Summary
CenterPoint Energy, Inc. (CNP) announced on July 20, 2006, that it has reached a settlement with the Internal Revenue Service (IRS) Appeals division concerning the tax treatment of its Zero Premium Exchangeable Subordinated Notes (ZENS) and Automatic Common Exchange Securities (ACES) for the tax years 1999 through 2029. This agreement, once approved by the U.S. Congress's Joint Committee on Taxation, resolves a significant tax dispute for the company. Under the settlement terms, CenterPoint Energy will pay approximately $64 million in previously accrued taxes related to ACES and ZENS. Additionally, the company will reduce its future interest deductions for the ZENS. This resolution allows CenterPoint Energy to release approximately $119 million in previously accrued tax and interest reserves, which will result in a positive impact of approximately $0.38 per fully diluted share on its second quarter 2006 earnings. Furthermore, the company will cease accruing quarterly tax and interest reserves for these specific financial instruments going forward.
Key Highlights
- 1Settlement reached with IRS Appeals regarding tax treatment of ZENS and ACES.
- 2Agreement covers tax years 1999 through 2029.
- 3Company to pay approximately $64 million in previously accrued taxes.
- 4Future interest deductions for ZENS will be reduced.
- 5Release of approximately $119 million in tax and interest reserves.
- 6Positive impact of approximately $0.38 per share on Q2 2006 earnings.
- 7Cessation of future quarterly tax and interest accruals for these instruments.