Dear Fellow Shareholders,

Thank you for investing your trust in CenterPoint Energy. Our vision is “to be recognized as America’s leading energy delivery company . . . and more.” We believe we will have achieved this vision when CenterPoint Energy delivers world-class performance to four key stakeholder groups beginning with you, our shareholders, but also including our customers, our employees and the communities we serve. We are pleased with the progress we made in 2004, but we know there is more work that needs to be done.

Investors today seek sound investments in companies that share their values. At CenterPoint Energy, our core values of integrity, accountability, initiative and respect guide everything we do. To achieve our vision, we need strong values and a sound corporate strategy. Though detailed in its execution, our strategy can be easily summarized: “One Company, Get it Right, and Grow.”

By “One Company,” we mean that we will leverage our talents and resources across our entire company rather than operate as a collection of smaller, autonomous business units. By “Get it Right,” we mean that we will constantly focus on making our businesses more efficient and cost- effective. Finally, by “Grow,” we mean that we want to expand our company and increase the value of your investment over time. (See Committed to Customers for examples of our One Company, Get it Right, and Grow strategic initiatives).

Sale of Texas Genco and our electric subsidiary “true-up” proceeding

In July 2004, we announced the sale of our electric generation business, Texas Genco, for $3.65 billion. CenterPoint Energy received $2.9 billion for our 81 percent interest in the company. The sale was structured in two phases. We finished the first phase, for which we received $2.2 billion, in late 2004 with the sale of 11 coal, lignite and gas-fired power plants. Following approval of the Nuclear Regulatory Commission, we were able to complete the final phase of the sale in April 2005 by selling our investment in the South Texas Project nuclear power plant for $700 million.

The second key event is the recovery of costs associated with the transition to electric competition in Texas. The recovery of these costs was provided for in the 1999 law that restructured Texas’ electric utility industry. In March 2004, we filed a “true-up” request with the Public Utility Commission of Texas (PUC) to recover $3.7 billion in stranded costs and regulatory assets, excluding interest. In December, the PUC approved (subject to certain adjustments) approximately $2.3 billion, including interest through August 31.

Frankly, we were very disappointed by this ruling. We don’t believe the Commission followed the law or its own regulations on a number of significant issues, and in January, we filed an appeal with the Texas state courts. However, it will likely take a number of years before the appeals process is complete.

With the proceeds from the first step in the sale of Texas Genco, we were able to reduce our company’s indebtedness by $2 billion in 2004. And by combining the proceeds from the second step in the sale of our 81 percent interest in the power generation subsidiary with the sale of approximately $1.8 billion in low-cost transition bonds, we will be in position to further reduce our company’s debt. These low-cost bonds cover most of the transition costs that were approved by the PUC in our true-up case.

Unfortunately, several parties have appealed the financing order authorizing the bond sale, which will delay our recovery of these costs for a number of months. We will, however, continue to earn interest on the approved amount during the consideration of these appeals.

The sale of our power generation subsidiary and the transition bonds are not, however, the only ways we are working to improve our company. Through our One Company, Get it Right and Grow strategic initiatives, we are taking important steps to make our company more efficient, cost effective and profitable.