<PAGE> 1
EXHIBIT 99.1
RELIANT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIANT ENERGY, INCORPORATED)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements of Reliant Energy Resources Corp. and its subsidiaries for the year
ended December 31, 1999 and as of and for the nine months ended September 30,
2000 have been prepared based upon Reliant Energy Resources Corp.'s (the
Company) historical financial statements. The pro forma financial statements
have been prepared to describe the effects of the transfer of a portion of the
Company's unregulated businesses to subsidiaries of Reliant Resources, Inc.
(Reliant Resources), a wholly owned subsidiary of Reliant Energy, Incorporated
(Reliant Energy).
On July 27, 2000, Reliant Energy announced its intention to divide into
two publicly traded companies in order to separate its unregulated businesses
from its regulated businesses. In August 2000, Reliant Energy formed Reliant
Resources to own and operate a substantial portion of Reliant Energy's
unregulated operations and to offer approximately 20% of Reliant Resources'
common stock in an initial public offering (the Offering). Reliant Energy
expects the Offering to be followed by a distribution to Reliant Energy's or its
successor's shareholders of the remaining common stock of Reliant Resources
within twelve months after the Offering.
As a part of Reliant Energy's separation plan, on December 31, 2000,
(a) the Company transferred all of the outstanding stock of Reliant Energy
Services International, Inc., Arkla Finance Corporation and Reliant Energy
Europe Trading & Marketing, Inc. to Reliant Resources (collectively, the Stock
Transfer) and (b) a wholly owned subsidiary of Reliant Resources merged with and
into Reliant Energy Services, Inc. (RES), a wholly owned subsidiary of the
Company, with RES as the surviving corporation (the Merger). As a result of the
Merger, RES became a wholly owned subsidiary of Reliant Resources. As
consideration for the Merger, Reliant Resources paid $120 million to the
Company, plus or minus, as the case may be, an amount equal to the difference of
the working capital of RES on December 31, 2000 and August 31, 2000.
The unaudited pro forma condensed consolidated financial statements do
not purport to present the Company's actual results of operations as if the
Stock Transfer and the Merger had occurred on January 1, 1999 for the unaudited
pro forma condensed statements of operations or September 30, 2000 for the
unaudited pro forma condensed balance sheet nor are they necessarily indicative
of the Company's financial position or results of operations that may be
achieved in the future.
The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the Company's audited consolidated financial
statements and related notes included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and the Company's interim
consolidated financial statements and related notes included in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000,
each of which has been previously filed with the Securities and Exchange
Commission.
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RELIANT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIANT ENERGY, INCORPORATED)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DISTRIBUTION OF
HISTORICAL UNREGULATED PRO FORMA
BALANCE RESOURCES BALANCE
----------- --------------- -----------
<S> <C> <C> <C>
Cash and cash equivalents ....................................... $ 24,373 $ (24,373) $ --
Accounts and notes receivable ................................... 1,702,486 (1,094,983) 607,503
Accounts and notes receivable - affiliated companies, net ....... -- 24,663 24,663
Price risk management assets .................................... 1,917,680 (1,917,680) --
Prepayments and other current assets ............................ 353,082 (146,008) 207,074
----------- ----------- -----------
Total current assets ......................................... 3,997,621 (3,158,381) 839,240
----------- ----------- -----------
Property, Plant and Equipment, net .............................. 3,012,375 (14,312) 2,998,063
----------- ----------- -----------
Goodwill and intangible assets, net ............................. 1,950,972 (99,864) 1,851,108
Price risk management assets .................................... 615,883 (615,883) --
Notes receivable - affiliated companies, net .................... -- 266,669 266,669
Other assets .................................................... 354,301 (110,912) 243,389
----------- ----------- -----------
Total other assets ........................................... 2,921,156 (559,990) 2,361,166
----------- ----------- -----------
Total Assets .............................................. $ 9,931,152 $(3,732,683) $ 6,198,469
=========== =========== ===========
Current portion of long-term debt ............................... $ 168,890 $ -- $ 168,890
Short-term borrowings ........................................... 635,000 -- 635,000
Accounts payable ................................................ 1,252,450 (905,155) 347,295
Accounts and notes payable - affiliated companies, net .......... 44,973 (44,973) --
Price risk management liabilities ............................... 1,880,983 (1,880,983) --
Other ........................................................... 352,653 (156,210) 196,443
----------- ----------- -----------
Total current liabilities .................................... 4,334,949 (2,987,321) 1,347,628
----------- ----------- -----------
Accumulated deferred income taxes ............................... 559,463 3,753 563,216
Price risk management liabilities ............................... 592,658 (592,658) --
Other ........................................................... 356,794 (25,734) 331,060
----------- ----------- -----------
Total other liabilities ...................................... 1,508,915 (614,639) 894,276
----------- ----------- -----------
Long-term debt .................................................. 1,393,602 -- 1,393,602
----------- ----------- -----------
Resources Obligated Mandatorily Redeemable Convertible
Preferred Securities of Subsidiary Trust Holding Solely
Junior Subordinated Debentures of Resources .................. 608 -- 608
----------- ----------- -----------
Common stock .................................................... 1 -- 1
Paid-in capital ................................................. 2,463,831 -- 2,463,831
Retained earnings ............................................... 229,633 (131,110) 98,523
Accumulated other comprehensive loss ............................ (387) 387 --
----------- ----------- -----------
Total stockholder's equity ................................... 2,693,078 (130,723) 2,562,355
----------- ----------- -----------
Total Liabilities and Stockholder's Equity ................ $ 9,931,152 $(3,732,683) $ 6,198,469
=========== =========== ===========
</TABLE>
See note to unaudited pro forma condensed consolidated financial statements
<PAGE> 3
RELIANT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIANT ENERGY, INCORPORATED)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DISTRIBUTION OF
HISTORICAL UNREGULATED PRO FORMA
BALANCE RESOURCES ADJUSTMENTS BALANCE
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues ....................................... $ 14,381,921 $(11,785,275) $ 440,031(a) $ 3,036,677
Expenses:
Natural gas and purchased power ............. 13,419,478 (11,672,852) 436,886(a) 2,183,512
Operation and maintenance ................... 397,211 (1,640) 3,145(a) 398,716
General, administrative and development ..... 157,423 (85,505) 71,918
Depreciation and amortization ............... 164,068 (9,530) 154,538
Taxes other than income taxes ............... 80,147 (448) 79,699
------------ ------------ ------------ ------------
Total .................................... 14,218,327 (11,769,975) 440,031 2,888,383
------------ ------------ ------------ ------------
Operating Income ............................... 163,594 (15,300) 148,294
------------ ------------ ------------ ------------
Other Income (Expense):
Interest expense ............................ (99,599) 2,258 (97,341)
Interest income ............................. 7,172 (5,470) 1,702
Interest income - affiliates, net ........... 3,409 21,129 24,538
Gain (loss) from investments ................ (26,373) 26,504 131
Distribution on trust preferred securities .. (22) -- (22)
Other, net .................................. 7,699 (8) 7,691
------------ ------------ ------------ ------------
Total .................................... (107,714) 44,413 (63,301)
------------ ------------ ------------ ------------
Income before Income Taxes ..................... 55,880 29,113 84,993
Income Tax Expense ............................. 41,119 3,648 44,767
------------ ------------ ------------ ------------
Income from Continuing Operations .............. $ 14,761 $ 25,465 $ 40,226
============ ============ ============ ============
</TABLE>
See note to unaudited pro forma condensed consolidated financial statements
<PAGE> 4
RELIANT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIANT ENERGY, INCORPORATED)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DISTRIBUTION OF
UNREGULATED PRO FORMA
HISTORICAL RESOURCES ADJUSTMENTS BALANCE
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues ....................................... $ 10,543,545 $ (7,728,814) $ 381,099(a) $ 3,195,830
Expenses:
Natural gas and purchased power ............. 9,307,445 (7,641,464) 380,109(a) 2,046,090
Operation and maintenance ................... 373,387 990(a) 374,377
General, administrative and development ..... 263,162 (60,037) 203,125
Depreciation and amortization ............... 198,676 (5,022) 193,654
Taxes other than income taxes ............... 103,192 (832) 102,360
------------ ------------ ------------ ------------
Total .................................... 10,245,862 (7,707,355) 381,099 2,919,606
------------ ------------ ------------ ------------
Operating Income ............................... 297,683 (21,459) 276,224
------------ ------------ ------------ ------------
Other Income (Expense):
Interest expense ............................ (119,269) 1,955 (117,314)
Interest income ............................. 2,768 (1,118) 1,650
Interest income - affiliates, net .......... 5,878 967 6,845
Distribution on trust preferred securities .. (357) -- (357)
Other, net .................................. 2,269 114 2,383
------------ ------------ ------------ ------------
Total .................................... (108,711) 1,918 (106,793)
------------ ------------ ------------ ------------
Income before Income Taxes ..................... 188,972 (19,541) 169,431
Income Tax Expense ............................. 88,771 (8,948) 79,823
------------ ------------ ------------ ------------
Income from Continuing Operations .............. $ 100,201 $ (10,593) $ 89,608
============ ============ ============ ============
</TABLE>
See note to unaudited pro forma condensed consolidated financial statements
<PAGE> 5
RELIANT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIANT ENERGY, INCORPORATED)
NOTE TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) Represents previously eliminated intercompany transactions due to the Stock
Transfer and the Merger.
