HOUSTON, Sept. 24 /PRNewswire-FirstCall/ -- Reliant Energy announced today that it has entered into an agreement with Merrill Lynch to create a new credit-enhanced retail structure.
Under the terms of the agreement, Merrill Lynch will guarantee the supply purchases and related transactions of Reliant's retail business. As a consequence, Reliant will no longer be required to post collateral for its retail supply purchases. In addition, Merrill Lynch will provide a credit facility to finance some of the working capital needs of the retail business.
"This agreement is an innovative and simple solution to reduce liquidity requirements and substantially eliminate collateral postings for the retail business," said Joel Staff, Reliant Energy's chairman and chief executive officer. "Through this arrangement, Reliant will significantly improve the flexibility of its retail business and is now in position to substantially surpass the $1 billion collateral reduction target that we set at the beginning of the year."
When the transaction closes, Reliant expects substantially all of the collateral it has posted in connection with its retail business to be returned over a period of several weeks, which should result in a gross debt reduction of approximately $500 million.
The transaction, which is contingent on the receipt of consents from certain of the company's bondholders and meeting the closing conditions, which include a series of financing activities related to its bank credit facilities, is expected to close in the fourth quarter of 2006.
Reliant Energy, Inc. based in Houston, Texas, provides electricity and energy services to retail and wholesale customers in the United States. In Texas, the company provides service to approximately 1.9 million retail electricity customers, including residential, small business and commercial, industrial, governmental and institutional customers. Reliant also serves commercial, industrial, governmental and institutional customers in the PJM (Pennsylvania, New Jersey and Maryland) market.
The company is one of the largest independent power producers in the nation with approximately 16,000 megawatts of power generation capacity across the United States. These strategically located generating assets utilize natural gas, fuel oil and coal. For more information, visit http://www.reliant.com/corporate.
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