8-KOther Events

CENTERPOINT ENERGY INC 8-K Report, Corporate Update (Oct 8, 2008)

Filed October 8, 2008For Securities:CNP

Summary

This 8-K filing from CenterPoint Energy, Inc. (CNP) provides an update on the aftermath of Hurricane Ike, specifically focusing on its electric transmission and distribution subsidiary, CenterPoint Energy Houston Electric, LLC (CenterPoint Houston). As of October 1, 2008, nearly all customers (approximately 99%) had their electric service restored following the widespread outages caused by the hurricane on September 13. The report details the company's efforts to address the remaining outages, which are primarily due to customer-owned equipment damage or flooding. The most significant financial aspect for investors relates to the estimated restoration costs, which are projected to be between $650 million and $750 million. The company plans to seek recovery of these uninsured storm restoration costs through the Texas regulatory process, potentially via securitization bonds, similar to a previous hurricane recovery. This approach aims to prevent these costs from impacting reported net income for 2008. Additionally, the company acknowledges lost revenue due to the outages and the potential impact on third-quarter and full-year 2008 earnings, though the exact amount is not yet determinable.

Key Highlights

  • 1CenterPoint Houston has restored service to approximately 99% of its customers following Hurricane Ike.
  • 2Estimated storm restoration costs are in the range of $650 million to $750 million.
  • 3The company intends to seek recovery of uninsured storm restoration costs through regulatory mechanisms, including potential securitization bonds.
  • 4Storm restoration costs are being deferred and are not expected to impact reported net income for 2008, pending regulatory approval.
  • 5CenterPoint Houston is experiencing lost revenue due to customer outages, which will negatively impact 2008 earnings.
  • 6The company believes it has sufficient liquidity to finance storm restoration costs until recovery.
  • 7Credit facilities for CenterPoint Energy and CenterPoint Houston remain largely available, though a minor reduction is noted due to Lehman Brothers' bankruptcy filing.

Frequently Asked Questions

CenterPoint Houston estimates its restoration costs will be in the range of approximately $650 million to $750 million.

CenterPoint Houston is deferring the uninsured storm restoration costs and expects to recover them through the regulatory process. As a result, these costs will not affect the reported net income for 2008, assuming successful recovery.

The company plans to seek recovery through the issuance of non-recourse securitization bonds, contingent on enabling legislation from the Texas Legislature. Alternatively, traditional regulatory mechanisms will be pursued if securitization is not feasible.

CenterPoint Energy and CenterPoint Houston believe they have sufficient liquidity to finance storm restoration costs until ultimate recovery, while continuing their current business plans. They have significant available capacity under their bank credit facilities.