CenterPoint Energy 2005 Annual Report Download - page 5

Finally, last year we began reporting separately the results of our competitive natural gas sales
unit, CenterPoint Energy Services. This business, which we had previously included as part of
our natural gas distribution group, recorded a 36 percent increase in operating income over 2004.
Though representing only 6 percent of CenterPoint Energy’s 2005 operating income, we believe
this business will play an important supporting role in our overall growth strategy.
GROWTH ON THE HORIZON: We are optimistic about our future growth. In October, we signed
an agreement with an anchor shipper, XTO Energy Inc., to transport approximately 600 million
cubic feet per day of XTO’s natural gas production for 10 years. To fulfill the agreement, we
will construct a 172-mile pipeline between Carthage, Texas, and our Perryville Hub in northeast
Louisiana, and we expect it to be in service next year. In another project, CenterPoint Energy
and Duke Energy subsidiaries signed an agreement
to evaluate, market and develop a potential
southeast pipeline connecting our Perryville Hub to
Duke’s partially owned affiliate, Gulfstream Natural
Gas Systems. Potential shippers have expressed
considerable interest in the project and, if we obtain
enough binding agreements, this pipeline could be
operational in mid-2008.
CHALLENGES: Amid our success, however, challenges
still lie ahead. The Texas PUC ordered our Houston
electric group to file a rate case by April 2006
to demonstrate that our current rates are just
and reasonable. The Texas PUC also initiated a
rulemaking regarding the appropriate rate of return
for the Competition Transition Charge. We expect
some changes as a result of these proceedings, but
will work hard to achieve a fair outcome for our
customers and the company.
Another hurdle we’re working to manage is the
recent rise in natural gas commodity prices. While
this environment may present opportunities for our
pipelines, field services and competitive gas sales
businesses, it can also lead to more uncollectible
customer accounts and bad debt write-offs for
our regulated gas distribution operations. We will
continue to assist our customers with their higher
bills and will seek appropriate rate recovery if
expenses increase.
Like many corporations, we’re facing the challenges
posed by an aging workforce as baby boomers near
retirement. In addition, we recognize that demands
on us continue to increase with rising expectations
from our customers and regulators.
Although we believe we have a strong operating model and
excellent business practices, we see opportunities to strengthen
our performance. We are restructuring our regulated operations
to improve service to our customers and increase our efficiency
and effectiveness. And to prepare our workforce for the future,
we are also evaluating our processes, seeking automated
solutions and enhancing employee development.
GIVING OUR BEST: While we were focused on executing our
strategy and building our business, we also felt compelled to
help people in need. When a tsunami in southeast Asia killed
thousands and left countless people without food or shelter
and when hurricanes Katrina and Rita left thousands homeless,
including many of our employees and customers in south
Louisiana and Mississippi, we matched employee contributions
dollar-for-dollar to help provide much-needed financial
assistance to the victims. More importantly, along the Gulf Coast,
our employees were directly involved on the front lines restoring
utility services and doing volunteer work to help people get their
lives back in order.
Achieving our corporate vision means more than just doing
business. It means doing business the right way – guided by a
set of core values that define who we are and what we believe
in. At CenterPoint Energy, we’re committed to operating with
integrity, accountability, initiative and respect – respect for our
customers, employees, shareholders and our communities.
Your company and its employees performed well in 2005. We
pledge to continue to keep our business on course, execute our
strategy and increase shareholder value. We believe that our
steady stride and measured pace will serve us well in achieving
our vision.
Thank you for your continued trust and confidence in us.
Sincerely,
MILTON CARROLL DAVID M. MCCLANAHAN
Chairman President and CEO
CENT ERPOINT E NERGY 2 0 05 AN N UA L R E PO R T [3]
OPERATIONAL IMPROVEMENTS AND COMPLETION
OF OUR TRANSITION PERIOD ALLOW US TO
DELIVER DIVIDENDS TO SHAREHOLDERS IN LINE
WITH OUR STATED DIVIDEND PAYOUT TARGET.