Reliant Energy Reports Second Quarter Results

HOUSTON, Aug. 8 /PRNewswire-FirstCall/ -- Reliant Energy, Inc. reported income from continuing operations before income taxes of $39 million for the second quarter of 2006, compared to $105 million for the same period of 2005. The reported numbers include net gains from unrealized energy derivatives of $52 million and $138 million, respectively, for 2006 and 2005.

Open EBITDA (earnings before interest, income taxes, depreciation and amortization) was $258 million for the second quarter of 2006, compared to $185 million for the second quarter of 2005. Improved retail adjusted gross margin, driven by higher unit margins in all customer classes, was partially offset by higher expenses. Adjusted EBITDA, which includes the effect of historical wholesale hedges and gains on sales of emission allowances, was $174 million for the second quarter of 2006, compared to $168 million for the second quarter of 2005. The improvement to adjusted EBITDA was primarily related to the same factors described above for open EBITDA, partially offset by lower net gains on sales of emission allowances and higher losses related to historical wholesale hedges.

"Our businesses, particularly the retail energy segment, delivered strong second quarter results," said Joel Staff, chairman and chief executive officer. "In addition, we have made excellent progress on the priorities outlined in February, including our collateral reduction target. The completion of our retail credit-enhanced structure, combined with our year-to- date results, should produce a $1.6 billion reduction in collateral, significantly exceeding our $1 billion target for 2006," Staff added.

Reliant Energy, Inc. reported a loss from continuing operations before income taxes of $42 million for the first six months of 2006, compared to income from continuing operations before income taxes of $51 million for the same period of 2005. The reported numbers include net gains from unrealized energy derivatives of $75 million and $262 million, respectively, for 2006 and 2005.

Open EBITDA was $303 million for the first six months of 2006 compared to $237 million for the same period of 2005. The improvement was due to improved retail adjusted and wholesale open gross margin, partially offset by higher expenses. Adjusted EBITDA was $250 million for the first six months of 2006 compared to $189 million for the same period of 2005. The improvement was primarily due to improved retail adjusted gross margin partially offset by higher losses related to historical wholesale hedges and higher expenses.

During the first half of 2006, the company reported a $115 million use of cash in continuing operations from operating activities, compared to $56 million for the same period of 2005. Free cash flow used in continuing operations after emission allowances activity was ($116) million for the first half of 2006, compared to $98 million of free cash flow provided by continuing operations after emission allowances activity for the same period of 2005. The decline in free cash flow from continuing operations after emission allowances activity was due to changes in working capital requirements partially offset by increased proceeds from emission allowances sales.

OUTLOOK

Reliant Energy's outlook for open EBITDA is $871 million, $1,038 million and $1,154 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 $607 million, $810 million and $1,043 million for the same periods. The outlook for free cash flow from continuing operations after emission allowances activity is $103 million, $147 million and $363 million for the years ending December 31, 2006, 2007 and 2008, respectively.

This outlook is based on forward commodity prices on June 23, 2006 and assumptions and estimates by Reliant Energy.

Open EBITDA Outlook Reconciliation ($ millions) 2006 2007 2008 Income from continuing operations before income taxes (a) $217 $164 $357 Delivery of product underlying the unrealized (gains) losses on energy derivatives (368) (45) (19) Depreciation and amortization 378 387 428 Interest expense, net 380 304 277 Adjusted EBITDA (a) $607 $810 $1,043 Historical wholesale hedges (b) 420 228 111 Gains on sales of emission allowances (a),(c) (156) -- -- Open EBITDA (a) $871 $1,038 $1,154 (a) Certain factors that could affect GAAP financial measures are not accessible on a forward-looking basis, but could be material to future reported earnings. (b) Historical wholesale hedges were entered into to primarily hedge the economics of our wholesale operations. These amounts primarily relate to settlements of forward power and fuel hedges, long-term tolling purchases, long-term natural gas transportation contracts, storage contracts and our legacy energy trading. These amounts are derived based on methodology consistent with the calculation of open EBITDA through June 30, 2006 and forward commodity prices as of June 23, 2006. (c) Sales through June 30, 2006. Free Cash Flow from Continuing Operations Before and After Emission Allowances Activity Outlook Reconciliation ($ millions) 2006 2007 2008 Operating cash flow from continuing operations (a) $651 $479 $750 Change in margin deposits (b) (749) --- --- Western states and Cornerstone settlement payments 159 --- --- Capital expenditures (129) (251) (251) Free cash flow from continuing operations before emission allowances activity ($68) $228 $499 Proceeds from sales of assets and emission allowances (b),(c) 197 --- --- Purchases of emission allowances (26) (81) (136) Free cash flow from continuing operations after emission allowances activity (d) $103 $147 $363 (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) Sales through June 30, 2006. (d) 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:

Adjusted gross margin Open energy gross margin Open wholesale gross margin Open gross margin Adjusted contribution margin Open contribution margin 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 second-quarter 2006 earnings conference call for Tuesday, August 8, 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 in the "Risk Factors" section of our 2005 Form 10-K and the "Management Discussion and Analysis of Financial Condition and Results of Operations - Recent Events" section of our second 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 Six Months Ended June 30, June 30, 2006 2005 2006 2005 Revenues: Revenues (including $52,393, $45,072, $201,899 and $(100,341) unrealized gains (losses)) $2,774,903 $2,431,392 $5,227,588 $4,148,709 Expenses: Purchased power, fuel and cost of gas sold (including $(364), $93,100, $(126,402) and $362,667 unrealized gains (losses)) 2,233,908 1,838,353 4,483,957 3,180,438 Operation and maintenance 229,975 207,165 415,530 377,713 Selling and marketing 30,326 21,925 54,323 40,910 Bad debt expense 22,056 12,529 32,861 21,139 Total 2,516,265 2,079,972 4,986,671 3,620,200 Contribution Margin 258,638 351,420 240,917 528,509 Other general and administrative 39,308 49,183 75,246 80,847 Gains on sales of assets and emission allowances, net (4,854) (24,672) (156,330) (23,919) Depreciation and amortization 91,092 103,920 171,597 212,372 Total 125,546 128,431 90,513 269,300 Operating Income 133,092 222,989 150,404 259,209 Other Income (Expense): Income (loss) of equity investments, net 2,061 (3,676) 2,387 (3,844) Other, net 744 (22,821) 829 (22,879) Income Before Interest and Taxes 135,897 196,492 153,620 232,486 Interest expense (103,444) (98,560) (211,606) (193,906) Interest income 6,877 6,841 15,895 12,053 Income (Loss) from Continuing Operations Before Income Taxes 39,330 104,773 (42,091) 50,633 Income tax expense 16,603 54,681 74,249 41,998 Income (Loss) from Continuing Operations 22,727 50,092 (116,340) 8,635 Income (loss) from discontinued operations (8,551) 48,632 (3,571) 65,167 Income (Loss) Before Cumulative Effect of Accounting Change 14,176 98,724 (119,911) 73,802 Cumulative effect of accounting change, net of tax - - 968 - Net Income (Loss) $14,176 $98,724 $(118,943) $73,802 Basic Earnings (Loss) Per Share: Income (loss) from continuing operations $0.07 $0.17 $(0.38) $0.03 Income (loss) from discontinued operations (0.02) 0.16 (0.01) 0.22 Cumulative effect of accounting change, net of tax - - - - Net income (loss) $0.05 $0.33 $(0.39) $0.25 Diluted Earnings (Loss) Per Share: Income (loss) from continuing operations $0.07 $0.16 $(0.38) $0.03 Income (loss) from discontinued operations (0.02) 0.14 (0.01) 0.21 Cumulative effect of accounting change, net of tax - - - - Net income (loss) $0.05 $0.30 $(0.39) $0.24 Weighted Average Common Shares Outstanding (in thousands): - Basic 306,780 301,250 306,208 300,848 - Diluted 342,592 337,679 306,208 308,907 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 Six Months Ended June 30, June 30, 2006 2005 Change 2006 2005 Change Retail Energy: Revenues $2,217 $1,717 $500 $3,904 $3,021 $883 Purchased power, fuel and cost of gas sold 1,836 1,364 472 3,530 2,445 1,085 Gross margin 381 353 28 374 576 (202) Operation and maintenance 58 49 9 109 87 22 Selling and marketing 30 22 8 54 41 13 Bad debt expense 22 12 10 36 21 15 Contribution margin - Retail Energy 271 270 1 175 427 (252) Wholesale Energy: Revenues 698 837 (139) 1,609 1,356 253 Purchased power, fuel and cost of gas sold 538 600 (62) 1,240 968 272 Gross margin 160 237 (77) 369 388 (19) Operation and maintenance 173 156 17 307 288 19 Bad debt expense - - - (3) - (3) Contribution margin - Wholesale Energy (13) 81 (94) 65 100 (35) Other Operations: Revenues - 2 (2) 1 3 (2) Purchased power, fuel and cost of gas sold - (1) 1 - (1) 1 Gross margin - 3 (3) 1 4 (3) Operation and maintenance - 2 (2) - 2 (2) Contribution margin - Other Operations - 1 (1) 1 2 (1) Eliminations: Revenues (140) (124) (16) (286) (231) (55) Purchased power, fuel and cost of gas sold (140) (124) (16) (286) (231) (55) Gross margin - - - - - - Consolidated: Revenues 2,775 2,432 343 5,228 4,149 1,079 Purchased power, fuel and cost of gas sold 2,234 1,839 395 4,484 3,181 1,303 Gross margin 541 593 (52) 744 968 (224) Operation and maintenance 231 207 24 416 377 39 Selling and marketing 30 22 8 54 41 13 Bad debt expense 22 12 10 33 21 12 Contribution margin - Consolidated 258 352 (94) 241 529 (288) Other general and administrative 40 49 (9) 75 81 (6) Gains on sales of assets and emission allowances, net (5) (25) 20 (156) (24) (132) Depreciation and amortization 91 105 (14) 172 213 (41) Total 126 129 (3) 91 270 (179) Operating income 132 223 (91) 150 259 (109) Income (loss) of equity investments, net 2 (4) 6 2 (4) 6 Other, net 1 (23) 24 1 (23) 24 Income before interest and income taxes 135 196 (61) 153 232 (79) Interest expense (103) (98) (5) (211) (193) (18) Interest income 7 7 - 16 12 4 Income (loss) from continuing operations before income taxes 39 105 (66) (42) 51 (93) Income tax expense 16 55 (39) 74 42 32 Income (loss) from continuing operations 23 50 (27) (116) 9 (125) Income (loss) from discontinued operations (9) 49 (58) (4) 65 (69) Cumulative effect of accounting change, net of tax - - - 1 - 1 Net income (loss) $14 $99 $(85) $(119) $74 $(193) 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 Six Months Ended June 30, June 30, 2006 2005 Change 2006 2005 Change Retail Energy: Adjusted gross margin $347 $244 $103 $404 $314 $90 Operation and maintenance 58 49 9 109 87 22 Selling and marketing 30 22 8 54 41 13 Bad debt expense 22 12 10 36 21 15 Adjusted contribution margin - Retail Energy 237 161 76 205 165 40 Wholesale Energy: Open gross margin (1) 231 247 (16) 473 458 15 Operation and maintenance 173 156 17 307 288 19 Bad debt expense - - - (3) - (3) Open contribution margin - Wholesale Energy (2) 58 91 (33) 169 170 (1) Other Operations: Gross margin - 3 (3) 1 4 (3) Operation and maintenance - 2 (2) - 2 (2) Contribution margin - Other Operations - 1 (1) 1 2 (1) Consolidated: Open gross margin 578 494 84 878 776 102 Operation and maintenance 231 207 24 416 377 39 Selling and marketing 30 22 8 54 41 13 Bad debt expense 22 12 10 33 21 12 Open contribution margin - Consolidated 295 253 42 375 337 38 Adjusted other general and administrative (40) (41) 1 (75) (73) (2) Income (loss) of equity investments, net 2 (4) 6 2 (4) 6 Other, net 1 (23) 24 1 (23) 24 Open EBITDA $258 $185 $73 $303 $237 $66 Historical wholesale hedges: Power (65) (53) (12) (180) (97) (83) Fuel 5 32 (27) 12 79 (67) Tolling/other (29) (21) (8) (41) (54) 13 (89) (42) (47) (209) (72) (137) Gains on sales of assets and emission allowances, net 5 25 (20) 156 24 132 Adjusted EBITDA $174 $168 $6 $250 $189 $61 Unrealized gains on energy derivatives 52 138 (86) 75 262 (187) Changes in California-related receivables and reserves - 3 (3) - 2 (2) Settlement of shareholder class action lawsuits - (8) 8 - (8) 8 EBITDA $226 $301 $(75) $325 $445 $(120) Depreciation and amortization (91) (105) 14 (172) (213) 41 Interest expense (103) (98) (5) (211) (193) (18) Interest income 7 7 - 16 12 4 Income (loss) from continuing operations before income taxes $39 $105 $(66) $(42) $51 $(93) (1) Wholesale adjusted gross margin was $142 million and $205 million during the three months ended June 30, 2006 and 2005, respectively, and $264 million and $386 million during the six months ended June 30, 2006 and 2005, respectively. (2) Wholesale adjusted contribution margin was $(31) million and $49 million during the three months ended June 30, 2006 and 2005, respectively, and $(40) million and $98 million during the six months ended June 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 Results of Operations by Segment - Adjustments (Millions of Dollars) (Unaudited) Three Months Ended June 30, 2006 June 30, 2005 Change Retail Energy: Gross Margin (1) Adjustments: Unrealized gains on energy derivatives $(34) $(109) $75 Total gross margin adjustments (34) (109) 75 Wholesale Energy: Gross Margin (1) Adjustments: Changes in California-related receivables and reserves - (3) 3 Unrealized gains on energy derivatives (18) (29) 11 Total gross margin adjustments (18) (32) 14 Consolidated: General and Administrative adjustment - settlement of shareholder class action lawsuits - (8) 8 Six Months Ended June 30, 2006 June 30, 2005 Change Retail Energy: Gross Margin (1) Adjustments: Unrealized (gains) losses on energy derivatives $30 $(262) $292 Total gross margin adjustments 30 (262) 292 Wholesale Energy: Gross Margin (1) Adjustments: Changes in California-related receivables and reserves - (2) 2 Unrealized gains on energy derivatives (105) - (105) Total gross margin adjustments (105) (2) (103) Consolidated: General and Administrative adjustment - settlement of shareholder class action lawsuits - (8) 8 (1) Revenues less purchased power, fuel and cost of gas sold. 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) (Unaudited) June 30, 2006 December 31, 2005 ASSETS Current Assets: Cash and cash equivalents $69,819 $88,397 Restricted cash 9,873 26,906 Accounts and notes receivable, principally customer, net 1,328,865 1,171,673 Inventory 290,760 299,099 Derivative assets 322,077 725,964 Margin deposits 1,403,865 1,716,035 Other current assets 390,715 499,045 Current assets of discontinued operations 10,804 203,332 Total current assets 3,826,778 4,730,451 Property, Plant and Equipment, net 5,830,813 5,934,060 Other Assets: Goodwill 386,594 386,594 Other intangibles, net 460,770 510,582 Derivative assets 447,868 527,799 Other long-term assets 581,728 598,524 Long-term assets of discontinued operations - 880,796 Total other assets 1,876,960 2,904,295 Total Assets $11,534,551 $13,568,806 LIABILITIES AND EQUITY Current Liabilities: Current portion of long-term debt and short-term borrowings $494,390 $789,325 Accounts payable, principally trade 769,078 886,965 Derivative liabilities 819,086 1,219,954 Margin deposits 15,000 15,588 Other current liabilities 446,038 397,942 Current liabilities of discontinued operations 35,270 96,456 Total current liabilities 2,578,862 3,406,230 Other Liabilities: Derivative liabilities 613,022 812,695 Other long-term liabilities 366,430 389,083 Long-term liabilities of discontinued operations - 779,678 Total other liabilities 979,452 1,981,456 Long-term Debt 4,226,437 4,317,427 Commitments and Contingencies Temporary Equity Stock-based Compensation 2,211 - Total Stockholders' Equity 3,747,589 3,863,693 Total Liabilities and Equity $11,534,551 $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) Six Months Ended June 30, 2006 2005 (in thousands) Cash Flows from Operating Activities: Net income (loss) $(118,943) $73,802 (Income) loss from discontinued operations 3,571 (65,167) Net income (loss) from continuing operations and cumulative effect of accounting change (115,372) 8,635 Adjustments to reconcile net income (loss) to net cash used in operating activities: Cumulative effect of accounting change (968) - Depreciation and amortization 171,597 212,372 Deferred income taxes 68,644 37,329 Net unrealized gains on energy derivatives (75,497) (262,326) Amortization of deferred financing costs 7,982 7,406 Gains on sales of assets and emission allowances, net (156,330) (23,919) Other, net 36,766 46,752 Changes in other assets and liabilities: Accounts and notes receivable and unbilled revenue, net (135,413) (90,381) Inventory 6,269 (21,121) Margin deposits, net 311,582 (205,676) Net derivative assets and liabilities (137,484) 61,536 Western states and Cornerstone settlement payments (159,319) - Accounts payable 35,514 186,080 Other current assets 8,304 26,311 Other assets 14,663 (21,706) Taxes payable/ receivable (29,884) (14,045) Other current liabilities 31,285 (14,936) Other liabilities 2,845 11,766 Net cash used in continuing operations from operating activities (114,816) (55,923) Net cash provided by (used in) discontinued operations from operating activities (36,997) 27,995 Net cash used in operating activities (151,813) (27,928) Cash Flows from Investing Activities: Capital expenditures (41,919) (33,065) Proceeds from sales of assets, net 1,382 44,932 Proceeds from sales of emission allowances 197,201 70,447 Purchases of emission allowances (3,273) (89,147) Restricted cash 17,033 29,974 Other, net 4,750 2,500 Net cash provided by continuing operations from investing activities 175,174 25,641 Net cash provided by discontinued operations from investing activities 967,568 20,541 Net cash provided by investing activities 1,142,742 46,182 Cash Flows from Financing Activities: Payments of long-term debt (326,201) (36,396) Increase (decrease) in short-term borrowings and revolving credit facilities, net (55,337) 24,019 Proceeds from issuances of stock 10,031 14,441 Net cash provided by (used in) continuing operations from financing activities (371,507) 2,064 Net cash used in discontinued operations from financing activities (638,000) - Net cash provided by (used in) financing activities (1,009,507) 2,064 Net Change in Cash and Cash Equivalents (18,578) 20,318 Cash and Cash Equivalents at Beginning of Period 88,397 105,054 Cash and Cash Equivalents at End of Period $69,819 $125,372 Free Cash Flow Reconciliation (Unaudited) Six Months Ended June 30, 2006 2005 (in millions) Operating cash flow from continuing operations $(115) $(56) Western states and Cornerstone settlement payments 159 - Change in margin deposits, net (312) 206 Capital expenditures (42) (33) Free cash flow before emission allowances activity (310) 117 Sales of emission allowances 197 70 Purchases of emission allowances (3) (89) Free cash flow after emission allowances activity $(116) $98 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 Six Months Ended June 30, June 30, 2006 2005 Change 2006 2005 Change (in millions) (in millions) Mass gross margin $272 $203 (1) $69 $297 $284 (1) $13 Commercial and Industrial gross margin 88 41 (1) 47 108 42 (1) 66 Market usage adjustments (13) - (13) (1) (12) 11 Total retail energy gross margin, excluding unrealized gains (losses) 347 244 103 404 314 90 Unrealized gains (losses) on energy derivatives 34 109 (75) (30) 262 (292) Total retail energy gross margin 381 353 28 374 576 (202) Operation and maintenance 58 49 9 109 87 22 Selling and marketing 30 22 8 54 41 13 Bad debt expense 22 12 10 36 21 15 Total retail energy contribution margin $271 $270 $1 $175 $427 $(252) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 (gigawatt hours) (gigawatt hours) Electricity Sales to End- Use Retail Customers: Mass: Residential: Houston 4,572 4,812 7,399 8,042 Non-Houston 2,013 1,458 3,502 2,626 Small Business: Houston 954 879 (1) 1,719 1,689 (1) Non-Houston 382 193 (1) 652 331 (1) Total Mass 7,921 7,342 13,272 12,688 Commercial and Industrial: ERCOT (2) 8,631 8,735 (1) 16,147 16,923 (1) Non-ERCOT 1,539 1,384 3,143 2,580 Total Commercial and Industrial 10,170 10,119 19,290 19,503 Market usage adjustments (62) (147) 11 (238) Total 18,029 17,314 32,573 31,953 Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 (in thousands, metered (in thousands, metered locations) locations) Weighted Average Retail Customer Count: Mass: Residential: Houston 1,189 1,276 1,201 1,289 Non-Houston 490 371 480 358 Small Business: Houston 134 140 (1) 135 141 (1) Non-Houston 27 15 (1) 28 14 (1) Total Mass 1,840 1,802 1,844 1,802 Commercial and Industrial: ERCOT (2) 75 72 (1) 74 73 (1) Non-ERCOT 2 1 2 1 Total Commercial and Industrial 77 73 76 74 Total 1,917 1,875 1,920 1,876 June 30, December 31, 2006 2005 (in thousands, metered locations) Retail Customers: Mass: Residential: Houston 1,169 1,213 Non-Houston 502 462 Small Business: Houston 133 137 (1) Non-Houston 29 29 (1) Total Mass 1,833 1,841 Commercial and Industrial: ERCOT (2) 76 70 (1) Non-ERCOT 2 2 Total Commercial and Industrial 78 72 Total 1,911 1,913 (1) Beginning in the first quarter of 2006, we recategorized financial and operational data for customers with a peak demand between 250 kilowatts and one MW from small business within mass to commercial and industrial. The 2005 data is presented on a comparable basis. (2) Includes customers of the 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 June 30, Six Months Ended June 30, 2006 2005 2006 2005 % % % % Economic Economic Economic Economic GWh (1) GWh (1) GWh (1) GWh (1) Economic Generation Volume (2): PJM Coal 5,869.0 81% 5,602.8 78% 11,676.4 81% 11,038.5 79% MISO Coal 1,758.9 64% 1,406.8 50% 3,051.7 56% 3,203.3 57% PJM/MISO Gas 249.8 3% 454.9 6% 283.9 2% 610.2 4% West 349.5 5% 47.3 1% 1,273.0 9% 192.3 2% Other 1,462.1 92% 1,570.7 61% 2,865.4 88% 2,907.8 59% Total 9,689.3 37% 9,082.5 36% 19,150.4 37% 17,952.1 35% Commercial Capacity Factor (3): PJM Coal 70.3% 74.9% 78.4% 75.4% MISO Coal 76.6% 84.7% 84.3% 87.8% PJM/MISO Gas 91.6% 75.9% 80.8% 70.7% West 87.6% 100.0% 96.5% 100.0% Other 94.2% 82.7% 88.8% 87.7% Total 76.3% 77.9% 82.2% 79.7% Generation Volume (4): GWh GWh GWh GWh PJM Coal 4,128.1 4,194.8 9,158.4 8,317.8 MISO Coal 1,347.6 1,191.3 2,573.7 2,811.8 PJM/MISO Gas 228.9 345.2 229.5 431.2 West 306.2 47.3 1,228.5 192.3 Other 1,377.4 1,299.7 2,543.7 2,550.7 Total 7,388.2 7,078.3 15,733.8 14,303.8 Unit Margin ($/MWh) (5): PJM Coal $26.16 $25.51 $26.86 $22.96 MISO Coal 19.29 28.54 20.98 24.54 PJM/MISO Gas 30.58 26.07 30.50 41.74 West NM (6) NM NM NM Other - 0.77 NM 2.35 Weighted Average Total $18.68 $20.63 $19.32 $19.44 Three Months Ended Six Months Ended June 30, June 30, 2006 2005 Change 2006 2005 Change Open Energy Gross (in millions) (in millions) Margin (7): PJM Coal $108 $107 $1 $246 $191 $55 MISO Coal 26 34 (8) 54 69 (15) PJM/MISO Gas 7 9 (2) 7 18 (11) West (3) (5) 2 (2) (6) 4 Other - 1 (1) (1) 6 (7) Total Open Energy Gross Margin 138 146 (8) 304 278 26 Other Margin (8): PJM Coal 7 10 (3) 17 21 (4) MISO Coal 2 4 (2) 4 5 (1) PJM/MISO Gas 10 12 (2) 13 15 (2) West 46 51 (5) 83 90 (7) Other 28 24 4 52 49 3 Total Other Margin 93 101 (8) 169 180 (11) Total Open Wholesale Gross Margin 231 247 (16) 473 458 15 Historical Wholesale Hedges (9): Power (65) (53) (12) (180) (97) (83) Fuel 5 32 (27) 12 79 (67) Tolling/other (29) (21) (8) (41) (54) 13 Total Historical Wholesale Hedges (89) (42) (47) (209) (72) (137) Unrealized gains on energy derivatives 18 29 (11) 105 - 105 Changes in California -related receivables and reserves - 3 (3) - 2 (2) Total Wholesale Energy Gross Margin 160 237 (77) 369 388 (19) Operation and maintenance 173 156 17 307 288 19 Bad debt expense - - - (3) - (3) Total Wholesale Energy Contribution Margin $(13) $81 $(94) $65 $100 $(35) (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 a model-derived number based on generation volume assuming (a) it had been sold at day-ahead power prices in the case of coal-fired generation and real-time power prices in the case of natural gas-fired generation and (b) it had been purchased at delivered spot fuel prices, each without regard to the effect of our historical wholesale hedges or prices actually paid or received. (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 (Unaudited) Summer/Winter Q2 economic generation Average Heat Rate volume (GWh) Unit Name Capacity (MW) (MMBtu/MWh) 2006 2005 Cheswick 580 10.0 935.6 763.1 Conemaugh 280 9.4 603.8 595.5 Elrama 466 11.3 722.6 718.0 Keystone 282 9.5 586.5 581.8 Portland 400 10.1 611.7 569.4 Seward 521 9.7 1,084.3 1,033.7 Shawville 566 10.3 1,010.5 1,036.7 Titus 246 10.8 314.0 304.6 PJM Coal Total 3,341 5,869.0 5,602.8 Q2 commercial capacity factor Q2 generation volume (GWh) Unit Name 2006 2005 2006 2005 Cheswick 31.0% 74.8% 290.0 570.7 Conemaugh 99.9% 97.9% 603.1 582.8 Elrama 48.5% 39.7% 350.1 284.7 Keystone 83.7% 85.7% 490.7 498.4 Portland 86.7% 81.3% 530.2 462.8 Seward 59.3% 77.8% 643.5 804.4 Shawville 90.5% 73.8% 914.6 765.1 Titus 97.4% 74.2% 305.9 225.9 PJM Coal Total 70.3% 74.9% 4,128.1 4,194.8 Summer/Winter Q2 economic generation Average Heat Rate volume (GWh) Unit Name Capacity (MW) (MMBtu/MWh) 2006 2005 Avon Lake 721 9.8 1,067.5 869.4 New Castle 328 10.7 418.5 314.7 Niles 208 10.5 272.9 222.7 MISO Coal Total 1,257 1,758.9 1,406.8 Q2 commercial capacity factor Q2 generation volume (GWh) Unit Name 2006 2005 2006 2005 Avon Lake 82.7% 86.9% 882.5 755.5 New Castle 66.6% 89.0% 278.8 280.1 Niles 68.3% 69.9% 186.3 155.7 MISO Coal Total 76.6% 84.7% 1,347.6 1,191.3 Summer/Winter Q2 YTD economic Average Heat Rate generation volume (GWh) Unit Name Capacity (MW) (MMBtu/MWh) 2006 2005 Cheswick 580 10.0 1,767.3 1,486.8 Conemaugh 280 9.4 1,206.6 1,194.7 Elrama 466 11.3 1,579.0 1,313.9 Keystone 282 9.5 1,156.6 1,167.4 Portland 400 10.1 1,225.8 1,216.9 Seward 521 9.7 2,193.5 1,960.1 Shawville 566 10.3 1,920.2 2,034.3 Titus 246 10.8 627.4 664.4 PJM Coal Total 3,341 11,676.4 11,038.5 Q2 YTD commercial capacity factor Q2 YTD generation volume (GWh) Unit Name 2006 2005 2006 2005 Cheswick 63.2% 85.5% 1,116.5 1,271.9 Conemaugh 97.7% 97.1% 1,179.2 1,160.5 Elrama 64.2% 32.9% 1,014.1 432.2 Keystone 81.3% 91.6% 940.2 1,068.8 Portland 90.6% 77.8% 1,110.9 947.0 Seward 65.4% 67.1% 1,434.2 1,315.9 Shawville 92.2% 77.1% 1,770.8 1,568.5 Titus 94.4% 83.2% 592.5 553.0 PJM Coal Total 78.4% 75.4% 9,158.4 8,317.8 Summer/Winter Q2 YTD economic Average Heat Rate generation volume (GWh) Unit Name Capacity (MW) (MMBtu/MWh) 2006 2005 Avon Lake 721 9.8 1,871.2 1,967.5 New Castle 328 10.7 656.1 702.0 Niles 208 10.5 524.4 533.8 MISO Coal Total 1,257 3,051.7 3,203.3 Q2 YTD commercial capacity factor Q2 YTD generation volume (GWh) Unit Name 2006 2005 2006 2005 Avon Lake 88.0% 89.2% 1,646.6 1,754.9 New Castle 76.2% 87.4% 500.2 613.4 Niles 81.4% 83.1% 426.9 443.5 MISO Coal Total 84.3% 87.8% 2,573.7 2,811.8 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 (Unaudited) Summer/Winter Q2 economic generation Average Heat Rate volume (GWh) Unit Name Capacity (MW) (MMBtu/MWh) 2006 2005 Aurora 942 10.5 5.4 89.1 Blossburg 23 14.6 0.3 0.9 Brunot Island 315 10.4 - - Gilbert 614 11.0 14.7 54.8 Glen Gardner 184 14.6 1.8 0.6 Hamilton 23 14.8 0.1 0.2 Hunterstown 71 14.8 0.6 1.0 Hunterstown CCGT 833 7.0 214.4 275.7 Mountain 47 14.3 0.8 1.0 Orrtanna 23 14.4 0.3 0.2 Portland 185 11.2 1.6 5.8 Sayreville 264 13.8 4.4 3.1 Shawnee 23 14.0 - 0.1 Shawville 5-7 6 10.2 - - Titus 35 17.4 - 0.1 Tolna 47 14.2 0.7 2.3 Werner 252 13.8 0.1 1.0 Shelby 356 9.8 4.6 19.0 PJM/MISO Gas Total 4,243 249.8 454.9 Q2 commercial capacity factor Q2 generation volume (GWh) Unit Name 2006 2005 2006 2005 Aurora 51.9% 100.0% 2.8 89.1 Blossburg 100.0% 100.0% 0.3 0.9 Brunot Island 0.0% 0.0% - - Gilbert 30.6% 70.1% 4.5 38.4 Glen Gardner 88.9% 50.0% 1.6 0.3 Hamilton 100.0% 100.0% 0.1 0.2 Hunterstown 83.3% 100.0% 0.5 1.0 Hunterstown CCGT 97.0% 66.3% 207.9 182.7 Mountain 100.0% 100.0% 0.8 1.0 Orrtanna 100.0% 100.0% 0.3 0.2 Portland 87.5% 100.0% 1.4 5.8 Sayreville 75.0% 100.0% 3.3 3.1 Shawnee 0.0% 100.0% - 0.1 Shawville 5-7 0.0% 0.0% - - Titus 0.0% 100.0% - 0.1 Tolna 100.0% 100.0% 0.7 2.3 Werner 100.0% 100.0% 0.1 1.0 Shelby 100.0% 100.0% 4.6 19.0 PJM/MISO Gas Total 91.6% 75.9% 228.9 345.2 Summer/Winter Q2 YTD economic Average Heat Rate generation volume (GWh) Unit Name Capacity (MW) (MMBtu/MWh) 2006 2005 Aurora 942 10.5 9.7 97.0 Blossburg 23 14.6 1.2 1.3 Brunot Island 315 10.4 - - Gilbert 614 11.0 43.6 86.9 Glen Gardner 184 14.6 2.0 0.7 Hamilton 23 14.8 0.2 0.2 Hunterstown 71 14.8 0.7 21.8 Hunterstown CCGT 833 7.0 209.0 355.3 Mountain 47 14.3 1.4 1.1 Orrtanna 23 14.4 0.3 0.4 Portland 185 11.2 1.9 19.2 Sayreville 264 13.8 4.8 4.2 Shawnee 23 14.0 - 0.2 Shawville 5-7 6 10.2 - - Titus 35 17.4 - 0.2 Tolna 47 14.2 0.9 2.3 Werner 252 13.8 - 0.4 Shelby 356 9.8 8.2 19.0 PJM/MISO Gas Total 4,243 283.9 610.2 Q2 YTD commercial capacity factor Q2 YTD generation volume (GWh) Unit Name 2006 2005 2006 2005 Aurora 39.2% 94.6% 3.8 91.8 Blossburg 100.0% 100.0% 1.2 1.3 Brunot Island 0.0% 0.0% - - Gilbert 19.7% 74.9% 8.6 65.1 Glen Gardner 90.0% 71.4% 1.8 0.5 Hamilton 100.0% 100.0% 0.2 0.2 Hunterstown 85.7% 5.5% 0.6 1.2 Hunterstown CCGT 96.8% 63.1% 202.4 224.2 Mountain 100.0% 100.0% 1.4 1.1 Orrtanna 100.0% 100.0% 0.3 0.4 Portland 73.7% 99.5% 1.4 19.1 Sayreville 58.3% 100.0% 2.8 4.2 Shawnee 0.0% 100.0% - 0.2 Shawville 5-7 0.0% 0.0% - - Titus 0.0% 100.0% - 0.2 Tolna 100.0% 100.0% 0.9 2.3 Werner 0.0% 100.0% - 0.4 Shelby 50.0% 100.0% 4.1 19.0 PJM/MISO Gas Total 80.8% 70.7% 229.5 431.2 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 (Unaudited) Summer/Winter Q2 economic generation Average Heat Rate volume (GWh) Unit Name Capacity (MW) (MMBtu/MWh) 2006 2005 Bighorn (1) 598 7.2 19.6 - Coolwater 622 10.1 111.3 3.0 Ellwood (1) 54 13.3 0.1 - Etiwanda (1) 640 10.0 - - Mandalay (1) 560 10.9 80.0 18.3 Ormond Beach 1,516 9.6 138.5 26.0 West Total 3,990 349.5 47.3 Q2 commercial capacity factor Q2 generation volume (GWh) Unit Name 2006 2005 2006 2005 Bighorn (1) 78.1% 0.0% 15.3 - Coolwater 98.8% 100.0% 110.0 3.0 Ellwood (1) 100.0% 0.0% 0.1 - Etiwanda (1) 0.0% 0.0% - - Mandalay (1) 95.9% 100.0% 76.7 18.3 Ormond Beach 75.2% 100.0% 104.1 26.0 West Total 87.6% 100.0% 306.2 47.3 Summer/Winter Q2 economic generation Average Heat Rate volume (GWh) Unit Name Capacity (MW) (MMBtu/MWh) 2006 2005 Channelview 830 6.1 1,462.1 1,404.4 Indian River (1) 587 10.5 - 151.3 Osceola (1) 470 11.0 - 15.0 Other Total 1,887 1,462.1 1,570.7 Q2 commercial capacity factor Q2 generation volume (GWh) Unit Name 2006 2005 2006 2005 Channelview 94.2% 84.1% 1,377.4 1,180.5 Indian River (1) 0.0% 74.0% - 111.9 Osceola (1) 0.0% 48.7% - 7.3 Other Total 94.2% 82.7% 1,377.4 1,299.7 Summer/Winter Q2 YTD economic Average Heat Rate generation volume (GWh) Unit Name Capacity (MW) (MMBtu/MWh) 2006 2005 Bighorn (1) 598 7.2 938.4 - Coolwater 622 10.1 109.7 51.2 Ellwood (1) 54 13.3 0.1 - Etiwanda (1) 640 10.0 - - Mandalay (1) 560 10.9 86.3 63.0 Ormond Beach 1,516 9.6 138.5 78.1 West Total 3,990 1,273.0 192.3 Q2 YTD commercial capacity factor Q2 YTD generation volume (GWh) Unit Name 2006 2005 2006 2005 Bighorn (1) 99.4% 0.0% 933.0 - Coolwater 98.8% 100.0% 108.4 51.2 Ellwood (1) 100.0% 0.0% 0.1 - Etiwanda (1) 0.0% 0.0% - - Mandalay (1) 96.1% 100.0% 82.9 63.0 Ormond Beach 75.2% 100.0% 104.1 78.1 West Total 96.5% 100.0% 1,228.5 192.3 Summer/Winter Q2 YTD economic Average Heat Rate generation volume (GWh) Unit Name Capacity (MW) (MMBtu/MWh) 2006 2005 Channelview 830 6.1 2,865.4 2,607.5 Indian River (1) 587 10.5 - 228.1 Osceola (1) 470 11.0 - 72.2 Other Total 1,887 2,865.4 2,907.8 Q2 YTD commercial capacity factor Q2 YTD generation volume (GWh) Unit Name 2006 2005 2006 2005 Channelview 88.8% 91.4% 2,543.7 2,383.5 Indian River (1) 0.0% 59.0% - 134.6 Osceola (1) 0.0% 45.2% - 32.6 Other Total 88.8% 87.7% 2,543.7 2,550.7 (1) 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) June 30, 2006 Debt: Senior secured revolver $323 Senior secured term loans 532 Senior secured notes 1,850 Convertible senior subordinated notes 275 Orion Power 12% notes (1) 444 PEDFA fixed-rate bonds for Seward plant due 2036 500 Channelview 346 Receivables facility 450 Warrants (1) Other (2) 1 REMA operating leases (off-balance sheet) 497 Total debt and debt equivalents (3) 5,217 Less: Cash and cash equivalents (70) Restricted cash (10) Net margin deposits (1,389) Adjusted Net Debt $3,748 (1) Orion 12% notes include purchase accounting adjustments of $44 million. (2) Other subsidiary debt. (3) Debt equivalents include off-balance sheet REMA leases of $497 million. Reference is made to Reliant Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005.