Reliant: The stadium name stays

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Reliant’s name has graced the NFL’s first retractable-roof stadium since 2002.

Hometown electric retail/wholesale giant Reliant Energy this week seems to be hitting its toughest patch since 2002, but a spokeswoman told us yesterday there are no plans for backing away from naming rights on the stadium where the Houston Texans play.
Dropping the naming rights would be a relatively small savings for a company of Reliant’s size. According to a 2002 Chron article on the deal:

“Under the proposed agreement, outlined by sources close to the talks, Reliant would pay about $9 million a year to name the $367 million football stadium being built for the Houston Texans. The energy company would pay an additional $750,000 to secure naming rights for the entire Astrodome complex, including the Dome, the AstroArena and a new exposition center.”

Even though the stadium name remains, analysts are not pleased with Reliant’s Texas retail electric business. As a matter of fact, they really want the company to sell the business and focus on wholesale.

“I think on the operating side, wholesale you guys actually have a good business but every time you touch derivatives, you totally destroy your credibility,” said Chris Taylor, an analyst with Evergreen Investments, during Tuesday’s conference call with investors. “Why don’t you just get out of the retail business? The truth is retail is destroying value for the shareholders.”

A long and rather awkward silence followed Taylor’s comments before Reliant COO Brian Landrum came to the defense of the business, pointing out it has brought more than $3.7 billion in profits to the business since 2002.

“We’ve had one year with extreme events, and that also exposes some challenges in how we operate that business. We believe we can fix what we’ve got in place to address those challenges,” Landrum said.

But analysts continued to harp on the retail business:

“I understand that when times are good for retail, they are very good but when times are not good, and that usually coincide with a hurricane, you know what ends up happening is that your securities on both sides of the capital structure get whacked,” said another analyst, identified on the call as Vanvan Noroff. “I am not sure that this is a non-recurring issue, it may occur again the next time that you have extreme weather in Texas. I just want to point that out…”

Profits for other retailers have been squeezed this year, too. New Mexico-based utility PNM Resources said this year it would likely sell its Texas-based retailer, First Choice Power, because of the difficulty of doing business in the state’s electric markets.
BTW, while we said this in the story today, Reliant wants to be clear it isn’t planning to shrink the business on the residential side. The changes are expected to come on the commercial/industrial customer side. Home owners and apartment dwellers shouldn’t be concerned. A quote that was cut from the print version of the story today due to space constraints:

“We’ll focus on delivering the service and reliability that we committed to with our customers, but we will be looking at contracts to make sure we can deliver on them in the in future and reduce our exposure to the capital markets,” company spokeswoman Pat Hammond said.

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