Fitch Comments on CenterPoint Energy True-Up Proceeding.

NEW YORK -- Fitch Ratings anticipates no immediate changes in CenterPoint Energy, Inc.'s (CNP) credit ratings or Rating Outlook following yesterday's disclosure that CNP could incur an after-tax charge of approximately $1.0 billion based on CNP's management assessment of pending true-up deliberations by the Public Utility Commission of Texas (PUCT). Fitch currently rates CNP's senior unsecured debt 'BBB-' and its trust-preferred securities 'BB+'. The Rating Outlook for CNP is Negative.

The conclusion of the true-up proceeding and subsequent securitization of stranded costs is the second of two anticipated deleveraging events factored into Fitch's ratings for CNP and its two wholly owned subsidiaries, CenterPoint Energy Houston Electric, LLC (CEHE; 'BBB' general mortgage bonds, Negative Outlook) and CenterPoint Energy Resources Corp. (CERC; 'BBB' senior unsecured, Negative Outlook). 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 early 2005.

CNP's announcement of the potential after-tax charge reflects the wide gap between CNP's claimed true-up amount of $3.7 billion (excluding interest) and CNP's understanding of the current PUCT position, which could reduce the final true-up balance to as low as $1.7 billion or approximately $2.0 billion with accrued interest. Fitch estimates that a settlement based on current PUCT deliberations, combined with the anticipated TGN sale proceeds would delever CNP's consolidated balance sheet by at least $4.5 billion, a level consistent with the current ratings of CNP, CEHE, and CERC. However, the scale of differentials between the respective positions of CNP and the PUCT increase the likelihood that protracted litigation could significantly delay the timing and ultimate receipt of securitization proceeds available to CNP.

Fitch continues to monitor CNP's true-up proceeding and will consider revising the Rating Outlook to Stable once the outcome of the PUCT review becomes more clearly defined. Importantly, cash proceeds from the TGN sale will provide a liquidity backstop against CNP's 2005-2006 debt maturity profile in the event that the stranded cost recovery process were to experience a prolonged delay.