CenterPoint Energy 2014 Annual Report Download - page 112

converted into subordinated units, as discussed further below. Subsequent to the IPO, Enable continues to be controlled jointly by CenterPoint
Energy and OGE.
As a result of Enable’s IPO, CenterPoint Energy’s limited partner interest in Enable was reduced from approximately 58.3%
to
approximately 54.7% . CenterPoint Energy accounted for the dilution of its investment in Enable as a result of Enable’
s IPO as a failed partial
sale of in-substance real estate. CenterPoint Energy did not receive any cash from Enable’
s IPO and, as such, CenterPoint Energy did not
recognize a gain or loss. CenterPoint Energy’s basis difference in Enable was reduced for the impact of the Enable IPO.
In accordance with the Enable formation agreements, CenterPoint Energy had certain put rights, and Enable had certain call rights,
exercisable with respect to the 25.05%
interest in Southeast Supply Header, LLC (SESH) retained by CenterPoint Energy on the Closing Date,
under which CenterPoint Energy would contribute its retained interest in SESH, in exchange for a specified number of limited partner common
units in Enable and a cash payment, payable either from CenterPoint Energy to Enable or from Enable to CenterPoint Energy, to the extent of
changes in the value of SESH subject to certain restrictions. Specifically, the rights were and are exercisable with respect to (1) a 24.95%
interest
in SESH ( 24.95% Put), which closed on May 30, 2014 as discussed below and (2) a 0.1%
interest in SESH, which may be exercised no earlier
than June 2015 for 25,341 common units in Enable.
On May 30, 2014, CenterPoint Energy closed its 24.95% Put and contributed to Enable its 24.95%
interest in SESH in exchange for
6,322,457 common units of Enable, which increased CenterPoint Energy’s limited partner interest in Enable from approximately 54.7%
to
approximately 55.4%
. No cash payment was required to be made pursuant to the Enable formation agreements in connection with CenterPoint
Energy’s exercise of the 24.95% Put. CenterPoint Energy accounted for the contribution of its 24.95%
interest in SESH to Enable in exchange
for common units of Enable as a non-monetary transaction of in-
substance real estate equity method investments. As such, CenterPoint Energy
recorded the 6,322,457 common units at the historical cost of the contributed 24.95% interest in SESH of $196 million
and recorded no gain or
loss in connection with its exercise of the 24.95% Put. As a result, CenterPoint Energy’
s basis difference in Enable was reduced for the impact of
its exercise of the 24.95% Put.
CenterPoint Energy incurred natural gas expenses, including transportation and storage costs, of $130 million and $123 million
during the
year ended
December 31, 2014 and 2013 , respectively, for transactions
with Enable occurring on or after the Closing Date. CenterPoint Energy
had accounts payable to Enable of $23 million and $22 million at December 31, 2014 and 2013 , respectively, from such transactions.
As of December 31, 2014 , CenterPoint Energy held an approximate 55.4% limited partner interest in Enable consisting of
94,126,366
common units and 139,704,916 subordinated units and a 0.1%
interest in SESH. The principal difference between Enable common units and
subordinated units is that in any quarter during the subordination period, holders of the subordinated units are not entitled to receive any
distribution of available cash until the common units have received the minimum quarterly distribution plus any arrearages in the payment of the
minimum quarterly distribution from prior quarters. If Enable does not pay distributions on its subordinated units, the subordinated units will not
accrue arrearages for those unpaid distributions. At the end of the subordination period, CenterPoint Energy’
s subordinated units in Enable will
be converted to common units in Enable on a one-for-one basis.
CenterPoint Energy evaluates its equity method investments for impairment when factors indicate that a decrease in value of its investment
has occurred and the carrying amount of its investment may not be recoverable. An impairment loss is recognized in earnings when an
impairment is deemed to be other than temporary. The carrying value of CenterPoint Energy’s investment in Enable is $19.33
per unit. As of
December 31, 2014, Enable’s common unit price closed at $19.39 (approximately $14 million
above carrying value). The lowest close price for
Enable’s common units in January 2015 was $17.34 (approximately $465 million
below carrying value). CenterPoint Energy performed an
analysis of its investment in Enable as of December 31, 2014. Based on that analysis, CenterPoint Energy believes that the decline in the value
of its investment is temporary, and that CenterPoint Energy will recover the value of its investment of $4.5 billion .
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