Reliant Energy Inc. and Mirant Corp., both caught up in the California energy saga, Tuesday reiterated their earnings forecasts for the rest of the year, indicating that despite the continuing charges, countercharges, lawsuits and falling stock prices, they will meet or beat Wall Street estimates.

Reliant Energy, headquartered in Houston, held a day-long analyst meeting Tuesday, calling upon executives from every sector of its regulated and unregulated business units to offer insight into the diversified company’s future. Despite the ongoing uncertainty in the western market and declining prices in Reliant units’ stock prices, executives said the outlook remains unchanged for both its regulated and unregulated units.

However, Joe Bob Perkins, president of Reliant Resources, the unregulated wholesale arm, warned that the soft price caps adopted by the Federal Energy Regulatory Commission last week will do nothing to encourage more generation construction in the short term. In fact, said Perkins, he would not be surprised to see delays and even cancellations of power projects throughout the West because of uncertain prices and the strange political environment.

Reliant Chairman Steve Letbetter added that he was encouraged that FERC’s current negotiations over outstanding receivables and refunds have taken “politics out of the discussion,” which should lead to a probable solution.

With much of the morning’s discussions focused on California and FERC’s price caps, Perkins said the country may be focused on the West Coast, but predicted that western facilities won’t be the only ones affected by FERC’s recent actions. The entire industry faces uncertainty, he said, especially those with peaking plants on the drawing board and not yet constructed. Because the peakers are more expensive to run and used only when extra supply is required, Perkins said he would not be surprised to see some projects abandoned.

Reliant Energy CFO Stephen Naeve also suggested that as majority stockholder, it may buy back shares of Reliant Resources because the stock now is below its initial price. Reliant Resources’ Initial Public Offering lit up the New York Stock Exchange just two months ago as the most active stock in heavy trading (see Daily GPI, April 30; May 2). It opened its first day of trading at $30, and closed at $33.02, a gain of 10%. Yesterday, the stock mostly dropped throughout the day, closing up slightly at $24.48. It has been as high as $37.50 since the IPO.

On the possibly buying back shares of the wholesaler, Naeve said the idea had “crossed our mind” because it would be a good investment. “We’re definitely giving it a thought.” However, he admitted he was not sure if the stock could be bought after only debuting in April, and said Reliant would need to consult with its legal team. Reliant Energy sold nearly 18% of Reliant Resources to investors, and had planned to spin off the rest by the end of this year.

Despite the fact that Reliant Energy’s stock, which closed yesterday at $30.50, also has fallen following FERC price caps (see Daily GPI, June 20), executives expect their profits will not be affected by the FERC decision. Notably, Reliant Resources has already sold all of its power for the third quarter of 2001, and has sold almost half of its generation for next year, Perkins said.

“With five months of actual figures, and with hedges for the remainder of the year, I can tell you, we will make our numbers in 2001…from the western part,” Perkins said.

First Call/Thomson Financial predicts Reliant Resources’ earnings per share to range between $1.57 and $1.70, and Perkins said the profit should be $1.65 a share this year and $2.08 in 2002. Reliant Energy will have earnings of about $1.85 a share for 2001 and $1.03 a share in 2002, said Naeve, who said the decline would come from accounting and other changes.

Naeve said that Reliant Energy, which continues to be regulated under Texas’ deregulation law, also will be renamed in 2002, and will sell about 14,000 MW of its Texas generating capacity to become a transmission and distribution company.

Reliant Resources also is considering establishing a presence in the Northwest that would use existing assets from California and other western states. Along with an expanded western market, Perkins said Reliant is considering Florida as a possible short-term market.

Because of the low natural gas prices, Perkins said Reliant has been buying gas on the open market for the past three weeks. He said that could change if prices come up as expected in July.

Atlanta-based Mirant, which has seen its stock steadily falling since FERC ordered price caps, also reported Tuesday that it will hit its earnings marks for the year.

“Despite recent rulings by the FERC concerning energy price mitigation, we remain on target to meet our previously announced earnings guidance,” said CEO Marce Fuller in a statement. In late April, Mirant said it would earn $1.90 a share this year with a profit increase of up to 25% in 2002. First Call predicts the company will make $0.45 a share in the second quarter and $1.93 for 2001. First Call estimates 2002 earnings to finish at $2.37.

Mirant completed its spin-off from Southern Co. in April (see Daily GPI, April 4), and is completely independent. It develops, constructs, owns and operates power plants and sells wholesale electricity, natural gas and other energy commodities. Because of its California-related problems, Mirant also is pulling back from expansion. It announced in May it would delay construction on its approved 530 MW expansion at its Contra Costa, CA power plant because of market uncertainty (see Daily GPI, June 4).

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