<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to _________________
COMMISSION FILE NUMBER 1-3187
A. Full title of the plan and address of the plan, if different from that of
the issuer named below:
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
RELIANT ENERGY, INCORPORATED
(FORMERLY HOUSTON INDUSTRIES INCORPORATED)
1111 LOUISIANA STREET
HOUSTON, TEXAS 77002
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditors' Report Page 1
Financial Statements:
Statement of Net Assets Available for Benefits, December 31, 1998 Page 2
Statement of Net Assets Available for Benefits, December 31, 1997 Page 3
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 1998 Page 4
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 1997 Page 5
Notes to Financial Statements for the Years Ended
December 31, 1998 and 1997 Page 6
Supplemental Schedules:
Supplemental Schedule of Investments, December 31, 1998 (Item 27a) Page 12
Supplemental Schedule of 5% Reportable Transactions for the
Year Ended December 31, 1998 (Item 27d) Page 13
</TABLE>
Pursuant to Item 4 of Form 11-K, the financial statements and
schedules referred to above have been prepared in accordance with regulations
of the Employee Retirement Income Security Act of 1974.
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
NorAm Energy Corp. Employee Savings and Investment Plan:
We have audited the accompanying statements of net assets for benefits of the
NorAm Energy Corp. Employee Savings and Investment Plan (the "Plan") as of
December 31, 1998 and 1997 and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1998 and 1997, and the changes in net assets available for benefits for the
years then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules,
listed in the Table of Contents, are presented for the purpose of additional
analysis and are not a required part of the basic financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental information by fund in the statements of
net assets available for benefits and the statements of changes in net assets
available for benefits is presented for the purpose of additional analysis
rather than to present the net assets available for benefits and the changes in
net assets available for benefits of the individual funds. These supplemental
schedules and supplemental information by fund are the responsibility of the
Plan's management. Such supplemental schedules and supplemental information by
fund have been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, are fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
Houston, Texas
June 18, 1999
1
<PAGE> 4
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
NORAM ENERGY COMPANY EXPRESS AMERICAN AMERICAN AMERICAN EXPRESS EXPRESS
CORP. COMMON TRUST U.S. EXPRESS EXPRESS EXPRESS NEW DIVERSIFIED
POOLED GIC STOCK GOVERNMENT SELECTIVE MUTUAL TRUST EQUITY DIMENSIONS EQUITY INCOME
FUND FUND SECURITIES FUND FUND FUND INDEX FUND FUND FUND
----------- -------- --------------- --------- -------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
INVESTMENTS
Aetna Life Insurance
Contract GIC $ 6,626
Company Common Stock $ 92,608
Equity Funds $ 42,635 $ 51,253 $ 96,832 $ 6,312
Fixed Income Funds $ 53,041 $ 21,738
Loans to Participants
------- -------- -------- -------- -------- -------- -------- -------
TOTAL INVESTMENTS 6,626 92,608 53,041 21,738 42,635 51,253 96,832 6,312
RECEIVABLES
Dividends and Interest 206
Fund Transfers, net 40 85 (29) (65) 110 (142) 1
------- -------- -------- -------- -------- -------- -------- -------
TOTAL RECEIVABLES 40 291 (29) (65) 110 (142) 1
------- -------- -------- -------- -------- -------- -------- -------
NET ASSETS AVAILABLE
FOR BENEFITS $ 6,626 $ 92,648 $ 53,332 $ 21,709 $ 42,570 $ 51,363 $ 96,690 $ 6,313
======= ======== ======== ======== ======== ======== ======== =======
<CAPTION>
TEMPLETON PARTICIPANT
FOREIGN LOAN
INCOME FUND FUND TOTAL
--------- ----------- -----
<S> <C> <C> <C>
ASSETS
INVESTMENTS
Aetna Life Insurance
Contract GIC $ 6,626
HII Common Stock 92,608
Equity Funds $ 4,243 201,275
Fixed Income Funds 74,779
Loans to Participants $ 11,052 11,052
------- -------- ----------
TOTAL INVESTMENTS 4,243 11,052 386,340
RECEIVABLES
Dividends and Interest 206
Fund Transfers, net
------- -------- ----------
TOTAL RECEIVABLES 206
------- -------- ----------
NET ASSETS AVAILABLE
FOR BENEFITS $ 4,243 $ 11,052 $ 386,546
======= ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICAN AMERICAN
NORAM ENERGY COMPANY EXPRESS AMERICAN AMERICAN AMERICAN EXPRESS
CORP. COMMON TRUST U.S. EXPRESS EXPRESS EXPRESS NEW
POOLED GIC STOCK GOVERNMENT SELECTIVE MUTUAL TRUST EQUITY DIMENSIONS
FUND FUND SECURITIES FUND FUND FUND INDEX FUND FUND
------------ ------- --------------- --------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
INVESTMENTS
Federal Income Fund $ 144
Aetna Life Insurance
Contract GIC 11,668
Company Common Stock $ 74,254
Money Market Trust Fund 375 126
Equity Funds $ 41,838 $ 40,064 $ 80,258
Fixed Income Funds $ 49,947 $ 20,242
Loans to Participants
------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENTS 12,187 74,380 49,947 20,242 41,838 40,064 80,258
------- -------- -------- -------- -------- -------- --------
RECEIVABLES
Participant Contributions 79 42 28 61 59 119
Employer Contributions 66 33 24 50 47 99
Dividends and Interest 1,284 1,034 236
------- -------- -------- -------- -------- -------- --------
TOTAL RECEIVABLES 1,284 1,179 311 52 111 106 218
------- -------- -------- -------- -------- -------- --------
NET ASSETS AVAILABLE
FOR BENEFITS $13,471 $ 75,559 $ 50,258 $ 20,294 $ 41,949 $ 40,170 $ 80,476
======= ======== ======== ======== ======== ======== ========
<CAPTION>
AMERICAN
EXPRESS
DIVERSIFIED TEMPLETON PARTICIPANT
EQUITY INCOME FOREIGN LOAN
FUND INCOME FUND FUND TOTAL
------------- ----------- ----------- -----
<S> <C> <C> <C> <C>
ASSETS
INVESTMENTS
Federal Income Fund $ 144
Aetna Life Insurance
Contract GIC 11,668
HII Common Stock 74,254
Money Market Trust Fund 501
Equity Funds $ 5,368 $ 4,881 172,409
Fixed Income Funds 70,189
Loans to Participants $ 10,106 10,106
------- ------- -------- ---------
TOTAL INVESTMENTS 5,368 4,881 10,106 339,271
------- ------- -------- ---------
RECEIVABLES
Participant Contributions 14 14 416
Employer Contributions 10 10 339
Dividends and Interest 2,554
------- ------- -------- ---------
TOTAL RECEIVABLES 24 24 3,309
------- ------- -------- ---------
NET ASSETS AVAILABLE
FOR BENEFITS $ 5,392 $ 4,905 $ 10,106 $ 342,580
======= ======= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICAN
NORAM ENERGY COMPANY EXPRESS AMERICAN AMERICAN AMERICAN
CORP. COMMON TRUST U.S. EXPRESS EXPRESS EXPRESS
POOLED GIC STOCK GOVERNMENT SELECTIVE MUTUAL TRUST EQUITY
FUND FUND SECURITIES FUND FUND FUND INDEX FUND
------------ ------- --------------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 4,219 $ 1,465 $ 5,768 $ 2
Interest $ 2,624
Net appreciation (depreciation)
in fair value of investments $ 571 15,297 201 (1,966) 11,371
------- -------- -------- -------- -------- --------
TOTAL 571 19,516 2,624 1,666 3,802 11,373
------- -------- -------- -------- -------- --------
CONTRIBUTIONS
Participant 1,749 1,214 746 1,582 1,737
Employer 1,273 788 598 1,249 1,289
------- -------- -------- -------- -------- --------
TOTAL 3,022 2,002 1,344 2,831 3,026
------- -------- -------- -------- -------- --------
Rollovers 33 1 11 12 155
Fund Transfers, net (6,487) 1,005 8,887 1,121 (1,436) 557
Participant distributions (929) (6,487) (10,440) (2,727) (4,588) (3,918)
------- -------- -------- -------- -------- --------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS (6,845) 17,089 3,074 1,415 621 11,193
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 13,471 75,559 50,258 20,294 41,949 40,170
------- -------- -------- -------- -------- --------
END OF YEAR $ 6,626 $ 92,648 $ 53,332 $ 21,709 $ 42,570 $ 51,363
======= ======== ======== ======== ======== ========
<CAPTION>
AMERICAN AMERICAN
EXPRESS EXPRESS
NEW DIVERSIFIED TEMPLETON PARTICIPANT
DIMENSIONS EQUITY INCOME FOREIGN LOAN
FUND FUND INCOME FUND FUND TOTAL
---------- ------------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 5,605 $ 704 $ 471 $ 18,234
Interest 2,624
Net appreciation (depreciation)
in fair value of investments 16,378 (49) (694) 41,109
-------- -------- ------- -------- ---------
TOTAL 21,983 655 (223) 61,967
-------- -------- ------- -------- ---------
CONTRIBUTIONS
Participant 3,344 433 345 11,150
Employer 2,603 268 231 8,299
-------- -------- ------- -------- ---------
TOTAL 5,947 701 576 19,449
-------- -------- ------- -------- ---------
Rollovers 80 60 352
Fund Transfers, net (4,242) 360 (711) 946
Participant distributions (7,554) (855) (304) (37,802)
-------- -------- ------- -------- ---------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS 16,214 921 (662) 946 43,966
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 80,476 5,392 4,905 10,106 342,580
-------- -------- ------- -------- ---------
END OF YEAR $ 96,690 $ 6,313 $ 4,243 $ 11,052 $ 386,546
======== ======== ======= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICAN
NORAM ENERGY COMPANY EXPRESS AMERICAN AMERICAN AMERICAN
CORP. COMMON TRUST U.S. EXPRESS EXPRESS EXPRESS
POOLED GIC STOCK GOVERNMENT SELECTIVE MUTUAL TRUST EQUITY
FUND FUND SECURITIES FUND FUND FUND INDEX FUND
------------ ------- --------------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 3,568 $ 1,389 $ 6,014
Interest $ 520 $ 2,474
Net appreciation (depreciation)
in fair value of investments 55 17,721 186 579 $ 9,290
-------- -------- -------- -------- -------- --------
TOTAL 575 21,289 2,474 1,575 6,593 9,290
-------- -------- -------- -------- -------- --------
CONTRIBUTIONS
Participant 2,193 1,209 820 1,690 1,546
Employer 1,812 1,210 691 1,404 1,232
-------- -------- -------- -------- -------- --------
TOTAL 4,005 2,419 1,511 3,094 2,778
-------- -------- -------- -------- -------- --------
Rollovers 4 7 81 79 51 23
Fund Transfers, net (23,684) (14,433) 14,984 2,245 3,134 4,749
Participant distributions (1,352) (3,346) (8,871) (2,063) (3,555) (2,852)
-------- -------- -------- -------- -------- --------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS (24,457) 7,522 11,087 3,347 9,317 13,988
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 37,928 68,037 39,171 16,947 32,632 26,182
-------- -------- -------- -------- -------- --------
END OF YEAR $ 13,471 $ 75,559 $ 50,258 $ 20,294 $ 41,949 $ 40,170
======== ======== ======== ======== ======== ========
<CAPTION>
AMERICAN AMERICAN
EXPRESS EXPRESS
NEW DIVERSIFIED TEMPLETON PARTICIPANT
DIMENSIONS EQUITY INCOME FOREIGN LOAN
FUND FUND INCOME FUND FUND TOTAL
---------- ------------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 5,986 $ 649 $ 542 $ 18,148
Interest 2,994
Net appreciation (depreciation)
in fair value of investments 8,983 (13) (491) 36,310
-------- ------- ------- -------- --------
TOTAL 14,969 636 51 57,452
-------- ------- ------- -------- --------
CONTRIBUTIONS
Participant 3,324 321 327 11,430
Employer 2,710 241 237 9,537
-------- ------- ------- -------- --------
TOTAL 6,034 562 564 20,967
-------- ------- ------- -------- --------
Rollovers 74 29 51 399
Fund Transfers, net 6,385 2,826 2,707 1,087
Participant distributions (3,886) (379) (124) (26,428)
-------- ------- ------- -------- --------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS 23,576 3,674 3,249 1,087 52,390
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 56,900 1,718 1,656 9,019 290,190
-------- ------- ------- -------- --------
END OF YEAR $ 80,476 $ 5,392 $ 4,905 $ 10,106 $342,580
======== ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 8
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1. ACCOUNTING POLICIES
In accordance with the provisions of the NorAm Energy Corp. Employee
Savings and Investment Plan ("Plan"), the financial records of the
Plan are kept and the valuations of accounts of participating
employees ("Participants") are determined on the accrual basis.
The Plan recognizes net appreciation or depreciation in the fair value
of its investments. Investments are reflected at fair value in the
financial statements. Fair value for securities listed on a national
exchange is principally determined using the closing price on the New
York Stock Exchange. Fair value for mutual funds is determined using
net asset value. The Plan's guaranteed investment contracts are not
fully-benefit responsive and, as such are valued at fair value as of
December 31, 1998 and 1997.
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions that
affect the reported amounts as well as certain disclosures. The Plan's
financial statements include amounts that are based on management's
best estimates and judgments. Actual results could differ from those
estimates.
Certain 1997 balances have been reclassed to conform to the 1998
presentation.
2. SUMMARY OF THE PLAN
DESCRIPTION OF PLAN
The following description of the Plan provides only general
information. Participants should refer to the Plan document for a more
complete description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan covering all qualified
Employees' of the Company. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA").
6
<PAGE> 9
PARTICIPANT ACCOUNTS
Each participant's account is credited with the Participant's
contributions and with allocations of (a) the Reliant Energy
Resources, Inc., formerly NorAm Energy Corp. ("Resources")
contributions and, (b) Plan earnings. Each Participant's account is
also charged with an allocation of administrative expenses.
Allocations are based on Participant earnings or account balances, as
defined in the Plan. The benefit to which a Participant is entitled is
the benefit that could be provided from the Participant's vested
account.
PARTICIPATION
Reliant Energy, Incorporated, formerly Houston Industries Incorporated
("Company") acquired Resources during 1997 (see Note 5). The Plan
covers eligible employees of Resources excluding certain employees of
the Minnegasco Division. The Plan is designed to comply in all material
respects with ERISA. An employee is eligible for participation as of
the first day of the calendar quarter coincident with or next following
(i) his rehire date or (ii) one month and one day following his hire
date. Temporary and part-time employees are eligible to participate
after completion of at least 1,000 Hours of Service in a year. The Plan
excludes nonresident aliens with no earned income from U.S. sources,
employees (other than hourly paid Entex Division employees) who are
covered by a collective bargaining agreement that does not expressly
provide for participation in the Plan, and leased employees. Each
Participant may contribute to the Plan annually an amount equal to any
whole percentage from 1% to 12% of their compensation.
The maximum amount that a participant may elect to defer as a pre-tax
contribution for any taxable year under all cash or deferred
arrangements (such as the Plan) in which the participant participates
was limited to $10,000 in 1998 and $9,500 in 1997. The limit for 1999
is $10,000, to be adjusted annually thereafter for inflation. The
Company matches 100% of a Participant's contributions to a maximum of
6% of a Participant's compensation.
INVESTMENT PROGRAM
In accordance with the Plan, various investment funds are maintained
by the trust. Investment of the Plan's assets into each of the
separate funds is based on the specifications of the Participant, in
5% increments. The objective of each of the funds is outlined below:
NORAM ENERGY CORP. POOLED GIC FUND: Invested primarily in a guaranteed
investment contract with an insurance company.
COMPANY COMMON STOCK FUND (FORMERLY NORAM ENERGY CORP. POOLED COMMON
STOCK FUND): Invested primarily in shares of common stock of the
Company.
7
<PAGE> 10
AMERICAN EXPRESS TRUST U.S. GOVERNMENT SECURITIES FUND: Invests in
short-term bond or debt instruments guaranteed as to principal and
interest by the U.S. Government or its agencies or instrumentalities.
AMERICAN EXPRESS SELECTIVE FUND: Invests in a portfolio of primarily
high-quality corporate bonds, government securities and money market
securities.
AMERICAN EXPRESS MUTUAL FUND: Invests in a portfolio of common stocks,
which offer capital appreciation, and in senior securities, such as
bonds and preferred stocks, that offer fixed interest and dividend
payments.
AMERICAN EXPRESS TRUST EQUITY INDEX FUND: Invests primarily in
medium-to-large, well-established companies offering both long-term
capital appreciation and income potential.
AMERICAN EXPRESS NEW DIMENSIONS FUND: Invests in a portfolio of
primarily common stocks of U.S. and foreign companies in which
powerful economic and technical changes may take place. Such companies
may also have demonstrated excellent technology, marketing or
management expertise.
AMERICAN EXPRESS DIVERSIFIED EQUITY INCOME FUND: Invests in a
portfolio of medium to large, well-established companies that offer
long-term capital growth potential as well as reasonable income from
dividends and interest.
TEMPLETON FOREIGN INCOME FUND: Invests primarily in common stocks of
companies outside the U.S., as well as preferred stocks and certain
debt securities.
GUARANTEED INVESTMENT CONTRACT
In accordance with American Institute of Certified Public Accountants
issued Statement of Position 94-4, "Reporting of Investment Contracts
Held by Health and Welfare Benefit Plans and Defined Contribution
Pension Plans" ("Statement"), which was implemented by the Plan during
the year ended December 31, 1996. This Statement requires that
investment contracts with insurance companies which are fully-benefit
responsive be recorded at contract value and contracts which are not
fully-benefit responsive are recorded at fair value. The Plan's
guaranteed investment contracts are not fully-benefit responsive and,
as such are valued at fair value as of December 31, 1998 and 1997.
Contract value represents contributions made under the contracts plus
interest, less withdrawals made by Participants and distributions to
former Participants. Fair value, which does not differ materially from
cost, is based upon the net present value of the guaranteed investment
contracts at December 31, 1998 and 1997. The Plan's guaranteed
investment contracts contain penalties for early withdrawal or
termination.
8
<PAGE> 11
PLAN ADMINISTRATION
The Benefits Committee appointed by the Board of Directors of the
Company, is responsible for directing American Express Trust (the
"Trustee"), in the day to day administration of the Plan. Any
administrative expenses not paid by Resources are borne by the Plan.
DISTRIBUTIONS AND FORFEITURES
A terminated Participant or the beneficiary of a deceased Participant
is entitled to a distribution of the value of the Participant's entire
account in case of death, disability, or retirement at or after the
Participant's attainment of age 65. In case of termination of service
for other reasons, a Participant is entitled to a distribution of the
entire value of his employee contribution account plus the vested
portion of his matching contribution account. Vesting is determined by
vesting service years in accordance with the following schedule:
<TABLE>
<CAPTION>
PARTICIPANT'S
YEARS OF VESTED
SERVICE PERCENTAGE
<S> <C>
Less than 2...................................... 0%
Two but less than three.......................... 20%
Three but less than four......................... 40%
Four but less than five.......................... 60%
Five but less than six........................... 80%
Six or more...................................... 100%
</TABLE>
Amounts forfeited upon distribution are held separately until the end
of the plan year in which the terminated employee incurs five
consecutive one year breaks in service. Subsequently, the amount
forfeited by a Participant is applied to reduce the Company's
contribution to the Plan. Employee forfeitures for the years ended
December 31, 1998 and 1997 were not significant to the Plan.
A terminated Participant may receive a lump sum final distribution of
the vested amount accumulated in each Participant's account upon
written request. Immediate lump sum distributions are made for
accounts which do not exceed $5,000.
9
<PAGE> 12
PARTICIPANT LOANS
A Participant may borrow against amounts attributable to his vested
account balance. The maximum amount that a Participant may borrow is
the lesser of (i) $50,000, reduced by the excess, if any, of the
highest outstanding balance of loans to the Participant from all plans
maintained by the Company or an affiliated entity during the one-year
period ending on the day before the date on which such loan is made
over the outstanding balance of loans from the Plan on the date on
which such loan is made, or (ii) 50% of the value of the Participant's
vested account balance under the Plan. The minimum amount which may be
borrowed is $1,000. A Participant may have only one loan outstanding
at any one time. Interest rates are fixed at the prime rate prevailing
at the loan's inception plus one percent. Interest rates are fixed for
the term of the loan at the time of loan origination and ranged from
7% to 10% for loans outstanding as of December 31, 1998. Principal and
interest payments are paid ratably through monthly payroll deductions
over a term not to exceed sixty months. Participants' account balances
are used as collateral for the loans. Loan transactions are treated as
a transfer to (from) the investment fund from (to) the Participant
Loan Fund.
TERMINATION OF THE PLAN
Resources may terminate the Plan at any time and must give written
notice to the Trustee. In the event of termination of the Plan, the
assets held by the Trustee under the Plan will be valued and each
Participant will become fully vested and entitled to distributions
respecting his account.
3. FEDERAL INCOME TAXES
No provision for federal income taxes has been made in the financial
statements of the Plan. The Internal Revenue Service ("IRS")
determined and informed the Company by a letter dated October 10,
1995, that the Plan and related trust are designed in accordance with
applicable sections of the Internal Revenue Code ("Code"). Although
the Plan was amended subsequent to that date, the Benefits Committee
and the Company's counsel believe that the Plan was designed and
operated in compliance with the requirements of the Code. As a result,
the Participant's Pre-tax Contributions, up to a specified maximum
amount each calendar year, and the Employer Contributions to the Trust
on behalf of a Participant are not currently taxable to a Participant
when made, and income from any source accruing to a Participant's
account is not taxable when realized by the Trust. Participant
withdrawals of After-tax Contributions made to the Plan prior to 1987,
are excludable from the Participant's gross income for federal income
tax purposes. The After-tax Contributions made by a Participant will
not be deductible by the Participant. However, Participant withdrawals
of amounts attributable to earnings on such After-tax Contributions
are subject to federal income tax. Participant withdrawals of amounts
attributable to Pre-tax Contributions or Employer Contributions are
subject to federal income tax when distributed.
10
<PAGE> 13
4. RELATED PARTY TRANSACTIONS
The Trustee is authorized under contract provisions and by ERISA
regulations providing administrative and statutory exemptions, to
invest in funds under its control and in securities of the Company.
During 1998 and 1997, the Trustee purchased and sold units of the
Company's and Resources common stock and American Express Trust Funds
as temporary investments, which are shown below:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C> <C>
PURCHASES Company's Common Stock $ 25,536,337 $ 11,497,638
Trustee 77,159,722 134,156,049
SALES Company's Common Stock $ 22,479,514 $ 23,155,437
Trustee 69,118,446 91,680,576
</TABLE>
5. MERGER WITH RELIANT ENERGY, INCORPORATED (FORMERLY HOUSTON INDUSTRIES
INCORPORATED)
On August 6, 1997, Resources was merged with and into a subsidiary of
the Company and became a wholly owned subsidiary of the Company (the
"Merger"). Consideration for the purchase of Resources Common Stock
was a combination of cash and the Company's Common Stock. As a result
of the Merger, the Plan Participants received cash and the Company's
Common Stock as Merger consideration in exchange for their Resources
Common Stock. The cash portion of the merger consideration was
automatically invested based upon Participant investment elections.
The Merger Agreement stipulates that the Company, for a period of one
year subsequent to the consummation of the Merger will continue or
cause to be continued, without adverse change to any employee or
former employee, all Resources benefit plans.
6. SUBSEQUENT EVENT
Effective April 1, 1999, the Plan was merged into the Reliant Energy,
Incorporated Savings Plan (formerly the Houston Industries
Incorporated Savings Plan). The Plan had aggregate net assets
available for benefits of approximately $344 million on April 1, 1999
that were transferred into the Company's Savings Plan. Management
believes that the merger was a tax exempt transaction under the
applicable provisions of the Internal Revenue Code.
11
<PAGE> 14
ITEM 27a - Schedule of Assets Held for Investment Purposes
EIN 74-0694415; PN: 033
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
(in thousands, except shares and units)
<TABLE>
<CAPTION>
MATURITY RATE OF PAR CURRENT
DESCRIPTION OF ASSET DATE INTEREST VALUE/SHARES COST VALUE
-------------------- -------- -------- ------------ ---- -------
<S> <C> <C> <C> <C> <C>
Guaranteed Investment Contracts
Aetna #LT-13938 01/04/99 8.75% 6,625,624 $ 6,626 $ 6,626
*Company Common Stock Fund 2,883 52,234 92,608
*American Express Trust U.S. Government Securities Fund 53,040,603 53,041 53,041
*American Express Selective Fund 2,344,009 21,389 21,738
*American Express Mutual Fund 3,273,576 43,200 42,635
*American Express Trust Equity Index Fund 1,463,693 29,498 51,253
*American Express New Dimensions Fund 3,356,961 67,380 96,832
*American Express Diversified Equity Income Fund 675,963 6,486 6,312
Templeton Foreign Income Fund 505,733 5,164 4,243
--------- ---------
TOTAL $ 285,018 $ 375,288
========= =========
Participant Loans, interest rate at prime plus 1% $ 11,052
=========
</TABLE>
*Party-in-interest
12
<PAGE> 15
Item 27d - Schedule of Reportable Transactions
EIN 74-0694415; PN: 033
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
5% REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
CURRENT VALUE
PURCHASE SELLING COST OF ON TRANSACTION NET GAIN
DESCRIPTION PRICE PRICE ASSET DATE OR (LOSS)
----------- -------- ------- ------- -------------- ---------
<S> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS
None
SERIES OF TRANSACTIONS
*American Express Mutual Fund
92 Purchases $10,664,125 $10,664,125
182 Sales $ 7,945,890 $ 7,400,935 $ 544,955
*American Express New Dimensions Fund
Fund, Inc.
112 Purchases 17,055,076 17,055,076
176 Sales 16,919,577 12,001,987 4,917,590
*American Express Trust U.S. Government
Securities Fund
301 Purchases 32,145,719 32,145,719
130 Sales 29,071,542 29,071,542
*American Express Trust Equity Index Fund
108 Purchases 8,219,140 8,219,140
141 Sales 8,490,963 5,024,227 3,466,736
*Company Common Stock Fund
83 Purchases 25,536,337 25,536,337
164 Sales 22,479,514 10,131,436 12,348,078
</TABLE>
*Party-in-interest
13
<PAGE> 16
SIGNATURE
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the Plan) have duly caused this
annual report to be signed on its behalf by the undersigned thereunto duly
authorized.
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
By /s/ Lee W. Hogan
-----------------------------------
(Lee W. Hogan, Chairman of the
Benefits Committee of
Reliant Energy, Incorporated,
Plan Administrator)
June 25, 1999
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
23 Independent Auditor's Consent
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-11329 of Reliant Energy Incorporated and Subsidiaries on Form S-8 of our
report dated June 18, 1999, appearing in the Annual Report on Form 11-K of the
NorAm Energy Corp. Employee Savings and Investment Plan for the year end
December 31, 1998.
Deloitte & Touche LLP
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
June 29, 1999
