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EX-32.2 - EXHIBIT - CENTERPOINT ENERGY TRANSITION BOND CO LLC | tbcexhibit322_03312013.htm |
EX-32.1 - EXHIBIT - CENTERPOINT ENERGY TRANSITION BOND CO LLC | tbcexhibit321_03312013.htm |
EX-31.2 - EXHIBIT - CENTERPOINT ENERGY TRANSITION BOND CO LLC | tbcexhibit312_03312013.htm |
EX-31.1 - EXHIBIT - CENTERPOINT ENERGY TRANSITION BOND CO LLC | tbcexhibit311_03312013.htm |
EXCEL - IDEA: XBRL DOCUMENT - CENTERPOINT ENERGY TRANSITION BOND CO LLC | Financial_Report.xls |
EX-10.1 - EXHIBIT - CENTERPOINT ENERGY TRANSITION BOND CO LLC | tbcexhibit101_03312013.htm |
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
________________
Form 10-Q
(Mark One) | ||
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE TRANSITION PERIOD FROM TO |
Commission File Number 333-91093
______________________
CenterPoint Energy Transition Bond Company, LLC
(Exact name of registrant as specified in its charter)
Delaware | 76-0624152 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
1111 Louisiana, Suite 4667 Houston, Texas 77002 | (713) 207-8272 |
(Address and zip code of principal executive offices) | (Registrant’s telephone number, including area code) |
The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of April 18, 2013, all outstanding membership interests in CenterPoint Energy Transition Bond Company, LLC were held by CenterPoint Energy Houston Electric, LLC.
CenterPoint Energy Transition Bond Company, LLC
TABLE OF CONTENTS
PART I. | FINANCIAL INFORMATION | ||
Page | |||
Item 1. | |||
Three Months Ended March 31, 2012 and 2013 (unaudited) | |||
December 31, 2012 and March 31, 2013 (unaudited) | |||
Three Months Ended March 31, 2012 and 2013 (unaudited) | |||
Item 2. | |||
Item 4. | |||
PART II. | OTHER INFORMATION | ||
Item 1A. | |||
Item 6. |
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. In some cases, you can identify our forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “will” or other similar words.
We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements.
The following are some of the factors that could cause actual results to differ from those expressed or implied by our forward-looking statements:
• | changes in market demand, including the effects of energy efficiency measures, and demographic patterns; |
• | weather variations and other natural phenomena, including, among others, hurricanes, tropical storms, ice or snow storms, floods and other weather-related events and natural disasters, affecting retail electric customer energy usage in CenterPoint Energy Houston Electric, LLC’s (CenterPoint Houston) service territory; |
• | damage to and the general operating performance of CenterPoint Houston’s facilities and third-party suppliers of electric energy in CenterPoint Houston’s service territory; |
• | state and federal legislative and regulatory actions or developments affecting various aspects of CenterPoint Houston’s business, including, among others, energy deregulation or re-regulation, health care reform, financial reform and tax legislation; |
• | the accuracy of the servicer’s forecast of electrical consumption or the payment of transition charges; |
• | non-payment of transition charges by retail electric providers; |
• | the reliability of the systems, procedures and other infrastructure necessary to operate the retail electric business in CenterPoint Houston’s service territory, including the systems owned and operated by the independent system operator in the Electric Reliability Council of Texas, Inc.; |
• | any direct or indirect effects of cyber attacks, data security breaches or other attempts to disrupt the business of CenterPoint Houston or retail electric providers operating in CenterPoint Houston’s service territory; |
• | the servicer's ability to perform its billing, collection and other functions; |
• | national or regional economic conditions affecting retail electric customer energy usage in CenterPoint Houston’s service territory; |
• | acts of war or terrorism or other catastrophic events affecting retail electric customer energy usage in CenterPoint Houston’s service territory; and |
• | other factors we discuss in “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012, which is incorporated herein by reference, and in Item 1A of Part II of this Quarterly Report on Form 10-Q, and our other Securities and Exchange Commission filings. |
You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement.
ii
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC
STATEMENTS OF INCOME
AND CHANGES IN MEMBER’S EQUITY
(Unaudited)
Three Months Ended March 31, | |||||||
2012 | 2013 | ||||||
(in thousands) | |||||||
Revenues: | |||||||
Transition charge revenue | $ | 24,495 | $ | 23,161 | |||
Investment income | 13 | 9 | |||||
Total operating revenues | 24,508 | 23,170 | |||||
Expenses: | |||||||
Interest expense | 2,841 | 1,435 | |||||
Amortization of transition property | 20,316 | 21,527 | |||||
Amortization of transition bond discount and issuance costs | 71 | 36 | |||||
Administrative and general expenses | 1,280 | 172 | |||||
Total operating expenses | 24,508 | 23,170 | |||||
Net Income | — | — | |||||
Member’s Equity at Beginning of Period | 3,745 | 3,745 | |||||
Contributed Capital | — | — | |||||
Member’s Equity at End of Period | $ | 3,745 | $ | 3,745 |
See Notes to Interim Unaudited Financial Statements
1
CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC
BALANCE SHEETS
(Unaudited)
December 31, 2012 | March 31, 2013 | ||||||
(in thousands) | |||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 46,979 | $ | 29,424 | |||
Restricted funds | 8,927 | 8,674 | |||||
Transition charge receivable | 12,323 | 12,369 | |||||
Current Assets | 68,229 | 50,467 | |||||
Intangible transition property | 51,170 | 29,643 | |||||
Unamortized debt issuance costs | 78 | 44 | |||||
Total Assets | $ | 119,477 | $ | 80,154 | |||
LIABILITIES AND MEMBER’S EQUITY | |||||||
Current Liabilities: | |||||||
Current portion of long-term debt | $ | 108,587 | $ | 71,279 | |||
Accrued interest | 1,800 | 178 | |||||
Customer deposits | 5,181 | 4,930 | |||||
Fees payable to servicer | 164 | 22 | |||||
Current Liabilities | 115,732 | 76,409 | |||||
Member’s Equity: | |||||||
Contributed capital | 3,745 | 3,745 | |||||
Retained earnings | — | — | |||||
Total Member’s Equity | 3,745 | 3,745 | |||||
Total Liabilities and Member’s Equity | $ | 119,477 | $ | 80,154 |
See Notes to Interim Unaudited Financial Statements
2
CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, | |||||||
2012 | 2013 | ||||||
(in thousands) | |||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | — | $ | — | |||
Adjustments for non-cash items: | |||||||
Amortization of transition bond discount and issuance costs | 71 | 36 | |||||
Amortization of transition property | 20,316 | 21,527 | |||||
Changes in other assets and liabilities: | |||||||
Transition charge receivable | 1,273 | (46 | ) | ||||
Accrued interest | (3,009 | ) | (1,622 | ) | |||
Customer deposits | (217 | ) | (251 | ) | |||
Fees payable to servicer | (149 | ) | (142 | ) | |||
Net cash provided by operating activities | 18,285 | 19,502 | |||||
Cash Flows from Investing Activities: | |||||||
Restricted funds | 218 | 253 | |||||
Net cash provided by investing activities | 218 | 253 | |||||
Cash Flows from Financing Activities: | |||||||
Payments of long-term debt | (33,738 | ) | (37,310 | ) | |||
Net cash used in financing activities | (33,738 | ) | (37,310 | ) | |||
Net Decrease in Cash and Cash Equivalents | (15,235 | ) | (17,555 | ) | |||
Cash and Cash Equivalents, Beginning of Period | 44,183 | 46,979 | |||||
Cash and Cash Equivalents, End of Period | $ | 28,948 | $ | 29,424 | |||
Supplemental Disclosure of Cash Flow Information: | |||||||
Cash Payments: | |||||||
Interest | $ | 5,850 | $ | 3,057 |
See Notes to Interim Unaudited Financial Statements
3
CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Background and Basis of Presentation
General. Included in this Quarterly Report on Form 10-Q (Form 10-Q) of CenterPoint Energy Transition Bond Company, LLC (the Company) are the Company’s interim financial statements and notes (Interim Financial Statements). The Interim Financial Statements are unaudited, omit certain financial statement disclosures and should be read with the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
Background. The Company is a special purpose Delaware limited liability company whose sole member is CenterPoint Energy Houston Electric, LLC (CenterPoint Houston). The Company has no commercial operations and was formed for the sole purpose of purchasing and owning transition property, issuing transition bonds and performing activities incidental thereto. CenterPoint Houston is a regulated utility engaged in the transmission and distribution of electric energy in the Texas Gulf Coast area that includes the city of Houston.
Basis of Presentation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company’s Interim Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the respective periods. Amounts reported in the Company’s Statements of Income and Changes in Member’s Equity are not necessarily indicative of amounts expected for a full-year period due to the effects of, among other things, seasonal variations in energy consumption.
Amortization. The transition property was recorded at acquired cost and is being amortized over 12 years, the expected life of the transition bonds, based on estimated revenue from transition charges, interest accruals and other expenses. The financing order authorizing the imposition of the transition charges and the issuance of the transition bonds limits the terms of the transition bonds to no greater than 15 years. In accordance with guidance for accounting for regulated operations, amortization is adjusted for over-collection or under-collection of transition charges. The transition charges are reviewed and adjusted at least annually by the Public Utility Commission of Texas to correct prospectively any over-collections or under-collections that occurred during the preceding 12 months and to provide for the expected recovery of amounts sufficient to timely provide all payment of debt service and other required amounts and charges in connection with the transition bonds.
(2) Transition Charges
The following table shows the aggregate amount of transition charges remitted by CenterPoint Houston to the trustee under the indenture pursuant to which the transition bonds were issued (the trustee) during each month from the date of issuance of the transition bonds through March 31, 2013 (in thousands):
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||||||||||||||||||||||||||
January | $ | — | $ | 4,584 | $ | 4,902 | $ | 4,652 | $ | 6,159 | $ | 5,729 | $ | 6,665 | $ | 7,616 | $ | 6,625 | $ | 6,837 | $ | 7,024 | $ | 7,854 | $ | 7,568 | |||||||||||||||||||||||||
February | — | 3,997 | 4,693 | 4,554 | 7,804 | 5,082 | 5,970 | 7,053 | 7,229 | 7,842 | 7,195 | 8,692 | 7,924 | ||||||||||||||||||||||||||||||||||||||
March | — | 4,297 | 4,698 | 5,798 | 8,136 | 5,916 | 7,003 | 7,141 | 7,040 | 9,127 | 8,460 | 8,065 | 7,590 | ||||||||||||||||||||||||||||||||||||||
April | — | 5,144 | 4,986 | 4,808 | 6,582 | 5,799 | 6,349 | 7,061 | 6,855 | 7,945 | 7,019 | 6,926 | — | ||||||||||||||||||||||||||||||||||||||
May | — | 3,678 | 4,236 | 3,754 | 7,028 | 5,176 | 6,414 | 7,464 | 6,434 | 6,868 | 6,812 | 9,100 | — | ||||||||||||||||||||||||||||||||||||||
June | — | 5,805 | 5,378 | 6,258 | 7,952 | 7,398 | 7,019 | 7,128 | 7,490 | 8,809 | 8,991 | 9,023 | — | ||||||||||||||||||||||||||||||||||||||
July | — | 5,892 | 6,195 | 6,039 | 8,481 | 7,792 | 7,572 | 9,444 | 9,533 | 10,827 | 9,036 | 10,496 | — | ||||||||||||||||||||||||||||||||||||||
August | — | 7,091 | 5,948 | 6,668 | 10,429 | 8,785 | 9,092 | 9,314 | 9,350 | 11,567 | 11,076 | 11,456 | — | ||||||||||||||||||||||||||||||||||||||
September | — | 7,195 | 6,359 | 7,217 | 10,164 | 7,942 | 7,919 | 9,719 | 10,647 | 12,095 | 11,235 | 10,663 | — | ||||||||||||||||||||||||||||||||||||||
October | 2 | 8,799 | 6,403 | 6,137 | 9,619 | 7,423 | 9,391 | 9,301 | 9,683 | 11,337 | 10,327 | 12,402 | — | ||||||||||||||||||||||||||||||||||||||
November | 414 | 6,119 | 4,667 | 7,055 | 9,788 | 7,253 | 7,866 | 5,857 | 7,765 | 9,680 | 9,683 | 10,323 | — | ||||||||||||||||||||||||||||||||||||||
December | 1,937 | 5,390 | 5,516 | 6,528 | 7,273 | 6,073 | 6,801 | 9,721 | 8,834 | 8,778 | 7,695 | 8,307 | — |
4
(3) Cash and Cash Equivalents/Restricted Funds
For purposes of the Balance Sheet and Statement of Cash Flows, the Company considers investments purchased with a maturity of three months or less to be the equivalent of cash. The trustee under the indenture pursuant to which the transition bonds were issued has established, as provided in the indenture, the following subaccounts for the Company’s cash balances related to its transition bonds:
• | The General Subaccount is comprised of collections of transition charges and interest earned from short-term investments. These amounts accumulate in the General Subaccount until they are transferred from the General Subaccount on each transition bond payment date. The General Subaccount had a balance of $36.1 million and $3.6 million at December 31, 2012 and March 31, 2013, respectively. |
• | The Reserve Subaccount is maintained for the purpose of holding any transition charges and investment earnings (other than investment earnings on amounts in the Capital Subaccount) not otherwise used on the payment dates of the transition bonds for payment of principal, interest, fees or expenses, or for funding the Capital Subaccount or the Overcollateralization Subaccount. The Reserve Subaccount had a balance of $7.4 million and $22.3 million at December 31, 2012 and March 31, 2013, respectively. |
• | The Overcollateralization Subaccount has a target funding level of approximately $3.7 million (0.5% of the initial principal amount of the transition bonds), and funding is scheduled to occur ratably over the life of the transition bonds. The trustee may draw from this subaccount if the General Subaccount and Reserve Subaccount are not sufficient on any payment date to make scheduled payments on the transition bonds and payments of certain fees and expenses. The Overcollateralization Subaccount had a balance of $3.4 million at December 31, 2012 with a scheduled level of $3.4 million. The Overcollateralization Subaccount had a balance of $3.6 million at March 31, 2013 with a scheduled level of $3.6 million. |
• | The Capital Subaccount received a deposit of approximately $3.7 million (0.5% of the initial principal amount of the transition bonds) on the date of issuance of the transition bonds. CenterPoint Houston contributed this amount to the Company. If amounts available in the General, Reserve and Overcollateralization Subaccounts are not sufficient on any payment date to make scheduled payments on the transition bonds and payments of certain fees and expenses, the trustee will draw on amounts in the Capital Subaccount. At both December 31, 2012 and March 31, 2013, the Capital Subaccount had a balance of $3.7 million and is classified as Restricted Funds in the Balance Sheets. |
At December 31, 2012 and March 31, 2013, cash deposits provided by retail electric providers (REPs) totaled $5.2 million and $4.9 million, respectively, and are classified as Restricted Funds in the Balance Sheets.
(4) Fair Value Measurement
Assets and liabilities recorded at fair value in the Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined below and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value are investments listed in active markets. At December 31, 2012 and March 31, 2013, the Company held Level 1 investments of $8.4 million and $8.1 million, respectively, which are primarily money market funds.
Level 2: Inputs, other than quoted prices included in Level 1, are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability. The Company had no Level 2 assets and liabilities at either December 31, 2012 or March 31, 2013.
Level 3: Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. These inputs reflect management’s best estimate of the assumptions market participants would use in determining fair value. The Company had no Level 3 assets and liabilities at either December 31, 2012 or March 31, 2013.
5
The Company determines the appropriate level for each financial asset and liability on a quarterly basis and recognizes any transfers at the end of the reporting period. For the three months ended March 31, 2013, there were no transfers between levels.
The fair values of cash and cash equivalents are estimated to be equivalent to carrying amounts and have been excluded from the table below. The fair value of each debt instrument is determined by multiplying the principal amount of each debt instrument by the market price. These assets and liabilities, which are not measured at fair value in the Balance Sheets but for which the fair value is disclosed, would be classified as Level 1 in the fair value hierarchy.
December 31, 2012 | March 31, 2013 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
(in millions) | |||||||||||||||
Financial liabilities: | |||||||||||||||
Long-term debt | $ | 109 | $ | 112 | $ | 71 | $ | 73 |
(5) Long-Term Debt
Principal and interest payments on the transition bonds are due semi-annually on March 15 and September 15 of each year and are paid from funds deposited with the trustee by CenterPoint Houston as servicer of the transition property.
The transition bonds are secured primarily by the transition property, which includes the irrevocable right to recover, through non-bypassable transition charges payable by certain retail electric customers, the qualified costs of CenterPoint Houston authorized by the financing order. The holders of the transition bonds have no recourse to any assets or revenues of CenterPoint Houston, and the creditors of CenterPoint Houston have no recourse to any assets or revenues (including, without limitation, the transition charges) of the Company. CenterPoint Houston has no payment obligations with respect to the transition bonds except to remit collections of transition charges as set forth in a servicing agreement between CenterPoint Houston and the Company and in an intercreditor agreement among CenterPoint Houston, the Company and other parties.
The source of repayment for the transition bonds is the transition charges. The servicer collects this non-bypassable charge from REPs in CenterPoint Houston’s service territory. The servicer deposits transition charge collections into the Company’s General Subaccount maintained by the trustee.
The outstanding transition bonds, which have an aggregate principal amount of $71.3 million, a scheduled final payment date of September 15, 2013, a final maturity date of September 15, 2015 and an interest rate of 5.63%, are reflected on the Balance Sheet as current portion of long-term debt (based on scheduled payments) at March 31, 2013.
6
The following table shows scheduled and actual principal payments on the transition bonds from the issuance date through March 31, 2013 (in thousands):
Class A-1 | Class A-2 | Class A-3 | Class A-4 | ||||||||||||||||||||||||||||
Scheduled | Actual | Scheduled | Actual | Scheduled | Actual | Scheduled | Actual | ||||||||||||||||||||||||
March 15, 2002 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
September 15, 2002 | 13,106 | 13,106 | — | — | — | — | — | — | |||||||||||||||||||||||
March 15, 2003 | 6,366 | 6,366 | — | — | — | — | — | — | |||||||||||||||||||||||
September 15, 2003 | 12,357 | 12,357 | — | — | — | — | — | — | |||||||||||||||||||||||
March 15, 2004 | 14,004 | 14,004 | — | — | — | — | — | — | |||||||||||||||||||||||
September 15, 2004 | 27,185 | 27,185 | — | — | — | — | — | — | |||||||||||||||||||||||
March 15, 2005 | 15,914 | 15,914 | — | — | — | — | — | — | |||||||||||||||||||||||
September 15, 2005 | 26,068 | 26,068 | 4,824 | 4,824 | — | — | — | — | |||||||||||||||||||||||
March 15, 2006 | — | — | 18,460 | 18,460 | — | — | — | — | |||||||||||||||||||||||
September 15, 2006 | — | — | 35,835 | 35,835 | — | — | — | — | |||||||||||||||||||||||
March 15, 2007 | — | — | 20,370 | 20,370 | — | — | — | — | |||||||||||||||||||||||
September 15, 2007 | — | — | 38,512 | 38,512 | 1,030 | 1,030 | — | — | |||||||||||||||||||||||
March 15, 2008 | — | — | — | — | 22,280 | 22,280 | — | — | |||||||||||||||||||||||
September 15, 2008 | — | — | — | — | 43,249 | 43,249 | — | — | |||||||||||||||||||||||
March 15, 2009 | — | — | — | — | 24,826 | 24,826 | — | — | |||||||||||||||||||||||
September 15, 2009 | — | — | — | — | 38,615 | 38,615 | 9,576 | 9,576 | |||||||||||||||||||||||
March 15, 2010 | — | — | — | — | — | — | 27,372 | 27,372 | |||||||||||||||||||||||
September 15, 2010 | — | — | — | — | — | — | 53,135 | 53,135 | |||||||||||||||||||||||
March 15, 2011 | — | — | — | — | — | — | 29,918 | 29,918 | |||||||||||||||||||||||
September 15, 2011 | — | — | — | — | — | — | 58,077 | 58,077 | |||||||||||||||||||||||
March 15, 2012 | — | — | — | — | — | — | 33,738 | 33,738 | |||||||||||||||||||||||
September 15, 2012 | — | — | — | — | — | — | 65,491 | 65,491 | |||||||||||||||||||||||
March 15, 2013 | — | — | — | — | — | — | 37,310 | 37,310 |
(6) Related Party Transactions and Major Customers
Related Party Transactions. As the servicer, CenterPoint Houston manages and administers the transition property of the Company and collects the transition charges on behalf of the Company. The Company pays a fixed annual servicing fee to CenterPoint Houston for these services. Pursuant to an administration agreement entered into between the Company and CenterPoint Houston, CenterPoint Houston also provides administrative services to the Company. The Company pays CenterPoint Houston a fixed fee for performing these services, plus all reimbursable expenses. The Company recorded administrative and servicing fees of $0.1 million during both of the three months ended March 31, 2012 and 2013.
Major Customers. A significant portion of the transition charges are collected by affiliates of NRG Energy, Inc. (NRG) and by affiliates of Energy Future Holdings Corp. (Energy Future Holdings). During the three months ended March 31, 2012 and 2013, revenues derived from transition charges to REPs that are currently affiliates of NRG accounted for approximately 31% and 34%, respectively, of total transition charge revenues. During both the three months ended March 31, 2012 and 2013, revenues derived from transition charges to REPs that are currently affiliates of Energy Future Holdings accounted for approximately 9% of total transition charge revenues. Affiliates of NRG had letters of credit aggregating $7.7 million and $7.3 million on deposit with the trustee at December 31, 2012 and March 31, 2013, respectively. Affiliates of Energy Future Holdings had letters of credit aggregating $2.7 million and $2.1 million on deposit with the trustee at December 31, 2012 and March 31, 2013, respectively. As with any REP that may default in its payment obligations in respect of transition charges, the servicer is expected to direct the trustee to seek recourse against such cash deposits or alternate form of credit support as a remedy for any payment default that may occur.
7
Item 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
This analysis should be read in combination with the Interim Financial Statements included in Item 1 of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2012 (2012 Form 10-K).
We meet the conditions specified in General Instruction H(1)(a) and (b) to Form 10-Q and therefore are providing the following analysis of our results of operations using the reduced disclosure format for wholly owned subsidiaries of reporting companies. Accordingly, we have omitted from this report the information called for by Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Item 3 (Quantitative and Qualitative Disclosures About Market Risk) of Part I and the following Part II items of Form 10-Q: Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds), Item 3 (Defaults Upon Senior Securities) and Item 4 (Submission of Matters to a Vote of Security Holders).
We are a Delaware limited liability company established in November 1999 for limited purposes. On October 24, 2001 we issued $748.9 million aggregate principal amount of transition bonds and used the net proceeds to purchase the transition property from Reliant Energy, Incorporated, now CenterPoint Energy Houston Electric, LLC (CenterPoint Houston). As we are restricted by our organizational documents from engaging in activities other than those described under “Business” in Item 1 of our 2012 Form 10-K, income statement effects are limited primarily to revenue generated from the transition charges, interest expense on the transition bonds, amortization of the transition property, debt issuance expenses and the discount on the transition bonds, transition property servicing and administration fees and incidental investment interest income. Net income is expected to be zero for each reporting period.
For the three months ended March 31, 2013, revenue from transition charges was $23.2 million and investment income was less than $0.1 million. Amortization of transition property was $21.5 million. Interest expense was $1.4 million related to interest on the transition bonds and amortization expense was less than $0.1 million related to amortization of debt issuance expenses and the discount on the transition bonds. We recorded administrative expenses of $0.2 million for the three months ended March 31, 2013.
For the three months ended March 31, 2012, revenue from transition charges was $24.5 million and investment income was less than $0.1 million. Amortization of transition property was $20.3 million. Interest expense was $2.8 million related to interest on the transition bonds and amortization expense was less than $0.1 million related to amortization of debt issuance expenses and the discount on the transition bonds. We recorded administrative expenses of $1.3 million for the three months ended March 31, 2012, which included $0.7 million related to the annual bad debt true-up.
We use collections of transition charges to make scheduled principal and interest payments on the transition bonds. Transition charges, together with interest earned on collected transition charges, are expected to offset (1) interest expense on the transition bonds, (2) the principal amount of the transition bonds scheduled to be paid and (3) fees and expenses, including fees charged by CenterPoint Houston for servicing the transition property and providing administrative services to us and expenses related to such administrative services.
The transition charges are reviewed and adjusted at least annually by the Public Utility Commission of Texas (Texas Utility Commission) to correct prospectively any over-collections or under-collections that occurred during the preceding 12 months and to provide for the expected recovery of amounts sufficient to timely provide all payment of debt service and other required amounts and charges in connection with the transition bonds.
CenterPoint Houston is required to true-up transition charges annually on November 1 in compliance with the financing order. CenterPoint Houston’s most recent true-up filing to adjust transition charges was filed with the Texas Utility Commission on September 28, 2012 and became effective November 1, 2012. The adjusted transition charges are designed to collect $109.5 million during the twelve-month period ending October 31, 2013. Such adjusted transition charges reflect the impact of an estimated over-collection of $12.2 million for the twelve-month period ended October 31, 2012. The scheduled final payment date of the Class A-4 transition bonds is September 15, 2013.
In all material respects, each materially significant retail electric provider (i) has been billed in accordance with the financing order, (ii) has made all payments in compliance with the requirements outlined in the financing order and (iii) has satisfied the creditworthiness requirements of the financing order.
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Item 4. CONTROLS AND PROCEDURES
In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2013 to provide assurance that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.
There has been no change in our internal controls over financial reporting that occurred during the three months ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1A. RISK FACTORS
Other than with respect to the updated risk factor set forth below, there have been no material changes from the risk factors disclosed in our 2012 Form 10-K.
It might be difficult to collect transition charges from retail electric providers (REPs).
As required by the 1999 utility restructuring amendments to the Public Utility Regulatory Act (Restructuring Act), retail electric customers pay the transition charges to REPs who supply them with electric power. The REPs are obligated to remit payments of the transition charges, less a specified percentage allowance for charge-offs of delinquent customer accounts, within 35 days of billing from the servicer, even if they do not collect the transition charges from retail electric customers. Because the REPs bill most retail electric customers for the transition charges, we have to rely on a relatively small number of entities for the collection of the bulk of the transition charges. As of December 31, 2012, CenterPoint Houston did business with approximately 75 REPs. Affiliates of NRG Energy, Inc. and Energy Future Holdings Corp. (Energy Future Holdings) accounted for approximately 37% and 10%, respectively, of CenterPoint Houston's billed receivables balance from REPs as of March 31, 2013. In April 2013, Energy Future Holdings publicly disclosed that it had recently engaged in discussions with certain of its creditors with respect to the capital structure of Energy Future Holdings and its affiliates, including the possibility of a restructuring transaction, and although it had not reached agreement on the terms of any change in capital structure, it expected to continue to explore available restructuring alternatives.
Failure by the REPs to remit transition charges to the servicer might cause delays in payments on the transition bonds and adversely affect the value of the transition bonds. Adverse economic conditions or financial difficulties of one or more REPs could impair the ability of these REPs to remit payments of the transition charges or could cause them to delay such payments. The servicer does not pay any shortfalls resulting from the failure of any REP to forward transition charge collections.
Adjustments to the transition charges and any credit support provided by a REP, while available to compensate for a failure by a REP to pay the transition charges to the servicer, might not be sufficient to protect the value of the transition bonds.
The Restructuring Act provides for one or more REPs in each area to be designated the “provider of last resort” for that area or a specified customer class. The provider of last resort is required to offer basic electric service to retail electric customers in its designated area, regardless of the creditworthiness of the customers. The provider of last resort might face greater difficulty in bill collection than other REPs and therefore the servicer may face greater difficulty in collecting transition charges from the provider of last resort.
REPs may issue a single bill to individual retail customers that includes all charges related to the purchase of electricity, without separately itemizing the transition charge component of the bill. A REP's use of a consolidated bill might increase the risk that customers who have claims against the REP will attempt to offset those claims against transition charges or increase the risk that, in the event of a bankruptcy of a REP, a bankruptcy court would find that the REP has an interest in the transition property and would make it more difficult to terminate the services of a bankrupt REP or collect transition charges from its customers.
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Item 6. EXHIBITS
The following exhibits are filed herewith:
Exhibits not incorporated by reference to a prior filing are designated by a cross (+); all exhibits not so designated are incorporated by reference to a prior filing of CenterPoint Energy Transition Bond Company, LLC.
Agreements included as exhibits are included only to provide information to investors regarding their terms. Agreements listed below may contain representations, warranties and other provisions that were made, among other things, to provide the parties thereto with specified rights and obligations and to allocate risk among them, and no such agreement should be relied upon as constituting or providing any factual disclosures about CenterPoint Energy Transition Bond Company, LLC, any other persons, any state of affairs or other matters.
Exhibit Number | Description | Report or Registration Statement | SEC File or Registration Number | Exhibit Reference | ||||
4.1 | Amended and Restated Limited Liability Company Agreement of Reliant Energy Transition Bond Company LLC | Current Report on Form 8-K filed with the SEC on October 23, 2001 | 333-91093 | 4.3 | ||||
4.2 | Amended and Restated Certificate of Formation of Reliant Energy Transition Bond Company LLC | Current Report on Form 8-K filed with the SEC on October 23, 2001 | 333-91093 | 4.7 | ||||
4.3 | Certificate of Amendment to the Certificate of Formation of Reliant Energy Transition Bond Company LLC | Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 | 333-91093 | 4.3 | ||||
10.1 | Semiannual Servicer’s Certificate, dated as of March 13, 2013, as to the transition bond balances, the balances of the collection account and its sub-accounts, and setting forth transfers and payments to be made on the March 15, 2013 payment date. | Annual Report on Form 10-K for the fiscal year ended December 31, 2012 | 333-91093 | 10.6 | ||||
+31.1 | Section 302 Certification of Gary L. Whitlock | |||||||
+31.2 | Section 302 Certification of Marc Kilbride | |||||||
+32.1 | Section 906 Certification of Gary L. Whitlock | |||||||
+32.2 | Section 906 Certification of Marc Kilbride | |||||||
+101.INS | XBRL Instance Document (1) | |||||||
+101.SCH | XBRL Taxonomy Extension Schema Document (1) | |||||||
+101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (1) | |||||||
+101.LAB | XBRL Taxonomy Extension Labels Linkbase Document (1) | |||||||
+101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (1) |
(1) Furnished, not filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC |
(Registrant) |
By: /s/ Walter L. Fitzgerald |
Walter L. Fitzgerald |
Senior Vice President and Chief Accounting Officer |
Date: May 13, 2013
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Index to Exhibits
The following exhibits are filed herewith:
Exhibits not incorporated by reference to a prior filing are designated by a cross (+); all exhibits not so designated are incorporated by reference to a prior filing of CenterPoint Energy Transition Bond Company, LLC.
Agreements included as exhibits are included only to provide information to investors regarding their terms. Agreements listed below may contain representations, warranties and other provisions that were made, among other things, to provide the parties thereto with specified rights and obligations and to allocate risk among them, and no such agreement should be relied upon as constituting or providing any factual disclosures about CenterPoint Energy Transition Bond Company, LLC, any other persons, any state of affairs or other matters.
Exhibit Number | Description | Report or Registration Statement | SEC File or Registration Number | Exhibit Reference | ||||
4.1 | Amended and Restated Limited Liability Company Agreement of Reliant Energy Transition Bond Company LLC | Current Report on Form 8-K filed with the SEC on October 23, 2001 | 333-91093 | 4.3 | ||||
4.2 | Amended and Restated Certificate of Formation of Reliant Energy Transition Bond Company LLC | Current Report on Form 8-K filed with the SEC on October 23, 2001 | 333-91093 | 4.7 | ||||
4.3 | Certificate of Amendment to the Certificate of Formation of Reliant Energy Transition Bond Company LLC | Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 | 333-91093 | 4.3 | ||||
10.1 | Semiannual Servicer’s Certificate, dated as of March 13, 2013, as to the transition bond balances, the balances of the collection account and its sub-accounts, and setting forth transfers and payments to be made on the March 15, 2013 payment date. | Annual Report on Form 10-K for the fiscal year ended December 31, 2012 | 333-91093 | 10.6 | ||||
+31.1 | Section 302 Certification of Gary L. Whitlock | |||||||
+31.2 | Section 302 Certification of Marc Kilbride | |||||||
+32.1 | Section 906 Certification of Gary L. Whitlock | |||||||
+32.2 | Section 906 Certification of Marc Kilbride | |||||||
+101.INS | XBRL Instance Document (1) | |||||||
+101.SCH | XBRL Taxonomy Extension Schema Document (1) | |||||||
+101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (1) | |||||||
+101.LAB | XBRL Taxonomy Extension Labels Linkbase Document (1) | |||||||
+101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (1) |
(1) Furnished, not filed.
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