Fitch Rates CenterPoint Houston's General Mortgage Bonds 'A'

NEW YORK--()--Fitch Ratings has assigned an 'A' rating to CenterPoint Energy Houston Electric, LLC's (CEHE) proposed $600 million 4.5% general mortgage bonds series X due 2044. The Rating Outlook is Stable.

Key Rating Drivers:

Low Risk T&D Business

CEHE's IDR and Stable Outlook reflect the low business risk of its regulated electric transmission and distribution operations in Texas. Fitch considers the regulatory environment in Texas reasonably supportive to CEHE's credit profile. CEHE has the ability to earn a return on its transmission and distribution investments with minimal regulatory lag. In addition, CEHE bears no commodity risk and does not maintain the provider of last resort requirement like T&Ds in other jurisdictions.

Solid Service Territory

CEHE's Texas service territory has historically delivered consistently strong population and economic growth relative to the national averages. The unemployment rate in Texas was 6% in December 2013, below the national average of 6.7%. At the peak of the financial crisis, its unemployment rate was 8.2% compared to the national average of 10%. Houston metropolitan area's unemployment rate was 5.5% in December 2013. Driven by the strong economic environment, CEHE has seen reasonably healthy customer growth of 2% per year.

Credit Metrics Well Positioned

Fitch expects CEHE's credit metrics to position well within its rating category in the next three years. Fitch forecasts CEHE's FFO interest coverage to average 4.4x and debt-to-EBITDA to average 2.6x over the next three years.

Rating Sensitivities:

Positive

--Unlikely absent upgrade at its parent CenterPoint Energy and its affiliate CenterPoint Energy Resources.

Negative

--The regulatory environment becomes contentious such that CEHE is unable to receive timely and reasonable recovery in rates;

--If Debt/EBITDA exceeds 3.7x and/or FFO interest coverage is less than 3.5x on a sustained basis.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012);

--'Recovery Ratings and Notching Criteria for Utilities' (May 3, 2012);

--'Rating North American Utilities, Power, Gas and Water Companies' (May 16, 2011).

Applicable Criteria and Related Research:

Recovery Ratings and Notching Criteria for Utilities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=722085

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=823546

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Contacts

Fitch Ratings
Primary Analyst
Julie Jiang
Director
+1-212-908-0708
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Shalini Mahajan
Senor Director
+1-212-908-0351
or
Committee Chairperson
Philip W. Smyth, CFA
Senior Director
+1-212-908-0531
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Julie Jiang
Director
+1-212-908-0708
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Shalini Mahajan
Senor Director
+1-212-908-0351
or
Committee Chairperson
Philip W. Smyth, CFA
Senior Director
+1-212-908-0531
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com