CenterPoint Energy 2015 Annual Report Download - page 23

• ourexposuretoGenOnEnergy,Inc.(GenOn)(formerlyknownasRRIEnergy,Inc.,ReliantEnergy,Inc.andReliantResources,Inc.(RRI)),awholly-
ownedsubsidiaryofNRG,inconnectionwithcertainindemnificationobligations;
•incrementalcollateralthatmayberequiredduetoregulationofderivatives;and
• provisionsofrelevanttaxandsecuritieslaws.
AsofDecember31,2015,CenterPointHoustonhadapproximately$2.1billionaggregateprincipalamountofgeneralmortgagebondsoutstandingunderthe
GeneralMortgage,including(a)approximately$56millionheldintrusttosecurepollutioncontrolbondsthatarenotreflectedonourfinancialstatementsbecause
CenterPointHouston isboththeobligoron thebondsandthecurrent ownerofthe bonds,and (b)approximately$118 millionheldin trusttosecure pollution
control bonds for which we are obligated. Additionally, as of December 31, 2015 , CenterPoint Houston had approximately $102 million aggregate principal
amountoffirstmortgagebondsoutstandingundertheMortgage.CenterPointHoustonmayissueadditionalgeneralmortgagebondsonthebasisofretiredbonds,
70%ofproperty additionsorcashdepositedwiththetrustee. Approximately$4.2billionofadditionalfirstmortgagebondsandgeneralmortgagebondsinthe
aggregatecouldbeissuedonthebasisofretiredbondsand70%ofpropertyadditionsasofDecember31,2015.However,CenterPointHoustonhascontractually
agreedthatitwillnotissueadditionalfirstmortgagebonds,subjecttocertainexceptions.
Ourcurrentcreditratingsarediscussedin“Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations—LiquidityandCapital
Resources—OtherMatters—ImpactonLiquidityofaDowngradeinCreditRatings”inItem7ofPartIIofthisreport.Thesecreditratingsmaynotremainin
effectforanygivenperiodoftimeandoneormoreoftheseratingsmaybeloweredorwithdrawnentirelybyaratingagency.Wenotethatthesecreditratingsare
notrecommendationstobuy,sellorholdoursecurities.Eachratingshouldbeevaluatedindependentlyofanyotherrating.Anyfuturereductionorwithdrawalof
oneormoreofourcreditratingscouldhaveamaterialadverseimpactonourabilitytoaccesscapitalonacceptableterms.
An impairment of goodwill, long-lived assets, including intangible assets, and equity-method investments could reduce our earnings.
Goodwill is recorded when the purchaseprice of a business exceeds the fair market valueof the tangible and separately measurable intangible net assets.
Accounting principles generally accepted in the United States of America require us to test goodwill for impairment on an annual basis or when events or
circumstancesoccurindicatingthatgoodwillmightbeimpaired.Long-livedassets,includingintangibleassetswithfiniteusefullives,arereviewedforimpairment
whenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.
Forinvestmentsweaccountforundertheequitymethod,theimpairmenttestconsiderswhetherthefairvalueoftheequityinvestmentasawhole,notthe
underlying net assets, has declined and whether that decline is other than temporary. For example, based on the sustained low Enable common unit price and
furtherdeclinesinsuchpriceduringthethreemonthsendedSeptember30,2015andDecember31,2015,respectively,aswellasthemarketoutlookforcontinued
depressedcrudeoilandnaturalgaspricesimpactingthemidstreamoilandgasindustry,wedeterminedinconnectionwithourpreparationoffinancialstatements
for the three months ended September 30, 2015 and December 31, 2015, that an otherthan temporary decrease in the value of our investment in Enable had
occurred.WewrotedownthevalueofourinvestmentinEnabletoitsestimatedfairvaluewhichresultedinimpairmentchargesof$250millionasofSeptember
30,2015and$975millionasofDecember31,2015.Ourtotalimpairmentlossincludedimpairmentchargestotaling$1,846millioncomposedoftheimpairments
ofourinvestmentinEnableof$1,225millionandourshare,$621million,ofimpairmentchargesEnablerecordedforgoodwillandlong-livedassets.
IfEnable’sunitprice,distributionsorearningsfurtherdeclineforreasonsincluding,butnotlimitedto,continueddeclinesincommoditypricesandproducer
activity,andthatdeclineisdeemedtobeotherthantemporary,wecoulddeterminethatweareunabletorecoverthecarryingvalueofourequityinvestmentin
Enable. As of December 31, 2015, the carrying value of CenterPoint Energy’s investment in Enable is $11.09 per unit, which includes the common and
subordinated units representing limited partner interests, general partner interest and incentive distribution rightswe hold. As of December 31, 2015,Enable’s
commonunitpriceclosedat$9.20.ThelowestclosepriceforEnable’scommonunitsthroughFebruary12,2016was$5.80.Considerablejudgmentisusedin
determiningifanimpairmentlossisotherthantemporaryandtheamountofanyimpairment.AsustainedlowEnablecommonunitpriceorfurtherdeclinesin
suchpricecouldresultinourrecordingfurtherimpairmentchargesinthefuture.Ifwedeterminethatanimpairmentisindicated,wewouldberequiredtotakean
immediatenon-cashchargetoearningswithacorrelativeeffectonequityandbalancesheetleverageasmeasuredbydebttototalcapitalization.
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