CenterPoint Energy 2009 Annual Report Download - page 131

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109
information and, as necessary, provides accruals for probable liabilities on the eventual disposition of these matters.
CenterPoint Energy does not expect the disposition of these matters to have a material adverse effect on CenterPoint
Energy’s financial condition, results of operations or cash flows.
In December 2009, $3.3 million was distributed to a subsidiary of CenterPoint Energy in connection with the
settlement of 2002 AOL Time Warner, Inc. securities and ERISA class action litigation. Pursuant to the terms of the
indenture governing CenterPoint Energy’s ZENS, in February 2010, CenterPoint Energy distributed to current
ZENS holders $2.8 million, which amount represented the portion of the payment received that was attributable to
the reference shares corresponding to the outstanding ZENS. This distribution reduced the contingent principal
amount of the ZENS from $814 million to $811 million. The litigation settlement was recorded as other income and
the distribution payable to ZENS holders was recorded as other expense in 2009.
(f) Guaranties
Prior to CenterPoint Energy’s distribution of its ownership in RRI to its shareholders, CERC had guaranteed
certain contractual obligations of what became RRI’s trading subsidiary. When the companies separated, RRI
agreed to secure CERC against obligations under the guaranties RRI had been unable to extinguish by the time of
separation. Pursuant to such agreement, as amended in December 2007, RRI has agreed to provide to CERC cash or
letters of credit as security against CERC’s obligations under its remaining guaranties 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 guaranties. The present value of the demand charges under these transportation contracts, which will
be effective until 2018, was approximately $96 million as of December 31, 2009. As of December 31, 2009, RRI
was not required to provide security to CERC. If RRI should fail to perform the contractual obligations, CERC
could have to honor its guarantee and, in such event, collateral provided as security may be insufficient to satisfy
CERC’s obligations.
(11) Estimated Fair Value of Financial Instruments
The fair values of cash and cash equivalents, investments in debt and equity securities classified as "available-for-
sale" and "trading" and short-term borrowings are estimated to be approximately equivalent to carrying amounts and
have been excluded from the table below. The fair values of non-trading derivative assets and liabilities and the
ZENS indexed debt securities derivative are stated at fair value and are excluded from the table below. The fair
value of each debt instrument is determined by multiplying the principal amount of each debt instrument by the
market price.
December 31, 2008 December 31, 2009
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
(in millions)
Financial liabilities:
Lon
g
-term deb
t
..................................................... $ 10,396 $ 9,875 $ 9,900 $ 10,413