CenterPoint Energy 2008 Annual Report Download - page 59

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CenterPoint Houston has deferred the uninsured storm restoration costs as management believes it is probable
that such costs will be recovered through the regulatory process. As a result, storm restoration costs did not affect
our or CenterPoint Houston’s reported net income for 2008. As of December 31, 2008, CenterPoint Houston
recorded an increase of $145 million in construction work in progress and $435 million in regulatory assets for
restoration costs incurred through December 31, 2008. Approximately $73 million of these costs are based on
estimates and are included in accounts payable as of December 31, 2008. Additional restoration costs will continue
to be incurred in 2009.
Assuming necessary enabling legislation is enacted by the Texas Legislature in the session that began in
January 2009, CenterPoint Houston expects to seek a financing order from the Texas Utility Commission to obtain
recovery of its storm restoration costs through the issuance of non-recourse securitization bonds similar to the storm
recovery bonds issued by another Texas utility following the hurricanes that affected that utility’s service territories
in 2005. Assuming those bonds are issued, CenterPoint Houston will recover the amount of storm restoration costs
determined by the Texas Utility Commission to have been prudently incurred out of the bond proceeds, with the
bonds being repaid over time through a charge imposed on customers. Alternatively, if securitization is not
available, recovery of those costs would be sought through traditional regulatory mechanisms. Under its 2006 rate
case settlement, CenterPoint Houston is entitled to seek an adjustment to rates in this situation, even though in most
instances its rates are frozen until 2010.
Gas Operations also suffered some damage to its system in Houston, Texas and in other portions of its service
territory across Texas and Louisiana. As of December 31, 2008, Gas Operations has deferred approximately
$4 million of costs related to Hurricane Ike for recovery as part of future natural gas distribution rate proceedings.
Debt Financing Transactions
Pursuant to a financing order issued by the Texas Utility Commission in September 2007, in February 2008 a
subsidiary of CenterPoint Houston issued approximately $488 million in transition bonds in two tranches with
interest rates of 4.192% and 5.234% and final maturity dates in February 2020 and February 2023, respectively.
Scheduled final payment dates are February 2017 and February 2020. Through issuance of the transition bonds,
CenterPoint Houston securitized transition property of approximately $483 million representing the remaining
balance of the competition transition charge (CTC) adjusted to refund certain unspent environmental retrofit costs
and to recover the amount of the fuel reconciliation settlement.
In April 2008, we purchased $175 million principal amount of pollution control bonds issued on our behalf at
102% of their principal amount. Prior to the purchase, $100 million principal amount of such bonds had a fixed rate
of interest of 7.75% and $75 million principal amount of such bonds had a fixed rate of interest of 8%. Depending
on market conditions, we may remarket both series of bonds, at 100% of their principal amounts, in 2009.
In April 2008, we called our 3.75% convertible senior notes for redemption on May 30, 2008. At the time of the
announcement, the notes were convertible at the option of the holders, and substantially all of the notes were
submitted for conversion on or prior to the May 30, 2008 redemption date. During the year ended December 31,
2008, we issued 16.9 million shares of our common stock and paid cash of approximately $532 million to settle
conversions of approximately $535 million principal amount of our 3.75% convertible senior notes.
In May 2008, we issued $300 million aggregate principal amount of senior notes due in May 2018 with an
interest rate of 6.50%. The proceeds from the sale of the senior notes were used for general corporate purposes,
including the satisfaction of cash payment obligations in connection with conversions of our 3.75% convertible
senior notes as discussed above.
In May 2008, CERC Corp. issued $300 million aggregate principal amount of senior notes due in May 2018 with
an interest rate of 6.00%. The proceeds from the sale of the senior notes were used for general corporate purposes,
including capital expenditures, working capital and loans to or investments in affiliates.
In November 2008, CERC replaced a receivables facility that had expired in October 2008 with a new receivables
facility that expires in November 2009. Availability under the new facility ranges from $128 million to
$375 million, reflecting seasonal changes in receivables balances.