Fitch Comment: Reliant Announces Sale of Upstate NY Generating Assets.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 19, 2004

Reliant Energy, Inc. (RRI) announced yesterday that it reached a definitive agreement to sell a portion of its New York-based generating portfolio to Canadian based Brascan Corp. for $900 million in cash. The assets to be sold consist of 770 megawatts (MW) of generating capacity located in upstate New York, including 675 MW of hydropower plants. Fitch continues to maintain the following credit ratings for RRI:

-- Senior secured debt 'B+';

-- Senior unsecured debt 'B';

-- Convertible senior subordinated notes 'B-'.

The Rating Outlook remains Stable.

On balance, Fitch views the planned asset divestiture as a positive credit development. In particular, the loss in future earnings and cash flow resulting from the sale should be offset by the expected reduction in consolidated debt leverage and improved financial flexibility and asset coverage at the RRI holding company level. Specifically, RRI will be required to utilize net cash proceeds from the transaction to substantially reduce outstandings under the Orion Power (ORN) New York/Midwest term loan facilities ($1.1 billion (net of restricted cash) as of March 31, 2004) which are scheduled to mature in October 2005. In addition to reducing near-term refinancing risk, Fitch notes that full repayment of the ORN subsidiary debt would substantially improve RRI's ability to extract excess cash generated by ORN for debt service at the corporate level.

The transaction is slated to close within three months subject to Hart Scott Rodino review and regulatory approval by the FERC and the New York Public Service Commission. Fitch will continue to monitor developments related to the sale as well as RRI's overall progress in achieving its stated goals for reducing debt leverage over the next several years.