SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): OCTOBER 7, 1999
RELIANT ENERGY, INCORPORATED
(Exact name of registrant as specified in its charter)
TEXAS 1-3187 74-0694415
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1111 LOUISIANA
HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 207-3000
ITEM 5. OTHER EVENTS.
CLOSING OF THE FIRST PHASE OF THE UNA ACQUISITION
On October 7, 1999, Reliant Energy, Incorporated (the "Company") completed
the first phase of its acquisition of the Dutch power generation company N.V.
UNA ("UNA"). In this first phase of the acquisition, a subsidiary of the
Company purchased 40 percent of the capital stock of UNA for $780 million, which
included $354 million in cash and a $426 million five year promissory note. The
promissory note must be prepaid in certain circumstances. The Company, through
the subsidiary, will increase its ownership interest to 52 percent of the
capital stock of UNA by December 1, 1999 and will purchase the remaining shares
of UNA on March 1, 2000. The total purchase price of the acquisition is
approximately $2.4 billion. All purchase price obligations are denominated in
Dutch guilders. The amounts shown above assume an exchange rate of 2.0565 NLG
per U.S. dollar (the exchange rate on October 7, 1999).
In connection with obtaining the necessary Dutch regulatory approvals, the
Company, UNA and the other shareholders of UNA agreed to revise the terms of
their original agreement providing that if UNA's stranded costs exceeded NLG 500
million, the purchase price would be reduced. Any downward adjustment would
have been limited to approximately NLG 1.4 billion. Under the amended
agreement, the other UNA shareholders are responsible for up to NLG 1.9 billion
of UNA's stranded costs. Accordingly, the purchase price increased by NLG 500
million.
CLOSING OF THE ZENS OFFERING
On September 21, 1999, the Company issued 17.2 million of its 2.0% Zero-
Premium Exchangeable Subordinated Notes due 2029 (the "ZENS") having an original
principal amount of $1.0 billion. The cash amount payable upon maturity,
redemption or exchange of the ZENS is based on the value of the then-current
price of a share of common stock of Time Warner Inc. ("Time Warner"). The amount
payable upon the maturity of the ZENS will be no less than the original
principal amount adjusted for changes in the Time Warner common stock dividend
rate. Of the $980 million net proceeds from the offering, the Company used $443
million for general corporate purposes, including the repayment of the Company's
indebtedness. The Company used $537 million of the net proceeds to purchase 9.2
million shares of Time Warner common stock. This Time Warner common stock is
expected to be held to provide an economic hedge against increases in the fair
value of the ZENS obligation for a portion of the ZENS.
CONVERSION OF THE TIME WARNER PREFERRED STOCK INTO TIME WARNER COMMON STOCK
On July 6, 1999, the Company exercised its option to convert its 11 million
shares of Time Warner convertible preferred stock into 45.8 million shares of
Time Warner common stock. Prior to the conversion, the Company's investment in
the Time Warner preferred stock was accounted for under the cost method.
Effective on the conversion date, the shares of Time Warner common stock were
classified as trading securities under SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" and an unrealized gain was recorded
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in the amount of $2.38 billion ($1.55 billion after tax) to reflect the
cumulative appreciation in the fair value of the Company's investment in Time
Warner securities. As a result of the conversion and the classification of the
shares of Time Warner common stock as trading securities, the Company will now
record changes in the market price of the Time Warner common stock and the
related changes in the market value of the Company's unsecured 7% Automatic
Common Exchange Securities (the "ACES") in its statement of consolidated
operations. For the period from July 1, 1999 to the conversion date of July 6,
1999, unrealized losses on the ACES were $35 million ($23 million after tax).
Prior to the issuance of the ZENS on September 21, 1999, the Company owned
8.0 million shares of Time Warner common stock that were not needed to
economically hedge its ACES obligation. For the period from July 6, 1999 to the
ZENS issuance date, losses (due to the decline in the market price of the Time
Warner common stock during such period) on the shares of Time Warner common
stock which will not be used to settle the ACES in July 2000 were $122 million
($79 million after tax). The shares of Time Warner common stock which will not
be used to settle the ACES in July 2000 are expected to be held to provide an
economic hedge against increases in the fair value of the ZENS obligation for a
portion of the ZENS.
FILING OF APPLICATION FOR FINANCING ORDER
Reliant Energy HL&P is preparing to file an application with the Public
Utility Commission of Texas requesting a financing order authorizing the
issuance by a special purpose entity organized by the Company, pursuant to the
Texas Electric Choice Plan, of approximately $1 billion of transition bonds
relating to Reliant Energy HL&P's generation-related regulatory assets. Payments
on the transition bonds will be made from non-bypassable transition charges
assessed to Reliant Energy HL&P's transmission and distribution customers. The
offering and sale of the transition bonds will be registered under the
Securities Act of 1933. The transition bonds will only be offered and sold by
means of a prospectus. This report does not constitute an offer to sell or the
solicitation of an offer to buy nor will there be any sale of the transition
bonds in any state in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of such state.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RELIANT ENERGY, INCORPORATED
Date: October 15, 1999 By: /s/ Mary P. Ricciardello
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Mary P. Ricciardello
Senior Vice President and Comptroller
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