CenterPoint Energy 2014 Annual Report Download - page 41

remaining guarantees for demand charges under certain gas transportation agreements if and to the extent changes in market conditions expose
CERC to a risk of loss on those guarantees based on an annual calculation, with any required collateral to be posted each December. The
undiscounted maximum potential payout of the demand charges under these transportation contracts, which will be in effect until 2018, was
approximately $42 million as of December 31, 2014. Based on market conditions in the fourth quarter of 2014 at the time the most recent
annual calculation was made under the agreement, GenOn was not obligated to post any security. If GenOn should fail to perform the contractual
obligations, CERC could have to honor its guarantee and, in such event, any collateral then provided as security may be insufficient to satisfy
CERC’s obligations.
If GenOn were unable to meet its obligations, it could consider, among various options, restructuring under the bankruptcy laws, in which
event GenOn might not honor its indemnification obligations and claims by GenOn’s creditors might be made against us as its former owner.
Reliant Energy and RRI (GenOn’
s predecessor) are named as defendants in a number of lawsuits arising out of sales of natural gas in
California and other markets. Although these matters relate to the business and operations of GenOn, claims against Reliant Energy have been
made on grounds that include liability of Reliant Energy as a controlling shareholder of GenOn’
s predecessor. We, CenterPoint Houston or
CERC could incur liability if claims in one or more of these lawsuits were successfully asserted against us, CenterPoint Houston or CERC and
indemnification from GenOn were determined to be unavailable or if GenOn were unable to satisfy indemnification obligations owed with
respect to those claims.
In connection with the organization and capitalization of Texas Genco (now an affiliate of NRG), Reliant Energy and Texas Genco entered
into a separation agreement in which Texas Genco assumed liabilities associated with the electric generation assets Reliant Energy transferred to
it. Texas Genco also agreed to indemnify, and cause the applicable transferee subsidiaries to indemnify, us and our subsidiaries, including
CenterPoint Houston, with respect to liabilities associated with the transferred assets and businesses. In many cases the liabilities assumed were
obligations of CenterPoint Houston, and CenterPoint Houston was not released by third parties from these liabilities. The indemnity provisions
were intended generally to place sole financial responsibility on Texas Genco and its subsidiaries for all liabilities associated with the current and
historical businesses and operations of Texas Genco, regardless of the time those liabilities arose. If Texas Genco (now an affiliate of NRG)
were unable to satisfy a liability that had been so assumed or indemnified against, and provided we or Reliant Energy had not been released from
the liability in connection with the transfer, CenterPoint Houston could be responsible for satisfying the liability.
In connection with our sale of Texas Genco, the separation agreement was amended to provide that Texas Genco would no longer be liable
for, and we would assume and agree to indemnify Texas Genco against, liabilities that Texas Genco originally assumed in connection with its
organization to the extent, and only to the extent, that such liabilities are covered by certain insurance policies held by us.
We or our subsidiaries have been named, along with numerous others, as a defendant in lawsuits filed by a number of individuals who claim
injury due to exposure to asbestos. Some of the claimants have worked at locations owned by us, but most existing claims relate to facilities
previously owned by our subsidiaries. We anticipate that additional claims like those received may be asserted in the future. Under the terms of
the arrangements regarding separation of the generating business from us and our sale of that business to an affiliate of NRG, ultimate financial
responsibility for uninsured losses from claims relating to the generating business has been assumed by the NRG affiliate, but we have agreed to
continue to defend such claims to the extent they are covered by insurance maintained by us, subject to reimbursement of the costs of such
defense by the NRG affiliate.
Cyber-
attacks, physical security breaches, acts of terrorism or other disruptions could adversely impact our results of operations, financial
condition and cash flows or the results of operations, financial condition and cash flows of Enable.
We and Enable are subject to cyber-
and physical security risks related to breaches in the systems and technology used (i) to manage
operations and other business processes and (ii) to protect sensitive information maintained in the normal course of business. The operation of
our electric transmission and distribution system is dependent on not only physical interconnection of our facilities, but also on communications
among the various components of our system. As we deploy smart meters and the intelligent grid, reliance on communication between and
among those components increases. Similarly, the distribution of natural gas to our customers and the gathering, processing and transportation
of natural gas or other commodities from Enable’
s gathering, processing and pipeline facilities, are dependent on communications among
Enable’s facilities and with third-
party systems that may be delivering natural gas or other commodities into or receiving natural gas and other
products from Enable’
s facilities. Disruption of those communications, whether caused by physical disruption such as storms or other natural
phenomena, by failure of equipment or technology, or by manmade events, such as cyber-
attacks or acts of terrorism, may disrupt our ability or
Enable’s ability to conduct operations and control assets. Cyber-
attacks could also result in the loss of confidential or proprietary data or security
breaches of other information technology systems that could disrupt operations and critical business functions, adversely affect reputation, and
subject us or Enable to possible legal claims and liability. Neither we nor Enable is fully insured
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