CenterPoint Energy 2012 Annual Report Download - page 127

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CENTERPOINT ENERGY, INC.
SCHEDULE I — NOTES TO CONDENSED FINANCIAL INFORMATION (PARENT COMPANY)
(1) Background. The condensed parent company financial statements and notes of CenterPoint Energy, Inc. (CenterPoint
Energy) should be read in conjunction with the consolidated financial statements and notes of CenterPoint Energy, Inc. and
subsidiaries appearing in the Annual Report on Form 10-K. Credit facilities at CenterPoint Energy Houston Electric, LLC
(CenterPoint Houston) and CenterPoint Energy Resources Corp., indirect wholly owned subsidiaries of CenterPoint Energy, limit
debt, excluding transition and system restoration bonds, as a percentage of their total capitalization to 65%. These covenants could
restrict the ability of these subsidiaries to distribute dividends to CenterPoint Energy.
(2) New Accounting Pronouncements. In June 2011, the FASB issued new accounting guidance on the presentation of
comprehensive income. The new guidance is intended to improve the overall quality of financial reporting by increasing the
prominence of items reported in other comprehensive income and aligning the presentation of other comprehensive income in
financial statements prepared in accordance with generally accepted accounting principles with those prepared in accordance with
International Financial Reporting Standards. The new guidance requires an entity to present the total of comprehensive income,
the components of net income, and the components of other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. This new guidance is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2011. Adoption of this new guidance did not have an impact on CenterPoint
Energy's financial position, results of operations or cash flows.
Management believes the impact of other recently issued standards, which are not yet effective, will not have a material impact
on CenterPoint Energy’s financial position, results of operations or cash flows upon adoption.
(3) Long-term Debt. As of December 31, 2011 and 2012, CenterPoint Energy had no borrowings and approximately $16 million
and $7 million, respectively, of outstanding letters of credit under its $1.2 billion credit facility. There was no commercial paper
outstanding that would have been backstopped by CenterPoint Energy’s $1.2 billion credit facility as of December 31, 2011 and
2012. CenterPoint Energy was in compliance with all debt covenants as of December 31, 2012.
CenterPoint Energy’s $1.2 billion credit facility, which is scheduled to terminate September 9, 2016, can be drawn at the
London Interbank Offered Rate (LIBOR) plus 150 basis points based on CenterPoint Energy’s current credit ratings. The facility
contains a debt (excluding transition and system restoration bonds) to earnings before interest, taxes, depreciation and amortization
(EBITDA) covenant (as those terms are defined in the facility). The facility allows for a temporary increase of the permitted ratio
in the financial covenant from 5 times to 5.5 times if CenterPoint Houston experiences damage from a natural disaster in its service
territory and CenterPoint Energy certifies to the administrative agent that CenterPoint Houston has incurred system restoration
costs reasonably likely to exceed $100 million in a consecutive twelve-month period, all or part of which CenterPoint Houston
intends to seek to recover through securitization financing. Such temporary increase in the financial ratio covenant would be in
effect from the date CenterPoint Energy delivers its certification until the earliest to occur of (i) the completion of the securitization
financing, (ii) the first anniversary of CenterPoint Energy’s certification or (iii) the revocation of such certification.
CenterPoint Energy’s maturities of long-term debt, excluding the indexed debt securities obligation, are $420 million in 2015
and $250 million in 2017. There are no maturities of long-term debt in 2013, 2014 or 2016.
(4) Guaranties. In September 2009 and April 2010, CenterPoint Energy Field Services, LLC (CEFS), an indirect wholly
owned subsidiary of CenterPoint Energy, entered into long-term agreements with an indirect wholly owned subsidiary of Encana
Corporation (Encana) and an indirect wholly owned subsidiary of Royal Dutch Shell plc (Shell) to provide gathering and treating
services for their natural gas production from certain Haynesville Shale and Bossier Shale formations in Texas and Louisiana.
CEFS also acquired jointly-owned gathering facilities from Encana and Shell. Each of the agreements includes acreage dedication
and volume commitments for which CEFS has rights to gather Shell’s and Encana’s natural gas production from the dedicated
areas.
In connection with the agreements, CEFS commenced gathering and treating services utilizing the acquired facilities. CEFS
has expanded the acquired facilities. If Encana or Shell elect, CEFS will further expand the facilities in order to gather and treat
additional future volumes. CenterPoint Energy has guaranteed to fund CEFS’ obligations up to $100 million, plus any additional
amount related to any expansion or additional services, upon completion of the gathering systems. As of December 31, 2012,
CenterPoint Energy had guaranteed CEFS’s obligations up to an amount of $100 million under these agreements.