Fitch Rates $500MM CenterPoint Energy Resources Notes ‘BBB’; Outlook Stable

Fitch assigns ratings of ‘BBB’ to the $250 million of 6.125% senior notes due Nov. 1, 2017 and $250 million of 6.625% senior notes due Nov. 1, 2037 of CenterPoint Energy Resources Corp. (CERC). Both new debt issues are unsecured and rank equally with existing and future unsecured debt of CERC. The proceeds will be used for general corporate purposes, including repayment or refinancing of debt, including $300 million of the 6.50% debentures due Feb. 1, 2008, capital expenditures, working capital and loans to or investments in affiliates. Pending application of the net proceeds from this offering for those purposes, CERC intends to repay approximately $394 million of borrowings under its revolving credit facility and to use the remainder of the net proceeds from this offering to repay advances for the purchase of receivables under the receivables facility that terminates in October 2007.

CERC’s ratings are supported by credit ratios that are in line with its peer group and the stability resulting from a majority of operating income generated from relatively low-risk regulated local gas distribution companies (LDCs) and interstate pipelines. Rating concerns include parent company leverage at CenterPoint Energy, Inc. (CNP), weather and volume sensitivity, the higher business risk associated with non-regulated gas sales, services and field service operations, and the risks associated with any adverse regulatory decisions and ongoing construction projects.

CERC owns and operates natural gas utilities in six states, three interstate pipelines, and intrastate pipelines in Texas and Louisiana. CERC also engages in competitive natural gas sales and field services and is a subsidiary of CNP.

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