(Mark One)
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R
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2010
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OR
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£
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM
TO
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Texas
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74-0694415
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1111 Louisiana
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Houston, Texas 77002
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(713) 207-1111
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(Address and zip code of principal executive offices)
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(Registrant’s telephone number, including area code
)
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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PART I.
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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1
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Three Months Ended March 31, 2009 and 2010 (unaudited)
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1
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December 31, 2009 and March 31, 2010 (unaudited)
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2
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Three Months Ended March 31, 2009 and 2010 (unaudited)
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4
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5
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Item 2.
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25
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Item 3.
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38
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Item 4.
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39
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PART II.
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OTHER INFORMATION
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Item 1.
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39
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Item 1A.
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39
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Item 5.
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39
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Item 6.
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40
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•
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the resolution of the true-up proceedings, including, in particular, the results of appeals to the Texas Supreme Court regarding rulings obtained to date;
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•
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state and federal legislative and regulatory actions or developments relating to the environment, including those related to global climate change;
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•
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other state and federal legislative and regulatory actions or developments, including, among others, deregulation, re-regulation and health care reform;
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•
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timely and appropriate regulatory actions allowing securitization or other recovery of costs associated with any future hurricanes or natural disasters;
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•
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timely and appropriate rate actions and increases, allowing recovery of costs and a reasonable return on investment;
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•
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problems with construction, implementation of necessary technology or other issues with respect to major capital projects that result in delays or in cost overruns that cannot be recouped in rates;
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•
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industrial, commercial and residential growth in our service territory and changes in market demand, including the effects of energy efficiency measures, and demographic patterns;
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•
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the timing and extent of changes in commodity prices, particularly natural gas and natural gas liquids;
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•
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the timing and extent of changes in the supply of natural gas, including supplies available for gathering by our field services business and transporting by our interstate pipelines;
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•
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the timing and extent of changes in natural gas basis differentials;
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•
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weather variations and other natural phenomena;
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•
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changes in interest rates or rates of inflation;
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•
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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;
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•
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actions by rating agencies;
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•
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effectiveness of our risk management activities;
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•
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inability of various counterparties to meet their obligations to us;
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•
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non-payment for our services due to financial distress of our customers;
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•
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the ability of RRI Energy, Inc. (RRI) (formerly known as Reliant Energy, Inc. and Reliant Resources, Inc.) and its subsidiaries to satisfy their obligations to us, including indemnity obligations, or in connection with the contractual arrangements pursuant to which we are their guarantor;
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•
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the ability of retail electric providers, and particularly the two largest customers of CenterPoint Houston Electric LLC, which are subsidiaries of NRG Retail LLC and TXU Energy Retail Company LLC, to satisfy their obligations to us and our subsidiaries;
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•
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the outcome of litigation brought by or against us;
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•
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our ability to control costs;
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•
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the investment performance of our pension and postretirement benefit plans;
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•
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our potential business strategies, including restructurings, acquisitions or dispositions of assets or businesses, which we cannot assure will be completed or will have the anticipated benefits to us;
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•
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acquisition and merger activities involving us or our competitors; and
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•
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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, 2009, which is incorporated herein by reference, and other reports we file from time to time with the Securities and Exchange Commission.
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Three Months Ended
March 31,
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||||||||
2009
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2010
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|||||||
Revenues
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$ | 2,766 | $ | 3,023 | ||||
Expenses:
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||||||||
Natural gas
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1,789 | 1,935 | ||||||
Operation and maintenance
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413 | 414 | ||||||
Depreciation and amortization
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166 | 200 | ||||||
Taxes other than income taxes
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113 | 117 | ||||||
Total
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2,481 | 2,666 | ||||||
Operating Income
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285 | 357 | ||||||
Other Income (Expense):
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||||||||
Gain (loss) on marketable securities
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(34 | ) | 38 | |||||
Gain (loss) on indexed debt securities
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22 | (27 | ) | |||||
Interest and other finance charges
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(129 | ) | (122 | ) | ||||
Interest on transition and system restoration bonds
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(33 | ) | (36 | ) | ||||
Equity in earnings of unconsolidated affiliates
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— | 5 | ||||||
Other, net
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4 | 1 | ||||||
Total
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(170 | ) | (141 | ) | ||||
Income Before Income Taxes
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115 | 216 | ||||||
Income tax expense
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(48 | ) | (102 | ) | ||||
Net Income
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$ | 67 | $ | 114 | ||||
Basic Earnings Per Share
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$ | 0.19 | $ | 0.29 | ||||
Diluted Earnings Per Share
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$ | 0.19 | $ | 0.29 | ||||
Dividends Declared Per Share
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$ | 0.190 | $ | 0.195 | ||||
Weighted Average Shares Outstanding, Basic
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347 | 393 | ||||||
Weighted Average Shares Outstanding, Diluted
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349 | 395 |
December 31,
2009
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March 31,
2010
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|||||||
Current Assets:
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||||||||
Cash and cash equivalents
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$ | 740 | $ | 329 | ||||
Investment in marketable securities
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300 | 338 | ||||||
Accounts receivable, net
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790 | 933 | ||||||
Accrued unbilled revenues
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485 | 296 | ||||||
Natural gas inventory
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189 | 32 | ||||||
Materials and supplies
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138 | 134 | ||||||
Non-trading derivative assets
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39 | 60 | ||||||
Prepaid expenses and other current assets
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223 | 262 | ||||||
Total current assets
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2,904 | 2,384 | ||||||
Property, Plant and Equipment:
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||||||||
Property, plant and equipment
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14,770 | 15,001 | ||||||
Less accumulated depreciation and amortization
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3,982 | 4,073 | ||||||
Property, plant and equipment, net
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10,788 | 10,928 | ||||||
Other Assets:
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Goodwill
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1,696 | 1,696 | ||||||
Regulatory assets
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3,677 | 3,619 | ||||||
Non-trading derivative assets
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15 | 18 | ||||||
Investment in unconsolidated affiliates
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463 | 478 | ||||||
Other
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230 | 228 | ||||||
Total other assets
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6,081 | 6,039 | ||||||
Total Assets
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$ | 19,773 | $ | 19,351 |
December 31,
2009
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March 31,
2010
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|||||||
Current Liabilities:
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||||||||
Short-term borrowings
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$ | 55 | $ | 2 | ||||
Current portion of transition and system restoration bonds long-term debt
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241 | 274 | ||||||
Current portion of indexed debt
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121 | 122 | ||||||
Current portion of other long-term debt
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541 | 776 | ||||||
Indexed debt securities derivative
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201 | 228 | ||||||
Accounts payable
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648 | 522 | ||||||
Taxes accrued
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148 | 226 | ||||||
Interest accrued
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181 | 148 | ||||||
Non-trading derivative liabilities
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51 | 53 | ||||||
Accumulated deferred income taxes, net
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406 | 354 | ||||||
Other
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445 | 497 | ||||||
Total current liabilities
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3,038 | 3,202 | ||||||
Other Liabilities:
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||||||||
Accumulated deferred income taxes, net
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2,776 | 2,799 | ||||||
Unamortized investment tax credits
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16 | 15 | ||||||
Non-trading derivative liabilities
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42 | 32 | ||||||
Benefit obligations
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861 | 863 | ||||||
Regulatory liabilities
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921 | 946 | ||||||
Other
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361 | 375 | ||||||
Total other liabilities
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4,977 | 5,030 | ||||||
Long-term Debt:
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Transition and system restoration bonds
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2,805 | 2,665 | ||||||
Other
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6,314 | 5,745 | ||||||
Total long-term debt
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9,119 | 8,410 | ||||||
Commitments and Contingencies (Note 11)
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||||||||
Shareholders’ Equity:
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Common stock (391,746,779 shares and 394,186,137 shares outstanding
at December 31, 2009 and March 31, 2010, respectively)
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4 | 4 | ||||||
Additional paid-in capital
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3,671 | 3,701 | ||||||
Accumulated deficit
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(912 | ) | (875 | ) | ||||
Accumulated other comprehensive loss
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(124 | ) | (121 | ) | ||||
Total shareholders’ equity
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2,639 | 2,709 | ||||||
Total Liabilities and Shareholders’ Equity
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$ | 19,773 | $ | 19,351 |
Three Months Ended March 31,
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||||||||
2009
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2010
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|||||||
Cash Flows from Operating Activities:
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Net income
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$ | 67 | $ | 114 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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166 | 200 | ||||||
Amortization of deferred financing costs
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10 | 7 | ||||||
Deferred income taxes
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30 | (34 | ) | |||||
Unrealized loss (gain) on marketable securities
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34 | (38 | ) | |||||
Unrealized loss (gain) on indexed debt securities
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(22 | ) | 27 | |||||
Write-down of natural gas inventory
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6 | — | ||||||
Equity in earnings of unconsolidated affiliates, net of distributions
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— | 5 | ||||||
Changes in other assets and liabilities:
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||||||||
Accounts receivable and unbilled revenues, net
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308 | (2 | ) | |||||
Inventory
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416 | 161 | ||||||
Accounts payable
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(425 | ) | (125 | ) | ||||
Fuel cost over (under) recovery
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(30 | ) | 126 | |||||
Non-trading derivatives, net
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8 | (6 | ) | |||||
Margin deposits, net
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(62 | ) | (67 | ) | ||||
Interest and taxes accrued
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(94 | ) | 44 | |||||
Net regulatory assets and liabilities
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21 | 19 | ||||||
Other current assets
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43 | 10 | ||||||
Other current liabilities
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(64 | ) | (16 | ) | ||||
Other assets
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(4 | ) | (5 | ) | ||||
Other liabilities
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24 | 13 | ||||||
Other, net
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1 | 2 | ||||||
Net cash provided by operating activities
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433 | 435 | ||||||
Cash Flows from Investing Activities:
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Capital expenditures
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(260 | ) | (258 | ) | ||||
Decrease in restricted cash of transition and system restoration bonds companies
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1 | 1 | ||||||
Investment in unconsolidated affiliates
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2 | (20 | ) | |||||
Other, net
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(4 | ) | (26 | ) | ||||
Net cash used in investing activities
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(261 | ) | (303 | ) | ||||
Cash Flows from Financing Activities:
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||||||||
Increase (decrease) in short-term borrowings, net
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62 | (53 | ) | |||||
Revolving credit facilities, net
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(706 | ) | — | |||||
Proceeds from commercial paper, net
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19 | — | ||||||
Proceeds from long-term debt
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500 | — | ||||||
Payments of long-term debt
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(110 | ) | (441 | ) | ||||
Debt issuance costs
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(4 | ) | (2 | ) | ||||
Payment of common stock dividends
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(66 | ) | (77 | ) | ||||
Proceeds from issuance of common stock, net
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30 | 29 | ||||||
Other, net
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1 | 1 | ||||||
Net cash used in financing activities
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(274 | ) | (543 | ) | ||||
Net Decrease in Cash and Cash Equivalents
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(102 | ) | (411 | ) | ||||
Cash and Cash Equivalents at Beginning of Period
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167 | 740 | ||||||
Cash and Cash Equivalents at End of Period
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$ | 65 | $ | 329 | ||||
Supplemental Disclosure of Cash Flow Information:
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||||||||
Cash Payments:
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||||||||
Interest, net of capitalized interest
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$ | 182 | $ | 191 | ||||
Income taxes (refunds), net
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26 | (8 | ) | |||||
Non-cash transactions:
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||||||||
Accounts payable related to capital expenditures
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67 | 83 |
(1)
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Background and Basis of Presentation
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•
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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 the city of Houston; and
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•
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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 Corp. 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.
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(2)
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New Accounting Pronouncements
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(3)
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Employee Benefit Plans
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Three Months Ended March 31,
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||||||||||||||||
2009
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2010
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Pension
Benefits
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Postretirement
Benefits
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Pension
Benefits
(1)
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Postretirement
Benefits
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|||||||||||||
(in millions)
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Service cost
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$ | 6 | $ | — | $ | 8 | $ | — | ||||||||
Interest cost
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28 | 7 | 25 | 6 | ||||||||||||
Expected return on plan assets
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(24 | ) | (2 | ) | (27 | ) | (2 | ) | ||||||||
Amortization of prior service credit
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1 | 1 | 1 | 1 | ||||||||||||
Amortization of net loss
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17 | — | 15 | — | ||||||||||||
Amortization of transition obligation
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— | 2 | — | 2 | ||||||||||||
Net periodic cost
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$ | 28 | $ | 8 | $ | 22 | $ | 7 |
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(1)
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Net periodic cost in these tables is before considering amounts subject to overhead allocations for capital expenditure projects or for amounts subject to deferral for regulatory purposes. CenterPoint Houston’s actuarially determined pension expense for 2010 in excess of the 2007 base year amount is being deferred for rate making purposes until its next general rate case pursuant to Texas law. CenterPoint Houston deferred as a regulatory asset $4 million and $6 million, respectively, in pension expense during the three months ended March 31, 2009 and 2010.
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(4)
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Regulatory Matters
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•
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reversed the Texas Utility Commission’s ruling that had denied recovery of a portion of the capacity auction true-up amounts;
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•
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reversed the Texas Utility Commission’s ruling that precluded CenterPoint Houston from recovering the interest component of the EMCs paid to retail electric providers (REPs); and
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•
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affirmed the True-Up Order in all other respects.
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•
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reversed the district court’s judgment to the extent it restored the capacity auction true-up amounts;
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•
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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 Energy, Inc. (RRI) (formerly known as Reliant Energy, Inc. and Reliant Resources, Inc.);
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•
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ordered that the tax normalization issue described below be remanded to the Texas Utility Commission as requested by the Texas Utility Commission; and
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•
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affirmed the district court’s judgment in all other respects.
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(5)
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Derivative Instruments
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Fair Value of Derivative Instruments
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||||||||||
December 31, 2009
|
||||||||||
Total derivatives not designated as hedging
instruments
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Balance Sheet
Location
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Derivative
Assets
Fair Value (2) (3)
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Derivative
Liabilities
Fair Value (2) (3)
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|||||||
(in millions)
|
||||||||||
Natural gas contracts (1)
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Current Assets
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$ | 46 | $ | (7 | ) | ||||
Natural gas contracts
(1)
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Other Assets
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16 | (1 | ) | ||||||
Natural gas contracts (1)
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Current Liabilities
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20 | (123 | ) | ||||||
Natural gas contracts (1)
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Other Liabilities
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1 | (86 | ) | ||||||
Indexed debt securities derivative
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Current Liabilities
|
— | (201 | ) | ||||||
Total
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$ | 83 | $ | (418 | ) |
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(1)
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Natural gas contracts are subject to master netting arrangements and are presented on a net basis in the Condensed Consolidated Balance Sheets. This netting causes derivative assets (liabilities) to be ultimately presented net in a liability (asset) account within the Condensed Consolidated Balance Sheets.
|
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(2)
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The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 674 billion cubic feet (Bcf) or a net 152 Bcf long position. Of the net long position, basis swaps constitute 71 Bcf and volumes associated with price stabilization activities of the Natural Gas Distribution business segment comprise 51 Bcf.
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(3)
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The net of total non-trading derivative assets and liabilities is a $39 million liability as shown on CenterPoint Energy’s Condensed Consolidated Balance Sheets, and is comprised of the natural gas contracts derivative assets and liabilities separately shown above offset by collateral netting of $95 million.
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Fair Value of Derivative Instruments
|
||||||||||
March 31, 2010
|
||||||||||
Total derivatives not designated as hedging
instruments
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Balance Sheet
Location
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Derivative
Assets
Fair Value (2) (3)
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Derivative
Liabilities
Fair Value (2) (3)
|
|||||||
(in millions)
|
||||||||||
Natural gas contracts (1)
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Current Assets
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$ | 61 | $ | (1 | ) | ||||
Natural gas contracts
(1)
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Other Assets
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18 | — | |||||||
Natural gas contracts (1)
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Current Liabilities
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20 | (179 | ) | ||||||
Natural gas contracts (1)
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Other Liabilities
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1 | (81 | ) | ||||||
Indexed debt securities derivative
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Current Liabilities
|
— | (228 | ) | ||||||
Total
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$ | 100 | $ | (489 | ) |
|
(1)
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Natural gas contracts are subject to master netting arrangements and are presented on a net basis in the Condensed Consolidated Balance Sheets. This netting causes derivative assets (liabilities) to be ultimately presented net in a liability (asset) account within the Condensed Consolidated Balance Sheets.
|
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(2)
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The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 717 billion cubic feet (Bcf) or a net 181 Bcf long position. Of the net long position, basis swaps constitute 73 Bcf and volumes associated with price stabilization activities of the Natural Gas Distribution business segment comprise 46 Bcf.
|
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(3)
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The net of total non-trading derivative assets and liabilities is a $7 million liability as shown on CenterPoint Energy’s Condensed Consolidated Balance Sheets, and is comprised of the natural gas contracts derivative assets and liabilities separately shown above offset by collateral netting of $154 million.
|
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(1)
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The Gains (Losses) in Expense: Natural Gas includes $(78) and $(25) million of costs in 2009 and 2010, respectively, associated with price stabilization activities of the Natural Gas Distribution business segment that will be ultimately recovered/refunded through purchased gas adjustments.
|
(6)
|
Fair Value Measurements
|
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
December 31,
2009
|
||||||||||||||||
(in millions)
|
||||||||||||||||||||
Assets
|
||||||||||||||||||||
Corporate equities
|
$ | 301 | $ | — | $ | — | $ | — | $ | 301 | ||||||||||
Investments in money
market funds
|
41 | — | — | — | 41 | |||||||||||||||
Natural gas derivatives
|
1 | 77 | 5 | (29 | ) | 54 | ||||||||||||||
Total assets
|
$ | 343 | $ | 77 | $ | 5 | $ | (29 | ) | $ | 396 | |||||||||
Liabilities
|
||||||||||||||||||||
Indexed debt securities
derivative
|
$ | — | $ | 201 | $ | — | $ | — | $ | 201 | ||||||||||
Natural gas derivatives
|
12 | 194 | 11 | (124 | ) | 93 | ||||||||||||||
Total liabilities
|
$ | 12 | $ | 395 | $ | 11 | $ | (124 | ) | $ | 294 |
|
(1)
|
Amounts represent the impact of legally enforceable master netting agreements that allow CenterPoint Energy to settle positive and negative positions and also include cash collateral of $95 million posted with the same counterparties.
|
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
March 31,
2010
|
||||||||||||||||
(in millions)
|
||||||||||||||||||||
Assets
|
||||||||||||||||||||
Corporate equities
|
$ | 340 | $ | — | $ | — | $ | — | $ | 340 | ||||||||||
Investments in money
market funds
|
40 | — | — | — | 40 | |||||||||||||||
Natural gas derivatives
|
— | 94 | 6 | (22 | ) | 78 | ||||||||||||||
Total assets
|
$ | 380 | $ | 94 | $ | 6 | $ | (22 | ) | $ | 458 | |||||||||
Liabilities
|
||||||||||||||||||||
Indexed debt securities
derivative
|
$ | — | $ | 228 | $ | — | $ | — | $ | 228 | ||||||||||
Natural gas derivatives
|
15 | 244 | 2 | (176 | ) | 85 | ||||||||||||||
Total liabilities
|
$ | 15 | $ | 472 | $ | 2 | $ | (176 | ) | $ | 313 |
|
(1)
|
Amounts represent the impact of legally enforceable master netting agreements that allow CenterPoint Energy to settle positive and negative positions and also include cash collateral of $154 million posted with the same counterparties.
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
||||||||
Derivative assets and liabilities, net
|
||||||||
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
(in millions)
|
||||||||
Beginning balance
|
$ | (58 | ) | $ | (6 | ) | ||
Total unrealized gains or (losses):
|
||||||||
Included in earnings
|
(3 | ) | 2 | |||||
Included in regulatory assets
|
(17 | ) | (1 | ) | ||||
Total purchases, sales, other settlements, net:
|
||||||||
Included in earnings
|
2 | — | ||||||
Included in regulatory assets
|
50 | 9 | ||||||
Ending balance
|
$ | (26 | ) | $ | 4 | |||
The amount of total gains(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
|
$ | (2 | ) | $ | 2 |
(7)
|
Goodwill
|
Natural Gas Distribution
|
$ | 746 | ||
Interstate Pipelines
|
579 | |||
Competitive Natural Gas Sales and Services
|
335 | |||
Field Services
|
25 | |||
Other Operations
|
11 | |||
Total
|
$ | 1,696 |
(8)
|
Comprehensive Income
|
For the Three Months Ended
March 31,
|
||||||||
2009
|
2010
|
|||||||
(in millions)
|
||||||||
Net income
|
$ | 67 | $ | 114 | ||||
Other comprehensive income:
|
||||||||
Adjustment related to pension and other postretirement
plans (net of tax of $1 and $1)
|
2 | 3 | ||||||
Total
|
2 | 3 | ||||||
Comprehensive income
|
$ | 69 | $ | 117 |
December 31,
2009
|
March 31,
2010
|
|||||||
(in millions)
|
||||||||
Adjustment related to pension and postretirement plans
|
$ | (120 | ) | $ | (117 | ) | ||
Net deferred loss from cash flow hedges
|
(4 | ) | (4 | ) | ||||
Total accumulated other comprehensive loss
|
$ | (124 | ) | $ | (121 | ) |
(9)
|
Capital Stock
|
(10)
|
Short-term Borrowings and Long-term Debt
|
(11)
|
Commitments and Contingencies
|
(12)
|
Income Taxes
|
December 31,
2009
|
March 31,
2010
|
|||||||
(in millions)
|
||||||||
Unrecognized tax benefits
|
$ | 187 | $ | 199 | ||||
Portion of unrecognized tax benefits that, if recognized,
would reduce the effective income tax rate
|
10 | 11 | ||||||
Interest accrued on unrecognized tax benefits
|
3 | 6 |
(13)
|
Estimated Fair Value of Financial Instruments
|
December 31, 2009
|
March 31, 2010
|
|||||||||||||||
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||
(in millions)
|
||||||||||||||||
Financial liabilities:
|
||||||||||||||||
Long-term debt
|
$ | 9,900 | $ | 10,413 | $ | 9,459 | $ | 10,087 |
(14)
|
Earnings Per Share
|
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
(in millions, except share and per share amounts)
|
||||||||
Basic earnings per share calculation:
|
||||||||
Net income
|
$ | 67 | $ | 114 | ||||
Weighted average shares outstanding
|
347,496,000 | 392,855,000 | ||||||
Basic earnings per share:
|
||||||||
Net income
|
$ | 0.19 | $ | 0.29 | ||||
Diluted earnings per share calculation:
|
||||||||
Net income
|
$ | 67 | $ | 114 | ||||
Weighted average shares outstanding
|
347,496,000 | 392,855,000 | ||||||
Plus: Incremental shares from assumed conversions:
|
||||||||
Stock options (1)
|
511,000 | 582,000 | ||||||
Restricted stock
|
1,150,000 | 1,641,000 | ||||||
Weighted average shares assuming dilution
|
349,157,000 | 395,078,000 | ||||||
Diluted earnings per share:
|
||||||||
Net income
|
$ | 0.19 | $ | 0.29 |
|
(1)
|
Options to purchase 2,662,903 and 1,753,239 shares were outstanding for the three months ended March 31, 2009 and 2010, respectively, 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.
|
(15)
|
Reportable Business Segments
|
For the Three Months Ended March 31, 2010
|
||||||||||||||||
Revenues from
External
Customers
|
Net
Intersegment
Revenues
|
Operating
Income
|
Total Assets
as of March 31,
2010
|
|||||||||||||
Electric Transmission & Distribution
|
$ | 482 | (1) | $ | — | $ | 107 | $ | 9,597 | |||||||
Natural Gas Distribution
|
1,533 | 4 | 139 | 4,597 | ||||||||||||
Competitive Natural Gas Sales and Services
|
844 | 8 | 15 | 1,215 | ||||||||||||
Interstate Pipelines
|
103 | 35 | 72 | 3,526 | ||||||||||||
Field Services
|
58 | 10 | 23 | 1,199 | ||||||||||||
Other Operations
|
3 | — | 1 | 2,378 | (2) | |||||||||||
Eliminations
|
— | (57 | ) | — | (3,161 | ) | ||||||||||
Consolidated
|
$ | 3,023 | $ | — | $ | 357 | $ | 19,351 |
(1)
|
Sales to subsidiaries of NRG Retail LLC, the successor to RRI's Texas retail business, in the three months ended March 31, 2009 and 2010 represented approximately $142 million and $135 million, respectively, of CenterPoint Houston’s transmission and distribution revenues. Sales to subsidiaries of TXU Energy Retail Company LLC in the three months ended March 31, 2009 and 2010 represented approximately $37 million and $42 million, respectively, of CenterPoint Houston’s transmission and distribution revenues.
|
(2)
|
Included in total assets of Other Operations as of December 31, 2009 and March 31, 2010 are pension and other postemployment related regulatory assets of $731 million and $721 million, respectively.
|
(16)
|
Subsequent Events
|
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
Revenues
|
$ | 2,766 | $ | 3,023 | ||||
Expenses
|
2,481 | 2,666 | ||||||
Operating Income
|
285 | 357 | ||||||
Gain (Loss) on Marketable Securities
|
(34 | ) | 38 | |||||
Gain (Loss) on Indexed Debt Securities
|
22 | (27 | ) | |||||
Interest and Other Finance Charges
|
(129 | ) | (122 | ) | ||||
Interest on Transition and System Restoration Bonds
|
(33 | ) | (36 | ) | ||||
Equity in Earnings of Unconsolidated Affiliates
|
— | 5 | ||||||
Other Income, net
|
4 | 1 | ||||||
Income Before Income Taxes
|
115 | 216 | ||||||
Income Tax Expense
|
(48 | ) | (102 | ) | ||||
Net Income
|
$ | 67 | $ | 114 | ||||
Basic Earnings Per Share
|
$ | 0.19 | $ | 0.29 | ||||
Diluted Earnings Per Share
|
$ | 0.19 | $ | 0.29 |
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
Electric Transmission & Distribution
|
$ | 70 | $ | 107 | ||||
Natural Gas Distribution
|
118 | 139 | ||||||
Competitive Natural Gas Sales and Services
|
2 | 15 | ||||||
Interstate Pipelines
|
69 | 72 | ||||||
Field Services
|
26 | 23 | ||||||
Other Operations
|
— | 1 | ||||||
Total Consolidated Operating Income
|
$ | 285 | $ | 357 |
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
Revenues:
|
||||||||
Electric transmission and distribution utility
|
$ | 346 | $ | 386 | ||||
Transition and system restoration bond companies
|
66 | 96 | ||||||
Total revenues
|
412 | 482 | ||||||
Expenses:
|
||||||||
Operation and maintenance, excluding transition and system
restoration bond companies
|
188 | 190 | ||||||
Depreciation and amortization, excluding transition and system
restoration bond companies
|
68 | 73 | ||||||
Taxes other than income taxes
|
53 | 52 | ||||||
Transition and system restoration bond companies
|
33 | 60 | ||||||
Total expenses
|
342 | 375 | ||||||
Operating Income
|
$ | 70 | $ | 107 | ||||
Operating Income:
|
||||||||
Electric transmission and distribution utility
|
37 | 71 | ||||||
Transition and system restoration bond companies
(1)
|
33 | 36 | ||||||
Total segment operating income
|
$ | 70 | $ | 107 | ||||
Throughput (in gigawatt-hours (GWh)):
|
||||||||
Residential
|
3,967 | 5,173 | ||||||
Total
|
15,142 | 16,436 | ||||||
Number of metered customers at period end:
|
||||||||
Residential
|
1,838,766 | 1,858,403 | ||||||
Total
|
2,082,930 | 2,104,786 |
|
(1)
|
Represents the amount necessary to pay interest on the transition and system restoration bonds.
|
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
Revenues
|
$ | 1,421 | $ | 1,537 | ||||
Expenses:
|
||||||||
Natural gas
|
1,045 | 1,139 | ||||||
Operation and maintenance
|
169 | 167 | ||||||
Depreciation and amortization
|
40 | 40 | ||||||
Taxes other than income taxes
|
49 | 52 | ||||||
Total expenses
|
1,303 | 1,398 | ||||||
Operating Income
|
$ | 118 | $ | 139 | ||||
Throughput (in billion cubic feet (Bcf)):
|
||||||||
Residential
|
78 | 96 | ||||||
Commercial and industrial
|
77 | 87 | ||||||
Total Throughput
|
155 | 183 | ||||||
Number of customers at period end:
|
||||||||
Residential
|
2,996,455 | 3,012,856 | ||||||
Commercial and industrial
|
246,405 | 246,676 | ||||||
Total
|
3,242,860 | 3,259,532 |
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
Revenues
|
$ | 765 | $ | 852 | ||||
Expenses:
|
||||||||
Natural gas
|
752 | 826 | ||||||
Operation and maintenance
|
10 | 9 | ||||||
Depreciation and amortization
|
1 | 1 | ||||||
Taxes other than income taxes
|
— | 1 | ||||||
Total expenses
|
763 | 837 | ||||||
Operating Income
|
$ | 2 | $ | 15 | ||||
Throughput (in Bcf):
|
141 | 141 | ||||||
Number of customers at period end
|
10,862 | 11,369 |
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
Revenues
|
$ | 153 | $ | 138 | ||||
Expenses:
|
||||||||
Natural gas
|
29 | 10 | ||||||
Operation and maintenance
|
35 | 35 | ||||||
Depreciation and amortization
|
12 | 13 | ||||||
Taxes other than income taxes
|
8 | 8 | ||||||
Total expenses
|
84 | 66 | ||||||
Operating Income
|
$ | 69 | $ | 72 | ||||
Transportation throughput (in Bcf)
|
467 | 438 |
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
Revenues
|
$ | 57 | $ | 68 | ||||
Expenses:
|
||||||||
Natural gas
|
7 | 16 | ||||||
Operation and maintenance
|
19 | 21 | ||||||
Depreciation and amortization
|
4 | 6 | ||||||
Taxes other than income taxes
|
1 | 2 | ||||||
Total expenses
|
31 | 45 | ||||||
Operating Income
|
$ | 26 | $ | 23 | ||||
Gathering throughput (in Bcf)
|
104 | 128 |
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
Revenues
|
$ | 3 | $ | 3 | ||||
Expenses
|
3 | 2 | ||||||
Operating Income
|
$ | — | $ | 1 |
Three Months Ended March 31,
|
||||||||
2009
|
2010
|
|||||||
(in millions)
|
||||||||
Cash provided by (used in):
|
||||||||
Operating activities
|
$ | 433 | $ | 435 | ||||
Investing activities
|
(261 | ) | (303 | ) | ||||
Financing activities
|
(274 | ) | (543 | ) |
|
•
|
capital expenditures of approximately $1.2 billion;
|
|
•
|
maturing long-term debt aggregating approximately $206 million;
|
|
•
|
scheduled principal payments on transition and system restoration bonds of $134 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
April 27,
2010
(1)
|
Termination Date
|
||||||||
June 29, 2007
|
CenterPoint Energy
|
Revolver
|
$ | 1,156 | $ | 20 | (2) |
June 29, 2012
|
|||||
June 29, 2007
|
CenterPoint Houston
|
Revolver
|
289 | 4 | (2) |
June 29, 2012
|
|||||||
June 29, 2007
|
CERC Corp.
|
Revolver
|
915 | — |
June 29, 2012
|
||||||||
October 9, 2009
|
CERC
|
Receivables
|
375 | — |
October 8, 2010
|
|
(1)
|
Based on the debt (excluding transition and system restoration bonds) to earnings before interest, taxes, depreciation and amortization (EBITDA) covenant contained in our $1.2 billion credit facility, we would have been permitted to incur incremental borrowings on a consolidated basis at March 31, 2010 of approximately $2.0 billion. The EBITDA covenant would have permitted us to utilize the full capacity of our credit facilities of $2.4 billion at March 31, 2010 if a qualifying natural disaster had occurred during the previous twelve months and securitization financing permitted under Texas law to recover restoration costs had not yet occurred. Amounts advanced under CERC Corp.’s receivables facility are not treated as outstanding indebtedness in the debt to EBITDA covenant calculation.
|
|
(2)
|
Represents outstanding letters of credit.
|
Moody’s
|
S&P
|
Fitch
|
||||||||||
Company/Instrument
|
Rating
|
Outlook/Review (1)
|
Rating
|
Outlook(2)
|
Rating
|
Outlook(3)
|
||||||
CenterPoint Energy Senior Unsecured Debt
|
Ba1
|
Positive Outlook
|
BBB-
|
Stable
|
BBB-
|
Stable
|
||||||
CenterPoint Houston Senior Secured Debt
|
Baa1
|
Upgrade Review
|
BBB+
|
Stable
|
A-
|
Stable
|
||||||
CERC Corp. Senior Unsecured Debt
|
Baa3
|
Positive Outlook
|
BBB
|
Stable
|
BBB
|
Stable
|
|
(1)
|
A Moody’s rating outlook is an opinion regarding the likely direction of a rating over the medium term.
Moody’s review for possible upgrade indicates the rating is under review for possible change in the short-term, usually within 90 days.
|
|
(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 and weather hedging and gas storage activities of our Natural Gas Distribution and Competitive Natural Gas Sales and Services business segments;
|
|
•
|
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 legislative or regulatory actions;
|
|
•
|
the ability of RRI and its subsidiaries to satisfy their obligations 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;
|
|
•
|
the ability of REPs that are subsidiaries of NRG Retail LLC and TXU Energy Retail Company LLC, which are CenterPoint Houston’s two largest customers, to satisfy their obligations to us and our subsidiaries;
|
|
•
|
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 pension and postretirement 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 2009 Form 10-K.
|
Exhibit
Number
|
Description
|
Report or Registration Statement
|
SEC File or Registration Number
|
Exhibit
Reference
|
||||
3.1
|
─
|
Restated Articles of Incorporation of CenterPoint Energy
|
CenterPoint Energy’s Form 8-K dated July 24, 2008
|
1-31447
|
3.2
|
|||
3.2
|
─
|
Amended and Restated Bylaws of CenterPoint Energy
|
CenterPoint Energy’s Form 8-K dated January 20, 2010
|
1-31447
|
3.1
|
|||
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
|
─
|
$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
|
|||
4.3.2
|
─
|
First Amendment to Exhibit 4.3.1, dated as of August 20, 2008, among CenterPoint Energy, as Borrower, and the banks named therein
|
CenterPoint Energy’s Form 10-Q for the quarter ended September 30, 2008
|
1-31447
|
4.4
|
|||
4.3.3
|
─
|
Second Amendment to Exhibit 4.3.1, dated as of November 18, 2008, among CenterPoint Energy, as Borrower, and the banks named therein
|
CenterPoint Energy’s Form 8-K dated November 18, 2008
|
1-31447
|
4.1
|
|||
4.3.4
|
─
|
Third Amendment to Exhibit 4.3.1, dated as of February 5, 2010, among CenterPoint Energy, as Borrower, and the banks named therein
|
CenterPoint Energy’s Form 8-K dated February 5, 2010
|
1-31447
|
4.1
|
|||
4.4.1
|
─
|
$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
|
|||
4.4.2
|
─
|
First Amendment to Exhibit 4.4.1, dated as of November 18, 2008, among CenterPoint Houston, as Borrower, and the banks named therein
|
CenterPoint Energy’s Form 8-K dated November 18, 2008
|
1-31447
|
4.2
|
|
(1)
|
Furnished, not filed.
|
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
|
─
|
Restated Articles of Incorporation of CenterPoint Energy
|
CenterPoint Energy’s Form 8-K dated July 24, 2008
|
1-31447
|
3.2
|
|||
3.2
|
─
|
Amended and Restated Bylaws of CenterPoint Energy
|
CenterPoint Energy’s Form 8-K dated January 20, 2010
|
1-31447
|
3.1
|
|||
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
|
─
|
$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
|
|||
4.3.2
|
─
|
First Amendment to Exhibit 4.3.1, dated as of August 20, 2008, among CenterPoint Energy, as Borrower, and the banks named therein
|
CenterPoint Energy’s Form 10-Q for the quarter ended September 30, 2008
|
1-31447
|
4.4
|
|||
4.3.3
|
─
|
Second Amendment to Exhibit 4.3.1, dated as of November 18, 2008, among CenterPoint Energy, as Borrower, and the banks named therein
|
CenterPoint Energy’s Form 8-K dated November 18, 2008
|
1-31447
|
4.1
|
|||
4.3.4
|
─
|
Third Amendment to Exhibit 4.3.1, dated as of February 5, 2010, among CenterPoint Energy, as Borrower, and the banks named therein
|
CenterPoint Energy’s Form 8-K dated February 5, 2010
|
1-31447
|
4.1
|
|||
4.4.1
|
─
|
$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
|
|||
4.4.2
|
─
|
First Amendment to Exhibit 4.4.1, dated as of November 18, 2008, among CenterPoint Houston, as Borrower, and the banks named therein
|
CenterPoint Energy’s Form 8-K dated November 18, 2008
|
1-31447
|
4.2
|
|
(1)
|
Furnished, not filed.
|
By:
/s/ David M. McClanahan
|
||
David M. McClanahan
|
||
President and Chief Executive Officer
|
||
ATTEST
:
|
||
/s/ Richard Dauphin
|
||
Richard Dauphin
|
||
Assistant Secretary
|
Three Months Ended
March 31,
|
||||||||
2009 (1)
|
2010 (1)
|
|||||||
Net Income
|
$ | 67 | $ | 114 | ||||
Equity in earnings of unconsolidated affiliates, net of distributions
|
─ | 5 | ||||||
Income taxes
|
48 | 102 | ||||||
Capitalized interest
|
(2 | ) | (1 | ) | ||||
113 | 220 | |||||||
Fixed charges, as defined:
|
||||||||
Interest
|
162 | 158 | ||||||
Capitalized interest
|
2 | 1 | ||||||
Interest component of rentals charged to operating expense
|
3 | 6 | ||||||
Total fixed charges
|
167 | 165 | ||||||
Earnings, as defined
|
$ | 280 | $ | 385 | ||||
Ratio of earnings to fixed charges
|
1.68 | 2.33 |
|
(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
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(a)
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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
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(b)
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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.
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/s/ Gary L. Whitlock
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Gary L. Whitlock
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Executive Vice President and Chief Financial Officer
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/s/ David M. McClanahan
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David M. McClanahan
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President and Chief Executive Officer
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May 5, 2010
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/s/ Gary L. Whitlock
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Gary L. Whitlock
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Executive Vice President and Chief Financial Officer
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May 5, 2010
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