e424b2
Filed Pursuant to Rule 424(b)(2)
Registration
No. 333-145223
PROSPECTUS
SUPPLEMENT
(To Prospectus Dated August 20, 2007)
$300,000,000
CenterPoint Energy Resources
Corp.
6.00% Senior Notes due
2018
The notes will bear interest at a rate of 6.00% per year from
the date of issuance to, but excluding, May 15, 2018, when
they will mature. We will pay interest on the notes on
May 15 and November 15 of each year, beginning on
November 15, 2008. The notes are subject to optional
redemption prior to maturity as described under the caption
Description of the Notes Optional
Redemption.
The notes will be unsecured and will rank on a parity with all
of our other unsecured and unsubordinated indebtedness.
Investing in the notes involves risks. See Risk
Factors beginning on
page S-4
of this prospectus supplement.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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Per Note
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Total
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Public Offering Price(1)
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99.171
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%
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$
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297,513,000
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Underwriting Discount
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0.650
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%
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$
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1,950,000
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Proceeds, before expenses, to CenterPoint Energy Resources
Corp.(1)
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98.521
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%
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$
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295,563,000
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(1) |
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Plus accrued interest from May 15, 2008, if settlement
occurs after that date. |
The underwriters expect to deliver the notes to purchasers in
New York, New York on or about May 15, 2008 through
the book-entry facilities of The Depository Trust Company.
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Barclays
Capital |
Credit
Suisse |
Lehman Brothers |
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SunTrust Robinson
Humphrey
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Prospectus Supplement dated May 12, 2008.
You should rely only on the information contained or
incorporated by reference in this prospectus supplement, the
accompanying prospectus and any written communication from us or
the underwriters specifying the final terms of the offering. We
have not, and the underwriters have not, authorized anyone to
provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely
on it. We are not making an offer to sell the notes and are not
soliciting an offer to buy the notes in any state where the
offer or sale is not permitted. You should assume that the
information we have included in this prospectus supplement or
the accompanying prospectus is accurate only as of the date of
this prospectus supplement or the accompanying prospectus, as
the case may be, and that any information we have incorporated
by reference is accurate only as of the date of the document
incorporated by reference. If the information varies between
this prospectus supplement and the accompanying prospectus, the
information in this prospectus supplement supersedes the
information in the accompanying prospectus.
Table of
Contents
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Page
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Prospectus Supplement
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S-1
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S-4
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S-10
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S-10
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S-11
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S-22
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S-24
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S-24
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S-24
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S-25
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S-26
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Prospectus
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About This Prospectus
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2
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Where You Can Find More Information
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3
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Incorporation by Reference
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3
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About CenterPoint Energy Resources Corp.
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4
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Risk Factors
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4
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Cautionary Statement Regarding Forward-Looking Information
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5
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Ratios of Earnings to Fixed Charges
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6
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Use of Proceeds
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6
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Description of Our Senior Debt Securities
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7
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Plan of Distribution
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16
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Legal Matters
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17
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Experts
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17
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S-i
SUMMARY
This summary highlights information from this prospectus
supplement and the accompanying prospectus. It is not complete
and may not contain all of the information that you should
consider before investing in the notes. We encourage you to read
this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference in their entirety before
making an investment decision, including the information set
forth under the heading Risk Factors. Unless the
context clearly indicates otherwise, references in this
prospectus supplement to we, us,
our, or other similar terms mean CenterPoint Energy
Resources Corp. and its subsidiaries, and references to
CenterPoint Energy mean our indirect parent,
CenterPoint Energy, Inc.
CENTERPOINT
ENERGY RESOURCES CORP.
General
We own and operate natural gas distribution systems in six
states. Subsidiaries of ours own interstate natural gas
pipelines and gas gathering systems and provide various
ancillary services. A wholly owned subsidiary of ours offers
variable and fixed-price physical natural gas supplies primarily
to commercial and industrial customers and electric and gas
utilities. We are an indirect wholly owned subsidiary of
CenterPoint Energy, a public utility holding company.
Our principal executive offices are located at 1111 Louisiana,
Houston, Texas 77002 (telephone number:
(713) 207-1111).
S-1
The
Offering
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Issuer |
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CenterPoint Energy Resources Corp. |
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Notes Offered |
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$300 million aggregate principal amount of
6.00% senior notes due 2018. |
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Maturity Date |
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May 15, 2018. |
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Interest Payment Dates |
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May 15 and November 15, commencing on November 15, 2008. |
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Ranking |
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The notes will: |
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be general unsecured obligations;
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rank equally in right of payment with all of our
other existing and future unsecured and unsubordinated
indebtedness; and
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with respect to the assets and earnings of our
subsidiaries, structurally rank below all of the liabilities of
our subsidiaries.
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As of March 31, 2008, our consolidated subsidiaries had no
outstanding third-party debt, other than $200 million of
debt incurred as a result of the sale of receivables. In
addition, as of March 31, 2008, a 50 percent owned
affiliate of ours had $146 million of outstanding
third-party debt. |
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Current Ratings (Outlook) |
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Moodys: Baa3 (Stable)
Standard & Poors: BBB (Stable)
Fitch: BBB (Stable) |
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These credit ratings may not remain in effect for any given
period of time and one or more of these ratings may be lowered
or withdrawn entirely by a rating agency. We note that these
credit ratings are not recommendations to buy, sell or hold our
securities. Each rating should be evaluated independently of any
other rating. Any future reduction or withdrawal of one or more
of our credit ratings could have a material adverse impact on
our ability to access capital on acceptable terms. |
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Optional Redemption |
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We may redeem all or a part of the notes at any time and from
time to time as specified under the heading Description of
the Notes Optional Redemption beginning on
page S-12
of this prospectus supplement. |
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Significant Covenants |
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We will issue the notes under an indenture containing certain
restrictive covenants for your benefit. Certain of these
covenants, which are described under Description of the
Notes Restrictive Covenants beginning on
page S-13
of this prospectus supplement and are subject to termination as
described, initially restrict our ability, with some exceptions,
to: |
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incur certain debt secured by liens; and
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engage in sale/leaseback transactions.
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In addition, the indenture restricts our ability to merge,
consolidate or transfer substantially all of our assets. See
Description of Our Senior Debt Securities
Consolidation, Merger and Sale of Assets on page 10
of the accompanying prospectus. |
S-2
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Lack of Public Markets for the Notes |
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There is no existing market for the notes. We cannot provide any
assurance about: |
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the liquidity of any markets that may develop for
the notes;
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your ability to sell the notes; or
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the prices at which you will be able to sell the
notes.
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Future trading prices of the notes will depend on many factors,
including: |
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prevailing interest rates;
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our operating results;
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the ratings of the notes; and
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the market for similar securities.
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We do not intend to apply for listing of the notes on any
securities exchange or for quotation of the notes in any
automated dealer quotation system. |
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Risk Factors |
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You should consider carefully all the information set forth and
incorporated by reference in this prospectus supplement and the
accompanying prospectus and, in particular, you should evaluate
the specific factors set forth under Risk Factors
beginning on
page S-4
of this prospectus supplement before deciding whether to invest
in the notes. |
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Governing Law |
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The indenture and the notes are governed by, and construed in
accordance with, the laws of the State of New York. |
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Use of Proceeds |
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The net proceeds from this offering will be approximately
$295 million,
after deducting underwriters discounts and estimated
expenses of the offering. We intend to use the net proceeds from
this offering for general corporate purposes, including capital
expenditures, working capital and loans to or investments in
affiliates. Pending application of the net proceeds from this
offering for these purposes, we intend to repay approximately
$30 million of borrowings under our senior unsecured
revolving credit facility, which terminates in 2012 and under
which affiliates of certain of the underwriters are lenders, and
to use the remainder of the net proceeds from this offering to
repay borrowings from our affiliates. See Use of
Proceeds on
page S-10
of this prospectus supplement. |
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Further Issues |
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The notes are initially limited to $300 million in
aggregate principal amount. However, we may issue additional
notes of the same series from time to time without the consent
of the holders. See Description of the Notes
Principal, Maturity and Interest on
page S-11
of this prospectus supplement. |
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Trustee and Paying Agent |
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The Bank of New York Trust Company, National Association
(as successor to JPMorgan Chase Bank, National Association). |
S-3
RISK
FACTORS
You should consider carefully the following information about
risks, as well as risks arising from any legal proceedings
identified in Part II Item 1 Legal
Proceedings of our Quarterly Report on
Form 10-Q
for the period ended March 31, 2008 (1st Quarter 2008
Form 10-Q),
together with the other information contained in this prospectus
supplement and the accompanying prospectus, before making an
investment in the notes.
Risk
Factors Affecting Our Businesses
Rate
regulation of our business may delay or deny our ability to earn
a reasonable return and fully recover our costs.
Our rates for our natural gas distribution business (Gas
Operations) are regulated by certain municipalities and state
commissions, and for our interstate pipelines by the Federal
Energy Regulatory Commission (FERC), based on an analysis of our
invested capital and our expenses in a test year. Thus, the
rates that we are allowed to charge may not match our expenses
at any given time. The regulatory process in which rates are
determined may not always result in rates that will produce full
recovery of our costs and enable us to earn a reasonable return
on our invested capital.
Our
businesses must compete with alternative energy sources, which
could result in us marketing less natural gas, and our
interstate pipelines and field services businesses must compete
directly with others in the transportation, storage, gathering,
treating and processing of natural gas, which could lead to
lower prices, either of which could have an adverse impact on
our results of operations, financial condition and cash
flows.
We compete primarily with alternate energy sources such as
electricity and other fuel sources. In some areas, intrastate
pipelines, other natural gas distributors and marketers also
compete directly with us for natural gas sales to end-users. In
addition, as a result of federal regulatory changes affecting
interstate pipelines, natural gas marketers operating on these
pipelines may be able to bypass our facilities and market, sell
and/or
transport natural gas directly to commercial and industrial
customers. Any reduction in the amount of natural gas marketed,
sold or transported by us as a result of competition may have an
adverse impact on our results of operations, financial condition
and cash flows.
Our two interstate pipelines and our gathering systems compete
with other interstate and intrastate pipelines and gathering
systems in the transportation and storage of natural gas. The
principal elements of competition are rates, terms of service,
and flexibility and reliability of service. We also compete
indirectly with other forms of energy, including electricity,
coal and fuel oils. The primary competitive factor is price. The
actions of our competitors could lead to lower prices, which may
have an adverse impact on our results of operations, financial
condition and cash flows.
Our
natural gas distribution and competitive natural gas sales and
services businesses are subject to fluctuations in natural gas
pricing levels, which could affect the ability of our suppliers
and customers to meet their obligations or otherwise adversely
affect our liquidity.
We are subject to risk associated with increases in the price of
natural gas. Increases in natural gas prices might affect our
ability to collect balances due from our customers and, for Gas
Operations, could create the potential for uncollectible
accounts expense to exceed the recoverable levels built into our
tariff rates. In addition, a sustained period of high natural
gas prices could apply downward demand pressure on natural gas
consumption in the areas in which we operate and increase the
risk that our suppliers or customers fail or are unable to meet
their obligations. Additionally, increasing natural gas prices
could create the need for us to provide collateral in order to
purchase natural gas.
S-4
A
decline in our credit rating could result in us having to
provide collateral in order to purchase gas.
If our credit rating were to decline, we might be required to
post cash collateral in order to purchase natural gas. If a
credit rating downgrade and the resultant cash collateral
requirement were to occur at a time when we were experiencing
significant working capital requirements or otherwise lacked
liquidity, we might be unable to obtain the necessary natural
gas to meet our obligations to customers, and our results of
operations, financial condition and cash flows would be
adversely affected.
The
revenues and results of operations of our interstate pipelines
and field services businesses are subject to fluctuations in the
supply of natural gas.
Our interstate pipelines and field services businesses largely
rely on natural gas sourced in the various supply basins located
in the Mid-continent region of the United States. To the extent
the availability of this supply is substantially reduced, it
could have an adverse effect on our results of operations,
financial condition and cash flows.
Our
revenues and results of operations are seasonal.
A substantial portion of our revenues is derived from natural
gas sales and transportation. Thus, our revenues and results of
operations are subject to seasonality, weather conditions and
other changes in natural gas usage, with revenues being higher
during the winter months.
The
actual cost of pipelines under construction and related
compression facilities may be significantly higher than our
current estimates.
Our subsidiaries are involved in significant pipeline
construction projects. The construction of new pipelines and
related compression facilities requires the expenditure of
significant amounts of capital, which may exceed our estimates.
These projects may not be completed at the budgeted cost, on
schedule or at all. The construction of new pipeline or
compression facilities is subject to construction cost overruns
due to labor costs, costs of equipment and materials such as
steel and nickel, labor shortages or delays, weather delays,
inflation or other factors, which could be material. In
addition, the construction of these facilities is typically
subject to the receipt of approvals and permits from various
regulatory agencies. Those agencies may not approve the projects
in a timely manner or may impose restrictions or conditions on
the projects that could potentially prevent a project from
proceeding, lengthen its expected completion schedule
and/or
increase its anticipated cost. As a result, there is the risk
that the new facilities may not be able to achieve our expected
investment return, which could adversely affect our financial
condition, results of operations or cash flows.
The
states in which we provide regulated local gas distribution may,
either through legislation or rules, adopt restrictions similar
to or broader than those under the Public Utility Holding
Company Act of 1935 regarding organization, financing and
affiliate transactions that could have significant adverse
impacts on our ability to operate.
The Public Utility Holding Company Act of 1935, to which
CenterPoint Energy was subject prior to its repeal in the Energy
Policy Act of 2005, provided a comprehensive regulatory
structure governing the organization, capital structure,
intracompany relationships and lines of business that could be
pursued by registered holding companies and their member
companies. Following repeal of that Act, some states in which we
do business have sought to expand their own regulatory
frameworks to give their regulatory authorities increased
jurisdiction and scrutiny over similar aspects of the utilities
that operate in their states. Some of these frameworks attempt
to regulate financing activities, acquisitions and divestitures,
and arrangements between the utilities and their affiliates, and
to restrict the level of non-utility businesses that can be
conducted within the holding company structure. Additionally
they may impose record keeping, record access, employee training
and reporting requirements related to affiliate transactions and
reporting in the event of certain downgrading of the
utilitys bond rating.
S-5
These regulatory frameworks could have adverse effects on our
ability to operate our utility operations, to finance our
business and to provide cost-effective utility service. In
addition, if more than one state adopts restrictions over
similar activities, it may be difficult for us to comply with
competing regulatory requirements.
Risk
Factors Associated with Our Consolidated Financial
Condition
If we
are unable to arrange future financings on acceptable terms, our
ability to refinance existing indebtedness could be
limited.
As of March 31, 2008, we had $2.9 billion of
outstanding indebtedness on a consolidated basis. As of
March 31, 2008, approximately $213 million principal
amount of this debt is required to be paid through 2010. Our
future financing activities may depend, at least in part, on:
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general economic and capital market conditions;
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credit availability from financial institutions and other
lenders;
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investor confidence in us and the markets in which we operate;
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maintenance of acceptable credit ratings;
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market expectations regarding our future earnings and cash flows;
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market perceptions of our and CenterPoint Energys ability
to access capital markets on reasonable terms; and
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provisions of relevant tax and securities laws.
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Our current credit ratings are discussed in
Managements Narrative Analysis of the Results of
Operations Liquidity and Capital
Resources Impact on Liquidity of a Downgrade in
Credit Ratings in Item 2 of Part I of our
1st Quarter 2008
Form 10-Q.
These credit ratings may not remain in effect for any given
period of time and one or more of these ratings may be lowered
or withdrawn entirely by a rating agency. We note that these
credit ratings are not recommendations to buy, sell or hold our
securities. Each rating should be evaluated independently of any
other rating. Any future reduction or withdrawal of one or more
of our credit ratings could have a material adverse impact on
our ability to access capital on acceptable terms.
The
financial condition and liquidity of our parent company could
affect our access to capital, our credit standing and our
financial condition.
Our ratings and credit may be impacted by CenterPoint
Energys credit standing. As of March 31, 2008,
CenterPoint Energy and its other subsidiaries had approximately
$400 million principal amount of debt required to be paid
through 2010, excluding its 3.75% Convertible Notes
discussed below. This amount excludes amounts related to capital
leases, transition bonds and indexed debt securities
obligations. In addition, as of March 31, 2008, CenterPoint
Energy had $401.6 million of outstanding
3.75% Convertible Notes, which CenterPoint Energy has
called for redemption on May 30, 2008, and on which holders
could exercise their conversion rights prior to such redemption.
We cannot assure you that CenterPoint Energy and its other
subsidiaries will be able to pay or refinance these amounts. If
CenterPoint Energy were to experience a deterioration in its
credit standing or liquidity difficulties, our access to credit
and our credit ratings could be adversely affected.
S-6
We are
an indirect wholly owned subsidiary of CenterPoint Energy.
CenterPoint Energy can exercise substantial control over our
dividend policy and business and operations and could do so in a
manner that is adverse to our interests.
We are managed by officers and employees of CenterPoint Energy.
Our management will make determinations with respect to the
following:
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our payment of dividends;
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decisions on our financings and our capital raising activities;
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mergers or other business combinations; and
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our acquisition or disposition of assets.
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There are no contractual restrictions on our ability to pay
dividends to CenterPoint Energy. Our management could decide to
increase our dividends to CenterPoint Energy to support its cash
needs. This could adversely affect our liquidity. However, under
our credit facility and our receivables facility, our ability to
pay dividends is impacted by a covenant that debt as a
percentage of total capitalization may not exceed 65%.
The
use of derivative contracts by us and our subsidiaries in the
normal course of business could result in financial losses that
could negatively impact our results of operations and those of
our subsidiaries.
We use derivative instruments, such as swaps, options, futures
and forwards, to manage our commodity, weather and financial
market risks. We could recognize financial losses as a result of
volatility in the market values of these contracts, or should a
counterparty fail to perform. In the absence of actively quoted
market prices and pricing information from external sources, the
valuation of these financial instruments can involve
managements judgment or use of estimates. As a result,
changes in the underlying assumptions or use of alternative
valuation methods could affect the reported fair value of these
contracts.
We
derive a substantial portion of our operating income from
subsidiaries through which we hold a substantial portion of our
assets.
We derive a substantial portion of our operating income from,
and hold a substantial portion of our assets through, our
subsidiaries. In general, these subsidiaries are separate and
distinct legal entities and have no obligation to provide us
with funds for our payment obligations, whether by dividends,
distributions, loans or otherwise. In addition, provisions of
applicable law, such as those limiting the legal sources of
dividends, limit our subsidiaries ability to make payments
or other distributions to us, and our subsidiaries could agree
to contractual restrictions on their ability to make
distributions.
Our right to receive any assets of any subsidiary, and therefore
the right of our creditors to participate in those assets, will
be effectively subordinated to the claims of that
subsidiarys creditors, including trade creditors. In
addition, even if we were a creditor of any subsidiary, our
rights as a creditor would be subordinated to any security
interest in the assets of that subsidiary and any indebtedness
of the subsidiary senior to that held by us.
Other
Risks
We are
subject to operational and financial risks and liabilities
arising from environmental laws and regulations.
Our operations are subject to stringent and complex laws and
regulations pertaining to health, safety and the environment. As
an owner or operator of natural gas pipelines and distribution
systems and gas gathering and processing systems, we must comply
with these laws and regulations at the federal, state and local
levels. These laws and regulations can restrict or impact our
business activities in many ways, such as:
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restricting the way we can handle or dispose of wastes;
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S-7
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limiting or prohibiting construction activities in sensitive
areas such as wetlands, coastal regions, or areas inhabited by
endangered species;
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requiring remedial action to mitigate pollution conditions
caused by our operations, or attributable to former
operations; and
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enjoining the operations of facilities deemed in non-compliance
with permits issued pursuant to such environmental laws and
regulations.
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In order to comply with these requirements, we may need to spend
substantial amounts and devote other resources from time to time
to:
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construct or acquire new equipment;
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acquire permits for facility operations;
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modify or replace existing and proposed equipment; and
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clean up or decommission waste disposal areas, fuel storage and
management facilities and other locations and facilities.
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Failure to comply with these laws and regulations may trigger a
variety of administrative, civil and criminal enforcement
measures, including the assessment of monetary penalties, the
imposition of remedial actions and the issuance of orders
enjoining future operations. Certain environmental statutes
impose strict, joint and several liability for costs required to
clean up and restore sites where hazardous substances have been
disposed or otherwise released. Moreover, it is not uncommon for
neighboring landowners and other third parties to file claims
for personal injury and property damage allegedly caused by the
release of hazardous substances or other waste products into the
environment.
Our
insurance coverage may not be sufficient. Insufficient insurance
coverage and increased insurance costs could adversely impact
our results of operations, financial condition and cash
flows.
We currently have general liability and property insurance in
place to cover certain of our facilities in amounts that we
consider appropriate. Such policies are subject to certain
limits and deductibles and do not include business interruption
coverage. Insurance coverage may not be available in the future
at current costs or on commercially reasonable terms, and the
insurance proceeds received for any loss of, or any damage to,
any of our facilities may not be sufficient to restore the loss
or damage without negative impact on our results of operations,
financial condition and cash flows.
We and
CenterPoint Energy could incur liabilities associated with
businesses and assets that we have transferred to
others.
In connection with the organization and capitalization of
Reliant Resources, Inc. (RRI), RRI and its subsidiaries assumed
liabilities associated with various assets and businesses
Reliant Energy, Incorporated (Reliant Energy) transferred to
them. RRI also agreed to indemnify, and cause the applicable
transferee subsidiaries to indemnify, CenterPoint Energy and its
subsidiaries, including us, with respect to liabilities
associated with the transferred assets and businesses. These
indemnity provisions were intended to place sole financial
responsibility on RRI and its subsidiaries for all liabilities
associated with the current and historical businesses and
operations of RRI, regardless of the time those liabilities
arose. If RRI were unable to satisfy a liability that has been
so assumed in circumstances in which Reliant Energy and its
subsidiaries were not released from the liability in connection
with the transfer, we and CenterPoint Energy could be
responsible for satisfying the liability.
Prior to the distribution of CenterPoint Energys ownership
in RRI to its shareholders, we had guaranteed certain
contractual obligations of what became RRIs trading
subsidiary. Under the terms of the separation agreement between
the companies, RRI agreed to extinguish all such guaranty
obligations prior to separation, but at the time of separation
in September 2002, RRI had been unable to extinguish all
obligations. To secure us against obligations under the
remaining guaranties, RRI agreed to provide cash or letters of
credit for our
S-8
benefit, and undertook to use commercially reasonable efforts to
extinguish the remaining guaranties. In December 2007, we,
CenterPoint Energy and RRI amended the agreement and we released
the letters of credit we held as security. Under the revised
agreement, RRI agreed to provide cash or new letters of credit
to secure us against exposure under the remaining guaranties as
calculated under the new agreement if and to the extent changes
in market conditions exposed us to a risk of loss on those
guaranties.
Our remaining exposure under the guaranties relates to payment
of demand charges related to transportation contracts. The
present value of the demand charges under these transportation
contracts, which will be effective until 2018, was approximately
$135 million as of March 31, 2008. RRI continues to
meet its obligations under the contracts, and on the basis of
current market conditions we believe that additional security is
not needed at this time. However, if RRI should fail to perform
its obligations under the contracts or if RRI should fail to
provide adequate security in the event market conditions change
adversely, we would retain our exposure to the counterparty
under the guaranty.
RRIs unsecured debt ratings are currently below investment
grade. If RRI were unable to meet its obligations, it would need
to consider, among various options, restructuring under the
bankruptcy laws, in which event RRI might not honor its
indemnification obligations and claims by RRIs creditors
might be made against CenterPoint Energy as its former owner.
Risk
Factor Related to the Notes
An
active trading market for the notes may not
develop.
The notes will be a new issue of securities for which there is
currently no established trading market. We do not intend to
apply for the listing of the notes on any securities exchange or
for quotation of the notes on any dealer quotation system. Even
if a market for the notes does develop, we cannot assure you
that there will be liquidity in that market, or that the notes
might not trade for less than their original value or face
amount. The liquidity of any market for the notes will depend on
the number of holders of those notes, the interest of securities
dealers in making a market in the notes and other factors. If a
liquid market for the notes does not develop, you may be unable
to resell the notes for a long period of time, if at all.
Accordingly, we cannot assure you as to the development or
liquidity of any trading market for the notes or as to your
ability to sell your notes.
Even if a market for the notes develops, trading prices could be
higher or lower than the initial offering price. The prices of
the notes will depend on many factors, including prevailing
interest rates, our operating results and financial conditions
and the market for similar securities. Declines in the market
prices for debt securities generally may also materially and
adversely affect the liquidity of the notes, independent of our
financial performance.
S-9
USE OF
PROCEEDS
The net proceeds from this offering will be approximately
$295 million, after deducting underwriters discounts
and estimated expenses of the offering. We intend to use the net
proceeds from this offering for general corporate purposes,
including capital expenditures, working capital and loans to or
investments in affiliates. Pending application of the net
proceeds from this offering for these purposes, we intend to
repay approximately $30 million of borrowings under our
senior unsecured revolving credit facility, which terminates in
2012 and under which affiliates of certain of the underwriters
are lenders, and to use the remainder of the net proceeds from
this offering to repay borrowings from our affiliates.
Borrowings under our senior unsecured revolving credit facility
currently bear an interest rate of approximately 2.4%.
Borrowings from our affiliates currently bear an interest rate
of approximately 1.9% and do not have a fixed maturity date. We
used the borrowings under our senior unsecured revolving credit
facility and the borrowings from our affiliates for general
corporate purposes.
CAPITALIZATION
The following table sets forth our short-term debt and
capitalization as of March 31, 2008. No adjustments have
been made for:
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the issuance of notes in this offering or the use of proceeds
therefrom, as discussed in Use of Proceeds
above; or
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any changes in short-term debt after March 31, 2008.
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This table should be read in conjunction with our consolidated
financial statements and related notes thereto and
Managements Narrative Analysis of Results of
Operations included in our Annual Report on
Form 10-K
for the year ended December 31, 2007 and our
1st Quarter 2008
Form 10-Q.
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March 31,
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2008
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(In millions)
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Short-Term Debt:
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Short-term borrowings
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$
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200
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3.2
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%
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Notes payable to affiliates
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98
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1.6
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%
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Current portion of long-term debt
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7
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0.1
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%
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Total short-term debt
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305
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4.9
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%
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Long-Term Debt
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2,623
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42.6
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%
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Total Debt
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2,928
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47.5
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%
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Stockholders Equity
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3,236
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52.5
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%
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Total Capitalization and Short-Term Debt
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$
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6,164
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100.0
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%
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S-10
DESCRIPTION
OF THE NOTES
The following description of the particular terms of the notes
(referred to in the accompanying prospectus as the debt
securities) supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and
provisions of the debt securities set forth in the accompanying
prospectus, to which we refer you.
We will issue the notes under an indenture, dated as of
February 1, 1998, as supplemented and as to be further
supplemented in connection with establishing the terms of the
notes (the indenture), between us and The Bank of
New York Trust Company, National Association (successor to
JPMorgan Chase Bank, National Association), as trustee. The
following description is a summary of the material provisions of
the notes and the indenture. This summary is not complete and is
qualified in its entirety by reference to the indenture and the
notes. For a complete description of the notes, you should refer
to the indenture, including the form of supplemental indenture
establishing the terms of the notes, copies of which are
available from us. In addition, we have filed the current
indenture and will file the supplemental indenture with the SEC.
Please read Where You Can Find More Information.
We may issue additional series of debt securities from time to
time under the indenture. There is no limitation on the amount
of debt securities we may issue under the indenture. As of
March 31, 2008, approximately $2.4 billion aggregate
principal amount of debt securities were outstanding under the
indenture.
We have included cross-references in the summary below to refer
you to the section numbers of the indenture we are describing.
Ranking
of the Notes
The notes will:
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be general unsecured obligations,
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rank equally in right of payment with all of our other existing
and future unsecured and unsubordinated indebtedness, and
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with respect to the assets and earnings of our subsidiaries,
structurally rank below all of the liabilities of our
subsidiaries.
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As of March 31, 2008, we, on an unconsolidated basis, had
approximately $2.7 billion aggregate principal amount of
indebtedness outstanding.
Subject to exceptions, and subject to compliance with the
applicable requirements, set forth in the indenture, we may
discharge our obligations under the indenture with respect to
the notes as described below under
Defeasance.
Principal,
Maturity and Interest
The notes will mature on May 15, 2018, and are initially
limited to $300 million in aggregate principal amount.
However, we may issue additional notes of the same series as the
notes from time to time, without the consent of the holders of
the notes. The notes will be issued only in denominations of
$1,000 principal amount and integral multiples of $1,000
principal amount.
Interest on the notes will:
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accrue at the rate of 6.00% per annum,
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be payable semi-annually in arrears on each May 15 and
November 15, with the initial interest payment date being
November 15, 2008,
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be payable to the person in whose name the notes are registered
at the close of business on the May 1 and November 1
immediately preceding the applicable interest payment date,
which we refer to with respect to the notes as regular
record dates,
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S-11
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be computed on the basis of a
360-day year
comprised of twelve
30-day
months, and
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be payable on overdue interest to the extent permitted by law at
the same rate as interest is payable on principal.
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If any interest payment date, the maturity date or any
redemption date falls on a day that is not a business day, the
required payment will be made on the next succeeding business
day with the same force and effect as if made on the relevant
interest payment date, maturity date or redemption date and no
additional amounts will accrue on that payment for the period
from and after the interest payment date, maturity date or
redemption date, as the case may be, to the date of that payment
on the next succeeding business day. Unless we default on a
payment, no interest will accrue for the period from and after
the applicable maturity date or redemption date.
Optional
Redemption
We may redeem the notes, in whole or in part, at our option
exercisable at any time and from time to time upon not less than
30 and not more than 60 days notice as provided in
the indenture, on any date prior to their maturity at a
redemption price equal to:
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100% of the principal amount of the notes to be redeemed, plus
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accrued and unpaid interest thereon, if any, to, but excluding,
the redemption date, plus
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the make-whole premium described below, if any.
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The redemption price will never be less than 100% of the
principal amount of the notes redeemed plus accrued and unpaid
interest thereon, if any, to, but excluding, the redemption date.
The amount of the make-whole premium with respect to any note to
be redeemed will be equal to the excess, if any, of:
(1) the sum of the present values, calculated as of the
redemption date, of:
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each interest payment that, but for such redemption, would have
been payable on the note or portion thereof being redeemed on
each interest payment date occurring after the redemption date
(excluding any accrued and unpaid interest for the period prior
to the redemption date), and
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the principal amount that, but for such redemption, would have
been payable at the final maturity of the note or portion
thereof being redeemed, over
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(2) the principal amount of the note or portion thereof
being redeemed.
The present values of interest and principal payments referred
to in clause (1) above will be determined in accordance
with generally accepted principles of financial analysis. These
present values will be calculated by discounting the amount of
each payment of interest or principal from the date that each
such payment would have been payable, but for the redemption, to
the redemption date at a discount rate equal to the comparable
treasury yield (as defined below) plus 35 basis points.
The make-whole premium will be calculated by an independent
investment banking institution of national standing appointed by
us. If we fail to appoint an independent investment banking
institution at least 45 days prior to the redemption date,
or if the independent investment banking institution we appoint
is unwilling or unable to calculate the make-whole premium, the
calculation will be made by Barclays Capital Inc., Credit Suisse
Securities (USA) LLC or Lehman Brothers Inc. If Barclays Capital
Inc., Credit Suisse Securities (USA) LLC and Lehman Brothers
Inc. are unwilling or unable to make the calculation, we will
appoint a different independent investment banking institution
of national standing to make the calculation.
For purposes of determining the make-whole premium,
comparable treasury yield means a rate of interest
per annum equal to the weekly average yield to maturity of
United States Treasury Securities that have a constant maturity
that corresponds to the remaining term to maturity of the notes,
calculated to the nearest
S-12
1/12th of
a year. The comparable treasury yield will be determined as of
the third business day immediately preceding the applicable
redemption date.
The weekly average yields of United States Treasury Securities
will be determined by reference to the most recent statistical
release published by the Federal Reserve Bank of New York and
designated H.15(519) Selected Interest Rates or any
successor release. If this statistical release sets forth a
weekly average yield for United States Treasury Securities
having a constant maturity that is the same as the remaining
term of the notes calculated as set forth above, then the
comparable treasury yield will be equal to such weekly average
yield. In all other cases, the comparable treasury yield will be
calculated by interpolation on a straight-line basis, between
the weekly average yields on the United States Treasury
Securities that have a constant maturity closest to and greater
than the remaining term of the notes and the United States
Treasury Securities that have a constant maturity closest to and
less than the remaining term of the notes (in each case as set
forth in the H.15 statistical release or any successor release).
Any weekly average yields calculated by interpolation will be
rounded to the nearest 1/100th of 1%, with any figure of
1/200th of 1% or above being rounded upward. If weekly
average yields for United States Treasury Securities are not
available in the H.15 statistical release or otherwise, then the
comparable treasury yield will be calculated by interpolation of
comparable rates selected by an independent investment banking
institution selected in the manner described in the second
preceding paragraph.
If we redeem less than all the notes, the trustee will select
the notes for redemption on a pro rata basis, by lot or by such
other method as the trustee in its sole discretion deems fair
and appropriate. We will only redeem notes in multiples of
$1,000 in original principal amount. If any note is to be
redeemed in part only, the notice of redemption will state the
portion of the principal amount to be redeemed. A new note in
principal amount equal to the unredeemed portion of the original
note will be issued upon the cancellation of the original note.
Sinking
Fund
We are not obligated to make mandatory redemption or sinking
fund payments with respect to the notes.
Restrictive
Covenants
The indenture does not limit the amount of indebtedness or other
obligations that we may incur and does not contain provisions
that would give holders of the notes the right to require us to
repurchase their notes in the event of a change in control of
us, or in the event we enter into one or more highly leveraged
transactions, regardless of whether a rating decline results
therefrom, or in the event we dispose of one or more of our
business units, nor are any such events deemed to be events of
default under the terms of the indenture.
The indenture contains certain covenants for the benefit of the
holders of the notes, which we have summarized below and in the
accompanying prospectus under the heading Description of
Our Senior Debt Securities Consolidation, Merger and
Sale of Assets. The restrictive covenants summarized below
are applicable to the notes; provided, however, that these
restrictive covenants will terminate pursuant to the termination
provision of the indenture and will no longer be applicable to
the notes on and after the date, which we refer to as the
termination date, on which there remains
outstanding, in the aggregate, no more than $200 million in
principal amount of our:
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7.875% Senior Notes due 2013 ($762 million outstanding
as of March 31, 2008),
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5.95% Senior Notes due 2014 ($160 million outstanding
as of March 31, 2008), and
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long-term indebtedness (but excluding for this purpose any
long-term indebtedness incurred pursuant to any revolving credit
facility, letter of credit facility or other similar bank credit
facility) issued subsequent to the issuance of the notes and
prior to the termination date containing covenants substantially
similar to the restrictive covenants summarized below, or an
event of default substantially similar to the event of default
described in the fourth bullet under Events of
Default below, but not containing the termination
provision.
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S-13
Our 7.875% Senior Notes due 2013 and our 5.95% Senior
Notes due 2014 have covenants similar to the restrictive
covenants summarized below. The terms of our 6.15% Senior
Notes due 2016, our 6.25% Senior Notes due 2037, our
6.125% Senior Notes due 2017 and our 6.625% Senior
Notes due 2037 have covenants similar to the restrictive
covenants summarized below and the termination provision
described above.
Limitations on Liens. We will not, and we will
not permit any subsidiary (as defined below) to, pledge,
mortgage or hypothecate, or permit to exist, except in our favor
or in favor of any subsidiary, any lien (as defined below) upon
any principal property (as defined below) or any equity interest
(as defined below) in any significant subsidiary (as defined
below) owning any principal property, at any time owned by us or
by a subsidiary, to secure any indebtedness (as defined below),
unless effective provision is made whereby outstanding notes
will be secured equally and ratably therewith (or prior
thereto), and with any other indebtedness similarly entitled to
be equally and ratably secured. This restriction will not apply
to or prevent the creation or existence of:
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liens on any property held or used by us or a subsidiary in
connection with the exploration for, development of or
production of, oil, gas, natural gas (including liquefied gas
and storage gas), other hydrocarbons, helium, coal, metals,
minerals, steam, timber, geothermal or other natural resources
or synthetic fuels, such properties to include, but not be
limited to, our or a subsidiarys interest in any mineral
fee interests, oil, gas or other mineral leases, royalty,
overriding royalty or net profits interests, production payments
and other similar interests, wellhead production equipment,
tanks, field gathering lines, leasehold or field separation and
processing facilities, compression facilities and other similar
personal property and fixtures,
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liens on oil, gas, natural gas (including liquefied gas and
storage gas), other hydrocarbons, helium, coal, metals,
minerals, steam, timber, geothermal or other natural resources
or synthetic fuels produced or recovered from any property, an
interest in which is owned or leased by us or a subsidiary,
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liens (or certain extensions, renewals or refundings thereof)
upon any property acquired, constructed or improved before or
after the date the notes are first issued, which liens were or
are created at the later of the time of acquisition or
commercial operation thereof, or within one year thereafter to
secure all or a portion of the purchase price thereof or the
cost of construction or improvement, or existing thereon at the
date of acquisition, provided that every such mortgage, pledge,
lien or encumbrance applies only to the property so acquired or
constructed and fixed improvements thereon,
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liens upon any property of any entity acquired by any entity
that is or becomes a subsidiary after the date the notes are
first issued, each of which we refer to as an acquired
entity, provided that every such mortgage, pledge, lien or
encumbrance:
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exist prior to the time the acquired entity becomes a
subsidiary, or
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be created at the time the acquired entity becomes a subsidiary
or within one year thereafter to secure payment of the
acquisition price thereof, and
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will only apply to those properties owned by the acquired entity
at the time it becomes a subsidiary or thereafter acquired by it
from sources other than us or any other subsidiary,
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pledges of current assets, in the ordinary course of business,
to secure current liabilities,
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deposits, including among others, good faith deposits in
connection with tenders, leases of real estate or bids or
contracts, or liens, including among others, liens reserved in
leases and mechanics or materialmens liens, to
secure certain duties or public or statutory obligations,
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liens upon any office, data processing or transportation
equipment,
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liens created or assumed in connection with the issuance of debt
securities, the interest on which is excludable from gross
income of the holder of such security pursuant to the Internal
Revenue Code, for the purpose of financing the acquisition or
construction of property to be used by us or a subsidiary,
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S-14
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pledges or assignments of accounts receivable or conditional
sales contracts or chattel mortgages and evidence of
indebtedness secured thereby, received in connection with the
sale of goods or merchandise to customers, or
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certain liens for taxes, judgments and attachments.
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Notwithstanding the foregoing, we or a subsidiary may issue,
assume or guarantee indebtedness secured by a mortgage which
would otherwise be subject to the foregoing restrictions in an
aggregate amount which, together with all of our other
indebtedness or indebtedness of a subsidiary secured by a
mortgage (not including secured indebtedness permitted under the
foregoing exceptions) and the value (as defined below) of all
sale and leaseback transactions (as defined below) existing at
such time (other than sale and leaseback transactions
(i) which, if a lien, would have been permitted under the
third or fourth bullet points above or (ii) as to which
application of amounts have been made in accordance with
Limitation on Sale and Leaseback
Transactions below), does not at the time such
indebtedness is incurred exceed 5% of consolidated net tangible
assets (as defined below), as shown on our most recent audited
consolidated balance sheet preceding the date of determination.
For purposes of this Limitation on Liens covenant,
subsidiary does not include a project finance subsidiary (as
defined below).
Limitation on Sale and Leaseback
Transactions. We will not, and we will not permit
any subsidiary to, engage in a sale and leaseback transaction of
any principal property unless the net proceeds of such sale are
at least equal to the fair value of such principal property (as
determined by our board of directors) and either:
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we or such subsidiary would be entitled under the indenture to
incur indebtedness secured by a lien on the principal property
to be leased, without equally and ratably securing the notes,
pursuant to the exceptions provided in the third and fourth
bullet points of the second sentence of
Limitations on Liens above, or
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within 120 days after the sale or transfer of the principal
property, we apply an amount not less than the fair value of
such property:
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to the payment or other retirement of our long-term indebtedness
or long-term indebtedness of a subsidiary, in each case ranking
senior to or on parity with the notes, or
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to the purchase at not more than the fair value of principal
property (other than that involved in such sale and leaseback
transaction).
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For purposes of this Limitation on Sale and Leaseback
Transactions covenant, subsidiary does not include a
project finance subsidiary.
Defined
Terms
Capital lease means a lease that, in
accordance with accounting principles generally accepted in the
United States, would be recorded as a capital lease on the
balance sheet of the lessee.
Consolidated net tangible assets means the
total amount of our assets, including the assets of our
subsidiaries, less, without duplication:
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total current liabilities (excluding indebtedness due within
12 months),
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all reserves for depreciation and other asset valuation
reserves, but excluding reserves for deferred federal income
taxes,
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all intangible assets such as goodwill, trademarks, trade names,
patents and unamortized debt discount and expense carried as an
asset, and
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all appropriate adjustments on account of minority interests of
other persons holding common stock of any subsidiary, all as
reflected in our most recent audited consolidated balance sheet
preceding the date of such determination.
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S-15
Equity interests means any capital stock,
partnership, joint venture, member or limited liability or
unlimited liability company interest, beneficial interest in a
trust or similar entity or other equity interest or investment
of whatever nature.
Indebtedness, as applied to us or any
subsidiary, means bonds, debentures, notes and other instruments
or arrangements representing obligations created or assumed by
us or any such subsidiary, including any and all:
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obligations for money borrowed, other than unamortized debt
discount or premium,
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obligations evidenced by a note or similar instrument given in
connection with the acquisition of any business, properties or
assets of any kind,
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obligations as lessee under a capital lease, and
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amendments, renewals, extensions, modifications and refundings
of any such indebtedness or obligation listed in the three
immediately preceding bullet points.
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All indebtedness secured by a lien upon property owned by us or
any subsidiary and upon which indebtedness we or any such
subsidiary customarily pays interest, although we or any such
subsidiary has not assumed or become liable for the payment of
such indebtedness, is also deemed to be indebtedness of us or
any such subsidiary. All indebtedness for borrowed money
incurred by other persons which is directly guaranteed as to
payment of principal by us or any subsidiary will for all
purposes of the indenture be deemed to be indebtedness of us or
any such subsidiary, but no other contingent obligation of us or
any such subsidiary in respect of indebtedness incurred by other
persons shall be deemed indebtedness of us or any such
subsidiary.
Lien means any mortgage, deed of trust,
pledge, hypothecation, assignment, deposit arrangement, charge,
security interest, encumbrance or lien of any kind whatsoever
(including any capital lease).
Non-recourse debt means (i) any
indebtedness for borrowed money incurred by any project finance
subsidiary to finance the acquisition, improvement,
installation, design, engineering, construction, development,
completion, maintenance or operation of, or otherwise to pay
costs and expenses relating to or providing financing for, any
project, which indebtedness for borrowed money does not provide
for recourse against us or any of our subsidiaries (other than a
project finance subsidiary and such recourse as exists under a
performance guaranty) or any property or asset of us or any of
our subsidiaries (other than equity interests in, or the
property or assets of, a project finance subsidiary and such
recourse as exists under a performance guaranty) and
(ii) any refinancing of such indebtedness for borrowed
money that does not increase the outstanding principal amount
thereof (other than to pay costs incurred in connection
therewith and the capitalization of any interest or fees) at the
time of the refinancing or increase the property subject to any
lien securing such indebtedness for borrowed money or otherwise
add additional security or support for such indebtedness for
borrowed money.
Performance guaranty means any guaranty
issued in connection with any non-recourse debt that (i) if
secured, is secured only by assets of or equity interests in a
project finance subsidiary, and (ii) guarantees to the
provider of such non-recourse debt or any other person
(a) performance of the improvement, installation, design,
engineering, construction, acquisition, development, completion,
maintenance or operation of, or otherwise affects any such act
in respect of, all or any portion of the project that is
financed by such non-recourse debt, (b) completion of the
minimum agreed equity or other contributions or support to the
relevant project finance subsidiary, or (c) performance by
a project finance subsidiary of obligations to persons other
than the provider of such non-recourse debt.
Principal property means any natural gas
distribution property, natural gas pipeline or gas processing
plant located in the United States, except any such property
that in the opinion of our board of directors is not of material
importance to the total business conducted by us and our
consolidated subsidiaries. Principal property shall
not include any oil or gas property or the production or
proceeds of production from an oil or gas producing property or
the production or any proceeds of production of gas processing
plants or oil or gas or petroleum products in any pipeline or
storage field.
S-16
Project finance subsidiary and
project finance subsidiaries means any of our
subsidiaries designated by us whose principal purpose is to
incur non-recourse debt
and/or
construct, lease, own or operate the assets financed thereby, or
to become a direct or indirect partner, member or other equity
participant or owner in a person created for such purpose, and
substantially all the assets of which subsidiary or person are
limited to (x) those assets being financed (or to be
financed), or the operation of which is being financed (or to be
financed), in whole or in part by non-recourse debt, or
(y) equity interests in, or indebtedness or other
obligations of, one or more other such subsidiaries or persons,
or (z) indebtedness or other obligations of us or our
subsidiaries or other persons. At the time of designation of any
project finance subsidiary, the sum of the net book value of the
assets of such subsidiary and the net book value of the assets
of all other project finance subsidiaries then existing shall
not in the aggregate exceed 10 percent of the consolidated
net tangible assets.
Sale and leaseback transaction means any
arrangement entered into by us or any subsidiary with any person
providing for the leasing to us or any subsidiary of any
principal property (except for temporary leases for a term,
including any renewal thereof, of not more than three years and
except for leases between us and a subsidiary or between
subsidiaries), which principal property has been or is to be
sold or transferred by us or such subsidiary to such person.
Significant subsidiary means any subsidiary
of ours, other than a project finance subsidiary, that is a
significant subsidiary as defined in
Rule 1-02
of
Regulation S-X
under the Securities Act of 1933 and the Securities Exchange Act
of 1934, as such regulation is in effect on the date of issuance
of the notes.
Subsidiary of any entity means any
corporation, partnership, joint venture, limited liability
company, trust or estate of which (or in which) more than 50% of
(i) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence
of any contingency), (ii) the interest in the capital or
profits of such limited liability company, partnership, joint
venture or other entity or (iii) the beneficial interest in
such trust or estate is at the time directly or indirectly owned
or controlled by such entity, by such entity and one or more of
its other subsidiaries or by one or more of such entitys
other subsidiaries.
Value means, with respect to a sale and
leaseback transaction, as of any particular time, the amount
equal to the greater of (1) the net proceeds from the sale
or transfer of the property leased pursuant to such sale and
leaseback transaction or (2) the fair value, in the opinion
of our board of directors, of such property at the time of
entering into such sale and leaseback transaction, in either
case divided first by the number of full years of the term of
the lease and then multiplied by the number of full years of
such term remaining at the time of determination, without regard
to any renewal or extension options contained in the lease.
Events of
Default
Each of the following is an event of default under the indenture
with respect to the notes; provided, however, that the event of
default described in the fourth bullet point below will
terminate pursuant to the termination provision of the indenture
and will no longer be applicable to the notes on and after the
termination date referred to under Restrictive
Covenants above:
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our failure to pay principal or premium, if any, on the notes
when due, including at maturity or upon redemption,
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our failure to pay any interest on the notes for 30 days
after interest becomes due,
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our failure to perform, or our breach in any material respect
of, any other covenant or warranty in the indenture, other than
a covenant or warranty included in the indenture solely for the
benefit of another series of our debt securities issued under
the indenture, for 90 days after either the trustee or
holders of at least 25% in principal amount of the outstanding
notes have given us written notice of the breach in the manner
required by the indenture,
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the default by us or any subsidiary, other than a project
finance subsidiary, of ours in the payment, when due, after the
expiration of any applicable grace period, of principal of
indebtedness for money
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S-17
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borrowed, other than non-recourse debt, in the aggregate
principal amount then outstanding of $50 million or more,
or acceleration of any indebtedness for money borrowed in such
aggregate principal amount so that it becomes due and payable
prior to the date on which it would otherwise have become due
and payable and such acceleration is not rescinded or such
default is not cured within 30 days after notice to us in
accordance with the indenture, and
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specified events involving bankruptcy, insolvency or
reorganization,
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provided, however, that no event described in the third, fourth
or fifth bullet points above will be an event of default until
an officer of the trustee, assigned to and working in the
trustees corporate trust department, has actual knowledge
of the event or until the trustee receives written notice of the
event at its corporate trust office, and the notice refers to
the notes generally, us or the indenture. (Section 501)
If an event of default occurs and is continuing with respect to
the notes, either the trustee or the holders of at least 25% in
principal amount of the outstanding notes may declare the
principal amount of the notes due and immediately payable. In
order to declare the principal amount of the notes due and
immediately payable, the trustee or the holders must deliver a
notice that satisfies the requirements of the indenture. Upon a
declaration by the trustee or the holders, we will be obligated
to pay the principal amount of the notes.
This right does not apply if an event of default described in
the fifth bullet point above occurs. If one of the events of
default described in the fifth bullet point above occurs and is
continuing, the notes then outstanding under the indenture shall
be due and payable immediately.
After any declaration of acceleration of the notes, but before a
judgment or decree for payment, the holders of a majority in
principal amount of the outstanding notes may, under certain
circumstances, rescind and annul the declaration of acceleration
if all events of default, other than the non-payment of
principal, have been cured or waived as provided in the
indenture. (Section 502) For information regarding
waiver of defaults, please read Description of Our Senior
Debt Securities Modification and Waiver in the
accompanying prospectus.
If an event of default occurs and is continuing, the trustee
will generally have no obligation to exercise any of its rights
or powers under the indenture at the request or direction of any
of the holders, unless the holders offer reasonable indemnity to
the trustee. (Section 603) The holders of a majority
in principal amount of the outstanding notes will generally have
the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising
any trust or power conferred on the trustee for the notes,
provided that:
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the direction is not in conflict with any law or the indenture,
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the trustee may take any other action it deems proper which is
not inconsistent with the direction, and
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the trustee will generally have the right to decline to follow
the direction if an officer of the trustee determines, in good
faith, that the proceeding would involve the trustee in personal
liability or would otherwise be contrary to applicable law.
(Section 512)
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A holder of a note may only pursue a remedy under the indenture
if:
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the holder has previously given the trustee written notice of a
continuing event of default for the notes,
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holders of at least 25% in principal amount of the outstanding
notes have made a written request to the trustee to pursue that
remedy,
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the holders have offered reasonable indemnity to the trustee,
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the trustee fails to pursue that remedy within 60 days
after receipt of the notice, request and offer of
indemnity, and
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during that
60-day
period, the holders of a majority in principal amount of the
notes do not give the trustee a direction inconsistent with the
request. (Section 507)
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However, these limitations do not apply to a suit by a holder of
a note demanding payment of the principal, premium, if any, or
interest on a note on or after the date the payment is due.
(Section 508)
S-18
We will be required to furnish to the trustee annually a
statement by some of our officers regarding our performance or
observance of any of the terms of the indenture and specifying
all of our known defaults, if any. (Section 1004)
Defeasance
If we deposit with the trustee funds or government securities
sufficient to make payments on the notes on the dates those
payments are due and payable, then, at our option, either of the
following will occur:
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we will be discharged from our obligations with respect to the
notes (legal defeasance), or
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we will no longer have any obligation to comply with the
restrictive covenants under the indenture and the related events
of default in the third bullet point under
Events of Default above, the events of
default described in the fourth bullet point under
Events of Default above and the
restrictions described under Description of Our Senior
Debt Securities Consolidation, Merger and Sale of
Assets in the accompanying prospectus will no longer apply
to us, but some of our other obligations under the indenture and
the notes, including our obligation to make payments on those
notes, will survive.
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If we effect legal defeasance of the notes, the holders of the
notes will not be entitled to the benefits of the indenture,
except for our obligations to:
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register the transfer or exchange of the notes,
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replace mutilated, destroyed, lost or stolen notes, and
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maintain paying agencies and hold moneys for payment in trust.
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We will be required to deliver to the trustee an opinion of
counsel that the deposit and related defeasance would not cause
the holders of the notes to recognize gain or loss for federal
income tax purposes and that the holders would be subject to
federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if the deposit and
related defeasance had not occurred. If we elect legal
defeasance, that opinion of counsel must be based upon a ruling
from the United States Internal Revenue Service or a change in
law to that effect. (Sections 1401, 1402, 1403 and 1404)
Payment
and Paying Agent
We have designated the trustee as the sole paying agent for the
notes.
Exchange
and Transfer of the Notes
We will issue the notes in registered form, without coupons. We
will only issue notes in denominations of integral multiples of
$1,000.
Holders may present notes for exchange or for registration of
transfer at the office of the security registrar or at the
office of any transfer agent we designate for that purpose. The
security registrar or designated transfer agent will exchange or
transfer the notes if it is satisfied with the documents of
title and identity of the person making the request. We will not
charge a service charge for any exchange or registration of
transfer of notes. However, we may require payment of a sum
sufficient to cover any tax or other governmental charge payable
for the exchange or registration of transfer. The trustee will
serve as the security registrar. (Section 305) At any
time we may:
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designate additional transfer agents,
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rescind the designation of any transfer agent, or
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approve a change in the office of any transfer agent.
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However, we are required to maintain a transfer agent in each
place of payment for the notes at all times. (Sections 305
and 1002)
S-19
In the event we elect to redeem the notes, neither we nor the
trustee will be required to register the transfer or exchange of
the notes:
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during the period beginning at the opening of business
15 days before the day we mail the notice of redemption for
the notes and ending at the close of business on the day the
notice is mailed, or
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if we have selected the notes for redemption, in whole or in
part, except for the unredeemed portion of the notes.
(Section 305)
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Regarding
the Trustee
The Bank of New York Trust Company, National Association,
successor to JPMorgan Chase Bank, National Association, is the
trustee, security registrar and paying agent under the indenture
for the notes. As of March 31, 2008, the trustee served as
trustee for approximately $2.5 billion aggregate principal
amount of our debt securities. In addition, the trustee served
as trustee or fiscal agent for debt securities of our affiliates
aggregating approximately $5.8 billion as of March 31,
2008.
Our affiliates maintain brokerage relationships and a rabbi
trust with the trustee and its affiliates.
Book-Entry
Delivery and Settlement
We will issue the notes in the form of one or more permanent
global notes in definitive, fully registered, book-entry form.
The global notes will be deposited with or on behalf of The
Depository Trust Company and registered in the name of
Cede & Co., as nominee of DTC, or will remain in the
custody of the trustee in accordance with the FAST Balance
Certificate Agreement between DTC and the trustee.
Beneficial interests in the global notes will be represented
through book-entry accounts of financial institutions acting on
behalf of beneficial owners as direct and indirect participants
in DTC. Investors may hold interests in the global notes through
DTC either directly if they are participants in DTC or
indirectly through organizations that are participants in DTC.
DTC has advised us as follows:
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DTC is a limited-purpose trust company organized under the New
York Banking Law, a banking organization within the
meaning of the New York Banking Law, a member of the Federal
Reserve System, a clearing corporation within the
meaning of the New York Uniform Commercial Code and a
clearing agency registered under Section 17A of
the Securities Exchange Act of 1934.
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DTC holds securities that its participants deposit with DTC and
facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
participants accounts, thereby eliminating the need for
physical movement of securities certificates.
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Direct participants include securities brokers and dealers,
banks, trust companies, clearing corporations and other
organizations.
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DTC is owned by a number of its direct participants and by The
New York Stock Exchange, Inc., the American Stock Exchange LLC
and the Financial Industry Regulatory Authority, Inc.
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Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly.
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The rules applicable to DTC and its direct and indirect
participants are on file with the SEC.
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We have provided the description of the operations and
procedures of DTC in this prospectus supplement solely as a
matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to change by it
from time to time. Neither we nor the underwriters or the
trustee takes any responsibility for these operations or
procedures, and you are urged to contact DTC or its participants
directly to discuss these matters.
S-20
We expect that under procedures established by DTC:
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upon deposit of the global notes with DTC or its custodian, DTC
will credit on its internal system the accounts of direct
participants designated by the underwriters with portions of the
principal amounts of the global notes; and
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ownership of the notes will be shown on, and the transfer of
ownership thereof will be effected only through, records
maintained by DTC or its nominee, with respect to interests of
direct participants, and the records of direct and indirect
participants, with respect to interests of persons other than
participants.
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The laws of some jurisdictions may require that purchasers of
securities take physical delivery of those securities in
definitive form. Accordingly, the ability to transfer interests
in the notes represented by a global note to those persons may
be limited. In addition, because DTC can act only on behalf of
its participants, who in turn act on behalf of persons who hold
interests through participants, the ability of a person having
an interest in notes represented by a global note to pledge or
transfer those interests to persons or entities that do not
participate in DTCs system, or otherwise to take actions
in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a
global note, DTC or that nominee will be considered the sole
owner or holder of the notes represented by that global note for
all purposes under the indenture and under the notes. Except as
provided below, owners of beneficial interests in a global note
will not be entitled to have notes represented by that global
note registered in their names, will not receive or be entitled
to receive physical delivery of certificated notes and will not
be considered the owners or holders thereof under the indenture
or under the notes for any purpose, including with respect to
the giving of any direction, instruction or approval to the
trustee. Accordingly, each holder owning a beneficial interest
in a global note must rely on the procedures of DTC and, if that
holder is not a direct or indirect participant, on the
procedures of the participant through which that holder owns its
interest, to exercise any rights of a holder of notes under the
indenture or the global note.
Neither we nor the trustee will have any responsibility or
liability for any aspect of the records relating to or payments
made on account of notes by DTC, or for maintaining, supervising
or reviewing any records of DTC relating to the notes.
Payments on the notes represented by the global notes will be
made to DTC or its nominee, as the case may be, as the
registered owner thereof. We expect that DTC or its nominee,
upon receipt of any payment on the notes represented by a global
note, will credit participants accounts with payments in
amounts proportionate to their respective beneficial interests
in the global note as shown in the records of DTC or its
nominee. We also expect that payments by participants to owners
of beneficial interests in the global note held through such
participants will be governed by standing instructions and
customary practice as is now the case with securities held for
the accounts of customers registered in the names of nominees
for such customers. The participants will be responsible for
those payments.
Initial settlement for the notes will be made in immediately
available funds. Secondary market trading between DTC
participants will occur in the ordinary way in accordance with
DTC rules and will be settled in immediately available funds.
Although DTC has agreed to the foregoing procedures to
facilitate transfers of the notes among its participants, it is
under no obligation to perform or continue to perform such
procedures and such procedures may be changed or discontinued at
any time.
Certificated
Notes
Certificated notes will be issued to each person that DTC
identifies as the beneficial owner of the notes represented by
the global notes, upon surrender by DTC of the global notes, if
(i) DTC or any successor depositary (the
depositary) notifies us that it is no longer willing
or able to act as a depositary for the global notes or DTC
ceases to be registered as a clearing agency under the
Securities Exchange Act of 1934 and a successor depositary is
not appointed within 90 days of such notice or cessation,
(ii) we, at our option and subject to DTC procedures,
notify the trustee in writing that we elect to cause the
issuance of notes in definitive form under the indenture or
(iii) upon the occurrence of certain other events as
provided pursuant to the indenture.
S-21
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement between us and the underwriters named below, for whom
Barclays Capital Inc., Credit Suisse Securities (USA) LLC and
Lehman Brothers Inc. are acting as representatives, we have
agreed to sell to each of the underwriters, and each of the
underwriters has severally agreed to purchase from us, the
principal amount of notes set forth opposite its name below.
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Principal
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Underwriter
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Amount
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Barclays Capital Inc.
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$
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70,000,000
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Credit Suisse Securities (USA) LLC
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70,000,000
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Lehman Brothers Inc.
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70,000,000
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HSBC Securities (USA) Inc.
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15,000,000
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Lazard Capital Markets LLC
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15,000,000
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RBC Capital Markets Corporation
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15,000,000
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SunTrust Robinson Humphrey, Inc.
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15,000,000
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Wachovia Capital Markets, LLC
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15,000,000
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Wells Fargo Securities, LLC
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15,000,000
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Total
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$
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300,000,000
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The obligations of the underwriters, including their agreement
to purchase the notes from us, are several and not joint. The
underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions and that the
underwriters will be obligated to purchase all of the notes if
any are purchased. The underwriting agreement also provides that
if an underwriter defaults, the purchase commitments of the
non-defaulting underwriters may be increased or the offering of
notes may be terminated.
The underwriters have advised us that they propose to initially
offer the notes to the public at the offering price appearing on
the cover page of this prospectus supplement and may also offer
the notes to dealers at a price that represents a concession not
in excess of 0.40% of the principal amount of the notes. Any
underwriter may allow, and any of these dealers may re-allow, a
concession not in excess of 0.25% of the principal amount of the
notes. After the initial offering of the notes, the underwriters
may from time to time vary the offering price and other selling
terms.
The notes are a new issue of securities with no established
trading market. We do not intend to apply for listing of the
notes on any national securities exchange. The underwriters have
advised us that they intend to make a market in the notes after
the offering, although they are under no obligation to do so.
The underwriters may discontinue any market-making activities at
any time without any notice. We can give no assurance as to the
liquidity of the trading market for the notes or that a public
trading market for the notes will develop.
In connection with the offering of the notes, the underwriters
may engage in transactions that stabilize, maintain or otherwise
affect the price of the notes. Specifically, the underwriters
may overallot in connection with the offering of the notes,
creating a syndicate short position. In addition, the
underwriters may bid for, and purchase, the notes in the open
market to cover short positions or to stabilize the price of the
notes. Finally, the underwriters may reclaim selling concessions
allowed for distributing the notes in the offering, if the
underwriters repurchase previously distributed notes in
transactions to cover short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize
or maintain the market prices of the notes above independent
market levels. The underwriters are not required to engage in
any of these activities, and may end any of them at any time
without notice.
We estimate that our share of the total expenses of the
offering, excluding underwriting discounts and commissions, will
be approximately $490,000.
S-22
We have agreed to indemnify the underwriters against, or
contribute to payments that the underwriters may be required to
make in respect of, certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
Lazard Capital Markets LLC (Lazard Capital Markets) has entered
into an agreement with Mitsubishi UFJ Securities (USA), Inc.
(MUS(USA)) pursuant to which MUS(USA) provides certain advisory
and/or other
services to Lazard Capital Markets, including in respect of this
offering. In return for the provision of such services by
MUS(USA) to Lazard Capital Markets, Lazard Capital Markets will
pay to MUS(USA) a mutually agreed upon fee.
In the ordinary course of their respective businesses, the
underwriters
and/or their
affiliates have engaged, and may in the future engage, in
commercial banking, investment banking or investment management
transactions with us and our affiliates for which they have
received, and will in the future receive, customary
compensation. Affiliates of certain of the underwriters are
lenders under our revolving credit facility. We intend to use a
portion of the net proceeds of the offering in connection with
the repayment of borrowings under our revolving credit facility,
as described under Use of Proceeds. Because more
than 10% of the net offering proceeds of the offering may be
paid to the underwriters or their respective affiliates or
associated persons, this offering is being made pursuant to the
provisions of Rule 2710(h) of the Conduct Rules of the
National Association of Securities Dealers.
S-23
LEGAL
MATTERS
Baker Botts L.L.P., Houston, Texas will pass on the validity of
the notes offered in this prospectus supplement. Scott E.
Rozzell, Esq., our Executive Vice President, General
Counsel and Corporate Secretary, or Rufus S. Scott, Esq.,
our Senior Vice President, Deputy General Counsel and Assistant
Corporate Secretary, may pass on other legal matters for us.
Dewey & LeBoeuf LLP will pass on certain legal matters
for the underwriters.
EXPERTS
The consolidated financial statements and the related
consolidated financial statement schedule, incorporated in this
document by reference from our Annual Report on
Form 10-K
for the year ended December 31, 2007, have been audited by
Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their reports (which
reports (1) express an unqualified opinion on the
consolidated financial statements and include an explanatory
paragraph regarding the adoption of a new accounting standard
related to conditional asset retirement obligations in 2005 and
(2) express an unqualified opinion on the consolidated
financial statement schedule), which are incorporated herein by
reference. Such consolidated financial statements and
consolidated financial statement schedule have been so
incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
In this prospectus supplement, including the information we
incorporate by reference, we make statements concerning our
expectations, beliefs, plans, objectives, goals, strategies,
future events or performance and underlying assumptions and
other statements that are not historical facts. These statements
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. You can generally identify our forward-looking
statements by the words anticipate,
believe, continue, could,
estimate, expect, forecast,
goal, intend, may,
objective, plan, potential,
predict, projection, should,
will, or other similar words.
We have based our forward-looking statements on our
managements beliefs and assumptions based on information
available to our management 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, we cannot assure
you that actual results will not differ materially from those
expressed or implied by our forward-looking statements.
The following are some of the factors that could cause actual
results to differ materially from those expressed or implied in
forward-looking statements:
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state and federal legislative and regulatory actions or
developments, including deregulation, re-regulation,
environmental regulations, including regulations related to
global climate change, and changes in or application of laws or
regulations applicable to the various aspects of our business;
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timely and appropriate rate actions and increases, allowing
recovery of costs and a reasonable return on investment;
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cost overruns on major capital projects that cannot be recouped
in prices;
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industrial, commercial and residential growth in our service
territory and changes in market demand and demographic patterns;
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the timing and extent of changes in commodity prices,
particularly natural gas;
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the timing and extent of changes in the supply of natural gas;
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the timing and extent of changes in natural gas basis
differentials;
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weather variations and other natural phenomena;
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S-24
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changes in interest rates or rates of inflation;
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commercial bank and financial market conditions, our access to
capital, the cost of such capital, and the results of our
financing and refinancing efforts, including availability of
funds in the debt capital markets;
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actions by rating agencies;
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effectiveness of our risk management activities;
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inability of various counterparties to meet their obligations to
us;
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non-payment for our services due to financial distress of our
customers, including Reliant Energy, Inc. (RRI);
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the ability of RRI and its subsidiaries to satisfy their other
obligations to us, including indemnity obligations, or in
connection with the contractual arrangements pursuant to which
we are their guarantor;
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the outcome of litigation brought by or against us;
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our ability to control costs;
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the investment performance of CenterPoint Energys employee
benefit plans;
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our potential business strategies, including acquisitions or
dispositions of assets or businesses, which we cannot assure
will be completed or will have the anticipated benefits to us;
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acquisition and merger activities involving our parent or our
competitors; and
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other factors we discuss in Risk Factors beginning
on page S-4
of this prospectus supplement, in Item 1A of Part I of
our Annual Report on
Form 10-K
for the year ended December 31, 2007 and other reports we
file from time to time with the Securities and Exchange
Commission.
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You should not place undue reliance on forward-looking
statements. Each forward-looking statement speaks only as of the
date of the particular statement.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other
information with the SEC. You may read and copy any document we
file with the SEC at the SECs public reference room
located at 100 F Street, N.E., Washington, D.C.
20549. You may obtain further information regarding the
operation of the SECs public reference room by calling the
SEC at
1-800-SEC-0330.
Our filings are also available to the public on the SECs
Internet site located at
http://www.sec.gov.
You can obtain information about us at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York
10005.
This prospectus supplement is part of a registration statement
we have filed with the SEC relating to the securities we may
offer. As permitted by SEC rules, this prospectus supplement
does not contain all of the information we have included in the
registration statement and the accompanying exhibits and
schedules we file with the SEC. You may refer to the
registration statement, the exhibits and the schedules for more
information about us and our securities. The registration
statement, exhibits and schedules are available at the
SECs public reference room or through its Internet site.
S-25
INCORPORATION
BY REFERENCE
We are incorporating by reference into this
prospectus supplement information we file with the SEC. This
means we are disclosing important information to you by
referring you to the documents containing the information. The
information we incorporate by reference is considered to be part
of this prospectus supplement. Information that we file later
with the SEC that is deemed incorporated by reference into this
prospectus supplement (but not information deemed to be
furnished to and not filed with the SEC) will automatically
update and supersede information previously included.
We are incorporating by reference into this prospectus
supplement the documents listed below and any subsequent filings
we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 (excluding
information deemed to be furnished and not filed with the SEC)
until all the securities are sold:
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our Annual Report on
Form 10-K
for the year ended December 31, 2007; and
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our Quarterly Report on
Form 10-Q
for the period ended March 31, 2008.
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You may also obtain a copy of our filings with the SEC at no
cost by writing to or telephoning us at the following address:
CenterPoint Energy Resources Corp.
c/o CenterPoint
Energy, Inc.
Attn: Investor Relations
P.O. Box 4567
Houston, Texas
77210-4567
(713) 207-6500
S-26
PROSPECTUS
CenterPoint Energy Resources Corp.
1111 Louisiana
Houston, Texas 77002
(713) 207-1111
CenterPoint
Energy Resources Corp.
$900,000,000
Senior Debt Securities
We may offer and sell up to $900,000,000 of our debt securities
in one or more series by using this prospectus. Unless we inform
you otherwise in a supplement to this prospectus, our debt
securities will be unsecured and will rank on a parity with all
of our other unsecured and unsubordinated indebtedness. We will
establish the terms for our debt securities at the time we sell
them and we will describe them in one or more supplements to
this prospectus. You should read this prospectus and the related
supplement carefully before you invest in our debt securities.
This prospectus may not be used to offer and sell our debt
securities unless accompanied by a prospectus supplement.
Investing in our debt securities involves risks. See
Risk Factors beginning on page 4 of this
prospectus.
Neither the Securities and Exchange Commission nor any
state securities commission has approved or disapproved of these
securities or determined whether this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is August 20, 2007.
TABLE OF
CONTENTS
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This prospectus is part of a registration statement we have
filed with the SEC using a shelf registration
process. Using this process, we may offer the securities
described in this prospectus in one or more offerings with a
total initial offering price of up to $900,000,000. This
prospectus provides you with a general description of the
securities we may offer. Each time we use this prospectus to
offer securities, we will file a supplement to this prospectus
with the SEC that will describe the specific terms of that
offering. The prospectus supplement may also add to, update or
change the information contained in this prospectus. Before you
invest, you should carefully read this prospectus, the
applicable prospectus supplement and the information contained
in the documents we refer to under the heading Where You
Can Find More Information.
You should rely only on the information contained or
incorporated by reference in this prospectus, any prospectus
supplement and any written communication from us or any
underwriter specifying the final terms of a particular offering.
We have not authorized anyone to provide you with different
information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not
assume that the information contained in this prospectus, any
prospectus supplement or any written communication from us or
any underwriter specifying the final terms of a particular
offering is accurate as of any date other than the date on the
front of that document. Any information we have incorporated by
reference is accurate only as of the date of the document
incorporated by reference.
References in this prospectus to the terms we,
us, our or other similar terms mean
CenterPoint Energy Resources Corp. and its subsidiaries, and
references to CenterPoint Energy mean our indirect
parent, CenterPoint Energy, Inc., unless the context clearly
indicates otherwise.
2
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other
information with the SEC. You may read and copy any document we
file with the SEC at the SECs public reference room
located at 100 F Street, N.E., Washington, D.C.
20549. You may obtain further information regarding the
operation of the SECs public reference room by calling the
SEC at
1-800-SEC-0330.
Our filings are also available to the public on the SECs
Internet site located at
http://www.sec.gov.
You can obtain information about us at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York
10005.
This prospectus is part of a registration statement we have
filed with the SEC relating to the securities we may offer. As
permitted by SEC rules, this prospectus does not contain all of
the information we have included in the registration statement
and the accompanying exhibits and schedules we file with the
SEC. You may refer to the registration statement, the exhibits
and the schedules for more information about us and our
securities. The registration statement, exhibits and schedules
are available at the SECs public reference room or through
its Internet site.
INCORPORATION
BY REFERENCE
We are incorporating by reference into this
prospectus information we file with the SEC. This means we are
disclosing important information to you by referring you to the
documents containing the information. The information we
incorporate by reference is considered to be part of this
prospectus. Information that we file later with the SEC that is
deemed incorporated by reference into this prospectus (but not
information deemed to be furnished to and not filed with the
SEC) will automatically update and supersede information
previously included.
We are incorporating by reference into this prospectus the
documents listed below and any subsequent filings we make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 (excluding information deemed to
be furnished and not filed with the SEC) until all the
securities are sold:
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our Annual Report on
Form 10-K
for the year ended December 31, 2006,
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our Quarterly Report on
Form 10-Q
for the period ended March 31, 2007,
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our Quarterly Report on
Form 10-Q
for the period ended June 30, 2007,
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our Current Reports on
Form 8-K
filed February 6, 2007 and July 6, 2007.
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You may also obtain a copy of our filings with the SEC at no
cost by writing to or telephoning us at the following address:
CenterPoint Energy Resources Corp.
c/o CenterPoint
Energy, Inc.
Attn: Investor Relations
P.O. Box 4567
Houston, Texas
77210-4567
(713) 207-6500
3
ABOUT
CENTERPOINT ENERGY RESOURCES CORP.
We own and operate natural gas distribution systems in six
states. Wholly owned subsidiaries of ours own interstate natural
gas pipelines and gas gathering systems and provide various
ancillary services. Another wholly owned subsidiary of ours
offers variable and fixed-price physical natural gas supplies
primarily to commercial and industrial customers and electric
and gas utilities. We are an indirect wholly owned subsidiary of
CenterPoint Energy, a public utility holding company.
Our principal executive offices are located at 1111 Louisiana,
Houston, Texas 77002 (telephone number:
713-207-1111).
Our businesses are influenced by many factors that are difficult
to predict and that involve uncertainties that may materially
affect actual operating results, cash flows and financial
condition. These risk factors include those described in the
documents that are incorporated by reference in this prospectus
(see Incorporation by Reference, above), and could
include additional uncertainties not presently known to us or
that we currently do not consider material. Before making an
investment decision, you should carefully consider these risks
as well as any other information we include or incorporate by
reference in this prospectus or include in any applicable
prospectus supplement.
4
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
In this prospectus, including the information we incorporate by
reference, we make statements concerning our expectations,
beliefs, plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements that
are not historical facts. These statements 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. You can generally identify our forward-looking
statements by the words anticipate,
believe, continue, could,
estimate, expect, forecast,
goal, intend, may,
objective, plan, potential,
predict, projection, should,
will or other similar words.
We have based our forward-looking statements on our
managements beliefs and assumptions based on information
available to our management 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, we cannot assure
you that actual results will not differ materially from those
expressed or implied by our forward-looking statements.
The following are some of the factors that could cause actual
results to differ materially from those expressed or implied in
forward-looking statements:
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state and federal legislative and regulatory actions or
developments, including deregulation, re-regulation and changes
in or application of laws or regulations applicable to the
various aspects of our business;
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timely and appropriate rate actions and increases, allowing
recovery of costs and a reasonable return on investment;
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industrial, commercial and residential growth in our service
territory and changes in market demand and demographic patterns;
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the timing and extent of changes in commodity prices,
particularly natural gas;
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the timing and extent of changes in the supply of natural gas;
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the timing and extent of changes in natural gas basis
differentials;
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changes in interest rates or rates of inflation;
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weather variations and other natural phenomena;
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commercial bank and financial market conditions, our access to
capital, the cost of such capital, and the results of our
financing and refinancing efforts, including availability of
funds in the debt capital markets;
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actions by rating agencies;
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effectiveness of our risk management activities;
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inability of various counterparties to meet their obligations to
us;
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the ability of Reliant Energy, Inc. (formerly Reliant Resources,
Inc.) and its subsidiaries to satisfy their obligations to us or
in connection with the contractual arrangements pursuant to
which we are their guarantor;
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the outcome of litigation brought by or against us;
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our ability to control costs;
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the investment performance of CenterPoint Energys employee
benefit plans;
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our potential business strategies, including acquisitions or
dispositions of assets or businesses, which we cannot assure
will be completed or will have the anticipated benefits to
us; and
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other factors we discuss in Risk Factors in our most
recent Annual Report on
Form 10-K.
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Additional or updated risk factors may be described in other
documents we file with the SEC and incorporate by reference in
this prospectus.
You should not place undue reliance on forward-looking
statements. Each forward-looking statement speaks only as of the
date of the particular statement.
5
RATIOS
OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratios of earnings from
continuing operations to fixed charges for each of the periods
indicated.
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Six Months
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Year Ended December 31,
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Ended
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2002
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2003
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2004
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2005
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2006
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June 30, 2007
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Ratio of earnings from continuing operations to fixed charges(1)
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2.25
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1.99
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2.20
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2.64
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2.67
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3.44
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We do not believe that the ratio for the six month period is
necessarily indicative of the ratios for the twelve month
periods due to the seasonal nature of our business. The ratios
were calculated pursuant to applicable rules of the SEC. |
Unless we inform you otherwise in the prospectus supplement, we
anticipate using any net proceeds from the sale of our
securities offered by this prospectus for general corporate
purposes. These purposes may include, but are not limited to:
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working capital,
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capital expenditures,
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acquisitions,
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the repayment or refinancing of debt, and
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loans to or investments in affiliates.
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Pending any specific application, we may initially invest funds,
directly or indirectly, in short-term marketable securities or
apply them to the reduction of short-term indebtedness.
6
DESCRIPTION
OF OUR SENIOR DEBT SECURITIES
The Senior Debt Securities offered by this prospectus will be
issued under an indenture, dated as of February 1, 1998, as
supplemented, between us and The Bank of New York
Trust Company, National Association (successor to JPMorgan
Chase Bank, National Association), as trustee. We have filed the
indenture as an exhibit to the registration statement of which
this prospectus is a part. We have summarized selected
provisions of the indenture and the Senior Debt Securities
below. This summary is not complete and is qualified in its
entirety by reference to the indenture. References to section
numbers in this prospectus, unless otherwise indicated, are
references to section numbers of the indenture. For purposes of
this summary, the terms we, our,
ours, and us refer only to CenterPoint
Energy Resources Corp. and not to any of our subsidiaries.
We may issue debt securities from time to time in one or more
series under the indenture. There is no limitation on the amount
of debt securities we may issue under the indenture. We will
describe the particular terms of each series of debt securities
we offer in a supplement to this prospectus. The terms of our
debt securities will include those set forth in the indenture
and those made a part of the indenture by the
Trust Indenture Act of 1939. You should carefully read the
summary below, the applicable prospectus supplement and the
provisions of the indenture that may be important to you before
investing in our debt securities.
Ranking
The debt securities offered by this prospectus will:
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be general unsecured obligations,
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rank equally in right of payment with all of our other existing
and future unsecured and unsubordinated indebtedness, and
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with respect to the assets and earnings of our subsidiaries,
effectively rank below all of the liabilities of our
subsidiaries.
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Subject to the exceptions, and subject to compliance with the
applicable requirements, set forth in the indenture, we may
discharge our obligations under the indenture with respect to
our debt securities as described below under
Defeasance.
Terms
We may issue debt securities in separate series from time to
time under the indenture. The total principal amount of debt
securities that may be issued under the indenture is unlimited.
Our
61/2% Debentures
due February 1, 2008 ($300 million outstanding as of
June 30, 2007), our 7.75% Notes due 2011
($550 million outstanding as of June 30, 2007), our
7.875% Senior Notes due 2013 ($762 million outstanding
as of June 30, 2007), our 5.95% Senior Notes due 2014
($160 million outstanding as of June 30, 2007), our
6.15% Senior Notes due 2016 ($325 million outstanding
as of June 30, 2007) and our 6.25% Senior Notes
due 2037 ($150 million outstanding as of June 30,
2007) are currently outstanding under the indenture. We may
limit the maximum total principal amount for the debt securities
of any series. However, any limit may be increased by resolution
of our board of directors. (Section 301) We will
establish the terms of each series of debt securities, which may
not be inconsistent with the indenture, in a supplemental
indenture.
We will describe the specific terms of the series of debt
securities being offered in a supplement to this prospectus.
These terms will include some or all of the following:
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the title of the debt securities,
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any limit on the total principal amount of the debt securities
of the series,
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the date or dates on which the principal of the debt securities
will be payable or the method used to determine or extend those
dates,
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any interest rate on the debt securities, any date from which
interest will accrue, any interest payment dates and regular
record dates for interest payments, or the method used to
determine any of the foregoing, and the basis for calculating
interest if other than a
360-day year
of twelve
30-day
months,
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the place or places where payments on the debt securities will
be payable, the debt securities may be presented for
registration of transfer or exchange, and notices and demands to
or upon us relating to the debt securities may be made,
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any provisions that would allow or obligate us to redeem or
purchase the debt securities prior to their maturity,
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the denominations in which we will issue the debt securities, if
other than denominations of an integral multiple of $1,000,
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any provisions that would determine payments on the debt
securities by reference to an index or a formula,
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any foreign currency, currencies or currency units in which
payments on the debt securities will be payable and the manner
for determining the equivalent amount in $U.S.,
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any provisions for payments on the debt securities in one or
more currencies or currency units other than those in which the
debt securities are stated to be payable,
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the percentage of the principal amount at which the debt
securities will be issued and the portion of the principal
amount of the debt securities that will be payable if the
maturity of the debt securities is accelerated, if other than
the entire principal amount,
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if the principal amount to be paid at the stated maturity of the
debt securities is not determinable as of one or more dates
prior to the stated maturity, the amount that will be deemed to
be the principal amount as of any such date for any purpose,
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any variation of the defeasance and covenant defeasance sections
of the indenture and the manner in which our election to defease
the debt securities will be evidenced, if other than by a board
resolution,
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whether we will issue the debt securities in the form of
temporary or permanent global securities, the depositories for
the global securities, and provisions for exchanging or
transferring the global securities,
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whether the interest rate of the debt securities may be reset,
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whether the stated maturity of the debt securities may be
extended,
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any addition to or change in the events of default for the debt
securities and any change in the right of the trustee or the
holders of the debt securities to declare the principal amount
of the debt securities due and payable,
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any addition to or change in the covenants in the indenture,
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any additions or changes to the indenture necessary to issue the
debt securities in bearer form, registrable or not registrable
as to principal, and with or without interest coupons,
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the appointment of any paying agents for the debt securities, if
other than the trustee,
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the terms of any right to convert or exchange the debt
securities into any other securities or property,
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the terms and conditions, if any, pursuant to which the debt
securities may be secured,
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any restriction or condition on the transferability of the debt
securities, and
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any other terms of the debt securities consistent with the
indenture. (Section 301)
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We may sell the debt securities, including original issue
discount securities, at a substantial discount below their
stated principal amount. If there are any special United States
federal income tax considerations applicable to debt securities
we sell at an original issue discount, we will describe them in
the prospectus
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supplement. In addition, we will describe in the prospectus
supplement any special United States federal income tax
considerations and any other special considerations for any debt
securities we sell which are denominated in a currency or
currency unit other than $U.S.
Form,
Exchange and Transfer
We will issue the debt securities in registered form, without
coupons. Unless we inform you otherwise in the prospectus
supplement, we will only issue debt securities in denominations
of integral multiples of $1,000. (Section 302)
Holders generally will be able to exchange debt securities for
other debt securities of the same series with the same total
principal amount and the same terms but in different authorized
denominations. (Section 305)
Holders may present debt securities for exchange or for
registration of transfer at the office of the security registrar
or at the office of any transfer agent we designate for that
purpose. The security registrar or designated transfer agent
will exchange or transfer the debt securities if it is satisfied
with the documents of title and identity of the person making
the request. We will not charge a service charge for any
exchange or registration of transfer of debt securities.
However, we may require payment of a sum sufficient to cover any
tax or other governmental charge payable for the registration of
transfer or exchange. Unless we inform you otherwise in the
prospectus supplement, we will appoint the trustee as security
registrar. We will identify any transfer agent in addition to
the security registrar in the prospectus supplement.
(Section 305) At any time we may:
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designate additional transfer agents,
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rescind the designation of any transfer agent, or
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approve a change in the office of any transfer agent.
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However, we are required to maintain a transfer agent in each
place of payment for the debt securities at all times.
(Sections 305 and 1002)
If we elect to redeem a series of debt securities, neither we
nor the trustee will be required:
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to issue, register the transfer of or exchange any debt
securities of that series during the period beginning at the
opening of business 15 days before the day we mail the
notice of redemption for the series and ending at the close of
business on the day the notice is mailed, or
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to register the transfer or exchange of any debt security of
that series if we have so selected the series for redemption, in
whole or in part, except for the unredeemed portion of the
series. (Section 305)
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Book-Entry
We may issue the debt securities of a series in the form of one
or more global debt securities that would be deposited with a
depositary or its nominee identified in the prospectus
supplement. We may issue global debt securities in either
temporary or permanent form. We will describe in the prospectus
supplement the terms of any depositary arrangement and the
rights and limitations of owners of beneficial interests in any
global debt security.
Payment
and Paying Agents
Under the indenture, we will pay interest on the debt securities
to the persons in whose names the debt securities are registered
at the close of business on the regular record date for each
interest payment. However, unless we inform you otherwise in the
prospectus supplement, we will pay the interest payable on the
debt securities at their stated maturity to the persons to whom
we pay the principal amount of the debt securities. The initial
payment of interest on any series of debt securities issued
between a regular record date and the related interest payment
date will be payable in the manner provided by the terms of the
series, which we will describe in the prospectus supplement.
(Section 307)
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Unless we inform you otherwise in the prospectus supplement, we
will pay principal, premium, if any, and interest on the debt
securities at the offices of the paying agents we designate.
However, except in the case of a global security, we may pay
interest by:
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check mailed to the address of the person entitled to the
payment as it appears in the security register, or
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by wire transfer in immediately available funds to the place and
account designated in writing by the person entitled to the
payment as specified in the security register.
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We will designate the trustee as the sole paying agent for the
debt securities unless we inform you otherwise in the prospectus
supplement. If we initially designate any other paying agents
for a series of debt securities, we will identify them in the
prospectus supplement. At any time, we may designate additional
paying agents or rescind the designation of any paying agents.
However, we are required to maintain a paying agent in each
place of payment for the debt securities at all times.
(Sections 307 and 1002)
Any money deposited with the trustee or any paying agent for the
payment of principal, premium, if any, and interest on the debt
securities that remains unclaimed for two years after the date
the payments became due, may be repaid to us upon our request.
After we have been repaid, holders entitled to those payments
may only look to us for payment as our unsecured general
creditors. The trustee and any paying agents will not be liable
for those payments after we have been repaid. (Section 1003)
Restrictive
Covenants
We will describe any restrictive covenants for any series of
debt securities in the prospectus supplement.
Consolidation,
Merger and Sale of Assets
Under the indenture, we may not consolidate with or merge into,
or convey, transfer or lease our properties and assets
substantially as an entirety, to any person, referred to as a
successor person, and we may not permit any person
to consolidate with or merge into, or convey, transfer or lease
its properties and assets substantially as an entirety to us,
unless:
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the successor person is a corporation, partnership, trust or
other entity organized and validly existing under the laws of
the United States of America or any state thereof or the
District of Columbia,
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the successor person expressly assumes our obligations with
respect to the debt securities and the indenture,
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immediately after giving effect to the transaction, no event of
default, and no event which, after notice or lapse of time or
both, would become an event of default, would occur and be
continuing, and
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we have delivered to the trustee the certificates and opinions
required under the indenture. (Section 801)
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As used in the indenture, the term corporation means
a corporation, association, company, joint-stock company or
business trust.
Events of
Default
Unless we inform you otherwise in the prospectus supplement,
each of the following will be an event of default under the
indenture for a series of debt securities:
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our failure to pay principal or premium, if any, on that series
when due,
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our failure to pay any interest on that series for 30 days
after the interest becomes due,
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our failure to deposit any sinking fund payment relating to that
series, when due,
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our failure to perform, or our breach in any material respect
of, any other covenant or warranty in the indenture, other than
a covenant or warranty included in the indenture solely for the
benefit of another series of debt securities, for 90 days
after either the trustee or holders of at least 25% in principal
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amount of the outstanding debt securities of that series have
given us written notice of the breach in the manner required by
the indenture,
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specified events involving our bankruptcy, insolvency or
reorganization, and
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any other event of default we may provide for that series,
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provided, however, that no event described in the fourth, fifth
or sixth bullet points above will be an event of default until
an officer of the trustee, assigned to and working in the
trustees corporate trust department, has actual knowledge
of the event or until the trustee receives written notice of the
event at its corporate trust office, and the notice refers to
the debt securities generally, us or the indenture.
(Section 501)
If an event of default for a series of debt securities occurs
and is continuing, either the trustee or the holders of at least
25% in principal amount of the outstanding debt securities of
that series may declare the principal amount of all the debt
securities of that series due and immediately payable. In order
to declare the principal amount of that series of debt
securities due and immediately payable, the trustee or the
holders must deliver a notice that satisfies the requirements of
the indenture. Upon a declaration by the trustee or the holders,
we will be obligated to pay the principal amount of the series
of debt securities.
The right described in the preceding paragraph does not apply if:
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an event of default described in the fifth bullet point above
occurs, or
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an event of default described in the fourth or sixth bullet
points above that applies to all outstanding debt securities
occurs.
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If any of these events of default occurs and is continuing,
either the trustee or holders of at least 25% in principal
amount of all of the debt securities then outstanding, treated
as one class, may declare the principal amount of all of the
debt securities then outstanding to be due and payable
immediately. In order to declare the principal amount of the
debt securities due and immediately payable, the trustee or the
holders must deliver a notice that satisfies the requirements of
the indenture. Upon a declaration by the trustee or the holders,
we will be obligated to pay the principal amount of the debt
securities.
However, after any declaration of acceleration of a series of
debt securities, but before a judgment or decree for payment has
been obtained, the holders of a majority in principal amount of
the outstanding debt securities of that series may rescind and
annul the declaration of acceleration if:
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we have paid or deposited with the trustee a sum sufficient to
pay:
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all overdue interest,
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the principal and premium, if any, due otherwise than by the
declaration of acceleration and any interest on such amounts,
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any interest on overdue interest, to the extent legally
permitted, and
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all amounts due to the trustee under the indenture, and
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all events of default with respect to that series of debt
securities, other than the nonpayment of the principal which
became due solely by virtue of the declaration of acceleration,
have been cured or waived. (Section 502)
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If an event of default occurs and is continuing, the trustee
will generally have no obligation to exercise any of its rights
or powers under the indenture at the request or direction of any
of the holders, unless the holders offer reasonable indemnity to
the trustee. (Section 603) The holders of a majority
in principal amount of the outstanding debt securities of any
series will generally have the right to direct the time, method
and place of conducting any proceeding for any remedy available
to the trustee or exercising any trust or power conferred on the
trustee for the debt securities of that series, provided that:
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the direction is not in conflict with any law or the indenture,
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the trustee may take any other action it deems proper which is
not inconsistent with the direction, and
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the trustee will generally have the right to decline to follow
the direction if an officer of the trustee determines, in good
faith, that the proceeding would involve the trustee in personal
liability or would otherwise be contrary to applicable law.
(Section 512)
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A holder of a debt security of any series may only pursue a
remedy under the indenture if:
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the holder gives the trustee written notice of a continuing
event of default for that series,
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holders of at least 25% in principal amount of the outstanding
debt securities of that series make a written request to the
trustee to institute proceedings with respect to the event of
default,
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the holders offer reasonable indemnity to the trustee,
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the trustee fails to pursue that remedy within 60 days
after receipt of the notice, request and offer of
indemnity, and
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during that
60-day
period, the holders of a majority in principal amount of the
debt securities of that series do not give the trustee a
direction inconsistent with the request. (Section 507)
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However, these limitations do not apply to a suit by a holder of
a debt security demanding payment of the principal, premium, if
any, or interest on a debt security on or after the date the
payment is due. (Section 508)
We will be required to furnish to the trustee annually a
statement by some of our officers regarding our performance or
observance of any of the terms of the indenture and specifying
all of our known defaults, if any. (Section 1004)
Modification
and Waiver
We may enter into one or more supplemental indentures with the
trustee without the consent of the holders of the debt
securities in order to:
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evidence the succession of another corporation to us, or
successive successions and the assumption of our covenants,
agreements and obligations by a successor,
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add to our covenants for the benefit of the holders of any
series of debt securities or to surrender any of our rights or
powers,
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add events of default for any series of debt securities,
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add to or change any provisions of the indenture to the extent
necessary to issue debt securities in bearer form,
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add to, change or eliminate any provision of the indenture
applying to one or more series of debt securities, provided that
if such action adversely affects the interests of any holder of
any series of debt securities, the addition, change or
elimination will become effective with respect to that series
only when no security of that series remains outstanding,
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convey, transfer, assign, mortgage or pledge any property to or
with the trustee or surrender any right or power conferred upon
us by the indenture,
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establish the form or terms of any series of debt securities,
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provide for uncertificated securities in addition to
certificated securities,
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evidence and provide for successor trustees or add or change any
provisions to the extent necessary to appoint a separate trustee
or trustees for a specific series of debt securities,
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correct any ambiguity, defect or inconsistency under the
indenture, provided that such action does not adversely affect
the interests of the holders of any series of debt securities,
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supplement any provisions of the indenture necessary to defease
and discharge any series of debt securities, provided that such
action does not adversely affect the interests of the holders of
any series of debt securities,
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comply with the rules or regulations of any securities exchange
or automated quotation system on which any debt securities are
listed or traded, or
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add, change or eliminate any provisions of the indenture in
accordance with any amendments to the Trust Indenture Act
of 1939, provided that the action does not adversely affect the
rights or interests of any holder of debt securities.
(Section 901)
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We may enter into one or more supplemental indentures with the
trustee in order to add to, change or eliminate provisions of
the indenture or to modify the rights of the holders of one or
more series of debt securities if we obtain the consent of the
holders of a majority in principal amount of the outstanding
debt securities of each series affected by the supplemental
indenture, treated as one class. However, without the consent of
the holders of each outstanding debt security affected by the
supplemental indenture, we may not enter into a supplemental
indenture that:
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changes the stated maturity of the principal of, or any
installment of principal of or interest on, any debt security,
except to the extent permitted by the indenture,
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reduces the principal amount of, or any premium or interest on,
any debt security,
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reduces the amount of principal of an original issue discount
security or any other debt security payable upon acceleration of
the maturity thereof,
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changes the place or currency of payment of principal, premium,
if any, or interest,
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impairs the right to institute suit for the enforcement of any
payment on any debt security,
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reduces the percentage in principal amount of outstanding debt
securities of any series, the consent of whose holders is
required for modification of the indenture, for waiver of
compliance with certain provisions of the indenture or for
waiver of certain defaults,
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makes certain modifications to the provisions for modification
of the indenture and for certain waivers, except to increase the
principal amount of debt securities necessary to consent to any
such change,
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makes any change that adversely affects the right to convert or
exchange any debt security or decreases the conversion or
exchange rate or increases the conversion price of any
convertible or exchangeable debt security, or
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changes the terms and conditions pursuant to which any series of
debt securities is secured in a manner adverse to the holders of
the debt securities. (Section 902)
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Holders of a majority in principal amount of the outstanding
debt securities of any series may waive past defaults or
noncompliance with restrictive provisions of the indenture.
However, such holders of a majority in principal amount may not
waive, and consequently, the consent of holders of each
outstanding debt security of a series would be required to:
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waive any default in the payment of principal, premium, if any,
or interest, or
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waive any covenants and provisions of the indenture that may not
be amended without the consent of the holder of each outstanding
debt security of the series affected. (Sections 513 and
1006)
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In order to determine whether the holders of the requisite
principal amount of the outstanding debt securities have taken
an action under the indenture as of a specified date:
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the principal amount of an original issue discount
security that will be deemed to be outstanding will be the
amount of the principal that would be due and payable as of that
date upon acceleration of the maturity to that date,
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if, as of that date, the principal amount payable at the stated
maturity of a debt security is not determinable, for example,
because it is based on an index, the principal amount of the
debt security deemed to be outstanding as of that date will be
an amount determined in the manner prescribed for the debt
security,
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the principal amount of a debt security denominated in one or
more foreign currencies or currency units that will be deemed to
be outstanding will be the $U.S. equivalent, determined as
of that date in the manner prescribed for the debt security, of
the principal amount of the debt security or, in the case of a
debt security described in the two preceding bullet points, of
the amount described above, and
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debt securities owned by us or any other obligor upon the debt
securities or any of our or their affiliates will be disregarded
and deemed not to be outstanding.
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An original issue discount security means a debt
security issued under the indenture which provides for an amount
less than the principal amount thereof to be due and payable
upon a declaration of acceleration of maturity. Some debt
securities, including those for the payment or redemption of
which money has been deposited or set aside in trust for the
holders and those that have been fully defeased pursuant to
Section 1402 of the indenture, will not be deemed to be
outstanding. (Section 101)
We will generally be entitled to set any day as a record date
for determining the holders of outstanding debt securities of
any series entitled to give or take any direction, notice,
consent, waiver or other action under the indenture. In limited
circumstances, the trustee will be entitled to set a record date
for action by holders of outstanding debt securities. If a
record date is set for any action to be taken by holders of a
particular series, the action may be taken only by persons who
are holders of outstanding debt securities of that series on the
record date. To be effective, the action must be taken by
holders of the requisite principal amount of debt securities
within a specified period following the record date. For any
particular record date, this period will be 180 days or
such shorter period as we may specify, or the trustee may
specify, if it set the record date. This period may be shortened
or lengthened by not more than 180 days. (Section 104)
Defeasance
When we use the term defeasance, we mean discharge from some or
all of our obligations under the indenture. Unless we inform you
otherwise in the prospectus supplement, if we deposit with the
trustee funds or government securities sufficient to make
payments on the debt securities of a series on the dates those
payments are due and payable, then, at our option, either of the
following will occur:
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we will be discharged from our obligations with respect to the
debt securities of that series (legal
defeasance), or
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we will no longer have any obligation to comply with the
restrictive covenants under the indenture, and the related
events of default will no longer apply to us, but some of our
other obligations under the indenture and the debt securities of
that series, including our obligation to make payments on those
debt securities, will survive.
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If we defease a series of debt securities, the holders of the
debt securities of the series affected will not be entitled to
the benefits of the indenture, except for our obligations to:
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register the transfer or exchange of debt securities,
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replace mutilated, destroyed, lost or stolen debt
securities, and
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maintain paying agencies and hold moneys for payment in trust.
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Unless we inform you otherwise in the prospectus supplement, we
will be required to deliver to the trustee an opinion of counsel
that the deposit and related defeasance would not cause the
holders of the debt securities to recognize gain or loss for
federal income tax purposes and that the holders would be
subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if the
deposit and related defeasance had not occurred. If we elect
legal defeasance, that opinion of counsel must be based upon a
ruling from the United States Internal Revenue Service or a
change in law to that effect. (Sections 1401, 1402, 1403
and 1404)
14
Satisfaction
And Discharge
We may discharge our obligations under the indenture while debt
securities remain outstanding if (1) all outstanding debt
securities issued under the indenture have become due and
payable, (2) all outstanding debt securities issued under
the indenture have or will become due and payable at their
scheduled maturity within one year or (3) all outstanding
debt securities issued under the indenture are scheduled for
redemption in one year, and in each case, we have deposited with
the trustee an amount sufficient to pay and discharge all
outstanding debt securities issued under the indenture on the
date of their scheduled maturity or the scheduled date of
redemption and we have paid all other sums payable under the
Indenture. (Section 401)
Notices
Holders will receive notices by mail at their addresses as they
appear in the security register. (Section 106)
Title
We may treat the person in whose name a debt security is
registered on the applicable record date as the owner of the
debt security for all purposes, whether or not it is overdue.
(Section 309)
Governing
Law
New York law will govern the indenture and the debt securities.
(Section 112)
Regarding
the Trustee
The Bank of New York Trust Company, National Association,
successor to JPMorgan Chase Bank, National Association, is the
trustee, security registrar and paying agent under the
indenture. As of June 30, 2007, the trustee served as
trustee for approximately $2.3 billion aggregate principal
amount of our debt securities. In addition, the trustee served
as trustee or fiscal agent for debt securities of our affiliates
aggregating approximately $6.0 billion as of June 30,
2007.
Our affiliates maintain brokerage relationships and a rabbi
trust with the trustee and its affiliates.
If an event of default occurs under the indenture and is
continuing, the trustee will be required to use the degree of
care and skill of a prudent person in the conduct of that
persons own affairs. The trustee will become obligated to
exercise any of its powers under the indenture at the request of
any of the holders of any debt securities issued under the
indenture only after those holders have offered the trustee
indemnity satisfactory to it.
If the trustee becomes one of our creditors, its rights to
obtain payment of claims in specified circumstances, or to
realize for its own account on certain property received in
respect of any such claim as security or otherwise will be
limited under the terms of the indenture pursuant to the
provisions of the Trust Indenture Act.
(Section 613) The trustee may engage in certain other
transactions; however, if the trustee acquires any conflicting
interest (within the meaning specified under the
Trust Indenture Act), it will be required to eliminate the
conflict or resign. (Section 608)
15
We may sell the offered securities in and outside the United
States:
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through underwriters or dealers,
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directly to purchasers, including our affiliates,
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through agents, or
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through a combination of any of these methods.
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Sale
Through Underwriters or Dealers
If we use underwriters in the sale, the underwriters will
acquire the securities for their own account. The underwriters
may resell the securities from time to time in one or more
transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the
time of sale. Underwriters may offer securities to the public
either through underwriting syndicates represented by one or
more managing underwriters or directly by one or more firms
acting as underwriters. Unless we inform you otherwise in the
prospectus supplement, the obligations of the underwriters to
purchase the securities will be subject to certain conditions,
and the underwriters will be obligated to purchase all the
offered securities if they purchase any of them. The
underwriters may change from time to time any initial public
offering price and any discounts or concessions allowed or
reallowed or paid to dealers.
During and after an offering through underwriters, the
underwriters may purchase and sell the securities in the open
market. These transactions may include overallotment and
stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. The
underwriters also may impose a penalty bid, which means that
selling concessions allowed to syndicate members or other
broker-dealers
for the offered securities sold for their account may be
reclaimed by the syndicate if the offered securities are
repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or
otherwise affect the market price of the offered securities,
which may be higher than the price that might otherwise prevail
in the open market. If commenced, the underwriters may
discontinue these activities at any time.
If we use dealers in the sale of securities, we will sell the
securities to them as principals. They may then resell those
securities to the public at varying prices determined by the
dealers at the time of resale. The dealers participating in any
sale of the securities may be deemed to be underwriters within
the meaning of the Securities Act of 1933 with respect to any
sale of these securities. We will include in the prospectus
supplement the names of the dealers and the terms of the
transaction.
Direct
Sales and Sales Through Agents
We may sell the securities directly. In that event, no
underwriters or agents would be involved. We may also sell the
securities through agents we designate from time to time. In the
prospectus supplement, we will name any agent involved in the
offer or sale of the offered securities, and we will describe
any commissions payable by us to the agent. Unless we inform you
otherwise in the prospectus supplement, any agent will agree to
use its reasonable best efforts to solicit purchases for the
period of its appointment.
We may sell the securities directly to institutional investors
or others who may be deemed to be underwriters within the
meaning of the Securities Act of 1933 with respect to any sale
of those securities. We will describe the terms of any such
sales in the prospectus supplement.
Delayed
Delivery Contracts
If we so indicate in the prospectus supplement, we may authorize
agents, underwriters or dealers to solicit offers from certain
types of institutions to purchase securities from us at the
public offering price under delayed delivery contracts. These
contracts would provide for payment and delivery on a specified
date in the
16
future. The contracts would be subject only to those conditions
described in the prospectus supplement. The prospectus
supplement will describe the commission payable for solicitation
of those contracts.
Remarketing
We may offer and sell any of the offered securities in
connection with a remarketing upon their purchase, in accordance
with a redemption or repayment by their terms or otherwise by
one or more remarketing firms acting as principals for their own
accounts or as our agents. We will identify any remarketing
firm, the terms of any remarketing agreement and the
compensation to be paid to the remarketing firm in the
prospectus supplement. Remarketing firms may be deemed
underwriters under the Securities Act of 1933.
Derivative
Transactions
We may enter into derivative transactions with third parties, or
sell securities not covered by this prospectus to third parties
in privately negotiated transactions. If the applicable
prospectus supplement indicates, in connection with those
derivatives, the third parties may sell securities covered by
this prospectus and the applicable prospectus supplement,
including in short sale transactions. If so, the third parties
may use securities pledged by us or borrowed from us or others
to settle those sales or to close out any related open
borrowings of stock, and may use securities received from us in
settlement of those derivatives to close out any related open
borrowings of stock. The third parties in these sale
transactions will be underwriters and will be identified in the
applicable prospectus supplement or in a
post-effective
amendment to the registration statement of which this prospectus
forms a part.
General
Information
We may have agreements with the agents, dealers and underwriters
to indemnify them against certain civil liabilities, including
liabilities under the Securities Act of 1933, or to contribute
with respect to payments that the agents, dealers or
underwriters may be required to make. Agents, dealers and
underwriters may be customers of, engage in transactions with or
perform services for us in the ordinary course of their
businesses.
Each series of offered securities will be a new issue and will
have no established trading market. We may elect to list any
series of offered securities on an exchange, but we are not
obligated to do so. It is possible that one or more underwriters
may make a market in a series of offered securities. However,
they will not be obligated to do so and may discontinue market
making at any time without notice. We cannot assure you that a
liquid trading market for any of our offered securities will
develop.
The validity of the securities described in this prospectus will
be passed upon for us by Baker Botts L.L.P., Houston, Texas.
Scott E. Rozzell, Esq., our Executive Vice President,
General Counsel and Corporate Secretary, or Rufus S. Scott,
our Senior Vice President, Deputy General Counsel and Assistant
Corporate Secretary, may pass upon other legal matters for us.
Any underwriters will be advised about the validity of our debt
securities and other matters by Dewey Ballantine LLP.
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference
from our Annual Report on
Form 10-K
for the year ended December 31, 2006 have been audited by
Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their reports (which
reports express an unqualified opinion and include an
explanatory paragraph regarding our adoption of a new accounting
standard related to conditional asset retirement obligations in
2005), which are incorporated herein by reference, and have been
so incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
17
$300,000,000
CenterPoint Energy Resources
Corp.
6.00% Senior Notes due
2018
PROSPECTUS SUPPLEMENT
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Barclays
Capital |
Credit
Suisse |
Lehman Brothers |
HSBC
Lazard Capital Markets
RBC Capital Markets
SunTrust Robinson Humphrey
Wachovia Securities
Wells Fargo
Securities
May 12, 2008