CenterPoint Energy 2014 Annual Report Download - page 139

CENTERPOINT ENERGY, INC.
SCHEDULE I — NOTES TO CONDENSED FINANCIAL INFORMATION (PARENT COMPANY)
(1) Background.
The condensed parent company financial statements and notes of CenterPoint Energy, Inc. (CenterPoint Energy) should be
read in conjunction with the consolidated financial statements and notes of CenterPoint Energy, Inc. and subsidiaries appearing in the Annual
Report on Form 10-
K. Credit facilities at CenterPoint Energy Houston Electric, LLC (CenterPoint Houston) and CenterPoint Energy Resources
Corp., indirect wholly owned subsidiaries of CenterPoint Energy, limit debt, excluding transition and system restoration bonds, as a percentage
of their consolidated capitalization to 65%
. These covenants could restrict the ability of these subsidiaries to distribute dividends to CenterPoint
Energy.
(2) New Accounting Pronouncements.
In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) No. 2014-08,
Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity
(ASU 2014-
08), which significantly changes the existing
accounting guidance on discontinued operations. Under ASU 2014-
08, only those disposals of components of an entity that represent a strategic
shift that has (or will have) a major effect on an entity’
s operations and financial results should be reported as a discontinued operation.
ASU 2014-08 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. ASU 2014-
08 should be
applied to components classified as held for sale after its effective date. Early adoption is permitted, but only for disposals (or classifications as
held for sale) that have not been reported in financial statements previously issued or available for issuance. The adoption is expected to reduce
the number of disposals that meet the definition of a discontinued operation.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ( Topic 606 ) (ASU 2014-
09), which supersedes
most current revenue recognition guidance. ASU 2014-
09 provides a comprehensive new revenue recognition model that requires revenue to be
recognized in a manner that depicts the transfer of goods or services to a customer at an amount that reflects the consideration expected to be
received in exchange for those goods or services. ASU 2014-
09 is effective for fiscal years, and interim periods within those years, beginning
after December 15, 2016. Early adoption is not permitted, and entities have the option of using either a full retrospective or a modified
retrospective adoption approach. Accordingly, CenterPoint Energy will adopt ASU 2014-
09 on January 1, 2017, and is currently evaluating the
impact that this standard will have on its financial position, results of operations, cash flows and disclosures.
In November 2014, the FASB issued ASU No. 2014-16,
Determining Whether the Host Contract in a Hybrid Financial Instrument Issued
in the Form of a Share Is More Akin to Debt or to Equity (ASU 2014-16). ASU 2014-
16 clarifies how current guidance should be interpreted in
evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share.
Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature
being evaluated for bifurcation, in evaluating the nature of a host contract. ASU 2014-
16 is effective for fiscal years and interim periods
beginning after December 15, 2015. CenterPoint Energy is currently assessing the impact, if any, that this standard will have on its financial
position, results of operations, cash flows and disclosures.
In January 2015, the FASB issued ASU No. 2015-01, Income Statement-Extraordinary and Unusual Items (Subtopic 225-20)-
Simplifying
Income Statement Presentation by Eliminating the Concept of Extraordinary Items
(ASU 2015-
01), which eliminates the concept of
extraordinary items. ASU 2015-
01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, and
may be applied either prospectively or retrospectively. CenterPoint Energy will adopt ASU 2015-
01 on January 1, 2016 and does not anticipate
the adoption to have a material impact on its consolidated financial statements.
Management believes that other recently issued standards, which are not yet effective, will not have a material impact on CenterPoint
Energy’s consolidated financial position, results of operations or cash flows upon adoption.
(3) Long-term Debt. As of December 31, 2014 and 2013 , CenterPoint Energy had no borrowings and approximately $6 million
and
$6 million , respectively, of outstanding letters of credit under its $1.2 billion credit facility. There was $191 million
of commercial paper
outstanding that was backstopped by CenterPoint Energy’s $1.2 billion credit facility as of December 31, 2014
. CenterPoint Energy was in
compliance with all financial debt covenants as of December 31, 2014 .
CenterPoint Energy’s $1.2 billion
revolving credit facility, which is scheduled to terminate on September 9, 2019, can be drawn at the
London Interbank Offered Rate (LIBOR) plus 1.25% based on CenterPoint Energy’
s current credit ratings. The revolving credit facility contains
a financial covenant which limits CenterPoint Energy’
s consolidated debt (excluding transition and system restoration bonds) to an amount not
to exceed 65% of CenterPoint Energy’s consolidated capitalization. The financial covenant limit will temporarily increase from 65% to 70%
if
CenterPoint Houston experiences damage from a natural disaster in its service territory and CenterPoint Energy certifies to the administrative
agent that CenterPoint Houston has incurred system
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