Reliant Energy Reports Third Quarter Results

HOUSTON, Nov. 9 /PRNewswire-FirstCall/ -- Reliant Energy, Inc. reported a loss from continuing operations before income taxes of $254 million for the third quarter of 2006, compared to a loss from continuing operations before income taxes of $464 million for the same period of 2005. The reported numbers include net losses from unrealized energy derivatives of $355 million and $354 million, and a $35 million and $351 million charge for western states settlement for 2006 and 2005, respectively.

Open EBITDA (earnings before interest, income taxes, depreciation and amortization) was $461 million for the third quarter of 2006, compared to $551 million for the third quarter of 2005. Improved retail adjusted gross margin, driven by higher unit margins in all customer classes, was partially offset by lower wholesale open gross margin and increased expenses. Adjusted EBITDA, which includes the effect of historical wholesale hedges and gains on sales of emission allowances, was $338 million for the third quarter of 2006, compared to $462 million for the third quarter of 2005. The reduction to adjusted EBITDA was primarily related to the same factors described above for open EBITDA and lower net gains on sales of emission allowances, partially offset by reduced losses related to historical wholesale hedges.

"Our businesses delivered strong third quarter results, and we have completed or are on track to meet or exceed our priorities for 2006," said Joel Staff, chairman and chief executive officer. "Notably, our 2007 and 2008 outlook for the wholesale business has improved slightly. Improvements in heat rate, a decline in coal prices, a new capacity contract for one of our power plants and progress on the development of a capacity market in PJM have more than offset a decline in forward power prices," Staff added.

Reliant Energy, Inc. reported a loss from continuing operations before income taxes of $296 million for the first nine months of 2006, compared to $413 million for the same period of 2005. The reported numbers include net losses from unrealized energy derivatives of $280 million and $91 million, and a $35 million and $351 million charge for western states settlement for 2006 and 2005, respectively. The first nine months of 2005 also included an $8 million charge related to the settlement of shareholder class action lawsuits.

Open EBITDA was $764 million for the first nine months of 2006 compared to $786 million for the same period of 2005. Adjusted EBITDA was $588 million for the first nine months of 2006 compared to $649 million for the same period of 2005. The decline in adjusted EBITDA was primarily due to higher expenses, higher losses related to historical wholesale hedges and lower wholesale open gross margin. These were partially offset by improved retail adjusted gross margin and higher gains on sales of emission allowances.

During the first nine months of 2006, the company reported cash provided by continuing operations from operating activities of $40 million, compared to $519 million use of cash in continuing operations from operating activities for the same period of 2005. Free cash flow from continuing operations after emission allowances activity was $109 million for the first nine months of 2006, compared to $291 million for the same period of 2005. The declines in free cash flow from continuing operations after emission allowances activity were primarily due to changes in working capital, partially offset by increased sale proceeds from and lower purchases of emission allowances.

OUTLOOK

Reliant Energy's outlook for open EBITDA is $856 million, $1,051 million and $1,190 million for the years ending December 31, 2006, 2007 and 2008, respectively. Adjusted EBITDA, which includes the impact of historical wholesale hedging activity and gains on the sales of emission allowances is $618 million, $825 million and $1,090 million for the same periods. The outlook for free cash flow from continuing operations after emission allowances activity is $99 million, $154 million and $336 million for the years ending December 31, 2006, 2007 and 2008, respectively.

This outlook is based on forward commodity prices on September 22, 2006 and assumptions and estimates by Reliant Energy.

Open EBITDA Outlook Reconciliation ($ millions) 2006E 2007E 2008E Income (loss) from continuing operations before income taxes (a) ($119) $431 $403 Delivery of product underlying the unrealized (gains) losses on energy derivatives (50) (321) (54) Depreciation and amortization 378 393 446 Interest expense, net 409 322 295 Adjusted EBITDA (a) $618 $825 $1,090 Historical wholesale hedges (b) 397 226 100 Gains on sales of emission allowances (a),(c) (159) -- -- Open EBITDA (a) $856 $1,051 $1,190 (a) Certain factors that could affect GAAP financial measures are not accessible on a forward-looking basis, but could be material to future reported earnings. (b) Historical wholesale hedges were entered into to primarily hedge the economics of our wholesale operations. These amounts primarily relate to settlements of forward power and fuel hedges, long-term tolling purchases, long-term natural gas transportation contracts, storage contracts and our legacy energy trading. These amounts are derived based on methodology consistent with the calculation of open EBITDA through September 30, 2006 and forward commodity prices as of September 22, 2006. (c) Sales through September 30, 2006. Free Cash Flow from Continuing Operations Before and After Emission Allowances Activity Outlook Reconciliation ($ millions) 2006E 2007E 2008E Operating cash flow from continuing operations (a) $1,165 $458 $771 Change in margin deposits (b) (1,284) --- --- Western states and Cornerstone settlement payments 160 35 (c) --- Capital expenditures (122) (253) (280) Free cash flow from continuing operations before emission allowances activity ($81) $240 $491 Proceeds from sales of emission allowances (b),(d), (e) 205 --- --- Purchases of emission allowances(e) (25) (86) (155) Free cash flow from continuing operations after emission allowances activity(e) $99 $154 $336 (a) Outlook assumes no changes in working capital. (b) Certain factors that could affect GAAP financial measures are not accessible on a forward-looking basis, but could be material to future reported earnings. (c) In October 2006, we reached a tentative settlement of some class action natural gas cases. We expect to pay this amount in the first quarter of 2007. (d) Sales through September 30, 2006. (e) Consistent with SEC guidance to the industry, purchases and sales of emission allowances are classified as cash flows from investing activities for GAAP purposes. NON-GAAP FINANCIAL MEASURES

This press release and the attached financial tables include the following non-GAAP financial measures:

Gross margin Adjusted gross margin Open energy gross margin Open wholesale gross margin Open gross margin Adjusted contribution margin Open contribution margin Adjusted other general and administrative expenses EBITDA Adjusted EBITDA Open EBITDA Free cash flow from continuing operations before emission allowances activity Free cash flow from continuing operations after emission allowances activity Adjusted net debt

A reconciliation of these financial measures and the most directly comparable GAAP measures is included above or in the attached financial tables. Additional information regarding these measures, including a discussion of their usefulness and purpose, is included in the Form 8-K furnished along with this press release.

WEBCAST OF EARNINGS CONFERENCE CALL

Reliant Energy has scheduled its third-quarter 2006 earnings conference call for Thursday, November 9, 2006, at 9:00 a.m. CT. Interested parties may listen to a live audio broadcast of the conference call at http://www.reliant.com/corporate. A replay of the call can be accessed approximately two hours after the completion of the call. A copy of the presentation accompanying the call is also available at this Website address.

Reliant Energy, Inc. based in Houston, Texas, provides electricity and energy services to retail and wholesale customers in the United States. In Texas, the company provides service to approximately 1.9 million retail electricity customers, including residential and small business customers and commercial, industrial, governmental and institutional customers. Reliant also serves commercial, industrial, governmental and institutional customers in the PJM (Pennsylvania, New Jersey and Maryland) market.

The company is one of the largest independent power producers in the nation with approximately 16,000 megawatts of power generation capacity in operation across the United States. These strategically located generating assets utilize natural gas, fuel oil and coal. For more information, visit http://www.reliant.com/corporate.

This news release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that contain projections, estimates or assumptions about our revenues, income and other financial items, our plans for the future, future economic performance, transactions and dispositions and financings related thereto. Forward-looking statements relate to future events and anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations or operating results. In many cases you can identify forward-looking statements by terminology such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target" and other similar words. However, the absence of these words does not mean that the statements are not forward-looking.

We have based our forward-looking statements on management's beliefs and assumptions based on information available to management at the time the statements are made. Actual results may differ materially from those expressed or implied by forward-looking statements as a result of many factors or events, including legislative and regulatory developments, the outcome of pending lawsuits, governmental proceedings and investigations, the effects of competition, financial market conditions, access to capital, the timing and extent of changes in commodity prices and interest rates, weather conditions, changes in our business plan and other factors we discuss or reference to in the "Risk Factors" section of our 2005 Form 10-K and the "Management Discussion and Analysis of Financial Condition and Results of Operations" section of our third quarter 2006 Form 10-Q filed with the Securities and Exchange Commission.

Each forward-looking statement speaks only as of the date of the particular statement and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Reliant Energy, Inc. and Subsidiaries Consolidated Statements of Operations (Thousands of Dollars, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 Revenues: Revenues (including $(14,579), $(226,509), $187,320 and $(326,849) unrealized gains (losses) on energy derivatives) $3,305,568 $2,963,021 $8,533,156 $7,111,730 Expenses: Purchased power, fuel and cost of gas sold (including $(340,886), $(127,367), $(467,288) and $235,483 unrealized gains (losses) on energy derivatives) 2,989,956 2,697,009 7,473,913 5,877,446 Operation and maintenance 220,460 178,393 635,990 556,106 Selling and marketing 37,415 25,415 91,738 66,325 Bad debt expense 35,049 22,687 67,909 43,827 Total 3,282,880 2,923,504 8,269,550 6,543,704 Contribution Margin 22,688 39,517 263,606 568,026 Other general and administrative 44,001 50,983 119,248 131,830 Western states settlement 35,000 350,805 35,000 350,805 Gains on sales of assets and emission allowances, net (3,457) (91,874) (159,787) (115,793) Depreciation and amortization 108,256 124,159 279,853 336,530 Total 183,800 434,073 274,314 703,372 Operating Loss (161,112) (394,556) (10,708) (135,346) Other Income (Expense): Income of equity investments, net 1,268 27,029 3,655 23,185 Other, net (163) 62 666 (22,817) Loss Before Interest and Taxes (160,007) (367,465) (6,387) (134,978) Interest expense (100,840) (99,774) (312,446) (293,680) Interest income 6,889 3,228 22,784 15,280 Loss from Continuing Operations Before Income Taxes (253,958) (464,011) (296,049) (413,378) Income tax benefit (100,135) (197,226) (25,886) (155,228) Loss from Continuing Operations (153,823) (266,785) (270,163) (258,150) Income (loss) from discontinued operations (1,340) (3,512) (4,911) 61,655 Loss Before Cumulative Effect of Accounting Change (155,163) (270,297) (275,074) (196,495) Cumulative effect of accounting change, net of tax - - 968 - Net Loss $(155,163) $(270,297) $(274,106) $(196,495) Basic Earnings (Loss) Per Share: Loss from continuing operations $(0.50) $(0.88) $(0.88) $(0.86) Income (loss) from discontinued operations - (0.01) (0.01) 0.21 Cumulative effect of accounting change, net of tax - - - - Net loss $(0.50) $(0.89) $(0.89) $(0.65) Diluted Earnings (Loss) Per Share: Loss from continuing operations $(0.50) $(0.88) $(0.88) $(0.86) Income (loss) from discontinued operations - (0.01) (0.01) 0.21 Cumulative effect of accounting change, net of tax - - - - Net loss $(0.50) $(0.89) $(0.89) $(0.65) Weighted Average Common Shares Outstanding (in thousands): - Basic 307,975 303,043 306,804 301,587 - Diluted 307,975 303,043 306,804 301,587 Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005. Reliant Energy, Inc. and Subsidiaries Results of Operations by Segment - As Reported (Millions of Dollars) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 Change 2006 2005 Change Retail Energy: Revenues $2,571 $2,288 $283 $6,475 $5,309 $1,166 Purchased power 2,473 2,125 348 6,003 4,570 1,433 Gross margin (1) 98 163 (65) 472 739 (267) Operation and maintenance 68 55 13 177 142 35 Selling and marketing 38 25 13 92 66 26 Bad debt expense 34 21 13 70 42 28 Contribution margin - Retail Energy (42) 62 (104) 133 489 (356) Wholesale Energy: Revenues 896 886 10 2,505 2,242 263 Purchased power, fuel and cost of gas sold 679 784 (105) 1,919 1,752 167 Gross margin (1) 217 102 115 586 490 96 Operation and maintenance 151 124 27 458 412 46 Bad debt expense 1 2 (1) (2) 2 (4) Contribution margin - Wholesale Energy 65 (24) 89 130 76 54 Other Operations: Revenues - 1 (1) 1 4 (3) Purchased power, fuel and cost of gas sold - - - - (1) 1 Gross margin (1) - 1 (1) 1 5 (4) Operation and maintenance - - - - 2 (2) Contribution margin - Other Operations - 1 (1) 1 3 (2) Eliminations: Revenues (162) (212) 50 (448) (443) (5) Purchased power, fuel and cost of gas sold (162) (212) 50 (448) (443) (5) Gross margin (1) - - - - - - Consolidated: Revenues 3,305 2,963 342 8,533 7,112 1,421 Purchased power, fuel and cost of gas sold 2,990 2,697 293 7,474 5,878 1,596 Gross margin (1) 315 266 49 1,059 1,234 (175) Operation and maintenance 219 179 40 635 556 79 Selling and marketing 38 25 13 92 66 26 Bad debt expense 35 23 12 68 44 24 Contribution margin - Consolidated 23 39 (16) 264 568 (304) Other general and administrative 44 50 (6) 119 132 (13) Western states settlement 35 351 (316) 35 351 (316) Gains on sales of assets and emission allowances, net (3) (92) 89 (159) (116) (43) Depreciation and amortization 108 124 (16) 280 336 (56) Total 184 433 (249) 275 703 (428) Operating loss (161) (394) 233 (11) (135) 124 Income of equity investments, net 2 27 (25) 4 23 (19) Other, net (1) - (1) - (23) 23 Loss before interest and income taxes (160) (367) 207 (7) (135) 128 Interest expense (101) (100) (1) (312) (293) (19) Interest income 7 3 4 23 15 8 Loss from continuing operations before income taxes (254) (464) 210 (296) (413) 117 Income tax benefit (100) (197) 97 (26) (155) 129 Loss from continuing operations (154) (267) 113 (270) (258) (12) Income (loss) from discontinued operations (1) (3) 2 (5) 62 (67) Cumulative effect of accounting change, net of tax - - - 1 - 1 Net loss $(155) $(270) $115 $(274) $(196) $(78) (1) Gross margin (revenues less purchased power, fuel and cost of gas sold) excludes depreciation, amortization, labor and other product costs. Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005. Reliant Energy, Inc. and Subsidiaries Results of Operations by Segment - Adjusted and Open (Millions of Dollars) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 Change 2006 2005 Change Retail Energy: Gross margin (1) $98 $163 $(65) $472 $739 $(267) Unrealized (gains) losses on energy derivatives 338 181 157 368 (81) 449 Adjusted gross margin - Retail Energy 436 344 92 840 658 182 Operation and maintenance 68 55 13 177 142 35 Selling and marketing 38 25 13 92 66 26 Bad debt expense 34 21 13 70 42 28 Adjusted contribution margin - Retail Energy 296 243 53 501 408 93 Wholesale Energy: Gross margin (1) 217 102 115 586 490 96 Unrealized (gains) losses on energy derivatives 17 173 (156) (88) 172 (260) Changes in California -related receivables and reserves - - - - (2) 2 Historical wholesale hedges 126 181 (55) 335 253 82 Open gross margin - Wholesale Energy 360 456 (96) 833 913 (80) Operation and maintenance 151 124 27 458 412 46 Bad debt expense 1 2 (1) (2) 2 (4) Open contribution margin - Wholesale Energy 208 330 (122) 377 499 (122) Other Operations: Gross margin (1) - 1 (1) 1 5 (4) Operation and maintenance - - - - 2 (2) Contribution margin - Other Operations - 1 (1) 1 3 (2) Consolidated: Adjusted gross margin - Retail Energy 436 344 92 840 658 182 Open gross margin - Wholesale Energy 360 456 (96) 833 913 (80) Gross margin - Other Operations - 1 (1) 1 5 (4) Open gross margin - Consolidated 796 801 (5) 1,674 1,576 98 Operation and maintenance 219 179 40 635 556 79 Selling and marketing 38 25 13 92 66 26 Bad debt expense 35 23 12 68 44 24 Open contribution margin - Consolidated 504 574 (70) 879 910 (31) Adjusted other general and administrative (44) (50) 6 (119) (124)(2) 5 Income of equity investments, net 2 27 (25) 4 23 (19) Other, net (1) - (1) - (23) 23 Open EBITDA $461(3) $551(3) $(90) $764(3) $786(3) $(22) Historical wholesale hedges: Power (104) (224) 120 (284) (321) 37 Fuel 7 26 (19) 19 105 (86) Tolling/other (29) 17 (46) (70) (37) (33) (126) (181) 55 (335) (253) (82) Gains on sales of assets and emission allowances, net 3 92 (89) 159 116 43 Adjusted EBITDA $338 $462 $(124) $588 $649 $(61) Unrealized losses on energy derivatives (355) (354) (1) (280) (91) (189) Western states settlement (35) (351) 316 (35) (351) 316 Changes in California -related receivables and reserves - - - - 2 (2) Settlement of shareholder class action lawsuits - - - - (8) 8 EBITDA $(52) $(243) $191 $273 $201 $72 Depreciation and amortization (108) (124) 16 (280) (336) 56 Interest expense (101) (100) (1) (312) (293) (19) Interest income 7 3 4 23 15 8 Loss from continuing operations before income taxes $(254) $(464) $210 $(296) $(413) $117 (1) Gross margin (revenues less purchased power, fuel and cost of gas sold) excludes depreciation, amortization, labor and other product costs. (2) Adjusted other general and administrative excludes $8 million for settlement of shareholder class action lawsuits for the nine months ended September 30, 2005. (3) Open EBITDA excludes $35 million and $351 million for the Western states settlement for the three and nine months ended September 30, 2006 and 2005, respectively. Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005. Reliant Energy, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Thousands of Dollars) September 30, December 31, 2006 2005 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $66,670 $88,397 Restricted cash 10,409 26,906 Accounts and notes receivable, principally customer, net of allowance of $52,602 and $34,054 1,390,954 1,171,673 Inventory 283,620 299,099 Derivative assets 448,755 725,964 Margin deposits 1,495,326 1,716,035 Accumulated deferred income taxes 333,879 361,547 Prepayments and other current assets 128,462 137,498 Current assets of discontinued operations 6,253 203,332 Total current assets 4,164,328 4,730,451 Property, plant and equipment, gross 7,160,153 7,112,684 Accumulated depreciation (1,381,810) (1,178,624) Property, Plant and Equipment, net 5,778,343 5,934,060 Other Assets: Goodwill 386,594 386,594 Other intangibles, net 433,877 510,582 Derivative assets 258,872 527,799 Prepaid lease 279,085 259,412 Other 329,782 339,112 Long-term assets of discontinued operations - 880,796 Total other assets 1,688,210 2,904,295 Total Assets $11,630,881 $13,568,806 LIABILITIES AND EQUITY Current Liabilities: Current portion of long-term debt and short-term borrowings $483,958 $789,325 Accounts payable, principally trade 794,934 886,965 Derivative liabilities 1,068,776 1,219,954 Margin deposits 15,200 15,588 Other 519,992 397,942 Current liabilities of discontinued operations 24,446 96,456 Total current liabilities 2,907,306 3,406,230 Other Liabilities: Derivative liabilities 567,009 812,695 Other 363,193 389,083 Long-term liabilities of discontinued operations - 779,678 Total other liabilities 930,202 1,981,456 Long-term Debt 4,095,470 4,317,427 Commitments and Contingencies Temporary Equity Stock-based Compensation 1,330 - Stockholders' Equity: Preferred stock; par value $0.001 per share (125,000,000 shares authorized; none outstanding) - - Common stock; par value $0.001 per share (2,000,000,000 shares authorized; 308,424,830 and 304,900,193 issued) 69 66 Additional paid-in capital 5,906,298 5,846,747 Retained deficit (1,972,610) (1,698,504) Accumulated other comprehensive loss (237,184) (284,281) Accumulated other comprehensive loss of discontinued operations - (335) Total stockholders' equity 3,696,573 3,863,693 Total Liabilities and Equity $11,630,881 $13,568,806 Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005. Reliant Energy, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2006 2005 (in thousands) Cash Flows from Operating Activities: Net loss $(274,106) $(196,495) (Income) loss from discontinued operations 4,911 (61,655) Net loss from continuing operations and cumulative effect of accounting change (269,195) (258,150) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Cumulative effect of accounting change (968) - Depreciation and amortization 279,853 336,530 Deferred income taxes (58,324) (177,844) Net changes in energy derivatives 351,711 101,107 Amortization of deferred financing costs 12,101 11,208 Gains on sales of assets and emission allowances, net (159,787) (115,793) Western states settlement 35,000 350,805 Income of equity investments, net (3,655) (23,185) Other, net 12,657 24,960 Changes in other assets and liabilities: Accounts and notes receivable and unbilled revenue, net (187,224) (329,166) Inventory 13,698 (21,224) Margin deposits, net 220,321 (881,568) Net derivative assets and liabilities (127,512) 170,208 Western states and Cornerstone settlement payments (159,885) - Accounts payable 25,712 298,690 Other current assets 14,972 51,546 Other assets (25,598) (62,263) Taxes payable/receivable (8,141) 1,788 Other current liabilities 77,330 (21,140) Other liabilities (3,341) 23,949 Net cash provided by (used in) continuing operations from operating activities 39,725 (519,542) Net cash provided by (used in) discontinued operations from operating activities (45,093) 105,307 Net cash used in operating activities (5,368) (414,235) Cash Flows from Investing Activities: Capital expenditures (63,887) (59,117) Proceeds from sales of assets, net 1,417 149,345 Proceeds from sales of emission allowances 205,186 130,040 Purchases of emission allowances (12,443) (142,794) Restricted cash 16,497 29,593 Other, net 5,750 2,500 Net cash provided by continuing operations from investing activities 152,520 109,567 Net cash provided by discontinued operations from investing activities 967,566 39,112 Net cash provided by investing activities 1,120,086 148,679 Cash Flows from Financing Activities: Payments of long-term debt (331,028) (42,164) Increase (decrease) in short-term borrowings and revolving credit facilities, net (189,364) 227,446 Proceeds from issuances of stock 21,947 25,975 Net cash provided by (used in) continuing operations from financing activities (498,445) 211,257 Net cash used in discontinued operations from financing activities (638,000) - Net cash provided by (used in) financing activities (1,136,445) 211,257 Net Change in Cash and Cash Equivalents (21,727) (54,299) Cash and Cash Equivalents at Beginning of Period 88,397 105,054 Cash and Cash Equivalents at End of Period $66,670 $50,755 Free Cash Flow Reconciliation (Unaudited) Nine Months Ended September 30, 2006 2005 (in millions) Operating cash flow from continuing operations $40 $(519) Western states and Cornerstone settlement payments 160 - Change in margin deposits, net (220) 882 Capital expenditures (64) (59) Free cash flow before emission allowances activity (84) 304 Proceeds from sales of emission allowances 205 130 Purchases of emission allowances (12) (143) Free cash flow after emission allowances activity $109 $291 Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005. Reliant Energy, Inc. and Subsidiaries Retail Energy Data (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 Change 2006 2005 Change (in millions) (in millions) Mass gross margin (1) $315 $274 (2) $41 $606 $563 (2) $43 Commercial and Industrial gross margin 134 68 (2) 66 234 110 (2) 124 Market usage adjustments (13) 2 (15) - (15) 15 Total retail energy gross margin (1), excluding unrealized gains (losses) on energy derivatives 436 344 92 840 658 182 Unrealized gains (losses) on energy derivatives (338) (181) (157) (368) 81 (449) Total retail energy gross margin (1) 98 163 (65) 472 739 (267) Operation and maintenance 68 55 13 177 142 35 Selling and marketing 38 25 13 92 66 26 Bad debt expense 34 21 13 70 42 28 Total retail energy contribution margin $(42) $62 $(104) $133 $489 $(356) Three Months Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 (gigawatt hours) (gigawatt hours) Electricity Sales to End-Use Retail Customers: Mass: Residential: Houston 5,403 6,339 12,635 14,428 Non-Houston 2,680 2,294 6,206 4,973 Small Business: Houston 1,116 1,027 (2) 2,888 2,780 (2) Non-Houston 463 279 (2) 1,093 605 (2) Total Mass 9,662 9,939 22,822 22,786 Commercial and Industrial: ERCOT (3) 9,283 8,307 (2) 25,415 25,030 (2) Non-ERCOT 1,334 1,959 4,488 4,518 Total Commercial and Industrial 10,617 10,266 29,903 29,548 Market usage adjustments (115) (65) 12 (241) Total 20,164 20,140 52,737 52,093 Three Months Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 (in thousands, (in thousands, metered locations) metered locations) Weighted Average Retail Customer Count: Mass: Residential: Houston 1,147 1,233 1,184 1,270 Non-Houston 516 403 492 373 Small Business: Houston 131 137 (2) 133 140 (2) Non-Houston 29 17 (2) 28 15 (2) Total Mass 1,823 1,790 1,837 1,798 Commercial and Industrial: ERCOT (3) 75 68 (2) 75 71 (2) Non-ERCOT 1 2 1 2 Total Commercial and Industrial 76 70 76 73 Total 1,899 1,860 1,913 1,871 September 30, December 31, 2006 2005 (in thousands, metered locations) Retail Customers: Mass: Residential: Houston 1,126 1,213 Non-Houston 532 462 Small Business: Houston 129 137 (2) Non-Houston 30 29 (2) Total Mass 1,817 1,841 Commercial and Industrial: ERCOT (3) 75 70 (2) Non-ERCOT 1 2 Total Commercial and Industrial 76 72 Total 1,893 1,913 (1) Gross margin (revenues less purchased power) excludes depreciation, amortization, labor and other product costs. (2) Beginning in the first quarter of 2006, we recategorized financial and operational data for customers with a peak demand between 200-250 kilowatts and one MW from small business within mass to commercial and industrial. The 2005 data is presented on a comparable basis. (3) Includes customers of the Texas General Land Office for whom we provide services. Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005. Reliant Energy, Inc. and Subsidiaries Wholesale Energy Data (Unaudited) Three Months Ended September 30, 2006 2005 GWh % Economic(1) GWh % Economic(1) Economic Generation Volume (2): PJM Coal 6,009.7 82% 6,146.7 84% MISO Coal 1,683.3 61% 2,020.9 71% PJM/MISO Gas 669.0 9% 831.8 12% West 1,350.6 24% 913.3 15% Other 1,481.6 87% 1,682.1 68% Total 11,194.2 46% 11,594.8 45% Commercial Capacity Factor (3): PJM Coal 86.1% 84.8% MISO Coal 85.0% 82.6% PJM/MISO Gas 96.8% 83.6% West 73.3% 92.4% Other 99.5% 97.3% Total 86.8% 86.7% Generation Volume (4): GWh GWh PJM Coal 5,171.7 5,213.2 MISO Coal 1,431.5 1,668.6 PJM/MISO Gas 647.8 695.5 West 990.2 843.5 Other 1,474.1 1,636.6 Total 9,715.3 10,057.4 Unit Margin ($/MWh) (5): PJM Coal $32.48 $46.61 MISO Coal 27.24 47.35 PJM/MISO Gas 46.31 27.32 West 17.17 NM (6) Other NM (6) NM (6) Weighted Average Total $26.66 $34.70 Three Months Ended September 30, 2006 2005 Change (in millions) Open Energy Gross Margin (7): PJM Coal $168 $243 $(75) MISO Coal 39 79 (40) PJM/MISO Gas 30 19 11 West 17 (5) 22 Other 5 13 (8) Total Open Energy Gross Margin 259 349 (90) Other Margin (8): PJM Coal 11 6 5 MISO Coal 5 4 1 PJM/MISO Gas 18 16 2 West 39 58 (19) Other 28 23 5 Total Other Margin 101 107 (6) Total Open Wholesale Gross Margin 360 456 (96) Historical Wholesale Hedges (9): Power (104) (224) 120 Fuel 7 26 (19) Tolling/other (29) 17 (46) Total Historical Wholesale Hedges (126) (181) 55 Unrealized gains (losses) on energy derivatives (17) (173) 156 Changes in California-related receivables and reserves - - - Total Wholesale Energy Gross Margin 217 102 115 Operation and maintenance 151 124 27 Bad debt expense 1 2 (1) Total Wholesale Energy Contribution Margin $65 $(24) $89 Nine Months Ended September 30, 2006 2005 GWh % Economic(1) GWh % Economic(1) Economic Generation Volume (2): PJM Coal 17,686.0 81% 17,197.3 81% MISO Coal 4,734.9 57% 5,223.5 62% PJM/MISO Gas 996.6 4% 1,388.2 6% West 2,623.4 14% 1,114.2 7% Other 4,356.8 88% 4,423.1 60% Total 30,397.7 40% 29,346.3 38% Commercial Capacity Factor (3): PJM Coal 81.0% 78.8% MISO Coal 84.6% 85.8% PJM/MISO Gas 87.2% 77.3% West 84.6% 93.6% Other 92.4% 94.0% Total 83.7% 82.8% Generation Volume (4): GWh GWh PJM Coal 14,330.3 13,543.1 MISO Coal 4,005.2 4,480.4 PJM/MISO Gas 868.7 1,073.0 West 2,218.4 1,042.8 Other 4,027.6 4,156.7 Total 25,450.2 24,296.0 Unit Margin ($/MWh) (5): PJM Coal $28.89 $32.05 MISO Coal 23.22 33.03 PJM/MISO Gas 42.59 34.48 West 6.76 NM (6) Other NM (6) NM (6) Weighted Average Total $22.12 $25.81 Nine Months Ended September 30, 2006 2005 Change (in millions) Open Energy Gross Margin (7): PJM Coal $414 $434 $(20) MISO Coal 93 148 (55) PJM/MISO Gas 37 37 - West 15 (11) 26 Other 4 19 (15) Total Open Energy Gross Margin 563 627 (64) Other Margin (8): PJM Coal 28 27 1 MISO Coal 9 9 - PJM/MISO Gas 31 31 - West 122 148 (26) Other 80 71 9 Total Other Margin 270 286 (16) Total Open Wholesale Gross Margin 833 913 (80) Historical Wholesale Hedges (9): Power (284) (321) 37 Fuel 19 105 (86) Tolling/other (70) (37) (33) Total Historical Wholesale Hedges (335) (253) (82) Unrealized gains (losses) on energy derivatives 88 (172) 260 Changes in California-related receivables and reserves - 2 (2) Total Wholesale Energy Gross Margin 586 490 96 Operation and maintenance 458 412 46 Bad debt expense (2) 2 (4) Total Wholesale Energy Contribution Margin $130 $76 $54 (1) Percent economic is economic generation volume divided by maximum generation at 100% plant availability. (2) Economic generation volume is estimated generation at 100% plant availability based on an hourly analysis of when it is economical to generate based on the price of power, fuel, emission allowances and variable operating costs. (3) Commercial capacity factor is the generation volume divided by the economic generation. (4) Excludes generation volume related to power purchase agreements, which includes tolling agreements. (5) Represents open energy gross margin divided by generation volume. (6) NM is not meaningful. (7) Open energy gross margin is calculated using the power sales prices received by the plants less delivered spot fuel prices. This figure excludes the effects of our historical wholesale hedges and prices actually paid for fuel. (8) Other margin represents power purchase agreements, capacity payments, ancillary revenues and West region hedges. (9) Historical wholesale hedges were entered into to primarily hedge the economics of our wholesale operations. These amounts primarily relate to settlements of forward power and fuel hedges, long-term tolling purchases, long-term natural gas transportation contracts, storage contracts and our legacy energy trading. These amounts are derived based on methodology consistent with the calculation of open energy gross margin. Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005. Reliant Energy, Inc. and Subsidiaries PJM Coal and MISO Coal (1) (Unaudited) Summer/Winter Average Heat Q3 economic generation Capacity Rate volume(GWh) Unit Name (MW) (MMBtu/MWh) 2006 2005 Cheswick 580 10.0 1,014.8 966.8 Conemaugh (2) 280 9.4 605.6 605.8 Elrama 466 11.3 688.6 701.8 Keystone (2) 282 9.5 606.4 607.3 Portland 400 10.1 649.5 720.5 Seward 521 9.7 1,114.2 1,087.2 Shawville (2) 566 10.3 987.6 1,065.8 Titus 246 10.8 343.0 391.5 PJM Coal Total 3,341 6,009.7 6,146.7 Q3 commercial Q3 generation capacity factor volume (GWh) Unit Name 2006 2005 2006 2005 Cheswick 91.1% 85.0% 924.8 821.7 Conemaugh (2) 97.0% 82.4% 587.2 499.4 Elrama 76.4% 83.8% 526.2 588.2 Keystone (2) 97.3% 95.3% 589.8 578.7 Portland 75.4% 90.9% 489.6 654.9 Seward 77.9% 83.5% 868.0 907.8 Shawville (2) 88.3% 73.5% 872.4 783.4 Titus 91.5% 96.8% 313.7 379.1 PJM Coal Total 86.1% 84.8% 5,171.7 5,213.2 Summer/Winter Average Heat Q3 economic generation Capacity Rate volume(GWh) Unit Name (MW) (MMBtu/MWh) 2006 2005 Avon Lake 721 9.8 1,067.7 1,208.8 New Castle 328 10.7 316.8 461.3 Niles 208 10.5 298.8 350.8 MISO Coal Total 1,257 1,683.3 2,020.9 Q3 commercial Q3 generation capacity factor volume (GWh) Unit Name 2006 2005 2006 2005 Avon Lake 85.2% 79.7% 909.3 963.8 New Castle 79.6% 88.2% 252.3 407.0 Niles 90.3% 84.9% 269.9 297.8 MISO Coal Total 85.0% 82.6% 1,431.5 1,668.6 Summer/Winter Average Heat Q3 YTD economic generation Capacity Rate volume(GWh) Unit Name (MW) (MMBtu/MWh) 2006 2005 Cheswick 580 10.0 2,782.1 2,453.6 Conemaugh (2) 280 9.4 1,812.2 1,800.5 Elrama 466 11.3 2,267.6 2,015.7 Keystone (2) 282 9.5 1,763.0 1,774.8 Portland 400 10.1 1,875.3 1,937.4 Seward 521 9.7 3,307.7 3,059.4 Shawville (2) 566 10.3 2,907.7 3,100.0 Titus 246 10.8 970.4 1,055.9 PJM Coal Total 3,341 17,686.0 17,197.3 Q3 YTD commercial Q3 YTD generation capacity factor volume (GWh) Unit Name 2006 2005 2006 2005 Cheswick 73.4% 85.3% 2,041.3 2,093.6 Conemaugh (2) 97.5% 92.2% 1,766.4 1,659.9 Elrama 67.9% 50.6% 1,540.3 1,020.4 Keystone (2) 86.8% 92.8% 1,530.0 1,647.5 Portland 85.4% 82.7% 1,600.6 1,601.9 Seward 69.6% 73.1% 2,302.2 2,235.8 Shawville (2) 90.9% 75.9% 2,643.3 2,351.9 Titus 93.4% 88.3% 906.2 932.1 PJM Coal Total 81.0% 78.8% 14,330.3 13,543.1 Summer/Winter Average Heat Q3 YTD economic generation Capacity Rate volume(GWh) Unit Name (MW) (MMBtu/MWh) 2006 2005 Avon Lake 721 9.8 2,938.9 3,175.5 New Castle 328 10.7 972.9 1,163.4 Niles 208 10.5 823.1 884.6 MISO Coal Total 1,257 4,734.9 5,223.5 Q3 YTD commercial Q3 YTD generation capacity factor volume (GWh) Unit Name 2006 2005 2006 2005 Avon Lake 87.0% 85.6% 2,555.9 2,718.7 New Castle 77.3% 87.7% 752.5 1,020.4 Niles 84.7% 83.8% 696.8 741.3 MISO Coal Total 84.6% 85.8% 4,005.2 4,480.4 (1) Unless otherwise indicated, the Company owns a 100% interest in each facility listed. (2) The Company leases a 100% interest in the Shawville facility, a 16.67% interest in the Keystone facility and a 16.45% interest in the Conemaugh facility under facility interest lease agreements, which expire in 2026, 2034 and 2034, respectively. Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005. Reliant Energy, Inc. and Subsidiaries PJM/MISO Gas (1) (Unaudited) Summer/Winter Average Heat Q3 economic generation Capacity Rate volume(GWh) Unit Name (MW) (MMBtu/MWh) 2006 2005 Aurora 942 10.5 38.4 57.1 Blossburg 23 14.6 0.6 1.6 Brunot Island 315 10.4 11.4 8.0 Gilbert 614 11.0 53.2 118.1 Glen Gardner 184 14.6 6.5 6.8 Hamilton 23 14.8 1.2 1.1 Hunterstown 71 14.8 3.5 5.3 Hunterstown CCGT 833 7.0 491.3 522.3 Mountain 47 14.3 7.9 4.7 Orrtanna 23 14.4 1.6 1.2 Portland 185 11.2 6.3 22.2 Sayreville 264 13.8 17.4 5.5 Shawnee 23 14.0 0.3 0.1 Shawville 5-7 (2) 6 10.2 - - Titus 35 17.4 - 0.4 Tolna 47 14.2 2.2 8.4 Werner 252 13.8 6.1 7.0 Shelby 356 9.8 21.1 62.0 PJM/MISO Gas Total 4,243 669.0 831.8 Q3 commercial Q3 generation capacity factor volume (GWh) Unit Name 2006 2005 2006 2005 Aurora 100.0% 99.8% 38.4 57.0 Blossburg 100.0% 100.0% 0.6 1.6 Brunot Island 99.1% 100.0% 11.3 8.0 Gilbert 94.2% 86.5% 50.1 102.1 Glen Gardner 98.5% 97.1% 6.4 6.6 Hamilton 100.0% 100.0% 1.2 1.1 Hunterstown 100.0% 100.0% 3.5 5.3 Hunterstown CCGT 96.8% 77.3% 475.4 403.8 Mountain 100.0% 100.0% 7.9 4.7 Orrtanna 87.5% 100.0% 1.4 1.2 Portland 87.3% 97.7% 5.5 21.7 Sayreville 98.3% 90.9% 17.1 5.0 Shawnee 100.0% 100.0% 0.3 0.1 Shawville 5-7 (2) 0.0% 0.0% - - Titus 0.0% 100.0% - 0.4 Tolna 100.0% 96.4% 2.2 8.1 Werner 96.7% 97.1% 5.9 6.8 Shelby 97.6% 100.0% 20.6 62.0 PJM/MISO Gas Total 96.8% 83.6% 647.8 695.5 Summer/Winter Average Heat Q3 YTD economic generation Capacity Rate volume(GWh) Unit Name (MW) (MMBtu/MWh) 2006 2005 Aurora 942 10.5 46.4 103.4 Blossburg 23 14.6 1.8 2.8 Brunot Island 315 10.4 8.4 5.0 Gilbert 614 11.0 95.4 204.9 Glen Gardner 184 14.6 8.5 7.5 Hamilton 23 14.8 1.4 1.3 Hunterstown 71 14.8 4.1 6.5 Hunterstown CCGT 833 7.0 752.9 898.3 Mountain 47 14.3 9.3 5.8 Orrtanna 23 14.4 1.9 1.6 Portland 185 11.2 8.2 41.4 Sayreville 264 13.8 22.2 9.7 Shawnee 23 14.0 0.3 0.3 Shawville 5-7 (2) 6 10.2 - - Titus 35 17.4 - 0.6 Tolna 47 14.2 3.1 10.7 Werner 252 13.8 5.7 7.4 Shelby 356 9.8 27.0 81.0 PJM/MISO Gas Total 4,243 996.6 1,388.2 Q3 YTD commercial Q3 YTD generation capacity factor volume (GWh) Unit Name 2006 2005 2006 2005 Aurora 87.5% 94.9% 40.6 98.1 Blossburg 100.0% 100.0% 1.8 2.8 Brunot Island 98.8% 100.0% 8.3 5.0 Gilbert 60.0% 81.6% 57.2 167.2 Glen Gardner 96.5% 94.7% 8.2 7.1 Hamilton 100.0% 100.0% 1.4 1.3 Hunterstown 100.0% 100.0% 4.1 6.5 Hunterstown CCGT 90.0% 69.9% 677.9 628.0 Mountain 100.0% 100.0% 9.3 5.8 Orrtanna 89.5% 100.0% 1.7 1.6 Portland 84.1% 98.8% 6.9 40.9 Sayreville 89.6% 94.8% 19.9 9.2 Shawnee 100.0% 100.0% 0.3 0.3 Shawville 5-7 (2) 0.0% 0.0% - - Titus 0.0% 100.0% - 0.6 Tolna 100.0% 97.2% 3.1 10.4 Werner 96.5% 97.3% 5.5 7.2 Shelby 83.3% 100.0% 22.5 81.0 PJM/MISO Gas Total 87.2% 77.3% 868.7 1,073.0 (1) Unless otherwise indicated, the Company owns a 100% interest in each facility listed. (2) The Company leases a 100% interest in the Shawville facility under facility interest lease agreement, which expires in 2026. Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005. Reliant Energy, Inc. and Subsidiaries West and Other (1) (Unaudited) Summer/Winter Average Heat Q3 economic generation Capacity Rate volume(GWh) Unit Name (MW) (MMBtu/MWh) 2006 2005 Bighorn (2) 598 7.2 - - Coolwater 622 10.1 427.1 253.1 Ellwood (2) 54 13.3 - - Etiwanda (2) 640 10.0 - - Mandalay (2) 560 10.9 236.4 170.9 Ormond Beach 1,516 9.6 687.1 489.3 West Total 3,990 1,350.6 913.3 Q3 commercial Q3 generation capacity factor volume (GWh) Unit Name 2006 2005 2006 2005 Bighorn (2) 0.0% 0.0% - - Coolwater 91.7% 100.0% 391.7 253.1 Ellwood (2) 0.0% 0.0% - - Etiwanda (2) 0.0% 0.0% - - Mandalay (2) 97.2% 100.0% 229.7 170.9 Ormond Beach 53.7% 85.7% 368.8 419.5 West Total 73.3% 92.4% 990.2 843.5 Summer/Winter Average Heat Q3 economic generation Capacity Rate volume(GWh) Unit Name (MW) (MMBtu/MWh) 2006 2005 Channelview 830 6.1 1,481.6 1,466.0 Indian River (2) 587 10.5 - 145.8 Osceola (2) 470 11.0 - 70.3 Other Total 1,887 1,481.6 1,682.1 Q3 commercial Q3 generation capacity factor volume (GWh) Unit Name 2006 2005 2006 2005 Channelview 99.5% 100.0% 1,474.1 1,466.0 Indian River (2) 0.0% 69.8% - 101.7 Osceola (2) 0.0% 98.0% - 68.9 Other Total 99.5% 97.3% 1,474.1 1,636.6 Summer/Winter Average Heat Q3 YTD economic generation Capacity Rate volume(GWh) Unit Name (MW) (MMBtu/MWh) 2006 2005 Bighorn (2) 598 7.2 938.4 - Coolwater 622 10.1 536.8 304.3 Ellwood (2) 54 13.3 0.1 0.1 Etiwanda (2) 640 10.0 - - Mandalay (2) 560 10.9 322.5 242.5 Ormond Beach 1,516 9.6 825.6 567.3 West Total 3,990 2,623.4 1,114.2 Q3 YTD commercial Q3 YTD generation capacity factor volume (GWh) Unit Name 2006 2005 2006 2005 Bighorn (2) 99.4% 0.0% 933.0 - Coolwater 93.2% 100.0% 500.1 304.3 Ellwood (2) 100.0% 100.0% 0.1 0.1 Etiwanda (2) 0.0% 0.0% - - Mandalay (2) 96.8% 99.3% 312.3 240.8 Ormond Beach 57.3% 87.7% 472.9 497.6 West Total 84.6% 93.6% 2,218.4 1,042.8 Summer/Winter Average Heat Q3 YTD economic generation Capacity Rate volume(GWh) Unit Name (MW) (MMBtu/MWh) 2006 2005 Channelview 830 6.1 4,347.0 3,849.6 Indian River (2) 587 10.5 - 442.0 Osceola (2) 470 11.0 9.8 131.5 Other Total 1,887 4,356.8 4,423.1 Q3 YTD commercial Q3 YTD generation capacity factor volume (GWh) Unit Name 2006 2005 2006 2005 Channelview 92.4% 100.0% 4,017.8 3,849.6 Indian River (2) 0.0% 52.2% - 230.9 Osceola (2) 100.0% 57.9% 9.8 76.2 Other Total 92.4% 94.0% 4,027.6 4,156.7 (1) Unless otherwise indicated, the Company owns a 100% interest in each facility listed. (2) Excludes generation volume during periods the unit operated under power purchase agreements. Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005. Reliant Energy, Inc. and Subsidiaries Adjusted Net Debt (Unaudited) (in millions) September 30, 2006 Debt: Senior secured revolver $189 Senior secured term loans 531 Senior secured notes 1,850 Convertible senior subordinated notes 275 Orion Power 12% notes (1) 441 PEDFA fixed-rate bonds for Seward plant due 2036 500 Channelview 343 Receivables facility 450 Warrants (1) Other (2) 1 REMA operating leases (off-balance sheet) 480 Total debt and debt equivalents (3) 5,059 Less: Cash and cash equivalents (67) Restricted cash (10) Net margin deposits (1,480) Adjusted Net Debt $3,502 (1) Orion 12% notes include purchase accounting adjustments of $41 million. (2) Other subsidiary debt. (3) Debt equivalents include off-balance sheet REMA leases of $480 million. Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005.