1126294--2/28/2007--RELIANT_ENERGY

related topics

{operation, natural, condition}

{competitive, industry, competition}

{system, service, information}

{financial, litigation, operation}

{cost, operation, labor}

{cost, contract, operation}

{condition, economic, financial}

{debt, indebtedness, cash}

{cost, regulation, environmental}

{interest, director, officer}

{regulation, government, change}

{gas, price, oil}

{product, candidate, development}

Risks Related to the Retail and Wholesale Energy Industries The financial results of our wholesale and retail energy segments are subject to market risks beyond our control. The markets in which we operate are relatively immature markets that are characterized by elements of both deregulated and regulated markets. Changes in the regulatory environment in which we operate could adversely affect the cost, manner or feasibility of conducting our business. We depend on sources, facilities and systems that we do not own or control for our fuel and fuel supply and to deliver electricity to and bill our customers. Any disruption in these sources, facilities or systems could have an adverse effect on our business. The operation of generation facilities involves significant risks that could interrupt operations and increase our costs. Our business operations expose us to the risk of loss if third parties fail to perform their contractual obligations. Our costs of compliance with environmental laws are significant and can affect our future financial results. Failure to obtain or maintain any required permits or approvals could prevent or limit us from operating our business. Significant events beyond our control, such as hurricanes and other weather-related problems or acts of terrorism, could have a material adverse effect on our businesses. Risks Relating to Our Texas Retail Operations Merrill Lynch provides credit support for our Texas retail business. We depend on third parties to provide electricity to supply our Texas retail customers. Initiatives undertaken by the PUCT may negatively impact the wholesale cost of power. Rising power supply costs could adversely affect the financial performance of our Texas retail electric operations. We may lose further market share in the Houston retail electricity market, which is a significant contributor of income to our consolidated results. Our ability to set rates at market prices in Texas may be constrained by new legislative restrictions. We depend on the ERCOT ISO to communicate operating and system information in a timely and accurate manner. Corrections to prior estimated billing and other information can have an impact on our future reported financial results. We could be liable for a share of the payment defaults of other retail electric providers within the ERCOT market. Risks Related to Our Company Our borrowing levels, debt service obligations and restrictive covenants may adversely affect our business. We are vulnerable to reductions in our cash flow. Our hedging and other risk management activities may not work as planned. Changes in the wholesale energy market or sales of generation assets could result in impairments. Lawsuits and regulatory proceedings could adversely affect our business. We have entered into outsourcing arrangements with third party service providers. In addition, our operations are highly dependent on computer and other operating systems, including telecommunications systems. Any interruptions in these arrangements or systems could significantly disrupt our business operations. If we acquire or develop additional generation assets, or dispose of existing generation assets, we may incur additional costs and risks.

Full 10-K form ▸

1126294--2/28/2007--RELIANT_ENERGY_INC