Interested in the background of Reliant Energy and its stock history? Below is a brief summary of the relationships and activities that led Reliant Energy to be what it is today. And, a helpful example to demonstrate the process of tax allocation between RRI and CNP shares.
Reliant Energy, was formed in August 2000 by CenterPoint Energy, Inc. (CenterPoint) (known as Reliant Energy, Incorporated at the time) in connection with the planned separation of its regulated and unregulated operations. CenterPoint transferred substantially all of its unregulated businesses to Reliant Energy.
In May 2001, Reliant Energy (RRI) became a publicly traded company and in September 2002, CenterPoint distributed its remaining ownership of our common stock to its shareholders.
Timeline
February 2, 1999 Houston Industries changed its name to Reliant Energy, Inc. (REI)
July 27, 2000 REI announced a plan to split its regulated and deregulated companies.
April 30, 2001 Reliant Resources, Inc. (RRI), a wholly-owned subsidiary of REI, which provides wholesale and retail energy services in competitive markets, began trading.
August 31, 2002 REI merged with an indirect subsidiary of CenterPoint Energy. As a result of the merger between REI and the CenterPoint subsidiary (the “Merger”), REI shareholders received one share of CenterPoint common stock in exchange for each share of REI common stock that they held before the Merger.
September 20, 2002 Holders of CenterPoint common stock received a distribution of .788603 shares of RRI for each share of CenterPoint they owned.
October 1, 2002 Official separation/spin-off date. RRI was officially spun off and the stock traded under the stock symbol RRI and CenterPoint began trading under the stock symbol CNP. Trading under REI ceased.
April 26, 2004 Reliant Resources changed its name to Reliant Energy, Inc. The name change aligned the company's corporate name with its brand name. The ticker symbol for the company's common stock stayed the same (NYSE: RRI). Holders of stock certificates and notes bearing the name "Reliant Resources, Inc." can continue to hold them and were not required to exchange them for new certificates or notes or take any other action. The CUSIP number for the company's common stock and notes remain unchanged.
In order to make your tax season easier, we provide the following tips for allocating between CenterPoint (CNP) and Reliant Resources Inc. (RRI).
After you determine the pre-distribution tax basis of your CenterPoint common stock, you must allocate it between the CenterPoint common stock that you held following the Distribution and the RRI common stock that you received in the Distribution. This allocation must be made in proportion to the relative fair market values of CenterPoint common stock and RRI common stock on the Distribution Date. For federal income tax purposes, the fair market value of a publicly traded stock is generally the average of its high and low trading price on the valuation date.
Based upon this rule, the fair market value of a share of RRI common stock on September 30, 2002 was $1.88 per share. The fair market value of a share of CenterPoint common stock (after accounting for the RRI distribution) on September 30, 2002 was $7.95 per share.
Based upon the allocation method just described and the 0.788603 distribution ratio, 84.3 percent of your basis would be allocated to your CenterPoint common stock, and the remaining 15.7 percent would be allocated to any RRI common stock that you received in the Distribution (including any fractional shares).
Consult your tax advisor regarding the application of this calculation to your particular circumstances.
