Posted on 07/06/2002 12:59:00 AM PDT by lewislynn
July 6, 2002, 1:01AM
Reliant Energy has reduced its reported revenue for the years 1999-2001 by $7.8 billion to exclude the sham energy trades the company admitted to earlier this year, according to a filing Friday with federal regulators.
Reliant Resources, the unregulated subsidiary of Reliant Energy, also restated its revenues for the same three years, trimming off $8 billion in reported revenues. Reliant Resources is under investigation by the Securities and Exchange Commission for the phony trades used to inflate its revenues and trading volumes.
Round-trip trades involve a company buying and selling the same amount of a commodity.
Other companies have admitted conducting such trades but did not record them on their books. Reliant Resources is the only one that has conceded it booked the trades as revenue in its reports to the SEC.
"The personnel who effected these transactions apparently did so with the sole objective of increasing volumes," according to the Reliant filing.
Reliant Resources' top two trading executives resigned following the admission of the trades, which also forced the company to cancel a $500 million bond offering, even though it had buyers already lined up for the debt sale.
Reliant Energy previously reported $15.2 billion in revenues in 1999, $29.3 billion in 2000 and $46.2 billion in 2001. On Friday, the company restated its revenues to $13.79 billion in 1999, $28.26 billion in 2000 and $40.81 billion in 2001.
It also restated its expenses for the same three-year period, decreasing its expenses from $13.9 billion to $12.5 billion in 1999, $27.5 billion to $26.4 billion in 2000 and $44.2 billion to $38.3 billion in 2001.
Reliant Resources reduced 2001 revenue by 15 percent to $31.1 billion from $36.5 billion. It adjusted 2000 revenue by 5.4 percent to $18.7 billion from $19.8 billion, and 1999 revenue by 18 percent to $6.5 billion from $8 billion, according to filings.
The restatements did not alter either companies' net income for the years in question.
Reliant Energy's shares traded down slightly after the disclosure. The company's shares closed Friday at $15.76, off 5 cents per share in an abbreviated trading session. The stock market overall recorded is 10th-biggest point gain ever Friday.
Reliant Energy is expecting the SEC to grant approval soon for its previously announced separation from Reliant Resources. Reliant Energy, which will be renamed CenterPoint Energy after the separation, owns 83 percent of Reliant Resources.
The amended filing was not technically required to facilitate the approval for the separation, but "it certainly doesn't hurt," Reliant spokeswoman Sandy Fruhman said. "Clearly, we needed to do this."
Reliant Resources is also under formal investigation by the SEC for some accounting issues related to natural gas and power purchases. The company booked them as hedges that could record gains on the deal over several years when it should have booked them as "mark-to-market" profits that are reported immediately.
The U.S. Attorney's Office is also investigating the sham trades. The company has said it is cooperating with all the investigations.
Reliant Resources officials said recently that they do not believe the SEC's investigation will keep the agency from approving Reliant Resources' separation from Reliant Energy.
Reliant Resources shares closed Friday at $8.60, down 5 cents per share.
So in 2001 whether there was a shortage or not, (one of possibly many companies) Reliant had over 5 billion dollars in electricity jamming the grid(s) going nowhere except up in price and fraudulently inflating their revenue/ volume picture for the purpose of duping investors....
These would be the same companies who expect we should trust with "deregulation"?
phantom juice from phantom trades certainly didn't jam any grid
as for prices, we don't know what the prices of the fake trades were (except that they were the same on both the buy and sell sides of each fake trade)
nor do we know whether the fake trade prices were higher than the prices of legitimate trades taking place at about the same time
nor do we know if the price of any fake trade was disclosed to other market participants, as the alleged purpose was to artificially inflate revenue
if nobody else in the market knew about the fake trades, or if the trades were at legitimate market prices, then the only effect they had was to bloat the revenue numbers of each company involved in each fake trade
but, those are a couple of very big ifs, as the same clowns who thought it would be a bright idea to fake revenue might also have thought it a good idea not only to do the trades at higher prices than would have otherwise prevailed, but also to make sure that everybody else in the market knew about it
if the details of these trades ever see the light of day, they could be either very boring or very damning
I will have to admit that probably there has been as much fraud involved with government securities as private ventures. Politicians uttering pronouncements on the huge surplus developing while the debt kept rising probably encouraged private companies to start cooking their books.
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Round-trip trades involve a company buying and selling the same amount of a commodity.
It wasn't phantom juice Mr. apologist for fraud. If it was "phantom juice" the charges would be even worse.
That's right, and there is NO market truly "deregulated" especially in energy.
Republicans like to use "deregulation" in the same way the Democrats use "to save Social Security" or "it's for the children"...
the trades were faked, no juice moved because of them, and the facts, or rather the lack of facts, i pointed out simply mean that we will have to wait to find out whether their accounting fraud had any effect on prices
Round-trip trades involve a company buying and selling the same amount of a commodity
It wasn't phantom juice Mr. apologist for fraud.
If it was "phantom juice" the charges would be even worse
it really is amusing to watch people yap about stuff they have no clue about, and your comments clearly demonstrate that you know next to nothing about
1) the wholesale electricity market
2) what reliant was up to
3) commodity trading in general
but, your four ridiculous assertions need to be demolished lest any future reader be left with the mistaken impression that they have any merit whatsoever
first, you seem to be laboring under the delusion that these trades were for actual power which was bought, paid for, received, stored, and then turned around and sold back to and delivered to the original party, "jamming the grid(s)"
beyond the fact that this is impossible as electricity isn't stored except in relatively small quantities and we're talking about BILLIONS of dollars worth of juice, you're obviously unaware that these fake trades were all for FUTURE DELIVERY in the over-the-counter markets developed and run by dynergy, enron, reliant and others, and no grid has ever been jammed by ELECTRICITY WHICH HAS NOT YET BEEN GENERATED
they were all jockeying for position as either the largest trader or the largest marketplace on the block (or both), and these bogus trades, each comprised of simultaneous purchases and sales with the same counterparties at the same prices for the same quantities, inflated their trading volumes as well as their revenues
second, not only was the juice phantom, the money involved was also phantom as NO MONEY EVER CHANGED HANDS in any of these trades, the companies involved all accounted for this stuff on an accrual basis, and all that these trades created were a bunch of book entries netting out to zero
third, as far as any charges go, not only are there none as of yet for the bogus trades themselves, the only probable potential charges by the s.e.c. are for securities law violations relating to material misstatements and fraud for putting out bogus revenue figures
the status of wash sales in the over-the-counter energy markets (which markets are specifically exempt from the commodity exchange act) is unclear, and the fake sales themselves may ultimately turn out to have been entirely legal
fourth, as previously mentioned, the full details of these trades may be boring OR damning, which isn't an apology for fraud or anything else, merely an observation
it will probably be boring, with the purpose of puffing up trading volume for bragging rights, and bloating revenue to prop up share prices and make selling new debt securities easier and cheaper, and not to manipulate the price of electricity in california or anywhere else
in fact, cms is one of the bigger known fake traders and they have said that none of their fake trades involved california
california prices didn't need any help to rise, they already had severe gas pipeline bottlenecks to go along with their severe generation capacity problems
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