File No. 070-10148
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1/A
AMENDMENT NO. 1 TO
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
CenterPoint Energy, Inc.
1111 Louisiana
Houston, Texas 77002
Utility Holding, LLC
200 West Ninth Street Plaza
Suite 411
Wilmington, Delaware 19801
(Name of companies filing this statement
and address of principal executive offices)
CenterPoint Energy, Inc.
1111 Louisiana
Houston, Texas 77002
(Name of top registered holding company parent of each applicant or declarant)
Rufus S. Scott
Vice President, Deputy General Counsel and Assistant Corporate Secretary
CenterPoint Energy, Inc.
1111 Louisiana
Houston, Texas 77002
(713) 207-7451
(Names and addresses of agents for service)
The Commission is also requested to send copies
of any communications in connection with this matter to:
James R. Doty, Esq. Margo S. Scholin, Esq.
Joanne C. Rutkowski, Esq. Baker Botts L.L.P.
Baker Botts L.L.P. 3000 One Shell Plaza
The Warner Houston, Texas 77002-4995
1299 Pennsylvania Avenue, N.W. (713) 229-1234
Washington, D.C. 20004-2400
(202) 639-7700
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
From time to time, we make statements concerning our expectations,
beliefs, plans, objectives, goals, strategies, future events or performance and
underlying assumptions and other statements, that are not historical facts.
These statements are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Actual results may differ
materially from those expressed or implied by these statements. You can
generally identify our forward-looking statements by the words "anticipate,"
"believe," "continue," "could," "estimate," "expect," "forecast," "goal,"
"intend," "may," "objective," "plan," "potential," "predict," "projection,"
"should," "will," or other similar words.
We have based our forward-looking statements on our management's
beliefs and assumptions based on information available to our management at the
time the statements are made. We caution you that assumptions, beliefs,
expectations, intentions and projections about future events may and often do
vary materially from actual results. Therefore, we cannot assure you that actual
results will not differ materially from those expressed or implied by our
forward-looking statements.
The following are some of the factors that could cause actual results
to differ materially from those expressed or implied in forward-looking
statements:
o state and federal legislative and regulatory actions or developments,
including deregulation, re-regulation and restructuring of the electric
utility industry, constraints placed on our activities or business by
the Public Utility Holding Company Act of 1935 (the "1935 Act" or the
"Act"), changes in laws or regulations or their application to our
business and regulatory actions with respect to:
o approval of stranded costs;
o allowed rates of return;
o rate structures;
o recovery of investments; and
o operation and construction of facilities;
o non-payment for our services due to financial condition of our
customers, including Reliant Resources, Inc. ("Reliant Resources");
o the successful and timely completion of our capital projects;
o industrial, commercial and residential growth in our service territory
and changes in market demand and demographic patterns;
o changes in business strategy or development plans;
o the timing and extent of changes in commodity prices, particularly
natural gas;
o changes in interest rates or rates of inflation;
o unanticipated changes in operating expenses and capital expenditures;
o weather variations and other natural phenomena;
o commercial bank and financial market conditions, our access to capital,
the cost of such capital, receipt of certain approvals under the 1935
Act, and the results of our financing and refinancing efforts,
including availability of funds in the debt capital markets;
o actions by rating agencies;
o legal and administrative proceedings and settlements;
o changes in tax laws;
o inability of various counterparties to meet their obligations with
respect to our financial instruments;
o any lack of effectiveness of our disclosure controls and procedures;
o changes in technology;
o significant changes in our relationship with our employees, including
the availability of qualified personnel and potential adverse effects
if labor disputes or grievances were to occur;
o significant changes in critical accounting policies;
o acts of terrorism or war, including any direct or indirect effect on
our business resulting from terrorist attacks such as occurred on
September 11, 2001 or any similar incidents or responses to those
incidents;
o the availability and price of insurance;
o the outcome of the pending securities lawsuits against us, Reliant
Energy, Incorporated and Reliant Resources;
o the ability of Reliant Resources to satisfy its indemnity obligations
to us;
o the reliability of the systems, procedures and other infrastructure
necessary to operate the retail electric business in our service
territory, including the systems owned and operated by the independent
system operator in the market served by the Electric Reliability
Council of Texas, Inc.;
o political, legal, regulatory and economic conditions and developments
in the United States; and
o other factors we discuss in CenterPoint Energy, Inc.'s Annual Report on
Form 10-K for the year ending December 31, 2002 (File No. 1-31447),
including those outlined in Item 1 "Business" and Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations", the Current Report of CenterPoint on Form 8-K dated as of
May 12, 2003, the Quarterly Report of CenterPoint on Form 10-Q for the
three months ended June 30, 2003 and in this Form U-1.
The reader should not place undue reliance on forward-looking
statements. Each forward-looking statement speaks only as of the date of the
particular statement, and we undertake no obligation to publicly update or
revise any forward-looking statements.
TABLE OF CONTENTS
PAGE
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION..............................................................1
A. Background...................................................................................1
B. The CenterPoint Facility.....................................................................2
C. Proposed Transactions........................................................................3
ITEM 2. FEES, COMMISSIONS AND EXPENSES...................................................................5
ITEM 3. APPLICABLE STATUTORY PROVISIONS..................................................................5
A. Applicable Provisions........................................................................5
B. Rule 54 Analysis.............................................................................8
ITEM 4. REGULATORY APPROVAL..............................................................................9
ITEM 5. PROCEDURE........................................................................................9
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS...............................................................10
A. Exhibits....................................................................................10
B. Financial Statements........................................................................10
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.........................................................10
CenterPoint Energy, Inc. ("CenterPoint") and its wholly-owned
subsidiary Utility Holding, LLC (together, the "Applicants") hereby amend and
restate their request for authority for CenterPoint to issue debt that is
secured by a pledge of CenterPoint's interest in Texas Genco Holdings, Inc. in
an amount of up to $2.35 billion at any one time outstanding through June 30,
2005 (the "Authorization Period"), where the proceeds of such financing
transactions will be used to extend the terms of or replace, refund or
refinance existing secured obligations, provided in each case that CenterPoint's
total capitalization is not increased as a result of such financing
transaction.(1)
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
A. BACKGROUND
CenterPoint's public-utility subsidiary companies own and operate
electric generation plants, electric transmission and distribution facilities,
natural gas distribution facilities and natural gas pipelines:
o CenterPoint Energy Houston Electric, LLC (the "T&D Utility") engages in the
electric transmission and distribution business in a 5,000-square mile area
of the Texas Gulf Coast that includes Houston.
o Texas Genco, LP owns and operates the Texas generating plants formerly
belonging to the integrated electric utility that was a part of Reliant
Energy, Incorporated.
o CenterPoint Energy Resources Corp. ("GasCo") owns gas distribution systems
that together form one of the United States' largest natural gas
distribution operations in terms of customers served. Through
unincorporated divisions, GasCo provides natural gas distributions services
in Louisiana, Mississippi and Texas (Entex Division), Arkansas, Louisiana,
Oklahoma and Texas (Arkla Division) and Minnesota (Minnegasco Division).
Through wholly owned subsidiaries, GasCo owns two interstate natural gas
pipelines and gas gathering systems and provides various ancillary
services.
CenterPoint also engages in financing transactions and energy-related and other
functionally related businesses through its nonutility subsidiary companies.(2)
By order dated May 28, 2003 (HCAR No. 27680) (the "Secured Financing
Order"), the Securities and Exchange Commission (the "Commission") authorized
CenterPoint to pledge its interest in the stock of Texas Genco Holdings, Inc.
(the "Texas Genco Stock"), a Section 3(a)(1) exempt indirect holding company
subsidiary of CenterPoint, in connection with the refinancing of approximately
$3.85 billion of CenterPoint debt.
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(1) For tax efficiency purposes, CenterPoint holds its utility ownership
interests through an intermediate holding company Utility Holding, LLC, a
Delaware entity.
(2) A list and description of the businesses of CenterPoint's non-utility
subsidiaries is included in Schedule 4.1 to the Joint Registration Statement of
CenterPoint and Utility Holding, LLC on Form U5B which is incorporated herein by
reference.
Thereafter, by order dated June 30, 2003 (HCAR No. 27692 (the "Omnibus
Financing Order")), the Commission authorized CenterPoint and its Subsidiaries
to engage in certain financing and related transactions through June 30,
2005.(3) Among other things, the Omnibus Financing Order authorized CenterPoint
to enter into:
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 total capitalization is not increased as a result of
such financing transaction
The Omnibus Financing Order provided, however, that: "Long-term debt issued
under the requested authority will be unsecured."
B. THE CENTERPOINT FACILITY
On October 10, 2002, CenterPoint entered into a $3.85 billion, 364-day
credit facility ("CenterPoint Facility") to replace a similar facility that had
expired. The CenterPoint Facility required, among other things, two mandatory
commitment reductions of $600 million, one by February 28, 2003, and the other
by June 30, 2003.
On February 28, 2003, CenterPoint reached agreement with a syndicate of
banks on a second amendment to the CenterPoint Facility ("Second Amendment").
Under the Second Amendment:
o The maturity date of the CenterPoint Facility was extended from October
2003 to June 30, 2005;
o The $1.2 billion in mandatory prepayments that would have been required in
2003 were eliminated; and
o At current credit ratings, pricing for loans under the Second Amendment
remains the same as under the original CenterPoint Facility.
As consideration to the banks for the extended maturity and the
elimination of the mandatory prepayments, CenterPoint made two commitments under
the Second Amendment, subject to Commission approval. First, CenterPoint agreed
to grant the banks, on or before May 28, 2003, warrants to purchase 10 percent,
on a fully diluted basis, of CenterPoint's common stock. Second, CenterPoint
committed to grant the banks a security interest in the Texas Genco Stock. The
Secured Financing Order granted the requisite authority.
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(3) The term "Subsidiaries" refers to each existing direct or indirect
subsidiary company of CenterPoint as well as to any subsidiary company that
CenterPoint may form with the approval of the Commission or in reliance on rules
or statutory exemptions.
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CenterPoint has been able to extinguish the warrants by reducing the
amount of the bank facility with other borrowings. The amount of the CenterPoint
Facility currently is $2.846 billion.
C. PROPOSED TRANSACTIONS
1. CenterPoint Energy Credit Agreement Refinancing
Based on the current favorable market conditions, CenterPoint is
considering the refinancing of the $2.846 billion CenterPoint Facility to reduce
the principal amount and the cost of borrowing under the facility. CenterPoint
expects to replace the facility with a new three year credit facility.
As noted above, the terms of the CenterPoint Facility were established
on February 28, 2003. The interest rate on borrowings under the facility,
currently 450 basis points over LIBOR, is based on CenterPoint's credit rating.
Such borrowings are also supported by a pledge of the Texas Genco Stock.
CenterPoint will repay the CenterPoint Facility with a combination of
borrowings and repayments of intrasystem receivables as described below:
(a) CenterPoint will enter into a new three year credit facility
expected to be approximately $2.35 billion (the "New Facility") that would be
secured by a pledge of the Texas Genco common stock, which CenterPoint owns.
The New Facility would be composed of a revolving credit facility (currently
contemplated to be approximately $1.35 billion), and a term loan (currently
contemplated to be approximately $1 billion) from institutional investors;
(b) CenterPoint will issue $200 million in unsecured debt under the
authority in the Omnibus Financing Order authorizing CenterPoint to refinance
existing debt; and
(c) The T&D Utility will issue $300 million in secured debt.(4)
The proposed financing transactions will reduce the effective cost of
money to CenterPoint and its Subsidiaries (together, the "CenterPoint System")
as well as dependence on bank lenders under the CenterPoint Facility, and are
expected to extend the maturity date of associated borrowings by at least a
year. The transactions will not increase the overall amount of debt or adversely
affect the capital structure of any entity or the CenterPoint System as a whole.
Nor will the transactions involve the grant of any new or additional security at
CenterPoint. The Texas Genco Stock that is pledged as security for the
CenterPoint Facility currently will be extended to a different group of lenders;
there will be no increased burden on the subject asset.
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(4) By order dated August 1, 2003 (HCAR No. 27705), the Commission
released jurisdiction over $250 million in T&D Utility financing authority,
authorizing that entity to issue up to $500 million in incremental external debt
through June 30, 2005. The T&D Utility has authority under the Omnibus Financing
Order to issue secured or unsecured debt.
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2. Requested Authority
In this matter, CenterPoint is asking the Commission for authority to
issue debt that is secured by a pledge of the Texas Genco Stock in an amount of
up to $2.35 billion at any one time outstanding during the Authorization Period,
where the proceeds of such financing transactions will be used to extend the
terms of or replace, refund or refinance existing secured obligations, provided
in each case that CenterPoint's total capitalization is not increased as a
result of such financing transaction. Any financings under the requested
authority will be subject to the following general terms, as modified from those
established in the Omnibus Financing Order:
(a) Effective Cost of Money. The effective cost of money on any
long-term debt financings occurring pursuant to the authorizations
granted under this Application-Declaration will not exceed the greater
of (i) 500 basis points over the yield to maturity of a U.S. Treasury
security having a remaining term approximately equal to the term of the
subject debt, but in no event greater than the current rates under the
CenterPoint Facility or (ii) a rate that is consistent with similar
securities of comparable credit quality and maturities issued by other
companies of reasonably comparable credit quality as determined by the
competitive capital markets.(5)
(b) Maturity. The maturity of long-term indebtedness will not exceed 5
years.
(c) Issuance Expenses. The underwriting fees, commissions or other
similar remuneration paid in connection with the non-competitive issue,
sale or distribution of securities pursuant to this
Application-Declaration will not exceed 7% of the principal or total
amount of the securities being issued.(6)
(d) Use of Proceeds. The proceeds from the sale of securities in
external financing transactions will be used to refinance or acquire,
retire or redeem pursuant to Rule 42 under the Act securities
previously issued by CenterPoint or its Subsidiaries.
(e) Common Equity Ratio. At all times during the Authorization Period,
each of the T&D Utility, GasCo, and Texas Genco, LP (the "Utility
Subsidiaries") will maintain common equity of at least 30% of its
consolidated capitalization (common equity, preferred stock, long-term
debt and short-term debt) as reflected
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(5) The term "competitive capital markets" does not mean that competitive
bidding is required in connection with any of the securities issuances for which
authority is requested herein.
(6) Issuance Expenses will not count toward the Effective Cost of Money
discussed above.
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in the most recent Form 10-K or Form 10-Q filed with the Commission
adjusted to reflect changes in capitalization since the balance sheet
date therein;(7)
(f) Investment Grade Ratings. No securities may be issued in reliance
on the authority requested herein unless: (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 CenterPoint are
rated investment grade by at least one NRSRO.(8)
(g) Authorization Period. No security will be issued pursuant to the
authority sought herein after the last day of the Authorization Period
(which is June 30, 2005), provided, however, that securities issuable
or deliverable upon exercise or conversion of, or in exchange for,
securities issued on or before June 30, 2005 in accordance with the
terms of such authorization may be issued or delivered after such date.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
The fees, commissions and expenses paid or incurred or to be incurred
in connection with this Application-Declaration are estimated to be $20,000.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
A. APPLICABLE PROVISIONS
In the Secured Financing Order, the Commission authorized CenterPoint
to pledge the Texas Genco Stock in connection with the refinancing of
approximately $3.85 billion of CenterPoint debt. The analysis applied by the
Commission in granting that order is equally valid here.
The proposed issuance of debt secured by a pledge of the Texas Genco
Stock is subject to Sections 6(a) and 7 of the Act and Rules 44 and 54. Section
6(a) requires the filing of a declaration with the Commission in connection with
(1) an issuance and sale of any security by
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(7) Net of securitization debt, CenterPoint's projected equity
capitalization will be 30% or greater by the end of 2006. Pursuant to the
Omnibus Financing Order, CenterPoint will provide the Commission on a quarterly
basis confidential exhibits updating CenterPoint's financial projections and
assumptions through 2006.
(8) The Applicants ask the Commission to reserve jurisdiction of the
issuance of securities subject to the Investment Grade Ratings criteria where
one or more of the Investment Grade Ratings criteria are not met.
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a registered holding company or subsidiary company or (2) an exercise of "any
privilege or right to alter the priorities, preferences, voting power or other
rights of the holders of an outstanding security" of the registered holding
company or subsidiary. Commission approval of a declaration is subject to
Section 7(c), which concerns the type of security and purpose for which it is
issued. If the standards of Sections 7(c) and 7(g) (which concerns any necessary
state approvals and is inapplicable in this matter) are met, the Commission
"shall" permit a declaration to become effective, unless it makes certain
findings described in Section 7(d) of the Act. Rule 44 requires the filing of a
declaration in connection with the proposed sale of a security of a
public-utility company by a registered holding company.
Section 7(c) of the Act provides in pertinent part that the Commission
shall not permit a declaration regarding the issue or sale of a security to
become effective unless it finds that: (1) "such security is ... (B) a bond ...
(iii) secured by any other assets of the type and character which the Commission
by rules and regulations or order may prescribe as appropriate in the public
interest or for the protection of investors." During the early years of its
administration of the Act, the Commission broadly interpreted the term "bond" in
section 7(c)(1)(B) of the Act to apply to a variety of debt instruments,
including loan agreements such as the one for which CenterPoint is seeking
approval, when:
The note is to be issued pursuant to a loan agreement between the
borrower and the bank setting forth the terms and conditions on which
the security of the loan is to be held and containing various covenants
on the part of the borrower. Because of that fact and the other
circumstances surrounding the issuance of the note, the Commission
deems that the note constitutes a "bond" within the meaning of that
word as used in Section 7(c).
The Commission has explained that:
The addition to Section 7(c)(1)(B) of subparagraph (iii) did not
reflect an intention by Congress to permit pyramiding. It embodied the
specific requirement that we find the security for proposed bonds to be
of a type and character appropriate in the public interest and for the
protection of investors.
With the passage of time, registered holding companies came to assume a more
"classical" capital structure, i.e., one in keeping with the Commission's
standard of appropriate capitalization, and the need for such relief faded. As
late as 1958, however, the Commission continued to cite these early decisions as
precedent:
In general, in the case in which we have approved under Section
7(c)(1)(B)(iii) the issuance of holding company debt securities secured
by the common stock of subsidiaries, the nature of and the
circumstances surrounding the proposed debt issue and the proposed
security -- such as the absence of substantial debt or other senior
securities in the subsidiaries, the short maturity of
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the proposed securities or the likelihood of their early retirement --
have been such as to satisfy us that the public and investor interests
were being appropriately safeguarded.
The situation of CenterPoint, which is newly registered and has a capital
structure that has been affected by the legislation enacted by the Texas
legislature in June 1999 (the "Texas Law") and the Distribution of Reliant
Resources (as described in the Secured Financing Order), is comparable to that
of the registered holding companies in these early matters and, as the
Commission found in the Secured Financing Order, the proposed issue and sale of
secured debt is within the precedent under Section 7(c)(1)(B)(iii) of the Act.
It is important to remember that CenterPoint has intended from the
beginning to sell or otherwise monetize the Texas Genco Stock and to use the
proceeds to reduce system debt. Further, in this matter, as in the precedent,
the declaration concerns "transactions involved in carrying out a general
program of refunding, upon more favorable terms, outstanding indebtedness" of a
newly registered holding company. Accordingly, the secured debt is permissible
under Section 7(c)(1)(B)(iii) of the Act.
No adverse findings are required under Section 7(d) of the Act. In
particular, no adverse finding is required under Section 7(d)(1) or (2)
concerning the pledge of the stock. Among other things, Section 7(d) authorizes
the Commission to authorize the issuance of a security unless it finds that: (1)
"the security is not reasonably adapted to the security structure of the
declarant and other companies in the same holding company system; or (2) the
security is not reasonably adapted to the earning power of the declarant."
The Commission has granted other registered holding companies the
ability to engage in various types of secured financings. In addition, the
Commission has permitted a registered holding company to establish a secured
credit facility for the purpose of maintaining liquidity during a financial
crisis as part of an effort to return to a more secure financial footing. The
decision was largely based on the Commission's recognition of the "urgent and
necessary cash requirements of applicants' operations as public utility
companies, or . . . as the parent."
The circumstances of this matter warrant authorizing secured debt of
the type that CenterPoint proposes under Section 7(d). In particular, the
proposed transactions are not being proposed in connection with CenterPoint's
taking on any additional debt, but solely in connection with a refinancing of
existing debt.
Furthermore, the value of the collateral and the holding company's
other unencumbered assets exceeds the amount of CenterPoint's total indebtedness
and other liabilities. The stock pledge will not increase the risk of default on
any of CenterPoint's other obligations.
Applicants state that CenterPoint and its subsidiary companies expect
to meet their capital requirements through cash flows from operations, bank
borrowings and proceeds from debt and/or equity offerings. Applicants will
provide cash flow projections that show that the CenterPoint System's current
liquidity, along with anticipated cash flows from operations and proceeds from
borrowings, will be sufficient to meet cash needs. In each year from 2003
through
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2007, CenterPoint projects that its internally generated cash will be more than
sufficient to cover its anticipated capital expenditures and other internal
operating cash needs of the CenterPoint System.
As noted previously, the early cases focused as well on the protection
of the secured creditor. The value of the pledge of Texas Genco Stock could be
diminished if, for example, the holding company were to issue excessive amounts
of debt at Texas Genco Holdings, Inc. or its subsidiary companies (together, the
"Texas Genco entities"). To that end, the Commission in the Omnibus Financing
Order has limited to $250 million the amount of debt that can be issued by the
Texas Genco entities (as compared to the estimated $1.5 billion market value of
Texas Genco assets). Accordingly, no adverse finding is required under Section
7(d)(1).
No adverse finding is necessary under Section 7(d)(2), which concerns
the earning power of the declarant. The CenterPoint System is a fundamentally
sound utility system that lacks the risks associated with merchant energy
generation and marketing. Following the restructuring, CenterPoint is no longer
responsible for making retail electric sales to customers, as that role is now
the responsibility of Reliant Resources' retail segment; the T&D Utility is
precluded by the Texas Act from selling electricity at retail; and unlike the
regulated entity under most other deregulation schemes, the T&D Utility has no
obligation to serve as a provider of last resort and only provides the wires and
service to deliver the electricity from the generating company to the retail
provider's customers. Nor does the T&D Utility retain the electric
power-sourcing obligation that has traditionally been the origin of most risk
for electric utilities. Net of securitization debt, CenterPoint's equity
capitalization is projected to be 30% or more in 2006, and the growth of equity
as a percentage of capitalization is expected to continue in subsequent years.
Other indices of financial stability include: (i) a growing, stable customer
rate base that the CenterPoint utilities have served for many years; (ii) a
state regulatory regime that has avoided the mistakes of other deregulation
plans by allowing for a market adjustment of retail rates; (iii) positive and
substantial cash flow from operations; and (iv) the ability, under Texas
Commission orders, to securitize stranded costs and regulatory assets and to
repay obligations to holders of securitization bonds through non-bypassable
transition charges which are creatures of state law. In view of the
circumstances of this matter, including the specific protections afforded by the
Texas Law, no adverse finding is required under Section 7(d)(2) of the Act.
Finally, no adverse finding is required under Section 7(d)(3) of the
Act, which concerns the necessity and appropriateness of a proposed financing to
the economical and efficient operations of a registered system. As noted above,
the proposed pledge of Texas Genco Stock is intended to minimize the costs of
the associated financing and so provide for the economical and efficient
operations of CenterPoint's businesses. No adverse finding is required under
Section 7(d)(3) of the Act.
B. RULE 54 ANALYSIS.
The proposed transactions are subject to Rule 54 under the Act, which
refers to Rule 53. Rule 54 under the Act provides that in determining whether to
approve certain transactions other than those involving exempt wholesale
generators ("EWGs") or foreign utility companies ("FUCOs"), as defined in the
Act, the Commission will not consider the effect of the
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capitalization or earnings of any Subsidiary which is an EWG or FUCO if Rule
53(a), (b) and (c) under the Act are satisfied.
As a result of the Restructuring authorized in the order dated July 5,
2002 (HCAR No. 27548 (the "July Order")) (as such term is defined in the July
Order), CenterPoint had negative retained earnings as of December 31, 2002.
Thus, although CenterPoint's aggregate investment (as defined in Rule
53(a)(1)(i) under the Act), in EWGs and FUCOs as of December 31, 2002 was
approximately $8 million, the Company is not currently in compliance with the
requirements of Rule 53(a)(1) under the Act. As previously explained,
CenterPoint is attempting to dispose of its remaining interests in EWGs and
FUCOs and is not planning to invest any more monies in those businesses.(9)
CenterPoint complies with, and will continue to comply with, the
record-keeping requirements of Rule 53(a)(2) under the Act, the limitation under
Rule 53(a)(3) under the Act on the use of domestic public-utility company
personnel to render services to EWGs and FUCOs, and the requirements of Rule
53(a)(4) under the Act concerning the submission of copies of certain filings
under the Act to retail regulatory commissions. Further, none of the
circumstances described in Rule 53(b) under the Act has occurred or is
continuing. Rule 53(c) under the Act is by its terms inapplicable to the
transactions proposed herein that do not involve the issue and sale of
securities (including guarantees) to finance an acquisition of an EWG or FUCO.
ITEM 4. REGULATORY APPROVAL.
No state or federal commission other than the Commission has
jurisdiction with respect to any of the proposed transactions described in this
Application-Declaration.
ITEM 5. PROCEDURE.
The Commission is respectfully requested to publish the requisite
notice under Rule 23 under the Act with respect to this Application-Declaration
as soon as possible, such notice to specify a date by which comments must be
entered and such date being the date when an order of the Commission granting
and permitting this Application-Declaration to become effective may be entered
by the Commission. The Applicants request that the Commission's order be issued
as soon as the rules allow, and that there should not be a 30-day waiting period
between issuance of the Commission's order and the date on which the order is to
become effective. The Applicants hereby waive a recommended decision by a
hearing officer or any other responsible officer of the Commission and consent
that the Division of Investment Management may assist in the preparation of the
Commission's decision and/or order, unless the Division opposes the matters
proposed herein.
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(9) Although CenterPoint is seeking to qualify Texas Genco, LP as an EWG,
CenterPoint does not intend to seek any financing authority in this regard.
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ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
A. EXHIBITS.
F-1.1 Opinion of counsel (previously filed).
G-1.1 Chart setting forth external debt and trust preferred securities of
CenterPoint and its subsidiaries as of May 31, 2003 (filed as Exhibit 99.3 to
CenterPoint's Current Report on Form 8-K dated as of June 2, 2003 (File No.
1-31447) on June 11, 2003 and incorporated by reference herein).
H-1 Proposed Form of Notice (previously filed).
B. FINANCIAL STATEMENTS.
FS-1 Consolidated Balance Sheets of CenterPoint as of December 31, 2002 and
Statements of Consolidated Operations, Statements of Consolidated Comprehensive
Income and Statements of Consolidated Cash Flows for the year ended December 31,
2002 (incorporated by reference to CenterPoint's Annual Report on Form 10-K for
the year ended December 31, 2002 (File No. 1-31447)).
FS-2 Consolidated Balance Sheets of CenterPoint as of June 30, 2003
(unaudited) and Statements of Consolidated Income and Statements of Consolidated
Cash Flows for the three months ended June 30, 2003 (unaudited) (incorporated by
reference to CenterPoint's Quarterly Report on Form 10-Q for the three months
ended June 30, 2003 (File No. 1-31447)).
FS-3 Consolidated Balance Sheets of CenterPoint as of December 31, 2002, and
Statements of Consolidated Operations, Statements of Consolidated Comprehensive
Income and Statements of Consolidated Cash Flows for the year ended December 31,
2002 (incorporated by reference to the Current Report of CenterPoint on Form 8-K
dated as of May 12, 2003 (File No. 1-31447)).
FS-13 CenterPoint consolidated financials (forecasts through 2007) (filed in
connection herewith with a request for confidential treatment).
FS-18 CenterPoint equity percentages (forecasts through 2007) (filed in
connection herewith with a request for confidential treatment).
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
The proposed transaction involves neither a "major federal action" nor
"significantly affects the quality of the human environment" as those terms are
used in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C.
Sec. 4321 et seq. No federal agency is preparing an environmental impact
statement with respect to this matter.
10
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the Applicants have duly caused this
Application-Declaration to be signed on their behalf by the undersigned
thereunto duly authorized.
Date: September 4, 2003
CENTERPOINT ENERGY, INC.
and its Subsidiaries
By: /s/ Rufus S. Scott
---------------------------
Rufus S. Scott
Vice President, Deputy General Counsel and Assistant Corporate Secretary
CenterPoint Energy, Inc.
11
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
F-1.1 Opinion of counsel (previously filed).
G-1.1 Chart setting forth external debt and trust preferred securities of
CenterPoint and its subsidiaries as of May 31, 2003 (filed as
Exhibit 99.3 to CenterPoint's Current Report on Form 8-K dated as of
June 2, 2003 (File No. 1-31447) on June 11, 2003 and incorporated by
reference herein).
H-1 Proposed Form of Notice (previously filed).