Filings Under the Public Utility Holding Company Act of 1935, as Amended (“Act”), 30500-30508 [E5-2675]
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Federal Register / Vol. 70, No. 101 / Thursday, May 26, 2005 / Notices
proposed amendment would issue a
written policy that clarifies how the
requirements of the OPRA Plan
pertaining to vendors apply to persons
who redistribute OPRA data over the
Internet. Notice of the proposal was
published in the Federal Register on
April 15, 2005.4 The Commission
received no comment letters on the
proposed OPRA Plan amendment. This
order approves the proposal.
The OPRA Plan generally defines a
‘‘vendor’’ as a person who redistributes
OPRA data (i.e., options last sale and
quotation reports and related
information) to persons outside of its
own organization. Persons who act as
vendors are required to enter into
vendor agreements with OPRA and pay
applicable access and redistribution
fees. The purpose of the proposed Plan
amendment is to adopt a written policy
codifying prior interpretations
concerning how provisions of the Plan
applicable to ‘‘vendors’’ apply to
persons who redistribute OPRA data by
means of the Internet.
After careful review, the Commission
finds that the proposed OPRA Plan
amendment is consistent with the
requirements of the Act and the rules
and regulations thereunder.5 The
Commission believes that the proposed
OPRA Plan amendment is consistent
with Section 11A of the Act 6 and Rule
11Aa3–2 thereunder 7 in that it is
appropriate in the public interest, for
the protection of investors and the
maintenance of fair and orderly markets,
to remove impediments to, and perfect
the mechanisms of, a national market
system. Specifically, given the
increasing use of the Internet as a means
of providing OPRA data to subscribers
and others, the Commission finds that it
is appropriate to clarify exactly who
among the various types of service
providers involved in Internet
transmission of OPRA data are
considered to be performing the
function of a vendor under the OPRA
Plan, and therefore subject to those
provisions of the OPRA Plan applicable
to vendors.
exchanges. The six participants to the OPRA Plan
are the American Stock Exchange LLC, the Boston
Stock Exchange, Inc., the Chicago Board Options
Exchange, Inc., the International Securities
Exchange, Inc., the Pacific Exchange, Inc., and the
Philadelphia Stock Exchange, Inc.
4 See Securities Exchange Act Release No. 51514
(April 8, 2005), 70 FR 19976.
5 In approving this proposed OPRA Plan
amendment, the Commission has considered its
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
6 15 U.S.C. 78k–1.
7 17 CFR 240.11Aa3–2.
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It is therefore ordered, pursuant to
Section 11A of the Act,8 and Rule
11Aa3–2 thereunder,9 that the proposed
OPRA Plan amendment (SR–OPRA–
2005–01) be, and it hereby is, approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2656 Filed 5–25–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 35–27972]
Filings Under the Public Utility Holding
Company Act of 1935, as Amended
(‘‘Act’’)
May 20, 2005.
Notice is hereby given that the
following filing(s) has/have been made
with the Commission pursuant to
provisions of the Act and rules
promulgated under the Act. All
interested persons are referred to the
application(s) and/or declaration(s) for
complete statements of the proposed
transaction(s) summarized below. The
application(s) and/or declaration(s) and
any amendment(s) is/are available for
public inspection through the
Commission’s Branch of Public
Reference.
Interested persons wishing to
comment or request a hearing on the
application(s) and/or declaration(s)
should submit their views in writing by
June 14, 2005, to the Secretary,
Securities and Exchange Commission,
Washington, DC 20549–0609, and serve
a copy on the relevant applicant(s) and/
or declarant(s) at the address(es)
specified below. Proof of service (by
affidavit or, in the case of an attorney at
law, by certificate) should be filed with
the request. Any request for hearing
should identify specifically the issues of
facts or law that are disputed. A person
who so requests will be notified of any
hearing, if ordered, and will receive a
copy of any notice or order issued in the
matter. After June 14, 2005, the
application(s) and/or declaration(s), as
filed or as amended, may be granted
and/or permitted to become effective.
CenterPoint Energy, Inc., et al. (70–
10299)
CenterPoint Energy, Inc. (‘‘CNP’’), a
registered holding company, of 1111
Louisiana, Houston, TX 77002; Utility
PO 00000
8 15
U.S.C. 78k–1.
CFR 240.11Aa3–2.
10 17 CFR 200.30–3(29).
9 17
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Holding, LLC (‘‘Utility Holding’’), a
direct subsidiary of CNP and also a
registered holding company, of 1011
Centre Road, Suite 324, Wilmington, DE
19805; their public utility subsidiaries,
CenterPoint Energy Houston Electric
(‘‘CEHE’’) and CenterPoint Energy
Resources Corp. (‘‘CERC’’) (together,
‘‘Utility Subsidiaries’’), both of 1111
Louisiana, Houston, TX 77002; and
certain of the non-utility subsidiaries
(‘‘Non-Utility Subsidiaries’’),1 all of
1111 Louisiana, Houston, TX 77002
(collectively, the ‘‘Applicants’’ or ‘‘CNP
System’’) have filed an applicationdeclaration (‘‘Application’’) under
Sections 6(a), 7, 9(a), 10 and 12(b), (c)
and (f) of the Act and Rules 42, 43, 44,
45, 46, 53 and 54 under the Act.
Background
CNP is a registered holding company
that was formed in 2002.2 CNP
indirectly owns all of its subsidiaries
through its direct, wholly-owned
subsidiary, Utility Holding. Utility
Holding is an intermediate registered
holding company formed to minimize
tax inefficiencies, and it serves merely
as a conduit. Utility Holding holds,
directly and indirectly, all of the CNP
subsidiaries, including the Utility
Subsidiaries.3
The electric Utility Subsidiary, CEHE,
is engaged in the transmission and
distribution of electric energy in a
5,000-square-mile area of the Texas Gulf
Coast that includes Houston. The
natural gas Utility Subsidiary, CERC,
owns gas distribution systems. Through
1 CenterPoint Energy Service Company, LLC;
CenterPoint Energy Funding Company; CenterPoint
Energy Transition Bond Company, LLC;
CenterPoint Energy Transition Bond Company II,
LLC; Houston Industries FinanceCo GP, LLC;
CenterPoint Energy Investment Management, Inc.;
CenterPoint Energy Properties, Inc.; Arkansas
Louisiana Finance Corporation; Arkla Industries
Inc.; CenterPoint Energy Alternative Fuels, Inc.;
CenterPoint Energy Field Services, Inc.; CenterPoint
Energy Gas Receivables, LLC; CenterPoint Energy
Gas Transmission Company; CenterPoint Energy—
Illinois Gas Transmission Company; CenterPoint
Energy Intrastate Holdings, LLC; Pine Pipeline
Acquisition Company, LLC; CenterPoint Energy Gas
Services, Inc.; CenterPoint Energy—Mississippi
River Transmission Corporation; CenterPoint
Energy MRT Services Company; CenterPoint Energy
Pipeline Services, Inc.; CenterPoint Energy OQ,
LLC; CenterPoint Energy Intrastate Pipelines, Inc.;
Minnesota Intrastate Pipeline Company; NorAm
Financing I; HL&P Capital Trust II; CenterPoint
Energy Funds Management, Inc.; CenterPoint
Energy International, Inc.; CenterPoint Energy Avco
Holdings, LLC; and CenterPoint Energy Offshore
Management Services, LLC.
2 See Reliant Energy, Inc., HCAR No. 27548 (July
5, 2002) (CNP was referred to there as ‘‘New REI’’).
3 As used herein, the defined-term ‘‘Subsidiaries’’
refers to the Applicants (other than CNP and Utility
Holding), as well as any direct or indirect
subsidiary companies that CNP may form with the
approval of the Commission or in reliance on rules
or statutory exemptions.
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Federal Register / Vol. 70, No. 101 / Thursday, May 26, 2005 / Notices
unincorporated divisions, CERC
provides retail natural gas distribution
services in Louisiana, Mississippi,
Texas, Arkansas, Oklahoma and
Minnesota. Through wholly owned
subsidiaries, CERC owns two interstate
natural gas pipelines and gas gathering
systems, provides various ancillary
services and offers natural gas supplies
to commercial and industrial customers
and natural gas distributors.
In addition to the gas pipeline and
gathering subsidiaries discussed above,
CNP has Non-Utility Subsidiaries
engaged in, among other things,
financing activities, real estate and
energy and gas-related activities.4
Requested Authorization
A. Summary of Transactions
Applicants request authority to
engage in the transactions set forth
below during the period from the
effective date of the order to be issued
in this filing through the period ending
June 30, 2008 (‘‘Authorization
Period’’).5 Applicants request authority
to engage in these transactions through
September 30, 2006, and ask the
Commission to reserve jurisdiction over
transactions during the remainder of the
Authorization Period, pending
completion of the record. Applicants
state that, based on their business plans
and the current conditions in the
financial markets, they anticipate that
the ‘‘Current Authority’’ requested in
their Application will be used during
the Authorization Period primarily to
refinance currently outstanding debt
obligations and to meet ongoing
operational needs of their respective
businesses.6 In summary, Applicants
request:
(i) CNP requests authorization for: (a)
Securities issuances, (b) guarantees and other
forms of credit support, as well as
performance guarantees (‘‘Guarantees’’), and
(c) hedging transactions;
(ii) With respect to its Subsidiaries, CNP
requests such authorization as may be
required for issuances of securities,
Guarantees, and hedging transactions;
(iii) CNP requests that the Commission
approve the continuation of a CNP Group
Money Pool (the ‘‘Money Pool’’);
4 CNP’s
Utility and Non-Utility Subsidiaries in
existence as of March 31, 2005 (except Utility
Holding and including non-applicant subsidiaries)
are further described in Ex. K–1 to the Application.
5 CNP’s current financing authority expires June
30, 2005. See CNP, HCAR No. 27692 (June 30, 2003)
(the ‘‘2003 Omnibus Financing Order’’).
6 ‘‘Current Authority’’ is the total amount of
securities that are outstanding or could be
outstanding (in the case of credit facilities that are
not fully drawn) under the 2003 Omnibus
Financing Order. The amounts, as set forth in the
first column of Ex. G–1 to the Application, are as
follows: CNP: $3.834 billion; CEHE: $3.780 billion;
CERC: $2.756.
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(iv) CNP and its Subsidiaries request that
the Commission approve the continuation of
existing financing arrangements, Guarantees
and hedging arrangements, as well as any
transactions undertaken to extend the terms
of or replace, refund or refinance existing
obligations and the issuance of new
obligations in exchange for existing
obligations, provided in each case that the
issuing entity’s ‘‘Consolidated
Capitalization’’ 7 is not increased as a result
of such financing transaction;
(v) CNP further requests authority to issue
or sell external debt securities, preferred
stock, preferred securities (including trust
preferred securities) and equity-linked
securities in an aggregate amount (including
the outstanding securities referenced in (iv)
above) not to exceed $4.334 billion at any
one time outstanding during the
Authorization Period, with a request that the
Commission reserve jurisdiction over $500
million of the requested authority; 8
(vi) CNP requests authority to issue or sell
an additional 200 million shares of common
stock or options, warrants or other rights to
purchase an equivalent number of shares of
common stock (and to issue or deliver
common stock upon the exercise of such
options, warrants or other rights) and to issue
one Right (as defined below) in connection
with each share of common stock and to
issue securities in connection with such
Right, in the event such Right is exercised;
(vii) CEHE requests authority to issue or
sell external debt securities, preferred stock
and preferred securities (including trust
preferred securities) in an aggregate amount
(including the outstanding securities
referenced in (iv) above) not to exceed $4.280
billion at any one time outstanding during
the Authorization Period, with a request that
the Commission reserve jurisdiction over
$500 million of the requested authority;
(viii) CERC requests authority to issue or
sell external debt securities, preferred stock
and preferred securities (including trust
preferred securities) in an aggregate amount
(including the outstanding securities
referenced in (iv) above) not to exceed $3.256
billion at any one time during the
Authorization Period, with a request that the
Commission reserve jurisdiction over $500
million of the requested authority;
(ix) The Subsidiaries may also finance their
capital needs through borrowings from CNP,
directly or indirectly through Utility Holding,
and Utility Holding requests authority to
issue and sell securities to its parent
company, CNP, and to acquire securities
from its subsidiary companies;
7 ‘‘Consolidated Capitalization’’ is defined to
include, where applicable, all common-stock equity
(comprised of common stock, additional paid-incapital, retained earnings, treasury stock and/or
other comprehensive income or loss), preferred
stock, preferred securities, equity-linked securities,
long-term debt, short-term debt, current maturities
and/or minority interests.
8 For purposes of the Application, the term
‘‘external’’ financing refers to a transaction in which
securities are issued and sold to an entity that is
not a member of the CNP System. Each of CNP,
CEHE and CERC is requesting authority on a
corporate, rather than a consolidated, basis. Utility
Holding is not seeking authority to issue and sell
external debt or equity securities.
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30501
(x) CNP requests that the Commission
approve the issuance by CNP and its
Subsidiaries of nonexempt Guarantees in an
amount such that the total amount of
nonexempt Guarantees issued by CNP and its
Subsidiaries, in the aggregate, does not
exceed $4 billion outstanding at any time
during the Authorization Period (the ‘‘CNP
System Guarantee Limit’’);
(xi) CNP and the Non-Utility Subsidiaries
request authority for the declaration and
payment of dividends out of capital or
unearned surplus;
(xii) CNP requests authority to form and
capitalize financing entities (including
special purpose subsidiaries) (each a
‘‘Financing Subsidiary’’) in connection with
the issuance of securities as requested in the
Application as well as authority for the
financing entities to issue such securities and
to transfer the proceeds of any financing to
their respective parent companies;
(xiii) CNP also requests continued
authority for the Non-Utility Subsidiaries to
restructure their duly authorized businesses
from time to time; and
(xiv) CNP and its Subsidiaries request
authority during the Authorization period in
an aggregate amount of up to $5 million for
‘‘Inactive Subsidiaries.’’ 9
B. Parameters for Financing Authority
Applicants request authorization to
engage in certain financing transactions
during the Authorization Period for
which the specific terms and conditions
are not at this time known, and which
may not be covered by Rule 52 under
the Act, without further prior approval
by the Commission. The following
general terms will be applicable where
appropriate to the financing transactions
requested to be authorized in the
Application:
(1) Effective Cost of Money. The
effective cost of capital for long-term
9 CNP’s ‘‘Inactive Subsidiaries,’’ as listed on Ex.
L–1 to the Application, are: CenterPoint Energy
Retail Interests, Inc.; Entex Gas Marketing
Company; Entex, NGV, Inc.; Entex Oil & Gas
Company; Allied Materials Corporation; National
Furnace Company; CenterPoint Energy Consumer
Group, Inc.; NorAm Utility Services, Inc.; Arkla
Products Company; ALG Gas Supply Company;
Intex, Inc.; United Gas, Inc.; CenterPoint Energy
Trading and Transportation Group, Inc.;
CenterPoint Energy MRT Holdings, Inc.;
CenterPoint Energy Field Services Holdings, Inc.;
CenterPoint Energy Gas Processing, Inc.;
CenterPoint Energy Hub Services, Inc.; HL&P
Capital Trust I; REI Trust I; CenterPoint Energy
Tegco, Inc.; Block 368 GP, LLC; Block 368, LP;
CenterPoint Energy Power Systems, Inc.;
CenterPoint Energy Products, Inc.; NorAm Energy,
Corp.; Utility Rail Services, Inc.; CenterPoint
Energy, Inc. (a Delaware company); CenterPoint
Energy Light, Inc.; Reliant Energy Brasil, Ltda.;
Reliant Energy Brazil Tiete Ltd.; Reliant Energy
Brazil Ltd.; Reliant Energy International Brasil
Ltda.; HIE Brasil Rio Sul Ltda.; CenterPoint Energy
International Services, Inc.; Reliant Energy
Columbia Ltda.; Reliant Energy El Salvador S.A. de
C.V.; Reliant Energy Outsource Ltd.; Venus
Generation El Salvador; CenterPoint Energy
International Holdings, LLC; Worldwide Electric
Holdings B.V.; CenterPoint Energy International II,
Inc.; HIE Ford Heights, Inc.; and HIE Fulton, Inc.
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Federal Register / Vol. 70, No. 101 / Thursday, May 26, 2005 / Notices
debt, short-term debt, preferred
securities and equity-linked securities
will not exceed competitive market rates
available at the time of issuance for
securities having the same or reasonably
similar terms and conditions issued by
similar companies of reasonably
comparable credit quality; provided that
in no event will the effective cost of
capital on (i) any long-term debt
securities exceed 500 basis points over
comparable term U.S. Treasury
securities; or (ii) any short-term debt
securities exceed 300 basis points over
the comparable-term London Interbank
Offered Rate (‘‘LIBOR’’). The dividend
rate on any series of preferred stock or
preferred or equity-linked securities will
not exceed (at the time of issuance) 700
basis points over comparable term U.S.
Treasury securities.
(2) Maturity. The final maturity of
long-term indebtedness will not exceed
50 years. All series of preferred stock,
preferred securities and equity-linked
securities will be required to be
redeemed no later than 50 years after
issuance, except for preferred stock or
preferred securities that are perpetual in
duration.
(3) Issuance Expenses. The
underwriting fees, commissions or other
similar remuneration paid in connection
with the issue, sale or distribution of
securities pursuant to the Application
will not exceed the competitive market
rates that are consistent with similar
securities of comparable credit quality
and maturities issued by other
companies; provided that in no event
will such fees and commissions exceed
seven percent (7%) of the principal or
face amount of the securities being
issued or gross proceeds of the
financing.10
(4) Use of Proceeds. The proceeds
from the sale of securities in external
financing transactions approved herein
will be used for general corporate
purposes including (i) the financing, in
part, of the capital expenditures of the
CNP System, (ii) the financing of
working capital requirements of the
CNP System, (iii) the repayment and/or
refinancing of debt; (iv) the acquisition,
retirement, or redemption of securities
previously issued by the issuing party,
(v) direct or indirect investment in
companies authorized under the Act, as
discussed herein, and (vi) other lawful
purposes. The Applicants represent that
no such financing proceeds will be used
to acquire a new Rule 58 Subsidiary
unless such transaction is consummated
in accordance with an order of the
10 Issuance Expenses will not count toward the
Effective Cost of Money, discussed above.
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Commission or an available exemption
under the Act.
The Applicants submit to a
reservation of jurisdiction over use of
such financing proceeds to invest in one
or more new lines of business, that is,
any line of business other than those
utility and non-utility businesses in
which CNP and its Subsidiaries are
currently engaged, as described on
Exhibit K–1 to the Application.
CNP requests a reservation of
jurisdiction over any investment by CNP
or any of its Subsidiaries in any new
energy- or gas-related companies within
the meaning of Rule 58 (‘‘Rule 58
Companies’’) at any time CNP’s ratio of
common equity to total capitalization
(net of securitization obligations) is less
than 30%; provided, however, that CNP
may increase its investment in an
existing Rule 58 Company to the extent
necessary to complete any project or
desirable to preserve or enhance the
value of CNP’s investment in the
company.
(5) Common Equity Ratio. Net of
securitization debt, CNP’s projected
equity capitalization will be 30% or
more of its Consolidated Capitalization
(defined above) by the end of the
Authorization Period. In connection
with the requested authority, CNP is
undertaking to provide the Commission
on a quarterly basis confidential
exhibits updating CNP’s financial
projections and assumptions through
2008.
Applicants represent that, from the
date of their formation until the date
hereof, each of CERC and CEHE has
maintained common equity of at least
30% of its Consolidated Capitalization.
At all times during the Authorization
Period, CERC will maintain common
equity of at least 30% of its
Consolidated Capitalization.
In carrying out the Texas
Commission’s Financing Order, CEHE’s
consolidated member’s equity ratio is
projected to decrease below the
Commission’s target of 30% of
Consolidated Capitalization during part
of the period that the Transition Bonds
are outstanding, if the securitization
debt is included. The decrease in
CEHE’s consolidated member’s equity
ratio below 30% is due to the Transition
Bonds being shown as debt in the
consolidated financial statements of
CEHE. The Transition Bonds will be
non-recourse to CEHE and will be
serviced by the cash flows from the
transition charges imposed under the
Financing Order, not the revenues of
CEHE’s utility operations. Excluding the
Transition Bonds from the consolidated
pro forma capital structure of CEHE, the
member’s equity ratio would be least
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30% of its Consolidated Capitalization
at all times during the Authorization
Period.11
Other than with respect to the Money
Pool, Applicants submit to a reservation
of jurisdiction over all authority granted
in an order in this filing during any
portion of the Authorization Period
when: (1) The common equity ratio of
CNP (net of securitization debt), on a
consolidated basis, falls below its
common equity ratio as of March 31,
2005; 12 (2) the member’s equity ratio of
CEHE, on a consolidated basis (net of
securitization debt) falls below 30% of
Consolidated Capitalization; or (3) the
common equity ratio of CERC, on a
consolidated basis, falls below 30%.
(6) Investment Grade Ratings. Apart
from common stock, member interests
or securities issued for the purpose of
funding the operations of subsidiaries
through the Money Pool, no guarantees
or other securities may be issued in
reliance on the authority requested in
the Application unless: 13 (i) The
security to be issued, if rated, is rated
investment grade by at least one
nationally recognized statistical rating
organization as that term is used in
paragraphs (c)(2)(vi)(E), (F) and (H) of
Rule 15c3–1 under the Securities
Exchange Act of 1934 (‘‘NRSRO’’); (ii)
all outstanding rated securities of the
issuer are rated investment grade by at
least one NRSRO; and (iii) all
outstanding rated securities of CNP are
rated investment grade by at least one
NRSRO.
(7) Authorization Period. No security
will be issued pursuant to the authority
sought in the Application after the last
day of the Authorization Period (which
is June 30, 2008), provided, however,
that securities issuable or deliverable
upon exercise or conversion of, or in
exchange for, securities issued on or
before June 30, 2008 in accordance with
the terms of such authorization may be
issued or delivered after such date.
11 Following issuance of the Transition Bonds,
CEHE is expected to have member’s equity
capitalization of slightly less than 30% of
Consolidated Capitalization if the securitization
debt is included. CEHE will improve its equity ratio
as securitization obligations are paid down. It is
anticipated that CEHE will reach a level of at least
30% of Consolidated Capitalization by 2009.
12 Based on CNP’s Quarterly Report on Form 10–
Q for the quarter ended March 30, 2005, CNP’s
common equity represented 11.4% of its
Consolidated Capitalization (excluding
securitization debt).
13 Applicants ask the Commission to reserve
jurisdiction over the issuance of securities subject
to the Investment Grade Ratings criteria where one
or more of the Investment Grade Ratings criteria are
not met. As noted previously, Utility Holding is not
seeking authority to issue external debt or equity
securities.
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C. Description of Specific Types of
Financing
(1) CNP External Financing
CNP requests authority to issue and
sell securities including common stock,
preferred stock and preferred and
equity-linked securities (either directly
or through a subsidiary), warrants, longterm and short-term debt securities and
convertible securities and derivative
instruments.14 CNP also requests
authorization to enter into obligations
with respect to tax-exempt debt issued
on behalf of CNP by governmental
authorities. Such obligations may relate
to the refunding of outstanding taxexempt debt or to the remarketing of
tax-exempt debt. CNP seeks
authorization to enter into lease
arrangements, and certain hedging
transactions in connection with the
foregoing issuances of taxable or taxexempt securities. Applicants state that,
based on their business plans and the
current conditions in the financial
markets, they anticipate that the Current
Authority (defined above) requested in
their Application will be used during
the Authorization Period primarily to
refinance currently outstanding debt
obligations and to meet ongoing
operational needs of their respective
businesses. The Current Authority for
CNP is $3.834 billion.
CNP may sell securities covered by
the Application in any one of the
following ways: (i) Through
underwriters; (ii) to initial purchasers in
transactions in reliance on Rule 144A
under the Securities Act of 1933 or
dealers; (iii) through agents; (iv) directly
to a limited number of purchasers or a
single purchaser; (v) in exchange for
already outstanding securities,
including tender offers; or (vi) directly
to employees (or to trusts established for
their benefit), shareholders and others.
If underwriters are used in the sale of
the securities, such securities may be
acquired by the underwriters for their
own account and may be resold 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.
The securities may be offered to the
public either through underwriting
syndicates (which may be represented
by a managing underwriter or
underwriters designated by CNP) or
directly by one or more underwriters
14 Any convertible or equity-linked securities or
warrants would be convertible into or linked only
to securities that CNP and its Subsidiaries are
otherwise authorized to issue pursuant to rule or
Commission order and will count against the
authorized limits for those securities granted
pursuant to the authority sought in the Application.
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acting alone. The securities may be sold
directly by CNP or through agents
designated by CNP from time to time. If
common or preferred stock or
convertible debt is being sold in an
underwritten offering, CNP may grant
the underwriters thereof a ‘‘green shoe’’
option permitting the purchase from
CNP at the same price of additional
shares or debt then being offered solely
for the purpose of covering overallotments.
Sales may be registered under the
Securities Act of 1933 or effected
through competitive bidding among
underwriters. In addition, sales may be
made through private placements, sales
to initial purchasers in Rule 144A
transactions or other non-public
offerings to one or more persons. All
such sales will be upon terms and
conditions, at rates or prices and under
conditions negotiated or based upon, or
otherwise determined by, competitive
capital markets.
(a) Common Stock
CNP is authorized under its restated
articles of incorporation to issue one
billion shares of common stock, par
value $.01 per share, and related
preferred stock purchase rights. Each
share of common stock includes one
right (‘‘Right’’) to purchase from CNP a
unit consisting of one one-thousandth of
a share of CNP Series A Preferred Stock
at a purchase price of $42.50 per unit,
subject to adjustment under specified
circumstances, as described in Exhibit
I–1. The Rights are issued pursuant to
the Rights Agreement dated as of
January 1, 2002 between CNP and
JPMorgan Chase Bank (the ‘‘Rights
Agreement’’), a copy of which was filed
with CNP’s Annual Report on Form 10–
K for the year ended December 31, 2001
(File No. 1–31447) and incorporated by
reference.15 As of February 28, 2005,
15 The Rights will become exercisable shortly
after (i) any public announcement that a person or
group of associated persons has acquired, or
obtained the right to acquire, beneficial ownership
of 20% or more of the outstanding shares of CNP
common stock; or (ii) the start of a tender or
exchange offer that would result in a person or
group of associated persons becoming a 20% owner.
The Rights are also exercisable for shares of (i) CNP
common stock in the event of certain tender or
exchange offers not approved by the CNP board;
and (ii) the common stock of an acquiring company
in the event of certain mergers, business
combinations, or substantial sales or transfers of
assets or earning power. Under certain
circumstances, CNP may substitute cash, property,
other equity securities or debt, or may reduce the
exercise price of the Rights. The Rights attach to all
certificates representing the outstanding shares of
common stock and are transferable only with such
certificates. The Rights are redeemable at CNP’s
option prior to their becoming exercisable and
expire on December 31, 2011.
CNP seeks continued authority to continue to
implement the Rights Agreement, including the
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30503
CNP had 308,501,031 shares of common
stock outstanding. CNP seeks authority
to issue 200 million additional shares of
common stock (including Rights) and to
issue warrants, options and other rights
to acquire an equivalent amount of
common stock, and to buy and sell
derivative securities to hedge these
transactions. CNP will not engage in
speculative transactions.
Such issuances may be used for the
general corporate purposes described
above in the ‘‘Use of Proceeds’’ section.
In addition, CNP proposes, from time to
time during the Authorization Period, to
issue and/or acquire in open market
transactions or negotiated block
purchases, shares of CNP common stock
for allocation under incentive
compensation plans and other equity
compensation and employee benefit
plans, and for the CenterPoint Investor’s
Choice Plan.16 Such transactions would
comply with applicable law and
Commission interpretations then in
effect. The requested authority to issue
or deliver CNP common stock under
these plans includes the authority to
issue related options, warrants, stock
appreciation rights, stock units, timebased restricted stock, performance
awards and other securities pursuant to
those plans. Any newly issued shares of
common stock, including shares of
common stock issued upon the
conversion or exercise of warrants,
convertible debt or other equity-linked
securities, will be counted toward the
overall limit on common stock; shares of
common stock purchased in the open
market or otherwise acquired for the
purpose of reissuance under Stock
Based Plans will not be counted toward
this limit to the extent that the net effect
of the purchase and reissuance does not
increase the number of shares of
common stock outstanding.
CNP may also issue common stock as
consideration, in whole or in part, for
acquisitions of securities or businesses
authority to issue shares of CNP Series A Preferred
Stock or CNP common stock, or to provide other
consideration issued upon exercise of the Rights.
Such securities issuances will not be counted
against the external financing limits requested in
this filing.
16 CNP’s existing stock-related employee plans
are: CenterPoint Energy, Inc. Savings Plan;
CenterPoint Energy, Inc. 1994 Long-Term Incentive
Compensation Plan; Long-Term Incentive Plan of
CenterPoint Energy, Inc.; CenterPoint Energy, Inc.
and Subsidiaries Common Stock Participation Plan
for Designated New Employees and Non-Officer
Employees; NorAm Energy Corp. 1994 Incentive
Equity Plan; and CenterPoint Energy, Inc. Stock
Plan for Outside Directors (collectively, the ‘‘Stock
Based Plans’’). The requested authority relating to
benefit and compensation plans is intended to
apply to these plans, as they may be amended or
supplemented from time to time, and similar plans
or arrangements that may be adopted in the future
without any additional prior Commission order.
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or assets where such acquisition is
otherwise authorized under the Act.
(b) External Debt, Preferred Stock,
Preferred and Equity-Linked Securities
CNP requests Commission
authorization during the Authorization
Period to issue debt securities and
preferred stock, and to issue directly or
indirectly through one or more
Financing Subsidiaries long-term debt
securities, preferred stock, preferred
securities (including, trust preferred
securities), and equity-linked securities
(including preferred stock, preferred
securities that are convertible, either
mandatorily or at the option of the
holder, into common stock, or forward
purchase contracts for common stock).
Long-term debt securities may be
comprised of bonds, notes, mediumterm notes or debentures under one or
more indentures, long-term
indebtedness under agreements with
banks or other institutional lenders,
directly or indirectly, and convertible
debt.17 Long-term securities could also
include obligations relating to the
refunding or remarketing of tax-exempt
debt issued on behalf of CNP or its
Subsidiaries by governmental
authorities.
Long-term debt issued pursuant to the
requested authority will be unsecured.18
Specific terms of any borrowings may
include one or more revolving credit
facilities, and will also continue to be
determined by CNP at the time of
issuance. Any borrowings will comply
in all regards with the parameters on
financing authorization set forth above.
Short-term debt issued by CNP will be
unsecured. Types of short-term debt
securities may include borrowings
under one or more bank loans,
commercial paper, short-term notes, bid
notes, institutional borrowings, and
privately placed notes. Specific terms of
any short-term borrowings will be
determined by CNP at the time of
issuance and will comply with the
parameters for financing authorization
set forth above. The maturity of any
short-term debt issued will not exceed
364 days or, if the notional maturity is
greater than 364 days, the debt security
will include put options at appropriate
points in time to cause the security to
be accounted for as a current liability
under generally accepted accounting
principles (‘‘GAAP’’).
CNP may sell commercial paper or
privately placed notes (‘‘commercial
17 Debt will be convertible only into such
securities as are otherwise authorized under the
Act.
18 Currently, certain pollution control bonds
outstanding at CNP are secured by mortgage bond
obligations of CEHE.
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19:11 May 25, 2005
Jkt 205001
paper’’), from time to time, in
established domestic or European
commercial paper markets. Such
commercial paper may be sold at a
discount or bear interest at a rate per
annum prevailing at the date of issuance
for commercial paper of a similarly
situated company. CNP may, without
counting against the limit on parent
financings set forth above, maintain
back-up lines of credit in connection
with one or more commercial paper
programs in an aggregate amount not to
exceed the amount of authorized
commercial paper.
CNP may sell shares of preferred stock
with terms of each series as may be
designated in the instrument creating
each such series. Shares of preferred
stock may be convertible or
exchangeable into CNP common stock,
provided that preferred stock will be
convertible only into such common
stock as is otherwise authorized under
the Act.
CNP may sell short-term notes
through one or more private placements
or public offerings primarily to
traditional money market investors.
CNP may enter into individual
agreements with one or more
commercial banks that may or may not
be lenders under CNP credit facilities.
These agreements would permit CNP to
negotiate with one or more banks on any
given day for such lender, or any
affiliate or subsidiary of such lender, to
purchase promissory notes directly from
CNP.
Equity-linked securities issued by
CNP will be exercisable or exchangeable
for or convertible, either mandatorily or
at the option of the holder, into common
stock or indebtedness or allow the
holder to surrender to the issuer or
apply the value of a security issued by
CNP, as approved by the Commission,
to such holder’s obligation to make a
payment on another security of CNP
issued as permitted by the Commission.
Any convertible or equity-linked
securities will be convertible into or
linked to common stock, preferred
securities or unsecured debt that CNP is
otherwise authorized to issue by
Commission order directly, or indirectly
through Financing Subsidiaries on
behalf of CNP.
Preferred stock and equity-linked
securities may be sold directly or
indirectly to or through underwriters,
initial purchasers or dealers or pursuant
to any other method of distribution as
described for common stock, above.
(c) Risk Management Devices
CNP requests authority to enter into
hedging arrangements intended to
reduce or manage interest rate risks.
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These arrangements may include, but
are not limited to interest rate swaps,
caps, floors, collars, forward
agreements, issuance of structured notes
(i.e., a debt instrument in which the
principal and/or interest payments are
indirectly linked to the value of an
underlying asset or index), or
transactions involving the purchase or
sale, including short sales, of U.S.
Treasury or U.S. governmental agency
(e.g., Fannie Mae) obligations or LIBOR
based swap instruments (collectively
referred to as ‘‘Hedging Instruments’’).
The transactions would be for fixed
periods and stated notional amounts as
generally accepted as prudent in the
capital markets. In no case will the
notional principal amount of any
interest rate hedge exceed that of the
underlying debt instrument. CNP will
not engage in ‘‘speculative transactions’’
as that term is described in Statement of
Financial Accounting Standards
(‘‘SFAS’’) 133 (‘‘Accounting for
Derivative Instruments and Hedging
Activities’’). Transaction fees,
commissions and other amounts
payable to brokers in connection with
an interest rate hedge will not exceed
those generally obtainable in capital
markets for parties of comparable credit
quality. CNP may employ interest rate
derivatives as a means of prudently
managing the risk associated with any of
its outstanding debt issued pursuant to
this authorization or an applicable
exemption by, in effect, synthetically (i)
converting variable rate debt to fixed
rate debt, (ii) converting fixed rate debt
to variable rate debt, (iii) limiting the
impact of changes in interest rates
resulting from variable rate debt and (iv)
managing other risks that may attend
outstanding securities. Transactions will
be entered into for a fixed or
determinable period. CNP will only
enter into agreements with
counterparties having a senior debt
rating at the time the transaction is
executed of at least ‘‘BBB-’’ or its
equivalent, as published by a NRSRO
(‘‘Approved Counterparties’’).
In addition, CNP requests
authorization to enter into hedging
transactions with respect to anticipated
debt offerings (the ‘‘Anticipatory
Hedges’’), subject to the limitations and
restrictions expressed below. Such
Anticipatory Hedges would only be
entered into with Approved
Counterparties, and would be utilized to
fix and/or limit the risk associated with
any issuance of securities through
appropriate means, including (i) a
forward sale of exchange-traded
Hedging Instruments, (ii) the purchase
of put options on Hedging Instruments,
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(iii) a put options purchase in
combination with the sale of call
options Hedging Instruments, (iv) some
combination of the above and/or other
derivative or cash transactions,
including, but not limited to, structured
notes, caps and collars, appropriate for
the Anticipatory Hedges, and (v) other
financial derivatives or other products
including Treasury rate locks, swaps,
forward starting swaps, and options on
the foregoing. Anticipatory Hedges may
be executed on-exchange with brokers
through the opening of futures and/or
options positions traded on the Chicago
Board of Trade, the opening of over-thecounter positions with one or more
counterparties, or a combination of the
two. CNP will determine the structure of
each Anticipatory Hedge transaction at
the time of execution. CNP may decide
to lock in interest rates and/or limit its
exposure to interest rate increases.
Each Hedging Instrument and
Anticipatory Hedge will be treated for
accounting purposes as provided for
under GAAP. Fees, commissions and
other amounts payable to the
counterparty or exchange (excluding,
however, the swap or option payments)
in connection with Hedging Instruments
will not exceed those generally
obtainable in competitive markets for
similarly-situated parties of comparable
credit quality. CNP will comply with
SFAS 133 and SFAS 138 (‘‘Accounting
for Certain Derivative Instruments and
Certain Hedging Activities’’) or such
other standards relating to accounting
for derivative transactions as are
adopted and implemented by the
Financial Accounting Standards Board.
(2) Subsidiary Financing
The Utility Subsidiaries and the NonUtility Subsidiaries, to the extent not
exempted pursuant to Rule 52, request
authority to issue and sell securities,
including preferred stock, preferred
securities (including trust preferred
securities) (either directly or through a
subsidiary), and long-term and shortterm debt securities (including
convertible debt, commercial paper and
privately placed short-term notes) on
the same terms and conditions
discussed above for CNP, except that
Subsidiary debt may be secured or
unsecured, and Utility Subsidiary debt
will be subject to the limits on aggregate
amounts of securities outstanding in the
applicable categories as set forth on
Exhibit G–1 to the Application.19
19 To
the extent CEHE issues secured debt, the
debt will be secured by assets or securities owned
by CEHE. To the extent CERC issues secured debt,
such debt will be secured by a pledge of the stock
of its nonutility subsidiary companies. CERC
currently does not have outstanding secured debt.
To the extent a Non-Utility Subsidiary issue
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The Utility Subsidiaries also request
authorization to enter into obligations
with respect to new tax-exempt debt
issued on behalf of a Utility Subsidiary
by governmental authorities as well as
obligations entered into in connection
with the refunding of outstanding taxexempt debt assumed by CNP in
connection with the August 31, 2002
restructuring by which CNP and Utility
Holding became holding companies for
the Utility Subsidiaries. The Utility
Subsidiaries and the Non-Utility
Subsidiaries, to the extent not exempted
pursuant to Rule 52, also request
authority to enter into hedging
transactions intended to reduce or
manage interest rate risks in connection
with the foregoing issuance of
securities, subject to the limitations and
requirements applicable to CNP. Based
on their business plans and the current
condition in the financial markets,
Applicants anticipate that the Current
Authority (defined above) sought in this
Application will be used during the
Authorization Period primarily to
refinance currently outstanding debt
obligations and to meet ongoing
operational needs of their respective
businesses.
(3) Guarantees and Intra-System
Advances
(a) Guarantees
Authorization is requested for CNP
and its Subsidiaries during the
Authorization Period to enter into
guarantees on their own behalf and on
behalf of their respective Subsidiaries to
third parties, obtain letters of credit,
enter into support or expense
agreements or liquidity support
agreements or otherwise provide credit
support with respect to the obligations
of the Subsidiaries, including
performance guarantees, as may be
appropriate to carry on in the ordinary
course of CNP or its Subsidiaries’ dulyauthorized utility and related
businesses, and the Subsidiaries request
authority to provide to their respective
Subsidiaries guarantees and other forms
of credit support such that in the
aggregate, CNP and its Subsidiaries will
not enter into guarantees in an amount
exceeding the CNP System Guarantee
Limit.20 Excluded from the CNP System
Guarantee Limit are obligations exempt
pursuant to Rule 45 under the Act.
secured debt, the debt will be secured by assets or
securities owned by that Non-Utility Subsidiary.
20 The amount of the requested authority (in the
aggregate, not to exceed $4 billion outstanding at
any time during the Authorization Period) is
intended to accommodate situations such as the
CNP System’s exposure to, among other things, the
volatility of natural gas prices.
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30505
CNP currently has a number of types
of guarantees in effect. Among other
things, it has issued guarantees with
respect to payment obligations of certain
of its Subsidiaries, both to
counterparties and, in some cases, to
regulatory authorities where required
under applicable laws; entered into
indemnification agreements to support
the issuance of surety bonds on behalf
of itself and its Subsidiaries; entered
into agreements to guarantee certain
amounts related to the issuance of
securities by certain Subsidiaries and to
guarantee certain other Subsidiary
expenses and liabilities. In addition,
CERC has guaranteed the office space
lease of one of its subsidiaries.
Certain of the guarantees may be in
support of obligations that are not
capable of exact quantification. In such
cases, CNP will determine the exposure
under a guarantee for purposes of
measuring compliance with the CNP
System Guarantee Limit by appropriate
means, including estimation of exposure
based on loss experience or potential
payment amounts. As appropriate, these
estimates will be made in accordance
with GAAP and sound financial
practices. Such estimation will be
reevaluated periodically.
The guarantor may charge each
Subsidiary a fee for any guarantee
provided on its behalf that is not greater
than the cost, if any, of obtaining the
liquidity necessary to perform the
guarantee (for example, bank line
commitment fees or letter of credit fees,
plus other transactional expenses) for
the period of time the guarantee remains
outstanding.
The amount of any guarantees will be
counted toward the applicable limits
under Rules 53 and 58.
(b) Money Pool
The ‘‘Participants’’ request
authorization to continue to conduct the
Money Pool, as approved in the 2003
Omnibus Financing Order (HCAR No.
27962 (June 30, 2003)).21 To the extent
not exempted by Rule 52 under the Act,
the Participants (other than CNP) also
request authorization to make, from
21 The participants in the Money Pool will be
CNP, CenterPoint Energy Service Company, LLC
(the ‘‘Service Company’’), the Utility Subsidiaries,
CenterPoint Energy Properties, Inc. (owner of CNP’s
office building, parking garage and dispatch
facility), CenterPoint Energy Products, Inc.
(inactive), and CenterPoint Energy Funding
Company (collectively, the ‘‘Participants’’).
CenterPoint Energy Funding Company is an entity
through which CNP had funded or acquired foreign
utility companies within the meaning of Section 33
of the Act and so, this company will be an investor
in but not a borrower from the Money Pool. No
exempt wholesale generator, foreign utility
company or exempt telecommunications company
will be a borrower from the Money Pool.
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time to time, unsecured short-term
borrowings from the Money Pool and to
contribute surplus funds to the Money
Pool and to lend and extend credit to
(and acquire promissory notes from) one
another through the Money Pool.
CNP requests authorization to
contribute surplus funds and to lend
and extend credit to the Participants
through the Money Pool. CNP will not
be a borrower from the Money Pool.
Under the terms of the Money Pool,
each Participant determines each day
the amount of funds each desires to
contribute to the Money Pool, and
contributes such funds to the Money
Pool.22 The determination of whether a
Participant has funds to contribute and
the determination whether a Participant
shall lend such funds to the Money Pool
is made by such Participant’s treasurer,
or by a designee thereof, in such
Participant’s sole discretion.23 Each
Participant may withdraw any of its
funds at any time upon notice to the
Service Company, as administrative
agent of the Money Pool.
Short-term funds will be available
from the following sources: (1) Surplus
funds in the treasuries of the
Participants, and (2) proceeds from
external borrowings, including bank
loans, the sale of notes and/or the sale
of commercial paper by the Participants,
in each case to the extent permitted by
applicable laws and regulatory orders.
Each borrowing Participant will
borrow pro rata from each fund source
in the same proportion that the amount
of funds provided from that fund source
bears to the total amount then loaned
through the Money Pool. On a day when
more than one source of funds is
invested in the Money Pool with
different rates of interest used to fund
loans through the Money Pool, each
borrower will borrow pro rata from each
such funding source from the Money
Pool in the same proportion that the
amount of funds provided by that fund
source bears to the total amount of
funds invested into the Money Pool. If
there are insufficient funds to meet all
borrowing requests, the needs of the
Utility Subsidiaries will be met before
loans are made to any Non-Utility
Subsidiaries.
The Service Company, as
administrator of the Money Pool, will
provide each Participant with a report
for each business day that includes,
22 An Amended and Restated Form of Money Pool
Agreement is attached to the Application as Exhibit
J–1.
23 Participants other than Utility Subsidiaries may
contribute amounts to the Money Pool from either
surplus funds or external borrowings. Utility
Subsidiaries will only contribute surplus funds to
the Money Pool.
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19:11 May 25, 2005
Jkt 205001
among other things, cash activity for the
day and the balance of loans
outstanding. All borrowings from the
Money Pool shall be authorized by the
borrowing Participant’s treasurer, or by
a designee thereof. No Participant shall
be required to effect a borrowing
through the Money Pool if such
Participant determines that it can (and
is authorized to) effect such borrowing
more advantageously directly from
banks or through the sale of its own
notes or commercial paper.
Funds which are loaned by
Participants and are not utilized to
satisfy borrowing needs of other
Participants will be invested by the
Service Company on behalf of the
lending Participants in one or more
short term instruments, including (i)
interest-bearing deposits with banks; (ii)
obligations issued or guaranteed by the
U.S. government and/or its agencies;
(iii) commercial paper rated not less
than A–1 by Standard & Poor’s and P–
1 by Moody’s Investors Services, Inc.;
(iv) money market funds; (v) bank
certificates of deposit; (vi) Eurodollar
funds; (vii) repurchase agreements
collateralized by securities issued or
guaranteed by the U.S. government; and
(viii) such other investments as are
permitted by Section 9(c) of the Act and
Rule 40 under the Act.
The interest rate applicable on any
day to then outstanding loans through
the Money Pool, whether or not
evidenced by a promissory demand
note, will be the composite weighted
average daily effective cost incurred by
CNP for external borrowings
outstanding on that date. The daily
effective cost shall be inclusive of
interest rate swaps related to such
external funds. If there are no external
borrowings outstanding on that date,
then the rate will be the certificate of
deposit yield equivalent of the 30-day
Federal Reserve ‘‘AA’’ Non-Financial
Commercial Paper Composite Rate or if
no composite is established for that day,
then the applicable rate will be the
composite for the next preceding day for
which a composite is established. If the
composite shall cease to exist, then the
rate will be the composite which then
most closely resembles the composite
and/or most closely mirrors the pricing
CNP would expect if it had external
borrowings.
Interest income related to external
investments will be calculated daily and
allocated back to lending Participants
on the basis of their relative
contribution to the Money Pool on that
date.
Each Participant receiving a loan from
the Money Pool shall repay the
principal amount of such loan, together
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with all interest accrued thereon, on
demand by the administrator and in any
event not later than the expiration date
of the Commission authorization for the
operation of the Money Pool. All loans
made through the Money Pool may be
prepaid by the borrower without
premium or penalty.
Borrowings by the Utility Subsidiaries
from the Money Pool should not exceed
the following amounts at any one time
outstanding during the Authorization
Period:
CEHE—$600 million 24
CERC—$600 million
(c) Other Intra-System Financing
In addition to external financings and
borrowings as described above through
the Money Pool, the Subsidiaries may
also finance their capital needs through
both short-term and long-term
borrowings from CNP, directly or
indirectly through Utility Holding.
Applicants request authorization,
consistent with the requirements of
Section 12(a) of the Act, to engage in
intra-system financings with each other.
Authority is sought for the Utility
Subsidiaries to acquire securities from
their respective subsidiaries and to issue
and sell securities to their respective
parents. Any short-term borrowings by
Utility Subsidiaries pursuant to this
request would be counted toward the
Money Pool limits above.
Applicants state that Utility Holding
is a subsidiary of CNP and is the direct
or indirect parent of all of the
Subsidiaries. Applicants state that
Utility Holding may have occasion to
issue its debt or equity securities to CNP
in exchange for funds. Utility Holding
could then purchase debt or equity
securities of its Subsidiaries with those
funds, adding to the capitalization of
those Subsidiaries. Applicants state that
no such issuance by Utility Holding will
increase the CNP system’s securities
held by third-parties. If CNP obtains
funds to purchase such securities from
an external source, CNP’s issuance of
securities will be only as approved by
the Commission’s order in this docket
and subject to the limitations imposed
in such order, including the overall
financing limitation of $4.334 billion.
All securities issuances by a Subsidiary
to Utility Holding, will be subject to
limitations imposed on that Subsidiary
regarding securities issuances and will
be within the dollar limitations imposed
by the order in this docket, if any.
24 CEHE’s external borrowings under the $200
million revolving credit facility authorized in CNP,
HCAR No. 27949 (Feb. 28, 2005) will be counted
toward the Money Pool limits during the
Authorization Period.
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Consequently, Applicants assert, there
is no need to impose a separate dollar
limitation on these conduit securities
issuances by Utility Holding. Applicants
state that the approval sought for Utility
Holding is merely to cover the technical
requirement that all of its securities
issuances be approved, as it is acting as
a conduit to invest funds by CNP in the
Subsidiaries. Applicants also seek
authority for Utility Holding to transfer
any financing proceeds received from
the Subsidiaries to CNP.
(d) Authority for Inactive Subsidiaries
The Applicants request authority in
an aggregate amount of up to $5 million
during the Authorization Period to pay,
on behalf of the Inactive Subsidiaries
(defined above), administrative
expenses and dissolution costs; to
resolve claims and lawsuits of any
Inactive Subsidiary, if any; and to pay
any other costs and expenses that any
Inactive Subsidiaries may incur from
time to time. Applicants request that the
Commission reserve jurisdiction over
this request.
(4) Changes in Capital Stock of Majority
Owned Subsidiaries
The portion of an individual
Subsidiary’s aggregate financing to be
effected through the sale of stock or
other equity securities to CNP or other
immediate parent company during the
Authorization Period pursuant to Rule
52 and/or pursuant to an order issued
pursuant to this filing cannot be
ascertained at this time. It may happen
that the proposed sale of capital
securities (i.e., common stock or
preferred stock) may in some cases
exceed the then authorized capital stock
of such Subsidiary. In addition, the
Subsidiary may choose to use capital
stock with no par value.
As needed to accommodate such
proposed transactions and to provide for
future issuances, request is made for
authority to change the terms of any
50% or more owned Subsidiary’s
authorized capital stock capitalization
or other equity interests by an amount
deemed appropriate by CNP or other
intermediate parent company; provided
that the consents of all other
shareholders or other equity holders
have been obtained for the proposed
change. This request for authorization is
limited to CNP’s 50% or more owned
Subsidiaries and will not affect the
aggregate limits or other conditions
contained in the Application. A
Subsidiary would be able to change the
par value, or change between par value
and no-par stock, or change the form of
such equity from common stock to
limited partnership or limited liability
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19:11 May 25, 2005
Jkt 205001
company interests or similar
instruments, or from such instruments
to common stock, without additional
Commission approval. Any such action
by a Utility Subsidiary would be subject
to and would only be taken upon the
receipt of any necessary approvals by
the state commission in the state or
states where the Utility Subsidiary is
incorporated and doing business. CNP
will be subject to all applicable laws
regarding the fiduciary duty of fairness
of a majority shareholder to minority
shareholders in any such 50% or more
owned Subsidiary and will undertake to
ensure that any change implemented
under this paragraph comports with
such legal requirements.25
(5) Payment of Dividends Out of Capital
or Unearned Surplus
CNP requests authority to declare and
pay dividends out of capital or
unearned surplus in an amount up to
$300 million during the Authorization
Period. CNP requests that the
Commission reserve jurisdiction over
this request.26
Applicants also request a
continuation of authority for the NonUtility Subsidiaries to pay dividends
with respect to the securities of the NonUtility Subsidiaries and/or acquire,
retire or redeem any securities of the
Non-Utility Subsidiaries that are held by
an associated company or affiliate, from
time to time, through the Authorization
Period, out of capital or unearned
surplus, to the extent permitted under
applicable corporate law; provided that
no Non-Utility Subsidiary will declare
or pay any dividend out of capital or
unearned surplus unless it: (i) Has
received excess cash as a result of the
sale of its assets; (ii) has engaged in a
restructuring or reorganization; and/or
(iii) is returning capital to an associate
company. Further, no Non-Utility
Subsidiary that derives any material
part of its revenues from the sale of
goods, services or electricity to Utility
Subsidiaries will declare or pay any
dividend out or capital or unearned
surplus. The Applicants request that the
Commission reserve jurisdiction over
the payment of such dividends out of
capital or unearned surplus when any of
these conditions are not met.
25 Applicants state that, in the event that proxy
solicitations are necessary with respect to the
internal corporate reorganizations, Applicants will
seek the necessary Commission approvals under
Sections 6(a)(2) and 12(e) of the Act through the
appropriate filing of a declaration.
26 CEHE will be seeking authority to declare and
pay dividends in a separate application in
connection with the issuance of transition bonds.
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
30507
(6) Financing Subsidiaries
CNP and its Subsidiaries propose to
organize and acquire the common stock
or other equity interests of one or more
Financing Subsidiaries for the purpose
of effecting various financing
transactions from time to time through
the Authorization Period. Financing
Subsidiaries may be corporations, trusts,
partnerships or other entities created
specifically for the purposes described
herein. The amount of securities issued
by the Financing Subsidiaries to third
parties will count toward the respective
financing limits of its immediate parent
as set forth on Exhibit G–1 of the
Application. Authorization is requested
for the issuance of such securities by the
Financing Subsidiaries and for the
transfer of proceeds from such issuance
to the respective parent companies.
CNP and, to the extent such issuances
are not exempt pursuant to Rule 52, the
Subsidiaries also request authorization
to issue their subordinated unsecured
notes (‘‘Subordinated Notes’’) to any
Financing Subsidiary to evidence the
loan of financing proceeds by a
Financing Subsidiary to its parent
company. The principal amount,
maturity and interest rate on such
Subordinated Notes will be designed to
parallel the amount, maturity and
interest or distribution rate on the
securities issued by a Financing
Subsidiary, in respect of which the
Subordinated Note is issued. CNP or a
Subsidiary may, if required, guarantee
or enter into support or expense
agreements in respect of the obligations
of such Financing Subsidiaries.
It is anticipated that the Financing
Subsidiaries will be wholly-owned
subsidiaries of CNP and fully
consolidated for purposes of financial
reporting. No Financing Subsidiary
shall acquire or dispose of, directly or
indirectly, any interest in any utility
asset, as that term is defined under the
Act, without first obtaining such further
approval as may be required.
The business of the Financing
Subsidiary will be limited to effecting
financing transactions that have been
otherwise authorized for CNP and its
Subsidiaries. In connection with such
financing transactions, CNP or its
Subsidiaries may enter into one or more
guarantees or other credit support
agreements in favor of the Financing
Subsidiary.
Any Financing Subsidiary organized
pursuant to this filing shall be organized
only if, in management’s opinion, the
creation and utilization of such
Financing Subsidiary will likely result
in tax savings, increased access to
E:\FR\FM\26MYN1.SGM
26MYN1
30508
Federal Register / Vol. 70, No. 101 / Thursday, May 26, 2005 / Notices
capital markets and/or lower cost of
capital for CNP or its Subsidiaries.
Each of CNP and its Subsidiaries also
requests authorization to enter into an
expense-related agreement with its
respective Financing Subsidiary,
pursuant to which it would agree to pay
all expenses of such entity. Any
amounts issued by such Financing
Subsidiaries to third parties pursuant to
this authorization will be included in
the additional external financing
limitation requested in the Application
for the immediate parent of such
financing entity. However, the
underlying intra-system mirror debt and
parent guarantee shall not be so
included. Applicants also seek authority
for the Financing Subsidiaries to
transfer the proceeds of any financing to
their respective parent companies.
(7) Restructuring of Non-Utility
Subsidiaries
The Commission previously
authorized CNP to restructure its NonUtility Subsidiaries from time to time as
may be necessary or appropriate.27 CNP
seeks a continuation of this authority,
provided that the Non-Utility
Subsidiaries will engage, directly or
indirectly, only in businesses that are
duly authorized, whether by order, rule
or statute.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2675 Filed 5–25–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51722; File No. SR–NASD–
2004–009]
Self-Regulatory Organizations; Notice
of Filing of Proposed Rule Change and
Amendment Nos. 1, 2, 3, and 4 Thereto
by the National Association of
Securities Dealers, Inc. To Modify
Nasdaq’s Clearly Erroneous Rule
May 20, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
21, 2004, the National Association of
Securities Dealers, Inc. (‘‘NASD’’),
through its subsidiary, The Nasdaq
Stock Market, Inc. (‘‘Nasdaq’’), filed
27 See CNP, Holding Co. Act Release No. 27692
(June 30, 2003).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate jul<14>2003
19:11 May 25, 2005
Jkt 205001
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by Nasdaq. On
August 23, 2004, Nasdaq submitted
Amendment No. 1 to the proposed rule
change.3 On May 5, 2005, Nasdaq
submitted Amendment No. 2 to the
proposed rule change.4 On May 11,
2005, Nasdaq submitted Amendment
No. 3 to the proposed rule change.5 On
May 16, 2005, Nasdaq submitted
Amendment No. 4 to the proposed rule
change.6 The Commission is publishing
this notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
Nasdaq proposes to amend NASD
Rule 11890 to better serve the current
market environment. Nasdaq proposes
to implement the proposed rule change
immediately upon approval by the
Commission. Below is the text of the
proposed rule change. Proposed new
language is in italics; proposed
deletions are in [brackets].7
*
*
*
*
*
11890. Clearly Erroneous Transactions
(a) Authority to Review Transactions
Pursuant to Complaint of Market
Participant.
(1) Scope of Authority.
(A) Subject to the limitations
described in paragraph (a)(2)(C) below,
o[O]fficers of Nasdaq designated by its
President shall, pursuant to the
procedures set forth in paragraph (a)(2)
below, have the authority to review any
transaction arising out of the use or
operation of any execution or
communication system owned or
operated by Nasdaq and approved by
the Commission, including transactions
entered into by a member of a national
securities exchange with unlisted
trading privileges in Nasdaq-listed
3 See letter from Mary M. Dunbar, Vice President
and Deputy General Counsel, Nasdaq, to Katherine
A. England, Assistant Director, Division of Market
Regulation (‘‘Division’’), Commission, dated August
20, 2004 (‘‘Amendment No. 1’’). Amendment No. 1
replaced the original rule filing in its entirety.
4 See Form 19b–4, dated May 5, 2005
(‘‘Amendment No. 2’’). Amendment No. 2 replaced
Amendment No. 1 in its entirety.
5 See Partial Amendment, dated May 11, 2005
(‘‘Amendment No. 3’’). Amendment No. 3 revised
incorrect cross-references in the rule text.
6 See Partial Amendment, dated May 16, 2005
(‘‘Amendment No. 4’’). Amendment No. 4 revised
an incorrect paragraph designation in the rule text.
7 The proposed rule change, as amended, is
marked to show changes from the rule as it appears
in the electronic NASD Manual available at
www.nasd.com.
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
securities (a ‘‘UTP Exchange’’) through
such a system; provided, however, that
the parties to the transaction must be
readily identifiable by Nasdaq through
its systems. A Nasdaq officer shall
review transactions with a view toward
maintaining a fair and orderly market
and the protection of investors and the
public interest. Based upon this review,
the officer shall decline to act upon a
disputed transaction if the officer
believes that the transaction under
dispute is not clearly erroneous. If the
officer determines the transaction in
dispute is clearly erroneous, however,
he or she shall declare that the
transaction is null and void or modify
one or more terms of the transaction.
When adjusting the terms of a
transaction, the Nasdaq officer shall
seek to adjust the price and/or size of
the transaction to achieve an equitable
rectification of the error that would
place the parties to a transaction in the
same position, or as close as possible to
the same position, as they would have
been in had the error not occurred. For
the purposes of this Rule, the terms of
a transaction are clearly erroneous if the
transaction is eligible for review under
the Rule and if [when] there is an
obvious error in any term, such as price,
number of shares or other unit of
trading, or identification of the security.
(2) Procedures for Reviewing
Transactions
(A) Any member, member of a UTP
Exchange, or person associated with any
such member that seeks to have a
transaction reviewed pursuant to
paragraph (a)(1) hereof shall submit a
written complaint to Nasdaq
MarketWatch in accordance with the
following time parameters:
(i) for transactions occurring at or
after 9:30 a.m., eastern time, but prior to
10 a.m., eastern time, complaints must
be received by Nasdaq by 10:30 a.m.,
eastern time; and
(ii) for transactions occurring prior to
9:30 a.m., eastern time and at or after 10
a.m., eastern time, complaints must be
received by Nasdaq within thirty
minutes of execution time.
(B) Once a complaint has been
received in accord with [sub]paragraph
(a)(2)(A) above[:], [(i)] the complainant
shall have up to thirty (30) minutes, or
such longer period as specified by
Nasdaq staff, to submit any supporting
written information concerning the
complaint necessary for a determination
under paragraph (a)(1)[;]. Such
supporting information must include
the approximate time of transaction(s),
security symbol, number of shares,
price(s), contra broker(s) if the
transactions are not anonymous,
Nasdaq system used to execute the
E:\FR\FM\26MYN1.SGM
26MYN1
]]>Agencies
[Federal Register Volume 70, Number 101 (Thursday, May 26, 2005)]
[Notices]
[Pages 30500-30508]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-2675]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-27972]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
May 20, 2005.
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and rules
promulgated under the Act. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the
proposed transaction(s) summarized below. The application(s) and/or
declaration(s) and any amendment(s) is/are available for public
inspection through the Commission's Branch of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in
writing by June 14, 2005, to the Secretary, Securities and Exchange
Commission, Washington, DC 20549-0609, and serve a copy on the relevant
applicant(s) and/or declarant(s) at the address(es) specified below.
Proof of service (by affidavit or, in the case of an attorney at law,
by certificate) should be filed with the request. Any request for
hearing should identify specifically the issues of facts or law that
are disputed. A person who so requests will be notified of any hearing,
if ordered, and will receive a copy of any notice or order issued in
the matter. After June 14, 2005, the application(s) and/or
declaration(s), as filed or as amended, may be granted and/or permitted
to become effective.
CenterPoint Energy, Inc., et al. (70-10299)
CenterPoint Energy, Inc. (``CNP''), a registered holding company,
of 1111 Louisiana, Houston, TX 77002; Utility Holding, LLC (``Utility
Holding''), a direct subsidiary of CNP and also a registered holding
company, of 1011 Centre Road, Suite 324, Wilmington, DE 19805; their
public utility subsidiaries, CenterPoint Energy Houston Electric
(``CEHE'') and CenterPoint Energy Resources Corp. (``CERC'') (together,
``Utility Subsidiaries''), both of 1111 Louisiana, Houston, TX 77002;
and certain of the non-utility subsidiaries (``Non-Utility
Subsidiaries''),\1\ all of 1111 Louisiana, Houston, TX 77002
(collectively, the ``Applicants'' or ``CNP System'') have filed an
application-declaration (``Application'') under Sections 6(a), 7, 9(a),
10 and 12(b), (c) and (f) of the Act and Rules 42, 43, 44, 45, 46, 53
and 54 under the Act.
---------------------------------------------------------------------------
\1\ CenterPoint Energy Service Company, LLC; CenterPoint Energy
Funding Company; CenterPoint Energy Transition Bond Company, LLC;
CenterPoint Energy Transition Bond Company II, LLC; Houston
Industries FinanceCo GP, LLC; CenterPoint Energy Investment
Management, Inc.; CenterPoint Energy Properties, Inc.; Arkansas
Louisiana Finance Corporation; Arkla Industries Inc.; CenterPoint
Energy Alternative Fuels, Inc.; CenterPoint Energy Field Services,
Inc.; CenterPoint Energy Gas Receivables, LLC; CenterPoint Energy
Gas Transmission Company; CenterPoint Energy--Illinois Gas
Transmission Company; CenterPoint Energy Intrastate Holdings, LLC;
Pine Pipeline Acquisition Company, LLC; CenterPoint Energy Gas
Services, Inc.; CenterPoint Energy--Mississippi River Transmission
Corporation; CenterPoint Energy MRT Services Company; CenterPoint
Energy Pipeline Services, Inc.; CenterPoint Energy OQ, LLC;
CenterPoint Energy Intrastate Pipelines, Inc.; Minnesota Intrastate
Pipeline Company; NorAm Financing I; HL&P Capital Trust II;
CenterPoint Energy Funds Management, Inc.; CenterPoint Energy
International, Inc.; CenterPoint Energy Avco Holdings, LLC; and
CenterPoint Energy Offshore Management Services, LLC.
---------------------------------------------------------------------------
Background
CNP is a registered holding company that was formed in 2002.\2\ CNP
indirectly owns all of its subsidiaries through its direct, wholly-
owned subsidiary, Utility Holding. Utility Holding is an intermediate
registered holding company formed to minimize tax inefficiencies, and
it serves merely as a conduit. Utility Holding holds, directly and
indirectly, all of the CNP subsidiaries, including the Utility
Subsidiaries.\3\
---------------------------------------------------------------------------
\2\ See Reliant Energy, Inc., HCAR No. 27548 (July 5, 2002) (CNP
was referred to there as ``New REI'').
\3\ As used herein, the defined-term ``Subsidiaries'' refers to
the Applicants (other than CNP and Utility Holding), as well as any
direct or indirect subsidiary companies that CNP may form with the
approval of the Commission or in reliance on rules or statutory
exemptions.
---------------------------------------------------------------------------
The electric Utility Subsidiary, CEHE, is engaged in the
transmission and distribution of electric energy in a 5,000-square-mile
area of the Texas Gulf Coast that includes Houston. The natural gas
Utility Subsidiary, CERC, owns gas distribution systems. Through
[[Page 30501]]
unincorporated divisions, CERC provides retail natural gas distribution
services in Louisiana, Mississippi, Texas, Arkansas, Oklahoma and
Minnesota. Through wholly owned subsidiaries, CERC owns two interstate
natural gas pipelines and gas gathering systems, provides various
ancillary services and offers natural gas supplies to commercial and
industrial customers and natural gas distributors.
In addition to the gas pipeline and gathering subsidiaries
discussed above, CNP has Non-Utility Subsidiaries engaged in, among
other things, financing activities, real estate and energy and gas-
related activities.\4\
---------------------------------------------------------------------------
\4\ CNP's Utility and Non-Utility Subsidiaries in existence as
of March 31, 2005 (except Utility Holding and including non-
applicant subsidiaries) are further described in Ex. K-1 to the
Application.
---------------------------------------------------------------------------
Requested Authorization
A. Summary of Transactions
Applicants request authority to engage in the transactions set
forth below during the period from the effective date of the order to
be issued in this filing through the period ending June 30, 2008
(``Authorization Period'').\5\ Applicants request authority to engage
in these transactions through September 30, 2006, and ask the
Commission to reserve jurisdiction over transactions during the
remainder of the Authorization Period, pending completion of the
record. Applicants state that, based on their business plans and the
current conditions in the financial markets, they anticipate that the
``Current Authority'' requested in their Application will be used
during the Authorization Period primarily to refinance currently
outstanding debt obligations and to meet ongoing operational needs of
their respective businesses.\6\ In summary, Applicants request:
---------------------------------------------------------------------------
\5\ CNP's current financing authority expires June 30, 2005. See
CNP, HCAR No. 27692 (June 30, 2003) (the ``2003 Omnibus Financing
Order'').
\6\ ``Current Authority'' is the total amount of securities that
are outstanding or could be outstanding (in the case of credit
facilities that are not fully drawn) under the 2003 Omnibus
Financing Order. The amounts, as set forth in the first column of
Ex. G-1 to the Application, are as follows: CNP: $3.834 billion;
CEHE: $3.780 billion; CERC: $2.756.
(i) CNP requests authorization for: (a) Securities issuances,
(b) guarantees and other forms of credit support, as well as
performance guarantees (``Guarantees''), and (c) hedging
transactions;
(ii) With respect to its Subsidiaries, CNP requests such
authorization as may be required for issuances of securities,
Guarantees, and hedging transactions;
(iii) CNP requests that the Commission approve the continuation
of a CNP Group Money Pool (the ``Money Pool'');
(iv) CNP and its Subsidiaries request that the Commission
approve the continuation of existing financing arrangements,
Guarantees and hedging arrangements, as well as any transactions
undertaken to extend the terms of or replace, refund or refinance
existing obligations and the issuance of new obligations in exchange
for existing obligations, provided in each case that the issuing
entity's ``Consolidated Capitalization'' \7\ is not increased as a
result of such financing transaction;
---------------------------------------------------------------------------
\7\ ``Consolidated Capitalization'' is defined to include, where
applicable, all common-stock equity (comprised of common stock,
additional paid-in-capital, retained earnings, treasury stock and/or
other comprehensive income or loss), preferred stock, preferred
securities, equity-linked securities, long-term debt, short-term
debt, current maturities and/or minority interests.
---------------------------------------------------------------------------
(v) CNP further requests authority to issue or sell external
debt securities, preferred stock, preferred securities (including
trust preferred securities) and equity-linked securities in an
aggregate amount (including the outstanding securities referenced in
(iv) above) not to exceed $4.334 billion at any one time outstanding
during the Authorization Period, with a request that the Commission
reserve jurisdiction over $500 million of the requested authority;
\8\
---------------------------------------------------------------------------
\8\ For purposes of the Application, the term ``external''
financing refers to a transaction in which securities are issued and
sold to an entity that is not a member of the CNP System. Each of
CNP, CEHE and CERC is requesting authority on a corporate, rather
than a consolidated, basis. Utility Holding is not seeking authority
to issue and sell external debt or equity securities.
---------------------------------------------------------------------------
(vi) CNP requests authority to issue or sell an additional 200
million shares of common stock or options, warrants or other rights
to purchase an equivalent number of shares of common stock (and to
issue or deliver common stock upon the exercise of such options,
warrants or other rights) and to issue one Right (as defined below)
in connection with each share of common stock and to issue
securities in connection with such Right, in the event such Right is
exercised;
(vii) CEHE requests authority to issue or sell external debt
securities, preferred stock and preferred securities (including
trust preferred securities) in an aggregate amount (including the
outstanding securities referenced in (iv) above) not to exceed
$4.280 billion at any one time outstanding during the Authorization
Period, with a request that the Commission reserve jurisdiction over
$500 million of the requested authority;
(viii) CERC requests authority to issue or sell external debt
securities, preferred stock and preferred securities (including
trust preferred securities) in an aggregate amount (including the
outstanding securities referenced in (iv) above) not to exceed
$3.256 billion at any one time during the Authorization Period, with
a request that the Commission reserve jurisdiction over $500 million
of the requested authority;
(ix) The Subsidiaries may also finance their capital needs
through borrowings from CNP, directly or indirectly through Utility
Holding, and Utility Holding requests authority to issue and sell
securities to its parent company, CNP, and to acquire securities
from its subsidiary companies;
(x) CNP requests that the Commission approve the issuance by CNP
and its Subsidiaries of nonexempt Guarantees in an amount such that
the total amount of nonexempt Guarantees issued by CNP and its
Subsidiaries, in the aggregate, does not exceed $4 billion
outstanding at any time during the Authorization Period (the ``CNP
System Guarantee Limit'');
(xi) CNP and the Non-Utility Subsidiaries request authority for
the declaration and payment of dividends out of capital or unearned
surplus;
(xii) CNP requests authority to form and capitalize financing
entities (including special purpose subsidiaries) (each a
``Financing Subsidiary'') in connection with the issuance of
securities as requested in the Application as well as authority for
the financing entities to issue such securities and to transfer the
proceeds of any financing to their respective parent companies;
(xiii) CNP also requests continued authority for the Non-Utility
Subsidiaries to restructure their duly authorized businesses from
time to time; and
(xiv) CNP and its Subsidiaries request authority during the
Authorization period in an aggregate amount of up to $5 million for
``Inactive Subsidiaries.'' \9\
---------------------------------------------------------------------------
\9\ CNP's ``Inactive Subsidiaries,'' as listed on Ex. L-1 to the
Application, are: CenterPoint Energy Retail Interests, Inc.; Entex
Gas Marketing Company; Entex, NGV, Inc.; Entex Oil & Gas Company;
Allied Materials Corporation; National Furnace Company; CenterPoint
Energy Consumer Group, Inc.; NorAm Utility Services, Inc.; Arkla
Products Company; ALG Gas Supply Company; Intex, Inc.; United Gas,
Inc.; CenterPoint Energy Trading and Transportation Group, Inc.;
CenterPoint Energy MRT Holdings, Inc.; CenterPoint Energy Field
Services Holdings, Inc.; CenterPoint Energy Gas Processing, Inc.;
CenterPoint Energy Hub Services, Inc.; HL&P Capital Trust I; REI
Trust I; CenterPoint Energy Tegco, Inc.; Block 368 GP, LLC; Block
368, LP; CenterPoint Energy Power Systems, Inc.; CenterPoint Energy
Products, Inc.; NorAm Energy, Corp.; Utility Rail Services, Inc.;
CenterPoint Energy, Inc. (a Delaware company); CenterPoint Energy
Light, Inc.; Reliant Energy Brasil, Ltda.; Reliant Energy Brazil
Tiete Ltd.; Reliant Energy Brazil Ltd.; Reliant Energy International
Brasil Ltda.; HIE Brasil Rio Sul Ltda.; CenterPoint Energy
International Services, Inc.; Reliant Energy Columbia Ltda.; Reliant
Energy El Salvador S.A. de C.V.; Reliant Energy Outsource Ltd.;
Venus Generation El Salvador; CenterPoint Energy International
Holdings, LLC; Worldwide Electric Holdings B.V.; CenterPoint Energy
International II, Inc.; HIE Ford Heights, Inc.; and HIE Fulton, Inc.
---------------------------------------------------------------------------
B. Parameters for Financing Authority
Applicants request authorization to engage in certain financing
transactions during the Authorization Period for which the specific
terms and conditions are not at this time known, and which may not be
covered by Rule 52 under the Act, without further prior approval by the
Commission. The following general terms will be applicable where
appropriate to the financing transactions requested to be authorized in
the Application:
(1) Effective Cost of Money. The effective cost of capital for
long-term
[[Page 30502]]
debt, short-term debt, preferred securities and equity-linked
securities will not exceed competitive market rates available at the
time of issuance for securities having the same or reasonably similar
terms and conditions issued by similar companies of reasonably
comparable credit quality; provided that in no event will the effective
cost of capital on (i) any long-term debt securities exceed 500 basis
points over comparable term U.S. Treasury securities; or (ii) any
short-term debt securities exceed 300 basis points over the comparable-
term London Interbank Offered Rate (``LIBOR''). The dividend rate on
any series of preferred stock or preferred or equity-linked securities
will not exceed (at the time of issuance) 700 basis points over
comparable term U.S. Treasury securities.
(2) Maturity. The final maturity of long-term indebtedness will not
exceed 50 years. All series of preferred stock, preferred securities
and equity-linked securities will be required to be redeemed no later
than 50 years after issuance, except for preferred stock or preferred
securities that are perpetual in duration.
(3) Issuance Expenses. The underwriting fees, commissions or other
similar remuneration paid in connection with the issue, sale or
distribution of securities pursuant to the Application will not exceed
the competitive market rates that are consistent with similar
securities of comparable credit quality and maturities issued by other
companies; provided that in no event will such fees and commissions
exceed seven percent (7%) of the principal or face amount of the
securities being issued or gross proceeds of the financing.\10\
---------------------------------------------------------------------------
\10\ Issuance Expenses will not count toward the Effective Cost
of Money, discussed above.
---------------------------------------------------------------------------
(4) Use of Proceeds. The proceeds from the sale of securities in
external financing transactions approved herein will be used for
general corporate purposes including (i) the financing, in part, of the
capital expenditures of the CNP System, (ii) the financing of working
capital requirements of the CNP System, (iii) the repayment and/or
refinancing of debt; (iv) the acquisition, retirement, or redemption of
securities previously issued by the issuing party, (v) direct or
indirect investment in companies authorized under the Act, as discussed
herein, and (vi) other lawful purposes. The Applicants represent that
no such financing proceeds will be used to acquire a new Rule 58
Subsidiary unless such transaction is consummated in accordance with an
order of the Commission or an available exemption under the Act.
The Applicants submit to a reservation of jurisdiction over use of
such financing proceeds to invest in one or more new lines of business,
that is, any line of business other than those utility and non-utility
businesses in which CNP and its Subsidiaries are currently engaged, as
described on Exhibit K-1 to the Application.
CNP requests a reservation of jurisdiction over any investment by
CNP or any of its Subsidiaries in any new energy- or gas-related
companies within the meaning of Rule 58 (``Rule 58 Companies'') at any
time CNP's ratio of common equity to total capitalization (net of
securitization obligations) is less than 30%; provided, however, that
CNP may increase its investment in an existing Rule 58 Company to the
extent necessary to complete any project or desirable to preserve or
enhance the value of CNP's investment in the company.
(5) Common Equity Ratio. Net of securitization debt, CNP's
projected equity capitalization will be 30% or more of its Consolidated
Capitalization (defined above) by the end of the Authorization Period.
In connection with the requested authority, CNP is undertaking to
provide the Commission on a quarterly basis confidential exhibits
updating CNP's financial projections and assumptions through 2008.
Applicants represent that, from the date of their formation until
the date hereof, each of CERC and CEHE has maintained common equity of
at least 30% of its Consolidated Capitalization.
At all times during the Authorization Period, CERC will maintain
common equity of at least 30% of its Consolidated Capitalization.
In carrying out the Texas Commission's Financing Order, CEHE's
consolidated member's equity ratio is projected to decrease below the
Commission's target of 30% of Consolidated Capitalization during part
of the period that the Transition Bonds are outstanding, if the
securitization debt is included. The decrease in CEHE's consolidated
member's equity ratio below 30% is due to the Transition Bonds being
shown as debt in the consolidated financial statements of CEHE. The
Transition Bonds will be non-recourse to CEHE and will be serviced by
the cash flows from the transition charges imposed under the Financing
Order, not the revenues of CEHE's utility operations. Excluding the
Transition Bonds from the consolidated pro forma capital structure of
CEHE, the member's equity ratio would be least 30% of its Consolidated
Capitalization at all times during the Authorization Period.\11\
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\11\ Following issuance of the Transition Bonds, CEHE is
expected to have member's equity capitalization of slightly less
than 30% of Consolidated Capitalization if the securitization debt
is included. CEHE will improve its equity ratio as securitization
obligations are paid down. It is anticipated that CEHE will reach a
level of at least 30% of Consolidated Capitalization by 2009.
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Other than with respect to the Money Pool, Applicants submit to a
reservation of jurisdiction over all authority granted in an order in
this filing during any portion of the Authorization Period when: (1)
The common equity ratio of CNP (net of securitization debt), on a
consolidated basis, falls below its common equity ratio as of March 31,
2005; \12\ (2) the member's equity ratio of CEHE, on a consolidated
basis (net of securitization debt) falls below 30% of Consolidated
Capitalization; or (3) the common equity ratio of CERC, on a
consolidated basis, falls below 30%.
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\12\ Based on CNP's Quarterly Report on Form 10-Q for the
quarter ended March 30, 2005, CNP's common equity represented 11.4%
of its Consolidated Capitalization (excluding securitization debt).
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(6) Investment Grade Ratings. Apart from common stock, member
interests or securities issued for the purpose of funding the
operations of subsidiaries through the Money Pool, no guarantees or
other securities may be issued in reliance on the authority requested
in the Application unless: \13\ (i) The security to be issued, if
rated, is rated investment grade by at least one nationally recognized
statistical rating organization as that term is used in paragraphs
(c)(2)(vi)(E), (F) and (H) of Rule 15c3-1 under the Securities Exchange
Act of 1934 (``NRSRO''); (ii) all outstanding rated securities of the
issuer are rated investment grade by at least one NRSRO; and (iii) all
outstanding rated securities of CNP are rated investment grade by at
least one NRSRO.
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\13\ Applicants ask the Commission to reserve jurisdiction over
the issuance of securities subject to the Investment Grade Ratings
criteria where one or more of the Investment Grade Ratings criteria
are not met. As noted previously, Utility Holding is not seeking
authority to issue external debt or equity securities.
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(7) Authorization Period. No security will be issued pursuant to
the authority sought in the Application after the last day of the
Authorization Period (which is June 30, 2008), provided, however, that
securities issuable or deliverable upon exercise or conversion of, or
in exchange for, securities issued on or before June 30, 2008 in
accordance with the terms of such authorization may be issued or
delivered after such date.
[[Page 30503]]
C. Description of Specific Types of Financing
(1) CNP External Financing
CNP requests authority to issue and sell securities including
common stock, preferred stock and preferred and equity-linked
securities (either directly or through a subsidiary), warrants, long-
term and short-term debt securities and convertible securities and
derivative instruments.\14\ CNP also requests authorization to enter
into obligations with respect to tax-exempt debt issued on behalf of
CNP by governmental authorities. Such obligations may relate to the
refunding of outstanding tax-exempt debt or to the remarketing of tax-
exempt debt. CNP seeks authorization to enter into lease arrangements,
and certain hedging transactions in connection with the foregoing
issuances of taxable or tax-exempt securities. Applicants state that,
based on their business plans and the current conditions in the
financial markets, they anticipate that the Current Authority (defined
above) requested in their Application will be used during the
Authorization Period primarily to refinance currently outstanding debt
obligations and to meet ongoing operational needs of their respective
businesses. The Current Authority for CNP is $3.834 billion.
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\14\ Any convertible or equity-linked securities or warrants
would be convertible into or linked only to securities that CNP and
its Subsidiaries are otherwise authorized to issue pursuant to rule
or Commission order and will count against the authorized limits for
those securities granted pursuant to the authority sought in the
Application.
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CNP may sell securities covered by the Application in any one of
the following ways: (i) Through underwriters; (ii) to initial
purchasers in transactions in reliance on Rule 144A under the
Securities Act of 1933 or dealers; (iii) through agents; (iv) directly
to a limited number of purchasers or a single purchaser; (v) in
exchange for already outstanding securities, including tender offers;
or (vi) directly to employees (or to trusts established for their
benefit), shareholders and others. If underwriters are used in the sale
of the securities, such securities may be acquired by the underwriters
for their own account and may be resold 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. The
securities may be offered to the public either through underwriting
syndicates (which may be represented by a managing underwriter or
underwriters designated by CNP) or directly by one or more underwriters
acting alone. The securities may be sold directly by CNP or through
agents designated by CNP from time to time. If common or preferred
stock or convertible debt is being sold in an underwritten offering,
CNP may grant the underwriters thereof a ``green shoe'' option
permitting the purchase from CNP at the same price of additional shares
or debt then being offered solely for the purpose of covering over-
allotments.
Sales may be registered under the Securities Act of 1933 or
effected through competitive bidding among underwriters. In addition,
sales may be made through private placements, sales to initial
purchasers in Rule 144A transactions or other non-public offerings to
one or more persons. All such sales will be upon terms and conditions,
at rates or prices and under conditions negotiated or based upon, or
otherwise determined by, competitive capital markets.
(a) Common Stock
CNP is authorized under its restated articles of incorporation to
issue one billion shares of common stock, par value $.01 per share, and
related preferred stock purchase rights. Each share of common stock
includes one right (``Right'') to purchase from CNP a unit consisting
of one one-thousandth of a share of CNP Series A Preferred Stock at a
purchase price of $42.50 per unit, subject to adjustment under
specified circumstances, as described in Exhibit I-1. The Rights are
issued pursuant to the Rights Agreement dated as of January 1, 2002
between CNP and JPMorgan Chase Bank (the ``Rights Agreement''), a copy
of which was filed with CNP's Annual Report on Form 10-K for the year
ended December 31, 2001 (File No. 1-31447) and incorporated by
reference.\15\ As of February 28, 2005, CNP had 308,501,031 shares of
common stock outstanding. CNP seeks authority to issue 200 million
additional shares of common stock (including Rights) and to issue
warrants, options and other rights to acquire an equivalent amount of
common stock, and to buy and sell derivative securities to hedge these
transactions. CNP will not engage in speculative transactions.
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\15\ The Rights will become exercisable shortly after (i) any
public announcement that a person or group of associated persons has
acquired, or obtained the right to acquire, beneficial ownership of
20% or more of the outstanding shares of CNP common stock; or (ii)
the start of a tender or exchange offer that would result in a
person or group of associated persons becoming a 20% owner. The
Rights are also exercisable for shares of (i) CNP common stock in
the event of certain tender or exchange offers not approved by the
CNP board; and (ii) the common stock of an acquiring company in the
event of certain mergers, business combinations, or substantial
sales or transfers of assets or earning power. Under certain
circumstances, CNP may substitute cash, property, other equity
securities or debt, or may reduce the exercise price of the Rights.
The Rights attach to all certificates representing the outstanding
shares of common stock and are transferable only with such
certificates. The Rights are redeemable at CNP's option prior to
their becoming exercisable and expire on December 31, 2011.
CNP seeks continued authority to continue to implement the
Rights Agreement, including the authority to issue shares of CNP
Series A Preferred Stock or CNP common stock, or to provide other
consideration issued upon exercise of the Rights. Such securities
issuances will not be counted against the external financing limits
requested in this filing.
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Such issuances may be used for the general corporate purposes
described above in the ``Use of Proceeds'' section. In addition, CNP
proposes, from time to time during the Authorization Period, to issue
and/or acquire in open market transactions or negotiated block
purchases, shares of CNP common stock for allocation under incentive
compensation plans and other equity compensation and employee benefit
plans, and for the CenterPoint Investor's Choice Plan.\16\ Such
transactions would comply with applicable law and Commission
interpretations then in effect. The requested authority to issue or
deliver CNP common stock under these plans includes the authority to
issue related options, warrants, stock appreciation rights, stock
units, time-based restricted stock, performance awards and other
securities pursuant to those plans. Any newly issued shares of common
stock, including shares of common stock issued upon the conversion or
exercise of warrants, convertible debt or other equity-linked
securities, will be counted toward the overall limit on common stock;
shares of common stock purchased in the open market or otherwise
acquired for the purpose of reissuance under Stock Based Plans will not
be counted toward this limit to the extent that the net effect of the
purchase and reissuance does not increase the number of shares of
common stock outstanding.
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\16\ CNP's existing stock-related employee plans are:
CenterPoint Energy, Inc. Savings Plan; CenterPoint Energy, Inc. 1994
Long-Term Incentive Compensation Plan; Long-Term Incentive Plan of
CenterPoint Energy, Inc.; CenterPoint Energy, Inc. and Subsidiaries
Common Stock Participation Plan for Designated New Employees and
Non-Officer Employees; NorAm Energy Corp. 1994 Incentive Equity
Plan; and CenterPoint Energy, Inc. Stock Plan for Outside Directors
(collectively, the ``Stock Based Plans''). The requested authority
relating to benefit and compensation plans is intended to apply to
these plans, as they may be amended or supplemented from time to
time, and similar plans or arrangements that may be adopted in the
future without any additional prior Commission order.
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CNP may also issue common stock as consideration, in whole or in
part, for acquisitions of securities or businesses
[[Page 30504]]
or assets where such acquisition is otherwise authorized under the Act.
(b) External Debt, Preferred Stock, Preferred and Equity-Linked
Securities
CNP requests Commission authorization during the Authorization
Period to issue debt securities and preferred stock, and to issue
directly or indirectly through one or more Financing Subsidiaries long-
term debt securities, preferred stock, preferred securities (including,
trust preferred securities), and equity-linked securities (including
preferred stock, preferred securities that are convertible, either
mandatorily or at the option of the holder, into common stock, or
forward purchase contracts for common stock).
Long-term debt securities may be comprised of bonds, notes, medium-
term notes or debentures under one or more indentures, long-term
indebtedness under agreements with banks or other institutional
lenders, directly or indirectly, and convertible debt.\17\ Long-term
securities could also include obligations relating to the refunding or
remarketing of tax-exempt debt issued on behalf of CNP or its
Subsidiaries by governmental authorities.
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\17\ Debt will be convertible only into such securities as are
otherwise authorized under the Act.
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Long-term debt issued pursuant to the requested authority will be
unsecured.\18\ Specific terms of any borrowings may include one or more
revolving credit facilities, and will also continue to be determined by
CNP at the time of issuance. Any borrowings will comply in all regards
with the parameters on financing authorization set forth above.
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\18\ Currently, certain pollution control bonds outstanding at
CNP are secured by mortgage bond obligations of CEHE.
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Short-term debt issued by CNP will be unsecured. Types of short-
term debt securities may include borrowings under one or more bank
loans, commercial paper, short-term notes, bid notes, institutional
borrowings, and privately placed notes. Specific terms of any short-
term borrowings will be determined by CNP at the time of issuance and
will comply with the parameters for financing authorization set forth
above. The maturity of any short-term debt issued will not exceed 364
days or, if the notional maturity is greater than 364 days, the debt
security will include put options at appropriate points in time to
cause the security to be accounted for as a current liability under
generally accepted accounting principles (``GAAP'').
CNP may sell commercial paper or privately placed notes
(``commercial paper''), from time to time, in established domestic or
European commercial paper markets. Such commercial paper may be sold at
a discount or bear interest at a rate per annum prevailing at the date
of issuance for commercial paper of a similarly situated company. CNP
may, without counting against the limit on parent financings set forth
above, maintain back-up lines of credit in connection with one or more
commercial paper programs in an aggregate amount not to exceed the
amount of authorized commercial paper.
CNP may sell shares of preferred stock with terms of each series as
may be designated in the instrument creating each such series. Shares
of preferred stock may be convertible or exchangeable into CNP common
stock, provided that preferred stock will be convertible only into such
common stock as is otherwise authorized under the Act.
CNP may sell short-term notes through one or more private
placements or public offerings primarily to traditional money market
investors. CNP may enter into individual agreements with one or more
commercial banks that may or may not be lenders under CNP credit
facilities. These agreements would permit CNP to negotiate with one or
more banks on any given day for such lender, or any affiliate or
subsidiary of such lender, to purchase promissory notes directly from
CNP.
Equity-linked securities issued by CNP will be exercisable or
exchangeable for or convertible, either mandatorily or at the option of
the holder, into common stock or indebtedness or allow the holder to
surrender to the issuer or apply the value of a security issued by CNP,
as approved by the Commission, to such holder's obligation to make a
payment on another security of CNP issued as permitted by the
Commission. Any convertible or equity-linked securities will be
convertible into or linked to common stock, preferred securities or
unsecured debt that CNP is otherwise authorized to issue by Commission
order directly, or indirectly through Financing Subsidiaries on behalf
of CNP.
Preferred stock and equity-linked securities may be sold directly
or indirectly to or through underwriters, initial purchasers or dealers
or pursuant to any other method of distribution as described for common
stock, above.
(c) Risk Management Devices
CNP requests authority to enter into hedging arrangements intended
to reduce or manage interest rate risks. These arrangements may
include, but are not limited to interest rate swaps, caps, floors,
collars, forward agreements, issuance of structured notes (i.e., a debt
instrument in which the principal and/or interest payments are
indirectly linked to the value of an underlying asset or index), or
transactions involving the purchase or sale, including short sales, of
U.S. Treasury or U.S. governmental agency (e.g., Fannie Mae)
obligations or LIBOR based swap instruments (collectively referred to
as ``Hedging Instruments''). The transactions would be for fixed
periods and stated notional amounts as generally accepted as prudent in
the capital markets. In no case will the notional principal amount of
any interest rate hedge exceed that of the underlying debt instrument.
CNP will not engage in ``speculative transactions'' as that term is
described in Statement of Financial Accounting Standards (``SFAS'') 133
(``Accounting for Derivative Instruments and Hedging Activities'').
Transaction fees, commissions and other amounts payable to brokers in
connection with an interest rate hedge will not exceed those generally
obtainable in capital markets for parties of comparable credit quality.
CNP may employ interest rate derivatives as a means of prudently
managing the risk associated with any of its outstanding debt issued
pursuant to this authorization or an applicable exemption by, in
effect, synthetically (i) converting variable rate debt to fixed rate
debt, (ii) converting fixed rate debt to variable rate debt, (iii)
limiting the impact of changes in interest rates resulting from
variable rate debt and (iv) managing other risks that may attend
outstanding securities. Transactions will be entered into for a fixed
or determinable period. CNP will only enter into agreements with
counterparties having a senior debt rating at the time the transaction
is executed of at least ``BBB-'' or its equivalent, as published by a
NRSRO (``Approved Counterparties'').
In addition, CNP requests authorization to enter into hedging
transactions with respect to anticipated debt offerings (the
``Anticipatory Hedges''), subject to the limitations and restrictions
expressed below. Such Anticipatory Hedges would only be entered into
with Approved Counterparties, and would be utilized to fix and/or limit
the risk associated with any issuance of securities through appropriate
means, including (i) a forward sale of exchange-traded Hedging
Instruments, (ii) the purchase of put options on Hedging Instruments,
[[Page 30505]]
(iii) a put options purchase in combination with the sale of call
options Hedging Instruments, (iv) some combination of the above and/or
other derivative or cash transactions, including, but not limited to,
structured notes, caps and collars, appropriate for the Anticipatory
Hedges, and (v) other financial derivatives or other products including
Treasury rate locks, swaps, forward starting swaps, and options on the
foregoing. Anticipatory Hedges may be executed on-exchange with brokers
through the opening of futures and/or options positions traded on the
Chicago Board of Trade, the opening of over-the-counter positions with
one or more counterparties, or a combination of the two. CNP will
determine the structure of each Anticipatory Hedge transaction at the
time of execution. CNP may decide to lock in interest rates and/or
limit its exposure to interest rate increases.
Each Hedging Instrument and Anticipatory Hedge will be treated for
accounting purposes as provided for under GAAP. Fees, commissions and
other amounts payable to the counterparty or exchange (excluding,
however, the swap or option payments) in connection with Hedging
Instruments will not exceed those generally obtainable in competitive
markets for similarly-situated parties of comparable credit quality.
CNP will comply with SFAS 133 and SFAS 138 (``Accounting for Certain
Derivative Instruments and Certain Hedging Activities'') or such other
standards relating to accounting for derivative transactions as are
adopted and implemented by the Financial Accounting Standards Board.
(2) Subsidiary Financing
The Utility Subsidiaries and the Non-Utility Subsidiaries, to the
extent not exempted pursuant to Rule 52, request authority to issue and
sell securities, including preferred stock, preferred securities
(including trust preferred securities) (either directly or through a
subsidiary), and long-term and short-term debt securities (including
convertible debt, commercial paper and privately placed short-term
notes) on the same terms and conditions discussed above for CNP, except
that Subsidiary debt may be secured or unsecured, and Utility
Subsidiary debt will be subject to the limits on aggregate amounts of
securities outstanding in the applicable categories as set forth on
Exhibit G-1 to the Application.\19\
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\19\ To the extent CEHE issues secured debt, the debt will be
secured by assets or securities owned by CEHE. To the extent CERC
issues secured debt, such debt will be secured by a pledge of the
stock of its nonutility subsidiary companies. CERC currently does
not have outstanding secured debt. To the extent a Non-Utility
Subsidiary issue secured debt, the debt will be secured by assets or
securities owned by that Non-Utility Subsidiary.
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The Utility Subsidiaries also request authorization to enter into
obligations with respect to new tax-exempt debt issued on behalf of a
Utility Subsidiary by governmental authorities as well as obligations
entered into in connection with the refunding of outstanding tax-exempt
debt assumed by CNP in connection with the August 31, 2002
restructuring by which CNP and Utility Holding became holding companies
for the Utility Subsidiaries. The Utility Subsidiaries and the Non-
Utility Subsidiaries, to the extent not exempted pursuant to Rule 52,
also request authority to enter into hedging transactions intended to
reduce or manage interest rate risks in connection with the foregoing
issuance of securities, subject to the limitations and requirements
applicable to CNP. Based on their business plans and the current
condition in the financial markets, Applicants anticipate that the
Current Authority (defined above) sought in this Application will be
used during the Authorization Period primarily to refinance currently
outstanding debt obligations and to meet ongoing operational needs of
their respective businesses.
(3) Guarantees and Intra-System Advances
(a) Guarantees
Authorization is requested for CNP and its Subsidiaries during the
Authorization Period to enter into guarantees on their own behalf and
on behalf of their respective Subsidiaries to third parties, obtain
letters of credit, enter into support or expense agreements or
liquidity support agreements or otherwise provide credit support with
respect to the obligations of the Subsidiaries, including performance
guarantees, as may be appropriate to carry on in the ordinary course of
CNP or its Subsidiaries' duly-authorized utility and related
businesses, and the Subsidiaries request authority to provide to their
respective Subsidiaries guarantees and other forms of credit support
such that in the aggregate, CNP and its Subsidiaries will not enter
into guarantees in an amount exceeding the CNP System Guarantee
Limit.\20\ Excluded from the CNP System Guarantee Limit are obligations
exempt pursuant to Rule 45 under the Act.
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\20\ The amount of the requested authority (in the aggregate,
not to exceed $4 billion outstanding at any time during the
Authorization Period) is intended to accommodate situations such as
the CNP System's exposure to, among other things, the volatility of
natural gas prices.
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CNP currently has a number of types of guarantees in effect. Among
other things, it has issued guarantees with respect to payment
obligations of certain of its Subsidiaries, both to counterparties and,
in some cases, to regulatory authorities where required under
applicable laws; entered into indemnification agreements to support the
issuance of surety bonds on behalf of itself and its Subsidiaries;
entered into agreements to guarantee certain amounts related to the
issuance of securities by certain Subsidiaries and to guarantee certain
other Subsidiary expenses and liabilities. In addition, CERC has
guaranteed the office space lease of one of its subsidiaries.
Certain of the guarantees may be in support of obligations that are
not capable of exact quantification. In such cases, CNP will determine
the exposure under a guarantee for purposes of measuring compliance
with the CNP System Guarantee Limit by appropriate means, including
estimation of exposure based on loss experience or potential payment
amounts. As appropriate, these estimates will be made in accordance
with GAAP and sound financial practices. Such estimation will be
reevaluated periodically.
The guarantor may charge each Subsidiary a fee for any guarantee
provided on its behalf that is not greater than the cost, if any, of
obtaining the liquidity necessary to perform the guarantee (for
example, bank line commitment fees or letter of credit fees, plus other
transactional expenses) for the period of time the guarantee remains
outstanding.
The amount of any guarantees will be counted toward the applicable
limits under Rules 53 and 58.
(b) Money Pool
The ``Participants'' request authorization to continue to conduct
the Money Pool, as approved in the 2003 Omnibus Financing Order (HCAR
No. 27962 (June 30, 2003)).\21\ To the extent not exempted by Rule 52
under the Act, the Participants (other than CNP) also request
authorization to make, from
[[Page 30506]]
time to time, unsecured short-term borrowings from the Money Pool and
to contribute surplus funds to the Money Pool and to lend and extend
credit to (and acquire promissory notes from) one another through the
Money Pool.
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\21\ The participants in the Money Pool will be CNP, CenterPoint
Energy Service Company, LLC (the ``Service Company''), the Utility
Subsidiaries, CenterPoint Energy Properties, Inc. (owner of CNP's
office building, parking garage and dispatch facility), CenterPoint
Energy Products, Inc. (inactive), and CenterPoint Energy Funding
Company (collectively, the ``Participants''). CenterPoint Energy
Funding Company is an entity through which CNP had funded or
acquired foreign utility companies within the meaning of Section 33
of the Act and so, this company will be an investor in but not a
borrower from the Money Pool. No exempt wholesale generator, foreign
utility company or exempt telecommunications company will be a
borrower from the Money Pool.
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CNP requests authorization to contribute surplus funds and to lend
and extend credit to the Participants through the Money Pool. CNP will
not be a borrower from the Money Pool.
Under the terms of the Money Pool, each Participant determines each
day the amount of funds each desires to contribute to the Money Pool,
and contributes such funds to the Money Pool.\22\ The determination of
whether a Participant has funds to contribute and the determination
whether a Participant shall lend such funds to the Money Pool is made
by such Participant's treasurer, or by a designee thereof, in such
Participant's sole discretion.\23\ Each Participant may withdraw any of
its funds at any time upon notice to the Service Company, as
administrative agent of the Money Pool.
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\22\ An Amended and Restated Form of Money Pool Agreement is
attached to the Application as Exhibit J-1.
\23\ Participants other than Utility Subsidiaries may contribute
amounts to the Money Pool from either surplus funds or external
borrowings. Utility Subsidiaries will only contribute surplus funds
to the Money Pool.
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Short-term funds will be available from the following sources: (1)
Surplus funds in the treasuries of the Participants, and (2) proceeds
from external borrowings, including bank loans, the sale of notes and/
or the sale of commercial paper by the Participants, in each case to
the extent permitted by applicable laws and regulatory orders.
Each borrowing Participant will borrow pro rata from each fund
source in the same proportion that the amount of funds provided from
that fund source bears to the total amount then loaned through the
Money Pool. On a day when more than one source of funds is invested in
the Money Pool with different rates of interest used to fund loans
through the Money Pool, each borrower will borrow pro rata from each
such funding source from the Money Pool in the same proportion that the
amount of funds provided by that fund source bears to the total amount
of funds invested into the Money Pool. If there are insufficient funds
to meet all borrowing requests, the needs of the Utility Subsidiaries
will be met before loans are made to any Non-Utility Subsidiaries.
The Service Company, as administrator of the Money Pool, will
provide each Participant with a report for each business day that
includes, among other things, cash activity for the day and the balance
of loans outstanding. All borrowings from the Money Pool shall be
authorized by the borrowing Participant's treasurer, or by a designee
thereof. No Participant shall be required to effect a borrowing through
the Money Pool if such Participant determines that it can (and is
authorized to) effect such borrowing more advantageously directly from
banks or through the sale of its own notes or commercial paper.
Funds which are loaned by Participants and are not utilized to
satisfy borrowing needs of other Participants will be invested by the
Service Company on behalf of the lending Participants in one or more
short term instruments, including (i) interest-bearing deposits with
banks; (ii) obligations issued or guaranteed by the U.S. government
and/or its agencies; (iii) commercial paper rated not less than A-1 by
Standard & Poor's and P-1 by Moody's Investors Services, Inc.; (iv)
money market funds; (v) bank certificates of deposit; (vi) Eurodollar
funds; (vii) repurchase agreements collateralized by securities issued
or guaranteed by the U.S. government; and (viii) such other investments
as are permitted by Section 9(c) of the Act and Rule 40 under the Act.
The interest rate applicable on any day to then outstanding loans
through the Money Pool, whether or not evidenced by a promissory demand
note, will be the composite weighted average daily effective cost
incurred by CNP for external borrowings outstanding on that date. The
daily effective cost shall be inclusive of interest rate swaps related
to such external funds. If there are no external borrowings outstanding
on that date, then the rate will be the certificate of deposit yield
equivalent of the 30-day Federal Reserve ``AA'' Non-Financial
Commercial Paper Composite Rate or if no composite is established for
that day, then the applicable rate will be the composite for the next
preceding day for which a composite is established. If the composite
shall cease to exist, then the rate will be the composite which then
most closely resembles the composite and/or most closely mirrors the
pricing CNP would expect if it had external borrowings.
Interest income related to external investments will be calculated
daily and allocated back to lending Participants on the basis of their
relative contribution to the Money Pool on that date.
Each Participant receiving a loan from the Money Pool shall repay
the principal amount of such loan, together with all interest accrued
thereon, on demand by the administrator and in any event not later than
the expiration date of the Commission authorization for the operation
of the Money Pool. All loans made through the Money Pool may be prepaid
by the borrower without premium or penalty.
Borrowings by the Utility Subsidiaries from the Money Pool should
not exceed the following amounts at any one time outstanding during the
Authorization Period:
CEHE--$600 million \24\
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\24\ CEHE's external borrowings under the $200 million revolving
credit facility authorized in CNP, HCAR No. 27949 (Feb. 28, 2005)
will be counted toward the Money Pool limits during the
Authorization Period.
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CERC--$600 million
(c) Other Intra-System Financing
In addition to external financings and borrowings as described
above through the Money Pool, the Subsidiaries may also finance their
capital needs through both short-term and long-term borrowings from
CNP, directly or indirectly through Utility Holding. Applicants request
authorization, consistent with the requirements of Section 12(a) of the
Act, to engage in intra-system financings with each other.
Authority is sought for the Utility Subsidiaries to acquire
securities from their respective subsidiaries and to issue and sell
securities to their respective parents. Any short-term borrowings by
Utility Subsidiaries pursuant to this request would be counted toward
the Money Pool limits above.
Applicants state that Utility Holding is a subsidiary of CNP and is
the direct or indirect parent of all of the Subsidiaries. Applicants
state that Utility Holding may have occasion to issue its debt or
equity securities to CNP in exchange for funds. Utility Holding could
then purchase debt or equity securities of its Subsidiaries with those
funds, adding to the capitalization of those Subsidiaries. Applicants
state that no such issuance by Utility Holding will increase the CNP
system's securities held by third-parties. If CNP obtains funds to
purchase such securities from an external source, CNP's issuance of
securities will be only as approved by the Commission's order in this
docket and subject to the limitations imposed in such order, including
the overall financing limitation of $4.334 billion. All securities
issuances by a Subsidiary to Utility Holding, will be subject to
limitations imposed on that Subsidiary regarding securities issuances
and will be within the dollar limitations imposed by the order in this
docket, if any.
[[Page 30507]]
Consequently, Applicants assert, there is no need to impose a separate
dollar limitation on these conduit securities issuances by Utility
Holding. Applicants state that the approval sought for Utility Holding
is merely to cover the technical requirement that all of its securities
issuances be approved, as it is acting as a conduit to invest funds by
CNP in the Subsidiaries. Applicants also seek authority for Utility
Holding to transfer any financing proceeds received from the
Subsidiaries to CNP.
(d) Authority for Inactive Subsidiaries
The Applicants request authority in an aggregate amount of up to $5
million during the Authorization Period to pay, on behalf of the
Inactive Subsidiaries (defined above), administrative expenses and
dissolution costs; to resolve claims and lawsuits of any Inactive
Subsidiary, if any; and to pay any other costs and expenses that any
Inactive Subsidiaries may incur from time to time. Applicants request
that the Commission reserve jurisdiction over this request.
(4) Changes in Capital Stock of Majority Owned Subsidiaries
The portion of an individual Subsidiary's aggregate financing to be
effected through the sale of stock or other equity securities to CNP or
other immediate parent company during the Authorization Period pursuant
to Rule 52 and/or pursuant to an order issued pursuant to this filing
cannot be ascertained at this time. It may happen that the proposed
sale of capital securities (i.e., common stock or preferred stock) may
in some cases exceed the then authorized capital stock of such
Subsidiary. In addition, the Subsidiary may choose to use capital stock
with no par value.
As needed to accommodate such proposed transactions and to provide
for future issuances, request is made for authority to change the terms
of any 50% or more owned Subsidiary's authorized capital stock
capitalization or other equity interests by an amount deemed
appropriate by CNP or other intermediate parent company; provided that
the consents of all other shareholders or other equity holders have
been obtained for the proposed change. This request for authorization
is limited to CNP's 50% or more owned Subsidiaries and will not affect
the aggregate limits or other conditions contained in the Application.
A Subsidiary would be able to change the par value, or change between
par value and no-par stock, or change the form of such equity from
common stock to limited partnership or limited liability company
interests or similar instruments, or from such instruments to common
stock, without additional Commission approval. Any such action by a
Utility Subsidiary would be subject to and would only be taken upon the
receipt of any necessary approvals by the state commission in the state
or states where the Utility Subsidiary is incorporated and doing
business. CNP will be subject to all applicable laws regarding the
fiduciary duty of fairness of a majority shareholder to minority
shareholders in any such 50% or more owned Subsidiary and will
undertake to ensure that any change implemented under this paragraph
comports with such legal requirements.\25\
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\25\ Applicants state that, in the event that proxy
solicitations are necessary with respect to the internal corporate
reorganizations, Applicants will seek the necessary Commission
approvals under Sections 6(a)(2) and 12(e) of the Act through the
appropriate filing of a declaration.
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(5) Payment of Dividends Out of Capital or Unearned Surplus
CNP requests authority to declare and pay dividends out of capital
or unearned surplus in an amount up to $300 million during the
Authorization Period. CNP requests that the Commission reserve
jurisdiction over this request.\26\
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\26\ CEHE will be seeking authority to declare and pay dividends
in a separate application in connection with the issuance of
transition bonds.
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Applicants also request a continuation of authority for the Non-
Utility Subsidiaries to pay dividends with respect to the securities of
the Non-Utility Subsidiaries and/or acquire, retire or redeem any
securities of the Non-Utility Subsidiaries that are held by an
associated company or affiliate, from time to time, through the
Authorization Period, out of capital or unearned surplus, to the extent
permitted under applicable corporate law; provided that no Non-Utility
Subsidiary will declare or pay any dividend out of capital or unearned
surplus unless it: (i) Has received excess cash as a result of the sale
of its assets; (ii) has engaged in a restructuring or reorganization;
and/or (iii) is returning capital to an associate company. Further, no
Non-Utility Subsidiary that derives any material part of its revenues
from the sale of goods, services or electricity to Utility Subsidiaries
will declare or pay any dividend out or capital or unearned surplus.
The Applicants request that the Commission reserve jurisdiction over
the payment of such dividends out of capital or unearned surplus when
any of these conditions are not met.
(6) Financing Subsidiaries
CNP and its Subsidiaries propose to organize and acquire the common
stock or other equity interests of one or more Financing Subsidiaries
for the purpose of effecting various financing transactions from time
to time through the Authorization Period. Financing Subsidiaries may be
corporations, trusts, partnerships or other entities created
specifically for the purposes described herein. The amount of
securities issued by the Financing Subsidiaries to third parties will
count toward the respective financing limits of its immediate parent as
set forth on Exhibit G-1 of the Application. Authorization is requested
for the issuance of such securities by the Financing Subsidiaries and
for the transfer of proceeds from such issuance to the respective
parent companies.
CNP and, to the extent such issuances are not exempt pursuant to
Rule 52, the Subsidiaries also request authorization to issue their
subordinated unsecured notes (``Subordinated Notes'') to any Financing
Subsidiary to evidence the loan of financing proceeds by a Financing
Subsidiary to its parent company. The principal amount, maturity and
interest rate on such Subordinated Notes will be designed to parallel
the amount, maturity and interest or distribution rate on the
securities issued by a Financing Subsidiary, in respect of which the
Subordinated Note is issued. CNP or a Subsidiary may, if required,
guarantee or enter into support or expense agreements in respect of the
obligations of such Financing Subsidiaries.
It is anticipated that the Financing Subsidiaries will be wholly-
owned subsidiaries of CNP and fully consolidated for purposes of
financial reporting. No Financing Subsidiary shall acquire or dispose
of, directly or indirectly, any interest in any utility asset, as that
term is defined under the Act, without first obtaining such further
approval as may be required.
The business of the Financing Subsidiary will be limited to
effecting financing transactions that have been otherwise authorized
for CNP and its Subsidiaries. In connection with such financing
transactions, CNP or its Subsidiaries may enter into one or more
guarantees or other credit support agreements in favor of the Financing
Subsidiary.
Any Financing Subsidiary organized pursuant to this filing shall be
organized only if, in management's opinion, the creation and
utilization of such Financing Subsidiary will likely result in tax
savings, increased access to
[[Page 30508]]
capital markets and/or lower cost of capital for CNP or its
Subsidiaries.
Each of CNP and its Subsidiaries also requests authorization to
enter into an expense-related agreement with its respective Financing
Subsidiary, pursuant to which it would agree to pay all expenses of
such entity. Any amounts issued b
