CNP Putting its House in Order - Analyst Blog

In order to meet the future requirement of funds and reduce interest liability, CenterPoint Energy Inc. (CNP) announced an exchange offer of senior notes along with selling new ones. The company in a shrewd move announced that it will exchange $762 million of its senior notes due 2013 with coupon rates of 7.875% with new senior notes due 2021 with a coupon rate of 4.50%. The exchange offer will expire on February 2, 2011. Through the exchange of senior notes with cheaper ones along with staving off the date of maturity, the company would be able to save considerable funds in the process.

CenterPoint Energy will also issue $550 million of senior notes, in two tranches, to augment its liquidity. Of this $250 million with a coupon rate of 4.50% would be due in 2021, while the remaining $300 million with a coupon rate of 5.85% senior notes would be due in 2041. The transaction is expected to close on January 11, 2011. The proceeds from the new issues would be used to redeem $550 million of senior notes with a coupon rate of 7.75% due on February 15, 2011.

CenterPoint Energy reported cash and cash equivalents of $583 million at the end of the first nine months of 2010, up from $151 million at the end of the year-ago period. The company reported $818 million in cash from operating activities, compared with $1.1 billion at the end of the year-ago period. Long-term debt decreased to $8.4 billion from $9.1 billion at fiscal-end 2009.

Looking forward, CenterPoint Energy's stable and regulated electric power operations and gas distribution utilities generate a relatively stable and growing earnings stream. This is complemented by its expanding pipeline network, expansion of pipeline capacity, rate base growth and gas well connections.

Despite CenterPoint Energy's balanced portfolio of electric and natural gas businesses, we maintain a Neutral outlook on the stock due to its pending regulatory cases, lower demand for electricity and a significant presence in the hurricane prone zone of the U.S. The company currently has a short-term Zacks #3 Rank (Hold).

Based in Houston, Texas, CenterPoint Energy Inc. engages in electric transmission & distribution, natural gas distribution, competitive natural gas sales and services, interstate pipelines, and field services operations. The major competitors of the company are American Electric Power Company Inc. (AEP) and Xcel Energy Inc. (XEL).

 
AMER ELEC PWR (AEP): Free Stock Analysis Report
 
CENTERPOINT EGY (CNP): Free Stock Analysis Report
 
XCEL ENERGY INC (XEL): Free Stock Analysis Report
 
Zacks Investment Research