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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 SEPTEMBER 30, 2007
 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 333-121505
 CenterPoint Energy Transition Bond Company II, LLC
  Delaware
    
    59-3790472(State or other jurisdiction
of incorporation or organization)
    
    (I.R.S. Employer Identification Number)1111 Louisiana, Suite 4655B 
Houston, Texas 77002
    
    (713) 207-5222(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.
 þ o
  o o þ
 o þ




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##### 



CenterPoint Energy Transition Bond Company II, LLC
 TABLE OF CONTENTS
 PART I.
    
    FINANCIAL INFORMATIONItem 1. Financial Statements
    
    1Statements of Income
and Changes in Members Equity Three and Nine Months Ended September 30, 2006 and 2007
(unaudited)
    
    1Balance Sheets December 31, 2006 and September 30, 2007 (unaudited)
    
    2Statements of Cash
Flows Nine Months Ended
September 30, 2006 and 2007 (unaudited)

    
    3Notes to Unaudited Financial Statements
    
    4Item 2. Managements Narrative Analysis of Results of Operations
    
    7Item 4. Controls and Procedures
    
    8PART II.
    
    OTHER INFORMATIONItem 1A. Risk Factors
    
    9Item 6.    Exhibits
    
    9Section 302 Certification of Gary L. WhitlockSection 302 Certification of Marc KilbrideSection 906 Certification of Gary L. WhitlockSection 906 Certification of Marc KilbrideRisk Factors
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
    
    
    changes in market demand and demographic patterns;
    
    weather variations and other natural phenomena affecting retail electric customer energy
usage;
    
    the operating performance of CenterPoint Energy Houston Electric, LLCs (CenterPoint
Houston) facilities and third-party suppliers of electric energy in CenterPoint Houstons
service territory;
    
    state and federal legislative and regulatory actions or developments, including
deregulation, re-regulation, changes in or application of laws or regulations applicable to
the various aspects of CenterPoint Houstons business;
    
    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.; and
    
    other factors we discuss in Risk Factors in Item 1A of Part I of our Annual Report on
Form 10-K for the year ended December 31, 2006, which is incorporated herein by reference,
and our other Securities and Exchange Commission filings.
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PART I. FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 
 CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
 STATEMENTS OF INCOME
AND CHANGES IN MEMBERS EQUITY
(Unaudited)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(in thousands)Revenues:Transition charge revenue
    
    $
    56,538
    
    
    $
    57,116
    
    
    $
    144,259
    
    
    $
    144,667Investment income
    
    
    400
    
    
    
    479
    
    
    
    1,222
    
    
    
    1,752Total operating revenues
    
    
    56,938
    
    
    
    57,595
    
    
    
    145,481
    
    
    
    146,419Expenses:Interest expense
    
    
    23,486
    
    
    
    22,502
    
    
    
    70,758
    
    
    
    68,286Amortization of transition property
    
    
    32,013
    
    
    
    33,956
    
    
    
    70,957
    
    
    
    75,062Amortization
of transition bond discount and issuance costs
    
    
    551
    
    
    
    481
    
    
    
    1,675
    
    
    
    1,499Administrative and general expenses
    
    
    888
    
    
    
    656
    
    
    
    2,091
    
    
    
    1,572Total operating expenses
    
    
    56,938
    
    
    
    57,595
    
    
    
    145,481
    
    
    
    146,419Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Members Equity at Beginning of Period
    
    
    9,256
    
    
    
    9,256
    
    
    
    9,256
    
    
    
    9,256Contributed Capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Members Equity at End of Period
    
    $
    9,256
    
    
    $
    9,256
    
    
    $
    9,256
    
    
    $
    9,256
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CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
 BALANCE SHEETS
(Unaudited)
 December 31, 2006
    
    
    September 30, 2007(in thousands)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    90,827
    
    
    $
    45,012Restricted funds
    
    
    33,243
    
    
    
    33,808Transition charge receivable
    
    
    24,411
    
    
    
    34,983Current Assets
    
    
    148,481
    
    
    
    113,803Intangible transition property
    
    
    1,746,421
    
    
    
    1,671,359Unamortized debt issuance costs
    
    
    10,439
    
    
    
    8,980Total Assets
    
    $
    1,905,341
    
    
    $
    1,794,142LIABILITIES AND MEMBERS EQUITYCurrent Liabilities:Current portion of long-term debt
    
    $
    86,864
    
    
    $
    93,697Accrued interest
    
    
    39,019
    
    
    
    14,907Customer deposits
    
    
    23,743
    
    
    
    24,428Fees payable to servicer
    
    
    1,143
    
    
    
    195Current Liabilities
    
    
    150,769
    
    
    
    133,227Long-term debt:Transition bonds, net of unamortized discount
    
    
    1,745,316
    
    
    
    1,651,659Total Liabilities
    
    
    1,896,085
    
    
    
    1,784,886Members Equity:Contributed capital
    
    
    9,256
    
    
    
    9,256Retained earnings
    
    
    
    
    
    
    Total Members Equity
    
    
    9,256
    
    
    
    9,256Total Liabilities and Members Equity
    
    $
    1,905,341
    
    
    $
    1,794,142
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CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
 STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended September 30,2006
    
    
    2007(in thousands)Cash Flows from Operating Activities:Net income
    
    $
    
    
    
    $
    Adjustments for non-cash items:Amortization of transition property
    
    
    70,957
    
    
    
    75,062Amortization of transition bond discount and issuance costs
    
    
    1,675
    
    
    
    1,499Changes in other assets and liabilities:Transition charge receivable
    
    
    (25,514
    )
    
    
    (10,572
    )Other current liabilities
    
    
    (1,460
    )
    
    
    Accrued interest
    
    
    11,669
    
    
    
    (24,112
    )Customer deposits
    
    
    5,459
    
    
    
    685Fees payable to servicer
    
    
    824
    
    
    
    (948
    )Net cash provided by operating activities
    
    
    63,610
    
    
    
    41,614Cash Flows from Investing Activities:Restricted funds
    
    
    (5,581
    )
    
    
    (565
    )Net cash used in investing activities
    
    
    (5,581
    )
    
    
    (565
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    (18,565
    )
    
    
    (86,864
    )Net cash used in financing activities
    
    
    (18,565
    )
    
    
    (86,864
    )Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    39,464
    
    
    
    (45,815
    )Cash and Cash Equivalents, Beginning of Period
    
    
    1,461
    
    
    
    90,827Cash and Cash Equivalents, End of Period
    
    $
    40,925
    
    
    $
    45,012Supplemental Disclosure of Cash Flow Information:Cash Payments:Interest
    
    $
    59,090
    
    
    $
    92,398
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CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
 NOTES TO UNAUDITED FINANCIAL STATEMENTS
 (1) Background and Basis of Presentation
 General.
 Background.
 Basis of Presentation.
  Amortization.
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(2) Transition Charges
  2006
    
    
    2007January
    
    $
    402
    
    
    $
    13,525February
    
    
    8,525
    
    
    
    12,489March
    
    
    13,257
    
    
    
    14,582April
    
    
    11,862
    
    
    
    12,956May
    
    
    12,589
    
    
    
    13,322June
    
    
    16,704
    
    
    
    12,987July
    
    
    16,302
    
    
    
    16,309August
    
    
    19,329
    
    
    
    19,958September
    
    
    18,528
    
    
    
    17,331October
    
    
    18,118November
    
    
    17,263December
    
    
    13,646
 (3) Cash and Cash Equivalents/Restricted Funds
  
    
    The General Subaccount is comprised of collections of transition charges remitted to the
trustees administrative agent by the servicer with respect to the transition bonds. 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
$37.8 million at September 30, 2007.
    
    The Excess Funds Subaccount is maintained for the purpose of holding any collected
transition charges and earnings on amounts in the collection account (other than earnings
on amounts allocated to 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. The Excess Funds Subaccount had a balance of $7.2 million at
September 30, 2007.
    
    The Capital Subaccount received a deposit of approximately $9.3 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 and Excess Funds 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s administrative agent will draw on amounts in the Capital Subaccount. As of
September 30, 2007, the Capital Subaccount had a balance of $9.4 million and is classified
as Restricted Funds in the Balance Sheets.
  (4) Long-Term Debt
  5




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Scheduled
    
    
    
    
    
    
    Interest
    
    
    AmountTranche
    
    Final Payment Date
    
    
    Final Maturity Date
    
    
    Rate
    
    
    (in millions)A-1
    
    February 1, 2009
    
    February 1, 2011
    
    
    4.84
    %
    
    $
    145A-2
    
    August 1, 2012
    
    August 1, 2014
    
    
    4.97
    %
    
    
    368A-3
    
    February 1, 2014
    
    August 1, 2015
    
    
    5.09
    %
    
    
    252A-4
    
    August 1, 2017
    
    August 1, 2019
    
    
    5.17
    %
    
    
    519A-5
    
    August 1, 2019
    
    August 1, 2020
    
    
    5.302
    %
    
    
    4621,746Less: Current Maturities (scheduled payments)
    
    
    
    
    
    
    (94
    )Total Long-Term Debt, net
    
    
    
    
    
    $
    1,652
  Tranche A-1
    
    Tranche A-2
    
    Tranche A-3
    
    Tranche A-4
    
    Tranche A-5Scheduled
    
    Actual
    
    Scheduled
    
    Actual
    
    Scheduled
    
    Actual
    
    Scheduled
    
    Actual
    
    Scheduled
    
    ActualAugust 1, 2006
    
    $
    18,565
    
    
    $
    18,565
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    February 1, 2007
    
    
    51,527
    
    
    
    51,527
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    August 1, 2007
    
    
    35,337
    
    
    
    35,337
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (5) Related Party Transactions and Major Customers
 Related Party Transactions.
  Major Customers.
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Item 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
         7




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Item 4. CONTROLS AND PROCEDURES
   8




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PART II. OTHER INFORMATION
 
 Item 1A. Risk Factors
  
 Item 6. Exhibits
   Report or Registration
    
    SEC File orExhibit Number
    
    Description
    
    Statement
    
    Registration Number
    
    Exhibit References4.1
    
    Amended and
Restated
Certificate of
Formation of
CenterPoint Energy
Transition Bond
Company II, LLC
    
    Current Report on
Form 8-K filed with
the SEC on December
16, 2005
    
    333-121505
    
    
    3.14.2
    
    Amended and
Restated Limited
Liability Company
Agreement of
CenterPoint Energy
Transition Bond
Company II, LLC
    
    Current Report on
Form 8-K filed with
the SEC on December
16, 2005
    
    333-121505
    
    
    3.210.1
    
    Semiannual
Servicers
Certificate, dated
as of July 31,
2007, 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 August 1,
2007 payment date
    
    Form 10-Q for the
quarter ended June
30, 2007
    
    333-121505
    
    
    10.1+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+99.1
    
    Items incorporated by
reference from the
CenterPoint Energy
Transition Bond Company
II, LLC Form 10-K. Item
1A Risk Factors.
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SIGNATURES
  CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLCBy:
    /s/ James S. BrianJames S. BrianSenior Vice President and Chief Accounting Officer  10