CenterPoint Energy 2010 Annual Report Download - page 126

104
Inventory Financing. In October 2009, Gas Operations entered into asset management agreements associated with
its utility distribution service in Arkansas, north Louisiana and Oklahoma that extend through March 31, 2012.
Pursuant to the provisions of the agreements, Gas Operations sells natural gas and agrees to repurchase an
equivalent amount of natural gas during the winter heating seasons at the same cost, plus a financing charge. These
transactions are accounted for as a financing and they had an associated principal obligation of $55 million and
$53 million as of December 31, 2009 and 2010, respectively.
(b) Long-term Debt
Pollution Control Bonds. In January 2010, CenterPoint Energy purchased $290 million principal amount of
pollution control bonds issued on its behalf at 101% of their principal amount plus accrued interest pursuant to the
mandatory tender provisions of the bonds. Prior to the purchase, the pollution control bonds had a fixed rate of
interest of 5.125%.
Convertible Subordinated Debentures. In January 2010, CERC Corp. redeemed $45 million of its outstanding 6%
convertible subordinated debentures due 2012 at 100% of the principal amount plus accrued and unpaid interest to
the redemption date.
CERC Corp. Senior Notes. In January 2011, CERC Corp. issued $250 million aggregate principal amount of
senior notes due 2021 with an interest rate of 4.50% and $300 million aggregate principal amount of senior notes
due 2041 with an interest rate of 5.85%. The proceeds from the issuance of the notes were used for the repayment
of $550 million of CERC Corp.’s 7.75% senior notes at their maturity in February 2011. Accordingly, the $550
million senior notes due in February 2011 are reflected as long-term debt as of December 31, 2010.
CERC Corp. Exchange Offer. Also in January 2011, CERC Corp. issued an additional $343 million aggregate
principal amount of 4.50% senior notes due 2021 and provided cash consideration of $114 million in exchange for
$397 million aggregate principal amount of its 7.875% senior notes due 2013. The premium of $58 million paid on
exchanged notes has been deferred and will be amortized to interest expense over the life of the 4.50% senior notes
due 2021.
Revolving Credit Facilities. As of both December 31, 2009 and 2010, there were no outstanding borrowings
under CenterPoint Energy’s, CenterPoint Houston’s or CERC Corp.’s long-term revolving credit facilities.
As of December 31, 2009 and 2010, CenterPoint Energy had approximately $25 million and $20 million,
respectively, of outstanding letters of credit under its $1.2 billion credit facility. As of both December 31, 2009 and
2010, CenterPoint Houston had approximately $4 million of outstanding letters of credit under its $289 million
credit facility. There was no commercial paper outstanding that would have been backstopped by CenterPoint
Energy’s $1.2 billion credit facility as of December 31, 2009 and 2010. As of December 31, 2009 and 2010, CERC
Corp. had commercial paper outstanding of $-0- and $183 million, respectively, which was backstopped by its credit
facility. CenterPoint Energy, CenterPoint Houston and CERC Corp. were in compliance with all debt covenants as
of December 31, 2010.
CenterPoint Energy’s $1.2 billion credit facility has a first drawn cost of the London Interbank Offered Rate
(LIBOR) plus 55 basis points based on CenterPoint Energy’s current credit ratings. The facility contains a debt
(excluding transition and system restoration bonds) to earnings before interest, taxes, depreciation and amortization
(EBITDA) covenant (as those terms are defined in the facility). In February 2010, CenterPoint Energy amended its
credit facility to modify the covenant to allow for a temporary increase of the permitted ratio from 5 times to 5.5
times if CenterPoint Houston experiences damage from a natural disaster in its service territory and CenterPoint
Energy certifies to the administrative agent that CenterPoint Houston has incurred system restoration costs
reasonably likely to exceed $100 million in a calendar year, all or part of which CenterPoint Houston intends to seek
to recover through securitization financing. Such temporary increase in the financial ratio covenant would be in
effect from the date CenterPoint Energy delivers its certification until the earliest to occur of (i) the completion of
the securitization financing, (ii) the first anniversary of CenterPoint Energy’s certification or (iii) the revocation of
such certification.