Investor

Reliant officials said the credit rating downgrade of subsidiary Reliant Resources (RRI) to junk status by Moody’s Investor Service Wednesday would not impact the proposed spin-off of RRI later this summer. The spin-off was approved Wednesday as a tax-free action by the Internal Revenue Service (IRS), but must be completed in six months. Reliant said the downgrade was inappropriate but expected given the state of the industry. Reliant shares fell 5% Wednesday to $10.06, and RRI shares tumbled 19% to $4.62.

Looking to shore-up investor support and appease credit rating agencies, El Paso Corp. last week reiterated its restructuring commitment, along with its mission of focusing on its global liquefied natural gas (LNG) and petroleum business (see NGI, June 3).

Williams took the next step last week in a process to restore its financial strength and investor confidence. The company announced it was putting its Memphis and Alaska refineries and related petroleum assets up for sale. Williams estimates the transactions will add up to $1 billion and be concluded by the end of the year.

Morgan Stanley initiated research coverage of Dynegy Wednesday with an “equal weight” rating and a 12-month stock price target of $15. Dynegy shares, it said, have the potential to ratchet up or down in the short term. “At $9 we see $2 to $3 of downside, with $6 to $7 of upside. If Dynegy survives, as we expect it to, the return to investors should be exceptional, in our view.”

Looking to calm investor and credit rating agency jitters about energy trading operations, Aquila, Inc. on Friday said that it estimates that 70% of its 2002 operating earnings and 75% of its 2003 operating earnings will come from the more traditional side of its business mix. The company also said it intends to maintain its dividend at $1.20 per share.

Despite NiSource Inc.’s strong earnings posted for the fourth quarter and full year 2001, Moody’s Investor Services on Friday downgraded the company’s senior debt to Baa3 and its subsidiaries to Baa2, noting that the “outlook remains negative.” Moody’s said the downgrades reflect higher-than-expected debt levels and weaker-than-expected cash flow from the company’s subsidiaries.

Quest Resource Corp., a Kansas-based independent, has retained Carl Thompson Associates to implement a national investor relations program in the next 12 months. Quest Resource is primarily involved in the exploration, production and transportation of natural gas in a 500-square-mile area of southeast Kansas, operating a 150-mile natural gas pipeline network to serve local and interstate markets. Currently, Quest is producing approximately 2,000 Mcf/d from 40 wells. It plans to drill between 40 and 50 more wells a year in the next several years.

In the first of sporadic teleconferenced “Afternoons with Archie,” Conoco CEO Archie Dunham on Thursday told the investor audience that while he found current natural gas prices “disconcerting,” he was pleased about the electric demand on the East Coast this week and continued to remain “very bullish” on natural gas in the immediate and near terms. Dunham, who had no planned agenda during the 20-minute call, also said that the company’s second quarter earnings had made him “cautiously optimistic” about the rest of the year.

With the convergence of regulatory, political and financial solutions for California’s investor-owned utilities heating up Monday in the state legislature and regulatory halls, questions about additional retail rate increases are being raised. Officials with Gov. Gray Davis are going out of their way to squash the notion that any more increases are imminent, on heels of 40% hikes earlier this year that just became effective in June.