CenterPoint Energy 2014 Annual Report Download - page 111

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 carrying amounts of non-
trading derivative assets and liabilities and CenterPoint Energy’s 2.0% 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. These assets and liabilities, which are not measured
at fair value in the Condensed Consolidated Balance Sheets but for which the fair value is disclosed, would be classified as Level 1 or Level 2 in
the fair value hierarchy.
On May 1, 2013 (the Closing Date) CERC Corp., OGE Energy Corp. (OGE) and ArcLight Capital Partners, LLC (ArcLight) closed on the
formation of Enable, and CenterPoint Energy recorded an equity method investment in Enable at the historical cost of the contributed net assets.
See Note 2 for further information on the formation of Enable.
CenterPoint Energy’
s maximum exposure to loss related to Enable, a VIE in which CenterPoint Energy is not the primary beneficiary, is
limited to its equity investment as presented in the Consolidated Balance Sheet at December 31, 2014 , CERC Corp.’
s guarantee of collection of
Enable’s $1.1 billion senior notes due 2019 and 2024 (Guaranteed Senior Notes) and other guarantees discussed in Note 14, CERC Corp.’s
$363
million notes receivable from Enable and outstanding current accounts receivable from Enable. The $363 million
of notes receivable from
Enable bears interest at an annual rate of 2.10% to 2.45% and matures in 2017. CenterPoint Energy recorded interest income of $8 million
and
$5 million during the year ended December 31, 2014 and 2013
, respectively, for interest earned on or after the Closing Date and had interest
receivable from Enable of $4 million as of both December 31, 2014 and 2013 on its notes receivable from Enable.
Effective on the Closing Date, CenterPoint Energy and Enable entered into a Services Agreement, Employee Transition Agreement,
Transitional Services Agreement and other agreements (collectively, Transition Agreements) whereby CenterPoint Energy agreed to provide
certain support services to Enable such as accounting, legal, risk management and treasury functions for an initial term ending on April 30, 2016.
Effective April 1, 2014, Enable’
s general partner, CenterPoint Energy and OGE agreed to reduce certain governance related costs billed to
Enable for transition services. Effective December 31, 2014, Enable’
s general partner, CenterPoint Energy and OGE agreed to terminate certain
support services provided by CenterPoint Energy to Enable. CenterPoint Energy expects to terminate all remaining support services by April
2016.
CenterPoint Energy billed Enable for reimbursement of transitional services, including the costs of seconded employees, $163 million
and
$119 million during the years ended December 31, 2014 and 2013
, respectively, under the Transition Agreements for transition services
incurred on or after the Closing Date. Actual transitional services costs are recorded net of reimbursements received from Enable. CenterPoint
Energy had accounts receivable from Enable of $28 million and $21 million as of December 31, 2014 and 2013
, respectively, for amounts billed
for transitional services, including the cost of seconded employees.
CenterPoint Energy provided seconded employees to Enable to support its operations for a term ending on December 31, 2014. Enable, at its
discretion, had the right to select and offer employment to seconded employees from CenterPoint Energy. During the fourth quarter of 2014,
Enable notified CenterPoint Energy that it selected seconded employees and provided employment offers to substantially all of the seconded
employees from CenterPoint Energy. Substantially all of the seconded employees became employees of Enable effective January 1, 2015. See
Note 6 for additional information.
On April 16, 2014, Enable completed its initial public offering (IPO) of 28,750,000 common units, at a price of $20.00
per unit, which
included 3,750,000 common units sold by ArcLight pursuant to an over-
allotment option that was fully exercised by the underwriters. Enable
received $464 million
in net proceeds from the sale of the units, after deducting underwriting fees, structuring fees and other offering costs. In
connection with Enable’s IPO, a portion of CenterPoint Energy’s common units were
101
December 31, 2014
December 31, 2013
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
(in millions)
Financial assets:
Notes receivable - affiliated companies
$
363
$
362
$
363
$
363
Financial liabilities:
Long-term debt
$
8,652
$
9,427
$
8,171
$
8,670
(9)
Unconsolidated Affiliates