CenterPoint Energy 2014 Annual Report Download - page 34

Enable provides certain transportation and storage services under long-term, fixed-price “negotiated rate”
contracts that are not subject to
adjustment, even if its cost to perform such services exceeds the revenues received from such contracts, and, as a result, Enable’
s costs could
exceed its revenues received under such contracts.
Enable has been authorized by the FERC to provide transportation and storage services at its facilities at negotiated rates. Generally,
negotiated rates are in excess of the maximum recourse rates allowed by the FERC, but it is possible that costs to perform services under
“negotiated rate”
contracts will exceed the revenues obtained under these agreements. If this occurs, it could decrease the cash flow realized by
Enable’s systems and, therefore, decrease the cash it has available for distribution.
As of December 31, 2014, approximately 56% of Enable’
s contracted transportation firm capacity and 44% of its contracted storage firm
capacity was subscribed under such “negotiated rate”
contracts. These contracts generally do not include provisions allowing for adjustment for
increased costs due to inflation, pipeline safety activities or other factors that are not tied to an applicable tracking mechanism authorized by the
FERC. Successful recovery of any shortfall of revenue, representing the difference between “recourse rates” (
if higher) and negotiated rates, is
not assured under current FERC policies.
If third-party pipelines and other facilities interconnected to Enable’
s gathering, processing or transportation facilities become partially or
fully unavailable for any reason, Enable
’s results of operations and its ability to make cash distributions could be adversely affected.
Enable depends upon third-
party natural gas pipelines to deliver natural gas to, and take natural gas from, its transportation systems. Enable
also depends on third-
party facilities to transport and fractionate NGLs that are delivered to the third party at the tailgates of the processing
plants. Fractionation is the separation of the heterogeneous mixture of extracted NGLs into individual components for end-
use sale. For example,
an outage or disruption on certain pipelines or fractionators operated by a third party could result in the shutdown of certain of Enable’
s
processing plants, and a prolonged outage or disruption could ultimately result in a reduction in the volume of NGLs Enable is able to produce.
Additionally, Enable depends on third parties to provide electricity for compression at many of its facilities. Since Enable does not own or
operate any of these third-party pipelines or other facilities, their continuing operation is not within its control. If any of these third-
party
pipelines or other facilities become partially or fully unavailable for any reason, Enable’
s results of operations and its ability to make cash
distributions to unitholders could be adversely affected.
Enable does not own all of the land on which its pipelines and facilities are located, which could disrupt its operations.
Enable does not own all of the land on which its pipelines and facilities have been constructed, and it is therefore subject to the possibility of
more onerous terms and/or increased costs to retain necessary land use if it does not have valid rights-of-way or if such rights-of-
way lapse or
terminate. Enable may obtain the rights to construct and operate its pipelines on land owned by third parties and governmental agencies for a
specific period of time. A loss of these rights, through Enable’s inability to renew right-of-
way contracts or otherwise, could cause it to cease
operations temporarily or permanently on the affected land, increase costs related to the construction and continuing operations elsewhere and
adversely affect its results of operations and ability to make cash distributions.
Enable conducts a portion of its operations through joint ventures, which subject it to additional risks that could have a material adverse
effect on the success of these operations and Enable’s financial position and results of operations.
Enable conducts a portion of its operations through joint ventures with third parties, including affiliates of Spectra Energy Corp, DCP
Midstream Partners, LP, Trans Louisiana Gas Pipeline, Inc. and Pablo Gathering LLC. Enable may also enter into other joint venture
arrangements in the future. These third parties may have obligations that are important to the success of the joint venture, such as the obligation
to pay their share of capital and other costs of the joint venture. The performance of these third-
party obligations, including the ability of the
third parties to satisfy their obligations under these arrangements, is outside Enable’
s control. If these parties do not satisfy their obligations
under these arrangements, Enable’s business may be adversely affected.
Enable’s joint venture arrangements may involve risks not otherwise present when operating assets directly, including, for example:
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• Enable’
s joint venture partners may share certain approval rights over major decisions;
• Enable’s joint venture partners may not pay their share of the joint venture’
s obligations, leaving Enable liable for their shares of joint
venture liabilities;