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QUESTIONS AND ANSWERS FOR SHAREHOLDERS
OF HOUSTON INDUSTRIES INCORPORATED
ABOUT THE ACQUISITION OF NORAM ENERGY CORP.
At a special meeting of shareholders scheduled to be held on December 17,
1996, you will be asked to vote on the adoption and approval of the Agreement
and Plan of Merger (the "Merger Agreement") between Houston Industries
Incorporated and certain of its subsidiaries, including Houston Lighting & Power
Company ("HL&P"), and NorAm Energy Corp. Because of the complexity of the issues
detailed in the accompanying Joint Proxy Statement/Prospectus, we are providing
this guide, in question-and-answer format, to help explain some of the most
important points of the acquisition. This information does not purport to be
complete and does not serve as a substitute for your reading the Joint Proxy
Statement/Prospectus. The information below is qualified in its entirety by
reference to the Joint Proxy Statement/Prospectus.
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: The boards of directors of Houston Industries Incorporated ("Houston
Industries") and NorAm Energy Corp. ("NorAm") have agreed that NorAm should
be acquired by Houston Industries. The NorAm acquisition will occur under
the terms of the Merger Agreement. You are being asked to approve the
Merger Agreement, the acquisition and the other transactions provided for
in the Merger Agreement. The Houston Industries Board of Directors has
unanimously approved the Merger Agreement and unanimously recommends that
shareholders vote FOR the adoption and approval of the Merger Agreement.
Q: WHO IS NORAM ENERGY CORP.?
A: NorAm is a company principally engaged in the distribution and transmission
of natural gas. NorAm is the third-largest natural gas utility in the
United States, serving 2.7 million residential and business customers in
six states through its Entex, Arkla and Minnegasco gas distribution
divisions. NorAm also is a major natural gas pipeline and energy marketer,
providing natural gas marketing, gathering, storage and transportation
services as well as wholesale electric power marketing. Its international
strategy focuses on Mexico and Latin America. NorAm's corporate
headquarters are located in Houston and it has principal offices in
Shreveport, Little Rock and Minneapolis.
Q: HOW WILL THE NORAM ACQUISITION AFFECT THE TWO COMPANIES?
A: As a result of the NorAm acquisition, Houston Industries and HL&P will be
combined and NorAm will become a wholly owned subsidiary of new Houston
Industries. The Merger Agreement provides that one of two alternative
structures could be used rather than the above structure in certain
circumstances.
Q: WHAT WILL BE THE DIFFERENCE BETWEEN THE OLD HOUSTON INDUSTRIES AND THE NEW
HOUSTON INDUSTRIES?
A: Houston Industries after the NorAm acquisition will be essentially the same
as Houston Industries before the NorAm acquisition, except that it will
have a new subsidiary, NorAm Energy Corp., and HL&P will be a division of
Houston Industries instead of a subsidiary. Its common stock will still be
listed on the New York, the Chicago and the London stock exchanges. With
the acquisition of NorAm, the nature of Houston Industries' business will
expand into local gas distribution, pipelines and the marketing and trading
of gas and electricity.
Q: WHAT WILL HAPPEN TO SHARES I OWN IN HOUSTON INDUSTRIES AND TO SHARES OF
NORAM COMMON STOCK?
A: Your Houston Industries shares will automatically be converted into shares
of the new Houston Industries on a one-for-one basis. You will continue to
own the same number of shares and you DO NOT have to send in your
certificates to receive new certificates. NorAm stockholders will be able
to elect, subject to proration, to receive Houston Industries common stock
and/or cash for their shares. Houston Industries will pay approximately 50%
in cash and 50% in stock to acquire NorAm.
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Q: WHEN WILL THE NORAM ACQUISITION BECOME EFFECTIVE?
A: We expect that the NorAm acquisition will close before the end of the first
quarter of 1997. In addition to your approval and the approval of NorAm's
stockholders of the Merger Agreement, favorable action must be obtained
from various regulatory authorities, including the Securities and Exchange
Commission, the Federal Trade Commission and the U.S. Department of
Justice, the utility regulatory commissions of Arkansas, Louisiana,
Minnesota, Oklahoma and Mississippi, and four municipalities, including the
City of Houston.
Q: WHY IS HOUSTON INDUSTRIES ACQUIRING NORAM?
A: The directors of Houston Industries and NorAm believe that the NorAm
acquisition will position the combined company as a leading national and
international energy competitor with both gas and electric capabilities.
The NorAm acquisition offers the following significant strategic and
financial benefits to Houston Industries and its shareholders, as well as
to its employees and customers:
- NorAm brings to the combined companies more than 2.1 million additional
retail distribution customers.
- NorAm has a fast-growing gas and electric wholesale trading organization,
which can be combined with HL&P's electric power expertise to build a
leading wholesale energy trading and risk management business.
- NorAm's international strategy, with its emphasis on gas transmission and
distribution, complements Houston Industries' international strategy,
which is focused on power plant development and acquisition of electric
distribution systems.
Q: WHAT ARE THE TAX CONSEQUENCES TO HOUSTON INDUSTRIES SHAREHOLDERS?
A: The exchange of your Houston Industries shares for new Houston Industries
shares will be tax-free.
Q: IS MY VOTE IMPORTANT?
A: YES. In order for the Merger Agreement to be approved, affirmative votes
must be received from the holders of more than 66 2/3% of the outstanding
shares of Houston Industries common stock. Your failure to vote, therefore,
is effectively a vote against the NorAm acquisition. Abstentions from
voting are counted as votes against the NorAm acquisition. WE URGE YOU TO
SEND IN YOUR PROXY AS EARLY AS POSSIBLE.
Q: HOW CAN I VOTE IF MY SHARES ARE HELD BY MY BROKER "IN STREET NAME"?
A: Your broker is required to send you a Joint Proxy Statement/Prospectus and
form of proxy or ballot. You must execute the form of proxy as instructed
and return it to your broker. Your broker can only vote your shares if he
has written instructions from you. Absent your instructions, your shares
will NOT be voted. WE URGE YOU TO SEND YOUR PROXY TO YOUR BROKER AS EARLY
AS POSSIBLE.
Q: IS THERE SOMEONE I CAN CALL FOR MORE INFORMATION OR IF I MISPLACE MY PROXY?
A: You should call Houston Industries' proxy solicitor, Morrow & Co., at their
toll-free number, 1-800-662-5200; and of course, you are always welcome to
call Houston Industries' Investor Services Department at 1-800-231-6406 or
713-207-3060.
SHAREHOLDERS ARE URGED TO CAREFULLY REVIEW THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY.
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN THE PROXY CARD DELIVERED
HEREWITH.
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