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Reliant restates 2001 earnings due to accounting changes

Reliant said it would restate its second and third quarter 2001 earnings, after an internal review found a number of transactions that were initially marked down as cashflow hedges failed to meet financial accounting standards' hedging criteria. Instead, the transactions will be retrospectively marked-to-market, meaning the company will realise earnings in 2001 that it previously had expected to recognise in 2002 and 2003. The company also said it would delay the release of its fourth quarter earnings expected on February 5 until the restatement is complete.

The errors were found by Houston-based Reliant’s accounting department as it prepared end-of-year financial information. The company said it has informed its auditors of the change.

A Reliant spokesman said that in the wake of the Enron debacle, Reliant is going over all its accounting procedures carefully. The company does not expect to announce any major surprises as a result of its review, he added.

But the company has marked down its expected 2002 earnings per share to $1.80-$2.00 from its previous guidance of $2.05-$2.15. Reliant said the revised earnings estimates reflect both the current outlook for its business and steps taken to strengthen its balance sheet in response to tighter rating agency standards for liquidity and credit criteria for merchant energy companies.

Reliant also said it would not sell off its European electricity generating operations as it had previously intended. It said it had not received an acceptable offer for its 3,500Mw generation business based in the Netherlands.

The company cited dramatic changes in the European electricity sector, such as the slowing pace of deregulation and the impact of Enron’s bankruptcy, as factors behind its decision. Reliant said it plans to expand its energy trading operations in northwest Europe.

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