CenterPoint Pours On the Power

By David Henry

Sometimes, the best stock investments come from the corporate bond market. CenterPoint Energy (CNP ) may be a case in point. The Houston utility sold notes and bonds three times in two weeks and got good terms. It is refinancing high-cost debt left from the deregulation craze. Scott Taylor of S&P says: "It is looking up. They have access to the markets again."

CenterPoint is shaping up as a slimmed-down, steady-Eddie business of transmitting electricity for returns guaranteed by regulators, he notes. The shares trade around 8.55, or 10 times 2003 Thomson First Call consensus earnings. But the p-e is effectively half that because each share is backed by $4 worth of publicly traded Texas Genco Holdings (TGN ), says Lawrence J. Goldstein of Santa Monica Partners. He is buying and says the stock could top 20 in a year as lower interest expenses lift earnings. It yields 4.5%.

In 2005, $5 billion of debt matures. But by then, CenterPoint will have cashed in $3.5 billion of "stranded cost" assets -- money it can recover from ratepayers for losses on generating plants the state says it must unload. Says a veteran money manager: "This is probably the single best vehicle for risk and reward in years."

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Gene Marcial is on vacation.

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