UPDATE 1-Reliant cuts profit forecast, gets new cash
NEW YORK, Sept 29 (Reuters) - U.S. power company Reliant Energy (RRI.N) on Monday cut its 2008 profit forecast because of Hurricane Ike and lower commodity prices and said it had obtained $1 billion in new capital to support its business.
The $1 billion in new capital, along with $1.2 billion in existing liquidity, will be used as collateral on existing contracts that were covered under a "credit-enhanced retail structure" deal with Merrill Lynch. That deal was being unwound, Reliant said.
The new $1 billion in financing comes from a $650 million term loan from GS Loan Partners and sale of $350 million of convertible preferred stock to private equity firm First Reserve Corp.
"Certainly, conditions for raising additional capital are not favorable, however, on balance we believe these steps are in our best long-term interests," President and Chief Executive Mark Jacobs said in a statement.
Merrill Lynch MER.N was among the number of financial institutions to have been nearly toppled by the expanding credit crisis and agreed earlier this month to be purchased by Bank of America (BAC.N).
Hurricane Ike swept across Houston earlier this month, cutting electricity to millions of households and causing widespread damage to the power grid.
Reliant, an independent power producer with more than 15,000 megawatts of electricity generating capacity, lowered its forecast for its retail margin for 2008 by $300 million to $350 million from its previous forecast of $672 million.
The company's 2008 open wholesale margin will be about $519 million versus the $999 million it had forecast.
That wholesale margin forecast was lowered because of the sharp decline in the natural gas prices since June, when the previous forecast was set, the company said. (Reporting by Matt Daily, editing by Leslie Gevirtz)
