8-KMaterial AgreementsFinancial EventsOther Events+1

CENTERPOINT ENERGY INC 8-K Report, Material Agreement (Dec 1, 2008)

Filed December 1, 2008For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) has filed an 8-K report detailing significant financing activities for its subsidiaries. Most notably, CenterPoint Energy Houston Electric, LLC (CEHE) secured a $600 million 364-day credit facility on November 25, 2008. This facility is intended to provide liquidity for costs incurred due to Hurricane Ike, with the expectation of seeking legislative and regulatory approval for bond issuance to securitize these costs during 2009. The credit facility is secured by CEHE's General Mortgage Bonds and has specific borrowing costs tied to LIBOR, plus commitment and duration fees, which are subject to CEHE's credit rating. In a related development, CenterPoint Energy Resources Corp. (CERC), the Company's natural gas subsidiary, also entered into a new 364-day receivables financing facility, effective November 25, 2008. This facility provides CERC and its subsidiaries with liquidity ranging from $128 million to $375 million, accommodating seasonal changes in receivables. This new facility replaces a similar one that expired in October 2008. These actions underscore the company's proactive approach to managing liquidity and financing obligations in the prevailing economic environment.

Key Highlights

  • 1CenterPoint Energy Houston Electric, LLC (CEHE) entered into a $600 million 364-day credit facility on November 25, 2008.
  • 2The $600 million credit facility is intended to securitize costs associated with Hurricane Ike through future bond issuances, subject to regulatory approval.
  • 3Borrowing costs for the CEHE facility are based on LIBOR plus a margin, with additional commitment and duration fees.
  • 4The CEHE credit facility is secured by a pledge of $600 million of CEHE's General Mortgage Bonds.
  • 5CenterPoint Energy Resources Corp. (CERC) established a new 364-day receivables financing facility, effective November 25, 2008.
  • 6The CERC facility provides liquidity ranging from $128 million to $375 million, reflecting seasonal receivables fluctuations.
  • 7The CERC facility replaces a similar, previously expired financing arrangement.

Frequently Asked Questions

The primary purpose of the $600 million 364-day credit facility for CEHE is to provide liquidity to cover costs incurred as a result of Hurricane Ike. The company plans to seek legislative and regulatory approval in 2009 to issue bonds to securitize these costs, which would then potentially terminate the credit facility prior to its November 2009 expiration.

Borrowing costs are structured around the London Interbank Offered Rate (LIBOR). Loans will incur a margin of 2.25 percent above LIBOR, based on CEHE's current credit ratings. Additionally, CEHE will pay an annual commitment fee of 0.5 percent and a quarterly duration fee of 0.75 percent on average outstanding borrowings, both also dependent on credit ratings. These rates and fees are subject to fluctuation based on CEHE's credit rating.

The new 364-day receivables financing facility provides additional liquidity to CERC and its subsidiaries. The facility's availability ranges from $128 million to $375 million, designed to adapt to seasonal changes in the company's accounts receivable balances, thereby enhancing CERC's working capital management.

These financing activities are significant as they demonstrate proactive measures by CenterPoint Energy and its subsidiaries to secure liquidity and manage financial obligations during a period of economic uncertainty. The establishment of substantial credit lines and financing facilities helps ensure operational stability and the ability to address unforeseen events like Hurricane Ike, which is crucial for investor confidence.