Reliant Resources Inc. last Wednesday said that it has entered into a definitive agreement for the sale of its 588 MW Desert Basin plant in Arizona to the Salt River Project Agricultural Improvement and Power District (SRP) for $288.5 million.

“The sale of our Desert Basin plant is consistent with our strategy of tightening our strategic focus and strengthening our balance sheet,” said Joel Staff, Reliant’s chairman.

Reliant will use the proceeds from the sale to prepay debt under its existing credit facility or for the possible acquisition of CenterPoint Energy Inc.’s 81% interest in Texas Genco Holdings Inc. The sale is expected to be neutral to earnings per share in 2004.

Desert Basin, a combined-cycle facility, started commercial operation in 2001 and is currently providing all of its power to SRP under a 10-year power purchase agreement. The facility is located in Casa Grande, AZ.

The transaction is subject to regulatory approvals, including the Federal Energy Regulatory Commission, and certain third-party consents and approvals. The deal is expected to close by the end of 2003.

Meanwhile, Standard & Poor’s Ratings Services (S&P) on Friday said that the plant sale announcement will have no immediate effect on near-term credit quality for Reliant. Noting that Reliant needs to deleverage, S&P said it would view positively any debt reduction. S&P said it has not reviewed the full implications of a purchase of Texas Genco on Reliant’s ratings.

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