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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ____________
COMMISSION FILE NUMBER 333-121505
CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
(Exact name of registrant as specified in its charter)
DELAWARE 59-3790472
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1111 LOUISIANA, SUITE 4655B (713) 207-5222
HOUSTON, TEXAS 77002 (Registrant's telephone number,
(Address and zip code of principal including area code)
executive offices)
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND
(b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED
DISCLOSURE FORMAT.
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
----- -----
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes No X
----- -----
As of November 1, 2005, all outstanding membership interests in CenterPoint
Energy Transition Bond Company II, LLC were held by CenterPoint Energy Houston
Electric, LLC.
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CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
TABLE OF CONTENTS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION................. ii
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS............................................ 1
Balance Sheets
December 31, 2004 and September 30, 2005 (unaudited)................. 1
Statements of Member's Equity for the period from December 3, 2004
(date of inception) to December 31, 2004 and the nine months ended
September 30, 2005 (unaudited)....................................... 2
Statements of Cash Flows for the period from December 3, 2004 (date of
inception) to December 31, 2004 and the nine months ended
September 30, 2005 (unaudited)....................................... 3
NOTES TO UNAUDITED FINANCIAL STATEMENTS................................. 4
Item 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS........ 5
PART II. OTHER INFORMATION
Item 6. Exhibits........................................................ 5
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
From time to time, 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,
including statements regarding our offering of transition bonds. 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.
We have based our forward-looking statements on our management's 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.
You should not place undue reliance on forward-looking statements. Each
forward-looking statement speaks only as of the date of the particular
statement.
ii
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
BALANCE SHEETS
(unaudited)
DECEMBER 31, 2004 SEPTEMBER 30, 2005
----------------- ------------------
Total assets - cash... $1,000 $1,000
====== ======
Member's equity....... $1,000 $1,000
====== ======
See Notes to the Company's Financial Statements
1
CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
STATEMENTS OF MEMBER'S EQUITY
(unaudited)
Initial contribution on December 3, 2004 (date of inception)............. $1,000
Net income for the period from December 3, 2004 (date of inception) to
December 31, 2004..................................................... --
------
Member's equity at December 31, 2004..................................... $1,000
------
Net income for the nine months ended September 30, 2005 ................. --
------
Member's equity at September 30, 2005 ................................... $1,000
======
See Notes to the Company's Financial Statements
2
CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
STATEMENTS OF CASH FLOWS
(unaudited)
DECEMBER 3, 2004
(INCEPTION) TO DECEMBER NINE MONTHS ENDED
31, 2004 SEPTEMBER 30, 2005
----------------------- ------------------
Cash Flows from Financing Activities:
Contribution from member............. $1,000 $ --
------ ------
Net Increase in Cash.................... 1,000 --
Cash at Beginning of Period............. -- 1,000
------ ------
Cash at End of Period................... $1,000 $1,000
====== ======
See Notes to the Company's Financial Statements
3
CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
CenterPoint Energy Transition Bond Company II, LLC (Company) is a special
purpose Delaware limited liability company, whose sole member is CenterPoint
Energy Houston Electric, LLC (CenterPoint Houston). CenterPoint Houston is a
regulated utility engaged in the transmission and distribution of electric
energy in a 5,000 square mile area located along the Texas Gulf Coast, including
the City of Houston.
The Texas Electric Utility Restructuring Act (Texas electric restructuring
law), enacted in 1999, authorized competition in the retail and generation
markets for electricity beginning in January 2002 and provides for recovery of
certain qualified costs through irrevocable non-bypassable transition charges
assessed on all retail electric customers within a utility's geographical
certificated service area as it existed on May 1, 1999, subject to certain
limitations specified in the Texas electric restructuring law (Transition
Charges). The Texas electric restructuring law authorizes the Public Utility
Commission of Texas (Texas Utility Commission) to issue financing orders
approving the issuance of transition bonds to recover qualified costs. The Texas
electric restructuring law and the financing order permit an electric utility to
transfer its rights and interests in the financing order, including the right to
collect Transition Charges pursuant to the Texas electric restructuring law, to
a special purpose entity formed by the electric utility to issue debt securities
secured by the right to receive revenues arising from the Transition Charges.
The electric utility's right to receive the Transition Charges and its other
rights and interests under the financing order constitute "Transition Property."
The Texas Utility Commission issued a financing order to CenterPoint Houston on
March 16, 2005 (Financing Order) that authorizes CenterPoint Houston to cause
the Company to issue transition bonds (Transition Bonds) in an aggregate
principal amount not to exceed $1,493,747,264 plus (a) the amount of excess
mitigation credits provided by CenterPoint Houston after August 31, 2004 through
the date of issuance of the Transition Bonds or the date of the termination of
such excess mitigation credits, whichever is earlier, (b) interest on stranded
costs accrued after August 31, 2004 through the date of issuance of the
Transition Bonds, and (c) up-front qualified costs as set forth in the Financing
Order. The excess mitigation credits were terminated as of April 29, 2005. The
Company has registered $1.857 billion aggregate principal amount of Transition
Bonds under the Securities Act of 1933 by a registration statement on Form S-3
(registration file no. 333-121505). The Securities and Exchange Commission
declared this registration statement effective in September 2005. The Company
expects to complete an issuance of Transition Bonds pursuant to this
registration statement in the fourth quarter of 2005, subject to, among other
matters, market conditions and the completion of documentation and rating agency
reviews.
The Company was organized on December 3, 2004 under the laws of the State
of Delaware for the sole purpose of issuing transition bonds, using the proceeds
therefrom to acquire Transition Property from CenterPoint Houston, holding the
Transition Property and taking certain other actions related thereto. The
Company had no operations during the period from December 3, 2004 (date of
inception) to September 30, 2005, and therefore has not presented a separate
statement of operations.
CenterPoint Houston's parent company, CenterPoint Energy, Inc. (CenterPoint
Energy), is a registered public utility holding company under the Public Utility
Holding Company Act of 1935, as amended (1935 Act). The 1935 Act and related
rules and regulations impose a number of restrictions on the activities of
CenterPoint Energy and its subsidiaries, including CenterPoint Houston. The 1935
Act has been repealed by the Energy Policy Act of 2005. The Company obtained
approval from the Securities and Exchange Commission under the 1935 Act on
September 30, 2005 to issue up to $2.0 billion of transition bonds.
The Company is restricted by its organizational documents from engaging in
any activity not directly related to the specific purposes for which the Company
was created. The Company is a separate and distinct legal entity from
CenterPoint Houston, and the Company's organizational documents require it to
operate in a manner to avoid consolidation with the bankruptcy estate of
CenterPoint Houston in the event CenterPoint Houston becomes subject to such a
proceeding. Upon the consummation of the transactions described above,
CenterPoint Houston will not be the owner of the Transition Property. The assets
of the Company are not available to pay creditors of CenterPoint Houston or any
of its affiliates.
Under a servicing agreement to be entered into by the Company and
CenterPoint Houston concurrently with the issuance of the Transition Bonds,
CenterPoint Houston, as servicer, will be required to manage and administer the
Transition Property and to collect the Transition Charges on behalf of the
Company. The Company will pay an annual servicing fee to CenterPoint Houston for
these services.
4
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
We were formed under the laws of the State of Delaware for the sole purpose
of issuing transition bonds, using the proceeds therefrom to acquire transition
property from CenterPoint Energy Houston Electric, LLC, our sole member, holding
transition property and taking certain other actions related thereto. Since our
inception, we have conducted no operations.
We have registered $1.857 billion aggregate principal amount of transition
bonds under the Securities Act of 1933 by a registration statement on Form S-3
(registration file no. 333-121505). The Securities and Exchange Commission
declared this registration statement effective in September 2005. We expect to
complete an issuance of transition bonds pursuant to this registration statement
in the fourth quarter of 2005, subject to, among other matters, market
conditions and the completion of documentation and rating agency reviews.
We meet the conditions specified in General Instruction H(1)(a) and (b) to
Form 10-Q and therefore are using the reduced disclosure format for wholly owned
subsidiaries of reporting companies and omitting from this report information
called for by various items of Form 10-Q.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
The following exhibits are filed herewith:
Exhibits not incorporated by reference to a prior filing are designated by
a cross (+); all exhibits not so designated are incorporated by reference to a
prior filing of CenterPoint Energy Transition Bond Company II, LLC.
SEC FILE OR
EXHIBIT REGISTRATION EXHIBIT
NUMBER DESCRIPTION REPORT OR REGISTRATION STATEMENT NUMBER REFERENCE
- ------- ------------------------------------------- ----------------------------------- ------------ ---------
3.1 -- Limited Liability Company Agreement of Form S-3/A dated September 12, 2005 333-121505 3.2
CenterPoint Energy Transition Bond
Company II, LLC
3.2 -- Certificate of Formation of Form S-3/A dated September 12, 2005 333-121505 3.1
CenterPoint Energy Transition Bond
Company II, LLC
+32.1 -- Section 906 Certification of Marc
Kilbride
5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTERPOINT ENERGY TRANSITION BOND
COMPANY II, LLC
By: /s/ Marc Kilbride
------------------------------------
Marc Kilbride
Sole Manager
Date: November 30, 2005
6
EXHIBIT INDEX
Exhibits not incorporated by reference to a prior filing are designated by
a cross (+); all exhibits not so designated are incorporated by reference to a
prior filing of CenterPoint Energy Transition Bond Company II, LLC.
SEC FILE OR
EXHIBIT REGISTRATION EXHIBIT
NUMBER DESCRIPTION REPORT OR REGISTRATION STATEMENT NUMBER REFERENCE
- ------- ------------------------------------------- ----------------------------------- ------------ ---------
3.1 -- Limited Liability Company Agreement of Form S-3/A dated September 12, 2005 333-121505 3.2
CenterPoint Energy Transition Bond
Company II, LLC
3.2 -- Certificate of Formation of Form S-3/A dated September 12, 2005 333-121505 3.1
CenterPoint Energy Transition Bond
Company II, LLC
+32.1 -- Section 906 Certification of Marc
Kilbride
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CenterPoint Energy Transition
Bond Company II, LLC (the "Company") on Form 10-Q for the period ended September
30, 2005 (the "Report"), as filed with the Securities and Exchange Commission on
the date hereof, I, Marc Kilbride, Sole Manager, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, to the best of my knowledge, that:
1. The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Marc Kilbride
- -------------------------------------
Marc Kilbride
Sole Manager
November 30, 2005
