CenterPoint Energy 2008 Annual Report Download - page 60

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In November 2008, CenterPoint Houston entered into a $600 million 364-day credit facility. The credit facility
will terminate if bonds are issued to securitize the costs incurred as a result of Hurricane Ike and if those bonds are
issued prior to the November 24, 2009 expiration of the facility. CenterPoint Houston expects to seek legislative and
regulatory approval for the issuance of such bonds during 2009.
In December 2008, CERC entered into an asset management agreement whereby it sold $110 million of its
natural gas in storage and agreed to repurchase an equivalent amount of natural gas during the 2008-2009 winter
heating season for payments totaling $114 million. This transaction was accounted for as a financing and, as of
December 31, 2008, the consolidated financial statements reflect natural gas inventory of $75 million and a
financing obligation of $75 million related to this transaction.
In January 2009, CenterPoint Houston issued $500 million aggregate principal amount of general mortgage bonds
due in March 2014 with an interest rate of 7.00%. The proceeds from the sale of the bonds were used for general
corporate purposes, including the repayment of outstanding borrowings under its revolving credit facility and the
money pool, capital expenditures and storm restoration costs associated with Hurricane Ike.
Equity Financing Transactions
In 2008, we received proceeds of approximately $65 million from the sale of approximately 4.9 million common
shares to our defined contribution plan and proceeds of approximately $13 million from the sale of approximately
0.9 million common shares to participants in our enhanced dividend reinvestment plan.
Interstate Pipeline Expansion
The Southeast Supply Header (SESH) pipeline project, a joint venture between CenterPoint Energy Gas
Transmission, a wholly owned subsidiary of CERC Corp., and Spectra Energy Corp., was placed into commercial
service on September 6, 2008. This new 270-mile pipeline, which extends from the Perryville Hub, near Perryville,
Louisiana, to an interconnection with the Gulf Stream Natural Gas System near Mobile, Alabama, has a maximum
design capacity of approximately one Bcf per day. The pipeline represents a new source of natural gas supply for
the Southeast United States and offers greater supply diversity to this region. Our share of SESH’s net construction
costs is approximately $625 million.
Outlook
During 2008, economic conditions in the United States declined significantly, with several large bank failures and
consolidations, large declines in the values of securities, disruptions in the capital markets, which made it difficult to
raise debt and equity, and increased costs for capital when it was available. Many of the factors that led to the
economic decline are continuing into 2009, but it is impossible to predict the impacts such events may have in the
future. Although our businesses and the areas in which we serve have, to date, not been as significantly affected as
some others, in 2008, we experienced substantial declines in the value of our pension plan assets as a result of the
stock market declines. Disruptions in the bank and capital markets during the last two quarters of 2008 have led to
higher borrowing costs and greater uncertainty regarding the ability to execute transactions in these markets.
Although we cannot predict future performance, the decline in the value of our pension plan assets that occurred
during 2008 will result in increased non-cash charges to pension plan expense in 2009, which will adversely impact
earnings, and may also result in the need for us to make significant cash contributions to our pension plan
subsequent to 2009. We also expect to experience higher borrowing costs and greater uncertainty in executing
capital markets transactions if conditions in financial markets do not improve from their current state.
To the extent the adverse economic conditions affect our suppliers and customers, results from our energy
delivery businesses may suffer. The current low commodity prices for natural gas and other energy products may
cause energy producers to scale back projects such as drilling new gas wells or constructing new facilities. Reduced
demand and lower energy prices could lead to financial pressure on some of our customers who operate within the
energy industry. Also, adverse economic conditions, coupled with concerns for protecting the environment, may
cause consumers to use less energy or avoid expansions of their facilities, resulting in less demand for our services.