CenterPoint Energy 2009 Annual Report Download - page 62

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weather and conservation, but such rate mechanisms have not yet been approved in all jurisdictions. We plan to
continue to pursue such decoupling mechanisms in our rate filings.
Our Field Services and Interstate Pipelines business segments are currently benefiting from their proximity to
new natural gas producing regions in Texas, Arkansas, Oklahoma and Louisiana. Our Interstate Pipelines business
segment benefited from new projects placed into service in 2009 on our Carthage to Perryville line. In our Field
Services business segment, strong drilling activity in the new shale producing regions has helped offset declines in
drilling activity in traditional producing regions due to the effects of the economic downturn and significantly lower
commodity prices in 2009. In monitoring performance of the segments, we focus on throughput of the pipelines and
gathering systems, and in the case of Field Services, on well-connects.
Our Competitive Natural Gas Sales and Services business segment contracts with customers for transportation,
storage and sales of natural gas on an unregulated basis. Its operations serve customers in the central and eastern
regions of the United States. The segment benefits from favorable price differentials, either on a geographic basis or
on a seasonal basis. While it utilizes financial derivatives to hedge its exposure to price movements, it does not
engage in speculative or proprietary trading and maintains a low value at risk level or VaR to avoid significant
financial exposures. Lower commodity prices and low price differentials during 2009 adversely affected results for
this business segment.
The nature of our businesses requires significant amounts of capital investment, and we rely on internally
generated cash, borrowings under our credit facilities and issuances of debt and equity in the capital markets to
satisfy these capital needs. We strive to maintain investment grade ratings for our securities in order to access the
capital markets on terms we consider reasonable. Our goal is to improve our credit ratings over time. A reduction in
our ratings generally would increase our borrowing costs for new issuances of debt, as well as borrowing costs under
our existing revolving credit facilities. Disruptions in the financial markets, such as occurred in the last half of 2008
and continued during 2009, can also affect the availability of new capital on terms we consider attractive. In those
circumstances companies like us may not be able to obtain certain types of external financing or may be required to
accept terms less favorable than they would otherwise accept. For that reason, we seek to maintain adequate
liquidity for our businesses through existing credit facilities and prudent refinancing of existing debt. For example,
we have negotiated amendments to the financial covenant in our revolving credit facility to better ensure that
adequate debt capacity would be available if needed to finance restoration costs following major storms. We expect
to experience higher borrowing costs and greater uncertainty in executing capital markets transactions given the
current uncertainties in the financial markets.
As it did with many businesses, the sharp decline in stock market values during the latter part of 2008 had a
significant adverse impact on the value of our pension plan assets. While that impact did not require us to make
additional contributions to the pension plan, it significantly increased the pension expense we recognized during
2009 and expect to recognize in 2010 for all our business segments, other than our Electric Transmission &
Distribution business segment, and we may need to make significant cash contributions to our pension plan
subsequent to 2010. Consistent with the regulatory treatment of such costs, we will defer until our next rate
proceeding before the Texas Utility Commission the amount of pension expense that differs from the level of
pension expense included in our 2007 base rates for our Electric Transmission & Distribution business segment.
Significant Events
Hurricane Ike
CenterPoint Houston’s electric delivery system suffered substantial damage as a result of Hurricane Ike, which
struck the upper Texas coast in September 2008.
As is common with electric utilities serving coastal regions, the poles, towers, wires, street lights and pole
mounted equipment that comprise CenterPoint Houston’s transmission and distribution system are not covered by
property insurance, but office buildings and warehouses and their contents and substations are covered by insurance
that provides for a maximum deductible of $10 million. Current estimates are that total losses to property covered by
this insurance were approximately $30 million.