Delaware
|
76-0511406
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
1111
Louisiana
|
|
Houston,
Texas 77002
|
(713)
207-1111
|
(Address
and zip code of principal executive offices)
|
(Registrant’s
telephone number, including area
code)
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer þ
|
Smaller
reporting company o
|
(Do
not check if a smaller reporting company)
|
PART
I.
|
FINANCIAL
INFORMATION
|
|||
Item
1.
|
1
|
|||
Three
and Six Months Ended June 30, 2007 and 2008 (unaudited)
|
1
|
|||
December
31, 2007 and June 30, 2008 (unaudited)
|
2
|
|||
Six
Months Ended June 30, 2007 and 2008 (unaudited)
|
4
|
|||
5
|
||||
Item
2.
|
18
|
|||
Item
4T.
|
26
|
|||
PART
II.
|
OTHER
INFORMATION
|
|||
Item
1.
|
26
|
|||
Item 1A.
|
27
|
|||
Item
5.
|
27
|
|||
Item
6.
|
27
|
·
|
state
and federal legislative and regulatory actions or developments,
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;
|
·
|
timely
and appropriate rate actions and increases, allowing recovery of costs and
a reasonable return on investment;
|
·
|
cost
overruns on major capital projects that cannot be recouped in
prices;
|
·
|
industrial,
commercial and residential growth in our service territory and changes in
market demand and demographic
patterns;
|
·
|
the
timing and extent of changes in commodity prices, particularly natural
gas;
|
·
|
the
timing and extent of changes in the supply of natural
gas;
|
·
|
the
timing and extent of changes in natural gas basis
differentials;
|
·
|
weather
variations and other natural
phenomena;
|
·
|
changes
in interest rates or rates of
inflation;
|
·
|
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;
|
·
|
actions
by rating agencies;
|
·
|
effectiveness
of our risk management activities;
|
·
|
inability
of various counterparties to meet their obligations to
us;
|
·
|
non-payment
for our services due to financial distress of our
customers;
|
·
|
the
ability of Reliant Energy, Inc. and its subsidiaries to satisfy
their obligations to us, including indemnity obligations, or in
connection with the contractual arrangements pursuant to which we are
their guarantor;
|
·
|
the
outcome of litigation brought by or against
us;
|
·
|
our
ability to control costs;
|
·
|
the
investment performance of CenterPoint Energy’s employee benefit
plans;
|
·
|
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;
|
·
|
acquisition
and merger activities involving our parent or our competitors;
and
|
·
|
other
factors we discuss in “Risk Factors” in Item 1A of Part I of our Annual
Report on Form 10-K for the year ended December 31, 2007, which is
incorporated herein by reference, and other reports we file from time to
time with the Securities and Exchange
Commission.
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 1,566 | $ | 2,157 | $ | 4,263 | $ | 5,109 | ||||||||
Expenses:
|
||||||||||||||||
Natural gas
|
1,208 | 1,750 | 3,358 | 4,143 | ||||||||||||
Operation and
maintenance
|
188 | 184 | 386 | 389 | ||||||||||||
Depreciation and
amortization
|
52 | 55 | 103 | 109 | ||||||||||||
Taxes other than income
taxes
|
35 | 38 | 83 | 96 | ||||||||||||
Total
|
1,483 | 2,027 | 3,930 | 4,737 | ||||||||||||
Operating
Income
|
83 | 130 | 333 | 372 | ||||||||||||
Other
Income (Expense):
Interest and other finance
charges
|
(45 | ) | (49 | ) | (84 | ) | (97 | ) | ||||||||
Other, net
|
4 | 16 | 7 | 27 | ||||||||||||
Total
|
(41 | ) | (33 | ) | (77 | ) | (70 | ) | ||||||||
Income
Before Income Taxes
|
42 | 97 | 256 | 302 | ||||||||||||
Income
tax expense
|
(12 | ) | (37 | ) | (95 | ) | (116 | ) | ||||||||
Net
Income
|
$ | 30 | $ | 60 | $ | 161 | $ | 186 |
December
31,
2007
|
June
30,
2008
|
|||||||
Current
Assets:
|
||||||||
Cash
and cash
equivalents
|
$ | 1 | $ | 30 | ||||
Accounts and notes receivable, net
|
732 | 780 | ||||||
Accrued unbilled
revenue
|
456 | 156 | ||||||
Accounts and notes receivable –
affiliated companies
|
82 | 16 | ||||||
Materials and
supplies
|
35 | 43 | ||||||
Natural gas
inventory
|
395 | 321 | ||||||
Non-trading derivative
assets
|
38 | 102 | ||||||
Deferred tax
asset
|
40 | 6 | ||||||
Prepaid expenses and other
current
assets
|
235 | 255 | ||||||
Total current
assets
|
2,014 | 1,709 | ||||||
Property,
Plant and Equipment:
|
||||||||
Property, plant and
equipment
|
5,837 | 6,034 | ||||||
Less accumulated depreciation
and amortization
|
806 | 877 | ||||||
Property, plant and equipment,
net
|
5,031 | 5,157 | ||||||
Other
Assets:
|
||||||||
Goodwill
|
1,696 | 1,696 | ||||||
Non-trading derivative
assets
|
11 | 96 | ||||||
Notes receivable from
unconsolidated affiliates
|
148 | 244 | ||||||
Other
|
234 | 403 | ||||||
Total other
assets
|
2,089 | 2,439 | ||||||
Total
Assets
|
$ | 9,134 | $ | 9,305 |
December
31,
2007
|
June
30,
2008
|
|||||||
Current
Liabilities:
|
||||||||
Short-term
borrowings
|
$ | 232 | $ | 200 | ||||
Current portion of long-term
debt
|
307 | 7 | ||||||
Accounts
payable
|
661 | 671 | ||||||
Accounts and notes payable —
affiliated companies
|
144 | 62 | ||||||
Taxes
accrued
|
118 | 95 | ||||||
Interest
accrued
|
59 | 51 | ||||||
Customer
deposits
|
59 | 57 | ||||||
Non-trading derivative
liabilities
|
60 | 30 | ||||||
Other
|
186 | 388 | ||||||
Total current
liabilities
|
1,826 | 1,561 | ||||||
Other
Liabilities:
|
||||||||
Accumulated deferred income
taxes,
net
|
778 | 763 | ||||||
Non-trading derivative
liabilities
|
14 | 9 | ||||||
Benefit
obligations
|
116 | 113 | ||||||
Regulatory
liabilities
|
474 | 494 | ||||||
Other
|
167 | 243 | ||||||
Total other
liabilities
|
1,549 | 1,622 | ||||||
Long-term
Debt
|
2,645 | 2,826 | ||||||
Commitments
and Contingencies (Note 10)
|
||||||||
Stockholder’s
Equity:
|
||||||||
Common
stock
|
— | — | ||||||
Paid-in
capital
|
2,406 | 2,406 | ||||||
Retained
earnings
|
692 | 878 | ||||||
Accumulated other comprehensive
income
|
16 | 12 | ||||||
Total stockholder’s
equity
|
3,114 | 3,296 | ||||||
Total Liabilities and
Stockholder’s
Equity
|
$ | 9,134 | $ | 9,305 |
Six
Months Ended June 30,
|
||||||||
2007
|
2008
|
|||||||
Cash
Flows from Operating Activities:
|
||||||||
Net income
|
$ | 161 | $ | 186 | ||||
Adjustments to reconcile net
income to net cash provided by operating activities:
|
||||||||
Depreciation and
amortization
|
103 | 109 | ||||||
Amortization of deferred
financing costs
|
4 | 4 | ||||||
Deferred income
taxes
|
23 | 14 | ||||||
Write-down of natural gas
inventory
|
6 | — | ||||||
Changes in other assets and
liabilities:
|
||||||||
Accounts receivable and
unbilled revenues, net
|
446 | 252 | ||||||
Accounts
receivable/payable, affiliates
|
12 | 51 | ||||||
Inventory
|
8 | 66 | ||||||
Accounts
payable
|
(277 | ) | 20 | |||||
Fuel cost over
recovery
|
(39 | ) | 3 | |||||
Interest and taxes
accrued
|
(33 | ) | (31 | ) | ||||
Non-trading derivatives,
net
|
12 | 27 | ||||||
Margin deposits,
net
|
80 | 95 | ||||||
Other current
assets
|
(112 | ) | (63 | ) | ||||
Other current
liabilities
|
(43 | ) | 94 | |||||
Other assets
|
(12 | ) | (20 | ) | ||||
Other
liabilities
|
(65 | ) | (73 | ) | ||||
Other, net
|
(1 | ) | (26 | ) | ||||
Net cash provided by operating
activities
|
273 | 708 | ||||||
Cash
Flows from Investing Activities:
|
||||||||
Capital
expenditures
|
(419 | ) | (222 | ) | ||||
Increase in notes receivable
from affiliates, net
|
— | (96 | ) | |||||
Investment in unconsolidated
affiliates
|
(34 | ) | (162 | ) | ||||
Other, net
|
(13 | ) | 19 | |||||
Net cash used in investing
activities
|
(466 | ) | (461 | ) | ||||
Cash
Flows from Financing Activities:
|
||||||||
Increase (decrease) in
short-term borrowings, net
|
38 | (32 | ) | |||||
Long-term
revolving credit facility, net
|
— | (150 | ) | |||||
Proceeds from commercial paper,
net
|
— | 40 | ||||||
Proceeds from long-term
debt
|
150 | 300 | ||||||
Payments of long-term
debt
|
(7 | ) | (307 | ) | ||||
Increase (decrease) in notes
payable to affiliates
|
11 | (67 | ) | |||||
Debt issuance
costs
|
(2 | ) | (2 | ) | ||||
Other, net
|
2 | — | ||||||
Net cash provided by (used in)
financing activities
|
192 | (218 | ) | |||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(1 | ) | 29 | |||||
Cash
and Cash Equivalents at Beginning of Period
|
5 | 1 | ||||||
Cash
and Cash Equivalents at End of Period
|
$ | 4 | $ | 30 | ||||
Supplemental
Disclosure of Cash Flow Information:
|
||||||||
Cash
Payments:
|
||||||||
Interest, net of capitalized
interest
|
$ | 85 | $ | 104 | ||||
Income taxes
|
167 | 109 |
Quoted Prices in
|
Significant Other
|
Significant
|
||||||||||||||||||
Active Markets
|
Observable
|
Unobservable
|
Balance
|
|||||||||||||||||
for Identical Assets
|
Inputs
|
Inputs
|
Netting
|
as of
|
||||||||||||||||
(Level 1)
|
(Level 2)
|
(Level 3)
|
Adjustments
(1)
|
June
30, 2008
|
||||||||||||||||
(in
millions)
|
||||||||||||||||||||
Assets
|
||||||||||||||||||||
Corporate
equities
|
$ | 1 | $ | — | $ | — | $ | — | $ | 1 | ||||||||||
Investments
|
11 | — | — | — | 11 | |||||||||||||||
Derivative
assets
|
62 | 266 | 14 | (144 | ) | 198 | ||||||||||||||
Total
assets
|
$ | 74 | $ | 266 | $ | 14 | $ | (144 | ) | $ | 210 | |||||||||
Liabilities
|
||||||||||||||||||||
Derivative
liabilities
|
$ | 70 | $ | 42 | $ | 8 | $ | (81 | ) | $ | 39 | |||||||||
Total
liabilities
|
$ | 70 | $ | 42 | $ | 8 | $ | (81 | ) | $ | 39 |
Fair
Value Measurements
Using
Significant
Unobservable
Inputs
(Level
3)
|
||||
Derivative
assets and
liabilities,
net
|
||||
(in
millions)
|
||||
Beginning
balance as of April 1, 2008
|
$ | 2 | ||
Total
gains or losses (realized and unrealized):
|
||||
Included
in earnings
|
3 | |||
Purchases,
sales, other settlements, net
|
1 | |||
Ending
balance as of June 30, 2008
|
$ | 6 | ||
The
amount of total gains or losses for the period included in earnings
attributable to the change in unrealized gains or losses relating to
assets still held at the reporting date
|
$ | 3 |
Fair
Value Measurements
Using
Significant
Unobservable
Inputs
(Level
3)
|
||||
Derivative
assets and
liabilities,
net
|
||||
(in
millions)
|
||||
Beginning
balance as of January 1, 2008
|
$ | (3 | ) | |
Total
gains or losses (realized and unrealized):
|
||||
Included
in earnings
|
9 | |||
Ending
balance as of June 30, 2008
|
$ | 6 | ||
The
amount of total gains or losses for the period included in earnings
attributable to the change in unrealized gains or losses relating to
assets still held at the reporting date
|
$ | 4 |
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
(in
millions)
|
||||||||||||||||
Interest
cost
|
$ | 2 | $ | 2 | $ | 4 | $ | 4 | ||||||||
Amortization
of prior service cost
|
1 | 1 | 1 | 1 | ||||||||||||
Net
periodic cost
|
$ | 3 | $ | 3 | $ | 5 | $ | 5 |
Natural
Gas Distribution
|
$ | 746 | ||
Interstate
Pipelines
|
579 | |||
Competitive
Natural Gas Sales and Services
|
335 | |||
Field
Services
|
25 | |||
Other
Operations
|
11 | |||
Total
|
$ | 1,696 |
For
the Three Months Ended
June
30,
|
For
the Six Months Ended
June
30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
(in
millions)
|
||||||||||||||||
Net
income
|
$ | 30 | $ | 60 | $ | 161 | $ | 186 | ||||||||
Other
comprehensive income (loss):
|
||||||||||||||||
SFAS No. 158 adjustment (net of
tax of $-0-)
|
— | — | 1 | — | ||||||||||||
Net deferred gain from cash flow
hedges (net of tax of $3 and $3)
|
5 | — | 5 | — | ||||||||||||
Reclassification of deferred
gain from cash flow hedges realized in net income (net of tax of $17 and
$2)
|
— | — | (27 | ) | (4 | ) | ||||||||||
Other
comprehensive income (loss)
|
5 | — | (21 | ) | (4 | ) | ||||||||||
Comprehensive
income
|
$ | 35 | $ | 60 | $ | 140 | $ | 182 |
December
31,
2007
|
June
30,
2008
|
|||||||
(in
millions)
|
||||||||
SFAS
No. 158 adjustment
|
$ | 11 | $ | 11 | ||||
Net
deferred gain from cash flow hedges
|
5 | 1 | ||||||
Total
accumulated other comprehensive income
|
$ | 16 | $ | 12 |
(11)
|
Income
Taxes
|
December
31,
2007
|
June
30,
2008
|
|||||||
Receivable
for uncertain tax positions
|
$ | (11 | ) | $ | (12 | ) | ||
Portion
of receivable for uncertain tax positions that, if recognized, would
reduce the effective income tax rate
|
1 | 1 | ||||||
Interest
accrued on uncertain tax positions
|
(3 | ) | (4 | ) |
(12)
|
Reportable
Business Segments
|
For
the Three Months Ended June 30, 2007
|
||||||||||||
Revenues
from External Customers
|
Net
Intersegment Revenues
|
Operating
Income (Loss)
|
||||||||||
Natural
Gas Distribution
|
$ | 573 | $ | 3 | $ | 8 | ||||||
Competitive
Natural Gas Sales and Services
|
874 | 7 | (4 | ) | ||||||||
Interstate
Pipelines
|
88 | 33 | 52 | |||||||||
Field
Services
|
30 | 12 | 27 | |||||||||
Other
Operations
|
1 | — | — | |||||||||
Eliminations
|
— | (55 | ) | — | ||||||||
Consolidated
|
$ | 1,566 | $ | — | $ | 83 |
For
the Three Months Ended June 30, 2008
|
||||||||||||
Revenues
from External Customers
|
Net
Intersegment Revenues
|
Operating
Income (Loss)
|
||||||||||
Natural
Gas Distribution
|
$ | 724 | $ | 2 | $ | 4 | ||||||
Competitive
Natural Gas Sales and Services
|
1,234 | 9 | (5 | ) | ||||||||
Interstate
Pipelines
|
150 | 42 | 101 | (1) | ||||||||
Field
Services
|
50 | 12 | 32 | |||||||||
Other
Operations
|
(1 | ) | — | (2 | ) | |||||||
Eliminations
|
— | (65 | ) | — | ||||||||
Consolidated
|
$ | 2,157 | $ | — | $ | 130 |
For
the Six Months Ended June 30, 2007
|
||||||||||||||||
Revenues
from External Customers
|
Net
Intersegment Revenues
|
Operating
Income (Loss)
|
Total
Assets
as
of December 31, 2007
|
|||||||||||||
Natural
Gas Distribution
|
$ | 2,137 | $ | 6 | $ | 137 | $ | 4,332 | ||||||||
Competitive
Natural Gas Sales and Services
|
1,921 | 24 | 52 | 1,221 | ||||||||||||
Interstate
Pipelines
|
147 | 64 | 96 | 3,007 | ||||||||||||
Field
Services
|
58 | 23 | 49 | 669 | ||||||||||||
Other
Operations
|
— | — | (1 | ) | 670 | |||||||||||
Eliminations
|
— | (117 | ) | — | (765 | ) | ||||||||||
Consolidated
|
$ | 4,263 | $ | — | $ | 333 | $ | 9,134 |
For
the Six Months Ended June 30, 2008
|
||||||||||||||||
Revenues
from External Customers
|
Net
Intersegment Revenues
|
Operating
Income (Loss)
|
Total
Assets
as
of June 30,
2008
|
|||||||||||||
Natural
Gas Distribution
|
$ | 2,421 | $ | 5 | $ | 125 | $ | 4,213 | ||||||||
Competitive
Natural Gas Sales and Services
|
2,343 | 20 | 1 | 1,498 | ||||||||||||
Interstate
Pipelines
|
241 | 84 | 172 | (1) | 3,464 | |||||||||||
Field
Services
|
104 | 16 | 77 | (2) | 759 | |||||||||||
Other
Operations
|
— | — | (3 | ) | 464 | |||||||||||
Eliminations
|
— | (125 | ) | — | (1,093 | ) | ||||||||||
Consolidated
|
$ | 5,109 | $ | — | $ | 372 | $ | 9,305 |
(1)
|
Included
in operating income of Interstate Pipelines for the three and six months
ended June 30, 2008 is an $18 million gain
on
the sale of two storage development
projects.
|
(2)
|
Included
in operating income of Field Services for the six months ended June 30,
2008 is an $11 million gain related to a
settlement
and contract buyout of one of its customers and a $6 million gain on the
sale of assets.
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
(in
millions)
|
||||||||||||||||
Revenues
|
$ | 1,566 | $ | 2,157 | $ | 4,263 | $ | 5,109 | ||||||||
Expenses:
|
||||||||||||||||
Natural
gas
|
1,208 | 1,750 | 3,358 | 4,143 | ||||||||||||
Operation
and maintenance
|
188 | 184 | 386 | 389 | ||||||||||||
Depreciation
and amortization
|
52 | 55 | 103 | 109 | ||||||||||||
Taxes
other than income taxes
|
35 | 38 | 83 | 96 | ||||||||||||
Total
Expenses
|
1,483 | 2,027 | 3,930 | 4,737 | ||||||||||||
Operating
Income
|
83 | 130 | 333 | 372 | ||||||||||||
Interest
and Other Finance Charges
|
(45 | ) | (49 | ) | (84 | ) | (97 | ) | ||||||||
Other
Income, net
|
4 | 16 | 7 | 27 | ||||||||||||
Income
Before Income Taxes
|
42 | 97 | 256 | 302 | ||||||||||||
Income
Tax Expense
|
(12 | ) | (37 | ) | (95 | ) | (116 | ) | ||||||||
Net
Income
|
$ | 30 | $ | 60 | $ | 161 | $ | 186 |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Natural
Gas Distribution
|
$ | 8 | $ | 4 | $ | 137 | $ | 125 | ||||||||
Competitive
Natural Gas Sales and Services
|
(4 | ) | (5 | ) | 52 | 1 | ||||||||||
Interstate
Pipelines
|
52 | 101 | 96 | 172 | ||||||||||||
Field
Services
|
27 | 32 | 49 | 77 | ||||||||||||
Other
Operations
|
— | (2 | ) | (1 | ) | (3 | ) | |||||||||
Total
Consolidated Operating Income
|
$ | 83 | $ | 130 | $ | 333 | $ | 372 |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 576 | $ | 726 | $ | 2,143 | $ | 2,426 | ||||||||
Expenses:
|
||||||||||||||||
Natural gas
|
366 | 512 | 1,578 | 1,845 | ||||||||||||
Operation and
maintenance
|
135 | 141 | 282 | 297 | ||||||||||||
Depreciation and
amortization
|
38 | 39 | 76 | 78 | ||||||||||||
Taxes other than income
taxes
|
29 | 30 | 70 | 81 | ||||||||||||
Total expenses
|
568 | 722 | 2,006 | 2,301 | ||||||||||||
Operating
Income
|
$ | 8 | $ | 4 | $ | 137 | $ | 125 | ||||||||
Throughput
(in Bcf):
|
||||||||||||||||
Residential
|
20 | 20 | 106 | 104 | ||||||||||||
Commercial and
industrial
|
44 | 47 | 126 | 130 | ||||||||||||
Total
Throughput
|
64 | 67 | 232 | 234 | ||||||||||||
Average
number of customers:
|
||||||||||||||||
Residential
|
2,925,120 | 2,956,291 | 2,935,661 | 2,965,941 | ||||||||||||
Commercial and
industrial
|
247,550 | 249,776 | 246,564 | 250,382 | ||||||||||||
Total
|
3,172,670 | 3,206,067 | 3,182,225 | 3,216,323 |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 881 | $ | 1,243 | $ | 1,945 | $ | 2,363 | ||||||||
Expenses:
|
||||||||||||||||
Natural gas
|
877 | 1,237 | 1,875 | 2,342 | ||||||||||||
Operation and
maintenance
|
7 | 10 | 16 | 18 | ||||||||||||
Depreciation and
amortization
|
1 | — | 1 | 1 | ||||||||||||
Taxes other than income
taxes
|
— | 1 | 1 | 1 | ||||||||||||
Total expenses
|
885 | 1,248 | 1,893 | 2,362 | ||||||||||||
Operating
Income (Loss)
|
$ | (4 | ) | $ | (5 | ) | $ | 52 | $ | 1 | ||||||
Throughput
(in Bcf)
|
120 | 129 | 275 | 267 | ||||||||||||
Average
number of customers
|
7,077 | 9,186 | 7,032 | 8,840 |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 121 | $ | 192 | $ | 211 | $ | 325 | ||||||||
Expenses:
|
||||||||||||||||
Natural gas
|
24 | 58 | 28 | 73 | ||||||||||||
Operation and
maintenance
|
29 | 16 | 56 | 46 | ||||||||||||
Depreciation and
amortization
|
11 | 11 | 21 | 23 | ||||||||||||
Taxes other than income
taxes
|
5 | 6 | 10 | 11 | ||||||||||||
Total expenses
|
69 | 91 | 115 | 153 | ||||||||||||
Operating
Income
|
$ | 52 | $ | 101 | $ | 96 | $ | 172 | ||||||||
Transportation
throughput (in Bcf)
|
274 | 361 | 568 | 785 |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Revenues
|
$ | 42 | $ | 62 | $ | 81 | $ | 120 | ||||||||
Expenses:
|
||||||||||||||||
Natural gas
|
(4 | ) | 8 | (7 | ) | 6 | ||||||||||
Operation and
maintenance
|
16 | 18 | 32 | 29 | ||||||||||||
Depreciation and
amortization
|
3 | 3 | 6 | 6 | ||||||||||||
Taxes other than income
taxes
|
— | 1 | 1 | 2 | ||||||||||||
Total expenses
|
15 | 30 | 32 | 43 | ||||||||||||
Operating
Income
|
$ | 27 | $ | 32 | $ | 49 | $ | 77 | ||||||||
Gathering
throughput (in Bcf)
|
100 | 104 | 193 | 202 |
Date
Executed
|
Company
|
Type
of Facility
|
Size
of Facility
|
Amount
Utilized at
July
31, 2008
|
Termination
Date
|
|||||||
June
29, 2007
|
CERC
Corp.
|
Revolver
|
$ | 950 | $ | 172 | (1) |
June
29, 2012
|
||||
October
30, 2007
|
CERC
|
Receivables
|
200 | 180 |
October
28, 2008
|
(1)
|
Includes
$150 million of borrowings under our credit facility and
$22 million of outstanding commercial paper supported by our credit
facility.
|
Moody’s
|
S&P
|
Fitch
|
||||||||
Rating
|
Outlook(1)
|
Rating
|
Outlook(2)
|
Rating
|
Outlook(3)
|
|||||
Baa3
|
Stable
|
BBB
|
Stable
|
BBB
|
Stable
|
(1)
|
A
“stable” outlook from Moody’s indicates that Moody’s does not expect to
put the rating on review for an upgrade or downgrade within 18 months from
when the outlook was assigned or last
affirmed.
|
(2)
|
An
S&P rating outlook assesses the potential direction of a long-term
credit rating over the intermediate to longer
term.
|
(3)
|
A
“stable” outlook from Fitch encompasses a one-to-two year horizon as to
the likely ratings direction.
|
|
•
|
cash
collateral requirements that could exist in connection with certain
contracts, including gas purchases, gas price hedging and gas storage
activities of our Natural Gas Distribution and Competitive Natural Gas
Sales and Services business segments, particularly given gas price levels
and volatility;
|
|
increased gas prices and concentration of
natural gas suppliers;
|
|
•
|
increased
costs related to the acquisition of natural
gas;
|
|
•
|
increases
in interest expense in connection with debt refinancings and borrowings
under credit facilities;
|
|
•
|
various
regulatory actions;
|
|
•
|
the
ability of RRI and its subsidiaries to satisfy their obligations to us and
our subsidiaries, including indemity obligations, or in connection
with the contractual obligations to a third party pursuant to which we are
a guarantor;
|
|
•
|
slower
customer payments and increased write-offs of receivables due to higher
gas prices or changing economic
conditions;
|
|
•
|
the
outcome of litigation brought by and against
us;
|
|
•
|
contributions
to benefit plans;
|
|
•
|
restoration
costs and revenue losses resulting from natural disasters such as
hurricanes; and
|
|
•
|
various
other risks identified in “Risk Factors” in Item 1A of our 2007 Form
10-K.
|
Exhibit
Number
|
Description
|
Report
or
Registration
Statement
|
SEC
File or
Registration
Number
|
Exhibit
Reference
|
||||
3.1.1
|
– Certificate
of Incorporation of RERC Corp.
|
Form
10-K for the year ended December 31, 1997
|
1-13265
|
3(a)(1)
|
||||
3.1.2
|
– Certificate
of Merger merging former NorAm Energy Corp. with and into HI Merger, Inc.
dated August 6, 1997
|
Form
10-K for the year ended December 31, 1997
|
1-13265
|
3(a)(2)
|
||||
3.1.3
|
– Certificate
of Amendment changing the name to Reliant Energy Resources
Corp.
|
Form
10-K for the year ended December 31, 1998
|
1-13265
|
3(a)(3)
|
||||
3.1.4
|
– Certificate
of Amendment changing the name to CenterPoint Energy Resources
Corp.
|
Form
10-Q for the quarter ended
June 30,
2003
|
1-13265
|
3(a)(4)
|
||||
3.2
|
– Bylaws
of RERC Corp.
|
Form
10-K for the year ended December 31, 1997
|
1-13265
|
3(b)
|
||||
4.1
|
– $950,000,000
Second Amended and Restated Credit Agreement, dated as of June 29, 2007,
among CERC Corp., as Borrower, and the banks named therein
|
CERC
Corp.’s Form 10-Q for the quarter ended June 30, 2007
|
1-13265
|
4.1
|
||||
4.2
|
– Indenture,
dated as of February 1, 1998, between Reliant Energy Resources Corp. and
Chase Bank of Texas, National Association, as Trustee
|
Form
8-K dated February 5, 1998
|
1-13265
|
4.1
|
||||
4.3
|
– Supplemental
Indenture No. 13 to Exhibit 4.8, dated as of May 15, 2007, providing for
the issuance of CERC Corp.’s 6.00% Senior Notes due 2018
|
CenterPoint
Energy’s Form 10-Q for the quarter ended June 30, 2008
|
1-31447
|
4.9
|
||||
+12
|
– Computation
of Ratios of Earnings to Fixed Charges
|
|||||||
+31.1
|
– Rule
13a-14(a)/15d-14(a) Certification of David M. McClanahan
|
|||||||
+31.2
|
– Rule
13a-14(a)/15d-14(a) Certification of Gary L. Whitlock
|
|||||||
+32.1
|
– Section
1350 Certification of David M. McClanahan
|
|||||||
+32.2
|
– Section
1350 Certification of Gary L. Whitlock
|
|||||||
+99.1
|
– Items
incorporated by reference from the CERC Corp. Form 10-K. Item 1A “—Risk
Factors.”
|
CENTERPOINT
ENERGY RESOURCES CORP.
|
|
By: /s/ Walter L.
Fitzgerald
|
|
Walter
L. Fitzgerald
|
|
Senior
Vice President and Chief Accounting Officer
|
|
Exhibit
Number
|
Description
|
Report
or
Registration
Statement
|
SEC
File or
Registration
Number
|
Exhibit
Reference
|
||||
3.1.1
|
– Certificate
of Incorporation of RERC Corp.
|
Form
10-K for the year ended December 31, 1997
|
1-13265
|
3(a)(1)
|
||||
3.1.2
|
– Certificate
of Merger merging former NorAm Energy Corp. with and into HI Merger, Inc.
dated August 6, 1997
|
Form
10-K for the year ended December 31, 1997
|
1-13265
|
3(a)(2)
|
||||
3.1.3
|
– Certificate
of Amendment changing the name to Reliant Energy Resources
Corp.
|
Form
10-K for the year ended December 31, 1998
|
1-13265
|
3(a)(3)
|
||||
3.1.4
|
– Certificate
of Amendment changing the name to CenterPoint Energy Resources
Corp.
|
Form
10-Q for the quarter ended
June 30,
2003
|
1-13265
|
3(a)(4)
|
||||
3.2
|
– Bylaws
of RERC Corp.
|
Form
10-K for the year ended December 31, 1997
|
1-13265
|
3(b)
|
||||
4.1
|
– $950,000,000
Second Amended and Restated Credit Agreement, dated as of June 29, 2007,
among CERC Corp., as Borrower, and the banks named therein
|
CERC
Corp.’s Form 10-Q for the quarter ended June 30, 2007
|
1-13265
|
4.1
|
||||
4.2
|
– Indenture,
dated as of February 1, 1998, between Reliant Energy Resources Corp. and
Chase Bank of Texas, National Association, as Trustee
|
Form
8-K dated February 5, 1998
|
1-13265
|
4.1
|
||||
4.3
|
– Supplemental
Indenture No. 13 to Exhibit 4.8, dated as of May 15, 2007, providing for
the issuance of CERC Corp.’s 6.00% Senior Notes due 2018
|
CenterPoint
Energy’s Form 10-Q for the quarter ended June 30, 2008
|
1-31447
|
4.9
|
||||
+12
|
– Computation
of Ratios of Earnings to Fixed Charges
|
|||||||
+31.1
|
– Rule
13a-14(a)/15d-14(a) Certification of David M. McClanahan
|
|||||||
+31.2
|
– Rule
13a-14(a)/15d-14(a) Certification of Gary L. Whitlock
|
|||||||
+32.1
|
– Section
1350 Certification of David M. McClanahan
|
|||||||
+32.2
|
– Section
1350 Certification of Gary L. Whitlock
|
|||||||
+99.1
|
– Items
incorporated by reference from the CERC Corp. Form 10-K. Item 1A “—Risk
Factors.”
|
Six
Months Ended
June
30,
|
||||||||
2007
|
2008
|
|||||||
Net
Income
|
$ | 161 | $ | 186 | ||||
Income
taxes
|
95 | 116 | ||||||
Capitalized
interest
|
(10 | ) | (3 | ) | ||||
246 | 299 | |||||||
Fixed
charges, as defined:
|
||||||||
Interest
|
84 | 97 | ||||||
Capitalized
interest
|
10 | 3 | ||||||
Interest component of rentals
charged to operating income
|
7 | 6 | ||||||
Total fixed
charges
|
101 | 106 | ||||||
Earnings,
as defined
|
$ | 347 | $ | 405 | ||||
Ratio
of earnings to fixed charges
|
3.44 | 3.82 |
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/
David M. McClanahan
|
|
David
M. McClanahan
|
|
President
and Chief Executive Officer
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/
Gary L. Whitlock
|
|
Gary
L. Whitlock
|
|
Executive
Vice President and Chief Financial
Officer
|
/s/
David M. McClanahan
|
|
David
M. McClanahan
|
|
President
and Chief Executive Officer
|
|
August
13, 2008
|
/s/
Gary L. Whitlock
|
|
Gary
L. Whitlock
|
|
Executive
Vice President and Chief Financial Officer
|
|
August
13, 2008
|
•
|
general
economic and capital market conditions;
|
||
•
|
credit
availability from financial institutions and other
lenders;
|
||
•
|
investor
confidence in us and the market in which we operate;
|
||
•
|
maintenance
of acceptable credit ratings;
|
||
•
|
market
expectations regarding our future earnings and probable cash
flows;
|
||
•
|
market
perceptions of our and CenterPoint Energy’s ability to access capital
markets on reasonable terms; and
|
||
•
|
provisions
of relevant tax and securities
laws.
|
•
|
our
payment of dividends;
|
||
•
|
decisions
on our financings and our capital raising activities;
|
||
•
|
mergers
or other business combinations; and
|
||
•
|
our
acquisition or disposition of
assets.
|
•
|
restricting
the way we can handle or dispose of wastes;
|
||
•
|
limiting
or prohibiting construction activities in sensitive areas such as
wetlands, coastal regions, or areas inhabited by endangered
species;
|
||
•
|
requiring
remedial action to mitigate pollution conditions caused by our operations,
or attributable to former operations;
and
|
•
|
enjoining
the operations of facilities deemed in non-compliance with permits issued
pursuant to such environmental laws and
regulations.
|
•
|
construct
or acquire new equipment;
|
||
•
|
acquire
permits for facility operations;
|
||
•
|
modify
or replace existing and proposed equipment; and
|
||
•
|
clean
up or decommission waste disposal areas, fuel storage and management
facilities and other locations and
facilities.
|