CenterPoint Energy Inc. (CNP) has replaced its existing revolving credit facilities with closure of three revolving bank credit facilities worth $2.45 billion. The company closed the three revolving bank credit facilities for the parent and its wholly-owned subsidiaries, CenterPoint Energy Houston Electric LLC (CEHE) and CenterPoint Energy Resources Corp. (CERC).
The lines of credit include $1.2 billion for CenterPoint, $300 million for its electric transmission and distribution subsidiary CenterPoint Energy Houston Electric LLC, and $950 million for its natural gas distribution, pipelines, and field services unit CenterPoint Energy Resources Corporation.
The CenterPoint Energy facility has a drawn cost of London Interbank Offered Rate (LIBOR) plus 175 basis points, and the CEHE facility and CERC facility have a drawn cost of LIBOR plus 150 basis points each.
The company has utilized the advantage of the current receptive market conditions and has locked the short-term liquidity provided by these facilities for the next 5 years. These revolving credit facilities may be drawn from time to time and the company expects to use the funds for general corporate purposes and to support commercial paper. Moreover, the facilities may also be utilized to obtain letters of credit.
Various multinational banks are acting as global coordinators, joint lead arrangers and joint bookrunners for the facilities. JPMorgan Chase Bank, N.A., which is the actual trustee of JPMorgan Chase & Co. (JPM) serves as the administrative agent for CenterPoint Energy’s and CEHE’s facilities, and Citibank, N.A. that is Citigroup Inc’s (C) primary subsidiary depository institution serves as the administrative agent for CERC’s facility.
Recently in August, the company reported its second quarter of 2011 adjusted earnings of 24 cents per share, a penny ahead of the Zacks Consensus Estimate. CenterPoint Energy ended the quarter with cash and cash equivalents of $190 million, down from $199 million at the end of the fiscal 2010.
However, long-term debt declined to $8.5 billion at quarter end from $9 billion at fiscal-end 2010. The company is continuously taking stepsnecessary to strengthen its liquidity and maintain its financial flexibility.
With its balanced portfolio of electric and natural gas businesses, CenterPoint provides a diversified risk profile, along with stable earnings and cash flow. Going forward, our bullish outlook on the company is supported by stable regulated operations, higher rates, ongoing infrastructure development projects, and a strong balance sheet.
However, this is partially offset by pending regulatory cases as well as the tepid economy, lower demand for electricity, falling wholesale natural gas prices and a significant presence in a hurricane prone section of the U.S. The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.
Headquartered in Houston, Texas CenterPoint Energy is a domestic energy delivery company, engaged in electric transmission & distribution, natural gas distribution, competitive natural gas sales and services, interstate pipelines and field services operations. The company serves more than five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas.
