8-KOther Events

CENTERPOINT ENERGY INC 8-K Report, Corporate Update (Jan 24, 2007)

Filed January 24, 2007For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) has officially resolved a long-standing tax dispute with the Internal Revenue Service (IRS) concerning its Zero Premium Exchangeable Subordinated Notes (ZENS) and formerly issued Automatic Common Exchange Securities (ACES). This resolution, finalized in January 2007 after receiving approval from the Joint Committee on Taxation (JCT), brings closure to tax treatment issues for the ZENS covering tax years 1999 through 2029. While a prior agreement in July 2006 led to a significant reduction in tax reserves ($119 million or $0.38 per diluted share) in the second quarter of 2006, the final closing agreement in January 2007 will result in a smaller, subsequent after-tax charge. This charge of approximately $12 million, or $0.04 per diluted share, will be recorded in the fourth quarter of 2006. This development provides greater certainty regarding the company's tax liabilities and financial reporting.

Key Highlights

  • 1CenterPoint Energy (CNP) has reached a final closing agreement with the IRS regarding the tax treatment of its ZENS and ACES.
  • 2The agreement resolves tax disputes for the ZENS covering tax years 1999 through 2029.
  • 3The Joint Committee on Taxation (JCT) has approved revised terms of the agreement, finalizing the resolution.
  • 4A previously announced reserve reduction of $119 million ($0.38/share) was made in Q2 2006 based on an initial agreement.
  • 5A final after-tax charge of approximately $12 million ($0.04/share) will be recorded in Q4 2006 to reflect the finalized agreement.
  • 6This resolution provides tax certainty for CenterPoint Energy and its investors.

Frequently Asked Questions

The dispute primarily concerned the tax treatment of CenterPoint Energy's Zero Premium Exchangeable Subordinated Notes (ZENS) and its former Automatic Common Exchange Securities (ACES) for various tax years.

The final closing agreement between CenterPoint Energy and the IRS was executed in January 2007, following approval of revised terms by the Joint Committee on Taxation (JCT).

The company will record an after-tax charge of approximately $12 million, or $0.04 per diluted share, in the fourth quarter of 2006. This is a revision from a larger reserve reduction made in Q2 2006.

A significant portion of the tax reserve ($119 million or $0.38/share) related to this issue was already accounted for in the second quarter of 2006. The final charge in Q4 2006 adjusts for the finalized terms.