“This article appeared in today’s Houston Chronicle…
Bid to exit credit deal would create electric providers
Reliant Energy has asked state regulators to let it create two new retail electric providers as it unwinds a credit agreement with Merrill Lynch and prepares for a possible sale of some or all of the company.

In filings with the Texas Public Utility Commission and the secretary of state, Reliant said it wanted to create the two businesses “to transition some or all Reliant customers” to facilitate the end of the Merrill Lynch agreement.

Merrill cancellation Late last month Reliant announced the cancellation of the agreement, which allowed Reliant to purchase power for its retail customers with the backing of Merrill Lynch’s investment-grade credit rating. Lost sales due to Hurricane Ike-related power outages and a failure to hedge adequately against falling power prices would have put Reliant in default of an income-related covenant in its arrangement with Merrill Lynch.

In its place Reliant negotiated a $350 million investment from private equity firm First Reserve and a $650 million loan from Goldman Sachs at rates that analysts said were far more expensive than the Merrill deal.

Reliant said it was cutting back its commercial and industrial retail business so it wouldn’t need to carry as much collateral, and later it said it was seeking “strategic alternatives,” which typically means looking to sell all or part of the company.” – Houston Chronicle