NEW YORK, Sept 30, Sep 30, 2008 -- Reuters

Shares of Reliant Energy plunged as much as 51 percent in early trade on Tuesday after the company said it had to raise $1 billion to replace a credit facility with Merrill Lynch.

Reliant, which operates more than 15,000 megawatts of power plants and owns a Texas retail electricity business, also cut its profit forecast due to damage from Hurricane Ike and hedging losses.

Earlier this month, Reliant's peer Constellation Energy Group was forced into a quick sale to MidAmerican Energy Holdings after fears that it would face liquiidity problems.

Reliant said it had secured a $650 million senior secured loan with Goldman Sachs at LIBOR +4.5 percent and another $350 million in convertible preferred debt with First Reserve at an interest rate of 14 percent.

"I would certainly acknowledge that it was not an ideal time to raise money in the capital markets and it was expensive to do that," Reliant Chief Executive Mark Jacobs told an analyst conference call.

However, because of the poor performance at Reliant's Texas retail business, the company was likely to fail to meet requirements stipulated under the Merrill Lynch contracts, Jacobs said.

"When we look at it, we removed what we saw as a significant risk here that the (credit facility) would become unavailable to us for a number of reasons," he said, adding that the outlook for Merrill had contributed to the decision.

Merrill Lynch is one of several financial institutions to be hit by the credit crisis and agreed earlier this month to be purchased by Bank of America.

Shares of Reliant, which had sunk to a low at $4.94 in the opening minutes of trading on the New York Stock Exchange, rebounded partially to trade at $7.36, down more than 26 percent from Monday's close.

(Reporting by Matt Daily, editing by Dave Zimmerman) Keywords: RELIANT/

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