CenterPoint Energy 2014 Annual Report Download - page 71

no change in the merger consideration), the reference shares for each ZENS note would include 0.360827 share of Comcast Common in place of
the current 0.125505 share of TWC Common. If our creditworthiness were to drop such that ZENS note holders thought our liquidity was
adversely affected or the market for the ZENS notes were to become illiquid, some ZENS note holders might decide to exchange their ZENS
notes for cash. Funds for the payment of cash upon exchange could be obtained from the sale of the shares of TW Common, TWC Common,
AOL Common and Time Common that we own or from other sources. We own shares of TW Common, TWC Common, AOL Common and
Time Common equal to approximately 100% of the reference shares used to calculate our obligation to the holders of the ZENS notes. ZENS
note exchanges result in a cash outflow because tax deferrals related to the ZENS notes and TW Common, TWC Common, AOL Common and
Time Common shares would typically cease when ZENS notes are exchanged or otherwise retired and TW Common, TWC Common, AOL
Common and Time Common shares are sold. The ultimate tax liability related to the ZENS notes continues to increase by the amount of the tax
benefit realized each year, and there could be a significant cash outflow when the taxes are paid as a result of the retirement of the ZENS notes.
If all ZENS notes had been exchanged for cash on December 31, 2014
, deferred taxes of approximately $357 million would have been payable
in 2014. If all the TW Common, TWC Common, AOL Common and Time Common had been sold on December 31, 2014
, capital gains taxes
of approximately $278 million would have been payable in 2014.
Cross Defaults
Under our revolving credit facility, a payment default on, or a non-
payment default that permits acceleration of, any indebtedness for
borrowed money and certain other specified types of obligations (including guarantees) exceeding $75 million by us or any of our significant
subsidiaries will cause a default. In addition, three outstanding series of our senior notes, aggregating $750 million in principal amount as of
December 31, 2014
, provide that a payment default by us, CERC Corp. or CenterPoint Houston in respect of, or an acceleration of, borrowed
money and certain other specified types of obligations (including guarantees), in the aggregate principal amount of $50 million, will cause a
default. A default by CenterPoint Energy would not trigger a default under our subsidiaries’ debt instruments or revolving credit facilities.
Possible Acquisitions, Divestitures and Joint Ventures
From time to time, we consider the acquisition or the disposition of assets or businesses or possible joint ventures or other joint ownership
arrangements with respect to assets or businesses. Any determination to take action in this regard will be based on market conditions and
opportunities existing at the time, and accordingly, the timing, size or success of any efforts and the associated potential capital commitments are
unpredictable. We may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances. Debt or equity financing may
not, however, be available to us at that time due to a variety of events, including, among others, maintenance of our credit ratings, industry
conditions, general economic conditions, market conditions and market perceptions.
Enable Midstream Partners
Certain of the entities contributed to Enable by CERC Corp. are obligated on approximately $363 million of indebtedness owed to a wholly
owned subsidiary of CERC Corp. that is scheduled to mature in 2017.
Following its IPO in April 2014, Enable is expected to pay a minimum quarterly distribution of $0.2875 per unit on its outstanding units to
the extent it has sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to its
general partner and its affiliates (referred to as “available cash”)
within 45 days after the end of each quarter. On January 23, 2015, Enable
declared a quarterly cash distribution of $0.30875 per unit on all of its outstanding common and subordinated units for the quarter ended
December 31, 2014. Accordingly, CERC Corp. expects to receive a cash distribution of approximately $72 million from Enable in the first
quarter of 2015 to be made with respect to CERC Corp.’s limited partner interest in Enable for the fourth quarter of 2014.
Dodd-Frank Swaps Regulation
We use derivative instruments such as physical forward contracts, swaps and options to mitigate the impact of changes in commodity prices
and weather on our operating results and cash flows. Following enactment of the Dodd-
Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank) in July 2010, the Commodity Futures Trading Commission (CFTC) has promulgated regulations to implement Dodd-Frank’
s
changes to the Commodity Exchange Act, including the definition of commodity-
based swaps subject to those regulations. The CFTC
regulations are intended to implement new reporting and record keeping requirements related to their swap transactions and a mandatory clearing
and exchange-execution regime for various types, categories or classes of swaps, subject to certain exemptions, including the trade-
option and
end-user exemptions. Although we anticipate that most, if not all, of our swap transactions should qualify for an exemption to the clearing and
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