S&P revises CenterPoint outlook to negative

Standard & Poor's said it affirmed its BBB corporate credit rating on CenterPoint Energy Inc., CenterPoint Energy Houston Electric LLC, and CenterPoint Energy Resources Corp. and revised the outlook to negative from stable.

The outlook revision follows the announcement by Reliant Resources Inc. (B/negative/--) that it is unlikely to exercise its option to purchase CenterPoint Energy's 81% stake in Texas Genco Holdings Inc.

S&P said the announcement by Reliant increases the risk that there will be a gap between the equity value used to value Texas Genco when determining stranded asset value, and the ultimate value received by CenterPoint for that equity. If ultimately there is a gap, this would result in less deleveraging than CenterPoint had originally planned, which would result in credit measures that are not aligned with the BBB rating.

Because Reliant is likely not to exercise this option, CenterPoint will need to explore other avenues for selling its stake. This also increases the risk that the timing of the proceeds will be later than originally planned.

However, CenterPoint's maturity profile has been lengthened in recent months, with its first large maturity a $1.31 billion term loan due in November 2005 and its next a $2.35 billion bank loan and revolver due in October 2006, which recently had been $2.85 billion due in June 2005.

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