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Reliant to Sell Three New York City Plants for $975M

Reliant Energy has reached an agreement to sell its three New York City power plants to an investor group led by Madison Dearborn Partners and US Power Generating Co. for $975 million.

The generating assets involved in the sale include Reliant's Astoria, Gowanus and Narrows plants. The facilities have a combined summer capacity rating of approximately 2,100 MW. Reliant acquired these units as part of its purchase of Orion Power Holdings in February 2002.

"A key element of the company's strategy to achieve financial flexibility was the realization of $1 billion to $2 billion in asset sales," said Joel Staff, Reliant chairman. Last week's announcement "marks the accomplishment of that objective. In gaining fair value for these assets, Reliant will be able to further strengthen its balance sheet and better position the company for future opportunities."

Reliant Energy will use proceeds from the sale to reduce debt and for general corporate purposes. When the transaction closes and the proceeds are applied, Reliant Energy will have reduced its net debt and debt equivalents by approximately $4 billion since the beginning of 2003.

The transaction is subject to certain regulatory approvals, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the Federal Energy Regulatory Commission, the New York Public Service Commission and is expected to close in the first quarter of 2006.

Reliant Energy expects to record a pre-tax loss of approximately $160 million on the sale in the third quarter of 2005. For accounting purposes, the New York City assets, along with a portion of the debt to be repaid, will be treated as discontinued operations beginning in the third quarter of 2005.

In connection with its second quarter earnings release, the company provided an outlook for 2005 adjusted EBITDA in the range of $900 million to $1.1 billion and for 2005 free cash flow of $275 million to $475 million, both of which were from continuing operations.

Included in that outlook, the New York City assets were expected to contribute $200 million-$250 million and $125 million-$175 million to the company's adjusted EBITDA and free cash flow ranges, respectively. The company will provide an updated outlook for 2005 adjusted EBITDA and free cash flow with its third quarter earnings release in November.

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