<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:
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS 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
Minnegasco Division Employees' Retirement Savings Plan:
We have audited the accompanying statements of net assets for benefits of the
Minnegasco Division Employees' Retirement Savings 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
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
AMERICAN AMERICAN
COMPANY EXPRESS AMERICAN AMERICAN EXPRESS
COMMON TRUST U.S. EXPRESS EXPRESS DIVERSIFIED
STOCK GOVERNMENT SELECTIVE MUTUAL EQUITY INCOME
FUND SECURITIES FUND FUND FUND FUND
------------ ---------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS
Company Common Stock $ 25,814,081
American Express Trust
U.S. Government Securities Fund $ 10,308,361
American Express Selective Fund $5,339,043
American Express Mutual Fund $ 14,896,736
American Express
Diversified Equity Income Fund $ 18,975,508
American Express Trust
Equity Fund
American Express
New Dimensions Fund
Templeton Foreign Income Fund
Loans to participants
------------- ---------------- ---------- ------------ -------------
TOTAL INVESTMENTS 25,814,081 10,308,361 5,339,043 14,896,736 18,975,508
INTEREST RECEIVABLE 39,248
------------- ---------------- ---------- ------------ -------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 25,814,081 $ 10,347,609 $5,339,043 $ 14,896,736 $ 18,975,508
============= ================ ========== ============ =============
<CAPTION>
AMERICAN
AMERICAN EXPRESS
EXPRESS NEW TEMPLETON PARTICIPANT
TRUST EQUITY DIMENSIONS FOREIGN LOAN
INDEX FUND FUND INCOME FUND FUND TOTAL
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS
Company Common Stock $ 25,814,081
American Express Trust
U.S. Government Securities Fund 10,308,361
American Express Selective Fund 5,339,043
American Express Mutual Fund 14,896,736
American Express
Diversified Equity Income Fund 18,975,508
American Express Trust
Equity Fund $ 18,209,304 18,209,304
American Express
New Dimensions Fund $ 29,134,770 29,134,770
Templeton Foreign Income Fund $ 3,798,266 3,798,266
Loans to participants $ 1,863,063 1,863,063
------------ ------------ ------------ ----------- ------------
TOTAL INVESTMENTS 18,209,304 29,134,770 3,798,266 1,863,063 128,339,132
INTEREST RECEIVABLE 39,248
------------ ------------ ------------ ----------- ------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 18,209,304 $ 29,134,770 $ 3,798,266 $ 1,863,063 $128,378,380
============ ============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
AMERICAN AMERICAN
COMPANY EXPRESS AMERICAN AMERICAN EXPRESS
COMMON TRUST U.S. EXPRESS EXPRESS DIVERSIFIED
STOCK GOVERNMENT SELECTIVE MUTUAL EQUITY INCOME
FUND SECURITIES FUND FUND FUND FUND
------------ --------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS
Company Common Stock $ 23,039,385
American Express Trust
U.S. Government Securities Fund $ 8,149,090
American Express Selective Fund $ 5,417,098
American Express Mutual Fund $ 14,352,963
American Express
Diversified Equity Income Fund $ 18,651,647
American Express Trust
Equity Fund
American Express
New Dimensions Fund
Templeton Foreign Income Fund
Loans to participants
------------ -------------- ----------- ------------ -------------
TOTAL INVESTMENTS 23,039,385 8,149,090 5,417,098 14,352,963 18,651,647
RECEIVABLES
Interest and Dividends 302,685 38,256
Fund transfers, net (77,250) 2,214 (3,414) 20,400 20,200
------------ -------------- ----------- ------------ -------------
TOTAL RECEIVABLES 225,435 40,470 (3,414) 20,400 20,200
NET ASSETS AVAILABLE
FOR BENEFITS $ 23,264,820 $ 8,189,560 $ 5,413,684 $ 14,373,363 $ 18,671,847
============ ============== =========== ============ =============
<CAPTION>
AMERICAN
AMERICAN EXPRESS
EXPRESS NEW TEMPLETON PARTICIPANT
TRUST EQUITY DIMENSIONS FOREIGN LOAN
INDEX FUND FUND INCOME FUND FUND TOTAL
-------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS
Company Common Stock $ $ 23,039,385
American Express Trust
U.S. Government Securities Fund 8,149,090
American Express Selective Fund 5,417,098
American Express Mutual Fund 14,352,963
American Express
Diversified Equity Income Fund 18,651,647
American Express Trust
Equity Fund $ 14,651,014 14,651,014
American Express
New Dimensions Fund $ 24,239,079 24,239,079
Templeton Foreign Income Fund $ 4,253,357 4,253,357
Loans to participants $ 1,860,430 1,860,430
-------------- ------------ ------------ ------------- ------------
TOTAL INVESTMENTS 14,651,014 24,239,079 4,253,357 1,860,430 114,614,063
RECEIVABLES
Interest and Dividends 340,941
Fund transfers, net 18,950 18,900
-------------- ------------ ------------ ------------- ------------
TOTAL RECEIVABLES 18,950 18,900 340,941
NET ASSETS AVAILABLE
FOR BENEFITS $ 14,651,014 $ 24,258,029 $ 4,272,257 $ 1,860,430 $ 114,955,004
============== ============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
AMERICAN AMERICAN
COMPANY EXPRESS AMERICAN AMERICAN EXPRESS AMERICAN
COMMON TRUST U.S. EXPRESS EXPRESS DIVERSIFIED EXPRESS
STOCK GOVERNMENT SELECTIVE MUTUAL EQUITY INCOME TRUST EQUITY
FUND SECURITIES FUND FUND FUND FUND INDEX FUND
----------- --------------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 466,095
Dividends
Common Stock $ 1,189,549
Mutual Funds $ 351,279 $ 1,996,741 $ 2,101,665
Net appreciation (depreciation)
in fair value of investments 4,300,377 46,834 (653,502) 4,082 $ 4,065,726
----------- --------------- ----------- ------------ ------------- -------------
TOTAL 5,489,926 466,095 398,113 1,343,239 2,105,747 4,065,726
CONTRIBUTIONS
Participant 395,502 261,495 232,616 631,387 856,411 628,224
Employer 125,944 93,809 81,687 212,150 294,865 208,971
----------- --------------- ----------- ------------ ------------- -------------
TOTAL 521,446 355,304 314,303 843,537 1,151,276 837,195
Fund transfers, net 423,573 2,738,311 164,999 (306,171) (1,270,538) 182,283
Participant distributions (3,833,235) (1,518,011) (943,236) (1,343,589) (1,665,859) (1,507,057)
Administrative expenses
net of forfeitures (52,449) 116,350 (8,820) (13,643) (16,965) (19,857)
----------- --------------- ----------- ------------ ------------- -------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS 2,549,261 2,158,049 (74,641) 523,373 303,661 3,558,290
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 23,264,820 8,189,560 5,413,684 14,373,363 18,671,847 14,651,014
----------- --------------- ----------- ------------ ------------- -------------
END OF YEAR $25,814,081 $ 10,347,609 $ 5,339,043 $ 14,896,736 $ 18,975,508 $ 18,209,304
=========== =============== =========== ============ ============= =============
<CAPTION>
AMERICAN
EXPRESS
NEW TEMPLETON PARTICIPANT
DIMENSIONS FOREIGN LOAN
FUND INCOME FUND FUND TOTAL
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 466,095
Dividends
Common Stock 1,189,549
Mutual Funds $ 1,677,269 $ 391,229 6,518,183
Net appreciation (depreciation)
in fair value of investments 4,919,744 (577,929) 12,105,332
----------- ----------- ----------- ------------
TOTAL 6,597,013 (186,700) 20,279,159
CONTRIBUTIONS
Participant 1,251,626 391,400 4,648,661
Employer 427,801 127,393 1,572,620
----------- ----------- ----------- ------------
TOTAL 1,679,427 518,793 6,221,281
Fund transfers, net (1,569,337) (365,753) $ 2,633
Participant distributions (1,802,950) (433,245) (13,047,182)
Administrative expenses
net of forfietures (27,412) (7,086) (29,882)
----------- ----------- ----------- ------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS 4,876,741 (473,991) 2,633 13,423,376
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 24,258,029 4,272,257 1,860,430 114,955,004
----------- ----------- ----------- ------------
END OF YEAR $29,134,770 $ 3,798,266 $ 1,863,063 $128,378,380
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
AMERICAN AMERICAN
COMPANY EXPRESS AMERICAN AMERICAN EXPRESS AMERICAN
COMMON TRUST U.S. EXPRESS EXPRESS DIVERSIFIED EXPRESS
STOCK GOVERNMENT SELECTIVE MUTUAL EQUITY INCOME TRUST EQUITY
FUND SECURITIES FUND FUND FUND FUND INDEX FUND
----------- --------------- ---------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 432,344
Dividends
Common Stock $ 1,119,457
Mutual Funds $ 365,840 $ 2,042,715 $ 2,361,847 $ 94
Net appreciation (depreciation)
in fair value of investments 5,524,255 (27,047) 43,914 98,520 508,521 3,287,985
----------- --------------- ---------- ------------ ------------- ------------
Total TOTAL 6,643,712 405,297 409,754 2,141,235 2,870,368 3,288,079
CONTRIBUTIONS
Participant 286,411 281,591 232,120 633,297 900,207 516,879
Employer 104,152 97,311 85,307 218,361 305,933 180,610
----------- --------------- ---------- ------------ ------------- ------------
TOTAL 390,563 378,902 317,427 851,658 1,206,140 697,489
Fund transfers, net (9,176,441) 628,007 509,066 1,022,464 1,777,893 1,702,836
Participant distributions (3,429,238) (1,330,269) (488,940) (1,096,647) (875,393) (797,114)
Administrative expenses
net of forfietures (7,987) 28,887 (1,944) (4,469) (2,296) (1,451)
----------- --------------- ---------- ------------ ------------- ------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS (5,579,391) 110,824 745,363 2,914,241 4,976,712 4,889,839
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 28,844,211 8,078,736 4,668,321 11,459,122 13,695,135 9,761,175
----------- --------------- ---------- ------------ ------------- ------------
END OF YEAR $23,264,820 $ 8,189,560 $5,413,684 $ 14,373,363 $ 18,671,847 $ 14,651,014
=========== =============== ========== ============ ============= ============
<CAPTION>
AMERICAN
EXPRESS
NEW TEMPLETON PARTICIPANT
DIMENSIONS FOREIGN LOAN
FUND INCOME FUND FUND TOTAL
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 432,344
Dividends
Common Stock 1,119,457
Mutual Funds $ 1,798,065 $ 472,544 7,041,105
Net appreciation (depreciation)
in fair value of investments 2,528,029 (279,795) 11,684,382
------------- ------------ ------------ -------------
TOTAL 4,326,094 192,749 20,277,288
CONTRIBUTIONS
Participant 1,214,287 431,339 4,496,131
Employer 417,467 138,137 1,547,278
------------- ------------ ------------ -------------
TOTAL 1,631,754 569,476 6,043,409
Fund transfers, net 2,386,317 1,046,974 $ 102,884
Participant distributions (890,906) (165,122) (9,073,629)
Administrative expenses
net of forfietures (8,711) (2,029)
------------- ------------ ------------ -------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS 7,444,548 1,642,048 102,884 17,247,068
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 16,813,481 2,630,209 1,757,546 97,707,936
------------- ------------ ------------ -------------
END OF YEAR $ 24,258,029 $ 4,272,257 $ 1,860,430 $ 114,955,004
============= ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 8
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1. ACCOUNTING POLICIES
In accordance with the provisions of the Minnegasco Division Employees'
Retirement Savings Plan ("Plan"), of the Minnegasco Division
("Minnegasco") of Reliant Energy Resources, Inc., formerly NorAm Energy
Corp. ("Resources") (see Note 5), the financial records of the Plan are
generally kept and the valuations of accounts of participating
employees ("Participants") are determined on the accrual basis.
Interest income is recorded as earned 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. Investments in common stock are stated at quoted
market prices of the stock on the last day of business of the year.
Purchases and sales of investments are recorded on their trade date.
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. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). The Plan is an eligible individual account plan as
defined by ERISA Section 407((d)(3)) which is authorized to acquire and
hold qualifying employer securities (as defined by ERISA Section
407((d)(3)) with a value in excess of ten percent of the fair market
value of the assets of the Plan.
6
<PAGE> 9
The Benefits Committee ("Committee") appointed by the Board of
Directors of Reliant Energy Incorporated, formerly Houston Industries
Incorporated (the "Company"), is responsible for directing American
Express Trust Company (the "Trustee"), in the day to day administration
of the Plan. All administrative expenses not paid by Minnegasco are
borne by the Plan.
PARTICIPANT ACCOUNTS
Each Participant's account is credited with the Participant's and
Minnegasco's contributions, and an allocation of the Plan's earnings.
Earnings allocations are based on Participant account balances as
defined by the Plan.
The allocation of the Participant's contributions to the investment
funds is selected by the Participant and may be changed at any time.
Allocation between funds is at the discretion of the Participant.
Contributions for each calendar month shall be deemed to have been
deposited as of the last day of such month for purposes of allocating
investment earnings.
PARTICIPATION
Eligible employees may contribute up to 12% of their basic earnings to
the Plan as pre-tax savings contributions. Company's matching
contributions are equal to 50% of an employee's pre-tax contributions
which do not exceed 6% of employee's basic earnings.
The Plan is available to all full-time employees of Minnegasco with at
least 30 days of service, part-time employees scheduled to work more
than 1,000 hours per year with at least 30 days of experience, and
other part time employees with one year of service. The Plan is not
available to employees covered by a collective bargaining agreement
unless the bargaining agreement expressly provides that such employee
will be eligible to participate. In addition the Plan is not available
to non-resident aliens, interns, temporary employees, seasonal
employees, and leased employees.
7
<PAGE> 10
INVESTMENT PROGRAM
Plan participants direct the investment of contributions allocated to
their accounts to one or more of the following investment funds held by
the Trustee:
COMPANY COMMON STOCK FUND (FORMERLY NORAM ENERGY CORP. POOLED COMMON
STOCK FUND): Invests primarily in shares of common stock of the
Company. See note 5 regarding the merger of the Company and Resources.
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 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.
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.
TEMPLETON FOREIGN INCOME FUND: Invests primarily in common stocks of
companies outside the U.S., as well as preferred stocks and certain
debt securities.
PLAN ADMINISTRATION
The Benefits Committee appointed by the Board of Directors of the
Company, was responsible for directing the Trustee in the day to day
administration of the Plan.
8
<PAGE> 11
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
later of (i) the Participant's attainment of age 65 or (ii) the fifth
anniversary of the Participant's commencement of participation in the
Plan. In case of termination of service for other reasons, a
Participant is entitled to a distribution of the entire value of his
contribution account plus the vested portion of his Employer
Contribution account. Vesting is determined by vesting service years in
accordance with the following schedule:
<TABLE>
<CAPTION>
Vesting Service Vested
Years Percentage
--------------- ----------
<S> <C>
Less than three................ 0%
Three but less than four....... 50%
Four but less than five........ 75%
Five or more................... 100%
</TABLE>
Any portion of the value of the Company's contributions not vested will
be forfeited. The amount forfeited by a Participant is applied to
reduce the respective Company's subsequent 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 elect a lump sum distribution or
installment payments of the vested amount accumulated in each
Participant's account. Immediate lump sum distributions are made for
accounts which do not exceed $5,000.
PARTICIPANT LOANS
A Participant may borrow up to 50% of his vested account balance, up to
a maximum of $50,000, reduced by the excess, if any, of the highest
outstanding loan balance during the previous 12 months of loans issued
to the Participant from all plans maintained by Minnegasco 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 ($1,000
minimum). A Participant may have only one loan outstanding at any one
time. Interest rates are fixed for the term of the loan at the time of
loan origination and ranged from 8.75% to 9.50% on loans originated
during 1998 and ranged from 8.25% to 10.00% 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.
9
<PAGE> 12
TERMINATION OF THE PLAN
The Company 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 determined and
informed Minnegasco, by letter dated October 10, 1995 that the Plan, as
amended, qualifies under Section 401(a) and 401(k) of the Internal
Revenue Code ("Code") and is exempt from federal taxes under the
provisions of Section 501 (a). Although the Plan was amended, the
Committee and the Minnegasco'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. The
After-tax Contributions made by a Participant will not be deductible by
the Participant. However, Participant withdrawals of After-tax
Contributions made to the Plan prior to May 3, 1994, are excludable
from each Participant's gross income for federal income tax purposes.
The continued status of the Trust as a tax-exempt trust and the Plan as
a qualified plan are contingent upon the continuing operation of the
Trust and the Plan in accordance with applicable provisions of the
Code.
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 Minnegasco's common stock and American Express Trust
Funds as temporary investments, which are shown below:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
PURCHASES Company's Common Stock $ 3,866,703 $ 3,524,761
Trustee 26,452,642 33,691,803
SALES Company's Common Stock $ 4,769,408 $ 32,300,714
Trustee 23,457,522 17,711,722
</TABLE>
10
<PAGE> 13
5. MERGER WITH RELIANT ENERGY INCORPORATED (FORMERLY HOUSTON INDUSTRIES
INCORPORATED)
On August 6, 1997, Minnegasco's parent Resources merged with and into a
subsidiary of the Company and became a wholly owned subsidiary.
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 Company Common Stock as
merger consideration in exchange for their Resources common stock. The
cash portion of merger consideration received was automatically
invested based upon Participant investment elections in the Plan. 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 $118 million on April 1, 1999 which were transferred
into the Company's Savings Plan. Management believes that the merger
was a tax exempt transaction under the applicable provisions of the
Code.
11
<PAGE> 14
Item 27a - Schedule of Assets Held for Investment Purposes
EIN 72-0694415; PN: 004
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PAR VALUE/ CURRENT
DESCRIPTION OF ASSET SHARES COST VALUE
- -------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
*Company Common Stock Fund 803,551 $ 11,037,903 $ 25,814,081
*American Express Trust U.S. Government Securities Fund 10,308,361 10,308,361 10,308,361
*American Express Selective Fund 575,700 5,248,038 5,339,043
*American Express Mutual Fund 1,143,791 14,944,098 14,896,736
*American Express Diversified Equity Income Fund 2,032,074 17,509,295 18,975,508
*American Express Trust Equity Index Fund 520,028 10,481,629 18,209,304
*American Express New Dimensions Fund 1,010,046 20,432,630 29,134,770
Templeton Foreign Income Fund 452,714 4,523,132 3,798,266
------------ -------------
TOTAL $ 94,485,085 $ 126,476,069
============ =============
Participant Loans, interest rate at prime plus 1% $ 1,863,063
=============
</TABLE>
*Party-in-interest
12
<PAGE> 15
Item 27d - Schedule of Reportable Transactions
EIN 74-0694415; PN: 004
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
LINE 27(d)--SCHEDULE OF 5% REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CURRENT VALUE
PURCHASE SELLING COST OF ON TRANSACTION
DESCRIPTION PRICE PRICE ASSET DATE NET GAIN
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS
None
SERIES OF TRANSACTIONS-SAME SECURITY
*American Express Mutual Fund
79 Purchases 3,854,734 3,854,734
120 Sales 2,682,530 2,423,915 258,615
*American Express Diversified Equity Income Fund
199 Purchases 3,697,098 3,697,098
132 Sales 3,377,262 2,905,320 471,942
*American Express New Dimensions Fund
91 Purchases 5,756,101 5,756,101
129 Sales 5,780,152 3,913,052 1,867,100
*American Express Trust U.S. Government Securities Fund
212 Purchases 7,735,660 7,735,660
114 Sales 5,576,389 5,576,389
*American Express Trust Equity Index Fund
94 Purchases 3,827,125 3,827,125
108 Sales 4,334,331 2,373,979 1,960,352
*Company Common Stock Fund
103 Purchases 3,866,703 3,866,703
89 Sales 4,769,408 1,757,619 3,011,789
*Party-in-interest
</TABLE>
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.
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS 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>
EXHIBIT 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
Minnegasco Division Employees' Retirement Savings Plan for the year end December
31, 1998.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Houston, Texas
June 29, 1999
