COMBINED NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
(1) Background and Basis of Presentation
General. This combined Form 10-Q is filed separately by three registrants: CenterPoint Energy, Inc., CenterPoint Energy Houston Electric, LLC and CenterPoint Energy Resources Corp. Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other Registrants or the subsidiaries of CenterPoint Energy other than itself or its subsidiaries.
Except as discussed in the last paragraph in Note 12 to the Registrants’ Interim Condensed Financial Statements, no registrant has an obligation in respect of any other Registrant’s debt securities, and holders of such debt securities should not consider the financial resources or results of operations of any Registrant other than the obligor in making a decision with respect to such securities.
Included in this combined Form 10-Q are the Interim Condensed Financial Statements of CenterPoint Energy, Houston Electric and CERC, which are referred to collectively as the Registrants. The Interim Condensed Financial Statements are unaudited, omit certain financial statement disclosures and should be read with the Registrants’ financial statements included in the Registrants’ combined 2020 Form 10-K. The Combined Notes to Interim Condensed Financial Statements apply to all Registrants and specific references to Houston Electric and CERC herein also pertain to CenterPoint Energy, unless otherwise indicated.
Background. CenterPoint Energy, Inc. is a public utility holding company and owns interests in Enable, a publicly traded MLP, as described below. As of March 31, 2021, CenterPoint Energy’s operating subsidiaries reported as continuing operations were as follows:
•Houston Electric provides electric transmission service to transmission service customers in the ERCOT region and distribution service to REPs serving the Texas Gulf Coast area that includes the city of Houston.
•CERC (i) owns and operates natural gas distribution systems in six states; (ii) owns and operates permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP; and (iii) provides temporary delivery of LNG and CNG throughout the contiguous 48 states through MES.
•Vectren holds three public utilities through its wholly-owned subsidiary, VUHI, a public utility holding company:
•Indiana Gas provides energy delivery services to natural gas customers located in central and southern Indiana;
•SIGECO provides energy delivery services to electric and natural gas customers located in and near Evansville in southwestern Indiana and owns and operates electric generation assets to serve its electric customers and optimizes those assets in the wholesale power market; and
•VEDO provides energy delivery services to natural gas customers located in and near Dayton in west-central Ohio.
•Vectren performs non-utility activities through ESG, which provides energy performance contracting and sustainable infrastructure services, such as renewables, distributed generation and combined heat and power projects.
As of March 31, 2021, CenterPoint Energy’s reportable segments were Electric, Natural Gas and Midstream Investments. Houston Electric and CERC each consist of a single reportable segment. For a description of CenterPoint Energy’s reportable segments, see Note 16.
As of March 31, 2021, CNP Midstream owned approximately 53.7% of the common units representing limited partner interests in Enable, which owns, operates and develops natural gas and crude oil infrastructure assets; CNP Midstream also owned 50% of the management rights and 40% of the incentive distribution rights in Enable GP. On February 16, 2021, Enable entered into the Enable Merger Agreement. At the closing of the transactions contemplated by the Enable Merger Agreement, if
and when it occurs, Energy Transfer will acquire all of Enable’s outstanding equity interests, including all Enable common units and Enable Series A Preferred Units held by CenterPoint Energy, and in return CenterPoint Energy will receive Energy Transfer common units and Energy Transfer Series G Preferred Units. For additional information regarding CenterPoint Energy’s interest in Enable, including the 14,520,000 Enable Series A Preferred Units directly owned by CenterPoint Energy, and the Enable Merger, see Note 9.
As of March 31, 2021, CenterPoint Energy and Houston Electric had VIEs consisting of the Bond Companies, which are consolidated. The consolidated VIEs are wholly-owned, bankruptcy-remote, special purpose entities that were formed solely for the purpose of securitizing transition and system restoration-related property. Creditors of CenterPoint Energy and Houston Electric have no recourse to any assets or revenues of the Bond Companies. The bonds issued by these VIEs are payable only from and secured by transition and system restoration property, and the bondholders have no recourse to the general credit of CenterPoint Energy or Houston Electric.
Basis of Presentation. The preparation of the Registrants’ financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Interim Condensed Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the respective periods. Amounts reported in the Condensed Statements of Consolidated Income are not necessarily indicative of amounts expected for a full-year period due to the effects of, among other things, (a) seasonal fluctuations in demand for energy and energy services, (b) changes in energy commodity prices, (c) timing of maintenance and other expenditures and (d) acquisitions and dispositions of businesses, assets and other interests. Certain prior year amounts have been reclassified to conform to the current year reportable segment presentation described in the 2020 Form 10-K.
(2) New Accounting Pronouncements
Management believes that recently adopted and recently issued accounting standards that are not yet effective will not have a material impact on the Registrants’ financial position, results of operations or cash flows upon adoption.
(3) Divestitures (CenterPoint Energy and CERC)
CenterPoint Energy completed the sale of the Infrastructure Services Disposal Group on April 9, 2020 for $850 million and collected a receivable of $4 million from PowerTeam Services in January 2021 for full and final settlement of the working capital adjustment in the Securities Purchase Agreement. CenterPoint Energy, through its subsidiary CERC Corp., completed the sale of the Energy Services Disposal Group on June 1, 2020 for $286 million in cash and collected a receivable for $79 million in October 2020 for full and final settlement of the working capital adjustment.. The earnings and expenses directly associated with these dispositions for the three months ended March 31, 2020 are reflected as discontinued operations on CenterPoint Energy’s and CERC’s Condensed Statements of Consolidated Income, as applicable.
A summary of the Infrastructure Services and Energy Services Disposal Groups presented in CenterPoint Energy’s and CERC’s Condensed Statements of Consolidated Income, as applicable, is as follows:
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Three Months Ended March 31, 2020
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CenterPoint Energy
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CERC
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Infrastructure Services Disposal Group
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Energy Services Disposal Group
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Total
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Energy Services Disposal Group
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(in millions)
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Revenues
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$
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222
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$
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886
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$
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1,108
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$
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886
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Expenses:
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Non-utility cost of revenues
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44
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808
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852
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808
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Operation and maintenance
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163
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20
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183
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20
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Taxes other than income taxes
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1
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1
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2
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1
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Total expenses
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208
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829
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1,037
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829
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Income (loss) from Discontinued Operations before income taxes
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14
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57
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71
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57
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Loss on classification to held for sale, net (1)
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(96)
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(138)
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(234)
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(132)
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Income tax benefit
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(5)
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(12)
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(17)
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(11)
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Net loss from Discontinued Operations
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$
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(77)
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$
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(69)
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$
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(146)
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$
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(64)
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(1)Loss from classification to held for sale is inclusive of goodwill impairment, gains and losses recognized upon sale, and for CenterPoint Energy, its costs to sell.
CenterPoint Energy and CERC have elected not to separately disclose discontinued operations on their respective Condensed Statements of Consolidated Cash Flows. Unregulated long-lived assets are not depreciated or amortized once they are classified as held for sale. The following table summarizes CenterPoint Energy’s and CERC’s cash flows from discontinued operations and certain supplemental cash flow disclosures related to the Infrastructure Services and Energy Services Disposal Groups, as applicable:
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Three Months Ended March 31, 2020
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CenterPoint Energy
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CERC
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Infrastructure Services Disposal Group
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Energy Services Disposal Group
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Energy Services Disposal Group
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(in millions)
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Write-down of natural gas inventory
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$
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—
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$
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3
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$
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3
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Capital expenditures
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16
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1
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1
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Non-cash transactions:
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Accounts payable related to capital expenditures
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2
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4
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4
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Other Sale Related Matters (CenterPoint Energy and CERC). CES provided natural gas supply to CenterPoint Energy’s and CERC’s Natural Gas under contracts executed in a competitive bidding process, with the duration of some contracts extending into 2021. In addition, CERC is the natural gas transportation provider for a portion of CES’s customer base and will continue to be the transportation provider for these customers as long as these customers retain a relationship with the divested CES business.
Transactions between CES and CenterPoint Energy’s and CERC’s Natural Gas that were previously eliminated in consolidation have been reflected in continuing operations until June 1, 2020, which was the date of closing of the sale of the Energy Services Disposal Group. Revenues and expenses included in continuing operations were as follows:
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Three Months Ended March 31, 2020
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CenterPoint Energy
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CERC
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(in millions)
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Transportation revenue
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$
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16
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$
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16
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Natural gas expense
|
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45
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44
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Natural Gas had AMAs associated with their utility distribution service in Arkansas, Louisiana and Oklahoma with the
Energy Services Disposal Group which expired in March 2021. The expired AMAs were replaced with new third-party AMAs beginning in April 2021. CenterPoint Energy and CERC had outstanding obligations related to the AMAs of $-0- and $24 million as of March 31, 2021 and December 31, 2020, respectively.
The Infrastructure Services Disposal Group provided pipeline construction and repair services to CenterPoint Energy’s and CERC’s Natural Gas. In accordance with consolidation guidance in ASC 980—Regulated Operations, costs incurred by Natural Gas utilities for these pipeline construction and repair services are not eliminated in consolidation when capitalized and included in rate base by the Natural Gas utility. Amounts charged for these services that are not capitalized are included primarily in Operation and maintenance expenses. Fees incurred by CenterPoint Energy’s and CERC’s Natural Gas for pipeline construction and repair services are as follows:
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Three Months Ended March 31, 2020
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CenterPoint Energy
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CERC
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(in millions)
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Pipeline construction and repair services capitalized
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$
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34
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$
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—
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Pipeline construction and repair service charges in operations and maintenance expense
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1
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1
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In the Securities Purchase Agreement, CenterPoint Energy agreed to a mechanism to reimburse PowerTeam Services subsequent to closing of the sale for certain amounts of specifically identified change orders that may be ultimately rejected by one of VISCO’s customers as part of on-going audits. CenterPoint Energy’s maximum contractual exposure under the Securities Purchase Agreement, in addition to the amount reflected in the working capital adjustment, for these change orders is $21 million. CenterPoint Energy does not expect the ultimate outcome of this matter to have a material adverse effect on its financial condition, results of operations or cash flows. CenterPoint Energy anticipates this matter will be resolved in 2021.
(4) Revenue Recognition and Allowance for Credit Losses
Revenues from Contracts with Customers
In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Registrants expect to be entitled to receive in exchange for these goods or services. The revenues and related balances in the following tables exclude operating revenues and balances from the Energy Services Disposal Group and the Infrastructure Services Disposal Group, which are reflected as discontinued operations prior to the date of closing of each transaction. See Note 3 for further information. Certain prior year amounts have been reclassified to conform to the current year reportable segment presentation described in the Registrants’ combined 2020 Form 10-K.
ARPs are contracts between the utility and its regulators, not between the utility and a customer. The Registrants recognize ARP revenue as other revenues when the regulator-specified conditions for recognition have been met. Upon recovery of ARP revenue through incorporation in rates charged for utility service to customers, ARP revenue is reversed and recorded as revenue from contracts with customers. The recognition of ARP revenues and the reversal of ARP revenues upon recovery through rates charged for utility service may not occur in the same period.
The following tables disaggregate revenues by reportable segment and major source:
CenterPoint Energy
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Three Months Ended March 31, 2021
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Electric
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Natural Gas
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Corporate
and Other
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Total
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(in millions)
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Revenue from contracts
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$
|
833
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|
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$
|
1,655
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$
|
53
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|
|
$
|
2,541
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Other (1)
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(3)
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8
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1
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6
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Total revenues
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|
$
|
830
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|
|
$
|
1,663
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|
$
|
54
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|
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$
|
2,547
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Three Months Ended March 31, 2020
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Electric
|
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Natural Gas
|
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Corporate
and Other
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Total
|
|
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(in millions)
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Revenue from contracts
|
|
$
|
767
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|
|
$
|
1,296
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|
|
$
|
78
|
|
|
$
|
2,141
|
|
Other (1)
|
|
—
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|
|
25
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|
|
1
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|
|
26
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|
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|
|
|
|
|
|
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Total revenues
|
|
$
|
767
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|
|
$
|
1,321
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|
|
$
|
79
|
|
|
$
|
2,167
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(1)Primarily consists of income from ARPs, weather hedge gains (losses) and leases. Total lease income was $2 million and $1 million for the three months ended March 31, 2021 and 2020, respectively.
Houston Electric
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Three Months Ended March 31,
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|
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2021
|
|
2020
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|
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(in millions)
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Revenue from contracts
|
|
|
|
|
$
|
687
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|
|
$
|
638
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Other (1)
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(3)
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(4)
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Total revenues
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$
|
684
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|
|
$
|
634
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(1)Primarily consists of income from ARPs and leases. Lease income was not significant for the three months ended March 31, 2021 and 2020.
CERC
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|
Three Months Ended March 31,
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|
|
2021
|
|
2020
|
|
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(in millions)
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Revenue from contracts
|
|
$
|
1,172
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|
|
$
|
984
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|
|
Other (1)
|
|
5
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|
|
27
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
1,177
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|
|
$
|
1,011
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|
(1)Primarily consists of income from ARPs, weather hedge gains (losses) and leases. Lease income was not significant for the three months ended March 31, 2021 and 2020.
Revenues from Contracts with Customers
Electric (CenterPoint Energy and Houston Electric). Houston Electric distributes electricity to customers over time and customers consume the electricity when delivered. Indiana Electric generates, distributes and transmits electricity to customers over time, and customers consume the electricity when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by state regulators, such as the PUCT and the IURC, is recognized as electricity is delivered and represents amounts both billed and unbilled. Discretionary services requested by customers are provided at a point in time with control transferring upon the completion of the service. Revenue for discretionary services provided by Houston Electric is recognized upon completion of service based on the tariff rates set by the PUCT. Payments for electricity distribution and discretionary services are aggregated and received on a monthly basis. Houston Electric performs transmission services over time as a stand-ready obligation to provide a reliable network of transmission systems. Revenue is recognized upon time elapsed, and the monthly tariff rate set by the regulator. Payments are received on a monthly basis. Indiana Electric customers are billed monthly and payment terms, set by the regulator, require payment within a month of billing.
Natural Gas (CenterPoint Energy and CERC). CenterPoint Energy and CERC distribute and transport natural gas to customers over time, and customers consume the natural gas when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by the state governing agency for that service area, is recognized as natural gas is delivered and represents amounts both billed and unbilled. Discretionary services requested by the customer are satisfied at a point in time and revenue is recognized upon completion of service and the tariff rates set by the applicable state regulator. Payments of natural gas distribution, transportation and discretionary services are aggregated and received on a monthly basis.
Contract Balances. When the timing of delivery of service is different from the timing of the payments made by customers and when the right to consideration is conditioned on something other than the passage of time, the Registrants recognize either a contract asset (performance precedes billing) or a contract liability (customer payment precedes performance). Those customers that prepay are represented by contract liabilities until the performance obligations are satisfied. The Registrants’ contract assets are included in Accrued unbilled revenues in their Condensed Consolidated Balance Sheets. As of March 31, 2021, CenterPoint Energy’s contract assets primarily relate to ESG contracts where revenue is recognized using the input method. The Registrants’ contract liabilities are included in Accounts payable and Other current liabilities in their Condensed Consolidated Balance Sheets. As of March 31, 2021, CenterPoint Energy’s contract liabilities primarily relate to ESG contracts where revenue is recognized using the input method.
The opening and closing balances of accounts receivable related to ASC 606 revenues, other accrued unbilled revenue, contract assets and contract liabilities from contracts with customers from continuing operations as of December 31, 2020 and March 31, 2021, respectively, are as follows:
CenterPoint Energy
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Accounts Receivable
|
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Other Accrued Unbilled Revenues
|
|
Contract
Assets
|
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Contract Liabilities
|
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(in millions)
|
Opening balance as of December 31, 2020
|
$
|
604
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|
|
$
|
505
|
|
|
$
|
27
|
|
|
$
|
18
|
|
Closing balance as of March 31, 2021
|
675
|
|
|
343
|
|
|
23
|
|
|
23
|
|
Increase (decrease)
|
$
|
71
|
|
|
$
|
(162)
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|
|
$
|
(4)
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|
|
$
|
5
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The amount of revenue recognized in the three-month period ended March 31, 2021 that was included in the opening contract liability was $11 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between CenterPoint Energy’s performance and the customer’s payment.
Houston Electric
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|
|
|
|
Accounts Receivable
|
|
Other Accrued Unbilled Revenues
|
|
|
|
Contract Liabilities
|
|
(in millions)
|
Opening balance as of December 31, 2020
|
$
|
225
|
|
|
$
|
113
|
|
|
|
|
$
|
3
|
|
Closing balance as of March 31, 2021
|
216
|
|
|
83
|
|
|
|
|
8
|
|
Increase (decrease)
|
$
|
(9)
|
|
|
$
|
(30)
|
|
|
|
|
$
|
5
|
|
The amount of revenue recognized in the three-month period ended March 31, 2021 that was included in the opening contract liability was $1 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between Houston Electric’s performance and the customer’s payment.
CERC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
Other Accrued Unbilled Revenues
|
|
|
|
|
|
(in millions)
|
|
|
Opening balance as of December 31, 2020
|
$
|
214
|
|
|
$
|
261
|
|
|
|
|
|
|
|
Closing balance as of March 31, 2021
|
299
|
|
|
168
|
|
|
|
|
|
|
|
Increase (decrease)
|
$
|
85
|
|
|
$
|
(93)
|
|
|
|
|
|
|
|
CERC does not have any opening or closing contract asset or contract liability balances.
Remaining Performance Obligations (CenterPoint Energy). The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period for contracts and (2) when CenterPoint Energy expects to recognize this revenue. Such contracts include energy performance and sustainable infrastructure services contracts of ESG, which are included in Corporate and Other.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rolling 12 Months
|
|
Thereafter
|
|
Total
|
|
(in millions)
|
|
|
Revenue expected to be recognized on contracts in place as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and Other
|
$
|
259
|
|
|
$
|
554
|
|
|
$
|
813
|
|
|
|
|
$
|
259
|
|
|
$
|
554
|
|
|
$
|
813
|
|
|
|
Practical Expedients and Exemption. Sales taxes and other similar taxes collected from customers are excluded from the transaction price. For contracts for which revenue from the satisfaction of the performance obligations is recognized in the amount invoiced, the practical expedient was elected and revenue expected to be recognized on these contracts has not been disclosed.
Allowance for Credit Losses
CenterPoint Energy and CERC segregate financial assets that fall under the scope of Topic 326, primarily trade receivables due in one year or less, into portfolio segments based on shared risk characteristics, such as geographical location and regulatory environment, for evaluation of expected credit losses. Historical and current information, such as average write-offs, are applied to each portfolio segment to estimate the allowance for losses on uncollectible receivables. Additionally, the allowance for losses on uncollectible receivables is adjusted for reasonable and supportable forecasts of future economic conditions, which can include changing weather, commodity prices, regulations, and macroeconomic factors, among others. Houston Electric recognizes losses on financial assets that fall under the scope of Topic 326. Losses on financial assets are primarily recoverable through regulatory mechanisms and do not materially impact Houston Electric's allowance for credit losses. For a discussion of regulatory deferrals related to COVID-19 and the February 2021 Winter Storm Event, see Note 6.
(5) Employee Benefit Plans
The Registrants’ net periodic cost, before considering amounts subject to overhead allocations for capital expenditure projects or for amounts subject to deferral for regulatory purposes, includes the following components relating to pension and postretirement benefits:
Pension Benefits (CenterPoint Energy)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
(in millions)
|
Service cost (1)
|
|
|
|
|
$
|
10
|
|
|
$
|
10
|
|
Interest cost (2)
|
|
|
|
|
15
|
|
|
19
|
|
Expected return on plan assets (2)
|
|
|
|
|
(26)
|
|
|
(28)
|
|
|
|
|
|
|
|
|
|
Amortization of net loss (2)
|
|
|
|
|
9
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
|
|
|
|
$
|
8
|
|
|
$
|
11
|
|
(1)Amounts presented in the table above are included in Operation and maintenance expense in CenterPoint Energy’s Condensed Statements of Consolidated Income, net of amounts capitalized and regulatory deferrals.
(2)Amounts presented in the table above are included in Other income (expense), net in CenterPoint Energy’s Condensed Statements of Consolidated Income, net of regulatory deferrals.
Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
(in millions)
|
Service cost (1)
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost (2)
|
2
|
|
|
1
|
|
|
1
|
|
|
3
|
|
|
1
|
|
|
1
|
|
Expected return on plan assets (2)
|
(1)
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
—
|
|
Amortization of prior service cost (credit) (2)
|
(1)
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost (income)
|
$
|
1
|
|
|
$
|
(1)
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
(1)
|
|
|
$
|
1
|
|
(1)Amounts presented in the tables above are included in Operation and maintenance expense in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of amounts capitalized and regulatory deferrals.
(2)Amounts presented in the tables above are included in Other income (expense), net in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of regulatory deferrals.
The table below reflects the expected contributions to be made to the pension and postretirement benefit plans during 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
(in millions)
|
Expected minimum contribution to pension plans during 2021
|
$
|
61
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Expected contribution to postretirement benefit plans in 2021
|
9
|
|
|
1
|
|
|
3
|
|
On March 11, 2021, the ARPA was signed into law which includes pension plan funding relief for the sponsoring employers. As a result, the expected minimum contribution to pension plans for 2021 as disclosed is likely to be significantly reduced. However, at this time, CenterPoint Energy is not able to quantify the reduction amount until further IRS guidance related to the pension funding relief under the ARPA becomes available.
The table below reflects the contributions made to the pension and postretirement benefit plans during 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
|
|
|
|
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
|
|
|
|
|
(in millions)
|
Pension plans
|
|
|
|
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Postretirement benefit plans
|
|
|
|
|
|
|
3
|
|
|
—
|
|
|
1
|
|
(6) Regulatory Matters
Equity Return
The Registrants are at times allowed by a regulator to defer an equity return as part of the recoverable carrying costs of a regulatory asset. A deferred equity return is capitalized for rate-making purposes, but it is not included in the Registrant’s regulatory assets on its Condensed Consolidated Balance Sheets. The allowed equity return is recognized in the Condensed Statements of Consolidated Income as it is recovered in rates. The recoverable allowed equity return not yet recognized by the Registrants is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
CenterPoint Energy (1)
|
|
Houston Electric (2)
|
|
CERC (3)
|
|
CenterPoint Energy (1)
|
|
Houston Electric (2)
|
|
CERC (3)
|
|
(in millions)
|
Allowed equity return not recognized
|
$
|
224
|
|
|
$
|
130
|
|
|
$
|
13
|
|
|
$
|
229
|
|
|
$
|
137
|
|
|
$
|
13
|
|
(1)In addition to the amounts described in (2) and (3) below, CenterPoint Energy’s allowed equity return on post in-service carrying cost generally associated with federally mandated investments in Indiana.
(2)Houston Electric’s allowed equity return on its true-up balance of stranded costs, other changes and related interest resulting from the formerly integrated electric utilities prior to Texas deregulation and certain storm restoration balances expected to be recovered in rates through 2024. The unrecognized equity return will be recognized as it is recovered in rates through 2024. The actual amounts recognized are adjusted at least annually to correct any over-collections or under-collections during the preceding 12 months.
(3)CERC’s allowed equity return on post in-service carrying cost associated with certain distribution facilities replacements expenditures in Texas.
The table below reflects the amount of allowed equity return recognized by each Registrant in its Condensed Statements of Consolidated Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
(in millions)
|
Allowed equity return recognized
|
$
|
8
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
6
|
|
|
$
|
—
|
|
February 2021 Winter Storm Event
In February 2021, certain of our jurisdictions experienced an extreme and unprecedented winter weather event that resulted in prolonged freezing temperatures, which impacted our businesses. In Texas, the February 2021 Winter Storm Event caused an electricity generation shortage that was severely disruptive to Houston Electric’s service territory and the wholesale generation market. While demand for electricity reached extraordinary levels due to the extreme cold, the supply of electricity significantly decreased in part because of the inability of certain power generation facilities to supply electric power to the grid. Houston Electric does not own or operate any electric generation facilities. It transmits and distributes to customers of REPs electric power that the REPs obtain from power generation facilities owned by third parties. ERCOT serves as the independent system operator and regional reliability coordinator for member electric power systems in most of Texas. To comply with ERCOT’s orders, Houston Electric implemented controlled outages across its service territory, resulting in a substantial number of businesses and residents being without power, many for extended periods of time, in compliance with ERCOT’s directives as an emergency procedure to avoid prolonged large-scale state-wide blackouts and long-term damage to the electric system in Texas. In anticipation of this weather event, Houston Electric implemented its emergency operations plan’s processes and procedures necessary to respond to such events, including establishing an incident command center and calling for mutual assistance from other utilities where needed, among other measures. Throughout the February 2021 Winter Storm Event, Houston Electric remained in contact with its regulators and stakeholders, including federal, state and local officials, as well as the PUCT and ERCOT.
The February 2021 Winter Storm Event also impacted wholesale prices of CenterPoint Energy and CERC’s natural gas and their ability to service customers in their Natural Gas service territories, including due to the reduction in available natural gas capacity and impacts to CenterPoint Energy’s and CERC’s natural gas supply portfolio activities, and the effects of weather on their systems and their ability to transport natural gas, among other things. The overall natural gas market, including the markets from which CenterPoint Energy and CERC sourced a significant portion of their natural gas for their operations, experienced significant impacts caused by the February 2021 Winter Storm Event, resulting in extraordinary increases in the price of natural gas purchased by CenterPoint Energy and CERC. On February 13, 2021, the Railroad Commission authorized each Texas natural gas distribution utility to record in a regulatory asset the extraordinary expenses associated with the February 2021 Winter Storm Event, including, but not limited to, natural gas cost and other costs related to the procurement and transportation of natural gas supply, subject to recovery in future regulatory proceedings. In addition, CenterPoint Energy’s and CERC’s Natural Gas utilities in jurisdictions outside of Texas deferred natural gas cost under existing recovery mechanisms and have either sought or intend to seek recovery of the increased cost of natural gas, which will be subject to customary regulatory prudency reviews that may impact the amounts recovered. Amounts for the under recovery of natural gas costs are reflected in regulatory assets and are probable of recovery; however, the timing of recovery for each jurisdiction for the estimated incremental gas cost attributable to the February 2021 Winter Storm Event within each regulatory asset is uncertain. As of March 31, 2021, CenterPoint Energy and CERC have recorded current regulatory assets of $462 million and $347 million, respectively, and non-current regulatory assets of $1.7 billion and $1.7 billion, respectively, associated with the February 2021 Winter Storm Event. Due to the uncertainty of timing and method of recovery, CenterPoint Energy and CERC may not earn a return on all amounts deferred in the non-current regulatory asset associated with the February 2021 Winter Storm Event.
On February 21, 2021, in response to the 2021 February Winter Storm Event, the PUCT issued an order prohibiting REPs from sending a request to TDUs to disconnect such REPs’ customers for non-payment, effective February 21, 2021. As a result of this order, in the event a request for disconnect is received from a REP, Houston Electric will not execute any such disconnect request until the PUCT issues orders for disconnects to resume. As of March 31, 2021, as authorized by the PUCT, CenterPoint Energy and Houston Electric established a regulatory asset of $14 million for bad debt expenses resulting from REPs’ default on their obligation to pay delivery charges to Houston Electric net of collateral. Additionally, CenterPoint Energy and Houston Electric recorded a regulatory asset of $14 million to defer operations and maintenance costs associated with the February 2021 Winter Storm Event.
See Notes 12 and 14(d) for further information regarding debt financing transactions and litigation related to the February 2021 Winter Storm Event, respectively.
COVID-19 Regulatory Matters
Governors, public utility commissions and other authorities in the states in which the Registrants operate issued a number of different orders related to the COVID-19 pandemic, including orders addressing customer non-payment and disconnection. Although the disconnect moratoriums have expired in certain of the Registrants’ service territories, CenterPoint Energy continues to support those customers who may need payment assistance, arrangements or extensions.
The COVID-19 ERP allows program expenses to be recovered in rates. CenterPoint Energy’s and Houston Electric’s COVID-19 ERP regulatory assets were $-0- as of March 31, 2021 and $6 million as of December 31, 2020.
Commissions in all of Indiana Electric’s and CenterPoint Energy’s and CERC’s Natural Gas service territories have either (1) issued orders to record a regulatory asset for incremental bad debt expenses related to COVID-19, including costs associated with the suspension of disconnections and payment plans or (2) provided authority to recover bad debt expense through an existing tracking mechanism. CenterPoint Energy and CERC have recorded estimated incremental uncollectible receivables to the associated regulatory asset of $29 million and $27 million, respectively, as of March 31, 2021 and $22 million and $19 million, respectively, as of December 31, 2020.
In some of the states in which the Registrants operate, public utility commissions have authorized utilities to employ deferred accounting authority for certain COVID-19 related costs which ensure the safety and health of customers, employees, and contractors, that would not have been incurred in the normal course of business. CERC’s Natural Gas service territories in Minnesota and Arkansas will include any offsetting savings in the deferral. Other jurisdictions where the Registrants operate may require them to offset the deferral with savings as well. The Arkansas FRP, filed on April 5, 2021, included a request for (1) the regulatory asset as of September 30, 2020 in working capital for the 2021 historical year using a thirteen-month average of the asset balance; (2) the regulatory asset as of September 30, 2020 in working capital for the 2021 projected year using a thirteen-month average of the asset balance; and (3) the amortization of the balance over the 2021 projected year twelve-month period beginning October 1, 2021.
(7) Derivative Instruments
The Registrants are exposed to various market risks. These risks arise from transactions entered into in the normal course of business. The Registrants utilize derivative instruments such as swaps and options to mitigate the impact of changes in commodity prices, weather and interest rates on operating results and cash flows.
(a)Non-Trading Activities
Commodity Derivative Instruments (CenterPoint Energy). CenterPoint Energy, through the Indiana Utilities, enters into certain derivative instruments to mitigate the effects of commodity price movements. Outstanding derivative instruments designated as economic hedges at the Indiana Utilities hedge long-term variable rate natural gas purchases. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging natural gas purchases, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset.
Interest Rate Risk Derivative Instruments. From time to time, the Registrants may enter into interest rate derivatives that are designated as cash flow hedges or accounted for as economic hedges. The objective of these hedges is to offset risk associated with interest rates borne by the Registrants in connection with an anticipated future fixed rate debt offering or other exposure to variable rate debt. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging financing activity, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset.
The table below summarizes the Registrants’ outstanding interest rate hedging activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
Hedging Classification
|
|
Notional Principal
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Economic hedge (1)
|
|
$
|
84
|
|
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Relates to interest rate derivative instruments at SIGECO.
Weather Hedges (CenterPoint Energy and CERC). CenterPoint Energy and CERC have weather normalization or other rate mechanisms that largely mitigate the impact of weather on Natural Gas in Arkansas, Indiana, Louisiana, Mississippi, Minnesota, Ohio and Oklahoma, as applicable. CenterPoint Energy’s and CERC’s Natural Gas in Texas and CenterPoint Energy’s electric operations in Texas and Indiana do not have such mechanisms, although fixed customer charges are historically higher in Texas for Natural Gas compared to its other jurisdictions. As a result, fluctuations from normal weather may have a positive or negative effect on CenterPoint Energy’s and CERC’s Natural Gas’ results in Texas and on CenterPoint Energy’s electric operations’ results in its Texas and Indiana service territories.
CenterPoint Energy and CERC, as applicable, enter into winter season weather hedges from time to time for certain Natural Gas jurisdictions and electric operations’ service territory to mitigate the effect of fluctuations from normal weather on results of operations and cash flows. These weather hedges are based on heating degree days at 10-year normal weather. Houston Electric and Indiana Electric do not enter into weather hedges.
(b)Derivative Fair Values and Income Statement Impacts
The following tables present information about derivative instruments and hedging activities. The first table provides a balance sheet overview of Derivative Liabilities, while the last table provides a breakdown of the related income statement impacts.
Fair Value of Derivative Instruments and Hedged Items (CenterPoint Energy)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
Fair Value
|
|
|
Balance Sheet Location
|
|
|
|
March 31, 2021
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
(in millions)
|
|
Natural gas derivatives (1)
|
Current Liabilities: Non-trading derivative liabilities
|
|
|
|
$
|
2
|
|
|
|
|
$
|
3
|
|
|
Natural gas derivatives (1)
|
Other Liabilities: Non-trading derivative liabilities
|
|
|
|
5
|
|
|
|
|
7
|
|
|
Interest rate derivatives
|
Other Liabilities: Non-trading derivative liabilities
|
|
|
|
9
|
|
|
|
|
20
|
|
|
Indexed debt securities derivative (2)
|
Current Liabilities
|
|
|
|
927
|
|
|
|
|
953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
943
|
|
|
|
|
$
|
983
|
|
(1)Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due. However, the mark-to-market fair value of each natural gas contract is in a liability position with no offsetting amounts.
(2)Derivative component of the ZENS obligation that represents the ZENS holder’s option to receive the appreciated value of the reference shares at maturity. See Note 11 for further information.
Income Statement Impact of Hedge Accounting Activity (CenterPoint Energy)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
Income Statement Location
|
|
|
|
|
|
2021
|
|
2020
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
(in millions)
|
Indexed debt securities derivative (1)
|
|
Gain (loss) on indexed debt securities
|
|
|
|
|
|
$
|
26
|
|
|
$
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
26
|
|
|
$
|
135
|
|
(1)The indexed debt securities derivative is recorded at fair value and changes in the fair value are recorded in CenterPoint Energy’s Statements of Consolidated Income.
(c) Credit Risk Contingent Features (CenterPoint Energy)
Certain of CenterPoint Energy’s derivative instruments contain provisions that require CenterPoint Energy’s debt to maintain an investment grade credit rating on its long-term unsecured unsubordinated debt from S&P and Moody’s. If CenterPoint Energy’s debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31, 2020
|
|
|
(in millions)
|
Aggregate fair value of derivatives with credit-risk-related contingent features in a liability position
|
|
$
|
9
|
|
|
$
|
20
|
|
Fair value of collateral already posted
|
|
7
|
|
|
7
|
|
Additional collateral required to be posted if credit risk contingent features triggered (1)
|
|
2
|
|
|
3
|
|
(1)The maximum collateral required if further escalating collateral is triggered would equal the net liability position.
(8) Fair Value Measurements
Assets and liabilities that are recorded at fair value in the Registrants’ Condensed Consolidated Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined below and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are exchange-traded derivatives and equity securities.
Level 2: Inputs, other than quoted prices included in Level 1, are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Fair value assets and liabilities that are generally included in this category are derivatives with fair values based on inputs from actively quoted markets. A market approach is utilized to value the Registrants’ Level 2 natural gas derivative assets or liabilities. CenterPoint Energy’s Level 2 indexed debt securities derivative is valued using an option model and a discounted cash flow model, which uses projected dividends on the ZENS-Related Securities and a discount rate as observable inputs.
Level 3: Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Unobservable inputs reflect the Registrants’ judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Registrants develop these inputs based on the best information available, including the Registrants’ own data.
The Registrants determine the appropriate level for each financial asset and liability on a quarterly basis.
The following tables present information about the Registrants’ assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques utilized by the Registrants to determine such fair value.
CenterPoint Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
Total
|
Assets
|
(in millions)
|
Corporate equities
|
$
|
850
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
850
|
|
|
$
|
873
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$
|
873
|
|
Investments, including money market funds (1)
|
43
|
|
|
—
|
|
|
—
|
|
|
|
|
43
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
893
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
893
|
|
|
$
|
916
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$
|
916
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indexed debt securities derivative
|
$
|
—
|
|
|
$
|
927
|
|
|
$
|
—
|
|
|
|
|
$
|
927
|
|
|
$
|
—
|
|
|
$
|
953
|
|
|
$
|
—
|
|
|
|
$
|
953
|
|
Interest rate derivatives
|
—
|
|
|
9
|
|
|
—
|
|
|
|
|
9
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
|
20
|
|
Natural gas derivatives
|
—
|
|
|
7
|
|
|
—
|
|
|
|
|
7
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
943
|
|
|
$
|
—
|
|
|
|
|
$
|
943
|
|
|
$
|
—
|
|
|
$
|
983
|
|
|
$
|
—
|
|
|
|
$
|
983
|
|
Houston Electric
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
Total
|
Assets
|
(in millions)
|
Investments, including money market funds (1)
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
27
|
|
|
$
|
26
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
27
|
|
|
$
|
26
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CERC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
Total
|
Assets
|
(in millions)
|
Corporate equities
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$
|
2
|
|
Investments, including money market funds (1)
|
11
|
|
|
—
|
|
|
—
|
|
|
|
|
11
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
|
11
|
|
Total assets
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Amounts are included in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.
Estimated Fair Value of Financial Instruments
The fair values of cash and cash equivalents, investments in debt and equity securities measured at fair value 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 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 a combination of historical trading prices and comparable issue data. These liabilities, which are not measured at fair value in the Registrants’ Condensed Consolidated Balance Sheets, but for which the fair value is disclosed, would be classified as Level 2 in the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
CenterPoint Energy (1)
|
|
Houston Electric (1)
|
|
CERC
|
|
CenterPoint Energy (1)
|
|
Houston Electric (1)
|
|
CERC
|
Long-term debt, including current maturities
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount
|
$
|
15,823
|
|
|
$
|
5,968
|
|
|
$
|
4,349
|
|
|
$
|
13,401
|
|
|
$
|
5,019
|
|
|
$
|
2,428
|
|
Fair value
|
16,848
|
|
|
6,485
|
|
|
4,580
|
|
|
15,226
|
|
|
5,957
|
|
|
2,855
|
|
(1)Includes Securitization Bonds debt.
(9) Unconsolidated Affiliates (CenterPoint Energy and CERC)
CenterPoint Energy has the ability to significantly influence the operating and financial policies of Enable, a publicly traded MLP, and, accordingly, accounts for its investment in Enable’s common units using the equity method of accounting. Enable is considered to be a VIE because the power to direct the activities that most significantly impact Enable’s economic performance does not reside with the holders of equity investment at risk. However, CenterPoint Energy is not considered the primary beneficiary of Enable since it does not have the power to direct the activities of Enable that are considered most significant to the economic performance of Enable. As of March 31, 2021, CenterPoint Energy’s maximum exposure to loss related to Enable is limited to its investment in unconsolidated affiliate, its investment in Enable Series A Preferred Units and outstanding current accounts receivable from Enable.
On February 16, 2021, Enable entered into the Enable Merger Agreement. At the closing of the transactions contemplated by the Enable Merger Agreement, if and when it occurs, Energy Transfer will acquire all of Enable’s outstanding equity interests, resulting in the exchange of Enable common units owned by CenterPoint Energy at the transaction exchange ratio of 0.8595x Energy Transfer common units for each Enable common unit. CenterPoint Energy will also receive $5 million in cash in exchange for its interest in Enable GP and Energy Transfer Series G Preferred Units with an aggregate liquidation preference of approximately $385 million in exchange for all of its Enable Series A Preferred Units. Pursuant to previously disclosed support agreements, CenterPoint Energy and OGE, who collectively own approximately 79.2% of Enable’s common units, delivered written consents approving the Enable Merger Agreement and, on a non-binding, advisory basis, the compensation that will or may become payable to Enable’s named executive officers in connection with the transactions contemplated by the Enable Merger Agreement. The transactions contemplated under the Enable Merger Agreement are expected to be completed in the second half of 2021, subject to customary closing conditions, including Hart-Scott-Rodino antitrust clearance. Upon the consummation of the transaction, the partnership agreements between CenterPoint Energy and OGE will terminate, and CenterPoint Energy will pay $30 million in cash to OGE (or other mutually agreed upon consideration). Because CenterPoint Energy will retain an investment in the midstream industry at the completion of this transaction, the transaction does not represent a strategic shift that will have a major effect on CenterPoint Energy’s operations or financial results, and as such, Enable is not classified and presented as discontinued operations. Equity method investments that do not qualify for discontinued operations are not presented as assets held for sale.
Investment in Unconsolidated Affiliates (CenterPoint Energy):
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(in millions)
|
Enable
|
$
|
852
|
|
|
$
|
782
|
|
Other
|
1
|
|
|
1
|
|
Total
|
$
|
853
|
|
|
$
|
783
|
|
As of March 31, 2021, Enable’s common unit price closed at $6.48 per unit.
Equity in Earnings (Losses) of Unconsolidated Affiliates, net (CenterPoint Energy):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020 (1)
|
|
|
|
|
|
(in millions)
|
Enable
|
|
|
|
|
$
|
108
|
|
|
$
|
(1,475)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
$
|
108
|
|
|
$
|
(1,475)
|
|
(1)Included an impairment charge on CenterPoint Energy’s investment in Enable of $1,541 million.
Limited Partner Interest and Units Held in Enable (CenterPoint Energy):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
Limited Partner Interest (1)
|
|
Common Units
|
|
Enable Series A Preferred Units (2)
|
|
CenterPoint Energy (3)
|
53.7
|
%
|
|
233,856,623
|
|
|
14,520,000
|
|
|
OGE
|
25.5
|
%
|
|
110,982,805
|
|
|
—
|
|
|
Public unitholders
|
20.8
|
%
|
|
91,007,338
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Total units outstanding
|
100.0
|
%
|
|
435,846,766
|
|
|
14,520,000
|
|
|
(1)Excludes the Enable Series A Preferred Units owned by CenterPoint Energy.
(2)The carrying amount of the Enable Series A Preferred Units, reflected as Preferred units - unconsolidated affiliate on CenterPoint Energy’s Condensed Consolidated Balance Sheets, was $363 million as of both March 31, 2021 and December 31, 2020. There were no settled transactions in the three months ended March 31, 2021 that would indicate a stand-alone, observable, and readily determinable fair value for securities identical or similar to Enable Series A Preferred Units. No impairment charges or adjustment due to observable price changes were required or recorded during the current or prior reporting periods.
(3)Held indirectly through CNP Midstream.
Generally, sales to any person or entity (including a series of sales to the same person or entity) of more than 5% of the aggregate of the common units CenterPoint Energy owns in Enable or sales to any person or entity (including a series of sales to the same person or entity) by OGE of more than 5% of the aggregate of the common units it owns in Enable are subject to mutual rights of first offer and first refusal set forth in Enable’s Agreement of Limited Partnership.
Interests Held in Enable GP (CenterPoint Energy):
CenterPoint Energy and OGE held the following interests in Enable GP as of both March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
Management
Rights (1)
|
|
Incentive Distribution Rights (2)
|
CenterPoint Energy (3)
|
50
|
%
|
|
40
|
%
|
OGE
|
50
|
%
|
|
60
|
%
|
(1)Enable is controlled jointly by CenterPoint Energy and OGE. Sale of CenterPoint Energy’s or OGE’s ownership interests in Enable GP to a third party is subject to mutual rights of first offer and first refusal, and CenterPoint Energy is not permitted to dispose of less than all of its interest in Enable GP.
(2)If cash distributions to Enable’s unitholders exceed $0.330625 per common unit in any quarter, Enable GP will receive increasing percentages or incentive distributions rights, up to 50%, of the cash Enable distributes in excess of that amount. In certain circumstances Enable GP will have the right to reset the minimum quarterly distribution and the target distribution levels at which the incentive distributions receive increasing percentages to higher levels based on Enable’s cash distributions at the time of the exercise of this reset election. To date, no incentive distributions have been made.
(3)Held indirectly through CNP Midstream.
Distributions Received from Enable (CenterPoint Energy):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Per Unit
|
|
Cash Distribution
|
|
Per Unit
|
|
Cash Distribution
|
|
|
|
|
|
|
|
|
(in millions, except per unit amounts)
|
Enable common units
|
|
|
|
|
|
|
|
|
$
|
0.16525
|
|
|
$
|
39
|
|
|
$
|
0.3305
|
|
|
$
|
77
|
|
Enable Series A Preferred Units
|
|
|
|
|
|
|
|
|
0.62500
|
|
|
9
|
|
|
0.6250
|
|
|
9
|
|
Total CenterPoint Energy
|
|
|
|
|
|
|
|
|
|
|
$
|
48
|
|
|
|
|
$
|
86
|
|
Transactions with Enable (CenterPoint Energy and CERC):
The transactions with Enable in the following tables exclude transactions with the Energy Services Disposal Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CenterPoint Energy and CERC
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
(in millions)
|
Natural gas expenses, includes transportation and storage costs
|
|
|
|
|
$
|
32
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CenterPoint Energy and CERC
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(in millions)
|
Accounts payable for natural gas purchases from Enable
|
$
|
9
|
|
|
$
|
9
|
|
Accounts receivable for amounts billed for services provided to Enable
|
1
|
|
|
1
|
|
Summarized Financial Information for Enable (CenterPoint Energy)
Summarized unaudited consolidated income information for Enable is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
(in millions)
|
Operating revenues
|
|
|
|
|
$
|
970
|
|
|
$
|
648
|
|
Cost of sales, excluding depreciation and amortization
|
|
|
|
|
519
|
|
|
226
|
|
Depreciation and amortization
|
|
|
|
|
106
|
|
|
104
|
|
Goodwill and long-lived assets impairments
|
|
|
|
|
—
|
|
|
28
|
|
Operating income
|
|
|
|
|
206
|
|
|
146
|
|
Net income attributable to Enable common units
|
|
|
|
|
155
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Equity in Earnings (Losses), net:
|
|
|
|
|
|
|
|
CenterPoint Energy’s interest
|
|
|
|
|
$
|
83
|
|
|
$
|
55
|
|
Basis difference amortization (1)
|
|
|
|
|
25
|
|
|
12
|
|
Loss on dilution, net of proportional basis difference recognition
|
|
|
|
|
—
|
|
|
(1)
|
|
Impairment of CenterPoint Energy’s equity method investment in Enable
|
|
|
|
|
—
|
|
|
(1,541)
|
|
CenterPoint Energy’s equity in earnings (losses), net
|
|
|
|
|
$
|
108
|
|
|
$
|
(1,475)
|
|
(1)Equity in earnings of unconsolidated affiliate includes CenterPoint Energy’s share of Enable earnings adjusted for the amortization of the basis difference of CenterPoint Energy’s original investment in Enable and its underlying equity in net assets of Enable. The basis difference is being amortized through the year 2048 or will cease upon the sale of CenterPoint Energy’s investment in Enable.
Summarized unaudited consolidated balance sheet information for Enable is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(in millions)
|
Current assets
|
$
|
449
|
|
|
$
|
381
|
|
Non-current assets
|
11,315
|
|
|
11,348
|
|
Current liabilities
|
1,334
|
|
|
582
|
|
Non-current liabilities
|
3,249
|
|
|
4,052
|
|
Non-controlling interest
|
26
|
|
|
26
|
|
Preferred equity
|
362
|
|
|
362
|
|
Accumulated other comprehensive loss
|
(5)
|
|
|
(6)
|
|
Enable partners’ equity
|
6,798
|
|
|
6,713
|
|
|
|
|
|
|
|
|
|
Reconciliation of Investment in Enable:
|
|
|
|
CenterPoint Energy’s ownership interest in Enable partners’ equity
|
$
|
3,645
|
|
|
$
|
3,601
|
|
CenterPoint Energy’s basis difference (1)
|
(2,793)
|
|
|
(2,819)
|
|
|
|
|
|
CenterPoint Energy’s equity method investment in Enable
|
$
|
852
|
|
|
$
|
782
|
|
(1)The basis difference is being amortized through the year 2048 or will cease upon sale of CenterPoint Energy’s investment in Enable.
(10) Goodwill and Other Intangibles (CenterPoint Energy)
CenterPoint Energy’s goodwill by reportable segment as of March 31, 2021 and December 31, 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Electric (1)
|
|
$
|
936
|
|
Natural Gas
|
|
3,323
|
|
Corporate and Other
|
|
438
|
|
|
|
|
Total
|
|
$
|
4,697
|
|
(1)Amount presented is net of the accumulated goodwill impairment charge of $185 million recorded in 2020.
The tables below present information on CenterPoint Energy’s intangible assets, excluding goodwill, recorded in Other non-current assets on CenterPoint Energy’s Condensed Consolidated Balance Sheets and the related amortization expense included in Depreciation and amortization on CenterPoint Energy’s Condensed Statements of Consolidated Income, unless otherwise indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Balance
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Balance
|
|
|
(in millions)
|
Customer relationships
|
|
$
|
33
|
|
|
$
|
(9)
|
|
|
$
|
24
|
|
|
$
|
33
|
|
|
$
|
(8)
|
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
16
|
|
|
(3)
|
|
|
13
|
|
|
16
|
|
|
(3)
|
|
|
13
|
|
Construction backlog (1)
|
|
5
|
|
|
(5)
|
|
|
—
|
|
|
5
|
|
|
(5)
|
|
|
—
|
|
Operation and maintenance agreements (1)
|
|
12
|
|
|
(1)
|
|
|
11
|
|
|
12
|
|
|
(1)
|
|
|
11
|
|
Other
|
|
2
|
|
|
(1)
|
|
|
1
|
|
|
2
|
|
|
(1)
|
|
|
1
|
|
Total
|
|
$
|
68
|
|
|
$
|
(19)
|
|
|
$
|
49
|
|
|
$
|
68
|
|
|
$
|
(18)
|
|
|
$
|
50
|
|
(1)Amortization expense related to the operation and maintenance agreements and construction backlog is included in Non-utility cost of revenues, including natural gas on CenterPoint Energy’s Condensed Statements of Consolidated Income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
(in millions)
|
|
Amortization expense of intangible assets recorded in Depreciation and amortization
|
|
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
Amortization expense of intangible assets recorded in Non-utility cost of revenues, including natural gas
|
|
|
|
|
—
|
|
|
1
|
|
|
CenterPoint Energy estimates that amortization expense of intangible assets with finite lives for the next five years will be as follows:
|
|
|
|
|
|
|
Amortization
Expense (1)
|
|
CenterPoint Energy
|
|
(in millions)
|
Remaining nine months of 2021
|
$
|
5
|
|
2022
|
6
|
|
2023
|
6
|
|
2024
|
5
|
|
2025
|
5
|
|
2026
|
5
|
|
(11) Indexed Debt Securities (ZENS) and Securities Related to ZENS (CenterPoint Energy)
(a) Investment in Securities Related to ZENS
A subsidiary of CenterPoint Energy holds shares of certain securities detailed in the table below, which are securities with a readily determinable fair value and are expected to be held to facilitate CenterPoint Energy’s ability to meet its obligation under the ZENS. Unrealized gains and losses resulting from changes in the market value of the ZENS-Related Securities are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income.
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Held
|
|
March 31, 2021
|
|
December 31, 2020
|
AT&T Common
|
10,212,945
|
|
|
10,212,945
|
|
Charter Common
|
872,503
|
|
|
872,503
|
|
|
|
|
|
|
|
|
|
(b) ZENS
In September 1999, CenterPoint Energy issued ZENS having an original principal amount of $1.0 billion of which $828 million remained outstanding as of March 31, 2021. Each ZENS is exchangeable at the holder’s option at any time for an amount of cash equal to 95% of the market value of the reference shares attributable to such note. The number and identity of the reference shares attributable to each ZENS are adjusted for certain corporate events.
CenterPoint Energy’s reference shares for each ZENS consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(in shares)
|
AT&T Common
|
0.7185
|
|
|
0.7185
|
|
Charter Common
|
0.061382
|
|
|
0.061382
|
|
|
|
|
|
|
|
|
|
CenterPoint Energy pays interest on the ZENS at an annual rate of 2% plus the amount of any quarterly cash dividends paid in respect of the reference shares attributable to the ZENS. The principal amount of the ZENS is subject to increases or decreases to the extent that the annual yield from interest and cash dividends on the reference shares attributable to the ZENS is less than or more than 2.309%. The adjusted principal amount is defined in the ZENS instrument as “contingent principal.” As of March 31, 2021, the ZENS, having an original principal amount of $828 million and a contingent principal amount of $52 million, were outstanding and were exchangeable, at the option of the holders, for cash equal to 95% of the market value of the reference shares attributable to the ZENS.
(12) Short-term Borrowings and Long-term Debt
Inventory Financing. CenterPoint Energy’s and CERC’s Natural Gas had AMAs associated with their utility distribution service in Arkansas, Louisiana and Oklahoma with the Energy Services Disposal Group that expired in March 2021. The expired AMAs were replaced with new third-party AMAs beginning in April 2021. CenterPoint Energy’s and CERC’s Natural Gas have AMAs with third parties associated with their utility distribution service in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Oklahoma and Texas. The AMAs have varying terms, the longest of which expires in 2027. Pursuant to the provisions of the agreements, CenterPoint Energy’s and CERC’s Natural Gas either sells natural gas to the asset manager and agrees to repurchase an equivalent amount of natural gas throughout the year at the same cost, or simply purchases its full natural gas requirements at each delivery point from the asset manager. These transactions are accounted for as an inventory financing. CenterPoint Energy and CERC had $-0- and $24 million outstanding obligations related to the AMAs as of March 31, 2021 and December 31, 2020, respectively.
Debt Transactions. In February 2021, CERC Corp. received financing commitments totaling $1.7 billion on a 364-day term loan facility to bridge any working capital needs related to the February 2021 Winter Storm Event. In March 2021, CERC Corp. issued $700 million aggregate principal amount of 0.70% senior notes and $1.0 billion aggregate principal amount of floating rate senior notes (three-month LIBOR plus 0.5%) due 2023. Total proceeds, net of issuance expenses and fees, of approximately $1.69 billion were used for general corporate purposes, including to fund working capital. Upon the consummation of the senior notes offerings, in March 2021, CERC Corp. terminated all of the commitments for the 364-day term loan facility.
In March 2021, Houston Electric issued $400 million aggregate principal amount of 2.35% general mortgage bonds due 2031 and $700 million aggregate principal amount of 3.35% general mortgage bonds due 2051. Total proceeds, net of issuance expenses and fees, of approximately $1.08 billion were or will be used for general limited liability company purposes, including capital expenditures and the repayment of (i) all of Houston Electric’s outstanding $102 million 9.15% first mortgage bonds due 2021, which matured on March 15, 2021, (ii) all of Houston Electric’s outstanding $300 million of 1.85% general mortgage bonds due 2021, which were called for redemption in full on May 1, 2021, as discussed further below, and (iii) all or a portion of Houston Electric’s borrowings under the CenterPoint Energy money pool.
Debt Redemption. In April 2021, Houston Electric provided notice of redemption relating to $300 million aggregate principal amount of its outstanding 1.85% general mortgage bonds due 2021. All of the outstanding bonds were called for redemption in full on May 1, 2021 at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest.
CenterPoint Energy Term Loan. In April 2021, CenterPoint Energy amended its existing term loan agreement, of which $700 million is still outstanding, by extending its maturity from May 15, 2021 to June 14, 2021.
Credit Facilities. In February 2021, each of CenterPoint Energy, Houston Electric, CERC Corp. and VUHI replaced their existing revolving credit facilities with new amended and restated credit facilities. The size of the CenterPoint Energy facility decreased from $3.3 billion to $2.4 billion, while the sizes of the Houston Electric, CERC Corp. and VUHI facilities remained unchanged.
The Registrants had the following revolving credit facilities as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Execution
Date
|
|
Registrant
|
|
Size of
Facility
|
|
Draw Rate of LIBOR plus (1)
|
|
Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio
|
|
Debt for Borrowed Money to Capital
Ratio as of
March 31, 2021 (2)
|
|
Termination Date
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
February 4, 2021
|
|
CenterPoint Energy
|
|
$
|
2,400
|
|
|
1.625%
|
|
65.0%
|
(3)
|
57.4%
|
|
February 4, 2024
|
February 4, 2021
|
|
CenterPoint Energy (4)
|
|
400
|
|
|
1.250%
|
|
65.0%
|
|
49.9%
|
|
February 4, 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 4, 2021
|
|
Houston Electric
|
|
300
|
|
|
1.375%
|
|
67.5%
|
(3)
|
57.9%
|
|
February 4, 2024
|
February 4, 2021
|
|
CERC
|
|
900
|
|
|
1.250%
|
|
65.0%
|
|
61.5%
|
|
February 4, 2024
|
|
|
Total
|
|
$
|
4,000
|
|
|
|
|
|
|
|
|
|
(1)Based on current credit ratings.
(2)As defined in the revolving credit facility agreements, excluding Securitization Bonds.
(3)For CenterPoint Energy and Houston Electric, the financial covenant limit will temporarily increase to 70% if Houston Electric experiences damage from a natural disaster in its service territory and CenterPoint Energy certifies to the administrative agent that Houston Electric has incurred system restoration costs reasonably likely to exceed $100 million in a consecutive 12-month period, all or part of which Houston Electric intends to seek to recover through securitization financing. Such temporary increase in the financial covenant would be in effect from the date CenterPoint Energy delivers its certification until the earliest to occur of (i) the completion of the securitization financing, (ii) the first anniversary of CenterPoint Energy’s certification or (iii) the revocation of such certification.
(4)This credit facility was issued by VUHI, is guaranteed by SIGECO, Indiana Gas and VEDO and includes a $20 million letter of credit sublimit. This credit facility backstops VUHI’s commercial paper program.
The Registrants, including the subsidiaries of CenterPoint Energy discussed above, were in compliance with all financial debt covenants as of March 31, 2021.
The table below reflects the utilization of the Registrants’ respective revolving credit facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
December 31, 2020
|
Registrant
|
|
Loans
|
|
Letters
of Credit
|
|
Commercial
Paper
|
|
Weighted Average Interest Rate
|
|
|
Loans
|
|
Letters
of Credit
|
|
Commercial
Paper
|
|
Weighted Average Interest Rate
|
|
|
(in millions, except weighted average interest rate)
|
CenterPoint Energy (1)
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
772
|
|
|
0.21
|
%
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
1,078
|
|
|
0.23
|
%
|
CenterPoint Energy (2)
|
|
—
|
|
|
—
|
|
|
210
|
|
|
0.18
|
%
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
0.22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston Electric
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
CERC
|
|
—
|
|
|
—
|
|
|
573
|
|
|
0.21
|
%
|
|
|
—
|
|
|
—
|
|
|
347
|
|
|
0.23
|
%
|
Total
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
1,555
|
|
|
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
1,517
|
|
|
|
(1)CenterPoint Energy’s outstanding commercial paper generally has maturities of 60 days or less.
(2)This credit facility was issued by VUHI and is guaranteed by SIGECO, Indiana Gas and VEDO.
Liens. As of March 31, 2021, Houston Electric’s assets were subject to liens securing approximately $5.4 billion of general mortgage bonds, including approximately $68 million held in trust to secure pollution control bonds that mature in 2028 for which CenterPoint Energy is obligated. These general mortgage bonds are not reflected in Houston Electric’s consolidated financial statements because of the contingent nature of the obligations. Houston Electric may issue additional general mortgage bonds on the basis of retired bonds, 70% of property additions or cash deposited with the trustee. As of March 15, 2021, no Houston Electric first mortgage bonds remained outstanding. Houston Electric could issue approximately $3.4 billion of additional first mortgage bonds and general mortgage bonds on the basis of retired bonds and 70% of property additions as of March 31, 2021. Houston Electric has contractually agreed that it will not issue additional first mortgage bonds, subject to certain exceptions.
Other. As of March 31, 2021, certain financial institutions agreed to issue, from time to time, up to $20 million of letters of credit on behalf of Vectren and certain of its subsidiaries in exchange for customary fees. These agreements to issue letters of credit expire on December 31, 2021. As of March 31, 2021, such financial institutions had issued $1 million of letters of credit on behalf of Vectren and certain of its subsidiaries.
(13) Income Taxes
The Registrants reported the following effective tax rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
CenterPoint Energy - Continuing operations (1)
|
|
|
|
|
17
|
%
|
|
25
|
%
|
CenterPoint Energy - Discontinued operations (2)
|
|
|
|
|
—
|
%
|
|
10
|
%
|
Houston Electric
|
|
|
|
|
13
|
%
|
|
13
|
%
|
CERC - Continuing operations (3)
|
|
|
|
|
22
|
%
|
|
21
|
%
|
CERC - Discontinued operations (4)
|
|
|
|
|
—
|
%
|
|
15
|
%
|
(1)CenterPoint Energy’s lower effective tax rate on income from continuing operations for the three months ended March 31, 2021 compared to the higher effective tax rate on a loss from continuing operations for the three months ended March 31, 2020 was primarily driven by an increase in the amount of amortization of the net regulatory EDIT liability. The higher effective tax rate on the loss from continuing operations for the three months ended March 31, 2020 was primarily due to lower earnings from the impairment of CenterPoint Energy’s investment in Enable. Other effective tax rate drivers include the non-deductible goodwill impairment at the Indiana Electric reporting unit, the impact of NOL carryback claims allowed under the CARES Act, and an increase in the amount of remeasurement of state deferred tax liabilities for changes in apportionment, the effects of which were compounded by the book loss in the three months ended March 31, 2020.
(2)CenterPoint Energy’s lower than statutory tax rate on the loss from discontinued operations for the three months ended March 31, 2020 was primarily due to the non-deductible portions of goodwill impairments on the Energy Services and Infrastructure Services Disposal Groups.
(3)CERC’s higher effective tax rate on income from continuing operations for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily driven by a decrease in the amount of amortization of the net regulatory EDIT liability.
(4)CERC’s lower than statutory tax rate on the loss from discontinued operations for the three months ended March 31, 2020 was primarily due to the non-deductible portion of the goodwill impairment on the Energy Services Disposal Group.
On March 11, 2021, the ARPA was enacted in response to continued economic and health impacts of the COVID-19 pandemic. The ARPA expands the definition of “covered employee” under section 162(m) beginning in 2027, and extends the employee retention tax credit through December 31, 2021, among other provisions. CenterPoint Energy does not currently anticipate any material impacts from this legislation. On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act provides relief to corporate taxpayers by permitting a five-year carryback of 2018-2020 NOLs, deferring the payment of the employer share of payroll taxes for the remaining months of 2020 until 2021 and 2022, increasing the 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerating refunds for minimum tax credit carryforwards, among other provisions. Based on the CARES Act NOL carryback provision, during the three months ended March 31, 2020, CenterPoint Energy recorded a $19 million benefit resulting from carryback claims to be filed to refund taxes paid.
CenterPoint Energy reported a net uncertain tax liability, inclusive of interest and penalties, of $10 million as of March 31, 2021. Interest and penalties of $1 million were recorded on the uncertain tax liability for the three month period ending March 31, 2021. The Registrants believe that it is reasonably possible that a decrease of up to $6 million in unrecognized tax benefits may occur in the next 12 months as a result of a lapse of statutes on older exposures and/or the acceptance of an application for an accounting method change. For CenterPoint Energy, tax years through 2018 have been audited and settled with the IRS. For the 2019 through 2021 tax years CenterPoint Energy is a participant in the IRS’s Compliance Assurance Process. Vectren’s pre-Merger 2017 through 2019 tax years are still open for examination.
(14) Commitments and Contingencies
(a)Purchase Obligations (CenterPoint Energy and CERC)
Commitments include minimum purchase obligations related to CenterPoint Energy’s and CERC’s Natural Gas reportable segment and CenterPoint Energy’s Electric reportable segment. A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on the registrant and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Contracts with minimum payment provisions have various quantity requirements and durations and are not classified as non-trading derivative assets and liabilities in CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020. These contracts meet an exception as “normal purchases contracts” or do not meet the definition of a derivative. Natural gas and coal supply commitments also include transportation contracts that do not meet the definition of a derivative.
On February 9, 2021, Indiana Electric entered into a BTA with a subsidiary of Capital Dynamics. Pursuant to the BTA, Capital Dynamics, with its partner Tenaska, will build a 300 MW solar array in Posey County, Indiana through a special purpose entity Posey Solar. Upon completion of construction, currently projected to be at the end of 2023, and subject to IURC approval, Indiana Electric will acquire Posey Solar and its solar array assets for a fixed purchase price.
As of March 31, 2021, undiscounted minimum purchase obligations are approximately:
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|
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|
|
|
|
|
|
|
|
|
CenterPoint Energy
|
|
CERC
|
|
Natural Gas
and Coal Supply
|
|
Other (1)
|
|
Natural Gas Supply
|
|
(in millions)
|
|
|
Remaining nine months of 2021
|
$
|
429
|
|
|
$
|
2
|
|
|
$
|
271
|
|
2022
|
547
|
|
|
12
|
|
|
332
|
|
2023
|
470
|
|
|
404
|
|
|
279
|
|
2024
|
392
|
|
|
198
|
|
|
259
|
|
2025
|
337
|
|
|
7
|
|
|
231
|
|
2026
|
304
|
|
|
7
|
|
|
226
|
|
2027 and beyond
|
1,634
|
|
|
137
|
|
|
1,331
|
|
(1)CenterPoint Energy’s undiscounted minimum payment obligations related to its 25-year agreement for its solar PPA in Warrick County, Indiana and its purchase commitment under its BTA in Posey County, Indiana are included above. The remaining undiscounted payment obligations relate primarily to technology hardware and software agreements.
Excluded from the table above are estimates for cash outlays from other PPAs through Indiana Electric that do not have minimum thresholds but do require payment when energy is generated by the provider. Costs arising from certain of these commitments are pass-through costs, generally collected dollar-for-dollar from retail customers through regulator-approved cost recovery mechanisms.
(b) Guarantees and Product Warranties (CenterPoint Energy)
In the normal course of business, ESG enters into contracts requiring it to timely install infrastructure, operate facilities, pay vendors and subcontractors and support warranty obligations and, at times, issue payment and performance bonds and other forms of assurance in connection with these contracts.
Specific to ESG’s role as a general contractor in the performance contracting industry, as of March 31, 2021, there were 51 open surety bonds supporting future performance with an aggregate face amount of approximately $527 million. ESG’s exposure is less than the face amount of the surety bonds and is limited to the level of uncompleted work under the contracts. As of March 31, 2021, approximately 47% of the work was yet to be completed on projects with open surety bonds. Further, various subcontractors issue surety bonds to ESG. In addition to these performance obligations, ESG also warrants the functionality of certain installed infrastructure generally for one year and the associated energy savings over a specified number of years. As of March 31, 2021, there were 32 warranties totaling $554 million and an additional $1.2 billion in energy savings commitments not guaranteed by Vectren. Since ESG’s inception in 1994, CenterPoint Energy believes ESG has had a history of generally meeting its performance obligations and energy savings guarantees and its installed products operating effectively.
CenterPoint Energy assessed the fair value of its obligation for such guarantees as of March 31, 2021 and no amounts were recorded on CenterPoint Energy’s Condensed Consolidated Balance Sheets.
CenterPoint Energy issues parent company level guarantees to certain vendors, customers and other commercial counterparties of ESG. These guarantees do not represent incremental consolidated obligations, but rather, represent guarantees of subsidiary obligations to allow those subsidiaries to conduct business without posting other forms of assurance. As of March 31, 2021, CenterPoint Energy, primarily through Vectren, has issued parent company level guarantees supporting ESG’s obligations. For those obligations where potential exposure can be estimated, management estimates the maximum exposure under these guarantees to be approximately $517 million as of March 31, 2021. This exposure primarily relates to energy savings guarantees on federal energy savings performance contracts. Other parent company level guarantees, certain of which do not contain a cap on potential liability, have been issued in support of federal operations and maintenance projects for which a maximum exposure cannot be estimated based on the nature of the projects. While there can be no assurance that performance under any of these parent company guarantees will not be required in the future, CenterPoint Energy considers the likelihood of a material amount being incurred as remote.
(c)Guarantees and Product Warranties (CenterPoint Energy and CERC)
On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. The transaction closed on June 1, 2020. In the normal course of business prior to June 1, 2020, the Energy Services Disposal Group through CES, traded natural gas under supply contracts and entered into natural gas related transactions under transportation, storage and other contracts. In connection with the Energy Services Disposal Group’s business activities prior to the closing of the sale of the Energy Services Disposal Group on June 1, 2020, CERC Corp. issued guarantees to CES’s counterparties to guarantee the payment of CES’s obligations. When CES remained wholly owned by CERC Corp., these guarantees did not represent incremental consolidated obligations, but rather, these guarantees represented guarantees of CES’s obligations to allow it to conduct business without posting other forms of assurance.
A CERC Corp. guarantee primarily had a one- or two-year term, although CERC Corp. would generally not be released from obligations incurred by CES prior to the termination of such guarantee unless the beneficiary of the guarantee affirmatively released CERC Corp. from its obligations under the guarantee. Throughout CERC Corp.’s ownership of CES and subsequent to the sale of the Energy Services Disposal Group through March 31, 2021, CERC Corp. did not pay any amounts under guarantees of CES’s obligations.
Under the terms of the Equity Purchase Agreement, Symmetry Energy Solutions Acquisition must generally use reasonable best efforts to replace existing CERC Corp. guarantees with credit support provided by a party other than CERC Corp. as of and after the closing of the transaction. Additionally, to the extent that CERC Corp. retains any exposure relating to certain guarantees of CES’s obligations 90 days after closing of the transaction, Symmetry Energy Solutions Acquisition will pay a 3% annualized fee on such exposure, increasing by 1% on an annualized basis every three months. As of March 31, 2021, management estimates approximately $51 million of exposure remained outstanding under CERC Corp. guarantees issued prior to the closing of the transaction on June 1, 2020. On May 3, 2021, the estimated remaining exposure under these obligations decreased to $41 million. CES has provided replacement credit support to counterparties to whom CERC Corp. had issued guarantees prior to closing representing the full amount of CERC’s remaining exposure under the guarantees. CERC believes that counterparties to whom replacement credit support has been provided would seek payment if needed under such replacement credit support instead of a CERC Corp. guarantee. No additional guarantees were provided by CERC Corp. to CES subsequent to the closing of the transaction on June 1, 2020.
If CERC Corp. is required to pay a counterparty under a guarantee in respect of obligations of CES, Symmetry Energy Solutions Acquisition is required to promptly reimburse CERC Corp. for all amounts paid. If Symmetry Energy Solutions Acquisition fails to reimburse CERC Corp., CERC Corp. has the contractual right to seek payment from Shell Energy North America (US), L.P. in an amount up to $40 million in the aggregate. While there can be no assurance that payment under any of these guarantees will not be required in the future, CenterPoint Energy and CERC consider the likelihood of a material amount being incurred as remote.
CenterPoint Energy and CERC recorded no amounts on their respective Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 related to the performance of these guarantees.
(d) Legal, Environmental and Other Matters
Legal Matters
Minnehaha Academy (CenterPoint Energy and CERC). On August 2, 2017, a natural gas explosion occurred at the Minnehaha Academy in Minneapolis, Minnesota, resulting in the deaths of two school employees, serious injuries to others and significant property damage to the school. CenterPoint Energy and CERC cooperated with the investigation conducted by the National Transportation Safety Board, which concluded its investigation in December 2019 and issued a report without making any recommendations. Further, CenterPoint Energy and CERC contested and reached a settlement regarding approximately $200,000 in fines imposed by the Minnesota Office of Pipeline Safety. In early 2018, the Minnesota Occupational Safety and Health Administration concluded its investigation without any adverse findings against CenterPoint Energy or CERC. CenterPoint Energy, certain of its subsidiaries, including CERC, and the contractor company working in the school were named in wrongful death, property damage and personal injury litigation arising out of the incident and have now reached confidential settlement agreements in all litigation. CenterPoint Energy’s and CERC’s general and excess liability insurance policies provide coverage for third party bodily injury and property damage claims.
Litigation Related to the Merger (CenterPoint Energy). With respect to the Merger, in July 2018, seven separate lawsuits were filed against Vectren and the individual directors of Vectren’s Board of Directors in the U.S. District Court for the Southern District of Indiana. These lawsuits alleged violations of Sections 14(a) of the Exchange Act and SEC Rule 14a-9 on the grounds that the Vectren Proxy Statement filed on June 18, 2018 was materially incomplete because it omitted material information concerning the Merger. In August 2018, the seven lawsuits were consolidated, and the Court denied the plaintiffs’ request for a preliminary injunction. In October 2018, the plaintiffs filed their Consolidated Amended Class Action Complaint. In December 2018, two plaintiffs voluntarily dismissed their lawsuits. In September 2019, the court granted the defendants’ motion to dismiss and dismissed the remaining plaintiffs’ claims with prejudice, which the plaintiffs appealed in October 2019. The U.S. Court of Appeals for the Seventh Circuit heard oral arguments in September 2020, and a ruling is expected in 2021. The defendants believe that the allegations asserted are without merit and intend to vigorously defend themselves against the claims raised. CenterPoint Energy does not expect the ultimate outcome of this matter to have a material adverse effect on its financial condition, results of operations or cash flows.
Litigation Related to the February 2021 Winter Storm Event. With respect to the February 2021 Winter Storm Event, CenterPoint Energy, CERC and Houston Electric, along with ERCOT, have received claims and lawsuits filed by plaintiffs alleging personal injury, property damage and other injuries and damages. Additionally, various regulatory and governmental entities have announced that they intend to conduct or are conducting inquiries, investigations and other reviews of the February 2021 Winter Storm Event and the efforts made by various entities to prepare for, and respond to, this event, including the electric generation shortfall issues. Entities that have announced that they plan to conduct or are conducting such inquiries, investigations and other reviews include the United States Congress, FERC, NERC, Texas RE, ERCOT, Texas government entities and officials such as the Texas Governor’s office, the Texas Legislature, the Texas Attorney General, the PUCT, the City of Houston and other municipal and county entities in Houston Electric’s service territory, among other entities.
Like other Texas TDUs, Houston Electric may become involved in certain of the above-referenced investigations, litigation or other regulatory and legal proceedings regarding their efforts to restore power and their compliance with NERC, ERCOT and PUCT rules and directives. CenterPoint Energy and Houston Electric are responding to inquiries from the Texas Attorney General and the Galveston County District Attorney’s Office, and CenterPoint Energy and CERC are responding to inquiries from the Arkansas, Minnesota and Oklahoma Attorneys General. CenterPoint Energy, Houston Electric and CERC are subject to, and may be further subject to, litigation and claims. Such claims include, or in the future could include, wrongful death, personal injury and property damage claims, lawsuits for impacts on businesses and other organizations and entities and shareholder claims, among other claims or litigation matters. As of April 29, 2021, CenterPoint Energy and Houston Electric have been named as a defendant in approximately 60 lawsuits related to the February 2021 Winter Storm Event. CenterPoint Energy and Houston Electric intend to vigorously defend themselves against the claims raised. CenterPoint Energy, Houston Electric and CERC are unable to predict the consequences of any such matters or to estimate a range of potential losses.
Litigation Related to the Enable Merger. In March 2021, several lawsuits were filed by persons claiming to be Enable unitholders against various defendants, including Enable, the members of Enable GP’s Board of Directors, Energy Transfer, and other parties to the Enable Merger Agreement, challenging the Enable Merger and the disclosures made in connection therewith. CenterPoint Energy has been named in one such lawsuit pending in the United States District Court for the Southern District of New York. The lawsuits allege violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9 on the grounds that the Registration Statement on Form S-4 filed by Energy Transfer on March 19, 2021, was materially incomplete because it omitted material information about, among other things, Enable's and Energy Transfer's financial projections and the analyses conducted by Enable's financial advisors. The lawsuits further allege that the individual defendants, including, among others,
Energy Transfer and CenterPoint Energy, violated Section 20(a) of the Exchange Act as controlling persons of Enable. Plaintiffs seek to have the court enjoin the Enable Merger, require defendants to disseminate a new registration statement disclosing the allegedly omitted information, declare that defendants violated the Exchange Act, rescind the Enable Merger or award rescissory damages in the event the Enable Merger is consummated, along with attorneys’ fees, costs, and other relief. CenterPoint Energy’s dates to respond to the lawsuit in which it was sued have not yet been set. CenterPoint Energy cannot predict the outcome of litigation related to the Enable Merger Agreement, but believes the litigation is without merit, intends to defend vigorously against such litigation, and does not expect the ultimate outcome of such litigation to have a material adverse effect on its financial condition, results of operations or cash flows.
Environmental Matters
MGP Sites. CenterPoint Energy, CERC and their predecessors operated MGPs in the past. In addition, certain of CenterPoint Energy’s subsidiaries acquired through the Merger operated MGPs in the past. The costs CenterPoint Energy or CERC, as applicable, expect to incur to fulfill their respective obligations are estimated by management using assumptions based on actual costs incurred, the timing of expected future payments and inflation factors, among others. While CenterPoint Energy and CERC have recorded all costs which they presently are obligated to incur in connection with activities at these sites, it is possible that future events may require remedial activities which are not presently foreseen, and those costs may not be subject to PRP or insurance recovery.
(i)Minnesota MGPs (CenterPoint Energy and CERC). With respect to certain Minnesota MGP sites, CenterPoint Energy and CERC have completed state-ordered remediation and continue state-ordered monitoring and water treatment. CenterPoint Energy and CERC recorded a liability as reflected in the table below for continued monitoring and any future remediation required by regulators in Minnesota.
(ii)Indiana MGPs (CenterPoint Energy). In the Indiana Gas service territory, the existence, location and certain general characteristics of 26 gas manufacturing and storage sites have been identified for which CenterPoint Energy may have some remedial responsibility. A remedial investigation/feasibility study was completed at one of the sites under an agreed upon order between Indiana Gas and the IDEM, and a Record of Decision was issued by the IDEM in January 2000. The remaining sites have been submitted to the IDEM’s VRP. CenterPoint Energy has also identified its involvement in 5 manufactured gas plant sites in SIGECO’s service territory, all of which are currently enrolled in the IDEM’s VRP. CenterPoint Energy is currently conducting some level of remedial activities, including groundwater monitoring at certain sites.
(iii)Other MGPs (CenterPoint Energy and CERC). In addition to the Minnesota and Indiana sites, the EPA and other regulators have investigated MGP sites that were owned or operated by CenterPoint Energy or CERC or may have been owned by one of their former affiliates.
Total costs that may be incurred in connection with addressing these sites cannot be determined at this time. The estimated accrued costs are limited to CenterPoint Energy’s and CERC’s share of the remediation efforts and are therefore net of exposures of other PRPs. The estimated range of possible remediation costs for the sites for which CenterPoint Energy and CERC believe they may have responsibility was based on remediation continuing for the minimum time frame given in the table below.
|
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|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
CenterPoint Energy
|
|
CERC
|
|
(in millions, except years)
|
Amount accrued for remediation
|
$
|
12
|
|
|
$
|
7
|
|
Minimum estimated remediation costs
|
8
|
|
|
5
|
|
Maximum estimated remediation costs
|
55
|
|
|
32
|
|
Minimum years of remediation
|
5
|
|
|
30
|
|
Maximum years of remediation
|
50
|
|
|
50
|
|
The cost estimates are based on studies of a site or industry average costs for remediation of sites of similar size. The actual remediation costs will depend on the number of sites to be remediated, the participation of other PRPs, if any, and the remediation methods used.
CenterPoint Energy and CERC do not expect the ultimate outcome of these matters to have a material adverse effect on the financial condition, results of operations or cash flows of either CenterPoint Energy or CERC.
Asbestos. Some facilities owned by the Registrants or their predecessors contain or have contained asbestos insulation and other asbestos-containing materials. The Registrants are from time to time named, along with numerous others, as defendants in lawsuits filed by a number of individuals who claim injury due to exposure to asbestos, and the Registrants anticipate that additional claims may be asserted in the future. Although their ultimate outcome cannot be predicted at this time, the Registrants do not expect these matters, either individually or in the aggregate, to have a material adverse effect on their financial condition, results of operations or cash flows.
CCR Rule (CenterPoint Energy). In April 2015, the EPA finalized its CCR Rule, which regulates ash as non-hazardous material under the RCRA. The final rule allows beneficial reuse of ash, and the majority of the ash generated by Indiana Electric’s generating plants will continue to be reused. In July 2018, the EPA released its final CCR Rule Phase I Reconsideration which extended the deadline to October 31, 2020 for ceasing placement of ash in ponds that exceed groundwater protections standards or that fail to meet location restrictions. In August 2019, the EPA proposed additional “Part A” amendments to its CCR Rule with respect to beneficial reuse of ash and other materials. Further “Part B” amendments, which related to alternate liners for CCR surface impoundments and the surface impoundment closure process, were published in March 2020. The Part A amendments were finalized in August 2020 and extended the deadline to cease placement of ash in ponds to April 11, 2021. The EPA published the final Part B amendments in November 2020. The Part A amendments do not restrict Indiana Electric’s current beneficial reuse of its fly ash. CenterPoint Energy continues to evaluate the Part B amendments to determine potential impacts.
Indiana Electric has three ash ponds, two at the F.B. Culley facility (Culley East and Culley West) and one at the A.B. Brown facility. Under the existing CCR Rule, Indiana Electric is required to perform integrity assessments, including ground water monitoring, at its F.B. Culley and A.B. Brown generating stations. The ground water studies are necessary to determine the remaining service life of the ponds and whether a pond must be retrofitted with liners or closed in place. Indiana Electric’s Warrick generating unit is not included in the scope of the CCR Rule as this unit has historically been part of a larger generating station that predominantly serves an adjacent industrial facility. Preliminary groundwater monitoring indicates potential groundwater impacts very close to Indiana Electric’s ash impoundments, and further analysis is ongoing. The CCR Rule required companies to complete location restriction determinations by October 18, 2018. Indiana Electric completed its evaluation and determined that one F.B. Culley pond (Culley East) and the A.B. Brown pond fail the aquifer placement location restriction. As a result of this failure, Indiana Electric is required to cease disposal of new ash in the ponds and commence closure of the ponds by April 11, 2021. CenterPoint Energy has applied for the extensions available under the CCR Rule that would allow Indiana Electric to continue to use the ponds through October 15, 2023. The inability to take these extensions may result in increased and potentially significant operational costs in connection with the accelerated implementation of an alternative ash disposal system or adversely impact Indiana Electric’s future operations. Failure to comply with these requirements could also result in an enforcement proceeding including the imposition of fines and penalties. On April 24, 2019, Indiana Electric received an order from the IURC approving recovery in rates of costs associated with the closure of the Culley West pond, which has already completed closure activities. On August 14, 2019, Indiana Electric filed its petition with the IURC for recovery of costs associated with the closure of the A.B. Brown ash pond, which would include costs associated with the excavation and recycling of ponded ash. This petition was subsequently approved by the IURC on May 13, 2020. On October 28, 2020, the IURC approved Indiana Electric’s ECA proceeding, which included the initiation of recovery of the federally mandated project costs.
Indiana Electric continues to refine site specific estimates of closure costs for its ten-acre Culley East pond. In July 2018, Indiana Electric filed a Complaint for Damages and Declaratory Relief against its insurers seeking reimbursement of defense, investigation and pond closure costs incurred to comply with the CCR Rule, and has since reached confidential settlement agreements with its insurers. The proceeds of these settlements will offset costs that have been and will be incurred to close the ponds.
As of March 31, 2021, CenterPoint Energy has recorded an approximate $88 million ARO, which represents the discounted value of future cash flow estimates to close the ponds at A.B. Brown and F.B. Culley. This estimate is subject to change due to the contractual arrangements; continued assessments of the ash, closure methods, and the timing of closure; implications of Indiana Electric’s generation transition plan; changing environmental regulations; and proceeds received from the settlements in the aforementioned insurance proceeding. In addition to these removal costs, Indiana Electric also anticipates equipment purchases of between $60 million and $80 million to complete the A.B. Brown closure project.
Other Environmental. From time to time, the Registrants identify the presence of environmental contaminants during operations or on property where their predecessors have conducted operations. Other such sites involving contaminants may be identified in the future. The Registrants have and expect to continue to remediate any identified sites consistent with state and federal legal obligations. From time to time, the Registrants have received notices, and may receive notices in the future, from regulatory authorities or others regarding status as a PRP in connection with sites found to require remediation due to the
presence of environmental contaminants. In addition, the Registrants have been, or may be, named from time to time as defendants in litigation related to such sites. Although the ultimate outcome of such matters cannot be predicted at this time, the Registrants do not expect these matters, either individually or in the aggregate, to have a material adverse effect on their financial condition, results of operations or cash flows.
Other Proceedings
The Registrants are involved in other legal, environmental, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding matters arising in the ordinary course of business. From time to time, the Registrants are also defendants in legal proceedings with respect to claims brought by various plaintiffs against broad groups of participants in the energy industry. Some of these proceedings involve substantial amounts. The Registrants regularly analyze current information and, as necessary, provide accruals for probable and reasonably estimable liabilities on the eventual disposition of these matters. The Registrants do not expect the disposition of these matters to have a material adverse effect on the Registrants’ financial condition, results of operations or cash flows.
(15) Earnings Per Share (CenterPoint Energy)
The Series C Preferred Stock issued in May 2020 are considered participating securities since these shares participate in dividends on Common Stock on a pari passu, pro rata, as-converted basis. As a result, beginning June 30, 2020, earnings per share on Common Stock is computed using the two-class method required for participating securities.
The two-class method uses an earnings allocation formula that treats participating securities as having rights to earnings that otherwise would have been available only to common shareholders. Under the two-class method, income (loss) available to common shareholders from continuing operations is derived by subtracting the following from income (loss) from continuing operations:
•preferred share dividend requirement;
•deemed dividends for the amortization of the beneficial conversion feature recognized at issuance of the Series C Preferred Stock; and
•an allocation of undistributed earnings to preferred shareholders of participating securities (Series C Preferred Stock) based on the securities’ right to receive dividends.
Undistributed earnings are calculated by subtracting dividends declared on Common Stock, the preferred share dividend requirement and deemed dividends for the amortization of the beneficial conversion feature from net income. Net losses are not allocated to the Series C Preferred Stock as it does not have a contractual obligation to share in the losses of CenterPoint Energy.
The Series C Preferred Stock includes conversion features at a price that is below the fair value of the Common Stock on the commitment date. This beneficial conversion feature, which was approximately $32 million, represents the difference between the fair value per share of the Common Stock as of the commitment date and the conversion price, multiplied by the number of common shares issuable upon conversion. The beneficial conversion feature is recognized as a discount to Series C Preferred Stock and was amortized as a deemed dividend over the period from the issue date to the first allowable conversion date, which was November 6, 2020.
Basic earnings per common share is computed by dividing income available to common shareholders from continuing operations by the basic weighted average number of common shares outstanding during the period. Participating securities are excluded from basic weighted average number of common shares outstanding. Diluted earnings per common share is computed by dividing income available to common shareholders from continuing operations by the weighted average number of common shares outstanding, including all potentially dilutive common shares, if the effect of such common shares is dilutive.
Diluted earnings per share reflects the dilutive effect of potential common shares from share-based awards and convertible preferred shares. The dilutive effect of the restricted stock, Series B Preferred Stock and Series C Preferred Stock is computed using the if-converted method, which assumes conversion of the restricted stock, Series B Preferred Stock and Series C Preferred Stock at the beginning of the period, giving income recognition for the add-back of the preferred share dividends, amortization of beneficial conversion feature, and undistributed earnings allocated to preferred shareholders.
The following table reconciles numerators and denominators of CenterPoint Energy’s basic and diluted earnings per common share.
|
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|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
(in millions, except per share and share amounts)
|
Numerator:
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
|
|
$
|
363
|
|
|
$
|
(1,053)
|
|
Less: Preferred stock dividend requirement (Note 19)
|
|
|
|
|
29
|
|
|
29
|
|
|
|
|
|
|
|
|
|
Less: Undistributed earnings allocated to preferred shareholders
|
|
|
|
|
23
|
|
|
—
|
|
Income (loss) available to common shareholders from continuing operations - basic
|
|
|
|
|
311
|
|
|
(1,082)
|
|
Income (loss) available to common shareholders from discontinued operations - basic and diluted
|
|
|
|
|
—
|
|
|
(146)
|
|
Add back: Series B Preferred Stock dividend
|
|
|
|
|
17
|
|
—
|
|
Add back: Undistributed earnings allocated to preferred shareholders
|
|
|
|
|
23
|
|
—
|
|
Income (loss) available to common shareholders - diluted
|
|
|
|
|
$
|
351
|
|
|
$
|
(1,228)
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
|
|
551,546,000
|
|
|
502,388,000
|
|
Plus: Incremental shares from assumed conversions:
|
|
|
|
|
|
|
|
Restricted stock (1)
|
|
|
|
|
3,114,000
|
|
|
—
|
|
Series B Preferred Stock (2)
|
|
|
|
|
35,937,000
|
|
|
—
|
|
Series C Preferred Stock
|
|
|
|
|
40,823,000
|
|
|
—
|
|
Weighted average common shares outstanding - diluted
|
|
|
|
|
631,420,000
|
|
|
502,388,000
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per Common Share:
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share - continuing operations
|
|
|
|
|
$
|
0.56
|
|
|
$
|
(2.15)
|
|
Basic earnings (loss) per common share - discontinued operations
|
|
|
|
|
—
|
|
|
(0.29)
|
|
Basic Earnings (Loss) Per Common Share
|
|
|
|
|
$
|
0.56
|
|
|
$
|
(2.44)
|
|
Diluted earnings (loss) per common share - continuing operations
|
|
|
|
|
$
|
0.56
|
|
|
$
|
(2.15)
|
|
Diluted earnings (loss) per common share - discontinued operations
|
|
|
|
|
—
|
|
|
(0.29)
|
|
Diluted Earnings (Loss) Per Common Share
|
|
|
|
|
$
|
0.56
|
|
|
$
|
(2.44)
|
|
(1)2,567,000 incremental common shares from assumed conversions of restricted stock have not been included in the computation of diluted earnings (loss) per share for the three months ended March 31, 2020, as their inclusion would be anti-dilutive.
(2)The computation of diluted earnings per common share outstanding for the three months ended March 31, 2020 excludes 35,923,000 potentially dilutive shares from the denominator, because the shares would be anti-dilutive.
(16) Reportable Segments
The Registrants’ determination of reportable segments considers the strategic operating units under which its CODM manages sales, allocates resources and assesses performance of various products and services to wholesale or retail customers in differing regulatory environments. Each Registrant’s CODM views net income as the measure of profit or loss for the reportable segments. Certain prior year amounts have been reclassified to conform to the current year reportable segment presentation described in the Registrants’ combined 2020 Form 10-K.
As of March 31, 2021, reportable segments by Registrant were as follows:
CenterPoint Energy
•CenterPoint Energy’s Electric reportable segment consists of electric transmission services to transmission service customers in the ERCOT region and distribution services to REPs serving the Texas Gulf Coast area and electric transmission and distribution services primarily to southwestern Indiana and includes power generation and wholesale power operations.
•CenterPoint Energy’s Natural Gas reportable segment consists of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas; (ii) permanent pipeline connections through
interconnects with various interstate and intrastate pipeline companies through CEIP; and (iii) temporary delivery of LNG and CNG throughout the contiguous 48 states through MES.
•CenterPoint Energy’s Midstream Investments reportable segment consists of the equity investment in Enable (excluding the Enable Series A Preferred Units). See Note 9 regarding the impact of the Enable Merger.
CenterPoint Energy’s Corporate and Other consists of energy performance contracting and sustainable infrastructure services through ESG and other corporate operations which support all of the business operations of CenterPoint Energy.
Houston Electric
•Houston Electric’s single reportable segment consists of electric transmission services to transmission service customers in the ERCOT region and distribution services to REPs serving the Texas Gulf Coast area.
CERC
•CERC’s single reportable segment consists of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas; (ii) permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP; and (iii) temporary delivery of LNG and CNG throughout the contiguous 48 states through MES.
Financial data for reportable segments is as follows, including Corporate and Other, and Discontinued Operations for reconciliation purposes:
CenterPoint Energy
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
Revenues from
External
Customers
|
|
Equity in Earnings of Unconsolidated Affiliates
|
|
Net Income (Loss)
|
|
Revenues from
External
Customers
|
|
Equity in Earnings of Unconsolidated Affiliates
|
|
Net Income (Loss)
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
Electric
|
$
|
830
|
|
(1)
|
$
|
—
|
|
|
$
|
75
|
|
|
$
|
767
|
|
(1)
|
$
|
—
|
|
|
$
|
(134)
|
|
|
|
|
|
|
|
|
Natural Gas
|
1,663
|
|
|
—
|
|
|
229
|
|
|
1,321
|
|
|
—
|
|
|
201
|
|
|
|
|
|
|
|
|
Midstream Investments (2)
|
—
|
|
|
108
|
|
|
71
|
|
|
—
|
|
|
(1,475)
|
|
|
(1,127)
|
|
|
|
|
|
|
|
|
Corporate and Other
|
54
|
|
|
—
|
|
|
(12)
|
|
|
79
|
|
|
—
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
$
|
2,547
|
|
|
$
|
108
|
|
|
363
|
|
|
$
|
2,167
|
|
|
$
|
(1,475)
|
|
|
(1,053)
|
|
|
|
|
|
|
|
|
Discontinued Operations, net
|
|
|
|
|
—
|
|
|
|
|
|
|
(146)
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
$
|
363
|
|
|
|
|
|
|
$
|
(1,199)
|
|
|
|
|
|
|
|
|
(1)Houston Electric revenues from major external customers are as follows (CenterPoint Energy and Houston Electric):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
(in millions)
|
Affiliates of NRG
|
|
|
|
|
|
$
|
195
|
|
|
$
|
156
|
|
Affiliates of Vistra Energy Corp.
|
|
|
|
|
|
88
|
|
|
81
|
|
(2)Includes the impairment of CenterPoint Energy’s equity method investment in Enable of $1,541 million recorded during the three months ended March 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(in millions)
|
Electric
|
$
|
15,410
|
|
|
$
|
14,493
|
|
Natural Gas
|
17,208
|
|
|
14,976
|
|
Midstream Investments
|
994
|
|
|
913
|
|
Corporate and Other, net of eliminations (1)
|
2,294
|
|
|
3,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
$
|
35,906
|
|
|
$
|
33,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Total assets included pension and other postemployment-related regulatory assets of $533 million and $540 million as of March 31, 2021 and December 31, 2020, respectively.
Houston Electric
Houston Electric consists of a single reportable segment; therefore, a tabular reportable segment presentation has not been included.
CERC
CERC consists of a single reportable segment; therefore, a tabular reportable segment presentation has not been included.
(17) Supplemental Disclosure of Cash Flow Information
CenterPoint Energy and CERC elected not to separately disclose discontinued operations on their respective Condensed Statements of Consolidated Cash Flows. The table below provides supplemental disclosure of cash flow information and has not been recast to exclude the Infrastructure Services and Energy Services Disposal Groups prior to the closing of the respective transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
(in millions)
|
Cash Payments/Receipts:
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of capitalized interest
|
$
|
159
|
|
|
$
|
70
|
|
|
$
|
21
|
|
|
$
|
148
|
|
|
$
|
68
|
|
|
$
|
35
|
|
Income tax payments, net
|
(4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable related to capital expenditures
|
166
|
|
|
140
|
|
|
56
|
|
|
200
|
|
|
110
|
|
|
66
|
|
ROU assets obtained in exchange for lease liabilities
|
1
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets to the amount reported in the Condensed Statements of Consolidated Cash Flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
(in millions)
|
Cash and cash equivalents (1)
|
$
|
146
|
|
|
$
|
143
|
|
|
$
|
1
|
|
|
$
|
147
|
|
|
$
|
139
|
|
|
$
|
1
|
|
Restricted cash included in Prepaid expenses and other current assets
|
21
|
|
|
16
|
|
|
—
|
|
|
20
|
|
|
15
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows
|
$
|
167
|
|
|
$
|
159
|
|
|
$
|
1
|
|
|
$
|
167
|
|
|
$
|
154
|
|
|
$
|
1
|
|
(1)Houston Electric’s Cash and cash equivalents as of March 31, 2021 and December 31, 2020 included $142 million and $139 million, respectively, of cash related to the Bond Companies.
(18) Related Party Transactions (Houston Electric and CERC)
Houston Electric and CERC participate in CenterPoint Energy’s money pool through which they can borrow or invest on a short-term basis. Funding needs are aggregated and external borrowing or investing is based on the net cash position. The net funding requirements of the CenterPoint Energy money pool are expected to be met with borrowings under CenterPoint Energy’s revolving credit facility or the sale of CenterPoint Energy’s commercial paper.
The table below summarizes CenterPoint Energy money pool activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Houston Electric
|
|
CERC
|
|
Houston Electric
|
|
CERC
|
|
(in millions, except interest rates)
|
Money pool investments (borrowings) (1)
|
$
|
665
|
|
|
$
|
—
|
|
|
$
|
(8)
|
|
|
$
|
—
|
|
Weighted average interest rate
|
0.21
|
%
|
|
0.21
|
%
|
|
0.24
|
%
|
|
0.24
|
%
|
(1)Included in Accounts and notes receivable (payable)–affiliated companies on Houston Electric’s and CERC’s respective Condensed Consolidated Balance Sheets.
CenterPoint Energy provides some corporate services to Houston Electric and CERC. The costs of services have been charged directly to Houston Electric and CERC using methods that management believes are reasonable. These methods include usage rates, dedicated asset assignment and proportionate corporate formulas based on operating expenses, assets, gross margin, employees and a composite of assets, gross margin and employees. Houston Electric provides certain services to CERC. These services are billed at actual cost, either directly or as an allocation and include fleet services, shop services, geographic services, surveying and right-of-way services, radio communications, data circuit management and field operations. Additionally, CERC provides certain services to Houston Electric. These services are billed at actual cost, either directly or as an allocation and include line locating and other miscellaneous services. These charges are not necessarily indicative of what would have been incurred had Houston Electric and CERC not been affiliates.
Amounts charged for these services were as follows and are included primarily in operation and maintenance expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Houston Electric
|
|
CERC
|
|
Houston Electric
|
|
CERC
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Corporate service charges
|
|
|
|
|
|
|
|
|
$
|
43
|
|
|
$
|
50
|
|
|
$
|
49
|
|
|
$
|
55
|
|
Net affiliate service charges (billings)
|
|
|
|
|
|
|
|
|
(1)
|
|
|
1
|
|
|
(6)
|
|
|
6
|
|
The table below presents transactions among Houston Electric, CERC and their parent, CenterPoint Energy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Houston Electric
|
|
CERC
|
|
Houston Electric
|
|
CERC
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Cash dividends paid to parent
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
385
|
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19) Equity
Dividends Declared and Paid (CenterPoint Energy)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Declared
Per Share
|
|
|
|
|
|
Dividends Paid
Per Share
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
2021
|
|
2020
|
Common Stock
|
|
|
|
|
|
$
|
—
|
|
|
$
|
0.2900
|
|
|
|
|
|
|
$
|
0.1600
|
|
|
$
|
0.2900
|
|
Series A Preferred Stock
|
|
|
|
|
|
—
|
|
|
30.6250
|
|
|
|
|
|
|
30.6250
|
|
|
30.6250
|
|
Series B Preferred Stock
|
|
|
|
|
|
—
|
|
|
17.5000
|
|
|
|
|
|
|
17.5000
|
|
|
17.5000
|
|
Series C Preferred Stock (1)
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
0.1600
|
|
|
—
|
|
(1)The Series C Preferred Stock is entitled to participate in any dividend or distribution (excluding those payable in Common Stock) with the Common Stock on a pari passu, pro rata, as-converted basis. The per share amount reflects the dividend per share of Common Stock as if the Series C Preferred Stock were converted into Common Stock.
Preferred Stock (CenterPoint Energy)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation Preference Per Share
|
|
Shares Outstanding as of
|
|
Outstanding Value as of
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
(in millions, except shares and per share amounts)
|
Series A Preferred Stock
|
|
$
|
1,000
|
|
|
800,000
|
|
|
800,000
|
|
|
$
|
790
|
|
|
$
|
790
|
|
Series B Preferred Stock
|
|
1,000
|
|
|
977,400
|
|
|
977,400
|
|
|
950
|
|
|
950
|
|
Series C Preferred Stock
|
|
1,000
|
|
|
625,000
|
|
|
625,000
|
|
|
623
|
|
|
623
|
|
|
|
|
|
2,402,400
|
|
|
2,402,400
|
|
|
$
|
2,363
|
|
|
$
|
2,363
|
|
Income Allocated to Preferred Shareholders (CenterPoint Energy)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
(in millions)
|
Series A Preferred Stock
|
|
|
|
|
$
|
12
|
|
|
$
|
12
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|
Series B Preferred Stock
|
|
|
|
|
17
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|
|
17
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|
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Total income allocated to preferred shareholders
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|
|
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|
$
|
29
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|
$
|
29
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|
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated comprehensive income (loss) are as follows:
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Three Months Ended March 31,
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2021
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|
2020
|
|
CenterPoint Energy
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|
Houston Electric
|
|
CERC
|
|
CenterPoint Energy
|
|
Houston Electric
|
|
CERC
|
|
(in millions)
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Beginning Balance
|
$
|
(90)
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|
|
$
|
—
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|
$
|
10
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|
|
$
|
(98)
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|
|
$
|
(15)
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|
|
$
|
10
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|
Other comprehensive loss before reclassifications:
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Other comprehensive income (loss) from unconsolidated affiliates
|
1
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|
|
—
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|
|
—
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|
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(3)
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|
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—
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|
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—
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|
Amounts reclassified from accumulated other comprehensive loss:
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Actuarial losses (1)
|
2
|
|
|
—
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|
|
—
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|
|
2
|
|
|
—
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|
|
—
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|
Tax expense
|
—
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|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
Net current period other comprehensive income (loss)
|
3
|
|
|
—
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|
|
—
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|
|
(2)
|
|
|
—
|
|
|
—
|
|
Ending Balance
|
$
|
(87)
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
(100)
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|
|
$
|
(15)
|
|
|
$
|
10
|
|
(1)Amounts are included in the computation of net periodic cost and are reflected in Other income (expense), net in each of the Registrants’ respective Statements of Consolidated Income.
(20) Subsequent Events (CenterPoint Energy)
CenterPoint Energy Dividend Declarations
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
Equity Instrument
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Per Share
|
|
|
Common Stock
|
|
April 23, 2021
|
|
May 20, 2021
|
|
June 10, 2021
|
|
$
|
0.1600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Preferred Stock
|
|
April 23, 2021
|
|
May 15, 2021
|
|
June 1, 2021
|
|
17.5000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enable Distributions Declarations (CenterPoint Energy)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Instrument
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Per Unit Distribution
|
|
Expected Cash Distribution
(in millions)
|
Enable common units
|
|
April 26, 2021
|
|
May 13, 2021
|
|
May 25, 2021
|
|
$
|
0.16525
|
|
|
$
|
39
|
|
Enable Series A Preferred Units (1)
|
|
April 26, 2021
|
|
April 26, 2021
|
|
May 14, 2021
|
|
0.58730
|
|
|
9
|
|
(1)On February 18, 2021, the Enable Series A Preferred Units converted to the floating rate period where the distribution rate is equal to the sum of three-month LIBOR, as calculated on each applicable date of determination, and 8.50%.
Series C Preferred Stock
In April 2021, CenterPoint Energy received two notifications of intent by shareholders to convert their Series C Preferred Stock to Common Stock. The table below details the two notifications.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of Notice
|
|
Conversion Date
|
|
Shares of Series C Preferred Stock Converted
|
|
Shares of Common Stock
to be Issued
|
April 5, 2021
|
|
April 5, 2021
|
|
400,000
|
|
26,126,714
|
April 16, 2021
|
|
April 16. 2021
|
|
37,500
|
|
2,449,379
|
Conversion of the remaining Series C Preferred Stock is mandatory on May 7, 2021, the 12-month anniversary date of the preferred stock purchase agreements. The remaining 187,500 shares of Series C Preferred Stock are expected to convert into 12,246,897 shares of Common Stock.
Sale of Arkansas and Oklahoma Natural Gas Businesses
On April 29, 2021, CenterPoint Energy, through its subsidiary CERC Corp., entered into an Asset Purchase Agreement to sell its Arkansas and Oklahoma Natural Gas businesses for $2.15 billion in cash, including recovery of approximately $425 million of storm-related incremental natural gas costs incurred in the February 2021 Winter Storm Event, subject to certain adjustments set forth in the Asset Purchase Agreement. The assets include approximately 17,000 miles of main pipeline in Arkansas, Oklahoma and certain portions of Bowie County, Texas serving more than half a million customers. The transaction is anticipated to close by the end of 2021, subject to customary closing conditions, including Hart-Scott-Rodino antitrust clearance and state regulatory approvals.