S&P drops Reliant Energy

Standard & Poor's said it lowered its corporate credit ratings on Reliant Energy Inc. and two subsidiaries, Reliant Energy Mid-Atlantic Power Holdings LLC (REMA) and Orion Power Holdings Inc., to B from B+.

In addition, Orion Power's senior unsecured rating was lowered to B- from B and the rating on Reliant's convertible issue was lowered to CCC+ from B-.

S&P said it also lowered its short-term rating to B-3 from B-2, adding that the ratings were removed from CreditWatch with negative implications, where they were placed on Nov. 4.

At the same time, the agency said it affirmed its 3 recovery rating on all of Reliant's senior secured debt.

The outlook is negative.

S&P added that the rating actions are driven by several factors, including the company's poor performance during 2005, the challenges that lie ahead in 2006 for the wholesale and especially for the retail operation and the continued uncertainty of the retail business model post-2006, when the price to beat expires.

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