.86/sh ((.42x293+80+50)/293)(excl's tax) for the year."

I think this is one of the main reasons why our new ( and conservative) management is using $.25 for 04 guidance.

Management stated that RRI has very high earnings leverage to things that they have no control over such as the weather, NG prices and power prices.

If I were conservative by nature I would also low ball the number if a number of small changes can have such a large impact on the numbers.

This is also why their peers are having the same problem.

In addition RRI is showing a large profit in retail at a time when rate payers are paying record costs. I don't think it would look good to be projecting large profits in 04 while trying to keep the rates as high as they can.

RRI also does not want to attract competition in the Houston market until they are able to acquire hard assets to protect that market.

RRI is also cutting another $200MM in expenses. I don't think it would look good to be projecting large profits while you are firing your fellow employees because you can't afford them anymore???.

RRI also still has to settle with CA. I don't think it would look good to be projecting large profits while trying to negotiate the best deal you can with CA.

When you think about it RRI doesn't have any reason to do anything except to be conservative.

I know it irritates a lot of the shareholders who were expecting more, but place yourself in the CEO's shoes and think about it????

finance.messages.yahoo.com
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