SEC Filing | CenterPoint Energy, Inc.,

View:

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 13, 2003 ------------------------------ CENTERPOINT ENERGY, INC. (Exact name of registrant as specified in its charter) Texas 1-31447 74-0694415 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1111 Louisiana Houston, Texas 77002 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 207-3000

ITEM 5. OTHER EVENTS. ANNOUNCEMENT OF 2002 RESULTS On February 13, 2003, CenterPoint Energy, Inc, ("CenterPoint Energy") reported fourth quarter 2002 and year-end 2002 earnings. For additional information regarding CenterPoint Energy's fourth quarter 2002 and year-end 2002 earnings, please refer to CenterPoint Energy's press release attached to this report as Exhibit 99.1 (the "Press Release"), which Press Release, other than the information therein under the caption "Outlook for 2003," is incorporated by reference herein. MANAGEMENT CONFERENCE CALL On February 13, 2003, executives of CenterPoint Energy spoke to the public, as well as various members of the financial and investment community in Houston, Texas regarding CenterPoint Energy's fourth quarter 2002 and year-end 2002 results. A replay of this conference call has been made available on CenterPoint Energy's web site found at www.centerpointenergy.com in the Investor Relations section and will be archived for 14 days after the event. In addition, a replay of the call can be accessed until February 20, 2003, 6 p.m. Central time, by calling (800) 642-1687 (Conference I.D. 775117). BANK NEGOTIATIONS As described in the press release attached to this report as Exhibit 99.1, CenterPoint Energy is in discussions with its bank group on proposed extensions of repayment schedules and other revised terms to its $3.85 billion credit facility. Existing repayment schedules include a $600 million commitment reduction at the end of this month and another $600 million reduction on June 30, 2003. Because of market conditions and other factors, CenterPoint Energy's access to other sources of financing to fund these required repayments and meet other requirements is constrained. CenterPoint Energy is negotiating with its bank lenders to extend all maturities under the credit facility into 2005, which should allow CenterPoint Energy time to complete the sale of its remaining interest in Texas Genco Holdings, Inc. and recover its stranded costs as permitted by Texas law. In connection with the negotiations, CenterPoint Energy is seeking approval from the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 to permit certain financing terms not currently available to CenterPoint Energy, and expects a ruling on its application later this month. Although CenterPoint Energy believes discussions with the bank group have been constructive, there is no assurance that agreement can be reached or that the SEC approval can be obtained before the February 28 date on which the $600 million repayment is due. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. The following exhibit is filed herewith: 1

99.1 Press Release issued February 13, 2003 regarding CenterPoint Energy's 2002 earnings. ITEM 9. REGULATION FD DISCLOSURE. CenterPoint Energy incorporates by reference into this Item 9 the information in the Press Release under the caption "Outlook for 2003." The information in Item 9 of this report is being furnished, not filed, pursuant to Regulation FD. Accordingly, the information in Item 9 of this report will not be incorporated by reference into any registration statement filed by CenterPoint Energy under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by reference. The furnishing of the information in this report is not intended to, and does not, constitute a determination or admission by CenterPoint Energy that the information in this report is material or complete, or that investors should consider this information before making an investment decision with respect to any security of CenterPoint Energy or any of its affiliates. FORWARD-LOOKING STATEMENTS Some of the statements in the Press Release incorporated by reference herein are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. In some cases, you can identify forward-looking statements by the words "anticipates," "believes," "continue," "could," "estimates," "expects," "forecast," "goal," "intends," "may," "objective," "plans," "potential," "predicts," "projection," "should," "will," or other similar words. We have based our forward-looking statements on our management's beliefs and assumptions based on information available at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, actual results may differ materially from those expressed or implied by our forward-looking statements. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to update or revise publicly any forward-looking statements. The following list identifies some of the factors that could cause actual results to differ from those expressed or implied by our forward-looking statements: o state and federal legislative and regulatory actions or developments, including deregulation, re-regulation and restructuring of the electric utility industry, constraints placed on our activities by the Public Utility Holding Company Act of 1935, changes in or application of laws or regulations applicable to other aspects of our business and actions with respect to, among other things: -- approval of stranded costs; -- allowed rates of return; 2

-- rate structures; -- recovery of investments; and -- operation and construction of facilities; o non-payment for our services due to financial distress of its customers; o the successful and timely completion of our capital projects; o industrial, commercial and residential growth in our service territory and changes in market demand and demographic patterns; o changes in business strategy or development plans; o unanticipated changes in interest rates or rates of inflation; o unanticipated changes in operating expenses and capital expenditures; o weather variations and other natural phenomena; o commercial bank and financial market conditions, our access to capital, the cost of such capital, receipt of certain approvals under the Public Utility Holding Company Act of 1935, and the results of our financing and refinancing efforts, including availability of funds in the debt capital markets; o actions by rating agencies; o legal and administrative proceedings and settlements; o changes in tax laws; o significant changes in our relationship with our employees, including the availability of qualified personnel and the potential adverse effects if labor disputes or grievances were to occur; o significant changes in critical accounting policies material to us; o acts of terrorism or war, including any direct or indirect effect on our business resulting from terrorist attacks such as occurred on September 11, 2001 or any similar incidents or responses to those incidents; o the availability and price of insurance; o the outcome of the pending securities lawsuits against Reliant Energy, Incorporated and Reliant Resources, Inc.; 3

o the outcome of the SEC investigation relating to the treatment in our consolidated financial statements of certain activities of Reliant Resources, Inc.; o the ability of Reliant Resources, Inc. to satisfy its indemnity obligations to us; o the reliability of the systems, procedures and other infrastructure necessary to operate the retail electric business in our service territory, including the systems owned and operated by the independent system operator in the Electric Reliability Council of Texas, Inc.; o political, legal, regulatory and economic conditions and developments in the United States; and o other factors discussed in our filings with the SEC. 4

SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CENTERPOINT ENERGY, INC. Date: February 13, 2003 By: /s/ JAMES S. BRIAN --------------------------------- James S. Brian Senior Vice President and Chief Accounting Officer

EXHIBIT INDEX

EXHIBIT 99.1 [CENTERPOINT LETTERHEAD] FOR IMMEDIATE RELEASE Page 1 of 6 - -------------------------------------------------------------------------------- CENTERPOINT ENERGY REPORTS STRONG 2002 EARNINGS CONTINUING OPERATIONS REPORT $1.29 EPS HOUSTON, TX - FEBRUARY 13, 2003 - CenterPoint Energy, Inc. (NYSE: CNP) today reported income from continuing operations before extraordinary item, cumulative effect of accounting change and preferred dividends (hereinafter referred to as income from continuing operations) of $386 million, or $1.29 per diluted share for the year ended December 31, 2002. The company reported income from continuing operations of $447 million, or $1.53 per diluted share for the year ended December 31, 2001. The 2002 results consist of income from electric generation, electric transmission & distribution, natural gas distribution, pipelines and gathering and other operations. They also reflect the change in the company's electric operations due to the opening of the Texas market to retail electric competition in January 2002. Retail electric sales are no longer a part of CenterPoint Energy's operations, and electric generation is no longer subject to rate regulation as was the case in 2001. Thus, 2002 results cannot be meaningfully compared to 2001. "I'm very proud of our employees, their commitment to serving our customers and their many accomplishments in 2002," said David McClanahan, president and chief executive officer of CenterPoint Energy. "We completed our separation from Reliant Resources, prepared for the partial distribution of Texas Genco common stock to shareholders and developed a comprehensive corporate strategy, all the while ensuring the successful performance of our utility businesses and improving operational productivity." CenterPoint Energy also took a number of steps during the year to position it for the future. The company reached an agreement, subject to approval by the Public Utility Commission of Texas (PUC), that ensures the recovery of over $8.3 billion worth of fuel incurred by the former integrated electric utility over the last four and one half years prior to deregulation. The company agreed to defer an additional $200 million in fuel costs for consideration in the 2004 stranded cost true-up proceeding. The natural gas distribution operations obtained $50 million in annualized rate increases, primarily in Arkansas and Oklahoma, and expect additional rate relief in other areas of their service territory in 2003. Texas Genco streamlined its workforce through an early retirement program and the electric transmission & distribution business and several business service functions implemented staff reductions. Although the company incurred costs related to these activities in 2002, it expects to realize the benefits in 2003 and beyond. For the 2002 fourth quarter, the loss from continuing operations was $8 million, or $0.03 per diluted share. For the same period in 2001, income from continuing operations was $19 million, or $0.07 per diluted share.

[CENTERPOINT LETTERHEAD] FOR IMMEDIATE RELEASE Page 2 of 6 - -------------------------------------------------------------------------------- The company's operating performance for 2002 compared to 2001 benefited from the following: o continued customer growth with the addition of over 100,000 metered electric and gas customers o normal weather compared to milder than normal weather in 2001 o reduced bad debt expense for both electric and natural gas operations o discontinuance of goodwill amortization in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets", which the company adopted on January 1, 2002. The company recognized goodwill amortization of $49 million in 2001, including $12 million in the fourth quarter o charges of $79 million for 2001, including $74 million for the fourth quarter, related to the an impairment of the company's remaining Argentine investments o increased revenues from rate increases of $20 million for the year, including $14 million for the quarter, for the natural gas distribution operations The company's results for 2002 compared to 2001 were negatively impacted by the following: o an increase in interest expense of $131 million for the year, including $126 million for the fourth quarter o severance charges in the fourth quarter of $26 million associated with staff reductions in the electric transmission & distribution operations and business service functions and an early retirement program in Texas Genco o a $24 million charge in the fourth quarter as a result of the settlement with the parties to a PUC fuel reconciliation proceeding SUMMARY OF TWO NEW REPORTABLE BUSINESS SEGMENTS Results for 2001 reflect CenterPoint Energy's operation as an integrated electric utility. With the opening of the Texas market to retail electric competition in January 2002, generation and retail electric sales were deregulated. The company no longer makes retail electric sales. Pursuant to these changes, CenterPoint Energy started reporting two new business segments, electric transmission & distribution and electric generation. The electric transmission & distribution segment includes results from regulated transmission & distribution operations as well as the impact of generation-related stranded costs recoverable by the regulated utility. The previously regulated generation operations in Texas, Texas Genco Holdings, Inc., are reported as the electric generation segment. As a result of deregulation, there are no meaningful comparisons for these segments against prior periods, which reflected a single business segment for integrated electric utility operations.

[CENTERPOINT LETTERHEAD] FOR IMMEDIATE RELEASE Page 3 of 6 - -------------------------------------------------------------------------------- EBIT BY SEGMENT DETAILED ELECTRIC TRANSMISSION & DISTRIBUTION The electric transmission & distribution segment generated earnings before interest and taxes (EBIT) of $1.1 billion in 2002 consisting of $421 million for the regulated electric transmission & distribution utility and non-cash EBIT of $697 million associated with generation-related regulatory assets, or Excess Cost Over Market (ECOM), as described below. The electric transmission & distribution utility recovers the cost of its service through an energy delivery charge. This business benefited from growth in residential demand in 2002 over 2001, partially offset by an anticipated decline in deliveries to industrial customers who now generate their own power. Metered customers, totaling 1.79 million at the end of 2002, continued to grow at an annualized rate of 2 percent. Under the Texas restructuring law, a regulated utility may recover the difference between market prices received by its affiliated power generation company and the prices used in the ECOM model established by the PUC as part of its 2004 stranded cost true-up proceeding. This difference produces non-cash EBIT and is recorded as a regulatory asset. For the fourth quarter of 2002, EBIT for the segment was $175 million consisting of $29 million for the regulated transmission & distribution utility and non-cash EBIT for ECOM of $146 million. Utility earnings were negatively affected by $11 million of severance costs from approximately 200 staff reductions, and a $24 million charge associated with the settlement of the fuel reconciliation proceeding described above. ELECTRIC GENERATION Texas Genco owns 14,175 MW of electric generation in Texas and sells capacity, energy, and ancillary services in the Texas electric market, primarily through capacity auctions. On January 6, 2003, CenterPoint Energy distributed approximately 19 percent of Texas Genco common stock to CenterPoint Energy shareholders. However, for the year ended December 31, 2002, CenterPoint Energy reported the results of Texas Genco as a wholly-owned subsidiary. Texas Genco stock is traded on the New York Stock Exchange under the symbol TGN. The publicly traded common stock of Texas Genco will be used to determine the market value of the generating assets formerly owned by the integrated electric utility in the quantification of the company's stranded costs in the 2004 true-up proceeding by the PUC. This method is prescribed by Senate Bill 7, the law enacted by the Texas legislature that opened the electric market to retail competition.

[CENTERPOINT LETTERHEAD] FOR IMMEDIATE RELEASE Page 4 of 6 - -------------------------------------------------------------------------------- Texas Genco reported a loss before interest and taxes of $130 million for the year and a $59 million loss for the fourth quarter. These losses reflect the low prices received for the 2002 capacity auctions. In response to low seasonal demand for some of its gas-fired generation, Texas Genco mothballed 3,400 MW of gas-fired generation through at least May of 2003, and implemented an early retirement program at a cost of $12 million in the fourth quarter. In the fall of 2002, Texas Genco conducted capacity auctions that covered approximately 74 percent of its available capacity for 2003. These auctions resulted in substantially higher prices than for 2002. NATURAL GAS DISTRIBUTION The natural gas distribution segment reported EBIT of $210 million for 2002, an increase of $61 million compared to the prior year's EBIT of $149 million. For the year, a reduction in bad debt expense in the second and third quarters contributed to the overall improvement in operating results. For the fourth quarter, EBIT from the natural gas distribution segment increased to $86 million from $72 million for the same period of 2001. Normal weather compared to milder than normal weather in 2001 and higher customer usage during the quarter, combined with the implementation of rate increases and a 2 percent growth in customers, contributed to the fourth quarter increase. These factors helped to offset higher employee benefit costs in the quarter. The amount of goodwill amortization recognized in 2001 was $31 million, including $8 million in the fourth quarter for this segment. PIPELINES AND GATHERING The pipelines and gathering segment reported EBIT of $158 million in 2002 compared to $138 million for the prior year. Improved margins were offset by increased operating expenses, including higher benefit costs. For the fourth quarter, the pipelines and gathering segment reported EBIT of $36 million compared to $31 million for the same period in 2001. Lower franchise tax expenses in the fourth quarter of 2002 offset higher benefit costs. The amount of goodwill amortization recognized in 2001 was $16 million, including $4 million in the fourth quarter. OTHER OPERATIONS The company's other operations reported EBIT for 2002 of $5 million compared to a loss before interest and taxes of $137 million for 2001. For the fourth quarter, EBIT was $36 million compared to a $91 million loss before interest and taxes for the same period last year. The 2001 results include charges related to the impairment of the company's remaining Argentine investments totaling $79 million,

[CENTERPOINT LETTERHEAD] FOR IMMEDIATE RELEASE Page 5 of 6 - -------------------------------------------------------------------------------- including $74 million in the fourth quarter. The company continues to operate these businesses in the near term while evaluating their disposal. The carrying value of the remaining Argentine investments is approximately $11 million. ACCOUNTING TREATMENT OF THE RELIANT RESOURCES SPIN-OFF AND EXTRAORDINARY ITEM As reported in the third quarter, the company distributed its investment in Reliant Resources (RRI) to CenterPoint Energy shareholders on September 30, 2002. In accounting for this distribution, the company wrote down its $5.2 billion investment in RRI to its then fair value of $847 million. This write-down is reported as a non-cash charge in discontinued operations. The company also reduced additional paid-in-capital for the $847 million fair value to record the distribution as a return of capital. RRI's historical results are reported as discontinued operations. Taking into account the write-down and the extraordinary item related to extinguishment of debt, CenterPoint Energy's net loss for 2002 was $3.9 billion, or $13.08 per diluted share. For 2001, net income was $980 million, or $3.35 per diluted share, which included a benefit of $59 million for the cumulative effect of accounting change. The net loss for the 2002 fourth quarter was $63 million, or a loss of $0.21 per diluted share. This loss reflects an adjustment to the write-down of the company's RRI investment, and an extraordinary item related to extinguishment of debt. Net income for the fourth quarter of 2001 was $46 million, or $0.16 per diluted share. CHARGE TO OTHER COMPREHENSIVE INCOME FOR PENSION MINIMUM LIABILITY Due to a decline in current market value of the pension plan's assets and increased benefit obligations associated with a reduction in the discount rate from 7.25 percent to 6.75 percent, the value of the pension plan's assets is less than the accumulated pension benefit obligation. Consequently, during the fourth quarter of 2002, CenterPoint Energy recorded a minimum liability adjustment related to its pension plan, which resulted in an after-tax charge to other comprehensive income of $414 million. Recording this minimum liability adjustment did not affect the company's results of operations during 2002 nor its ability to meet any existing financial covenants related to its debt facilities. Additionally, the company was not required to make any pension plan contribution in 2002, nor will it be required to do so in 2003.

[CENTERPOINT LETTERHEAD] FOR IMMEDIATE RELEASE Page 6 of 6 - -------------------------------------------------------------------------------- OUTLOOK FOR 2003 CenterPoint Energy expects 2003 diluted earnings per share to be between $0.85 and $1.00. This guidance reflects the company's outlook for continued strong operational performance by each of its business segments. However, higher interest expense on borrowings and increased pension expense of approximately $50 million, as well as higher insurance costs of over $20 million are expected to negatively impact 2003 results. As previously announced, Texas Genco expects to achieve 2003 earnings between $1.10 and $1.30 per diluted share. The company is presently in discussions with its group of banks to modify the payment schedule and certain other terms of its $3.85 billion bank credit facility. Currently, the company expects to conclude negotiations with its banks by the end of February, when a $600 million payment is due under the existing facility. Results of these discussions could materially impact the 2003 guidance for CenterPoint Energy. WEBCAST OF EARNINGS CONFERENCE CALL CenterPoint Energy's management will host an earnings conference call on Thursday, February 13, 2003, at 10 a.m. Central Standard Time. Interested parties may listen to a live audio broadcast of the conference call in the investor section of CenterPoint Energy's web site, www.CenterPointEnergy.com. A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for 14 days. CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, interstate pipeline and gathering operations, and more than 14,000 megawatts of power generation in Texas. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Missouri, Oklahoma, and Texas. Assets total nearly $19 billion. CenterPoint Energy became the new holding company for the regulated operations of the former Reliant Energy, Incorporated in August 2002. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years. This news release includes forward-looking statements. Actual events and results may differ materially from those projected. Factors that could affect actual results include the timing and impact of future regulatory and legislative decisions, effects of competition, weather variations, changes in CenterPoint Energy's or Texas Genco's business plans, financial market conditions, the timing and extent of changes in commodity prices, particularly natural gas and other factors discussed in CenterPoint Energy's and Texas Genco's filings with the Securities and Exchange Commission. -###-

CenterPoint Energy, Inc. and Subsidiaries Statements of Consolidated Operations (Thousands of Dollars) (Unaudited)