Houston-based Reliant Resources said Friday it has decided to leave the financial gas trading business after it incurred an estimated $80 million pre-tax loss when it closed trading positions that were battered by high prices in late February.

“While this loss resulted from unprecedented market volatility, its magnitude is inconsistent with our desired risk profile and led to our decision to exit the proprietary trading business,” said Reliant CEO Steve Letbetter.

In December, Reliant’s financial gas trading desk carried a spread position that included a short position for March gas deliveries and a long position for April gas deliveries, which were within the company’s authorized risk level. But “natural gas market conditions changed dramatically” during the last weekend of February, with the Nymex March contract rising $2.53/MMBtu on (Monday) Feb. 24 from Friday’s closing price, the company said. Reliant “closed these positions, resulting in a trading loss of approximately $80 million pre-tax.”

But on the plus side, Reliant reported that some of its businesses were affected positively by the higher gas prices. Its unhedged coal-fired generation capacity in the Northeast should continue to benefit from higher power prices stemming from the strong gas prices, it said.

Considering all factors, the company noted it was revising its 2003 earnings guidance to between 80 cents and $1 a share, excluding the accrual for payment to CenterPoint Energy, the impact of transitioning from mark-to-market to accrual accounting, and the loss on the sale of its European business.

Reliant estimated its domestic margin and collateral positions total approximately $700,000, up by $100,000 from late January due to recent commodity price volatility. The company said it currently has about $800,000 of additional available liquidity to meet additional posting requirements.

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