CenterPoint Energy 2012 Annual Report Download - page 105

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83
The following tables present additional information about assets or liabilities, including derivatives that are measured at fair
value on a recurring basis for which CenterPoint Energy has utilized Level 3 inputs to determine fair value:
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)
Derivative assets and liabilities, net
Year Ended December 31,
2010 2011 2012
(in millions)
Beginning balance........................................................................................... $(6) $ 3 $ 6
Total gains or (losses):
Included in earnings...................................................................................... 463
Included in regulatory assets ........................................................................ (1) — —
Total settlements:
Included in earnings...................................................................................... (2)(3)(6)
Included in regulatory assets ........................................................................ 8——
Total purchases................................................................................................ — 2 —
Transfers out of Level 3(1) ............................................................................... —(2)(1)
Ending balance................................................................................................ $ 3 $ 6 $ 2
The amount of total gains for the period included in earnings
attributable to the change in unrealized gains or losses relating
to assets still held at the reporting date........................................................ $ 4 $ 5 $ 1
________
(1) During 2010, 2011 and 2012, CenterPoint Energy did not have material Level 3 sales or significant transfers into Level
3.
Estimated Fair Value of Financial Instruments
The fair values of cash and cash equivalents, investments in debt and equity securities classified as "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 CenterPoint Energy’s 2.00% Zero-Premium Exchangeable
Subordinated Notes due 2029 (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, 2011 December 31, 2012
Carrying
Amount Fair
Value Carrying
Amount Fair
Value
(in millions)
Financial liabilities:
Long-term debt.................................................................. $ 8,994 $ 10,049 $ 9,619 $ 10,807
(9) Indexed Debt Securities (ZENS) and Time Warner Securities
(a) Investment in Time Warner Securities
In 1995, CenterPoint Energy sold a cable television subsidiary to Time Warner, Inc. (TW) and received TW securities as
partial consideration. A subsidiary of CenterPoint Energy now holds 7.2 million shares of TW common stock (TW Common),
1.8 million shares of Time Warner Cable Inc. (TWC) common stock (TWC Common) and 0.7 million shares of AOL, Inc. (AOL)
common stock (AOL Common) (together with the TW Common and TWC Common, the TW Securities) which are classified as
trading securities and are expected to be held to facilitate CenterPoint Energy’s ability to meet its obligation under the ZENS.
Unrealized gains and losses resulting from changes in the market value of the TW Securities are recorded in CenterPoint Energy’s
Statements of Consolidated Income.