CenterPoint Energy 2014 Annual Report Download - page 35

The risks described above or the failure to continue Enable’
s joint ventures or to resolve disagreements with its joint venture partners could
adversely affect its ability to transact the business that is the subject of such joint venture, which would in turn negatively affect Enable’
s
financial condition and results of operations. The agreements under which Enable formed certain joint ventures may subject it to various risks,
limit the actions it may take with respect to the assets subject to the joint venture and require Enable to grant rights to its joint venture partners
that could limit its ability to benefit fully from future positive developments. Some joint ventures require Enable to make significant capital
expenditures. If Enable does not timely meet its financial commitments or otherwise does not comply with its joint venture agreements, its rights
to participate, exercise operator rights or otherwise influence or benefit from the joint venture may be adversely affected. Certain of Enable’
s
joint venture partners may have substantially greater financial resources than Enable has and Enable may not be able to secure the funding
necessary to participate in operations its joint venture partners propose, thereby reducing its ability to benefit from the joint venture.
Enable’s ability to grow is dependent on its ability to access external financing sources.
Enable expects that it will distribute all of its “available cash”
to its unitholders. As a result, Enable is expected to rely primarily upon
external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund acquisitions and
expansion capital expenditures. As a result, to the extent Enable is unable to finance growth externally, Enable’
s cash distribution policy will
significantly impair its ability to grow. In addition, because Enable is expected to distribute all of its available cash, its growth may not be as fast
as businesses that reinvest their available cash to expand ongoing operations.
To the extent Enable issues additional units in connection with any acquisitions or expansion capital expenditures, the payment of
distributions on those additional units may increase the risk that Enable will be unable to maintain or increase its per unit distribution level,
which in turn may impact the available cash that it has to distribute on each unit. There are no limitations in Enable’
s partnership agreement on
its ability to issue additional units, including units ranking senior to the common units. The incurrence of additional commercial borrowings or
other debt by Enable to finance its growth strategy would result in increased interest expense, which in turn may negatively impact the available
cash that Enable has to distribute to its unitholders.
If Enable does not make acquisitions or is unable to make acquisitions on economically acceptable terms, its future growth will be
adversely affected.
Enable’
s growth strategy includes, in part, the ability to make acquisitions that result in an increase in its cash generated from operations. If
Enable is unable to make these accretive acquisitions either because: (i) it is unable to identify attractive acquisition targets or it is unable to
negotiate purchase contracts on acceptable terms, (ii) it is unable to obtain acquisition financing on economically acceptable terms, or (iii) it is
outbid by competitors, then our future growth and ability to increase distributions will be adversely affected.
Enable’s debt levels may limit its flexibility in obtaining additional financing and in pursuing other business opportunities.
As of December 31, 2014, Enable had approximately $1.9 billion of long-
term debt outstanding, excluding the premiums on their senior
notes. Enable has $363 million of long-term notes payable-
affiliated companies due to CERC Corp. Enable has a $1.4 billion revolving credit
facility for working capital, capital expenditures and other partnership purposes, including acquisitions, of which $1.1 billion was available as of
December 31, 2014. As of January 31, 2015, Enable had the ability to issue up to $1.2 billion in commercial paper, subject to available
borrowing capacity under its revolving credit facility and market conditions, to manage the timing of cash flows and fund short-
term working
capital deficits. As of January 31, 2015, $224 million was outstanding
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•
Enable may be unable to control the amount of cash we will receive from the joint venture;
•
Enable may incur liabilities as a result of an action taken by its joint venture partners;
•
Enable may be required to devote significant management time to the requirements of and matters relating to the joint ventures;
• Enable’
s insurance policies may not fully cover loss or damage incurred by both Enable and its joint venture partners in certain
circumstances;
• Enable’
s joint venture partners may be in a position to take actions contrary to its instructions or requests or contrary to its policies or
objectives; and
•
disputes between Enable and its joint venture partners may result in delays, litigation or operational impasses.