1130310--2/28/2007--CENTERPOINT_ENERGY

related topics

{operation, natural, condition}

{debt, indebtedness, cash}

{financial, litigation, operation}

{loss, insurance, financial}

{cost, regulation, environmental}

{gas, price, oil}

CenterPoint Houston s receivables are concentrated in a small number of REPs, and any delay or default in payment could adversely affect CenterPoint Houston s cash flows, financial condition and results of operations. Rate regulation of CenterPoint Houston s business may delay or deny CenterPoint Houston s ability to earn a reasonable return and fully recover its costs. Disruptions at power generation facilities owned by third parties could interrupt CenterPoint Houston s sales of transmission and distribution services. CenterPoint Houston s revenues and results of operations are seasonal. Risk Factors Affecting Our Natural Gas Distribution, Competitive Natural Gas Sales and Services, Interstate Pipelines and Field Services Businesses Rate regulation of CERC s business may delay or deny CERC s ability to earn a reasonable return and fully recover its costs. CERC s businesses must compete with alternative energy sources, which could result in CERC marketing less natural gas, and its interstate pipelines and field services businesses must compete directly with others in the transportation, storage, gathering, treating and processing of natural gas, which could lead to lower prices, either of which could have an adverse impact on CERC s results of operations, financial condition and cash flows. CERC s natural gas distribution and competitive natural gas sales and services businesses are subject to fluctuations in natural gas pricing levels, which could affect the ability of CERC s suppliers and customers to meet their obligations or otherwise adversely affect CERC s liquidity. If CERC were to fail to renegotiate a contract with one of its significant pipeline customers or if CERC renegotiates the contract on less favorable terms, there could be an adverse impact on its operations. A decline in CERC s credit rating could result in CERC s having to provide collateral in order to purchase gas. The revenues and results of operations of CERC s interstate pipelines and field services businesses are subject to fluctuations in the supply of natural gas. CERC s revenues and results of operations are seasonal. The actual construction costs of proposed pipelines and related compression facilities may be significantly higher than CERC s current estimates. The states in which CERC provides regulated local gas distribution may, either through legislation or rules, adopt restrictions similar to or broader than those under the 1935 Act regarding organization, financing and affiliate transactions that could have significant adverse impacts on CERC s ability to operate. Risk Factors Associated with Our Consolidated Financial Condition If we are unable to arrange future financings on acceptable terms, our ability to refinance existing indebtedness could be limited. As a holding company with no operations of our own, we will depend on distributions from our subsidiaries to meet our payment obligations, and provisions of applicable law or contractual restrictions could limit the amount of those distributions. The use of derivative contracts by us and our subsidiaries in the normal course of business could result in financial losses that could negatively impact our results of operations and those of our subsidiaries. Risks Common to Our Businesses and Other Risks We are subject to operational and financial risks and liabilities arising from environmental laws and regulations. Our insurance coverage may not be sufficient. Insufficient insurance coverage and increased insurance costs could adversely impact our results of operations, financial condition and cash flows. We, CenterPoint Houston and CERC could incur liabilities associated with businesses and assets that we have transferred to others.

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1130310--2/28/2007--CENTERPOINT_ENERGY_INC