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63
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Background
CenterPoint Energy, Inc. (CenterPoint Energy) is a public utility holding company. CenterPoint Energy’s operating subsidiaries
own and operate electric transmission and distribution facilities, natural gas distribution facilities, interstate pipelines and natural
gas gathering, processing and treating facilities. As of December 31, 2012, CenterPoint Energy’s indirect wholly owned subsidiaries
included:
• CenterPoint Energy Houston Electric, LLC (CenterPoint Houston), which engages in the electric transmission and
distribution business in the Texas Gulf Coast area that includes the city of Houston; and
• CenterPoint Energy Resources Corp. (CERC Corp. and, together with its subsidiaries, CERC), which owns and operates
natural gas distribution systems. Subsidiaries of CERC own interstate natural gas pipelines and gas gathering systems
and provide various ancillary services. A wholly owned subsidiary of CERC Corp. offers variable and fixed-price physical
natural gas supplies primarily to commercial and industrial customers and electric and gas utilities.
For a description of CenterPoint Energy’s reportable business segments, see Note 16.
(2) Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(b) Principles of Consolidation
The accounts of CenterPoint Energy and its wholly owned and majority owned subsidiaries are included in the consolidated
financial statements. All intercompany transactions and balances are eliminated in consolidation. CenterPoint Energy uses the
equity method of accounting for investments in entities in which CenterPoint Energy has an ownership interest between 20% and
50% and exercises significant influence.
CenterPoint Energy’s investments in unconsolidated affiliates include a 50% ownership interest in Southeast Supply Header,
LLC (SESH), which owns and operates a 274-mile interstate natural gas pipeline.
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. During 2010, CenterPoint
Energy invested $20 million in Waskom. 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 amount of
the purchase price allocated to the acquisition of the 50% interest in Waskom was approximately $201 million, with the remaining
purchase price allocated to the other gathering assets, based on a discounted cash flow methodology. The $273 million purchase
price was allocated as follows: $253 million to property, plant and equipment; $16 million to goodwill; and the remaining balance
to other assets and liabilities. 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. As a result of the purchase, CenterPoint Energy recorded
goodwill of $24 million, which includes $17 million related to Waskom (including the re-measurement of its existing 50% interest)
and $7 million related to the other gathering and related assets.
Other investments, excluding marketable securities, are carried at cost.
As of December 31, 2012, CenterPoint Energy had five variable interest entities (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