CenterPoint Energy Affirmed by Fitch; Outlook Revised to Stable.

NEW YORK -- Fitch Ratings has affirmed the outstanding senior unsecured debt obligations of CenterPoint Energy, Inc. (CNP) at 'BBB-'. Also affirmed are outstanding ratings of CNP subsidiaries CenterPoint Energy Houston Electric, LLC (CEHE) and CenterPoint Energy Resources Corp. (CERC). The Rating Outlook for all three companies has been revised to Stable from Negative. Details of the securities affected are listed below.

The rating action follows Fitch's assessment of the Nov. 10, 2004 determination by the Public Utility Commission of Texas (PUCT) that CNP will be permitted to recover a true-up balance of $2.3 billion, including accrued interest. Although this amount is significantly less than the $3.7 billion (excluding interest) true-up sought in CNP's original application with the PUCT, it is in line with Fitch's expectations when taken together with other expected cash proceeds discussed below. The conclusion of the true-up proceeding and expected securitization of stranded costs is the second of two highly anticipated deleveraging events factored into Fitch's ratings for CNP and its two wholly owned subsidiaries, CEHE and CERC. The first was the definitive agreement reached by CNP on July 21, 2004 to sell its 81% interest in Texas Genco Holdings for after-tax cash proceeds of $2.5 billion in a two-step transaction expected to be completed by the first half of 2005.

These transactions, combined with the $177 million retail clawback payment owed by Reliant Energy, Inc., will enable CNP to delever its balance sheet by approximately $5 billion, an amount which will result in consolidated credit measures that are more consistent with CNP's current 'BBB-' rating. Upon completion of CNP's planned monetizations and subsequent retirement of certain debt obligations, Fitch expects CNP's total debt-to-EBITDA ratio to trend toward the low 4.0 times (x) range, a level which is viewed as appropriate for the rating category given the low cash flow volatility exhibited by CNP's electric and gas distribution and interstate gas pipeline businesses. Fitch notes that the potential $500 million prefunding of CNP's future pension obligations may reduce the amount of funds immediately available for debt repayment. However, such a prefunding would reduce the company's future pension expense by approximately $40 million annually, as well as bolster CNP's equity base by reversing a charge taken in 2002.

The Stable Rating Outlook reflects Fitch's expectation that CNP will secure a financing order for its planned securitization in a reasonable amount of time and complete the issuance of bonds by mid-2005. Any prolonged delays would be an unfavorable credit development. Fitch notes that CNP will likely apply for a rehearing of the amount disallowed by the PUCT and appeal to the Texas state courts, if necessary. Importantly, the Texas statute permits CNP to proceed with its plans to securitize the lower $2.3 billion true-up amount, regardless of the appeal status.

The following ratings are affirmed by Fitch:

CenterPoint Energy, Inc.

-- Senior unsecured debt 'BBB-';

-- Unsecured pollution control bonds 'BBB-';

-- Trust originated preferred securities 'BB+';

-- Zero premium exchange notes (ZENS) 'BB+'.

CenterPoint Energy Houston Electric, LLC

-- First mortgage bonds 'BBB+';

-- General mortgage bonds 'BBB'

-- $1.3 billion secured term loan 'BBB'.

CenterPoint Energy Resources Corp.

-- Senior unsecured notes and debentures 'BBB';

-- Convertible preferred securities 'BBB-'.