HOUSTON -- Reliant Resources Inc. restated its earnings yesterday for a three-year period during which the company said it engaged in trades that artificially inflated its revenues by more than $7.8 billion.

In its filing with the Securities and Exchange Commission yesterday, Reliant said "round-trip trades" the company engaged in during 1999, 2000 and 2001 should not have been reflected in its revenues or expenses. The trades added $6.4 billion to the company's revenues during that period.

Federal regulators are investigating Reliant and numerous other energy companies for the so-called round-trip trades, in which electricity is bought and sold at the same quantity and price to inflate revenue and trading volume.

Last month, Seattle class-action law firm Hagens Berman sued Reliant and two other energy companies on behalf of customers of 21 public utility districts in Washington state. That suit contends Reliant, Duke Energy Trading and Dynegy Power Marketing conspired to create a cartel to withhold power from the market, create artificial shortages and drive up the cost of power.

In May 2001, the company revised its financial statements for the first quarter of 2001 to adjust for bogus trades that artificially inflated revenues by $1.2 billion.

"It doesn't look like much in the way of a surprise," said Ed Paik, who helps manage $800 million at the Liberty Utilities Fund, which owns Reliant Energy shares.

Yesterday's disclosures were that the "round-trip trades" were spread over a much longer period.

"The personnel who effected these transactions apparently did so with the sole objective of increasing volumes," the Reliant filing said, echoing the company's remarks in its May filing with the SEC.

In addition to the round-trip trades, the company's revenues also were inflated by nearly $1.5 billion because of how it accounted for four other energy contracts. Reliant described these deals as swaps, but said each had a legitimate business purpose and was expected to increase future cash flow.

Reliant previously reported $15.2 billion in revenue in 1999, $29.3 billion in 2000 and $46.2 billion in 2001.

Yesterday, the company restated its revenues to $13.79 billion in 1999, $28.26 billion in 2000 and $40.81 billion in 2001.

It also restated its expenses for the same three-year period decreasing its expenses from $13.9 billion to $12.5 billion in 1999; $27.5 billion to $26.4 billion in 2000 and $44.2 billion to $38.3 billion in 2001.

The company said since the trades involved the same volume and the same price, they did not affect reported cash flows, operating income or net income.

The Houston-based company disclosed the round-trip trades in May and said it suspended such activity and would review how it accounted for the transactions. In its SEC filing yesterday, Reliant said in September, when the company's third-quarter results are released, it will begin reporting all energy trading and marketing activities on a net basis.

Seattle P-I

-- Anonymous, July 06, 2002