CenterPoint Energy 2005 Annual Report Download - page 4

Dear Shareholder,
Over the last three years, our company has been
in transition. Following deregulation of the Texas
electricity market and our emergence as an
independent company, we’ve focused on restructuring
the company, improving our balance sheet and
preparing to achieve our vision of being recognized
as America’s leading energy delivery company … and
more. We’ve successfully completed our transition
and we’re optimistically looking to the future.
REDUCING DEBT, RAISING THE DIVIDEND: Reducing our
debt to a level more typical for a company our size
has been a key focus for us. In order to accomplish
this, we needed to sell our electric generation assets
and recover our electric market transition costs.
Completing these steps would strengthen our
balance sheet, provide us with financial flexibility
and position us for future growth. We’re pleased to
report we made solid progress on all fronts:
• In April 2005, we completed the final step in the sale of Texas Genco Holdings, Inc., for
$700 million in cash, bringing total sale proceeds to $2.9 billion. As a result, we no longer
own any power generation assets.
• Last December, we closed on $1.85 billion in
transition bonds authorized by the Public Utility
Commission of Texas (Texas PUC). This was one
of the final steps in the transition to a competitive
retail electric market that began in 2001.
• We reduced our debt levels, excluding transition
bonds, from a high of almost $11 billion to
$6.4 billion at the end of 2005, and successfully
renegotiated our credit facilities to improve
their terms and extend maturity dates. These
transactions kept us true to our financing strategy
to reduce borrowing costs, ensure adequate
liquidity and provide financial flexibility for our
company and subsidiaries.
LETTER TO SHAREHOLDERS
These activities, along with continued solid
results from our operating businesses, allowed us
to raise our dividend in the first quarter of 2006.
On an annualized basis, this change represents a
50 percent increase and reflects the confidence
the board of directors has in our ability to deliver
sustainable earnings and cash flow.
BUILDING ON A SOLID FOUNDATION: A quick review
of each of our business segment’s 2005 results
demonstrates that we are prepared to run a
strong race. Anchoring our team are our regulated
gas and electric delivery operations. Together
they generated about 70 percent of our 2005
operating income and continue to produce strong,
predictable cash flow and earnings.
In addition, our pipelines and field services business
reported outstanding results in 2005. This business
segment produced $235 million in operating income
last year, an increase of 31 percent over 2004 and
approximately 24 percent of our total.
[2] CENT ERPOINT E NERGY 2 0 05 AN N UA L R E PO R T
[left] David M. McClanahan, President and CEO,
Milton Carroll, Chairman