CenterPoint Energy 2014 Annual Report Download - page 30

The amount of cash Enable has available for distribution to us depends primarily on its cash flow rather than on its profitability, which
may prevent Enable from making distributions, even during periods in which Enable records net income.
The amount of cash Enable has available for distribution depends primarily upon its cash flows and not solely on profitability, which will be
affected by non-
cash items. As a result, Enable may make cash distributions during periods when it records losses for financial accounting
purposes and may not make cash distributions during periods when it records net earnings for financial accounting purposes.
We are not able to exercise control over Enable, which entails certain risks.
Enable is controlled jointly by CERC Corp. and OGE, who each own 50% of the management rights in the general partner of Enable. The
board of directors of Enable’
s general partner is composed of an equal number of directors appointed by OGE and by us, the president and chief
executive officer of Enable’
s general partner and three directors who are independent as defined under the independence standards established by
the New York Stock Exchange. Accordingly, we are not able to exercise control over Enable .
Although we jointly control Enable with OGE, we may have conflicts of interest with Enable that could subject us to claims that we have
breached our fiduciary duty to Enable and its unitholders.
CERC Corp. and OGE each own 50% of the management rights in Enable’
s general partner, as well as limited partnership interests in
Enable, and interests in the incentive distribution rights held by Enable’
s general partner. Conflicts of interest may arise between us and Enable
and its unitholders. Our joint control of the general partner of Enable may increase the possibility of claims of breach of fiduciary duties
including claims of conflicts of interest related to Enable. In resolving these conflicts, we may favor our own interests and the interests of our
affiliates over the interests of Enable and its unitholders as long as the resolution does not conflict with Enable’
s partnership agreement. These
circumstances could subject us to claims that, in favoring our own interests and those of our affiliates, we breached a fiduciary duty to Enable or
its unitholders.
Enable’s contracts are subject to renewal risks.
Enable generates a substantial portion of its gross margins under long-term, fee-
based agreements. For the year ended December 31, 2014,
approximately 72% of Enable’s gross margin was generated from contracts that are fee-
based and approximately 50% of its gross margin was
attributable to fees associated with firm contracts or contracts with minimum volume commitment features. As these and other contracts expire,
Enable may have to negotiate extensions or renewals with existing suppliers and customers or enter into new contracts with other suppliers and
customers. Enable may be unable to obtain new contracts on favorable commercial terms, if at all. It also may be unable to maintain the
economic structure of a particular contract with an existing customer or the overall mix of its contract portfolio. For example, depending on
prevailing market conditions at the time of a contract renewal, gathering and processing customers with fixed-fee or fixed-
margin contracts may
desire to enter into contracts under different fee arrangements. To the extent Enable is unable to renew its existing contracts on terms that are
favorable to it, if at all, or successfully manage its overall contract mix over time, its revenue, results of operations and distributable cash flow
could be adversely affected.
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its debt service requirements and other liabilities;
•
fluctuations in its working capital needs;
•
its ability to borrow funds and access capital markets;
•
restrictions contained in its debt agreements;
•
the amount of cash reserves established by its general partner; and
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other business risks affecting its cash levels.