Following two days of meetings that concluded late Thursday, the board of directors of Reliant Energy Inc. voted to remove Steve Letbetter as chairman and CEO of the regulated business, which is undergoing a name change to CenterPoint Energy. Once set to become the non-executive chairman of CenterPoint, he also stepped down from the board of directors.

Letbetter will remain chair and CEO of Reliant Resources Inc., the unregulated business.

The decision was made, said the board, to ensure shareholders have a clear understanding that there will be two separate businesses: CenterPoint, which will hold all of the regulated entities of former Reliant Energy, and Reliant Resources, which will hold the unregulated businesses.

The board also voted to distribute Reliant Energy’s 83% ownership in Reliant Resources to shareholders. Each Reliant Energy shareholder as of the close of business Sept. 20 will receive 0.79% of a common share of Reliant Resources for each common share owned. The distribution ratio is subject to final adjustments, and the stock dividend, payable Sept. 30, will complete the split.

In a written statement, Letbetter was upbeat, saying, “This business separation will allow each company to reach its full potential.” Steve Letbetter, chairman and chief executive of both Reliant Energy and Resources, said in a written statement.

CenterPoint and its subsidiaries will hold all of Reliant Energy’s regulated assets, including transmission and distribution businesses. Reliant Energy’s business separation plan, finalized Aug. 31, provided for the separation of its generation, transmission and distribution, and retail operations into three different companies, as well as the separation of its regulated and unregulated businesses into two publicly traded companies.

Since Jan.1 (when Texas became fully deregulated), the generation, transmission and distribution, and retail electric sales operations of Reliant Energy, which were previously conducted through Reliant Energy HL&P, have been functionally separated, with retail sales operations conducted by subsidiaries of Reliant Resources.

CenterPoint’s new chairman will be Milton Carroll, a board member since 1992, and currently chairman and CEO of Houston-based Instrument Products, which makes oil field equipment. David McClanahan, now vice chairman of Reliant Energy and president of the company’s delivery group, will serve as CenterPoint’s president and CEO.

When a portion of Reliant Resources was spun off from Reliant Energy last year — at a time when energy trading and marketing was driving the profits — its opening-day price of $30 made a spectacular splash. Last week, Reliant Resources was hovering in the $5 range.

Reliant Resources, which has lost most of its early investor enthusiasm, now is chasing bank loans totaling $1.3 billion due in October and December. A $2.9 billion loan, related to its acquisition of Orion Power Holdings, expires in February. Meanwhile, it may have a new name, but CenterPoint is taking on Reliant Energy’s indebtedness as well, with $4.7 billion in bank loans expiring in October.

As required in its 8-K filing with the Securities and Exchange Commission to report any adverse business conditions going forward, CenterPoint detailed the numerous lawsuits against Reliant Energy and Reliant Resources, as well as the federal, California and Texas investigations on market manipulation. Under a master separation agreement between Reliant Energy and Reliant Resources, CenterPoint is entitled to be indemnified by Reliant Resources for any losses arising out of the lawsuits, including attorneys’ fees and other costs, except for some municipal franchise-fee lawsuits.

“We are involved in other proceedings before various courts, regulatory commissions and governmental agencies regarding matters arising in the ordinary course of business,” CenterPoint noted in its filing. “Our management currently believes that the disposition of these matters will not have a material adverse effect on our financial condition, results of operations or cash flows.”

Regarding “other risks,” CenterPoint reported that “as a result of several recent events, including the Sept.11, 2001 terrorist attacks, the bankruptcy of Enron Corp., the downgrading of the credit ratings of several energy companies and the unusual volatility in the U.S. financial markets, the availability and cost of capital for our business have been adversely affected. If we are unable to obtain external financing to meet our future capital requirements on terms that are acceptable to us, our financial condition and future results of operations could be materially adversely affected.”

As of Aug. 31, 2002, CenterPoint noted that it had $400 million of outstanding debt under its $400 million credit facility that is expiring in October. “To the extent that we continue to need access to this amount of committed credit, we expect to extend or replace this facility. If we are unable to maintain appropriately sized credit facilities on terms that are acceptable to us, our financial condition could be materially adversely affected.

“In addition, the capital constraints currently impacting our industry may require our future indebtedness to include terms that are more restrictive or burdensome than those of our current indebtedness. These terms may negatively impact our ability to operate our business or severely restrict or prohibit distributions from our subsidiaries.”

CenterPoint reported that its future financing efforts could depend, “at least in part” on general economic conditions; credit availability; investor confidence; maintaining acceptable credit ratings; market expectations on future earnings and cash flows; market perceptions of the ability to access capital markets; exposure to Reliant Resources as a customer; and relevant tax and securities laws.

With the separation, CenterPoint will have approximately 11,500 employees, with about 7,000 based in the Houston headquarters. Reliant Resources’ employees number around 6,200, with nearly 3,000 based in Houston.

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