Reliant Resources Inc. on Thursday reported even deeper losses in this year’s first quarter net income than in last year’s due to the poor performance of its wholesale energy trading business and the financial effect of the planned sale of its European energy operations.

The Houston-based electricity and energy services supplier posted a net loss of $462.4 million, or $1.59 a share, for the three-month period on revenues of $2.54 billion, compared to a net loss of $137.4 million, or 48 cents a share, on revenues of $1.65 billion for the first quarter of 2002. Reliant said its loss from continuing operations in the first quarter was $56 million, or 19 cents a share.

The results included a loss before interest and taxes of $10 million in Reliant’s trading business, compared to earnings before interest and taxes (EBIT) of $115 million for the first quarter of last year. The decline reflected significantly lower trading margins, including a previously disclosed trading loss of approximately $80 million, continued weakness in the wholesale energy markets and hedge ineffectiveness losses, the company said.

The dismal performance also reflected a $384 million income loss from the discontinued operations of Reliant’s European energy business, which it plans to sell to ny Nuon, a Netherlands-based electricity distributor. The company said it began reporting the European business as a discontinued operation in February. It expects to close the transaction this summer.

Despite the lackluster results, Reliant Chairman Joel Staff was upbeat about the progress the company made during the first quarter. “We closed a new financing package [for $6.2 billion, maturing in 2007] that has stabilized the company’s capital structure, and we are now positioned to transition our capital structure to one that reflects our business profile. The agreement to sell our European business and the decision to discontinue proprietary trading were important steps in our ongoing effort to sharpen our strategic focus,” he said.

“Our top priorities going forward will be to achieve resolution of outstanding legal and regulatory issues, and to accelerate the momentum we have begun to see in regaining our corporate credibility.”

For 2003, Reliant said its expects income from continuing operations to be between 50 cents and 70 cents a share. This excludes the impact of transitioning from mark-to-market to accrual accounting (15 cents a share); a $47 million accrual for payment to CenterPoint Energy under Texas’ deregulation legislation (10 cents a share); and the reversal of California-related reserves (15 cents a share).

Reliant’s retail energy business was the only one to finish in the black for the quarter, turning in EBIT of $23 million. But this was significantly below the $46 million of EBIT that was reported in the first quarter in 2002. Retail energy’s first quarter EBIT would have been significantly higher ($70 million), if it hadn’t been for the $47 million accrual for payment to CenterPoint Energy, the company said.

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