CenterPoint Energy 2008 Annual Report Download - page 51

Download and view the complete annual report

Please find page 51 of the 2008 CenterPoint Energy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 140

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140

29
• clean up or decommission waste disposal areas, fuel storage and management facilities and other locations
and facilities.
Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal
enforcement measures, including the assessment of monetary penalties, the imposition of remedial actions, and the
issuance of orders enjoining future operations. Certain environmental statutes impose strict, joint and several
liability for costs required to clean up and restore sites where hazardous substances have been disposed or otherwise
released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for
personal injury and property damage allegedly caused by the release of hazardous substances or other waste
products into the environment.
Our insurance coverage may not be sufficient. Insufficient insurance coverage and increased insurance costs
could adversely impact our results of operations, financial condition and cash flows.
We currently have general liability and property insurance in place to cover certain of our facilities in amounts
that we consider appropriate. Such policies are subject to certain limits and deductibles and do not include business
interruption coverage. Insurance coverage may not be available in the future at current costs or on commercially
reasonable terms, and the insurance proceeds received for any loss of, or any damage to, any of our facilities may
not be sufficient to restore the loss or damage without negative impact on our results of operations, financial
condition and cash flows.
In common with other companies in its line of business that serve coastal regions, CenterPoint Houston does not
have insurance covering its transmission and distribution system because CenterPoint Houston believes it to be cost
prohibitive. CenterPoint Houston may not be able to recover the costs incurred in restoring its transmission and
distribution properties following Hurricane Ike, or any such costs sustained in the future, through a change in its
regulated rates, and any such recovery may not be timely granted. Therefore, CenterPoint Houston may not be able
to restore any loss of, or damage to, any of its transmission and distribution properties without negative impact on its
results of operations, financial condition and cash flows.
We, CenterPoint Houston and CERC could incur liabilities associated with businesses and assets that we have
transferred to others.
Under some circumstances, we, CenterPoint Houston and CERC could incur liabilities associated with assets and
businesses we, CenterPoint Houston and CERC no longer own. These assets and businesses were previously owned
by Reliant Energy, Incorporated (Reliant Energy), a predecessor of CenterPoint Houston, directly or through
subsidiaries and include:
• merchant energy, energy trading and REP businesses transferred to RRI or its subsidiaries in connection
with the organization and capitalization of RRI prior to its initial public offering in 2001; and
• Texas electric generating facilities transferred to Texas Genco Holdings, Inc. (Texas Genco) in 2004 and
early 2005.
In connection with the organization and capitalization of RRI, RRI and its subsidiaries assumed liabilities
associated with various assets and businesses Reliant Energy transferred to them. RRI also agreed to indemnify, and
cause the applicable transferee subsidiaries to indemnify, us and our subsidiaries, including CenterPoint Houston
and CERC, with respect to liabilities associated with the transferred assets and businesses. These indemnity
provisions were intended to place sole financial responsibility on RRI and its subsidiaries for all liabilities associated
with the current and historical businesses and operations of RRI, regardless of the time those liabilities arose. If RRI
were unable to satisfy a liability that has been so assumed in circumstances in which Reliant Energy and its
subsidiaries were not released from the liability in connection with the transfer, we, CenterPoint Houston or CERC
could be responsible for satisfying the liability.
Prior to the distribution of our ownership in RRI to our shareholders, CERC had guaranteed certain contractual
obligations of what became RRI’s trading subsidiary. Under the terms of the separation agreement between the
companies, RRI agreed to extinguish all such guaranty obligations prior to separation, but at the time of separation