CenterPoint Energy 2010 Annual Report Download - page 56

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34
GenOn’s unsecured debt ratings are currently below investment grade. If GenOn were unable to meet its
obligations, it would need to consider, among various options, restructuring under the bankruptcy laws, in which
event GenOn might not honor its indemnification obligations and claims by GenOn’s creditors might be made
against us as its former owner.
Reliant Energy and RRI (GenOn’s predecessors) are named as defendants in a number of lawsuits arising out of
sales of natural gas in California and other markets. Although these matters relate to the business and operations of
GenOn, claims against Reliant Energy have been made on grounds that include liability of Reliant Energy as a
controlling shareholder of GenOn’s predecessor. We, CenterPoint Houston or CERC could incur liability if claims
in one or more of these lawsuits were successfully asserted against us, CenterPoint Houston or CERC and
indemnification from GenOn were determined to be unavailable or if GenOn were unable to satisfy indemnification
obligations owed with respect to those claims.
In connection with the organization and capitalization of Texas Genco, Reliant Energy and Texas Genco entered
into a separation agreement in which Texas Genco assumed liabilities associated with the electric generation assets
Reliant Energy transferred to it. Texas Genco also agreed to indemnify, and cause the applicable transferee
subsidiaries to indemnify, us and our subsidiaries, including CenterPoint Houston, with respect to liabilities
associated with the transferred assets and businesses. In many cases the liabilities assumed were obligations of
CenterPoint Houston, and CenterPoint Houston was not released by third parties from these liabilities. The
indemnity provisions were intended generally to place sole financial responsibility on Texas Genco and its
subsidiaries for all liabilities associated with the current and historical businesses and operations of Texas Genco,
regardless of the time those liabilities arose. If Texas Genco were unable to satisfy a liability that had been so
assumed or indemnified against, and provided we or Reliant Energy had not been released from the liability in
connection with the transfer, CenterPoint Houston could be responsible for satisfying the liability.
In connection with our sale of Texas Genco to a third party, the separation agreement was amended to provide
that Texas Genco would no longer be liable for, and we would assume and agree to indemnify Texas Genco against,
liabilities that Texas Genco originally assumed in connection with its organization to the extent, and only to the
extent, that such liabilities are covered by certain insurance policies held by us. Texas Genco and its related
businesses now operate as subsidiaries of NRG Energy, Inc.
We or our subsidiaries have been named, along with numerous others, as a defendant in lawsuits filed by a
number of individuals who claim injury due to exposure to asbestos. Some of the claimants have worked at locations
owned by us, but most existing claims relate to facilities previously owned by our subsidiaries but currently owned
by NRG Texas LP. We anticipate that additional claims like those received may be asserted in the future. Under the
terms of the arrangements regarding separation of the generating business from us and its sale to NRG Texas LP,
ultimate financial responsibility for uninsured losses from claims relating to the generating business has been
assumed by NRG Texas LP, but we have agreed to continue to defend such claims to the extent they are covered by
insurance maintained by us, subject to reimbursement of the costs of such defense by NRG Texas LP.
The unsettled conditions in the global financial system may have impacts on our business, liquidity and
financial condition that we currently cannot predict.
The continued unsettled conditions in the global financial system may have an impact on our business, liquidity
and financial condition. Our ability to access the capital markets may be severely restricted at a time when we would
like, or need, to access those markets, which could have an impact on our liquidity and flexibility to react to
changing economic and business conditions. In addition, the cost of debt financing and the proceeds of equity
financing may be materially adversely impacted by these market conditions. Defaults of lenders in our credit
facilities, should they further occur, could adversely affect our liquidity. Capital market turmoil was reflected in
significant reductions in equity market valuations in 2008, which significantly reduced the value of assets of our
pension plan. These reductions increased non-cash pension expense in 2009 and may impact liquidity if
contributions are made to offset reduced asset values.
In addition to the credit and financial market issues, national and local recessionary conditions may impact our
business in a variety of ways. These include, among other things, reduced customer usage, increased customer
default rates and wide swings in commodity prices.