Texas
|
74-0694415
|
(State
or other jurisdiction of
incorporation
or
organization)
|
(I.R.S.
Employer Identification No.)
|
1111
Louisiana
|
|
Houston,
Texas 77002
|
(713)
207-1111
|
(Address
and zip code of principal executive offices)
|
(Registrant’s telephone
number, including area code
)
|
Large
accelerated filer
þ
|
Accelerated
filer
o
|
Non-accelerated
filer
o
|
Smaller
reporting company
o
|
(Do
not check if a smaller reporting company)
|
PART
I.
|
FINANCIAL
INFORMATION
|
|||
Item
1.
|
1 | |||
Three
and Nine Months Ended September 30, 2007 and 2008
(unaudited)
|
1 | |||
December 31,
2007 and September 30, 2008 (unaudited)
|
2 | |||
Nine
Months Ended September 30, 2007 and 2008 (unaudited)
|
4 | |||
5 | ||||
Item
2.
|
25 | |||
Item
3.
|
38 | |||
Item
4.
|
39 | |||
PART
II.
|
||||
Item
1.
|
40 | |||
Item 1A.
|
40 | |||
Item
5.
|
41 | |||
Item
6.
|
42 |
|
·
|
the
resolution of the true-up proceedings, including, in particular, the
results of appeals to the courts regarding rulings obtained to
date;
|
|
·
|
state
and federal legislative and regulatory actions or developments, including
deregulation or re-regulation of our businesses, environmental
regulations, including regulations related to global climate change, and
changes in or application of laws or regulations applicable to the various
aspects of our business;
|
|
·
|
timely
and appropriate legislative and regulatory actions allowing securitization
or other recovery of costs associated with Hurricane
Ike;
|
|
·
|
timely
and appropriate rate actions and increases, allowing recovery of costs,
and a reasonable return on
investment;
|
|
·
|
cost
overruns on major capital projects that cannot be recouped in
prices;
|
|
·
|
industrial,
commercial and residential growth rates in our service territory and
changes in market demand and demographic
patterns;
|
|
·
|
the
timing and extent of changes in commodity prices, particularly natural
gas;
|
|
·
|
the
timing and extent of changes in the supply of natural
gas;
|
|
·
|
the
timing and extent of changes in natural gas basis
differentials;
|
|
·
|
weather
variations and other natural
phenomena;
|
|
·
|
changes
in interest rates or rates of
inflation;
|
|
·
|
commercial
bank and financial market conditions, our access to capital, the cost of
such capital, and the results of our financing and refinancing efforts,
including availability of funds in the debt capital
markets;
|
|
·
|
actions
by rating agencies;
|
|
·
|
effectiveness
of our risk management activities;
|
|
·
|
inability
of various counterparties to meet their obligations to
us;
|
|
·
|
non-payment
for our services due to financial distress of our customers, including
Reliant Energy, Inc. (RRI);
|
|
·
|
the
ability of RRI and its subsidiaries to satisfy their other obligations to
us, including indemnity obligations, or in connection with the contractual
arrangements pursuant to which we are their
guarantor;
|
|
·
|
the
outcome of litigation brought by or against
us;
|
|
·
|
our
ability to control costs;
|
|
·
|
the
investment performance of our employee benefit
plans;
|
|
·
|
our
potential business strategies, including acquisitions or dispositions of
assets or businesses, which we cannot assure will be completed or will
have the anticipated benefits to
us;
|
|
·
|
acquisition
and merger activities involving us or our competitors;
and
|
|
·
|
other
factors we discuss in “Risk Factors” in Item 1A of Part I of our Annual
Report on Form 10-K for the year ended December 31, 2007, which is
incorporated herein by reference, and other reports we file from time to
time with the Securities and Exchange
Commission.
|
Three
Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
||||||||||||||
2007
|
2008
|
2007
|
2008
|
||||||||||||
Revenues
|
$ | 1,882 | $ | 2,515 | $ | 7,021 | $ | 8,548 | |||||||
Expenses:
|
|||||||||||||||
Natural gas
|
991 | 1,532 | 4,349 | 5,675 | |||||||||||
Operation and
maintenance
|
349 | 371 | 1,031 | 1,078 | |||||||||||
Depreciation and
amortization
|
170 | 194 | 475 | 540 | |||||||||||
Taxes other than income
taxes
|
85 | 81 | 284 | 285 | |||||||||||
Total
|
1,595 | 2,178 | 6,139 | 7,578 | |||||||||||
Operating
Income
|
287 | 337 | 882 | 970 | |||||||||||
Other
Income (Expense):
|
|||||||||||||||
Loss on Time Warner
investment
|
(58 | ) | (36 | ) | (74 | ) | (73 | ) | |||||||
Gain on indexed debt
securities
|
56 | 33 | 70 | 66 | |||||||||||
Interest and other finance
charges
|
(126 | ) | (116 | ) | (368 | ) | (344 | ) | |||||||
Interest on transition
bonds
|
(30 | ) | (34 | ) | (93 | ) | (102 | ) | |||||||
Distribution from AOL-Time
Warner litigation settlement
|
32 | — | 32 | — | |||||||||||
Additional distribution to ZENS
holders
|
(27 | ) | — | (27 | ) | — | |||||||||
Other, net
|
11 | 29 | 23 | 56 | |||||||||||
Total
|
(142 | ) | (124 | ) | (437 | ) | (397 | ) | |||||||
Income
Before Income Taxes
|
145 | 213 | 445 | 573 | |||||||||||
Income tax
expense
|
(54 | ) | (77 | ) | (154 | ) | (213 | ) | |||||||
Net
Income
|
$ | 91 | $ | 136 | $ | 291 | $ | 360 | |||||||
Basic
Earnings Per Share
|
$ | 0.29 | $ | 0.40 | $ | 0.91 | $ | 1.08 | |||||||
Diluted
Earnings Per Share
|
$ | 0.27 | $ | 0.39 | $ | 0.85 | $ | 1.05 |
December 31,
2007
|
September 30,
2008
|
|||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 129 | $ | 84 | ||||
Investment
in Time Warner common stock
|
357 | 284 | ||||||
Accounts
receivable, net
|
910 | 784 | ||||||
Accrued
unbilled revenues
|
558 | 243 | ||||||
Natural
gas inventory
|
395 | 598 | ||||||
Materials
and supplies
|
95 | 120 | ||||||
Non-trading
derivative assets
|
38 | 75 | ||||||
Taxes
receivable
|
— | 289 | ||||||
Prepaid
expenses and other current assets
|
306 | 360 | ||||||
Total
current assets
|
2,788 | 2,837 | ||||||
Property,
Plant and Equipment:
|
||||||||
Property,
plant and equipment
|
13,250 | 13,766 | ||||||
Less
accumulated depreciation and amortization
|
3,510 | 3,617 | ||||||
Property,
plant and equipment, net
|
9,740 | 10,149 | ||||||
Other
Assets:
|
||||||||
Goodwill
|
1,696 | 1,696 | ||||||
Regulatory
assets
|
2,993 | 3,219 | ||||||
Non-trading
derivative assets
|
11 | 9 | ||||||
Notes
receivable from unconsolidated affiliates
|
148 | 323 | ||||||
Other
|
496 | 799 | ||||||
Total
other assets
|
5,344 | 6,046 | ||||||
Total
Assets
|
$ | 17,872 | $ | 19,032 |
December 31,
2007
|
September
30,
2008
|
|||||||
Current
Liabilities:
|
||||||||
Short-term
borrowings
|
$ | 232 | $ | 150 | ||||
Current
portion of transition bond long-term debt
|
159 | 208 | ||||||
Current
portion of other long-term debt
|
1,156 | 123 | ||||||
Indexed
debt securities derivative
|
261 | 195 | ||||||
Accounts
payable
|
726 | 1,130 | ||||||
Taxes
accrued
|
316 | 148 | ||||||
Interest
accrued
|
170 | 166 | ||||||
Non-trading
derivative liabilities
|
61 | 49 | ||||||
Accumulated
deferred income taxes, net
|
350 | 328 | ||||||
Other
|
360 | 375 | ||||||
Total
current liabilities
|
3,791 | 2,872 | ||||||
Other
Liabilities:
|
||||||||
Accumulated
deferred income taxes, net
|
2,235 | 2,687 | ||||||
Unamortized
investment tax credits
|
31 | 26 | ||||||
Non-trading
derivative liabilities
|
14 | 20 | ||||||
Benefit
obligations
|
499 | 482 | ||||||
Regulatory
liabilities
|
828 | 808 | ||||||
Other
|
300 | 281 | ||||||
Total
other liabilities
|
3,907 | 4,304 | ||||||
Long-term
Debt:
|
||||||||
Transition
bonds
|
2,101 | 2,381 | ||||||
Other
|
6,263 | 7,416 | ||||||
Total
long-term debt
|
8,364 | 9,797 | ||||||
Commitments
and Contingencies (Note 10)
|
||||||||
Shareholders’
Equity:
|
||||||||
Common
stock (322,718,785 shares and 342,967,485 shares outstanding
at December 31, 2007 and
September 30, 2008, respectively)
|
3 | 3 | ||||||
Additional
paid-in capital
|
3,023 | 3,099 | ||||||
Accumulated
deficit
|
(1,172 | ) | (994 | ) | ||||
Accumulated
other comprehensive loss
|
(44 | ) | (49 | ) | ||||
Total
shareholders’ equity
|
1,810 | 2,059 | ||||||
Total
Liabilities and Shareholders’ Equity
|
$ | 17,872 | $ | 19,032 |
Nine
Months Ended September 30,
|
||||||||
2007
|
2008
|
|||||||
Cash
Flows from Operating Activities:
|
||||||||
Net income
|
$ | 291 | $ | 360 | ||||
Adjustments to reconcile net
income to net cash provided by operating activities:
|
||||||||
Depreciation and
amortization
|
475 | 540 | ||||||
Amortization of deferred
financing costs
|
44 | 20 | ||||||
Deferred income
taxes
|
23 | 471 | ||||||
Unrealized loss on Time Warner
investment
|
74 | 73 | ||||||
Unrealized gain on indexed debt
securities
|
(70 | ) | (66 | ) | ||||
Write-down of natural gas
inventory
|
11 | 24 | ||||||
Changes in other assets and
liabilities:
|
||||||||
Accounts receivable and
unbilled revenues, net
|
540 | 441 | ||||||
Inventory
|
(160 | ) | (252 | ) | ||||
Taxes
receivable
|
— | (289 | ) | |||||
Accounts
payable
|
(460 | ) | (119 | ) | ||||
Fuel cost
recovery
|
(90 | ) | (11 | ) | ||||
Non-trading derivatives,
net
|
13 | (28 | ) | |||||
Margin deposits,
net
|
49 | (96 | ) | |||||
Interest and taxes
accrued
|
(150 | ) | (173 | ) | ||||
Net regulatory assets and
liabilities
|
57 | (48 | ) | |||||
Other current
assets
|
(29 | ) | (2 | ) | ||||
Other current
liabilities
|
(49 | ) | (6 | ) | ||||
Other assets
|
(39 | ) | (60 | ) | ||||
Other
liabilities
|
(50 | ) | (20 | ) | ||||
Other, net
|
12 | (35 | ) | |||||
Net cash provided by operating
activities
|
492 | 724 | ||||||
Cash
Flows from Investing Activities:
|
||||||||
Capital
expenditures
|
(851 | ) | (632 | ) | ||||
Increase in restricted cash of
transition bond companies
|
— | (8 | ) | |||||
Increase in notes receivable
from unconsolidated affiliates
|
(51 | ) | (175 | ) | ||||
Investment in unconsolidated
affiliates
|
(40 | ) | (207 | ) | ||||
Other, net
|
9 | 31 | ||||||
Net cash used in investing
activities
|
(933 | ) | (991 | ) | ||||
Cash
Flows from Financing Activities:
|
||||||||
Decrease in short-term
borrowings, net
|
(37 | ) | (82 | ) | ||||
Long-term revolving credit
facilities, net
|
580 | 737 | ||||||
Proceeds from commercial paper,
net
|
76 | — | ||||||
Proceeds from long-term
debt
|
400 | 1,088 | ||||||
Payments of long-term
debt
|
(509 | ) | (1,373 | ) | ||||
Debt issuance
costs
|
(4 | ) | (11 | ) | ||||
Payment of common stock
dividends
|
(164 | ) | (183 | ) | ||||
Proceeds from issuance of common
stock, net
|
20 | 45 | ||||||
Other
|
6 | 1 | ||||||
Net cash provided by financing
activities
|
368 | 222 | ||||||
Net
Decrease in Cash and Cash Equivalents
|
(73 | ) | (45 | ) | ||||
Cash
and Cash Equivalents at Beginning of Period
|
127 | 129 | ||||||
Cash
and Cash Equivalents at End of Period
|
$ | 54 | $ | 84 | ||||
Supplemental
Disclosure of Cash Flow Information:
|
||||||||
Cash
Payments:
|
||||||||
Interest, net of capitalized
interest
|
$ | 447 | $ | 447 | ||||
Income taxes
|
195 | 188 | ||||||
Non-cash
transactions:
|
||||||||
Accounts payable related to
capital expenditures
|
78 | 218 |
(1)
|
Background
and Basis of Presentation
|
|
·
|
CenterPoint
Energy Houston Electric, LLC (CenterPoint Houston), which engages in the
electric transmission and distribution business in a 5,000-square mile
area of the Texas Gulf Coast that includes Houston;
and
|
|
·
|
CenterPoint
Energy Resources Corp. (CERC Corp., and, together with its subsidiaries,
CERC), which owns and operates natural gas distribution systems in six
states. Subsidiaries of CERC own interstate natural gas pipelines and gas
gathering systems and provide various ancillary services. A wholly owned
subsidiary of CERC Corp. offers variable and fixed-price physical natural
gas supplies primarily to commercial and industrial customers and electric
and gas utilities.
|
(2)
|
New
Accounting Pronouncements
|
Quoted
Prices in
Active
Markets
for
Identical Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Significant
Unobservable
Inputs
(Level
3)
|
Netting
Adjustments
(1)
|
Balance
as
of
September
30,
2008
|
|||||||||||||
(in
millions)
|
|||||||||||||||||
Assets
|
|||||||||||||||||
Corporate
equities
|
$ | 286 | $ | — | $ | — | $ | — | $ | 286 | |||||||
Investments
|
67 | — | — | — | 67 | ||||||||||||
Derivative
assets
|
24 | 111 | 38 | (89 | ) | 84 | |||||||||||
Total
assets
|
$ | 377 | $ | 111 | $ | 38 | $ | (89 | ) | $ | 437 | ||||||
Liabilities
|
|||||||||||||||||
Indexed
debt securities derivative
|
$ | — | $ | 195 | $ | — | $ | — | $ | 195 | |||||||
Derivative
liabilities
|
31 | 124 | 97 | (183 | ) | 69 | |||||||||||
Total
liabilities
|
$ | 31 | $ | 319 | $ | 97 | $ | (183 | ) | $ | 264 |
(1)
|
Amounts
represent the impact of legally enforceable master netting agreements that
allow the Company to settle positive and negative positions and also cash
collateral held or placed with the same
counterparties.
|
Fair
Value Measurements
Using
Significant
Unobservable
Inputs
(Level
3)
|
||||
Derivative
assets and
liabilities,
net
|
||||
(in
millions)
|
||||
Beginning
asset (liability) balance as of July 1, 2008
|
$ | 6 | ||
Total
gains or (losses) (realized and unrealized):
|
||||
Included
in deferred fuel cost recovery
|
(59 | ) | ||
Included
in earnings
|
(2 | ) | ||
Purchases,
sales, other settlements, net
|
(4 | ) | ||
Ending
asset (liability) balance as of September 30, 2008
|
$ | (59 | ) | |
The
amount of total gains or (losses) for the period included in earnings
attributable to the change in unrealized gains or losses relating to
assets still held at the reporting date
|
$ | 4 |
Fair
Value Measurements
Using
Significant
Unobservable
Inputs
(Level
3)
|
||||
Derivative
assets and
liabilities,
net
|
||||
(in
millions)
|
||||
Beginning
asset (liability) balance as of July 1, 2008
|
$ | (3 | ) | |
Total
gains or (losses) (realized and unrealized):
|
||||
Included
in deferred fuel cost recovery
|
(59 | ) | ||
Included
in earnings
|
7 | |||
Purchases,
sales, other settlements, net
|
(4 | ) | ||
Ending
asset (liability) balance as of September 30, 2008
|
$ | (59 | ) | |
The
amount of total gains or (losses) for the period included in earnings
attributable to the change in unrealized gains or losses relating to
assets still held at the reporting date
|
$ | 9 |
(3)
|
Employee
Benefit Plans
|
Three
Months Ended September 30,
|
||||||||||||||||
2007
|
2008
|
|||||||||||||||
Pension
Benefits
|
Postretirement
Benefits
|
Pension
Benefits
|
Postretirement
Benefits
|
|||||||||||||
(in
millions)
|
||||||||||||||||
Service
cost
|
$ | 9 | $ | — | $ | 8 | $ | — | ||||||||
Interest
cost
|
25 | 7 | 25 | 6 | ||||||||||||
Expected
return on plan assets
|
(38 | ) | (2 | ) | (37 | ) | (3 | ) | ||||||||
Amortization
of prior service cost
|
(1 | ) | — | (2 | ) | — | ||||||||||
Amortization
of net loss
|
8 | — | 6 | — | ||||||||||||
Amortization
of transition obligation
|
— | 2 | — | 2 | ||||||||||||
Net
periodic cost
|
$ | 3 | $ | 7 | $ | — | $ | 5 | ||||||||
Nine
Months Ended September 30,
|
||||||||||||||||
2007
|
2008
|
|||||||||||||||
Pension
Benefits
|
Postretirement
Benefits
|
Pension
Benefits
|
Postretirement
Benefits
|
|||||||||||||
(in
millions)
|
||||||||||||||||
Service
cost
|
$ | 27 | $ | 1 | $ | 23 | $ | 1 | ||||||||
Interest
cost
|
75 | 20 | 76 | 20 | ||||||||||||
Expected
return on plan assets
|
(112 | ) | (8 | ) | (111 | ) | (9 | ) | ||||||||
Amortization
of prior service cost
|
(5 | ) | 2 | (5 | ) | 3 | ||||||||||
Amortization
of net loss
|
26 | — | 18 | — | ||||||||||||
Amortization
of transition obligation
|
— | 5 | — | 4 | ||||||||||||
Net
periodic cost
|
$ | 11 | $ | 20 | $ | 1 | $ | 19 | ||||||||
(4)
|
Regulatory
Matters
|
(a)
|
Hurricane
Ike
|
(b)
|
Recovery
of True-up Balance
|
|
·
|
reversed
the Texas Utility Commission’s ruling that had denied recovery of a
portion of the capacity auction true-up
amounts;
|
|
·
|
reversed
the Texas Utility Commission’s ruling that precluded CenterPoint Houston
from recovering the interest component of the EMCs paid to retail electric
providers; and
|
|
·
|
affirmed
the True-Up Order in all other
respects.
|
|
·
|
reversed
the district court’s judgment to the extent it restored the capacity
auction true-up amounts;
|
|
·
|
reversed
the district court’s judgment to the extent it upheld the Texas Utility
Commission’s decision to allow CenterPoint Houston to recover EMCs paid to
Reliant Energy, Inc. (RRI);
|
|
·
|
ordered
that the tax normalization issue described below be remanded to the Texas
Utility Commission as requested by the Texas Utility Commission;
and
|
|
·
|
affirmed
the district court’s judgment in all other
respects.
|
(c)
|
Rate
Proceedings
|
(5)
|
Derivative
Instruments
|
(a)
|
Non-Trading
Activities
|
(6)
|
Goodwill
|
Natural
Gas Distribution
|
$ | 746 | ||
Interstate
Pipelines
|
579 | |||
Competitive
Natural Gas Sales and Services
|
335 | |||
Field
Services
|
25 | |||
Other
Operations
|
11 | |||
Total
|
$ | 1,696 |
(7)
|
Comprehensive
Income
|
For
the Three Months Ended
September 30,
|
For
the Nine Months Ended
September 30,
|
||||||||||||||
2007
|
2008
|
2007
|
2008
|
||||||||||||
(in
millions)
|
|||||||||||||||
Net
income
|
$ | 91 | $ | 136 | $ | 291 | $ | 360 | |||||||
Other
comprehensive income (loss):
|
|||||||||||||||
Adjustment to pension and other
postretirement plans (net of tax of $1, $2, $4 and $3)
|
1 | — | 5 | 3 | |||||||||||
Net deferred gain (loss) from
cash flow hedges (net of tax of $3, $-0-, $6 and $2)
|
6 | (1 | ) | 11 | (4 | ) | |||||||||
Reclassification of deferred
loss (gain) from cash flow hedges realized in net income (net of tax of
$1, $-0-, $10 and $2)
|
3 | — | (14 | ) | (4 | ) | |||||||||
Total
|
10 | (1 | ) | 2 | (5 | ) | |||||||||
Comprehensive
income
|
$ | 101 | $ | 135 | $ | 293 | $ | 355 |
December 31,
2007
|
September 30,
2008
|
|||||||
(in
millions)
|
||||||||
SFAS
No. 158 incremental effect
|
$ | (48 | ) | $ | (45 | ) | ||
Net
deferred gain (loss) from cash flow hedges
|
4 | (4 | ) | |||||
Total
accumulated other comprehensive loss
|
$ | (44 | ) | $ | (49 | ) |
(8)
|
Capital
Stock
|
(9)
|
Short-term
Borrowings and Long-term Debt
|
(a)
|
Short-term
Borrowings
|
(b)
|
Long-term
Debt
|
December 31,
2007
|
September 30,
2008
|
|||||||
CenterPoint
Energy $1.2 billion credit facility borrowings
|
$ | 131 | $ | 152 | ||||
CenterPoint
Houston $300 million credit facility borrowings
|
50 | 171 | ||||||
CERC
Corp. $950 million credit facility borrowings
|
150 | 745 | ||||||
Total
credit facility borrowings outstanding
|
$ | 331 | $ | 1,068 |
(10)
|
Commitments
and Contingencies
|
(a)
|
Natural
Gas Supply Commitments
|
(b)
|
Legal,
Environmental and Other Regulatory
Matters
|
(11)
|
Income
Taxes
|
December 31,
2007
|
September 30,
2008
|
|||||||
Liability
for uncertain tax positions
|
$ | 82 | $ | 102 | ||||
Portion
of liability for uncertain tax positions that, if recognized, would reduce
the effective income tax rate
|
10 | 13 | ||||||
Interest
accrued on uncertain tax positions
|
4 | 8 |
(12)
|
Earnings
Per Share
|
For
the Three Months Ended
September 30,
|
For
the Nine Months Ended
September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
(in
millions, except share and per share amounts)
|
||||||||||||||||
Basic
earnings per share calculation:
|
||||||||||||||||
Net income
|
$ | 91 | $ | 136 | $ | 291 | $ | 360 | ||||||||
Weighted
average shares outstanding
|
321,192,000 | 342,228,000 | 320,071,000 | 333,652,000 | ||||||||||||
Basic
earnings per share
|
$ | 0.29 | $ | 0.40 | $ | 0.91 | $ | 1.08 | ||||||||
Diluted
earnings per share calculation:
|
||||||||||||||||
Net income
|
$ | 91 | $ | 136 | $ | 291 | $ | 360 | ||||||||
Weighted
average shares outstanding
|
321,192,000 | 342,228,000 | 320,071,000 | 333,652,000 | ||||||||||||
Plus: Incremental shares from
assumed conversions:
|
||||||||||||||||
Stock options
(1)
|
1,027,000 | 841,000 | 1,104,000 | 846,000 | ||||||||||||
Restricted stock
units
|
1,713,000 | 1,515,000 | 1,713,000 | 1,515,000 | ||||||||||||
2.875% convertible senior
notes
|
— | — | 389,000 | — | ||||||||||||
3.75% convertible senior
notes
|
17,042,000 | — | 18,945,000 | 6,174,000 | ||||||||||||
Weighted average shares assuming
dilution
|
340,974,000 | 344,584,000 | 342,222,000 | 342,187,000 | ||||||||||||
Diluted
earnings per share
|
$ | 0.27 | $ | 0.39 | $ | 0.85 | $ | 1.05 |
(1)
|
Options
to purchase 3,474,562 shares were outstanding for both the three and nine
months ended September 30, 2007, and options to purchase 2,720,083
shares were outstanding for both the three and nine months ended September
30, 2008, but were not included in the computation of diluted earnings per
share because the options’ exercise price was greater than the average
market price of the common shares for the respective
periods.
|
(13)
|
Reportable
Business Segments
|
For
the Three Months Ended September 30, 2007
|
||||||||||||
Revenues
from External Customers
|
Net
Intersegment Revenues
|
Operating
Income (Loss)
|
||||||||||
Electric
Transmission & Distribution
|
$ | 528 | (1) | $ | — | $ | 196 | |||||
Natural
Gas Distribution
|
457 | 1 | (8 | ) | ||||||||
Competitive
Natural Gas Sales and Services
|
758 | 12 | 4 | |||||||||
Interstate
Pipelines
|
100 | 37 | 70 | |||||||||
Field
Services
|
36 | 8 | 26 | |||||||||
Other
Operations
|
3 | — | (1 | ) | ||||||||
Eliminations
|
— | (58 | ) | — | ||||||||
Consolidated
|
$ | 1,882 | $ | — | $ | 287 |
For
the Three Months Ended September 30, 2008
|
||||||||||||
Revenues
from External Customers
|
Net
Intersegment Revenues
|
Operating
Income (Loss)
|
||||||||||
Electric
Transmission & Distribution
|
$ | 552 | (1) | $ | — | $ | 202 | |||||
Natural
Gas Distribution
|
548 | 2 | (6 | ) | ||||||||
Competitive
Natural Gas Sales and Services
|
1,256 | 13 | 35 | |||||||||
Interstate
Pipelines
|
96 | 47 | 55 | |||||||||
Field
Services
|
60 | 11 | 44 | |||||||||
Other
Operations
|
3 | — | 7 | |||||||||
Eliminations
|
— | (73 | ) | — | ||||||||
Consolidated
|
$ | 2,515 | $ | — | $ | 337 |
For
the Nine Months Ended September 30, 2008
|
||||||||||||||||
Revenues
from External Customers
|
Net
Intersegment Revenues
|
Operating
Income
|
Total
Assets
as
of September 30,
2008
|
|||||||||||||
Electric
Transmission & Distribution
|
$ | 1,471 | (1) | $ | — | $ | 457 | (3) | $ | 9,141 | ||||||
Natural
Gas Distribution
|
2,969 | 7 | 119 | 4,354 | ||||||||||||
Competitive
Natural Gas Sales and Services
|
3,599 | 33 | 36 | 1,193 | ||||||||||||
Interstate
Pipelines
|
337 | 131 | 227 | (4) | 3,539 | |||||||||||
Field
Services
|
164 | 27 | 121 | (5) | 792 | |||||||||||
Other
Operations
|
8 | — | 10 | 1,736 | (2) | |||||||||||
Eliminations
|
— | (198 | ) | — | (1,723 | ) | ||||||||||
Consolidated
|
$ | 8,548 | $ | — | $ | 970 | $ | 19,032 |
(1)
|
Sales
to subsidiaries of RRI in each of the three months ended September 30,
2007 and 2008 represented approximately $196 million and
$199 million, respectively, of CenterPoint Houston’s transmission and
distribution revenues. Sales to subsidiaries of RRI in the nine months
ended September 30, 2007 and 2008 represented approximately
$496 million and $492 million,
respectively.
|
(2)
|
Included
in total assets of Other Operations as of December 31, 2007 and
September 30, 2008 are pension assets of $231 million and
$247 million, respectively. Also included in total assets of Other
Operations as of December 31, 2007 and September 30, 2008, are
pension-related regulatory assets of $319 million and
$311 million, respectively, which resulted from the Company’s
adoption of SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans — An Amendment of FASB
Statements No. 87, 88, 106 and
132(R).”
|
(3)
|
Included
in operating income of Electric Transmission & Distribution for the
nine months ended September 30, 2008 is a $9 million gain on
sale of land.
|
(4)
|
Included
in operating income of Interstate Pipelines for the three and nine months
ended September 30, 2008 is a $7 million loss on pipeline assets
removed from service. Also included in operating income of
Interstate Pipelines for the nine months ended September 30, 2008 is
an $18 million gain on the sale of two storage development
projects.
|
(5)
|
Included
in operating income of Field Services for the nine months ended September
30, 2008 is an $11 million gain related to a settlement and contract
buyout of one of its customers and a $6 million gain on the sale of
assets.
|
(14)
|
Subsequent
Event
|
Three
Months Ended September 30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 1,882 | $ | 2,515 | $ | 7,021 | $ | 8,548 | ||||||||
Expenses
|
1,595 | 2,178 | 6,139 | 7,578 | ||||||||||||
Operating
Income
|
287 | 337 | 882 | 970 | ||||||||||||
Interest
and Other Finance Charges
|
(126 | ) | (116 | ) | (368 | ) | (344 | ) | ||||||||
Interest
on Transition Bonds
|
(30 | ) | (34 | ) | (93 | ) | (102 | ) | ||||||||
Other
Income, net
|
14 | 26 | 24 | 49 | ||||||||||||
Income
Before Income Taxes
|
145 | 213 | 445 | 573 | ||||||||||||
Income
Tax Expense
|
(54 | ) | (77 | ) | (154 | ) | (213 | ) | ||||||||
Net
Income
|
$ | 91 | $ | 136 | $ | 291 | $ | 360 | ||||||||
Basic
Earnings Per Share
|
$ | 0.29 | $ | 0.40 | $ | 0.91 | $ | 1.08 | ||||||||
Diluted
Earnings Per Share
|
$ | 0.27 | $ | 0.39 | $ | 0.85 | $ | 1.05 |
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Electric
Transmission & Distribution
|
$ | 196 | $ | 202 | $ | 457 | $ | 457 | ||||||||
Natural
Gas Distribution
|
(8 | ) | (6 | ) | 129 | 119 | ||||||||||
Competitive
Natural Gas Sales and Services
|
4 | 35 | 56 | 36 | ||||||||||||
Interstate
Pipelines
|
70 | 55 | 166 | 227 | ||||||||||||
Field
Services
|
26 | 44 | 75 | 121 | ||||||||||||
Other
Operations
|
(1 | ) | 7 | (1 | ) | 10 | ||||||||||
Total
Consolidated Operating Income
|
$ | 287 | $ | 337 | $ | 882 | $ | 970 |
Three
Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues:
|
||||||||||||||||
Electric transmission and
distribution utility
|
$ | 445 | $ | 455 | $ | 1,187 | $ | 1,220 | ||||||||
Transition bond
companies
|
83 | 97 | 212 | 251 | ||||||||||||
Total
revenues
|
528 | 552 | 1,399 | 1,471 | ||||||||||||
Expenses:
|
||||||||||||||||
Operation and maintenance,
excluding transition bond companies
|
163 | 167 | 467 | 502 | ||||||||||||
Depreciation and amortization,
excluding transition bond companies
|
58 | 71 | 182 | 208 | ||||||||||||
Taxes other than income
taxes
|
58 | 48 | 171 | 153 | ||||||||||||
Transition bond
companies
|
53 | 64 | 122 | 151 | ||||||||||||
Total
expenses
|
332 | 350 | 942 | 1,014 | ||||||||||||
Operating
Income
|
$ | 196 | $ | 202 | $ | 457 | $ | 457 | ||||||||
Operating
Income:
|
||||||||||||||||
Electric
transmission and distribution utility
|
$ | 155 | $ | 169 | $ | 335 | $ | 352 | ||||||||
Competition
transition charge
|
11 | — | 32 | 5 | ||||||||||||
Transition
bond companies
(1)
|
30 | 33 | 90 | 100 | ||||||||||||
Total
segment operating income
|
$ | 196 | $ | 202 | $ | 457 | $ | 457 | ||||||||
Throughput
(in gigawatt-hours (GWh)):
|
||||||||||||||||
Residential
|
8,381 | 8,446 | 19,060 | 19,623 | ||||||||||||
Total
|
22,726 | 21,594 | 58,561 | 58,523 | ||||||||||||
Average
number of metered customers:
|
||||||||||||||||
Residential
|
1,782,281 | 1,822,351 | 1,767,431 | 1,812,821 | ||||||||||||
Total
|
2,022,448 | 2,066,538 | 2,006,344 | 2,055,723 |
Three
Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 458 | $ | 550 | $ | 2,601 | $ | 2,976 | ||||||||
Expenses:
|
||||||||||||||||
Natural gas
|
267 | 351 | 1,845 | 2,196 | ||||||||||||
Operation and
maintenance
|
139 | 139 | 421 | 436 | ||||||||||||
Depreciation and
amortization
|
38 | 40 | 114 | 118 | ||||||||||||
Taxes other than income
taxes
|
22 | 26 | 92 | 107 | ||||||||||||
Total expenses
|
466 | 556 | 2,472 | 2,857 | ||||||||||||
Operating
Income (Loss)
|
$ | (8 | ) | $ | (6 | ) | $ | 129 | $ | 119 | ||||||
Throughput
(in Bcf):
|
||||||||||||||||
Residential
|
12 | 13 | 118 | 117 | ||||||||||||
Commercial and
industrial
|
42 | 41 | 168 | 171 | ||||||||||||
Total
Throughput
|
54 | 54 | 286 | 288 | ||||||||||||
Average
number of customers:
|
||||||||||||||||
Residential
|
2,910,041 | 2,937,618 | 2,927,122 | 2,956,500 | ||||||||||||
Commercial and
industrial
|
246,021 | 245,514 | 246,382 | 248,759 | ||||||||||||
Total
|
3,156,062 | 3,183,132 | 3,173,504 | 3,205,259 |
Three
Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 770 | $ | 1,269 | $ | 2,715 | $ | 3,632 | ||||||||
Expenses:
|
||||||||||||||||
Natural gas
|
756 | 1,225 | 2,631 | 3,567 | ||||||||||||
Operation and
maintenance
|
7 | 8 | 23 | 26 | ||||||||||||
Depreciation and
amortization
|
3 | 1 | 4 | 2 | ||||||||||||
Taxes other than income
taxes
|
— | — | 1 | 1 | ||||||||||||
Total expenses
|
766 | 1,234 | 2,659 | 3,596 | ||||||||||||
Operating
Income
|
$ | 4 | $ | 35 | $ | 56 | $ | 36 | ||||||||
Throughput
(in Bcf)
|
119 | 125 | 393 | 392 | ||||||||||||
Average
number of customers
|
6,976 | 9,245 | 7,014 | 8,974 |
Three
Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 137 | $ | 143 | $ | 348 | $ | 468 | ||||||||
Expenses:
|
||||||||||||||||
Natural gas
|
27 | 24 | 55 | 97 | ||||||||||||
Operation and
maintenance
|
29 | 47 | 85 | 93 | ||||||||||||
Depreciation and
amortization
|
11 | 11 | 32 | 34 | ||||||||||||
Taxes other than income
taxes
|
— | 6 | 10 | 17 | ||||||||||||
Total expenses
|
67 | 88 | 182 | 241 | ||||||||||||
Operating
Income
|
$ | 70 | $ | 55 | $ | 166 | $ | 227 | ||||||||
Transportation
throughput (in Bcf) :
|
312 | 360 | 880 | 1,145 |
Three
Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 44 | $ | 71 | $ | 125 | $ | 191 | ||||||||
Expenses:
|
||||||||||||||||
Natural gas
|
(2 | ) | 5 | (9 | ) | 11 | ||||||||||
Operation and
maintenance
|
17 | 19 | 49 | 48 | ||||||||||||
Depreciation and
amortization
|
2 | 3 | 8 | 9 | ||||||||||||
Taxes other than income
taxes
|
1 | — | 2 | 2 | ||||||||||||
Total expenses
|
18 | 27 | 50 | 70 | ||||||||||||
Operating
Income
|
$ | 26 | $ | 44 | $ | 75 | $ | 121 | ||||||||
Gathering
throughput (in Bcf) :
|
104 | 109 | 297 | 311 |
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 3 | $ | 3 | $ | 8 | $ | 8 | ||||||||
Expenses
|
4 | (4 | ) | 9 | (2 | ) | ||||||||||
Operating
Income (Loss)
|
$ | (1 | ) | $ | 7 | $ | (1 | ) | $ | 10 |
Nine
Months Ended September 30,
|
||||||||
2007
|
2008
|
|||||||
(in
millions)
|
||||||||
Cash
provided by (used in):
|
||||||||
Operating
activities
|
$ | 492 | $ | 724 | ||||
Investing
activities
|
(933 | ) | (991 | ) | ||||
Financing
activities
|
368 | 222 |
|
·
|
approximately
$385 million of capital
requirements;
|
|
·
|
estimated
restoration costs related to Hurricane Ike of approximately
$600 million;
|
|
·
|
investment
in and advances to SESH of approximately $30 million;
and
|
|
·
|
dividend
payments on CenterPoint Energy common stock and interest payments on
debt.
|
Date Executed
|
Company
|
Type
of
Facility
|
Size of Facility
|
Amount
Utilized at
October 31, 2008
|
Termination Date
|
|||||||||
June
29, 2007
|
CenterPoint
Energy
|
Revolver
|
$ |
1,200
|
(1) | $ |
308
|
(2)
|
|
June
29, 2012
|
||||
June
29, 2007
|
CenterPoint
Houston
|
Revolver
|
300 | (1) | 247 |
(3)
|
June
29, 2012
|
|||||||
June
29, 2007
|
CERC
Corp.
|
Revolver
|
950 | (1) | 919 |
June
29, 2012
|
Moody’s
|
S&P
|
Fitch
|
||||||||||
Company/Instrument
|
Rating
|
Outlook(1)
|
Rating
|
Outlook(2)
|
Rating
|
Outlook(3)
|
||||||
CenterPoint
Energy Senior Unsecured
Debt
|
Ba1
|
Stable
|
BBB-
|
Stable
|
BBB-
|
Stable
|
||||||
CenterPoint
Houston Senior Secured
Debt
(First Mortgage Bonds)
|
Baa2
|
Stable
|
BBB+
|
Stable
|
A-
|
Stable
|
||||||
CenterPoint
Houston Senior Secured
Debt
(General Mortgage Bonds)
|
Baa2
|
Stable
|
BBB+
|
Stable
|
BBB+
|
Stable
|
||||||
CERC
Corp. Senior Unsecured Debt
|
Baa3
|
Stable
|
BBB
|
Stable
|
BBB
|
Stable
|
(1)
|
A
“stable” outlook from Moody’s indicates that Moody’s does not expect to
put the rating on review for an upgrade or downgrade within 18 months from
when the outlook was assigned or last
affirmed.
|
(2)
|
An
S&P rating outlook assesses the potential direction of a long-term
credit rating over the intermediate to longer
term.
|
(3)
|
A
“stable” outlook from Fitch encompasses a one to two-year horizon as to
the likely ratings direction.
|
|
·
|
cash
collateral requirements that could exist in connection with certain
contracts, including gas purchases, gas price hedging and gas storage
activities of our Natural Gas Distribution and Competitive Natural Gas
Sales and Services business segments, particularly given gas price levels
and volatility;
|
|
·
|
acceleration
of payment dates on certain gas supply contracts under certain
circumstances, as a result of increased gas prices and concentration of
natural gas suppliers;
|
|
·
|
increased
costs related to the acquisition of natural
gas;
|
|
·
|
increases
in interest expense in connection with debt refinancings and borrowings
under credit facilities;
|
|
·
|
various
regulatory actions;
|
|
·
|
the
ability of RRI and its subsidiaries to satisfy their obligations as the
principal customers of CenterPoint Houston and in respect of RRI’s
indemnity obligations to us and our subsidiaries or in connection with the
contractual obligations to a third party pursuant to which CERC is a
guarantor;
|
|
·
|
slower
customer payments and increased write-offs of receivables due to higher
gas prices or changing economic
conditions;
|
|
·
|
the
outcome of litigation brought by and against
us;
|
|
·
|
contributions
to benefit plans;
|
|
·
|
restoration
costs and revenue losses resulting from natural disasters such as
hurricanes and the timing of recovery of such restoration
costs; and
|
|
·
|
various
other risks identified in “Risk Factors” in Item 1A of our 2007 Form
10-K and in “Risk Factors” in Item 1A of Part II of this Quarterly Report
on Form 10-Q.
|
|
The
following exhibits are filed
herewith:
|
Exhibit
Number
|
Description
|
Report or Registration
Statement
|
SEC
File
or
Registration
Number
|
Exhibit
Reference
|
||||
3.1.1
|
—
|
Restated
Articles of Incorporation of CenterPoint Energy
|
CenterPoint
Energy’s Form 8-K dated July 24, 2008
|
1-31447
|
3.1
|
|||
3.2
|
—
|
Amended
and Restated Bylaws of CenterPoint Energy
|
CenterPoint
Energy’s Form 8-K dated July 24, 2008
|
1-31447
|
3.2
|
|||
4.1
|
—
|
Form
of CenterPoint Energy Stock Certificate
|
CenterPoint
Energy’s Registration Statement on Form S-4
|
3-69502
|
4.1
|
|||
4.2
|
—
|
Rights
Agreement dated January 1, 2002, between CenterPoint Energy and
JPMorgan Chase Bank, as Rights Agent
|
CenterPoint
Energy’s Form 10-K for the year ended December 31, 2001
|
1-31447
|
4.2
|
|||
4.3
|
—
|
$1,200,000,000
Second Amended and Restated Credit Agreement dated as of June 29, 2007,
among CenterPoint Energy, as Borrower, and the banks named
therein
|
CenterPoint
Energy’s Form 10-Q for the quarter ended June 30, 2007
|
1-31447
|
4.3
|
|||
+4.4
|
—
|
First
Amendment to Amended and Restated Credit Agreement dated as of August 20,
2008, among CenterPoint Energy, as Borrower, and the banks named
therein.
|
||||||
4.5
|
—
|
$300,000,000
Second Amended and Restated Credit Agreement dated as of June 29, 2007,
among CenterPoint Houston, as Borrower, and the banks named
therein
|
CenterPoint
Energy’s Form 10-Q for the quarter ended June 30,
2007
|
1-31447
|
4.4
|
|||
4.6
|
—
|
$950,000,000
Second Amended and Restated Credit Agreement dated as of June 29, 2007,
among CERC Corp., as Borrower, and the banks named therein
|
CenterPoint
Energy’s Form 10-Q for the quarter ended June 30,
2007
|
1-31447
|
4.5
|
|||
+10.1
|
—
|
Amended
and Restated CenterPoint Energy 2005 Deferred Compensation Plan effective
as of January 1, 2009
|
||||||
+10.2
|
—
|
Amended
and Restated Houston Light & Power Company Executive Incentive
Compensation Plan effective as of January 1, 1985
|
||||||
+10.3
|
—
|
First
Amendment dated October 17, 2008 to Amended and Restated Houston Light
& Power Company Executive Incentive Compensation Plan effective as of
January 1, 1985
|
||||||
+12
|
—
|
Computation
of Ratios of Earnings to Fixed Charges
|
Exhibit
Number
|
Description
|
Report or Registration
Statement
|
SEC
File
or
Registration
Number
|
Exhibit
Reference
|
||||
+31.1
|
—
|
Rule
13a-14(a)/15d-14(a) Certification of David M. McClanahan
|
||||||
+31.2
|
—
|
Rule
13a-14(a)/15d-14(a) Certification of Gary L. Whitlock
|
||||||
+32.1
|
—
|
Section
1350 Certification of David M. McClanahan
|
||||||
+32.2
|
—
|
Section
1350 Certification of Gary L. Whitlock
|
||||||
+99.1
|
—
|
Items
incorporated by reference from the CenterPoint Energy Form 10-K. Item 1A
“Risk Factors”
|
CENTERPOINT
ENERGY, INC.
|
|
By:
/s/ Walter L.
Fitzgerald
|
|
Walter
L. Fitzgerald
|
|
Senior
Vice President and Chief Accounting Officer
|
|
Exhibit
Number
|
Description
|
Report or Registration
Statement
|
SEC
File
or
Registration
Number
|
Exhibit
Reference
|
||||
3.1.1
|
—
|
Restated
Articles of Incorporation of CenterPoint Energy
|
CenterPoint
Energy’s Form 8-K dated July 24, 2008
|
1-31447
|
3.1
|
|||
3.2
|
—
|
Amended
and Restated Bylaws of CenterPoint Energy
|
CenterPoint
Energy’s Form 8-K dated July 24, 2008
|
1-31447
|
3.2
|
|||
4.1
|
—
|
Form
of CenterPoint Energy Stock Certificate
|
CenterPoint
Energy’s Registration Statement on Form S-4
|
3-69502
|
4.1
|
|||
4.2
|
—
|
Rights
Agreement dated January 1, 2002, between CenterPoint Energy and
JPMorgan Chase Bank, as Rights Agent
|
CenterPoint
Energy’s Form 10-K for the year ended December 31, 2001
|
1-31447
|
4.2
|
|||
4.3
|
—
|
$1,200,000,000
Second Amended and Restated Credit Agreement dated as of June 29, 2007,
among CenterPoint Energy, as Borrower, and the banks named
therein
|
CenterPoint
Energy’s Form 10-Q for the quarter ended June 30, 2007
|
1-31447
|
4.3
|
|||
+4.4
|
—
|
First
Amendment to Amended and Restated Credit Agreement dated as of August 20,
2008, among CenterPoint Energy, as Borrower, and the banks named
therein.
|
||||||
4.5
|
—
|
$300,000,000
Second Amended and Restated Credit Agreement dated as of June 29, 2007,
among CenterPoint Houston, as Borrower, and the banks named
therein
|
CenterPoint
Energy’s Form 10-Q for the quarter ended June 30,
2007
|
1-31447
|
4.4
|
|||
4.6
|
—
|
$950,000,000
Second Amended and Restated Credit Agreement dated as of June 29, 2007,
among CERC Corp., as Borrower, and the banks named therein
|
CenterPoint
Energy’s Form 10-Q for the quarter ended June 30,
2007
|
1-31447
|
4.5
|
|||
+10.1
|
—
|
Amended
and Restated CenterPoint Energy 2005 Deferred Compensation Plan effective
as of January 1, 2009
|
||||||
+10.2
|
—
|
Amended
and Restated Houston Light & Power Company Executive Incentive
Compensation Plan effective as of January 1, 1985
|
||||||
+10.3
|
—
|
First
Amendment dated October 17, 2008 to Amended and Restated Houston Light
& Power Company Executive Incentive Compensation Plan effective as of
January 1, 1985
|
||||||
+12
|
—
|
Computation
of Ratios of Earnings to Fixed
Charges
|
Exhibit
Number
|
Description
|
Report or Registration
Statement
|
SEC
File
or
Registration
Number
|
Exhibit
Reference
|
||||
+31.1
|
—
|
Rule
13a-14(a)/15d-14(a) Certification of David M. McClanahan
|
||||||
+31.2
|
—
|
Rule
13a-14(a)/15d-14(a) Certification of Gary L. Whitlock
|
||||||
+32.1
|
—
|
Section
1350 Certification of David M. McClanahan
|
||||||
+32.2
|
—
|
Section
1350 Certification of Gary L. Whitlock
|
||||||
+99.1
|
—
|
Items
incorporated by reference from the CenterPoint Energy Form 10-K. Item 1A
“Risk Factors”
|
Period
|
Ratio
|
Closing
Date through December 31, 2007
|
5.25:1.00
|
January
1, 2008 through the Maturity Date
|
5.00:1.00
|
CENTERPOINT
ENERGY, INC.
|
|
By:
|
/s/
Marc Kilbride
|
Name:
Marc Kilbride
|
|
Title: Vice
President & Treasurer
|
|
JPMORGAN
CHASE BANK, N.A., as Administrative Agent and as a Bank
|
|
By:
|
/s/
Rob Traband
|
Name:
Rob Traband
|
|
Title: Executive
Director
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
Bank
of America, N.A., as a Bank
|
|
By:
|
/s/
Richard L. Stein
|
Name:
Richard L. Stein
|
|
Title: Senior
Vice President
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
BARCLAYS
BANK PLC, as a Bank
|
|
By:
|
/s/
Alicia Borys
|
Name:
Alicia Borys
|
|
Title: Manager
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
DEUTSCHE
BANK AG NEW YORK
BRANCH,
as a Bank
|
|
By:
|
/s/
Ming K. Chu
|
Name:
Ming K. Chu
|
|
Title: Vice
President
|
|
By:
|
/s/
Heidi Sandquist
|
Name:
Heidi Sandquist
|
|
Title: Vice
President
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
WACHOVIA
BANK, N.A as a Bank
|
|
By:
|
/s/
Henry R. Biedrzycki
|
Name:
Henry R. Biedrzycki
|
|
Title: Director
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
ABN
AMRO Bank, N.V., as a Bank
|
|
By:
|
/s/
James L. Moyes
|
Name:
James L. Moyes
|
|
Title: Managing
Director
|
|
By:
|
/s/
R. Scott Donaldson
|
Name:
R. Scott Donaldson
|
|
Title: Director
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
The
Bank of Nova Scotia
, as a Bank
|
|
By:
|
/s/
Gordon Eadon
|
Name:
Gordon Eadon
|
|
Title: Managing
Director
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
CREDIT
SUISSE, CAYMAN ISLANDS
BRANCH,
as
a Bank
|
|
By:
|
/s/
James Moran
|
Name:
James Moran
|
|
Title: Managing
Director
|
|
By:
|
/s/
Nupur Kumar
|
Name:
Nupur Kumar
|
|
Title: Associate
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
The Royal Bank of
Scotland, plc
,as a Bank
|
|
By:
|
/s/
Belinda Tucker
|
Name:
Belinda Tucker
|
|
Title: Senior
Vice President
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
UBS
Loan Finance LLC,
as
a Bank
|
|
By:
|
/s/
Irja R. Otsa
|
Name:
Irja R. Otsa
|
|
Title: Associate
Director
|
|
By:
|
/s/
Richard L. Tavrow
|
Name:
Richard L. Tavrow
|
|
Title: Director
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
CITIBANK,
N.A
,
as a Bank
|
|
By:
|
/s/
Nietzsche Rodricks
|
Name:
Nietzsche Rodricks
|
|
Title: Vice
President
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
LEHMAN
BROTHERS BANK, FSB
,
as a Bank
|
|
By:
|
/s/
Janine M. Shugan
|
Name:
Janine M. Shugan
|
|
Title: Authorized
Signatory
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
Bank of
Tokyo-Mitsubishi UFJ, Ltd.
,
as a Bank
|
|
By:
|
/s/
Kevin Cullen
|
Name:
Kevin Cullen
|
|
Title: Authorized
Signatory
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
HSBC
BANK USA, NATIONAL ASSOCIATION
,
as a Bank
|
|
By:
|
/s/
Jennifer Diedzic
|
Name:
Jennifer Diedzic
|
|
Title: Vice
President
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
Royal
Bank of Canada
,
as a Bank
|
|
By:
|
/s/
Linda M. Stephens
|
Name:
Linda M. Stephens
|
|
Title: Authorized
Signatory
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
Wells
Fargo Bank, National Association
,
as a Bank
|
|
By:
|
/s/
Scott D. Bjelde
|
Name:
Scott D. Bjelde
|
|
Title: Senior
Vice President
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
First
Commercial Bank, New York Agency
, as a
Bank
|
|
By:
|
/s/
Yu-Mei Hsiao
|
Name:
Yu-Mei Hsiao
|
|
Title: Assistant
General Manager
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
Comercia
Bank
,
as a Bank
|
|
By:
|
/s/
Joey Powell
|
Name:
Joey Powell
|
|
Title: Vice
President
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
THE
NORTHERN TRUST COMPANY
,
as a Bank
|
|
By:
|
/s/
Keith Burson
|
Name:
Keith Burson
|
|
Title: Vice
President
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
SUNTRUST
BANK
,
as a Bank
|
|
By:
|
/s/
Andrew Johnson
|
Name:
Andrew Johnson
|
|
Title: Director
|
Signature
Page
|
|
First
Amendment to CenterPoint Credit Agreement
|
|
MORGAN
STANLEY BANK
,
as a Bank
|
|
By:
|
/s/
Daniel Twenge
|
Name:
Daniel Twenge
|
|
Title: Authorized
Signatory
|
Page
|
||
ARTICLE
I PURPOSES OF PLAN; DEFINITIONS; DURATION
|
2
|
|
1.1
|
Purposes
|
2
|
1.2
|
Definitions
|
2
|
1.3
|
Term
|
4
|
ARTICLE
II ADMINISTRATION
|
4
|
|
ARTICLE
III PARTICIPATION
|
5
|
|
3.1
|
Eligibility
of Employees and Directors
|
5
|
3.2
|
Designation
of Participants
|
5
|
3.3
|
Election
to Participate
|
5
|
3.4
|
Salary
Deferral
|
5
|
3.5
|
Bonus
Deferral
|
5
|
3.6
|
Director
Fees Deferral
|
6
|
ARTICLE
IV BENEFICIARY DESIGNATIONS; WITHHOLDING
|
6
|
|
4.1
|
Beneficiary
Designations
|
6
|
4.2
|
Withholding
of Taxes
|
7
|
|
||
ARTICLE
V BENEFITS
|
7
|
|
5.1
|
Benefit
Payments
|
7
|
5.2
|
Death
|
8
|
5.3
|
Separation
from Service During Participation Year
|
8
|
5.4
|
Delay
of Payments to Certain Participants
|
9
|
5.5
|
Crediting
of Interest
|
9
|
ARTICLE
VI RIGHTS OF PARTICIPANTS
|
10
|
|
6.1
|
Limitation
of Rights
|
10
|
6.2
|
Non-Alienation
of Benefits
|
10
|
6.3
|
Prerequisites
to Benefits
|
11
|
6.4
|
Nature
of Employer’s Obligation
|
11
|
6.5
|
Claims
and Review Procedures
|
12
|
|
||
ARTICLE
VII MISCELLANEOUS
.
|
13
|
|
7.1
|
Amendment
or Termination of the Plan
|
13
|
7.2
|
Reliance
Upon Information
|
13
|
7.3
|
Effective
Date
|
13
|
7.4
|
Code
Section 409A
|
13
|
7.5
|
Governing
Law
|
13
|
7.6
|
Severability
|
13
|
7.7
|
Notice
|
14
|
(i)
|
a
lump-sum distribution of the amounts of Compensation deferred, minus any
Early Distributions; or
|
(ii)
|
15
annual installment payments of such Compensation, minus any Early
Distributions.
|
CENTERPOINT
ENERGY, INC.
|
|
By:
|
/s/
David M. McClanahan
|
David
M. McClanahan
|
|
President
and Chief Executive Officer
|
ATTEST
:
|
|
/s/ Richard
Dauphin
|
|
Richard
Dauphin
|
|
Assistant
Corporate Secretary
|
1.
|
Purpose.
|
2.
|
Definitions.
|
3.
|
Administration.
|
4.
|
Participation.
|
5.
|
Performance
Goals.
|
6.
|
Maximum Amount
Available For Awards.
|
7.
|
Determination of
Awards.
|
8.
|
Payment of
Awards.
|
AGE
|
INTEREST
RATE
|
49
or less
|
Moody’s
Rate + 4%
|
50
to 54
|
22%
per year until payment
|
55
to 59
|
23%
per year until payment
|
60
or older
|
24%
per year until payment
|
9.
|
Assignments and
Transfers.
|
10.
|
Employee Rights Under
the Plan.
|
11.
|
Withholding
Taxes.
|
12.
|
Other
Plans.
|
13.
|
Term.
|
HOUSTON
LIGHTING & POWER
|
|
COMPANY
|
|
By:
|
/s/
Don D. Jordan
|
Don
D. Jordan, Chairman
|
|
&
Chief Executive Officer
|
ATTEST
:
|
|
/s/
Hugh Rice Kelly
|
|
Secretary
|
|
CENTERPOINT
ENERGY, INC.
|
|
By:
|
/s/
David M. McClanahan
|
David
M. McClanahan
|
|
President
and Chief Executive Officer
|
ATTEST
:
|
|
/s/ Richard
Dauphin
|
|
Richard
Dauphin
|
|
Assistant
Corporate Secretary
|
Nine Months
Ended
September
30,
|
||||||||
2007
|
2008
|
|||||||
Net
Income
|
$ | 291 | $ | 360 | ||||
Income
tax expense
|
154 | 213 | ||||||
Capitalized
interest
|
(18 | ) | (10 | ) | ||||
427 | 563 | |||||||
Fixed
charges, as defined:
|
||||||||
Interest
|
461 | 446 | ||||||
Capitalized
interest
|
18 | 10 | ||||||
Interest component of rentals
charged to operating expense
|
12 | 11 | ||||||
Total fixed
charges
|
491 | 467 | ||||||
Earnings,
as defined
|
$ | 918 | $ | 1,030 | ||||
Ratio
of earnings to fixed charges
|
1.87 | 2.21 |
(1)
|
Excluded
from the computation of fixed charges for the nine months ended September
30, 2007 and 2008 is interest expense of $5 million and $10 million,
respectively, which is included in income tax expense. The ratio of
earnings to fixed charges would be 1.85 and 2.16, respectively, for the
nine months ended September 30, 2007 and 2008, if the interest expense
included in income tax expense were included in the computation of fixed
charges.
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/
David M. McClanahan
|
|
David
M. McClanahan
|
|
President
and Chief Executive Officer
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/
Gary L. Whitlock
|
|
Gary
L. Whitlock
|
|
Executive
Vice President and Chief Financial
Officer
|
/s/
David M. McClanahan
|
|
David
M. McClanahan
|
|
President
and Chief Executive Officer
|
|
November
5, 2008
|
/s/
Gary L. Whitlock
|
|
Gary
L. Whitlock
|
|
Executive
Vice President and Chief Financial Officer
|
|
November
5, 2008
|
Item 1A.
|
Risk
Factors
|
CenterPoint
Houston may not be successful in ultimately recovering the full value of
its true-up components, which could result in the elimination of certain
tax benefits and could have an adverse impact on CenterPoint Houston’s
results of operations, financial condition and cash
flows.
|
•
|
reversed
the Texas Utility Commission’s ruling that had denied recovery of a
portion of the capacity auction true-up
amounts;
|
•
|
reversed
the Texas Utility Commission’s ruling that precluded CenterPoint Houston
from recovering the interest component of the EMCs paid to REPs;
and
|
•
|
affirmed
the True-Up Order in all other
respects.
|
•
|
reversed
the district court’s judgment to the extent it restored the capacity
auction true-up amounts;
|
•
|
reversed
the district court’s judgment to the extent it upheld the Texas Utility
Commission’s decision to allow CenterPoint Houston to recover EMCs paid to
RRI;
|
•
|
ordered
that the tax normalization issue described below be remanded to the Texas
Utility Commission; and
|
•
|
affirmed
the district court’s judgment in all other
respects.
|
|
CenterPoint
Houston’s receivables are concentrated in a small number of REPs, and any
delay or default in payment could adversely affect CenterPoint Houston’s
cash flows, financial condition and results of
operations.
|
|
Rate
regulation of CenterPoint Houston’s business may delay or deny CenterPoint
Houston’s ability to earn a reasonable return and fully recover its
costs.
|
|
Disruptions
at power generation facilities owned by third parties could interrupt
CenterPoint Houston’s sales of transmission and distribution
services.
|
Rate
regulation of CERC’s business may delay or deny CERC’s ability to earn a
reasonable return and fully recover its
costs.
|
CERC’s
businesses must compete with alternative energy sources, which could
result in CERC marketing less natural gas, and its interstate pipelines
and field services businesses must compete directly with others in the
transportation, storage, gathering,
treating
and processing of natural gas, which could lead to lower prices, either of
which could
have an adverse impact on CERC’s results of operations, financial
condition and cash flows.
|
|
|
The
revenues and results of operations of CERC’s interstate pipelines and
field services businesses are subject to fluctuations in the supply of
natural gas.
|
|
CERC’s
revenues and results of operations are
seasonal.
|
|
The
actual cost of pipelines under construction and related compression
facilities may be significantly higher than CERC’s current
estimates.
|
|
The
states in which CERC provides regulated local gas distribution may, either
through legislation or rules, adopt restrictions similar to or broader
than those under the Public Utility Holding Company Act of 1935 regarding
organization, financing and affiliate transactions that could have
significant adverse impacts on CERC’s ability to
operate.
|
•
|
the
resolution of the true-up components, including, in particular, the
results of appeals to the courts regarding rulings obtained to
date;
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general
economic and capital market
conditions;
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credit
availability from financial institutions and other
lenders;
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investor
confidence in us and the markets in which we
operate;
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maintenance
of acceptable credit ratings;
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market
expectations regarding our future earnings and cash
flows;
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market
perceptions of our ability to access capital markets on reasonable
terms;
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our
exposure to RRI in connection with its indemnification obligations arising
in connection with its separation from us;
and
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provisions
of relevant tax and securities
laws.
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We
are subject to operational and financial risks and liabilities arising
from environmental laws and
regulations.
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restricting
the way we can handle or dispose of
wastes;
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limiting
or prohibiting construction activities in sensitive areas such as
wetlands, coastal regions, or areas inhabited by endangered
species;
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requiring
remedial action to mitigate pollution conditions caused by our operations,
or attributable to former operations;
and
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enjoining
the operations of facilities deemed in non-compliance with permits issued
pursuant to such environmental laws and
regulations.
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construct
or acquire new equipment;
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acquire
permits for facility operations;
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modify
or replace existing and proposed equipment;
and
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clean
up or decommission waste disposal areas, fuel storage and management
facilities and other locations and
facilities.
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those
transferred to RRI or its subsidiaries in connection with the organization
and capitalization of RRI prior to its initial public offering in 2001;
and
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those
transferred to Texas Genco in connection with its organization and
capitalization.
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