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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2004

OR

For the transition period from              to             

Commission file number 1-16455

RELIANT ENERGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

1000 Main Street

Houston, Texas 77002

(Address of Principal Executive Offices) (Zip Code)

(713) 497-3000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨.

As of August 2, 2004, the last practicable date for determination, Reliant Energy, Inc. had 298,339,179 shares of common stock outstanding, excluding 1,464,821 shares held by the registrant as treasury stock.

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RELIANT ENERGY, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

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Cautionary Statement Regarding Forward-Looking Information

When we make statements containing projections, estimates or assumptions about our revenues, income and other financial items, our plans for the future, future economic performance, transactions for the sale of parts of our operations and financings related thereto, we are making “forward-looking statements.” Forward-looking statements relate to future events and anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations or operating results. In many cases you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and other similar words. However, the absence of these words does not mean that the statements are not forward-looking. Although we believe that the expectations and the underlying assumptions reflected in our forward-looking statements are reasonable, there can be no assurance that these expectations will prove to be correct. Forward-looking statements are not guarantees of future performance or events. Such statements involve a number of risks and uncertainties, and actual results may differ materially from the results discussed in the forward-looking statements.

Among other things, the matters described in (a) (i) “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Factors” in Item 7 and (ii) note 15 to our consolidated financial statements, each included in our Annual Report on Form 10-K for the year ended December 31, 2003 (Form 10-K), (b) (i) notes 11 and 12 to our interim financial statements and (ii) “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” each included in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (First Quarter Form 10-Q) and (c) (i) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) notes 12 and 13 to our interim financial statements could cause actual results to differ materially from those expressed or implied in our forward-looking statements.

Each forward-looking statement speaks only as of the date of the particular statement and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RELIANT ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Thousands of Dollars, except per share amounts)

(Unaudited)

See Notes to our Unaudited Consolidated Interim Financial Statements

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RELIANT ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars, except share amounts)

(Unaudited)

See Notes to our Unaudited Consolidated Interim Financial Statements

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RELIANT ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

See Notes to our Unaudited Consolidated Interim Financial Statements

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RELIANT ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(1) Background and Basis of Presentation

Background

As used in this Form 10-Q, “Reliant Energy” refers to Reliant Energy, Inc. and “we,” “us” and “our” refer to Reliant Energy, Inc. and its consolidated subsidiaries.

Our business operations provide electricity and related services to retail customers (including acquiring and managing the related supply) primarily in Texas and generate and sell electricity and other related services in wholesale energy markets in various regions of the United States. For information regarding our reportable segments, see note 15.

This Form 10-Q includes our consolidated interim financial statements and notes (interim financial statements). The interim financial statements are unaudited, omit certain financial statement disclosures and should be read in conjunction with (a) our audited consolidated financial statements and notes included in our Form 10-K and (b) our unaudited interim financial statements and notes included in our First Quarter Form 10-Q.

Basis of Presentation

Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Adjustments and Reclassifications. In May 2004, we signed an agreement to sell 770 megawatts (MW) of generation assets located in upstate New York (hydropower plants) for $900 million in cash, subject to certain closing adjustments. We are reporting the operations of the hydropower plants as discontinued operations and, accordingly, have reclassified amounts for all periods. See notes 5 and 16 for further discussion.

The interim financial statements reflect all normal recurring adjustments necessary, in management’s opinion to present fairly our financial position and results of operations for the reported periods. Amounts reported for interim periods, however, may not be indicative of a full year period due to seasonal fluctuations in demand for energy and energy services, changes in energy commodity prices, timing of maintenance and other expenditures, dispositions, changes in interest expense and other factors.

We have reclassified certain amounts reported in this Form 10-Q from prior periods to conform to the 2004 presentation of financial statements. These reclassifications had no impact on reported earnings.

We have reclassified general and administrative expenses and operation and maintenance expenses from prior year’s presentation. Other general and administrative expenses in the consolidated statements of operations include (a) corporate and administrative services (including management services, financial and accounting, cash management and treasury support, certain legal costs, information technology system support, communications, office management and human resources), (b) regulatory costs and (c) certain benefit costs.

Restructuring Costs. Throughout 2004, we intend to continue to identify, evaluate and pursue opportunities to restructure our business operations in order to increase our efficiency, reduce our costs and reduce our liquidity and capital requirements. We will incur short-term costs in the form of severance payments, information technology systems investments, costs and write-offs related to corporate leases and other restructuring costs as part of our efforts to reduce our cost structure. During the three and six months ended June 30, 2004, we incurred $7 million and $28 million, respectively, in severance costs, which are included in operation and maintenance, selling and marketing and other general and administrative expenses in our consolidated statements of operations. The majority of these costs have been paid and $2 million is accrued in our consolidated balance sheet as of June 30, 2004. See note 5 for a discussion of write-downs of property, plant and equipment. In addition, severance costs and other restructuring costs are expected to be incurred in the remainder of 2004 and in 2005 and 2006.

FIN No. 46R. In January 2004, we adopted Financial Accounting Standards Board (FASB) Interpretation No. 46, which modified certain criteria in determining which entities should be considered as variable interest entities. The adoption had no impact on our financial statements. The application of FIN No. 46R continues to evolve as the FASB continues to address issues submitted for consideration. We will continue to assess our application of clarified or revised guidance related to FIN No. 46R.

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Changes in Estimates for Retail Energy Sales and Costs. Our revenues and the related energy supply costs are based on (a) our estimates of customer usage and (b) initial usage information provided by the Electric Reliability Council of Texas (ERCOT) Independent System Operator (ISO) and the PJM Interconnection, LLC relating to customer meter reading data provided by third parties. Upon receipt of actual or updated usage data from the ERCOT ISO and PJM Interconnection, LLC, we revise the estimates and record any resulting changes in the period when the information becomes available. As of June 30, 2004 and December 31, 2003, we recorded unbilled revenues, based on our estimates, of $385 million and $290 million, respectively, for retail energy sales.

During the three months ended June 30, 2004 and 2003, we recognized in gross margin $1 million and $11 million of expense, respectively, and during the six months ended June 30, 2004 and 2003, we recognized in gross margin $10 million of expense and $1 million of income, respectively, resulting from revisions to prior period estimates related to customer usage in ERCOT and PJM Interconnection, LLC (collectively referred to as “market usage adjustments”).

EITF No. 03-11. Prior to October 1, 2003, we generally recorded revenues, fuel and cost of gas sold, and purchased power related to sale and purchase contracts designated as hedges on a gross basis in the delivery period. Thereafter, we began to record certain transactions on a net basis, including the settlement of sales and purchases of fuel and purchased power related to our non-trading energy derivative activities that were not physically delivered. The change in accounting treatment resulted in a $521 million and $955 million decrease in revenues and a corresponding $521 million and $955 million decrease in fuel and cost of gas sold and purchased power for the three and six months ended June 30, 2004, respectively. We believe the application of Emerging Issues Task Force (EITF) Issue No. 03-11 will continue to result in a significant amount of our non-trading energy derivative activities being reported on a net basis prospectively that were previously reported on a gross basis. EITF No. 03-11 has no impact on margins or net income. Reclassification of periods prior to October 1, 2003 is not required and it is not practicable for us to do so.

(2) Cumulative Effect of Change in Accounting Principle

Prior to January 1, 2004, we recognized repair and maintenance costs for power generation assets acquired prior to December 31, 1999, under the “accrue-in-advance” method. Under the accrue-in-advance method, we estimated the costs of planned major maintenance and accrued the related expense over the maintenance cycle, which ranges from two to 12 years. Effective January 1, 2004, we began expensing these costs as incurred. Such change conforms our accounting for all major maintenance costs to a method that we believe is preferable in the circumstances. As a result of this change in accounting method, we (a) recognized a cumulative effect of an accounting change resulting in an increase in net income of $7 million, net of tax of $3 million, (or $0.02 per diluted share) for the six months ended June 30, 2004, (b) decreased long-term liabilities by $10 million and (c) decreased deferred tax assets by $3 million.

(3) Stock-based Compensation Plans and Retirement Plans

(a) Stock-based Compensation Plans.

We apply the intrinsic value method of accounting for employee stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25).

In March 2004, the FASB issued a proposed statement that would eliminate the ability to account for share-based compensation transactions using APB No. 25 and would generally require that such transactions be accounted for using a fair value based method. The FASB’s current technical plan is for the final statement to be issued in the fourth quarter of 2004 and to be effective for us beginning January 1, 2005; however, such schedules are sometimes delayed.

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If employee stock-based compensation costs had been expensed based on the fair value (determined using the Black-Scholes model) method of accounting applied to all stock awards, our net loss and per share amounts would have approximated the following pro forma results for the three and six months ended June 30, 2004 and 2003:

(b) Retirement Plans.

Net benefit cost for our qualified retirement plans includes the following components:

Pension expense associated with our non-qualified pension plan was $0 and $1 million during the three months ended June 30, 2004 and 2003, respectively, and $3 million and $1 million during the six months ended June 30, 2004 and 2003, respectively. During the six months ended June 30, 2004, we recognized an accounting settlement charge of $2 million (pre-tax) related to distributions paid.

We expect cash contributions to our pension plans for continuing operations will be approximately $12 million during 2004. As of June 30, 2004, we had contributed $5 million.

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(4) Comprehensive Income (Loss)

The following table summarizes the components of total comprehensive income (loss):

(5) Goodwill and Property, Plant and Equipment

We evaluate goodwill annually (in November) and goodwill and property, plant and equipment when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable.

May 2004 Goodwill Impairment Test Related to our Wholesale Energy Segment. In May 2004, we signed an agreement to sell 770 MW of generation assets. Generally accepted accounting principles require us to allocate a portion of the goodwill in the wholesale energy reporting unit to the assets being sold on a relative fair value basis as of May 2004 in order to compute the gain on disposal. We have allocated an estimated $47 million of the $430 million of goodwill formerly recorded for our wholesale energy reporting unit to the assets being sold. After giving effect to this allocation, the goodwill for our wholesale energy reporting unit as of June 30, 2004 is $383 million and $435 million for Reliant Energy as a whole. For additional information, see note 16.

As of May 2004, we also tested the recoverability of goodwill in our remaining wholesale energy reporting unit and determined that no impairment had occurred. For additional information regarding the process and assumptions used in our impairment tests for 2003 and 2002, see note 6 to our consolidated financial statements included in our Form 10-K. The significant assumptions used in the May 2004 test are consistent with our November 2003 annual impairment test assumptions, which were previously disclosed.

Property, Plant and Equipment. We performed impairment analyses of certain assets of our wholesale energy reporting unit’s property, plant and equipment as of June 30, 2004. In conjunction with those tests, we recorded no impairments. During the three months ended June 30, 2004 and 2003, we recognized $24 million and $7 million, respectively, and during the six months ended June 30, 2004 and 2003, we recognized $36 million and $7 million, respectively, in depreciation expense related to early retirements and write-downs of certain property, plant and equipment.

Potential Future Impairments of Property, Plant and Equipment. We are currently evaluating the continued use of certain information technology systems, which have a net book value of approximately $20 million as of June 30, 2004.

See note 13 for discussion of possible impairment of a subsidiary’s generation assets.

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(6) Derivative Instruments, Including Energy Trading Activities

Trading and derivative assets and liabilities at June 30, 2004 and December 31, 2003 include amounts for non-trading and trading activities, as follows: