CenterPoint Energy 2014 Annual Report Download - page 88

$1.5 billion of liabilities (which includes a term loan and the indebtedness owed to CERC of $1.05 billion and $363 million
, respectively) were
contributed by CERC Corp. CenterPoint Energy has the ability to significantly influence the operating and financial policies of, but not solely
control, Enable and, accordingly, recorded an equity method investment, at the historical costs of net assets contributed, of $4.3 billion
in Enable
on the Closing Date. Pursuant to the MFA, CenterPoint Energy retained certain assets and liabilities historically held by CenterPoint Midstream
such as balances relating to federal income taxes and benefit plan obligations.
Under the equity method, CenterPoint Energy adjusts its investment in Enable each period for contributions made, distributions received,
CenterPoint Energy’s share of Enable’
s comprehensive income and accretion of basis differences, as appropriate. CenterPoint Energy evaluates
its equity method investments for impairment when events or changes in circumstances indicate there is a loss in value of the investment that is
other than a temporary decline.
CenterPoint Energy’
s investment in Enable is considered to be a variable interest entity (VIE) because the power to direct the activities that
most significantly impact Enable’
s economic performance does not reside with the holders of equity investment at risk. However, CenterPoint
Energy is not considered the primary beneficiary of Enable since it does not have the power to direct the activities of Enable that are considered
most significant to the economic performance of Enable.
As of December 31, 2014, CERC Corp. and OGE held approximately 55.4% and 26.3%
, respectively, of the limited partner interests in
Enable. Enable is controlled jointly by CERC Corp. and OGE, and each own 50% of the management rights in the general partner of Enable.
As of December 31, 2014, CERC Corp. and OGE also own a 40% and 60%
interest, respectively, in the incentive distribution rights held by
the general partner of Enable. 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, within 45 days after the end of each quarter. If cash distributions to Enable’s unitholders exceed $0.330625
per
unit in any quarter, the general partner will receive increasing percentages or incentive distributions rights, up to 50%
, of the cash Enable
distributes in excess of that amount. In certain circumstances the general partner of Enable will have the right to reset the minimum quarterly
distribution and the target distribution levels at which the incentive distributions receive increasing percentages to higher levels based on
Enable’s cash distributions at the time of the exercise of this reset election.
Prior to July 2012, CenterPoint Energy owned a 50%
interest in Waskom Gas Processing Company (Waskom), a Texas general partnership,
which owns and operates a natural gas processing plant and natural gas gathering assets. On July 31, 2012, CenterPoint Energy purchased the
50% interest that it did not already own in Waskom, as well as other gathering and related assets from a third-party for approximately
$273
million . The purchase of the 50%
interest in Waskom was determined to be a business combination achieved in stages, and as such CenterPoint
Energy recorded a pre-tax gain of approximately $136 million on July 31, 2012, which is the result of remeasuring its original 50%
interest in
Waskom to fair value.
Other investments, excluding marketable securities, are carried at cost.
As of December 31, 2014
, CenterPoint Energy had VIEs consisting of transition and system restoration bond companies, which it
consolidates. The consolidated VIEs are wholly owned bankruptcy remote special purpose entities that were formed specifically for the purpose
of securitizing transition and system restoration related property. Creditors of CenterPoint Energy have no recourse to any assets or revenues of
the transition and system restoration bond companies. The bonds issued by these VIEs are payable only from and secured by transition and
system restoration property and the bondholders have no recourse to the general credit of CenterPoint Energy.
CenterPoint Energy records revenue for electricity delivery and natural gas sales and services under the accrual method and these revenues
are recognized upon delivery to customers. Electricity deliveries not billed by month-
end are accrued based on actual advanced metering system
data, daily supply volumes and applicable rates. Natural gas sales not billed by month-
end are accrued based upon estimated purchased gas
volumes, estimated lost and unaccounted for gas and currently effective tariff rates.
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(c)
Revenues