CenterPoint Energy 2015 Annual Report Download - page 28

The amount of cash Enable has available for distribution on its units, including the Series A Preferred Units, to us depends primarily on its cash flow rather
than on its profitability, which may prevent Enable from making distributions, even during periods in which Enable records net income.

TheamountofcashEnablehasavailablefordistributiononitsunits,includingtheSeriesAPreferredUnits,dependsprimarilyuponitscashflowsandnot
solely on profitability, which will be affected by non-cash items. As a result, Enable may make cash distributions during periods when it records losses for
financialaccountingpurposesandmaynotmakecashdistributionsduringperiodswhenitrecordsnetearningsforfinancialaccountingpurposes.
We are not able to exercise control over Enable, which entails certain risks.
EnableiscontrolledjointlybyCERCCorp.andOGE,whoeachown50%ofthemanagementrightsinthegeneralpartnerofEnable.Theboardofdirectorsof
Enable’sgeneralpartneriscomposedofanequalnumberofdirectorsappointedbyOGEandbyus,thepresidentandchiefexecutiveofficerofEnable’sgeneral
partnerandthreedirectorswhoareindependentasdefinedundertheindependencestandardsestablishedbytheNewYorkStockExchange.Accordingly,weare
notabletoexercisecontroloverEnable.
Although we jointly control Enable with OGE, we may have conflicts of interest with Enable that could subject us to claims that we have breached our
fiduciary duty to Enable and its unitholders.
CERCCorp.andOGEeachown50%ofthemanagementrightsinEnable’sgeneralpartner,aswellaslimitedpartnershipinterestsinEnable,andinterestsin
theincentivedistributionrightsheldbyEnable’sgeneralpartner.ConflictsofinterestmayarisebetweenusandEnableanditsunitholders.Ourjointcontrolofthe
generalpartnerofEnablemayincreasethepossibilityofclaimsofbreachoffiduciarydutiesincludingclaimsofconflictsofinterestrelatedtoEnable.Inresolving
theseconflicts,wemayfavorourowninterestsandtheinterestsofouraffiliatesovertheinterestsofEnableanditsunitholdersaslongastheresolutiondoesnot
conflictwithEnable’spartnership agreement.Thesecircumstancescouldsubject ustoclaimsthat, infavoring ourowninterestsand thoseof ouraffiliates, we
breachedafiduciarydutytoEnableoritsunitholders.
Enable’s contracts are subject to renewal risks.
Enablegeneratesasubstantialportionofitsgrossmarginsunderlong-term,fee-basedagreements.FortheyearendedDecember31,2015,approximately81%
ofEnable’sgrossmarginwasgeneratedfromcontractsthatarefee-basedandapproximately56%ofitsgrossmarginwasattributabletofeesassociatedwithfirm
contractsorcontractswithminimumvolumecommitmentfeatures.Astheseandothercontractsexpire,Enablemayhavetonegotiateextensionsorrenewalswith
existing suppliers and customers or enter into new contracts with other suppliers and customers. Enable may be unable to obtain new contracts on favorable
commercialterms,ifatall.Italsomaybeunabletomaintaintheeconomicstructureofaparticularcontractwithanexistingcustomerortheoverallmixofits
contractportfolio.Forexample,dependingonprevailingmarketconditionsatthetimeofacontractrenewal,gatheringandprocessingcustomerswithfixed-feeor
fixed-margincontractsmaydesiretoenterintocontractsunderdifferentfeearrangements.TotheextentEnableisunabletorenewitsexistingcontractsonterms
thatarefavorabletoit,ifatall,orsuccessfullymanageitsoverallcontractmixovertime,itsrevenue,resultsofoperationsanddistributablecashflowcouldbe
adverselyaffected.
Enable depends on a small number of customers for a significant portion of its firm transportation and storage services revenues. The loss of, or reduction
in volumes from, these customers could result in a decline in sales of its transportation and storage services and its consolidated financial position, results of
operations and its ability to make cash distributions.
Enableprovidesfirmtransportationandstorageservicestocertainkeycustomersonitssystem.ItsmajortransportationcustomersareaffiliatesofCenterPoint
Energy,Laclede,OGE,AmericanElectricPowerCompany,Inc.andXTOEnergyInc.,anaffiliateofExxonMobilCorporation.
Thelossofallorevenaportionoftheinterstateorintrastatetransportationandstorageservicesforanyofthesecustomers,thefailuretoextendorreplace
thesecontractsortheextensionorreplacementofthesecontractsonlessfavorableterms,asaresultofcompetitionorotherwise,couldadverselyaffectEnable’s
financialposition,resultsofoperationsanditsabilitytomakecashdistributions.
Enable’s businesses are dependent, in part, on the drilling and production decisions of others.
Enable’sbusinessesaredependentonthecontinuedavailabilityofnaturalgas,NGLsandcrudeoilproduction.Enablehasnocontroloverthelevelofdrilling
activityinitsareasofoperation,theamountofreservesassociatedwithwellsconnectedtoits
24